SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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--------------------------
[ ] Preliminary Proxy Statement
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Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
________________________
ALEXANDER & BALDWIN, INC.
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if other than the Registrant)
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ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
March 7, 2005
To the Shareholders of Alexander & Baldwin, Inc.:
The 2005 Annual Meeting of Shareholders of Alexander & Baldwin, Inc.
will be held in the Bankers Club on the 30th Floor of the First Hawaiian Center,
999 Bishop Street (please note the change in location from prior years; a map
providing directions to the Annual Meeting is located on the following page),
Honolulu, Hawaii, on Thursday, April 28, 2005 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
2004, 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/ W. Allen Doane
------------------
W. ALLEN DOANE
President and Chief Executive Officer
[OBJECT OMITTED]
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 Bankers Club on the 30th
Floor of the First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii, on
Thursday, April 28, 2005, at 8:30 a.m., Honolulu time, for the following
purposes:
1. To elect ten 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
Stock Option/Stock Incentive Plan which, among other things,
authorizes for issuance an additional 700,000 shares of A&B
common stock, eliminates the 250,000-share limitation on the
aggregate number of shares available for issuance through the
restricted stock program, specifies minimum vesting periods
for restricted stock and prohibits the repricing of options;
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 18,
2005 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 7, 2005
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 28, 2005 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 18,
2005 are entitled to notice of and to vote at the Annual Meeting. On that date,
A&B had outstanding 43,677,850 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 Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive
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
or personal interview. Arrangements also will be made with brokerage houses and
other custodians, nominees and fiduciaries that are record holders of A&B's
common stock to forward proxy soliciting material to the beneficial owners of
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 7, 2005.
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 ten persons
named below, all of whom, except Mr. Pasquale, are currently members of the
Board of Directors. The Board has reviewed each of its current directors and its
new nominee, and has determined that all such persons, with the exception of Mr.
Doane, who is an executive officer of A&B, are independent under Nasdaq rules.
The Board 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. On
February 24, 2005, the Board of Directors amended the Bylaws to authorize the
Board to waive for a period of one year the Bylaw provision prohibiting the
election of a director who has attained the age of 72. The new Bylaw provides
that no person granted such a waiver may stand for election once having attained
the age of 73. Acting pursuant to such authority, the Board waived for one year
the age 72 prohibition with respect to Mr. Stockholm, who is Chairman of the
Board, and Mr. McKissick, both of whom are 72 years old. As a result, Messrs.
Stockholm and McKissick are standing for reelection to the Board of Directors at
the Annual Meeting. They will not be eligible to stand for election as directors
next year. The new Bylaw provides that the Board's authority to grant such
waivers expired on March 7, 2005, and therefore no further waivers may be
granted pursuant thereto.
The following table sets forth the name, age (as of March 31, 2005) 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
---- ------------------------------------------ --- --------
Michael J. Chun President and Headmaster, The Kamehameha 61 1990
Schools, Kapalama Campus, Honolulu, Hawaii
(educational institution) since June 1988;
Director of Bank of Hawaii Corporation.
W. Allen Doane President and Chief Executive Officer of 57 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 of BancWest 63 1989
Jr. Corporation and its subsidiary, First
Hawaiian Bank, Honolulu, Hawaii,
(banking) since September 1989; Chief
Executive Officer of BancWest Corporation and
its subsidiary, First Hawaiian Bank, from
September 1989 through December 2004;
Director of BancWest Corporation and its
banking subsidiaries, First Hawaiian Bank
and Bank of the West; Director of Maui
Land & Pineapple Company, Inc. since October
2004.
Charles G. King President and Dealer Principal, King 59 1989
Auto Center, Lihue, Kauai, Hawaii
(automobile dealership) since October
1995; Dealer Principal, King Windward
Nissan, Kaneohe, Oahu, Hawaii (automobile
dealership) since February 1999; Dealer
Principal, King Infiniti (automobile
dealership) since April 2004.
Constance H. Lau President, Chief Executive Officer and 53 2004
Director of American Savings Bank,
F.S.B. ("ASB"), Honolulu, Hawaii
(banking), a subsidiary of Hawaiian
Electric Industries, Inc., since June
2001; Chief Operating Officer and Senior
Executive Vice President of ASB from
December 1999 to June 2001; Director of
Hawaiian Electric Industries, Inc. from
June 2001 to December 2004.
Carson R. Managing Director, The Corporate 72 1971
McKissick Development Company, Los Angeles,
California (financial advisory services)
since July 1991.
Douglas M. President and Chief Executive Officer of 50 --
Pasquale Nationwide Health Properties, Inc. ("NHP")
(healthcare real estate investment trust)
since April 2004; Director of NHP since
November 2003; Executive Vice President
and Chief Operating Officer of NHP from
November 2003 to April 2004; Chairman
of the Board and Chief Executive Officer
of ARV Assisted Living, Inc. from
December 1999 to September 2003; President
and Chief Executive Officer of Atria
Senior Living Group from April 2003 to
September 2003.
Maryanna G. Shaw Private investor. 66 1980
Charles M. Managing Director, Trust Company of the 72 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 & 62 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 shareholder's notice that the
person's name be placed in nomination is received by the Chairman of the Board,
the President, or the Secretary of A&B not less than 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 eleven meetings during 2004. In conjunction with several of these meetings,
the independent directors of A&B met in formally-scheduled executive sessions,
led by the Chairman of the Board. 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 Committee, and a Nominating and Corporate Governance Committee.
The current members of the Audit Committee, which held six meetings
during 2004, are Mr. McKissick, Chairman, Mr. Dods, Ms. Lau and Ms. Shaw, 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, and are summarized in
the Audit Committee Report which appears in this Proxy Statement. A current copy
of the charter of the Audit Committee is available on the corporate governance
page of A&B's corporate website at www.alexanderbaldwin.com.
The current members of the Compensation Committee, which held six
meetings during 2004, are Mr. King, Chairman, Dr. Chun, Mr. Stockholm and Mr.
Watanabe, 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 Compensation Committee
is governed by a charter, a current copy of which is available on the corporate
governance page of A&B's corporate website at www.alexanderbaldwin.com.
The current members of the Nominating and Corporate Governance
Committee (the "Nominating Committee"), which held five meetings in 2004, 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 the corporate governance page of 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, Hawaii 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, a commitment to shareholders, a genuine interest in A&B and a
willingness and ability to devote adequate time to a director's duties. The
Committee also is 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 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 Committee may request information from the candidate, review
the person's accomplishments and qualifications, and conduct interviews with the
candidate. The Committee's evaluation process does not vary based on whether or
not a candidate is recommended by a shareholder, 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. Mr. Pasquale, who has been nominated by the Board for election as a
director, was recommended to the Nominating Committee by the third-party search
firm.
Compensation of Directors. 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. 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. 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 2005, Mr.
Stockholm also received a discretionary cash bonus in the amount of $100,000 for
services rendered in 2004. 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 2004 received an annual stock retainer of
300 shares of A&B common stock (or a proportionate amount if the director served
for less than a full year), which had a fair market value of $9,972 on the date
of the award. Directors who are employees of A&B or its subsidiaries do not
receive compensation for serving as directors.
Under A&B's 1998 Non-Employee Director Stock Option Plan (the
"Non-Employee Director Plan"), a non-qualified stock option to purchase 8,000
shares of A&B common stock automatically is granted at each Annual Meeting of
Shareholders to each individual who is, at the meeting, elected or reelected as
an outside director of A&B. The option price per share is the 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 2004 Annual Meeting, held on April 22, 2004, options to
purchase 8,000 shares of A&B common stock, at an exercise price of $33.37 per
share, were granted to each of the outside directors under the Non-Employee
Director Plan.
In the past, A&B has maintained life insurance, personal excess
liability insurance and a retirement plan, and provided medical and dental
benefits for its outside directors. These benefits have ceased as of December
31, 2004 (with the exception of medical and dental benefits, which will cease as
of June 30, 2005). Through 2004, the outside directors were 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 afforded coverage of $50,000 for directors. The
personal excess liability insurance program afforded coverage of $10 million for
the outside directors ($20 million for the Chairman of the Board). Under the
retirement plan, a director with five or more years of service will receive a
lump-sum payment upon retirement or attainment of age 65, whichever is later
(but in no event later than the date of the first annual meeting of shareholders
after the director attains age 72), that is actuarially equivalent to a payment
stream for the life of the director consisting of 50 percent of the amount of
the annual retainer fee in effect at the time of his or her retirement or other
termination, plus 10 percent of that amount, up to an additional 50 percent, for
each year of service as a director over five years. Effective December 31, 2004,
these retirement benefits were frozen, based on a director's status of service
on that date. Directors will retain business travel accident coverage of
$200,000 for themselves and $50,000 for their spouses while accompanying
directors on A&B business. They also may participate in the Company's matching
gifts program, in which the Company matches contributions to qualified cultural
and educational organizations up to a maximum of $3,000 for each director, and
in the Company's deferred compensation program.
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 2004 were in attendance at the 2004 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 18, 2005, 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
------------------- -------------------- ----------
FMR Corp. 5,052,453 (a) 11.6
82 Devonshire
Boston, MA 02109
Barclays Global Investors, NA. 2,362,340 (b) 5.4
45 Fremont Street
San Francisco, CA 94105
Hotchkis and Wiley Capital Management, LLC 2,284,000 (c) 5.2
725 South Figueroa Street, 39th Floor
Los Angeles, CA 90017
--------------------
(a) As reported in Amendment No. 3 to Schedule 13G dated February 10, 2005
(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, has, in the aggregate, sole voting
power over 2,102,175 shares, sole dispositive power over all 5,052,453
shares, and does not have shared voting or dispositive power over any
shares.
(b) As reported in a Schedule 13G dated February 14, 2005 (the "Barclays
13G") filed with the SEC. According to the Barclays 13G, three entities
(Barclays Global Investors, NA., Barclays Global Fund Advisors and
Barclays Global Investors, Ltd.) have, in the aggregate, sole voting
power over 2,069,787 shares, sole dispositive power over all 2,362,340
shares, and do not have shared voting or dispositive power over any
shares.
(c) As reported in a Schedule 13G dated February 10, 2005 (the "Hotchkis
13G") filed with the SEC. According to the Hotchkis 13G, Hotchkis and
Wiley Capital Management, LLC has sole voting power over 1,802,000
shares, sole dispositive power over all 2,284,000 shares, and does not
have shared voting or dispositive power over any shares.
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Security Ownership of Directors and Executive Officers. The following
table shows the number of shares of A&B common stock beneficially owned as of
February 18, 2005 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.
Number of
Name or Number Shares Stock Percent
in Group Owned (a)(b) Options (c) Total of Class
-------- ------------ ----------- ----- --------
Michael J. Chun 5,087 28,666 33,753 --
W. Allen Doane 139,512 329,699 469,211 1.1
Walter A. Dods, Jr. 9,712 28,666 38,378 --
Charles G. King 7,985 28,666 36,651 --
Constance H. Lau 400 2,666 3,066 --
Carson R. McKissick 6,300 27,666 33,966 --
Douglas M. Pasquale 0 0 0 --
Maryanna G. Shaw 298,815 28,666 327,481 0.7
Charles M. Stockholm 16,746 4,666 21,412 --
Jeffrey N. Watanabe 511 4,666 5,177 --
James S. Andrasick 66,325 37,767 104,092 0.2
Matthew J. Cox 7,064 14,066 21,130 --
Stanley M. Kuriyama 66,312 85,799 152,111 0.3
G. Stephen Holaday 56,400 4,000 60,400 0.1
21 Directors, Nominees
and Executive Officers
as a Group 741,230 685,992 1,427,222 3.3
--------------------
(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, including as follows:
BancWest Corporation - 2,065,339 shares, Bank of Hawaii - 523,571
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: Dr.
Michael J. Chun - 3,128 shares, Mr. King - 685 shares, Ms. Lau - 200
shares, Ms. Shaw - 19,515 shares, and directors, nominees and executive
officers as a group - 23,528 shares, and (ii) sole voting power only,
as follows: Mr. Holaday - 384 shares, and directors, nominees and
executive officers as a group - 729 shares.
(c) Amounts reflect shares deemed to be owned beneficially by directors,
nominees and executive officers because they may be acquired prior to
May 6, 2005 through the exercise of stock options.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934 (the "Exchange Act") requires A&B's
directors and executive officers, and persons who own more than 10 percent of
its common stock, to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the SEC. A&B believes that during fiscal 2004, its directors and
executive officers filed all reports required to be filed under Section 16(a) on
a timely basis, except that Dr. Michael J. Chun was required to file a Form 4 on
or before March 11, 2004, with respect to the sale of 3,000 shares, but such
Form 4 was filed on March 22, 2004.
Certain Relationships and Transactions. Until December 31, 2004, Walter
A. Dods, Jr., a director of A&B, was 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. Effective as of January
1, 2005, Mr. Dods ceased to be Chief Executive Officer of BancWest Corporation
and First Hawaiian Bank, but continued as Chairman of the Board of BancWest
Corporation and First Hawaiian Bank.
First Hawaiian Bank (i) has a 26.75 percent participation in and is
agent for A&B's $200,000,000 revolving credit and term loan agreement, under
which no amount was outstanding at February 15, 2005, (ii) has a revolving
credit agreement with A&B under which $9,000,000 was outstanding at February 15,
2005, and which, when combined with First Hawaiian Bank's share of amounts drawn
under the previously described $200,000,000 revolving credit and term loan
agreement and letters of credit totaling $1,068,000, may not exceed $78,500,000,
(iii) had a $25,000,000 revolving credit facility with Matson to support the
issuance of commercial paper, which was terminated on August 31, 2004, with no
amounts outstanding, (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
15, 2005, and for which a limited guarantee equal to the lesser of $15,000,000
or 15.5 percent of the outstanding loan balance was executed by an A&B
subsidiary, (v) has issued letters of credit, totaling $11,375,000 as of
February 15, 2005, on behalf of Matson for insurance security purposes, (vi) has
issued letters of credit totaling $1,068,000, as of February 15, 2005, 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 five vehicle leases
with Matson, totaling $96,000 as of February 15, 2005, (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 aggregate net rents in 2004 of
$332,360, and from and after January 1, 2005 of $1,046,140, with certain rental
payments subject to renegotiation from time to time, and (ix) acts as custodian
of $289,979,000 in assets for A&B's pension plan as of January 31, 2005.
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. The adult son of Carson
R. McKissick, a director of A&B, has entered into an agreement to purchase a
condominium unit in a project being developed by a limited liability company in
which a subsidiary of A&B is a member, for a purchase price of $1,070,000.
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 that has entered into a
five-year commercial lease (with one five-year renewal option) at market rates
with a subsidiary of A&B. The aggregate rental obligation under the five-year
lease term is $974,100.
Constance H. Lau, a director of A&B, was a director of Hawaiian
Electric Industries, Inc. ("HEI") until December 2004. She also is President,
Chief Executive Officer and a director of American Savings Bank, F.S.B., a
subsidiary of HEI. A&B and its subsidiaries have a number of relationships with
American Savings Bank, including:
American Savings Bank (i) has a 9 percent participation in A&B's
$200,000,000 revolving credit and term loan agreement under which no amount was
outstanding at February 15, 2005, (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 15, 2005, and for which a limited guarantee equal to the
lesser of $15,000,000 or 15.5 percent of the outstanding loan balance was
executed by an A&B subsidiary, (iii) has a $40,000,000 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 $581,900 at February 15, 2005, (iv) 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 aggregate net rents in 2004
of $425,966, and from and after January 1, 2005 of $4,026,012, and (v) 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 per month. A&B also has four certificates
of deposit with American Savings Bank that total $89,058 and which have
maturities of less than six months.
In 2004, an A&B division sold electricity that it had produced to Maui
Electric Company, Inc., an HEI subsidiary, in the amount of approximately
$11,700,000.
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
and November 2012, with aggregate net rents in 2004 of approximately $71,700,
and from and after January 1, 2005 of approximately $512,000. 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 2014 and with an aggregate rent in 2004 of approximately $164,800, and
from and after January 1, 2005 of approximately $1,120,600.
The brother of Matthew J. Cox, Senior Vice President and Chief
Financial Officer of Matson, is an officer in a company from which Matson leased
transportation equipment in 2004 in the amount of $1,499,525.
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 2004
for fees in the amount of $209,577.
Code of Ethics. A&B has adopted a Code of Ethics that applies to the
Chief Executive Officer, Chief Financial Officer and Controller (the "Code"). A
copy of the Code, along with copies of Codes of Conduct applicable to all
directors, officers and employees of A&B, is posted on the corporate governance
page of A&B's website, www.alexanderbaldwin.com. A&B intends to satisfy any
disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to,
or a waiver from, a provision of the Code by posting such information on its
website.
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation. The following table summarizes
the cash and noncash compensation paid by A&B for services rendered, during each
of the last three completed fiscal years, by A&B's Chief Executive Officer and
the four other most highly compensated executive officers. As used in this Proxy
Statement, "named executive officers" means all persons identified in the
Summary Compensation Table.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------- -------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities All
Compen- Stock Underlying LTIP Other
Name and sation Awards Options/SARs Payouts Compen-
Principal Position Year Salary($) Bonus($)(3) ($)(6) ($)(7) (#) ($)(8) sation($)(10)
------------------ ---- --------- ----------- ------ ------ ------------ ------- -------------
W. Allen Doane (1) 2004 716,250 425,025(4) 2,424 1,173,555 85,000 850,000 27,638
President and Chief 2003 690,000 400,039(4) 2,135 599,961 85,000 250,000 34,500
Executive Officer of A&B 2002 665,000 587,400 2,252 187,808 75,000 125,263(9) 29,925
James S. Andrasick (2) 2004 476,400 205,390(4) 61,819 879,221 41,300 200,085(9) 20,442
President and Chief Executive 2003 380,167 312,012(4) 315,983 546,283 40,000 52,323(9) 19,008
Officer of Matson 2002 322,500 330,243(4) 738 231,549 32,000 39,221(9) 14,513
Matthew J. Cox 2004 281,024 184,665(5) 521 123,188 10,200 87,572(9) 14,581
Senior Vice President and 2003 264,216 177,120 480 0 16,000 6,150 13,211
Chief Financial Officer 2002 246,154 108,580 524 0 10,000 0 6,508
of Matson
Stanley M. Kuriyama 2004 259,725 143,087(4) 506 316,543 30,400 250,000 13,942
Vice Chairman and Chief 2003 248,100 150,002(4) 466 303,400 25,000 52,276(9) 12,405
Executive Officer of A&B 2002 239,425 75,630(4) 510 174,676 22,000 40,841(9) 10,774
Properties, Inc.
G. Stephen Holaday 2004 271,225 78,224(4) 506 195,983 12,000 50,000 14,287
General Manager, Hawaiian 2003 265,000 44,779(4) 466 67,108 19,000 18,347 13,250
Commercial & Sugar Company 2002 255,725 97,815(4) 510 146,616 14,000 102,481 11,508
(1) Mr. Doane also 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. 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.
(3) "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 (4).
(4) 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 dual responsibilities during those
periods as President and Chief Executive Officer of Matson and Chief
Financial Officer and Treasurer of A&B.
(5) Includes (i) the portion of the named executive officer's award under the
One-Year Plan which such officer elected to defer under the A&B Deferred
Compensation Plan and to convert into common stock-equivalent units, and
(ii) additional common stock-equivalent units awarded, in the discretion
of the Compensation Committee, in an amount equal to 50 percent of the
common stock-equivalent units into which the deferred One-Year Plan award
was converted.
(6) "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), and in 2004, such amount also included $34,800 in reimbursement for
additional costs associated with his relocation.
(7) 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, (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 the
Three-Year Plan award that the named executive officer has elected to
take in stock, and (iv) the dollar amount of restricted stock granted
under the A&B 1998 Stock Option/Stock Incentive Plan for the fiscal year
identified in column (b). As of December 31, 2004, the number and value
(based upon a $42.42 per share closing price of A&B's common stock on
December 31, 2004) of shares of restricted stock held by the named
executive officers are as follows: Mr. Doane - 53,515 shares
($2,270,106); Mr. Andrasick - 38,449 shares ($1,631,007); Mr. Cox - 2,000
shares ($84,840); Mr. Kuriyama - 29,730 shares ($1,261,147); and Mr.
Holaday - 12,027 shares ($510,185). Dividends are payable on the
restricted shares to the extent payable on A&B's common stock generally.
(8) "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).
(9) 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).
(10) "All Other Compensation" for 2004 includes: (i) amounts contributed by
A&B to the A&B Profit Sharing Retirement Plan and A&B Individual Deferred
Compensation Plan ($12,300 each for Messrs. Doane, Andrasick, Cox,
Kuriyama and Holaday); and (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 - $15,338, Mr. Andrasick - $8,142, Mr. Cox -
$2,281, Mr. Kuriyama - $1,642, and Mr. Holaday - $1,987).
Option Grants. The following table contains information concerning the
grant of stock options under the 1998 Plan during 2004 to the named executive
officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Number of Percent of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees Price Present Value
Name Granted (#) in Fiscal Year ($/share) Expiration Date ($)(2)
---- ------------ ---------------- --------- --------------- -------------
W. Allen Doane 85,000(1) 20.50% 33.505 February 24, 2014 632,400
James S. Andrasick 41,300(1) 9.96% 33.505 February 24, 2014 307,272
Matthew J. Cox 10,200(1) 2.46% 33.505 February 24, 2014 75,888
Stanley M. Kuriyama 30,400(1) 7.33% 33.505 February 24, 2014 226,176
G. Stephen Holaday 12,000(1) 2.89% 33.505 February 24, 2014 89,280
(1) Options granted on February 25, 2004 under the 1998 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 Plan, whether
original or reload options, will be accelerated in accordance with the
terms of the grant.
(2) Based on the Black-Scholes option pricing model, the assumptions used
included: (i) stock volatility of 22.79%, (ii) the expected exercise of
options in 5.79 years, (iii) a risk-free rate of return of 3.63%, (iv) a
discount of 6.41% for the forfeiture resulting from an executive officer's
termination of employment prior to exercise, and (v) a long-term dividend
yield of 2.12%. 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 2004
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, 2004.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs At Options/SARs
FY-End (#) At FY-End ($)(3)
Shares ---------------------- --------------------
Acquired Value
Name on Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- ------------ ----------- ------------- ----------- -------------
W. Allen Doane 202,600 3,660,822 (1) 248,033 166,667 4,061,717 2,123,797
James S. Andrasick 118,665 1,789,596 (2) 0 78,635 0 993,636
Matthew J. Cox 15,000 222,525 (2) 333 25,867 5,543 351,481
Stanley M. Kuriyama 46,100 718,399 (1) 59,999 54,401 972,690 673,728
G. Stephen Holaday 55,100 1,117,865 (1) 62,665 29,335 1,104,488 395,877
(1) 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, in each case minus the
exercise price.
(2) 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.
(3) Based on the mean of the highest and lowest sales price of A&B common
stock on December 31, 2004 ($42.65 per share), minus the exercise price.
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 $ 52,578 $ 70,104 $ 87,630 $ 96,393 $105,156 $ 113,919
300,000 80,328 107,104 133,880 147,268 160,656 174,044
400,000 108,078 144,104 180,130 198,143 216,156 234,169
500,000 135,828 181,104 226,380 249,018 271,656 294,294
600,000 163,578 218,104 272,630 299,893 327,156 354,419
700,000 191,328 255,104 318,880 350,768 382,656 414,544
800,000 219,078 292,104 365,130 401,643 438,156 474,669
900,000 246,828 329,104 411,380 452,518 493,656 534,794
1,000,000 274,578 366,104 457,630 503,393 549,156 594,919
1,100,000 302,328 403,104 503,880 554,268 604,656 655,044
1,200,000 330,078 440,104 550,130 605,143 660,156 715,169
1,300,000 357,828 477,104 596,380 656,018 715,656 775,294
1,400,000 385,578 514,104 642,630 706,893 771,156 835,419
1,500,000 413,328 551,104 688,880 757,768 826,656 895,544
1,600,000 441,078 588,104 735,130 808,643 882,156 955,669
1,700,000 468,828 625,104 781,380 859,518 937,656 1,015,794
1,800,000 496,578 662,104 827,630 910,393 993,156 1,075,919
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, 2005
for the named executive officers are: Mr. Doane - 13.9, Mr. Andrasick - 4.8, Mr.
Cox - 3.8, Mr. Kuriyama - 13.1 and Mr. Holaday - 22.1.
In addition, Messrs. Doane and Holaday 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, Kuriyama and Holaday
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 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.
The charter of the Compensation Committee is available on the corporate
governance page of A&B's corporate website at www.alexanderbaldwin.com.
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
2004, approximately 71 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
corporate, 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 460 organizational operating units, controlled for size
and complexity. This survey data includes four 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.
For 2004, based on the Company's exceptional performance, the
Compensation Committee approved one-year and three-year Performance Improvement
Incentive Plan ("PIIP") awards at the highest level provided by the Plans. These
two incentive plans, together with performance-based grants of stock options and
restricted stock, resulted in levels above the 75th percentile. As a result,
four of the Named Executive Officers' pay are above the 75th percentile. These
pay levels are fully consistent with the Company's established pay for
performance executive compensation philosophy.
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 1998 Plan, which includes executive officers and
other senior managers. Another component of long-term incentive compensation has
been the Three-Year Performance Improvement Incentive Plan (the "Three-Year
Plan"); however, as discussed below, there will be no awards granted under the
Three-Year Plan for the 2005-2007 performance cycle.
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 2004, 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: one was above the 75th percentile and
two were 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 or other key employee, the Compensation Committee considers
corporate performance, individual performance and business unit performance (if
applicable). 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 2004 plan cycle, the
corporate performance factors, and their relative weights, were as follows:
corporate profit before income tax (65 percent) and return on invested capital
(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, as applicable, corporate performance, individual performance or
business unit 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.
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 individual performance, corporate performance and business unit
performance (if applicable) 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 2002-2004 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. There will be no awards granted under
the Three-Year Plan for the 2005-2007 plan cycle, as the Company expects to rely
more heavily on the use of restricted stock for compensation for that period.
Stock option and/or restricted stock grants under the 1998 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. Specific terms of
options granted in 2004 are described under the subsection of this Proxy
Statement captioned "Option Grants." Restricted stock granted in 2004 vests in
five equal annual installments, provided that the grantee remains employed by
A&B. Restricted stock granted in 2005 will vest in three equal annual
installments. If an employee retires, dies or becomes disabled prior to the end
of the applicable period, all unvested shares automatically vest upon
retirement. Grantees receive dividends on the full amount of restricted stock
granted, regardless of vesting, at the same rate as is payable on A&B's common
stock generally.
Stock options and/or restricted stock are granted at 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 2004, 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 2002-2004 performance cycle that was
above the distinguished level. Mr. Doane's award under the One-Year Plan for
2004 was above the exceptional level 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 and a
restricted stock grant of 16,000 shares in 2004. That grant was based on an
overall review of corporate performance in 2003, without focus on any specific
corporate performance measure, and an assessment of Mr. Doane's current and
expected contributions to A&B. The full Board of Directors reviews the Chief
Executive Officer's performance at least annually, using both financial and
non-financial goals.
The foregoing report is submitted by Mr. King (Chairman), Dr. Chun, and
Messrs. Stockholm and Watanabe.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2004, the members of the Compensation Committee were Mr. King,
Chairman, Dr. Chun, and Messrs. Stockholm and Watanabe. 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. Ms. Lau and 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.
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, 2004 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), Mr.
Dods, Ms. Lau and Ms. Shaw.
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. 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.
[OBJECT OMITTED]
* $100 INVESTED ON DECEMBER 31, 1999 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.
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Alexander & Baldwin, Inc. 100 120 126 126 171 221
S&P Composite - 500 100 91 80 62 80 89
DJ US Industrial Transportation 100 105 119 122 157 202
DJ US Real Estate 100 128 143 148 202 265
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, 2004 and 2003, 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,
2004 and 2003 and for the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q were $1,582,062 and
$626,220, respectively. $875,000 of the 2004 fees represented
Sarbanes-Oxley Section 404 attestation-related work.
Audit-Related Fees. The aggregate fees billed for Audit-Related
services for the fiscal years ended December 31, 2004 and 2003 were
$226,652 and $147,447, respectively. The fees related to audits of
employee benefit plans, research and consultation on joint ventures and
vessel delivery, and consultation for Sarbanes-Oxley readiness
(excluding Section 404 attestation work) for the fiscal year ended
December 31, 2004, and to audits of employee benefit plans and research
and consultation on joint ventures, leases and derivatives,
consultation for Sarbanes-Oxley readiness, capitalizing dry docking,
inventory, investments, acquisitions, revenue recognition and
certification of a vessel for the fiscal year ended December 31, 2003.
Tax Fees. The aggregate fees billed for tax services for the fiscal
years ended December 31, 2004 and 2003 were $0 and $17,398,
respectively. The fees for the fiscal year ended December 31, 2003
related to income tax services for an individual and an estate.
All Other Fees. The aggregate fees for services not included above were
$0 and $9,249, respectively, for the fiscal years ended December 31,
2004 and 2003. The fees for the fiscal year ended December 31, 2003
related to accounting training.
APPROVAL OF AMENDMENT TO THE 1998 STOCK OPTION/STOCK INCENTIVE PLAN
Subject to shareholder approval, the Compensation Committee recommended
and the Board of Directors adopted an amendment to the Alexander & Baldwin, Inc.
1998 Stock Option/Stock Incentive Plan ("1998 Plan") on February 24, 2005. The
proposed amendment will:
o Increase the number of shares of A&B common stock reserved for
issuance under the 1998 Plan by an additional 700,000 shares;
o Eliminate the 250,000-share limitation on the aggregate number of
shares available for issuance through the restricted stock program.
Accordingly, shares reserved for issuance under the 1998 Plan may be
issued either in the form of option grants or restricted stock
grants. Under the terms of the 1998 Plan, no participant may receive
option grants, share right awards and direct stock issuances in the
aggregate for more than 500,000 shares per year;
o Specifically prohibit the repricing of stock options;
o Specify minimum vesting periods for restricted stock to no sooner
than one-third in each of the first three years since the grant date
for time-based awards and no sooner than one year following the grant
date for performance-based awards (certain limited exceptions exist
for retirement and change of control situations); and
o Specifically prohibit any material amendment to the 1998 Plan without
shareholder approval.
A description of the 1998 Plan, incorporating the proposed amendment,
is set forth in Appendix A 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 executives, and to better align their interests with those of
shareholders. In particular, the Board believes it is desirable to have the
ability to grant restricted stock as an alternative to stock options it would
otherwise grant, and accordingly is recommending the removal of the aggregate
limit on the number of shares of restricted stock that can be issued under the
1998 Plan. It is expected that fewer shares will be granted as restricted stock
than would otherwise have been granted as options. The proposed amendment will
allow A&B to continue to provide these equity incentives.
Securities authorized for issuance under equity compensation plans as
of December 31, 2004, included:
----------------------------------------------------------------------------------------------------------------------
Number of securities
remaining available for
Number of securities to be future issuance under
Plan Category issued upon exercise of Weighted-average exercise equity compensation plans
outstanding options, price of outstanding (excluding securities
warrants and rights options, warrants and rights reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans 1,723,276 $27.61 1,481,363*
approved by security holders
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders -- -- 198,342**
----------------------------------------------------------------------------------------------------------------------
Total 1,723,276 $27.61 1,679,705
----------------------------------------------------------------------------------------------------------------------
* Under the 1998 Plan, 173,187 shares may be issued either as restricted stock
grants or option grants.
** A&B has two compensation plans under which its stock is authorized for
issuance 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 198,342 shares that were available for future issuance, 7,950 shares
were available for future issuance under the Non-Employee Director Stock
Retainer Plan and 190,392 shares were available for issuance under the
Restricted Stock Bonus Plan.
The Board of Directors recommends that shareholders vote FOR approval
of the proposed amendment to the 1998 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 2006
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 2006 must
be received at the headquarters of A&B on or before November 7, 2005 in order to
be considered for inclusion in the year 2006 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 28, 2006. 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 28, 2006 and not
earlier than December 29, 2005.
By Order of the Board of Directors
/s/ Alyson J. Nakamura
----------------------
ALYSON J. NAKAMURA
Secretary
March 7, 2005
APPENDIX A
DESCRIPTION OF THE ALEXANDER & BALDWIN, INC.
1998 STOCK OPTION/STOCK INCENTIVE PLAN
The following is a summary of the principal provisions of the Alexander
& Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan (the "Plan"), as modified
by the amendment that the shareholders are being asked to approve at the 2005
Annual Meeting of Shareholders.
Term. The Plan was adopted by A&B's Board of Directors (the "Board") on
January 22, 1998 and approved by the shareholders at the 1998 Annual Meeting of
Shareholders. The Plan will terminate on the earlier of (i) the close of
business on January 21, 2008 or (ii) the date on which all shares available for
issuance under the Plan have been issued or canceled pursuant to (a) the
exercise of outstanding stock options under the Plan or (b) the issuance of
shares under the Stock Issuance Program (discussed below).
Administration. The Plan is administered by the Compensation Committee
(the "Committee") comprised of two or more Board members appointed by the Board.
The Committee has full authority to determine which eligible individuals are to
receive option grants, share right awards or direct stock issuances under the
Plan, the number of shares to be covered by each such award, the date or dates
on which the granted option is to become exercisable or the shares are to be
issued or to vest, and the maximum term for which any granted option is to
remain outstanding, subject to specific vesting limitations described below. In
addition, the Committee has full authority to accelerate the exercisability of
outstanding options or the issuance or vesting of shares under the Plan, subject
to specific vesting limitations described below, all upon such terms and
conditions as it deems appropriate. The present members of the Committee are Mr.
Charles G. King, Chairman, Dr. Michael J. Chun, and Messrs. Charles M. Stockholm
and Jeffrey N. Watanabe.
The Committee has the authority, subject to the express provisions of
the Plan, to change the terms and conditions of any outstanding option grant,
share right award or unvested share issuance, but, without the consent of the
holder, no such change may affect adversely the holder's rights and obligations
under the Plan or the outstanding grant, share right award or stock issuance.
However, the repricing of options is prohibited.
Eligibility. Option grants, share right awards and direct stock
issuances may be made only to employees (including officers and employee
directors) of A&B or its 50-percent-or-more-owned subsidiaries (corporate or
non-corporate), and to the non-employee members of the boards of directors of
such subsidiaries. No non-employee board members of subsidiaries have received
option grants, any share right awards or direct stock issuances under the Plan
as of January 31, 2005. Non-employee members of the Board are not eligible to
receive option grants, share right awards or direct stock issuances under the
Plan.
Option grants, share right awards and direct stock issuances may be
made under the Plan to eligible individuals, whether or not they previously have
received stock option grants, share right awards or direct stock issuances under
the Plan or under any other stock plan or other compensation or benefit program
of A&B or its subsidiaries. However, the maximum number of shares of A&B common
stock for which any one individual participating in the Plan may be granted
stock options, share right awards or direct stock issuances may not exceed
500,000 shares in the aggregate per calendar year. The 500,000-share limitation
will be subject to periodic adjustment in the event of certain changes in A&B's
capital structure, as explained below.
Stock Awards. The table below shows, as to each of A&B's officers named
in the Summary Compensation Table and the various indicated groups, the
following information with respect to stock option transactions and direct share
issuances effected during the period from January 1, 2004 to January 31, 2005:
(i) the number of shares of A&B common stock subject to options granted under
the Plan during that period and the average option price payable per share for
the shares subject to such options, and (ii) the number of shares of A&B common
stock directly issued without an intervening option grant. All direct issuances
were made without a cash payment required of the recipient but were subject to
vesting requirements tied to the recipient's continued service with A&B or its
subsidiaries.
OPTION TRANSACTIONS
Weighted Average
Options Granted Option Price of
Name (Number of Shares) Options Granted
---- ------------------ ---------------
W. Allen Doane 155,000 $38.45
James S. Andrasick 62,500 $37.22
Matthew J. Cox 15,900 $37.43
Stanley M. Kuriyama 44,500 $36.97
G. Stephen Holaday 18,400 $37.31
All executive officers, as of 1/31/05,
as a group (11 persons) 371,410 $37.61
All eligible employees, as of 1/31/05,
as a group (approx. 34 persons) including
current officers who are not executive officers 546,487 $37.42
DIRECT SHARE ISSUANCES
Name Number of Issued Shares
---- -----------------------
W. Allen Doane 64,000
James S. Andrasick 22,300
Matthew J. Cox 5,800
Stanley M. Kuriyama 15,450
G. Stephen Holaday 6,600
All executive officers, as of 1/31/05, 138,250
as a group (11 persons)
All eligible employees, as of 1/31/05,
as a group (approx. 33 persons) including
current officers who are not executive officers 198,700
New Plan Benefits. As of January 31, 2005, 1,574,984 shares were
subject to outstanding options, 1,581,805 shares had been issued under the Plan,
and 1,553,863 shares (including the 700,000-share increase to the Plan which the
shareholders are being asked to approve) remain available for future issuance.
Stock Subject to the Plan. The stock issuable under the Plan will be
shares of A&B's authorized but unissued common stock and shares of common stock
reacquired by A&B and held as Treasury shares ("Common Stock"). The total number
of shares of Common Stock issuable over the term of the Plan will not exceed
4,700,000 shares, which includes the increase of 700,000 shares for which
shareholder approval is being sought at the 2005 Annual Meeting of Shareholders.
The number of shares issuable over the term of the Plan will be subject to
periodic adjustment for certain changes in A&B's capital structure, as explained
below. The amendment that the shareholders are being asked to approve eliminates
the 250,000-share limitation on the maximum number of shares of Common Stock
issuable pursuant to share right awards or direct stock issuances in the
aggregate over the term of the Plan.
If any option granted under the Plan expires or terminates for any
reason prior to exercise in full, then the number of shares subject to the
portion of the option not so exercised will be available for future option
grants, share right awards or direct stock issuances under the Plan. Unvested
shares of Common Stock purchased by A&B pursuant to its repurchase rights under
the Plan will not be available for subsequent issuance. 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 the 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.
In the event any change is made to the Common Stock issuable under the
Plan (whether such change occurs by reason of merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in capital structure effected without
A&B's receipt of consideration), then the maximum number and/or class of
securities issuable over the term of the Plan, the maximum number and/or class
of securities for which any one individual participating in the Plan may be
granted stock options, share right awards or direct share issuances under the
Plan per calendar year, and the number and/or class of securities which may be
issued in the aggregate pursuant to share right awards or direct stock
issuances, will be adjusted automatically to reflect such change, and
appropriate adjustments also will be made to the number and/or class of
securities and the price per share in effect under each outstanding option or
share right award in order to prevent dilution or enlargement of the rights and
benefits thereunder.
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.
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 January 31, 2005, the fair market value of the Common Stock
determined on such basis was $46.01 per share.
Structure of the Plan. The Plan is divided into two separate
components: the Discretionary Option Grant Program and the Stock Issuance
Program.
(1) Discretionary Option Grant Program.
(a) Terms. Under the Discretionary Option Grant Program,
eligible individuals may be granted options to purchase shares of
Common Stock at an option price not less than 100 percent of the fair
market value per share on the grant date.
Each option will be for a term of years (not in excess of ten)
determined by the Committee. The Committee has the discretion to make
each option granted under the Plan immediately exercisable for the full
number of option shares or have the option become exercisable in
installments over the option term. Repricing of options is prohibited
by the Plan.
The option price will become due immediately upon exercise of
an option and may be paid in cash or in shares of Common Stock valued
at fair market value on the option exercise date.
(b) Reload Options.
(i) The Committee has full power and authority to
grant options under the Discretionary Option Grant Program with a
reload feature. To the extent an option with such a reload feature (the
"Original Option") subsequently is exercised through the delivery of
previously-acquired shares of Common Stock in payment of the exercise
price, the optionee automatically will be granted, at the time of such
exercise, a new option (the "Reload Option") to purchase the number of
shares of Common Stock so delivered.
(ii) Each Reload Option will be exercisable upon
substantially the same terms and conditions as the Original Option to
which it relates, except for the following differences:
(A) The exercise price per share will be
equal to the fair market value per share of Common Stock on the date
the Reload Option is granted. However, the Committee has full power and
authority to structure the Reload Option so that the exercise price per
share will be in excess of the fair market value per share of Common
Stock on the reload date in the event such fair market value per share
is not more than one hundred fifty percent (150%) of the exercise price
per share in effect under the Original Option.
(B) In no event will any additional Reload
Option be granted in connection with the subsequent exercise of the
first Reload Option.
(C) The Committee has full authority to set
the period of time which must elapse following the exercise of the
Original Option before the Reload Option will become exercisable.
Once that period has elapsed, the Reload Option immediately will
become exercisable for all of the shares of Common Stock at the time
subject to that Reload Option.
(2) Stock Issuance Program.
(a) Terms. The Committee also has the authority to issue
shares of Common Stock as a reward for past services rendered to A&B or
one of its subsidiaries or as an incentive for future service with such
entities. In the Committee's discretion, the recipient may be issued
shares that vest in installments, upon such terms and conditions as are
determined by the Committee, or the Committee may grant share right
awards that entitle the recipient to receive a specific number of
shares upon the completion of a designated service period or the
attainment of specified performance goals; provided that no time-based
grant of shares or share right awards may vest more rapidly than
one-third per year on each of the first three anniversaries of the
grant date, and no performance-based grant of shares or share right
awards may vest more rapidly than one year from the grant date (certain
limited exceptions exist for retirement and change of control
situations).
The recipient may not transfer share right awards or unvested
shares of Common Stock, except in certain limited circumstances. The
recipient, however, will have all the rights of a shareholder with
respect to the unvested shares, including the right to vote such shares
and to receive all regular cash dividends paid on such shares.
(b) Cancellation of Shares. In the event the recipient
should cease to continue his or her employment with A&B for any reason
whatsoever while holding one or more unvested shares of Common Stock,
or in the event the performance objectives should not be attained with
respect to one or more unvested shares of Common Stock, then those
shares must immediately be surrendered to A&B for cancellation, and the
recipient thereafter will have no further shareholder rights with
respect to such shares. The Committee may, in its discretion, waive
such surrender and cancellation of unvested shares in whole or in part
and thereby effect the immediate vesting of the recipient's interest in
the shares of Common Stock as to which the waiver applies, subject to
the vesting requirements discussed above.
Amendment of the Plan. The Board may amend or modify the Plan, subject
to shareholder approval of any material amendment to the Plan or as required
under applicable laws and regulations. However, no such amendment or
modification may, without the consent of the holders, adversely affect rights
and obligations with respect to any stock options, share right awards or
unvested Common Stock at the time outstanding under the Plan.
Change in Control. In the event of a Change in Control of A&B (defined
below), then (i) 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 as fully-vested shares,
(ii) all of A&B's outstanding rights to cancel or repurchase unvested shares
under the Stock Issuance Program shall terminate automatically, and all the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, and (iii) all shares of Common Stock not yet issued in connection with
outstanding share right awards shall be issued immediately as fully-vested
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.
Shareholder Rights. An option holder will have none of the rights of a
shareholder with respect to any shares covered by the option until the optionee
has exercised the option, paid the option price and satisfied all other
conditions precedent to the issuance of certificates for the purchased shares.
Transferability. During the optionee's lifetime, the option may be
exercised only by the optionee and will not be assignable or transferable other
than by will or the laws of inheritance.
Termination of Employment. Any option outstanding at the time of the
optionee's cessation of service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Committee and set forth
in the documents evidencing the option, but no such option shall be exercisable
after the expiration of the option term.
The Committee will have complete discretion, exercisable either at the
time the option is granted or at any time the option remains outstanding, to (i)
allow one or more options granted under the Plan to be exercised, during the
post-service exercise period, not only with respect to the number of shares for
which the option is exercisable at the time of the optionee's cessation of
service, but also with respect to one or more subsequent installments of
purchasable shares for which the option otherwise would have become exercisable
had such cessation of service not occurred, and (ii) extend the period of time
for which the option is to remain exercisable following the optionee's cessation
of service, from the post-service exercise period otherwise in effect for that
option to such greater period of time as the Committee deems appropriate, but in
no event beyond the expiration of the option term.
Any exercisable option held by the optionee at the time of death 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 no later than the tenth anniversary of the date of the option grant.
No Impairment of A&B's Rights. The granting of options, share rights
awards or direct stock issuances under the Plan will not affect the right of A&B
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
Tax Withholding. The Committee may provide one or more holders of
options with the election to have A&B withhold a portion of the shares otherwise
issuable to such holders upon the exercise of those options in order to satisfy
the federal and state income and employment tax withholding liability incurred
in connection with the option exercise. Alternatively, the Committee may permit
such holders to deliver existing shares of A&B's Common Stock in satisfaction of
such withholding tax liability.
Federal Tax Consequences. The federal income tax treatment of the stock
options and stock issuances under the Plan may be summarized as follows:
(1) Stock Options.
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 "Code"). 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, equal to the excess of
the fair market value of the purchased shares on the exercise date over
the option price paid for such shares, and the optionee will be
required to satisfy the tax withholding requirements applicable to such
income.
Special provisions of the Code apply to the acquisition of
Common Stock under a non-statutory option if the purchased shares are
unvested and, accordingly, subject to certain repurchase rights of A&B
or other substantial risks of forfeiture. These special provisions may
be summarized as follows:
(a) The optionee will not recognize any taxable income at
the time the option is exercised for such unvested shares, but will
have to report as ordinary income, as and when those shares vest, an
amount equal to the excess of (a) the fair market value of the shares
on their vesting date over (b) the option price paid for such shares.
(b) The optionee may, however, elect under Section 83(b)
of the Code to include as ordinary income, for the year in which the
non-statutory option is exercised for the unvested shares, an amount
equal to the excess of (a) the fair market value of the purchased
shares on the exercise date (determined as if the shares were not
subject to A&B's repurchase right or other risk of forfeiture) over (b)
the option price paid for such shares. If the Section 83(b) election is
made, the optionee will not recognize any additional income as and when
the purchased shares subsequently vest.
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. In general, the deduction
will be allowed for the taxable year of A&B in which the ordinary
income is recognized by the optionee. A&B anticipates that the
deduction attributable to the ordinary income recognized by optionees
upon the exercise of non-statutory options granted under the Plan will
not be subject to the $1 million limitation per covered individual on
the deductibility of compensation paid to certain executive officers
which is imposed under Section 162(m) of the Code.
(2) Share Right Awards and Direct Stock Issuances.
An individual who is issued vested shares of Common Stock
under the Stock Issuance Program will recognize ordinary income at the
time of issuance equal to the fair market value of the issued shares.
An individual who is issued unvested Common Stock may elect, through
the filing of a Section 83(b) election under the Code, to include as
ordinary income at the time of issuance an amount equal to the fair
market value of the unvested shares. If the Section 83(b) election is
made, the individual will not recognize any additional income as his or
her interest in the issued shares subsequently vests. Should the
individual not make the Section 83(b) election, then he or she will not
recognize any taxable income at the time the unvested Common Stock is
issued, but will have to report as ordinary income, for the taxable
year in which his or her interest in such Common Stock vests, an amount
equal to the fair market value of the shares at the time of vesting.
A&B will be entitled to an income tax deduction equal to the
ordinary income recognized by the participant in connection with the
issued shares. Such deduction will be allowed in the taxable year of
A&B in which such ordinary income is recognized by the optionee.
However, such deduction will be subject to the $1 million limitation
per covered individual on the deductibility of compensation paid to
certain executive officers which is imposed under Section 162(m) of the
Code.
Accounting Treatment. Shares of Common Stock issued under the Stock
Issuance Program will result in a direct charge to A&B's earnings equal to the
fair market value of those shares on the issue date. This will be charged to
compensation expense over the vesting period for the shares. 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, due to a new accounting standard
(Statement of Financial Accounting Standards No. 123 Revised "Share based
payment") that becomes effective for reporting periods beginning after June 15,
2005, result in a direct charge to A&B's earnings starting with the third
quarter of 2005. The amount of the charge will be based on the fair value of the
options at the time of grant and will be recorded as compensation expense on a
pro-rata basis over the vesting period for the grant. The number of outstanding
options also is a factor in determining A&B's earnings per share on a diluted
basis.
PROXY CARD
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 28, 2005
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. A. Doane,
W. A. Dods, Jr., and M. G. Shaw, and each of them,
proxies with full power of substitution, to vote
the shares of stock of Alexander & Baldwin, Inc.,
which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Corporation
to be held on Thursday, April 28, 2005, 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 W. A. Doane, 03
W. A. Dods, Jr., 04 C. G. King,
05 C. H. Lau, 06 C. R.
McKissick, 07 D. M. Pasquale,
08 M. G. Shaw, 09 C. M.
Stockholm, 10 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 STOCK OPTION/STOCK INCENTIVE
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.proxyvoting.com/alex
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site.
OR
Telephone
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call.
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.