As filed with the Securities and Exchange Commission on December 18, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 18, 1996
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Exact name of Registrant as specified
Commission in its charter, address of principal State of I.R.S. Employer
File No. executive offices, telephone number Incorporation Identification No.
1-8349 FLORIDA PROGRESS CORPORATION Florida 59-2147112
One Progress Plaza
St. Petersburg, Florida 33701
Telephone (813) 824-6400
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The address of the registrant has not changed since the last report.
<PAGE>
Item 5. Other Events
In light of ongoing securities offerings by Florida Progress Corporation
("Florida Progress") and its subsidiaries, including Florida Power Corporation
("Florida Power") and Progress Capital Holdings, Inc., the following information
is being presented pending distribution of the combined Florida Progress and
Florida Power Annual Report on Form 10-K for the year ended December 31, 1996:
Florida Progress issued a News Release dated December 18, 1996 announcing
the spin-off of Echelon International Corporation, Florida Progress' real
estate, lending and leasing unit ("Echelon"). A copy of the News Release is
being filed herewith as Exhibit 99.(1). In addition, Florida Progress is filing
herewith as Exhibits 10.(1) and 10.(2), executed final copies of the
Distribution Agreement and Tax Sharing Agreement, respectively, each dated as of
December 16, 1996, by and between Florida Progress and Echelon, relating to the
spin-off.
Item 7. Financial Statements and Exhibits
(c) Exhibits:
Exhibit Number (by
reference to Item 601
of Regulation S-K) Description of Exhibit
10.(1) Distribution Agreement dated as of December 16, 1996 between Florida
Progress and Echelon.
10.(2) Tax Sharing Agreement dated as of December 16, 1996 between Florida
Progress and Echelon.
99.(1) Florida Progress News Release dated December 18, 1996 regarding the
spin-off of Echelon.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FLORIDA PROGRESS CORPORATION
By:/s/James V. Smallwood
---------------------------
James V. Smallwood
Vice President and Treasurer
Date: December 18, 1996
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
10.(1) Distribution Agreement dated as of December 16, 1996 between Florida
Progress and Echelon.
10.(2) Tax Sharing Agreement dated as of December 16, 1996 between Florida
Progress and Echelon.
99.(1) Florida Progress News Release dated December 18, 1996 regarding the
spin-off of Echelon.
EXHIBIT 10.(1)
DISTRIBUTION AGREEMENT
by and between
FLORIDA PROGRESS CORPORATION,
a Florida corporation,
and
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation,
Dated as of December 16, 1996
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TABLE OF CONTENTS
Page
ARTICLE I
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DEFINITIONS................................................. 2
1.1 General......................................................................... 2
1.2 References to Time............................................................. 10
1.3 References; Interpretation..................................................... 10
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE............................ 10
2.1 Transfer of Assets............................................................. 10
2.2 Articles of Incorporation; By-laws; Rights
Agreement...................................................................... 10
2.3 Issuance of Stock.............................................................. 10
2.4 Registration and Listing....................................................... 11
2.5 Echelon Board.................................................................. 11
2.6 Notices to Third Parties....................................................... 11
2.7 Licenses and Permits........................................................... 11
2.8 Settlement of Intercompany Accounts............................................ 12
2.9 Indebtedness and Capital Structure............................................. 12
2.10 Resignations................................................................... 12
2.11 Ancillary Agreements........................................................... 13
2.12 No Representations or Warranties............................................... 13
2.13 Certain Contingent Liabilities................................................. 13
ARTICLE III
THE DISTRIBUTION............................................ 14
3.1 Record Date and Distribution Date.............................................. 14
3.2 The Agent...................................................................... 14
3.3 Delivery of Share Certificates to Agent........................................ 14
ARTICLE IV
INDEMNIFICATION............................................... 15
4.1 Indemnification................................................................ 15
4.2 Procedures for Indemnification for Third-Party
Claims......................................................................... 15
4.3 Remedies Cumulative............................................................ 17
4.4 Indemnification Payments....................................................... 17
ARTICLE V
CERTAIN ADDITIONAL COVENANTS................................. 18
5.1 Assumption and Satisfaction of Liabilities..................................... 18
5.2 Intercompany Agreements........................................................ 18
5.3 Guarantees..................................................................... 19
5.4 Further Assurances............................................................. 21
5.5 Witness Services............................................................... 21
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TABLE OF CONTENTS (continued)
Page
5.6 Certain Post-Distribution Transactions........................................ 21
5.7 Certain Agreements of Echelon................................................. 22
5.8 Corporate Names............................................................... 22
5.9 Transfers Not Effected Prior to the
Distribution; Transfers Deemed Effective as of
the Distribution Date......................................................... 23
ARTICLE VI
ACCESS TO INFORMATION....................................... 24
6.1 Provision of Corporate Records................................................ 24
6.2 Access to Information......................................................... 24
6.3 Reimbursement; Other Matters.................................................. 25
6.4 Retention of Records.......................................................... 25
6.5 Confidentiality............................................................... 25
6.6 Privileged Matters............................................................ 26
6.7 Ownership of Information...................................................... 28
6.8 Limitation of Liability....................................................... 28
6.9 Other Agreements Providing for Exchange of
Information................................................................... 28
ARTICLE VII
ADMINISTRATIVE SERVICES.................................... 28
7.1 Performance of Services....................................................... 28
7.2 Independence.................................................................. 28
ARTICLE VIII
DISPUTE RESOLUTION......................................... 29
8.1 Negotiation. ................................................................ 29
8.2 Arbitration................................................................... 29
8.3 Continuity of Service and Performance......................................... 30
ARTICLE IX
INSURANCE.................................................. 30
ARTICLE X
MISCELLANEOUS.............................................. 31
10.1 Complete Agreement; Construction.. ........................................... 31
10.2 Ancillary Agreements.......................................................... 31
10.3 Counterparts.................................................................. 31
10.4 Survival of Agreements........................................................ 31
10.5 Expenses...................................................................... 31
10.6 Notices....................................................................... 32
10.7 Waivers....................................................................... 32
10.8 Amendments.................................................................... 32
10.9 Assignment.................................................................... 32
ii
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10.10 Successors and Assigns........................................................ 33
10.11 Termination................................................................... 33
10.12 Subsidiaries.................................................................. 33
10.13 Third Party Beneficiaries..................................................... 33
10.14 Title and Headings............................................................ 33
10.15 Exhibits and Schedules........................................................ 33
10.16 GOVERNING LAW................................................................. 34
10.17 Consent to Jurisdiction....................................................... 34
10.18 Severability.................................................................. 34
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Exhibits and Schedules
EXHIBIT A Form of PCH Note
Schedule 1.1(a) Retained Assets of the Florida Progress Group,
if any
Schedule 1.1(b) Retained Liabilities of the Florida Progress,
Group, if any
Schedule 2.8 Settlement of Intercompany Accounts
Schedule 5.2(a) Intercompany Agreements which are not to be
Cancelled
Schedule 5.2(b) Intercompany Agreements which are not to be
Cancelled
Schedule 5.3(a) Guarantees and Obligations by the Florida
Progress Group
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DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of December 16, 1996, by
and between FLORIDA PROGRESS CORPORATION, a Florida corporation ("Florida
Progress"), and ECHELON INTERNATIONAL CORPORATION, a Florida corporation and a
wholly owned subsidiary of Florida Progress ("Echelon").
W I T N E S S E T H:
WHEREAS, prior to entering into this Agreement, the Echelon
Group consisted of (i) Progress Credit Corporation ("PCC"), a Florida
corporation and a direct, wholly owned subsidiary of Progress Capital Holdings,
Inc. ("PCH"), (ii) Talquin Development Company ("Talquin"), a Florida
corporation and a direct, wholly owned subsidiary of PCC, (iii) Progress Leasing
Corporation ("Progress Leasing"), a Florida corporation and a direct, wholly
owned subsidiary of PCC, (iv) Echelon, formerly known as PLC Leasing Corporation
("PLC Leasing") and a direct, wholly owned subsidiary of Progress Leasing and
(v) their respective Subsidiaries;
WHEREAS, prior to entering into this Agreement, (i) Talquin
merged with and into PCC, (ii) PCC merged with and into Progress Leasing and
(iii) Progress Leasing merged with and into Echelon, which, as a result of such
merger, became the successor to Talquin, PCC and Progress Leasing (collectively,
the "Pre- Distribution Mergers");
WHEREAS, it has been proposed that Florida Progress distribute
the shares of Echelon Common Stock (and Echelon Rights) to Florida Progress
stockholders and enter into this Agreement and effect the Distribution and the
other transactions contemplated hereby, subject to the terms and conditions set
forth herein and in the Ancillary Agreements;
WHEREAS, the respective Boards of Directors of Florida
Progress, PCH and Echelon have duly considered the foregoing, have determined
the Distribution and the other transactions contemplated hereby to be desirable
and in the best interests of Florida Progress, PCH and Echelon, respectively;
WHEREAS, the Distribution is intended to qualify as a
tax-free spin-off under Section 355 of the Code; and
WHEREAS, the parties hereto have determined that it is
necessary and desirable to set forth their agreements that will govern certain
matters prior to and following the Distribution;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and intending to be legally bound thereby, the
parties hereto agree as follows:
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2
ARTICLE I
DEFINITIONS
1.1 General. As used in this Agreement, the following
terms shall have the following meanings:
Action: any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any
governmental or other regulatory or administrative agency, body
or commission or any arbitration tribunal.
Affiliate: with respect to any specified Person, a Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person; provided,
however, that for purposes of this Agreement, no member of either Group shall be
deemed to be an Affiliate of any member of the other Group.
Agent: The First National Bank of Boston, as the distribution
agent appointed by Florida Progress to distribute the shares of Echelon Common
Stock pursuant to the Distribution.
Agreement: this Agreement, as the same may be amended,
supplemented, or otherwise modified from time to time in accordance with the
terms hereof, together with all Schedules and Exhibits attached hereto or
delivered simultaneously herewith.
Agreement Disputes: as defined in Section 8.1 hereof.
Aircraft: as defined in Section 5.3 hereof.
Ancillary Agreements: all of the written agreements,
instruments, assignments or other arrangements (other than this Agreement)
entered into in connection with the transactions contemplated hereby, including,
without limitation, the Employee Benefits Allocation Agreement, the PCH Note,
the Tax Sharing Agreement and the Transition Services Agreement, and any
exhibit, schedule or appendix to any of the foregoing.
Assets: assets, properties and rights (including goodwill),
wherever located, whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, including, without limitation, the following:
(i) all accounting and other books, records and files
whether in paper, microfilm, microfiche, computer
tape or disc, magnetic tape or any other form;
(ii) all apparatus, computers and other electronic data
processing equipment, fixtures, machinery,
equipment, furniture, office equipment,
<PAGE>
3
automobiles, trucks, aircraft and other
transportation equipment, special and general
tools, test devices, prototypes and models and
other tangible personal property;
(iii) all inventories of materials, parts, raw
materials, supplies, work-in-process and finished
goods and products;
(iv) all interests in real property of whatever
nature, including easements, whether as
owner, mortgagee or holder of a Security
Interest in real property, lessor,
sublessor, lessee, sublessee or otherwise;
(v) all interests in any capital stock or other equity
interests of any Subsidiary or any other Person,
all bonds, notes, debentures or other securities
issued by any Subsidiary or any other Person, all
loans, advances or other extensions of credit or
capital contributions to any Subsidiary or any
other Person and all other investments in
securities of any Person;
(vi) all license agreements, leases of personal
property, open purchase orders for raw
materials, supplies, parts or services,
unfilled orders for the manufacture and sale
of products and other contracts, agreements
or commitments;
(vii) all deposits, letters of credit and performance
and surety bonds;
(viii) all written technical information, data,
specifications, research and development
information, engineering drawings, operating
and maintenance manuals, and materials and
analyses prepared by consultants and other
third parties;
(ix) all intellectual property, including
patents, copyrights, trade names,
trademarks, service marks and registrations
and applications for any of the foregoing,
mask works, trade secrets, inventions, data
bases, other proprietary information and
licenses from third Persons granting the
right to use any of the foregoing;
(x) all computer applications, programs and
other software, including operating
software, network software, firmware,
middleware, design software, design tools,
systems documentation and instructions;
(xi) all cost information, sales and pricing data,
customer prospect lists, supplier records,
<PAGE>
4
customer and supplier lists, customer and vendor
data, correspondence and lists, product
literature, artwork, design, development and
manufacturing files, vendor and customer
drawings, formulations and specifications,
quality records and reports and other books,
records, studies, surveys, reports, plans
and documents;
(xii) the right to receive mail and other
communications;
(xiii) all prepaid expenses, trade accounts and other
accounts and notes receivables;
(xiv) all rights under leveraged leases, direct finance
leases, operating or other equipment leases or
other contracts or agreements, all claims or
rights against any Person arising from the
ownership of any asset, all rights in connection
with any bids or offers and all claims, chooses in
action or similar rights, whether accrued or
contingent;
(xv) all rights under insurance policies and all rights
in the nature of insurance, indemnification or
contribution;
(xvi) all licenses (including radio and similar
licenses), permits, approvals and authorizations
which have been issued by any governmental
authority;
(xvii) cash or cash equivalents, bank accounts, lock
boxes and other deposit arrangements; and
(xviii) interest rate, currency, commodity or other
swap, collar, cap or other hedging or
similar agreements or arrangements.
Business Plan: the Echelon business plan set forth in
the Progress Credit Corporation Ten-Year Financial Projections
and Assumptions 1997-2006.
Code: the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder, including
any successor legislation.
Distribution: the distribution on the Distribution Date to
holders of record of shares of Florida Progress Common Stock as of the Record
Date of the Echelon Common Stock owned by Florida Progress on the basis of one
share of Echelon Common Stock for each 15 outstanding shares of Florida Progress
Common Stock.
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5
Distribution Date: the date fixed by the Board of
Directors of Florida Progress as the date on which the
Distribution is to be effected.
Echelon: as defined in the recitals to this Agreement.
Echelon Assets: collectively, all of the rights and Assets
(excluding Tax and employee-related Assets) of the parties hereto or any of
their respective Subsidiaries primarily relating to the Echelon Business,
including (i) all rights and Assets of Echelon under this Agreement or any
Ancillary Agreement (or any exhibit, schedule or appendix hereto or thereto) and
(ii) the Assets included on the Echelon Balance Sheet or the accounting records
supporting such balance sheet and any Assets acquired by any member of the
Florida Progress Group or the Echelon Group primarily relating to the Echelon
Business after the date of the Echelon Balance Sheet, but excluding (x) any
Assets included on the Echelon Balance Sheet which have been disposed of after
the date of the Echelon Balance Sheet, and (y) any Assets identified or set
forth on Schedule 1.1(a) hereto.
Echelon Balance Sheet: the consolidated balance sheet
of Echelon, including the notes thereto, as of September 30,
1996, set forth in the Information Statement.
Echelon Business: all of the businesses and operations
conducted directly or indirectly at any time by any member of the Echelon Group
which relate to real estate development, real estate management, or real estate,
aircraft or other equipment finance, lending and/or leasing, and all of the
businesses and operations conducted by any member of the Echelon Group directly
or indirectly on or after the Distribution Date, including, in each case, any
investment managed by any such Person.
Echelon Common Stock: the common stock, par value $.01
per share, of Echelon, together with the Echelon Rights.
Echelon Group: Echelon, as successor to the group of companies
consisting of PCC, Talquin, Progress Leasing and PLC Leasing Corporation, the
Subsidiaries thereof, and any Persons which may hereafter be organized or
acquired directly or indirectly as Echelon Subsidiaries.
Echelon Indemnitees: each member of the group of companies
which formerly comprised the Echelon Group, each of their respective directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing.
Echelon Investments: any corporation, partnership or
other business entity, in which any member of the Echelon Group
has owned or will own any equity interest or other investment and
which relates to the business and operations conducted by Echelon
<PAGE>
6
or any Echelon Subsidiary, other than a member of the Florida
Progress Group.
Echelon Liabilities: collectively, all Liabilities (other than
Tax and employee-related Liabilities, which shall be the subject of the Tax
Sharing Agreement and Employee Benefits Allocation Agreement, respectively) of
the parties hereto or any of their respective Subsidiaries (whenever arising,
whether prior to, at or after the Effective Time) primarily arising out of or in
connection with or otherwise relating to the management or conduct, before or
after the Effective Time, of the Echelon Business, or the Echelon Assets, and
including, (i) all the Liabilities of Echelon under this Agreement or any
Ancillary Agreement (or any exhibit, schedule or appendix hereto or thereto),
(ii) Liabilities reflected on the Echelon Balance Sheet or the accounting
records supporting such balance sheet and any Liabilities assumed or incurred by
any member of the Florida Progress Group or the Echelon Group primarily arising
out of or in connection with or otherwise relating to the Echelon Business after
the date of the Echelon Balance Sheet, and (iii) all Liabilities relating to or
involving the Echelon Business or the current, former or future Assets or
operations of any member of the Echelon Group which arise under, relate to or
are based upon any law, statute, regulation, rule, judgment, decree, rule of
common law or any similar requirement relating to hazardous or toxic substances
or materials or to the protection of human health or the environment; provided,
however, that any Liabilities set forth or identified on Schedule 1.1(b) hereto
shall not be Echelon Liabilities and shall instead be deemed hereunder to
constitute Florida Progress Liabilities.
Echelon Rights: the preferred stock purchase rights of Echelon
issued pursuant to the Rights Agreement dated as of November 15, 1996 by and
between Echelon and The First National Bank of Boston, as Rights Agent.
Echelon Subsidiaries: all Subsidiaries of Echelon and
all Echelon Investments.
Effective Time: 12:01 a.m., St. Petersburg, Florida
time, on the Distribution Date.
Employee Benefits Allocation Agreement: the Employee
Benefits Agreement dated as of December 16, 1996, between Florida
Progress and Echelon.
Employee Benefit Plan: has the meaning set forth in
Section 1.1 of the Employee Benefits Allocation Agreement.
Exchange Act: the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated
thereunder.
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7
Florida Progress: as defined in the recitals to this
Agreement.
Florida Progress Assets: collectively, all of the rights and
Assets of Florida Progress or any direct or indirect Subsidiary of Florida
Progress, including any Assets acquired under this Agreement or any Ancillary
Agreement, but excluding the Echelon Assets.
Florida Progress Business: all of the businesses and
operations conducted at any time, whether prior to, on or after
the Distribution Date, by any direct or indirect Subsidiary of
Florida Progress, other than the Echelon Business.
Florida Progress Common Stock: the common stock,
without par value, of Florida Progress.
Florida Progress Group: Florida Progress and the
Florida Progress Subsidiaries, other than Echelon and other
members of the Echelon Group.
Florida Progress Indemnitees: each member of the
Florida Progress Group, each of their respective directors,
officers, employees and agents and each of the heirs, executors,
successors and assigns of any of the foregoing.
Florida Progress Liabilities: collectively, all obligations
and Liabilities of Florida Progress or any direct or indirect Subsidiary of
Florida Progress, including all Liabilities incurred under this Agreement or any
Ancillary Agreement, but excluding the Echelon Liabilities.
Florida Progress Subsidiaries: all Subsidiaries of
Florida Progress, other than Echelon and the other members of the
Echelon Group (including the Echelon Investments).
Group: the Florida Progress Group or the Echelon
Group.
Indemnifiable Losses: any and all losses, Liabilities, claims,
damages, demands, costs or expenses (including, without limitation, reasonable
attorneys' fees and any and all out-of-pocket expenses) reasonably incurred in
investigating, preparing for or defending against any Actions or potential
Actions or in settling any Action or potential Action or in satisfying any
judgment, fine or penalty rendered in or resulting from any Action.
Indemnifying Party: as defined in Section 4.2 hereof.
Indemnitee: as defined in Section 4.2 hereof.
Information Statement: the information statement to be
included in the Registration Statement and sent to Florida
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8
Progress stockholders in connection with the Distribution, including any
amendment or supplement thereto.
Liabilities: any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, payments, costs
and expenses, sums of money, accounts, reckonings, bonds, specialties,
indemnities and similar obligations, exonerations, covenants, contracts,
controversies, agreements, promises, doings, omissions, variances, guarantees,
make whole agreements and similar obligations, and other liabilities, including
all contractual obligations, whether absolute or contingent, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising, and including those arising under any law, rule, regulation,
Action, threatened or contemplated Action (including the costs and expenses of
demands, assessments, judgments, settlements and compromises relating thereto
and attorneys' fees and any and all costs and expenses (including allocated
costs of in-house counsel and other personnel), whatsoever reasonably incurred
in investigating, preparing or defending against any such Actions or threatened
or contemplated Actions), order or consent decree of any governmental or other
regulatory or administrative agency, body or commission or any award of any
arbitrator or mediator of any kind, and those arising under any contract,
commitment or undertaking, including those arising under this Agreement or any
Ancillary Agreement, in each case, whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any Person.
NYSE: the New York Stock Exchange.
PCC: as defined in the recitals to this Agreement.
PCH: as defined in the recitals to this Agreement.
PCH Note: the note to be issued by Echelon to PCH upon
the Distribution in substantially the form of Exhibit A hereto.
Person: any natural person, corporation, business
trust, joint venture, association, company, limited liability
company, partnership or government, or any agency or political
subdivision thereof.
PLC Leasing: as defined in the recitals to this
Agreement.
Pre-Distribution Mergers: as defined in the recitals
to this Agreement.
Progress Leasing: as defined in the recitals to this
Agreement.
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9
Record Date: December 5, 1996.
Records: as defined in Section 6.1 hereof.
Registration Statement: the registration statement on
Form 10 to effect the registration of the Echelon Common Stock
pursuant to the Exchange Act.
Rules: as defined in Section 8.2 hereof.
SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as
amended, together with the rules and regulations promulgated
thereunder.
Security Interest: any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer, or other encumbrance of any nature whatsoever.
Subsidiary: with respect to any specified Person, any
corporation, partnership or other legal entity of which such Person or any of
its Subsidiaries controls or owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of members to
the board of directors or similar governing body; provided, however, that,
except for the definitions of "Florida Progress Assets," "Florida Progress
Liabilities" and "Florida Progress Business," for purposes of this Agreement,
Echelon and the Echelon Subsidiaries shall not be deemed to be Subsidiaries of
Florida Progress or any of the Florida Progress Subsidiaries.
Talquin: as defined in the recitals to this Agreement.
Tax: as defined in the Tax Sharing Agreement.
Tax Sharing Agreement: the Tax Sharing Agreement dated
as of December 16, 1996, between Florida Progress and Echelon.
Third-Party Claim: as defined in Section 4.2 hereof.
Transfer Agent: as defined in Section 2.3 hereof.
Transition Services Agreement: the Transition Services
Agreement dated as of December 16, 1996, between Florida Progress
and Echelon.
1.2 References to Time. All references in this
Agreement to times of the day shall be to St. Petersburg, Florida
time.
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10
1.3 References; Interpretation. References in this Agreement
to any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include," "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation." Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
such Agreement. Unless the context otherwise requires, the words "hereof,"
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
2.1 Transfer of Assets. Except as otherwise
specifically set forth in this Agreement or any Schedule hereto
or in any Ancillary Agreement, on or prior to the Distribution
Date:
(a) Florida Progress shall, on behalf of itself and the
Florida Progress Subsidiaries, transfer or cause to be transferred to Echelon
all of Florida Progress's and the Florida Progress Subsidiaries' right, title
and interest in the Echelon Assets, and
(b) Echelon shall, on behalf of itself and the Echelon
Subsidiaries, transfer to Florida Progress or another member of the Florida
Progress Group all of Echelon's and the Echelon Subsidiaries' right, title and
interest in the Florida Progress Assets.
2.2 Articles of Incorporation; By-laws; Rights Agreement.
Prior to the Distribution Date, Florida Progress and Echelon shall take (or
shall have taken) all action necessary so that, at the Distribution Date, the
Articles of Incorporation, By-laws and Rights Agreement of Echelon shall be in
the forms attached as exhibits to the Registration Statement.
2.3 Issuance of Stock. (a) Echelon shall issue (or
shall have issued) to PCH, a direct, wholly owned subsidiary of
Florida Progress, as a stock dividend, such number of shares of Echelon Common
Stock as will be required to effect the Distribution, as certified by Florida
Progress's stock transfer agent (the "Transfer Agent"). In connection therewith
Florida Progress shall cause (or shall have caused) PCH to deliver to Echelon
for cancellation the share certificate then held by PCH representing shares of
Echelon Common Stock, and PCH shall receive (or shall have received) a new
certificate representing
<PAGE>
11
the total number of shares of Echelon Common Stock to be owned by PCH after
giving effect to such stock dividend.
(b) Florida Progress shall cause (or shall have caused) PCH to
issue to Florida Progress as a stock dividend all of the shares of Echelon
Common Stock owned by PCH after receipt of the dividend contemplated by the
preceding paragraph (a).
2.4 Registration and Listing. Prior to the
Distribution Date:
(a) The parties hereto shall use reasonable efforts to take
all such action as may be necessary or appropriate under state securities and
blue sky laws in connection with the transactions contemplated by this Agreement
or any Ancillary Agreement.
(b) Echelon shall prepare, file and seek to make effective, an
application for the listing of the Echelon Common Stock on the NYSE, subject to
official notice of issuance.
(c) The parties hereto shall cooperate in preparing, filing
with the SEC and causing to become effective any registration statements or
amendments thereto, including any amendments to the Registration Statement,
which are necessary or appropriate in order to effect the transactions
contemplated hereby or to reflect the establishment of, or amendments to, any
Employee Benefit Plans contemplated hereby or by the Employee Benefits
Allocation Agreement requiring registration under the Securities Act.
2.5 Echelon Board. Prior to the Distribution Date, the parties
hereto shall take (or shall have taken) all steps necessary so that, effective
immediately after the Distribution, the Board of Directors of Echelon shall be
comprised of those individuals so named in the Information Statement.
2.6 Notices to Third Parties. In addition to the actions
described in Section 2.7 hereof, Echelon shall, and the members of the Florida
Progress Group shall cooperate with the efforts of Echelon to, make all other
filings and give notice to and obtain consents from all third parties that may
reasonably be required to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements.
2.7 Licenses and Permits. On or prior to the Distribution
Date, or as soon thereafter as is practicable, Echelon shall prepare and file
with the appropriate licensing and permitting authorities applications for the
transfer or issuance to Echelon of all material governmental licenses and
permits required for Echelon to operate the Echelon Business after the
Distribution. The members of the Florida Progress Group and Echelon shall
cooperate and use all commercially reasonable
<PAGE>
12
efforts to secure the transfer or issuance of the licenses and
permits.
2.8 Settlement of Intercompany Accounts. Without limiting the
terms of Section 2.9 hereof, as of the Effective Time, all intercompany
receivables, payables and loans (other than receivables, payables and loans
otherwise specifically provided for in any of the Ancillary Agreements or
hereunder), including, without limitation, in respect of any cash balances, any
cash balances representing deposited checks or drafts for which only a
provisional credit has been allowed or any cash held in any centralized cash
management system, between Echelon, on the one hand, and any member of the
Florida Progress Group, on the other hand, shall be settled, capitalized or
converted into ordinary trade accounts, in each case as set forth on Schedule
2.8 hereto.
2.9 Indebtedness and Capital Structure. On or prior
to the Distribution Date, Florida Progress and Echelon shall
take, or shall cause to be taken, the following actions:
(a) Echelon shall deliver to PCH the PCH Note in
substantially the form of Exhibit A hereto in the principal
amount of $36 million;
(b) Florida Progress shall contribute $13,718,432.46 million
to the equity of Echelon to provide cash for the payment of expenses incurred in
evaluating and implementing the Distribution and to provide additional
liquidity.
2.10 Resignations. Subject to Section 2.5 hereof, Florida
Progress shall cause all its employees to resign, effective as of the Effective
Time, from all positions as officers or directors of Echelon in which they
serve. Echelon shall cause all its employees to resign, effective as of the
Distribution Date, from all positions as officers or directors of any member of
the Florida Progress Group in which they serve.
2.11 Ancillary Agreements. Prior to the Distribution Date,
each of Florida Progress and Echelon shall enter into the Ancillary Agreements
and any other agreements in respect of the Distribution reasonably necessary or
appropriate in connection with the transactions contemplated hereby and thereby.
If there shall be a conflict between the provisions of this Agreement and the
provisions of the Ancillary Agreements, the provisions of the Ancillary
Agreements shall control. Notwithstanding the foregoing, the effectiveness of
the Ancillary Agreements shall be conditioned upon the Distribution.
2.12 No Representations or Warranties. Each of the
parties hereto agrees that neither party hereto is, in this
Agreement or in any other agreement or document contemplated by
this Agreement or otherwise, making any representation or
warranty whatsoever, as to title or value of Assets being
<PAGE>
13
transferred. It is also agreed that all Assets either transferred to or retained
by the parties, as the case may be, shall be "as is, where is" and that (subject
to Section 5.4 hereof) the party to which such Assets are to be transferred
hereunder shall bear the economic and legal risk that such party's title to any
such Assets shall be other than good and marketable and free from encumbrances.
Similarly, each party hereto agrees that neither party hereto is representing or
warranting in any way that the obtaining of any consents or approvals, the
execution and delivery of any amendatory agreements and the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable agreements or the requirements of any or all
applicable laws or judgments, it being agreed that the party to which any Assets
are transferred shall bear the economic and legal risk that any necessary
consents or approvals are not obtained or that any requirements of laws or
judgments are not complied with.
2.13 Certain Contingent Liabilities. (a) Each of the parties
hereto agrees that any Liability arising out of or in relation to any
litigation, claims or proceedings brought by a third party or governmental
agency who or which contends that its consent, authorization or approval was
required in order to effectuate the Pre-Distribution Mergers or the Distribution
shall be the responsibility of Echelon, and shall be deemed to be Echelon
Liabilities accordingly.
(b) Echelon, on behalf of itself and the members of the
Echelon Group, hereby waives any right which Echelon or any such Person may have
at any time to seek contribution or any other recovery from or against any
member of the Florida Progress Group for any and all Liabilities, other than
Florida Progress Liabilities, relating to or involving the Echelon Business or
the current, former or future Assets, or operations of any member of the Echelon
Group which arise under, relate to or are based upon any law, statute,
regulation, rule, judgment, decree, rule of common law or any similar
requirement relating to hazardous or toxic substances or materials or to the
protection of human health or the environment.
(c) Echelon and Florida Progress agree that each party shall
assume liability for 50% of the total amount of any Liabilities arising out of,
relating to or based upon any misstatements or omissions, or alleged
misstatements or omissions, in the Registration Statement; provided, however,
that until any Third-Party Claim giving rise to any such Liabilities has been
the subject of a final non-appealable judgment or otherwise definitively
settled, solely for purposes of determining the procedures for responding to
such Third-Party Claim and the rights of the parties under Section 4.2 hereof,
such Liabilities shall be deemed to be Florida Progress Liabilities, and 50% of
the total amount of such Liabilities shall become Echelon Liabilities only after
such Liabilities have
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14
become the subject of such a final non-appealable judgment or
otherwise definitively settled.
ARTICLE III
THE DISTRIBUTION
3.1 Record Date and Distribution Date. The Board of Directors
of Florida Progress, in its sole discretion, shall have established the Record
Date and the Distribution Date and shall establish any appropriate procedures in
connection with the Distribution.
3.2 The Agent. Prior to the Distribution Date, Florida
Progress shall enter (or shall have entered into) into an agreement with the
Agent providing for, among other things, the payment of the Distribution,
including the payment of cash in lieu of fractional shares, to the holders of
Florida Progress Common Stock in accordance with this Article III.
3.3 Delivery of Share Certificates to Agent. Florida
---------------------------------------
Progress shall deliver to the Agent share certificates
representing the outstanding shares of Echelon Common Stock
delivered to Florida Progress by PCH pursuant to Section 2.3(b)
hereof and shall instruct the Agent to distribute, on or as soon
as practicable following the Distribution Date, such common
shares to holders of record of shares of Florida Progress Common
Stock on the Record Date as further contemplated by the
Information Statement and herein. Echelon shall provide all
share certificates that the Agent shall require in order to
effect the Distribution.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification. (a) Except as specifically otherwise
provided in any provision of this Agreement or of any Ancillary Agreement,
Florida Progress shall, subject to this Article IV, indemnify, defend and hold
harmless the Echelon Indemnitees from and against any and all Indemnifiable
Losses of the Echelon Indemnitees arising out of, by reason of or otherwise in
connection with the Florida Progress Liabilities or alleged Florida Progress
Liabilities, including any breach by Florida Progress of any provision of this
Agreement or any Ancillary Agreement.
(b) Except as specifically otherwise provided in any provision
of this Agreement or of any Ancillary Agreement, Echelon shall, subject to this
Article IV, indemnify, defend and hold harmless the Florida Progress Indemnitees
from and against any and all Indemnifiable Losses of the Florida Progress
<PAGE>
15
Indemnitees arising out of, by reason of or otherwise in connection with the
Echelon Liabilities or alleged Echelon Liabilities including any breach by
Echelon of any provision of this Agreement or any Ancillary Agreement.
4.2 Procedures for Indemnification for Third-Party Claims. (a)
If a claim or demand is made against a Florida Progress Indemnitee or an Echelon
Indemnitee (each, an "Indemnitee") by any Person who is not a party to this
Agreement (a "Third-Party Claim") as to which such Indemnitee is entitled to
indemnification pursuant to this Agreement, such Indemnitee shall notify the
party which is or may be required pursuant to Section 4.1 hereof to make such
indemnification (the "Indemnifying Party") in writing, and in reasonable detail,
of the Third-Party Claim promptly (and in any event within 15 business days)
after receipt by such Indemnitee of written notice of the Third-Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure (except that the
Indemnifying Party shall not be liable for any expenses incurred during the
period in which the Indemnitee failed to give such notice). Thereafter, the
Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event
within five business days) after the Indemnitee's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnitee
relating to the Third-Party Claim.
If a Third-Party Claim is made against an Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges in writing its obligation to indemnify the
Indemnitee therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third-Party Claim, the Indemnifying Party shall, within 30 days (or sooner if
the nature of the Third-Party Claim so requires), notify the Indemnitee of its
intent to do so, and the Indemnifying Party shall thereafter not be liable to
the Indemnitee for legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided, that such
Indemnitee shall have the right to employ counsel to represent such Indemnitee
if, in such Indemnitee's reasonable judgment, a conflict of interest between
such Indemnitee and such Indemnifying Party exists in respect of such claim
which would make representation of both such parties by one counsel
inappropriate, and in such event the fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. Where there is more than one
Indemnitee and the Indemnifying Party is responsible for the fees and expenses
of separate counsel on behalf of such Indemnitees, the Indemnifying Party shall
be responsible for the fees and expenses of only one such separate counsel
unless, in the reasonable
<PAGE>
16
opinion of such counsel, the interests of the Indemnitees are such that
representation by a single counsel would or could create a conflict of interest
or otherwise be inappropriate, in which event the several Indemnitees may employ
separate counsel to the extent necessary to avoid such conflict or as otherwise
may be reasonably appropriate, and the fees and expenses of each such separate
counsel shall be paid by such Indemnifying Party. If the Indemnifying Party
assumes such defense, the Indemnitee shall have the right to participate in the
defense thereof and to employ counsel, subject to the proviso of the preceding
sentence, at its own expense, separate from the counsel employed by the
Indemnifying Party, it being understood that the Indemnifying Party shall
control such defense. The Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnitee for any period during which the
Indemnifying Party has failed to assume the defense thereof (other than during
the period prior to the time the Indemnitee shall have given notice of the
Third-Party Claim as provided above). If the Indemnifying Party so elects to
assume the defense of any Third-Party Claim, all of the Indemnitees shall
cooperate with the Indemnifying Party in the defense or prosecution thereof,
including by providing or causing to be provided, Records and witnesses as soon
as reasonably practicable after receiving any request therefor from or on behalf
of the Indemnifying Party.
If the Indemnifying Party acknowledges in writing
responsibility for a Third-Party Claim, then in no event will the Indemnitee
admit any liability with respect to, or settle, compromise or discharge, any
Third-Party Claim without the Indemnifying Party's prior written consent;
provided, however, that the Indemnitee shall have the right to settle,
compromise or discharge such Third-Party Claim without the consent of the
Indemnifying Party if the Indemnitee releases (in writing) the Indemnifying
Party from its indemnification obligation hereunder with respect to such
Third-Party Claim and such settlement, compromise or discharge would not
otherwise adversely affect the Indemnifying Party. If the Indemnifying Party
acknowledges in writing liability for a Third-Party Claim, the Indemnitee will
agree to any settlement, compromise or discharge of a Third-Party Claim that the
Indemnifying Party may recommend and that by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third-Party Claim and releases the Indemnitee completely in connection with
such Third- Party Claim and that would not otherwise adversely affect the
Indemnitee; provided, however, that the Indemnitee may refuse to agree to any
such settlement, compromise or discharge if the Indemnitee agrees that the
Indemnifying Party's indemnification obligation with respect to such Third-Party
Claim shall not exceed the amount that would be required to be paid by or on
behalf of the Indemnifying Party in connection with such settlement, compromise
or discharge. If an Indemnifying Party elects not to assume the defense of a
Third-Party Claim, or fails to notify an Indemnitee of its election to do so as
provided
<PAGE>
17
herein, such Indemnitee may compromise, settle or defend such
Third-Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense of any Third-Party Claim (and shall be
liable for the fees and expenses of counsel incurred by the Indemnitee in
defending such Third-Party Claim) if the Third-Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the Indemnitee which the Indemnitee reasonably determines, after
conferring with its counsel, cannot be separated from any related claim for
money damages. If such equitable relief or other relief portion of the
Third-Party Claim can be so separated from that for money damages, the
Indemnifying Party shall be entitled to assume the defense of the portion
relating to money damages.
(b) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
4.3 Remedies Cumulative. The remedies provided in
this Article IV shall be cumulative and shall not preclude
assertion by any Indemnitee of any other rights or the seeking of
any and all other remedies against any Indemnifying Party.
4.4 Indemnification Payments. Indemnification required by this
Article IV shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or loss,
liability, claim, damage or expense is incurred.
ARTICLE V
CERTAIN ADDITIONAL COVENANTS
5.1 Assumption and Satisfaction of Liabilities. Except as
otherwise specifically set forth in any Ancillary Agreement, and subject to
Section 2.8 hereof, from and after the Distribution Date, (i) Florida Progress
shall, and shall cause each member of the Florida Progress Group to, assume,
pay, perform and discharge all Florida Progress Liabilities and (ii) Echelon
shall assume, pay, perform and discharge all Echelon Liabilities. To the extent
reasonably requested to do so by the other party hereto, each party hereto
agrees to sign such documents, in a form reasonably satisfactory to such party,
as
<PAGE>
18
may be reasonably necessary to evidence the assumption of any
Liabilities hereunder.
5.2 Intercompany Agreements. (a) Except for this Agreement and
the Ancillary Agreements, all contracts, licenses, agreements, commitments or
other arrangements, formal or informal, between any member of the Florida
Progress Group, on the one hand, and any member of the Echelon Group (or any
predecessor thereof), on the other, in existence as of the Distribution Date,
pursuant to which any member of the Florida Progress Group provides to any
member of the Echelon Group any services (including, without limitation,
management, administrative, legal, financial, accounting, data processing,
insurance, or technical support), or the use of any Florida Progress Assets, or
the secondment of any employee, or pursuant to which rights, privileges or
benefits are accorded to any member of the Echelon Group or the Echelon Business
as a unit of the Florida Progress Group, shall terminate as of the close of
business on the day prior to the Distribution Date, except as specifically
provided herein or on Schedule 5.2(a) hereto or in any Ancillary Agreement. From
and after the Distribution Date, no member of the Echelon Group shall have any
rights under any such contract, license, agreement, commitment or arrangement
with any member of the Florida Progress Group, except as specifically provided
herein or on Schedule 5.2(a) hereto or in any Ancillary Agreement.
(b) Except for this Agreement and the Ancillary Agreements,
all contracts, licenses, agreements, commitments or other arrangements, formal
or informal, between any member of the Echelon Group, on the one hand, and any
member of the Florida Progress Group, on the other, in existence as of the
Distribution Date, pursuant to which any member of the Echelon Group provides to
any member of the Florida Progress Group any services (including, without
limitation, management, administrative, legal, financial, accounting, data
processing, insurance, or technical support), or the use of any Echelon Assets,
or the secondment of any employee, or pursuant to which rights, privileges or
benefits are accorded to any member of the Florida Progress Group or the Florida
Progress Business as a unit of the Echelon Group, shall terminate as of the
close of business on the day prior to the Distribution Date, except as
specifically provided herein or on Schedule 5.2(b) hereto or in any Ancillary
Agreement. From and after the Distribution Date, no member of the Florida
Progress Group shall have any rights under any such contract, license,
agreement, commitment or arrangement with any member of the Echelon Group,
except as specifically provided herein or on Schedule 5.2(b) hereto or in any
Ancillary Agreement.
5.3 Guarantees. (a) Except as otherwise specified in
any Ancillary Agreement, Florida Progress and Echelon shall use
their commercially reasonable efforts to have, on or prior to the
Distribution Date, or as soon as practicable thereafter, any
<PAGE>
19
member of the Florida Progress Group removed as guarantor of or obligor for any
Echelon Liability, including, without limitation, in respect of those guarantees
and obligations set forth on Schedule 5.3(a) hereto.
(b) If Florida Progress or Echelon is unable to obtain, or to
cause to be obtained, any such required removal as set forth in clause (a) of
this Section 5.3, then the applicable guarantor or obligor shall continue to be
bound as such and, unless not permitted by law or the terms thereof, Echelon
shall, as agent or subcontractor for such guarantor or obligor, pay, perform and
discharge fully all the obligations or other liabilities of such guarantor or
obligor thereunder from and after the date hereof, and such obligations shall be
Echelon Liabilities.
(c) Without the prior written consent of the Chief Financial
Officer or Treasurer of Florida Progress, from and after the Distribution Date,
Echelon shall not renew or extend the term of, increase its obligations under,
or transfer to a third party, by sale, assignment, merger or operation of law or
otherwise any loan, lease, contract or other obligation of Echelon for which any
member of the Florida Progress Group is or may be liable unless all obligations
of the Florida Progress Group with respect thereto are thereupon terminated by
documentation reasonably satisfactory in form and substance to the Chief
Financial Officer or Treasurer of Florida Progress.
(d) For so long as Florida Progress or any member of the
Florida Progress Group is a guarantor of or obligor for any agreement by Echelon
to be and remain a "citizen of the United States" as defined in 49 U.S.C. ss.
40102 or in 46 U.S.C. ss. 802, Echelon agrees (i) that it shall be and remain a
"citizen of the United States" as so defined and, in particular, that it will
have a president, a chairman and persons comprising at least two-thirds of its
board of directors who are citizens of the United States and (ii) that in the
event its status as a "citizen of the United States" as defined in 49 U.S.C. ss.
40102 changes, or it makes public disclosure of circumstances as a result of
which it believes that such status is likely to change, it will notify Florida
Progress and any member of the Florida Progress Group who is a guarantor of or
obligor for any such Echelon Liability of such change in its status promptly
after obtaining knowledge thereof or such belief as soon as practicable after
such public disclosure but in any event within ten business days after such
public disclosure. If at any time when Florida Progress or any member of the
Florida Progress Group is a guarantor of or obligor for any such Echelon
Liability, Echelon ceases to be a "citizen of the United States" as defined in
49 U.S.C. ss. 40102, and (A) any aircraft owned or controlled by Echelon (the
"Aircraft") is then registered in the United States and the Aircraft shall be or
would thereupon become ineligible for registration in the name of the relevant
owner trustee under the Federal Aviation Act (the "FAA Act") as in effect at
such time as a result of such lack of
<PAGE>
20
citizenship (without regard to the "based and primarily used" provisions
thereof) and the regulations then applicable thereunder, or (B) (1) the Aircraft
is then registered in a jurisdiction other than the United States, (2) a lessee,
sublessee or sub-sublessee has given notice that it proposes to register the
Aircraft within 120 days in the United States and (3) at the time such
registration in the United States is proposed to occur, the Aircraft would be
ineligible for registration in the name of the relevant owner trustee under the
FAA Act as in effect at such time as a result of such lack of citizenship
(without regard to the "based and primarily used" provisions thereof) and the
regulations then applicable thereunder, then Echelon shall forthwith (x)
transfer all (but not less than all) of its right, title and interest in and to
the Aircraft or (y) take such other action, including, without limitation, the
establishment of a voting trust or voting powers agreement (in which case
Echelon shall remain the beneficial owner of the Aircraft), as may be necessary
to prevent the deregistration of the Aircraft under the FAA Act or to maintain
such registration of the Aircraft or to make possible such registration of the
Aircraft in the United States and to prevent Florida Progress from being
adversely affected as a result thereof. Any voting powers or voting trust
arrangement utilized by Echelon (or any transferee of Echelon) shall be approved
by the Federal Aviation Administration (to the extent required by the FAA Act or
the Federal Aviation Administration).
(e) In addition to and not in limitation of the provisions of
paragraph (d) above, Echelon agrees (i) not to permit the imposition or
continuance of any lien or other Security Interest on any asset which would
result in the breach of any obligation guaranteed by Florida Progress or any
member of the Florida Progress Group, (ii) not to do or take any other action,
or fail to do or take any action, which would result in the breach of any other
obligation guaranteed by Florida Progress or any member of the Florida Progress
Group, and (iii) to do and take any and all actions necessary to cause any
guarantee of any Echelon Liability by Florida Progress or of any member of the
Florida Progress Group to be cancelled, discharged or otherwise terminated as
promptly as practicable.
5.4 Further Assurances. In case at any time after the
Effective Time any further action is reasonably necessary or desirable to carry
out the purposes of this Agreement and the Ancillary Agreements, the proper
officers of each party to this Agreement shall take all such necessary action.
Without limiting the foregoing, Florida Progress and Echelon shall use their
commercially reasonable efforts promptly to obtain all consents and approvals,
to enter into all amendatory agreements and to make all filings and applications
that may be required for the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements, including, without limitation, all
applicable governmental and regulatory filings.
<PAGE>
21
5.5 Witness Services. At all times from and after the
Distribution Date, each of Florida Progress and Echelon shall use their
commercially reasonable efforts to make available to the other, upon reasonable
written request, its and its Subsidiaries' officers, directors, employees and
agents as witnesses to the extent that (i) such persons may reasonably be
required in connection with the prosecution or defense of any Action or
threatened Action in which the requesting party may from time to time be
involved and (ii) there is no conflict in the Action or threatened Action
between the requesting party and the party receiving the request. A party
providing witness services to the other party under this Section shall be
entitled to receive from the recipient of such services, upon the presentation
of invoices therefor, payments for such amounts, relating to disbursements and
other out-of-pocket expenses (which shall be deemed to exclude the costs of
salaries and benefits of employees who are witnesses), as may be reasonably
incurred in providing such witness services.
5.6 Certain Post-Distribution Transactions. (a)(i)
--------------------------------------
Florida Progress shall comply, and shall cause each member of the
Florida Progress Group to comply, with and otherwise not take
action inconsistent with each representation and statement made
with respect to Florida Progress or any other member of the
Florida Progress Group to the Internal Revenue Service in
connection with the request by Florida Progress for a ruling
letter in respect of the Distribution as to certain tax aspects
of the Distribution and (ii) until two years after the
Distribution Date, Florida Progress will maintain its status as a
company engaged in the active conduct of a trade or business, as
defined in Section 355(b) of the Code.
(b)(i) Echelon shall comply with and otherwise not take action
inconsistent with each representation and statement made with respect to Echelon
to the Internal Revenue Service in connection with the request by Florida
Progress for a ruling letter in respect of the Distribution as to certain tax
aspects of the Distribution and (ii) until two years after the Distribution
Date, Echelon will maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Code.
5.7 Certain Agreements of Echelon. Echelon hereby agrees that
it is Echelon's plan and intention to use its reasonable best efforts to
implement the Business Plan. Echelon acknowledges that, as provided for in the
Business Plan, Florida Progress has provided Echelon with capitalization and
liquidity which the parties believe is sufficient to allow Echelon to carry out
the Business Plan, including liquidity reserves which the parties believe are
sufficient to address unforeseen business risks or events. Echelon agrees to
maintain at all times a liquidity reserve of at least $27 million during the
first 12 months following the Distribution Date, a liquidity reserve of at least
$25 million during the period beginning on the first day of
<PAGE>
22
the second year following the Distribution Date and ending on the last day of
the second year following the Distribution Date, and a liquidity reserve of at
least $17 million during the period beginning on the first day of the third year
following the Distribution Date and ending on the last day of such third year.
5.8 Corporate Names. (a) Except as otherwise
specifically provided in any Ancillary Agreement:
(i) as soon as reasonably practicable after the Distribution
Date but in any event within two months thereafter, Echelon will, at
its own expense, remove (or, if necessary, on an interim basis, cover
up) any and all exterior signs and other identifiers located on any of
its property or premises which refer or pertain to Florida Progress or
which include the Florida Progress name, logo or other trademark or
other Florida Progress intellectual property; and
(ii) as soon as is reasonably practicable after the
Distribution Date but in any event within six weeks thereafter, Echelon
will remove from all letterhead, envelopes, invoices and other
communications media of any kind, all references to Florida Progress,
including the "Florida Progress" or "Progress" name, logo and any other
trademark or other Florida Progress intellectual property, and Echelon
shall not use or display the "Florida Progress" or "Progress" name,
logo or other trademark or Florida Progress intellectual property
without the prior written consent of Florida Progress.
(b) Except as otherwise specifically provided in any
Ancillary Agreement:
(i) as soon as reasonably practicable after the Distribution
Date but in any event within two months thereafter, Florida Progress
will, at its own expense, remove (or, if necessary, on an interim
basis, cover up) any and all exterior signs and other identifiers
located on any of its property or premises owned or used by it or other
members of the Florida Progress Group which refer or pertain to Echelon
or which include the "Echelon," "Talquin," "Progress Credit," "Progress
Leasing" or "PLC Leasing" name, logo or other trademark or other
Echelon intellectual property; and
(ii) as soon as is reasonably practicable after the
Distribution Date but in any event within six weeks thereafter, Florida
Progress will, and will cause the other members of the Florida Progress
Group to, remove from all letterhead, envelopes, invoices and other
communications media of any kind, all references to Echelon, including
the "Talquin," "Progress Credit," "Progress Leasing" or "PLC Leasing"
name, logo and any other trademark or other Echelon
<PAGE>
23
intellectual property, and Florida Progress and the other members of
the Florida Progress Group shall not use or display the "Talquin,"
"Progress Credit," "Progress Leasing" or "PLC Leasing" name, logo or
other trademark or Echelon intellectual property without the prior
written consent of Echelon.
5.9 Transfers Not Effected Prior to the Distribution;
Transfers Deemed Effective as of the Distribution Date. To the extent that any
transfers contemplated by Article II and V shall not have been consummated on or
prior to the Distribution Date, the parties shall cooperate to effect such
transfers as promptly following the Distribution Date as shall be practicable.
Nothing herein shall be deemed to require the transfer of any Assets or the
assumption of any Liabilities which by their terms or operation of law cannot be
transferred; provided, however, that the parties hereto and their respective
Subsidiaries shall cooperate to seek to obtain any necessary consents or
approvals for the transfer of all Assets and Liabilities contemplated to be
transferred pursuant to Article II and V. In the event that any such transfer of
Assets or Liabilities has not been consummated, from and after the Distribution
Date the party retaining such Asset or Liability shall hold such Asset in trust
for the use and benefit of the party entitled thereto (at the expense of the
party entitled thereto) or retain such Liability for the account of the party by
whom such Liability is to be assumed pursuant hereto, as the case may be, and
take such other action as may be reasonably requested by the party to whom such
Asset is to be transferred, or by whom such Liability is to be assumed, as the
case may be, in order to place such party, insofar as is reasonably possible, in
the same position as would have existed had such Asset or Liability been
transferred as contemplated hereby. As and when any such Asset or Liability
becomes transferable, such transfer shall be effected forthwith. The parties
agree that, as of the Distribution Date, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership over all of the Assets,
together with all rights, powers and privileges incident thereto, and shall be
deemed to have assumed in accordance with the terms of this Agreement all of the
Liabilities, and all duties, obligations and responsibilities incident thereto,
which such party is entitled to acquire or required to assume pursuant to the
terms of this Agreement.
ARTICLE VI
ACCESS TO INFORMATION
6.1 Provision of Corporate Records. Prior to or as
promptly as practicable after the Distribution Date, Florida
Progress shall deliver to Echelon all corporate books, records
and files (collectively, "Records") of Echelon in its possession
and copies of the relevant portions of all Records of the Florida
<PAGE>
24
Progress Group relating directly and primarily to the Echelon Assets, the
Echelon Business, or the Liabilities of Echelon, including, in each case, all
active agreements, active litigation files and government filings. From and
after the Distribution Date, all Records so delivered shall be the property of
Echelon.
6.2 Access to Information. Other than in circumstances in
which indemnification is sought pursuant to Article IV (in which event the
provisions of such Article will govern), from and after the Distribution Date,
each of Florida Progress and Echelon shall afford to the other and its
authorized accountants, counsel and other designated representatives reasonable
access during normal business hours, subject to appropriate restrictions for
classified, privileged or confidential information, to the personnel,
properties, books and records of such party and its Subsidiaries insofar as such
access is reasonable required by the other party and relates to (x) such other
party or the conduct of its business prior to the Effective Time or (y) any
Ancillary Agreement to which the party requesting such access and the party
requested to grant such access are parties.
6.3 Reimbursement; Other Matters. Except to the extent
otherwise contemplated by any Ancillary Agreement, a party providing Records or
access to information to the other party under this Article VI shall be entitled
to receive from the recipient, upon the presentation of invoices therefor,
payments for such amounts, relating to supplies, disbursements and other
out-of-pocket expenses, as may be reasonably incurred in providing such Records
or access to information.
6.4 Retention of Records. Except as otherwise agreed in
writing, or as otherwise provided in the Ancillary Agreements, each of Florida
Progress and Echelon shall, and shall cause any members of its Group to, retain
all information in such party's possession or under its control relating
directly and primarily to the pre-Distribution Business, Assets or Liabilities
of the other party that is less than ten years old until such information is at
least ten years old except that if, prior to the expiration of such period,
information in the possession or control of either party is to be destroyed or
disposed of, and such information is at least three years old, prior to
destroying or disposing of any such information, (1) the party that is proposing
to dispose of or destroy any such information shall provide no less than 30
days' prior written notice to the other party, specifying the information
proposed to be destroyed or disposed of, and (2) if, prior to the scheduled date
for such destruction or disposal, the other party requests in writing that any
of the information proposed to be destroyed or disposed of be delivered to such
other party, the party that is proposing to dispose of or destroy such
information promptly shall arrange for the delivery of the requested information
to a location specified by, and at the expense of, the requesting party.
<PAGE>
25
6.5 Confidentiality. Each of (i) Florida Progress and the
Florida Progress Subsidiaries and (ii) Echelon and the Echelon Subsidiaries
shall not use or permit the use of (without the prior written consent of the
other) and shall keep, and shall cause its consultants and advisors to keep,
confidential all information concerning the other party in its possession or
under its control (except to the extent that (A) such information has been in
the public domain through no fault of such party, (B) such information has been
later lawfully acquired from other sources by such party or (C) this Agreement
or any other Ancillary Agreement or any other agreement entered into pursuant
hereto permits the use or disclosure of such information) to the extent such
information (x) relates to the period up to the Effective Time, (y) relates to
any Ancillary Agreement or (z) is obtained in the course of performing services
for the other party pursuant to any Ancillary Agreement, and neither party shall
(without the prior written consent of the other) otherwise release or disclose
such information to any other Person, except such party's auditors and
attorneys, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by law and such
party has used commercially reasonable efforts to consult with the other party
prior to such disclosure.
6.6 Privileged Matters. The parties hereto recognize that
legal and other professional services that have been and will be provided prior
to the Distribution Date have been and will be rendered for the benefit of each
of the members of the Florida Progress Group and the members of the Echelon
Group, and that each of the members of the Florida Progress Group and the
members of the Echelon Group should be deemed to be the client for the purposes
of asserting all privileges which may be asserted under applicable law. To
allocate the interests of each party in the information as to which any party is
entitled to assert a privilege, the parties agree as follows:
(a) Florida Progress shall be entitled, in perpetuity, to
control the assertion or waiver of all privileges in connection with privileged
information which relates solely to the Florida Progress Business, whether or
not the privileged information is in the possession of or under the control of
Florida Progress or Echelon. Florida Progress shall also be entitled, in
perpetuity, to control the assertion or waiver of all privileges in connection
with privileged information that relates solely to the subject matter of any
claims constituting Florida Progress Liabilities, now pending or which may be
asserted in the future, in any lawsuits or other proceedings initiated against
or by Florida Progress, whether or not the privileged information is in the
possession of or under the control of Florida Progress or Echelon.
(b) Echelon shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the Echelon
<PAGE>
26
Business, whether or not the privileged information is in the possession of or
under the control of Florida Progress or Echelon. Echelon shall also be
entitled, in perpetuity, to control the assertion or waiver of all privileges in
connection with privileged information which relates solely to the subject
matter of any claims constituting Echelon Liabilities, now pending or which may
be asserted in the future, in any lawsuits or other proceedings initiated
against or by Echelon, whether or not the privileged information is in the
possession of Echelon or under the control of Florida Progress or Echelon.
(c) The parties hereto agree that they shall have a shared
privilege, with equal right to assert or waive, subject to the restrictions in
this Section 6.6, with respect to all privileges not allocated pursuant to the
terms of Sections 6.6(a) and (b) hereto. All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both Florida
Progress and Echelon in respect of which both Florida Progress and Echelon
retain any responsibility or liability under this Agreement shall be subject to
a shared privilege between them.
(d) No party hereto may waive any privilege which could be
asserted under any applicable law, and in which the other party hereto has a
shared privilege, without the consent of the other party, except to the extent
reasonably required in connection with any litigation with third parties or as
provided in subsection (e) below. Consent shall be in writing, or shall be
deemed to be granted unless written objection is made within 20 days after
notice upon the other party requesting such consent.
(e) In the event of any litigation or dispute between the
parties hereto, a party and a Subsidiary of the other party hereto, or a
Subsidiary of one party hereto and a Subsidiary of other party hereto, either
such party may waive a privilege in which the other party has a shared
privilege, without obtaining the consent of the other party, provided that such
waiver of a shared privilege shall be effective only as to the use of
information with respect to the litigation or dispute between the parties and/or
their Subsidiaries, and shall not operate as a waiver of the shared privilege
with respect to third parties.
(f) If a dispute arises between the parties hereto or their
respective Subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of either party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other party, and shall not unreasonably withhold consent to any request
for waiver by the other party. Each party hereto specifically agrees that it
will not withhold consent to waiver for any purpose except to protect its own
legitimate interests.
<PAGE>
27
(g) Upon receipt by either party hereto or by any Subsidiary
thereof of any subpoena, discovery or other request which arguably calls for the
production or disclosure of information subject to a shared privilege or as to
which the other party has the sole right hereunder to assert a privilege, or if
either party obtains knowledge that any of its or any of its Subsidiaries'
current or former directors, officers, agents or employees have received any
subpoena, discovery or other requests which arguably calls for the production or
disclosure of such privileged information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the information and to assert any rights it may
have under this Section 6.6 or otherwise to prevent the production or disclosure
of such privileged information.
(h) The transfer of all Records and other information pursuant
to this Agreement is made in reliance on the agreement of Florida Progress and
Echelon, as set forth in Sections 6.5 and 6.6, to maintain the confidentiality
of privileged information and to assert and maintain all applicable privileges.
The access to information being granted pursuant to Sections 6.1 and 6.2 hereof,
the agreement to provide witnesses and individuals pursuant to Sections 4.2 and
5.5 hereof, the furnishing of notices and documents and other cooperative
efforts contemplated by Section 4.2 hereof, and the transfer of privileged
information between the parties and their respective Subsidiaries pursuant to
this Agreement shall not be deemed a waiver of any privilege that has been or
may be asserted under this Agreement or otherwise.
6.7 Ownership of Information. Any information owned by one
party or any of its Subsidiaries that is provided to a requesting party pursuant
to Article IV or this Article VI shall be deemed to remain the property of the
providing party. Unless specifically set forth herein, nothing contained in this
Agreement shall be construed as granting or conferring rights of license or
otherwise in any such information.
6.8 Limitation of Liability. Neither party shall have any
liability to the other party in the event that any information exchanged or
provided pursuant to this Agreement which is an estimate or forecast, or which
is based on an estimate or forecast, is found to be inaccurate.
6.9 Other Agreements Providing for Exchange of Information.
The rights and obligations granted under this Article VI are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of information set forth in any Ancillary
Agreement.
<PAGE>
28
ARTICLE VII
ADMINISTRATIVE SERVICES
7.1 Performance of Services. Beginning on the Distribution
Date, Florida Progress will provide, or cause one or more of its Subsidiaries to
provide, to Echelon such services on such terms as may be set forth in the
Transition Services Agreement.
7.2 Independence. Unless otherwise agreed in writing, all
employees and representatives of Florida Progress providing the scheduled
services to Echelon will be deemed for purposes of all compensation and employee
benefits matters to be employees or representatives of Florida Progress and not
employees or representatives of Echelon. In performing such services, such
employees and representatives will be under the direction, control and
supervision of Florida Progress (and not Echelon) and Florida Progress will have
the sole right to exercise all authority with respect to the employment
(including, without limitation, termination of employment), assignment and
compensation of such employees and representatives.
ARTICLE VIII
DISPUTE RESOLUTION
8.1 Negotiation. In the event of a controversy, dispute or
claim arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Agreement or otherwise
arising out of, or in any way related to this Agreement or the transactions
contemplated hereby, including, without limitation, any claim based on contract,
tort, statute or constitution (collectively, "Agreement Disputes"), the general
counsels of the parties (or, such other senior officer appointed by the Chief
Executive Officer of the relevant party) shall negotiate in good faith for a
reasonable period of time to settle such Agreement Dispute, provided such
reasonable period shall not, unless otherwise agreed by the parties in writing,
exceed 30 days from the time the parties began such negotiations; provided
further that in the event of any arbitration in accordance with Section 8.2
hereof, the parties shall not assert the defenses of statute of limitations and
laches arising for the period beginning after the date the parties began
negotiations hereunder, and any contractual time period or deadline under this
Agreement or any Ancillary Agreement to which such Agreement Dispute relates
shall not be deemed to have passed until such Agreement Dispute has been
resolved.
8.2 Arbitration. If after such reasonable period such
general counsels (or other appointed officers) are unable to
settle such Agreement Dispute (and in any event, unless otherwise
<PAGE>
29
agreed in writing by the parties, after 60 days have elapsed from the time the
parties began such negotiations), such Agreement Dispute shall be determined, at
the request of either party, by arbitration conducted in St. Petersburg, before
and in accordance with the then-existing International Arbitration Rules of the
American Arbitration Association (the "Rules"). In any dispute between the
parties hereto, the number of arbitrators shall be one. Any judgment or award
rendered by the arbitrator shall be final, binding and nonappealable (except
upon grounds specified in 9 U.S.C. ss. 10(a) as in effect on the date hereof).
If the parties are unable to agree on an arbitrator, the arbitrator shall be
selected in accordance with the Rules. Any controversy concerning whether an
Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has
been waived, whether an assignee of this Agreement is bound to arbitrate, or as
to the interpretation of enforceability of this Article VIII shall be determined
by the arbitrator. In resolving any dispute, the parties intend that the
arbitrator applies the substantive laws of the State of Florida, without regard
to the choice of law principles thereof. The parties intend that the provisions
to arbitrate set forth herein be valid, enforceable and irrevocable. The parties
agree to comply with any award made in any such arbitration proceedings that has
become final in accordance with the Rules and agree to enforcement of or entry
of judgment upon such award, by any court of competent jurisdiction, including
(a) the Circuit Court of the State of Florida, Pinellas County, or (b) the
United States District Court for the Middle District of Florida, in accordance
with Section 10.16 hereof. The arbitrator shall be entitled, if appropriate, to
award any remedy in such proceedings, including, without limitation, monetary
damages, specific performance and all other forms of legal and equitable relief;
provided, however, the arbitrator shall not be entitled to award punitive
damages. Without limiting the provisions of the Rules, unless otherwise agreed
in writing by the parties or permitted by this Agreement, the parties shall keep
confidential all matters relating to the arbitration or the award, provided such
matters may be disclosed (i) to the extent reasonably necessary in any
proceeding brought to enforce the award or for entry of a judgment upon the
award and (ii) to the extent otherwise required by law. Notwithstanding Article
32 of the Rules, the party which is not the prevailing party in the arbitration
shall be responsible for all of the costs of the arbitration, including legal
fees and other costs specified by such Article 32. Nothing contained herein is
intended to or shall be construed to prevent either party, in accordance with
Article 22(3) of the Rules or otherwise, from applying to any court of competent
jurisdiction for interim measures or other provisional relief in connection with
the subject matter of any Agreement Disputes.
8.3 Continuity of Service and Performance. Unless otherwise
agreed in writing, the parties will continue to provide service and honor all
other commitments under this Agreement and each Ancillary Agreement during the
course of dispute resolution
<PAGE>
30
pursuant to the provisions of this Article VIII with respect to all matters not
subject to such dispute, controversy or claim.
ARTICLE IX
INSURANCE
On or before the Distribution Date, Florida Progress and
Echelon will take such actions with respect to insurance coverage of the Echelon
Assets and the Echelon Business as Florida Progress and Echelon shall reasonably
deem appropriate to permit Echelon to implement a smooth transition to being an
independent company upon the Distribution.
ARTICLE X
MISCELLANEOUS
10.1 Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any inconsistency
between this Agreement and any Exhibit or Schedule hereto, the Exhibit or
Schedule shall prevail. Other than Section 2.12 and Article VIII, which shall
prevail over any inconsistent or conflicting provisions in any Ancillary
Agreement, notwithstanding any other provisions in this Agreement to the
contrary, in the event and to the extent that there shall be a conflict between
the provisions of this Agreement and the provisions of any Ancillary Agreement,
such Ancillary Agreement shall control.
10.2 Ancillary Agreements. Subject to the last
sentence of Section 10.1 hereof, this Agreement is not intended
to address, and should not be interpreted to address, the matters
specifically and expressly covered by the Ancillary Agreements.
10.3 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each party and delivered to the other party.
10.4 Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
10.5 Expenses. Except as otherwise set forth in this
Agreement or any Ancillary Agreement, all costs and expenses
<PAGE>
31
incurred on or prior to the Distribution Date (whether or not paid on or prior
to the Distribution Date) in connection with the preparation, execution,
delivery and implementation of this Agreement and any Ancillary Agreement, the
Registration Statement, the Information Statement, and the Distribution and the
consummation of the transactions contemplated thereby shall be charged to and
paid by Florida Progress to the extent such costs and expenses exceed 100% of
the amount contributed by Florida Progress to Echelon pursuant to Section
2.9(b). Except as otherwise set forth in this Agreement or any Ancillary
Agreement, each party shall bear its own costs and expenses incurred after the
Distribution Date. Any amount or expense to be paid or reimbursed by one party
hereto to the other party hereto shall be so paid or reimbursed promptly after
the existence and amount of such obligation is determined and demand therefore
is made.
10.6 Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To Florida Progress Corporation:
3201 34th Street South
St. Petersburg, Florida 33711
Telephone: (813) 866-5153
Telecopy: (813) 866-4881
Attn: General Counsel
To Echelon International Corporation:
One Progress Plaza
Suite 2400
St. Petersburg, Florida 33701
Telephone: (813) 824-6768
Telecopy: (813) 824-6536
Attn: Chief Executive Officer
10.7 Waivers. The failure of either party to require strict
performance by the other party of any provision in this Agreement will not waive
or diminish such party's right to demand strict performance thereafter of that
or any other provision hereof.
<PAGE>
32
10.8 Amendments. Subject to the terms of Section 10.11 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
10.9 Assignment. (a) This Agreement shall not be assignable,
in whole or in part, directly or indirectly, by either party hereto without the
prior written consent of the other party hereto, and any attempt to assign any
rights or obligations arising under this Agreement without such consent shall be
void.
(b) Echelon will not distribute to its stockholders any
interest in any Echelon Subsidiary, by way of a spin-off distribution, split-off
or other exchange of interests in an Echelon Subsidiary for any interest in
Echelon held by Echelon stockholders, or any similar transaction or
transactions, unless the distributed Echelon Subsidiary undertakes to Florida
Progress to be jointly and severally liable for all Echelon Liabilities
hereunder.
10.10 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
10.11 Termination. This Agreement (including, without
limitation, Article IV hereof) may be terminated and the Distribution may be
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of Florida Progress without the approval of Echelon or the
stockholders of Florida Progress. In the event of such termination, no party
shall have any liability of any kind to the other party or any other Person.
After the Distribution, this Agreement may not be terminated except by an
agreement in writing signed by the parties; provided, however, that Article IV
shall not be terminated or amended after the Distribution in respect of the
third party beneficiaries thereto without the consent of such Persons.
10.12 Subsidiaries. Florida Progress shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Florida Progress Subsidiary.
If Echelon subsequently organizes or acquires any Subsidiary, Echelon shall not
permit such Subsidiary to take or fail to take any action, if taking or failing
to take such action would result in a breach of this Agreement if taken or
failed to be taken, as the case may be, by Echelon. Echelon shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Echelon Subsidiary.
10.13 Third Party Beneficiaries. Except as provided
in Article IV relating to Indemnitees, this Agreement is solely
<PAGE>
33
for the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
10.14 Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
10.15 Exhibits and Schedules. The Exhibits and Schedules shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
10.16 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
FLORIDA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF FLORIDA.
10.17 Consent to Jurisdiction. Without limiting the provisions
of Article VIII hereof, each of the parties irrevocably submits to the exclusive
jurisdiction of (a) the Circuit Court of the State of Florida, Pinellas County,
and (b) the United States District Court for the Middle District of Florida, for
the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the Middle District of Florida or if such suit, action
or other proceeding may not be brought in such court for jurisdictional reasons,
in the Circuit Court of the State of Florida, Pinellas County. Each of the
parties further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth above shall
be effective service of process for any action, suit or proceeding in Florida
with respect to any matters to which it has submitted to jurisdiction in this
Section 10.17. Each of the parties irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) the Circuit
Court of the State of Florida, Pinellas County, or (ii) the United States
District Court for the Middle District of Florida, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
10.18 Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired
<PAGE>
34
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
FLORIDA PROGRESS CORPORATION,
a Florida corporation
By:/s/James V. Smallwood
---------------------
James V. Smallwood
Vice President and Treasurer
ECHELON INTERNATIONAL
CORPORATION,
a Florida corporation
By:/s/Darryl A. LeClair
---------------------
Darryl A. LeClair
President and Chief
Executive Officer
EXHIBIT 10.(2)
TAX SHARING AGREEMENT
by and between
FLORIDA PROGRESS CORPORATION,
a Florida corporation,
and
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation,
Dated as of December 16, 1996
<PAGE>
i
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS................................................. 2
1.1 General........................................................... 2
1.2 References; Interpretation........................................ 6
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS............................ 6
2.1 Manner of Preparation............................................ 6
2.2 Predistribution Tax Returns...................................... 8
2.3 Post-Distribution Tax Returns.. ................................ 8
ARTICLE III
PAYMENT OF TAXES.......................................... 8
3.1 Predistribution Taxes.. ......................................... 8
3.2 Post-Distribution Taxes.......................................... 9
3.3 Reorganization Taxes. .......................................... 9
3.4 Indemnification.................................................. 9
ARTICLE IV
TAX ATTRIBUTES AND TIMING ADJUSTMENTS ........................... 10
4.1 Carrybacks....................................................... 10
4.2 Deductions or Credits............................................ 11
4.3 Timing Adjustments............................................... 11
ARTICLE V
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS........................... 13
5.1 Tax Audits and Controversies..................................... 13
5.2 Prior Agreements................................................. 13
5.3 Cooperation...................................................... 14
5.4 Retention of Records; Access..................................... 14
5.5 Dispute Resolution............................................... 14
5.6 Confidentiality; Ownership of Information;
Privileged Information.......................................... 14
ARTICLE VI
MISCELLANEOUS.............................................. 15
6.1 Complete Agreement; Construction................................. 15
6.2 Counterparts..................................................... 15
6.3 Survival of Agreements........................................... 15
6.4 Expenses......................................................... 15
6.5 Notices.......................................................... 15
6.6 Waivers.......................................................... 16
6.7 Amendments....................................................... 16
6.8 Assignment....................................................... 16
6.9 Successors and Assigns........................................... 16
<PAGE>
ii
TABLE OF CONTENTS (continued)
Page
6.10 Termination..................................................... 16
6.11 Subsidiaries.................................................... 17
6.12 Third Party Beneficiaries....................................... 17
6.13 Title and Headings.............................................. 17
6.14 Schedules....................................................... 17
6.15 GOVERNING LAW................................................... 17
6.16 Consent to Jurisdiction......................................... 17
6.17 Severability.................................................... 18
<PAGE>
<PAGE>
1
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT, dated as of December 16, 1996, by
and between FLORIDA PROGRESS CORPORATION, a Florida corporation ("Florida
Progress"), and ECHELON INTERNATIONAL CORPORATION, a Florida corporation and a
wholly owned subsidiary of Florida Progress ("Echelon").
W I T N E S S E T H:
WHEREAS, as of the date hereof, Florida Progress is the common
parent of an affiliated group of domestic corporations within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
including the members of the Echelon Group (as defined below), and the members
of the affiliated group have heretofore joined in filing consolidated federal
income tax returns;
WHEREAS, as of the date hereof, Florida Progress is the common
parent of an affiliated group of domestic corporations within the meaning of
Section 220.131(1) of the Florida Income Tax Code, including the members of the
Echelon Group (as defined below), and the members of the affiliated group have
heretofore joined in filing consolidated state income tax returns;
WHEREAS, prior to entering into this Agreement, the Echelon
Group consisted of (i) Progress Credit Corporation ("PCC"), a Florida
corporation and a direct, wholly owned subsidiary of Progress Capital Holdings,
Inc. ("PCH"), (ii) Talquin Development Company ("Talquin"), a Florida
corporation and a direct, wholly owned subsidiary of PCC, (iii) Progress Leasing
Corporation ("Progress Leasing"), a Florida corporation and a direct, wholly
owned subsidiary of PCC, (iv) Echelon, formerly known as PLC Leasing Corporation
("PLC Leasing") and a direct, wholly owned subsidiary of Progress Leasing and
(v) their respective Subsidiaries;
WHEREAS, prior to entering into this Agreement, (i) Talquin,
merged with and into PCC, (ii) PCC, merged with and into Progress Leasing and
(iii) Progress Leasing, merged with and into Echelon, which, as a result of such
mergers, became the successor to Talquin, PCC and Progress Leasing;
WHEREAS, PCH, a wholly owned subsidiary of Florida Progress,
has distributed the shares of Echelon Common Stock (and Echelon Rights) to
Florida Progress and it has been proposed that Florida Progress distribute the
shares of Echelon Common Stock (and Echelon Rights) to Florida Progress
stockholders (the "Distribution") and, as a result of the Distribution, the
Echelon Group will not be included in the consolidated Federal income tax return
of Florida Progress for the portion of the year following the Distribution or in
future years;
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2
WHEREAS, the Distribution is intended to qualify as a
tax-free spin-off under Section 355 of the Code;
WHEREAS, Florida Progress and Echelon have entered into an
agreement (the "Distribution Agreement") to, among other things, allocate
certain assets and to allocate and assign responsibility for certain liabilities
of the present Florida Progress and its present and former subsidiaries; and
WHEREAS, Florida Progress and Echelon desire to allocate the
tax burdens and benefits of transactions which occurred on or prior to the
Distribution Date and to provide for certain other tax matters, including the
assignment of responsibility for the preparation and filing of tax returns, the
payment of taxes, and the prosecution and defense of any tax controversies;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 General. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
(a) "Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other arrangements (other than this
Agreement) entered into in connection with the transactions contemplated hereby,
including, without limitation, the Distribution Agreement, the Employee Benefits
Allocation Agreement, the Transition Services Agreement, the PCH Note (as
defined below), and any exhibit, schedule or appendix to any of the foregoing.
(b) "Code" shall mean the Internal Revenue Code of
1986, as amended, and the Treasury regulations promulgated
thereunder, including any successor legislation.
(c) "Consolidated Return" shall mean any consolidated federal
or state income tax return of Florida Progress for the period commencing on
January 1, 1996, and including members of the Echelon Group through the
Distribution Date.
(d) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of Florida Progress Common
Stock as of the Record Date of the Echelon Common Stock owned by Florida
Progress on the basis of one Echelon
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3
Common Stock for each 15 outstanding shares of Florida Progress Common Stock.
(e) "Distribution Agreement" is defined in the
recitals hereto.
(f) "Distribution Date" shall mean the date on which
the Distribution is effected.
(g) "Echelon" is defined in the recitals hereto.
(h) "Echelon Common Stock" shall mean the common stock, par
value $.01 per share, of Echelon, together with the Echelon Rights.
(i) "Echelon Group" shall mean Echelon and the group of
companies which become part of Echelon as a result of the Reorganizations
(including PCC, Talquin, and Progress Leasing) as well as any Person which may
hereafter be organized or acquired directly or indirectly as an Echelon
Subsidiary.
(j) "Echelon Investments" means any corporation, partnership
or other business entity, in which any member of the Echelon Group has owned or
will own any equity interest or other investment and which relates to the
business and operations conducted by Echelon or any Echelon Subsidiary, other
than a member of the Florida Progress Group.
(k) "Echelon Rights" shall mean the preferred stock purchase
rights of Echelon issued pursuant to the Rights Agreement dated as of November
15, 1996 by and between Echelon and The First National Bank of Boston, as Rights
Agent.
(l) "Echelon Subsidiaries" shall mean all Subsidiaries
of Echelon and all Echelon Investments.
(m) "Effective Time" shall mean 12:01 a.m., St.
Petersburg, Florida time, on the Distribution Date.
(n) "Final Determination" shall mean the final resolution of
liability for any Tax for any taxable period, including any related interest or
penalties, by or as a result of: (i) a final and unappealable decision,
judgment, decree or other order by any court of competent jurisdiction; (ii) a
closing agreement or accepted offer in compromise under Section 7121 or 7122 of
the Code, or comparable agreement under the laws of other jurisdictions which
resolves the entire tax liability for any taxable period; (iii) any allowance of
a refund or credit in respect of an overpayment of tax, but only after the
expiration of all periods during which such refund may be recovered (including
by way of offset) by the jurisdiction imposing the Tax; or (iv) any other final
disposition, including by reason of the expiration of the applicable statute of
limitations.
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4
(o) "Florida Progress" is defined in the recitals
hereto.
(p) "Florida Progress Common Stock" shall mean the shares of
common stock, without par value, of Florida Progress.
(q) "Florida Progress Group" shall mean Florida Progress and
all of the direct and indirect Subsidiaries of Florida Progress as of the
Distribution Date that have joined in or are eligible to join a Consolidated
Return or any Prior Period Consolidated Return, other than any member of the
Echelon Group.
(r) "Governmental Authority" shall mean any federal, state,
local, foreign or international court, government, department, commission,
board, bureau, agency, official or other regulatory, administrative or
governmental authority.
(s) "Group" shall mean the Florida Progress Group and the
Echelon Group, as the context may require.
(t) "Included Party" is defined in Section 2.1.
(u) "Income Taxes" shall mean any federal, state or local
Taxes determined by reference to income.
(v) "Indemnifying Party" is defined in Section 3.4.
(w) "Indemnitee" is defined in Section 3.4.
(x) "IRS" shall mean the Internal Revenue Service.
(y) "Note Balance" shall mean the outstanding balance
of the PCH Note plus any accrued but unpaid interest.
(z) "Old Florida Progress Consolidated Group" shall mean
Florida Progress and all of the direct and indirect Subsidiaries of Florida
Progress prior to the Distribution Date that joined in or were eligible to join
a Consolidated Return or any Prior Period Consolidated Return.
(aa) "Other Taxes" shall mean any federal, state or local
Taxes determined without regard to income.
(ab) "PCH Note" shall mean the note dated as of December __,
1996 to be issued in connection with the Distribution by Echelon to PCH.
(ac) "person" shall mean any natural person, corporation,
business trust, joint venture, association, company, limited liability company,
partnership or government, or any agency or political subdivision thereof.
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5
(ad) "Policy Statement" shall mean the policy statement that
clarifies the existing tax allocation practices of the Old Florida Progress
Consolidated Group.
(ae) "Preparing Party" shall have the meaning as
defined in Section 2.1.
(af) "Prior Period Consolidated Return" shall mean any
consolidated income tax return (federal or state) of Florida Progress filed, or
to be filed, for years prior to the Consolidated Return year.
(ag) "Record Date" shall mean December 5, 1996.
(ah) "Reorganizations" shall mean the series of transactions
that occurred prior to the Distribution pursuant to which Echelon became a
first-tier subsidiary of PCH and the assets of PCC, Talquin and Progress Leasing
became a part of Echelon.
(ai) "Subsidiary" shall mean any corporation of which another
entity's ownership satisfies the 80-percent voting and value test of Section
1504(a)(2) of the Code.
(aj) "Tax" or "Taxes" whether used in the form of a noun or
adjective, shall mean taxes on or measured by income, franchise, gross receipts,
sales, use, excise, payroll, personal property, real property, ad-valorem,
value-added, leasing, leasing use or other taxes, levies, imposts, duties,
charges or withholdings of any nature. Whenever the term "Tax" or "Taxes" is
used (including, without limitation, regarding any duty to reimburse another
party for indemnified taxes or refunds or credits of taxes) it shall include
penalties, fines, additions to tax and interest thereon.
(ak) "Tax Benefit" shall mean the sum of the amount by which
the tax liability (after giving effect to any alternative minimum or similar
tax) of a corporation or group of affiliated corporations to the appropriate
taxing authority is reduced (including, without limitation, by deduction,
entitlement to refund, credit or otherwise) plus any interest from such
government or jurisdiction relating to such tax liability.
(al) "Tax Detriment" shall mean the sum of the amount by which
the tax liability (after giving effect to any alternative minimum or similar
tax) of a corporation or group of affiliated corporations to the appropriate
taxing authority is increased (including, without limitation, by the inclusion
of income or gain or by the denial of a deduction, entitlement to refund, loss
or credit) plus any interest owed to such government or jurisdiction relating to
such tax liability.
(am) "Tax Item" shall mean any item of income, capital gain,
net operating loss, capital loss, deduction, credit or
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6
other tax attribute relevant to the calculation of a Tax
liability.
(an) "Tax Returns" shall mean all reports or returns
(including information returns) required to be filed or that may be filed for
any period with any taxing authority (whether domestic or foreign) in connection
with any Tax or Taxes (whether domestic or foreign).
(ao) "Timing Adjustment" shall mean any adjustment which (i)
(x) decreases deductions, losses or credits or increases income, gains or
recapture of tax credits for the period in question, and (y) will permit Echelon
or any of its Subsidiaries to increase deductions, losses or tax credits or
decrease income, gains or recapture of tax credits for any taxable period or
periods beginning after the Distribution Date, or (ii) (x) increases deductions,
losses or credits or decreases income, gains or recapture of tax credits for the
period in question, and (y) will require Echelon or any of its Subsidiaries to
decrease deductions, losses or tax credits or increase income, gains or
recapture of tax credits for any taxable period or periods beginning after the
Distribution Date.
1.2 References; Interpretation. References in this Agreement
to any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation". Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
such Agreement. Unless the context otherwise requires, the words "hereof",
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
2.1 Manner of Preparation.
(a) All Tax Returns filed after the Distribution Date shall be
prepared on a basis that is consistent with the rulings obtained from the IRS or
any other Governmental Authority in connection with the Reorganizations or
Distribution (in the absence of a controlling change in law or circumstances)
and shall be filed on a timely basis (including pursuant to extensions) by the
party responsible for such filing under this Agreement. In the absence of a
controlling change in law or circumstances and unless deviation from past
practice would have no adverse effect on any of the parties, all Tax Returns
filed
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7
after the date of this Agreement shall be prepared on a basis consistent with
the elections, accounting methods, conventions, and principles of taxation used
for the most recent taxable periods for which Tax Returns involving similar Tax
Items have been filed. Subject to the provisions of this Agreement, all
decisions relating to the preparation of Tax Returns shall be made in the sole
discretion of the party responsible under this Agreement for its preparation;
provided, however, that to the extent a party (or any of its Subsidiaries) is
included in a Tax Return prepared by another party (the "Preparing Party"), the
party not responsible for preparing the Tax Return (the "Included Party") shall
have the right to review and comment on such Tax Return prior to the filing
thereof in the following manner:
(i) The Preparing Party shall submit any part of such Tax
Return relating to the Included Party to the Included Party at least 21 days
prior to the date on which such Tax Return is due (including extensions). The
Included Party shall submit its comments to the Preparing Party within 10 days
of receipt of the relevant portions of such Tax Return. The Preparing Party
shall alter such Tax Return to reflect the comments of the Included Party unless
the Preparing Party reasonably believes that such alteration is not required by
law and would have an adverse impact upon the Preparing Party. Notwithstanding
the foregoing, at least 30 days prior to the date on which such Tax Return is
due (including extensions), the Preparing Party shall use its best efforts to
notify the Included Party of and to discuss with the Included Party any
substantive issue that may adversely affect the Included Party.
(b) Unless otherwise required by the IRS, any Governmental
Authority or a court, the parties hereby agree to file all Tax Returns, and to
take all other actions, in a manner consistent with the position that the last
day on which the Echelon Group and each of its members are included in the Old
Florida Progress Consolidated Group is the Distribution Date. For any period
that includes but does not end on the Distribution Date, to the extent permitted
by law or administrative practice, the taxable year of each member of the Old
Florida Progress Consolidated Group and any group of such members shall be
treated as closing on the Distribution Date. If a taxable year of any member of
the Old Florida Progress Consolidated Group or any group or other combination of
such members that begins on or before and ends after the Distribution Date is
not treated under the previous sentence as closing on the Distribution Date, it
will be treated for purposes of this Agreement as if the member or group had a
taxable year that ended on the Distribution Date, except that Tax Items that are
calculated on an annual basis shall be apportioned on a time basis.
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8
2.2 Predistribution Tax Returns.
(a) All consolidated federal income Tax Returns of the Old
Florida Progress Consolidated Group that are required to be filed for periods
beginning before the Distribution Date shall be prepared and filed by Florida
Progress.
(b) All state and local income Tax Returns of any member of
the Old Florida Progress Consolidated Group that may be or are required to be
filed for periods beginning before the Distribution Date shall be prepared and
filed by Florida Progress.
(c) All Tax Returns for Other Taxes of any member of the Old
Florida Progress Consolidated Group that may be or are required to be filed for
any period beginning before the Distribution Date shall be prepared and filed by
the entity that filed the corresponding Tax Return for the most recent period
for which such a Tax Return has been filed, or, if no such corresponding Tax
Return has been filed, by the appropriate entity in accordance with local law or
custom. See Schedule 2.2(c) for a listing of these Tax Returns for Other Taxes
whose preparation and filing will be the responsibility of Echelon.
2.3 Post-Distribution Tax Returns. The filing of all Tax
Returns for periods beginning on or after the Distribution Date shall be the
responsibility of Florida Progress if they relate to the Florida Progress Group
or any Subsidiary of Florida Progress and shall be the responsibility of Echelon
if they relate to the Echelon Group or any Subsidiary of Echelon.
ARTICLE III
PAYMENT OF TAXES
3.1 Predistribution Taxes.
(a) Except to the extent provided for in Section 5.2, Florida
Progress shall be liable for and shall pay all Taxes due (and receive all
refunds) in connection with the filing of the Old Florida Progress Consolidated
Group's consolidated federal income Tax Returns, as well as any separate federal
income Taxes of any member of the Old Florida Progress Consolidated Group, for
all taxable periods beginning before the Distribution Date.
(b) Except to the extent provided for in Section 5.2 and in
subsection (i) below, Florida Progress shall be liable for and shall pay to the
relevant taxing authority all state and local Income Taxes (or receive all
refunds) for any taxable periods for which Florida Progress has filing
responsibility under Section 2.2(b) of this Agreement.
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9
(i) In the case of any such taxable period that does not end
on or before the Distribution Date, Echelon shall provide Florida Progress, at
least 90 days prior to the due date (including extensions) of the relevant Tax
Return, with a true and correct accounting of all relevant Tax Items and
corresponding Taxes of Echelon and each Subsidiary of Echelon as if the taxable
period for such entity began immediately after the Distribution Date (using the
principles provided in Section 2.1(b) of this Agreement) and Echelon shall be
liable for and shall pay to Florida Progress any such Taxes attributable to such
period, including any audit adjustments to such Taxes.
(c) Except to the extent that a liability for such Taxes has
been accrued on the balance sheet of a member of the Echelon Group on or prior
to the Distribution Date, Florida Progress shall be liable for and shall pay to
the relevant taxing authority all Other Taxes due or payable (or receive all
refunds) for any taxable periods described in Section 2.2(c) of this Agreement.
See Schedule 3.1(c) for a listing of those Other Taxes relating to any taxable
periods described in Section 2.2(c) of this Agreement for which any member of
the Echelon Group has accrued a liability either on or before the Distribution
Date.
3.2 Post-Distribution Taxes. Unless otherwise
provided in this Agreement:
(a) Florida Progress shall pay all Taxes and shall be entitled
to receive and retain all refunds of Taxes with respect to periods beginning on
or after the Distribution Date that are attributable to the Florida Progress
Group or any Subsidiary of Florida Progress;
(b) Echelon shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes with respect to periods beginning on or
after the Distribution Date that are attributable to the Echelon Group or any
Subsidiary of Echelon.
3.3 Reorganization Taxes. Notwithstanding any statement to the
contrary in this Agreement, and except as otherwise provided in the Distribution
Agreement, to the extent that any Taxes are found to arise out of the
Reorganizations or as a result of the Distribution not qualifying as a tax-free
spin-off under Section 355 of the Code, then any such Tax liability (including
interest and penalties) incurred by the parties (or any Subsidiaries) shall be
the responsibility of Florida Progress.
3.4 Indemnification.
(a) Any and all Tax liabilities allocated to Florida Progress
by this Agreement shall be "Florida Progress Liabilities" within the meaning of
the Distribution Agreement and Section 4.1 thereof.
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10
(b) Any and all Tax liabilities allocated to Echelon by this
Agreement shall be "Echelon Liabilities" within the meaning of the Distribution
Agreement and Section 4.1 thereof.
(c) (i) Notwithstanding the provisions of Section 4.4 of the
Distribution Agreement, to the extent that one party (the "Indemnifying Party")
owes money to another party (the "Indemnitee") pursuant to this Section 3.4, the
Indemnitee shall, within 14 days after receiving the Indemnifying Party's
calculations, submit to the Indemnifying Party the Indemnitee's calculations of
the amount required to be paid pursuant to this Section 3.4, showing such
calculations in sufficient detail so as to permit the Indemnifying Party to
understand the calculations. The Indemnifying Party shall pay the Indemnitee, no
later than 30 days prior to the due date (including extensions) of the relevant
Tax Returns or 14 days after the Indemnifying Party receives the Indemnitee's
calculations, the amount for which the Indemnifying Party is required to pay or
indemnify the Indemnitee under this Section 3.4. The Indemnifying Party shall
have the right to disagree with the Indemnitee's calculations. Any dispute
regarding such calculations shall be resolved in accordance with Section 5.5 of
this Agreement.
(ii) All indemnity payments shall be calculated on a pre-tax
basis and shall be treated as contributions to capital and/or dividends
immediately prior to the Distribution.
(d) Florida Progress shall indemnify Echelon for any Income
Taxes or franchise taxes for any taxable period (or portion of a taxable period)
ending before or including the Distribution Date for which Echelon may be liable
solely as a result of the operation of United States Treasury regulation
sections 1.1502-6 and 1.1502-77 or any state counterpart statute or regulation.
ARTICLE IV
TAX ATTRIBUTES AND TIMING ADJUSTMENTS
4.1 Carrybacks.
(a) In the event of the realization of any Tax Item by Echelon
or any of its Subsidiaries for any taxable period beginning on or after the
Distribution Date which, under the applicable tax law, Echelon or any of its
Subsidiaries is permitted or required to carry back to a Consolidated Return or
a Prior Period Consolidated Return and the carry back of such Tax Item will
result in a Tax Benefit, Echelon shall inform Florida Progress of the existence
of such Tax Item and take any reasonable steps necessary to allow Florida
Progress to carry back such Tax Item to a Consolidated Return or a Prior Period
Consolidated Return. The amount of any Tax Benefit that results from the carry
back of any Tax Item pursuant to this paragraph
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11
shall be applied against the Note Balance at the time such Tax Benefit is
realized (as defined in Section 4.3(b)). To the extent the amount of the Tax
Benefit exceeds the Note Balance as of the date such Tax Benefit is realized (as
defined in Section 4.3(b)), Florida Progress shall remit any refund it receives
with respect to the carry back of such Tax Item to Echelon within 30 days of the
date such Tax Benefit is realized. In the event that two or more carrybacks of
Tax Items are available for use in a Consolidated Return or in any Prior Period
Consolidated Return, their order of use will be determined by the Code. Where
two or more carrybacks of Tax Items have equal priority and can not be used in
full, each such carryback shall be used in proportion to the total of such
carrybacks.
(b) In the event that the Note Balance is reduced and/or an
amount is paid to Echelon under Section 4.1(a) and the Tax Benefit that led to
such reduction and/or payment is subsequently modified (whether as the result of
an IRS adjustment or any other reason), then the amount of the reduction or
payment (plus any interest) relating to such Tax Benefit shall be added to the
Note Balance to the extent such Tax Benefit reduced the Note Balance and, to the
extent not applied against the Note Balance, repaid to Florida Progress within
30 days of a Final Determination that the claimed Tax Benefit has been denied.
4.2 Deductions or Credits. Except as provided in Section 4.3,
none of the parties shall be obligated to make a payment to another party as a
result of utilizing a net operating loss or similar tax attribute arising in a
period beginning prior to the Distribution Date.
4.3 Timing Adjustments.
(a) If an audit or other examination of any federal, state or
local Tax Return for any period beginning prior to the Distribution Date shall
result (by settlement or otherwise) in a Timing Adjustment in favor of Echelon
or any of its Subsidiaries, then:
(i) Florida Progress shall notify Echelon and shall provide
Echelon with adequate information so that it can reflect on the appropriate Tax
Returns any resulting increases in deductions, losses or tax credits or
decreases in income, gains or recapture of tax credits; and
(ii) Echelon shall pay Florida Progress the amount of any Tax
Benefit that results from such Timing Adjustment within 30 days of the date such
Tax Benefits are realized.
(b) If an audit or other examination of any federal, state or
local Tax Return for any period beginning prior to the Distribution Date shall
result (by settlement or otherwise) in a
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12
Timing Adjustment to the detriment of Echelon or any of its Subsidiaries, then:
(i) Florida Progress shall notify Echelon and shall provide
Echelon with adequate information so that it can reflect on the appropriate Tax
Returns any resulting decreases in deductions, losses or tax credits or
increases in income, gains or recapture of tax credits; and
(ii) Florida Progress shall pay Echelon the amount of any Tax
Detriment that results from such Timing Adjustment within 30 days of the date
such Tax Detriment is realized, provided, however, that the amount of any
payment made by Florida Progress pursuant to this Section 4.3(b)(ii) shall not
exceed the Tax Benefit realized by Florida Progress as a result of such Timing
Adjustment.
(c) For purposes of this Section 4.3, a Tax Benefit shall be
deemed to have been realized at the time any refund of Taxes is received or
applied against other Taxes due, or at the time of filing of a Tax Return
(including any Tax Return relating to estimated Taxes) on which a loss,
deduction or credit is applied in reduction of Taxes which would otherwise be
payable; provided, however, that where a party has other losses, deductions,
credits or similar items available to it, such deductions, credits or similar
items of such party may be applied prior to the use of any Timing Adjustment.
For purposes of this Section 4.3, a Tax Detriment shall be deemed to have been
realized at the time any refund of Taxes is received or applied against other
Taxes due provided that such refund was reduced as a result of the Tax
Detriment, or at the time of filing of a Tax Return (including any Tax Return
relating to estimated Taxes) provided the Tax Detriment caused an increase in
income, gain or recapture of a tax credit with respect to such Tax Return. In
the event of a Tax Benefit, Echelon may, at its election, pay the amount of any
Tax Benefit to Florida Progress rather than filing amended returns or otherwise
reflecting adjustments or taking positions on its Tax Returns. If such an
election is made, Echelon will be treated as having realized a Tax Benefit at
the time it would have realized a Tax Benefit had it chosen to file amended
returns or otherwise to reflect adjustments or to take positions on its Tax
Returns. If any Tax Benefit realized pursuant to Section 4.3 is subsequently
denied, then Florida Progress shall refund the amount of any payment for such
benefit within 30 days of its notification by Echelon that a Final Determination
has been reached denying the claimed Tax Benefit. In the event of a Tax
Detriment, Florida Progress will not be obligated to make any payment under
(b)(ii) above unless Echelon either files amended returns or otherwise reflects
the Tax Detriment on its Tax Returns. If any Tax Detriment realized pursuant to
Section 4.3 is subsequently reversed, then Echelon shall refund the amount of
any payment for such detriment within 30 days of its notification that a Final
Determination has been reached reversing the Tax Detriment.
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13
ARTICLE V
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
5.1 Tax Audits and Controversies. In the case of any audit,
examination or other proceeding ("Proceeding") with respect to Taxes of the Old
Florida Progress Consolidated Group or any member thereof for any taxable period
for which Florida Progress is or may be liable for such Taxes pursuant to this
Agreement, Echelon shall promptly inform Florida Progress and shall execute or
cause to be executed any powers of attorney or other documents necessary to
enable Florida Progress to take all actions desired by Florida Progress with
respect to such Proceeding to the extent such Proceeding may affect the amount
of Taxes for which Florida Progress is liable pursuant to this Agreement;
Florida Progress shall have the right to control any such Proceedings and to
initiate any claim for refund, file any amended return or take any other action
which it deems appropriate with respect to such taxable periods, provided,
however, that Florida Progress shall consult with Echelon with respect to any
Proceeding that may adversely affect the Echelon Group. In addition, Florida
Progress shall not enter into any final settlement or closing agreement with
respect to a matter that adversely affects Echelon without the consent of
Echelon, which consent may not be unreasonably withheld. Where Echelon withholds
its consent to any final settlement or closing agreement, Echelon shall continue
or initiate further proceedings with respect to such matter, at its own expense,
and the liability of Florida Progress shall not exceed the liability that would
have resulted from the proposed final settlement or closing agreement (including
interest, additions to tax and penalties which have accrued at that time).
Echelon shall have the right to control and to initiate any claim for refund,
file any amended return or take any other action which it deems appropriate with
respect to a Proceeding relating to Taxes for any taxable period beginning after
the Distribution Date provided such Proceeding does not involve any Taxes
attributable to any member of the Florida Progress Group.
5.2 Prior Agreements. Immediately prior to the Distribution,
Echelon shall pay to Florida Progress, on behalf of the Echelon Group, an amount
that represents Echelon Group's share of (i) Taxes due in connection with the
filing of the Old Florida Progress Consolidated Group's consolidated federal and
state income Tax Returns for all taxable periods beginning before the
Distribution Date, (ii) all state and local Income Taxes attributable to taxable
periods beginning before the Distribution Date and (iii) Other Taxes
attributable to taxable periods beginning before the Distribution Date. The
amount of this payment shall be determined under the Policy Statement. At the
time such payment is made, any member of the Echelon Group shall be deemed to
have satisfied all of its obligations under the Policy Statement.
Notwithstanding the foregoing, in consideration of the mutual indemnities and
other obligations of
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14
this Agreement, any and all prior tax sharing agreements or practices between
any member of the Florida Progress Group and any member of the Echelon Group,
including the Policy Statement, shall be terminated with respect to the Echelon
Group as of the date of the Distribution.
5.3 Cooperation. Florida Progress and Echelon shall cooperate
with each other in the filing of any Tax Returns and the conduct of any audit or
other proceeding and each shall execute and deliver such powers of attorney and
other documents and make available such information and documents as are
necessary to carry out the intent of this Agreement. To the extent such
cooperation requires the services of officers, directors, employees, or agents
of a party, such services shall be made available in accordance with the
Distribution Agreement and the cost of such services shall be borne by the party
requiring such services. Each party agrees to notify the other parties of any
audit adjustment that does not result in Tax liability but can reasonably be
expected to affect Tax Returns of the other parties or any of their
Subsidiaries.
5.4 Retention of Records; Access. Beginning on the
Distribution Date, Florida Progress and Echelon shall, and shall
cause each of their Subsidiaries to:
(a) retain adequate records, documents, accounting data and
other information (including computer data) necessary for the preparation and
filing of all Tax Returns required to be filed by any member of the Old Florida
Progress Consolidated Group or any combination of such members and for any
audits and litigation relating to such Tax Returns or to any Taxes payable by
any member of the Old Florida Progress Consolidated Group or any combination of
such members; and
(b) give to the other parties reasonable access to such
records, documents, accounting data and other information (including computer
data) and to its personnel and premises, for the purpose of the review or audit
of such reports or returns to the extent relevant to an obligation or liability
of a party under this Agreement and in accordance with the procedures provided
in Article VI of the Distribution Agreement. The obligations set forth in these
paragraphs 5.4(a) and 5.4(b) shall continue until the final conclusion of any
litigation to which the records and information relate or until expiration of
all applicable statutes of limitations, whichever is longer.
5.5 Dispute Resolution. Any dispute or claim arising out of,
in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, shall be resolved in the manner set
forth in Article VIII of the Distribution Agreement.
<PAGE>
15
5.6 Confidentiality; Ownership of Information;
Privileged Information. The provisions of Section 6.5 of the Distribution
Agreement relating to confidentiality of information, ownership of information,
privileged information and related matters shall apply with equal force to any
records and information prepared and/or shared by and among the parties in
carrying out the intent of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Complete Agreement; Construction. This Agreement,
including the Schedules, and the Ancillary Agreements shall constitute the
entire agreement between the parties with respect to the subject matter hereof
and shall supersede all previous negotiations, commitments and writings with
respect to such subject matter. In the event of any inconsistency between this
Agreement and any Schedule hereto, the Schedule shall prevail. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of any Ancillary Agreement, this Agreement shall control.
6.2 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each party and delivered to the other party.
6.3 Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
6.4 Expenses. Except as otherwise set forth in this Agreement,
each party shall bear its own costs and expenses incurred after the Distribution
Date. Except as otherwise set forth in the Distribution Agreement or any
Ancillary Agreement, any amount or expense to be paid or reimbursed by any party
hereto to the other party hereto shall be so paid or reimbursed promptly after
the existence and amount of such obligation is determined and demand therefore
is made.
6.5 Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
<PAGE>
16
To Florida Progress Corporation:
3201 34th Street South
St. Petersburg, Florida 33711
Telephone: (813) 866-5153
Telecopy: (813) 866-4881
Attn: General Counsel
To Echelon International Corporation:
One Progress Plaza
Suite 2400
St. Petersburg, Florida 33701
Telephone: (813) 824-6768
Telecopy: (813) 824-6536
Attn: Chief Executive Officer
6.6 Waivers. The failure of either party to require strict
performance by the other party of any provision in this Agreement will not waive
or diminish such party's right to demand strict performance thereafter of that
or any other provision hereof.
6.7 Amendments. Subject to the terms of Section 6.10 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
6.8 Assignment. (a) This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by either party hereto without the
prior written consent of the other party hereto, and any attempt to assign any
rights or obligations arising under this Agreement without such consent shall be
void.
(b) Echelon will not distribute to its stockholders any
interest in any Echelon Subsidiary, by way of a spin-off distribution, split-off
or other exchange of interests in a Echelon Subsidiary for any interest in
Echelon held by Echelon stockholders, or any similar transaction or
transactions, unless the distributed Echelon Subsidiary undertakes to Florida
Progress to be jointly and severally liable for all Echelon Liabilities
hereunder.
6.9 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
6.10 Termination. This Agreement may be terminated,
amended, modified or abandoned at any time prior to the
<PAGE>
17
Distribution by and in the sole discretion of Florida Progress without the
approval of Echelon or the stockholders of Florida Progress. In the event of
such termination, no party shall have any liability of any kind to any other
party or any other person. After the Distribution, this Agreement may not be
terminated except by an agreement in writing signed by the parties.
6.11 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
or by any entity that is contemplated to be a Subsidiary of such party on and
after the Distribution Date.
6.12 Third Party Beneficiaries. Except as provided in Article
IV of the Distribution Agreement relating to Indemnities, this Agreement is
solely for the benefit of the parties hereto and their respective Subsidiaries
and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
6.13 Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
6.14 Schedules. The Schedules shall be construed with
and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
6.15 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
FLORIDA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF FLORIDA.
6.16 Consent to Jurisdiction. Without limiting the provisions
of Section 5.5 hereof, each of the parties irrevocably submits to the exclusive
jurisdiction of (a) the Circuit Court of the State of Florida, Pinellas County,
and (b) the United States District Court for the Middle District of Florida, for
the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the Middle District of Florida or if such suit, action
or other proceeding may not be brought in such court for jurisdictional reasons,
in the Circuit Court of the State of Florida, Pinellas County. Each of the
parties further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth above shall
be effective service of process for any action, suit or proceeding in Florida
with respect to any matters to which it has submitted to jurisdiction in this
Section 6.16. Each of the parties
<PAGE>
18
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Circuit Court of the State of Florida, Pinellas
County, or (ii) the United States District Court for the Middle District of
Florida, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
6.17 Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
FLORIDA PROGRESS CORPORATION,
a Florida corporation
By:/s/James V. Smallwood
------------------------
James V. Smallwood
Vice President and Treasurer
ECHELON INTERNATIONAL
CORPORATION,
a Florida corporation
By:/s/Darryl A. LeClair
------------------------
Darryl A. LeClair
President and Chief
Executive Officer
<PAGE>
Schedule 2.2(c)
Tax Returns for Other Taxes whose preparation and filing will be the
responsibility of Echelon:
(i) Florida sales and use tax returns relating to the
Harborage of Bayboro; and
(ii) Florida sales and use tax returns relating to Talquin
Development Company (including operations under HEB
Partners, 100 Carillon Associates, Ltd. and Highpoint
Center Partners, Ltd.).
<PAGE>
Schedule 3.1(c)
Other Taxes relating to any taxable periods described in Section 2.2(c) of this
Agreement for which any member of the Echelon Group has accrued a liability
either on or before the Distribution Date:
(i) Florida sales and use tax returns relating to the
Harborage of Bayboro; and
(ii) Florida sales and use tax returns relating to Talquin
Development Company (including operations under HEB
Partners, 100 Carillon Associates, Ltd. and Highpoint
Center Partners, Ltd.).
<PAGE>
EXHIBIT 99.(1)
Florida Progress Corporation
News Release
Corporate Relations Department, St. Petersburg, Florida
[LOGO OMITTED]
Media Contact:
Jeffrey Volk
Lippert/Heilshorn & Associates
(212) 838-3777
Florida Progress Spins-Off Echelon International
To Shareholders
ST. PETERSBURG, Fla. (December 18, 1996) -- Continuing with its plan to focus on
its core utility and coal and transportation businesses, Florida Progress
Corporation (NYSE:FPC) today announced it has completed the spin-off of Echelon
International Corporation, the company's real estate, lending and leasing unit.
Echelon International is listed on the NYSE under the ticker symbol "EIN."
As previously announced, Florida Progress Corporation shareholders, as of the
December 5 record date, received one share of Echelon International common stock
for each 15 shares of Florida Progress common stock owned. Florida Progress'
board of directors determined, after an extensive review of various strategic
options, that a spin-off of its real estate, lending and leasing unit was the
most appropriate way to achieve Florida Progress' strategic objectives. The
board is confident that as an independent company with its own highly
experienced and focused management team, Echelon is well positioned for future
growth in the real estate development and management business.
Echelon International has assets of approximately $560 million. The company's
business segments include development, ownership and management of commercial
and multi-family residential real estate and collateralized financing. Echelon's
strategy focuses on expanding the real estate business, particularly
multi-family residential and commercial real estate development.
Echelon International's over one million square foot real estate portfolio
includes 134 acres in Carillon Corporate Park, the Barnett Tower in St.
Petersburg, the Highpoint Center in Tallahassee and a research office park near
Gainesville. The company also has real estate loans on other properties in Texas
and Washington.
The company's management team includes Michael Doramus, chairman and Darryl
LeClair, president and chief executive officer. Mr. Doramus has over 20 years
experience in residential
- more -
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Florida Progress Corporation
News Release - Florida Progress Spins-Off Echelon International
real estate. In January 1996, he founded Mission Development Company which
serves numerous areas of the real estate industry. He also served as president
and operating partner of two Tramell Crow companies and managed over 60,000
units in 33 states. Mr. LeClair has been with Florida Progress or its affiliates
for 15 years. He has been president of Progress Credit, a predecessor of
Echelon, since 1992 and has extensive experience in real estate and aircraft
lending and leasing. Mr. LeClair has also worked on numerous acquisition and
divestiture projects for Florida Progress.
Florida Progress is a Fortune 500 diversified utility holding company with
assets of $5.6 billion. Its principal subsidiary is Florida Power, the state's
second-largest electric utility with about 1.3 million customers. Diversified
operations include coal mining, marine operations, rail service and life
insurance.
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