A&B
ALEXANDER & BALDWIN, INC.
P. O. BOX 3440 - HONOLULU, HAWAII 96801-3440
March 9, 1998
To the Shareholders of Alexander & Baldwin, Inc.:
The 1998 Annual Meeting of Shareholders of Alexander & Baldwin, Inc. will
be held in the Plaza Meeting Room on the ground floor of Amfac Center, 745 Fort
Street, Honolulu, Hawaii, on THURSDAY, APRIL 23, 1998 AT 10:00 A.M. You are
invited to attend, and we hope you will be able to do so. At the meeting, we
will have the opportunity to discuss the Company's financial performance during
1997, and our future plans and expectations.
WHETHER OR NOT YOU NOW PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED
TO SIGN, DATE AND MAIL THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE AT YOUR EARLIEST CONVENIENCE. Regardless of the size of your holding,
it is important that your shares be represented. If you attend the Annual
Meeting, you may withdraw your proxy and vote in person.
Sincerely,
/s/ John C. Couch
JOHN C. COUCH
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
A&B
ALEXANDER & BALDWIN, INC.
P. O. BOX 3440 - HONOLULU, HAWAII 96801-3440
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of
Alexander & Baldwin, Inc. ("A&B") will be held in the Plaza Meeting Room on the
ground floor of Amfac Center, 745 Fort Street, Honolulu, Hawaii, on Thursday,
April 23, 1998, at 10:00 a.m., Honolulu time, for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and
qualified;
2. To approve the Alexander & Baldwin, Inc. 1998 Stock Option/Stock
Incentive Plan;
3. To approve the Alexander & Baldwin, Inc. 1998 Non-Employee Director
Stock Option Plan;
4. To elect auditors for the ensuing year; and
5. To transact such other business as properly may be brought before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on February 13,
1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting.
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE
PROVIDED.
By Order of the Board of Directors
MICHAEL J. MARKS
Vice President, General
Counsel and Secretary
March 9, 1998
<PAGE>
A&B
ALEXANDER & BALDWIN, INC.
P. O. BOX 3440 - HONOLULU, HAWAII 96801-3440
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Alexander & Baldwin, Inc. ("A&B") for use
at the Annual Meeting of Shareholders to be held on April 23, 1998 and at any
adjournment or postponement thereof (the "Annual Meeting"). A proxy may be
revoked at any time prior to its exercise by a written revocation bearing a
later date than the proxy and filed with the Secretary of A&B, by submission of
a later-dated proxy, or by voting in person at the Annual Meeting.
Only shareholders of record at the close of business on February 13, 1998
are entitled to notice of and to vote at the Annual Meeting. On that date, A&B
had outstanding 44,853,282 shares of common stock without par value, each of
which is entitled to one vote. Provided a quorum is present, the affirmative
vote of a majority of the shares of A&B common stock represented at the Annual
Meeting, in person or by proxy, will be necessary for the election of directors
and election of auditors, and the affirmative vote of a majority of the
outstanding shares of A&B common stock will be necessary for the approval of
the A&B 1998 Stock Option/Stock Incentive Plan and approval of the A&B 1998
Non-Employee Director Stock Option Plan. Abstentions and broker non-votes will
be included for purposes of determining a quorum at the Annual Meeting. Broker
non-votes will have the same effect as a vote to withhold authority in the
election of directors, and abstentions and broker non-votes will have the same
effect as a vote against each of the other proposals.
Following the original mailing of proxy soliciting material, officers,
employees and directors of A&B and its subsidiaries may, without additional
compensation, solicit proxies by appropriate means, including by mail,
telephone, telecopy and personal interview. Arrangements also will be made
with brokerage houses and other custodians, nominees and fiduciaries which are
record holders of A&B's common stock to forward proxy soliciting material to
the beneficial owners of such stock, and A&B will reimburse such record holders
for their reasonable expenses. A&B has retained the firms of Morrow & Co.,
Inc., New York, New York, and Skinner & Co., San Francisco, California, to
assist in the solicitation of proxies, at a combined cost of $11,000 plus
reasonable out-of-pocket expenses.
This proxy statement and the enclosed proxy are being mailed to
shareholders on or about March 9, 1998.
ELECTION OF DIRECTORS
Directors will be elected at the Annual Meeting to serve until the next
Annual Meeting of Shareholders and until their successors are duly elected and
qualified. There is no cumulative voting in the election of directors.
NOMINEES. The nominees of the Board of Directors are the nine persons
named below, all of whom are currently members of the Board of Directors. The
Board of Directors has no reason to believe that any nominee will be unable to
serve. However, if any nominee or nominees should decline or become unable to
serve for any reason, shares represented by the accompanying proxy will be
voted for such other person or persons as the Board of Directors may nominate.
The following table sets forth the name, age and principal occupation of
each person nominated by the A&B Board, their positions with A&B and business
experience during at least the last five years, and the year each first was
elected or appointed a director.
PRINCIPAL OCCUPATION, INFORMATION AS TO
OTHER POSITIONS WITH A&B, AND OTHER DIRECTOR
NAME DIRECTORSHIPS AGE SINCE
---- -------------------------------------------- --- --------
Michael J. Chun President, The Kamehameha Schools, Honolulu, 54 1990
Hawaii (educational institution) since June
1988; Vice President and Secretary, ParEn,
Inc., Honolulu, Hawaii (environmental
engineering services) from January 1985
until June 1988; Director of Bank of Hawaii.
John C. Couch Chairman of the Board (since 1995), Chief 58 1985
Executive Officer (since 1992) and President
(since 1991) of A&B; Chairman of the Boards
(since 1995) of A&B's subsidiaries,
A&B-Hawaii, Inc. ("ABHI") and Matson
Navigation Company, Inc. ("Matson"); Chief
Executive Officer (from 1989 until 1996) and
President (from 1989 until 1995) of ABHI;
previously held various executive officer
positions with A&B and Matson; Director of
First Hawaiian, Inc. and First Hawaiian
Bank.
Leo E. Denlea, Jr. Retired Chairman of the Board and Chief 66 1987
Executive Officer, Farmers Group, Inc., Los
Angeles, California (insurance)
(September 1986 - March 1997); President of
Farmers Group, Inc. from September 1986
until December 1995.
Walter A. Dods, Jr. Chairman of the Board and Chief Executive 56 1989
Officer of First Hawaiian, Inc. and its
subsidiary, First Hawaiian Bank, Honolulu,
Hawaii (banking) since September 1989;
Director of First Hawaiian, Inc. and First
Hawaiian Bank.
Charles G. King President, King Auto Center, Lihue, Kauai, 52 1989
Hawaii (automobile dealership) since October
1995; Vice President, Kuhio Motors, Inc.,
Lihue, Kauai, Hawaii (automobile dealership)
from December 1983 to October 1995.
Carson R. McKissick Managing Director, The Corporate Development 65 1971
Company, Los Angeles, California (financial
advisory services) since July 1991; Director
of Triangle Pacific Corp.; Director of
Peregrine Real Estate Trust.
C. Bradley Chief Executive Officer of Matson since 56 1991
Mulholland April 1992; President of Matson since
May 1990; Chief Operating Officer of Matson
from July 1989 until April 1992; prior to
July 1989 held various executive officer
positions with Matson.
Maryanna G. Shaw Private investor. 59 1980
Charles M. Managing Director, Trust Company of the 65 1972
Stockholm West, San Francisco, California (investment
management services) since June 1986.
The Bylaws of A&B provide that no person (other than a person nominated
by or on behalf of the Board) will be eligible to be elected a director at an
annual meeting of shareholders unless a written notice that the person's name
be placed in nomination is received by the Chairman of the Board, the
President, or the Secretary of A&B not less than 60 days nor more than 90 days
prior to the anniversary date of the immediately preceding annual meeting. If
the annual meeting is not called for a date which is within 30 days of the
anniversary date of the preceding annual meeting, a shareholder's notice must
be given not later than 10 days after the date on which notice of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever occurs first. To be in proper written form, a shareholder's
notice must set forth specified information about each nominee and the share-
holder making the nomination. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
COMMITTEES. The Board of Directors, which held seven meetings during
1997, has an Audit Committee and a Compensation and Stock Option Committee.
A&B has no nominating or similar committee; the full Board of Directors
performs that function.
The current members of the Audit Committee, which held three meetings
during 1997, are Mr. McKissick, Chairman, Ms. Shaw, and Messrs. Chun and Dods.
The Audit Committee meets from time to time with A&B's independent auditors and
has general responsibility for reviewing the accounting and auditing affairs of
A&B.
The current members of the Compensation and Stock Option Committee, which
held five meetings during 1997, are Mr. Stockholm, Chairman, and Messrs. Denlea
and King. The Compensation and Stock Option Committee has general
responsibility for management and other salaried employee compensation,
including incentive compensation and stock option plans.
COMPENSATION OF DIRECTORS. Directors who are not employees of A&B
(outside directors) receive an annual retainer of $16,000 and an additional
$3,000 if also serving as Chairman of a Board committee. In 1997, outside
directors received an attendance fee of $700 per Board meeting and, in
addition, attendance fees of $700 and $600 per committee meeting if also
serving as chairmen and members, respectively, of Board committees. All
directors of A&B served as directors of A&B's ABHI and Matson subsidiaries and,
in such capacities, outside directors received attendance fees of $700 per ABHI
or Matson Board meeting. Directors who are employees of A&B do not receive
compensation for serving as directors. Outside directors may defer up to 100
percent of their annual retainer and meeting fees until retirement or until
such earlier date as they may select. No directors have deferred such fees.
Under A&B's 1989 Non-Employee Director Stock Option Plan, approved by
the shareholders at the 1989 Annual Meeting, a non-qualified stock option to
purchase 3,000 shares of A&B common stock automatically will be granted at each
Annual Meeting of Shareholders to each individual who is, at such meeting,
elected or re-elected as an outside director of A&B. The option price per
share is the average of the means between the highest and lowest sales prices
per share of common stock for the five consecutive trading days prior to the
grant date, and the option expires 10 years from the date of grant, or earlier
if the optionee ceases to be a director. Options become exercisable six months
after the grant date. At the 1997 Annual Meeting held on April 24, 1997,
options to purchase 3,000 shares of A&B common stock, at an exercise price of
$25.10 per share, were granted to each of the seven outside directors.
A&B maintains life insurance, retirement and deferred compensation plans,
and provides medical and dental benefits, for its directors who are not A&B
employees. The life insurance program affords coverage of $50,000 for
directors, as well as business travel accident coverage of $200,000 for
directors and $50,000 for their spouses while accompanying directors on A&B
business. Under the retirement plan, a director who has five or more years of
service will receive, in addition to certain post-retirement health care
insurance benefits, a lump sum payment upon retirement or attainment of age 65,
whichever is later, that is actuarially equivalent to a payment stream for the
life of the director consisting of 50 percent of the amount of the annual
retainer fee in effect at the time of his or her retirement or other
termination, plus 10 percent of that amount, up to an additional 50 percent,
for each year of service as a director over five years.
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS
The following table lists the names and addresses of the only share-
holders known by A&B to have owned beneficially more than five percent of A&B's
common stock outstanding on February 13, 1998, the number of shares they
beneficially own, and the percentage of outstanding shares such ownership
represents. Except as indicated in the footnotes, such shareholders have sole
voting and dispositive power over shares they beneficially own.
Name and Address Amount of Percent of
of Beneficial Owner Beneficial Ownership Class
- ------------------- -------------------- ----------
Southeastern Asset 4,351,600 (b) 9.7
Management, Inc.
6410 Poplar Avenue
Suite 900
Memphis, Tennessee 38119
The Capital Group 3,310,000 (c) 7.4
Companies, Inc./Capital
Research and Management
Company
333 South Hope Street
Los Angeles, California
90071
First Hawaiian Bank (a) 2,449,734 (d) 5.5
P. O. Box 3200
Honolulu, Hawaii 96847
The Harry and Jeanette 2,271,079 (e) 5.1
Weinberg Foundation,
Incorporated
7 Park Center Court
Owings Mills, Maryland 21117
Alexander C. Waterhouse 2,251,196 (f) 5.0
670 Queen Street #200
Honolulu, Hawaii 96813
____________________
(a) For additional information concerning relationships and transactions
between A&B and First Hawaiian Bank, please see "Security Ownership of
Directors and Executive Officers" and "Compensation Committee Interlocks
and Insider Participation" below.
(b) As reported in Amendment No. 6 to Schedule 13G dated February 4, 1998 (the
"Southeastern 13G") filed with the Securities and Exchange Commission.
According to the Southeastern 13G, such shares are owned legally by
investment advisory clients of Southeastern Asset Management, Inc.
("Southeastern"), and are held in discretionary accounts, with
Southeastern having sole dispositive power over all such shares and sole
voting power over 4,154,200 of such shares. In addition, according to the
Southeastern 13G, (i) investment advisory clients of Southeastern own an
aggregate of 1,036,400 shares (2.3% of A&B's outstanding common stock) in
non-discretionary accounts over which Southeastern has no dispositive or
voting power, and (ii) Longleaf Partners Fund and Longleaf Partners Realty
Fund (collectively, "Longleaf"), which are investment companies, own
1,565,000 shares (3.5% of A&B's outstanding common stock) over which
Longleaf has sole dispositive and voting power. Southeastern is
Longleaf's investment counsel.
(c) The Capital Group Companies, Inc. ("Capital Group") is the parent holding
company of various investment management companies which hold discre-
tionary investment power and, in some cases, voting power over the shares
reported in Amendment No. 1 to Schedule 13G dated February 10, 1998 (the
"Capital 13G") filed with the Securities and Exchange Commission.
According to the Capital 13G, Capital Research and Management Company, a
wholly-owned subsidiary of Capital Group, or certain other subsidiaries of
Capital Group, have sole dispositive power over all 3,310,000 shares and
sole voting power over 525,000 shares.
(d) Shares are beneficially owned in a fiduciary capacity by the trust
department of First Hawaiian Bank, as follows: shared voting and disposi-
tive power - 1,975,652 shares, sole voting and dispositive power - 447,335
shares, sole voting and shared dispositive power - 6,000 shares, shared
dispositive power only - 4,500 shares, shared voting power only - 1,000
shares, and sole dispositive power only - 400 shares. First Hawaiian
Bank's trust department holds 14,847 shares over which it has neither
voting nor dispositive power.
(e) As reported in Schedule 13G dated February 17, 1998 (the "Foundation 13G")
filed by The Harry and Jeanette Weinberg Foundation, Incorporated (the
"Foundation") with the Securities and Exchange Commission. According to
the Foundation 13G, the Foundation has sole dispositive and voting power
over 2,164,530 shares and shared dispositive and voting power over 106,549
shares.
(f) Amount includes (i) 663,646 shares owned by Waterhouse Properties, Inc.,
of which Mr. Waterhouse is Vice Chairman of the Board and 56 percent
shareholder, having sole voting and dispositive power, (ii) an aggregate
of 1,531,302 shares owned by the Martha A. Waterhouse Trust Estate, and
three trusts established under the Will of John T. Waterhouse, deceased,
of which Mr. Waterhouse is a co-trustee, having shared voting and
dispositive power with First Hawaiian Bank and other trustees, (iii) 5,800
shares owned by the John Carl Waterhouse Trust, of which Mr. Waterhouse is
a co-trustee, having shared voting and dispositive power with First
Hawaiian Bank, (iv) 7,758 shares owned by Mr. Waterhouse as a life tenant,
having sole voting and no dispositive power, and (v) 42,690 shares owned
by Mr. Waterhouse, having sole voting and dispositive power. The above
figure does not include 8,240 shares owned by Mr. Waterhouse's wife.
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. The following
table shows the number of shares of A&B common stock beneficially owned as of
February 13, 1998 by each director and nominee, by each executive officer named
in the "Summary Compensation Table" below, and by directors, nominees and
executive officers as a group (including one advisory director) and, if at
least one-tenth of one percent, the percentage of outstanding shares such
ownership represents. Except as indicated in the footnotes, directors,
nominees and executive officers have sole voting and dispositive power over
shares they beneficially own.
Name or Number Amount of Beneficial Percent of
in Group Ownership (a)(b)(c) Class
- -------------- -------------------- ----------
Michael J. Chun 24,438 --
John C. Couch 588,682 1.3
Leo E. Denlea, Jr. 28,600 --
Walter A. Dods, Jr. 25,119 --
Charles G. King 29,885 --
Carson R. McKissick 31,000 --
C. Bradley Mulholland 416,202 0.9
Maryanna G. Shaw 886,230 2.0
Charles M. Stockholm 30,000 --
W. Allen Doane 177,262 0.4
David G. Koncelik 101,220 0.2
Glenn R. Rogers 227,932 0.5
21 Directors, Nominees
and Executive Officers 5,453,573 11.7
as a Group (d)
____________________
(a) Amounts do not include shares owned by spouses of those directors and
executive officers who disclaim beneficial ownership thereof, as follows:
Mr. McKissick - 600, and directors, nominees and executive officers as a
group - 8,840. In addition, Mr. Stockholm and Ms. Shaw, who are husband
and wife, each disclaim beneficial ownership of all shares beneficially
owned by the other. Except as noted in footnote (d) below, amounts do not
include shares beneficially owned in a fiduciary capacity by trust com-
panies or the trust departments of banks of which A&B directors are
directors or officers, or both, and shares held by foundations or trusts
of which A&B directors are trustees or directors, as follows: First
Hawaiian Bank - 2,449,734 shares, The Wallace Alexander Gerbode
Foundation, of which Ms. Shaw and Mr. Stockholm are trustees - 40,000
shares, and the William Garfield King Educational Trust, of which Mr. King
is a trustee - 400 shares.
(b) Amounts include shares as to which directors, nominees and executive
officers have (i) shared voting and dispositive power, as follows:
Mr. Chun - 438 shares, Mr. Denlea - 1,600 shares, Mr. King - 685 shares
(held by a living trust of which Mr. King is a co-trustee),
Mr. Mulholland - 37,678 shares, Ms. Shaw - 63,300 shares, Mr. Rogers -
1,109 shares, and directors, nominees and executive officers as a group -
1,668,787 shares, and (ii) sole voting power only, as follows:
Mr. Couch - 1,836 shares, Mr. Mulholland - 2,212 shares,
Mr. Rogers - 1,756 shares, and directors, nominees and executive officers
as a group - 12,098 shares.
(c) Amounts include shares deemed to be owned beneficially by directors,
nominees and executive officers because they may be acquired prior to
May 8, 1998 through the exercise of stock options, as follows:
Mr. Couch - 395,983, Mr. Mulholland - 338,400, Mr. Rogers - 196,200,
Mr. Doane - 152,600, Mr. Koncelik - 94,800, Ms. Shaw and Messrs. Denlea,
King, McKissick and Stockholm - 27,000 each, Messrs. Chun and Dods -
24,000 each, and directors, nominees and executive officers as a group -
1,876,081.
(d) Includes 2,251,196 shares beneficially owned by Alexander C. Waterhouse,
an advisory director of A&B, of which 1,537,102 shares also are bene-
ficially owned by First Hawaiian Bank in a fiduciary capacity.
Mr. Waterhouse served as a director of A&B from 1974 to 1984. As an
advisory director, Mr. Waterhouse is entitled to attend and participate
in meetings of the Board and to receive director's compensation, but he
has no vote.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a)
of the Securities Exchange Act of 1934 requires A&B's directors and executive
officers, and persons who own more than 10 percent of its common stock, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission. Alexander C. Waterhouse, an advisory
director, was required to report the sale of shares of A&B stock by a trust of
which he is a co-trustee on or before May 10, 1997, but such sale was reported
on February 13, 1998. The Company believes that during fiscal 1997, all other
reports required to be filed under Section 16(a) by its directors and executive
officers were filed on a timely basis.
EXECUTIVE COMPENSATION
EQUITY INCENTIVE PLANS. A&B currently has two equity incentive plans
applicable to executive officers and other key employees of A&B.
Under A&B's 1989 Stock Option/Stock Incentive Plan ("1989 Plan"), adopted
in 1989, eligible employees may be granted stock options with an exercise price
not less than the fair market value of A&B common stock on the date of grant.
The options generally become exercisable one year after the grant date, and the
term of an option may not exceed 10 years. Also under the 1989 Plan, eligible
employees may be awarded shares of A&B common stock as a reward for past
services rendered to A&B or as an incentive for future services. As of
February 13, 1998, options for 3,328,219 shares were outstanding under the 1989
Plan and 8,036 shares remained available for future issuance.
Under the A&B Restricted Stock Bonus Plan, adopted in 1983, an employee
who earns an award under A&B's One-Year Performance Improvement Incentive Plan
("One-Year Plan") or Three-Year Performance Improvement Incentive Plan ("Three-
Year Plan") may elect to apply up to 50% of the amount of such award to the
purchase of A&B common stock. Such employee also may receive, at the
discretion of the Compensation and Stock Option Committee ("Committee"), bonus
shares with a value of up to 50% of the amount of the award taken in stock. If
the employee leaves A&B's employ (for any reason other than retirement, death
or disability) within three years after the award, the employee may lose all
right, title and interest in the bonus shares which form part of that award,
and the non-bonus shares will be subject to repurchase by A&B at the lesser of
their fair market value at the time of repurchase or the amount of the award
originally applied to their purchase. Shares awarded under the A&B Restricted
Stock Bonus Plan may not be sold or transferred within three years after the
award date. As of February 13, 1998, 493,909 shares had been issued under the
A&B Restricted Stock Bonus Plan (of which 120,919 shares still were unvested),
and 546,092 shares were available for future issuance.
DEFERRED COMPENSATION PLAN. Under the A&B Deferred Compensation Plan,
participants in the One-Year and Three-Year Plans may elect to defer up to 100%
of the cash amounts earned under those Plans until retirement or other
termination of employment, or an earlier date specified by the participant, and
may elect to convert all or a portion (subject to specified limitations) of
such deferred amounts into common stock-equivalent units that are valued on the
basis of the fair market value of A&B stock. The balance of such deferred
award will be credited with interest, compounded annually, at an annual rate
equal to 1% above the New York Reserve Bank discount rate. Participants who
convert all or part of a deferred award into common stock-equivalent units may,
at the discretion of the Committee, be awarded as a bonus additional common
stock-equivalent units of up to 50% of the number of those units into which
that award was initially converted. If a participant terminates employment
with A&B (for any reason other than retirement, death or disability), then
such participant no longer will have any right, title or interest in any bonus
common stock-equivalent units awarded within three years prior to the date of
such termination, and the non-bonus common stock-equivalent units credited to
the participant's account within that three-year period will be subject to
conversion to cash at an amount equal to the lesser of the fair market value of
A&B stock on the date of such termination or the dollar amount of the award
that was converted into these non-bonus common stock-equivalent units.
SUMMARY OF CASH AND OTHER COMPENSATION. The following table summarizes
the cash and noncash compensation paid by A&B for services rendered, during
each of the last three completed fiscal years, by A&B's Chief Executive
Officer and the four other most highly compensated executive officers
(collectively, the "named executive officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------- -------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Name and sation Awards Options/SARs Payouts sation
Principal Position Year Salary($) Bonus($)(3) ($)(6) ($)(7) (#) ($)(8) ($)(11)
- ------------------ ---- --------- ----------- ------- ---------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John C. Couch 1997 651,000 273,038(4) 0 220,462 73,500 265,000 59,428
Chairman of the Board, 1996 590,000 225,506(4) 6,234 328,016 60,000 41,828(9) 75,552
President and Chief Executive 1995 590,000 60,021(4) 7,551 152,903 75,000 41,952(9) 73,117
Officer of A&B
C. Bradley Mulholland 1997 440,807 75,008(4) 475 175,466 30,400 98,026(9) 33,095
President and Chief 1996 416,000 195,000 0 0 37,000 57,500 50,804
Executive Officer of Matson 1995 416,000 42,541(4) 4,565 125,176 45,000 41,034(9) 47,930
David G. Koncelik 1997 270,006 184,534(4) 0 30,716 35,600 212,500(10) 13,770
President and Chief Executive 1996 235,600 207,024(4) 0 34,476 23,200 56,250(10) 12,519
Officer of California and 1995 235,000 27,518(4) 0 41,232 24,000 0 0
Hawaiian Sugar Company, Inc.
W. Allen Doane (1) 1997 310,000 150,000(5) 1,241 74,994 28,100 50,006(9) 47,530
President and Chief 1996 285,000 83,012(4) 804 148,460 24,500 16,028(9) 15,113
Executive Officer of ABHI 1995 282,333 40,037(4) 2,808 86,187 30,000 17,526 14,399
Glenn R. Rogers (2) 1997 241,000 60,007(4) 601 164,988 27,900 50,006(9) 35,496
Executive Vice President, 1996 218,000 77,034(4) 0 143,936 24,300 19,030(9) 34,800
Chief Financial Officer 1995 218,000 42,541(4) 4,153 93,679 30,000 20,030(9) 34,323
and Treasurer of A&B
</TABLE>
____________________
(1) Mr. Doane was appointed President of A&B-Hawaii, Inc. ("ABHI") effective
April 1995, and Chief Executive Officer of ABHI effective January 1997.
In accordance with applicable requirements, the table includes information
with respect to Mr. Doane's compensation as an executive officer during
1995 prior to the time he became President of ABHI.
(2) Mr. Rogers was appointed Executive Vice President effective July 1997. He
had been Vice President, and continues to be Chief Financial Officer and
Treasurer, since April 1993.
(3) "Bonus" consists of cash amounts earned for the fiscal year identified in
column (b) under A&B's One-Year Performance Improvement Incentive Plan
("One-Year Plan").
(4) Represents the portion of the named executive officers' award under the
One-Year Plan payable in cash. The named executive officers elected to
receive the balance of their One-Year Plan award in restricted stock, the
value of which is included in column (f).
(5) Includes (i) the portion of the named executive officer's award under the
One-Year Plan which such officer elected to defer under the A&B Deferred
Compensation Plan and to convert into common stock-equivalent units, and
(ii) additional common stock-equivalent units awarded, in the discretion
of the Committee, in an amount equal to 50% of the common stock-equivalent
units into which the deferred One-Year Plan award was converted.
(6) "Other Annual Compensation" consists of amounts reimbursed to the named
executive officers for their estimated income tax liability by reason of
A&B's payments for the cost of personal excess liability insurance. It
does not include the aggregate amount of perquisites received by each
named executive officer, which for each fiscal year in question was less
than the lesser of $50,000 or 10% of reported salary and bonus.
(7) Represents (i) the dollar amount of One-Year Plan awards, for the fiscal
year identified in column (b), elected to be received in stock, (ii) the
dollar amount of Three-Year Plan awards, for the three-year plan cycle
ending with and including the fiscal year identified in column (b),
elected to be received in stock, and (iii) additional stock awarded, in
the discretion of the Committee, in an amount equal to 50% of the dollar
amount of the One-Year Plan and/or Three-Year Plan award that the named
executive officer has elected to take in stock. As of December 31, 1997,
the number and value (based upon a $27.3125 per share closing price of
A&B's common stock on such date) of shares of restricted stock held by
the named executive officers are as follows: Mr. Couch - 35,789 shares
($977,487); Mr. Mulholland - 17,795 shares ($486,026); Mr. Koncelik -
4,541 shares ($124,026); Mr. Doane - 16,177 shares ($441,834); and
Mr. Rogers - 15,596 shares ($425,966). Dividends are payable on the
restricted shares if and to the extent payable on A&B's common stock
generally.
(8) "LTIP Payouts" consist of cash amounts earned under the Three-Year Plan
for the three-year plan cycle ending with and including the fiscal year
identified in column (b).
(9) Represents the portion of the named executive officers' award under the
Three-Year Plan payable in cash. The named executive officers elected to
receive the balance of their Three-Year Plan award in restricted stock,
the value of which is included in column (f).
(10) Represents (i) the entire amount of the named executive officer's award
under the Three-Year Plan, including the portion of such amount which such
officer elected to defer under the A&B Deferred Compensation Plan and to
convert into common stock-equivalent units, and (ii) additional common
stock-equivalent units awarded, in the discretion of the Committee, in an
amount equal to 50% of the common stock-equivalent units into which the
deferred Three-Year Plan award was converted.
(11) "All Other Compensation" for 1997 includes: (i) amounts contributed by
A&B to the A&B Profit Sharing Retirement Plan (Mr. Couch - $8,160,
Mr. Mulholland - $8,160, Mr. Koncelik - $8,160, Mr. Doane - $8,160 and
Mr. Rogers - $8,160); (ii) amounts accrued for profit sharing under the
A&B Excess Benefits Plan, pursuant to which executives chosen by the
Committee receive additional credits and payments equal to the difference
between the maximum benefit permitted under federal tax laws and the
benefit the executives otherwise would receive under A&B's qualified plans
(Mr. Couch - $25,041, Mr. Mulholland - $14,321, Mr. Koncelik - $5,610,
Mr. Doane - $7,650 and Mr. Rogers - $4,131); and (iii) amounts contributed
by A&B for the accounts of the named executive officers under the A&B
Executive Survivor/Retirement Benefit Plan, pursuant to which executives
selected by the Chief Executive Officer of A&B receive benefits in lieu of
coverage over $50,000 which otherwise would be provided under A&B's group
life insurance program (Mr. Couch - $26,227, Mr. Mulholland - $10,614,
Mr. Doane - $31,720 and Mr. Rogers - $23,205).
OPTION GRANTS. The following table contains information concerning the grant
of stock options under A&B's 1989 Stock Option/Stock Incentive Plan during 1997
to the named executive officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees Price Present Value
Name Granted (#) in Fiscal Year ($/share) Expiration Date ($)(c)
---- ------------ ---------------- --------- --------------- -------------
<S> <C> <C> <C> <C> <C>
John C. Couch 73,500(a) 13.0% 26.250 January 21, 2007 556,395
18,913(b) 3.3% 32.625 January 24, 2005 115,748
38,219(b) 6.8% 34.875 January 23, 2006 148,672
C. Bradley Mulholland 30,400(a) 5.4% 26.250 January 21, 2007 230,128
David G. Koncelik 35,600(a) 6.3% 26.250 January 21, 2007 269,492
W. Allen Doane 28,100(a) 5.0% 26.250 January 21, 2007 212,717
Glenn R. Rogers 27,900(a) 4.9% 26.250 January 21, 2007 211,203
</TABLE>
___________________
(a) Options granted on January 22, 1997 under the 1989 Stock Option/Stock
Incentive Plan ("1989 Plan") with an exercise price per share equal to the
fair market value of the underlying shares of A&B common stock on the
grant date. These options became exercisable one year after the date of
grant. No stock appreciation rights were granted with these options.
Each of these granted options ("original option") contains a reload
feature, pursuant to which the optionee automatically will be granted a
new option to the extent the original option is exercised within five
years after the grant date through the optionee's delivery of previously-
acquired shares of A&B common stock in payment of the exercise price, and
certain other conditions are satisfied at the time of such exercise. The
reload option will be granted at the time the original option is so
exercised, and will allow the optionee to purchase the same number of
shares of A&B common stock as is delivered in exercise of the original
option. The reload option will have an exercise price per share equal to
the greater of (i) the fair market value per share of A&B common stock on
the date the reload option is granted or (ii) 150% of the exercise price
per share in effect under the original option. The reload option will not
become exercisable unless the shares purchased under the original option
have been held for at least two years. In certain merger, reorganization
or change in control situations involving A&B, the exercisability of
options under the 1989 Plan, whether original or reload options, will be
accelerated in accordance with the terms of the grant, and options may be
surrendered for a cash distribution per share equal to the difference
between the fair market value of the option share (or, if greater, the
change in control consideration paid per share) and the exercise price.
(b) Reload options for 18,913 shares and for 38,219 shares were granted on
February 26, 1997 and July 23, 1997, respectively, under the 1989 Plan, in
each case with an exercise price per share equal to 150% of the exercise
price per share in effect under the original option. See footnote (a)
above for additional information.
(c) Based on an option pricing model proposed by A&B's independent compensa-
tion consultant that projects future gains from stock options. This
option pricing model modifies the Black-Scholes model by using
the average stock price volatility for a broad range of stocks and
converting the results into explicit price growth assumptions consistent
with the Capital Asset Pricing Model ("CAP-M"). The assumptions used in
this pricing model are as follows: (i) the market value of A&B stock will
increase at a uniform rate of 10% compounded annually, (ii) stock options
will be exercised five years from the date of grant, (iii) projected
future gains are discounted back to the date of grant using a 15% discount
rate, and (iv) the resulting current dollar values are further discounted
by 5% to take into account the probability the stock options will be
forfeited as a result of executives' termination of employment within one
year of the grant date. This option pricing model makes no explicit
assumptions about A&B's future dividend yields, but the CAP-M price growth
and discount factors implicitly assume an average dividend yield of
between 2% and 3% for the broad market. There is no assurance the value
realized by an executive officer will be at or near the value estimated by
this option pricing model. The actual value, if any, an executive officer
may realize will depend upon how much the stock price has increased over
the exercise price on the date the option is exercised.
OPTION EXERCISES AND FISCAL YEAR-END HOLDINGS. The following table
provides information, with respect to the named executive officers, concerning
(i) the exercise of stock options and stock appreciation rights during the 1997
fiscal year and the value realized in connection with such exercise, and
(ii) the number and value of unexercised options held as of December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs At Options/SARs
FY-End (#) At FY-End ($)(c)
Shares ---------------------- --------------------
Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Couch 126,317(a) 487,338(b) 322,483 168,295 510,352 101,063
C. Bradley 0 0 308,000 30,400 738,125 41,800
Mulholland
David G. 0 0 59,200 35,600 250,000 48,950
Koncelik
W. Allen Doane 0 0 124,500 28,100 400,313 38,638
Glenn R. Rogers 0 0 168,300 27,900 416,313 38,363
</TABLE>
___________________
(a) Includes 21,091 shares with respect to which tandem stock appreciation
rights were exercised.
(b) Based on the highest sales price of A&B common stock on date of exercise
minus the exercise price.
(c) Based on the highest sales price of A&B common stock on December 31, 1997
($27.625 per share), minus the exercise price.
LONG-TERM INCENTIVE PLANS. The following table provides information,
with respect to the named executive officers, concerning threshold, target and
maximum award levels determined in 1997 under A&B's Three-Year Performance
Improvement Incentive Plan ("Three-Year Plan") for the three-year performance
cycle beginning 1998 and ending 2000. Under the Three-Year Plan, neither
shares, units nor other quantifiable rights are awarded to participants at the
outset of the three-year cycle. Instead, at the beginning of the plan cycle,
the Compensation and Stock Option Committee ("Committee"), with the advice and
recommendations of management, identifies the participants for the Three-Year
Plan and formulates the performance goals to be achieved for the plan cycle.
Goals are established for A&B as a whole, for each operating unit, and for each
individual participant. At the end of each plan cycle, results are compared
with goals, and awards are made accordingly. Aggregate awards for all
participants under the Three-Year Plan generally are limited by minimum pre-tax
income levels for A&B set by the Committee in advance of each plan cycle, and
if such minimum levels are not reached, the aggregate awards to participants
are reduced proportionately. Participants may elect to receive awards earned
under the Three-Year Plan entirely in cash or up to 50 percent in shares of A&B
stock and the remainder in cash. Alternatively, participants may defer all or
a portion of such awards. See "Executive Compensation - Deferred Compensation
Plan" above for information on the A&B Deferred Compensation Plan. Cash
amounts earned under the Three-Year Plan are reported in the "Summary
Compensation Table" above for the year for which those amounts are earned,
under column (h).
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts Under
Performance or Non-Stock Price-Based Plans (2)
Other Period ------------------------------------
Until Maturation
Name or Payout (1) Threshold($) Target($) Maximum($)
---- ---------------- ------------ --------- ----------
<S> <C> <C> <C> <C>
John C. Couch December 31, 2000 165,500 331,000 662,000
C. Bradley December 31, 2000 97,500 195,000 390,000
Mulholland
David G. Koncelik December 31, 2000 64,500 129,000 258,000
W. Allen Doane December 31, 2000 58,000 116,000 232,000
Glenn R. Rogers December 31, 2000 54,500 109,000 218,000
</TABLE>
___________________
(1) Performance period beginning January 1, 1998 and ending December 31, 2000.
(2) In addition to the amounts shown, if the executive officers elect to
receive any portion of their awards in restricted shares of A&B common
stock, the Committee may, in its sole discretion, award additional shares
of A&B common stock under the A&B Restricted Stock Bonus Plan valued at
up to 50 percent of the amount of the awards elected to be taken in stock.
Also, if the executive officers elect to defer all or a portion of their
awards under the A&B Deferred Compensation Plan and to convert the
deferred amount into common stock-equivalent units, the Committee may, in
its sole discretion, award additional common stock-equivalent units of up
to 50 percent of the number of such units into which the deferred award is
initially converted.
RETIREMENT PLAN. The A&B Retirement Plan for Salaried Employees, a
non-contributory defined benefit pension plan, provides retirement benefits to
A&B's salaried employees who are not subject to collective bargaining
agreements. The table below shows estimated annual retirement benefits to
covered participants at normal retirement age (age 65) under this plan,
including amounts payable under A&B's Excess Benefits Plan, pursuant to which
executives chosen by the Committee will receive additional credits and payments
equal to the difference between the maximum benefit permitted under federal tax
laws and the benefit the executives otherwise would receive under A&B plans.
PENSION PLAN TABLE
Remuneration Years of Service
- ------------ --------------------------------------------------------------
15 20 25 30 35
-- -- -- -- --
$ 125,000 $ 32,820 $ 43,760 $ 54,700 $ 60,170 $ 65,640
150,000 39,757 53,010 66,262 72,888 79,514
175,000 46,695 62,260 77,825 85,607 93,390
200,000 53,632 71,510 89,387 98,326 107,264
250,000 67,507 90,010 112,512 123,763 135,014
300,000 81,382 108,510 135,637 149,201 162,764
400,000 109,132 145,510 181,887 200,076 218,264
500,000 136,882 182,510 228,137 250,951 273,764
600,000 164,632 219,510 274,387 301,826 329,264
700,000 192,382 256,510 320,637 352,701 384,764
800,000 220,132 293,510 366,887 403,576 440,264
900,000 247,882 330,510 413,137 454,451 495,764
1,000,000 275,632 367,510 459,387 505,326 551,264
1,100,000 303,382 404,510 505,637 556,201 606,764
1,200,000 331,132 441,510 551,887 607,076 662,264
Retirement benefits are based on participants' average monthly compensa-
tion in the five highest consecutive years of their final 10 years of service.
Compensation includes base salary, overtime pay, certain commissions and fees,
shift differentials and one-year bonuses. Credited years of service as of
March 1, 1998 for the persons named in the "Summary Compensation Table" above
are: Mr. Couch - 21.5, Mr. Mulholland - 32.6, Mr. Koncelik - 9.3, Mr. Doane -
6.9, and Mr. Rogers - 22.6. The amounts are based on an ordinary straight life
annuity payable at normal retirement age, and do not give effect to social
security offsets.
SEVERANCE AGREEMENTS. A&B has entered into severance agreements (the
"Severance Agreements") with Messrs. Couch, Mulholland, Koncelik, Doane and
Rogers in order to encourage their continued employment with A&B by providing
them with greater security in the event of termination of their employment
following a change in control of A&B. A&B also has entered into Severance
Agreements with seven other employees, including three other executive
officers. Each Severance Agreement has an initial two-year term and is
automatically extended at the end of each term for a successive one-year
period, unless terminated by A&B. The Severance Agreements provide for certain
severance benefits if the executive's employment is terminated by A&B without
"cause" or by the executive for "good reason" following a "change in control"
of A&B (as those terms are defined in the Severance Agreements). Upon such
termination of employment, the executive will be entitled to receive a lump sum
severance payment equal to two times the sum of the executive's base salary
plus certain awards and amounts under various A&B incentive and deferred
compensation plans, and an amount equal to the spread between the exercise
price of outstanding options held by the executive and the higher of the then
current market price of A&B common stock or the highest price paid in
connection with a change in control of A&B. In addition, A&B will maintain all
(or provide similar) employee benefit plans for the executive's continued
benefit for a period of two years after termination. Each Severance Agreement
provides for a tax gross-up payment to offset any excise taxes that may become
payable by an executive by reason of Sections 280G and 4999 of the Internal
Revenue Code if the executive's employment is terminated without cause or for
good reason following a change in control of A&B.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee ("Committee") of the Board of
Directors directs the management of A&B's executive compensation program. The
Committee is composed entirely of independent, non-employee Board members, and
is assisted by an international management consulting firm that advises the
Committee on compensation matters.
COMPENSATION PHILOSOPHY
The Committee has implemented an executive compensation philosophy,
approved by the Board, that seeks to relate executive compensation to corporate
performance, individual performance and creation of shareholder value. This
philosophy is achieved through a performance-based compensation system,
pursuant to which a substantial portion of executive officers' compensation is
based on the short-term and long-term results achieved for A&B and A&B
shareholders and on the executive officers' individual performances. For 1997,
approximately 63% of the compensation of named executive officers in the above
Summary Compensation Table was in the form of non-salary, performance-based
compensation.
Consistent with this compensation philosophy, and to enhance the linkage
between the financial interests of executive officers and those of A&B
shareholders, the Board of Directors, in June 1994, approved stock ownership
guidelines that recommend specified minimum levels of ownership of A&B stock to
be met by executive officers within a period of five years. These recommended
minimum levels range from ownership of A&B stock with a value of one times base
salary to, in the case of the Chief Executive Officer, ownership of A&B stock
with a value of five times base salary.
An objective of the executive compensation philosophy is to enable
executive officers to receive above-average compensation, compared with
compensation of executive officers with comparable job responsibilities at
other companies, in order that A&B will be able to attract, retain and motivate
executive officers. Achievement of above-average compensation is tied to
corporate and individual results and the performance of A&B stock, so there is
no assurance that this level of compensation will be achieved.
Comparative data is provided by the Committee's independent compensation
consultant and is based on national compensation survey data from approximately
370 industrial companies, controlled for size and complexity. This survey data
includes none of the three companies (other than A&B) included in the Dow Jones
Marine Transportation Index used in the Shareholder Return Performance Graph
which appears in this Proxy Statement. A&B competes for executive talent
across a broad group of industries, so survey data based on a broad group of
industrial companies is more appropriate than survey data based on just the
companies in the Dow Jones Marine Transportation Index.
Consistent with the foregoing compensation objectives, the Committee will
not necessarily limit executive compensation to that amount deductible by A&B
under Section 162(m) of the Internal Revenue Code of 1986, as amended. The
Committee nevertheless will consider the deductibility of executive compensa-
tion as one factor in its consideration of compensation matters, and will
consider reasonable steps and alternatives to preserve the deductibility of
compensation payments.
In accordance with the Committee's executive compensation philosophy, the
major components of compensation under A&B's executive compensation program
consist of: (i) base salary, (ii) annual incentive compensation pursuant to
the One-Year Performance Improvement Incentive Plan ("One-Year Plan"), and
(iii) long-term incentive compensation pursuant to the Three-Year Performance
Improvement Incentive Plan ("Three-Year Plan") and the 1989 Stock Option/Stock
Incentive Plan.
BASE SALARY
Adjustments to base salary, if any, are considered annually by the
Committee. The Committee reviews the salary adjustments for the executive
officers (other than the Chief Executive Officer) with the Chief Executive
Officer and the senior human resources executive. In making a salary
adjustment, the Committee considers the executive officer's performance in the
past year, the previously-described survey data provided by its independent
compensation consultant pertaining to the salary level necessary for A&B to pay
competitively, and projected salary increases in the coming year for executive
officers in the diversified group of companies selected by its independent
compensation consultant, but does not consider any specific corporate
performance factor. For 1997, the base salaries of the Chief Executive Officer
and executive officers as a group were set to approximate a range between the
25th and 75th percentile of salaries in such diversified group.
ANNUAL INCENTIVES
The One-Year Plan provides performance-based incentives to eligible
executive officers and other key employees who contribute materially to the
financial success of A&B. In determining the size of an incentive award to an
executive officer, the Committee considers both corporate performance and
individual performance (the latter includes the performance of the business
unit for which the executive officer is responsible) in the past year.
Corporate performance counts toward 10%-60% of the incentive awards, depending
upon the executive officer's corporate responsibilities. For incentive awards
granted for the 1997 plan cycle, the corporate performance factors, and their
relative weights, were as follows: corporate profit before income tax (65%)
and return on adjusted net assets (35%). The relevant corporate performance
factors and their relative weights are determined annually by the Committee,
and therefore are subject to change for future plan cycles. At the beginning
of each one-year plan cycle, the goals for these corporate performance factors,
as well as the goals for the specific business units for which the executive
officers are responsible and the goals for the individuals themselves, are
identified, and threshold, target and maximum award levels are assigned. At
the end of each plan cycle, the amounts of the incentive awards, if any, are
determined by comparing results with the performance goals. Aggregate awards
under the One-Year Plan are limited by whether A&B meets certain levels of
corporate performance set by the Committee in advance of each plan cycle. The
Committee, however, retains the discretion to adjust awards if, in its
judgment, the awards do not accurately reflect the performance of A&B, the unit
or the individual.
LONG-TERM INCENTIVES
The Three-Year Plan is structured like the One-Year Plan, but provides
performance-based incentives to eligible executive officers and other key
employees who contribute materially to the financial success of A&B on the
basis of corporate performance and individual performance over a three-year
performance cycle. Corporate performance counts toward 10%-100% of the
incentive awards, depending upon the executive officer's corporate
responsibilities. For incentive awards granted for the 1995-1997 plan cycle,
the specific corporate performance factors, and their relative weights, were as
follows: corporate profit before income tax (50%), corporate cash flow from
operations (25%) and return on average total capital (25%). As with the One-
Year Plan, the relevant corporate performance factors and their relative
weights are determined annually by the Committee, and therefore are subject to
change for future plan cycles. In addition, as with the One-Year Plan, the
specific business unit performance factors used in assessing individual
performance, and their relative weights, vary by business unit and job
position. These business unit performance factors include, but are not limited
to, profit before income tax, cash flow from operations, revenue, cost
reduction, gross margin, and cost of crops.
Stock option grants under the 1989 Stock Option/Stock Incentive Plan are
considered annually by the Committee. Stock option grants are viewed as a
desirable long-term compensation method because they link directly the
financial interests of executive officers with those of shareholders. Stock
options are granted in the discretion of the Committee. In determining the
size of a stock option award to an executive officer, the Committee considers
the role of the executive officer and corporate performance and individual
performance in the past year, without assigning specific weight to any
particular factor. In determining the size of stock option awards, the
Committee does not consider amounts of stock options outstanding, but does
consider the size of previously-granted stock options and the aggregate size of
current awards.
CHIEF EXECUTIVE OFFICER COMPENSATION
In 1997, the Committee approved a base salary increase for the Chief
Executive Officer based on the Chief Executive Officer's performance in the
previous year and the salaries of other executive officers with comparable job
responsibilities in the diversified group of companies selected by its
independent compensation consultant. In this regard, the Committee's objective
was to maintain a competitive base salary, which was set to correspond to a
level between the average and the 75th percentile of base salaries in the
selected diversified group of companies. Mr. Couch's award under the Three-
Year Plan for the 1995-1997 performance cycle was below target, reflecting
above-target corporate profit before income tax, below-target return on average
total capital and below-target corporate cash flow from operations.
Mr. Couch's award under the One-Year Plan for 1997 was above target, reflecting
slightly below-target corporate profit before income tax and above-target
return on adjusted net assets. Mr. Couch also received a stock option grant
totaling 73,500 shares in 1997. That grant was based on an overall review of
corporate performance in 1996, without focus on any specific corporate
performance measure, and an assessment of Mr. Couch's past and expected
contributions.
The foregoing report is submitted by Mr. Stockholm (Chairman), and
Messrs. Denlea and King.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation and Stock Option Committee are
Mr. Stockholm, Chairman, and Messrs. Denlea and King. Since April 20, 1995,
Mr. Couch, Chairman of the Board, President and Chief Executive Officer of A&B,
has served as a member of the Executive Compensation Committee of First
Hawaiian, Inc. Mr. Dods, a director of A&B, is Chairman of the Board and Chief
Executive Officer of First Hawaiian, Inc., and Chairman of the Board and Chief
Executive Officer of its banking subsidiary, First Hawaiian Bank.
First Hawaiian Bank (i) has a 29 percent participation in and is agent
for a $155,000,000 revolving credit and term loan agreement with A&B and ABHI,
under which $35,000,000 was outstanding at February 13, 1998, (ii) has a
revolving credit agreement with A&B under which the amount outstanding
($5,500,000 at February 13, 1998), when combined with First Hawaiian Bank's
share of amounts drawn under the previously-described $155,000,000 revolving
credit and term loan agreement, may not exceed $45,000,000, (iii) has 16.34
percent and 16.08 percent beneficial interests in trusts that hold 20 percent
equity investments in the original hull and midbody improvements, respectively,
of the S.S. Lurline, a vessel chartered to Matson for 25 years, subject to an
option to renew the charter (expiring in August 1998) for up to five years,
which interests were received in consideration of an aggregate equity
investment participation commitment of $2,040,500, (iv) had a 22.9 percent
beneficial interest in a leveraged lease to lease containers to Matson, which
interest terminated in December 1997, (v) has issued a $12,800,000 letter of
credit on behalf of Matson for insurance security purposes, (vi) has a
40 percent participation in a $100,000,000 revolving credit facility with
California and Hawaiian Sugar Company, Inc. ("C&H"), under which no amount was
outstanding at February 13, 1998, and (vii) has a $10,000,000 line of credit
with C&H to support the issuance of letters of credit, under which $8,743,202
was outstanding at February 13, 1998.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on A&B's common stock against the
cumulative total return of the S&P Composite - 500 Stock Index and the Dow
Jones Marine Transportation Index. The Dow Jones Marine Transportation Index
is a published index consisting of four companies, including A&B. For
illustrative purposes, the Company again has chosen to display the Dow Jones
Real Estate Investment Index in the comparison.
*$100 INVESTED ON DECEMBER 31, 1992 IN ALEXANDER & BALDWIN, INC. COMMON STOCK,
THE S&P 500 STOCK INDEX, THE DJ MARINE TRANSPORTATION INDEX AND THE DJ REAL
ESTATE INVESTMENT INDEX. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
FISCAL YEARS ENDING DECEMBER 31.
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Alexander & Baldwin, Inc. 100 112 97 104 117 132
S&P Composite - 500 100 110 112 153 189 252
DJ Marine Transportation 100 128 118 134 164 197
DJ Real Estate Investment 100 117 111 138 185 219
APPROVAL OF 1998 STOCK OPTION/STOCK INCENTIVE PLAN
Subject to shareholder approval at the Annual Meeting, the Board of
Directors has adopted the Alexander & Baldwin, Inc. 1998 Stock Option/Stock
Incentive Plan (the "1998 Plan"). Employees, including officers and employee
directors, who provide valuable services to A&B or its subsidiaries will have
an opportunity under the 1998 Plan to acquire a proprietary interest in A&B, or
otherwise increase their proprietary interest, and thereby be encouraged to
remain in the employ of A&B or its subsidiaries.
A description of the 1998 Plan is set forth in Appendix A to this proxy
statement. The description is intended to be a summary of the material
provisions of the 1998 Plan and does not purport to be complete. A copy of the
1998 Plan will be furnished to any shareholder upon request.
The Board of Directors believes that competition for experienced and
qualified personnel makes it necessary for A&B to provide equity incentives in
order to attract and retain the services of key employees. A&B's existing
employee stock option plan, the 1989 Stock Option/Stock Incentive Plan, will
expire in January 1999. Accordingly, THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE 1998 STOCK OPTION/STOCK INCENTIVE PLAN.
The affirmative vote of a majority of the outstanding shares of A&B's common
stock is required for approval. Should such shareholder approval not be
obtained, the 1998 Plan will not be implemented.
APPROVAL OF THE 1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Subject to shareholder approval at the Annual Meeting, the Board of
Directors has adopted the Alexander & Baldwin, Inc. 1998 Non-Employee Director
Stock Option Plan (the "1998 Director Plan"). The purpose of the 1998 Director
Plan is to make service on A&B's Board more attractive to present and
prospective non-employee, or outside, directors, since the continued services
of qualified outside directors are considered essential to the management,
growth and sustained financial success of A&B.
A description of the 1998 Director Plan is set forth in Appendix B to
this proxy statement. The description is intended to be a summary of the
material provisions of the 1998 Director Plan and does not purport to be
complete. A copy of the 1998 Director Plan will be furnished to any share-
holder upon request.
Outside directors of A&B currently receive, under A&B's 1989 Non-Employee
Director Stock Option Plan ("1989 Director Plan"), an automatic grant, at each
annual meeting of the shareholders, of a stock option to purchase 3,000 shares
of A&B common stock at an exercise price equal to the fair market value of A&B
common stock on the date of grant. The options generally are exercisable six
months after the grant date, and the term of an option may not exceed 10 years.
As of February 13, 1998, options for 192,000 shares were outstanding under the
1989 Director Plan and 143,000 shares remained available for future issuance.
Each outside director reelected at the Annual Meeting will receive a 3,000-
share option grant under the 1989 Director Plan. If the 1998 Director Plan is
approved by shareholders, no further option grants will be made under the 1989
Director Plan, which will expire in January 1999, and the 1998 Director Plan
will serve as the successor option grant program for the outside directors.
The Board of Directors believes that competition for experienced and
qualified individuals makes it necessary for A&B to provide equity incentives
in order to attract and retain the services of qualified outside directors.
Accordingly, THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE 1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. The affirmative
vote of a majority of the outstanding shares of A&B's common stock is required
for approval. Should such shareholder approval not be obtained, the 1998
Director Plan will not be implemented.
ELECTION OF INDEPENDENT AUDITORS
The Board of Directors has nominated Deloitte & Touche LLP for election
as auditors of A&B for the ensuing year. Deloitte & Touche LLP and its
predecessors have served A&B as such since 1957. Representatives of Deloitte &
Touche LLP are expected to be present at the Annual Meeting, where they will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from shareholders.
OTHER BUSINESS
The Board of Directors of A&B knows of no other business to be presented
for shareholder action at the Annual Meeting. However, should matters other
than those set forth in this proxy statement properly come before the Annual
Meeting, the proxyholders named in the accompanying proxy will vote upon them
in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 1999
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of A&B must be received at the headquarters of A&B on or before
November 9, 1998 in order to be considered for inclusion in the 1999 proxy
statement and proxy.
By Order of the Board of Directors
/s/ Michael J. Marks
MICHAEL J. MARKS
Vice President, General
Counsel and Secretary
March 9, 1998
<PAGE>
APPENDIX A
DESCRIPTION OF THE ALEXANDER & BALDWIN, INC.
1998 STOCK OPTION/STOCK INCENTIVE PLAN
TERM. The Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive
Plan (the "Plan") was adopted by A&B's Board of Directors (the "Board") on
January 22, 1998, and will become effective as of such date, provided it is
approved by the shareholders at the 1998 Annual Meeting. The Plan will
terminate on the earlier of (i) the close of business on January 21, 2008 or
(ii) the date on which all shares available for issuance under the Plan have
been issued or canceled pursuant to (a) the exercise of outstanding stock
options under the Plan or (b) the issuance of shares under the Stock Issuance
Program (discussed below).
ADMINISTRATION. The Plan is administered by the Compensation and Stock
Option Committee (the "Committee") comprised of two or more Board members
appointed by the Board. The Committee has full authority to determine which
eligible individuals are to receive option grants, share right awards or direct
stock issuances under the Plan, the number of shares to be covered by each such
award, the date or dates on which the granted option is to become exercisable
or the shares are to be issued or to vest, and the maximum term for which any
granted option is to remain outstanding. In addition, the Committee has full
authority to accelerate the exercisability of outstanding options or the
issuance or vesting of shares under the Plan, all upon such terms and
conditions as it deems appropriate. The present members of the Committee are
Mr. Charles M. Stockholm, Chairman, and Messrs. Leo E. Denlea, Jr. and
Charles G. King.
The Committee also will have the authority, subject to the express pro-
visions of the Plan, to change the terms and conditions of any outstanding
option grant, share right award or unvested share issuance, but, without the
consent of the holder, no such change may affect adversely the holder's rights
and obligations under the Plan or the outstanding grant, share right award or
stock issuance.
ELIGIBILITY. Option grants, share right awards and direct stock
issuances may be made only to employees (including officers and employee
directors) of A&B or its 50-percent-or-more-owned subsidiaries (corporate or
non-corporate), and to non-employee directors of such subsidiaries. A&B
estimates that at present approximately 2,900 employees are eligible to receive
option grants, share right awards or direct stock issuances under the Plan,
including 13 executive officers.
Option grants, share right awards and direct stock issuances may be made
under the Plan to eligible employees, whether or not they previously have
received stock option grants, share right awards or direct stock issuances
under the Plan or under any other stock plan or other compensation or benefit
program of A&B or its subsidiaries. However, the maximum number of shares of
A&B common stock for which any one individual participating in the Plan may be
granted stock options, share right awards or direct stock issuances may not
exceed 500,000 shares in the aggregate per calendar year. The 500,000-share
limitation will be subject to periodic adjustment in the event of certain
changes in A&B's capital structure, as explained below. Non-employee members
of the Board will not be eligible to receive option grants, share right awards
or direct stock issuances under the Plan.
STOCK SUBJECT TO THE PLAN. The stock issuable under the Plan will be
shares of A&B's authorized but unissued common stock or shares of common stock
reacquired by A&B and held as Treasury shares ("Common Stock"). The total
number of shares of Common Stock issuable over the term of the Plan will not
exceed 2,100,000 shares, subject to periodic adjustment for certain changes in
A&B's capital structure, as explained below. Of the 2,100,000 shares, the
maximum number of shares of Common Stock issuable pursuant to share right
awards or direct stock issuances may not exceed 250,000 in the aggregate over
the term of the Plan, subject to the adjustment described below.
If any option granted under the Plan expires or terminates for any reason
prior to exercise in full, then the number of shares subject to the portion of
the option not so exercised will be available for future option grants, share
right awards or direct stock issuances under the Plan. Unvested shares of
Common Stock purchased by A&B pursuant to its repurchase rights under the Plan
will not be available for subsequent issuance. Should the exercise price of an
option granted under the Plan be paid with shares of Common Stock, or should
shares of Common Stock otherwise issuable under the Plan be withheld by A&B in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option under the Plan, then the number of shares of Common Stock
available for issuance under the Plan will be reduced only by the net number of
shares of Common Stock issued to the holder of such option, and not by the
gross number of shares for which the option is exercised.
In the event any change is made to the Common Stock issuable under the
Plan (whether such change occurs by reason of merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in capital structure effected
without A&B's receipt of consideration), then the maximum number and/or class
of securities issuable over the term of the Plan, the maximum number and/or
class of securities for which any one individual participating in the Plan may
be granted stock options, share right awards or direct share issuances under
the Plan per calendar year, and the number and/or class of securities which may
be issued in the aggregate pursuant to share right awards or direct stock
issuances, will be adjusted automatically to reflect such change, and
appropriate adjustments also will be made to the number and/or class of
securities and the price per share in effect under each outstanding option in
order to prevent dilution or enlargement of the rights and benefits thereunder.
VALUATION. The fair market value per share of Common Stock on any
relevant date will be the mean between the highest and lowest selling prices
per share of Common Stock on such date, as quoted on the Nasdaq National Market
(or any successor system). Should the Common Stock become traded on a national
securities exchange, then the fair market value per share will be the mean
between the highest and lowest selling prices on such exchange on the date in
question, as such price is quoted on the composite tape of transactions on such
exchange. If there is no reported sale of Common Stock on the Nasdaq National
Market (or national securities exchange) on the date in question, then the fair
market value will be the mean between the highest and lowest selling prices on
the Nasdaq National Market (or such securities exchange) on the last preceding
date for which such quotation exists. On February 13, 1998, the fair market
value of the Common Stock determined on such basis was $28.125 per share.
STRUCTURE OF THE PLAN. The Plan is divided into two separate components:
The Discretionary Option Grant Program and the Stock Issuance Program.
(1) DISCRETIONARY OPTION GRANT PROGRAM.
(a) TERMS. Under the Discretionary Option Grant Program, eligible
individuals may be granted options to purchase shares of Common Stock at
an option price equal to 100 percent of the fair market value per share
on the grant date.
Each option will be for a term of years (not in excess of ten)
determined by the Committee. The Committee will have the discretion to
make each option granted under the Plan immediately exercisable for the
full number of option shares or have the option become exercisable in
installments over the option term.
The option price will become due immediately upon exercise of an
option and may be paid in cash or in shares of Common Stock valued at
fair market value on the option exercise date.
(b) RELOAD OPTIONS.
(i) The Committee will have full power and authority,
exercisable in its sole discretion, either at the time an option is
granted under the Discretionary Option Grant Program or at any time while
such option remains outstanding, to incorporate a reload feature into
that option. To the extent an option with such a reload feature (the
"Original Option") subsequently is exercised through the delivery of
previously-acquired shares of Common Stock in payment of the exercise
price, the optionee automatically will be granted, at the time of such
exercise, a new option (the "Reload Option") to purchase the number of
shares of Common Stock so delivered. In addition, to the extent one or
more options granted with such a reload feature under the 1989 Stock
Option/Stock Incentive Plan ("1989 Plan") are exercised with shares of
Common Stock at a time when there are not enough shares of Common Stock
under the 1989 Plan to cover the Reload Option, then that Reload Option
will be granted under the new Plan.
(ii) Each Reload Option will be exercisable upon substantially
the same terms and conditions as the Original Option to which it relates,
except for the following differences:
(A) The exercise price per share will be equal to the
fair market value per share of Common Stock on the date the Reload
Option is granted. However, the Committee will have full power and
authority to structure the Reload Option so that the exercise price
per share will be in excess of the fair market value per share of
Common Stock on the grant date in the event such fair market value per
share is not more than one hundred fifty percent (150%) of the
exercise price per share in effect under the Original Option.
(B) In no event will any additional Reload Option be
granted in connection with the subsequent exercise of the first Reload
Option.
(C) The Committee will have full authority to set the
period of time which must elapse following the exercise of the
Original Option before the Reload Option will become exercisable.
Once that period has elapsed, the Reload Option will become
immediately exercisable for all of the shares of Common Stock at the
time subject to that Reload Option.
(2) STOCK ISSUANCE PROGRAM.
(a) TERMS. The Committee also has the authority to issue shares of
Common Stock as a reward for past services rendered to A&B or one of its
subsidiaries or as an incentive for future service with such entities.
In the Committee's discretion, the recipient either may be issued shares
that are vested fully and immediately upon issuance or that vest in one
or more installments, upon such terms and conditions as are determined by
the Committee, or may be granted share right awards that entitle the
recipient to receive a specific number of shares upon the completion of a
designated service period or the attainment of specified performance
goals.
The recipient may not transfer share right awards or unvested shares
of Common Stock, except in certain limited circumstances. The recipient,
however, will have all the rights of a shareholder with respect to the
unvested shares, including the right to vote such shares and to receive
all regular cash dividends paid on such shares.
(b) CANCELLATION OF SHARES. In the event the recipient should
cease to continue his or her employment with A&B for any reason
whatsoever while holding one or more unvested shares of Common Stock, or
in the event the performance objectives should not be attained with
respect to one or more unvested shares of Common Stock, then those shares
must immediately be surrendered to A&B for cancellation, and the
recipient thereafter will have no further shareholder rights with respect
to such shares. The Committee may, in its discretion, waive such
surrender and cancellation of unvested shares in whole or in part and
thereby effect the immediate vesting of the recipient's interest in the
shares of Common Stock as to which the waiver applies.
AMENDMENT OF THE PLAN. The Board may amend or modify the Plan in any or
all respects whatsoever. However, no such amendment or modification may,
without the consent of the holders, adversely affect rights and obligations
with respect to any stock options, share right awards or unvested Common Stock
at the time outstanding under the Plan. In addition, certain amendments may
require stockholder approval pursuant to applicable laws and regulations.
CHANGE IN CONTROL. In the event of a Change in Control (defined below),
then (i) the exercisability of each option outstanding under the Plan will
accelerate automatically so that each such option will become exercisable
immediately prior to the specified effective date for such transaction for the
total number of shares of Common Stock at the time subject to that option and
may be exercised for all or any portion of such shares, (ii) all of the
Corporation's outstanding rights to cancel or repurchase unvested shares under
the Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
and (iii) all shares of Common Stock not yet issued in connection with
outstanding share right awards shall be issued immediately as fully-vested
shares. A "Change in Control" shall mean:
(i) a merger or consolidation approved by A&B's shareholders
in which securities possessing 35% or more of the total combined voting
power of A&B's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction,
(ii) any approval by the shareholders of A&B of a plan of
complete liquidation or dissolution of A&B, or any sale, transfer or
other disposition of all or substantially all of the assets of A&B, other
than to an entity, at least 75% of the combined voting power of the
voting securities of which are owned by the shareholders of A&B in
substantially the same proportions as their ownership of A&B immediately
prior to such sale, or
(iii) any other change in control of a nature required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A under
the 1934 Act, whether or not A&B is at the time required to comply with
such Regulation 14A, provided that, without limitation, a change in
control shall in all events be deemed to have occurred if (a) a person
other than A&B or an affiliate of A&B becomes the beneficial owner of
securities of A&B representing 35% or more of the combined voting power
of A&B's outstanding securities, or (b) there is a change in the Board
occurring over a period of 24 consecutive months or less such that the
majority of the Board ceases to consist of individuals who either (I)
have served continuously on the Board since the beginning of such period
or (II) have been nominated for election by A&B's shareholders (or
appointed to the Board) by a vote of at least two-thirds of the directors
then still in office who have served continuously on the Board since the
beginning of the period, other than, in the case of either (I) or (II)
above, a director whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of
directors of A&B.
SHAREHOLDER RIGHTS. An option holder will have none of the rights of a
shareholder with respect to any shares covered by the option until the optionee
has exercised the option, paid the option price and satisfied all other
conditions precedent to the issuance of certificates for the purchased shares.
TRANSFERABILITY. During the optionee's lifetime, the option may be
exercised only by the optionee and will not be assignable or transferable other
than by will or the laws of inheritance.
TERMINATION OF EMPLOYMENT. Any option outstanding at the time of the
optionee's cessation of service for any reason shall remain exercisable for
such period of time thereafter as shall be determined by the Committee and set
forth in the documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
The Committee will have complete discretion, exercisable either at the
time the option is granted or at any time the option remains outstanding, to
(i) allow one or more options granted under the Plan to be exercised, during
the post-service exercise period, not only with respect to the number of shares
for which the option is exercisable at the time of the optionee's cessation of
service, but also with respect to one or more subsequent installments of
purchasable shares for which the option otherwise would have become exercisable
had such cessation of service not occurred, and (ii) extend the period of time
for which the option is to remain exercisable following the optionee's
cessation of service, from the post-service exercise period otherwise in effect
for that option to such greater period of time as the Committee deems
appropriate, but in no event beyond the expiration of the option term.
Any exercisable option held by the optionee at the time of death may be
exercised by the personal representative of the optionee's estate, or by the
person or persons to whom the option is transferred pursuant to the optionee's
will or in accordance with the laws of inheritance. However, such exercise
must occur no later than the tenth anniversary of the date of the option grant.
NO IMPAIRMENT OF A&B'S RIGHTS. The granting of options, share rights
awards or direct stock issuances under the Plan will not affect the right of
A&B to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
TAX WITHHOLDING. The Committee may provide one or more holders of
options with the election to have A&B withhold a portion of the shares
otherwise issuable to such holders upon the exercise of those options in order
to satisfy the Federal and state income tax liability incurred in connection
with the option exercise. Alternatively, the Committee may permit such holders
to deliver existing shares of A&B's Common Stock in satisfaction of such tax
liability.
FEDERAL TAX CONSEQUENCES. The Federal income tax treatment of the stock
options and stock issuances under the Plan may be summarized as follows:
(1) STOCK OPTIONS.
All options granted under the Plan will be non-statutory options
which are not intended to satisfy the requirements of Section 422 of the
Internal Revenue Code (the "Code"). No taxable income is recognized by
an optionee upon the grant of a non-statutory option. In general, the
optionee will recognize ordinary income, in the year in which the option
is exercised for vested shares, equal to the excess of the fair market
value of the purchased shares on the exercise date over the option price
paid for such shares, and the optionee will be required to satisfy the
tax withholding requirements applicable to such income.
Special provisions of the Code apply to the acquisition of Common
Stock under a non-statutory option if the purchased shares are unvested
and, accordingly, subject to certain repurchase rights of A&B or other
substantial risks of forfeiture. These special provisions may be
summarized as follows:
(a) The optionee will not recognize any taxable income at the time
the option is exercised for such unvested shares, but will have to report
as ordinary income, as and when those shares vest, an amount equal to the
excess of (a) the fair market value of the shares on their vesting date
over (b) the option price paid for such shares.
(b) The optionee may, however, elect under Section 83(b) of the
Code to include as ordinary income, for the year in which the non-
statutory option is exercised for the unvested shares, an amount equal
to the excess of (a) the fair market value of the purchased shares on the
exercise date (determined as if the shares were not subject to A&B's
repurchase right or other risk of forfeiture) over (b) the option price
paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the
purchased shares subsequently vest.
A&B will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee in connection with the
exercise of the non-statutory option. In general, the deduction will be
allowed for the taxable year of A&B in which the ordinary income is
recognized by the optionee. A&B anticipates that the deduction
attributable to the ordinary income recognized by optionees upon the
exercise of non-statutory options granted under the Plan will not be
subject to the $1 million limitation per covered individual on the
deductibility of compensation paid to certain executive officers.
(2) SHARE RIGHT AWARDS AND DIRECT STOCK ISSUANCES.
An individual who is issued vested shares of Common Stock under the
Stock Issuance Program will recognize ordinary income at the time of
issuance equal to the fair market value of the issued shares. An
individual who is issued unvested Common Stock may elect, through the
filing of a Section 83(b) election under the Code, to include as ordinary
income at the time of issuance an amount equal to the fair market value
of the unvested shares. If the Section 83(b) election is made, the
individual will not recognize any additional income as his or her
interest in the issued shares subsequently vests. Should the individual
not make the Section 83(b) election, then he or she will not recognize
any taxable income at the time the unvested Common Stock is issued, but
will have to report as ordinary income, for the taxable year in which his
or her interest in such Common Stock vests, an amount equal to the fair
market value of the shares at the time of vesting.
A&B will be entitled to an income tax deduction equal to the
ordinary income recognized by the participant in connection with the
issued shares. Such deduction will be allowed in the taxable year of A&B
in which such ordinary income is recognized by the optionee, subject to
the $1 million limitation per covered individual on the deductibility of
compensation paid to certain executive officers.
ACCOUNTING TREATMENT. Shares of Common Stock issued under the Stock
Issuance Program will result in a direct compensation expense to A&B's earnings
equal to the fair market value of those shares on the issue date. The grant of
options with an exercise price equal to 100% of the fair market value of the
option shares on the grant date will not result in any direct charge to A&B's
earnings. However, the fair value of those options is required to be disclosed
in the notes to A&B's financial statements, and A&B also must disclose the pro-
forma impact those options would have upon A&B's reported earnings if the value
of those options at the time of grant were treated as a compensation expense.
The number of outstanding options also is a factor in determining A&B's
earnings per share on a diluted basis.
NEW PLAN BENEFITS. At present, no option grants, share right awards or
direct stock issuances have been made under the Plan.
<PAGE>
APPENDIX B
DESCRIPTION OF THE ALEXANDER & BALDWIN, INC.
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
PURPOSE. On January 22, 1998, the Board of Directors of A&B
(the "Board") adopted, subject to shareholder approval, the Alexander &
Baldwin, Inc. 1998 Non-Employee Director Stock Option Plan (the "Plan"). The
purpose of the Plan is to make service on the Board more attractive to present
and prospective outside directors, since the continued services of qualified
non-employee, or outside, directors are considered essential to the management,
growth and sustained financial success of A&B.
ELIGIBILITY. Each non-employee member of the Board will be eligible to
receive automatic option grants pursuant to the provisions of the Plan. There
currently are seven non-employee directors on the Board.
STOCK SUBJECT TO THE PLAN. The stock issuable under the Plan will be
shares of A&B's authorized but unissued common stock or shares of common stock
reacquired by A&B and held as Treasury shares ("Common Stock"). The aggregate
number of shares issuable under the Plan will not exceed 130,000 shares,
subject to the adjustments described below.
If any option granted under the Plan expires or terminates for any reason
prior to exercise, then the number of shares subject to the portion of the
option not so exercised will be available for future option grants under the
Plan. Should the exercise price of an option granted under the Plan be paid
with shares of Common Stock, or should shares of Common Stock otherwise
issuable under the Plan be withheld by A&B in satisfaction of any applicable
withholding taxes incurred in connection with the exercise of an option under
the Plan, then the number of shares of Common Stock available for issuance
under the Plan will be reduced only by the net number of shares of Common Stock
issued to the holder of such option, and not by the gross number of shares for
which the option is exercised.
Should the total number of shares at any time available for grant under
the Plan not be sufficient for the automatic grants to be made at that
particular time to the directors, then the available shares will be allocated
proportionately among all the automatic grants to be made at that time.
In the event any change is made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, combination of shares or
other change affecting the outstanding Common Stock as a class without A&B's
receipt of consideration, then appropriate adjustments will be made to the
aggregate number and/or class of shares issuable under the Plan, and to the
number and/or class of shares for which options subsequently are to be granted
to each non-employee Board member in accordance with the terms of the Plan.
The number of shares and the exercise price per share of the Common Stock
subject to outstanding options also will be adjusted in order to prevent the
dilution or enlargement of benefits thereunder.
If A&B is the surviving entity in any merger or other business
combination which does not result in the termination of outstanding options
pursuant to the provisions of the Plan, then each such continuing option will
be adjusted appropriately to apply and pertain, after such merger or business
combination, to the number of securities which would be issuable, in
consummation of such merger or business combination, to an actual holder of
Common Stock for the same number of shares as are subject to such option
immediately prior to such merger or other business combination. Appropriate
adjustments also will be made to (i) the option price payable per share,
provided the aggregate option price will remain the same, and (ii) the number
and class of securities for which automatic grants may be made under the Plan
in the future.
VALUATION. The fair market value per share of Common Stock on any
relevant date will be the mean between the highest and lowest selling prices
per share of Common Stock on such date, as quoted on the Nasdaq National Market
(or any successor system). Should the Common Stock become traded on a national
securities exchange, then the fair market value per share will be the mean
between the highest and lowest selling prices on such exchange on the date in
question, as such price is quoted on the composite tape of transactions on such
exchange. If there is no reported sale of Common Stock on the Nasdaq National
Market (or national securities exchange) on the date in question, then the fair
market value will be the mean between the highest and lowest selling prices on
the Nasdaq National Market (or such securities exchange) on the last preceding
date for which such quotation exists. On February 13, 1998, the fair market
value of the Common Stock determined on such basis was $28.125 per share.
AUTOMATIC GRANTS. At each Annual Meeting of Shareholders, beginning with
the 1999 Annual Meeting, each individual who is at the time elected as a non-
employee Board member automatically will be granted a non-statutory stock
option to purchase 3,000 shares of Common Stock. The option price per share
will be 100 percent of the fair market value per share of Common Stock on the
grant date. Shareholder approval of the Plan also shall constitute pre-
approval of each option granted pursuant to the provisions of the Plan, and of
the subsequent exercise of that option in accordance with those provisions.
Upon exercise of the option, the option price for purchased shares will
be payable immediately in cash or cash equivalents, shares of Common Stock
valued at fair market value on the date of exercise, or any combination of the
foregoing.
TERM AND EXERCISABILITY OF OPTIONS. Each option will become exercisable
in three successive equal annual installments upon the optionee's completion of
each year of Board service over the three-year period measured from the grant
date; provided, however, that, as described below in "Termination of Service",
(i) options held by the optionee at the time of his/her death, but not other-
wise fully exercisable, automatically shall accelerate and become exercisable
for all of the option shares, and (ii) options held by the optionee at the time
of his/her termination of Board service by reason of disability, retirement at
or after age 72, or termination with five or more years of Board service, shall
continue to become exercisable for any remaining installments for up to a 36-
month period following the date of such termination. The option thereafter
will remain exercisable until the expiration or sooner termination of the
option term. Each granted option will have a maximum term of 10 years,
measured from the automatic grant date.
CHANGE IN CONTROL. In the event of a Change in Control, the
exercisability of each option outstanding under the Plan will accelerate
automatically so that each such option will become exercisable, immediately
prior to the specified effective date for such transaction, for the total
number of shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of such shares. A "Change in Control" shall
mean:
(i) a merger or consolidation approved by A&B's shareholders
in which securities possessing 35% or more of the total combined voting
power of A&B's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) any approval by the shareholders of A&B of a plan of
complete liquidation or dissolution of A&B, or any sale, transfer or
other disposition of all or substantially all of the assets of A&B, other
than to an entity, at least 75% of the combined voting power of the
voting securities of which are owned by the shareholders of A&B in
substantially the same proportions as their ownership of A&B immediately
prior to such sale, or
(iii) any other change in control of a nature required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A under
the 1934 Act, whether or not A&B is at the time required to comply with
such Regulation 14A, provided that, without limitation, a change in
control shall in all events be deemed to have occurred if (a) a person
other than A&B or an affiliate of A&B becomes the beneficial owner of
securities of A&B representing 35% or more of the combined voting power
of A&B's outstanding securities, or (b) there is a change in the Board
occurring over a period of 24 consecutive months or less such that the
majority of the Board ceases to consist of individuals who either (I)
have served continuously on the Board since the beginning of such period
or (II) have been nominated for election by A&B's shareholders (or
appointed to the Board) by a vote of at least two-thirds of the directors
then still in office who have served continuously on the Board since the
beginning of the period, other than, in the case of either (I) or (II)
above, a director whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of
directors of A&B.
TRANSFERABILITY. Options will not be assignable or transferable other
than by will or the laws of inheritance, and during the optionee's lifetime,
the option may be exercised only by the optionee.
SHAREHOLDER RIGHTS. An option holder will have none of the rights of a
shareholder with respect to any shares covered by the grant until such
individual has exercised the option, paid the option price and been issued a
stock certificate for the purchased shares.
TERMINATION OF SERVICE. Should an optionee cease to be a member of the
Board for any reason (other than death, disability, retirement at or after age
72, or termination with five or more years of Board service) while the holder
of one or more automatic grants under the Plan, then each such grant will
remain exercisable, for the number of shares for which the grant is exercisable
at the time of such cessation of Board service, for a six-month period
following the date of such cessation of Board membership.
Should any optionee cease Board service by reason of death, then any
outstanding grants held by him/her at that time automatically shall accelerate
and become immediately exercisable for all of the shares at the time subject to
that option, and may be exercised by the personal representative of the
optionee's estate, or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the laws of
inheritance. However, such exercise must occur prior to the earlier of (i) the
tenth anniversary of the grant date of the option or (ii) the expiration of 12
months following the optionee's death. Upon the occurrence of the earlier
event, the option will terminate and cease to be exercisable.
Should an optionee cease to be a Board member by reason of disability,
retirement at or after age 72, or termination with five or more years of Board
service, then each automatic grant at the time held by such optionee will
remain exercisable, and will continue to become exercisable, for any remaining
installments during the 36 months following the date of cessation of Board
membership.
In no event will any option remain exercisable after the specified
expiration of the 10-year option term.
NO IMPAIRMENT OF A&B'S RIGHTS. Nothing in this Plan or any grant made
pursuant to the Plan will be construed or interpreted so as to affect adversely
or otherwise impair A&B's right to remove any optionee from service on the
Board at any time in accordance with the provisions of applicable law.
EFFECTIVE DATE AND TERM OF PLAN. The Plan will become effective on the
date of its adoption by the Board. However, no automatic grants will be made
under the Plan unless the Plan is approved by the shareholders at the 1998
Annual Meeting. The Plan will terminate upon the earliest to occur of (i) the
close of business on January 21, 2008, (ii) the date on which all shares
available for issuance under the Plan have been issued pursuant to the exercise
of the options, or (iii) the date on which all outstanding options are
terminated or cashed out in connection with the change in control provisions of
the Plan. If the date of termination is determined under clause (i) above,
then any option grants outstanding on such date will not be affected by the
termination of the Plan and will continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants.
FEDERAL TAX CONSEQUENCES. All options granted under the Plan will be
non-statutory options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code (the "Code"). The Federal income tax
treatment of such options may be summarized as follows:
No taxable income is recognized by an optionee upon the grant of a non-
statutory option. In general, the optionee will recognize ordinary income, in
the year in which the option is exercised for vested shares of Common Stock,
equal to the excess of the fair market value of the purchased shares at the
date of exercise over the exercise price paid for those shares.
A&B will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee in connection with the exercise of
the non-statutory option. The deduction will be allowed for the taxable year
of A&B in which the ordinary income is recognized by the optionee.
NEW PLAN BENEFITS. No options will be granted under the Plan until the
1999 Annual Meeting of Shareholders.
ACCOUNTING TREATMENT. The grant of options with an exercise price equal
to 100% of the fair market value of the option shares on the grant date will
not result in any direct charge to A&B's earnings. However, the fair value of
those options is required to be disclosed in the notes to A&B's financial
statements, and A&B also must disclose the pro-forma impact those options would
have upon A&B's reported earnings if the value of those options at the time of
grant were treated as a compensation expense. The number of outstanding
options also is a factor in determining A&B's earnings per share on a diluted
basis.
<PAGE>
PROXY CARD
A&B
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 23, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. C. Couch, W. A. Dods, Jr., and M. G. Shaw,
and each of them, proxies with full power of substitution, to vote the shares
of stock of Alexander & Baldwin, Inc., which the undersigned is entitled to
vote at the Annual Meeting of Shareholders of the Corporation to be held on
Thursday, April 23, l998, and any adjournments thereof, on the matters set
forth in the Notice of Meeting and Proxy Statement, as follows:
(continued and to be signed on reverse side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4 BELOW.
---
Please mark your votes as indicated in this example / X /
1. ELECTION OF DIRECTORS (Check one box only):
FOR WITHOUT AUTHORITY
all nominees to vote for all nominees
listed below listed below
__ __
|__| |__|
M. J. Chun, J. C. Couch, L. E. Denlea, Jr., W. A. Dods, Jr., C. G. King,
C. R. McKissick, C. B. Mulholland, M. G. Shaw, C. M. Stockholm.
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK THE "FOR ALL
NOMINEES" BOX ABOVE AND WRITE THE NAME OF THE NOMINEE FOR WHOM YOU WISH
TO WITHHOLD AUTHORITY IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE 1998 STOCK __ __ __
OPTION/STOCK INCENTIVE PLAN: |__| |__| |__|
3. PROPOSAL TO APPROVE THE 1998 NON-EMPLOYEE __ __ __
DIRECTOR STOCK OPTION PLAN: |__| |__| |__|
4. PROPOSAL TO ELECT DELOITTE & TOUCHE LLP __ __ __
AS THE AUDITORS OF THE CORPORATION: |__| |__| |__|
5. In their discretion on such other matters as may properly come before the
meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2, 3 AND 4 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
DATED: , 1998
--------------------------------------
PLEASE SIGN EXACTLY AS NAME(S) APPEARS AT LEFT:
____________________________________________
Signature
____________________________________________
Signature
IMPORTANT: WHEN STOCK IS IN TWO OR MORE NAMES, ALL MUST SIGN. WHEN SIGNING AS
EXECUTOR, TRUSTEE, GUARDIAN OR OFFICER OF A CORPORATION, GIVE TITLE AS SUCH.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
