<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Hawaiian Electric Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
HAWAIIAN ELECTRIC INDUSTRIES, INC. - PO BOX 730 - HONOLULU, HI 96808-0730
(LOGO)
Robert F. Clarke
President and
Chief Executive Officer
March 8, 1996
Dear Fellow Stockholder:
On behalf of the Board of Directors, it is once again my pleasure to invite
you to attend the Annual Meeting of Stockholders of Hawaiian Electric
Industries, Inc. (HEI). The meeting will be held on the Company's premises in
Room 805 on the eighth floor of the Pacific Tower in Honolulu, Hawaii on April
23, 1996, at 9:30 a.m. A map showing the location of the meeting site appears on
the last page of the Proxy Statement.
The matters expected to be acted upon at the meeting are described in the
attached Proxy Statement. In addition, we will review significant events of 1995
and their impact on you and your Company. Corporate officers will be available
before and after the meeting to talk with you and answer any questions you may
have.
As a stockholder of HEI, it is important that your views be represented. To
help us obtain the representation needed to conduct business at the meeting, we
ask that you promptly sign, date and return the enclosed proxy in the postage
prepaid envelope.
I join the management team of HEI in expressing our appreciation for your
confidence and support. I look forward to seeing you at the Annual Meeting in
Honolulu.
Sincerely,
LOGO
(LOGO) Recycled
<PAGE> 3
- --------------------------------------------------------------------------------
HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 RICHARDS STREET [LOGO]
HONOLULU, HAWAII 96813
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1996
To the Holders of Common Stock
Notice is hereby given that the Annual Meeting of Stockholders of Hawaiian
Electric Industries, Inc. will be held on Tuesday, April 23, 1996, at 9:30 a.m.
in the Pacific Tower, 8th floor, Room 805, 1001 Bishop Street, Honolulu, Hawaii
96813, for the following purposes:
1. To elect a Class II director.
2. To elect five Class III directors.
3. To elect the independent auditor of the Company.
4. To amend the 1987 Stock Option and Incentive Plan, as amended in
1992.
5. To transact such other business as may be properly brought before
the meeting.
Only holders of record of Common Stock at the close of business on February
14, 1996, will be entitled to vote at the meeting. If your shares are registered
in the name of a brokerage firm (street name) or trustee and you plan to attend
the meeting, please obtain from the firm or trustee a letter or other evidence
of your beneficial ownership of those shares to facilitate your admittance to
the meeting.
All stockholders are urged to attend the meeting in person or by proxy. It
is important that your shares be represented at the meeting, regardless of the
size of your holding. Therefore, we urge you to SIGN, DATE and RETURN AS SOON AS
POSSIBLE the enclosed proxy in the postage prepaid envelope furnished for that
purpose.
Your attention is directed to the Proxy Statement which appears on the
following pages.
Betty Ann M. Splinter, Secretary
Hawaiian Electric Industries, Inc.
Honolulu, Hawaii
March 8, 1996
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction......................................................................... 1
Voting Rights........................................................................ 1
Shares Held in Street Name........................................................... 2
Election of Directors................................................................ 2
Management Proposal 1. Election of Class II Director............................ 3
Management Proposal 2. Election of Class III Directors.......................... 3
Board of Directors................................................................... 7
Committees of the Board......................................................... 7
Compensation of Directors....................................................... 8
Attendance at Meetings.......................................................... 8
Nonemployee Director Retirement Plan............................................ 8
Indemnification and Limitation of Liability.......................................... 8
Security Ownership of Directors and Executive Officers............................... 10
Security Ownership of Certain Beneficial Owner....................................... 11
Section 16 Proxy Statement Disclosure................................................ 11
Executive Management Compensation.................................................... 12
Summary Compensation Table...................................................... 12
Option Grants in Last Fiscal Year............................................... 13
Aggregated Option Exercises and Fiscal Year-End Option Values................... 14
Long-Term Incentive Plan ("LTIP") Awards........................................ 15
Pension Plans................................................................... 16
Change-in-Control Agreements.................................................... 17
Compensation Committee Report on Executive Compensation......................... 18
Stockholder Performance Graph................................................... 22
Compensation Committee Interlocks and Insider Participation..................... 23
Indebtedness of Management........................................................... 24
Transactions with Management and Directors........................................... 25
Management Proposal 3. Election of Auditor........................................... 25
Management Proposal 4. Amendment of 1987 Stock Option and Incentive Plan, as amended
in 1992............................................................................ 25
Submission of Stockholder Proposals.................................................. 31
Other Business....................................................................... 31
Exhibit A............................................................................ A-1
</TABLE>
<PAGE> 5
HAWAIIAN ELECTRIC INDUSTRIES, INC.
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
This Proxy Statement is furnished to stockholders by Hawaiian Electric
Industries, Inc. ("HEI" or the "Company") in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders of the Company to be held
on April 23, 1996, and at any adjournments thereof. The mailing address of the
principal executive offices of the Company is P.O. Box 730, Honolulu, Hawaii
96808. This Proxy Statement and the accompanying form of proxy, together with
the Company's annual report to stockholders for the fiscal year ended December
31, 1995, are being sent to stockholders commencing approximately March 8, 1996.
The annual report is not to be regarded as proxy soliciting material or as
a communication by means of which any solicitation is to be made.
All of the expenses of the solicitation of proxies for the Annual Meeting
will be borne by the Company. The Company may request banks, brokerage houses
and other custodians, nominees, and fiduciaries to forward proxies and proxy
material to the beneficial owners of stock of the Company and to request
authority for the execution of proxies, and will reimburse them for their
expenses. Proxies may be solicited personally, or by telephone, telegram or mail
by certain directors, officers and regular employees of the Company without
additional compensation for such services. In addition, the Company has retained
D. F. King & Co., Inc., to assist in the solicitation of proxies for an
estimated fee not to exceed $8,000, plus reasonable out-of-pocket expenses.
VOTING RIGHTS
Only holders of Common Stock of record at the close of business on February
14, 1996, will be entitled to vote. On February 14, 1996, 29,857,858 shares of
Common Stock were outstanding. Each share of Common Stock is entitled to one
vote on each of the matters presented at the Annual Meeting. Under the By-Laws
of the Company, the holders of voting stock of the Company do not have
cumulative voting rights in the election of directors.
Each stockholder returning a proxy to the Company has the right to revoke
it at any time before it is voted by 1) submitting a later dated proxy in proper
form, 2) by notifying the Secretary of the Company in writing of such
revocation, or 3) by appearing at the Meeting, requesting a return of the proxy
and voting the shares in person.
Unless your proxy is mutilated or otherwise received in such form or at
such time as to render it not votable, the shares represented by your proxy will
be voted as directed, and if no direction is indicated it will be voted for all
management proposals as set forth in this Proxy Statement. If you wish to give a
proxy to someone other than the holders of the Company's proxies, you may cross
out all three names appearing on the enclosed proxy and insert the name of
another person to vote the shares at the meeting. For your convenience, a
self-addressed envelope is enclosed, requiring no postage if mailed within the
United States.
The holders of a majority of the shares of the Company's Common Stock,
present in person or by proxy at the Annual Meeting, constitute a quorum for the
transaction of business. Electing a Class II director, electing Class III
directors, electing the independent auditor, and amending the 1987 Stock Option
and Incentive Plan, as amended in 1992, require the affirmative vote of a
majority of such quorum. For purposes of determining whether a proposal has
received a majority vote, abstentions will be included in the vote totals.
Therefore, in the case of all matters brought before the meeting other than the
election of directors, abstentions will have the effect of a vote against the
<PAGE> 6
proposal. In instances where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned a proxy
(broker nonvotes), those shares will not be included in the vote totals and,
therefore, will have no effect on the vote.
D. F. King & Co. will act as tabulator for broker and bank proxies while
the Company has contracted with an affiliate company to act as tabulator for the
proxies of the other stockholders of record for the Annual Meeting. The identity
and vote of any stockholder shall not be disclosed to any persons other than
those acting as tabulators except (i) as necessary to meet applicable legal
requirements, (ii) in the case of any contested proxy solicitation, as may be
necessary to permit proper parties to verify the propriety of proxies presented
by any person and the results of the voting, and (iii) in the event a
stockholder has made a written comment on the proxy form.
If you own shares of HEI stock in the Dividend Reinvestment and Stock
Purchase Plan ("DRIP") and/or the Hawaiian Electric Industries Retirement
Savings Plan ("HEIRS") (including shares held in the Hawaiian Electric
Industries Stock Ownership Plan which was originally adopted as a Tax Reduction
Act Stock Ownership Plan ("TRASOP")), your share ownership is shown on the
enclosed proxy. The respective plan trustee will vote the shares of stock held
in the Plans in accordance with the directions received from stockholders
participating in the Plans. For both DRIP and HEIRS (excluding TRASOP), the
trustee will vote all the shares of Common Stock for which it has received no
voting instruction in the same proportion as it votes shares for which it
receives instruction. The trustee is prohibited from voting the shares in TRASOP
for which it receives no voting instruction.
SHARES HELD IN STREET NAME
Stockholders whose shares are held in the name of a brokerage firm or
trustee or other holder of record are invited to attend the meeting, but may not
vote at the meeting unless they have first obtained a proxy, executed in the
stockholder's favor, from the brokerage firm or trustee.
ELECTION OF DIRECTORS
The Board of Directors currently consists of 15 persons, divided into three
classes of equal size: Class I, Class II, and Class III, with the term of office
of one class expiring each year. Terms for all current Class I directors expire
in 1997 and for all Class II directors in 1998. All five Class III nominees are
being proposed for election at this Annual Meeting for a new three-year term
expiring in 1999.
The persons named in the proxy will vote your stock for the election of one
director to serve in Class II and five directors to serve in Class III of the
Company's Board of Directors for terms expiring at the 1998 and 1999 Annual
Meeting, respectively, and thereafter until their successors are duly elected
and qualified.
Although it is not contemplated that any Board of Directors nominee will
decline or be unable to serve, should such a situation arise prior to the
meeting, the proxy holders may vote in their discretion for a suitable
substitute.
2
<PAGE> 7
MANAGEMENT PROPOSAL 1. -- ELECTION OF CLASS II DIRECTOR
Harwood D. Williamson, a Class II director whose term expires at the 1998
Annual Meeting, retired effective September 1, 1995. As provided in the By-Laws
of the Company, the Board of Directors, upon recommendation of the Nominating
Committee, appointed T. Michael May, effective the same date, as a Class II
director to fill the vacancy created by the retirement of Mr. Williamson until
the Annual Meeting. Mr. May is proposed for election as a Class II director with
a term expiring at the 1998 Annual Meeting.
The following sets forth the business experience during the past five years
and other directorships of Mr. May.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF T. MICHAEL MAY TO SERVE AS A CLASS II DIRECTOR.
T. MICHAEL MAY
AGE 49
DIRECTOR SINCE 1995
Senior vice president of the Company since September
1, 1995. President, chief executive officer and director of
Hawaiian Electric Company, Inc. and chairman of the boards
of Maui Electric Company, Limited and Hawaii Electric Light
Company, Inc. since September 1, 1995. From February 1,
1992, to August 31, 1995, he was senior vice president of
Hawaiian Electric Company, Inc. He was a principal in the
Management Assets Group from September 1989 to January
1992. He is also a director of Hawaiian Electric Industries
Charitable Foundation and HEI Power Corp.
MANAGEMENT PROPOSAL 2. -- ELECTION OF CLASS III DIRECTORS
Five Class III directors are being proposed for election for new three-year
terms (expiring in 1999) at this Annual Meeting. Ben F. Kaito, a Class III
director, retired on December 31, 1995. As provided in the By-Laws of the
Company, the Board of Directors, upon recommendation of the Nominating
Committee, appointed Don E. Carroll as a Class III director to fill the
unexpired term of Mr. Kaito, effective January 16, 1996.
The following sets forth the name, age, year first elected or appointed as
a director of the Company, positions with the Company or business experience
during the past five years, and a list of directorships of the five nominees for
Class III directors as well as the Class I and II directors (except Mr. May) who
will continue to serve on the Board of Directors pursuant to their prior
elections.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF THE NOMINEES TO SERVE AS CLASS III DIRECTORS.
3
<PAGE> 8
NOMINEES FOR CLASS III DIRECTORS --
Terms would end at the 1999 Annual Meeting.
<TABLE>
<S> <C> <C> <C> <C>
- ------------------- ------------------- ------------------- ------------------- -------------------
DON E. CARROLL EDWIN L. CARTER RICHARD HENDERSON BILL D. MILLS OSWALD K. STENDER
AGE 54 AGE 70 AGE 67 AGE 44 AGE 64
DIRECTOR SINCE 1996 DIRECTOR SINCE 1985 DIRECTOR SINCE 1981 DIRECTOR SINCE 1988 DIRECTOR SINCE 1993
President, chief President and President and Chairman of the Trustee, Kamehameha
executive director director board and chief Schools/Bishop
officer, and di- of Bishop Trust of HSC, Inc. and executive officer Estate.
rector of Oceanic Company, Limited its subsidiaries. of Bill Mills
Cablevision. Vice from 1984 until his Development and Director of
president of Time retirement in May Investment Company, Hawaiian Electric
Warner Cable. 1993. Director of Inc. Industries
Hawaiian Electric Charitable
Director of Director of Company, Inc., Director of Grace Foundation, Malama
Pacific Guardian Hawaiian Electric Hawaii Electric Pacific Corporation Pacific Corp. and
Life, Aloha United Company, Inc., HEI Light Company, and Hawaii Theatre its subsidiary
Way, American Red Investment Corp. Inc., Hawaiian Tug Center. Trustee, companies, Hawaii
Cross-Hawaii and Hawaii Council & Barge Corp., Hawaii Pacific Community
Chapter, Hawaii on Economic Young Brothers, University, St. Reinvestment Corp.,
International Film Education. Limited, Hawaiian Andrew's Priory, Pacific Housing
Festival, Hawaii Chairman, Board of Natural Water and The Nature Assistance
Nature Center, and Regents, Chaminade Company, Ltd., Conservancy of Corporation, Hawaii
University of Ha- University of InterIsland Hawaii. Member, Real Estate
waii Koa Anuenue. Honolulu. Director Petroleum, Inc., Board of Governors, Research and
Secretary-treasurer and past president Hawaii Island Iolani School. Education Center,
and director of the of the Boy Scouts Economic Hawaii Nature
Hawaii Cable of America-Aloha Development Board, Center, Friends of
Television Council. National Big Island Iolani Palace, and
Association. director and past Substance Abuse Help, Understanding
Chairman, Oceanic president of the Council, United Way and Group Support
Cable Foundation. Pacific Region of Statewide (HUGS). Director
President, Boy the Navy League of Association of and past president
Scouts of the United States. Hawaii, and Hawaii of the American
America-Aloha Chairman, Board of Island Chamber of Right of Way
Council and The 200 Directors, USS Mis- Commerce. President Association.
Club Advisory souri Memorial and trustee, Lyman President, Mutual
Board. Member, Association, Inc. House Memorial Housing Association
Hawaii Business Honorary member and Museum. Wharton Real Estate
Roundtable, Hawaii past chairman of Center. Trustee,
Executives Council, the Bishop Museum Mr. Henderson was Cash Assets Trust,
Air Force Civilian Board of Directors. the chairman of the Hawaiian Tax-Free
Advisory Council, Member, Board of board of Ocean Trust, Pacific
Army Civilian Managers, Farms of Hawaii, Capital Funds, The
Advisory Council, Mid-Pacific Inc. (OFH), an Peregrine Fund, The
USS Missouri Institute and Board aquaculture company Nature Conservancy
Advisory Committee, of Management, that filed a of Hawaii, Academy
Honolulu Community Armed Services petition in June of the Pacific, and
Media Council, YMCA. Trustee and 1992 for voluntary St. Andrew's
National Cable treasurer, Board of bankruptcy under Priory. Member,
Television As- Trustees of the Chapter 7 of the Board of Governors,
sociation, and Academy of the U.S. Bankruptcy Iolani School.
Cable Television Pacific. Code. The assets of
Administration and OFH in the
Marketing Society, bankruptcy
Inc. proceedings were
abandoned to the
secured creditor,
and the Trustee was
discharged. HSC,
Inc. owned an
approximate 1%
interest in OFH.
</TABLE>
4
<PAGE> 9
CLASS I DIRECTORS --
Directors continuing in office with terms ending at the 1997 Annual Meeting.
<TABLE>
<S> <C> <C> <C> <C>
- ------------------- ------------------- ------------------- ------------------- -------------------
ROBERT F. CLARKE JOHN D. FIELD A. MAURICE MYERS RUTH M. ONO, PH.D. JAMES K. SCOTT, ED.D.
AGE 53 AGE 70 AGE 55 AGE 60 AGE 44
DIRECTOR SINCE 1989 DIRECTOR SINCE 1986 DIRECTOR SINCE 1991 DIRECTOR SINCE 1987 DIRECTOR SINCE 1995
President and chief Vice president-- President, chief Vice president of President of
executive officer regulatory affairs operating officer, The Queen's Health Punahou School
of the Company. of GTE Service and Systems. since
Corporation from director of America August 1994. From
Chairman of the 1982 until his West Airlines, Inc. Director of 1985 to June 1994,
board of Hawaiian retirement in from January 1994 American Savings he served as
Electric Company, October 1985. until his Bank, F.S.B., Aloha Headmaster of The
Inc., American retirement United Way, Catlin Gabel School
Savings Bank, in December 1995. Japanese in Portland, Oregon.
F.S.B., From June 1985 to Cultural Center of Trustee, the
Hawaiian Tug & December 1993, he Hawaii, Japan- College Board.
Barge Corp., Young was president and America Society
Brothers, Limited, chief executive of Hawaii, Hawaii
Malama Pacific officer of Aloha Children's Trust
Corp., Airgroup, Inc. Fund,
Pacific Energy Director of Greater Urasenke
Conservation Phoenix Economic Foundation,
Services, Inc., and Council. Member, Tokushukai
HEI Power Corp. National Board of International, Inc.,
President and Advisors, Leadership America
director University of National Advisory
of Hawaiian Arizona. Board, and
Electric Soroptimist
Industries International of
Charitable the Americas
Foundation. Foundation.
Director Chairman of the
of Chamber of Board of Governors
Commerce of of the Plaza Club.
Hawaii, Aloha Honorary Dean
United Way, and Visiting
and Rehabilitation Professor of Toho
Hospital of the University School
Pacific. Member, of Medicine. Member,
Hawaii Business Air Force Civilian
Roundtable and Advisory Council
Air Force Civilian and the Spark M.
Advisory Council. Matsunaga Peace
Trustee, The Nature Foundation Board of
Conservancy of Governors.
Hawaii and Hawaii
Pacific University.
</TABLE>
5
<PAGE> 10
CLASS II DIRECTORS --
Directors continuing in office with terms ending at the 1998 Annual Meeting
<TABLE>
<S> <C> <C> <C>
- ------------------- ------------------- ------------------- -------------------
VICTOR HAO LI, DIANE J. PLOTTS KELVIN H. TAKETA JEFFREY N. WATANABE
S.J.D. AGE 60 AGE 41 AGE 53
AGE 54 DIRECTOR SINCE 1987 DIRECTOR SINCE 1993 DIRECTOR SINCE 1987
DIRECTOR SINCE 1988 General partner of Vice president and Partner in the law
Co-chairman, Asia Mideast and China director of the firm
Pacific Consulting Trading Company, Asia of Watanabe, Ing &
Group. formerly known as Pacific Region, The Kawashima.
Hemmeter Investment Nature Conservancy.
Director of Company. Director of
Hawaiian Director of HISCO, American Savings
Electric Industries Director of Ltd. and Bank, F.S.B.,
Charitable Hawaiian Sustainable Hawaiian Electric
Foundation, Electric Company, Conservation. Industries
HEI Power Corp., Inc., American Sav- Charitable
AES China ings Bank, F.S.B., Foundation, HEI
Generating Malama Pacific Power Corp., Grace
Corporation, and Corp. and its Pacific Corporation
The Queen's Health subsidiary and affiliates,
Systems. Chairman companies, Hawaii Suntory
of the board of Theatre Center, Resorts, Inc.,
Queen's University of Hawaiian Host, Inc.
International Hawaii Foundation, and affiliates,
Corporation and Plaza Club, and Child & Family
Pacific States Honolulu Country Service--
University. Member, Club. Philippines,
Advisory Committee, Rehabilitation
First Amendment Hospital of the
Center and The Pacific
Immigrant Center. and Foundation, and
Chamber of Com-
merce of Hawaii.
Trustee, University
of Hawaii
Foundation and
Children and Youth
Foundation of the
Philippines. Chair,
The Nature Conser-
vancy of Hawaii,
The Queen's Health
Systems, The
Queen's Medical
Center, The Alger
Foundation, and the
Smithsonian Insti-
tution National
Board.
</TABLE>
6
<PAGE> 11
BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Board of Directors has four standing committees: Audit, Compensation,
Executive and Nominating. The names of the members, number of meetings held in
1995, and the duties and responsibilities of each committee are shown in the
table below.
<TABLE>
<CAPTION>
NUMBER OF
MEETINGS HELD PRINCIPAL DUTIES AND
COMMITTEE MEMBERS DURING 1995 RESPONSIBILITIES
- ------------- ---------------------- ------------- ------------------------------------
<S> <C> <C> <C>
AUDIT Diane J. Plotts* 6 Reviews with management, the
John D. Field internal auditor and the Company's
Victor H. Li independent auditor the activities
Ruth M. Ono of the internal auditor, the results
Kelvin H. Taketa of the annual audit by the
independent auditor and the
financial statements which are
included in the Company's annual
report to stockholders. The Audit
Committee holds such meetings as it
deems advisable to review the
financial operations of the Company.
COMPENSATION Edwin L. Carter* 2 Reviews the current salary
Richard Henderson administration policies and
Bill D. Mills compensation strategy of the
Oswald K. Stender Company. See pages 18 to 21 for the
Jeffrey N. Watanabe Compensation Committee Report on
Executive Compensation.
EXECUTIVE Richard Henderson* 2 Reviews and discusses organizational
Edwin L. Carter and other matters. The Executive
Robert F. Clarke** Committee possesses and exercises
Diane J. Plotts such powers of the Board as are
Jeffrey N. Watanabe expressly delegated to it by the
Board from time to time and is
responsible for considering and
making recommendations to the Board
concerning any questions relating to
the business and affairs of the
Company.
NOMINATING Jeffrey N. Watanabe* 2 Recommends to the Board of Directors
A. Maurice Myers the slate of nominees for director
James K. Scott to be submitted to the stockholders
at the Annual Meeting. The Committee
will consider recommendations for
nominees for director from all
sources, including stockholders.
Stockholders who wish to recommend
nominees should write to the
Company's Nominating Committee, in
care of the Secretary, Hawaiian
Electric Industries, Inc., P.O. Box
730, Honolulu, Hawaii 96808. Such
recommendations must be received by
December 9, 1996, to be considered
for the 1997 Annual Meeting of
Stockholders.
</TABLE>
- ---------------
*denotes chair
**employee director
7
<PAGE> 12
COMPENSATION OF DIRECTORS
Nonemployee directors of the Company received the following compensation
for their services as directors during 1995 (employee members of the Board of
Directors do not receive a retainer for service as a director of the Company and
are not compensated for attendance at any meetings of the Board or committees of
the Board).
<TABLE>
<CAPTION>
COMPENSATION AMOUNT
------------ -------
<S> <C>
Annual Board Retainer $12,000
Stock component -- 174 shares*
Cash component -- $6,000**
Board Attendance Fee (per meeting) 700
Committee Attendance Fee (per meeting) 700
Committee Attendance Fee for Committee Chair
(per meeting) 800
</TABLE>
- ---------------
* One-half of retainer pursuant to the Nonemployee Director Stock Plan. The
number of shares of stock distributed was based on a price of $34.375 per
share, which is equal to the closing sales price of HEI Common Stock on the
New York Stock Exchange on April 18, 1995, as quoted in "Composite
Transactions" in The Wall Street Journal, divided into $6,000, with a cash
payment made in lieu of any fractional share.
** Paid quarterly in equal installments. In order to receive the fourth quarter
installment, directors are required to have attended at least 75% of the
combined total of all Board meetings and all meetings of Board committees on
which they serve.
ATTENDANCE AT MEETINGS
In 1995, there were twelve regular monthly meetings and two special
meetings of the Board of Directors. All incumbent directors attended at least
75% of the combined total meetings of the Board and committees on which they
served, except Oswald K. Stender.
NONEMPLOYEE DIRECTOR RETIREMENT PLAN
The Nonemployee Director Retirement Plan, which is not funded, was
established in 1989 and provides certain retirement benefits to nonemployee
directors of the Company or any subsidiary of the Company that elects to
participate in the Plan. No director who serves as an officer or employee of the
Company or any of its subsidiaries is entitled to receive benefits under the
Plan. Upon retirement from service as a nonemployee director or age 65,
whichever is later, nonemployee directors who have served for at least five
consecutive years and who meet the other requirements of the Plan receive
payments each year in an amount equal to the annual retainer which was
established for the year in which the nonemployee director retired. The annual
payments will continue to be paid for a period equal to the number of years of
active service accumulated by a nonemployee director as provided in the Plan or
terminate in the event of the nonemployee director's death.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company has entered into Indemnity Agreements with each of the
Company's directors and executive officers in substantially the form approved by
stockholders at the 1989 Annual Meeting. Each Indemnity Agreement provides for
mandatory indemnification of the director or officer to the fullest extent
permitted by law, including indemnification against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action by or in the right of the
Company. The Indemnity Agreement provides for the mandatory payment of expenses
incurred by the director or officer in defending a threatened or actual
proceeding before its final disposition, subject to the obligation to
8
<PAGE> 13
repay such expenses if it is later determined that the officer or director is
not entitled to indemnification.
Each Indemnity Agreement specifically excludes indemnification (i) with
respect to proceedings initiated by the officer or director unless the Board of
Directors determines indemnification to be appropriate; (ii) with respect to
amounts covered by insurance or payable otherwise than under the Indemnity
Agreement; (iii) on account of profits made from the purchase or sale of stock
by a director or officer which are subject to the "short-swing profits"
liability provisions of federal or state securities laws; (iv) on account of an
action or omission of the officer or director finally adjudicated to be willful
misconduct or to have been knowingly fraudulent or deliberately dishonest; or
(v) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not permitted by law.
The Securities and Exchange Commission takes the position that
indemnification against liability arising under the Securities Act of 1933 is
contrary to public policy and is unenforceable.
At the 1990 Annual Meeting, the stockholders approved a proposal to amend
the Restated Articles of Incorporation of the Company to add a new Article
Fourteenth eliminating the personal liability of its directors for monetary
damages to the fullest extent permitted by Hawaii law.
9
<PAGE> 14
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the shares of Common Stock beneficially owned by
each director, named executive officers as listed in the Summary Compensation
Table on page 12 (except Mr. Williamson), and by directors and executive
officers as a group, as of February 14, 1996, based on information furnished by
the respective individuals.
<TABLE>
<CAPTION>
AMOUNT OF
COMMON STOCK
NAME OF INDIVIDUAL AND NATURE OF
OR GROUP BENEFICIAL OWNERSHIP TOTAL
------------------ -------------------- -------
<S> <C> <C>
NONEMPLOYEE DIRECTORS
Don E. Carroll.......................................................... 948(a) 948
-------
Edwin L. Carter......................................................... 2,525(a) 2,525
-------
John D. Field........................................................... 1,025(a)
1,149(b)
1,944(d) 4,118
-------
Richard Henderson....................................................... 1,527(a) 1,527
-------
Victor Hao Li........................................................... 1,265(b)
250(c) 1,515
-------
Bill D. Mills........................................................... 3,092(a)
4(c) 3,096
-------
A. Maurice Myers........................................................ 241(a)
1,002(b) 1,243
-------
Ruth M. Ono............................................................. 1,032(a) 1,032
-------
Diane J. Plotts......................................................... 1,275(a) 1,275
-------
James K. Scott.......................................................... 176(a) 176
-------
Oswald K. Stender....................................................... 1,511(a) 1,511
-------
Kelvin H. Taketa........................................................ 1,398(a) 1,398
-------
Jeffrey N. Watanabe..................................................... 1,175(a)
467(b)
2(c)
1,016(e) 2,660
-------
EMPLOYEE DIRECTORS AND EXECUTIVE OFFICERS
Robert F. Clarke........................................................ 3,182(a)
10,000(b)
89,483(f) 102,665
-------
T. Michael May.......................................................... 587(a)
562(b)
2,000(f) 3,149
-------
OTHER NAMED EXECUTIVE OFFICERS
Peter C. Lewis.......................................................... 2,297(a)
261(c)
5,704(f) 8,262
-------
Wayne K. Minami......................................................... 1,536(a)
3,882(b)
10,208(f) 15,626
-------
Robert F. Mougeot....................................................... 524(a)
2,834(b)
5,704(f) 9,062
-------
All directors and executive officers as a group (24 persons)............ 29,592(a)
21,386(b)
1,706(c)
1,944(d)
1,016(e)
144,866(f) 200,510*
-------
</TABLE>
10
<PAGE> 15
- ---------------
* The directors and executive officers of Hawaiian Electric Industries as a
group beneficially owned 0.67% of the Company's Common Stock on February 14,
1996, and no one director or officer owned more than 0.34% of such stock.
(a) Sole voting and investment power.
(b) Shared voting and investment power (shares registered in name of respective
individual and spouse).
(c) Shares owned by spouse, children or other relatives sharing the home of the
director or an officer in the group and in which personal interest of the
director or officer is disclaimed.
(d) Mr. Field is co-trustee of the Catharine P. Field Trust and shares voting
and investment powers over the 1,944 shares.
(e) Mr. Watanabe is sub-trustee of the Jeffrey N. Watanabe Profit Sharing Plan
Sub-Trust and has sole voting and investment powers over the 1,016 shares.
(f) Stock options, including accompanying dividend equivalent shares,
exercisable within 60 days after February 14, 1996, under the 1987 Stock
Option and Incentive Plan, as amended in 1992.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER
The following table sets forth information as to the beneficial ownership
of each person known to the Company to own more than 5% of the outstanding
Common Stock as of December 31, 1995.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) CLASS
---------------- ------------ ----------
<S> <C> <C>
Franklin/Templeton 2,142,480 7.3%
Group of Funds
777 Mariners Island Boulevard
P.O. Box 7777
San Mateo, California 94403
</TABLE>
- ---------------
(1) This information is based on a Schedule 13G, dated February 12, 1996, filed
with the Securities and Exchange Commission that discloses that the
Franklin/Templeton Group of Funds has sole voting power over 2,140,480
shares and shared dispositive power over 2,142,480 shares.
SECTION 16 PROXY STATEMENT DISCLOSURE
Section 16 of the Securities Exchange Act of 1934, as amended, requires
that officers, directors, and holders of more than 10% of the Common Stock file
reports of their trading in equity securities of the Company with the Securities
and Exchange Commission. Based on a review of Section 16 forms filed by its
reporting persons during the last fiscal year, the Company believes that its
reporting persons complied with all applicable Section 16 filing requirements.
11
<PAGE> 16
EXECUTIVE MANAGEMENT COMPENSATION
The Executive Management Compensation section contains the following tables
and a graph: Summary Compensation Table; Option Grants in Last Fiscal Year;
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values; Long-Term Incentive Plan -- Awards in Last Fiscal Year; and Stockholder
Performance Graph. Also included in this section of the Proxy Statement is a
Pension Plan Table, a report on Change-in-Control agreements, a report on
executive compensation which has been issued by the Compensation Committee of
the Board of Directors, and a discussion of Compensation Committee Interlocks
and Insider Participation.
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the annual and
long-term compensation of the chief executive officer and the five other most
highly compensated executive officers of the Company serving during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION
------------------------------- AWARDS
OTHER ---------- PAYOUTS ALL
ANNUAL SECURITIES ---------- OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY(2) BONUS(3) SATION(4) OPTIONS(5) PAYOUTS(6) SATION(7)
POSITION(1) YEAR ($) ($) ($) (#) ($) ($)
------------------ ---- --------- -------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert F. Clarke...................... 1995 $440,000 $108,301 $ -0- 20,000 -- $17,852
President & CEO 1994 452,967 199,149 101,033 20,000 $ -0- 14,195
1993 403,800 160,578 -0- 15,000 127,500 10,942
Harwood D. Williamson................. 1995 230,000 57,920 86,184 15,000 -- 22,956
Senior Vice President 1994 387,367 100,174 76,465 15,000 -0- 20,663
1993 341,333 -0- 68,544 8,000 66,150 18,843
T. Michael May........................ 1995 226,000 41,987 -0- 4,000 N/A 8,177
Senior Vice President 1994 199,667 32,995 -0- -0- N/A 8,151
1993 191,000 -0- 105,138 4,000 N/A 4,796
Wayne K. Minami....................... 1995 221,000 -0- -0- 8,000 -- 77
President & CEO 1994 219,733 39,166 -0- 8,000 85,875 72
American Savings Bank, F.S.B. 1993 203,300 66,894 -0- 5,000 104,755 54
Robert F. Mougeot..................... 1995 217,000 25,892 -0- 5,000 -- 8,598
Financial Vice President 1994 206,667 58,608 -0- 5,000 -0- 7,147
1993 195,666 41,059 -0- 5,000 45,675 5,517
Peter C. Lewis........................ 1995 188,000 31,046 -0- 5,000 -- 11,871
V.P.--Administration 1994 179,667 53,561 -0- 5,000 -0- 10,809
1993 171,333 40,006 -0- 5,000 37,800 10,320
</TABLE>
- ---------------
(1) Mr. Williamson retired as HEI Senior Vice President and Hawaiian Electric
Company, Inc. President and CEO effective September 1, 1995 and Mr. May
succeeded Mr. Williamson effective the same date.
(2) Includes a one-time lump sum transitional payment in 1994, representing two
years of "normalized" insider directors' fees following a decision by the
Compensation Committee to discontinue all insider directors' fees, effective
May 1, 1994; the table includes lump sum payments of $40,000 for Mr. Clarke,
$49,000 for Mr. Williamson and $9,800 for Mr. Minami. Also includes
directors' fees of $6,300 for the period January 1 through April 30, 1994
and $23,800 for 1993 for Mr. Clarke; directors' fees of $7,700 for the
period January 1 through April 30, 1994 and $28,000 for 1993 for Mr.
Williamson; and directors' fees of $1,400 for the period January 1 through
April 30, 1994 and $4,900 for 1993 for Mr. Minami.
(3) The named executive officers are eligible for an incentive award under the
Company's annual Executive Incentive Compensation Plan ("EICP"). EICP bonus
payouts are reflected as compensation for the year earned.
12
<PAGE> 17
(4) Covers perquisites of $105,138 for Mr. May for 1993 which he recognized as
imputed income under the Internal Revenue Code, including $40,026 for moving
expenses grossed up for taxes and $63,282 for closing costs on the sale of
his San Diego home grossed up for taxes. Covers perquisites of $101,033 for
Mr. Clarke for 1994 which he recognized as imputed income under the Internal
Revenue Code, including $91,306 under the category club membership
(representing once in a lifetime reimbursement of initiation fees of $48,000
grossed up for taxes, plus reimbursement of monthly dues not grossed up for
taxes). Covers interest earned on deferred compensation by Mr. Williamson at
above-market interest rates on deferred annual and long-term incentive plan
payouts as well as interest earned at market rates on deferred long-term
incentive plan payouts totalling $86,184 for 1995, $76,465 for 1994 and
$68,544 for 1993.
(5) Except for Mr. May, options granted in 1995 and earlier years contained
dividend equivalents as further described below under the heading Option
Grants in Last Fiscal Year.
(6) Long-Term Incentive Plan ("LTIP") payouts are determined in April each year
for the three-year cycle ending on December 31 of the previous calendar
year; if there is a payout, the amount is reflected as LTIP compensation in
the table for the previous year for the named executive officers. In April
1994, LTIP payouts were made for the 1991-1993 performance cycle and are
reflected as LTIP compensation in the table for 1993. In April 1995, an LTIP
payout was made only to Mr. Minami for the 1992-1994 performance cycle and
is reflected as LTIP compensation in the table for 1994. The determination
of whether there will be a payout under the 1993-1995 LTIP will not be made
until later this year.
(7) Represents amounts accrued by the Company for certain death benefits
provided to the named executive officers, as more fully covered in the
Compensation Committee Report on page 21 under the heading, "Other
Compensation Plans".
OPTION GRANTS IN LAST FISCAL YEAR
Set forth in the following table is information on the stock options which
were granted to the six named executive officers on April 18, 1995, all of which
were nonqualified stock options. The practice of granting stock options, which
include dividend equivalent shares, has been followed each year since 1987.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF GRANT
UNDERLYING TOTAL OPTIONS DATE
OPTIONS GRANTED TO EXERCISE PRESENT
GRANTED(1) EMPLOYEES IN PRICE VALUE(2)
(#) FISCAL YEAR ($/SHARE) EXPIRATION DATE ($)
---------- ------------- --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Robert F. Clarke....... 20,000 14% $ 32.83 April 18, 2005 $ 136,400
Harwood D. Williamson.. 15,000 11 32.83 April 18, 2005 102,300
T. Michael May......... 4,000 3 32.83 April 18, 2005 11,280
Wayne K. Minami........ 8,000 6 32.83 April 18, 2005 54,560
Robert F. Mougeot...... 5,000 4 32.83 April 18, 2005 34,100
Peter C. Lewis......... 5,000 4 32.83 April 18, 2005 34,100
</TABLE>
- ---------------
(1) For the 53,000 option shares granted with an exercise price of $32.83 per
share to the named executive officers (except Mr. May), additional dividend
equivalent shares are granted at no additional cost throughout the four-year
vesting period (vesting in equal installments) which begins on the date of
grant. Dividend equivalents are computed, as of each dividend record date,
both with respect to the number of shares under the option and with respect
to the number of dividend equivalent shares previously credited to the
participant and not issued during the period prior to the dividend record
date. The 4,000 option shares were granted to Mr. May without additional
dividend equivalent shares. Accelerated vesting is provided in the
13
<PAGE> 18
event a Change-in-Control occurs. No stock appreciation rights have been
granted under the Company's current benefit plans.
(2) Based on a Binomial Option Pricing Model which is a variation of the
Black-Scholes Option Pricing Model. For the stock options granted on April
18, 1995, with a 10-year option period, an exercise price of $32.83, and
with additional dividend equivalent shares granted for the first four years
of the option (except for Mr. May), the Binomial Value adjusted for
forfeiture risk is $6.82 per share. The following assumptions were used in
the model: Stock Price: $32.83; Exercise Price: $32.83; Term: 10 years;
Volatility: 0.333; Interest Rate: 6.25%; and Dividend Yield: 6.57%. The
following were the valuation results: Binomial Option Value: $2.82; Dividend
Credit Value: $4.00; and Total Value: $6.82.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table shows the stock options, including dividend
equivalents, exercised by the named executive officers in 1995. Also shown is
the number of unexercised options and the value of unexercised in the money
options, including dividend equivalents, at the end of 1995. Under the Stock
Option and Incentive Plan, dividend equivalents have been granted to each
executive officer as part of the stock option grant, except for Mr. May's 1993
and 1995 stock option grants and a one-time, premium-priced grant to Messrs.
Clarke and Williamson in May 1992.
Dividend equivalents permit a participant who exercises a stock option to
obtain at no additional cost, in addition to the option shares, the amount of
dividends declared on the number of shares of Common Stock with respect to which
the option is exercised during the period between the grant and the exercise of
the option. Dividend equivalents are computed, as of each dividend record date
throughout the four-year vesting period (vesting in equal installments), which
begins on the date of grant, both with respect to the number of shares
underlying the option and with respect to the number of dividend equivalent
shares previously credited to the executive officer and not issued during the
period prior to the dividend record date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (INCLUDING IN THE MONEY OPTIONS
DIVIDEND EQUIVALENTS) (INCLUDING DIVIDEND EQUIVALENTS)
DIVIDEND VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END(1)(2)
SHARES EQUIVALENTS VALUE REALIZED ---------------------- --------------------------------
ACQUIRED ACQUIRED REALIZED ON DIVIDEND EXERCISABLE/ EXERCISABLE/
ON EXERCISE ON EXERCISE ON OPTIONS EQUIVALENTS UNEXERCISABLE UNEXERCISABLE
(#) (#) ($) ($) (#) ($)
------------ ------------ ----------- ------------ ---------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert F.
Clarke........... 25,000 7,256 $ 60,450 $256,144 89,031/51,744 $267,205/427,487
Harwood D.
Williamson...... 64,000 10,916 262,473 410,245 40,000/0 0/0
T. Michael May.... -- -- -- -- 2,000/6,000 960/24,640
Wayne K. Minami... 7,500 2,189 17,313 79,078 10,053/19,776 92,547/163,417
Robert F.
Mougeot......... 18,750 5,357 86,391 204,570 4,421/14,088 34,077/116,382
Peter C. Lewis.... 10,000 2,790 14,347 99,381 4,421/14,088 34,077/116,382
</TABLE>
- ---------------
(1) All options were in the money (where the option price is less than the
closing price on December 31, 1995) except the 1992 premium-priced stock
option grant without dividend equivalents with an exercise price of $41.00
per share.
(2) Value based on closing price of $38.75 per share on the New York Stock
Exchange on December 29, 1995.
14
<PAGE> 19
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS
The table below sets forth a listing of LTIP awards made to the named
executive officers during 1995. The table shows potential payments that are tied
to the achievement of better than average performance over a three-year period
(1995-1997) relating to two separate goals for all the named executive officers
except Mr. Minami, who has a third goal in addition to the two goals listed
immediately below. Mr. Williamson became ineligible for an LTIP award for the
three-year period (1995-1997) due to his retirement from the Company effective
September 1, 1995.
The two goals are (1) return on average common equity (weighted 40%), and
(2) total return to shareholders (weighted 60%). The weighting of each goal
applies to all the named executive officers except Mr. Minami. The Company's
performance is measured against the Edison Electric Institute Index of 100
Investor-Owned Electric Companies as of December 31, 1997 ("Peer Group"). This
is the same Peer Group used for the Stockholder Performance Graph shown on page
22. However, the performance of the LTIP Peer Group is calculated on a
noncapitalized weighted basis whereas the Stockholder Performance Graph Peer
Group is calculated on a capitalized weighted basis. The LTIP uses a
noncapitalized weighted basis so as not to give a disproportionate emphasis to
the larger companies in the Edison Electric Institute Index. For Mr. Minami, the
two goals set forth above are weighted (1) return on average common equity
(20%), and (2) total return to shareholders (30%). Mr. Minami's third goal
(weighted 50%) is based on a return on average common equity for American
Savings Bank, F.S.B. for the same three-year LTIP cycle.
Threshold minimum awards with respect to each goal will be earned if the
Company's performance equals the average performance of the Peer Group with
respect to that goal. Mr. Minami's threshold minimum for his third goal, which
must be achieved in at least two out of three years during the LTIP cycle, is a
return on average common equity of 12%. Maximum awards will be earned on the
return on average common equity goal if the Company's performance is 2 1/2
percentage points above the average of the return on average common equity of
the Peer Group. Maximum awards will be earned on the total return to
shareholders goal if the Company's performance is 5 percentage points above the
average of the total return to shareholders of the Peer Group. For Mr. Minami,
the maximum award on his third goal will be earned if the return on average
common equity equals or exceeds 16%. Earned awards are distributed in the form
of 60% cash and 40% Company Common Stock with the maximum award level for each
executive officer ranging from 75% to 100% of the midpoint of the officer's
salary grade range at the end of the performance cycle.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
---------------------------
PERFORMANCE CYCLE THRESHOLD(1) MAXIMUM
ENDING DATE ($) ($)
----------------- ------------ --------
<S> <C> <C> <C>
Robert F. Clarke..................... 12/31/97 $157,410 $477,000
T. Michael May....................... 12/31/97 58,500 175,600
Wayne K. Minami...................... 12/31/97 62,000 186,000
Robert F. Mougeot.................... 12/31/97 57,000 171,000
Peter C. Lewis....................... 12/31/97 47,250 141,750
</TABLE>
- ---------------
(1) Assumes meeting minimum threshold on all goals; however, if only one goal
(weighted 40%) is met, the minimum threshold estimated future payout would
be: Mr. Clarke -- $62,964; Mr. May -- $23,400; Mr. Mougeot -- $22,800; and
Mr. Lewis -- $18,900. For Mr. Minami, if only one goal (weighted 20%) is
met, the minimum threshold estimated future payout would be $12,400. There
is no LTIP payout unless the minimum threshold is met on at least one of the
goals.
15
<PAGE> 20
PENSION PLANS
All regular employees (including the named executive officers) of the
Company are covered by noncontributory, qualified defined benefit pension plans.
The plans provide retirement benefits at normal retirement (age 65), reduced
early retirement benefits and death benefits. The named executive officers
except Mr. Minami participate in the Retirement Plan for Employees of HEI and
Participating Subsidiaries ("HEI Plan"). Mr. Minami is a participant in the
American Savings Bank Retirement Plan ("ASB Plan").
Due to certain Internal Revenue Code limitations on qualified plan
benefits, executives affected by these limits are also covered under the
Hawaiian Electric Industries, Inc. Excess Benefit Plan ("Excess Plan") and the
Hawaiian Electric Industries, Inc. Excess Pay Supplemental Executive Retirement
Plan ("Excess Pay SERP"), which are noncontributory, nonqualified plans.
The following table shows estimated annual pension benefits payable upon
retirement under the HEI Plan, Excess Plan and Excess Pay SERP based on
remuneration that is covered under the three plans and years of service with the
Company and all of its subsidiaries.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000........................ $ 30,600 $ 40,800 $ 51,000 $ 61,200 $ 67,000
150,000........................ 45,900 61,200 76,500 91,800 100,500
200,000........................ 61,200 81,600 102,000 122,400 134,000
250,000........................ 76,500 102,000 127,500 153,000 167,500
300,000........................ 91,800 122,400 153,000 183,600 201,000
350,000........................ 107,100 142,800 178,500 214,200 234,500
400,000........................ 122,400 163,200 204,000 244,800 268,000
450,000........................ 137,700 183,600 229,500 275,400 301,500
</TABLE>
The HEI Plan provides a monthly retirement pension for life. Benefits are
determined by multiplying the product of years of credited service and 2.04%
(product not to exceed 67%) times the participant's Final Average Compensation
(average base salary for any consecutive 36 months that produce the highest
monthly average). As of December 31, 1995, the named executive officers had the
following number of years of credited service under the HEI Plan: Mr. Clarke, 8
years; Mr. May, 3 years; Mr. Mougeot, 7 years; Mr. Lewis, 27 years; and Mr.
Williamson, 39 years (as of September 1, 1995).
Benefits under the ASB Plan are determined by multiplying the product of
years of credited service (not to exceed 35 years) and 1.5% times the
participant's Final Average Compensation (average compensation for the highest
five of the last ten years of credited service). As of December 31, 1995, Mr.
Minami had nine years of credited service under the ASB Plan. His estimated
annual benefit payable in the form of a single life annuity projected to age 65
is $53,180, based on his current compensation level.
Internal Revenue Code Section 415 limits the benefit that a participant can
receive from qualified retirement plans such as the HEI Plan and ASB Plan. The
limit for 1995 is $120,000 per year at age 65. The Company adopted the Excess
Plan to provide benefits that cannot be paid from the qualified plans due to
this maximum limit.
Internal Revenue Code Section 401(a) limits a participant's compensation
that can be recognized under qualified retirement plans. The limit on the
maximum compensation for 1995 under Section 401(a) is $245,000 for the HEI Plan
and $150,000 for the ASB Plan. The Company adopted the Excess Pay SERP to
provide benefits that cannot be paid from the qualified plans due to the maximum
compensation limit under Section 401(a).
16
<PAGE> 21
The Company maintains two Supplemental Executive Retirement Plans ("HEI
SERP" and "ASB SERP") for certain executive officers. Messrs. Clarke and
Williamson participate in the HEI SERP and Mr. Minami participates in the ASB
SERP. Benefits under the HEI SERP and ASB SERP are in addition to qualified
retirement benefits payable from the HEI Plan, the ASB Plan and Social Security.
Under the HEI SERP, at age 60, the executive is eligible to receive a
benefit of up to 60% (depending on years of credited service) of the
participant's average compensation, which includes amounts received under the
annual Executive Incentive Compensation Plan ("EICP") in the highest three out
of the last five years of service. The benefit payable under the HEI SERP is
reduced by the participant's primary Social Security benefit and the benefit
payable from the Company's Retirement Plan, but in no event less than the
benefit that would have been payable under the Excess Plan or the Excess Pay
SERP (after taking into consideration the reduction of the benefit payable from
the Company's qualified Retirement Plan). The HEI SERP provides for reduced
early retirement benefits at age 50 with 15 years of service or age 55 with five
years of service, and survivor benefits in the form of an annuity in the event
of the participant's death after becoming eligible for early retirement. Mr.
Clarke and Mr. Williamson are currently approved for coverage under the HEI
SERP. The overall total retirement benefits payable to Mr. Clarke in the form of
a straight life annuity projected to age 65 is $213,294, based on his current
compensation level ($61,690 from the qualified Retirement Plan and $151,604 from
the HEI SERP). The overall total retirement benefits payable to Mr. Williamson
(who retired effective September 1, 1995) in the form of a joint and 66 2/3
survivor annuity is $185,952 per year ($109,333 from the qualified HEI Plan and
$76,619 from the HEI SERP).
The ASB SERP provides a benefit at age 65 of up to 60% (depending upon
years of credited service) of the participant's average compensation (including
50% of the amounts received under the EICP) in the highest five consecutive
years out of the last ten years of service, reduced by the participant's primary
Social Security benefit and the benefit payable from the ASB Retirement Plan,
but in no event less than the benefit that would have been payable under the
Excess Plan or the Excess Pay SERP (after taking into consideration the
reduction of the benefit payable from the ASB Retirement Plan). The ASB SERP
also provides for termination and survivor benefits in certain circumstances.
Mr. Minami is currently approved for coverage under the ASB SERP. The overall
total retirement benefits payable to Mr. Minami in the form of a straight life
annuity projected to age 65 is $117,348, based on his current compensation level
($53,180 from the qualified ASB Plan and $64,168 from the ASB SERP).
CHANGE-IN-CONTROL AGREEMENTS
Since 1989, the Company has entered into Change-in-Control Agreements with
certain executives, including the executives named in the Summary Compensation
Table, to encourage and ensure their continued attention and dedication to the
performance of their assigned duties without distraction in the event of
potentially disturbing circumstances arising from the possibility of a
change-in-control of the Company.
Each Agreement provides that benefits, compensation and position
responsibility of these officers will remain at existing levels for a period of
two years following a "Change-in-Control," unless the "Expiration Date" of the
Agreement has occurred. A "Change-in-Control" is defined to include a
change-in-control required to be reported under the proxy rules in effect on the
date of the agreements, the acquisition by a person (as defined under the
Securities Exchange Act of 1934) of 25% or more of the voting securities of the
Company, or specified changes in the composition of the Board of Directors of
the Company following a merger, tender offer or certain other corporate
transactions. "Expiration Date" is defined as the earliest to occur of (a) two
years after a change-in-control, (b) termination of the executive's employment
by the Company for "Cause" (as defined in the Agreement) or by the executive
other than for "Good Reason" (as defined in the Agreement), (c) retirement, or
(d) termination of the Agreement by the Company's Board of Directors, or
termination of the executive's employment, prior to a change-in-control. If the
17
<PAGE> 22
employment of one of these executives is terminated after a change-in-control
and prior to the expiration date by the Company other than for cause or
disability, or by the executive for good reason, the Company is obligated to
provide a lump sum severance equal to 2.99 times the executive's average W-2
earnings for the last five years (or such lesser period that the executive has
been employed by the Company), subject to certain limitations. Based on W-2
earnings for the five most recent years (1991-1995), the lump sum severance
would be as follows: Mr. Clarke -- $1,895,565; Mr. May -- $770,696; Mr.
Minami -- $996,951; Mr. Mougeot -- $928,591; and Mr. Lewis -- $874,677. In the
event of a change-in-control, all outstanding stock options would become
immediately exercisable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
Decisions on executive compensation are made by the Compensation Committee
of the Board which is composed of five independent nonemployee directors. All
decisions by the Compensation Committee are reviewed by the full Board except
for decisions about the Company's stock-based plans, which must be made solely
by the committee in order to satisfy Securities Exchange Act Rule 16b-3.
The committee has retained the services of an independent compensation
consulting firm to assist in executive compensation matters.
Executive Compensation Philosophy
The Compensation Committee's philosophy with respect to the Company's
executive officers, including the chief executive officer, is designed to (1)
maintain a compensation program that is equitable in a competitive marketplace,
(2) provide compensation opportunities that integrate pay with the Company's
annual and long-term performance goals which reinforce growth in stockholder
value, (3) recognize and reward individual initiative and achievements, and (4)
allow the Company to attract, retain, and motivate qualified executives who are
critical to the Company's success.
The committee endorses the position that stock ownership by management is
beneficial in aligning management's and stockholders' interests in the
enhancement of stockholder value. Thus, the committee has increasingly utilized
stock options and stock payouts in the compensation program for the executive
officers with a goal of increasing stock ownership over time.
Executive Compensation Program
The Company's executive compensation program consists of three main
components: (1) base salary, (2) potential for an annual bonus based on overall
Company financial and operational performance as well as individual performance,
and (3) the opportunity to earn long-term cash and stock-based incentives which
are intended to encourage the achievement of superior results over time and to
align executive officer and stockholder interests. The second and third elements
constitute the "at-risk" portion of the compensation program and are designed to
link the interests of the executive with those of the stockholders. This means
that total compensation for each executive is variable and may fluctuate
significantly from year to year depending on the short-and long-term performance
of the Company as well as the subsidiary companies.
Base Salary
Salaries for executive officers are reviewed by the committee in April of
each year in consultation with the committee's independent compensation
consultant. The consultant, at the direction of the committee, examines the
position responsibilities of each incumbent officer at HEI and each of its
subsidiaries against similar positions in similar organizations. All
compensation references represent the fiftieth percentile or midpoint of pay
practices found in companies which are similar in size and marketplace
orientation. The specific surveys used are at the consultant's
18
<PAGE> 23
recommendation based on the consultant's knowledge of appropriate references
given the organization's overall compensation philosophy. For executive officers
at the holding company level, the competitive references are drawn from
compensation surveys of other electric utilities (weighted 75%) and general
industry (weighted 25%); for electric utility executive officers, the
competitive references are drawn exclusively from compensation surveys of other
electric utilities; for financial institution executive officers, the references
are drawn exclusively from compensation surveys of other financial institutions;
for interisland freight transportation executive officers, compensation
references are drawn from other transportation companies (weighted 50%) and
general industry (weighted 50%); and for real estate related executive officers,
the compensation surveys encompass companies within the real estate industry.
Based on the information from these surveys, the consultant recommends a salary
range for each executive officer position. The midpoint of the range
approximates the fiftieth percentile of the survey data and the range has a
spread of plus and minus 20% around this midpoint. Based on the consultant's
recommendation, the committee has determined that it is not economically
feasible to survey all 100 investor-owned electric utilities used in the
Stockholder Performance Graph. Instead the consultant provides the committee
with references from two surveys of electric utilities which includes many, but
not all, of the 100 investor-owned electric utility companies. These surveys
include one conducted by the Edison Electric Institute in which the Company
participates and one conducted by Executive Compensation Surveys in which the
Company does not participate. Actual setting of an executive officer's base
salary (except for Mr. Clarke) within the recommended range is based on Mr.
Clarke's recommendation and the committee's approval.
Mr. Clarke's base salary is determined through the committee's overall
evaluation of his performance during the preceding year. This evaluation is
subjective in nature and takes into account all aspects of his responsibilities
at the total discretion of the committee. Based on the survey data provided by
the consultant, the resulting salary range recommendation, and the committee's
overall evaluation of Mr. Clarke's performance during 1994, Mr. Clarke's base
salary was raised from an annual rate of $415,000 to an annual rate of $452,000
effective May 1, 1995. The $37,000 increase aligned Mr. Clarke's base salary
close to the midpoint of the relevant salary range. Mr. Clarke's new base salary
was approximately 4% below the consultant's findings with respect to the
fiftieth percentile of competitive references.
Annual Executive Incentive Compensation Plan
Under the annual Executive Incentive Compensation Plan ("EICP"), annual
incentive awards are granted upon the achievement of financial and nonfinancial
performance measures as established by the committee in the early part of each
calendar year. The financial measures are stated in terms of minimum, target and
maximum goals. One of the financial measures is directly linked to financial
operating budgets submitted to the Company's Board of Directors for approval in
December of the previous year. These financial measures are earnings-related for
all named executive officers and include criteria such as earnings per share for
the named executive Company officers and net income for the named executive
officers who are also subsidiary presidents (Mr. Williamson, Mr. May and Mr.
Minami). Other financial measures for the named executive Company officers
relate to (1) a comparison of the Company's total return to shareholders in 1995
measured against the Edison Electric Institute Peer Group of 100 investor-owned
electric utility companies included in the Stockholder Performance Graph for the
same period and (2) measurement of individual officers' actual administrative
and general expenses for 1995 against budgeted expenses established at the
beginning of the year. For the named executive Company officers (except Mr.
Clarke) there is an additional nonfinancial goal relating to the individual
officer's performance. Mr. Clarke evaluates each officer's performance and makes
a recommendation to the committee. For the three named executive officers who
are also subsidiary presidents, company specific operational and strategic goals
make up the remainder of their EICP goals.
19
<PAGE> 24
The EICP has a minimum financial performance threshold linked to earnings
per share or net income (based on whether measurement is at the Company or
subsidiary company level) which must be achieved before a bonus can be
considered. The maximum awards under the EICP differ for each of the named
executive officers, ranging from a low of 37% to a high of 60% of the midpoint
of the salary grade range at the end of the performance period for Mr. Clarke.
The minimum, target and maximum EICP potential award levels for each of the
named executive officers are established by the committee each year based on
recommendations from the committee's independent compensation consultant. The
consultant bases its recommendations on an assessment of competitive practices
from a cross-section of all industries, including some of the electric utility
companies included in the Stockholder Performance Graph.
Under the 1995 EICP, Mr. Clarke received a payout of $108,301 in early
1996. This resulted from achievement of (1) the earnings per share goal
(weighted 70%) at a level above minimum but below target and (2) lower than
forecast 1995 administrative and general expenses for the Company (weighted 10%)
above the target level. There was no payout for the total return to shareholders
goal (weighted 20%) since the Company's total return for 1995 was slightly below
the minimum threshold of at least being equal to the average total return of the
Edison Electric Institute Peer Group of 100 investor-owned electric utility
companies. The EICP award for Mr. Clarke was exclusively based on the foregoing
measures. No further adjustment was made by the committee.
Long-Term Incentive Plan
The Company provides a long-term incentive plan ("LTIP") that is linked to
the long-term financial performance of the Company. All awards under the LTIP
are paid 60% in cash and 40% in HEI Common Stock. The LTIP opportunity is
measured against the achievement of financial criteria established by the
committee for a three-year period. A new performance period of three years
starts each year. In April 1995, the committee established the financial
measures for the 1995-1997 cycle which included (1) return on average common
equity (weighted 40%) and (2) total return to stockholders (weighted 60%),
comparing the Company's results against the Edison Electric Institute Peer Group
of 100 investor-owned electric utility companies included in the Stockholder
Performance Graph. The weighting of each goal applies to all the named executive
officers except Mr. Minami who has a third LTIP goal (weighted 50%) which is
discussed in the Long-Term Incentive Plan ("LTIP") Awards section on page 15.
The three LTIP financial performance goals above were selected by the committee
because they represented a meaningful method of reinforcing growth in
stockholder value over time. The achievement of each of the three goals is
expressed in terms of minimum and maximum levels. The minimum and maximum LTIP
potential award levels for each of the named executive officers are established
by the committee each year based on recommendations from the committee's
independent compensation consultant. The consultant bases its recommendations on
an assessment of competitive practices from a cross-section of all industries,
including some of the electric utility companies included in the Stockholder
Performance Graph. These goals are covered in more detail in the discussion of
the Long-Term Incentive Plan ("LTIP") Awards section on page 15.
For the three-year cycle ending December 31, 1994, Mr. Clarke did not
receive an LTIP payout.
Stock Options
The committee can grant nonqualified stock options, incentive stock
options, restricted stock, stock appreciation rights, and dividend equivalents
pursuant to the 1987 Stock Option and Incentive Plan of Hawaiian Electric
Industries, Inc. (as amended and restated effective April 21, 1992), which was
previously approved by the stockholders. To date, only nonqualified stock
options and dividend equivalents have been issued under the Plan. Biennially,
the committee requests its independent compensation consultant to assess
competitive practices with respect to stock option grants from a cross-section
of all industries, including some of the electric utility companies included in
the Stockholder Performance Graph. Based on this assessment, the consultant
recommends a range of
20
<PAGE> 25
stock option grants for each named executive officer. This range takes into
account the fact that a portion of the officer's long-term incentive opportunity
is delivered through participation in the LTIP. In granting stock options, the
committee takes into consideration the amount and value of current options
outstanding. The grants are intended to retain the officers and to motivate them
to improve long-term stock performance. Stock options are granted at average
fair market value which is based on the average of the daily high and low sales
prices of the Company's Common Stock on the New York Stock Exchange during the
calendar month preceding the date of grant. Stock options generally vest in
equal installments over a four-year period.
The 1995 stock option award to Mr. Clarke of 20,000 shares of HEI Common
Stock plus dividend equivalents was based on the consultant's recommendation and
the independent evaluation of an appropriate award level by the committee. In
this evaluation, the committee took into account prior grants to Mr. Clarke and
an overall subjective evaluation of his job performance. To receive the dividend
equivalents which accrue only during the first four years following a stock
option grant, Mr. Clarke must exercise the stock option.
Other Compensation Plans
The Company has adopted certain broad-based employee benefit plans and
executive retirement and life insurance plans in which its named executive
officers participate. Other than the HEI Retirement Savings Plan (which
qualifies under Section 401(k) of the Internal Revenue Code), which offers the
Company's Common Stock as one of the investment options to further align
employees' and stockholders' long-term financial interests, benefits under these
other plans are not tied to Company performance.
For the named executive officers and certain other employees, the Company
provides additional retirement benefits which are discussed on pages 16 and 17.
In the event of death during active employment, the Company also provides all
the named executive officers (except Mr. Minami) and certain other employees
$50,000 term life insurance plus an amount equal to two times the employee's
salary at the date of death, paid by the Company on an after-tax basis to the
employee's beneficiary. If the employee dies after retirement, this benefit is
reduced to $20,000 term life insurance plus an amount equal to one times the
employee's salary at retirement, also on an after-tax basis. For Mr. Minami,
American Savings Bank provides term life insurance equal to one and one-half
times his salary at the date of death in the event of death during active
employment. After retirement, the benefit is reduced to $5,000.
Finally, the committee has reviewed the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended (IRC), relating to the $1 million
deduction cap for executive salaries and believes that no compensation for the
five highest paid named executives will be governed by this regulation during
1996. Compensation alternatives to comply with IRC 162(m) will be considered by
the committee at the appropriate time.
SUBMITTED BY THE
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
EDWIN L. CARTER, CHAIRMAN
RICHARD HENDERSON
BILL D. MILLS
OSWALD K. STENDER
JEFFREY N. WATANABE
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<PAGE> 26
STOCKHOLDER PERFORMANCE GRAPH
Set forth below is a Comparison of Five-Year Cumulative Total Return graph
comparing the cumulative total stockholder return on the Company's Common Stock
against the cumulative total return of companies listed on the Standard & Poor's
500 Stock Index and the Edison Electric Institute ("EEI") Index of 100
Investor-Owned Electric Companies. The 100 companies comprising the EEI Index
serve 99% of the customers of the investor-owned electric utility industry. The
graph is based on the market price of the common stock for all the companies at
December 31 each year and assumes that $100 was invested on December 31, 1990,
in the Company's Common Stock and the common stock of all the companies and that
dividends were reinvested for all companies.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG HAWAIIAN ELECTRIC INDUSTRIES, INC.,
S&P 500 INDEX, AND EDISON ELECTRIC INSTITUTE INDEX
1990 - 1995
<TABLE>
<CAPTION>
MEASUREMENT PERIOD HAWAIIAN S&P 500 EEI 100 IN-
(FISCAL YEAR COVERED) ELECTRIC INDS COMPOSITE DEX
<S> <C> <C> <C>
1990 100 100 100
1991 123.90 130.47 129.68
1992 133.04 140.41 142.73
1993 136.26 154.56 159.45
1994 132.11 156.60 138.93
1995 168.89 215.45 176.64
</TABLE>
22
<PAGE> 27
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee serving at the end of 1995 were
Edwin L. Carter, Chairman, and Richard Henderson, Bill D. Mills, Oswald K.
Stender, and Jeffrey N. Watanabe, members. Two members of the Compensation
Committee, Richard Henderson and Jeffrey N. Watanabe, are involved in various
relationships with the Company.
American Savings Bank, F.S.B. ("ASB"), a subsidiary of the Company,
previously offered preferential rate loans to its directors, including
individuals who are also directors or executive officers of the Company.
However, in August 1989, the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") provided that savings institutions would
henceforth be subject to provisions of the Federal Reserve Act which prohibit
loans to directors and executive officers of the insured institution or its
commonly owned affiliates on terms more favorable than available to the general
public.
The following schedule shows detailed information on a preferential rate
loan made by ASB to Mr. Watanabe, whose aggregate indebtedness to ASB exceeded
$60,000 during 1995. This loan, which was made prior to the enactment of FIRREA,
will not be affected by the new prohibitions against preferential loans unless
it is renegotiated or otherwise significantly modified. The first mortgage loan
rate was based on ASB's policy for employees and directors using a formula of
.50% above the cost of funds or .50% above the Applicable Federal Rate
established by the Internal Revenue Service, whichever is greater.
<TABLE>
<CAPTION>
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1995 12/31/95 TRANSACTION CHARGED
----------- ----------- -------------- -------
<S> <C> <C> <C> <C>
Jeffrey N. Watanabe.................. $317,849 $312,105 First Mortgage 7.50%
</TABLE>
In addition, Mr. Watanabe is a partner in the law firm of Watanabe, Ing &
Kawashima that provided legal services to the Company and three of its
subsidiaries in 1995.
Malama Pacific Corp. ("MPC"), a subsidiary of the Company, is engaged in
real estate development activities. Two of MPC's subsidiaries are currently
involved in partnerships in which Mr. Henderson has a significant interest. Both
of the transactions described below were negotiated on an arm's length basis and
were approved by the disinterested members of the HEI Board.
Sunrise Estates. Malama Development Corp. ("Malama Development"), a wholly
owned subsidiary of MPC, and HSC, Inc. ("HSC"), are partners in a general
partnership known as Sunrise Estates which is completing the development and
sale of the final 9-lot increment of a project consisting of 165 one-acre
residential agricultural lots in Hilo, Hawaii. HSC is the managing partner of
the partnership. No management fees were paid in 1995, and there were no sales
made in 1995. Malama Development and HSC have each contributed $200,000 to the
partnership and have advanced $6,500 and $7,200, respectively, to the
partnership. Each partner has received distributions of $1,136,639. Malama
Development and HSC share equally in the profits and losses of the partnership.
As of December 31, 1995, 95% of the lots were sold. Mr. Henderson and members of
his family own, directly or indirectly, approximately 76% of the stock of HSC.
Sunrise Estates II. Malama Elua Corp. ("Malama Elua"), a wholly owned
subsidiary of MPC, and HSC are partners in a general partnership known as
Sunrise Estates II which will develop and market approximately 145 one-acre
residential agricultural lots in Hilo, Hawaii, adjacent to the Sunrise Estates
development. The property was purchased by HSC in June 1990 for $2.1 million. In
1991, the partnership purchased the development property from HSC at an agreed
upon fair market value of $2.7 million, subject to a bank loan of $2.1 million.
The valuation of the property interest transferred by HSC to the Sunrise Estates
II partnership was negotiated and took into account HSC's incurred acquisition,
carrying, and development costs as well as existing market conditions. HSC is
the managing partner of the partnership. As of December 31, 1995, Malama Elua
and HSC
23
<PAGE> 28
have each contributed $300,000 to the partnership, and have advanced $701,247
and $1,149,247, respectively, to the partnership. The partners will share
equally in the profits and losses of the partnership. On December 4, 1995, MPC
extended a loan to HSC in the amount of $135,000 to be used to reduce the bank
debt of Sunrise Estates II. The loan is secured by HSC's partnership interest
and is also guaranteed by the principals of HSC, Inc.
INDEBTEDNESS OF MANAGEMENT
As disclosed in the above section on Compensation Committee Interlocks and
Insider Participation on page 23, ASB previously offered preferential rate loans
to its directors, including individuals who are also directors or executive
officers of the Company, prior to the enactment of FIRREA.
In addition to Mr. Watanabe, one other director of the Company, whose
aggregate indebtedness to ASB exceeded $60,000 at any time during 1995, received
a preferential rate loan as shown below:
<TABLE>
<CAPTION>
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1995 12/31/95 TRANSACTION(1) CHARGED(2)
------------ ------------ --------------- -----------
<S> <C> <C> <C> <C>
Ruth M. Ono..................... $184,588 $181,548 First Mortgage 7.50%
</TABLE>
- ---------------
(1) The loan was made prior to the enactment of FIRREA restrictions.
(2) The first mortgage rate is based on ASB's policy for employees and directors
using a formula of .50% above the cost of funds or .50% above the Applicable
Federal Rate established by the Internal Revenue Service, whichever is
greater.
ASB has made other loans, established lines of credit and issued credit
cards to directors and executive officers of the Company, and to members of
their immediate families. These loans and extensions of credit have been made in
the ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features.
In addition, ASB has purchased a 25% participation interest in two loans
made by Bank of Hawaii to Finance Realty Company, Ltd. ("Finance Realty") and
Finance Holdings, Ltd. The family of the spouse of Constance H. Lau, the
Treasurer of the Company, owns approximately one-sixth of the common stock of
Finance Enterprises, the parent company of Finance Realty and Finance Holdings,
Ltd. ASB's 25% participation interest in both loans was made in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features.
In addition to the above loans financed by ASB, two officers of the
Company, T. Michael May (also a director of the Company) and Robert F. Mougeot,
are indebted to the Company or one of its subsidiary companies. Mr. May is
indebted in the amount of $180,000 by reason of an employee relocation loan made
to him by Hawaiian Electric Company, Inc. in 1993. The loan is an interest only
loan at an interest rate of 6.28%, with the unpaid principal and interest due on
December 28, 2008, or sooner if Mr. May ceases to be an employee of the Company.
Mr. Mougeot is indebted in the amount of $165,000 by reason of a loan made to
him by the Company in 1989 to finance his purchase of the fee simple interest in
his home. The loan is an interest only loan, at an interest rate of 8.01%, with
the entire principal balance of the loan due on March 1, 2004.
24
<PAGE> 29
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
Malama Development and Malama Elua, wholly owned subsidiaries of MPC, are
each in partnership with HSC, a corporation in which director Richard Henderson
and his family own 76% of the stock. The partnerships and their real estate
development activities are discussed on pages 23 and 24 in the section on
Compensation Committee Interlocks and Insider Participation.
In addition, Malama Mohala Corp. ("Malama Mohala"), a wholly owned
subsidiary of MPC, is involved in a partnership with Palailai Holdings, Inc.
("PHI"), a subsidiary of Finance Enterprises in which the family of Ms. Lau, the
Treasurer of the Company, owns approximately one-sixth of the common stock.
Finance Enterprises is the parent company of Finance Realty, Ltd., PHI, Finance
Home Builders, Ltd., and Finance Factors Limited.
Palailai Associates. Malama Mohala and PHI are equal partners in a general
partnership known as Palailai Associates ("Palailai") which is currently
developing homes in Makakilo, Hawaii. PHI's parent company, Finance Realty,
Ltd., received $360,118 in management fees, $30,875 for development cost
reimbursement, and $316,233 in sales commissions from the partnership during
1995. Finance Home Builders, Ltd., a general contractor and affiliate of PHI and
Finance Realty, received payments of $2,919,581 during 1995 under its contract
with Palailai for the construction of homes. The partnership also earned $7,603
of interest income from Finance Factors Limited.
Finally, director Jeffrey Watanabe is a partner in a law firm that
performed legal services for the Company and certain of its subsidiaries during
1995.
MANAGEMENT PROPOSAL 3. -- ELECTION OF AUDITOR
The firm of KPMG Peat Marwick LLP, independent certified public
accountants, has been the auditor of the Company since 1981. The Board of
Directors recommends the election of KPMG Peat Marwick LLP as the auditor of the
Company for the fiscal year 1996 and thereafter until its successor is duly
elected.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement if they desire to
do so and to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
MANAGEMENT PROPOSAL 4. -- AMENDING THE 1987 STOCK OPTION
AND INCENTIVE PLAN, AS AMENDED IN 1992
The 1987 Stock Option and Incentive Plan, as amended and restated in 1992
("the Plan"), provides a means to attract and retain high caliber personnel and
provides participating employees with long-term stock incentives to align their
interests with the interests of stockholders. The Board of Directors has amended
the Plan, effective as of February 20, 1996, subject to stockholder approval at
the Annual Meeting. A summary of the proposed amendments to the Plan is set
forth below.
INCREASE OF NUMBER OF AUTHORIZED SHARES
The proposed amendments to the Plan increase the number of shares of Common
Stock for which options or other incentive awards ("Incentive Awards") may be
granted during the term of the Plan from 1,250,000 to 2,650,000 shares. Either
authorized but unissued shares or previously issued shares reacquired by the
Company, including shares purchased on the open market, may be issued under the
Plan.
25
<PAGE> 30
On February 14, 1996, the average price of the Common Stock on the New York
Stock Exchange was $38.38. As of February 14, 1996, 267,000 shares of Common
Stock remained available for grant under the Plan and options to purchase
523,333 shares of Common Stock were outstanding.
The 2,650,000-share limit, as well as option prices, the number of shares
subject to options and other Incentive Awards outstanding under the Plan, will
be appropriately adjusted for stock dividends, stock splits, recapitalizations,
combinations of shares and other changes affecting the Company's stock. Shares
for which options have terminated or expired may again be available for issuance
pursuant to Incentive Awards under the Plan and shares for which options are
surrendered in exercise of stock appreciation rights ("SARs") may be available
for issuance again pursuant to Incentive Awards under the Plan to the extent the
SARs are exercised for cash. In addition, pursuant to the proposed amendments,
all shares subject to restricted stock awards under the Plan that are forfeited
or terminated, including awards that provide the grantee with dividend and
voting rights, will be available again for issuance pursuant to Incentive Awards
under the Plan.
EXTENSION OF TERM OF THE PLAN
The proposed amendment to the Plan will extend the term of the Plan from
December 31, 2001, to February 19, 2006.
FUTURE COMPLIANCE WITH SECTION 162(M) OF THE CODE; COMMITTEE COMPOSITION;
MAXIMUM ANNUAL GRANT OF OPTIONS
The Plan will be administered by the Compensation Committee (the
"Committee") of the Board of Directors, consisting of two or more persons who
are "disinterested persons" within the meaning of Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934 (the "Exchange Act"). The proposed
amendments to the Plan are designed to enable the Board to ensure that certain
compensation payable under the Plan will qualify as performance based
compensation within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), at such time as the Board determines that it
is necessary for such compensation to so qualify and thereby be fully
tax-deductible by the Company. To this end, the proposed amendments provide that
at such time as the Board deems it necessary for the Plan to comply with Section
162(m) of the Code, the members of the Committee will also be "outside
directors" within the meaning of Section 162(m) of the Code. In addition,
pursuant to the proposed amendments, commencing with the 1996 calendar year,
grants of options under the Plan to any individual in any calendar year will be
limited to options to purchase no greater than 100,000 shares of Common Stock.
ADDITIONAL AMENDMENTS
Certain other technical revisions to the Plan were made, including proposed
amendments intended to (a) add flexibility to the Plan in light of the latest
proposed amendments to Rule 16b-3, and (b) enable the Plan to comply with
Section 162(m) of the Code, if and to the extent applicable. Specifically, the
provisions of the Plan restricting the transferability of certain Incentive
Awards were amended to enable the Committee to grant awards that are
transferable, to the extent permitted by Rule 16b-3. Certain restrictive
provisions governing the exercise of SARs were amended to apply only to the
extent required by Rule 16b-3. The proposed amendments also add an
interpretation section to the Plan so that the Plan will be interpreted in a
manner to comply with Rule 16b-3, and to the extent applicable, Section 162(m)
of the Code. In addition, pursuant to the proposed amendments, stockholder
approval of future amendments to the Plan will be required, if and to the extent
such approval is required to comply with Section 162(m) of the Code, at such
time as the Plan is intended to so comply.
Pursuant to the proposed amendments, the definition of fair market value
was amended to mean the average of the daily high and low sales prices of the
Common Stock on the composite
26
<PAGE> 31
tape for stocks listed on the New York Stock Exchange as quoted in the New York
Stock Exchange Composite Transactions published in the Western Edition of The
Wall Street Journal. Previously, fair market value meant the closing sales price
as so listed. In addition, the proposed amendments to the Plan permit the
Committee to allow participants to defer receipt of any portion of a performance
award that would otherwise have been paid in shares of Common Stock. Previously
deferrals were permitted only for awards payable in cash. Finally, the Plan was
amended to make certain nonmaterial technical changes.
SUMMARY OF THE REMAINING MATERIAL PROVISIONS OF THE PLAN
The Plan, as proposed to be amended and restated, is printed in full and
attached to this Proxy Statement as Exhibit A, and is incorporated herein by
reference. The Plan summary contained herein is qualified in its entirety by
reference to the full text of the Plan.
The current members of the Committee are identified in the description of
the Committee set forth earlier on page 7. Subject to the express provisions of
the Plan, the Committee will have complete authority to interpret and implement
the Plan and its actions and decisions will be final and binding upon
participants.
The Committee selects from all employees of the Company and its
subsidiaries those employees who are eligible to receive awards under the Plan.
No determination has yet been made concerning which individuals will receive
future awards under the Plan. Although it is contemplated that the principal
participants will be the executive officers of the Company and its subsidiaries,
the Committee has broad discretion under the Plan in selecting employees.
The Plan provides that the Committee may grant to eligible individuals any
combination of Incentive Awards in the form of nonqualified stock options,
incentive stock options, restricted stock, SARs, performance awards, stock
payments or dividend equivalents. Each grant will be evidenced by a separate
agreement with the person receiving the grant or in a written plan, in either
case indicating the type and terms of the award.
Nonqualified stock options will provide for the right to purchase Common
Stock at a price that is not less than 85% of the average fair market value on
the effective date of the grant. These options will be granted for a term that
may not exceed ten years.
Under the Plan, the term "average fair market value" means, as of any
determination date, the average of the daily high and low sales prices of the
Common Stock on the composite tape for stocks listed on the New York Stock
Exchange as quoted in the New York Stock Exchange Composite Transactions for all
trading days during the calendar month preceding the determination date. If the
Company's Common Stock is no longer traded on the New York Stock Exchange, fair
market value and average fair market value would be determined in such
reasonable manner as the Committee determines.
Incentive stock options will be designed to comply with the provisions of
the Code, and will be subject to restrictions contained in the Code. Incentive
stock options will be granted at not less than fair market value of the stock
subject to the option on the date of grant and will extend for a term of up to
ten years. Incentive stock options granted to any person who owns more than 10%
of the combined voting power of the Company's outstanding securities must be
granted at prices that are not less than 110% of fair market value and may not
extend for more than five years.
The purchase price of Common Stock purchased upon the exercise of a stock
option must be paid in full on the date of exercise in cash or its equivalent,
or in such other manner acceptable to the Committee, including other Common
Stock owned by the participant and valued at its fair market value on the
exercise date.
Restricted stock may be sold to employees for prices determined by the
Committee, which shall be at least equal to the minimum price required under
applicable state law for the issuance of
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Common Stock. The Committee may provide that a restricted stock award will vest
upon the satisfaction of certain restrictions, including restrictions based on
seniority, performance or other criteria. In general, restricted shares may not
be sold, transferred or hypothecated, and the stock will be placed in escrow,
until restrictions are removed or expire. Purchasers of restricted stock, unlike
recipients of options, may have voting rights and may receive dividends prior to
the time when restrictions lapse.
SARs may be granted in tandem with either nonqualified or incentive stock
options. SARs granted by the Committee will permit the participant to exercise
the SARs and surrender the unexercised option in exchange for an amount
equivalent to the difference between the fair market value of the option shares
with respect to which the SARs are exercised and the option price of such
shares.
The Committee may elect to pay SARs in cash or in Common Stock or in a
combination of cash and Common Stock. The SARs will provide that the holder of
the SARs may exercise the SARs or the option in whole or in part, but the
aggregate exercise may not cover more than the aggregate number of shares upon
which the value of the SARs is based. SARs granted in tandem with options may
not extend beyond the term of the related option and will be transferable only
to the extent that the related option is transferable. To the extent that an
option is exercised, any related SARs will be reduced by the number of shares
with respect to which the option is exercised. To the extent any SARs are
exercised, any related option will be reduced by the number of shares with
respect to which the SARs are exercised.
Dividend equivalents may also be granted as an additional feature of
nonqualified and incentive stock options. Dividend equivalents will permit a
participant who exercises a stock option to obtain, in addition to the option
shares and without additional consideration, the amount of dividends declared on
the number of shares of Common Stock with respect to which the option is
exercised during the period between the grant and the exercise of the option or
such other period as may be designated by the Committee. Dividend equivalents
will be computed, as of each dividend record date, both with respect to the
number of shares under the option and with respect to the number of dividend
equivalent shares previously credited to the participant and not issued during
the period prior to the dividend record date. Upon the exercise of an option,
the dividend equivalents may be paid either in cash or in additional shares of
Common Stock.
Performance awards may be granted by the Committee on an individual basis.
These awards may be paid in cash or shares of Common Stock and will be based
either upon specific written instruments or upon specific incentive performance
plans. The written instrument or plan will set forth the performance criteria to
be utilized to calculate the value of the performance awards, the term over
which such performance will be measured, the events which will give rise to
payment of the awards and the form and time of payment of the awards. The
Committee may also provide for interest or earnings to be credited on any cash
or stock payments that are deferred at a rate specified by the Committee.
The Committee may approve a payment in Common Stock to any employee who
otherwise may be entitled to a cash payment other than base salary, such as the
payment of a performance award or a bonus under one of the Company's bonus
plans. In the event Common Stock is issued in lieu of such a cash compensation
payment, the Common Stock will be valued at its fair market value or average
fair market value, as determined by the Committee.
Under the Plan, the Committee has discretion to prescribe the time period
during which an option may be exercised after termination of employment. In the
case of performance awards, if a participant's employment with the Company is
terminated for any reason prior to the occurrence of the events that vest a
performance award, the performance award expires unless the applicable
performance award written instrument or plan provides otherwise. Similarly, all
of a participant's restricted stock remaining subject to restrictions on the
date of termination of employment are forfeited unless the applicable restricted
stock award agreement provides otherwise.
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The Plan may be amended, suspended or terminated by the Board of Directors
of the Company at any time. However, no amendment may be made without
stockholder approval to the extent such approval is required in order to comply
with the requirements of Rule 16b-3 promulgated under the Exchange Act, or if
applicable, Section 162(m) of the Code. No amendment, suspension or termination
may alter or impair the rights or obligations of the participant under an
Incentive Award previously granted under the Plan.
The Plan further provides that the Committee may include in any Incentive
Award written instrument or plan, provisions to the effect that the time at
which the award is vested, exercisable, payable or free from restrictions, as
the case may be, may be accelerated by the occurrence of certain events, either
automatically or upon a further determination made by the Committee at the time
of the events. Among the events that may be included in the written instrument
or plan granting the award as an accelerating event is a change-in-control of
the Company. Adoption by the Committee of provisions permitting or requiring
such an acceleration of Incentive Awards could make it more difficult or could
discourage an attempt to obtain control of the Company.
Unless terminated earlier by the Board of Directors, the Plan will expire
on February 19, 2006.
INFORMATION CONCERNING CERTAIN GRANTS MADE IN 1995 AND DESCRIPTION OF AMENDED
PLAN BENEFITS
On April 18, 1995, options to purchase an aggregate of 141,000 shares of
Common Stock were granted by the Committee, to a total of 41 key employees,
including 10 executive officers of the Company. Such options had an exercise
price of $32.83 per share, which was the average fair market value per share of
Common Stock on the date of grant.
The benefits to be derived from the Plan to the eligible participating
individuals and groups cannot be estimated, as grants will be made at the sole
discretion of the Committee, based on a variety of factors. In addition, the
value of any option grant will depend on the market performance of the Common
Stock. For information regarding the 1995 grants to the named executive officers
listed in the Executive Management Compensation section starting on page 12, see
"Option Grants in Last Fiscal Year" on page 13. With respect to all executive
officers as a group, options to purchase 68,000 shares were granted. With
respect to all nonexecutive officer employees as a group, options to purchase
73,000 shares of Common Stock were granted. Nonemployee directors are not
eligible to participate in the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
transactions under the Plan based on current federal income tax laws. This
summary is not intended to be exhaustive and does not describe state, local or
other tax laws.
NONQUALIFIED STOCK OPTIONS
The grant of a nonqualified stock option under the Plan will not result in
the recognition of taxable income to the participant or in a deduction to the
Company. Upon exercise, a participant will recognize income in an amount equal
to the excess of the fair market value of each share of Common Stock purchased
over the exercise price. The Company is required to withhold taxes on the amount
of income so recognized, and, subject to the provisions of Section 162(m) of the
Code, is entitled to a tax deduction equal to the amount of such income. Gain or
loss upon a subsequent sale of any shares of Common Stock received upon the
exercise of a nonqualified stock option is taxed as capital gain or loss to the
participant (long-term or short-term, depending upon the holding period of the
stock sold).
A participant who pays the exercise price of a nonqualified stock option,
in whole or in part, by delivering shares of Common Stock already owned by the
participant will recognize no gain or loss for federal income tax purposes on
the shares surrendered, but will otherwise be taxed in
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accordance with the rules described above for nonqualified stock options. With
respect to shares of Common Stock acquired upon exercise which are equal in
number to the shares of Common Stock surrendered, the basis of such shares will
be equal to the basis of the shares surrendered, and the holding period of such
shares will include the holding period of the shares surrendered. The basis of
additional shares received upon exercise will be equal to the fair market value
of such shares on the date of exercise, and the holding period for such
additional shares will commence on the day after the date the option is
exercised.
INCENTIVE STOCK OPTIONS
In general, no income will be recognized by a participant and no deduction
will be allowed to the Company with respect to the grant or exercise of an
incentive stock option granted under the Plan, provided that the option is
exercised within three months after the termination of the participant's
employment (one year in the case of the participant's disability). The
difference between the exercise price and the fair market value of the shares of
Common Stock on the date the option is exercised is, however, an adjustment item
for the participant for purposes of the alternative minimum tax. When the stock
received upon exercise of the option is sold, provided that the stock is held
for more than two years from the date of grant of the option and more than one
year from the date of exercise, the participant will recognize long-term capital
gain or loss equal to the difference between the amount realized and the
exercise price of the option related to such stock. If the above-mentioned
holding period requirements of the Code are not satisfied, the subsequent sale
of stock received upon exercise of an incentive stock option is treated as a
"disqualifying disposition." In general, a participant will recognize taxable
income at the time of a disqualifying disposition as follows: (i) ordinary
income in an amount equal to the excess of (A) the lesser of the fair market
value of the shares of Common Stock on the date the incentive stock option is
exercised or the amount realized on such disqualifying disposition over (B) the
exercise price and (ii) capital gain to the extent of any excess of the amount
realized on such disqualifying disposition over the fair market value of the
shares of Common Stock on the date the incentive stock option is exercised (or
capital loss to the extent of any excess of the exercise price over the amount
realized on disposition). Any capital gain or loss recognized by the participant
will be long-term or short-term depending upon the holding period for the stock
sold. The Company may claim a deduction at the time of the disqualifying
disposition equal to the amount of ordinary income the participant recognizes,
subject to the provisions of Section 162(m) of the Code.
If an incentive stock option is not exercised within three months after the
termination of the participant's employment (one year in the case of disability
of the participant), it will be treated for federal income tax purposes as a
nonqualified stock option, as described above.
In general, a participant who pays the exercise price of an incentive stock
option, in whole or in part, by delivering shares of Common Stock already owned
by the participant will recognize no gain or loss for federal income tax
purposes on the shares surrendered. However, if the shares delivered to exercise
the incentive stock option were acquired pursuant to the prior exercise of an
incentive stock option and the holding period requirements discussed above have
not been met with respect to such shares, the delivery of such shares to
exercise the incentive stock option will be considered a taxable disposition of
the shares. Under proposed Treasury Regulations, a portion of shares received
upon exercise of an incentive stock option equal in number to the shares
surrendered will have a basis equal to the basis of the shares surrendered
(increased, if applicable, by any income recognized as a result of the exchange)
and the holding period of such shares will include the holding period of the
shares surrendered (except for purposes of determining whether there has been a
disqualifying disposition of the shares). The basis of the additional shares
received upon such exercise will be zero, and the holding period of such shares
for all purposes will begin on the date the shares are transferred.
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STOCK APPRECIATION RIGHTS
The grant of a SAR to a participant under the Plan will not result in the
recognition of taxable income to the participant or in a deduction for the
Company. In general, upon exercise of a SAR granted in connection with an
incentive stock option or a nonqualified stock option, the participant will
recognize ordinary income for federal income tax purposes equal to the amount of
any cash received plus the fair market value of any shares of Common Stock
received. The Company is required to withhold income taxes on amounts recognized
as ordinary income, and is entitled to a tax deduction equal to the amount of
income recognized by the participant, subject to Section 162(m) of the Code.
The Plan provides that the Company may make whatever provisions it deems
appropriate to withhold any taxes it is required to withhold with respect to
Incentive Awards and to require participants to satisfy any tax requirements
before authorizing the issuance of shares of Common Stock to the participants.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next Annual
Meeting must be received by the Company by November 12, 1996, for inclusion in
the Proxy Statement and form of proxy for the 1997 Annual Meeting of
Stockholders. Proposals should be sent to the attention of the Secretary of the
Company.
OTHER BUSINESS
The Company knows of no other business to be presented at the Annual
Meeting, but if further matters do properly come before the meeting, the holders
of your proxy will vote your stock in accordance with their best judgment.
Under the By-Laws of the Company, if a stockholder of record wishes to
present a matter of business which may be properly brought before the Annual
Meeting, the stockholder must give notice in writing to the Secretary of the
Company no later than March 25, 1996. The notice must state a brief description
of such business, the name and address of the stockholder, the number of shares
of Common Stock owned by the stockholder, and any material interest of the
stockholder in such business.
YOU ARE URGED TO DATE, SIGN AND RETURN YOUR PROXY AS SOON AS POSSIBLE to
make certain that your shares will be voted at the meeting. If you attend the
meeting, as we hope you will, you may vote your shares in person.
By Order of the Board of Directors
Betty Ann M. Splinter, Secretary
March 8, 1996
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EXHIBIT A
1987 STOCK OPTION AND INCENTIVE PLAN OF
HAWAIIAN ELECTRIC INDUSTRIES, INC. (AS AMENDED
AND RESTATED EFFECTIVE FEBRUARY 20, 1996)
I. GENERAL PROVISIONS
1.1 Purposes of the Plan
The purposes of the 1987 Stock Option and Incentive Plan of Hawaiian
Electric Industries, Inc., (the "Company") are to provide a means to attract and
retain high caliber personnel and to provide to participating employees
long-term incentives for sustained high levels of performance for the Company
and its subsidiaries. These purposes may be achieved through the granting of
Incentive Awards under the Plan.
1.2 Definitions
(a) "Average Fair Market Value" means, as of any determination date, the
average of the daily high and low sales prices of the Common Stock on the
composite tape for stocks listed on the New York Stock Exchange as quoted in the
New York Stock Exchange Composite Transactions published in the Western Edition
of The Wall Street Journal for all trading days during the calendar month
preceding the determination date. If the Common Stock is not admitted to trade
on the New York Stock Exchange, the Average Fair Market Value shall be
determined by the Committee in such other reasonable manner as the Committee
shall decide.
(b) "Board" means the Board of Directors of Hawaiian Electric Industries,
Inc.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee of the Board of Directors.
The Committee shall be composed entirely of members who meet the requirements of
Section 1.4(a) hereof.
(e) "Common Stock" means the Common Stock of Hawaiian Electric Industries,
Inc.
(f) "Company" means Hawaiian Electric Industries, Inc. and any successor
corporation.
(g) "Employee" means any regular full-time employee of the Company or any
of the Company's present or future parent or subsidiary corporations (as defined
in Section 424 of the Code), or any successor of such corporation.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(i) "Fair Market Value" means, as of any determination date, the average of
the daily high and low sales prices of the Common Stock on the composite tape
for stocks listed on the New York Stock Exchange as quoted in the New York Stock
Exchange Composite Transactions published in the Western Edition of The Wall
Street Journal on the date as of which Fair Market Value is to be determined, or
if there is no trading of Common Stock on such date, the average of the daily
high and low sales prices of the Common Stock as quoted in such Composite
Transactions on the next preceding date on which there was trading in such
shares, or if the Common Stock is not admitted to trade on the New York Stock
Exchange, the Fair Market Value shall be determined by the Committee in such
other reasonable manner as the Committee shall decide.
(j) "Incentive Award" means a Stock Option, Restricted Stock, Stock
Appreciation Right, Stock Payment, Dividend Equivalent, or Performance Award
granted or sold under the Plan.
(k) "Incentive Stock Option" means an incentive stock option, as defined
under Section 422 of the Code and the regulations thereunder.
(l) "Nonqualified Stock Option" means a stock option other than an
Incentive Stock Option.
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(m) "Option" means a right to purchase Common Stock and refers to both
Incentive Stock Options and Nonqualified Stock Options.
(n) "Participant" means any Employee or, in the case of death of the
Employee, the Employee's beneficiary, selected to receive an Incentive Award
pursuant to Section 1.5 hereof.
(o) "Payment Event" means the occurrence of the event or events giving rise
to the right to payment of a Performance Award.
(p) "Performance Award" means an award, payable in cash or Common Stock or
combination thereof, the value of which may be determined by the Committee at
the time the Performance Award is granted.
(q) "Plan" means the Company's 1987 Stock Option and Incentive Plan as set
forth herein, as amended from time to time.
(r) "Purchase Price" means the purchase price to be paid by a Participant
for Restricted Stock as determined by the Committee.
(s) "Restricted Stock" means Common Stock that the Participant may purchase
at a price determined by the Committee (which price shall be at least equal to
the minimum price required under applicable state law for the issuance of a
share of Common Stock) which is nontransferable and subject to a substantial
risk of forfeiture until specific conditions are met. Conditions may be based on
continuing employment or achievement of pre-established performance objectives.
(t) "Rule 16b-3" means Rule 16b-3 promulgated under Section 16 of the
Exchange Act (or any other comparable provisions in effect at the time or times
in question).
(u) "Stock Appreciation Right" or "Right" means a right granted pursuant to
Section V of the Plan to receive a number of shares of Common Stock, or an
amount of cash, or a combination of shares and cash, based on the increase in
the Fair Market Value of the shares subject to the right.
(v) "Stock Payment" means a payment in shares of the Company's Common Stock
(valued at Fair Market Value or Average Fair Market Value, as determined by the
Committee) to replace all or any portion of the compensation (other than base
salary) that would otherwise become payable to a Participant in cash.
1.3 Shares of Common Stock Subject to the Plan
(a) Subject to the provisions of Section 1.3(c) and Section 8.1 of the
Plan, the aggregate number of shares of Common Stock that may be issued pursuant
to Incentive Awards under the Plan shall be 2,650,000 shares. Notwithstanding
the foregoing, commencing with the 1996 calendar year, grants of Options under
the Plan to any individual in any calendar year shall be limited to Options to
purchase no greater than 100,000 shares of Common Stock.
(b) The Common Stock to be issued under the Plan will be made available, at
the discretion of the Board or the Committee, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common Stock
reacquired by the Company, including shares purchased on the open market.
(c) If any shares of Common Stock subject to an Option (and related Stock
Appreciation Right, if any) terminate without being exercised, then shares
subject to such Option shall be available again for the grant of Options or
other Incentive Awards under the Plan. If any shares subject to a Restricted
Stock Award are forfeited, expire or are otherwise cancelled or terminated, then
shares subject to such Restricted Stock Award shall be available again for the
grant of Restricted Stock Awards or other Incentive Awards under the Plan.
Shares of Common Stock with reference to which Stock Appreciation Rights have
been granted shall be available for granting of Incentive Awards to the extent
the Stock Appreciation Rights are exercised for cash, or, with respect to Stock
Appreciation Rights not related to Options, to the extent the Stock Appreciation
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Rights terminate without being exercised. If any other Incentive Award shall
expire or be forfeited, cancelled or terminated for any reason, the shares of
Common Stock available under such Incentive Award shall be available again for
the granting of Incentive Awards to the maximum extent consistent with Rule
16b-3.
1.4 Administration of the Plan
(a) The Plan will be administered by the Committee, which will consist of
two or more persons who are "disinterested persons" within the meaning of Rule
16b-3. At such time as the Board deems it necessary for the Plan to satisfy the
applicable requirements of Section 162(m) of the Code, the members of the
Committee will also be "outside directors" within the meaning of Section 162(m)
of the Code.
(b) Subject to the express provisions of the Plan, the Committee has and
may exercise such powers and authority of the Board as may be necessary or
appropriate for the Committee to carry out its functions as described in the
Plan. The Committee has authority in its discretion to determine the Employees
to whom, and the time or times at which, Incentive Awards may be granted or
sold, the nature of the Incentive Award, the number of shares of Common Stock
that make up each Incentive Award, the performance criteria (which need not be
identical) utilized to measure the value of Performance Awards, the form of
payment (cash or Common Stock or a combination thereof) payable upon the event
or events giving rise to payment of an Incentive Award and such other terms and
conditions applicable to each individual Incentive Award as the Committee shall
determine. The Committee may grant at any time new Incentive Awards to a
Participant who has previously received Incentive Awards or other grants
(including other stock options) whether such prior Incentive Awards or such
other grants are still outstanding, have previously been exercised in whole or
in part, or are cancelled in connection with the issuance of new Incentive
Awards. The purchase price or initial value of the Incentive Awards may be
established by the Committee without regard to the existing Incentive Awards or
such other grants.
(c) Each Incentive Award will be evidenced by a written instrument or
granted pursuant to a written performance plan adopted by the Committee and may
include any other terms and conditions consistent with the Plan as the Committee
may in its discretion determine. Each Option award agreement shall designate the
Option as either an Incentive Stock Option or Nonqualified Stock Option.
(d) Subject to the express provisions of the Plan, the Committee has the
authority to interpret the Plan, to determine the terms and provisions of the
Incentive Awards and to make all other determinations necessary or advisable for
the administration of the Plan. The Committee has authority to prescribe, amend,
and rescind rules relating to the Plan. All interpretations, determinations, and
actions by the Committee will be final, conclusive, and binding upon all
parties. Any action by the Committee with respect to the administration of the
Plan shall be taken pursuant to a majority vote or by the unanimous written
consent of its members.
(e) No member of the Board or the Committee or designee thereof will be
liable for any action or determination made in good faith by the Board or the
Committee with respect to the Plan or any transaction arising under the Plan.
1.5 Participation
(a) Such Employees of the Company and its subsidiaries as may be selected
by the Committee in its discretion are eligible to participate in the Plan. An
individual who has been granted or sold an Incentive Award may, if otherwise
eligible, be granted or sold additional Incentive Awards if the Committee so
determines.
(b) No person who owns (or is deemed to own) immediately before the grant
of such Incentive Stock Option, directly or indirectly, stock possessing more
than 10% of the total combined
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voting power of all classes of stock of the Company will be eligible for the
grant of an Incentive Stock Option. This restriction does not apply if, at the
time such Incentive Stock Option is granted, the Incentive Stock Option exercise
price is at least 110% of the Fair Market Value on the date of grant and the
Incentive Stock Option by its terms is not exercisable after the expiration of
five (5) years from the date of grant.
(c) In no event may any member of the Board who is not an Employee be
granted an Incentive Award.
II. TERMS AND CONDITIONS OF OPTIONS
2.1 Option Plan
The purchase price of Common Stock under each Incentive Stock Option will
be determined by the Committee but may not be less than the Fair Market Value on
the date of grant. The purchase price of Common Stock under each Nonqualified
Stock Option will be determined by the Committee but may not be less than 85% of
the Average Fair Market Value on the date of grant.
2.2 Exercisability
Options granted pursuant to this Plan shall be exercisable at such times
and under such conditions as shall be determined by the Committee; provided,
however that no Option shall be exercisable after the expiration of ten (10)
years from the date the Option is granted.
2.3 Exercise of Option
Options may be exercised by written notice to the Company specifying the
number of shares of Common Stock with respect to which the option will be
exercised. At the time of exercise of an Option, the purchase price shall be
paid in full in cash or its equivalent acceptable to the Committee. To the
extent provided by the Option agreement executed by the Participant, the
purchase price may be paid by the assignment and delivery to the Company of
shares of Common Stock or a combination of cash and shares of Common Stock equal
in value to the exercise price, or in such other manner acceptable to the
Committee. Any shares assigned and delivered to the Company in payment or
partial payment of the purchase price will be valued at their Fair Market Value
on the exercise date. No fractional shares will be issued pursuant to the
exercise of an Option, but the Committee in its discretion, may make a cash
payment.
III. TERMS AND CONDITIONS OF PERFORMANCE AWARDS
3.1 Grant of Performance Awards
The Committee shall determine the performance criteria (which need not be
identical) to be utilized to calculate the value of Performance Awards, the
terms of such Performance Awards, the Payment Event, and the form and time of
payment of Performance Awards. The specific terms and conditions of each
Performance Award shall be set forth in a written instrument evidencing the
grant of a Performance Award, or in a performance plan adopted by the Committee.
3.2 Payment of Performance Awards
Payment of Performance Awards may be in cash or in shares of Common Stock
valued at Fair Market Value or Average Fair Market Value on the date of payment,
or a combination of Common Stock and cash, as the Committee in its discretion
may determine. The Committee may permit a Participant to elect to defer receipt
of any portion of a Performance Award that is paid in cash or shares of Common
Stock and credit any such amounts with an interest rate or such other rate of
return as shall be specified by the Committee. The Committee may impose a
limitation on the amount payable upon the occurrence of a Payment Event, which
limitation shall be set forth in the written instrument evidencing the grant of
a Performance Award.
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3.3 Expiration of Performance Awards
If any Participant's employment with the Company is terminated for any
reason prior to the occurrence of the Payment Event, all of the Participant's
rights under the Performance Award shall expire and terminate unless the
applicable performance award written instrument or plan provides otherwise.
IV. RESTRICTED STOCK
4.1 Award of Restricted Stock
The Committee may grant awards of Restricted Stock to Employees. The
Committee shall determine the Purchase Price (which price shall be at least
equal to the minimum price required under applicable state law for the issuance
of a share of Common Stock), the terms of payment of the Purchase Price, the
restrictions upon the Restricted Stock, and when such restrictions shall lapse.
The terms and conditions of the Restricted Stock shall be set forth in a written
instrument.
4.2 Conditions of Restricted Stock
All shares of Restricted Stock (including shares received as a result of
stock dividends, stock splits or other forms of recapitalization) sold pursuant
to the Plan will be subject to the following conditions:
(a) The shares may not be sold, transferred or otherwise alienated or
hypothecated until the restrictions are removed or expire.
(b) The Participant shall enter into an escrow agreement providing that the
certificates representing the Restricted Stock sold to a Participant pursuant to
the Plan will remain in the physical custody of an escrow holder until all
restrictions are removed or expire.
(c) Each certificate representing Restricted Stock sold to a Participant
pursuant to the Plan will bear a legend making appropriate reference to the
restriction imposed.
(d) Such other conditions as the Committee may deem advisable including,
without limitation, restrictions designed to facilitate compliance with or
exemption from the Exchange Act, the requirements of any stock exchange on which
shares of the same class are listed, and with any Blue Sky or securities laws
which may be applicable to such shares.
4.3 Lapse of Restrictions
The restrictions imposed upon Restricted Stock under Section 4.2 above will
lapse in accordance with such conditions as are determined by the Committee and
set forth in a written instrument describing the terms of the sale of the
Restricted Stock.
4.4 Rights of Participant
Subject to the provisions of Section 4.2 above, the Committee may determine
that the Participant will have all rights of a stockholder with respect to the
Restricted Stock sold to the Participant, including the right to vote the shares
and receive all dividends and other distributions paid or made with respect
thereto. Each Participant who has an outstanding award of Restricted Stock that
is subject to restrictions shall deposit with the Company any stock, securities
or other property which the Participant is entitled to receive with respect to
the Participant's shares of Restricted Stock by reason of an event described in
Section 8.1(a) hereof, and such stock, securities or other property will be
subject to the restrictions imposed on such Restricted Stock.
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4.5 Termination of Employment
Unless the applicable Restricted Stock award agreement provides otherwise,
upon a Participant's termination of employment for any reason, all of the
Participant's Restricted Stock remaining subject to restrictions on the date of
such termination of employment shall be forfeited and shall be available again
for grant of Incentive Awards under the Plan.
V. STOCK APPRECIATION RIGHTS
5.1 Granting of Stock Appreciation Rights
The Committee may approve the grant of Stock Appreciation Rights related to
Options to Participants, subject to the following terms and conditions:
(a) A Stock Appreciation Right may be granted:
(i) either at the time of grant, or at any time thereafter during the
Option term if related to a Nonqualified Stock Option; or
(ii) only at the time of grant if related to an Incentive Stock
Option.
(b) A Stock Appreciation Right granted in connection with an Option will
entitle the holder of the related Option, upon exercise of the Stock
Appreciation Right, to surrender such Option with respect to the number of
shares as to which such Stock Appreciation Right is exercised, and to receive
payment of an amount computed pursuant to Section 5.1(d). Such Option will, to
the extent surrendered, then cease to be exercisable.
(c) Subject to Section 5.1(f), a Stock Appreciation Right granted in
connection with an Option hereunder will be exercisable at such time or times,
and only to the extent that a related Option is exercisable, and will not be
transferable except to the extent that such related Option may be transferable.
(d) Upon the exercise of a Stock Appreciation Right related to an Option,
the holder will be entitled to receive payment of an amount determined by
multiplying:
(i) the difference obtained by subtracting the purchase price of a
share of Common Stock specified in the related Option from the Fair Market
Value of a share of Common Stock on the date of exercise of such Stock
Appreciation Right, by
(ii) the number of shares as to which such Stock Appreciation Right
has been exercised.
(e) Payment of the amount determined under Section 5.1(d) may be made in
whole shares of Common Stock in a number determined at their Fair Market Value
or Average Fair Market Value on the date of exercise of the Stock Appreciation
Right or, alternatively, in cash or in a combination of cash and shares as
determined by the Committee. If the Committee decides to make full payment in
shares of Common Stock, and the amount payable results in a fractional share,
payment for the fractional share will be made in cash.
(f) The Committee may, at the time a Stock Appreciation Right is granted,
impose such conditions on the exercise of the Stock Appreciation Right as may be
required to satisfy the requirements of Rule 16b-3. Without limiting the
generality of the foregoing, the Committee may determine that a Stock
Appreciation Right may be exercised only during the period beginning on the
third business day and ending on the twelfth business day following the release
of the Company's quarterly and annual summarized financial data.
(g) To the extent required to satisfy the applicable requirements of Rule
16b-3, no Stock Appreciation Right granted to a Participant of the Company
subject to Section 16 of the Exchange Act may be exercised before six (6) months
after the date of grant, except (i) in the event death of the Participant occurs
before the expiration of the six-month period, or (ii) to the extent permitted
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pursuant to Rule 16b-3, in the event disability of the Participant occurs before
the expiration of the six-month period.
VI. STOCK PAYMENT
The Committee may approve Stock Payments of the Company's Common Stock
(valued at Fair Market Value or Average Fair Market Value at the time of
payment, as determined by the Committee) to an Employee for all or any portion
of the compensation (other than base salary) that would otherwise become payable
to an Employee in cash.
VII. DIVIDEND EQUIVALENTS
A Participant may also be granted at no additional cost "Dividend
Equivalents" based on the dividends declared on the Common Stock on record dates
during the period between the date an Option is granted and the date such Option
is exercised, or such other period, as determined by the Committee. Such
Dividend Equivalents shall be converted to additional shares or cash by such
formula as may be determined by the Committee.
Dividend Equivalents shall be computed, as of each dividend record date,
both with respect to the number of shares under the Option and with respect to
the number of Dividend Equivalent shares previously credited to the Participant
(or Participant's successor in interest) and not issued during the period prior
to the dividend record date.
VIII. OTHER PROVISIONS
8.1 Adjustment Provisions
(a) Subject to Section 8.1(b) below, if the outstanding shares of Common
Stock of the Company are increased, decreased, or exchanged for a different
number or kind of shares or other securities, or if additional shares or new or
different shares or other securities are distributed with respect to such shares
of Common Stock or other securities through merger, consolidation, sale of all
or substantially all of the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (i) the
maximum number and kind of shares provided in Section 1.3, (ii) the number and
kind of shares or other securities subject to the outstanding Incentive Awards,
and (iii) the price for each share or other unit of any other securities subject
to outstanding Incentive Awards without material change in the aggregate
purchase price or value as to which such Incentive Awards remain exercisable or
subject to restrictions.
(b) In addition to the adjustments covered under Section 8.1(a) above, any
Incentive Award may contain provisions to the effect that upon the occurrence of
certain events, including a change-in-control of the Company (as defined by the
Committee), any outstanding Incentive Awards not theretofore vested,
exercisable, payable or free from restrictions, as the case may be, shall either
immediately, or upon a further determination made by the Committee at the time
of the event, become fully vested, exercisable, payable, or free from
restrictions.
(c) Adjustments and determinations under Section 8.1(a) and 8.1(b) will be
made by the Committee, whose determination will be final, binding, and
conclusive. No fractional interests will be issued under the Plan resulting from
any such adjustments, but the Committee in its discretion may make a cash
payment in lieu of fractional shares.
8.2 Continuation of Employment
Nothing in the Plan or in any instrument executed pursuant to the Plan will
confer upon any Participant any right to continue in the employ of the Company
or affect the right of the Company to terminate the employment of any
Participant at any time with or without cause.
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8.3 Compliance with Government Regulations
No shares of Common Stock will be issued pursuant to an Incentive Award
unless and until all applicable requirements imposed by federal and state
securities and other laws, rules and regulations and by any regulatory agencies
having jurisdiction and by any stock exchanges upon which the Common Stock may
be listed have been fully met. As a condition precedent to the issuance of
shares of Common Stock pursuant to an Incentive Award, the Company may require
the Participant to take any reasonable action to comply with such requirements.
8.4 Privileges of Stock Ownership
No Participant and no beneficiary or other person claiming under or through
such Participant will have any right, title or interest in or to any shares of
Common Stock allocated or reserved under the Plan or subject to any Incentive
Award except as to such shares of Common Stock, if any, that have been issued to
such Participant.
8.5 Withholding
The Company may make such provisions as it deems appropriate to withhold
any taxes the Company determines it is required to withhold in connection with
any Incentive Award. The Company may require the Participant to satisfy any
relevant tax requirements before authorizing any issuance of Common Stock to the
Participant. To the extent permitted by the applicable Incentive Award agreement
a Participant may satisfy any such withholding tax obligation by any of the
following means or by a combination of such means: (a) tendering a cash payment;
(b) authorizing the Company to withhold from the Common Stock otherwise issuable
to the Participant, a number of shares having a Fair Market Value, as of the
date the withholding tax obligation arises, less than or equal to the amount of
withholding tax obligation; or (c) delivering to the Company already owned and
unencumbered shares of Common Stock having a Fair Market Value, as of the date
the withholding tax obligation arises, less than or equal to the amount of the
withholding tax obligation.
8.6 Transferability of Incentive Awards
To the extent necessary to satisfy the requirements of Rule 16b-3 with
respect to Incentive Awards granted under the Plan, the Committee shall provide
that (a) no Option or Right may be exercised during the life of the Participant
other than by the Participant or the Participant's duly appointed guardian or
personal representative, and (b) no Incentive Award and no Right under the Plan,
contingent or otherwise, will be assignable or subject to any encumbrance,
pledge, or charge of any nature except that, under such rules as the Committee
may establish pursuant to the terms of the Plan, a beneficiary may be designated
with respect to an Incentive Award in the event of death of a Participant. If
such beneficiary is the executor or administrator of the estate of the
Participant, any rights with respect to such Incentive Award may be transferred
to the person or persons or entity (including a trust) entitled thereto under
the will of the Participant of such Incentive Award. Notwithstanding the
foregoing, the Committee may permit transferability of Incentive Awards to the
extent permitted by the applicable provisions of Rule 16b-3; provided, however,
that the Committee, in its discretion, may impose any restrictions on
transferability of Incentive Awards as it deems appropriate.
8.7 Amendment and Termination of Plan; Amendment of Incentive Award
(a) The Board will have the power, in its discretion, to amend, suspend, or
terminate the Plan at any time; provided, however, that no amendment to the Plan
may be made without approval of the stockholders of the Company to the extent
stockholder approval of the amendment is required to comply with the
requirements of Rule 16b-3 or, if applicable, Section 162(m) of the Code.
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(b) Except as otherwise provided by the applicable Incentive Award written
instrument or by Section 1.4, the Committee may not, without the consent of a
Participant, make modifications in the terms and conditions of an Incentive
Award.
(c) No amendment, suspension, or termination of the Plan will, without the
consent of the Participant, alter, terminate, impair, or adversely affect any
right or obligations under any Incentive Award previously granted under the
Plan.
IX. INTERPRETATION
The Plan is designed and intended to comply with Rule 16b-3 and, to the
extent applicable, Section 162(m) of the Code, and all provisions hereof shall
be construed in a manner to so comply.
X. DURATION OF PLAN
Unless previously terminated by the Board of Directors, the Plan will
terminate on February 19, 2006.
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[MAP]
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HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 Richards Street, Honolulu, Hawaii 96813
[HEI LOGO]
P
R
O
X
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 23, 1996, AT 9:30 A.M., IN THE
PACIFIC TOWER, 8TH FLOOR, ROOM 805, 1001 BISHOP STREET, HONOLULU, HAWAII 96813.
The undersigned hereby constitutes and appoints Robert F. Clarke,
Richard Henderson and Edwin L. Carter and each of them the proxy of the
undersigned, with full power of substitution, to vote all the Common Stock of
the Company which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders to be held on April 23, 1996, or at any adjournment thereof.
Said proxies are instructed to vote as indicated below. If no direction
is indicated, said proxies will vote FOR all Nominees in Class II and Class III
and FOR proposals 3 and 4. Said proxies are also authorized to vote in their
discretion with respect to any other matters which may come before the meeting.
The Board of Directors recommends a vote FOR the following proposals:
1. Election of T. Michael May as Class II director (term ending at the
1998 Annual Meeting) (Check one box only)
[ ] FOR [ ] WITHHOLD AUTHORITY
2. Election of Class III directors (term ending at the 1999 Annual
Meeting)
Don E. Carroll, Edwin L. Carter, Richard Henderson, Bill D.
Mills and Oswald K. Stender (Check one box only)
To vote FOR all Nominees named above, check this box. [ ]
To WITHHOLD AUTHORITY to vote for all Nominees named above,
check this box. [ ]
To withhold authority for any particular Nominee, write the
Nominee's name in the following space:
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3. Election of KPMG Peat Marwick LLP as auditor (Check one box only)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Amend the 1987 Stock Option and Incentive Plan, as amended in 1992
(Check one box only)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign your name exactly as it appears at the top of this proxy. Joint
owners should each sign personally. Attorney, Executor, Administrator, Trustee
or Guardian should indicate full title. If address is incorrect, please give
us the correct one.)
Dated , 1996
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Signature (no witness required)
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Signature (if held jointly)
PLEASE COMPLETE AND RETURN ENTIRE PROXY
