SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
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ALEXANDER & BALDWIN, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
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ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
March 8, 2004
To the Shareholders of Alexander & Baldwin, Inc.:
The 2004 Annual Meeting of Shareholders of Alexander & Baldwin, Inc.
will be held in the Plaza Meeting Room on the ground floor of the Topa Plaza,
745 Fort Street, Honolulu, Hawaii, on Thursday, April 22, 2004 at 8:30 a.m. You
are invited to attend the meeting, and we hope you will be able to do so. At the
meeting, we will have the opportunity to discuss the Company's financial
performance during 2003, and our future plans and expectations.
Whether or not you now plan to attend the Annual Meeting, you are urged
to sign, date and mail the enclosed proxy and return it in the enclosed envelope
at your earliest convenience. Alternatively, A&B shareholders of record can vote
their shares over the Internet, or by calling a specially designated telephone
number. These Internet and telephone voting procedures are designed to
authenticate your vote and to confirm that your voting instructions are
followed. Specific instructions for shareholders of record who wish to use
Internet or telephone voting procedures are set forth in the enclosed proxy.
Regardless of the size of your holding, it is important that your
shares be represented. If you attend the Annual Meeting, you may withdraw your
proxy and vote in person.
Sincerely,
/s/ Allen Doane
ALLEN DOANE
President and Chief Executive Officer
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of
Alexander & Baldwin, Inc. ("A&B") will be held in the Plaza Meeting Room on the
ground floor of the Topa Plaza, 745 Fort Street, Honolulu, Hawaii, on Thursday,
April 22, 2004, at 8:30 a.m., Honolulu time, for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting
of Shareholders and until their successors are duly elected
and qualified;
2. To ratify the appointment of auditors for the ensuing year;
3. To approve an amendment to the Alexander & Baldwin, Inc. 1998
Non-Employee Director Stock Option Plan to authorize for
issuance an additional 350,000 shares of A&B common stock and
to increase the number of options granted annually to each
non-employee director from 3,000 to 8,000; and
4. To transact such other business as properly may be brought
before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on February 19,
2004 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
PLEASE PROMPTLY SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED, OR VOTE VIA THE INTERNET OR BY TELEPHONE.
By Order of the Board of Directors
/s/ Alyson J. Nakamura
ALYSON J. NAKAMURA
Secretary
March 8, 2004
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Alexander & Baldwin, Inc. ("A&B") for
use at the Annual Meeting of Shareholders to be held on April 22, 2004 and at
any adjournment or postponement thereof (the "Annual Meeting"). Shareholders may
submit their proxies either by signing, dating and returning the enclosed proxy,
or via the Internet or by telephone in accordance with the procedures set forth
in the enclosed proxy. A proxy may be revoked at any time prior to its exercise
by a written revocation bearing a later date than the proxy and filed with the
Secretary of A&B, by submission of a later-dated proxy or subsequent Internet or
telephonic proxy, or by voting in person at the Annual Meeting.
Only shareholders of record at the close of business on February 19,
2004 are entitled to notice of and to vote at the Annual Meeting. On that date,
A&B had outstanding 42,373,576 shares of common stock without par value, each of
which is entitled to one vote. Provided a quorum is present, the affirmative
vote of a majority of the shares of A&B common stock represented at the Annual
Meeting, in person or by proxy, will be necessary for the election of directors,
the ratification of the appointment of auditors and the approval of the
amendment to the A&B 1998 Non-Employee Director Stock Option Plan ("1998 Plan").
Abstentions and broker non-votes will be included for purposes of determining a
quorum at the Annual Meeting. Broker non-votes will have the same effect as a
vote to withhold authority in the election of directors, and abstentions and
broker non-votes will have the same effect as a vote against the ratification of
auditors and against the approval of the amendment to the 1998 Plan.
Following the original mailing of proxy soliciting material, officers,
employees and directors of A&B and its subsidiaries may, without additional
compensation, solicit proxies by appropriate means, including by mail,
telephone, telecopy and personal interview. Arrangements also will be made with
brokerage houses and other custodians, nominees and fiduciaries that are record
holders of A&B's common stock to forward proxy soliciting material to the
beneficial owners of such stock, and A&B will reimburse such record holders for
their reasonable expenses. A&B has retained the firm of Morrow & Co., Inc. to
assist in the solicitation of proxies, at a cost of $10,000 plus reasonable
out-of-pocket expenses.
This Proxy Statement and the enclosed proxy are being mailed to
shareholders, and are being made available on the Internet at
www.alexanderbaldwin.com, on or about March 8, 2004.
ELECTION OF DIRECTORS
Directors will be elected at the Annual Meeting to serve until the next
Annual Meeting of Shareholders and until their successors are duly elected and
qualified. There is no cumulative voting in the election of directors.
Nominees. The nominees of the Board of Directors are the nine persons
named below, all of whom, except Ms. Lau, are currently members of the Board of
Directors. The Board has reviewed each of its nominees and has determined that
all directors, with the exception of Mr. Doane, who is an executive officer of
A&B, are independent under Nasdaq rules. The Board of Directors has no reason to
believe that any nominee will be unable to serve. However, if any nominee or
nominees should decline or become unable to serve for any reason, shares
represented by the accompanying proxy will be voted for such other person or
persons as the Board of Directors may nominate. Under A&B's retirement policy
for directors at age 72, Leo E. Denlea, Jr., who has served as a director since
1987, is retiring from the Board at the Annual Meeting. The Board and management
of A&B thank Mr. Denlea for his years of service and valuable advice.
The following table sets forth the name, age and principal occupation
of each person nominated by the A&B Board, their positions with A&B and business
experience during at least the last five years, and the year each first was
elected or appointed a director.
PRINCIPAL OCCUPATION, INFORMATION AS TO
OTHER POSITIONS WITH A&B, AND OTHER DIRECTOR
NAME DIRECTORSHIPS AGE SINCE
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Michael J. Chun President and Headmaster, The Kamehameha 60 1990
Schools, Kapalama Campus, Honolulu, Hawaii
(educational institution) since June 1988;
Director of Bank of Hawaii.
Allen Doane President and Chief Executive Officer of 56 1998
A&B since October 1998; Chairman of
the Board of A&B's subsidiary, Matson
Navigation Company, Inc. ("Matson"), from
July 2002 to January 2004; Vice Chairman of
the Board of Matson from January 2004 to
present and from December 1998 to July 2002;
Executive Vice President of A&B from August
1998 to October 1998; Chief Executive
Officer of A&B's subsidiary, A&B-Hawaii,
Inc. ("ABHI"), from January 1997 to December
1999, when ABHI was merged into A&B;
President of ABHI from April 1995 to
December 1999; Director of BancWest
Corporation and its banking subsidiary,
First Hawaiian Bank.
Walter A. Dods, Chairman of the Board and Chief Executive 62 1989
Jr. Officer of BancWest Corporation and its
subsidiary, First Hawaiian Bank, Honolulu,
Hawaii (banking) since September 1989;
Director of BancWest Corporation and its
banking subsidiaries, First Hawaiian Bank
and Bank of the West.
Charles G. King President, and Dealer Principal, King 58 1989
Windward Nissan, Kaneohe, Oahu, Hawaii
(automobile dealership) since February
1999; Dealer Principal, King Auto Center,
Lihue, Kauai, Hawaii (automobile dealership)
since October 1995.
Constance H. Lau President, Chief Executive Officer and 51 --
Director of American Savings Bank,
F.S.B. ("ASB"), Honolulu, Hawaii
(banking) since June 2001; Chief
Operating Officer and Senior Vice
President of ASB from December 1999 to
June 2001; Director of Hawaiian Electric
Industries, Inc.
Carson R. Managing Director, The Corporate 71 1971
McKissick Development Company, Los Angeles,
California (financial advisory services)
since July 1991.
Maryanna G. Shaw Private investor. 65 1980
Charles M. Managing Director, Trust Company of the 71 1972
Stockholm West, San Francisco, California
(investment management services) since
June 1986; Chairman of the Board of A&B
since August 1999; Chairman of the Board
of Matson from January 2004 to present and
from August 1999 to July 2002; Vice
Chairman of the Board of Matson from
July 2002 to January 2004; Chairman of
the Board of ABHI from August 1999 to
December 1999, when ABHI was merged into
A&B.
Jeffrey N. Managing Partner, Watanabe Ing Kawashima & 61 2003
Watanabe Komeiji LLP, Honolulu, Hawaii
(attorneys at law) since 1990; Director of
Hawaiian Electric Industries, Inc.
The Bylaws of A&B provide that no person (other than a person nominated
by or on behalf of the Board) will be eligible to be elected a director at an
annual meeting of shareholders unless a written notice that the person's name be
placed in nomination is received by the Chairman of the Board, the President, or
the Secretary of A&B not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting. If the annual
meeting is not called for a date which is within 30 days of the anniversary date
of the preceding annual meeting, a shareholder's notice must be given not later
than 10 days after the date on which notice of the annual meeting was mailed or
public disclosure of the date of the annual meeting was made, whichever occurs
first. To be in proper written form, a shareholder's notice must set forth
specified information about each nominee and the shareholder making the
nomination. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
Shareholders should note that separate procedures have been established
for shareholders to submit director candidates for consideration by the
Nominating and Corporate Governance Committee. These procedures are described
below under the subsection "Nominating Committee Processes."
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Board of Directors and Committees of the Board. The Board of Directors
held ten meetings during 2003. All directors were present for 75 percent or more
of the total number of meetings of the Board of Directors and Committees of the
Board on which they serve. The Board of Directors has an Audit Committee, a
Compensation and Stock Option Committee, and a Nominating and Corporate
Governance Committee.
The current members of the Audit Committee, which held six meetings
during 2003, are Mr. McKissick, Chairman, Ms. Shaw and Messrs. Dods and
Watanabe, each of whom is an independent director under the applicable Nasdaq
listing standards. The duties and responsibilities of the Audit Committee are
set forth in a written charter adopted by the Board of Directors, a copy of
which is attached as an appendix to this Proxy Statement, and are summarized in
the Audit Committee Report which appears in this Proxy Statement.
The current members of the Compensation and Stock Option Committee (the
"Compensation Committee"), which held five meetings during 2003, are Mr. Denlea,
Chairman (who is retiring from the Board of Directors), and Messrs. Chun, King
and Stockholm, each of whom is an independent director under the applicable
Nasdaq listing standards. The Compensation Committee has general responsibility
for management and other salaried employee compensation, including incentive
compensation and stock option plans. The Compensation Committee also determines
the compensation for A&B's Chief Executive Officer.
The current members of the Nominating and Corporate Governance
Committee (the "Nominating Committee"), which held six meetings in 2003, are Mr.
Stockholm, Chairman, and Messrs. Dods and McKissick, each of whom is an
independent director under the applicable Nasdaq listing standards. The
functions of the Nominating Committee include the following:
o identifying and recommending to the Board individuals
qualified to serve as directors of A&B;
o recommending to the Board the size of committees of the
Board and monitoring the functioning of the committees of
the Board;
o advising the Board with respect to matters of Board
composition and procedures;
o reviewing corporate governance principles applicable to A&B
and considering other corporate governance issues that arise
from time to time;
o overseeing the annual evaluation of the Board; and
o evaluating its performance under the Nominating Committee
Charter.
The Nominating Committee is governed by a charter, a current copy of
which is available on A&B's corporate website at www.alexanderbaldwin.com.
Nominating Committee Processes. The Nominating Committee will consider
director candidates recommended by shareholders. In considering candidates
submitted by shareholders, the Nominating Committee will take into consideration
the needs of the Board and the qualifications of the candidate. The Nominating
Committee may also take into consideration the number of shares held by the
recommending shareholder and the length of time that such shares have been held.
To have a candidate considered by the Nominating Committee, a shareholder must
submit the recommendation in writing and must include the following information:
o The name of the shareholder and evidence of the person's
ownership of A&B stock, including the number of shares owned
and the length of time of ownership; and
o The name of the candidate, the candidate's resume or a
listing of his or her qualifications to be a director of A&B
and the person's consent to be named as a director if
selected by the Nominating Committee and nominated by the
Board.
The shareholder recommendation and information described above must be
sent to the Corporate Secretary at 822 Bishop Street, Honolulu, HI 96813 and
must be received by the Corporate Secretary not less than 120 days before the
date of A&B's Proxy Statement released to shareholders in connection with the
previous year's annual meeting.
The Nominating Committee believes that the minimum qualifications for
serving as a director of A&B are that a nominee demonstrate high ethical
standards, commitment to shareholders, a genuine interest in A&B and a
willingness and ability to devote adequate time to a director's duties. The
Nominating Committee is also authorized to consider such other factors that it
deems to be in the best interests of A&B and its shareholders.
The Nominating Committee identifies potential nominees by asking
current directors and executive officers to notify the Committee if they become
aware of persons, meeting the criteria described above, who might be available
to serve on the Board. The Nominating Committee also, from time to time, engages
firms that specialize in identifying director candidates. As described above,
the Committee also will consider candidates recommended by shareholders.
Once a person has been identified by the Nominating Committee as a
potential candidate, the Committee collects and reviews information regarding
the person to determine whether the person should be considered further. If
appropriate, the Nominating Committee may request information from the
candidate, review the person's accomplishments and qualifications, and conduct
interviews with the candidate. The Nominating Committee's evaluation process
does not vary based on whether or not a candidate is recommended by a
shareholder, although, as stated above, the Board may take into consideration
the number of shares held by the recommending shareholder and the length of time
that such shares have been held.
A&B paid a fee to a third-party search firm to assist in identifying
and evaluating candidates for nomination as directors at this Annual Meeting.
The search firm provided information on potential candidates, assisted in
background reviews and performed other functions in connection with assisting
the Nominating Committee in identifying and evaluating potential director
candidates. Ms. Lau, who has been nominated by the Board for election as a
director, was recommended to the Nominating Committee by a non-management
director.
Compensation of Directors. Through August 31, 2003, directors who were
not employees of A&B (outside directors) received an annual cash retainer of
$18,000 and an additional $3,500 if also serving as Chairperson of a Board
committee. Also through August 31, 2003, outside directors received an
attendance fee of $1,000 per Board meeting and, in addition, attendance fees of
$800 and $700 per committee meeting if also serving as chairpersons and members,
respectively, of Board committees. Effective as of September 1, 2003, outside
directors received an annual cash retainer of $27,000 and an additional $7,500
if also serving as Chairperson of the Compensation Committee or the Nominating
Committee, and an additional $10,000 if serving as Chairperson of the Audit
Committee. Also effective as of September 1, 2003, outside directors received an
attendance fee of $1,200 per Board meeting and, in addition, attendance fees of
$1,200 and $1,000 per committee meeting if also serving as chairpersons and
members, respectively, of Board committees. The annual cash retainer fee amounts
referred to above were prorated for the portion of 2003 during which such
amounts were in effect. Pursuant to an agreement with A&B, Mr. Stockholm, A&B's
non-executive Chairman of the Board, has received an additional annual retainer
of $150,000 since 1999. In 2004, Mr. Stockholm also received a discretionary
cash bonus in the amount of $75,000 for services rendered in 2003. All directors
of A&B served as directors of A&B's Matson subsidiary and, in such capacities,
outside directors received attendance fees of $1,000 per Matson Board meeting.
Outside directors may defer up to 100 percent of their annual cash retainer and
meeting fees until retirement or until such earlier date as they may select. No
directors have deferred such fees. In addition to the annual cash retainer and
meeting fees, each individual who served as an outside director during 2003
received an annual stock retainer of 300 shares of A&B common stock (or a
portion thereof, if the director served for less than a full year). Directors
who are employees of A&B or its subsidiaries do not receive compensation for
serving as directors.
Under the current terms of the 1998 Plan, a non-qualified stock option
to purchase 3,000 shares of A&B common stock automatically is granted at each
Annual Meeting of Shareholders to each individual who is, at such meeting,
elected or re-elected as an outside director of A&B. A proposal to amend the
1998 Plan includes a proposed increase in the number of options granted annually
to each non-employee director from 3,000 to 8,000 options. The option price
per share is the fair market value of A&B common stock on the grant date, and
the option expires 10 years from the date of grant, or earlier if the optionee
ceases to be a director. Options become exercisable in three equal annual
installments, beginning one year after the grant date. At the 2003 Annual
Meeting, held on April 24, 2003, options to purchase 3,000 shares of A&B common
stock, at an exercise price of $26.525 per share, were granted to each of the
outside directors under the 1998 Plan.
A&B maintains life insurance, personal excess liability insurance,
retirement and deferred compensation plans, and provides medical and dental
benefits, for its outside directors. In addition, the outside directors are
reimbursed for their estimated income tax liability by reason of A&B's payments
for the cost of life insurance, personal excess liability insurance, and medical
and dental benefits. The life insurance program affords coverage of $50,000 for
directors, as well as business travel accident coverage of $200,000 for
directors and $50,000 for their spouses while accompanying directors on A&B
business. The personal excess liability insurance program affords coverage of
$10 million for the outside directors ($20 million for the Chairman of the
Board). Under the retirement plan, a director who has five or more years of
service will receive a lump-sum payment upon retirement or attainment of age 65,
whichever is later, that is actuarially equivalent to a payment stream for the
life of the director consisting of 50 percent of the amount of the annual
retainer fee in effect at the time of his or her retirement or other
termination, plus 10 percent of that amount, up to an additional 50 percent, for
each year of service as a director over five years. In addition, a director who
has ten or more years of service may elect certain post-retirement health care
insurance benefits. Directors also may participate in the Company's matching
gifts program, in which the Company matches contributions to qualified
charitable organizations up to a certain dollar amount.
Shareholder Communications with Directors. The Board has a process to
receive communications from shareholders. Shareholders may contact any member
(or all members) of the Board by mail. To communicate with the Board of
Directors, correspondence should be addressed to the Board of Directors or any
one or more individual directors or group or committee of directors by either
name or title. All such correspondence should be sent "c/o A&B Law Department"
at A&B's headquarters at 822 Bishop Street, Honolulu, Hawaii 96813.
In addition, it is A&B policy that directors are invited and strongly
encouraged to attend the Annual Meeting of Shareholders. All nine members of the
Board of Directors in 2003 were in attendance at the 2003 Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS
The following table lists the names and addresses of the only
shareholders known by A&B to have owned beneficially more than five percent of
A&B's common stock outstanding on February 19, 2004, the number of shares they
beneficially own, and the percentage of outstanding shares such ownership
represents. Except as indicated in the footnotes, such shareholders have sole
voting and dispositive power over shares they beneficially own.
Name and Address Amount of Percent of
of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- -----
BancWest Corporation (a) 2,207,188 (b) 5.2
999 Bishop Street
Honolulu, Hawaii 96813
FMR Corp. 2,989,175 (c) 7.1
82 Devonshire
Boston, Massachusetts 02109
The Harry and Jeanette Weinberg 2,153,027 (d) 5.1
Foundation, Incorporated
7 Park Center Court
Owings Mills, Maryland 21117
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(a) For additional information concerning relationships and transactions
between A&B and BancWest Corporation, please see "Security Ownership of
Directors and Executive Officers" and "Certain Relationships and
Transactions" below.
(b) As reported in Amendment No. 4 to Schedule 13G dated January 16, 2004
(the "BancWest 13G") filed with the Securities and Exchange Commission
("SEC"). According to the BancWest 13G, BancWest Corporation has sole
voting power over 405,208 shares, shared voting power over 1,801,980
shares, sole dispositive power over 1,230,808 shares, and shared
dispositive power over 976,380 shares.
(c) As reported in Amendment No. 1 to Schedule 13G dated February 16, 2004
(the "FMR 13G") filed with the SEC. According to the FMR 13G, FMR
Corp., through its subsidiaries, Fidelity Management & Research Company
and Fidelity Management Trust Company, and an affiliate of FMR Corp.,
Fidelity International Limited, have, in the aggregate, sole voting
power over 1,968,022 shares, sole dispositive power over all 2,989,175
shares, and do not have shared voting or dispositive power over any
shares.
(d) As reported in Amendment No. 1 to Schedule 13G dated February 5, 2004
(the "Foundation 13G") filed by The Harry and Jeanette Weinberg
Foundation, Incorporated (the "Foundation") with the SEC. According to
the Foundation 13G, the Foundation has sole dispositive and voting
power over 2,046,478 shares and shared dispositive and voting power
over 106,549 shares.
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Security Ownership of Directors and Executive Officers. The following
table shows the number of shares of A&B common stock beneficially owned as of
February 26, 2004 by each director and nominee, by each executive officer named
in the "Summary Compensation Table" below, and by directors, nominees and
executive officers as a group and, if at least one-tenth of one percent, the
percentage of outstanding shares such ownership represents. Except as indicated
in the footnotes, directors, nominees and executive officers have sole voting
and dispositive power over shares they beneficially own.
Name or Number Amount of Beneficial Percent of
in Group Ownership (a)(b)(c) Class
-------- ------------------- -----
Michael J. Chun 28,742 --
Leo E. Denlea, Jr. 9,100 --
Allen Doane 543,496 1.3
Walter A. Dods, Jr. 30,193 --
Charles G. King 33,585 --
Constance H. Lau 200 --
Carson R. McKissick 30,000 --
C. Bradley Mulholland 307,030 0.7
Maryanna G. Shaw 393,815 0.9
Charles M. Stockholm 24,971 --
Jeffrey N. Watanabe 1,206 --
James S. Andrasick 160,690 0.4
Matthew J. Cox 12,333 --
Stanley M. Kuriyama 156,567 0.4
22 Directors, Nominees
and Executive Officers
as a Group 2,069,534 4.7
- --------------------
(a) Amounts do not include shares owned by spouses of those directors and
executive officers who disclaim beneficial ownership thereof, as
follows: Mr. McKissick - 600; in addition, Mr. Stockholm and Ms. Shaw,
who are husband and wife, each disclaim beneficial ownership of all
shares beneficially owned by the other. Amounts do not include shares
beneficially owned in a fiduciary capacity by trust companies or the
trust departments of banks of which A&B directors are directors or
officers, or both, and shares held by foundations or trusts of which
A&B directors are trustees or directors, as follows: BancWest
Corporation - 2,207,188 shares, Bank of Hawaii - 507,149 shares, The
Wallace Alexander Gerbode Foundation, of which Ms. Shaw and Mr.
Stockholm are trustees - 40,000 shares, and the William Garfield King
Educational Trust, of which Mr. King is a trustee - 400 shares.
(b) Amounts include shares as to which directors, nominees and executive
officers have (i) shared voting and dispositive power, as follows: Mr.
Chun - 3,125 shares, Mr. King - 685 shares (held by a living trust of
which Mr. King is a co-trustee), Ms. Lau - 200 shares, Mr. Mulholland -
32,153 shares, Ms. Shaw - 19,515 shares, and directors, nominees and
executive officers as a group - 60,561 shares, and (ii) sole voting
power only, as follows: Mr. Mulholland - 2,749 shares and directors,
nominees and executive officers as a group - 6,794 shares.
(c) Amounts include shares deemed to be owned beneficially by directors,
nominees and executive officers because they may be acquired prior to
May 7, 2004 through the exercise of stock options, as follows: Mr.
Doane - 450,633, Mr. Mulholland - 172,515, Mr. Andrasick - 118,665, Mr.
Cox - 10,333, Mr. Kuriyama - 106,099, Ms. Shaw and Messrs. Chun, Dods,
King and McKissick - 24,000 each, Mr. Denlea - 3,000, Mr. Stockholm -
15,000, Mr. Watanabe - 1,000, and directors, nominees and executive
officers as a group - 1,249,843.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934 (the "Exchange Act") requires A&B's
directors and executive officers, and persons who own more than 10 percent of
its common stock, to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the SEC. A&B believes that during fiscal 2003, its directors and
executive officers filed all reports required to be filed under Section 16(a) on
a timely basis.
Certain Relationships and Transactions. Walter A. Dods, Jr., a director
of A&B, is Chairman of the Board and Chief Executive Officer of BancWest
Corporation, and Chairman of the Board and Chief Executive Officer of its
banking subsidiary, First Hawaiian Bank.
First Hawaiian Bank (i) has a 24.32 percent participation in and is
agent for A&B's $185,000,000 revolving credit and term loan agreement, under
which no amount was outstanding at February 19, 2004, (ii) has a revolving
credit agreement with A&B under which the amount outstanding ($22,500,000 was
outstanding at February 19, 2004), when combined with First Hawaiian Bank's
share of amounts drawn under the previously described $185,000,000 revolving
credit and term loan agreement, may not exceed $70,000,000, (iii) has a
$25,000,000 revolving credit facility with Matson to support the issuance of
commercial paper, under which no amount was outstanding at February 19, 2004,
(iv) has a 19.23 percent participation in a $130,000,000 construction loan made
to a limited liability company in which a subsidiary of A&B is a member, that
had a total outstanding balance of $12,000,000 at February 19, 2004, and for
which a $2,500,000 loan guarantee and a limited guarantee equal to the lesser of
$15,000,000 or 15.5 percent of the outstanding loan balance were executed by an
A&B subsidiary, (v) has issued letters of credit, totaling $11,364,000 as of
February 19, 2004, on behalf of Matson for insurance security purposes, (vi) has
issued letters of credit totaling $564,000, as of February 19, 2004, on behalf
of a real estate subsidiary and A&B's agricultural operations in connection with
a real estate development and mill operations, (vii) has three vehicle leases
with Matson, totaling $69,000 as of February 19, 2004, (viii) is a commercial
tenant in certain properties owned by A&B or its subsidiaries, under leases with
terms expiring from May 2007 to July 2012, with an aggregate rental obligation
of $1,378,500, with certain rental payments subject to renegotiation from time
to time, and (ix) acts as custodian of $276,600,000 in assets for A&B's pension
plan as of February 11, 2004.
Mr. Dods, who, as noted above, is a director of A&B, has entered into
an agreement to purchase two residential units at market prices in a project
being developed by a limited liability company in which a subsidiary of A&B is a
member, for an aggregate purchase price of $1,950,000.
Charles G. King, a director of A&B, owns a 6.1 percent interest, and
Mr. King's brother owns a 65 percent interest, in a corporation which has
entered into a five-year commercial lease (with one five-year renewal option) at
market rates with a subsidiary of A&B. The aggregate rental obligation under the
five-year lease term is $974,100.
Constance H. Lau, a nominee standing for election to A&B's Board of
Directors, is a director of Hawaiian Electric Industries, Inc. and President,
Chief Executive Officer and a director of its subsidiary, American Savings Bank,
F.S.B.
American Savings Bank (i) has a 5.41 percent participation in A&B's
$185,000,000 revolving credit and term loan agreement under which no amounts
were outstanding at February 19, 2004, (ii) has a 19.23 percent participation in
a $130,000,000 construction loan made to a limited liability company in which a
subsidiary of A&B is a member, that had a total outstanding balance of
$12,000,000 at February 19, 2004, and for which a $2,500,000 loan guarantee and
a limited guarantee equal to the lesser of $15,000,000 or 15.5 percent of the
outstanding loan balance were executed by an A&B subsidiary, (iii) is a
commercial tenant in certain properties owned by A&B or its subsidiaries, under
leases with terms expiring from May 2006 to December 2017, with an aggregate
rental obligation from and after January 1, 2004 of $1,122,954, and (iv) is a
holdover licensee in A&B's Maui Mall Shopping Center, with a month-to-month
license for a monthly rent of $1,282.20 per month. A&B also has four
certificates of deposit with American Savings Bank that total $88,538 and which
have maturities of less than six months.
Ms. Lau's spouse is the Vice Chairman, Chief Executive Officer and
Director of Finance Factors, Ltd., a Hawaii-based financial institution. Finance
Factors has two commercial leases with A&B, with terms expiring in November
2007, with aggregate rents from and after January 1, 2004 of approximately
$235,114. In addition, Ms. Lau's brother-in-law is a partner in a law firm that
is a commercial tenant in an office building owned by a subsidiary of A&B, with
a term expiring in December 2006 and with an aggregate rent from and after
January 1, 2004 of approximately $511,290.
The spouse of Nelson N. S. Chun, Vice President and General Counsel of
A&B, is a partner in a law firm that performed legal services for A&B in 2003
for fees in the amount of $123,200.
Code of Ethics. The Company has adopted a Code of Ethics that applies
to the Chief Executive Officer, Chief Financial Officer and Controller (the
"Code"). A copy of the Code is posted on the Company's website,
www.alexanderbaldwin.com. The Company intends to satisfy any disclosure
requirements under Item 10 of Form 8-K regarding an amendment to, or a waiver
from, a provision of the Code by posting such information on its website.
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation. The following table summarizes
the cash and noncash compensation paid by A&B for services rendered, during each
of the last three completed fiscal years, by A&B's Chief Executive Officer and
the four other most highly compensated executive officers. As used in this Proxy
Statement, "named executive officers" means all persons identified in the
Summary Compensation Table.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------- -------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities All
Compen- Stock Underlying LTIP Other
Name and sation Awards Options/SARs Payouts Compen-
Principal Position Year Salary($) Bonus($)(5) ($)(7) ($)(8) (#) ($)(9) sation($)(11)
- ------------------ ---- --------- ----------- ------ ------ ------------ ------- -------------
Allen Doane 2003 690,000 400,039(6) 2,135 599,961 85,000 250,000 34,500
President and Chief 2002 665,000 587,400 2,252 187,808 75,000 125,263(10) 29,925
Executive Officer of A&B, 2001 650,000 296,287(6) 2,501 319,460 93,500 342,753(10) 32,500
Vice Chairman of Matson (1)
C. Bradley Mulholland 2003 523,000 257,908(6) 960 419,068 20,000 21,654(10) 902,143
Former Executive Vice 2002 523,000 138,212(6) 1,250 207,286 33,500 80,407 23,535
President of A&B, Vice 2001 520,347 58,268(6) 1,182 87,357 51,000 250,500 26,017
Chairman of Matson (2)
James S. Andrasick 2003 380,167 312,012(6) 315,983 546,283 40,000 52,323(10) 19,008
Executive Vice President 2002 322,500 330,243(6) 738 231,549 32,000 39,221(10) 14,513
of A&B, President and CEO 2001 291,000 86,215(6) 480 129,285 44,000 0 8,821
of Matson (3)
Matthew J. Cox 2003 264,216 177,120 480 0 16,000 6,150 13,211
Senior Vice President and 2002 246,154 108,580 524 0 10,000 0 6,508
Chief Financial Officer of 2001 180,404 43,400 247 0 5,000 0 0
Matson (4)
Stanley M. Kuriyama 2003 248,100 150,002(6) 466 303,400 25,000 52,276(10) 12,405
Vice President of A&B, Vice 2002 239,425 75,630(6) 510 174,676 22,000 40,841(10) 10,774
Chairman and Chief Executive 2001 235,000 67,152(6) 480 207,652 28,000 71,321(10) 11,750
Officer of A&B Properties,
Inc.
(1) Mr. Doane served as Chairman of Matson from July 1, 2002 to January 21,
2004 and, effective January 22, 2004, he was appointed Vice Chairman of
Matson, at which time Mr. Stockholm, Chairman of A&B, was appointed
Chairman of Matson.
(2) Mr. Mulholland was appointed Vice Chairman of Matson, effective July 1,
2002 and retired, effective January 1, 2004. He had been President and
Chief Executive Officer of Matson from prior to January 1, 2000 to July
2002.
(3) Mr. Andrasick became an executive officer of A&B effective June 2000, as
Senior Vice President, Chief Financial Officer and Treasurer. He was
appointed Executive Vice President of A&B effective April 25, 2002, and
was appointed President and Chief Executive Officer of Matson, effective
July 1, 2002. He ceased to serve as Chief Financial Officer and
Treasurer, effective February 9, 2004.
(4) Mr. Cox was appointed Senior Vice President and Chief Financial Officer
of Matson effective June 28, 2001.
(5) "Bonus" consists of cash amounts earned for the fiscal year identified in
column (b) under A&B's One-Year Performance Improvement Incentive Plan
("One-Year Plan"), except as set forth in note (6).
(6) Represents the portion of the named executive officer's award under the
One-Year Plan payable in cash. The named executive officer elected to
receive the balance of the One-Year Plan award in restricted stock, the
value of which is included in column (f). In the case of Mr. Andrasick in
2002 and 2003, the amount also includes a bonus of $215,000 and $130,000,
respectively, in recognition of his additional responsibilities in 2002
and 2003 as President and Chief Executive Officer of Matson.
(7) "Other Annual Compensation" consists of amounts reimbursed to the named
executive officers for their estimated income tax liability by reason of
A&B's payments for the cost of personal excess liability insurance. In
the case of Mr. Andrasick in 2003, such amount also includes payments
of (i) $100,000 in consideration of his relocation from Honolulu,
Hawaii to San Francisco, California to serve as President and Chief
Executive Officer of Matson, (ii) $123,373 in reimbursement for temporary
living and other costs incurred in connection with his relocation and
(iii) $91,170 in reimbursement for taxes associated with the payments
made in (ii).
(8) Represents (i) the dollar amount of One-Year Plan awards, for the fiscal
year identified in column (b), elected to be received in restricted
stock, (ii) the dollar amount of A&B's Three-Year Performance Improvement
Incentive Plan ("Three-Year Plan") awards, for the three-year plan cycle
ending with and including the fiscal year identified in column (b),
elected to be received in restricted stock, and (iii) additional
restricted stock awarded, in the discretion of the Compensation
Committee, in an amount equal to 50% of the dollar amount of the One-Year
Plan and/or Three-Year Plan award that the named executive officer has
elected to take in stock. As of December 31, 2003, the number and value
(based upon a $33.75 per share closing price of A&B's common stock on
December 31, 2003) of shares of restricted stock held by the named
executive officers are as follows: Mr. Doane - 32,313 shares
($1,090,564); Mr. Mulholland - 22,456 shares ($757,890); Mr. Andrasick -
17,355 shares ($585,731); Mr. Cox - 0 shares ($0); and Mr. Kuriyama -
19,314 shares ($651,848). Dividends are payable on the restricted shares
if and to the extent payable on A&B's common stock generally. The
restrictions on Mr. Mulholland's shares were removed effective January 1,
2004 upon his retirement and shares issued during 2004 were not
restricted.
(9) "LTIP Payouts" consist of cash amounts earned under the Three-Year Plan
for the three-year plan cycle ending with and including the fiscal year
identified in column (b).
(10) Represents the portion of the named executive officer's award under the
Three-Year Plan payable in cash. The named executive officer elected to
receive the balance of the Three-Year Plan award in restricted stock, the
value of which is included in column (f).
(11) "All Other Compensation" for 2003 includes: (i) amounts contributed by
A&B to the A&B Profit Sharing Retirement Plan ($10,000 each for Messrs.
Doane, Mulholland, Andrasick, Cox and Kuriyama); (ii) amounts accrued for
profit sharing under the A&B Excess Benefits Plan, pursuant to which
executives chosen by the Compensation Committee receive additional
credits and payments equal to the difference between the maximum benefit
permitted under federal tax laws and the benefit the executives otherwise
would receive under A&B's qualified plans (Mr. Doane - $24,500, Mr.
Mulholland - $16,150, Mr. Andrasick - $9,008, Mr. Cox - $3,211, and Mr.
Kuriyama - $2,405); and (iii) in the case of Mr. Mulholland in 2003, it
includes the payment of $614,493 in accrued vacation pay in accordance
with policy and $261,500 paid in connection with his retirement from
various positions at A&B and Matson.
Option Grants. The following table contains information concerning the
grant of stock options under A&B's 1998 Stock Option/Stock Incentive Plan during
2003 to the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees Price Present Value
Name Granted (#) in Fiscal Year ($/share) Expiration Date ($)(b)
---- ------------ ---------------- --------- --------------- -------------
Allen Doane 85,000(a) 19.96% 26.005 January 21, 2013 365,500
C. Bradley Mulholland 20,000(a) 4.70% 26.005 January 21, 2013 86,000
James S. Andrasick 40,000(a) 9.39% 26.005 January 21, 2013 172,000
Matthew J. Cox 16,000(a) 3.76% 26.005 January 21, 2013 68,800
Stanley M. Kuriyama 25,000(a) 5.87% 26.005 January 21, 2013 107,500
(a) Options granted on January 22, 2003 under the 1998 Stock Option/Stock
Incentive Plan ("1998 Stock Option Plan") with an exercise price per share
equal to the fair market value of the underlying shares of A&B common stock
on the grant date. These options become exercisable in three annual
installments beginning one year after the date of grant. No stock
appreciation rights were granted with these options. Each of these granted
options ("original option") contains a reload feature, pursuant to which
the optionee automatically will be granted a new option to the extent the
original option is exercised within five years after the grant date through
the optionee's delivery of previously-acquired shares of A&B common stock
in payment of the exercise price, and certain other conditions are
satisfied at the time of such exercise. The reload option will be granted
at the time the original option is so exercised, and will allow the
optionee to purchase the same number of shares of A&B common stock as is
delivered in exercise of the original option. The reload option will have
an exercise price per share equal to the greater of (i) the fair market
value per share of A&B common stock on the date the reload option is
granted or (ii) 150% of the exercise price per share in effect under the
original option. The reload option will not become exercisable unless the
shares purchased under the original option have been held for at least two
years. In certain merger, reorganization or change in control situations
involving A&B, the exercisability of options under the 1998 Stock Option
Plan, whether original or reload options, will be accelerated in accordance
with the terms of the grant.
(b) Based on the Black-Scholes option pricing model, the assumptions used
included: (i) stock volatility of 24.4%, (ii) the expected exercise of
options in 5.23 years, (iii) a risk-free rate of return of 3.25%, (iv) a
discount of 4.86% for the forfeiture resulting from an executive officer's
termination of employment prior to exercise, and (v) a long-term dividend
yield of 2.67%. There is no assurance the value realized by an executive
officer will be at or near the value estimated by this option pricing
model. The actual value, if any, an executive officer may realize will
depend upon how much the stock price has increased over the exercise price
on the date the option is exercised.
Option Exercises and Fiscal Year-End Holdings. The following table
provides information, with respect to the named executive officers, concerning
(i) the exercise of stock options and stock appreciation rights during the 2003
fiscal year and the value realized in connection with such exercise, and (ii)
the number and value of unexercised options held as of December 31, 2003.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs At Options/SARs
FY-End (#) At FY-End ($)(d)
Shares -------------------------- ------------------
Acquired Value
Name on Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- ------------ ----------- ------------- ----------- -------------
Allen Doane 25,000 127,500 (a) 366,132 166,168 3,746,296 1,241,644
C. Bradley Mulholland 180,483 1,043,626 (b) 137,683 59,334 1,398,588 427,503
James S. Andrasick 0 0 79,998 76,002 666,807 567,743
Matthew J. Cox 15,000 72,850 (c) 0 31,000 0 258,310
Stanley M. Kuriyama 22,300 130,890 (a) 81,099 49,001 770,135 365,856
(a) Based on the highest sales price of A&B common stock on the date of
exercise minus the exercise price.
(b) Based on either (i) the mean between the highest and lowest sales price
of A&B common stock on the date of exercise or (ii) the highest sales
price of A&B common stock on date of exercise, minus the exercise price.
(c) Based on the mean between the highest and lowest sales price of A&B
common stock on the date of exercise, minus the exercise price.
(d) Based on the mean of the highest and lowest sales price of A&B common
stock on December 31, 2003 ($34.06 per share), minus the exercise price.
Long-Term Incentive Plans. The following table provides information,
with respect to the named executive officers, concerning threshold, target and
maximum award levels determined in 2003 under A&B's Three-Year Performance
Improvement Incentive Plan ("Three-Year Plan") for the three-year performance
cycle beginning 2004 and ending 2006. Under the Three-Year Plan, neither shares,
units nor other quantifiable rights are awarded to participants at the outset of
the three-year cycle. Instead, at the beginning of the plan cycle, the
Compensation Committee, with the advice and recommendations of management,
identifies the participants for the Three-Year Plan and formulates the
performance goals to be achieved for the plan cycle. Goals are established for
A&B as a whole and for each major operating unit. At the end of each plan cycle,
results are compared with goals, and awards are made accordingly. Aggregate
awards for all participants under the Three-Year Plan generally are limited by
minimum pre-tax income levels and return on invested capital for A&B set by the
Compensation Committee in advance of each plan cycle, and if such minimum levels
are not reached, the aggregate awards to participants are reduced
proportionately. The Compensation Committee retains the discretion to adjust
awards if, in its judgment, the awards do not accurately reflect the performance
of A&B, the major operating unit, or the individual. Participants may elect to
receive awards earned under the Three-Year Plan entirely in cash or up to 50
percent in shares of A&B stock and the remainder in cash. Alternatively,
participants may defer all or a portion of such awards. Cash amounts earned
under the Three-Year Plan are reported in the "Summary Compensation Table" above
for the year for which those amounts are earned, under column (h).
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts Under
Non-Stock Price-Based Plans (2)
Performance or Other ----------------------------------------------------
Period Until Matura-
Name tion or Payout (1) Threshold ($) Target ($) Maximum ($)
---- ------------------ ------------- ---------- -----------
Allen Doane December 31, 2006 207,000 414,000 828,000
C. Bradley Mulholland December 31, 2006 0 0 0
James S. Andrasick December 31, 2006 99,000 198,000 396,000
Matthew J. Cox December 31, 2006 31,896 63,742 127,584
Stanley M. Kuriyama December 31, 2006 46,519 93,038 186,076
- --------------------
(1) Performance period beginning January 1, 2004 and ending December 31, 2006.
(2) In addition to the amounts shown, if the executive officers elect to
receive any portion of their awards in restricted shares of A&B common
stock, the Compensation Committee may, in its sole discretion, award
additional shares of A&B common stock under the A&B Restricted Stock Bonus
Plan, valued at up to 50% of the amount of the awards elected to be taken
in stock. Also, if the executive officers elect to defer all or a portion
of their awards under the A&B Deferred Compensation Plan and to convert all
or a portion of the deferred amount into common stock-equivalent units, the
Compensation Committee may, in its sole discretion, award additional common
stock-equivalent units of up to 50% of the number of such units into which
the deferred award is initially converted.
Retirement Plans. The A&B Retirement Plan for Salaried Employees
("Retirement Plan"), a non-contributory defined benefit pension plan, provides
retirement benefits to A&B's salaried employees who are not subject to
collective bargaining agreements. The table below shows estimated annual
retirement benefits to covered participants at normal retirement age (age 65)
under this plan, including amounts payable under A&B's Excess Benefits Plan,
pursuant to which executives chosen by the Compensation Committee will receive
additional credits and payments equal to the difference between the maximum
benefit permitted under federal tax laws and the benefit the executives
otherwise would receive under A&B plans.
PENSION PLAN TABLE
Years of Service
----------------
Remuneration 15 20 25 30 35 40
- ------------ -- -- -- -- -- --
$ 200,000 $ 52,723 $ 70,297 $ 87,872 $ 96,659 $105,446 $114,233
300,000 80,473 107,297 134,122 147,534 160,946 174,358
400,000 108,223 144,297 180,372 198,409 216,446 234,483
500,000 135,973 181,297 226,622 249,284 271,946 294,608
600,000 163,723 218,297 272,872 300,159 327,446 354,733
700,000 191,473 255,297 319,122 351,034 382,946 414,858
800,000 219,223 292,297 365,372 401,909 438,446 474,983
900,000 246,973 329,297 411,622 452,784 493,946 535,108
1,000,000 274,723 366,297 457,872 503,659 549,446 595,233
1,100,000 302,473 403,297 504,122 554,534 604,946 655,358
1,200,000 330,223 440,297 550,372 605,409 660,446 715,483
1,300,000 357,973 477,297 596,622 656,284 715,946 775,608
1,400,000 385,723 514,297 642,872 707,159 771,446 835,733
1,500,000 413,473 551,297 689,122 758,034 826,946 895,858
1,600,000 441,223 588,297 735,372 808,909 882,446 955,983
1,700,000 468,973 625,297 781,622 859,784 937,946 1,016,108
Retirement benefits are based on participants' average monthly
compensation in the five highest consecutive years of their final 10 years of
service. Compensation includes base salary, overtime pay, certain commissions
and fees, shift differentials and one-year bonuses. The amounts are based on an
ordinary straight life annuity payable at normal retirement age, and do not give
effect to social security offsets. Credited years of service as of March 1, 2004
for the named executive officers are: Mr. Doane - 12.9, Mr. Mulholland - 38.6,
Mr. Andrasick - 3.8, Mr. Cox - 2.8 and Mr. Kuriyama - 12.1.
In addition, Messrs. Doane and Mulholland participate in the A&B
Executive Survivor/Retirement Benefit Plan ("Executive Survivor Plan"). The
Executive Survivor Plan provides for a pre-retirement death benefit equal to 50
percent of final base compensation for 10 years and, at such person's election
upon retirement, either (i) a continuation of such death benefit or (ii) an
additional retirement income benefit equal to 26 percent of final base
compensation for 10 years.
Severance Agreements. A&B currently has severance agreements (the
"Severance Agreements") with Messrs. Doane, Andrasick, Cox and Kuriyama in order
to encourage their continued employment with A&B by providing them with greater
security in the event of termination of their employment following a change in
control of A&B. A&B also has entered into Severance Agreements with three other
employees, including one other executive officer. Each Severance Agreement has
an initial two-year term and is automatically extended at the end of each term
for a successive one-year period, unless terminated by A&B. The Severance
Agreements provide for certain severance benefits if the executive's employment
is terminated by A&B without "cause" or by the executive for "good reason"
following a "change in control" of A&B (as those terms are defined in the
Severance Agreements). Upon such termination of employment, the executive will
be entitled to receive a lump-sum severance payment equal to two times the sum
of the executive's base salary plus certain awards and amounts under various A&B
incentive and deferred compensation plans, and an amount equal to the spread
between the exercise price of outstanding options held by the executive and the
higher of the then-current market price of A&B common stock or the highest price
paid in connection with a change in control of A&B. In addition, A&B will
maintain all (or provide similar) employee benefit plans for the executive's
continued benefit for a period of two years after termination. Each Severance
Agreement provides for a tax gross-up payment to offset any excise taxes that
may become payable by an executive by reason of Sections 280G and 4999 of the
Internal Revenue Code of 1986, as amended, if the executive's employment is
terminated without cause or for good reason following a change in control of
A&B.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee directs the management of A&B's executive
compensation program. The Compensation Committee is composed entirely of
independent Board members, and is assisted by an international management
consulting firm that advises the Compensation Committee on compensation matters.
Compensation Philosophy
The Compensation Committee has implemented an executive compensation
philosophy, approved by the Board, that seeks to relate executive compensation
to corporate performance, individual performance and creation of shareholder
value. This philosophy is achieved through a performance-based compensation
system, pursuant to which a substantial portion of executive officers'
compensation is based on the short-term and long-term results achieved for A&B
and A&B shareholders and on the executive officers' individual performances. For
2003, approximately 67 percent of the compensation of named executive officers
in the above Summary Compensation Table was in the form of non-salary,
performance-based compensation.
An objective of the executive compensation philosophy is to enable
executive officers to receive above-average compensation, when warranted by
company, business unit and individual performance, compared with compensation of
executive officers with comparable job responsibilities at other companies, in
order that A&B will be able to attract, retain and motivate executive officers.
In light of the fact that achievement of above-average compensation is tied to
corporate, business unit and individual performance, there is no assurance that
this level of compensation will be achieved.
Comparative data is provided by the Compensation Committee's
independent compensation consultant and is based on national compensation survey
data from approximately 450 organizational operating units, controlled for size
and complexity. This survey data includes seven of the companies (other than
A&B) included in the Dow Jones US Industrial Transportation Index used in the
Shareholder Return Performance Graph which appears in this Proxy Statement. A&B
competes for executive talent across a broad group of industries, so survey data
based on a broad group of industrial companies is more appropriate than survey
data based on just the companies in the Dow Jones US Industrial Transportation
Index.
Consistent with the foregoing compensation objectives, the Compensation
Committee will not necessarily limit executive compensation to that amount
deductible by A&B under Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Compensation Committee nevertheless will consider the deductibility
of executive compensation as one factor in its consideration of compensation
matters, and will consider reasonable steps and alternatives to preserve the
deductibility of compensation payments.
In accordance with the Compensation Committee's executive compensation
philosophy, the major components of compensation under A&B's executive
compensation program consist of: (i) base salary, (ii) annual incentive
compensation pursuant to the One-Year Performance Improvement Incentive Plan
("One-Year Plan"), (iii) annual incentive compensation pursuant to the Annual
Incentive Plan ("Annual Incentive Plan"), and (iv) long-term incentive
compensation pursuant to the Three-Year Performance Improvement Incentive Plan
("Three-Year Plan"), which applies to selected executive officers, and the 1998
Stock Option/Stock Incentive Plan ("1998 Stock Option Plan"), which includes
executive officers and other senior managers.
Base Salary
Adjustments to base salary, if any, are considered annually by the
Compensation Committee. The Compensation Committee reviews the salary
adjustments for the executive officers (other than the Chief Executive Officer)
with the Chief Executive Officer and the senior human resources executive. In
making a salary adjustment, the Compensation Committee considers the executive
officer's performance in the past year, the previously-described survey data
pertaining to the salary level necessary for A&B to pay competitively, and
projected salary increases in the coming year for executive officers in the
selected diversified group of companies, but does not consider any specific
corporate performance factor. For 2003, the base salaries of the Chief Executive
Officer and executive officers as a group were set between the 25th and 75th
percentile. There were three exceptions: two, including a named executive
officer who has retired, were above the 75th percentile and one was below the
25th percentile.
Annual Incentives
The One-Year Plan provides performance-based incentives to eligible
executive officers and other key employees who contribute materially to the
financial success of A&B. In determining the size of an incentive award to an
executive officer, the Compensation Committee considers both corporate
performance and individual performance (the latter includes the performance of
the business unit for which the executive officer is responsible) in the past
year. Corporate performance counts toward 20 percent-60 percent of the incentive
awards, depending upon the executive officer's corporate responsibilities. For
incentive awards granted for the 2003 plan cycle, the corporate performance
factors, and their relative weights, were as follows: corporate profit before
income tax (65 percent) and return on adjusted net assets (35 percent). The
relevant corporate performance factors and their relative weights are determined
annually by the Compensation Committee, and therefore are subject to change for
future plan cycles.
The Annual Incentive Plan provides performance-based incentives to four
groups of key employees, including executives, at the A&B corporate level or one
of three strategic business units. Those individuals who are eligible under the
One-Year Plan will not be eligible to participate in the Annual Incentive Plan.
In determining the size of an incentive award, the Compensation Committee will
consider both corporate performance and individual performance. Corporate
performance will be measured, in the case of an executive at the A&B corporate
level, by the performance of A&B as a whole, and, in the case of an executive
located at one of the strategic business units, by the performance of the
applicable operating unit or units.
Under either incentive Plan, at the beginning of each one-year plan
cycle, the goals for corporate performance factors, as well as the goals for the
specific business units to which the executives are assigned and the goals for
the individuals themselves, are identified, and threshold, target and maximum
award levels are assigned. At the end of each plan cycle, the amounts of the
incentive awards, if any, are determined by comparing results with the
performance goals under the applicable plan. Aggregate awards are limited by
whether A&B or the business unit meets certain levels of performance set by the
Compensation Committee in advance of each plan cycle. The Compensation
Committee, however, retains the discretion to adjust awards if, in its judgment,
the awards do not accurately reflect the performance of A&B, the unit or the
individual.
Long-Term Incentives
The Three-Year Plan is structured like the One-Year Plan, but provides
performance-based incentives to eligible executive officers and a limited number
of other key employees who contribute materially to the financial success of A&B
on the basis of corporate performance and unit performance over a three-year
performance cycle. Corporate performance counts toward 20 percent-100 percent of
the incentive awards, depending upon the executive officer's corporate
responsibilities. For incentive awards granted for the 2001-2003 plan cycle, the
specific corporate performance factors, and their relative weights, were as
follows: corporate profit before income tax (65 percent) and return on adjusted
net assets (35 percent). As with the One-Year Plan, the relevant corporate
performance factors and their relative weights are determined at the beginning
of each plan cycle by the Compensation Committee, and therefore are subject to
change for future plan cycles. In addition, as with the One-Year Plan, the
specific business unit performance factors used in assessing individual
performance, and their relative weights, vary by business unit and job position.
These business unit performance factors include, but are not limited to, profit
before income tax, revenue, cost reduction, gross margin, and cost of crops.
Stock option and/or restricted stock grants under the 1998 Stock Option
Plan are considered annually by the Compensation Committee. Such grants are
viewed as a desirable long-term compensation method because they link directly
the financial interests of executive officers with those of shareholders. Stock
options and/or restricted stock are granted in the discretion of the
Compensation Committee. In determining the size of an award to an executive
officer, the Compensation Committee considers, among other things, the shares
covered by the award as a reflection of the executive officer's current and
expected future contributions to A&B. In determining the size of awards, the
Compensation Committee does not consider amounts of awards outstanding, but does
consider the size of previously-granted awards and the aggregate size of current
awards.
Chief Executive Officer Compensation
For 2003, the Compensation Committee approved a base salary increase
for the Chief Executive Officer, based on his performance in the previous year
and the salaries of other executive officers with comparable job
responsibilities in the selected diversified group of companies. In this regard,
the Compensation Committee's objective was to maintain a competitive base
salary, which was set to correspond to a level slightly above the median of base
salaries in the selected diversified group of companies. Mr. Doane received an
award under the Three-Year Plan for the 2001-2003 performance cycle that was
between threshold and target. Mr. Doane's award under the One-Year Plan for 2003
was slightly less than the exceptional standard under the Plan, and the amount
of the award was determined on the basis of the performance of A&B and Mr. Doane
for the Plan year. Mr. Doane also received a stock option grant totaling 85,000
shares in 2003. That grant was based on an overall review of corporate
performance in 2002, without focus on any specific corporate performance
measure, and an assessment of Mr. Doane's current and expected contributions to
A&B.
The foregoing report is submitted by Mr. Denlea (Chairman), and Messrs.
Chun, King and Stockholm.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2003, the members of the Compensation Committee were Mr. Denlea,
Chairman, and Messrs. Chun, King and Stockholm. Mr. Stockholm serves as
non-executive Chairman of the Boards of A&B and, since January 22, 2004, of
Matson. As set forth above under the subsection "Certain Relationships and
Transactions," Mr. King owns a 6.1 percent interest, and his brother owns a 65
percent interest, in a corporation which has entered into a commercial lease
with a subsidiary of A&B.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of four
directors, all of whom have been determined to be independent pursuant to the
requirements of Nasdaq. Messrs. Dods and McKissick have been determined by the
Board of Directors to be audit committee financial experts under the rules of
the SEC. The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached as Appendix A to this Proxy Statement.
The Audit Committee provides assistance to the Board of Directors in
fulfilling its obligations with respect to matters involving the accounting,
auditing, financial reporting, internal control and legal compliance functions
of A&B. Among other things, the Audit Committee reviews and discusses with
management and Deloitte & Touche LLP, A&B's independent auditors, the results of
the year-end audit of A&B, including the auditors' report and audited financial
statements. In this context, the Audit Committee has reviewed and discussed
A&B's audited financial statements with management, has discussed with Deloitte
& Touche LLP the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended, and, with and without management present, has
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee has received the written disclosures and the letter
from Deloitte & Touche LLP required by Independence Standards Board Standard No.
1, and has discussed with Deloitte & Touche LLP its independence from A&B. The
Audit Committee has determined that the provision of non-audit services rendered
by Deloitte & Touche LLP to A&B is compatible with maintaining the independence
of Deloitte & Touche LLP from A&B in the conduct of its auditing function.
In compliance with applicable SEC rules, the Audit Committee has
adopted policies and procedures for Audit Committee approval of audit and
non-audit services. Under such policies and procedures, the Audit Committee
pre-approves or has delegated to the Chairman of the Audit Committee authority
to pre-approve all audit and non-prohibited, non-audit services performed by the
independent auditor in order to assure that such services do not impair the
auditor's independence. Any additional proposed services or costs exceeding
pre-approved cost levels require additional pre-approval as described above. The
Audit Committee may delegate pre-approval authority to one or more of its
members for services not to exceed a specific dollar amount per engagement.
Requests for pre-approval include a description of the services to be performed,
the fees to be charged and the expected dates that the services will be
performed.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that A&B's audited consolidated
financial statements be included in A&B's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 for filing with the SEC. The Audit Committee
also has appointed, subject to shareholder ratification, Deloitte & Touche LLP
as independent auditors.
The foregoing report is submitted by Mr. McKissick (Chairman), Ms. Shaw
and Messrs. Dods and Watanabe.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on A&B's common stock against the
cumulative total return of the S&P Composite - 500 Stock Index and the Dow Jones
US Industrial Transportation Index (formerly known as the Dow Jones
Transportation Index). The Dow Jones US Industrial Transportation Index is a
published index, which includes A&B. For illustrative purposes, A&B again has
chosen to display the Dow Jones US Real Estate Investment Index in the
comparison.
[CHART]
* $100 INVESTED ON DECEMBER 31, 1998 IN ALEXANDER & BALDWIN, INC. COMMON STOCK,
THE S&P 500 STOCK INDEX, THE DJ US INDUSTRIAL TRANSPORTATION INDEX, AND THE
DJ US REAL ESTATE INVESTMENT INDEX. TOTAL RETURN ASSUMES REINVESTMENT OF
DIVIDENDS. FISCAL YEARS ENDING DECEMBER 31.
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Alexander & Baldwin, Inc. 100 102 122 129 129 174
S&P Composite - 500 100 121 110 97 76 97
DJ US Industrial Transportation 100 92 97 110 112 145
DJ US Real Estate 100 95 121 135 140 192
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed Deloitte &
Touche LLP as independent auditors of A&B for the ensuing year, and the Audit
Committee recommends that shareholders vote in favor of ratifying such
appointment. Deloitte & Touche LLP and its predecessors have served A&B as such
since 1957. Representatives of Deloitte & Touche LLP are expected to be present
at the Annual Meeting, where they will have the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions from shareholders.
For the years ended December 31, 2003 and 2002, professional services
were performed by Deloitte & Touche LLP (including consolidated affiliates) as
follows:
Audit Fees. The aggregate fees billed for the audit of the Company's
annual financial statements for the fiscal years ended December 31,
2003 and 2002 and for the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q were $626,220 and
$614,988, respectively.
Audit-Related Fees. The aggregate fees billed for Audit-Related
services for the fiscal years ended December 31, 2003 and 2002 were
$147,447 and $76,222, respectively. These fees related to audits of
employee benefit plans and research and consultation on joint ventures,
leases and derivatives, the Sarbanes-Oxley Act, capitalizing dry
docking, inventory, investments, acquisitions, revenue recognition and
certification of a vessel for the fiscal year ended December 31, 2003
and to audits of employee benefit plans and research and consultation
on joint ventures, consolidation requirements, proposed acquisitions,
accounting for stock options, tenant leases and review of SEC documents
for the fiscal year ended December 31, 2002.
Tax Fees. The aggregate fees billed for tax services for the fiscal
years ended December 31, 2003 and 2002 were $17,398 and $25,713,
respectively. These fees relate to income tax services for an
individual and an estate for the fiscal year ended December 31, 2003
and to the income tax services for an individual and an estate and
consultation on a proposed acquisition for the fiscal year ended
December 31, 2002.
All Other Fees. The aggregate fees for services not included above were
$9,249 and $10,937, respectively, for the fiscal years ended December
31, 2003 and 2002. The fees relate to accounting training for the
fiscal year ended December 31, 2003 and to consultation regarding
matters including disclosure controls and internal controls and
accounting training for the fiscal year ended December 31, 2002.
APPROVAL OF AMENDMENT TO THE 1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Subject to shareholder approval, the Board of Directors adopted an
amendment to the 1998 Non-Employee Director Stock Option Plan ("1998 Plan") on
February 26, 2004. The proposed amendment will increase the number of shares of
A&B common stock reserved for issuance under the 1998 Plan by an additional
350,000 shares and increase the number of options granted annually to each
non-employee director from 3,000 to 8,000 options.
A description of the 1998 Plan, incorporating the proposed amendment,
is set forth in Appendix B to this Proxy Statement. The description is intended
to be a summary of the material provisions of the 1998 Plan, and does not
purport to be complete. A copy of the 1998 Plan, as amended, will be furnished
to any shareholder upon request.
The Board of Directors believes it is necessary for A&B to continue to
provide equity incentives in order to attract and retain the services of
qualified outside directors. The proposed amendment will allow A&B to continue
to provide these equity incentives.
Accordingly, the Board of Directors recommends that shareholders vote
FOR approval of the proposed amendment to the 1998 Non-Employee Director Stock
Option Plan. The affirmative vote of a majority of the shares of A&B common
stock represented at the Annual Meeting, in person or by proxy, is required for
approval.
OTHER BUSINESS
The Board of Directors of A&B knows of no other business to be
presented for shareholder action at the Annual Meeting. However, should matters
other than those set forth in this proxy statement properly come before the
Annual Meeting, the proxyholders named in the accompanying proxy will vote upon
them in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 2005
Proposals of shareholders intended to be presented pursuant to Rule
14a-8 under the Exchange Act at the Annual Meeting of A&B in the year 2005 must
be received at the headquarters of A&B on or before November 8, 2004 in order to
be considered for inclusion in the year 2005 proxy statement and proxy. In order
for proposals of shareholders made outside of Rule 14a-8 under the Exchange Act
to be considered "timely" within the meaning of Rule 14a-4(c) under the Exchange
Act, such proposals must be received at the headquarters of A&B not later than
January 22, 2005. A&B's Bylaws require that proposals of shareholders made
outside of Rule 14a-8 under the Exchange Act must be submitted, in accordance
with the requirements of the Bylaws, not later than January 22, 2005 and not
earlier than December 23, 2004.
By Order of the Board of Directors
/s/ Alyson J. Nakamura
ALYSON J. NAKAMURA
Secretary
March 8, 2004
APPENDIX A
----------
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
ALEXANDER & BALDWIN, INC.
AS AMENDED BY THE BOARD ON JANUARY 22, 2004
- -------------------------------------------------------------------------------
I. PURPOSE OF THE COMMITTEE
The purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Alexander & Baldwin, Inc. (the "Corporation") is to
oversee the accounting and financial reporting processes of the Corporation and
its subsidiaries and the audits of the financial statements of the Corporation.
While the Committee has the duties and responsibilities set forth in
this charter, the Committee is not responsible for preparing or certifying the
financial statements, for planning or conducting the audit, or for determining
whether the Corporation's financial statements are complete and accurate and are
in accordance with generally accepted accounting principles.
II. COMPOSITION OF THE COMMITTEE
The Committee shall consist of three or more directors, as determined
from time to time by the Board. Each member of the Committee shall be qualified
to serve on the Committee pursuant to the requirements of The Nasdaq Stock
Market, Inc. ("Nasdaq"), and any additional requirements that the Board deems
appropriate. Any vacancy on the Committee shall be filled by majority vote of
the directors then in office. No member of the Committee shall be removed except
by majority vote of the Board.
The Board shall designate one member of the Committee as its
Chairperson. Each member of the Committee must be able to read and understand
fundamental financial statements, including the Corporation's balance sheet,
income statement and cash flow statement. In addition, at least one member must
meet the financial sophistication requirements of Nasdaq.
III. MEETINGS OF THE COMMITTEE
The Committee shall meet as often as it determines necessary to carry
out its duties and responsibilities, but no less frequently than once every
fiscal quarter. To encourage open communications, the Committee shall meet on a
periodic basis with (i) management, (ii) the head of the internal auditing
department, and (iii) the Corporation's independent accountants in separate
executive sessions. The Committee, in its discretion, may ask members of
management or others to attend its meetings (or portions thereof) and to provide
pertinent information as necessary.
The presence in person, by telephone or by videoconference of a
majority of the Committee's members shall constitute a quorum for any meeting of
the Committee. All actions of the Committee will require the vote of a majority
of its members present at a meeting of the Committee at which a quorum is
present. The Committee shall maintain minutes of its meetings and records
relating to those meetings and the Committee's activities.
IV. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
In carrying out its duties and responsibilities, the Committee's
policies and procedures should remain flexible, so that it may be in a position
to best address, react or respond to changing circumstances or conditions. The
following duties and responsibilities are within the authority of the Committee
and the Committee shall, in compliance with applicable law and the rules and
regulations promulgated by the Securities and Exchange Commission ("SEC"),
Nasdaq, or any other applicable regulatory authority:
Selection, Evaluation, and Oversight of the Auditors
- ----------------------------------------------------
(a) Be directly responsible for the appointment, compensation,
retention and oversight of the work of the Corporation's independent auditors
and any other public accounting firm performing audit, review or attest services
for the Corporation, with such independent auditors and other public accounting
firm required to report directly to the Committee;
(b) Review and, in its sole discretion, approve in advance the
Corporation's independent auditors' annual engagement letter, including the
proposed fees contained therein, as well as all audit and, as provided in the
Sarbanes-Oxley Act of 2002 and the SEC rules and regulations promulgated
thereunder, all permitted non-audit engagements and relationships between the
Corporation and such independent auditors (which approval should be made after
receiving input from the Corporation's management, if desired). Approval of
audit and permitted non-audit services will be made by the Committee or as
otherwise provided for in the Audit Committee Independent Auditor Pre-Approval
Policy;
(c) Review the performance of the Corporation's independent auditors
and, in its sole discretion (subject, if applicable, to shareholder
ratification), make decisions regarding the replacement or termination of the
independent auditors when circumstances warrant;
(d) Evaluate the independence of the Corporation's independent auditors
by, among other things:
(i) obtaining and reviewing from the Corporation's
independent auditors a formal written statement
delineating all relationships between the independent
auditors and the Corporation, consistent with
Independence Standards Board Standard 1;
(ii) actively engaging in a dialogue with the Corporation's
independent auditors with respect to any disclosed
relationships or services that may impact the
objectivity and independence of the auditors; and
(iii) taking, or recommending that the Board take,
appropriate action to oversee the independence of the
Corporation's independent auditors;
Oversight of Annual Audit and Quarterly Reviews
- -----------------------------------------------
(e) Review and discuss with the independent auditors, their annual
audit plan, including the timing and scope of audit activities and monitor such
plan's progress and results during the year;
(f) Review with management, the Corporation's independent auditors and
the head of the internal auditing department, information that is required to be
reported by the independent auditors regarding critical accounting policies and
practices, alternative treatments of financial information and their
ramifications, and all other material written communications between the
independent auditors and management;
(g) Resolve all disagreements between the Corporation's independent
auditors and management regarding financial reporting;
Oversight of Financial Reporting Process and Internal Controls
- --------------------------------------------------------------
(h) Review
(i) the adequacy and effectiveness of the Corporation's
accounting and internal control policies and procedures
on a regular basis; and
(ii) the yearly report prepared by management, and attested
to by the Corporation's independent auditors, assessing
the effectiveness of the Corporation's internal control
over financial reporting and stating management's
responsibility for establishing and maintaining
adequate internal control over financial reporting
prior to its inclusion in the Corporation's annual
report;
(i) Review with the chief executive officer and chief financial officer
and independent auditors, periodically, the adequacy and effectiveness of the
Corporation's administrative, disclosure, accounting, and internal control
policies and procedures, including the independent auditor's judgment as to the
quality of the Corporation's accounting principles and the performance of the
Corporation's internal audit function, and all other matters in connection with
the certifications of the chief executive officer and chief financial officer to
be included in the Corporation's reports on Form 10-K and Form 10-Q;
(j) Review and discuss with the independent auditors the results of the
year-end audit of the Corporation, including any comments or recommendations of
the Corporation's independent auditors and, based on such review and discussions
and on such other considerations as it determines appropriate, recommend to the
Board whether the Corporation's financial statements should be included in the
Annual Report on Form 10-K;
Miscellaneous
- -------------
(k) Establish and implement policies and procedures for the Committee's
review and approval of proposed transactions or courses of dealings with respect
to which executive officers or directors or members of their immediate families
have an interest (including all transactions required to be disclosed by Item
404(a) of Regulation S-K);
(l) Meet periodically with the general counsel, and outside counsel
when appropriate, to review legal and regulatory matters, including (i) any
matters that may have a material impact on the financial statements of the
Corporation and (ii) any matters involving potential or ongoing material
violations of law or breaches of fiduciary duty by the Corporation or any of its
directors, officers, employees, or agents or breaches of fiduciary duty to the
Corporation;
(m) Prepare the Audit Committee report to be included in the
Corporation's annual proxy statement;
(n) Review the Corporation's program to monitor compliance with the
Corporation's Code of Conduct, review the reports that will be submitted by the
Corporation's Compliance Committee no less than semi-annually and meet
periodically with a member or members of the Corporation's Compliance Committee
to discuss compliance with the Code of Conduct;
(o) Establish procedures for (i) the receipt, retention and treatment
of complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters, and (ii) the confidential, anonymous
submission by employees of the Corporation of concerns regarding questionable
accounting or auditing matters;
(p) Secure independent expert advice as appropriate, including
retaining, with or without Board approval, independent counsel, accountants,
consultants or others, to assist the Committee in fulfilling its duties and
responsibilities, the cost of such independent expert advisors to be borne by
the Corporation;
(q) Conduct or authorize investigations into any matters within its
scope of responsibilities, including retaining outside advisors to assist the
Committee in the conduct of any investigation, the cost of such investigations
to be borne by the Corporation;
(r) Evaluate the Committee's performance under this Charter on an
annual basis, including an annual review and assessment of the adequacy of this
Charter; and
(s) Perform such additional activities, and consider such other
matters, within the scope of its responsibilities, as the Committee or the Board
deems necessary or appropriate.
APPENDIX B
----------
DESCRIPTION OF THE ALEXANDER & BALDWIN, INC.
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The following is a summary of the principal provisions of the Alexander
& Baldwin, Inc. 1998 Non-Employee Director Stock Option Plan (the "Plan"), as
modified by the amendment which the shareholders are being asked to approve at
the 2004 Annual Meeting of Shareholders.
Purpose. The Plan was adopted by the Board of Directors of A&B (the
"Board") on January 22, 1998 and approved by the shareholders at the 1998 Annual
Meeting of Shareholders. The purpose of the Plan is to make service on the Board
more attractive to present and prospective outside directors, since the
continued services of qualified non-employee, or outside, directors are
considered essential to the management, growth and sustained financial success
of A&B.
Eligibility. Each non-employee member of the Board will be eligible to
receive automatic option grants pursuant to the provisions of the Plan. There
currently are eight non-employee directors on the Board.
Stock Subject to the Plan. The stock issuable under the Plan will be
shares of A&B's authorized but unissued common stock or shares of common stock
reacquired by A&B and held as Treasury shares ("Common Stock"). The aggregate
number of shares issuable under the Plan will not exceed 480,000 shares, which
includes the proposed 350,000 share increase, subject to the adjustments
described below.
If any option granted under the Plan expires or terminates for any
reason prior to exercise, then the number of shares subject to the portion of
the option not so exercised will be available for future option grants under the
Plan. Should the exercise price of an option granted under the Plan be paid with
shares of Common Stock, or should shares of Common Stock otherwise issuable
under the Plan be withheld by A&B in satisfaction of any applicable withholding
taxes incurred in connection with the exercise of an option under the Plan, then
the number of shares of Common Stock available for issuance under the Plan will
be reduced only by the net number of shares of Common Stock issued to the holder
of such option, and not by the gross number of shares for which the option is
exercised.
Should the total number of shares at any time available for grant under
the Plan not be sufficient for the automatic grants to be made at that
particular time to the directors, then the available shares will be allocated
proportionately among all the automatic grants to be made at that time.
In the event any change is made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, combination of shares or
other change affecting the outstanding Common Stock as a class without A&B's
receipt of consideration, then appropriate adjustments will be made to the
aggregate number and/or class of shares issuable under the Plan, and to the
number and/or class of shares for which options subsequently are to be granted
to each non-employee Board member in accordance with the terms of the Plan. The
number of shares and the exercise price per share of the Common Stock subject to
outstanding options also will be adjusted in order to prevent the dilution or
enlargement of benefits thereunder.
If A&B is the surviving entity in any merger or other business
combination which does not result in the termination of outstanding options
pursuant to the provisions of the Plan, then each such continuing option will be
adjusted appropriately to apply and pertain, after such merger or business
combination, to the number of securities which would be issuable, upon
consummation of such merger or business combination, to an actual holder of the
same number of shares of Common Stock as are subject to such option immediately
prior to such merger or other business combination. Appropriate adjustments also
will be made to (i) the option price payable per share, provided the aggregate
option price will remain the same, and (ii) the number and class of securities
for which automatic grants may be made under the Plan in the future.
Valuation. The fair market value per share of Common Stock on any
relevant date will be the mean between the highest and lowest selling prices per
share of Common Stock on such date, 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 will be the mean
between the highest and lowest selling prices on such exchange on the date in
question, as such price is quoted on the composite tape of transactions on such
exchange. 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 will 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 quotation exists. On February 19, 2004, the fair market
value of the Common Stock determined on such basis was $34.20 per share.
Automatic Grants. At each Annual Meeting of Shareholders, each
individual who is at the time elected as a non-employee Board member
automatically will be granted a non-statutory stock option to purchase 8,000
shares of Common Stock (which includes the proposed increase from 3,000
options). The option price per share will be 100 percent of the fair market
value per share of Common Stock on the grant date. Shareholder approval of the
amendment to the Plan also shall constitute pre-approval of each option granted
pursuant to the provisions of the Plan, and of the subsequent exercise of that
option in accordance with those provisions.
Upon exercise of the option, the option price for purchased shares will
be payable immediately in cash or cash equivalents, shares of Common Stock
valued at fair market value on the date of exercise, or any combination of the
foregoing.
Term and Exercisability of Options. Each option will become exercisable
in three successive equal annual installments upon the optionee's completion of
each year of Board service over the three-year period measured from the grant
date; provided, however, that, as described below in "Termination of Service,"
(i) options held by the optionee at the time of his/her death, but not otherwise
fully exercisable, automatically shall accelerate and become exercisable for all
of the option shares, and (ii) options held by the optionee at the time of
his/her termination of Board service by reason of disability, retirement at or
after age 72, or termination with five or more years of Board service, shall
continue to become exercisable for any remaining installments for up to a
36-month period following the date of such termination. The option thereafter
will remain exercisable until the expiration or sooner termination of the option
term. Each granted option will have a maximum term of 10 years, measured from
the automatic grant date.
Change in Control. In the event of a Change in Control of A&B, the
exercisability of each option outstanding under the Plan will accelerate
automatically so that each such option will become exercisable, immediately
prior to the specified effective date for such transaction, for the total number
of shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of such shares.
For purposes of the Plan, a "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 Securities Exchange
Act of 1934, as amended (the "Exchange Act"), whether or not A&B 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 Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of A&B representing 35% or more of the
combined voting power of A&B's then outstanding securities;
(ii) at least a majority of the Board ceases to consist of (a)
individuals who have served continuously on the Board since January 1,
2000 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 A&B) whose election, or
nomination for election by A&B'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,
2000 or whose election or nomination was previously so approved;
(iii) there is consummated a merger or consolidation of A&B or
any direct or indirect subsidiary of A&B 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 A&B, the entity
surviving such merger or consolidation or any parent thereof or (b) a
merger or consolidation effected to implement a recapitalization of A&B
(or similar transaction) in which no person is or becomes the
beneficial owner, directly or indirectly, of securities of A&B (not
including in the securities beneficially owned by such person any
securities acquired directly from A&B or its affiliates) representing
35% or more of the combined voting power of A&B's then outstanding
securities; or
(iv) the shareholders of A&B approve a plan of complete
liquidation or dissolution of A&B or there is consummated an agreement
for the sale or disposition by A&B of all or substantially all of A&B's
assets, other than a sale or disposition by A&B of all or substantially
all of A&B'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 A&B 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 A&B 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 A&B immediately following
such transaction or series of transactions.
Transferability. Options will not be assignable or transferable other
than by will or the laws of inheritance, and during the optionee's lifetime, the
option may be exercised only by the optionee.
Shareholder Rights. An option holder will have none of the rights of a
shareholder with respect to any shares covered by the grant until such
individual has exercised the option, paid the option price and been issued a
stock certificate for the purchased shares.
Termination of Service. Should an optionee cease to be a member of the
Board for any reason (other than death, disability, retirement at or after age
72, or termination with five or more years of Board service) while the holder of
one or more automatic grants under the Plan, then each such grant will remain
exercisable, for the number of shares for which the grant is exercisable at the
time of such cessation of Board service, for a six-month period following the
date of such cessation of Board membership.
Should any optionee cease Board service by reason of death, then any
outstanding grants held by him/her at that time automatically shall accelerate
and become immediately exercisable for all of the shares at the time subject to
that option, and may be exercised by the personal representative of the
optionee's estate, or by the person or persons to whom the option is transferred
pursuant to the optionee's will or in accordance with the laws of inheritance.
However, such exercise must occur prior to the earlier of (i) the tenth
anniversary of the grant date of the option or (ii) the expiration of 12 months
following the optionee's death. Upon the occurrence of the earlier event, the
option will terminate and cease to be exercisable.
Should an optionee cease to be a Board member by reason of disability,
retirement at or after age 72, or termination with five or more years of Board
service, then each automatic grant at the time held by such optionee will remain
exercisable, and will continue to become exercisable, for any remaining
installments during the 36 months following the date of cessation of Board
membership.
In no event will any option remain exercisable after the specified
expiration of the 10-year option term.
No Impairment of A&B's Rights. Nothing in this Plan or any grant made
pursuant to the Plan will be construed or interpreted so as to affect adversely
or otherwise impair A&B's right to remove any optionee from service on the Board
at any time in accordance with the provisions of applicable law.
Term of Plan. The Plan will terminate upon the earliest to occur of (i)
the close of business on January 21, 2008, (ii) the date on which all shares
available for issuance under the Plan and any amendments have been issued
pursuant to the exercise of the options, or (iii) the date on which all
outstanding options are terminated or cashed out in connection with the change
in control provisions of the Plan. If the date of termination is determined
under clause (i) above, then any option grants outstanding on such date will not
be affected by the termination of the Plan and will continue to have force and
effect in accordance with the provisions of the instruments evidencing such
grants.
Federal Tax Consequences. All options granted under the Plan will be
non-statutory options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code. The Federal income tax treatment of
such options may be summarized as follows:
No taxable income is recognized by an optionee upon the grant of a
non-statutory option. In general, the optionee will recognize ordinary income,
in the year in which the option is exercised for vested shares of Common Stock,
equal to the excess of the fair market value of the purchased shares at the date
of exercise over the exercise price paid for those shares.
A&B will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee in connection with the exercise of
the non-statutory option. The deduction will be allowed for the taxable year of
A&B in which the ordinary income is recognized by the optionee.
New Plan Benefits. As of February 19, 2004, non-employee directors had
been granted options as to 120,000 shares of Common Stock under the Plan, with
111,000 of such options outstanding and 9,000 of such options having been
exercised. There remains available for issuance under the Plan 363,000 shares of
Common Stock (including the 350,000-share increase to the Plan that the
shareholders are being asked to approve).
Accounting Treatment. As of January 31, 2004, the grant of options with
an exercise price equal to 100% of the fair market value of the option shares on
the grant date will not result in any direct charge to A&B's earnings. However,
the fair value of those options is required to be disclosed in the notes to
A&B's financial statements, and A&B also must disclose the pro-forma impact
those options would have upon A&B's reported earnings if the value of those
options at the time of grant were treated as a compensation expense. The number
of outstanding options also is a factor in determining A&B's earnings per share
on a diluted basis.
Securities authorized for issuance under equity compensation plans as
of December 31, 2003, included:
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under
Plan Category issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
warrants and rights rights reflected in column (a))
- ----------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- ----------------------------------------------------------------------------------------------------------------------
Equity compensation plans 2,476,000 $24.57 1,598,494
approved by security holders
- ----------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders -- -- 271,719*
- ----------------------------------------------------------------------------------------------------------------------
Total 2,476,000 $24.57 1,870,213
- ----------------------------------------------------------------------------------------------------------------------
* A&B has two compensation plans under which its stock is authorized for
issuance that were adopted without the approval of its security
holders. (1) Under A&B's Non-Employee Director Stock Retainer Plan,
each outside Director is issued a stock retainer of 300 A&B shares
after each year of service on A&B's Board of Directors. Those 300
shares vest immediately and are free and clear of any restrictions.
These shares are issued in January of the year following the year of
the Director's service to A&B. (2) Under A&B's Restricted Stock Bonus
Plan, the Compensation Committee identifies the executive officers and
other key employees who participate in one- and three-year performance
improvement incentive plans and formulates performance goals to be
achieved for the plan cycles. At the end of each plan cycle, results
are compared with goals, and awards are made accordingly. Participants
may elect to receive awards entirely in cash or up to 50 percent in
shares of A&B stock and the remainder in cash. If a participant elects
to receive a portion of the award in stock, an additional 50 percent
stock bonus may be awarded. In general, shares issued under the
Restricted Stock Bonus Plan may not be traded for three years following
the award date; special vesting provisions apply for the death,
termination or retirement of a participant.
Of the 271,719 shares that were available for future issuance, 7,950
shares were available for future issuance under the Non-Employee
Director Stock Retainer Plan and 263,769 shares were available for
issuance under the Restricted Stock Bonus Plan.
PROXY CARD
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 22, 2004
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints A. Doane,
W. A. Dods, Jr., and M. G. Shaw, and each of them,
proxies with full power of substitution, to vote
the shares of stock of Alexander & Baldwin, Inc.,
which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Corporation
to be held on Thursday, April 22, 2004, and at any
adjournments or postponements thereof, on the
matters set forth in the Notice of Meeting and
Proxy Statement, as follows:
(continued and to be signed on reverse side)
______________________________________________________________________________
FOLD AND DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3 BELOW.
---
Please mark your X
votes as indicated
in this example
1. ELECTION OF DIRECTORS (Check one box only): 01 M. J. Chun, 02 A. Doane, 03
W. A. Dods, Jr., 04 C. G. King,
05 C. H. Lau, 06 C. R.
McKissick, 07 M. G. Shaw,
08 C. M. Stockholm,
09 J. N. Watanabe.
FOR all nominees __ (To withhold authority to vote
listed to the right: |__| for any individual nominee,
check the "FOR all nominees"
WITHOUT AUTHORITY box to the left and write the
to vote for all nominees listed to name of the nominee for whom
the right: __ you wish to withhold authority
|__| in the space provided below.)
____________________________________________________________________________
2. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP
as the auditors of the Corporation:
FOR AGAINST ABSTAIN
__ __ __
|__| |__| |__|
3. PROPOSAL TO AMEND THE 1998 NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN
FOR AGAINST ABSTAIN
__ __ __
|__| |__| |__|
4. In their discretion on such other matters as properly
may come before the meeting or any adjournments or
postponements thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS
AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE SIGN EXACTLY AS NAME(S) APPEARS ABOVE
Signature____________________ Signature__________________ Date_________________
IMPORTANT: WHEN STOCK IS IN TWO OR MORE NAMES, ALL SHOULD SIGN. WHEN SIGNING
AS EXECUTOR, TRUSTEE, GUARDIAN OR OFFICER OF A CORPORATION, GIVE TITLE AS SUCH.
______________________________________________________________________________
FOLD AND DETACH HERE
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card.
Internet
http://www.eproxy.com/alex
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.