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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-14020
CASTLE & COOKE, INC.
(Exact name of Registrant as Specified in Its Charter)
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HAWAII 77-0412800
(State or Other Jurisdiction (I.R.S. Employer
of Identification Number)
Incorporation or
Organization)
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10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (310) 208-3636
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, No Par Value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive Proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 10, 1999 was approximately $186,575,115.
The number of shares of Common Stock outstanding as of March 10, 1999 was
17,025,020.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for its 1999 Annual
Meeting of Stockholders are incorporated by reference into Part III.
Portions of the registrant's 1999 Annual Report to Stockholders for the year
ended December 31, 1998 are incorporated by reference into Parts I, II and IV.
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CASTLE & COOKE, INC.
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
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ITEM NUMBER
IN FORM 10-K PAGE
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PART I
1. Business........................................................................................ 1
2. Properties...................................................................................... 22
3. Legal Proceedings............................................................................... 27
4. Submission of Matters to a Vote of Security Holders; Executive Officers of the Registrant....... 27
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters....................... 28
6. Selected Financial Data......................................................................... 29
7. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 29
8. Financial Statements and Supplementary Data..................................................... 29
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 29
PART III
10. Directors and Executive Officers of the Registrant.............................................. 30
11. Executive Compensation.......................................................................... 30
12. Security Ownership of Certain Beneficial Owners and Management.................................. 30
13. Certain Relationships and Related Transactions.................................................. 30
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................. 30
(a) 1. Financial Statements................................................................... 30
2. Financial Statement Schedules............................................................... 30
3. Exhibits.................................................................................... 31
(b) Reports on Form 8-K........................................................................ 32
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SIGNATURES............................................................................. 33
FINANCIAL STATEMENT SCHEDULES.......................................................... F-1
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PART I
ITEM 1. BUSINESS
GENERAL
Castle & Cooke, Inc. (the "Company" or "Castle") was incorporated in Hawaii
on October 10, 1995, to be the successor to the real estate and resort business
of Dole Food Company, Inc. ("Dole"). Effective December 28, 1995 (the
"Distribution Date"), Dole transferred its real estate and resorts business to
Castle and distributed to Dole shareholders one share of Castle common stock for
every three shares of Dole common stock. This transaction is referred to herein
as the "Distribution". As used herein, the terms "Company" or "Castle" refer to
the real estate and resorts business of Dole when used with reference to time
periods prior to the Distribution Date, and to Castle and its consolidated
subsidiaries and controlled joint ventures when used with respect to time
periods on or after the Distribution Date.
The Company is engaged in three principal businesses: residential real
estate, resorts and commercial real estate. Castle conducts residential real
estate development operations in Hawaii on the island of Oahu, and in
Bakersfield, California, Sierra Vista, Arizona and Orlando, Florida. Castle's
resort operations are located in Hawaii on the island of Lana'i and include two
luxury resort hotels, The Lodge at Koele and The Manele Bay Hotel, two golf
courses, and luxury vacation home developments associated with the resort
hotels. It develops commercial properties in Bakersfield and San Jose,
California; Raleigh, North Carolina; Atlanta, Georgia; Phoenix and Sierra Vista,
Arizona; Orlando, Florida and on Oahu. Castle also owns and manages office
buildings, shopping centers and other commercial properties in California,
Hawaii, Arizona, North Carolina and Georgia. The Company occasionally disposes
of property which either does not meet its business needs or can be sold at an
advantageous price due to market conditions.
The Company's residential real estate, resorts and commercial real estate
businesses are described in more detail below. In 1998 and Castle's two
preceding fiscal years, Castle had no foreign operations or export sales. For
detailed financial information with respect to the Company's business and
operations including amounts of revenue, operating profit or loss and
identifiable assets attributable to each of the Company's industry segments and
to domestic operations, see the Company's Consolidated Financial Statements and
the related Notes to Consolidated Financial Statements in Part II herein.
Statements herein that are not historical facts are "forward-looking
statements." Forward-looking statements are based largely on the Company's
current expectations and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from results that may be
expressed or implied by such statements. These risks and uncertainties include,
but are not limited to, such things as product demand, the Company's lack of
experience in operating in markets outside of its current markets, the effect of
economic conditions and geographic concentration, the impact of competitive
products and pricing, the cost of materials and labor, governmental regulations
and the need for governmental approvals, interest rates and other risks inherent
in the real estate business, and the potential impact of year 2000 computer
problems. These and other factors can affect the Company's financial results and
operations, and can cause them to differ from current expectations and plans.
RESIDENTIAL REAL ESTATE
Castle is one of the largest developers and builders of single-family and
multi-family homes on the island of Oahu in the State of Hawaii, and one of the
largest developers of residential real estate in Bakersfield, California and
Sierra Vista, Arizona. It began development of a master planned community of
single-family homes in Orlando, Florida in December 1997, which includes a golf
course and clubhouse expected to open in the third quarter of 1999. Castle's
residential real estate operations on Oahu include the development, construction
and marketing of single-family and multi-family detached and attached homes
within master-planned residential communities developed by Castle and on other
parcels of land,
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which have been acquired and developed by Castle. In Bakersfield, which is
located approximately 100 miles north of Los Angeles, Castle primarily
subdivides and develops residential communities and sells finished homesites to
national and local homebuilders. While Castle has focused on the sale of
homesites to national and local homebuilders, it also engages in limited
homebuilding on its properties in Bakersfield, including building single-family
homes for the active adult market. In addition, Castle is developing and selling
homesites in Sierra Vista, Arizona, which is located approximately 70 miles
southwest of Tucson. In Orlando, Florida, Castle is developing a residential
community and selling finished homesites to homebuilders.
Castle owns large parcels of entitled and unentitled land intended for
residential development in the Oahu and Sierra Vista markets. Castle's land in
Orlando and Bakersfield is entitled. "Entitled" land is land that has received
all necessary land use and zoning approvals for development from the appropriate
state, county and local governments, except for any required plat maps,
subdivision approvals, grading and building permits and other secondary
approvals. "Unentitled" land is land that has not received all such approvals.
HAWAII
GENERAL
In Hawaii, Castle develops land and designs, builds and sells single-family
and multi-family homes for "entry-level" and "move-up" buyers. Castle's Hawaii
communities emphasize the development of planned neighborhoods with a range of
lot and home sizes. Home designs within a particular product line are generally
standardized and limited in number. This standardization helps permit on-site
mass production and bulk purchasing of material and components by contractors
and subcontractors engaged by Castle. Homes built by Castle in Hawaii are
generally designed by consulting architects whose designs are geared to the
local market. Designs are also constrained by zoning requirements, building
codes, energy efficiency laws and local architectural guidelines, among other
factors. Castle normally builds, decorates, furnishes and landscapes several
model homes for each subdivision or project. Major changes in design from the
model homes are not generally permitted, but homebuyers may select various
optional amenities.
HAWAII'S "AFFORDABLE" HOUSING PROGRAM
In prior years, governmental agencies in Hawaii implemented various formal
and informal policies at both the state and local levels in an effort to
increase the supply of low-income and moderate-income housing. As a condition to
classifying land for urban development, the State Land Use Commission ("LUC")
and the County Councils for each county in Hawaii imposed, most often at the
time of entitlement proceedings before those bodies, requirements, on a
project-by-project basis, for the provision by residential developers of
"affordable" housing. Generally, the State of Hawaii had required developers of
residential projects to offer for sale to eligible buyers a portion (50% to 60%
prior to 1996) of the total number of units in the project at prices affordable
to buyers with incomes between 80% and 140% of median local income as determined
by the United States Department of Housing and Urban Development ("HUD").
Counties supported this policy and normally required that a portion of the
"affordable" units (generally 10-30% of the total number of units) be affordable
to families with incomes between 80% and 120% of the HUD median local income. To
ensure that homes sold pursuant to "affordable" housing requirements remain
"affordable" to other eligible buyers and to prevent speculation, state and
local governments have sometimes imposed transfer restrictions on purchasers of
"affordable" homes.
Prior to 1996, the State LUC required that 50% of the homes sold in the
Company's Mililani Mauka development be affordable to families with incomes
between 80% and 140% of the HUD median local income. Within this 50%
requirement, the City and County of Honolulu required that at least 10% of the
homes be affordable to families with incomes not more than 80% of the HUD median
local income. In 1996, the State of Hawaii, through the Governor's Office,
initiated a change in its affordable housing
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policies by assigning the implementation and enforcement of such policies to the
Counties. Based on this new policy, the Company sought and was granted an
amendment to the affordable housing requirements that were imposed by the State
LUC on its Mililani Mauka Phase I and Phase II projects. The earlier LUC
requirement that 30% of the homes be affordable to buyers earning between 80%
and 120% of HUD median local income, and the requirement that 20% of the homes
be affordable to buyers earning between 120% and 140% of the HUD median local
income were replaced with a requirement that the Company satisfy the affordable
housing requirements imposed by the City and County of Honolulu. Accordingly,
for Mililani Mauka Phase I and Phase II-B, 10% of the units must be priced to be
affordable to families with incomes of not more than 80% of the HUD median local
income and 20% of the units must be priced to be affordable to families with
incomes between 80% and 120% of HUD median local income. For Mililani Mauka
Phase II-A, 10% of the units would be priced to be affordable to families with
incomes of not more than 80% of the HUD median local income and 40% of the units
would be priced to be affordable to families with incomes between 80% and 140%
of HUD median local income.
The determination of whether a home is "affordable" is based on an
assessment of whether a purchaser is able to satisfy certain specified mortgage
criteria. For example, the 1998 HUD median local income for a family of four in
the City and County of Honolulu (Oahu) was $59,600. Therefore, in an affordable
project in Mililani Mauka, allocating one-third of monthly income for housing,
and assuming a customer trust fund amount for insurance, real property tax and
maintenance of $195 per month, a 10% down payment, a 30-year loan and an annual
interest rate of 7%, a home priced at approximately $179,000 would be
"affordable" for a family earning 80% of HUD median local income and a home
priced at approximately $350,000 would be "affordable" for a family earning 140%
of HUD median local income.
Castle's revenues and operating income may fluctuate significantly depending
upon the mix of "affordable" and market-priced homes sold during any given
period. Therefore, Castle's historical revenues and operating income may not be
indicative of future performance. In addition, because the formula for
calculating the price of "affordable" homes takes into account mortgage interest
payments, increases in mortgage interest rates may decrease the price of
Castle's "affordable" homes, which could result in lower revenues and operating
income.
DEVELOPMENTS
MILILANI TOWN, Castle's largest development, is an approximately 3,500-acre
master-planned community located on the central plain of Oahu, approximately 18
miles northwest of downtown Honolulu. Mililani Town, which was founded 30 years
ago, has a population of approximately 37,000 and offers a full range of
residential, commercial, educational and recreational services. It is
anticipated that Mililani Town will eventually house approximately 50,000
residents in approximately 16,000 single-family and multi-family units.
In Mililani Makai, the first section of the community to be developed,
Castle sold approximately 9,300 units on approximately 2,300 acres of land. In
Mililani Mauka, the section of Mililani Town currently undergoing development,
Castle currently plans to develop approximately 6,100 units on approximately
1,200 acres. The necessary land use and zoning approvals for these units have
been received, roadways are being built and utilities are being installed in
each subdivision, and sales of approximately 3,329 (including 360 units built
and sold by a third party) of the 6,100 units currently planned have closed
through December 31, 1998. Castle's market-priced homes in the first phase of
Mililani Mauka range in size from approximately 800 to 2,700 square feet of
living area and in price from approximately $260,000 to over $470,000. Castle
has designed Mililani Mauka to allow it to build to suit market conditions by
developing moderately priced and higher-priced homes. Based upon 1998 HUD median
local income, "affordable" homes in Mililani Mauka are currently priced from
approximately $115,000 to $265,000.
ROYAL KUNIA is an approximately 270-acre master-planned community being
built in central Oahu, approximately 19 miles west of downtown Honolulu. The
undeveloped residential areas of Royal Kunia
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were purchased in August 1992 as entitled but unimproved land by a limited
partnership, 50% of which is held by Company subsidiaries and in which a
wholly-owned subsidiary of Castle is the sole general partner. The development,
when completed in accordance with the master plan, will offer single-family and
multi-family housing adjacent to commercial properties, parks and recreational
facilities. The current master plan provides for 1,692 units at Royal Kunia,
including 972 market-priced units and 720 "affordable" units. The price of the
market-priced single-family homes (between approximately 800 and 2,000 square
feet of living area) ranges from approximately $225,000 to $325,000. Based upon
1998 HUD median local income, "affordable" housing is currently priced from
approximately $200,000 to $235,000. Sales of 712 units had closed through
December 31, 1998. In the fourth quarter of 1998, Castle filed suit against the
50% limited partner seeking to recover the limited partner's share of certain
expenditures made by the partnership. The limited partner filed an answer,
including various defenses and counterclaims. This matter has not been set for
trial.
LALEA AT HAWAII KAI is a low-rise condominium development proposed to
contain approximately 290 units in the community of Hawaii Kai in East Oahu.
Located on approximately 22 acres of land, all units are market priced and range
in price from approximately $220,000 to $320,000. Closings commenced in the
third quarter of 1996, and 200 units had closed through December 31, 1998.
NA PU'U NANI AT WAIKOLOA is a proposed residential development on the island
of Hawaii which forms a part of Waikoloa Village. Na Pu'u Nani is held by a
joint venture in which a wholly-owned subsidiary of Castle is the managing
general partner and holds a 30% interest. The joint venture acquired the
property in 1990. In September 1993, the joint venture filed suit against the
party from whom the property was purchased. The parties settled this litigation
in January 1996, prior to trial, under terms that the Company believes will be
beneficial upon development of the project. The property remains undeveloped and
this project is currently inactive, pending improvement of market conditions.
SALES AND MARKETING
In Hawaii, Castle promotes its residential developments through general
public awareness of Castle using public relations activities and advertising in
the local media. Castle employs in-house commissioned sales personnel and
generally maintains on-site sales offices for each subdivision or project.
Castle also retains outside brokers, sales and marketing firms and consultants
in the marketing of its homes. Castle sells its homes in its Royal Kunia
development on Oahu through an affiliate of its limited partner in the project.
Sales contracts are usually subject to certain contingencies such as the buyer's
ability to qualify for financing. Castle has from time to time utilized various
sales incentives in marketing its homes and has facilitated the financing
process by providing closing credits and by purchasing commitments from local
financial institutions to provide fixed-rate mortgage loans to eligible buyers.
Homebuyers must comply with the credit criteria required by these institutions.
ORDER INVENTORY AND BACKLOG
Castle's inventory of completed homes on Oahu varies according to the stage
of development of each of Castle's communities. It is currently Castle's
practice to include a home in backlog at the contract price upon execution of a
sales contract and receipt of money on deposit (usually $1,000 to $5,000), and
to remove it from backlog upon transfer of title. Backlog may vary substantially
over time because Castle's communities are long-term projects that are
frequently at different stages of development. In the past, the Company has
generally allowed prospective purchasers who are unable to obtain financing to
cancel their contracts and has refunded their deposit. During the past five
years, the Company experienced an average contract cancellation rate of
approximately 25%.
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The following table sets forth the dollar amount of backlog orders for
Castle's residential projects on Oahu in Hawaii as of December 31, 1998 and as
of December 31, 1997.
OAHU
BACKLOG--HOMES
(DOLLARS ARE IN THOUSANDS)
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1998 1997
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Backlog at beginning of year........................................ $ 11,920 $ 15,053
New orders.......................................................... 119,498 107,348
Deliveries.......................................................... (110,327) (110,481)
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Backlog at end of year.............................................. $ 21,091 $ 11,920
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THE HAWAII ECONOMY AND HOUSING MARKET
The Hawaii economy, which has been in decline for several years, did not
improve during 1998 and continued its generally poor performance. The Hawaii
economy is strongly influenced by tourism. Tourism (as measured by total visitor
count) peaked in 1990 at approximately 7 million, and declined to approximately
6.1 million in 1993. It experienced some recovery until late 1996, when it began
to decline again. In 1997, total visitor count to Hawaii experienced a modest
0.7% increase over 1996. In 1998, the Asian financial crisis began to be felt
and tourism and total visitor count decreased by approximately 1.9% when
compared to 1997. Hawaii experienced a loss of non-agricultural wage and salary
jobs in 1998, and Hawaii's 1998 average monthly unemployment rate of 5.8%
exceeded the national average of 4.5%. The Asian financial crisis may continue
to have an adverse effect on the Hawaii economy, including tourism, and may
prolong Hawaii's recession. No assurance can be given that Hawaii will
experience economic growth in the future. A continuing economic downturn would
have a material adverse effect on Castle's financial condition and results of
operations. The Hawaii economy is also subject to risks associated with its
weather. Heavy rainfall, hurricanes and other natural disasters could impact the
local economy and Castle's operations.
The median resale price of a single-family home on Oahu decreased by
approximately 3% in 1995, decreased by approximately 4% in 1996, decreased by
approximately 8% in 1997 and decreased by approximately 3% in 1998. The number
of re-sales of single-family homes on Oahu during 1996, as compared to 1995,
decreased by approximately 6%; during 1997, as compared to 1996, the number of
such re-sales increased by approximately 16%; during 1998, as compared to 1997,
the number of such re-sales increased by approximately 23%.
MAINLAND COMMUNITIES
GENERAL
Castle's U.S. Mainland communities are located in California, Arizona and
Florida. Castle's active residential developments in California are in
Bakersfield, the county seat of Kern County, located in the southern part of
California's central (San Joaquin) valley. Castle's Bakersfield developments are
located in the southwest part of the city in the vicinity of the California
State University at Bakersfield. In Bakersfield, Castle primarily subdivides and
develops its landholdings into developable parcels and planned residential
communities designed to meet demand for housing in each market segment. This
includes homesites for single family homes in price ranges from entry level to
luxury homes, including pre-designed as well as custom plans. Castle also
engages in homebuilding in its Bakersfield developments. Castle intends to
continue the development of certain of its existing landholdings in California.
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Castle's active development in Arizona is in the town of Sierra Vista, where
it subdivides and develops its land holdings into developable parcels and
homesites to provide housing primarily for the military-based population and
retirement market.
In Florida, the Company, through a partnership with a third party, is
developing a residential community with a golf course and clubhouse and selling
finished homesites to homebuilders.
DEVELOPMENTS
SEVEN OAKS is a master-planned community on approximately 1,700 acres and is
the premier residential development in Bakersfield. Seven Oaks surrounds the
Seven Oaks Country Club and Golf Course, which was developed by Castle and
eventually will be contributed to a nonprofit mutual benefit corporation. Castle
has the exclusive right to sell memberships in the Seven Oaks Country Club and
is obligated to fund the net operating losses and receives the excess cash flow
of the country club through a transfer date which can be, at Castle's election,
no earlier than the time at which the Club has a specified number of active golf
memberships and no later than a specified date. In 1998, Castle decided to add
nine additional golf holes to the golf course, which resulted in an extension of
the transfer date to no later than October 31, 2007. As of December 31, 1998,
276 such memberships had been sold. In January 1999, an additional 5 year
extension to October 31, 2012, was approved by the membership of Seven Oaks
Country Club. The final approval is in process with the California Department of
Corporations. If this approval is obtained, the transfer date will become no
earlier than the time at which the Club has 615 active golf memberships and no
later than October 31, 2012. Development of the community is being completed in
phases, based on market demand. Castle has developed neighborhoods offering
homesites for "move-up" to luxury homes in eight price ranges. Homesite prices
in Seven Oaks range from approximately $25,000 to $300,000. During 1998, 217
homesites and two homes were sold. Approximately 1,980 homesites remain to be
developed on approximately 1,017 acres. Castle also engages in homebuilding in
this community, including single-family homes for the active adult market and
single-family homes for the semi-custom market.
SILVER CREEK is a master-planned community encompassing approximately 600
acres in Bakersfield. Castle offers homesites and homes at three price levels.
Castle's homes are currently priced between approximately $90,000 and $150,000
and its homesites are priced between approximately $19,000 and $22,000.
Approximately 448 homesites remain to be developed on approximately 162 acres.
BRIMHALL, a residential community in Bakersfield comprised of approximately
1,232 acres, is planned to attract entry-level and move-up homebuyers. The
prices of single-family homesites in the current phases in Brimhall range from
approximately $18,500 to $74,000. Approximately 382 homesites remain to be
developed on approximately 193 acres. In addition, approximately 458 acres are
currently being planned to complete the Brimhall community.
FAIRWAYS, comprising approximately 225 acres, is currently being planned for
an active adult community. Other Bakersfield residential projects include the
HAGGIN OAKS, CAMPUS PARK, THE OAKS and RENFRO single-family developments
(comprising approximately 517 single-family lots in total), and the MING &
GOSFORD multi-family development. In January 1999, Castle purchased 61.3 acres
in Tevis Ranch, located approximately one half mile directly south of the Seven
Oaks development, and directly across the street (west) from the Campus Park
development. The property is currently being planned for an estimated 300 lots.
SIERRA VISTA is near Sierra Vista, Arizona, in Cochise County in the
southeast portion of Arizona about 70 miles from Tucson. Sierra Vista contains
single-family and multi-family homesites developed by Castle for sale to
builders and individuals. The homesites in Sierra Vista are currently priced
from approximately $13,000 to $55,000. Approximately 1,184 homesites remain to
be developed on the approximately 1,054 entitled acres. The Company also owns
approximately 3,341 unentitled acres at Sierra Vista. WINTERHAVEN, a gated
active adult community begun in 1997, is located adjacent to the Pueblo del Sol
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Country Club. Lot prices currently range from approximately $22,000 to $55,000
with 1,076 lots remaining as of December 31, 1998. Other Sierra Vista
communities of Castle include one acre lots in Mountain Shadows, Mountain Ridge
with 7,500 square foot lots, and Chaparral Village with 4,500 square foot lots.
In total, 108 lots remained in these villages as of December 31, 1998. During
1998 Castle sold a 52.7-acre parcel of undeveloped land in Sierra Vista to a
third party for the construction of a 400,000 square foot regional mall, which
would be the first of its kind in Sierra Vista. Scheduled for completion in late
1999, a recreational vehicle park is currently under construction on
approximately 57 acres of Castle property in Sierra Vista. This park will
include a total of 220 overnight RV rental spaces, approximately 450 lots for
park models, and approximately 80 recreational vehicle storage spaces.
KEENE'S POINTE in Orlando consists of approximately 946 acres, including the
approximately 240 acre Jack Nicklaus designed signature golf course that is
under construction and expected to be completed around mid-1999. Keene's Pointe
is being developed by a partnership ("Keene's Pointe Partnership") formed by
Castle and Golden Bear International, Inc. ("GBI"), a company wholly-owned by
professional golfer, Jack Nicklaus. Castle is the managing general partner and
GBI is the limited partner. The venture was restructured in 1998 to eliminate
GBI's obligation to provide the partnership with a first look at opportunities
for new projects, and to eliminate the Company's funding obligation for new
projects. In 1996, the Keene's Pointe Partnership entered into the contract to
acquire property for its Keene's Pointe community in Orlando, Florida. The
property, under this contract, comprises approximately 866 developable acres in
the town of Windermere adjacent to the Disney Preserve, and can be purchased on
a parcel by parcel basis over a 10-year period. The first purchase under this
contract was in December 1997, and consisted of approximately 240 acres for a
proposed 18-hole golf course and clubhouse and an additional 206 acres proposed
for approximately 361 lots. Two additional purchases under the 1996 contract
occurred in 1998 consisting of a total of approximately 100 acres proposed for
approximately 181 lots. An additional 80 acres, located adjacent to the Keene's
Pointe project, and proposed to be developed as an additional 158 lots, were
purchased by the partnership in January 1998 under a different purchase
agreement. In the fourth quarter of 1998, Castle assumed responsibility for
completion of the construction of the golf course for the Keene's Pointe
project, which had been contracted to an affiliate of GBI. Purchase of the
property and development of Keene's Pointe is planned to occur in phases, based
on market demand. Castle develops and sells homesites for "semi-custom" to
luxury homes to homebuilders at Keene's Pointe. Homesites are currently priced
between approximately $45,000 and $500,000. Approximately 1,062 homesites are
being developed on approximately 706 acres. As of December 31, 1998,
approximately 906 lots remain to be developed.
SALES AND MARKETING
In California, Arizona and Florida, Castle markets its developments through
a combination of local newspapers, magazines, radio and outdoor advertising,
promotional literature, and sales meetings conducted for both individual
homebuyers and residential brokers and builders. Castle also maintains sales
centers in Bakersfield and a sales center in Sierra Vista, and is constructing a
sales center in Windermere (Keene's Pointe) to display available homesites to
prospective builders and individual buyers. In California, Florida and Arizona,
Castle occasionally uses outside brokers in marketing its properties. Castle
sells its finished homesites in Bakersfield, Arizona and Florida to
homebuilders. Castle also sells options in Bakersfield, Sierra Vista and at
Keene's Pointe to homebuilders to acquire a number of available homesites, and
it has been Castle's experience that nearly all of the options granted pursuant
to the agreements have been exercised in full. These options typically require a
non-refundable deposit of 10% of the aggregate purchase price of the homesites.
Contracts for homesites sold by Castle provide for Castle's approval of home
design and construction and the lots are subject to architectural control
covenants.
From time to time, Castle provides financing to buyers of its California and
Arizona homesites by taking promissory notes instead of cash for a portion of
the sales price of the properties it sells. Down payments on these transactions
have averaged between 20% to 25%.
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ORDER INVENTORY AND BACKLOG
Castle's inventory of developed homesites in California, Arizona and Florida
varies according to the stage of development of each of Castle's communities. It
is currently the policy of Castle to limit its inventory of completed but unsold
homesites in Bakersfield and Sierra Vista to approximately one year of
anticipated demand. It has been Castle's experience that nearly all of the
options granted to homebuilders have been exercised in full.
The following table sets forth the dollar amount of backlog orders for
Castle's homesite development in California, Arizona and Florida as of December
31, 1998 and as of December 31, 1997.
MAINLAND COMMUNITIES
BACKLOG--HOMESITES
(DOLLARS ARE IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Backlog at beginning of year.......................................... $ 19,964 $ 7,959
New orders............................................................ 44,269 30,393
Deliveries............................................................ (42,159) (18,388)
---------- ----------
Backlog at end of year................................................ $ 22,074 $ 19,964
---------- ----------
---------- ----------
</TABLE>
Castle's inventory of completed homes in Bakersfield varies according to the
stage of development of the community. It is currently Castle's practice to
include a home in backlog at the contract price upon execution of a sales
contract and receipt of money on deposit (usually $1,000 to $5,000), and to
remove it from backlog upon transfer of title. Backlog may vary substantially
over time because Castle's communities are long-term projects that are
frequently at different stages of development. In the past, the Company has
generally allowed prospective home purchasers who are unable to obtain financing
to cancel their contracts and has refunded their deposit.
The following table sets forth the dollar amount of backlog orders for
Castle's homes in Bakersfield as of December 31, 1998 and as of December 31,
1997.
BAKERSFIELD
BACKLOG--HOMES
(DOLLARS ARE IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Backlog at beginning of year............................................... $ 0 $ 0
New orders................................................................. 5,715 557
Deliveries................................................................. (1,663) (557)
--------- ---------
Backlog at end of year..................................................... $ 4,052 $ 0
--------- ---------
--------- ---------
</TABLE>
THE BAKERSFIELD ECONOMY AND HOUSING MARKET
A majority of Castle's residential developments in the continental United
States are located in Bakersfield, the county seat of Kern County. Kern County's
population was approximately 640,000 persons, comprising approximately 203,000
households in 1998. Bakersfield is one of the most affordable cities in
California (based on a November, 1996 survey by the National Association of
Homebuilders). The population of metropolitan Bakersfield increased from
approximately 329,000 in 1990 to approximately 388,000 in 1998, an average
annual growth rate of 2.2% versus 1.4% for California as a whole. The median
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resale price of a single-family home in Bakersfield increased by approximately
4.1% in 1998, compared to a national average increase of approximately 4.9%.
Kern County is the leading oil-producing county in the lower 48 states and
the third leading agricultural county (based on crop value) in the United
States. The Bakersfield economy is sensitive to economic, political and weather
conditions affecting oil and agriculture. In the first quarter of 1999, the per
barrel price for locally produced crude oil (known as Kern River crude) was at
$7, down $1.54 from January 1998. This price decrease is expected to lead to
additional cutbacks in spending by area oil producers. The climate and geology
of California present certain risks for natural disasters and other sudden
events. The Bakersfield area, like much of California, is at risk for seismic
activity. Storms, floods, drought, earthquakes and crop freezes may have a
material adverse effect on the local economy and on the properties or operations
of Castle. During 1998, citrus trees in Kern County experienced several nights
of below 32 degrees Fahrenheit, causing substantial crop damage.
THE ORLANDO AND SIERRA VISTA ECONOMIES AND HOUSING MARKET
The Keene's Pointe project is located in Orange County, Florida, in the town
of Windermere adjacent to the Disney Preserve. In 1998 the median price of a
single-family home in Windermere was approximately $98,000, the city's job
growth rate was approximately 1.5% and its unemployment rate was approximately
2.6%. Keene's Pointe is located approximately 30 miles from Orlando.
Metropolitan Orlando is one of the fastest growing regions in the nation, adding
approximately 12,000 jobs in 1998. Tourism is Florida's largest industry, and
the Orlando area includes such major theme parks as Disney World, Universal
Studios and Sea World.
Sierra Vista, Arizona has a population of approximately 40,000, and Cochise
County, Arizona has a population of approximately 124,000. For Sierra Vista, the
1998 median price of a single-family home was approximately $96,000, the city
experienced a negative job growth rate of approximately (6%) and its
unemployment rate was approximately 6.5%.
DEVELOPMENT OF MASTER-PLANNED COMMUNITIES
Master-planned communities are long-term projects requiring substantial
investments of time and capital resources. In Castle's experience,
master-planned communities have generally required approximately eight to ten
years from initial planning and entitlement proceedings to the closing of the
first sale of a completed home on the island of Oahu and up to three years from
initial planning and entitlement proceedings to the closing of the first sale of
a finished homesite or a completed home on the mainland.
THE ENTITLEMENT PROCESS. Castle prepares the plans for each master-planned
community providing for infrastructure, neighborhoods, commercial and industrial
areas, educational and other public facilities as well as open space. Once
preliminary plans have been prepared, Castle must obtain numerous governmental
approvals, licenses, permits and agreements, referred to as "entitlements,"
before it can commence development and construction of a project. In Hawaii and
California, obtaining the necessary entitlements for large residential
developments and master-planned communities is an extended process, which can
involve a number of different governmental jurisdictions and agencies,
considerable risk and expense, and substantial delays.
Before developing its Hawaii properties, Castle must obtain a variety of
regulatory approvals from state and local governmental authorities relating to
such matters as permitted land uses and levels of density, the installation of
utilities and waste disposal services, and the dedication of acreage for open
space, parks, schools and other community purposes. For example, if the current
land classification is "Agricultural", the Hawaii State Land Use Commission must
issue a final decision and order approving urban land uses and amending district
boundaries. The city and/or county councils must enact ordinances or issue
resolutions approving amendments to the relevant general plan and development
plan and approving zoning changes and variances, and issue permits for shoreline
management, if applicable. After
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these entitlements are granted, subdivision approvals and building permits must
be obtained. Changes in circumstances or in applicable law may require amended
or additional approvals. Castle may incur substantial direct costs in connection
with the land use approval process in Hawaii. In addition to the costs and fees
required in connection with various applications, counties may impose conditions
having economic costs and consequences and assess "impact fees" based on
anticipated effects of Castle's projects on existing communities, including such
things as infrastructure, transportation, waste disposal, education and air
quality.
Castle owns unentitled land in California in Los Angeles County and Santa
Clara County. Castle also owns unentitled land at its Sierra Vista development
in Arizona. While the requirements vary in each location, and while the amount
of time it takes to obtain entitlements is generally shorter in Arizona than in
California, the entitlement process for transforming such land into a
developable parcel or a master-planned community includes such things as
annexation proceedings involving the local municipalities, regulatory approvals
relating to such matters as permitted land uses and levels of density, the
installation of utilities and waste disposal services, and the dedication of
acreage for open space, parks, schools, and other community purposes. In
addition, upon receipt of a building permit for a finished homesite,
homebuilders are required in California to pay impact fees based on governmental
assessment of the effects of their projects on existing communities, including
such things as infrastructure, transportation, waste disposal, education and air
quality of the communities.
DEVELOPMENT. The land development process for a master-planned community
entails a range of activities, including design engineering, grading raw land,
constructing public infrastructure such as streets, utilities and public
facilities, and finishing individual lots. Castle arranges for the design and
the construction and installation by contractors and subcontractors of the
infrastructure in its master-planned communities. The development process
results in finished and graded construction sites for homes or other facilities.
In its master-planned communities, Castle generally coordinates home
construction with commercial development and installation of parks and
recreational facilities. In this process, Castle may contract with third parties
to develop commercial zones, public areas and recreational amenities, which may
include shopping centers, schools, libraries, community centers, parks, golf
courses and other essential facilities. It is the policy of Castle to retain
control over the location and character of non-residential properties, such as
shopping centers and recreational facilities, within its master-planned
communities. Castle develops its communities in phases to allow Castle
flexibility to build to suit market conditions and to create stable and
attractive neighborhoods. Consequently, at any particular time, the various
phases of a project generally are in different stages of land development and
construction.
HOME CONSTRUCTION AND WARRANTIES
For most of its projects, Castle contracts or subcontracts virtually all
construction work. Independent contractors and subcontractors that are familiar
with local requirements perform engineering, landscaping, master-planning and
environmental impact analysis work. Castle engages consulting firms to assist in
project planning and hires independent contractors and subcontractors to perform
site development and construction work on individual projects. At all stages of
production, Castle monitors and coordinates the activities of builders,
contractors, subcontractors, consultants and suppliers.
Castle provides customary warranties to purchasers of its homes. Castle
evaluates its contractors and subcontractors and its builders with respect to
their ability to meet potential warranty obligations. In addition to customary
warranties provided by Castle to its homebuyers, Castle is subject in California
to a state law, which establishes a ten-year period during which consumers can
seek redress for latent defects in new homes.
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RESORTS
The island of Lana'i consists of approximately 90,500 acres and is the sixth
largest of the Hawaiian Islands. The Company owns approximately 88,000 acres or
98% of the island. On Lana'i, Castle owns and operates two luxury resorts, with
two championship golf courses. Castle is also developing two luxury vacation
home projects on Lana'i. For the purposes of this discussion, the activities of
Castle on Lana'i will be divided into three areas: Resorts, Resort Developments
and Other Businesses on Lana'i.
RESORTS
The Company owns and operates two luxury resorts, the Lodge at Koele and the
Manele Bay Hotel, on Lana'i. The Company is responsible for all phases of
lodging operations, including the hiring, training and supervision of all of the
managers and employees necessary for the operation of the facilities, and the
marketing and maintenance of the properties.
THE LODGE AT KOELE, a 102-room luxury hotel situated in the wooded highlands
of the island, opened in mid-1990. This resort hotel includes tennis facilities,
stables and a riding facility, an executive putting course, a fitness center,
two restaurants, a retail shop and award-winning gardens. There is also a
championship 18-hole golf course, the Experience at Koele, designed by Greg
Norman and course architect Ted Robinson, with a clubhouse, a retail shop and
restaurant. In 1996, the Lana'i Pines Sporting Clays facility was opened
featuring skeet, trap, compact sporting and a 14 station clays course catering
to upscale shooters. The resort, golf course, and restaurants have received
numerous awards. In 1998, for the second consecutive year, the Koele resort made
Conde Nast Traveler's Gold List and was voted by its readers the World's Best
Golf Resort as well as the Best Pacific Rim Resort.
THE MANELE BAY HOTEL, a 249-room luxury oceanfront resort, was opened in
1991. The Manele Bay complex includes a 12,000 square foot conference center, a
spa facility, tennis center and pro shop, three restaurants, a retail shop and a
salon. The resort also features an 18-hole championship golf course, the
Challenge at Manele, designed by Jack Nicklaus, and a clubhouse with a pro shop
and restaurant. The Manele Bay Hotel, restaurants and golf course have been
recognized with numerous awards. In the 1998 Conde Nast Readers' Choice Poll,
the Manele Bay Hotel was voted number 11 among the top 25 Pacific Rim Resorts
and number three among the 50 best golf resorts. The resort was also rated by
readers of Travel & Leisure as number 2 among the 20 Best Hotels in Hawaii.
The following table sets forth combined operating statistics for the two
hotels for fiscal years 1995 through 1998:
<TABLE>
<CAPTION>
1998 1997 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average daily room rate........................................................... $ 286 $ 280 $ 266 $ 251
Occupancy rate.................................................................... 67% 67% 62% 58%
Room revenue per available room (daily)........................................... $ 191 $ 187 $ 166 $ 143
</TABLE>
"Average daily room rate," for any period, is the aggregate room revenue
from the two Lana'i resorts during such period, divided by the aggregate number
of days during which guests occupied rooms at the two Lana'i resorts during such
period. "Room revenue per available room," for any period, is the aggregate room
revenue from the two Lana'i resorts during such period, divided by the number of
rooms available at the two Lana'i resorts during such period.
The Lana'i resorts cater to upscale leisure travelers. In late 1998, Castle
and Starwood Hotels and Resorts entered into an agreement whereby the Lodge at
Koele and the Manele Bay Hotel became members of The Luxury Collection, an elite
group of hotels that includes such properties as the St. Regis in New York and
Aspen, Colorado; the Phoenician in Scottsdale, Arizona; the Hotel Danielli in
Venice; Prince De Galles in Paris; and the Hotel Imperial in Vienna. While
Castle operates its own computerized reservations service headquartered on
Lana'i, the agreement provides the Lana'i resorts with access to
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Starwood's sales, marketing and reservations services and systems. Castle
continues to manage the Lana'i resorts and directs an international sales and
marketing program, including national advertising, publicity efforts, satellite
sales offices in Honolulu, Los Angeles, Chicago and New York, and international
representation. The majority of the guests of the Lana'i resorts come from the
mainland United States, with roughly equal percentages from Asia and Europe.
There is also a strong local market in Hawaii.
Tourism to Hawaii is affected by a number of variables, including, among
others, general economic conditions, exchange rates, competition from other
destinations, and the cost and availability of airline transportation. Lana'i is
particularly vulnerable to changes in air service, which can be affected by
adverse weather conditions. Many of these factors have had a negative effect on
Hawaii tourism over the last several years, causing a decline in visitor
arrivals from 1991 to 1994. Tourism (measured in terms of total visitor
arrivals) improved in 1995, although the benefit of such improvement was felt
primarily in Oahu and not on the neighbor islands, including Lana'i. In 1996,
tourism was essentially flat, with the decline in mainland visitors offset by an
increase in visitors from Japan. In 1997, tourism declined slightly overall with
a decrease in Japanese business, due to a weak economy and an unfavorable
exchange rate, only partially offset by an increase in arrivals from the
mainland United States. In 1998 total visitor arrivals declined by approximately
1.9%, with a drop of more than 10% in arrivals from Japan and other Asian
countries resulting from, at least in part, the Asian economic crisis. In 1998,
statewide occupancy levels fell below 1997 levels in 11 of the 12 months.
RESORT DEVELOPMENTS
GENERAL
Castle is a developer and builder of single-family and multi-family homes on
the island of Lana'i. Castle develops land and designs, builds and sells high
quality homes for the resort and local housing markets. Projects being developed
or proposed include townhomes and detached single family homes for the luxury
vacation homebuyer.
LUXURY VACATION HOME PROJECTS
THE KOELE PROJECT. Koele, located at the edge of Lana'i City at an
elevation of 1,800 feet, includes 632 acres zoned for hotels, golf, residential
and park uses. The Lodge at Koele and the Experience at Koele golf course form
the focus of the development. The first phase of the Koele luxury residential
project includes the Villas at Koele, consisting of 88 proposed multi-family
units on 18.5 acres, and 255 proposed single family units on 138 acres. The
first phase of infrastructure, including all roads, utility and drainage
improvements for the Villas at Koele and the 19 single family homesites in a
project known as Puulani Ridge, was completed in August 1995. The development
and sale of the residential property in the Koele Project is expected to occur
over a twenty-year period.
The Villas at Koele are multi-family units, overlooking the Experience at
Koele golf course. There are six floor plans ranging in size from approximately
1,360 square feet to approximately 2,660 square feet, with sales prices ranging
from approximately $500,000 to $1,000,000. A sales center with six furnished
model homes and sales office opened in December 1994, and construction on the
first phase of 20 units commenced in March 1995. Pre-sales for the Villas at the
Koele Project commenced in December 1994. As of December 31, 1998, there were
seven closings of sales of Villas townhomes (one in 1998, four in 1996 and two
in 1995), and five unsold completed units.
Luxury single-family homes at Koele are sold as a custom house and lot
package, where the buyer selects a lot and house design and the Company
constructs the house. Completed house and lot packages range in price from
approximately $800,000 to $2,500,000. Three model homes were completed at
Puulani Ridge in 1996. As of December 31, 1998, there had been four closings of
homes at Puulani Ridge (two in 1998 and two in 1997, one of which was reacquired
by the company in 1998).
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The vacation homes at Koele are marketed primarily to affluent individuals
from the mainland United States and, to a lesser degree, Japan and Hawaii.
Marketing efforts include local and national advertising and publicity, as well
as those of an on-site sales team of licensed professionals. The majority of
buyers are anticipated to be repeat guests of the Lodge at Koele or the Manele
Bay Hotel. The development and construction of new luxury hotels in Hawaii and
elsewhere, and continued economic weakness in Hawaii and Asia, could negatively
impact occupancy levels at the resort hotels on Lana'i, resulting in a reduced
number of vacation home sales. The Company continues to monitor the Koele
project and explore alternatives to stimulate sales activity.
THE MANELE BAY PROJECT. The Manele Bay Project is located on approximately
868 acres on the southern coast of Lana'i. The property is currently zoned for
hotel, golf course, commercial, residential, park and open space uses. The
Manele Bay Hotel and The Challenge at Manele golf course will form the
centerpiece of the development.
The first increment of the Manele Bay Project is proposed to include 94
multi-family units on approximately 33.4 acres and 166 single-family homesites
on approximately 145 acres. The development of this increment will proceed in
phases. The first phase of this increment received all necessary approvals from
the County of Maui and sales began in 1998. The Company does not currently have
all required governmental approvals for the development of the second or any
subsequent increments of the Manele Bay Project. There can be no assurance that
Castle will obtain all such approvals and permits.
The Company began accepting contracts and/or reservations for the Manele Bay
Project in December of 1996. As of December 31, 1998, twelve units including
four model homes had been completed at the Terraces, which is a multi-family
project with five floor plans ranging in size from approximately 1,560 square
feet to approximately 3,200 square feet. They are currently priced from
approximately $800,000 to approximately $2.1 million. The single-family lots at
Manele are currently priced from approximately $650,000 to approximately
$2,450,000. The development and sale of the residential property at the Manele
Bay Project is expected to occur over a twenty-year period. As of December 31,
1998, there were three closings of single-family lots (one in 1998 and two in
1997) and seven closings of Terrace units all of which occurred in 1998. As of
March 1, 1999, there were sales contracts for seven Terrace units, with closings
expected to occur throughout 1999.
OTHER BUSINESSES ON LANA'I
The Company is involved in a number of other businesses on Lana'i, including
a residential redevelopment project and the operation of commercial properties
and various support services.
LANA'I CITY RESIDENTIAL REAL ESTATE PROJECT. The Company has a residential
redevelopment project within Lana'i City that includes up to approximately 250
single family homes that are planned to be sold. This project involves the
demolition of old plantation homes and rebuilding on the lots new single family
homes mirroring the plantation style architecture. The single family plantation
style homes are proposed to range in size from approximately 780 square feet to
1,344 square feet with prices ranging from approximately $115,000 to $260,000.
In connection with obtaining County approvals for this project, Castle agreed to
an affordable housing program to include 195 affordable housing and/or rental
units. As of December 31, 1998, thirty-one plantation style homes had been
completed, twenty-two sales had closed and four were under contract for sale.
Castle also plans to develop, build and manage approximately 164
multi-family units for rental to employees of Castle and other residents of
Lana'i. Of these, 40 quad units have been completed and are available for
rentals. An additional 24 elderly housing units were completed in 1998. These
are available for rental and are managed by Hale Mahaolu, Inc., a non-profit
agency unaffiliated with the Company.
COMMERCIAL PROPERTIES AND SUPPORT SERVICES. The Company owns and manages
approximately 113,000 square feet of improved commercial lease space within
Lana'i City. The Company is also engaged in a
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number of support businesses or activities on the island of Lana'i. These
support operations include the management of approximately 542 residential
rental units in Lana'i City, and prior to 1997, the management of a diversified
agricultural program. Castle's agricultural operation on Lana'i included cattle
grazing, forage production, a limited number of small crops and raising beef
cattle and hogs. In 1997, Castle sold the cattle operation and has discontinued
substantially all of its remaining agricultural operations. In addition, Castle
owns and operates a water company, which is regulated by the Hawaii Public
Utilities Commission and provides water service to the resorts, commercial
customers, government entities and the residents of Lana'i City. Castle also
owns and operates motor vehicles used to transport resort guests and employees,
which business is also licensed by the Hawaii Public Utilities Commission.
COMMERCIAL REAL ESTATE
HAWAII PROPERTIES
On the island of Oahu, Castle is the developer and manager of the Mililani
Technology Park, the Iwilei Cannery Development, the Town Center of Mililani and
the Dole Plantation. In the case of the Mililani Technology Park and the Dole
Plantation, Castle utilized undeveloped Company land and processed the property
through the entire range of development, including entitlements and permits,
planning, design, construction of site infrastructure, and construction and
management of building improvements. The Town Center of Mililani is an integral
part of the Mililani master-planned community and its development has been timed
with the growth of the surrounding community. The Iwilei Cannery Development is
an on-going conversion of a former pineapple cannery into a retail-entertainment
commercial center. The following paragraphs describe each of the properties in
more detail.
MILILANI TECHNOLOGY PARK is a high technology/business park approximately
two miles from Mililani Town and has approximately 226 acres remaining. The park
is planned to be an employment center for Central Oahu and Oahu's North Shore.
The zoning for Mililani Technology Park requires that no less than 45% of the
initial acreage be sold or ground leased to high technology companies. Phase One
of the Mililani Technology Park, with approximately 90 acres remaining, has
received all necessary entitlements. Subdivision improvements for all but
approximately 28 acres of Phase One are in place. Of the 100 acres in Phase One,
50 acres have been sold. As of December 31, 1998, four developed lots in Phase
One, totaling approximately 19 acres, were being marketed for sale, with an
additional 28 undeveloped acres remaining in this Phase. Phase Two, consisting
of approximately 136 acres, has been classified as Urban by the Hawaii State
Land Use Commission. The City approved the Development Plan amendment for Phase
Two in December 1995. The zoning application will be submitted for City approval
when market conditions warrant. Major development work is required in Phase Two,
including subdivision improvements, construction of a one million-gallon
off-site water reservoir and adding capacity to off-site sewer lines. There are
two buildings owned by Castle in the park: the 31,000 square foot Verifone
Building, and the 21,000 square foot multi-tenant office building known as the
Leilehua Building. Castle leases the Leilehua Building land from a third party.
As of December 31, 1998, the Verifone Building was fully leased to a single
tenant and the Leilehua Building was 93% leased, with a monthly weighted average
rent of $1.57 per square foot. Verifone was acquired by Hewlett-Packard in 1997.
In November 1998, Verifone vacated approximately 18,570 square feet of the
Verifone Building for which space rent was paid through January 1999, and is
expected to vacate its remaining space in the Verifone Building when its lease
expires in May 1999. In the first quarter of 1999, Castle relocated its Oahu
headquarters to the second floor of the Verifone Building from the Castle &
Cooke Building at the Iwilei Cannery Development.
IWILEI CANNERY DEVELOPMENT. This property, previously used by Dole for its
Hawaii pineapple cannery operations, consists of approximately 45 acres and is
located approximately 10 minutes driving time to downtown Honolulu, 10-15
minutes driving time to the Honolulu International Airport, and 15-20 minutes
driving time to Waikiki. The property is in various stages of development.
Approximately 31 acres are developed or are under construction, including
streets, parking lots and building pads. There is a plan for 14 acres to be
developed as an urban business/industrial park over the next five to seven
years. The current
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operating properties within the Iwilei development include a single-tenant
building (925 Dillingham), a multi-tenant building (801 Dillingham), and a
multi-tenant office and retail center (the Dole Center). The 925 and 801
Dillingham buildings include 55,000 square feet and 54,000 square feet,
respectively, of rentable office space. The Dole Center consists of multi-tenant
office space (Dole Office Building and Castle & Cooke Building), a retail center
(the Shops at Dole Cannery), and a 1,200-stall parking structure, which, along
with the 748-stall surface parking lot, serves the entire Dole Center. The Shops
at Dole Cannery consists of approximately 200,000 rentable square feet of retail
space, the 48,000 square foot banquet facilities ("Dole Visitor Center"), and
the 18-screen Signature Theaters (80,000 square feet) under construction, with a
scheduled opening of May 1999. Excluding the approximately 40,000 square feet of
the Dole Center then occupied by Castle's Oahu headquarters at December 31,
1998, the Cannery Development had approximately 636,000 rentable square feet
which was 62% leased to third parties. In the first quarter of 1999, Castle
relocated its Oahu headquarters from the Castle & Cooke Building at the Dole
Center to the Verifone Building at the Mililani Technology Park.
In 1998, Castle formed a venture with Horizon/Glen Outlet Centers Limited
Partnership ("Horizon"), a large developer of outlet centers in the United
States, and the lessee of property at the Dole Cannery under a long-term master
space lease that was to expire in 2044 (the "Cannery Lease"). Under this
agreement, Horizon contributed to the venture (i) its rights and obligations
under the Cannery Lease, and (ii) substantially all of its economic interest in
an approximately 368,000 square foot factory outlet center now known as the
Prime Outlets at Lake Elsinore ("Prime Outlets") in Lake Elsinore, California,
subject to existing mortgage financing, together with certain undeveloped
property comprising approximately 200 acres and located adjacent to the Prime
Outlets. In exchange for its contributions to the venture, Horizon was released
from all continuing obligations under the Cannery Lease. The Company owns a
substantial majority of the venture and controls its operations. As of December
31, 1998, the Prime Outlets was approximately 90% leased. In the fourth quarter
of 1998, Castle purchased an additional 3.89 acres of undeveloped land adjacent
to the Prime Outlets.
Home Depot, the largest home improvement retailer in the United States, is
leasing a nine-acre parcel at the Iwilei Cannery Development on which it is
building a 136,000 square foot store, which will be its first store in Hawaii
and which is expected to open in late 1999.
Signature Theaters, a chain theater operator headquartered in Northern
California, signed a long-term lease for what was formerly the Dole Can Plant.
This 80,000 square foot, 18-screen multi-plex, which is scheduled to open in May
1999, will be the first urban theater complex in Honolulu offering stadium
seating and state-of-the-art audio and visual equipment.
TOWN CENTER OF MILILANI is the fifth largest community shopping center on
Oahu. The Town Center, which sits on approximately 45 acres (41 acres of which
are owned by Castle), was built in phases with the first phase completed in
1987. In 1993, Wal-Mart entered into a ground lease for 11 acres and built a
137,000 square foot store (their first store in Hawaii) which opened in 1994.
The Town Center contains approximately 441,000 rentable square feet, of which
Castle owns approximately 394,000 rentable square feet. At December 31, 1998,
approximately 88% of Castle's property was leased. As part of a nationwide store
closing, Woolworth negotiated an early termination of its lease at the Town
Center, closing its store in March 1998. Also in March 1998, a lease was signed
with Consolidated Theaters, the largest theater operator in Honolulu, for a
14-screen multi-plex, which is scheduled to open in late 1999. Approximately
62,000 square feet of additional retail space or office space can be added to
the Town Center.
DOLE PLANTATION, located just north of the town of Wahiawa on a major road
leading to the North Shore of Oahu, is a retail visitor operation, occupying two
buildings totaling approximately 11,000 square feet on approximately 250 acres
(approximately 243 acres of which is a proposed expansion area). The property is
zoned for agricultural use, but has a special use permit to operate a retail
store restricted to selling agricultural and related products. The main products
sold are clothing and other items with the Dole logo, products made in Hawaii,
and food and beverages generally made with pineapples. The Dole Plantation is
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one of the busiest tourist attractions on Oahu and had over 900,000 visitors
during 1998 and revenues of approximately $6.4 million. A hedge maze, with the
center in the shape of a pineapple, was completed and opened in April 1998, and
was designated by the 1998 Guinness Book of World Records as the world's largest
permanent maze.
The Leilehua, Verifone, Iwilei Cannery Development and Dole Plantation
properties are pledged as collateral in connection with Castle's credit
agreement with a group of banks. According to 1997 appraisals by independent
third parties engaged by the banks, the total appraised value for the Leilehua,
Verifone and Dole Plantation properties was approximately $16 million, excluding
the undeveloped land. According to a 1998 appraisal by an independent third
party engaged by the banks, the income-producing leases of the Iwilei Cannery
Development, including the Home Depot lease, were valued at approximately $62
million. The Town Center is pledged as collateral in connection with Castle's
fixed rate loan from Teachers Insurance and Annuity Association of America which
funded at the end of 1998 (the "Teachers" Loan). In connection with the Teachers
Loan, an independent third party engaged by the lender performed an appraisal of
the property in the fourth quarter of 1998. Based on the applicable loan to
value ratio, the Town Center would have a value of approximately $62 million.
THE HAWAII COMMERCIAL REAL ESTATE MARKET
The Oahu downtown commercial office market has declined in the last few
years with a vacancy rate of 3.5% in 1990 climbing to a high of approximately
19% in 1996, and decreasing to approximately 15% at the end of 1998. This is the
result of a declining economy and an increase in the development of office space
since 1991. Vacancy rates are projected to stay in double digits through the
remainder of the decade. Since 1990, the Oahu retail industry has experienced a
slow economy and the entry into the Hawaii market of large discount retailers,
which has had an adverse effect on smaller local retailers. See "The Hawaii
Economy and Housing Market" for a discussion of the Hawaii economy.
BAKERSFIELD PROPERTIES
In Bakersfield, California, Castle owns two industrial parks comprising 98
acres (Stockdale Industrial Park and Gateway Industrial Park), two industrial
warehouses (Harvel and 7021 Schirra Court), two office buildings (10000 Ming
Avenue and One Riverwalk), a shopping center (The Marketplace), and a 50%
interest in a general partnership that owns a shopping center (Town & Country).
Castle owns 42 acres of undeveloped highway commercial land at Highway 99 and
Bear Mountain Boulevard (Highway 99 @ Bear Mountain). In addition, Castle owns
an undeveloped industrial park (Stockdale Industrial Park Phase VI) which
includes 285 acres of land currently being used for agricultural purposes. The
42 acres at Highway 99 @ Bear Mountain, the two industrial parks (Stockdale
Industrial Park and Gateway Industrial Park) and the undeveloped industrial park
(Stockdale Industrial Park Phase VI) are currently being marketed for sale. The
following paragraphs describe each of these properties in more detail.
HARVEL, located at 7001 Schirra Court, is an industrial warehouse of tilt-up
construction completed in August of 1998. The building contains approximately
100,000 square feet and is fully leased to Harvel Plastics at a current monthly
base rent of $0.306 per square foot.
7021 SCHIRRA COURT is an industrial warehouse of tilt-up construction
containing approximately 150,000 square feet. At December 31, 1998, the building
was fully leased with a monthly weighted average base rent of $0.22 per square
foot.
10000 MING AVENUE is a Class A, suburban office building constructed in 1984
containing approximately 214,000 square feet. The total site consists of
approximately 18.5 acres and is located in southwest Bakersfield. In November
1997, Castle signed a 10-year lease with AERA Energy, LLC. On July 1, 1999, when
the lease term commences, AERA will occupy 185,000 square feet at a monthly base
rent of $1.73 per square foot with the remaining 29,000 square feet occupied by
Celeron, resulting in a monthly weighted average base rent for the property of
$1.63 per square foot.
16
<PAGE>
ONE RIVERWALK is a 73,000 square foot Class A suburban office building which
was completed in February 1999. Castle & Cooke mainland communities headquarters
occupies approximately 17,000 square feet and effective March 1, 1999, a Dole
Food Company subsidiary began leasing approximately 25,000 square feet. An
additional 12,000 square feet is leased to third parties with move-in's
scheduled for the first half of 1999. Signed leases total approximately 75% of
the available space.
THE MARKETPLACE is a 32-acre, 300,000 square foot shopping center in
Bakersfield. The center has an "upscale" Georgian theme with a large fountain as
an amenity. Phase I (214,000 square feet) is 98% leased. Vons (a major southern
California grocery store chain) and Edwards Cinema are the anchor tenants
leasing 57,000 and 58,000 square feet, respectively. Vons opened in November of
1996 and Edwards opened in March of 1997. In December of 1998, Phase II was
completed adding 35,000 square feet to the 214,000 square feet in Phase I. As of
December 31, 1998, 89% of THE MARKETPLACE was leased with a weighted average
monthly rent of $1.22 per square foot. The remaining 51,000 square feet of space
is planned to be completed in 1999 and 2000.
TOWN & COUNTRY is a 173,000 square foot shopping center held by a
partnership in which Castle has a 50% ownership interest. The center was built
in 1986 and includes Albertsons Grocery Store and Longs Drug Stores as the major
tenants. As of December 31, 1998, the center was 98% leased with a weighted
average monthly rent of $1.03 per square foot.
THE BAKERSFIELD COMMERCIAL REAL ESTATE MARKET
Vacancies in southwest Bakersfield, where Castle's properties are located,
have averaged between a high of 19%, in 1991, and a current low of 7%. The
vacancy rates are projected to increase in the next year as new space becomes
available. See "The Bakersfield Economy and Housing Market" for a discussion of
the Bakersfield economy.
OTHER PROPERTIES
Castle owns and operates office buildings in Georgia (Premier Plaza), North
Carolina (Landmark Center and Horizons at Six Forks) and Arizona (Regents
Center) and an apartment complex in North Carolina (One Norman Square). Castle
also owns one golf course and is completing construction of another in San Jose,
California (Coyote Creek); owns a golf course in Sierra Vista, Arizona (Pueblo
Del Sol); is completing a golf course in Keene's Pointe (Orlando Florida); and
owns a landfill in San Jose, California (Kirby Canyon) that is leased to and
operated by a third party. Castle also owns a substantial majority interest in a
venture that owns substantially all of the economic interest in an outlet
shopping center (Prime Outlets) in Lake Elsinore, California. Except as
otherwise noted below, all office leases are full service, with excess operating
expenses passed through to the tenants. The following paragraphs describe each
of the properties in more detail.
PREMIER PLAZA includes One Premier Plaza and Two Premier Plaza. One Premier
Plaza is a Class A, suburban multi-tenant office building constructed in 1988
located in the North Central sub-market of Atlanta, Georgia consisting of
approximately 188,000 square feet. At December 31, 1998, this building had an
occupancy rate of 99% with a monthly weighted average base rent of $1.57 per
square foot. Two Premier Plaza, a sister Class A building at the same location,
consists of approximately 129,000 square feet and was completed in December
1997. At December 31, 1998, it was approximately 88% leased with a monthly
weighted average base rent of $1.85 per square foot, and lease negotiations were
in process with other prospective tenants.
LANDMARK CENTER consists of two Class A office buildings constructed in 1984
and 1986, respectively, located in northeastern Raleigh, North Carolina.
Building One consists of approximately 82,000 square feet and Building Two
consists of approximately 84,000 square feet. Total site area is 7.02 acres. At
December 31, 1998, Landmark Center had an occupancy rate of 99% with a monthly
weighted average base rent of $1.49 per square foot.
17
<PAGE>
HORIZON AT SIX FORKS consists of two multi-tenant office buildings and two
single-tenant buildings located in Raleigh, North Carolina. The buildings are
Class A and were constructed in 1989, 1990, and 1996. The two multi-tenant
office buildings consist of approximately 32,000 and 27,850 square feet,
respectively. The two single-tenant buildings consist of approximately 20,500
and 46,700 square feet, respectively. The total site area is 12.31 acres. At
December 31, 1998, the properties were 95% leased with a monthly weighted
average base rent of $1.07 per square foot. Some of the leases are full service
and some are net of electric and/or janitorial expenses.
REGENTS CENTER consists of two office buildings located in Tempe, Arizona.
Regents Center I was constructed in 1989 and consists of approximately 62,000
square feet with a total site area of 4.27 acres. At December 31, 1998, it was
100% occupied by DHL Worldwide Express at a monthly base rent of $1.90 per
square foot. Regents Center II, an approximately 43,000 square foot building,
was completed in the third quarter of 1998. The building is 100% leased to IKON
Office Solutions at a monthly base rent of $1.62 per square foot.
ONE NORMAN SQUARE APARTMENTS located in Cornelius, North Carolina, a suburb
of Charlotte, is a 192-unit apartment complex constructed in 1993. At December
31, 1998, the property was 98% leased with an average monthly lease rent of $800
per unit. The Company has entered into a contract to sell the One Norman Square
Apartments to a third party. Assuming satisfactory completion of due diligence
and the satisfaction of other closing conditions, this sale is expected to close
in the second quarter of 1999.
COYOTE CREEK GOLF COURSE, located approximately 2.5 miles south of San Jose,
California, and formerly known as Riverside Golf Course, is an 18-hole daily-fee
course. In 1998, approximately 61,000 rounds were played at an average fee of
$26 per round. Rounds were down approximately 27% in 1998 from 1997 due to El
Nino causing poor playing conditions. Castle is completing another 18-hole
daily-fee golf course adjacent to the existing course. This course was designed
by Jack Nicklaus and is expected to be open for play in the third quarter of
1999. It is expected to average 50,000 rounds per year at a starting green fee
of $60 per round. In conjunction with the construction of the new golf course,
the existing clubhouse is being replaced with a new approximately 12,000 square
foot clubhouse that will serve both the new Jack Nicklaus course and the
existing course.
PUEBLO DEL SOL GOLF COURSE, located in Sierra Vista, Arizona, is an 18-hole
daily-fee course surrounded by Castle's residential development. In 1998,
approximately 37,000 rounds were played at an average fee of $17.50 per round.
In 1996, the Company completed a 7,000 square foot clubhouse at the Pueblo Del
Sol Golf Course and made certain improvements to the golf course.
KEENE'S POINTE COUNTRY CLUB, located in Orlando Florida, is expected to open
in the third quarter of 1999. Keene's Pointe is an 18-hole daily-fee course
designed by Jack Nicklaus and is surrounded by residential property being
developed by the Keene's Pointe Partnership. Keene's Pointe is expected to
average around 45,000 rounds per year with an average green fee of $70. Also
expected to open in the third quarter of 1999 is the 23,000 square foot Keene's
Pointe Clubhouse which will serve the golf course and surrounding communities.
KIRBY CANYON, located approximately 2.5 miles south of San Jose, California,
is an operating landfill leased to a large waste management company.
PRIME OUTLETS, located in Lake Elsinore, California, is an approximately
368,000 square foot factory outlet center. As of December 31, 1998, the Prime
Outlets was approximately 90% leased.
The Schirra Court, 10000 Ming, The Marketplace, One Premier Plaza, Two
Premier Plaza, Horizon at Six Forks, Regents Center I and II, One Norman Square
and Coyote Creek Golf Course properties are pledged as collateral for Castle's
credit agreement with a group of banks. According to 1997 appraisals by
independent third parties engaged by the banks, the total appraised value of the
Schirra Court, The Marketplace, One Premier Plaza, Horizon at Six Forks, Regents
Center I, One Norman Square and Coyote Creek Golf Course properties was
approximately $90 million. According to 1998 appraisals by
18
<PAGE>
independent third parties engaged by the banks, Two Premier Plaza and Regents
Center II had a combined value of approximately $23 million. According to a 1998
appraisal by an independent third party engaged by the banks, the total
appraised value of 10000 Ming was approximately $29 million. Landmark Center is
pledged as collateral in connection with the Teachers Loan. In connection with
the Teachers Loan, an independent third party engaged by the lender performed an
appraisal of the property. Based on the applicable loan to value ratio, Landmark
Center would have a value of approximately $19 million.
COMPETITION AND OTHER INDUSTRY FACTORS
Castle's real estate operations are cyclical and highly sensitive to changes
in general and local economic conditions. Such conditions are levels of consumer
confidence, employment, income, interest rates, demand for housing and office
space and the availability of financing for mortgages, acquisitions and
construction. Other factors include shifts in population, fluctuations in the
real estate market, changes in the desirability and preferences for residential,
commercial and industrial areas, increased competition in the luxury resort
market, and the effects of changes in tax laws. Land use planning, management
and development are also subject to local zoning, economic and political
constraints. The State of Hawaii's regulatory process is lengthy and
time-consuming. The process of securing proper approvals and permits can be
costly, and no assurances can be given that requested approvals will be
obtained.
The real estate industry is highly competitive, with developers and
homebuilders competing for desirable properties, financing, raw materials and
skilled labor. Castle generally competes against a number of large,
well-capitalized real estate developers for residential, commercial and
industrial projects. Castle competes for residential sales with other
developers, homebuilders and the re-sale housing market, and for commercial and
industrial sales and leases with other developers with the same or similar
products. Castle competes primarily on the basis of location, price, quality,
design, service, and reputation.
Hawaii is home to a number of the top resort hotels in the world. Castle's
Lana'i resort hotels are in competition with these resorts for both individual
travelers and high level groups. Moreover, because Lana'i is considered a
world-class destination, it competes with resort hotels around the world with a
similar guest profile. Furthermore, increased competition in the market can be
expected as additional luxury resort hotels are opened around the world.
In addition to the general risks of real estate development and resort
operation and development, Castle is subject to some special or more pronounced
risks with respect to its Hawaii properties. These include the availability of
construction materials and labor and the costs thereof (including transportation
costs); adverse changes in the market for real estate due to the adverse changes
in international economic conditions which lessen travel, tourism and investment
in Hawaii; costs associated with environmental matters; and delays in obtaining
permits or approvals for development. Competition for the acquisition of
developable land is particularly intense in Hawaii, largely due to the
concentration of land ownership and the limited supply of available land that is
entitled for development.
In 1995, the Hawaii Supreme Court issued a decision (commonly known in
Hawaii as the "PASH Decision") which held that native Hawaiians possess rights
to engage in traditional and customary practices on undeveloped land in Hawaii.
The PASH Decision has created some uncertainty as to what these rights are and
how they may be exercised in light of other legally recognized rights of private
property owners. The Company is sensitive to the recognition of legitimate
native Hawaiian rights and supports establishing a process whereby these rights
can be fairly determined while preserving the rights of property owners. To
date, the Company has not experienced any adverse impact on its operations as a
result of the PASH Decision. At this time, however, there can be no assurance
that a process will be established to balance these rights of native Hawaiians
with those of property owners, and that the exercise of such native Hawaiian
rights will not adversely affect the Company's development and other operations.
19
<PAGE>
ENVIRONMENTAL AND REGULATORY MATTERS
Castle is subject to local, state and federal statutes, ordinances, rules
and regulations, including those protecting health and safety, archeological
preservation laws, cultural and environmental laws, including without limitation
the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act
and the Endangered Species Act. The particular environmental requirements that
apply to any given community vary greatly according to the condition and the
present and former uses of the site. Environmental laws may cause Castle to
incur substantial compliance, mitigation and other costs, may restrict or
prohibit development in certain environmentally sensitive areas, and may delay
or prevent completion of Castle's projects and adversely impact the
profitability of such projects.
Portions of Castle's properties in California, Keene's Pointe and on Lana'i
contain habitat for endangered or potentially endangered species. Some of the
properties held for development by Castle in California, Florida and Hawaii were
formerly sites of large agricultural operations, which necessarily involved the
use of pesticides and other agricultural chemicals. In addition, petroleum
operations conducted by third parties are or have been located on or adjacent to
land owned by Castle in Bakersfield and Hawaii.
Although environmental laws have not had a material adverse effect on
Castle's capital expenditures, earnings or competitive position to date, and
management is not currently aware of any environmental compliance issues that
are expected to have a material adverse effect on Castle, no assurance can be
given that such laws will not have a material adverse effect on Castle in the
future. In connection with the Distribution, Castle assumed and indemnified Dole
against any environmental liabilities associated with properties obtained from
Dole and certain other real estate projects completed by Dole prior to the
Distribution Date.
The availability and quality of water can affect real estate development and
operations. California has experienced drought conditions from time to time,
resulting in certain water conservation measures and, in some cases, rationing
by local municipalities with which Castle does business. Similarly, water
availability and quality can affect the Company in other locations where it does
business. Although Castle has not suffered any curtailment of its development
activity or operations as a result of drought or problems with the availability
or quality of water, restrictions on the Company's operations resulting from
water unavailability could have an adverse effect upon Castle's operations.
Changes in federal income tax laws and state and local property tax laws may
affect demand for new homes and therefore the value of developable real
property. In addition, Hawaii imposes "roll-back" taxes on agricultural land
which is reclassified for other purposes. Three years after reclassification of
agricultural land for higher urban or rural use, or earlier if the land is put
to such higher use, the owner is assessed the difference between the normal tax
rate and the preferential agricultural tax rate which was paid during the
preceding ten years, plus interest at the statutory rate.
Castle's real estate operations are subject to approval and regulation by
various federal, state and county agencies. Approval may be required with
respect to the layout, design and extent of improvements, as well as
construction, land use, water use, zoning, health, environmental and numerous
other matters. Approvals may also be required for sales and marketing
activities, sales literature, contract forms and the like. Castle is subject to
a number of laws imposing registration, filing and disclosure requirements with
respect to its residential developments, including the Lana'i resort residential
development. For example, the Federal Consumer Credit Protection Act requires,
among other things, that certain disclosures be made to purchasers about finance
charges in credit transactions. Various federal, state and local authorities
regulate the manner in which Castle conducts its sales activities and other
dealings with its customers.
20
<PAGE>
LICENSES
Castle is licensed as a general building contractor by the states of Hawaii
and California and has applied for licensing in Florida, and is licensed as a
real estate broker in Hawaii and Florida and has applied for licensing in
California. These licenses must be renewed periodically. Castle holds liquor
licenses for its Lana'i resort development and the Dole Plantation in Hawaii,
the Seven Oaks Country Club in Bakersfield, the Coyote Creek Golf Course in San
Jose, the Pueblo Del Sol Golf Course in Sierra Vista, and has applied for a
liquor license for the Keene's Pointe Country Club in Orlando. Castle also holds
a motor carrier certificate for its Lana'i operations.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The major raw materials and operating supplies used by the Company are
lumber, concrete, roofing material, steel frames, and plumbing and electrical
fixtures. Materials used in the construction of Castle's homes are generally
available from a number of sources. However, material prices may fluctuate due
to various factors, including demand or supply shortages.
Castle is subject to certain risks associated with the availability and cost
of materials and labor, delays in construction schedules and cost overruns.
Environmental regulations can also have an adverse impact on the availability
and price of certain materials such as lumber. Additionally, Castle's operations
are susceptible to delays caused by strikes or other events involving trade
unions, weather disturbances, and international events affecting the shipping
industry and the transportation of building materials.
Independent contractors, subcontractors and suppliers from customary trade
sources generally secure the materials and supplies used in the construction
work conducted by Castle. Construction time for Castle's homes depends on the
time of the year, the local labor situation, the availability of materials and
supplies and other factors. Castle is not presently experiencing any serious
labor or material shortages; however, the residential construction industry has
in the past experienced serious labor and material shortages, including lumber,
insulation, drywall and cement. Delays in construction of homes due to these
shortages or to inclement weather conditions could have an adverse effect upon
Castle's homebuilding operations.
EMPLOYEES
At December 31, 1998, the Company had approximately 1,674 employees (1,291
full-time and 383 part-time), including corporate staff, supervisory personnel
of construction projects, maintenance crews to service completed projects,
resort and hotel staff, as well as persons engaged in administrative, legal,
finance and accounting, engineering, land acquisition and development, and sales
and marketing activities. At December 31, 1998, certain of Castle's Hawaii
employees were affiliated with the Carpenters' Union (72 employees), and the
International Longshoremen's and Warehousemen's Union (781 employees). The
Company's California and other Mainland employees are not unionized. In
addition, Castle hires contractors and subcontractors for many of its
development and homebuilding operations. The Company believes that its relations
with its employees have been satisfactory.
21
<PAGE>
ITEM 2. PROPERTIES
The Company owns and maintains executive offices in Los Angeles, California
and auxiliary executive offices in Honolulu, and Lana'i City, Hawaii,
Bakersfield, California and Kannapolis, North Carolina. In the first quarter of
1999, Castle moved its Oahu headquarters from their offices in the Castle &
Cooke Building at the Iwilei Cannery Development to the Verifone Office Building
in Mililani Technology Park. Also in the first quarter of 1999, Castle moved its
Bakersfield offices from 10000 Ming Avenue to the newly-constructed One
Riverwalk office building in Bakersfield. The Company and each of its
subsidiaries believe that their property and equipment are generally well
maintained, in good operating condition and adequate for their present needs.
The following is a description of the Company's significant properties.
HAWAII--RESIDENTIAL
Castle's residential landholdings and unentitled agricultural and
conservation landholdings on Oahu, as of December 31, 1998, are described in the
following table.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF STATE LAND USE
UNITS(1) ACRES ENTITLED ACRES COMMISSION
PROPERTY (APPROXIMATE) (APPROXIMATE) (APPROXIMATE) CLASSIFICATION
- --------------------------------------------- --------------- ------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Mililani Mauka Phase I....................... 406 148 148 Urban
Mililani Mauka Phase II-A.................... 797 158 158 Urban
Mililani Mauka Phase II-B.................... 1,587 280 280 Urban
Mililani Makai............................... 6 1 1 Urban
Royal Kunia(2)............................... 980 195 195 Urban
Lalea........................................ 90 7 7 Urban
Na Pu'u Nani(3).............................. 640 255 255 Urban
Mililani Mauka 110 Acre Site................. -- 110 -- Urban
Kipapa Gulch(5).............................. -- 1,600 -- Agricultural(4)
Koa Ridge Mauka.............................. -- 640 -- Agricultural(4)
Koa Ridge Makai.............................. -- 570 -- Agricultural(4)
Waiawa....................................... -- 418 -- Agricultural(4)
Waipio West.................................. -- 270 -- Agricultural(4)(6)
Mililani South............................... -- 610 -- Agricultural(4)
Whitmore..................................... -- 295 -- Agricultural(4)
Waipio Forest/Other.......................... -- 5,520 -- Conservation(4)
----- ------ -----
TOTAL HAWAII................................. 4,506 11,077 1,044
----- ------ -----
----- ------ -----
</TABLE>
- ------------------------
(1) Number of units refers to the remaining (unsold and, in certain cases,
undeveloped) approved units and units on entitled land as of December 31,
1998.
(2) Wholly-owned subsidiaries of Castle, one of which is the managing general
partner, own 50% of the limited partnership that owns Royal Kunia. The
partnership is controlled by Castle and included in the Company's
consolidated financial statements.
(3) Na Pu'u Nani, located on the island of Hawaii, is held by a joint venture in
which a wholly-owned subsidiary of Castle owns a 30% interest and is the
managing general partner.
(4) Property has no approvals for development. In Hawaii, obtaining the many
necessary approvals for residential and commercial developments is an
extended process, which can involve a number of different governmental
jurisdictions and agencies, considerable risk and expense, and substantial
delays. No assurance can be given that Castle will be able to obtain any
such approvals.
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<PAGE>
(5) Includes approximately 125 acres of non-developable open space associated
with the Mililani Mauka Phase I and Phase II-A properties.
(6) The City and County of Honolulu announced plans for a large regional park
and sports complex in Central Oahu on this property. The City and County has
commenced an appraisal of this property and announced its intention to
proceed to acquire the property through eminent domain proceedings.
MAINLAND--RESIDENTIAL
Castle's residential, open space and agricultural landholdings in
California, Florida and Arizona as of December 31, 1998 are described in the
following table.
<TABLE>
<CAPTION>
NUMBER OF
LOTS(1) NUMBER OF ACRES ENTITLED ACRES
PROPERTY (APPROXIMATE) (APPROXIMATE) (APPROXIMATE) CURRENT ZONING
- ------------------------------------------------- --------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
BAKERSFIELD:
Seven Oaks....................................... 1,980 1,017 1,017 Residential
Silver Creek..................................... 448 162 162 Residential
Brimhall......................................... 382 193 193 Residential
Fairways (Single Family)......................... 700 225 225 Residential
Haggin Oaks (Single Family)...................... 8 1 1 Residential
Campus Park (Single Family)...................... 160 28 28 Residential
The Oaks (Single Family)......................... 22 19 19 Residential
Renfro (Single Family)........................... 327 81 81 Residential
Ming & Gosford (Multi Family).................... -- 31 31 Residential
Brimhall bulk land............................... -- 458 458 Residential
West of Buena Vista.............................. -- 136 136 Residential
Brimhall freeway alignment....................... -- 100 100 Residential
----- ----- -----
4,027 2,451 2,451
----- ----- -----
OTHER CALIFORNIA:
San Jose......................................... -- 2,210 -- Open Space
Atascadero....................................... 3 11 11 Residential
Mountaingate..................................... -- 282 -- Residential(2)
----- ----- -----
3 2,503 11
----- ----- -----
FLORIDA:
Keene's Pointe................................... 544 327 327 Residential
ARIZONA:
Sierra Vista Country Club Community.............. 1,076 336 336 Residential
Sierra Vista Other Entitled...................... 108 718 718 Residential
40 Acre Parcels--Cochise County.................. -- 661 -- Open Space
Unentitled--Greater Sierra Vista Area............ -- 2,680 -- Open Space
----- ----- -----
1,184 4,395 1,054
----- ----- -----
TOTAL MAINLAND................................... 5,758 9,676 3,843
----- ----- -----
----- ----- -----
</TABLE>
- ------------------------
(1) Number of lots refers to the remaining (unsold and, in certain cases,
undeveloped) lots that either have entitlements or are planned for future
development as of December 31, 1998.
23
<PAGE>
(2) This property is part of the original Mountaingate master planned community
that was zoned for residential development. In 1998, the Company filed a
vesting tentative tract map for this property. Also in 1998, the City of Los
Angeles approved a community plan update and slope density ordinance
affecting this property, which could greatly reduce or eliminate feasible
residential development of the property.
COMMERCIAL
The total land owned by Castle on the island of Oahu and designated by
Castle for commercial or industrial development is approximately 754 acres.
Approximately 542 acres are not fully entitled commercial or industrial lands
and may not all be developed for commercial or industrial uses.
In California, Castle owns approximately 840 acres of land, which are
intended for commercial use, including approximately 533 entitled acres in
Bakersfield. Castle owns approximately 164 acres in Sierra Vista, Arizona, which
are used to operate the 18-hole Pueblo Del Sol Golf Course. In addition, Castle
is currently constructing an 18-hole golf course on approximately 240 acres in
Orlando, Florida.
Castle's commercial land in San Jose, California consists of 149 acres that
are used for the operation of the 18-hole Coyote Creek Golf Course, an
additional 149 acres planned to be used for a new 18-hole golf course that is
under construction, and 760 acres that have been leased to a third party for the
Kirby Canyon landfill site.
Castle's Lindero Canyon property is currently undeveloped and consists of
approximately 20 acres located in Westlake Village, California.
Castle's Mountaingate commercial property is located in Los Angeles County.
This consists of an approximately 67-acre closed landfill site that is being
mined for methane gas by a third party.
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<PAGE>
Castle's commercial landholdings as of December 31, 1998, are described in
the following table.
<TABLE>
<CAPTION>
NUMBER OF
PROPERTY LOCATION ACRES TYPE
- ------------------------------------------------------------------- --------------- ----------- -----------------
<S> <C> <C> <C>
HAWAII
OPERATING PROPERTY
Verifone Office Building........................................... Mililani, HI 4 Office
Leilehua Building.................................................. Mililani, HI 0 Office(1)
925 Dillingham Office Building..................................... Honolulu, HI 3 Office
801 Dillingham Office Building..................................... Honolulu, HI 2 Office
Home Depot--Iwilei................................................. Honolulu, HI 9 Retail
Dole Center........................................................ Honolulu, HI 17 Office/Retail
Dole Plantation Retail Visitor Center.............................. Wahiawa, HI 7 Agricultural(2)
Town Center of Mililani............................................ Mililani, HI 41 Retail
---
83
---
---
</TABLE>
<TABLE>
<CAPTION>
CURRENT LAND
NUMBER OF USE
UNDEVELOPED LANDHOLDINGS LOCATION ACRES DESIGNATION
- ------------------------------------------------------------------- --------------- ----------- -----------------
<S> <C> <C> <C>
Mililani Mauka Commercial.......................................... Mililani, HI 24 Urban
Mililani Technology Park........................................... Mililani, HI 226 Urban
Pine Spur.......................................................... Wahiawa, HI 163 Agricultural
Dole Plantation.................................................... Wahiawa, HI 243 Agricultural
Other Iwilei....................................................... Honolulu, HI 14 Urban(3)
---
670
---
---
</TABLE>
- ------------------------
(1) Leasehold
(2) The property is zoned for agricultural use, but has a special use permit to
operate a retail store restricted to selling agricultural and related
products.
(3) Six acres are improved and five acres partially improved.
25
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
PROPERTY LOCATION ACRES TYPE
- ---------------------------------------------------------------- --------------------- ----------- --------------
<S> <C> <C> <C>
MAINLAND
OPERATING PROPERTY
10000 Ming Office Building...................................... Bakersfield, CA 19 Office
10000 Stockdale (One Riverwalk)................................. Bakersfield, CA 5 Office
The Marketplace Shopping Center................................. Bakersfield, CA 33 Retail
Schirra Court Industrial Warehouse.............................. Bakersfield, CA 8 Industrial
Harvel Warehouse................................................ Bakersfield, CA 8 Industrial
Premier Plaza Office Buildings.................................. Atlanta, GA 8 Office
Landmark Center Office Buildings................................ Raleigh, NC 7 Office
Horizon at Six Forks Office Buildings........................... Raleigh, NC 12 Office
Falls of the Neuse Office Building (under construction)......... Raleigh, NC 10 Office
Regents Center Office Buildings................................. Tempe, AZ 9 Office
One Norman Square Apartments.................................... Cornelius, NC 22 Multi Family
Coyote Creek Golf Courses (1 completed, 1 under construction)... San Jose, CA 298 Golf Course
Pueblo del Sol Golf Course...................................... Sierra Vista, AZ 164 Golf Course
Keene's Pointe Golf Course (under construction)................. Orlando, FL 240 Golf Course
Kirby Canyon.................................................... San Jose, CA 760 Landfill
Prime Outlets(1)................................................ Lake Elsinore, CA 43 Retail
-----
1,646
-----
-----
</TABLE>
<TABLE>
<CAPTION>
CURRENT LAND
NUMBER OF USE
UNDEVELOPED LANDHOLDINGS LOCATION ACRES DESIGNATION
- ------------------------------------------------------------- ------------------------ ----------- --------------
<S> <C> <C> <C>
Stockdale Industrial Park.................................... Bakersfield, CA 312 Industrial
Gateway Industrial Park...................................... Bakersfield, CA 71 Industrial
Silver Creek Commercial...................................... Bakersfield, CA 34 Commercial
Stockdale Highway............................................ Bakersfield, CA 74 Commercial
Highway 99 @ Bear Mountain................................... Bakersfield, CA 42 Commercial
Camarillo.................................................... Camarillo, CA 5 Commercial
Paso Robles.................................................. Paso Robles, CA 9 Commercial
Lindero Canyon............................................... Westlake Village, CA 20 Commercial
Mountaingate................................................. Los Angeles, CA 67 Landfill
Lake Elsinore................................................ Lake Elsinore, CA 84 Commercial
Lake Elsinore Open Space..................................... Lake Elsinore, CA 122 Open Space
-----
840
-----
-----
Certain operating properties of Castle are under mortgages in favor of Castle lenders.
</TABLE>
- ------------------------
(1) The Company owns substantially all of the economic interest in this property
which is held by a limited partnership.
RESORTS
The island of Lana'i is the sixth largest of the islands of Hawaii. Castle
owns approximately 88,000 acres or 98% of the island. Of the total acreage on
the island (approximately 90,500 acres), approximately 3,228 acres are
classified by the Hawaii State Land Use Commission as Urban, 38,197 acres are
classified as Conservation, 46,678 acres are classified as Agricultural and
2,397 acres are classified as Rural.
26
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in various claims and legal
actions incident to its operations. In the opinion of management, after
consultation with legal counsel, none of such claims is expected to have a
material adverse effect on the financial condition or other operating results of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT
Below is a list of the names and ages of all executive officers of the
Company as of March 20, 1999 indicating their positions with the Company and
their principal occupations during at least the past five years. Each of such
executive officers serves at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS WITH THE COMPANY AND SUBSIDIARIES AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------ ------------------------------------------------------------------------------------
<S> <C>
David H. Murdock (75) Chairman of the Board, Chief Executive Officer and Director of Castle since October
1995. Chairman of the Board, Chief Executive Officer and Director of Castle & Cooke
Homes, Inc. (formerly a publicly traded company that was 82% owned by Dole) from
September 1992 until January 1995. Chairman of the Board, Chief Executive Officer
and Director of Dole since July 1985. Since June 1982, Chairman of the Board and
Chief Executive Officer of Flexi-Van Corporation, a Delaware corporation
wholly-owned by Mr. Murdock. Sole owner and developer of the Sherwood Country Club
in Ventura County, California, and numerous other real estate developments; also
sole stockholder of numerous corporations engaged in a variety of business ventures,
including the manufacture of textile-related products, and industrial and building
products.
Wallace S. Miyahira (66) President--Hawaii Residential and Commercial Operations of Castle and a Director
since December 1996. Senior Vice President of Castle from October 1995 to December
1996. Senior Vice President of Castle & Cooke Homes, Inc. from June 1993 to January
1995. Senior Vice President of Castle & Cooke Properties, Inc. (a subsidiary of
Castle conducting real estate business in Hawaii) from 1983 to December 1996, and
President since December 1996. President of Castle & Cooke Homes Hawaii, Inc. (a
subsidiary of Castle conducting the residential real estate business in Hawaii) from
1984 to March 1995 and from December 1995 to present.
Lynne Scott Safrit (40) President--North American Commercial Operations of Castle since October 1995 and
Director since December 1995. President of Mega Management Company, Inc. since
December 1993, and President of Atlantic American Properties, Inc. since August
1989, both of which are real estate management companies wholly-owned, directly or
indirectly, by David H. Murdock.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS WITH THE COMPANY AND SUBSIDIARIES AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------ ------------------------------------------------------------------------------------
<S> <C>
Bruce M. Freeman (49) Senior Vice President of Castle since October 1995. President of Castle & Cooke
California, Inc., a California corporation (a subsidiary of Castle conducting the
mainland communities real estate business) or its predecessor company since
September 1993. President Bakersfield/Arizona of Castle & Cooke Homes, Inc. from
September 1993 to January 1995. President and Chief Operating Officer of Griffin
Homes, a real estate development company unaffiliated with Castle, from 1987 until
1993.
Patrick Birmingham (61) Senior Vice President of Castle since February 1998 and a Director since February
1999. President and Chief Operating Officer of Lana'i Company, Inc. (a subsidiary of
Castle conducting the resorts business on Lana'i) since February 1998. Mr.
Birmingham retired from ITT Sheraton Corporation in October 1995. Senior Vice
President and Director of International Development, ITT Sheraton Corporation, 1995;
and Senior Vice President and President of Europe, Africa and Middle East Division,
ITT Sheraton Corporation, 1993 to 1994.
Edward C. Roohan (35) Vice President and Chief Financial Officer of Castle since April 1996 and Treasurer
since May 1998, and Vice President and Corporate Controller of Castle from October
1995 to April 1996. Vice President and Corporate Controller of Castle & Cooke Homes,
Inc. from August 1993 to January 1995. Audit Manager with Arthur Andersen LLP in Los
Angeles, California from 1990 to 1993 and employed in the Audit Division of Arthur
Andersen LLP from 1985 to 1990.
Roberta Wieman (54) Vice President and Corporate Secretary of Castle since April 1996. Vice President of
Dole since February 1995. President of Pacific Holding Company, a sole
proprietorship of David H. Murdock, since January 1999, and Secretary since 1992.
Executive Assistant to the Chairman of the Board and Chief Executive Officer of Dole
from November 1991 to February 1995.
Kevin R. Shaney (48) Vice President, General Counsel and Assistant Secretary of Castle since April 1996.
President of Castle & Cooke Land Company (a division of Castle responsible for land
management in Hawaii) from January 1994 to October 1997. Senior Vice President and
General Counsel of Castle & Cooke Properties, Inc. and Castle & Cooke Homes Hawaii,
Inc. from March 1997 to present, and Vice President and General Counsel from
December 1990 to March 1997. Vice President and Assistant Secretary of Castle &
Cooke Homes, Inc. from September 1993 to January 1995.
Scott Blechman (34) Vice President and Corporate Controller of Castle since July 1997 and Assistant
Controller of Castle from April 1996 to June 1997. Senior Auditor for Price
Waterhouse in Los Angeles, California from January 1992 to March 1996.
</TABLE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of February 28, 1999, there were approximately 9,289 holders of record of
the Company's Common Stock. The Company's Common Stock is traded on the New York
Stock Exchange ("NYSE") under the
28
<PAGE>
symbol "CCS". The following table shows the market price range of the Company's
Common Stock for each quarterly period in 1998 and 1997:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1998
First Quarter.............................................................. $ 17.31 $ 14.19
Second Quarter............................................................. 19.19 16.63
Third Quarter.............................................................. 21.38 14.75
Fourth Quarter............................................................. 16.44 13.63
--------- ---------
Year....................................................................... $ 21.38 $ 13.63
--------- ---------
--------- ---------
1997
First Quarter.............................................................. $ 16.50 $ 14.88
Second Quarter............................................................. 16.56 13.13
Third Quarter.............................................................. 20.50 15.88
Fourth Quarter............................................................. 20.38 15.88
--------- ---------
Year....................................................................... $ 20.50 $ 13.13
--------- ---------
--------- ---------
</TABLE>
The payment and amount of cash dividends on Castle Common Stock will be
subject to the discretion of Castle's Board of Directors. Castle anticipates
that it will retain all earnings for use in its business and will not pay cash
dividends on shares of Castle Common Stock in the foreseeable future.
Furthermore, the terms of the Credit Agreement restrict the payment of dividends
on the Castle Common Stock. Castle's dividend policy will be reviewed by
Castle's Board of Directors from time to time as may be appropriate and payment
of dividends will depend upon Castle's financial position, capital requirements
and Credit Agreement restrictions and such other factors as Castle's Board of
Directors deems relevant.
No equity securities of Castle were sold by Castle since the Distribution
that were not registered under the Securities Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information appearing under
the caption "Results of Operations and Selected Financial Data" on page 17 of
the Castle Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
There is hereby incorporated by reference the information appearing under
the caption "Management's Discussion and Analysis of Results of Operations and
Financial Position" on pages 18 through 23 of the Castle Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is hereby incorporated by reference the information appearing on pages
24 through 39 of the Castle Annual Report. See also Item 14 of this report
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in the Company's independent public accountants
for 1998, 1997 and 1996 nor have there been any disagreements with the Company's
independent public accountants on accounting principles or practices for
financial statement disclosures.
29
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information regarding the
Company's directors that appears under the caption "Election of Directors" in
the Company's definitive proxy statement for its 1999 Annual Meeting of
Stockholders (the "1999 Proxy Statement"). There is hereby incorporated by
reference the Company's executive officers and related information under
"Executive Officers of the Registrant", which is set forth in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information that appears under
the captions "Compensation of Directors" and "Compensation of Executive
Officers" in the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information with respect to
security ownership that appears under the captions "Beneficial Ownership of
Certain Stockholders" and "Security Ownership of Directors and Executive
Officers" in the 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information that appears under
the caption "Certain Transactions" in the 1999 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
ANNUAL
REPORT
PAGE
-----------
<C> <S> <C>
(A)1. FINANCIAL STATEMENTS:
Consolidated Statements of Operations for the years ended December 31, 1998, December 31, 1997
and December 31, 1996........................................................................... 24
Consolidated Balance Sheets at December 31, 1998 and December 31, 1997.......................... 25
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998, December
31, 1997 and December 31, 1996.................................................................. 26
Consolidated Statements of Cash Flows for the years ended December 31, 1998, December 31, 1997
and December 31, 1996........................................................................... 27
Notes to Consolidated Financial Statements...................................................... 28-38
Report of Independent Public Accountants........................................................ 39
2. FINANCIAL STATEMENT SCHEDULES:
<CAPTION>
FORM
10-K
PAGES
-----------
<C> <S> <C>
Independent Public Accountants' Report on Financial Statement Schedule.......................... F-1
Schedule III--Real Estate and Accumulated Depreciation.......................................... F-2
</TABLE>
30
<PAGE>
All other schedules are omitted because they are not applicable, not
required or the information is included elsewhere in the financial statements or
notes thereto.
<TABLE>
<CAPTION>
3. EXHIBITS
EXHIBIT
NO.
- -----------
<C> <S>
2.1 Allocation Agreement between the Company and Dole Food Company, Inc. (incorporated
herein by reference to Exhibit 2.1 to the Company's Registration Statement on Form
10/A, as amended, File No. 1-14020).
3.1 Amended Articles of Incorporation (incorporated herein by reference to Exhibit 3.2
to the Company's Registration Statement on Form 10/A, as amended, File No. 1-14020).
3.2 Resolution of the Board of Directors of Castle authorizing and fixing the terms and
conditions of the Series A 10% Cumulative Preferred Stock (incorporated herein by
reference to Exhibit 3.3 to the Company's Registration Statement on Form 10/A, as
amended, File No. 1-14020).
3.3 Bylaws as amended through February 9, 1999.
4.1 Term Note (incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 10/A, as amended, File No. 1-14020).
4.2 Amended and Restated Credit Agreement dated as of May 16, 1997, among Castle &
Cooke, Inc., as Borrower, and the Lenders named therein, and the Chase Manhattan
Bank, as Administrative Agent and Collateral Agent (incorporated herein by reference
to Exhibit 4.2 to the Company's Form 10-Q for the quarterly period ended June 30,
1997, File No. 1-14020).
4.3 Amendment No. 1 to the Amended and Restated Credit Agreement (incorporated herein by
reference to Exhibit 4.3 to the Company's Form 10-Q for the quarterly period ended
June 30, 1998, File No. 1-14020).
4.4 Amendment No. 2 to the Amended and Restated Credit Agreement (incorporated herein by
reference to Exhibit 4.3 to the Company's Form 10-Q for the quarterly period ended
June 30, 1998, File No. 1-14020).
4.5 Amendment No. 3 to the Amended and Restated Credit Agreement (incorporated herein by
reference to Exhibit 4.3 to the Company's Form 10-Q for the quarterly period ended
June 30, 1998, File No. 1-14020).
4.6 Temporary Waiver Agreement relating to the Amended and Restated Credit Agreement
(incorporated herein by reference to Exhibit 4.3 to the Company's Form 10-Q for the
quarterly period ended June 30, 1998, File No. 1-14020).
The Company agrees to furnish to the Securities and Exchange Commission upon request
a copy of each instrument with respect to issues of long-term debt of the Company
and its subsidiaries, the authorized principal amount of which does not exceed 10%
of the consolidated assets of the Company and its subsidiaries.
Executive Compensation Plans and Arrangements--Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and
10.7:
10.1 Employee Benefits and Compensation Allocation Agreement between the Company and Dole
Food Company, Inc. (incorporated herein by reference to Exhibit 10.2 to the
Company's Registration Statement on Form 10/A, as amended, File No. 1-14020).
10.2 Amended and Restated 1995 Stock Option and Award Plan (as amended through February
9, 1999, subject to stockholder approval).
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<C> <S>
10.3 Form of Non-Qualified Stock Option Agreement for Initial Converted Options under the
1995 Plan (incorporated herein by reference to Executive Compensation Plans and
Arrangements-- Exhibit 10.3 to the Company's Annual Report on Form 10K for the year
ended December 31, 1995, File No. 1-14020).
10.4 Form of Non-Qualified Stock Option Agreement for Initial Converted Options under the
1995 Plan (incorporated herein by reference to Executive Compensation Plans and
Arrangements-- Exhibit 10.4 to the Company's Annual Report on Form 10K for the year
ended December 31, 1995, File No. 1-14020).
10.5 Form of Nonqualified Stock Option under the 1995 Plan (incorporated herein by
reference to Executive Compensation Plans and Arrangements--Exhibit 10.5 to the
Company's Annual Report on Form 10K for the year ended December 31, 1995, File No.
1-14020).
10.6 Castle & Cooke, Inc. Deferred Stock Compensation Plan for Non-Employee Directors, as
amended through February 9, 1999.
10.7 Castle & Cooke, Inc. Supplementary Retirement Plan.
13 Castle & Cooke, Inc. 1998 Annual Report for the year ended December 31, 1998. (This
report is furnished for information of the Commission and, except for those portions
thereof which are expressly incorporated by reference herein, is not "filed" as a
part of this Annual Report on Form 10-K.)
21 Subsidiaries of Castle & Cooke, Inc.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K:
No current reports on Form 8-K were filed by the Company during the last
quarter of the year ended December 31, 1998.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
CASTLE & COOKE, INC.
By: /s/ DAVID H. MURDOCK
-----------------------------------------
David H. Murdock
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
March 23, 1999
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ DAVID H. MURDOCK Chairman of the Board and
- ------------------------------ Chief Executive Officer March 23, 1999
David H. Murdock and Director
President--Hawaii
/s/ WALLACE S. MIYAHIRA Residential and
- ------------------------------ Commercial Operations March 23, 1999
Wallace S. Miyahira and Director
/s/ LYNNE SCOTT SAFRIT President--North American
- ------------------------------ Commercial Operations March 23, 1999
Lynne Scott Safrit and Director
/s/ PATRICK J. BIRMINGHAM
- ------------------------------ Senior Vice President and March 23, 1999
Patrick J. Birmingham Director
Vice President, Treasurer
/s/ EDWARD C. ROOHAN and Chief Financial
- ------------------------------ Officer (Principal March 23, 1999
Edward C. Roohan Financial Officer)
Vice President and
/s/ SCOTT J. BLECHMAN Corporate Controller
- ------------------------------ (Principal Accounting March 23, 1999
Scott J. Blechman Officer)
/s/ EDWARD M. CARSON
- ------------------------------ Director March 23, 1999
Edward M. Carson
/s/ LODWRICK M. COOK
- ------------------------------ Director March 23, 1999
Lodwrick M. Cook
/s/ EDWARD J. HOGAN
- ------------------------------ Director March 23, 1999
Edward J. Hogan
/s/ DELL TRAILOR
- ------------------------------ Director March 23, 1999
Dell Trailor
</TABLE>
33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Castle & Cooke, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in Castle & Cooke, Inc.'s annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 8, 1999. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The financial statement
Schedule III--Real Estate and Accumulated Depreciation is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The information included in the schedule for the year
ended December 31, 1998, has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 8, 1999
F-1
<PAGE>
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION--CASTLE & COOKE, INC.
AS OF DECEMBER 31, 1998--(000'S)
<TABLE>
<CAPTION>
COLUMN D
--------------------------------
COLUMN C
-------------------------
COST CAPITALIZED SUBSEQUENT TO
INITIAL COST TO COMPANY
COLUMN B ACQUISITION
COLUMN A --------------- ------------------------- --------------------------------
- ------------------------------------------------ ENCUM- BUILDINGS AND CARRYING
DESCRIPTION BRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
- ------------------------------------------------ --------------- --------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Verifone Office Building
Mililani, Hawaii.............................. (1) $ 1,000 $ 4,188 $ 251 $ 0
Leilehua Office Building
Mililani, Hawaii.............................. (1) -- 2,029 1,386 0
925 Dillingham Office Building
Honolulu, Hawaii.............................. (1) 2,517 4,105 740 0
801 Dillingham Office Building
Honolulu, Hawaii.............................. (1) 500 5,049 402 0
Dole Center, Office/Retail mixed use
Honolulu, Hawaii.............................. (1) 16,919 50,849 14,331 0
Town Center of Mililani Shopping Center
Mililani, Hawaii.............................. (2) 4,254 15,788 7,681 0
Mililani Mauka, McDonalds site
Mililani, Hawaii.............................. 351 485 0 0
Dole Plantation Retail Store
Wahiawa, Hawaii............................... (1) 222 3,446 1,278 0
10000 Ming Office Building
Bakersfield, California....................... (1) 1,135 16,812 2,325 0
The Market Place
Bakersfield, California....................... (1) 1,885 13,148 11,185 0
Schirra Court Industrial Warehouse
Bakersfield, California....................... (1) 258 2,757 878 0
Harvel Building
Bakersfield, California....................... 314 2,403 0 0
Premier Plaza Office Buildings
Atlanta, Georgia.............................. (1) 4,244 15,181 16,013 0
Landmark Center Office Buildings
Raleigh, North Carolina....................... (2) 1,401 14,997 1,021 0
Horizon at Six Forks Office Buildings
Raleigh, North Carolina....................... (1) 2,859 4,588 4,005 0
Regents Center Office Buildings
Tempe, Arizona................................ (1) 2,664 8,024 3,660 0
One Norman Square Apartments
Charlotte, North Carolina..................... (1) 1,284 9,424 226 0
--
--------- -------------- ---------------
$ 41,807 $ 173,273 $ 65,382 $ 0
--
--
--------- -------------- ---------------
--------- -------------- ---------------
<CAPTION>
COLUMN E
------------------------------------
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD COLUMN F COLUMN G COLUMN H
COLUMN A ------------------------------------ ------------- ---------------- ----------
- ------------------------------------------------ BUILDING AND ACCUMULATED DATE OF DATE
DESCRIPTION LAND IMPROVEMENTS TOTAL(3) DEPRECIATION CONSTRUCTION ACQUIRED
- ------------------------------------------------ --------- -------------- --------- ------------- ---------------- ----------
<S> <C>
Verifone Office Building
Mililani, Hawaii.............................. $ 1,000 $ 4,439 $ 5,439 $ 1,059 1989 1989
Leilehua Office Building
Mililani, Hawaii.............................. 0 3,415 3,415 1,293 1989 1989
925 Dillingham Office Building
Honolulu, Hawaii.............................. 2,517 4,845 7,362 1,625 1984 1984
801 Dillingham Office Building
Honolulu, Hawaii.............................. 500 5,451 5,951 1,710 1993 1993
Dole Center, Office/Retail mixed use
Honolulu, Hawaii.............................. 16,919 65,180 82,099 19,319 1988-1996 1988-1996
Town Center of Mililani Shopping Center
Mililani, Hawaii.............................. 4,254 23,469 27,723 5,334 1988 1988
Mililani Mauka, McDonalds site
Mililani, Hawaii.............................. 351 485 836 0 1998 1998
Dole Plantation Retail Store
Wahiawa, Hawaii............................... 222 4,724 4,946 1,471 1989 1989
10000 Ming Office Building
Bakersfield, California....................... 1,135 19,137 20,272 7,326 1984 1987
The Market Place
Bakersfield, California....................... 1,885 24,333 26,218 960 1996 1996
Schirra Court Industrial Warehouse
Bakersfield, California....................... 258 3,635 3,893 766 1992 1992
Harvel Building
Bakersfield, California....................... 314 2,403 2,717 23 1998 1998
Premier Plaza Office Buildings
Atlanta, Georgia.............................. 4,244 31,194 35,438 3,540 1988, 1997 1993, 1997
Landmark Center Office Buildings
Raleigh, North Carolina....................... 1,401 16,018 17,419 2,920 1984, 1986 1993
Horizon at Six Forks Office Buildings
Raleigh, North Carolina....................... 2,859 8,593 11,452 1,171 1989, 1990, 1996 1993, 1996
Regents Center Office Buildings
Tempe, Arizona................................ 2,664 11,684 14,348 1,368 1989, 1997 1993, 1997
One Norman Square Apartments
Charlotte, North Carolina..................... 1,284 9,650 10,934 1,927 1993 1993
--------- -------------- --------- -------------
$ 41,807 $ 238,655 $ 280,462 $ 51,812
--------- -------------- --------- -------------
--------- -------------- --------- -------------
<CAPTION>
COLUMN I
--------------
LIFE ON WHICH
DEPRECIATION
IN LATEST
COLUMN A INCOME
- ------------------------------------------------ STATEMENTS
DESCRIPTION IS COMPUTED
- ------------------------------------------------ --------------
Verifone Office Building
Mililani, Hawaii.............................. 40 years
Leilehua Office Building
Mililani, Hawaii.............................. 40 years
925 Dillingham Office Building
Honolulu, Hawaii.............................. 40 years
801 Dillingham Office Building
Honolulu, Hawaii.............................. 20 years
Dole Center, Office/Retail mixed use
Honolulu, Hawaii.............................. 20-40 years
Town Center of Mililani Shopping Center
Mililani, Hawaii.............................. 40 years
Mililani Mauka, McDonalds site
Mililani, Hawaii.............................. 40 years
Dole Plantation Retail Store
Wahiawa, Hawaii............................... 40 years
10000 Ming Office Building
Bakersfield, California....................... 40 years
The Market Place
Bakersfield, California....................... 40 years
Schirra Court Industrial Warehouse
Bakersfield, California....................... 40 years
Harvel Building
Bakersfield, California....................... 40 years
Premier Plaza Office Buildings
Atlanta, Georgia.............................. 39 years
Landmark Center Office Buildings
Raleigh, North Carolina....................... 39 years
Horizon at Six Forks Office Buildings
Raleigh, North Carolina....................... 39 years
Regents Center Office Buildings
Tempe, Arizona................................ 39 years
One Norman Square Apartments
Charlotte, North Carolina..................... 27.5 years
</TABLE>
- ----------------------------------------
(1) This property is pledged as collateral in connection with the Company's
revolving line of credit agreement.
(2) This property is pledged as collateral in connection with the Company's
long-term note payable.
(3) Aggregate cost for federal income tax purposes as of December 31, 1998 is
$227 million.
F-2
<PAGE>
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
CASTLE & COOKE, INC.
AS OF DECEMBER 31, 1998
(000'S)
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Reconciliation of cost basis:
Balance at beginning of period............................................. $ 260,775 $ 243,093 $ 264,351
Additions during the period:
Acquisitions through foreclosure......................................... -- -- --
Other acquisitions/newly completed property.............................. 11,243 -- 2,888
Improvements, etc........................................................ 8,304 21,486 13,251
Other.................................................................... -- -- --
Deductions during the period:
Cost of real estate sold................................................. (36,904) (177) (512)
Other.................................................................... (325) (51) 484
---------- ---------- ----------
Balance at close of period............................................... $ 243,093 $ 264,351 $ 280,462
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Reconciliation of accumulated depreciation:
Balance at beginning of period............................................. $ 37,030 $ 38,144 $ 44,595
Additions during the period:
Depreciation expense..................................................... 6,920 6,531 7,601
Other.................................................................... -- -- --
Deductions during the period:
Cost of real estate sold................................................. (5,806) (92) (422)
Other.................................................................... -- 12 38
---------- ---------- ----------
Balance at close of period................................................. $ 38,144 $ 44,595 $ 51,812
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<C> <S>
2.1 Allocation Agreement between the Company and Dole Food Company, Inc. (incorporated herein by reference to
Exhibit 2.1 to the Company's Registration Statement on Form 10/A, as amended, File No. 1-14020).
3.1 Amended Articles of Incorporation (incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form 10/A, as amended, File No. 1-14020).
3.2 Resolution of the Board of Directors of Castle authorizing and fixing the terms and conditions of the
Series A 10% Cumulative Preferred Stock (incorporated herein by reference to Exhibit 3.3 to the Company's
Registration Statement on Form 10/A, as amended, File No. 1-14020).
3.3 Bylaws, as amended through February 9, 1999.
4.1 Term Note (incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement on
Form 10/A, as amended, File No. 1-14020).
4.2 Amended and Restated Credit Agreement dated as of May 16, 1997, among Castle & Cooke, Inc., as Borrower,
and the Lenders named therein, and the Chase Manhattan Bank, as Administrative Agent and Collateral Agent
(incorporated herein by reference to Exhibit 4.2 to the Company's Form 10-Q for the quarterly period
ended June 30, 1997, File No. 1-14020).
4.3 Amendment No. 1 to the Amended and Restated Credit Agreement (incorporated herein by reference to Exhibit
4.3 to the Company's Form 10-Q for the quarterly period ended June 30, 1998, File No. 1-14020).
4.4 Amendment No. 2 to the Amended and Restated Credit Agreement (incorporated herein by reference to Exhibit
4.3 to the Company's Form 10-Q for the quarterly period ended June 30, 1998, File No. 1-14020).
4.5 Amendment No. 3 to the Amended and Restated Credit Agreement (incorporated herein by reference to Exhibit
4.3 to the Company's Form 10-Q for the quarterly period ended June 30, 1998, File No. 1-14020).
4.6 Temporary Waiver Agreement relating to the Amended and Restated Credit Agreement (incorporated herein by
reference to Exhibit 4.3 to the Company's Form 10-Q for the quarterly period ended June 30, 1998, File
No. 1-14020).
The Company agrees to furnish to the Securities and Exchange Commission upon request a copy of each
instrument with respect to issues of long-term debt of the Company and its subsidiaries, the authorized
principal amount of which does not exceed 10% of the consolidated assets of the Company and its
subsidiaries.
</TABLE>
Executive Compensation Plans and Arrangements--Exhibits 10.1, 10.2, 10.3, 10.4,
10.5, 10.6 and 10.7:
<TABLE>
<C> <S>
10.1 Employee Benefits and Compensation Allocation Agreement between the Company and Dole
Food Company, Inc. (incorporated herein by reference to Exhibit 10.2 to the
Company's Registration Statement on Form 10/A, as amended, File No. 1-14020).
10.2 Amended and Restated 1995 Stock Option and Award Plan (as amended through February
9, 1999, subject to stockholder approval).
10.3 Form of Non-Qualified Stock Option Agreement for Initial Converted Options under the
1995 Plan (incorporated herein by reference to Executive Compensation Plans and
Arrangements-- Exhibit 10.3 to the Company's Annual Report on Form 10K for the year
ended December 31, 1995, File No. 1-14020).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<C> <S> <S>
10.4 Form of Non-Qualified Stock Option Agreement for Initial Converted Options under the 1995 Plan
(incorporated herein by reference to Executive Compensation Plans and Arrangements-- Exhibit 10.4 to the
Company's Annual Report on Form 10K for the year ended December 31, 1995, File No. 1-14020).
10.5 Form of Nonqualified Stock Option under the 1995 Plan (incorporated herein by reference to Executive
Compensation Plans and Arrangements--Exhibit 10.5 to the Company's Annual Report on Form 10K for the year
ended December 31, 1995, File No. 1-14020).
10.6 Castle & Cooke, Inc. Deferred Stock Compensation Plan for Non-Employee Directors, as amended through
February 9, 1999.
10.7 Castle & Cooke, Inc. Supplementary Executive Retirement Plan.
13 Castle & Cooke, Inc. 1998 Annual Report for the year ended December 31, 1998. (This report is furnished
for information of the Commission and, except for those portions thereof which are expressly incorporated
by reference herein, is not "filed" as a part of this Annual Report on Form 10-K.)
21 Subsidiaries of Castle & Cooke, Inc.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
</TABLE>
<PAGE>
BYLAWS
(Amended through February 9, 1999)
OF
CASTLE & COOKE, INC.
ARTICLE I
OFFICES AND SEAL
SECTION 1.01. PRINCIPAL OFFICE. The principal office of the
corporation shall be located at 10900 Wilshire Boulevard, Los Angeles,
California 90024. In addition to its principal office at Los Angeles aforesaid,
the corporation may maintain offices in such other place or places within or
without the State of Hawaii as may be from time to time designated by the Board
of Directors.
SECTION 1.02. CORPORATE SEAL. The corporation may have a corporate
seal in such form as may be determined by the board of directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
SECTION 2.01. ANNUAL MEETING. Unless dispensed with by unanimous
written consent of shareholders in accordance with law and with Section 2.05 of
these Bylaws, the annual meeting of the shareholders shall be held at such place
and at such time as the President shall designate and if the President shall
fail to designate such date, then the annual meeting for that year shall be held
at such place and on such date as shall be fixed by the Board of Directors. At
the annual meeting the shareholders shall elect the directors to hold office
until the next annual meeting and thereafter until their successors shall be
duly elected and qualified and, subject to any requirements of law or of the
Articles of Incorporation or of these Bylaws with respect to notice, may
transact any other business which may be brought before the meeting and take any
other corporate action.
SECTION 2.02. SPECIAL MEETINGS. Special meetings of the shareholders
shall be called by the Secretary upon written request of the President, any
director of the corporation, or the
1
<PAGE>
holders of not less than one-tenth (1/10th) of all the shares entitled to
vote at the meeting, or upon the resolution of the Board of Directors. At
any special meeting such business shall be brought before the shareholders
and may be transacted as shall have been specified in the notice of such
meeting, but any other business may be transacted subject to any requirements
of law or of the Articles of Incorporation or of these Bylaws with respect to
notice. Special meetings of shareholders shall be held at such place and at
such times as shall be fixed by the Board of Directors.
SECTION 2.03. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum for the transaction
of business at any meeting of the shareholders. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders and
shall be valid and binding upon the corporation, except as otherwise
specifically provided by law, the Articles of Incorporation, or these Bylaws.
Each shareholder entitled to vote at any meeting of the shareholders shall be
entitled to one vote in person or by proxy for each share registered in the name
of such shareholder on the books of the corporation.
SECTION 2.04. NOTICE OF MEETINGS. Written notice specifying the
place, day and hour of each shareholders' meeting, whether annual or special,
and if a special meeting the purpose or purposes for which the meeting is
called, shall be delivered not less than ten nor more than seventy days before
the date of the meeting, either personally or by mail, by or at the direction of
the President, the Secretary, or the officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at the shareholder's address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid. If
notice is given as aforesaid, non-receipt of such notice by any shareholder
shall not invalidate any business done at any meeting, either annual or special,
at which a quorum is present. The presence of any shareholder at any meeting
shall constitute a waiver of the requirement of giving of notice of said meeting
to such shareholder, except where a shareholder
2
<PAGE>
attends a meeting for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. Any
shareholder may, prior to, at the meeting, or subsequent thereto, waive
notice of any meeting in writing signed by such shareholder or a duly
authorized attorney-in-fact thereof.
SECTION 2.05. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof. Such consent shall have the same effect as a unanimous vote of
shareholders.
SECTION 2.06. VOTING RECORD. The Treasurer, or such other officer or
agent of the corporation having charge of the stock transfer books of the
corporation, shall make a complete record of the shareholders entitled to vote
at any shareholders' meeting, whether annual or special, or any adjournment
thereof. Such record shall be arranged in alphabetical order, with the address
of and the number of shares held by each shareholder, and shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting for the
purposes thereof. Failure to comply with the requirements of this Section 2.06
shall not affect the validity of any action taken at such meeting.
SECTION 2.07. PROXIES. At any meeting of the shareholders, a
shareholder may vote in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the corporation before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
ARTICLE III
DIRECTORS
SECTION 3.01. NUMBER AND QUALIFICATIONS. There shall be a Board of
Directors to consist of not less than five (5) nor more than nine (9) members,
the exact number of directors to
3
<PAGE>
be determined from time to time by resolution adopted by a majority of the
members of the Board of Directors. No decrease in the number of directors
shall have the effect of shortening the term of any incumbent director. Each
director shall hold office until the next annual meeting of shareholders and
thereafter until the successor of such director is duly elected or appointed
and qualified, subject, however, to removal by the shareholders.
SECTION 3.02. QUORUM. A majority of the number of directors fixed in
accordance with Section 3.01 of these Bylaws shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors. The act of
the majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 3.03 VACANCIES. In case of any vacancy or vacancies in
the Board of Directors (including, but not limited to, any vacancy resulting
from an increase in the number of directors), the remaining directors
(although less than a quorum) may fill the same by the affirmative vote of a
majority of the remaining directors, subject, however, to removal by the
shareholders. In the case of a director elected by the remaining directors
to fill a vacancy resulting from an increase in the number of directors, such
director's term of office shall continue only until the next election of
directors by the shareholders. A director elected to fill any other vacancy
shall be elected for the unexpired term of such director's predecessor in
office. The determination by the Board of Directors, as shown in the
minutes, of the fact of any vacancy shall be conclusive as to all persons and
the corporation.
SECTION 3.04. REGULAR MEETINGS. The Board of Directors shall hold a
meeting immediately following the annual meeting of the shareholders. No notice
of such meeting need be given. Other regular meetings of the Board of Directors
may be held at such times as the business of the corporation shall require
according to resolutions of the Board of Directors. No notice of regular
meetings of the Board of Directors shall be required.
SECTION 3.05. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by resolutions of the Board
4
<PAGE>
of Directors or upon the call of the President or any director. Such special
meetings shall be held at such place and at such time as shall be fixed by
the person or one of the persons so authorized and calling such special
meeting.
SECTION 3.06. NOTICE. Notice of the time and place of any meeting of
the Board of Directors for which notice is required shall be given to each
director by the Secretary or by the person or one of the persons calling the
meeting, not less than twenty-four hours before the date set for the meeting, by
advising each director by telephone, by word of mouth, or by leaving written
notice of such meeting with each director or at the residence or usual place of
business of each director, or by facsimile transmission, or by sending written
notice of such meeting by first-class mail, postage prepaid, not less than three
nor more than fifteen days before the meeting, to each director at such
director's last known address as it appears on the records of the corporation.
Non-receipt of any such notice shall not invalidate any business done at any
meeting at which a quorum is present. The presence of any director at any
meeting shall constitute a waiver of the requirement of giving of notice of said
meeting to such director, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Any director or directors, whether
attending a meeting or not, may, prior to, at the meeting, or subsequent
thereto, waive notice of the meeting by written waiver signed by such director
or directors.
SECTION 3.07. TELEPHONE MEETINGS. Subject to the notice requirements
in Section 3.06 of these Bylaws, members of the Board of Directors or any
committee designated thereby may participate in a meeting of the Board of
Directors or of such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
SECTION 3.08. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
designated thereby may be taken without a meeting if all the directors or all of
the members of
5
<PAGE>
the committee, as the case may be, sign a written consent setting forth the
action taken or to be taken at any time before or after the intended
effective date of such action. Such consent shall be filed with the minutes
of the Board of Directors or committee, as the case may be, and shall have
the same effect as a unanimous vote.
SECTION 3.09. REMOVAL OF DIRECTORS AND FILLING OF VACANCIES.
(a) At a meeting of shareholders called expressly for that
purpose, any director or the entire Board of Directors may be removed, with
or without cause, by the affirmative vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
(b) The shareholders of the corporation may, at any special
meeting called for that purpose, decrease the number of directors and fill any
vacancies which may then exist in the Board of Directors, whether caused by
resignations, removals or otherwise, including temporary vacancies. No decrease
in the number of directors shall have the effect of shortening the term of any
incumbent director.
SECTION 3.10. POWERS OF DIRECTORS. Subject to any limitations
provided by law or set forth in the Articles of Incorporation or in these
Bylaws, the Board of Directors shall have full power to control and direct the
business and affairs of the corporation and to exercise all the powers and
perform all the acts which the corporation may legally exercise and perform.
SECTION 3.11. PRESUMPTION OF ASSENT. A director present at a meeting
of the Board of Directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless such director's dissent
shall be entered in the minutes of the meeting or unless such director shall
file a written dissent to such action with the secretary of the meeting before
the adjournment thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
6
<PAGE>
SECTION 3.12. EXECUTIVE AND OTHER COMMITTEES. The Board of
Directors, by resolution adopted by a majority of the full Board of Directors,
may designate from among its members an executive committee and one or more
other committees each of which, to the extent provided in such resolution, shall
have and may exercise all the authority of the Board of Directors, except as
limited by law, the Articles of Incorporation, or these Bylaws.
SECTION 3.13. NOMINATION OF DIRECTOR CANDIDATES. Nominations of
candidates for election to the Board of Directors of the corporation at any
meeting of the shareholders called for election of directors (an "Election
Meeting") may be made by the Board of Directors or by any shareholder entitled
to vote at such Election Meeting.
Nominations made by the Board of Directors shall be made at a meeting
of the Board of Directors, or by written consent of directors in lieu of a
meeting, not less than 30 days prior to the date of the Election Meeting. At
the request of the secretary of the corporation, each person so nominated by the
Board of Directors shall provide the corporation with such information
concerning himself as is required, under the rules of the Securities and
Exchange Commission, to be included in the corporation's proxy statement
soliciting proxies for his election as a director.
Not less than 30 days prior to the date of an Election Meeting, any
shareholder who intends to make a nomination of a candidate for election to the
Board of Directors of the corporation at such Election Meeting shall deliver a
notice to the secretary of the corporation setting forth (i) the name, age,
business address and residence address of each such intended nominee, (ii) the
principal occupation or employment of each such intended nominee, (iii) the
number of shares of capital stock of the corporation which are beneficially
owned by each such intended nominee, and (iv) such other information concerning
each such intended nominee as would be required, under the rules of the
Securities and Exchange Commission, in a proxy statement soliciting proxies for
the election of each such nominee.
In the event that a person is validly designated as a nominee in
accordance with the procedures specified above and
7
<PAGE>
shall thereafter become unable or unwilling to stand for election to the
Board of Directors, the Board of Directors or the shareholder who proposed
such nominee, as the case may be, may designate a substitute nominee.
If the chairman of the Election Meeting determines that a nomination
was not made in accordance with the foregoing procedures, such nomination shall
be void.
ARTICLE IV
OFFICERS
SECTION 4.01. GENERALLY. The officers of the corporation shall
consist of a Chief Executive Officer/President, one or more Vice Presidents, a
Treasurer and a Secretary and, at the discretion of the Board of Directors, a
Chairman of the Board. Any two or more offices may be held by the same
individual; provided that if there are two or more directors there shall be at
least two individuals as officers. The officers shall be appointed annually by
the Board of Directors at its first meeting after the annual or special meeting
of the shareholders at which the Board of Directors is elected and shall hold
office until the next annual meeting and thereafter until their successors shall
be duly appointed and qualified, subject, however, to removal by the Board of
Directors. The number of Vice Presidents may be changed from time to time by
the Board of Directors at any meeting or meetings thereof and, if increased at
any time, the additional Vice President or Vice Presidents shall be appointed by
the Board of Directors. There may also be one or more Assistant Vice
Presidents, Assistant Treasurers, Assistant Secretaries, and other subordinate
officers who shall be appointed by the Board of Directors and the number thereof
shall be determined from time to time by the Board of Directors.
SECTION 4.02. VACANCIES. Vacancies which may occur in any office
shall be filled by appointment by the Board of Directors for the remainder of
the term of such office.
SECTION 4.03. REMOVALS. Any officer or agent may be removed by the
Board of Directors whenever in its judgment the best interests of the
corporation will be served thereby, but such removal shall be without prejudice
to the contract rights,
8
<PAGE>
if any, of the person so removed. Election or appointment of an officer or
agent shall not of itself create such contract rights.
SECTION 4.04. CHAIRMAN OF THE BOARD. The Chairman shall preside at
all meetings of the shareholders and Board of Directors at which the Chairman is
present, and shall perform such other duties and have such other powers as the
Board of Directors may prescribe.
SECTION 4.05. CHIEF EXECUTIVE OFFICER/PRESIDENT. The President shall
preside at all meetings of the Board of Directors and of the shareholders at
which the Chairman is absent. Subject to the control of the Board of Directors,
the President shall have general charge and care of the business and property of
the corporation, shall appoint and discharge employees and agents of the
corporation and determine their compensation, shall vote the stock of other
companies which is owned by the corporation and shall do and perform such
additional duties as may be prescribed by the Board of Directors. When
authorized by the Board of Directors so to do, the President may delegate to one
of the Vice Presidents the whole or any part of the general management and care
of the business and property of the corporation, including the employment and
discharge of agents and employees.
SECTION 4.06. VICE PRESIDENTS. It shall be the duty of the Vice
Presidents to assume and perform the duties of the President in the absence or
disability of the President or whenever the office of President is vacant. Each
Vice President shall do and perform such additional duties as may be prescribed
by the Board of Directors.
SECTION 4.07. TREASURER. The Treasurer shall be the financial and
accounting officer of the corporation. The Treasurer shall have custody of all
moneys, valuable papers and documents of the corporation, shall keep the same
for safekeeping in such depositories as may be designated by the Board of
Directors and shall expend the funds of the corporation as directed by the Board
of Directors. The Treasurer shall register and transfer stock of the
corporation under such regulations as may be prescribed by the Board of
Directors. The Treasurer shall keep or cause to be kept a book or books setting
forth a true record of the receipts and expenditures, assets and liabilities,
losses and gains of the corporation and shall, when and as
9
<PAGE>
required by the Board of Directors, render a statement of the financial
condition of the corporation. If required to do so by the Board of Directors,
the Treasurer shall give a bond in such amount and with such surety as may be
prescribed by the Board of Directors for the faithful discharge of the duties
of the office. The Treasurer shall also do and perform such additional
duties as may be prescribed by the Board of Directors. In the absence or
disability of the Treasurer, the duties of the office shall be performed by
the Secretary or by an Assistant Treasurer.
SECTION 4.08. SECRETARY. The Secretary shall be ex officio secretary
of the Board of Directors, shall give or cause to be given all required notices
of meetings of the shareholders and the Board of Directors, shall record the
proceedings of meetings of the shareholders and the Board of Directors in a book
or books to be kept for that purpose, and shall perform such other duties as may
be assigned from time to time by the Board of Directors and by the President.
The Secretary shall have custody of the seal of the corporation, if there is
one. In the absence or disability of the Secretary, the duties of the office
shall be performed by the Treasurer or by an Assistant Secretary.
SECTION 4.09. SUBORDINATE OFFICERS. The powers and duties of the
subordinate officers shall be as prescribed by the Board of Directors. In the
absence or disability of the Treasurer and Secretary, the Assistant Treasurer or
the Assistant Secretary may register and transfer stock of the corporation under
such regulations as may be prescribed by the Board of Directors.
ARTICLE V
EXECUTION OF INSTRUMENTS
SECTION 5.01. INSTRUMENTS IN GENERAL. All checks, dividend warrants,
and other orders for the payment of money, drafts, notes, bonds, acceptances,
contracts, deeds, leases, mortgages, agreements of sale, bills of lading, and
all other instruments except as otherwise provided in these Bylaws, shall be
signed by such person or persons as shall be provided by general or special
resolution of the Board of Directors. In the absence of any such general or
special resolution applicable to any instrument, such instrument shall be signed
by the President
10
<PAGE>
or any Vice President and by the Treasurer or the Secretary or the Assistant
Treasurer or the Assistant Secretary.
SECTION 5.02. FACSIMILE SIGNATURES. The Board of Directors may
provide for the execution of checks, stock certificates and other written
instruments by the printed, lithographed or engraved facsimile signature or
signatures of the person or persons authorized by the Board of Directors to sign
such instruments.
SECTION 5.03. SEAL. If the corporation has a seal, any officer or
subordinate officer of the corporation, and any other person authorized to do so
by the Board of Directors, may affix the seal of the corporation to any
instrument and may attest the same.
ARTICLE VI
CAPITAL STOCK
SECTION 6.01. SHARES REPRESENTED BY CERTIFICATES. Except in the case
of uncertificated shares, the President shall issue or cause to be issued to
each shareholder a certificate or certificates signed by the Chairman of the
Board, a Vice Chairman of the Board, the President, or a Vice President, and
countersigned by the Treasurer, the Secretary, an Assistant Treasurer, or an
Assistant Secretary, with the seal of the corporation (or a facsimile thereof)
thereto affixed, if the corporation has a seal. Each such certificate shall
state on its face that the corporation is organized under the laws of the State
of Hawaii, the name of the person to whom issued, the number and class, and
series if any within a class, of the shares of the stock of the corporation
represented by such certificate, the par value of each share represented by such
certificate or a statement that the shares are without par value, and such other
information as may be required by law. No certificate shall be issued for any
share unless the consideration established for its issuance shall have been
paid.
SECTION 6.02. UNCERTIFICATED SHARES. The Board of Directors may
provide by resolution that some or all of any or all classes and series of the
shares of the corporation shall be uncertificated shares, provided that such
resolution shall not apply to shares represented by a certificate until such
11
<PAGE>
certificate is surrendered to the corporation. Within a reasonable time
after issuance or transfer of uncertificated shares, the corporation shall
send to the registered owner thereof a written notice containing the
information required by law to be set forth or stated in certificates.
SECTION 6.03. TRANSFERS. Shares of the corporation shall be
transferable only upon its books by the holder or holders thereof in person, or
by the authorized attorney or legal representative of such holder or holders.
If the shares transferred are represented by certificates, the holder or holders
thereof or the authorized attorney or legal representative of such holder or
holders shall, at the time of transfer, surrender to the corporation, duly
endorsed, the old certificate or certificates and receive new certificates in
exchange therefor. Each transfer shall be recorded and the original record or
duplicate thereof shall be kept at an office of the corporation.
SECTION 6.04. CLOSING OF TRANSFER BOOKS AND RECORD DATE.
(a) For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for a stated
period but not to exceed, in any case, seventy days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting.
(b) In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken.
12
<PAGE>
(c) If the stock transfer books are not closed and no record
date is fixed for the determination of shareholders entitled to notice of or
to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or
the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled
to vote at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment thereof.
ARTICLE VII
DIRECTOR CONFLICTS OF INTEREST
SECTION 7.01. GENERALLY. No contract or other transaction between
this corporation and one or more of its directors or any other corporation,
firm, association, or entity in which one or more of its directors are directors
or officers or are financially interested, shall be either void or voidable
because of such relationship or interest or because such director or directors
are present at the meeting of the Board of Directors or a committee thereof
which authorizes, approves, or ratifies such contract or transaction or because
the vote or votes of such director or directors are counted for such purpose,
if:
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to this
corporation.
SECTION 7.02. QUORUM. Common or interested directors may be counted
in determining the presence of a quorum at a
13
<PAGE>
meeting of the Board of Directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction.
SECTION 7.03. NO LIABILITY. Neither any director or officer of the
corporation, being so interested in any contract, transaction or act of the
corporation which is not void or voidable pursuant to this Article VII, nor any
other corporation, firm, association, or entity in which such director or
officer is a director or officer or is financially interested shall be liable or
accountable to the corporation, or to any shareholder thereof, for any loss
incurred by the corporation pursuant to or by reason of such contract,
transaction or act, or for any gain received by any such other party pursuant
thereto or by reason thereof.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. ADJOURNMENT. Whenever at any meeting provided for in
these Bylaws less than a quorum shall be present or represented, such meeting
may thereupon be adjourned without notice from time to time by a majority vote
of those present or represented until a quorum shall be present or represented.
Any meeting at which a quorum is present or represented may be adjourned in the
same manner for such time as may be fixed by a majority vote at such meeting.
Whenever a quorum is present at any adjourned meeting, any business may be
transacted which could have been done at the meeting originally called.
SECTION 8.02. FISCAL YEAR. The fiscal year of the corporation shall
be as determined from time to time by the Board of Directors.
SECTION 8.03. APPROVAL OF ACTS OF BOARD OF DIRECTORS. At any annual
or special meeting of the shareholders, any or all of the acts of the Board of
Directors may be submitted for ratification and approval and may be ratified or
approved by the shareholders. Such ratification or approval shall be as valid
and binding upon the corporation and upon all the shareholders as though it had
been approved or ratified by every shareholder of the corporation.
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ARTICLE IX
AMENDMENTS
These Bylaws may be amended, altered, or repealed and new Bylaws may
be adopted by the affirmative vote of a majority of the members of the Board of
Directors of the corporation, subject to repeal or change by action of the
shareholders.
<PAGE>
CASTLE & COOKE, INC.
AMENDED AND RESTATED
1995 STOCK OPTION AND AWARD PLAN
(AS AMENDED EFFECTIVE FEBRUARY 9, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
I. THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Administration and Authorization; Power and Procedure. . . . . . . .1
1.3 Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Shares Available for Awards. . . . . . . . . . . . . . . . . . . . .2
1.5 Grant of Awards. . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.6 Award Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.7 Limitations on Exercise and Vesting of Awards. . . . . . . . . . . .4
1.8 Acceptance of Notes to Finance Exercise. . . . . . . . . . . . . . .4
1.9 No Transferability . . . . . . . . . . . . . . . . . . . . . . . . .5
II. EMPLOYEE OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.3 Limitations on Grant and Terms of Incentive Stock Options. . . . . .6
2.4 Limits on 10% Holders. . . . . . . . . . . . . . . . . . . . . . . .7
2.5 Waiver of Restrictions . . . . . . . . . . . . . . . . . . . . . . .7
2.6 Options and Rights in Substitution for Stock Options Granted by
Other Corporations . . . . . . . . . . . . . . . . . . . . . . . . .7
III. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . .8
3.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.2 Exercise of SARs . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Limited SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
IV. RESTRICTED STOCK AND STOCK UNIT AWARDS. . . . . . . . . . . . . . . . . .9
4.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.2 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Return to the Corporation. . . . . . . . . . . . . . . . . . . . . 10
V. PERFORMANCE AWARDS AND STOCK BONUSES. . . . . . . . . . . . . . . . . . 11
5.1 Grants of Performance Share Awards . . . . . . . . . . . . . . . . 11
5.2 Grants of Stock Bonuses. . . . . . . . . . . . . . . . . . . . . . 11
5.3 Deferred Payments. . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Special Performance-Based Share Awards . . . . . . . . . . . . . . 12
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VI. OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Rights of Eligible Employees, Participants and Beneficiaries . . 12
6.2 Adjustments; Acceleration. . . . . . . . . . . . . . . . . . . . 13
6.3 Termination of Employment; Termination of Subsidiary Status;
Discretionary Provisions . . . . . . . . . . . . . . . . . . . . 14
6.4 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Plan Amendment, Termination and Suspension . . . . . . . . . . . 16
6.7 Privileges of Stock Ownership. . . . . . . . . . . . . . . . . . 17
6.8 Effective Date of this Plan. . . . . . . . . . . . . . . . . . . 17
6.9 Term of this Plan. . . . . . . . . . . . . . . . . . . . . . . . 17
6.10 Governing Law/Construction/Severability. . . . . . . . . . . . . 17
6.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Non-Exclusivity of Plan. . . . . . . . . . . . . . . . . . . . . 18
VII. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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CASTLE & COOKE, INC.
AMENDED AND RESTATED
1995 STOCK OPTION AND AWARD PLAN
(AS AMENDED EFFECTIVE FEBRUARY 9, 1999)
I. THE PLAN.
1.1 PURPOSE.
The purpose of this Plan is to promote the success of the Company
and the interest of its stockholders by providing an additional means through
the grant of Awards to attract, motivate, retain and reward key employees by
providing them long-term incentives to improve the financial performance of
the Company. "Corporation" means Castle & Cooke, Inc., a Hawaii corporation,
and its successors, and "Company" means the Corporation and its Subsidiaries,
collectively. These terms and other capitalized terms are defined in Article
VII.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
(a) COMMITTEE. This Plan shall be administered by and all
Awards to Eligible Employees shall be authorized by the Committee. Action of
the Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by written consent of its members.
(b) PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject
to the express provisions of this Plan, the Committee shall have the
authority:
(i) to determine the particular Eligible Employees who
will receive Awards;
(ii) to grant Awards to Eligible Employees, determine the
price at which securities will be offered or awarded and the amount of
securities to be offered or awarded to any of such persons, and determine
the other specific terms and conditions of such Awards consistent with the
express limits of this Plan, and establish the installments (if any) in
which such Awards shall become exercisable or shall vest, or determine that
no delayed exercisability or vesting is required, and establish the events
of termination or reversion of such Awards;
(iii) to approve the forms of Award Agreements (which need
not be identical either as to type of award or among Participants);
(iv) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Employee
Participants under this Plan, further define the terms used in this Plan,
and prescribe, amend and rescind rules and regulations relating to the
administration of this Plan;
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(v) to cancel, modify, or waive the Corporation's rights
with respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Employees, subject to any required
consent under Section 6.6;
(vi) to accelerate or extend the exercisability or extend
the term of any or all such outstanding Awards, subject to Section 1.6; and
(vii) to make all other determinations and take such other
action as contemplated by this Plan or as may be necessary or advisable for
the administration of this Plan and the effectuation of its purposes.
(c) BINDING DETERMINATIONS. Any action taken by, or inaction
of, the Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan shall be within the absolute discretion of that entity
or body and shall be conclusive and binding upon all persons. No member of
the Board or Committee, or officer of the Corporation or any Subsidiary,
shall be liable for any such action or inaction of the entity or body, of
another person. Subject only to compliance with the express provisions
hereof, the Board and Committee may act in their absolute discretion in
matters within their authority related to this Plan.
(d) RELIANCE ON EXPERTS. In making any determination or in
taking or not taking any action under this Plan, the Committee or the Board,
as the case may be, may obtain and may rely upon the advice of experts,
including professional advisors to the Corporation. No director, officer or
agent of the Company shall be liable for any such action or determination
taken or made or omitted in good faith.
(e) DELEGATION. The Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or employees of the
Company.
1.3 PARTICIPATION.
Awards may be granted by the Committee only to those persons that
the Committee determines to be Eligible Employees. An Eligible Employee who
has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee shall so determine. Non-Employee Directors shall not
be eligible to receive any Awards under this Plan.
1.4 SHARES AVAILABLE FOR AWARDS.
Subject to the provisions of Section 6.2, the capital stock that
may be delivered under this Plan shall be shares of the Corporation's
authorized but unissued Common Stock. The shares may be delivered for any
lawful consideration.
(a) NUMBER OF SHARES. The maximum number of shares of Common
Stock that may be delivered pursuant to Awards granted to Eligible Employees
under this Plan shall not exceed 2,000,000 shares. The maximum number of
shares subject to those options and stock appreciation rights that during any
calendar year are granted to any individual shall be limited to 250,000 and
the maximum number of shares in the aggregate subject to all Awards that
during any calendar year are granted to any individual under this Plan shall
be 300,000. Each of the
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<PAGE>
three foregoing numerical limits shall be subject to adjustment as
contemplated by this Section 1.4 and Section 6.2.
(b) CALCULATION OF AVAILABLE SHARES AND REPLENISHMENT. Shares
subject to outstanding Awards of derivative securities (as defined in Rule
16a-1(c) under the Exchange Act) shall be reserved for issuance. If any
Option or other right to acquire shares of Common Stock under or receive cash
or shares in respect of an Award shall expire or be cancelled or terminated
without having been exercised or paid in full, or any Common Stock subject to
a Restricted Stock Award or other Award shall not vest or be delivered, the
unpurchased, unvested or undelivered shares of Common Stock subject thereto
shall again be available for the purposes of this Plan, subject only to any
applicable limitations under Section 162(m) of the Code as to Awards intended
as performance-based awards thereunder. If the Corporation withholds shares
of Common Stock pursuant to Section 6.5, the number of shares that would have
been deliverable with respect to an Award but that are withheld pursuant to
the provisions of Section 6.5 may in effect not be issued, but the aggregate
number of shares issuable with respect to the applicable Award and under this
Plan shall be reduced by the number of shares withheld and such shares shall
not be available for additional Awards under this Plan. Subject only to the
preceding sentence, Section 1.4(c) and Section 6.10(c), Awards payable solely
in cash, and Awards that do not constitute equity securities as defined in
Rule 16a-1(d), shall not reduce the number of shares available for Awards
under this Plan, (2) any imputed charges to the maximum number of shares
deliverable under this Plan (through reserves or otherwise) shall be reversed
in the case of Awards actually paid in cash, and (3), to the extent any
shares were previously reserved in respect of Awards payable in cash or
shares, the number of shares not delivered shall again be available for
purposes of this Plan.
(c) PROVISIONS FOR CERTAIN CASH AWARDS. The number of Awards
payable solely in cash or actually paid in cash ("CASH AWARDS") shall be
determined by reference to the number of shares by which the value or price
of the Award is measured and shall not, together with the aggregate number of
shares theretofore delivered and subject to then outstanding Awards payable
in shares (or alternatively payable in cash or shares) under this Plan,
exceed the aggregate or individual limits of Section 1.4(a), subject to
adjustments under this Section 1.4 and Section 6.2. Cash Awards that are
forfeited or for any reason are not paid in cash under this Plan may again,
subject to Section 6.10(c), be the subject of and available for subsequent
Awards under the Plan. If an Award under this Plan is payable in cash only
and is not measured by reference to shares of Common Stock, the aggregate
dollar limits of Section 5.4 shall apply. Any cash-only Award that is
measured by reference to shares but not intended as a performance-based award
for purposes of Section 162(m) of the Code need not be counted against the
limits under Section 1.4(a), (b) or (c), if applicable.
(d) RESTRICTED STOCK LIMIT. The maximum number of shares that
may be delivered under Restricted Stock or Stock Unit Awards that are issued
only for services rendered (or for services and nominal consideration), as
distinguished from an Award in payment or settlement of other rights,
deferred compensation or otherwise expressly in lieu of cash compensation of
comparable value, shall not exceed 200,000 shares, plus any shares in respect
of dividend equivalent awards or Units thereon, subject to adjustments under
or contemplated by Sections 1.4 and 6.2.
3
<PAGE>
1.5 GRANT OF AWARDS.
Subject to the express provisions of this Plan, the Committee has
the authority to determine those individuals who are Eligible Employees,
whether any of them will receive an Award and if so the type of Award, the
number of shares of Common Stock subject to each Award, the price (if any) to
be paid for the shares or the Award, the other terms of the Award, and, in
the case of Performance Share Awards, in addition to the matters addressed in
Section 1.2(b), the specific objectives, goals and performance criteria,
including the years of service before vesting, the relevant job
classification or level of responsibility or other factors that further
define the terms of the Performance Share Award. Each Award shall be
evidenced by an Award Agreement signed by the Corporation and, if required by
the Committee, by the Participant. The Award Agreement shall set forth the
material terms and conditions of the Award established by the Committee
consistent with the specific provisions of this Plan.
1.6 AWARD PERIOD.
Each Award and all executory rights or obligations under the
related Award Agreement shall expire on such date (if any) as shall be
determined by the Committee, but in the case of Options, SARs or other rights
to acquire Common Stock not later than 10 years after the Award Date;
provided, however, that any payment of cash or delivery of shares pursuant to
an Award may be delayed until a future date if specifically authorized by the
Committee pursuant to Article IV or otherwise, by resolution, written consent
or other writing.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
(a) PROVISIONS FOR EXERCISE. Unless the Committee otherwise
expressly provides, no Award shall be exercisable or shall vest until at
least six (6) months after the initial Award Date, and once exercisable an
Award shall remain exercisable until the expiration or earlier termination of
the Award.
(b) PROCEDURE. Any exercisable Award shall be deemed to be
exercised when the Corporation receives written notice of such exercise from
the Participant, together with any required payment made in accordance with
Section 2.2.
(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share
interests shall be disregarded, but may be accumulated. The Committee,
however, may determine in the case of Eligible Employees that cash, other
securities, or other property will be paid or transferred in lieu of any
fractional share interests. No fewer than 100 shares may be purchased on
exercise of any Award at one time unless the number purchased is the total
number at the time available for purchase under the Award.
4
<PAGE>
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE.
The Corporation may, with the Committee's approval, accept one or
more notes from any Eligible Employee in connection with the exercise or
receipt of any outstanding Award; provided that any such note shall be
subject to the following terms and conditions:
(a) The principal of the note shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of one or
more Awards under this Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the
Committee; provided that the term of the note, including extensions, shall
not exceed a period of 10 years.
(c) The note shall provide for full recourse to the Employee
Participant and shall bear interest at a rate determined by the Committee but
not less than the interest rate necessary to avoid the imputation of interest
under the Code.
(d) If the employment of the Employee Participant terminates,
the unpaid principal balance of the note shall become due and payable on the
10th business day after such termination; provided, however, that if a sale
of such shares would cause the Employee Participant to incur liability under
Section 16(b) of the Exchange Act, the unpaid balance shall become due and
payable on the 10th business day after the first day on which a sale of such
shares could have been made without incurring such liability assuming for
these purposes that there are no other transactions (or deemed transactions
in securities of this Corporation) by the Employee Participant subsequent to
such termination.
(e) If required by the Committee or by applicable law, the
note shall be secured by a pledge of any shares or rights financed thereby in
compliance with applicable law.
(f) The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform with
applicable rules and regulations of the Federal Reserve Board as then in
effect.
1.9 NO TRANSFERABILITY.
(a) LIMIT ON EXERCISE. Except as provided herein and subject
to Section 6.10, Awards may be exercised only by, and amounts payable or
shares issuable pursuant to an Award shall be paid only to (or for the
account of), the Participant or, if the Participant has died, the
Participant's Beneficiary or, if the Participant has suffered a Disability,
the Participant's Personal Representative, if any, or if there is none, the
Participant. Subject to Section 6.4 and 6.10, the Committee may by express
written authorization permit Awards to be exercised by and/or paid to certain
persons or entities related to the Participant who are transferees of the
Participant without consideration, or to such other persons as the Committee
deems appropriate, pursuant to such conditions and procedures as the
Committee in writing may establish and set forth in or by amendment to an
Award Agreement.
5
<PAGE>
(b) LIMIT ON TRANSFER. No option, right or other Award
granted under this Plan including, without limitation, any undistributed
performance share or share of Restricted Stock that has not vested, shall be
transferable by the Participant or shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge (other than to the Corporation), except (i) by will or the laws of
descent and distribution, or (ii) pursuant to any other exception to transfer
restrictions expressly permitted by the Committee AND set forth in the Award
Agreement (or an amendment thereto), and (iii) in the case of Awards
comprising Incentive Stock Options, as permitted by the Code. Any attempted
transfer in violation of these provisions shall be void and the Corporation
shall disregard any attempt at transfer, assignment or other alienation so
prohibited.
(c) DESIGNATION OF BENEFICIARY. The designation of a
Beneficiary shall not constitute a transfer prohibited by the foregoing
provisions.
II. EMPLOYEE OPTIONS.
2.1 GRANTS.
One or more Options may be granted under this Article to any
Eligible Employee. Each Option granted shall be designated by the Committee
in the applicable Award Agreement as either a Nonqualified Stock Option or an
Incentive Stock Option.
2.2 OPTION PRICE.
(a) PRICING LIMITS. The purchase price per share of the
Common Stock covered by each Option shall be determined by the Committee at
the time of the Award, but in the case of Incentive Stock Options shall not
be less than 100% (110% in the case of a Participant described in Section
2.4) of the Fair Market Value of the Common Stock on the date of grant.
(b) PAYMENT PROVISIONS. The purchase price of any shares
purchased on exercise of an Option granted under this Article shall be paid
in full at the time of each purchase in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by certified or
cashier's check payable to the order of the Corporation; (iii) if authorized
by the Committee or specified in the applicable Award Agreement, by a
promissory note of the Participant consistent with the requirements of
Section 1.8; or (iv) by the delivery of shares of Common Stock of the
Corporation already owned by the Participant, PROVIDED, HOWEVER, that the
Committee may in its absolute discretion limit the Participant's ability to
exercise an Award by delivering such shares, and PROVIDED FURTHER that any
shares delivered which were initially acquired from the Company must have
been owned by the Participant at least six (6) months as of the date of
delivery. Shares of Common Stock used to satisfy the exercise price of an
Option shall be valued at their Fair Market Value on the date of exercise.
In addition to the payment methods described above, the Committee may provide
that the Option can be exercised and payment made by delivering a properly
executed exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Corporation the amount of sale proceeds necessary
to pay the exercise price and, unless otherwise allowed by the Committee, any
applicable tax withholding under Section 6.5. The Corporation shall not be
obligated to deliver
6
<PAGE>
certificates for the shares unless and until it receives full payment of the
exercise price therefor and any related withholding obligations have been
satisfied.
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
(a) $100,000 LIMIT. To the extent that the aggregate Fair
Market Value of stock with respect to which incentive stock options first
become exercisable by a Participant in any calendar year exceeds $100,000,
taking into account both Common Stock subject to Incentive Stock Options
under this Plan and stock subject to incentive stock options under all other
plans of the Company or any parent corporation, such options shall be treated
as nonqualified stock options. For this purpose, the Fair Market Value of
the stock subject to options shall be determined as of the date the options
were awarded. In reducing the number of options treated as incentive stock
options to meet the $100,000 limit, the most recently granted options shall
be reduced first. To the extent a reduction of simultaneously granted
options is necessary to meet the $100,000 limit, the Committee may, in the
manner and to the extent permitted by law, designate which shares of Common
Stock are to be treated as shares acquired pursuant to the exercise of an
Incentive Stock Option.
(b) OPTION PERIOD. Each Option and all exercise rights
thereunder shall expire no later than 10 years after the Award Date, but may
be subject to early termination pursuant to Sections 6.2 and 6.3 and/or
deferred payout elections, as the Committee may permit.
(c) OTHER CODE LIMITS. There shall be imposed in any Award
Agreement relating to Incentive Stock Options such terms and conditions as
from time to time are required in order that the Option be an "incentive
stock option" as that term is defined in Section 422 of the Code.
2.4 LIMITS ON 10% HOLDERS.
No Incentive Stock Option may be granted to any person who, at
the time the Option is granted, owns (or is deemed to own under Section
424(d) of the Code) shares of outstanding Common Stock possessing more than
10% of the total combined voting power of all classes of stock of the
Corporation, unless the exercise price of such Option is at least 110% of the
Fair Market Value of the stock subject to the Option and such Option by its
terms is not exercisable after the expiration of five years from the date
such Option is granted.
2.5 WAIVER OF RESTRICTIONS.
Subject to Section 1.4 and Section 6.6 and the specific
limitations on Awards contained in this Plan, the Committee from time to time
may, generally or in specific cases only, for the benefit of any Eligible
Employee, revise the vesting schedule, extend post-service exercise periods,
or release other restrictions upon or change the number of shares subject to
or the term of, an Award granted under this Article by cancellation of an
outstanding Award and contemporaneous regrant, amendment, substitution,
waiver or other legally valid means. Notwithstanding the foregoing, if such
amendment or other action results in an exercise or purchase price which is
lower than the exercise or purchase price of the original or prior Award,
such action shall require shareholder approval.
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2.6 OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY
OTHER CORPORATIONS. Options and Stock Appreciation Rights may be granted to
Eligible Employees under this Plan in substitution for employee stock options
granted by other entities to persons who are or who become employees of the
Company, in connection with a distribution, merger or reorganization by or with
the granting entity or an affiliated entity, or the acquisition by the Company,
directly or indirectly, of all or a substantial part of the stock or assets of
the employing entity.
III. STOCK APPRECIATION RIGHTS.
3.1 GRANTS.
In its discretion, the Committee may grant to any Eligible
Employee stock appreciation rights ("SARs") concurrently with the grant of
Options or other Awards or in respect of an outstanding Award, in whole or in
part, or independently of any other Award, all on such terms as set forth by
the Committee in the Award Agreement. Any SAR granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations
promulgated thereunder, unless the holder otherwise agrees.
3.2 EXERCISE OF SARs.
(a) EXERCISABILITY. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the terms
of the Award Agreement. Unless the Award Agreement or the Committee
otherwise provides, an SAR related to another Award shall be exercisable at
such time or times, and to the extent, that the related Award shall be
exercisable and only when the Fair Market Value of the stock subject to the
related Award exceeds the base price of the SAR.
(b) EFFECT ON AVAILABLE SHARES. To the extent that a SAR is
exercised, the number of shares of Common Stock subject to any related Award
shall be charged against the maximum amount of Common Stock that may be
delivered pursuant to Awards under this Plan. The number of shares subject
to the SAR and the related Award of the Participant shall also be reduced by
such number of shares, unless the Award Agreement otherwise provides.
(c) PROPORTIONATE REDUCTION. If an SAR extends to less than
all the shares covered by the related Award and if a portion of the related
Award is thereafter exercised, the number of shares subject to the
unexercised SAR shall be reduced only if and to the extent that the remaining
number of shares covered by such related Award is less than the remaining
number of shares subject to such SAR.
3.3 PAYMENT.
(a) AMOUNT. Unless the Committee otherwise provides, upon
exercise of an SAR and surrender of an exercisable portion of any related Award
(to the extent required by Section 3.2), the Participant shall be entitled to
receive subject to Section 6.5 payment of an amount determined by multiplying
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(i) the difference obtained by subtracting the base price
per share of Common Stock under the SAR from the Fair Market Value of a
share of Common Stock on the date of exercise of the SAR, by
(ii) the number of shares with respect to which the SAR shall
have been exercised.
(b) FORM OF PAYMENT. The Committee, in its sole discretion, shall
determine the form in which payment shall be made of the amount determined
under paragraph (a) above, either solely in cash, solely in shares of Common
Stock (valued at Fair Market Value on the date of exercise of the SAR), or
partly in such shares and partly in cash, provided that the Committee shall
have determined that such exercise and payment are consistent with applicable
law. If the Committee permits the Participant to elect to receive cash or
shares (or a combination thereof) on such exercise, any such election shall
be subject to such conditions as the Committee may impose.
3.4 LIMITED SARs.
The Committee may grant to any Eligible Employee SARs exercisable
only upon or in respect of a change in control or any other specified event
("Limited SARs") and such Limited SARs may relate to or operate in tandem or
combination with or substitution for Options, other SARs or other Awards (or any
combination thereof), and may be payable in cash or shares based on the spread
between the base price of the SAR and a price based upon or equal to the Fair
Market Value of the Shares during a specified period (not more than seven
months) or at a specified time within a period of not more than seven months
before, after or including the date of such event.
IV. RESTRICTED STOCK AND STOCK UNIT AWARDS.
4.1 GRANTS.
(a) GENERAL. The Committee may, in its discretion, grant one
or more Restricted Stock or Stock Unit Awards or any combination thereof to
any Eligible Employee, subject to the limits of Section 1.4(d). Each Award
Agreement shall specify the number of shares of Common Stock to be issued to
the Participant, the date of such issuance, the consideration for such shares
(but not less than the minimum lawful consideration under applicable state
law) by the Participant, the extent (if any) to which and the time (if ever)
at which the Participant shall be entitled to dividends, voting and other
rights in respect of the shares prior to vesting, and the restrictions (which
may be based on performance criteria, passage of time or other factors or any
combination thereof) imposed on such shares and the conditions of release or
lapse of such restrictions. Such restrictions shall not lapse earlier than
six (6) months after the Award Date, except to the extent the Committee may
otherwise provide. Stock certificates evidencing shares of Restricted Stock
pending the lapse of the restrictions ("Restricted Shares") shall bear a
legend making the appropriate reference to the restrictions imposed hereunder
and shall be held by the Corporation or by a third party designated by the
Committee until the restrictions on such shares shall have lapsed and the
shares shall have vested in accordance with the provisions of the Award and
Section 1.7. Upon issuance of the Restricted
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Stock Award, the Participant may be required to provide such further
assurance and documents as the Committee may require to enforce the
restrictions.
(b) SPECIAL PROVISIONS FOR STOCK UNITS. Subject to such rules
and procedures as the Committee may establish from time to time, the
Committee may, in its discretion, authorize a Stock Unit Award or the
crediting of Stock Units pursuant to the terms of this Plan and any
applicable deferred compensation plan maintained by the Company, permit an
Eligible Employee to irrevocably elect to defer or receive in Stock Units all
or a portion of any Award hereunder, or may grant Stock Units in lieu of, in
exchange for, in respect of, or in addition to any other Award under this
Plan or any other stock option plan or deferred compensation plan of the
Company. The specific terms, conditions and provisions relating to each
Stock Unit grant or election, including the form of payment to be made at or
following the vesting thereof, shall be set forth in or pursuant to the
applicable agreement or Award and the relevant Company deferred compensation
plan, in form substantially as approved by the Committee.
(c) STOCK UNIT PAYOUTS. The Committee shall determine, among
other terms of a Stock Unit grant or Award, the form of payment of Stock
Units, whether in cash, Common Stock, or other consideration (including any
other Award) or any combination thereof, the valuation of the Stock Units or
any non-cash payment for purposes of the Award, and the applicable vesting
and payout provisions of the Stock Units. The Committee in the applicable
Award Agreement or the relevant Company deferred compensation plan may permit
the Participant to elect the form and time of payout of vested Stock Units on
such conditions or subject to such procedures as the Committee may impose,
and may permit Stock Unit offsets or other provision for payment of any
applicable taxes that may be due on the crediting, vesting or payment in
respect of the Stock Units.
4.2 RESTRICTIONS.
(a) PRE-VESTING RESTRAINTS. Except as provided in Section 4.1
and 1.9, restricted shares comprising any Restricted Stock Award and shares
subject to a Stock Unit Award may not be sold, assigned, transferred, pledged
or otherwise disposed of or encumbered, either voluntarily or involuntarily,
until the restrictions on such shares or units have lapsed and the shares or
units become vested and other conditions to delivery or transfer are
satisfied.
(b) DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in
the applicable Award Agreement, a Participant receiving a Restricted Stock or
Stock Unit Award shall not be entitled to dividends for any of the shares
(which dividends or any right to payment of the dividend equivalent amount
shall be retained in a restricted account until the shares or units have
vested and shall revert to the Corporation if they fail to vest). Restricted
Stock shall be entitled to vote prior to vesting.
(c) CASH PAYMENTS. If the Participant shall have paid or
received cash (including any dividends) in connection with the Restricted Stock
Unit Award, the Award Agreement shall specify whether and to what extent such
cash shall be returned (with or without an earnings factor) as to any restricted
shares or units which cease to be eligible for vesting.
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4.3 RETURN TO THE CORPORATION.
Unless the Committee otherwise expressly provides, Stock Units or
shares of Restricted Stock that are subject to restrictions at the time of
termination of employment or are subject to other conditions to vesting that
have not been satisfied by the time specified in the applicable Award
Agreement shall not vest, and Restricted Stock shall be returned to the
Corporation in such circumstances and in such manner and on such terms as the
Committee shall therein provide.
V. PERFORMANCE AWARDS AND STOCK BONUSES.
5.1 GRANTS OF PERFORMANCE SHARE AWARDS.
The Committee may, in its discretion, grant Performance Share
Awards to Eligible Employees based upon such factors, which in the case of
any Award to a Section 16 Person shall include but not be limited to the
contributions, responsibilities and other compensation of the person as the
Committee shall deem relevant in light of the specific type and terms of the
award. An Award Agreement shall specify the maximum number of shares of
Common Stock (if any) subject to the Performance Share Award, the
consideration (but not less than the minimum lawful consideration) to be paid
for any such shares as may be issuable to the Participant, the duration of
the Award and the conditions upon which delivery of any shares or cash to the
Participant shall be based. The amount of cash or shares or other property
that may be deliverable pursuant to such Award shall be based upon the degree
of attainment over a specified period of not more than ten years (a
"performance cycle") as may be established by the Committee of such
measure(s) of the performance of the Company (or any part thereof) or the
Participant as may be established by the Committee. The Committee may
provide for full or partial credit, prior to completion of such performance
cycle or the attainment of the performance achievement specified in the
Award, in the event of the Participant's death, Retirement, or Total
Disability, a Change in Control Event or in such other circumstances as the
Committee (consistent with Section 6.10(c)(2), if applicable) may determine.
5.2 GRANTS OF STOCK BONUSES.
The Committee may grant a Stock Bonus to any Eligible Employee to
reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee. The number of
shares so awarded shall be determined by the Committee. The Award may be
granted independently or in lieu of a cash bonus.
5.3 DEFERRED PAYMENTS.
The Committee may authorize for the benefit of any Eligible
Employee the deferral of any payment of cash or shares that may become due or
of cash otherwise payable under this Plan, and provide for accreted benefits
thereon based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such
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deferment shall be subject to such further conditions, restrictions or
requirements as the Committee may impose, subject to any then vested rights
of Participants.
5.4 SPECIAL PERFORMANCE-BASED SHARE AWARDS.
(a) GENERAL PROVISIONS. Without limiting the generality of
the foregoing, and in addition to awards granted under other provisions of
this Plan, performance-based awards within the meaning of Section 162(m) of
the Code ("PERFORMANCE-BASED AWARDS") may be granted under this Plan, in the
form of restricted stock, performance stock, stock, units, bonuses, options,
or other rights, whether or not related to stock values or appreciation and
payable in shares or cash or a combination thereof, the vesting of which
depends on the performance of the Company on a consolidated or Business Unit
basis with reference to any one or more of the business criteria set forth on
Exhibit A to this Plan (the "Business Criteria"), incorporated herein by this
reference, relative to preestablished performance goals.
(b) ELIGIBLE CLASS. The eligible class of persons for Awards
under this Section 5.4 shall be officers of the Company.
(c) MAXIMUM AWARD. In no event shall grants made in any
fiscal year to any eligible person under this Section 5.4 relate to more than
300,000 shares or a cash amount of more than $3.75 million payable in respect
of any one fiscal year.
(d) TIMING OF DECISIONS; ADJUSTMENTS; COMMITTEE CERTIFICATION.
The applicable Business Criteria and specific performance goal or goals
("targets") must be approved by the Committee in advance of applicable
deadlines under the Code and while the performance relating to such targets
remains substantially uncertain. The applicable performance measurement
period may be not less than one nor more than 10 years. The Award terms
shall specify whether and in what manner the performance targets will be
adjusted to mitigate the unbudgeted impact of material, unusual or
nonrecurring gains and losses, accounting changes or other extraordinary
events not foreseen at the time the targets were set, to the extent permitted
by Section 162(m) of the Code and applicable regulations and interpretations
thereunder. Before any Performance-Based Award under this Section 5.4 is
paid, the Committee must certify (to the extent required by Section 162(m) of
the Code) that the material terms of the Performance-Based Award were
satisfied.
(e) TERMS AND CONDITIONS OF AWARDS. The Committee will have
discretion to determine the restrictions or other limitations of the
individual Awards under this Section 5.4, including the authority to reduce
Awards, payouts or vesting or to pay no Awards, in its sole discretion, IF
the Committee preserves such authority at the time of grant by language to
this effect in its authorizing resolutions or otherwise.
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VI. OTHER PROVISIONS.
6.1 RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIESH.
(a) EMPLOYMENT STATUS. Status as an Eligible Employee shall not
be construed as a commitment that any Award will be made under this Plan to an
Eligible Employee or to Eligible Employees generally.
(b) NO EMPLOYMENT CONTRACT; NO PARTIAL VESTING. Nothing
contained in this Plan (or in any other documents related to this Plan or to any
Award) shall change an employee's status as an "at will" employee nor confer
upon any Eligible Employee or other Participant any right to continue in the
employ or other service of the Company or constitute any contract or agreement
of employment or other service, nor shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the person's employment. However, neither shall anything contained in
this Plan or any document related hereto adversely affect any independent
contractual right of such person without his or her consent. Service between
specified vesting dates shall provide no basis for partial vesting or pro rata
benefits unless an Award Agreement expressly otherwise provides.
(c) PLAN NOT FUNDED. Awards payable under this Plan shall be
payable in shares or from the general assets of the Corporation, and (except
as provided in Section 1.4(b)) no special or separate reserve, fund or
deposit shall be made to assure payment of such Awards. No Participant,
Beneficiary or other person shall have any right, title or interest in any
fund or in any specific asset (including shares of Common Stock, except as
expressly otherwise provided) of the Company by reason of any Award
hereunder. Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Company
and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive payment
pursuant to any Award hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company.
6.2 ADJUSTMENTS; ACCELERATION.
(a) ADJUSTMENTS. If there shall occur any extraordinary dividend
or other extraordinary distribution in respect of the Common Stock (whether in
the form of cash, Common Stock, other securities, or other property), or any
reclassification, recapitalization, stock split (including a stock split in the
form of a stock dividend), reverse stock split, reorganization, merger,
combination, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Common Stock or other securities of the Corporation, or there shall
occur any similar extraordinary corporate transaction (or event in respect of
the Common Stock) or a sale of substantially all the assets of the Corporation
as an entirety, then the Committee shall, in such manner and to such extent (if
any) as it deems appropriate and equitable (1) proportionately adjust any or all
of (a) the number and type of shares of Common Stock (or other securities) which
thereafter may be made the subject of Awards (including the specific maxima and
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numbers of shares set forth elsewhere in this Plan), (b) the number, amount
and type of shares of Common Stock (or other securities or property) subject
to any or all outstanding Awards, (c) the grant, purchase, or exercise price
of any or all outstanding Awards, (d) the securities, cash or other property
deliverable upon exercise of any outstanding Awards, or (e) the performance
standards appropriate to any outstanding Awards, or (2) in the case of an
extraordinary dividend or other distribution, recapitalization,
reclassification, reorganization, merger, consolidation, combination, sale of
assets, split up, exchange, or spin off, make provision for a cash payment or
for the substitution or exchange of any or all outstanding Awards or the
cash, securities or property deliverable to the holder of any or all
outstanding Awards based upon the distribution or consideration payable to
holders of the Common Stock of the Corporation upon or in respect of such
event; PROVIDED, HOWEVER, in each case, that with respect to Awards of
Incentive Stock Options, no such adjustment shall be made which would cause
the Plan to violate Section 424(a) of the Code or any successor provisions
thereto without the written consent of holders materially adversely affected
thereby. In any of such events, the Committee may take such action
sufficiently prior to such event if necessary to permit the Participant to
realize the benefits intended to be conveyed with respect to the underlying
shares in the same manner as is available to shareholders generally.
(b) ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. Unless
prior to a Change in Control Event the Committee determines that, upon its
occurrence, there shall be no acceleration of benefits under Awards or
determines that only certain or limited benefits under Awards shall be
accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Event for such acceleration,
then upon the occurrence of a Change in Control Event
(i) each Option and SAR shall become immediately exercisable,
(ii) Restricted Stock shall immediately vest free of
restrictions, and
(iii) the number of shares, cash or other property covered by
each Performance Share or Stock Unit Award shall be issued to the Participant;
The Committee may override the limitations on acceleration in this Section
6.2(b) by express provision in the Award Agreement or otherwise and may
accord any Eligible Employee a right to refuse any acceleration, whether
pursuant to the Award Agreement or otherwise, in such circumstances as the
Committee may approve. Any acceleration of Awards shall comply with
applicable legal requirements.
(c) POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any
Option or other right to acquire Common Stock under this Plan has been fully
accelerated as permitted by Section 6.2(b) but is not exercised prior to (i)
a dissolution of the Corporation, or (ii) an event described in Section
6.2(a) that the Corporation does not survive, or (iii) the consummation of an
event described in Section 6.2(a) that results in a Change of Control
approved by the Board, such Option or right shall thereupon terminate,
subject to any provision that has been expressly made by the Committee for
the survival, substitution, exchange or other settlement of such Option or
right.
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6.3 TERMINATION OF EMPLOYMENT; TERMINATION OF SUBSIDIARY STATUS;
DISCRETIONARY PROVISIONS.
(a) OPTIONS - RESIGNATION OR DISMISSAL. If the Participant's
employment by the Company terminates for any reason other than Retirement,
Total Disability or death, the Participant shall have, subject to earlier
termination pursuant to or as contemplated by Section 1.6, three months from
the date of termination of employment to exercise any Option to the extent it
shall have become exercisable on the date of termination of employment, and
any Option to the extent not exercisable on that date shall terminate.
(b) OPTIONS - RETIREMENT, DEATH OR DISABILITY. If the
Participant's employment by the Company terminates as a result of Retirement,
Total Disability or death, the Participant, Participant's Personal
Representative or his or her Beneficiary, as the case may be, shall have,
subject to earlier termination pursuant to or as contemplated by Section 1.6,
12 months from the date of termination of employment to exercise any Option
to the extent it shall have become exercisable by the date of termination of
employment, and any Option to the extent not exercisable on that date shall
terminate.
(c) CERTAIN SARS. Each SAR granted concurrently or in tandem
with an Option shall have the same post-termination provisions and
exercisability periods as the Option to which it relates, unless the
Committee otherwise provides.
(d) OTHER AWARDS. The Committee shall establish in respect of
each other Award granted hereunder the Participant's rights and benefits (if
any) in the event of a termination of employment and in so doing may make
distinctions based upon the cause of termination and the nature of the Award.
(e) CHANGE IN SUBSIDIARY STATUS. For purposes of this Plan
and any Award hereunder, if an entity ceases to be a Subsidiary, a
termination of employment shall be deemed to have occurred with respect to
each employee of such Subsidiary who does not continue as an employee of
another entity owned, controlled by or under common control with the Company.
(f) STOCK UNITS. Each Award Agreement in respect of Stock
Units shall include the applicable benefit distribution and termination
provisions for the grant or Award and shall specify the form of payment and
may incorporate (to the extent applicable) terms of this Plan, another Award
and/or any other deferred compensation plan under which it is governed.
(g) COMMITTEE DISCRETION. Notwithstanding the foregoing
provisions of this Section 6.3, in the event of, or in anticipation of, a
termination of employment with the Company for any reason, other than
discharge for cause, the Committee may, in its discretion, increase the
portion of the Participant's Award available to the Participant, or
Participant's Beneficiary or Personal Representative, as the case may be, or,
subject to the provisions of Section 1.6, extend the exercisability period
upon such terms as the Committee shall determine and expressly set forth in
or by amendment to the Award Agreement.
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6.4 COMPLIANCE WITH LAWS.
This Plan, the granting and vesting of Awards under this Plan and
the offer, issuance and delivery of shares of Common Stock and/or the payment of
money under this Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, agency or any
regulatory or governmental authority as may, in the opinion of counsel for the
Corporation, be necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Corporation, provide such
assurances and representations to the Corporation as the Corporation may deem
necessary or desirable to assure compliance with all applicable legal
requirements.
6.5 TAX WITHHOLDING.
Upon any exercise, vesting, or payment of any Award (or upon the
disposition of shares of Common Stock acquired pursuant to the exercise of an
Incentive Stock Option prior to satisfaction of the holding period
requirements of Section 422 of the Code), the Company shall have the right at
its option to (i) require the Participant (or Personal Representative or
Beneficiary, as the case may be) to pay or provide for payment of the amount
of any taxes which the Company may be required to withhold with respect to
such Award event or payment or (ii) deduct from any amount payable the amount
of any taxes which the Company may be required to withhold with respect to
such cash payment. In any case where a tax is required to be withheld in
connection with the delivery of shares of Common Stock under this Plan, the
Committee may in its sole discretion grant (either at the time of the Award
or thereafter) to the Participant the right to elect, pursuant to such rules
and subject to such conditions as the Committee may establish, to have the
Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares valued at their then Fair Market
Value, to satisfy such withholding obligation.
6.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
(a) BOARD OR COMMITTEE AUTHORIZATION. The Board may, at any
time, terminate or, from time to time, amend, modify or suspend this Plan, in
whole or in part. No Awards may be granted during any suspension of this Plan
or after termination of this Plan, but the Committee shall retain jurisdiction
as to Awards then outstanding or payments deferred in accordance with the terms
of this Plan.
(b) SHAREHOLDER APPROVAL. To the extent then required under
Sections 422 and 424 of the Code or any other applicable law, or deemed
necessary or advisable by the Board, any amendment to this Plan shall be subject
to shareholder approval.
(c) AMENDMENTS TO AWARDS. Without limiting any other express
authority of the Committee under but subject to the express limits of this Plan,
the Committee by agreement or resolution may waive conditions of or limitations
on Awards to Eligible Employees that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and may make other
changes to the terms and conditions of Awards that do not
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affect, in any manner materially adverse to the Employee Participant, his or
her rights and benefits under an Award.
(d) LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No
amendment, suspension or termination of this Plan or change of or affecting
any outstanding Award shall, without written consent of the Participant,
affect in any manner materially adverse to the Participant any rights or
benefits of the Participant or obligations of the Corporation under any Award
granted under this Plan prior to the effective date of such change. Changes
contemplated by Section 6.2 shall not be deemed to constitute changes or
amendments requiring a Participant's consent under this Section 6.6 or any
other provision of this Plan or any Award Agreement.
6.7 PRIVILEGES OF STOCK OWNERSHIP.
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership
as to any shares of Common Stock not actually delivered to and held of record
by him or her. No adjustment will be made for dividends or other rights as a
shareholders for which a record date is prior to such date of delivery.
6.8 EFFECTIVE DATE OF THIS PLAN.
The effective date of this Plan was November 1, 1995. Amendments
effective February 9, 1999 were approved by the Board, subject to shareholder
approval.
6.9 TERM OF THIS PLAN.
No Award shall be granted under this Plan after October 31, 2005
(the "termination date"). Unless otherwise expressly provided in this Plan
or in an applicable Award Agreement, any Award granted prior to the
termination date may extend beyond such date, and all authority of the
Committee with respect to Awards hereunder, including the authority to amend
an Award, shall continue during any suspension of this Plan and shall
continue in respect of Awards outstanding on the termination date.
6.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
(a) CHOICE OF LAW. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with the laws of the State of California.
(b) SEVERABILITY. If any provision shall be held by a court
of competent jurisdiction to be invalid and unenforceable, the remaining
provisions of this Plan shall continue in effect.
(c) PLAN CONSTRUCTION.
(1) RULE 16b-3. Transactions or events in respect of Awards
hereunder, to the extent approved by the Board or Committee, are intended, in
the case of Participants who are or may be Section 16 Persons, to satisfy the
applicable requirements for exemption under Rule 16b-
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3 to avoid liability under Section 16 of the Exchange Act. If any provision
of this Plan or of any Award would frustrate or conflict with this intent,
the provision to the extent possible shall be interpreted so as to avoid such
conflict.
(2) SECTION 162(m). It is the further intent of the Company
that Options or SARs with an exercise or base price not less than Fair Market
Value on the date of grant and Performance-Based Awards under Section 5.4 of
this Plan that are granted to or held by a Section 16 Person shall (if so
designated by the Committee) qualify as performance-based compensation under
Section 162(m) of the Code, and this Plan shall be interpreted consistent
with such intent.
(3) BIFURCATION. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS PLAN, the provisions of this Plan may at any time be bifurcated by the
Board or the Committee in any manner so that certain provisions of any Award
Agreement (or this Plan) intended (or required in order) to satisfy the
applicable requirements of Rule 16b-3 or Section 162(m) of the Code (to the
extent permitted thereby) are applicable only to persons subject to those
provisions and to those Awards to those persons intended to satisfy the
requirements of those rules.
6.11 CAPTIONS.
Captions and headings are given to the sections and subsections
of this Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of this Plan or any provision thereof.
6.12 NON-EXCLUSIVITY OF PLAN.
Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Committee to grant awards or authorize any
other compensation, with or without reference to the Common Stock, under any
other plan or authority.
VII. DEFINITIONS.
7.1 DEFINITIONS.
(a) "AWARD" shall mean an award of any Option, SAR, Restricted
Stock, Stock Bonus, Stock Unit, Performance Share, or Performance-Based
Award, or any dividend equivalent rights in respect of any thereof, or any
deferred payment right or other right or security in respect of any thereof,
and may include as an incident thereto any other Award, or any combination of
the foregoing, whether alternative or cumulative, authorized by and granted
under this Plan.
(b) "AWARD AGREEMENT" shall mean any writing setting forth the
terms of an Award that has been authorized by the Committee.
(c) "AWARD DATE" shall mean the date upon which the Committee
took the action granting an Award or such later date as the Committee
designates as the Award Date.
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(d) "AWARD PERIOD" shall mean the period beginning on an Award
Date and ending on the expiration date of such Award.
(e) "BENEFICIARY" shall mean the person, persons, trust or
trusts designated by a Participant or, in the absence of a designation,
entitled by will or the laws of descent and distribution, to receive the
benefits specified in the Award Agreement and under this Plan in the event of
a Participant's death, and shall mean the Participant's executor or
administrator if no other Beneficiary is designated and able to act under the
circumstances.
(f) "BOARD" shall mean the Board of Directors of the
Corporation.
(g) "CHANGE IN CONTROL EVENT" shall mean any of the following:
(1) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with or into one
or more entities that are not Subsidiaries or other affiliates, as a result
of which less than 50% of the outstanding voting securities of the surviving
or resulting entity immediately after the reorganization are, or will be,
owned, directly or indirectly, by shareholders of the Corporation immediately
before such reorganization (assuming for purposes of such determination that
there is no change in the record ownership of the Corporation's securities
from the record date for such approval until such reorganization and that
such record owners hold no securities of the other parties to such
reorganization, but including in such determination any securities of the
other parties to such reorganization held by affiliates of the Corporation);
(3) Approval by the shareholders of the Corporation of the
sale of substantially all of the Corporation's business and/or assets to a
person or entity which is not a Subsidiary or other affiliate; or
(4) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act but excluding any person described in and
satisfying the conditions of Rule 13d-1(b)(1) thereunder), other than a
person who is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of more than 20% of the outstanding Shares of Common Stock at
the time of adoption of this Plan (or an affiliate, successor, heir,
descendent or related party of or to any such person), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing more than 50% of
the combined voting power of the Corporation's then outstanding securities
entitled to then vote generally in the election of directors of the
Corporation.
(h) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(i) "COMMISSION" shall mean the Securities and Exchange
Commission.
(j) "COMMITTEE" shall mean a committee appointed by the Board
to administer this Plan, which committee shall be comprised of at least two
Board members, at least
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a majority of whom, during such time as one or more Participants may be
subject to Section 16 of the Exchange Act, should be Disinterested Directors,
PROVIDED, HOWEVER, that the fact that one or more Directors acting in the
matter are not Disinterested Directors shall not affect the validity of any
action taken by them or the Committee.
(k) "COMMON STOCK" shall mean the Common Stock of the
Corporation and such other securities or property as may become the subject
of Awards, or become subject to Awards, pursuant to an adjustment made under
Section 6.2 of this Plan.
(l) "COMPANY" shall mean, collectively, the Corporation and
its Subsidiaries.
(m) "CORPORATION" shall mean Castle & Cooke, Inc., a Hawaii
corporation, and its successors.
(n) "DISINTERESTED DIRECTOR" means (unless the Board otherwise
determines) a member of the Board who is a Non-Employee Director as defined
in Rule 16b-3 and an "outside director" as defined in regulations under
Section 162(m) of the Code, as each may be amended from time to time.
(o) "ELIGIBLE EMPLOYEE" shall mean an officer (whether or not
a director) or employee of the Company, or any Other Eligible Person, as
determined by the Committee in its discretion.
(p) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(q) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(r) "FAIR MARKET VALUE" on any date shall mean (i) if the
stock is listed or admitted to trade on a national securities exchange, the
closing price of the stock on the Composite Tape, as published in the Western
Edition of The Wall Street Journal, of the principal national securities
exchange on which the stock is so listed or admitted to trade, on such date,
or, if there is no trading of the stock on such date, then the closing price
of the stock as quoted on such Composite Tape on the next preceding date on
which there was trading in such shares; (ii) if the stock is not listed or
admitted to trade on a national securities exchange, the last price for the
stock on such date, as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through the NASDAQ National Market Reporting System or
a similar organization if the NASD is no longer reporting such information;
(iii) if the stock is not listed or admitted to trade on a national
securities exchange and is not reported on the National Market Reporting
System, the mean between the bid and asked price for the stock on such date,
as furnished by the NASD or a similar organization; or (iv) if the stock is
not listed or admitted to trade on a national securities exchange, is not
reported on the National Market Reporting System and if bid and asked prices
for the stock are not furnished by the NASD or a similar organization, the
value as established by the Committee at such time for purposes of this Plan.
20
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(s) "INCENTIVE STOCK OPTION" shall mean an Option which is
designated and intended as an incentive stock option within the meaning of
Section 422 of the Code, the award of which contains such provisions
(including but not limited to the receipt of shareholder approval of this
Plan, if the award is made prior to such approval) and is made under such
circumstances and to such persons as may be necessary to comply with that
section.
(t) "NONQUALIFIED STOCK OPTION" shall mean an Option that is
designated as a Nonqualified Stock Option and shall include any Option
intended as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as
an incentive stock option shall be deemed to be designated a nonqualified
stock option under this Plan and not an incentive stock option under the
Code.
(u) "OPTION" shall mean an option to purchase Common Stock
under this Plan. The Committee shall designate any Option granted to an
Eligible Employee as a Nonqualified Stock Option or an Incentive Stock
Option.
(v) "OTHER ELIGIBLE PERSON" shall mean any individual
consultant or advisor, or (to the extent provided in the next sentence)
agent, who renders or has rendered BONA FIDE services (other than services in
connection with the offering or sale of securities of the Company in a
capital raising transaction) to the Company, and who is selected to
participate in this Plan by the Committee. A non-employee agent providing
BONA FIDE services to the Company (other than as an eligible advisor or
consultant) may also be selected as an Other Eligible Person if such agent's
participation in this Plan would not adversely affect (x) the Corporation's
eligibility to use Form S-8 to register under the Securities Act the offer
and sale by the Company of shares issuable under this Plan or (y) the
Corporation's compliance with any other applicable laws.
(w) "PARTICIPANT" shall mean an Eligible Employee who has been
granted an Award under this Plan.
(x) "PERFORMANCE SHARE AWARD" shall mean an award of a right
to receive shares of Common Stock under Section 5.1, or to receive shares of
Common Stock or other compensation (including cash) under Section 5.4, the
issuance or payment of which is contingent upon, among other conditions, the
attainment of performance objectives specified by the Committee.
(y) "PERSONAL REPRESENTATIVE" shall mean the person or persons
who, upon the disability or incompetence of a Participant, shall have
acquired on behalf of the Participant, by legal proceeding or otherwise, the
power to exercise the rights or receive benefits under this Plan by virtue of
having become the legal representative of the Participant.
(z) "PLAN" shall mean this Castle & Cooke, Inc. Amended and
Restated 1995 Stock Option and Award Plan, as from time to time amended.
(aa) "RESTRICTED STOCK" shall mean shares of Common Stock
awarded to a Participant subject to payment of such consideration, if any,
and such conditions on vesting (which may include, among others, the passage
of time, specified performance objectives or other factors) and such transfer
and other restrictions as are established in or pursuant to this Plan
21
<PAGE>
and the related Award Agreement, for so long as such shares remain unvested
under the terms of the applicable Award Agreement.
(bb) "RETIREMENT" shall mean retirement with the consent of the
Company or, from active service as an employee or officer of the Company on
or after attaining age 55 with ten or more years of service or age 65.
(cc) "RULE 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act effective on November 1, 1996, or any
successor provision, as amended from time to time.
(dd) "SECTION 16 PERSON" shall mean a person subject to Section
16(a) of the Exchange Act.
(ee) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
(ff) "STOCK APPRECIATION RIGHT" or "SAR" shall mean a right
authorized under this Plan to receive a number of shares of Common Stock or
an amount of cash, or a combination of shares and cash, the aggregate amount
or value of which is determined by reference to a change in the Fair Market
Value of the Common Stock.
(gg) "STOCK BONUS" shall mean an Award of shares of Common
Stock for no consideration other than past services and without restriction
other than such transfer or other restrictions as the Committee may deem
advisable to assure compliance with law.
(hh) "STOCK UNIT" shall mean a non-voting unit of measurement
which is deemed for bookkeeping purposes to be equivalent to one outstanding
share of Common Stock of the Company (subject to adjustment) solely for
purposes of this Plan.
(ii) "STOCK UNIT ACCOUNT" shall mean the bookkeeping account
maintained by the Company on behalf of each Participant who is credited with
Stock Units in accordance with this Plan, which account may be payable in
cash, stock and/or other consideration, as the Committee may determine.
(jj) "SUBSIDIARY" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Corporation.
(kk) "TOTAL DISABILITY" shall mean a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Code and such other
disabilities, infirmities, afflictions or conditions as the Committee by rule
may include.
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<PAGE>
EXHIBIT A
BUSINESS CRITERIA
Business Criteria means any one or more of: Total Stockholder Return,
Earnings Per Share, Net Income, Earnings Before Taxes, Return on Average
Common Equity, Return On Average Assets, EBT-ROI, Net Income, Net Income-ROI,
Net Cash Flow, Stock Appreciation, Funds From Operations, Occupancy Gains,
EBITDA, Overall Square Footage Growth, Entitlement Gains and Cost Reduction,
determined on either a Business Unit or Company (consolidated) basis. The
following provisions further define these and related terms.
"Applicable Period" means a period of time within or coincident to a
Performance Cycle with respect to which Performance Target(s) are established
for any one or more of the Business Criteria.
"Business Unit" means a region, subsidiary, division or other
organizational unit of the Company, or segment of its operations for
accounting purposes, which maintains or which is the subject of a separate
accounting of its financial performance.
"Company" means Castle & Cooke, Inc. and its subsidiaries on a
consolidated basis, unless the context otherwise requires.
"Cost Reduction" for any Applicable Period means a reduction in cost of
goods sold, selling, marketing, and general and administrative expenses
during the Applicable Period as compared to a prior Applicable Period or
average of more than one Applicable Period, expressed as an absolute dollar
amount or as a percentage of a specific amount.
"Earnings Before Taxes" or "EBT" for any Applicable Period means the
consolidated net income of the Company for the Applicable Period before
income taxes.
"Earnings Per Share" means per share net income of the Company, as
determined on either a "basic" or "diluted" basis under FAS 128 (or its
successor), as specified and established by the Committee in connection with
the grant of the Award.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization for the Applicable Period.
"EBT-ROI" means EBT for the Applicable Period divided by the periodic
average of the Net Investment for the Applicable Period.
"Entitlement Gains" means obtaining entitlements (i.e., receipt of all
necessary land use and zoning approvals for development from applicable
governmental agencies, except for plat maps, subdivision approvals, grading
and building permits and other secondary approvals) for land previously
unentitled, measured in units or acres as specified by the Committee, during
the Applicable Period as reflected in the Company's reports for the
Applicable Period.
A-1
<PAGE>
"Funds From Operations" means Funds from Operations, as defined by The
National Association of Real Estate Investment Trusts (or its successor) at
the time of the grant of an Award, for the Applicable Period.
"Net Cash Flow" means EBITDA plus the non-cash cost of sales, minus
developmental expenditures and capital expenditures, adjusted for other cash
flow items in accordance with GAAP.
"Net Income" means net income for the Applicable Period.
"Net Income-ROI" means the Net Income for the Applicable Period divided
by the periodic average of the Net Investment for the Applicable Period.
"Net Investment" means total assets less the sum of cash and cash
equivalents (short-term investments), investments in consolidated
subsidiaries, accounts payable and accrued liabilities, and minority
interests and deferred credits.
"Occupancy Gains" means increases in the occupancy level of specified
property or properties (owned at both the beginning and end of the Applicable
Period) during the Applicable Period, measured as a percentage of the gross
leasable/occupiable area in the case of commercial properties and as a
percentage of the number of rooms available in the case of hotel properties.
"Overall Square Footage Growth" means the increase, between the
beginning and end of the Applicable Period, in the total square feet of gross
leasable area.
"Performance Cycle" means the period of time not less than one fiscal
year nor more than 10 fiscal years over which performance is measured for
determining the amount of any payment opportunity from Awards granted under
the Plan.
"Return On Average Common Equity" means the consolidated net income to
common stockholders for the Applicable Period divided by the periodic average
of total common stockholders equity during the Applicable Period.
"Return on Average Assets" means consolidated net income divided by the
periodic average of total assets for the Applicable Period.
"Stock Appreciation" means an increase in the price or value of the
Common Stock of the Corporation after the date of grant of an Award and
during the Applicable Period with respect to the Corporation's Common Stock
on stand alone basis, or on a basis relative to the performance of a
specified peer group.
Except as otherwise expressly provided, all financial terms are used as
defined or used under generally accepted accounting principles (GAAP) and,
where applicable, all determinations shall be made in accordance with GAAP
and as made or applied by the Company in, or in the preparation of, its
periodic reports to stockholders or other financial reports, as the case may
be.
A-2
<PAGE>
CASTLE & COOKE, INC.
DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED THROUGH FEBRUARY 9, 1999)
<PAGE>
CASTLE & COOKE, INC.
DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED THROUGH FEBRUARY 9, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I TITLE, PURPOSE AND AUTHORIZED SHARES. . . . . . . . . . . . . . . . .1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE IV DEFERRAL ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . .3
4.1 Stock Unit Account. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4.2 Dividend Equivalents; Dividend Equivalent Stock Account . . . . . . . . .4
4.3 Vesting of Stock Unit Account and Dividend Equivalent Stock Account . . .4
4.4 Distribution of Benefits. . . . . . . . . . . . . . . . . . . . . . . . .4
4.5 Adjustments in Case of Changes in Common Stock. . . . . . . . . . . . . .5
4.6 Corporation's Right to Withhold . . . . . . . . . . . . . . . . . . . . .5
4.7 Limitations on Rights Associated with Units . . . . . . . . . . . . . . .6
4.8 Restrictions on Resale. . . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE V ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
5.1 FORMULA PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
5.2 Decisions Final; Delegation; Reliance; and Limitation on Liability. . . .6
ARTICLE VI PLAN CHANGES AND TERMINATION. . . . . . . . . . . . . . . . . . . . .7
6.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
6.2 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
6.3 Distribution of Shares. . . . . . . . . . . . . . . . . . . . . . . . . .7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.1 Limitation on Directors' Rights . . . . . . . . . . . . . . . . . . . . .7
7.2 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.3 Benefits Not Assignable; Obligations Binding Upon Successors. . . . . . .8
7.4 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . .8
7.5 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . . . . . . .8
7.6 Plan Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
7.7 Headings Not Part of Plan . . . . . . . . . . . . . . . . . . . . . . . .8
7.8 Shareholder Approval; Effective Date. . . . . . . . . . . . . . . . . . .8
7.9 Irrevocability of Payout Elections. . . . . . . . . . . . . . . . . . . .8
</TABLE>
ii
<PAGE>
CASTLE & COOKE, INC.
DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED THROUGH FEBRUARY 9, 1999)
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
This Plan shall be known as "Castle & Cooke, Inc. Deferred Stock
Compensation Plan For Non-Employee Directors" and shall become effective as
provided in Section 7.8. The purpose of this Plan is to compensate directors in
a manner that further aligns their economic interest with the interests of
shareholders generally and by so doing further attract, motivate and retain
experienced and knowledgeable directors of the Corporation. The total number of
shares of Common Stock that may be delivered pursuant to awards under this Plan
is 50,000, subject to adjustments contemplated by Section 4.5.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan they shall have the
meaning specified below unless the context clearly indicates to the contrary:
ACCOUNTS means a Director's Stock Unit Account and Dividend Equivalent
Stock Account.
AVERAGE FAIR MARKET VALUE means the average of the Fair Market Values
of a share of COMMON Stock of the Corporation during the last 10 trading
days preceding the applicable date of determination.
AWARD means THE crediting of a Unit or Units under this Plan.
AWARD DATE means June 1 of each year, commencing in 1996.
BENEFICIARY shall HAVE the meaning specified in Section 7.2(b).
BOARD OF DIRECTORS or BOARD means the Board of Directors of the
Corporation.
CHANGE IN CONTROL EVENT MEANS and shall be deemed to have occurred
upon:
(1) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;
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<PAGE>
(2) Approval by the shareholders of the Corporation of an agreement
to merge or consolidate, or otherwise reorganize, with or into one or more
entities that are not subsidiaries or other affiliates, as a result of
which less than 50% of the outstanding voting securities of the surviving
or resulting entity immediately after the reorganization are, or will be,
owned, directly or indirectly, by shareholders of the Corporation
immediately before such reorganization (assuming for purposes of such
determination that there is no change in the record ownership of the
Corporation's securities from the record date for such approval until such
reorganization and that such record owners hold no securities of the other
parties to such reorganization, but including in such determination any
securities of the other parties to such reorganization held by affiliates
of the Corporation);
(3) Approval by the shareholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a person
or entity which is not a subsidiary or other affiliate; or
(4) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act but excluding any person described in and satisfying the
conditions of Rule 13d-1(b)(1) thereunder), other than a person who is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more
than 20% of the outstanding shares of Common Stock at the time of adoption
of this Plan (or an affiliate, successor, heir, descendent or related party
of or to any such person), becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing more than 50% of the combined voting power of the
Corporation's then outstanding securities entitled to then vote generally
in the election of directors of the Corporation.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK MEANS shares of Common Stock of the Corporation, subject
to adjustments made under Section 4.5 or by operation of law.
CORPORATION means CASTLE & Cooke, Inc., a Hawaii corporation, and its
successors and assigns.
DIRECTOR means a member of the Board of Directors of the Corporation
who is eligible to receive COMPENSATION in the form of retainer fees for
services in such capacity and who is not an officer or employee of the
Corporation or any of its subsidiaries.
DISABILITY means a "PERMANENT and total disability" within the meaning
of Section 22(e)(3) of the Code.
DISTRIBUTION means the initial distribution of the shares of Common
Stock of the Corporation by Dole Food COMPANY, Inc. to its shareholders.
DIVIDEND EQUIVALENT means the amount of dividends or other
distributions paid by the Corporation on that number of shares of Common
Stock equivalent to the number of
2
<PAGE>
Stock Units then credited to a Director's Stock Unit Account and Dividend
Equivalent Stock Account, which amount shall be allocated as additional
Stock Units to the Director's Dividend Equivalent Stock Account.
DIVIDEND EQUIVALENT STOCK ACCOUNT means the bookkeeping account
maintained by the Corporation on behalf of a Director which is credited
with Dividend Equivalents in the form of STOCK Units in accordance with
Section 4.2.
EFFECTIVE DATE means the effective date referred to in Section 7.8.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended
from time to time.
FAIR MARKET VALUE means the closing price of the Stock as reported on
the composite tape of New York Stock Exchange issues (or, if the Stock is
not so listed or if the principal market on which it is traded is not the
New York Stock Exchange, such other reporting system as shall be selected
by the Board) on the relevant date, or, if no sale of the Stock is reported
for that date, the next preceding day for which there is a reported sale.
PLAN means the Castle & Cooke, Inc. Deferred Stock Compensation Plan
For Non-Employee DIRECTORS, as amended.
STOCK means Common Stock.
STOCK UNIT OR UNIT means a non-voting unit of measurement that is
deemed for bookkeeping purposes to be equivalent to an outstanding share of
Common Stock of the Corporation and INCLUDES fractional units.
STOCK UNIT ACCOUNT means the bookkeeping account maintained by the
Corporation on behalf of EACH Director which is credited with Stock Units
in accordance with Section 4.1.
ARTICLE III
PARTICIPATION
Each Director shall become a participant in the Plan upon a crediting event
under Article IV.
ARTICLE IV
DEFERRAL ACCOUNTS
4.1 STOCK UNIT ACCOUNT.
The Stock Unit Account of each Director shall be credited on each Award
Date with a number of Units determined by dividing $10,000 by the Average Fair
Market Value of the
3
<PAGE>
Common Stock on the Award Date. A Director who is not serving as a director
on an Award Date is not eligible for any portion of the Award for the
applicable year.
4.2 DIVIDEND EQUIVALENTS; DIVIDEND EQUIVALENT STOCK ACCOUNT.
(a) ALLOCATION OF DIVIDEND EQUIVALENTS. Each Director shall be
entitled to receive Dividend Equivalents on the Units credited to his or her
Stock Unit Account and Dividend Equivalent Stock Account, whether before or
after a termination of service, which Dividend Equivalents shall be credited to
the Director's Dividend Equivalent Stock Account in accordance with Section
4.2(b) below.
(b) DIVIDEND EQUIVALENT STOCK ACCOUNT. The Director's Dividend
Equivalent Stock Account shall be credited with an additional number of Units
determined by dividing the amount of Dividend Equivalents by the Fair Market
Value of a share of Common Stock as of each dividend payment date. The Units
credited to a Director's Dividend Equivalent Stock Account shall be allocated
(for purposes of distribution) in accordance with Section 4.4(b) and shall be
subject to adjustment in accordance with Section 4.5.
4.3 VESTING OF STOCK UNIT ACCOUNT AND DIVIDEND EQUIVALENT STOCK ACCOUNT.
The rights of each Director in respect of his or her Stock Unit
Account and related Dividend Equivalent Stock Account shall vest immediately on
crediting.
4.4 DISTRIBUTION OF BENEFITS.
(a) COMMENCEMENT OF BENEFITS DISTRIBUTION. Subject to the terms of
this Section 4.4 and Section 4.5, each Director shall be entitled to receive a
distribution in a number of shares of Stock equal to the number of Units in his
or her Accounts upon a termination of service (including but not limited to a
retirement or resignation) as a Director of the Corporation.
(b) MANNER OF DISTRIBUTION. The benefits payable under this Plan
shall be distributed to the Director (or, in the event of his or her death,
the Director's Beneficiary) in a lump sum, unless the Director elects in
writing (on forms provided by the Corporation) by the time specified in
Section 4.4(f), to receive a distribution of his or her benefits in respect
of such Units in approximately equal annual installments (before giving
effect to post-termination crediting of additional Dividend Equivalents
before the applicable payment date) for up to five years thereafter.
Elections with respect to any Units in the Stock Unit Account shall apply to
all Dividend Equivalent Units attributable to those Stock Units, and to all
Dividend Equivalent Units attributable to those Dividend Equivalent Units.
Installment payments shall commence as of the date benefits become
distributable under Section 4.4(a). Notwithstanding the foregoing, if the
vested balance remaining in a Director's Stock Unit Account and Dividend
Equivalent Stock Account is less than 1,000 shares, then the remaining
balance shall be distributed in shares in a lump sum. No fractional
interests shall be distributed, but they may be accumulated and paid in cash.
(c) EFFECT OF DEATH OR DISABILITY; CHANGE IN CONTROL.
Notwithstanding Sections 4.4(a) and (b), if a Director or former Director dies
or suffers a Disability resulting in or
4
<PAGE>
following a termination of service, the distribution in Stock of the
Director's Accounts (or remaining Accounts, as the case may be) shall be made
immediately in a lump sum. If the Director's service terminates upon or
after a Change in Control Event, or a former Director has any remaining
Accounts at the time of such Change in Control Event, the distribution in
Stock of the Director's Accounts (or remaining Accounts, as the case may be)
shall be made immediately in a lump sum.
(d) FORM OF DISTRIBUTION. Stock Units credited to a Director's Stock
Unit Account and Dividend Equivalent Stock Account shall be paid and distributed
by means of a distribution of an equivalent whole number of shares of the Common
Stock. Fractions shall be accumulated and converted to Units, but any
fractional interest in a Unit shall be paid in cash on final distribution.
(e) SUB-ACCOUNTS. The Administrator shall retain sub-accounts of a
Director's Accounts as may be necessary to determine which Units are subject to
any distribution elections under Section 4.4(b).
(f) TIMING OF ELECTIONS. A Director may elect (with respect to Units
credited on any June 1 and any related Dividend Equivalent Units) an installment
distribution as provided in Section 4.4(b) within 60 days following the annual
crediting of the Units to his or her Stock Unit Account; provided, however, that
no such election shall be effective until 12 months after the election is filed
with the Corporation. If a director has made such an election, it shall be
deemed a continuing one as to Units to be credited in future years, unless
(subject to Sections 7.6 and 7.9) the Director notifies the Corporation to the
contrary at least 60 days after the applicable June 1st on which the additional
Units are credited.
4.5 ADJUSTMENTS IN CASE OF CHANGES IN COMMON STOCK. If there shall occur
any recapitalization, stock split (including a stock split in the form of a
stock dividend), reverse stock split, merger, combination, consolidation, or
other reorganization or any extraordinary non-cash dividend or other
extraordinary distribution in respect of the Stock (whether in the form of
Stock, other securities, or other property), or any split-up, spin-off,
extraordinary redemption, or exchange of outstanding Stock, or there shall occur
any other similar corporate transaction or event in respect of the Stock, or a
sale of substantially all the assets of the Corporation as an entirety,
proportionate and equitable adjustments consistent with the effect of such event
on shareholders generally (but without duplication of benefits if Dividend
Equivalents are credited) shall be made in the number and type of shares of
Common Stock or other consideration (including cash, property or securities in
respect thereof) reserved and to be distributed, and of Units, under this Plan.
4.6 CORPORATION'S RIGHT TO WITHHOLD. The Corporation shall satisfy state
or federal income tax withholding obligations, if any, arising upon distribution
of a Director's accounts by reducing the number of shares of Common Stock
otherwise deliverable to the Director by the appropriate number of shares (based
on the Average Fair Market Value) required to satisfy such tax withholding
obligation. If the Corporation, for any reason, cannot satisfy the withholding
obligation in accordance with the preceding sentence, the Director shall pay or
provide for
5
<PAGE>
payment in cash of the amount of any taxes which the Corporation may be
required to withhold with respect to the benefits hereunder.
4.7 LIMITATIONS ON RIGHTS ASSOCIATED WITH UNITS. A Director's Accounts
shall be memorandum accounts on the books of the Corporation. The Units
credited to a Director's Accounts shall be used solely as a device for the
determination of the number of shares of Common Stock to be eventually
distributed to such Director in accordance with this Plan. The Units shall not
be treated as property or as a trust fund of any kind, although the Corporation
shall reserve shares to satisfy its obligations under this Plan. Each
Director's rights in the Units is limited to the right to receive shares of
Common Stock (or other consideration) in the future as herein provided. No
Director shall be entitled to any voting or other shareholder rights with
respect to Units granted under this Plan. The number of Units credited under
this Section shall be subject to adjustment in accordance with Section 4.5.
4.8 RESTRICTIONS ON RESALE. Stock distributed in respect of those Stock
Units that were first credited under Section 4.1 within six months of the
distribution (and Dividend Equivalent Account Units credited under Section 4.2
solely in respect thereof) may be legended or otherwise restricted so as to
prevent a sale of the Stock within six months of the initial crediting of those
Stock Units. Installments shall be deemed payable and paid in the order (i.e.,
last-in, last-out) of the accrual of the underlying Units.
ARTICLE V
ADMINISTRATION
5.1 FORMULA PLAN. This Plan shall be, to the maximum extent possible,
self-effectuating. This Plan shall be construed, interpreted and, to the extent
required, administered by the Board or a committee duly appointed and authorized
by the Board to act on its behalf under this Plan. No director shall
participate in any decision relating solely to his or her benefits. Subject to
the terms of this Plan, the Board (or such committee) may resolve any questions
and make all other determinations and adjustments required by this Plan,
maintain all the necessary records for the administration of this Plan, and
provide forms and procedures to facilitate the implementation of this Plan.
5.2 DECISIONS FINAL; DELEGATION; RELIANCE; AND LIMITATION ON LIABILITY.
Any determination of the Board or a duly authorized committee of the Board
made in good faith shall be conclusive. In performing its duties, the Board
or the committee shall be entitled to rely on public records and on
information, opinions, reports or statements prepared or presented by
officers or employees of the Corporation or other experts believed to be
reliable and competent. The Board or the committee may delegate ministerial,
bookkeeping and other non-discretionary functions to individuals who are
officers or employees of the Corporation.
Neither the Corporation nor any member of the Board, nor any other person
participating in any determination of any question under this Plan, or in the
interpretation, administration or application of this Plan, shall have any
liability to any party for any action taken or not taken in good faith under
this Plan or for the failure of an Award (or action or payment in respect of an
Award) to satisfy Code requirements for realization of intended tax
consequences, to qualify for
6
<PAGE>
exemption or relief under Rule 16b-3 under the Exchange Act, or to comply
with any other law, compliance with which is not required on the part of the
Corporation.
ARTICLE VI
PLAN CHANGES AND TERMINATION
6.1 AMENDMENTS. The Board of Directors shall have the right to amend this
Plan in whole or in part from time to time or may at any time suspend or
terminate this Plan; provided, however, that no amendment or termination shall
cancel or otherwise adversely affect in any way, without his or her written
consent, any Director's rights with respect to Stock Units and Dividend
Equivalents credited to his or her Stock Unit Account or Dividend Equivalent
Stock Account.
6.2 TERM. This Plan shall continue for a period of 10 years following the
date of its approval by the Board, but continuance of this Plan is not assumed
as a contractual obligation of the Corporation. In the event that the Board of
Directors decides to terminate this Plan, it shall notify the Directors of its
action in an instrument in writing, and this Plan shall be terminated at the
time therein set forth, and all Directors shall be bound thereby.
6.3 DISTRIBUTION OF SHARES. If this Plan terminates pursuant to
Section 6.2, the distribution of the Accounts of a Director shall be made at the
time provided in Section 4.4(a) and in a manner consistent with the elections
made pursuant to Section 4.4(b).
ARTICLE VII
MISCELLANEOUS
7.1 LIMITATION ON DIRECTORS' RIGHTS. Participation in this Plan shall not
give any Director the right to continue to serve as a member of the Board or any
rights or interests other than as herein provided. No Director shall have any
right to any payment or benefit hereunder except to the extent provided in this
Plan. This Plan shall create only a contractual obligation on the part of the
Corporation as to such amounts and shall not be construed as creating a trust.
This Plan, in and of itself, has no assets. Directors shall have only the
rights of general unsecured creditors of the Corporation with respect to amounts
credited or vested and benefits payable, if any, on their Accounts.
7.2 BENEFICIARIES.
(a) BENEFICIARY DESIGNATION. Upon forms provided and in accordance
with procedures established by the Corporation, each Director may designate in
writing (and change a designation of) the Beneficiary or Beneficiaries (as
defined in Section 7.3(b)) that the Director chooses to receive the Common Stock
payable under this Plan after his or her death, subject to applicable laws
(including any applicable community property and probate laws).
(b) DEFINITION OF BENEFICIARY. A Director's "Beneficiary" or
"Beneficiaries" shall be the person or persons, including a trust or trusts,
validly designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive the
Director's benefits under this Plan in the event of the Director's death.
7
<PAGE>
7.3 BENEFITS NOT ASSIGNABLE; OBLIGATIONS BINDING UPON SUCCESSORS.
Benefits of a Director under this Plan shall not be assignable or transferable
and any purported transfer, assignment, pledge or other encumbrance or
attachment of any payments or benefits under this Plan, or any interest therein,
other than pursuant to Section 7.2, shall not be permitted or recognized.
Obligations of the Corporation under this Plan shall be binding upon successors
of the Corporation.
7.4 GOVERNING LAW; SEVERABILITY. The validity of this Plan or any of its
provisions shall be construed, administered and governed in all respects under
and by the laws of the State of California. If any provisions of this
instrument shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
7.5 COMPLIANCE WITH LAWS. This Plan and the offer, issuance and delivery
of shares of Common Stock and/or the payment and deferral of compensation under
this Plan are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal reporting,
registration, insider trading and other securities laws) and to such approvals
by any listing agency or any regulatory or governmental authority as may, in the
opinion of counsel for the Corporation, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring the securities shall, if requested by the
Corporation, provide such assurances and representations to the Corporation as
the Corporation may deem necessary or desirable to assure compliance with all
applicable legal requirements.
7.6 PLAN CONSTRUCTION. It is the intent of the Corporation that
transactions or events in respect of Awards hereunder satisfy and be interpreted
in a manner that satisfies any applicable requirements of Rule 16b-3 so that
Directors will be entitled to the benefits of Rule 16b-3 or other exemptive
rules under Section 16 of the Exchange Act and will not be subjected to
avoidable liability thereunder. Any contrary interpretation shall be avoided.
7.7 HEADINGS NOT PART OF PLAN. Headings and subheadings in this Plan are
inserted for reference only and are not to be considered in the construction of
this Plan.
7.8 SHAREHOLDER APPROVAL; EFFECTIVE DATE. This Plan has been approved by
the Board of Directors and was approved by Dole Food Company, Inc. as the sole
shareholder of the Corporation.
7.9 IRREVOCABILITY OF PAYOUT ELECTIONS. A Director may, subject to the
approval of the Committee, prospectively change a distribution election under
Section 4.4(b) by a subsequent election that will take effect at least 12 months
after the subsequent election is received by the Company if, in the opinion of
Counsel to the Company, the subsequent election would not adversely affect the
efficacy of deferrals under the Code in respect of other Participants or this
Plan. The Committee may, subject to Sections 7.5 and 7.6, permit an election
that would not qualify for an exemption under Section 16(b) of the Exchange Act,
so long as the availability of any exemption thereunder for other Directors
under this Plan, is not compromised.
8
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CASTLE & COOKE, INC.
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1 - INTENT AND EFFECTIVE DATE OF THE PLAN............................1
SECTION 2 - DEFINITIONS......................................................2
2.1 Change in Control................................................2
2.2 Code.............................................................2
2.3 Company..........................................................2
2.4 Corporation......................................................2
2.5 Defined Benefit Plan.............................................2
2.6 Employee.........................................................2
2.7 ERISA............................................................2
2.8 Event............................................................2
2.9 Plan.............................................................3
2.10 Plan Administrator...............................................3
2.11 Retiree..........................................................3
2.12 Service..........................................................3
SECTION 3 - ELIGIBILITY FOR BENEFITS.........................................4
SECTION 4 - AMOUNT OF BENEFITS...............................................5
SECTION 5 - FORM OF BENEFITS.................................................6
SECTION 6 - DEATH BENEFITS...................................................7
6.1 Death Before Retirement..........................................7
6.2 Death After Retirement...........................................7
6.3 Employees Entitled to Benefits Under
Section 4.2......................................................7
SECTION 7 - COST OF THE PLAN.................................................8
SECTION 8 - ADMINISTRATION...................................................9
8.1 Charter of the Committee.........................................9
8.2 Plan Interpretations Following a Change In
Control..........................................................9
8.3 Claims Procedure and Arbitration.................................9
SECTION 9 - FACILITY OF PAYMENT AND LAPSE OF BENEFITS.......................12
9.1 Lack of Valid Beneficiary Designation...........................12
9.2 Payments or Deposits............................................12
<PAGE>
SECTION 10 - GENERAL PROVISIONS
10.1 Frequency and Duration of Payment..............................13
10.2 Payments and Benefits Not Assignable...........................13
10.3 No Right of Employment.........................................13
10.4 Adjustments....................................................13
SECTION 11 - AMENDMENTS, ASSIGNMENT AND DISCONTINUANCE......................14
11.1 Amendment of Plan..............................................14
11.2 Assignment of Plan.............................................14
11.3 Termination....................................................14
11.4 Effect of Amendment or Termination.............................14
<PAGE>
CASTLE & COOKE, INC.
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
SECTION 1 - INTENT AND EFFECTIVE DATE OF THE PLAN
The Plan is intended to provide a supplemental retirement allowance, in
accordance with the provisions of the Plan contained herein, to those retired
employees and their beneficiaries whose benefits from the qualified defined
benefit retirement plan maintained by the Company are reduced by reason of the
maximum annual limitations on benefits imposed by Section 415 of the Code, the
limitation on compensation imposed by Section 401(a)(17) of the Code, or who are
granted a supplemental retirement' benefit in accordance with the Plan. The
portion of the Plan relating to Section 415 is intended to constitute an
"excess benefit plan" as defined in Section 3(36) of ERISA. The remaining
portion of the Plan is intended to constitute a plan which is unfunded and
maintained primarily for the purpose of providing deferred compensation to a
select group of management or highly compensated employees. This Plan was
created in connection with the distribution of the common shares of the Company
(the "Distribution") to the shareholders of Dole Food Company ("Dole"). The
benefits of the employees and former employees of the Corporation and its
affiliates which had been provided under the Dole Food Company Supplementary
Executive Retirement Plan ("Dole SERP") have been assumed by the Corporation
under this Plan. The Plan is effective as of the date of the Distribution.
<PAGE>
SECTION 2 - DEFINITIONS
2.1 CHANGE IN CONTROL means either of the following:
(A) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Corporation representing 20% or more of the combined voting power of
the Corporation's then outstanding securities, unless such person was, on
the effective date of the Trust, such a beneficial owner of securities
representing 20% or more of such voting power; or
(B) During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's shareholders, of each new
Board member was approved by a at least three-fourths of the Board members
then still in office who were Board members at the beginning of such
period.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMPANY means the Corporation and each of its affiliates which has
employees who are included in the Plan upon authorization of the Corporate
Compensation and Benefits Committee of the Board of Directors of the
Corporation and adoption of the Plan by such affiliate. For purposes of
this Plan, affiliate means an entity which is controlled by or under
common control with the Corporation, within the meaning of Code Sections
414 and 1563.
2.4 CORPORATION means Castle & Cooke, Inc.
2.5 DEFINED BENEFIT PLAN means a defined benefit plan, as defined in Code
Section 414(j), maintained by a Company.
2.6 EMPLOYEE means any person who is regularly employed by a Company, whether
on a full time or part time basis.
2.7 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
2
<PAGE>
2.8 EVENT means any of the following:
(A) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;
(B) Approval by the shareholders of the Corporation of an agreement
to merge or consolidate, or otherwise reorganize, with or into one or more
entities which are not subsidiaries of the Corporation, as a result of
which less than 50% of the outstanding voting securities of the surviving
or resulting entity are, or are to be, owned by former shareholders of the
Corporation;
(C) Approval by the shareholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a person
or entity which is not a subsidiary of the Corporation; or
(D) Approval by the shareholders of the Corporation of a Change in
Control.
2.9 PLAN means the Castle & Cooke, Inc. Supplementary Executive Retirement
Plan, as contained herein and amended from time to time.
2.10 PLAN ADMINISTRATOR means the Corporation.
2.11 RETIREE means any retired Employee, joint annuitant or beneficiary who is
entitled to receive benefits under the Plan.
2.12 SERVICE means continuous service with the Corporation or with an affiliated
company. For any individual who (a) becomes an employee of the Corporation
or an affiliated company on the Date of the distribution, or (b) had a
benefit under the Dole SERP which is assumed by the Corporation under this
Plan, Service also includes Service with Dole prior to the Distribution.
3
<PAGE>
SECTION 3 - ELIGIBILITY FOR BENEFITS
3.1 Each Employee who retires with a normal or early retirement benefit from a
Defined Benefit Plan, or terminates employment after participating in a
Defined Benefit Plan and being credited with five (5) or more years of
Service with a Company and:
(a) whose retirement benefit is reduced solely as a result of the Code
Section 415 limits and/or the limit on compensation in Code
Section 401 (a)(17), or
(b) who is granted a supplemental retirement benefit under the Plan
shall be eligible for the benefits provided by the Plan without the
necessity for filing an application for such benefits.
3.2 Benefits under the Plan shall be payable at such time as the Retiree
commences receipt of a retirement benefit from the Defined Benefit Plan.
4
<PAGE>
SECTION 4 - AMOUNT OF BENEFIT
4.1 The amount of a Retiree's benefit under the Plan with respect to a
reduction in benefits under a Defined Benefit Plan, shall be equal to the
amount by which such Retiree's retirement allowance from a Defined Benefit
Plan which is attributable to Service is reduced solely as a result of the
application of Code Sections 415 and/or 401(a)(17).
4.2 At its sole discretion, the Corporate Compensation and Benefits Committee
of the Board of Directors of the Corporation may award a supplemental
retirement benefit to any eligible Employee in such amount or to be
computed on such basis, as it may determine. By example and not by way of
limitation, such committee may award a benefit by designating a qualified
defined benefit plan of the Company; in such an instance the benefit to be
provided to the Employee would be the benefit determined as if the Employee
were a participant in the designated plan. Such awards may be granted for
any reason deemed appropriate by such committee. In no event shall a
supplemental retirement benefit be granted under the Plan to or on account
of any Employee who is not a member of a select group of management or
other highly compensated employees as defined from time to time by
the Corporate Compensation and Benefits Committee of the Board of
Directors. A certified copy of the resolution granting a supplemental
retirement benefit shall be furnished to the Plan Administrator prior to
the date any payment on account thereof is to be made under the Plan.
5
<PAGE>
SECTION 5 - FORM OF BENEFITS
(1) An Employee's benefit under the Plan will be paid in the same form as
the Employee's benefit paid by the Defined Benefit Plan and an
Employee's designation of a joint annuitant and/or beneficiary made
under such plan will also be applicable under the Plan.
(2) In the case of an Employee entitled to a benefit under Section 4.2,
the form of benefits shall be as established by the Corporate
Compensation and Benefits Committee. If such a benefit has been
awarded by designated a qualified retirement plan of the Company, then
the benefit shall commence to be paid at the later of (1) termination
of employment or (2) the attainment of the earliest retirement age
under the designated plan. Notwithstanding the above, the Employee
may elect any other benefit commencement date which follows
termination of employment and is available under the designated plan
by electing such benefit commencement date or form of benefit at least
one year prior to the date benefits would otherwise commence.
(3) Notwithstanding subsections (a) and (b), at the sole discretion of the
Corporation, benefits under the Plan may be paid in the form of a lump
sum payment. The amount of the lump sum shall be determined using the
actuarial assumptions of the Defined Benefit Plan in which the
Employee last participated, or, in the case of an employee entitled to
a benefit under Section 4.2, the actuarial assumptions of the plan
designated by the Committee.
6
<PAGE>
SECTION 6 - DEATH BENEFITS
6.1 DEATH BEFORE RETIREMENT. No death benefit shall be payable under the Plan
in the event of death before retirement unless a qualified pre-retirement
survivor benefit (as described in Code Section 417) is payable under the
Defined Benefit Plan and such survivor benefit is reduced solely as a
result of Code Sections 415 and/or 401(a)(17). In such event, the amount
of the monthly benefit payable under the Plan to a beneficiary entitled to
benefits under the Defined Benefit Plan will be equal to the amount of
reduction in the benefit payable to such beneficiary under the Defined
Benefit Plan which is attributable to Service and results from the
aforementioned Code sections. A survivor benefit payable to a beneficiary
under the Plan will cease at the same time the survivor benefit to such
beneficiary is terminated under the Defined Benefit Plan. Notwithstanding
the foregoing, at the sole discretion of the Corporation, the survivor
benefit may be paid in the form of a lump sum payment. The amount of the
lump sum shall be determined using the actuarial assumptions of the Defined
Benefit Plan in which the Employee last participated.
6.2 DEATH AFTER RETIREMENT. To the extent that a post-retirement death
benefit, attributable to Service, otherwise payable under the Defined
Benefit Plan is reduced by application of Code Sections 415 and/or
401(a)(17), the amount of such reduction will be payable under the Plan.
At the sole discretion at the Corporation, the death benefit may be paid in
the form of a lump sum payment. The amount of the lump sum shall be
determined using the actuarial assumptions of the Defined Benefit Plan in
which the Employee last participated.
6.3 EMPLOYEES ENTITLED TO BENEFITS UNDER SECTION 4.2. Notwithstanding Sections
6.1 and 6.2, in the case of an Employee entitled to a benefit under Section
4.2, the benefit payable on account of a death before or after retirement
shall be as established by the Corporate Compensation and Benefits
Committee. If such a benefit has been awarded by designating a qualified
retirement plan of the Company, then the benefit payable on account of
death shall be as set forth in the designated plan. At the sole discretion
of the Company, a lump-sum benefit may be paid, calculated in the manner
described in Section 6.1 and 6.2 for lump-sum benefits.
7
<PAGE>
SECTION 7 - COST OF THE PLAN
All costs of the Plan, including the administration thereof, shall be borne by
the Corporation and no contributions from Employees shall be required or
permitted.
Nothing in the establishment of this Plan is to be construed as requiring the
Corporation to create or maintain any separate fund, account or reserve to
provide for the payment of the Corporation's liability to an Employee under the
Plan. All benefits under the Plan shall be paid from the general assets of the
Corporation, or from a grantor trust established for the purpose of making such
payments.
8
<PAGE>
SECTION 8 - ADMINISTRATION
8.1 CHARTER OF THE COMMITTEE. This Plan shall be administered according to
the Charter of the Corporate Compensation & Benefits Committee. The
provisions of the Charter of the Corporate Compensation & Benefits
Committee, including any amendments thereto subsequently adopted, are
incorporated herein by reference as if set forth fully herein.
8.2 PLAN INTERPRETATIONS FOLLOWING A CHANGE IN CONTROL. Following a Change
in Control or an Event, any provisions of this Plan or the Charter of the
Corporate Compensation & Benefits Committee which allow or purport to allow
the Plan Committee, any Company or any fiduciary of the Plan discretionary
authority or power to construe and interpret the terms of the Plan shall be
void as applied to any dispute involving benefits which accrued under this
Plan prior to the Change in Control or Event. Accordingly, as to such
disputes, an arbitrator or court shall, following a Change in Control or
Event, interpret the Plan on a DE NOVO basis.
8.3 CLAIMS PROCEDURE AND ARBITRATION.
(a) The claims procedure established pursuant to the Charter of the
Corporate Compensation and Benefits Committee shall apply to this
Plan, as modified by the arbitration procedure described in
Section 8.3(b).
(b) (i) A Retiree or an Employee (collectively referred to as a
"Claimant") may, if he or she desires, submit any claim for
payment under this Plan or dispute regarding the
interpretation of this Plan to arbitration. This right to
select arbitration shall be solely that of the Claimant,
and the Claimant may decide whether or not to arbitrate in
his or her discretion. The "right to select arbitration"
does not impose upon the Claimant a requirement to submit a
dispute for arbitration. The Claimant may, in lieu of
arbitration, pursue the claims procedure set forth herein,
and upon exhaustion of such claims procedure, bring an
action in an appropriate civil court. Furthermore, at any
time during the claims procedure, and before the Claimant
commences an
9
<PAGE>
action in a civil court, the Claimant may select
arbitration. The claims procedure would thereafter be
abandoned, and the dispute would be subject to the
arbitration procedure set forth herein. The Claimant need
not commence or exhaust the Plan's claim procedure in order
to commence arbitration. The Claimant retains the right to
select arbitration, even if a civil action (including,
without limitation, an action for declaratory relief) is
brought by the Company, or any other fiduciary of the Plan
prior to the commencement of arbitration. If arbitration
is selected by the Claimant after a civil action concerning
the Claimant's dispute has been brought by a person other
than the Claimant, then the Company, the Trustee and the
Claimant shall take such actions as are necessary or
appropriate, including dismissal of the civil action, so
that the arbitration can be timely heard. Once an
arbitration is commenced, it may not be discontinued
without the unanimous consent of all parties to the
arbitration. During the lifetime of the Employee only he
or she can use the arbitration procedure set forth in this
section.
(ii) Any claim for arbitration may be submitted as follows: if
the Claimant disagrees with an interpretation of this Plan
by the Company, or any fiduciary of the Plan, or disagrees
with the calculation of his or her benefit under the Plan,
such claim may be filed in writing with an arbitrator of
the Claimant's choice who is selected by the method
described in the next four sentences. The first step of
the selection shall consist of the Claimant submitting in
writing a list of five potential arbitrators to the
Company, and the trustee of any grantor trust which holds
assets for the purpose of making benefit payments under
this Plan ("Trustee"). Each of the five arbitrators must
be either (1) a member of the National Academy of
Arbitrators located in the state of the Claimant's
principal residence or (2) a retired California Superior
Court or Appellate Court judge. Within one week
10
<PAGE>
after receipt of the list, the Trustee and the Company
shall jointly select one of the five arbitrators as the
arbitrator for the dispute in question. If the Trustee and
Company fail to select an arbitrator in a timely manner
(including failure to select an arbitrator by reason of
disagreement between the Trustee and the Company as to the
arbitrator to be selected), the Claimant shall then
designate one of the five arbitrators as the arbitrator for
the dispute in question.
(iii) The arbitration hearing shall be held within seven days (or
as soon thereafter as possible) after the selection of the
arbitrator. No continuance of said hearing shall be
allowed without the mutual consent of the Claimant, the
Trustee and the Company. Absence from or nonparticipation
at the hearing by any party shall not prevent the issuance
of an award. Hearing procedures which will expedite the
hearing may be ordered at the arbitrator's discretion, and
the arbitrator may close the hearing in his or her sole
discretion when he or she decides he or she has heard
sufficient evidence to satisfy issuance of an award.
(iv) The arbitrator's award shall be rendered as expeditiously
as possible and in no event later than one week after the
close of the hearing. In the event the arbitrator finds
that the Claimant is entitled to the benefits he or she
claimed, the arbitrator shall order the Company and/or the
Trustee to pay such benefits, in the amounts and at such
times as the arbitrator determines. The obligation of the
Trustee to pay such benefits shall not, however, exceed the
assets of the trust, and the Company shall be jointly and
severally liable for any amount which the Trustee is
ordered to pay. The award of the arbitrator shall be final
and binding upon the parties. The Company shall thereupon
pay the Claimant immediately the amount that the arbitrator
orders to be paid in the manner described in the award. The
award may be enforced in any appropriate
11
<PAGE>
court as soon as possible after its rendition. If an action
is brought to confirm the award, no appeal shall be taken
by any party from any decision rendered in such action.
(v) If the arbitrator determines either that the Claimant is
entitled to the claimed benefits or that the claim by the
Claimant was made in good faith, the arbitrator shall
direct the Company to pay to the Claimant and Company
agrees to pay to the Claimant in accordance with such
order, an amount equal to the Claimant's expenses in
pursuing the claim, including attorneys' fees.
12
<PAGE>
SECTION 9 - FACILITY OF PAYMENT AND LAPSE OF BENEFITS
9.1 LACK OF VALID BENEFICIARY DESIGNATION. If no valid designation of
beneficiary is on file with the Defined Benefit Plan, any payment due to a
person under the provisions of the Plan for any period to the date of the
person's death, and any payment due thereafter as a result of the person's
death shall be paid by the Plan Administrator to the decedent's estate, or
if the Plan Administrator in its sole discretion deems it appropriate, in
whole or in part to any relative or relatives of the decedent by blood,
marriage, or adoption, or to any person who may have paid expenses of the
last illness, or funeral or burial expenses, or any combination of such
persons, in such proportions and in such manner as the Plan Administrator
shall determine in its sole discretion. The foregoing authorization shall
include, without limitation, sums represented by any check for benefit
payments due to the date of such person's death when such check has not
been negotiated prior to the death of the decedent.
9.2 PAYMENTS OR DEPOSITS. Payments or deposits made pursuant to any
provision of this Section 9 shall be a complete discharge, to the extent
thereof, of all liability under the provision of the Plan, or otherwise, of
the Plan Administrator, the Company and the Plan, and the receipt by the
person or persons receiving any such payment, distribution or deposit shall
be a complete acquittance therefore, and there shall be no obligation to
see to the application of any payments, distributions or deposits so made.
13
<PAGE>
SECTION 10 - GENERAL PROVISIONS
10.1 FREQUENCY AND DURATION OF PAYMENTS. All benefits under the Plan other than
those payable in a single sum shall be paid in monthly installments at the
beginning of the month to which the payment applies and shall cease with
the month at the retired Employee's death unless continued to a
beneficiary or joint annuitant in accordance with other provisions of the
Plan.
10.2 PAYMENTS AND BENEFITS NOT ASSIGNABLE. Payments to and benefits under the
Plan are not assignable or subject to alienation since they are primarily
for the support and maintenance of the Employees and their joint annuitants
or beneficiaries after retirement. Likewise, such payments shall not be
subject to attachment by creditors of or through legal process against, the
Company, the Plan Administrator, any Employee or Retiree.
10.3 NO RIGHT OF EMPLOYMENT. The provisions at the Plan shall not give an
Employee the right to be retained in the service of the Company.
10.4 ADJUSTMENTS. The Plan Administrator may, with respect to a Retiree, adjust
such Retiree's benefit under the Plan or make such other adjustments with
respect to such Retiree as required to correct administrative errors or
provide uniform treatment of Retirees in a manner consistent with the
intent and purposes of the Plan.
14
<PAGE>
SECTION 11 - AMENDMENTS, ASSIGNMENT AND DISCONTINUANCE
11.1 AMENDMENT OF PLAN. The Plan may be amended from time to time as set forth
in the Charter of the Corporate Compensation & Benefits Committee, except
that, as to benefits accrued prior to a Change in Control or Event,
sections 8.2 and 8.3 may not be amended following such a Change in Control
or Event, and Section 8.3 may not, at any time, be amended with respect to
a dispute over which arbitration has previously been selected.
11.2 ASSIGNMENT OF PLAN. In the event of a Change in Control or Event, with
respect to the Employees of any Company or portion of a Company which is
subject to such a Change in Control or Event, the Corporation agrees to
take good faith efforts to obligate any successor organization to assume
and agree to discharge all of the obligations under the Plan of the
Corporation to the Employees of such Company or such portion of a Company
and its applicable Retirees under the terms and conditions of the Plan.
Furthermore, if such Employee ceases to be employed by the Company or its
successor prior to the second anniversary of such Change in Control or
Event, the requirement of at least five (5) years of Service contained in
Section 3.1 shall not apply to such Employee.
Upon such assumption and agreement, the term "Corporation," and where
applicable "Company," as used in the Plan shall be deemed to refer to the
successor corporation.
11.3 TERMINATION. The Corporation intends to continue the Plan indefinitely but
reserves the right to terminate it at any time.
11.4 EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of the
Plan may adversely affect the benefits payable to any retiree receiving
benefits under the Plan prior to the effective date of the amendment or
termination, or to any Employee who, as of such date, was vested in his
benefit under a Defined Benefit Plan and had accrued a benefit under the
Plan.
15
<PAGE>
To record the adoption of this Plan, this document has been executed April 10,
1996.
CASTLE & COOKE, INC.
/s/ BERT KIDO
----------------------------------
BERT KIDO
16
<PAGE>
CASTLE & COOKE, INC. 17
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS AND SELECTED FINANCIAL DATA (1)
<TABLE>
<CAPTION>
(in thousands, except share data) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Residential and other property sales $ 165,635 $ 133,504 $ 201,520 $ 241,720 $ 246,384
Resort revenues 72,452 56,304 52,529 46,106 43,826
Commercial and other revenues 52,103 50,288 49,488 53,325 51,827
Gain on sale of income producing
properties - - 4,207 400 -
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues 290,190 240,096 307,744 341,551 342,037
- ----------------------------------------------------------------------------------------------------------------------------
Cost of residential and other property sales 142,533 122,158 176,613 191,700 172,120
Cost of resort operations 81,969 71,601 70,458 72,857 76,780
Cost of commercial and other operations 33,566 29,264 32,277 36,013 39,567
General and administrative expenses 13,986 13,239 13,039 12,393 17,526
Write-down of certain properties to
fair value - - - 176,000 -
- ----------------------------------------------------------------------------------------------------------------------------
Total costs of operations 272,054 236,262 292,387 488,963 305,993
- ----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 18,136 3,834 15,357 (147,412) 36,044
Net income (loss) 10,798 3,873 9,213 (85,800) 22,005
Net income (loss) available to common
shareholders $ 10,798 $ (104) $ 5,013 $ (86,024) $ 22,005
- ----------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings (loss)
per common share (2) $ 0.58 $ (0.01) $ 0.25 $ (4.31) $ 1.10
- ----------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding (2) 18,494 19,975 19,955 19,952 19,952
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE SHEETS
Real estate developments $ 501,147 $ 514,794 $ 511,358 $ 571,828 $ 528,670
Property and equipment, net 500,000 460,919 444,435 442,162 634,656
Total assets 1,054,105 1,019,260 1,019,822 1,071,733 1,229,765
Total debt 260,044 186,101 152,130 195,000 -
Preferred stock - - 35,700 35,000 -
Total common shareholders' equity 536,786 583,744 583,307 578,172 1,078,352
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consolidated historical financial information prior to December 28, 1995
relates to the business of the Company as it was operated by Dole. At
December 28, 1995, Dole transferred its real estate and resorts business
to the Company and distributed to Dole shareholders one share of the
Company for every three shares of Dole common stock ("Distribution"). The
selected consolidated historical financial data are derived from the
consolidated financial statements of the Company. The historical
consolidated financial statements of the Company prior to January 1, 1996
may not reflect the results of operations or financial position that
would have been obtained had the Company been a separate, publicly held
company.
(2) Prior to 1996, the earnings per common share is based on an assumed
weighted average outstanding number of shares of 19,951,578 which was the
number of common shares outstanding immediately after the December 28,
1995 distribution date.
<PAGE>
18 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
POSITION
INTRODUCTION
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company's consolidated
financial statements and related notes, included elsewhere in this report. The
Company was formed on October 10, 1995 to be the successor of the assets and
related liabilities of the real estate and resorts business of Dole Food
Company, Inc. and its subsidiaries ("Dole"). On December 28, 1995, Dole
completed the separation of its real estate and resorts business from its food
business through a pro rata distribution of the stock of the Company to its
shareholders. The consolidated statements of operations, balance sheets and cash
flows for periods prior to December 28, 1995 are those of Dole and have been
prepared on the basis that the assets and liabilities of the real estate and
resorts business were transferred using historical carrying values as recorded
by Dole and present the Company's results of operations and cash flows as
derived from Dole's historical financial statements. Historical results set
forth in the Company's consolidated financial statements should not be taken as
indicative of future operations.
OVERVIEW AND OUTLOOK
The Company's revenues are derived primarily from three sources: (i) residential
development and other land sales on Oahu, Hawaii, and in Bakersfield,
California, Orlando, Florida and Sierra Vista, Arizona; (ii) luxury resort
operations on the Island of Lana'i, Hawaii; and (iii) commercial real estate
activities, including office, industrial and retail operations, on Oahu and in
Bakersfield, office rentals in North Carolina, Georgia and Arizona and golf
courses in California and Arizona. Historically, a significant portion of the
Company's earnings have been generated by the residential real estate operations
on Oahu, particularly from the Mililani Town master planned community. In recent
years, however, the Oahu residential earnings were not as significant to the
consolidated earnings and the Company expects this trend to continue in the near
future. The Company believes that the slowdown on Oahu was primarily the result
of the general uncertainty of prospective homebuyers as to, and to their lack of
confidence in, Hawaii's economy. Due to the economy, it is expected that Oahu
sales rates will persist at their current levels for new home sales.
The resort operations on the Island of Lana'i began with the opening
of The Lodge at Koele in April 1990, followed by the opening of The Manele
Bay Hotel in May 1991. The Lana'i resort operations have suffered significant
operating losses since the resorts opened. The Company's management is taking
steps to reduce these operating losses by attempting to increase occupancy
through focused advertising and by reducing annual costs through the
reduction of non-core operations and services. More importantly, the
Company's ability to earn a return on its investment in Lana'i depends
primarily on the sale of luxury residential homes and lots at it's Manele Bay
and Koele communities. The Company expects to fund future operating and
capital requirements of Lana'i out of cash flow from its other operations and
from borrowings.
The Company continues to expand its commercial operations by acquiring
and developing property in selected markets. Castle currently has over 3.4
million square feet of rentable commercial space and expects to add an
additional 300,000 square feet over the next year as selected properties are
developed. The completed and under construction projects include over 1.6
million square feet of office space, over 1.2 million square feet of retail
space, over 500,000 square feet of commercial ground leases and over 250,000
square feet of industrial space. Castle expects to continue to add to the
commercial portfolio to provide the Company with more predictable earnings
and cash flows.
Residential and commercial real estate businesses in general are
cyclical. The Company's operating results have historically varied
significantly from period to period as a result of, among other things, the
timing of sales in developed projects, the availability of units for sale in
new projects and the mix of homes and homesites developed with different
locations, sizes and prices. In addition, the timing of commercial or large
parcel sales can contribute to large variances in revenues and earnings.
RESULTS OF OPERATIONS
1998 COMPARED WITH 1997
REVENUE
Consolidated revenues increased 21% to $290 million in 1998 from $240 million in
1997. Excluding three bulk land sales in the third and fourth quarters of 1998,
residential property sales increased 17% to $156 million in 1998 from $134
million in 1997. This increase is primarily due to homesite deliveries at the
new Keene's Pointe development in Orlando, Florida, which commenced deliveries
in the second quarter of 1998, and increased sales at the Seven Oaks development
in Bakersfield, California. In 1998, the Keene's Pointe development delivered
156 homesites with revenues of $17.9 million, or $115,000 per homesite. Revenues
at the Seven Oaks development increased $4.7 million in 1998 as compared to 1997
due to the sale of 219 homesites in 1998 compared to 141 homesites in 1997.
Included in the 1998 residential and other property sales are the sale of three
undeveloped land parcels for a total of $9.8 million and earnings before taxes
of $4.1 million. These land parcels are located in Westlake Village, California,
Sierra Vista, Arizona and Oahu, Hawaii.
Resort revenues increased 29% to $72 million in 1998 from $56 million in
1997. This increase is primarily due to increased resort residential sales.
Resort residential revenues were $19 million in 1998 compared to $5 million in
1997. The Company
<PAGE>
CASTLE & COOKE, INC. 19
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sold 11 residential units at its two luxury resort residential developments for
a total of $13.9 million in 1998, compared to 2 residential units for a total of
$3.4 million during 1997. Resort residential sales also include the sale of 10
plantation homes for a total of $2.0 million in 1998 compared to 6 plantation
homes for a total of $1.1 million during 1997. In addition, the 1998 resort
residential revenues include construction contract revenues of $2.7 million
relating to the construction of a senior housing facility on Lana'i and
improvements to the Lana'i Airport. Both the senior housing facility and Lana'i
Airport are owned and operated by independent third parties. Hotel occupancy
rates were 66.7% in 1998 and 66.8% in 1997. The average daily room rate was $286
in 1998 and $280 in 1997.
Commercial and other revenues increased 4% to $52 million in 1998
compared to $50 million in 1997. The increase is primarily due to an increase
of approximately $3 million of commercial revenues on the mainland partially
offset by a decrease of approximately $1 million of commercial revenues on
the Island of Oahu. The mainland revenue increase is primarily due to the
addition of office space as new buildings came on line. The Oahu commercial
revenue decrease is primarily due to the venture the Company entered into
during 1998 with Horizon/Glen Outlet Centers Limited Partnership ("Horizon"),
called Castle & Cooke Outlet Centers, LLC ("CCOC"). Prior to this venture,
the Dole Cannery Factory Outlet Center in Honolulu was leased to Horizon.
Subsequent to the CCOC venture with Horizon, the outlet center's lease was
assumed by CCOC, which is substantially owned by the Company.
COST AND EXPENSES
Consolidated costs of operations increased 15% to $272 million in 1998 from $236
million in 1997. Excluding the 1998 bulk land sales, the cost of residential
property sales as a percentage of residential property sales decreased to 89% in
1998 from 92% in 1997. This decrease is primarily due to the new Keene's Pointe
project and improved results at the Seven Oaks development.
Excluding resort residential sales and depreciation, the cost of resort
operations as a percentage of resort revenues was 106% in 1998 as compared to
112% in 1997. The change is primarily due to cost containment efforts and
improved efficiencies in managing the hotels. Resort depreciation was $8 million
in 1998 compared to $9 million in 1997. The resort residential operating income
was $1.9 million in 1998 compared to $244,000 in 1997. The increase is primarily
due to increased sales as explained above.
The cost of commercial and other operations as a percentage of commercial
and other revenues increased to 64% in 1998 from 58% in 1997. This increase is
primarily due to the CCOC venture with Horizon explained above. Prior to this
venture, the Dole Cannery Factory Outlet Center in Honolulu was leased
to Horizon and a significant portion of the operating expenses were paid by
Horizon. Subsequent to the CCOC venture with Horizon, those operating expenses
were paid by CCOC, which is substantially owned by the Company. Depreciation in
the cost of commercial and other operations was $8.2 million in 1998 compared to
$7.2 million in 1997.
Interest and other income increased to $3.9 million in 1998 from $3.3
million in 1997. This increase is primarily due to CCOC's investment in a
partnership which provided equity earnings of $2.4 million in 1998 partially
offset by a gain of $1.1 million in 1997 related to the sale of an option on
certain property on Oahu. In addition, interest from notes receivable and other
miscellaneous income decreased approximately $600,000
in 1998 as compared to 1997.
The Company's interest expense increased during 1998 as compared to 1997
primarily due to increased debt. The Company's borrowings and related
interest incurred are summarized as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Total borrowings at year end $260,044 $186,101
- --------------------------------------------------------------------------------------------
Total interest incurred $16,877 $11,838
Less: interest capitalized into real estate
developments and property and
equipment under construction (10,958) (10,735)
- --------------------------------------------------------------------------------------------
Interest expense, net of capitalized interest $5,919 $1,103
- --------------------------------------------------------------------------------------------
Amortization in cost of residential
and other property sales of interest
previously capitalized $5,287 $4,210
- --------------------------------------------------------------------------------------------
</TABLE>
NET INCOME AND EARNINGS PER SHARE
The Company's effective income tax rate decreased to 33% in 1998 from 36% in
1997. The lower effective rate is primarily due to low-income housing credits.
The preferred stock dividend and accretion in 1997 relates to the $35
million cumulative preferred stock issued in connection with the Company's
separation from Dole in December of 1995. The Company redeemed all of its
outstanding preferred stock in December of 1997.
Net income available to common shareholders was $10.8 million in 1998
compared to a net loss available to common shareholders of $104,000 in 1997.
This increase is primarily due to better operating results described above.
NEW ACCOUNTING PRONOUNCEMENTS
In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities"
<PAGE>
20 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
("SFAS No. 133"), which establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires an entity to
recognize all derivatives on the balance sheet and measure those instruments at
fair value. SFAS No. 133 requires implementation for the Company in the first
quarter of 2000. Although the Company does not currently engage in significant
derivative activities, the interest rate swaps discussed herein will be
reflected on the balance sheet. However, SFAS No. 133 is not expected to have an
effect on the results of operations of the Company.
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 132, Employers' Disclosures About Pensions and Other
Post-retirement Benefits ("SFAS No. 132"). This statement standardized the
disclosure requirements for pensions and other post-retirement benefits. The
provisions of SFAS No. 132 are disclosure oriented and do not have an impact on
the Company's financial position or results of operations. The prior disclosures
for 1997 and 1996 have been changed to conform to the new disclosure
requirements.
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS No. 131"). This statement establishes standards for
reporting and display of information about operating segments. SFAS No. 131
required additional disclosures only, and there was no effect on the financial
condition or results of operations of the Company.
1997 COMPARED WITH 1996
REVENUE
Consolidated revenues decreased 22% to $240 million in 1997 from $308 million in
1996. Excluding the sale of approximately 3,000 acres of agricultural land in
Bakersfield for $11 million in 1996, residential and other property sales
decreased 30% to $134 million in 1997 from $190 million in 1996. This decrease
is primarily due to the soft Oahu market where 168 fewer units were delivered in
1997 than in 1996. Management believes this decrease in unit sales is the result
of the continuation of the prior year's general uncertainty of prospective
homebuyers as to, and to their lack of confidence in, Hawaii's economy, together
with increased competition. In addition, commercial land sales in Bakersfield
decreased $7.7 million in 1997 as compared to 1996. Bakersfield commercial land
sales in 1997 were not significant. Excluding resort residential home and lot
sales, the resort revenues increased 8% to $52 million from $48 million in 1996
primarily due to increased occupancy rates and average daily room rates. The
occupancy rates increased 7% to 66.8% in 1997 from 62.2% in 1996 and the average
daily room rate increased 5% to $280 in 1997 from $266 in 1996. Resort
residential revenues were $5 million for 1997 and 1996. The gain on sale of
income producing properties in 1996 is due to the sale of three Mississippi
apartment complexes and a Bakersfield office building, which generated an
aggregate of $37.5 million in revenues, offset by $33.3 million in capitalized
and selling cost.
COST OF OPERATIONS
Consolidated costs of operations decreased 19% to $236 million from $292 million
in 1996. Excluding the agricultural land sale in 1996, the cost of residential
property sales as a percentage of residential sales increased to 92% in 1997
from 88% in 1996. The increase is primarily due to aggressive marketing programs
and sales incentives used in the Oahu operations which have been necessary to
stimulate activity in the soft market. The 1996 agricultural land sale generated
approximately $2 million in operating income.
Excluding resort residential home sales and depreciation, the cost of
resort operations as a percentage of resort revenues improved to 112% in 1997
from 119% in 1996. The improvement is primarily due to improved occupancy and
average daily room rates. Since a significant portion of the resort operation's
costs is fixed, these costs will not increase proportionately as occupancy and
resort revenues increase. Resort depreciation was $9 million in 1997 and in
1996.
The cost of commercial and other operations as a percentage of commercial
and other revenues decreased to 58% in 1997 from 65% in 1996. This decrease is
primarily due to the addition of the Marketplace shopping center in late 1996
and decreased costs at the San Jose and Sierra Vista golf courses.
Total interest incurred decreased to $11.8 million in 1997 from $12.6
million in 1996. Total interest capitalized into real estate developments and
property and equipment was $10.7 million in 1997 and in 1996. Total borrowings
were $186.1 million at December 31, 1997 compared to $152.1 million at December
31, 1996. The increase is primarily due to the redemption of the Company's
preferred stock totaling $36.4 million on December 8, 1997. Amortization in cost
of sales of previously capitalized interest totaled approximately $4 million and
$3 million for 1997 and 1996, respectively.
NET INCOME AND EARNINGS PER SHARE
Interest and other income increased to $3.3 million in 1997 from $1.8 million in
1996. The increase is primarily due to a gain of $1.1 million related to the
sale of an option on certain property on Oahu.
The Company's effective income tax rate decreased to 36% in 1997 from 39.5%
in 1996. The decrease is primarily due to low-income housing credits, which have
a larger impact on the effective income tax rate as earnings before taxes
decrease.
Net loss available to common shareholders was $104,000 in 1997 compared to
net income available to common shareholders of $5 million in 1996. This decrease
is primarily due to the lower operating results described above.
<PAGE>
CASTLE & COOKE, INC. 21
- --------------------------------------------------------------------------------
FINANCIAL CONDITION AND LIQUIDITY
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to operate its resorts, purchase and develop land,
construct homes and homesites and to acquire, to develop and to operate
commercial property. Prior to the Company's separation from Dole in December of
1995, the Company financed its operations, acquisitions and developments
primarily from capital contributions by Dole and, to a lesser extent, borrowings
from a group of banks. In May 1997, the Company's existing credit agreement with
a syndicate of banks was amended and restated (the "Credit Agreement"). Pursuant
to this agreement, the banks agreed to provide a three-year revolving credit
facility of up to $250 million, based upon a percentage of value of certain
commercial properties and home building inventory (the "Borrowing Base"). At
December 31, 1998 the Borrowing Base allowed the Company to borrow up to $234
million. The Credit Agreement bears interest at a variable rate based on the
London Interbank Offered Rate ("LIBOR") or at an alternative rate based upon a
designated bank's prime rate or the federal funds rate. At December 31, 1998,
total borrowings under the Credit Agreement were $198 million with an interest
rate of 6.83%. On December 30, 1998, the Company entered into a $50 million
long-term fixed rate financing arrangement with an insurance company. This debt,
which has an interest rate of 6.73% and a 30-year amortization rate, matures on
December 30, 2008. At December 31, 1998, the Company was in compliance with the
various financial covenants of its loan agreements.
The Company's financial market risk exposures relate primarily to interest
rates. Therefore, the Company utilizes interest rate agreements to manage
interest rate exposures. The principal objective of such contracts is to
minimize the risks and/or costs associated with financial activities. The
Company does not utilize financial instruments for trading or other speculative
purposes. In October 1997, the Company entered into interest rate swaps on
issued variable-rate debt for notional amounts totaling $80 million. This
effectively converted variable-rate debt into fixed-rate debt, with an interest
rate of 7.44% at December 31, 1998. These agreements mature on October 1, 2002.
Notional amounts do not represent cash flow, and credit risk exposure is limited
to the net interest differentials. The swap rate difference resulted in
approximately $331,000 and $48,000 of additional interest expense in 1998 and
1997, respectively, compared to what interest expense would have been had the
debt remained at variable rates.
In Bakersfield, the Company periodically creates assessment districts with
the City of Bakersfield to issue bonds to finance infrastructure improvements.
The bonds are repaid by property owners over a 20-year period and have interest
rates averaging approximately 7%. As of December 31, 1998, the Company
had $9.4 million in bond liability.
The cash flow from each of the Company's residential developments differs
substantially from their reported earnings, depending on the status of the
development cycle. The initial years of development require significant cash
outlays for, among other things, land acquisition costs, major roads,
interchanges, infrastructure, model homes, sales and administration facilities,
landscaping and certain utilities. Since these costs are capitalized, this can
result in income reported for financial statement purposes during those initial
years significantly exceeding cash flow. However, after the initial years of
development or expansion, when these expenditures are made, cash flow can
significantly exceed income reported for financial statement purposes, as cost
of operations includes charges for substantial amounts of previously expended
costs.
The Company expects 1999 residential development expenditures to be
approximately $88 million for Hawaii residential projects and $33 million for
mainland residential projects. Approximately $75 million of the Oahu residential
development expenditures relate to house construction and onsite improvements,
which will be driven by sales activity.
The Company expects 1999 capital expenditures for its commercial operations
to be approximately $36 million and $13 million for the mainland and Oahu
developments, respectively. Significant planned expenditures on the mainland
include the completion of the development of a 173,000 square foot office
complex in Raleigh, North Carolina ($9 million), completion of the Coyote Creek
golf course and clubhouse adjacent to the Company's existing course in San Jose,
California ($6 million), completion of the Keene's Pointe Golf Course ($6
million), completion of the 75,000 square foot Riverwalk office building in
Bakersfield, California ($4 million) and tenant improvement costs at the
existing 10,000 Ming building in Bakersfield ($5 million). Significant
expenditures on Oahu are planned to include additional development and tenant
improvement costs at the Dole Cannery ($8 million) and Town Center of Mililani
($4 million).
The Company expects the resort developmental and capital expenditures in
1999 to be approximately $13 million and $6 million, respectively. The
developmental expenditures primarily relate to the luxury residential
developments and will be driven by sales activity.
The Company believes that the funds available under its existing debt
agreements and cash generated from operations combined with selective sales of
commercial and other properties from time to time will be adequate for its
short-term and long-term cash needs. There can be no assurance, however, that
the amounts available from such sources will be sufficient. The Company may be
required to seek additional capital in the form of public equity or debt
offerings or from a variety of potential sources, including additional bank
financing or assessment district financing.
<PAGE>
22 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
During 1998, cash provided by operations was $40 million, compared to $34
million in 1997. This increase is primarily due to a net decrease of $11.5
million in real estate development in 1998 compared to a net decrease of
$717,000 in 1997. In addition, the Company's net income tax payments during 1998
were $7 million compared to a net income tax refund of $10 million in 1997. As
noted above, the cash flow for each of the Company's residential projects can
differ substantially from reported earnings, depending on the status of the
development cycle. As of December 31, 1998, on Oahu the Company had expended
approximately 76% of the projected infrastructure costs at Mililani Mauka while
it had delivered only 54% (or 6,119) of the total planned homes, and at the
Company's Royal Kunia community, the Company had expended approximately 85% of
the projected land and infrastructure costs while it had delivered only 42% (or
1,692) of the total planned homes. As of December 31, 1998, at the Company's
Seven Oaks master planned community in Bakersfield, the Company had expended
approximately 65% of the projected costs for infrastructure, golf course and
clubhouse and had delivered 25% (or 2,639) of the planned homes and homesites.
During 1997, cash provided by operations was $34 million, compared to $47
million in 1996. This decrease is primarily due to a net decrease in real estate
development in 1996. In 1997, the real estate development balance did not
significantly fluctuate from the prior year. In addition, the Company's net tax
refund during 1997 was $10 million compared to net income tax payments of $21
million in 1996.
Cash used in investing activities was $53 million in 1998, which was
attributable to capital expenditures. Significant capital expenditures in 1998
on the mainland included the partial construction of the Keene's Pointe golf
course and clubhouse ($8 million), partial construction of the Coyote Creek golf
course and clubhouse ($13 million), construction of the Two Premier Plaza office
building ($3 million), construction of the Marketplace shopping center third
phase ($4 million), construction of the Riverwalk office building ($5 million),
construction of the Regents II office building ($2 million), construction of a
build-to-suit manufacturing facility in Bakersfield ($2 million), the
acquisition of land and early planning costs for the construction of the Falls
of the Neuse office building ($4 million). Capital expenditures in 1998 on Oahu
totaled $3 million and included additional development of the Dole Cannery and
Town Center of Mililani. Total 1998 capital expenditures on Lana'i totaled $4
million.
Cash used in investing activities was $33 million in 1997, which was
attributable to capital expenditures. Significant capital expenditures in 1997
include the construction of the Premier II office building ($11 million),
construction of the Marketplace shopping center second phase ($7 million),
partial construction of the Coyote Creek golf course ($6 million), construction
of a new office building adjacent to the Regents Center ($2 million), partial
construction of additional employee housing on Lana'i ($1 million), and
completion of a waste water treatment facility on Lana'i to primarily service
the Manele residential project ($1 million).
Cash provided by financing activities in 1998 was $16 million. The
Company's net borrowings under its revolving credit agreement and long term debt
were $74 million, which was partially offset by the stock repurchase of $58
million.
Cash used in financing activities in 1997 was $5 million. The Company paid
preferred stock dividends of $3 million and paid $36 million to redeem the
outstanding preferred stock. These uses were partially offset by net borrowings
under its revolving credit agreement of $34 million.
The Company currently carries insurance that protects it against a variety
of potential losses, including losses from building and construction-risks,
property damage and general liabilities. The Company's insurance is subject to
various coverage limits, exclusions and deductibles. The Company believes it has
a cost-effective level of insurance coverage that is adequate in light of
the risks associated with its various businesses.
YEAR 2000
READINESS
The year 2000 ("Y2K") problem arose because many existing computer programs use
two digits instead of four to refer to the year. These programs may be unable to
properly interpret a year that begins with "20" (i.e., the year 2000), which
could cause disruption of normal business activities. The Company uses computer
software and related technologies that will be affected by the Y2K problem. The
Company also relies upon a number of third parties in conducting its business
and could be adversely affected if these third parties are not Y2K compliant.
The Company is addressing the Y2K problem with a company-wide program
involving its corporate office and principal locations. This program includes
the identification of affected software and systems through an inventory and
assessment, communications with the Company's material suppliers and other third
parties to determine the extent to which the Company is vulnerable to failure by
them to be Y2K compliant, and the development and implementation of a
remediation and response plan.
The Company has completed the inventory phase (identification of all
potential exposure items) and is currently completing the assessment phase
(determine if the component is Y2K compliant) for all information technology
systems (such as business computing systems and technical infrastructure), as
well as non-information technology systems (such as embedded technology). The
assessment phase is estimated to be approximately 90%
<PAGE>
CASTLE & COOKE, INC. 23
- --------------------------------------------------------------------------------
complete. Subject to new information becoming available, the Company expects
this to be complete by April 30, 1999.
In conjunction with the inventory and assessment, the Company is developing
and implementing a remediation and response plan intended to remedy Y2K
deficiencies and to address contingencies for unforeseen problems. In most
cases, the Company will replace older software with new, upgraded software and
systems that are Y2K compliant. The Company's major accounting systems are Y2K
compliant.
In addition to problems that may arise if material suppliers are not Y2K
compliant, systemic problems in the economy resulting from the Y2K problem, such
as problems with air traffic control, other transportation systems, power supply
or overall economic dislocation would affect the Company. In addition, the
Company's development and other activities could be halted or materially delayed
if its lenders are, as a result of the Y2K problem, unable to advance funds from
credit or similar facilities.
COSTS
The cumulative amount spent by the Company as of December 31, 1998 to address
the Y2K problem is approximately $183,000. Given the information available at
this time, the Company currently anticipates the total cost (including past
expenditures) to remediate the Y2K problem will not exceed $800,000. Although
the timing of some of these expenditures may be accelerated by the Y2K problem,
in most instances they will involve expenditures that would have occurred in the
normal course of business.
RISKS AND CONTINGENCY PLANS
The Company is currently uncertain as to what are the most reasonably likely
worst case Y2K scenarios for its operations. The Company will continue to
analyze this issue and to develop a contingency plan to respond to these
scenarios as more information becomes available.
Statements herein that are not historical facts are "forward-looking
statements." For example, the estimated costs of the Company's Y2K compliance
project and the dates on which the Company plans to complete its remediation and
other activities are based on management's best estimates, which were derived
from numerous assumptions about future events, including the availability of
remediation resources, the existence and adequacy of third party Y2K compliance
plans, the ability to identify and correct all relevant computer codes, and
other factors. There can be no guarantee that these estimates and plans will be
achieved and actual results could differ materially.
BACKLOG
At December 31, 1998, the Company's residential operations had a backlog of
new orders of 88 homes and 594 homesites. The value of the homes and
homesites backlog at December 31, 1998 was $25.1 million and $22.1 million,
respectively. The Company anticipates delivering the majority of the homes
during the balance of 1999. Included in the homesite backlog at December 31,
1998, are homesites to be sold to builders under option contracts, pursuant
to which approximately 162 homesites with an aggregate sales price of
approximately $6.8 million are expected to close after December 31, 1999. It
is currently the Company's practice to include a home or homesites in backlog
at the contract price upon execution of a sales contract and receipt of money
on deposit, and to remove it from backlog upon closing of escrow.
In the past, the Company has generally allowed prospective home
purchasers who are unable to obtain financing to cancel their contracts and
has refunded their deposits. During the past five years, the Company
experienced an average home contract cancellation rate of approximately 25%.
Since primarily all homesite sales are to local homebuilders, the Company has
experienced insignificant cancellations after executing a homesite sales
contract. No assurance can be given that the Company will be able to enter
into or close pre-construction sales contracts for its homes or homesites in
the future. In addition, the backlog may vary substantially because the
Company's projects are long-term and are frequently at different development
stages. At December 31, 1998, the backlog of new orders on the Island of
Lana'i included 4 luxury townhomes with a total value of $4.7 million.
INTEREST RATES AND CHANGING PRICES
The Company's business is significantly affected by general economic conditions
in Hawaii and California and, particularly, by fluctuations in interest rates.
Higher interest rates may decrease the potential market for new homes by making
it more difficult for homebuyers to qualify for mortgages or to obtain mortgages
at interest rates acceptable to them. In Hawaii, because pricing on "affordable"
homes is based primarily on mortgage payments, increasing mortgage interest
rates will lower the prices of "affordable" homes. Inflation also has a
detrimental effect on operating costs, but can lead to higher values for the
Company's existing landholdings.
RISK FACTORS
The statements contained herein, which are not historical facts, are
forward-looking statements based on economic forecasts, strategic plans and
other factors, which, by their nature, involve risk and uncertainties. In
particular, among the factors that could cause actual results to differ
materially are the following: business conditions and general economy;
competitive factors; political decisions affecting land use permits; capital
resources; interest rates and other risks inherent in the real estate
business.
<PAGE>
24 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(in thousands, except share data) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Residential and other property sales $165,635 $133,504 $201,520
Resort revenues 72,452 56,304 52,529
Commercial and other revenues 52,103 50,288 49,488
Gain on sale of income producing properties - - 4,207
- ----------------------------------------------------------------------------------------------------
Total revenues 290,190 240,096 307,744
- ----------------------------------------------------------------------------------------------------
COST OF OPERATIONS
Cost of residential and other property sales 142,533 122,158 176,613
Cost of resort operations 81,969 71,601 70,458
Cost of commercial and other operations 33,566 29,264 32,277
General and administrative expenses 13,986 13,239 13,039
- ----------------------------------------------------------------------------------------------------
Total costs of operations 272,054 236,262 292,387
- ----------------------------------------------------------------------------------------------------
Operating income 18,136 3,834 15,357
Interest and other income, net 3,899 3,349 1,795
Interest expense, net 5,919 1,103 1,923
- ----------------------------------------------------------------------------------------------------
Income before income taxes 16,116 6,080 15,229
Income tax provision (5,318) (2,207) (6,016)
- ----------------------------------------------------------------------------------------------------
Net income 10,798 3,873 9,213
Preferred stock dividend and accretion - (3,977) (4,200)
- ----------------------------------------------------------------------------------------------------
Net income (loss) available to common shareholders $ 10,798 $ (104) $ 5,013
- ----------------------------------------------------------------------------------------------------
Basic and diluted earnings (loss) per common share $0.58 $(0.01) $0.25
- ----------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS
OF OPERATIONS.
<PAGE>
CASTLE & COOKE, INC. 25
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands, except share data) 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,764 $ 1,612
Receivables, net 23,127 22,520
Real estate developments 501,147 514,794
Property and equipment, net 500,000 460,919
Other assets 25,067 19,415
- ---------------------------------------------------------------------------------------
Total assets $1,054,105 $1,019,260
- ---------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 250,044 $176,101
Note payable to Dole 10,000 10,000
Accounts payable 20,239 18,162
Accrued liabilities 30,411 28,263
Deferred taxes 174,450 176,357
Deferred income and other liabilities 32,175 26,633
- ---------------------------------------------------------------------------------------
Total liabilities 517,319 435,516
- ---------------------------------------------------------------------------------------
Commitments and contingencies
Common shareholders' equity:
Common stock, no par value; 20,036,117 and 19,996,288
shares issued at December 31, 1998 and 1997, respectively 512,182 511,616
Common stock in treasury, at cost; 3,015,764 shares at
December 31, 1998 (58,322) -
Retained earnings 82,926 72,128
Total common shareholders' equity 536,786 583,744
- ---------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,054,105 $1,019,260
- ---------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED BALANCE
SHEETS.
<PAGE>
26 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
TREASURY TOTAL COMMON
COMMON COMMON RETAINED TREASURY STOCK SHAREHOLDERS'
(in thousands, except share data) SHARES STOCK EARNINGS SHARES AT COST EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 19,951,578 $ 510,953 $ 67,219 - $ - $578,172
Net income - - 9,213 - - 9,213
Preferred stock dividend
and accretion - - (4,200) - - (4,200)
Issuance of common stock
under incentive plans 3,147 122 - - - 122
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 19,954,725 511,075 72,232 - - 583,307
Net income - - 3,873 - - 3,873
Preferred stock dividend
and accretion - - (3,977) - - (3,977)
Issuance of common stock
under incentive plans 41,563 541 - - - 541
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 19,996,288 511,616 72,128 - - 583,744
Net Income - - 10,798 - - 10,798
Purchase of Treasury Stock - - - (3,015,764) (58,322) (58,322)
Issuance of common stock
under incentive plans 39,829 566 - - - 566
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 20,036,117 $ 512,182 $ 82,926 (3,015,764) $ (58,322) $ 536,786
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY.
<PAGE>
CASTLE & COOKE, INC. 27
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 10,798 $ 3,873 $ 9,213
Adjustments to reconcile net income to cash
provided by operating activities:
Gain on sale of income producing properties - - (4,207)
Depreciation 17,542 17,594 17,420
Equity earnings, net of dividends received (1,519) 195 79
Other 40 287 472
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net (607) 870 2,498
Decrease in real estate developments, net 11,528 717 45,105
Decrease in income tax receivable - 9,209 -
Increase (decrease) in accounts payable 2,077 1,532 (10,067)
Increase (decrease) in accrued liabilities 3,287 (852) 1,138
(Decrease) increase in income taxes (1,907) 3,538 (15,267)
Net change in other assets and liabilities (984) (2,695) 498
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 40,255 34,268 46,882
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of income producing properties - - 36,231
Acquisition of property and equipment (53,250) (33,114) (35,684)
- ----------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (53,250) (33,114) 547
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (reductions) under revolving loan agreement 22,000 34,000 (42,870)
Proceeds from issuance of debt 51,971 - -
Reduction of debt (28) (29) -
Purchase of stock (58,322) - -
Redemption of redeemable preferred stock - (36,400) -
Preferred stock dividends paid - (3,277) (3,724)
Proceeds from exercise of stock options 526 501 47
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 16,147 (5,205) (46,547)
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 3,152 (4,051) 882
Cash and cash equivalents at beginning of year 1,612 5,663 4,781
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,764 $ 1,612 $ 5,663
- ----------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS OF
CASH FLOWS.
<PAGE>
28 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Castle & Cooke, Inc. (the "Company" or "Castle"), a Hawaii corporation, was
formed on October 10, 1995 to be the successor of the assets and related
liabilities of the real estate and resorts business of Dole Food Company, Inc.
and its subsidiaries ("Dole"). Dole transferred the assets and related
liabilities to Castle & Cooke, Inc. in December 1995. On December 28, 1995, Dole
distributed (the "Distribution") all the common shares of Castle to the
shareholders of Dole. The Dole shareholders received one share of common stock
in Castle for every three shares of Dole common stock. As consideration for the
transfer of Dole's real estate and resorts business to the Company, the Company
issued to Dole (i) all of the outstanding shares of Castle Common Stock, (ii) a
promissory note in the principal amount of $200 million, a promissory note in
the principal amount of $10 million, and (iii) 3,500 shares of redeemable
preferred stock of Castle with an aggregate liquidation value of $35 million.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all wholly owned subsidiaries and controlled joint ventures. All significant
inter-company accounts and transactions have been eliminated. The Company's
investments in unconsolidated joint ventures in which it has less than a
controlling interest are accounted for under the equity method.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
GAIN ON SALE OF INCOME PRODUCING PROPERTIES
Gain on the sale of income producing properties reflects revenues generated
through the sale of income producing properties, net of capitalized costs and
selling costs associated with those properties.
REAL ESTATE DEVELOPMENTS
Construction and development costs are comprised of direct and allocated costs,
including estimated future costs for warranties and amenities. Land acquisition,
land development and other common costs are allocated to individual units in a
real estate development based on specific identification, relative value or area
method. Interest and real estate taxes incurred during
the development period are capitalized.
CARRYING VALUE OF REAL ESTATE ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS No. 121"), real estate assets are reviewed for possible
impairment whenever events or circumstances indicate the carrying amount of the
asset may not be recoverable such as a significant decrease in market value, a
significant adverse change in legal factors or business climate, a significant
change in intended use, an accumulation of costs significantly in excess of the
amount originally expected, or current period losses combined with a history of
losses or a forecast of continuing losses. If indications are that the carrying
amount of an asset may not be recoverable, SFAS No. 121 requires an estimate of
the future undiscounted cash flows expected to result from the use of the asset
and its eventual disposition. If these cash flows are less than the carrying
amount of the asset, an impairment loss must be recognized to write down the
asset to an amount a willing buyer would pay for such property in a current
transaction, that is, other than in a forced or liquidation sale.
REVENUE RECOGNITION
Revenue from the sale of land and residential units is generally recognized when
closings have occurred, required down payments are received and other criteria
for sale and profit recognition are satisfied in accordance with generally
accepted accounting principles governing profit recognition for real estate
transactions. In situations where the Company has continuing involvement with
the property sold, revenues are recognized by the percentage-of-completion
method as development and construction proceed, provided that cost and profit
can be reasonably estimated. The cost of residential and other property sales
includes selling and marketing expenses.
Rent revenue from commercial and retail properties is generally recognized on
the straight-line basis over the terms of leases. Revenue from the resort hotels
is generally recognized when due from the guests.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful life as follows:
<TABLE>
<S> <C>
Land improvements, buildings
and improvements 9-40 years
Equipment 3-5 years
</TABLE>
The costs and accumulated depreciation of property retired or otherwise
disposed of in the normal course of business are removed from the accounts,
and any gain or loss is recognized
<PAGE>
CASTLE & COOKE, INC. 29
- --------------------------------------------------------------------------------
in the year of the disposition. Property and equipment includes, among other
things, the resort hotels on Lana'i, commercial office complexes and other
rental properties.
INCOME TAXES
Deferred income taxes are recognized for the tax consequences of temporary
differences between financial statement carrying amounts and the tax bases of
assets and liabilities by applying enacted statutory tax rates to these
differences.
EARNINGS PER COMMON SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which
established standards for computing and presenting earnings per share. The
adoption of SFAS No. 128 had no effect on earnings per share amounts previously
reported for the year ended 1996. Basic earnings per share was computed by
dividing net income (loss), after reduction for preferred stock dividends and
accretion, if any, by the sum of (1) the weighted average number of shares of
common stock outstanding during the year and (2) the weighted average number of
non-employee director grants outstanding during the year. The computation of
diluted earnings per share further assumes the dilutive effect of stock options.
The weighted average number of shares of common stock outstanding were
18,488,191, 19,971,381 and 19,953,938 for 1998, 1997 and 1996, respectively. The
weighted average number of non-employee director grants outstanding was 6,188,
3,841 and 1,331 for 1998, 1997 and 1996, respectively. In connection with its
"Dutch Auction" self-tender offer, the Company repurchased 3,015,764 shares of
the Company's common stock at a price of $19.25 per share on July 6, 1998.
The 1998 and 1996 computation of dilutive earnings per share includes the
assumed exercise of 71,514 and 66,207 options outstanding, respectively. The
1997 computation of dilutive earnings per share does not include the assumed
exercise of 62,971 options outstanding because their effect was anti-dilutive.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and time deposits which have
original maturities of three months or less at the time of purchase.
FINANCIAL INSTRUMENTS
The Company utilizes interest rate agreements to manage interest rate exposures.
The principal objective of such contracts is to minimize the risks and/or costs
associated with financial activities. The Company does not utilize financial
instruments for trading or other speculative purposes. The counterparties to
these contractual arrangements are major financial institutions with which the
Company also has other financial relationships.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For short-term financial instruments, the historical carrying amount is a
reasonable estimate of fair value. For long-term financial instruments not
readily marketable (primarily receivables and notes payable), fair values were
estimated based upon discounted future cash flows at prevailing interest rates.
For interest rate swaps, the fair value of the interest rate swaps is the
settlement amount, based on estimates obtained from dealers. Based on these
estimates, the Company would be required to pay approximately $2.9 million and
$698,000 to terminate its swap agreements as of December 31, 1998 and 1997,
respectively.
It is estimated that the carrying value of the Company's other financial
instruments are not materially different from their recorded amounts as of
December 31, 1998 and December 31, 1997.
ENVIRONMENTAL COSTS
The Company incurs on-going environmental costs, including consulting fees for
environmental studies and investigations. Costs incurred in connection with
operating properties and properties previously sold are expensed. Expenditures
that relate to undeveloped land are capitalized as part of development costs.
Reserves for estimated costs are recorded when environmental remediation efforts
are probable and the costs can be reasonably estimated. In determining the
reserves, the Company uses the most current information available, including
similar past experiences, available technology, regulations in effect, the
timing of remediation and cost sharing arrangements, if any. The environmental
reserves are based on management's estimate of the most likely cost to be
incurred and are reviewed periodically and adjusted as additional or new
information becomes available. Environmental reserves and environmental
remediation costs charged to operations for 1998, 1997 and 1996 were not
significant.
NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 132, Employers' Disclosures About Pensions and Other
Post-retirement benefits ("SFAS No. 132"). This statement standardized the
disclosure requirements for pensions and other post-retirement benefits. The
provisions of SFAS No. 132 are disclosure oriented and do not have an impact
on the Company's financial position or results of operations. The prior
disclosures for 1997 have been changed to conform to the new disclosure
requirements.
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 131, Disclosures About Segments of an Enterprise and
Related Information ("SFAS No. 131"). This statement establishes standards
for reporting and display of information about operating segments. SFAS No.
131 required additional disclosures only, and there was no effect on the
financial condition or results of operations of the Company.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the 1998 presentation.
<PAGE>
30 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
NOTE 3 - RECEIVABLES
The following is a summary of receivables:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Notes receivable bearing interest
of 7% to 11%, secured by real
property and improvements $ 11,093 $ 12,337
Escrow holdbacks 1,015 1,520
Due from Dole 1,731 -
Other receivables 10,535 10,153
Less allowance for doubtful accounts (1,247) (1,490)
- -------------------------------------------------------------------
$ 23,127 $ 22,520
- -------------------------------------------------------------------
</TABLE>
The weighted average interest rates of all notes receivable were approximately
8% at December 31, 1998 and 9% at December 31, 1997.
NOTE 4 - REAL ESTATE DEVELOPMENTS
Real estate developments consist of the following:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Finished inventory $108,490 $ 84,860
Development projects in progress 208,165 240,694
Unimproved lands held for
future development 184,492 189,240
- -------------------------------------------------------------------
$501,147 $514,794
- -------------------------------------------------------------------
</TABLE>
Real estate developments included $11.9 million and $13.6 million of homes
reserved by deposit or sales contract as of December 31, 1998 and December 31,
1997, respectively. Additionally, real estate developments included $13.6
million and $4.1 million of homesites reserved by option contract as of December
31, 1998 and December 31, 1997, respectively. Development projects in progress
consist principally of land, land improvement costs and, if applicable,
construction costs for houses and condominiums, which are in various stages of
development but not ready for sale.
The Company constructed a country club and golf course in its Seven Oaks
master planned community in Bakersfield, California. These and other related
assets will be contributed by the Company to the Seven Oaks Country Club, a
nonprofit organization, in 2012. The Company has the right to sell memberships
in the club and is obligated to fund operating shortfalls until the club is
transferred. The operating cash shortfalls totaled approximately $1.4 million,
$1.8 million and $1.6 million for 1998, 1997 and 1996, respectively, and were
capitalized. The Company's net investment in these amenities included in
real estate developments was $28 million and $30 million at December 31, 1998
and December 31, 1997, respectively. Over the life of the project, the Company
expects to invest approximately $45 million, which includes an estimate of the
future funding requirements for the golf course and country club. Over the life
of the project, $21 million of this investment is expected to be recovered from
the sale of country club memberships. The balance of the costs of approximately
$24 million is being amortized through cost of residential property sales as
homesites and homes are sold. Management believes such costs will be recovered
through the sale of the residential homes and homesites surrounding the country
club.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 246,885 $ 244,567
Buildings and improvements 283,441 252,057
Equipment 101,126 95,453
Construction in progress 42,341 26,989
- -------------------------------------------------------------------
673,793 619,066
Accumulated depreciation (173,793) (158,147)
- -------------------------------------------------------------------
$ 500,000 $ 460,919
- -------------------------------------------------------------------
</TABLE>
Depreciation expense for 1998, 1997 and 1996 totaled $18 million, $18 million
and $17 million, respectively.
NOTE 6 - INVESTMENTS IN AFFILIATES:
Investments in which the Company owns greater than 20% but less than 50% are
accounted for using the equity method. Investments accounted for by the equity
method were $9.2 million and $6.7 million at December 31, 1998 and 1997,
respectively. Dividends or cash distributions received from these investments
were $1.1 million, $291,000 and $200,000 for 1998, 1997 and 1996, respectively.
These entities are engaged in real estate developments. The Company's share of
earnings of these affiliates is included in income as earned.
Summarized financial information for these equity investees is shown below:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 8,937 $ 2,494 $ 2,644
Costs and other deductions 7,271 2,265 2,491
- -----------------------------------------------------------------------------------
Net income $ 1,666 $ 229 $ 153
- -----------------------------------------------------------------------------------
Total assets $76,764 $29,757 $29,987
- -----------------------------------------------------------------------------------
Total liabilities $45,763 $16,056 $16,359
- -----------------------------------------------------------------------------------
Net equity $31,001 $13,701 $13,628
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
CASTLE & COOKE, INC. 31
- --------------------------------------------------------------------------------
In 1998, the Company acquired an equity interest in a partnership, which owns
four separate commercial properties. Through this partnership, the Company has
the right to the earnings and respective cashflows from only one of the four
properties, the Lake Elsinore Outlet Center in California. The Company, however,
does not control the partnership or the operations of the Lake Elsinore Outlet
Center. As such, the investment in the partnership is recorded using the equity
method of accounting and only the Lake Elsinore Outlet Center is included with
the Company's investments summarized above.
NOTE 7 - NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Borrowings under revolving loan agreements,
at an average interest rate of 7.5% and
7.6% in 1998 and 1997, respectively $198,000 $176,000
Term loan 50,000 -
Other 2,044 101
- ---------------------------------------------------------------------
Total notes payable 250,044 $176,101
- ---------------------------------------------------------------------
</TABLE>
In May 1997, the Company's existing credit agreement with a syndicate of banks
was amended and restated (the "Credit Agreement"). Pursuant to this Credit
Agreement, the banks agreed to provide a three-year revolving line of credit of
up to $250 million, based upon a percentage of the value of certain commercial
properties and homebuilding inventory (the "Borrowing Base"). The Credit
Agreement bears interest at a variable rate based on the London Interbank
Offered Rate ("LIBOR") or at an alternative rate based upon a designated bank's
prime rate or the federal funds rate. The Credit Agreement contains customary
covenants including, but not limited to, negative pledges; limitations on
consolidations; sale of assets; limitations on other debt; financial covenants
relating to tangible net worth, interest coverage, cash flow and inventory
levels. At December 31, 1998, the Company was in compliance, and the Borrowing
Base was $234 million, which assets had a net book value of approximately $400
million.
In December 1998, the Company entered into a 6.73% ten-year term loan with an
insurance company. The loan, which is amortized over a 30-year period, is
secured by two commercial properties, with a net book value of approximately $37
million.
In October 1997, the Company entered into interest rate swaps on issued
variable-rate debt for notional amounts totaling $80 million. This
effectively converted variable-rate debt into fixed-rate debt, with an
average interest rate of 7.44% at December 31, 1998. These agreements mature
on October 1, 2002. Notional amounts do not represent cash flow, and credit
risk exposure is limited to the net interest differentials. The swap rate
difference resulted in approximately $331,000 and $48,000 of additional
interest expense in 1998 and 1997, respectively, compared to what interest
expense would have been had the debt remained at variable rates.
In December 1995, the Company issued a $10 million term note to Dole in
connection with the Distribution. The unsecured note bears interest at 7% per
annum and matures on December 8, 2000.
The total interest paid, net of capitalized interest, was $4.9 million,
$822,000 and $1.5 million in 1998, 1997 and 1996, respectively.
The following is a summary of interest costs incurred:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Capitalized $10,958 $10,735 $10,696
Expensed 5,919 1,103 1,923
- ---------------------------------------------------------------------------------
$16,877 $11,838 $12,619
- ---------------------------------------------------------------------------------
Amortization of interest
previously capitalized $ 5,287 $ 4,210 $ 2,883
- ---------------------------------------------------------------------------------
</TABLE>
NOTE 8 - LEASES
The Company receives rental income from the leasing of retail, office and
industrial building space under operating leases. Future minimum rentals, under
non-cancelable operating leases over the next five years (excluding tenant
reimbursements of operating expenses) as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
COMBINED RETAIL
AND OFFICE LEASE
(in thousands) BUILDING SPACE WITH DOLE
- ---------------------------------------------------------------------
<S> <C> <C>
1999 $ 28,371 $ 95
2000 26,677 -
2001 24,762 -
2002 22,344 -
2003 18,515
Thereafter 150,291
- ---------------------------------------------------------------------
$270,960 $ 95
- ---------------------------------------------------------------------
</TABLE>
The leases also provide for additional rentals based on increases
in operating expenses. These increases are generally payable in equal
installments throughout the year, based on estimated increases, with any
differences being adjusted in the succeeding year.
<PAGE>
32 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES
In connection with the Distribution, the assets were recorded by the Company at
a new tax basis equal to the aggregate fair market value of the stock and notes
issued to Dole and the liabilities that were assumed by the Company in
connection with the transaction. The difference in the new tax basis in
comparison to the historical book value of the real estate and resorts assets
recorded in the financial statements created a large deferred tax liability.
Dole has agreed to indemnify and hold the Company harmless for any federal,
state and local income taxes which may be imposed for all periods prior to the
Distribution that have not been paid or provided for in the Company's
consolidated balance sheet. The Company made income tax payments of
approximately $7.1 million, $4.6 million and $21 million in 1998, 1997 and 1996,
respectively. In 1997, the Company received income tax refunds of approximately
$15.1 million.
The components of the income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes:
Federal $11,614 $4,629 $11,495
State 1,713 602 1,360
- -----------------------------------------------------------------------------------
Total 13,327 5,231 12,855
- -----------------------------------------------------------------------------------
Deferred taxes:
Federal (6,980) (2,676) (6,116)
State (1,029) (348) (723)
- -----------------------------------------------------------------------------------
Total (8,009) (3,024) (6,839)
- -----------------------------------------------------------------------------------
Provision for income taxes $5,318 $2,207 $6,016
- -----------------------------------------------------------------------------------
</TABLE>
The Company's reported income tax expense varied from the expense calculated
using the U.S. federal statutory income tax rate for the following reasons:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Expense computed at U.S.
federal statutory income
tax rate $ 5,641 $ 2,128 $ 5,330
State and local income tax,
net of federal income tax
benefit 670 244 630
Income tax credits (1,019) (761) (745)
Other 26 596 801
- -----------------------------------------------------------------------------------
Reported income tax
expense $ 5,318 $ 2,207 $ 6,016
- -----------------------------------------------------------------------------------
</TABLE>
Deferred income taxes result from the temporary differences in the financial and
tax bases of assets and liabilities. The sources of deferred tax liabilities
(assets) and the tax effect of each are comprised of the following:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
Differences between book values assigned
in prior acquisitions and tax values $ 165,630 $ 174,148
State taxes 147 243
Other, net 8,673 1,966
- -----------------------------------------------------------------------------------
$ 174,450 $ 176,357
- -----------------------------------------------------------------------------------
</TABLE>
Total deferred tax liabilities and deferred tax (assets) were as
follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- ------------------------------------------------------------------
<S> <C> <C>
Total deferred tax liabilities $180,412 $177,612
Total deferred tax assets (5,962) (1,255)
- ------------------------------------------------------------------
$174,450 $176,357
- ------------------------------------------------------------------
</TABLE>
NOTE 10 - PENSION AND RETIREMENT PLANS
Certain full-time employees participate in qualified defined benefit pension
plans. Certain highly paid employees also receive a portion of their benefits
from a non-qualified defined benefit pension plan. Benefits under these plans
are generally based on each employee's eligible compensation and years of
service. The Company's funding policy is to fund the service costs of its plan,
preferably on a tax-deductible basis.
Effective January 1, 1993, post-retirement medical and life insurance
benefits were eliminated; however, certain full time employees who met minimum
age and service requirements continue to be eligible for the post-retirement
medical and life insurance benefits. The Company pays the full cost of
participants' life insurance coverage and makes contributions based on years
of service to the cost of participants' medical insurance coverage, subject to a
maximum annual contribution.
<PAGE>
CASTLE & COOKE, INC. 33
- --------------------------------------------------------------------------------
The status of the Company's pension and other benefit plans are summarized as
follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
(in thousands) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefits obligation:
Benefit obligation at beginning of year $ 20,037 $ 18,040 $ 2,580 $ 2,505
Service cost 716 681 8 12
Interest cost 1,457 1,330 187 185
Actuarial loss 1,767 1,075 224 42
Benefits paid (1,404) (1,089) (192) (164)
- --------------------------------------------------------------------------------------------------
Benefits obligation at end of year $ 22,573 $ 20,037 $ 2,807 $ 2,580
- --------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at
beginning of year $ 18,068 $ 16,628 $ - $ -
Actual return on plan assets 2,946 2,059 - -
Employer contributions 445 469 - -
Benefits paid (1,405) (1,088) - -
- --------------------------------------------------------------------------------------------------
Fair value of plan assets at year end $ 20,054 $ 18,068 $ - $ -
- --------------------------------------------------------------------------------------------------
Funded status $ 2,519 $ 1,969 $ 2,807 $ 2,580
Unrecognized net actuarial gain 129 448 11 235
Unrecognized prior service cost (67) (78) - -
- --------------------------------------------------------------------------------------------------
Net amount recognized $ 2,581 $ 2,339 $ 2,818 $ 2,815
- --------------------------------------------------------------------------------------------------
Weighted average assumptions at year end:
Discount rate 6.75% 7.25% 6.75% 7.25%
Expected return on plan assets 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase 4.0% 4.0%
- --------------------------------------------------------------------------------------------------
</TABLE>
For measurement purposes, an annual rate of increase in the per capita cost of
covered health care benefits of 8.5% was assumed for 1999. The rate was assumed
to decrease gradually to 5% for 2006 and remain at that level thereafter. The
net periodic benefit costs include the following components:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
(in thousands) 1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost $ 716 $ 681 $ 781 $ 8 $ 12 $ 18
Interest cost 1,457 1,330 1,258 187 185 178
Expected return on
plan assets (1,481) (2,059) (1,480) - - -
Other, net (5) 658 211 - - (5)
- -------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 687 $ 610 $ 770 $ 195 $ 197 $ 191
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
34 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one percent increase or decrease in these
assumed health care cost trend rates would result in an increase of $251,000 or
a reduction of $217,000, respectively, in the post-retirement benefit obligation
as of December 31, 1998. A one percent increase or decrease in these assumed
health care cost trend rates would result in an increase of $20,000 or a
reduction or $17,000, respectively, in the total of the service and interest
cost components.
Retirement benefits are provided to most salaried and hourly non-bargaining
Company employees under a 401(k) savings plan. The terms of this plan provide
for the Company to partially match tax deferred employee contributions.
Substantially all full-time salaried and hourly employees meeting age and length
of service requirements are eligible to participate in the plan. Total Company
contributions to these plans for 1998, 1997 and 1996 were $555,000, $468,000 and
$467,000, respectively. The Company also participates in multi-employer pension
plans provided under certain of its collective bargaining agreements which also
provide for pension benefits. Total contributions to these plans were $131,000,
$232,000 and $338,000 for 1998, 1997 and 1996, respectively. Information from
the plans' administrators is not available to permit the Company to determine
its share of unfunded vested benefits, if any. The Company has no intention of
withdrawing from any of these plans, nor is there any intention to terminate
such plans.
NOTE 11 - REDEEMABLE PREFERRED STOCK
Authorized Redeemable 10% Preferred Stock consists of 5,000 shares of $10,000
par value. The holders of the Preferred Stock are entitled to receive, when
declared, cash dividends at a rate of $1,000 per share per year. Such dividends
are cumulative, accrue without interest from the date of issuance and are
payable quarterly in arrears on the first day of each January, April, July, and
October.
During 1995, the Company issued 3,500 shares of the Preferred Stock, which
had a liquidation value of $10,000 per share plus accrued and unpaid dividends.
The stock was not convertible into any other class of stock and the Preferred
stockholders had limited voting rights. The Preferred Stock was redeemable, in
whole or in part, at the option of the holder during the 90-day period
commencing on December 8, 1997. The redemption price, payable upon the exercise
of the holder's option, was the sum of the liquidation value cumulative and
unpaid dividends, and a redemption premium of $400 per share. The excess of the
preference value over the carrying value was accreted by periodic charges to
retained earnings over the initial life of the issue. On December 8, 1997, the
outstanding shares were redeemed for $36.4 million.
Preferred stock dividends declared and paid totaled $3.3 million and $3.5
million for 1997 and 1996, respectively. The dividend declared for the period
from issuance (December 8, 1995) to December 31, 1995 was paid in 1996.
Changes in Preferred Stock are summarized as follows:
<TABLE>
<CAPTION>
REDEEMABLE
PREFERRED
(in thousands) SHARES STOCK
- --------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1996 3,500 $ 35,700
Accretion of redemption
premium - 700
Redemption (3,500) (36,400)
- --------------------------------------------------------------------
Balance at December 31, 1997 - $ -
- --------------------------------------------------------------------
</TABLE>
NOTE 12 - COMMON SHAREHOLDERS' EQUITY
Authorized capital of Castle consists of 50,000,000 shares of no par value
common stock, 1,000,000 shares of no par value Preference Stock, and 1,000,000
shares of no par value Preferential Stock.
NOTE 13 - STOCK OPTIONS AND AWARDS
The Castle & Cooke, Inc. 1995 Stock Option and Award Plan ("1995 Plan") provides
for the granting of incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock awards, performance share awards and stock
bonuses to officers. In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123").
This statement defines, among other things, a fair value based method of
accounting for options under an employee stock option plan. However, it also
allows an entity to continue to account for such items using Accounting
Principles Board Opinion No. 25- "Accounting for Stock Issued to Employees,"
under which no compensation expense is recognized. The Company elected this
option, which alternatively requires pro forma disclosure of net income and
earnings per share as if
<PAGE>
CASTLE & COOKE, INC. 35
- --------------------------------------------------------------------------------
compensation expense had been recognized. The pro forma results determined in
accordance with SFAS No. 123 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) available
to common shareholders:
As reported $ 10,798 $ (104) $ 5,013
Pro forma $ 10,024 $ (547) $ 4,805
- ----------------------------------------------------------------------------------
Basic earnings (loss)
per share:
As reported $ 0.58 $ (0.01) $ 0.25
Pro forma $ 0.54 $ (0.03) $ 0.24
- ----------------------------------------------------------------------------------
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes Option Pricing Model. The assumptions used for the risk free
interest rate were 5.56%, 6.37% and 5.54% for 1998, 1997 and 1996, respectively.
The assumptions used for the dividend yield and expected life were zero percent
and seven years, respectively, for all years. The assumption used for expected
volatility rate was 32.30%, 28.23% and 29.56% for 1998, 1997 and 1996,
respectively.
Because SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The 1995 Plan is intended to provide an incentive to officers and key
employees to remain with the Company. Stock options may be exercised for up to
ten years from the date of grant, as determined by the Corporate Compensation
and Benefits Committee of the Board of Directors which administers the plan.
The committee has the authority to determine the officers and key employees to
whom awards will be made and other terms and conditions of the awards. In 1995,
the Company reserved 1,000,000 common shares for the 1995 Plan, which was
reduced to 988,202 in 1996.
Stock options under Dole's 1982 and 1991 Stock Option and Award Plan, which
were not exercised prior to December 28, 1995, were adjusted in connection with
the separation of the real estate and resorts business from the food business.
Option holders who become employees of Castle after the Distribution received
options to purchase shares of Castle Common Stock shares in lieu of their Dole
options. The number of shares subject to, and the exercise price of, each option
were adjusted and as a result, options to purchase approximately 287,465 shares
of common stock of the Company at exercise prices ranging from $10.49 to $16.79
per share were issued upon conversion of preexisting Dole options. At December
31, 1998, a total of 270,276 common shares are available for future grants.
Change in stock options are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
- ------------------------------------------------------------------
<S> <C> <C>
Outstanding, December 31, 1995 287,465 $ 14.56
Granted 226,000 12.38
Exercised (3,147) 14.96
Canceled (124,575) 14.64
- ------------------------------------------------------------------
Outstanding, December 31, 1996 385,743 $ 13.25
Granted 149,800 16.38
Exercised (41,563) 12.12
Canceled (9,966) 14.10
- ------------------------------------------------------------------
Outstanding, December 31, 1997 484,014 $ 14.30
Granted 218,400 15.11
Exercised (39,829) 13.21
Canceled (29,198) 15.00
- ------------------------------------------------------------------
Outstanding, December 31, 1998 633,387 $ 14.61
- ------------------------------------------------------------------
Exercisable, December 31, 1998 284,246 $ 14.12
- ------------------------------------------------------------------
</TABLE>
The options outstanding as of December 31, 1998 have exercise prices between
$11.50 and $16.79 and a weighted average remaining term of 8 years. The options
exercisable as of December 31, 1998 have exercise prices between $11.50 and
$16.79 and a weighted average remaining term of 6 years.
The Castle & Cooke, Inc. Deferred Stock Compensation Plan for Non-Employee
Directors (the "Plan") provides for $10,000 in eligible Directors' annual
compensation to be deferred and paid in shares of common stock, in lieu of cash.
The Plan is intended to attract, motivate and retain experienced directors of
the Company. Each director is entitled to receive a distribution of a number of
shares of stock equal to the number of shares in his or her account upon his or
her termination from service on the Board. The Company has reserved 50,000
common shares for the Plan. In 1996, 2,281 shares were granted and $40,000 was
recognized as compensation expense. In 1997, 2,673 shares were granted and
$40,000 was recognized as compensation expense. In 1998, 2,104 shares were
granted and $40,000 was recognized as compensation expense. As of December 31,
1998, a total of 7,058 shares under the Plan had been granted and 42,942 shares
remain for future grants.
<PAGE>
36 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
NOTE 14 - COMMITMENTS AND CONTINGENCIES
The Company is constructing office buildings and golf courses in various
locations on the mainland. As of December 31, 1998 the estimated cost of future
construction under contracts totaled approximately $12 million.
The Company and its subsidiaries are contingently liable as joint indemnitors
to surety companies for subdivision, off-site improvement and construction bonds
issued on their behalf. Outstanding bond commitments approximated $188 million
and $186 million at December 31, 1998 and 1997, respectively.
The Company is a defendant in several lawsuits arising in the normal course
of business. In the opinion of management, the final resolution of these
lawsuits will not have a material adverse effect on its financial position or
results of operations.
NOTE 15 - RELATED-PARTY TRANSACTIONS
Related party transactions were substantially the same as those that could have
been obtained from unaffiliated third parties. In connection with the
Distribution in December 1995, the Company and Dole entered into various
agreements to define ongoing relationships including an Allocation Agreement, an
Aircraft Co-ownership Agreement and certain other operating Agreements which
govern future relationships.
The Company received a general excise tax refund of $777,000 from the State
of Hawaii in 1997. Pursuant to the Allocation Agreement, the refund was paid to
Dole in the first quarter of 1998. The Company leased Dole office space in
Bakersfield, California and Honolulu, Hawaii and farm land on Oahu and
in 1998, 1997 and 1996 received $621,000, $739,000 and $771,000 respectively,
for such leases. In 1998, 1997 and 1996, the Company purchased $229,000,
$260,000 and $377,000, respectively, of products from Dole for its retail store
and hotels in Hawaii.
In connection with the Distribution, and as partial consideration for Dole's
real estate and resort business, the Company issued a promissory note to Dole in
the principal amount of $10 million (the "Term Note"). The Term Note is
unsecured, payable in December 2000, and bears interest at the rate of 7% per
annum, payable quarterly. Interest incurred on the Term Note
was $700,000 in 1998, 1997 and 1996.
In connection with the Distribution, the Company received a fifty percent
undivided interest in a corporate aircraft that was owned by Dole. Dole
retained the other fifty percent undivided interest in the aircraft. Under
the Aircraft Co-ownership Agreement, the Company and Dole agreed that each
party would be responsible for the direct costs associated with its use of
the aircraft, and that all indirect costs would be equally shared. Pursuant
to the Aircraft Co-ownership Agreement, the Company's proportionate share of
the operating costs for the aircraft was $641,000, $561,000 and $548,000
during 1998, 1997 and 1996, respectively.
In 1998, the Company sold a parcel of undeveloped land to an unrelated third
party for $5.2 million. On such land, Dole's new corporate headquarters is being
constructed. In 1999, the Company was reimbursed $2 million, including interest,
by Dole for certain pre-development costs related to this land. In addition, the
Company paid Dole $3.0 million for a separate parcel of land in 1998.
In 1998, the Company sold an approximately 5-acre parcel of land for
approximately $330,000 to a company owned by Mr. Edward Hogan, a Director of the
Company.
The Company had a net receivable from Dole of $1.7 million at December 31,
1998. The Company had an accrued liability due to Dole of $880,000 at December
31, 1997.
NOTE 16 - INDUSTRY SEGMENT INFORMATION
In the fourth quarter of 1998, the Company adopted the provisions of SFAS No.
131 - "Disclosures About Segments of an Enterprise and Related Information". The
Company conducts its operations through three industry segments: Residential and
other property sales, Resorts and Commercial and other operations. Each segment
is managed as a separate business unit because each segment is responsible for
executing a unique business strategy. The residential and other property sales
segment primarily develops and sells homes and finished homesites. This segment
also includes the sales of undeveloped landholdings. The Resorts segment
includes the operation of the Island of Lana'i which includes two luxury hotels,
hotel amenities including two championship golf courses, the development and
sale of residential homes and homesites, other construction activity, property
management and other support operations. The Commercial and other operations
segment includes the development and management of office, retail, golf course,
industrial and other income producing properties. All of the Company's
operations are in the United States.
<PAGE>
CASTLE & COOKE, INC. 37
- --------------------------------------------------------------------------------
Industry segment information is presented below:
<TABLE>
<CAPTION>
RESIDENTIAL
AND OTHER COMMERCIAL
PROPERTY RESORT AND OTHER
(in thousands) SALES OPERATIONS OPERATIONS CORPORATE TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Total revenues $ 165,635 $ 72,452 $ 52,103 $ - $ 290,190
Operating income 17,256 (11,308) 17,568 (5,380) 18,136
Interest and other income, net 1,079 61 2,648 111 3,899
Interest expense, net - - - (5,919) (5,919)
- ------------------------------------------------------------------------------------------------
Income before income taxes $ 18,335 $(11,247) $ 20,216 $ (11,188) $ 16,116
- ------------------------------------------------------------------------------------------------
Property and equipment additions $ 230 $ 4,316 $ 48,699 $ 5 $ 53,250
- ------------------------------------------------------------------------------------------------
Depreciation $ 556 $ 8,167 $ 8,202 $ 617 $ 17,542
- ------------------------------------------------------------------------------------------------
Total Assets $ 393,804 $ 240,517 $414,478 $ 5,306 $1,054,105
- ------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
Total revenues $ 133,504 $ 56,304 $ 50,288 $ - $ 240,096
Operating income 5,781 (17,362) 20,031 (4,616) 3,834
Interest and other income, net 1,598 278 1,324 149 3,349
Interest expense, net - - - (1,103) (1,103)
- ------------------------------------------------------------------------------------------------
Income before income taxes $ 7,379 $ (17,084) $ 21,355 $ (5,570) $ 6,080
- ------------------------------------------------------------------------------------------------
Property and equipment additions $ 68 $ 3,707 $ 29,325 $ 14 $ 33,114
- ------------------------------------------------------------------------------------------------
Depreciation $ 654 $ 9,171 $ 7,157 $ 612 $ 17,594
- ------------------------------------------------------------------------------------------------
Total Assets $ 399,172 $ 240,907 $ 373,857 $ 5,324 $1,019,260
- ------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
Total revenues $ 201,520 $ 52,529 $ 53,695 $ - $ 307,744
- ------------------------------------------------------------------------------------------------
Operating income 19,280 (19,886) 20,145 (4,182) 15,357
Interest and other income, net 1,520 71 55 149 1,795
Interest expense, net - - - (1,923) (1,923)
- ------------------------------------------------------------------------------------------------
Income before income taxes $ 20,800 $ (19,815) $ 20,200 $ (5,956) $ 15,229
- ------------------------------------------------------------------------------------------------
Property and equipment additions $ 632 $ 7,642 $ 27,388 $ 22 $ 35,684
- ------------------------------------------------------------------------------------------------
Depreciation $ 654 $ 8,800 $ 7,360 $ 606 $ 17,420
- ------------------------------------------------------------------------------------------------
Total Assets $ 431,980 $ 238,435 $ 332,417 $ 16,990 $1,019,822
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
38 CASTLE & COOKE, INC.
- --------------------------------------------------------------------------------
NOTE 17 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents summarized quarterly results:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
(in thousands, except share data) QUARTER QUARTER QUARTER QUARTER YEAR
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Revenues $ 57,250 $ 69,480 $ 79,136 $ 84,324 $ 290,190
Operating income 2,861 3,735 6,512 5,028 18,136
Net income available to common
shareholders 1,396 2,588 4,019 2,795 10,798
- -----------------------------------------------------------------------------------------------
Basic and diluted earnings per
common share $ 0.07 $ 0.13 $ 0.24 $ 0.16 $ 0.58
- -----------------------------------------------------------------------------------------------
1997
Revenues $ 54,178 $ 55,057 $ 54,461 $ 76,400 $ 240,096
Operating income 860 1,602 370 1,002 3,834
Net (loss) income available to
common shareholders (532) 236 (574) 766 (104)
- -----------------------------------------------------------------------------------------------
Basic and diluted (loss) earnings
per common share $ (0.03) $ 0.01 $ (0.03) $ 0.04 $ (0.01)
- -----------------------------------------------------------------------------------------------
1996
Revenues $77,058 $80,635 $58,885 $91,166 $307,744
Operating income 4,992 5,408 3,297 1,660 15,357
Net income available to common
shareholders 1,628 2,066 1,070 249 5,013
- -----------------------------------------------------------------------------------------------
Basic and diluted earnings per
common share $ 0.08 $ 0.10 $ 0.05 $ 0.01 $ 0.25
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Castle & Cooke, Inc. 39
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF CASTLE & COOKE, INC.:
We have audited the accompanying consolidated balance sheets of Castle & Cooke,
Inc. (a Hawaii corporation) and subsidiaries as of December 31, 1998 and
December 31, 1997 and the related consolidated statements of operations,
shareholders' equity and cash flows for the years ended December 31, 1998,
December 31, 1997 and December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Castle & Cooke, Inc. and
subsidiaries as of December 31, 1998 and December 31, 1997 and the results of
their operations and their cash flows for the years ended December 31, 1998,
December 31, 1997 and December 31, 1996 in conformity with generally accepted
accounting principles.
/S/ ARTHUR ANDERSEN LLP
Los Angeles, California
February 8, 1999
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF CASTLE & COOKE, INC.
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
---- -------------
<S> <C>
C & C Mountaingate, Inc. California
Castle & Cooke Arizona, Inc. Arizona
Castle & Cooke Aviation, Inc. Hawaii
Castle & Cooke California, Inc. California
Castle & Cooke Commercial - CA, Inc. California
Castle & Cooke Commercial Properties, LLC Hawaii
Castle & Cooke Homes Hawaii, Inc. Hawaii
Castle & Cooke Kunia, Inc. Hawaii
Castle & Cooke North American Commercial, Inc. California
Castle & Cooke North American Commercial, L.P. California
Castle & Cooke Outlet Centers, LLC California
Castle & Cooke Properties, Inc. Hawaii
Castle & Cooke Retail, Inc. California
CCC/GBI Keene's Pointe, L.P. Delaware
Kunia Residential Partners Hawaii
Lanai Builders, Inc. Hawaii
Lanai Company, Inc. Hawaii
Lanai Holdings, Inc. Hawaii
Lanai Transportation Company, Inc. Hawaii
Lanai Water Company, Inc. Hawaii
Oceanic Insurance, Inc. Hawaii
Pueblo del Sol Water Company Arizona
Stockdale Coffee Company California
Seven Oaks Country Club California
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports, dated February 8, 1999, included and incorporated by reference
in this Form 10-K for the year ended December 31, 1998, into the Company's
previously filed Form S-8 Registration Statements (File No. 333-502 and File
No. 333-2632).
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
March 23, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,764
<SECURITIES> 23,127
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 673,793
<DEPRECIATION> 173,793
<TOTAL-ASSETS> 1,054,105
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 512,182
<OTHER-SE> 24,604
<TOTAL-LIABILITY-AND-EQUITY> 1,054,105
<SALES> 290,190
<TOTAL-REVENUES> 290,190
<CGS> 258,068
<TOTAL-COSTS> 272,054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,919
<INCOME-PRETAX> 16,116
<INCOME-TAX> 5,318
<INCOME-CONTINUING> 10,798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,798
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
