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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1998
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Commission File Number 2-89530
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FLORIDA EAST COAST INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
FLORIDA 59-2349968
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Malaga Street, St. Augustine, FL 32085-1048
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (904) 829-3421
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1650 Prudential Drive, Jacksonville, FL 32207
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(Former name, former address, and former fiscal
year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at September 30, 1998
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Common Stock-no par value 36,286,360 shares
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FLORIDA EAST COAST INDUSTRIES, INC.
INDEX
Page No.
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PART I Financial Information:
Consolidated Condensed Balance Sheets -
September 30, 1998 and December 31, 1997 2
Consolidated Condensed Statements of Income
and Retained Earnings - Three Months and Nine
Months Ended September 30, 1998 and 1997 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 4
Notes to Consolidated Condensed Financial
Statements 5-6
Management's Discussion and Analysis of
the Consolidated Financial Condition
and Results of Operations 7-11
PART II Other Information 11-12
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FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Sept. 30 December 31
--------- -----------
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 50,466 $ 30,845
Short-term investments 507 258
Accounts receivable, net 29,854 31,045
Materials and supplies 10,719 11,789
Other 9,815 7,987
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Total current assets 101,361 81,924
Other investments 53,089 72,041
Properties, less accumulated depreciation and amortization 702,064 663,672
Other assets and deferred charges 5,968 7,853
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$ 862,482 $ 825,490
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,420 $ 20,580
Income taxes 7,503 4,630
Accrued property taxes 9,672 1,008
Accrued casualty and other reserves 4,992 5,143
Other accrued liabilities 2,529 3,005
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Total current liabilities 45,116 34,366
Deferred income taxes 132,741 133,884
Reserves and other long-term liabilities 7,709 8,365
Shareholders' equity:
Common stock, no par value; 50,000,000 shares authorized;
37,085,444 shares issued and 36,286,360 shares outstanding 60,802 60,802
Retained earnings 624,318 594,132
Accumulated other comprehensive income 1,151 3,296
Less:
Treasury stock at cost (799,084 shares) (9,355) (9,355)
--------- ---------
Total shareholders' equity 676,916 648,875
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$ 862,482 $ 825,490
========= =========
</TABLE>
(See accompanying notes)
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FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPT. 30 ENDED SEPT. 30
1998 1997 1998 1997
------------------------- -------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Transportation $ 47,081 $ 46,333 $ 145,230 $ 136,526
Realty-Sales 5,050 4,885 5,319 26,703
Realty-Rents & Other 11,601 9,689 32,012 28,123
--------- --------- --------- ---------
Total Operating Revenues 63,732 60,907 182,561 191,352
OPERATING COSTS:
Transportation 31,231 31,326 97,304 93,749
Realty 7,114 5,823 20,417 16,740
Realty Sales 521 1,286 592 22,424
General and Administrative 6,263 6,050 19,983 19,749
--------- --------- --------- ---------
Total Operating Costs 45,129 44,485 138,296 152,662
Operating Profit 18,603 16,422 44,265 38,690
OTHER INCOME (EXPENSE):
Dividends 637 178 1,204 383
Interest income 780 1,538 3,298 3,961
Interest expense (105) (89) (248) (331)
Gains (Loss) on sales and other disposition of properties (241) 202 235 1,534
Other (net) 989 968 3,574 2,551
--------- --------- --------- ---------
Total Other Income (Expense) 2,060 2,797 8,063 8,098
Income before income taxes 20,663 19,219 52,328 46,788
INCOME TAXES:
Current 8,107 6,927 19,229 17,115
Deferred (411) 281 193 434
--------- --------- --------- ---------
Total Income Taxes 7,696 7,208 19,422 17,549
--------- --------- --------- ---------
Net income $ 12,967 $ 12,011 $ 32,906 $ 29,239
--------- --------- --------- ---------
Retained earnings:
Balance at beginning of period 612,259 573,038 594,132 557,621
Cash dividends (908) (905) (2,720) (2,716)
--------- --------- --------- ---------
Balance at end of period $ 624,318 $ 584,144 $ 624,318 $ 584,144
========= ========= ========= =========
Per Share data:
Cash dividends $ 0.025 $ 0.025 $ 0.075 $ 0.075
========= ========= ========= =========
Earnings per common share $ 0.36 $ 0.33 $ 0.91 $ 0.81
========= ========= ========= =========
</TABLE>
(See accompanying notes)
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FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 32,906 $ 29,239
Adjustments to reconcile net income to cash generated:
Depreciation and amortization 20,414 18,102
Gain on disposition of assets (235) (1,534)
Realized gains on investments (2,991) (1,960)
Non-monetary fiber optic transaction (2,557) 0
Deferred taxes 193 434
Changes in operating assets and liabilities:
Accounts receivable 1,191 4,388
Other current assets (758) 166
Other assets and deferred charges 1,885 577
Accounts payable (160) 1,485
Income taxes payable 2,873 1,540
Estimated property taxes 8,664 4,711
Other current liabilities (627) (188)
Reserves and other long-term liabilities (656) 196
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Net cash generated by operating activities 60,142 57,156
Cash flows from investing activities:
Purchases of properties (61,808) (48,353)
Purchases of investments:
Available-for-sale (32,285) (14,917)
Held-to-maturity 0 (8,044)
Maturities and redemption of investments:
Available-for-sale 39,542 11,737
Held-to-maturity 11,000 9,960
Proceeds from disposition of assets 5,750 10,855
-------- --------
Net cash used in investing activities (37,801) (38,762)
Cash flows from financing activities:
Payment of dividends (2,720) (2,716)
-------- --------
Net cash used in financing activities $ (2,720) $ (2,716)
Net increase in cash and cash equivalents 19,621 15,678
Cash and cash equivalents at beginning of period 30,845 23,602
-------- --------
Cash and cash equivalents at end of period $ 50,466 $ 39,280
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 16,049 $ 15,727
======== ========
Cash paid during the period for interest $ 248 $ 331
======== ========
</TABLE>
(See accompanying notes)
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FLORIDA EAST COAST INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting of normal recurring accruals) considered
necessary to present fairly the financial position as of
September 30, 1998 and December 31, 1997, and the results of
operations and cash flows for the three- and nine-month periods
ended September 30, 1998 and September 30, 1997.
2. The results of operations for the nine months ended September 30,
1998 are not necessarily indicative of the results that may be
expected for the full year.
3. The Company has retained certain self-insurance risks with
respect to losses for third-party liability, property damage and
group health insurance coverage provided employees. The Company
is the defendant and plaintiff in various lawsuits resulting from
its operations. In the opinion of management, adequate provision
has been made in the financial statements for the estimated
liability which may result from disposition of such lawsuits.
The Company is subject to proceedings arising out of
environmental laws and regulations, which primarily relate to the
disposal and use of fuel and oil in the transportation business.
It is the Company's policy to accrue and charge against earnings
environmental cleanup costs when it is probable that a liability
has been incurred and an amount can be reasonably estimated.
The Company is currently a party to, or involved in legal
proceedings directed at the cleanup of three Superfund sites. The
Company has accrued its allocated share of the total estimated
cleanup costs for these three sites. Based upon management's
evaluation of the other potentially responsible parties, the
Company does not expect to incur additional amounts even though
the Company has joint and several liability. Other proceedings
involving environmental matters, such as alleged discharge of oil
or waste material into water or soil, are pending against the
Company.
It is difficult to quantify future environmental costs because of
many issues relating to actions by third parties or changes in
environmental regulation. However, based on information presently
available, management believes that the ultimate disposition of
currently known matters will not have a material effect on the
financial position or liquidity of the Company in any one period.
Environmental liabilities of $2.0 million at September 30, 1998
will be paid over an extended period, and the timing of such
payments cannot be predicted with any confidence.
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4. Gran Central Corporation, a wholly-owned subsidiary of the
Company, entered into an agreement with the State of Florida
Department of Transportation to furnish all land necessary for
the construction of the N.W. 106th Street Interchange on the
Homestead Extension of the Florida Turnpike and to subsidize the
Department for 15 years to cover any annual operating deficit
related to the interchange which is not covered by toll revenues.
The maximum assessment amount over the 15 years would be
approximately $9.3 million with no annual assessment to exceed
$1.1 million. No assessments have been made to date.
5. The revenue recognition policies are:
Transportation Revenues: Revenues are substantially recognized
upon completion of transportation services at destination.
Realty Land Sales: Revenue is recognized upon closing of sales
contracts for sale of land or upon settlement of legal
proceedings such as condemnations.
Rental Income: Revenue is recognized upon completion of rental
and lease contracts. The Company uses the straight-line basis for
recording the revenues over the life of the lease contract.
6. Because a large percentage of the Company's properties is
long-lived, asset replacement will be at a higher cost and will
take place over many years. The acquisition of new assets will
result in higher depreciation charges and, in the case of realty,
higher taxes and operating costs.
Generally accepted accounting principles require the use of
historical costs in preparing financial statements. This approach
disregards the effect of inflation on the replacement cost of
property and equipment. The Company is a capital-intensive
company and has approximately $917 million (original cost)
invested in such assets as of December 31, 1997. The replacement
costs of these assets, as well as the related depreciation
expense, would be substantially greater than the amounts reported
on the basis of historical costs.
7. All share numbers and per share amounts have been restated to
reflect the four-for-one split of the Company's common stock
which became effective June 1, 1998.
8. The Company adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income,"
effective January 1, 1998. This Statement establishes standards
for reporting and display of comprehensive income and its
components. Comprehensive income for the nine months ended
September 30, 1998 and 1997 was approximately $30.8 and $30.7
million, respectively. Comprehensive income for the three months
ending September 30, 1998 and 1997 was approximately $10.8 and
$12.2 million, respectively. This amount differs from net income
due to changes in the net unrealized holding gains generated from
available-for-sale securities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Florida East Coast Industries, Inc.'s (FECI) operating revenues for the first
nine months of 1998 reflected a decrease of approximately $8.8 million.
Operating costs for the same comparative period decreased approximately $14.4
million, resulting in an increase in operating profits of approximately $5.6
million.
Operating revenues for the third quarter 1998, when compared to the third
quarter 1997, increased approximately $2.8 million. Operating costs for the
third quarter 1998, when compared to the same period 1997, increased by $.6
million, resulting in an increase of $2.2 million in operating profits.
When comparing third quarter 1998 with second quarter 1998, operating revenues
increased by approximately $1.7 million, while operating expenses decreased by
approximately $1.5 million, resulting in an increase in operating profits of
$3.2 million.
ANALYSIS
Revenues - When comparing the first nine months of 1998 with the same period in
1997, transportation revenues increased by approximately $8.7 million or 6.4%.
Included in transportation revenues was a non-monetary gain of approximately
$2.6 million related to an exchange involving fiber optics that was reported in
second quarter 1998. This gain was the result of an exchange of unrestricted
rights to 36 dark fiber optic communication fibers for the forgiveness of 1998
rental income payable to the Company on certain right-of-way operating leases,
and a final installment covering the sale of conduit owned by the Company.
Excluding the total increase in fiber optic income of approximately $3.7 million
for the first nine months of 1998, transportation revenues increased
approximately $5.0 million. These increases consist of approximately $1.9
million in revenue from rail-related operations, and $3.1 million in revenues
from trucking-related operations. The composition of rail-related traffic for
the first nine months of 1998 versus 1997 reflects a decrease in the total
number of shipments of 846. Within the different classifications of traffic,
this decrease was comprised of increases of 8.0% in aggregate, and 22.5% in
automotive and automotive-related shipments offset by decreases of 2.9% in
intermodal traffic, and 7.6% in all other carload traffic. The increase in
aggregate products is
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related to their use in residential, commercial and highway construction within
the state. The increase in the number of automotive shipments is primarily
attributable to a new Norfolk Southern automobile facility located on the
Railway's right-of-way in Titusville. The decline in other carload shipments has
been primarily attributed to coal shipments because of shipper's use of
alternative transportation. However, a new contract was negotiated in April 1998
that secures future shipments via rail. Even though the rail segment shows a net
decrease in the number of shipments, the rail-related revenues increased
approximately $1.9 million. Of the $1.9 million increase, approximately $.3
million was directly related to rail shipments, whereas $1.6 million was related
to ancillary services associated with rail moves. Realty sales of properties
decreased approximately $21.4 million when comparing nine months of 1998 with
same period in 1997. This decrease was substantially comprised of four separate
dispositions of properties in the first nine months of 1997 of approximately
$23.7 million. Realty rents and other income increased approximately $3.9
million for the first nine months of 1998 versus 1997. This increase is
primarily attributed to the addition of leasable space of approximately .5
million square feet, and the normal increases associated with tenant billings.
Comparing third quarter 1998 with third quarter 1997, transportation revenues
increased approximately $.7 million or 1.6%. This increase was comprised of
decreases in rail-related revenues of approximately $.5 million offset by
increases in trucking-related revenues of approximately $1.2 million. Fiber
optic income remained approximately the same at $.5 million. The rail-related
revenues represent a decrease in total shipments of 5,473. Within the different
classifications of shipments, this decrease was comprised of increases of 4.4%
shipments in aggregate, and 26.4% in automotive and automotive-related shipments
offset by decreases of 8.7% in intermodal traffic, and 2.4% in all other carload
traffic. As previously discussed, the increase in aggregate shipments was
related to the various types of construction being performed within the state.
The increase in the number of automotive shipments was primarily attributed to
the new automobile facility at Titusville. The revenues directly related to rail
shipments decreased approximately $1.0 million, whereas revenues related to
ancillary services associated with the rail moves increased approximately $.5
million. The increase in truck-related revenues primarily reflects increases in
long-haul shipments to the transportation segment's railhead for movement to
destinations in Florida. During this same period, realty sales increased
approximately $.2 million, while realty rents and other income increased
approximately $1.9 million. This increase was primarily related to the .1
million square feet of leasable space added to inventory, and the normal
increases associated with the tenant billings.
Comparing third quarter 1998 with second quarter 1998, transportation revenues
decreased approximately $4.3 million or 8.3%. During second quarter 1998,
transportation revenues included the non-monetary gain related to fiber optic
income. Excluding this decrease in total fiber optic income of approximately
$3.5 million, transportation revenues for the third quarter 1998 decreased
approximately $.7 million or 1.6%. This decrease of approximately $1.1 million
was comprised of decreases of approximately $1.1 million in rail-related
revenues offset by increases in trucking-related revenues of approximately $.4
million. The $.7 million decrease was reflected in a decrease in the total
number of shipments of 6,099. Within the different classifications of shipments,
these decreases were comprised of 3.7% in aggregates, 4.4% in automotive and
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automotive-related shipments, 5.3% in intermodal traffic, and 5.8% in all other
carload traffic. Basically, the same rationale as previously discussed applies
when comparing third quarter with second quarter 1998. Rail-related revenues
decreased approximately $1.1 million, while revenues related to ancillary
services associated with rail moves remained approximately the same as second
quarter 1998 at approximately $1.6 million. Sales of realty properties increased
approximately $5.1 million from second quarter to third quarter 1998. Realty
rents and other income increased $.9 million from second quarter to third
quarter 1998, which is primarily attributable to the addition of leasable space
from new construction, and normal increases associated with tenant billings.
Operating Costs - Operating costs in the first nine months of 1998 decreased by
approximately $14.4 million when compared to the same period in 1997. This
decrease was comprised of increases of $3.7 million in realty operating costs,
$.2 million in general and administrative costs, and $3.5 million in
transportation costs offset by a decrease in costs of realty sales of
approximately $21.8 million. The decrease in cost of realty sales was primarily
attributable to the cost of four separate dispositions of realty properties of
approximately $21.6 million in the first nine months of 1997. The increase of
$3.5 million in transportation costs consisted of $.7 million in rail-related
costs, and $2.8 million in trucking-related costs. The $.7 million increase in
transportation costs was primarily comprised of increases of approximately $1.3
million in casualty and insurance, and $.8 million in property taxes offset by
decreases of approximately $1.5 million in fuel costs, $.7 million in purchased
services and $.6 million in repairs. The $2.8 million increase in
trucking-related costs primarily reflects the costs of long-haul shipments to
the transportation segment's railhead for movement to destinations in Florida.
General and administrative costs for the first nine months of 1997 included a
special charge of $2.9 million for expenses incurred prior to the May 5, 1997
announcement concerning the possible disposition of the Florida East Coast
Railway and Gran Central Corporation. Excluding this $2.9 million charge,
general and administrative expenses increased approximately $3.1 million in the
first nine months of 1998 when compared to the same period in 1997. This
increase of $3.1 million was related to the outsourcing of the asset and
property management function of Gran Central Corporation to The St. Joe Company
and related entities of approximately $1.4 million, a severance package offered
to supervisory employees in an effort to downsize of approximately $.8 million,
bonuses awarded to officers for the 1997 performance appraisals of approximately
$.3 million, and other operating costs of the Company of approximately $.6
million.
Operating costs for the third quarter 1998 increased by $.6 million when
compared to the third quarter 1997. These increases were comprised of $1.3
million in realty operating costs, and $.2 million in general and administrative
costs offset by decreases of $.8 million in realty sales, and transportation
costs of approximately $.1 million.
When comparing third quarter 1998 with second quarter 1998, operating costs
decreased by approximately $1.5 million. These decreases were comprised of $1.8
million in transportation costs, and $.6 million in general and administrative
costs offset by increases of $.5 million in realty sales, and $.4 million in
realty operating expenses. The decrease in transportation costs of $1.8 million
consisted of an increase in trucking-related costs of $.4 million, and a
decrease in rail-
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related costs of $2.2 million. The decreases in rail costs were primarily
attributable to $.4 million in fuel costs, $.8 million in fringe benefits, $.5
million in material, and $.3 million in casualty and insurance costs.
Other Income - Other income for the first nine months of 1998, when compared to
the same period in 1997, remained approximately the same as 1997 at $8.1
million. When comparing third quarter 1998 with third quarter 1997, other income
decreased approximately $.7 million. This decrease was comprised of
approximately $.4 million in gain on sale and other disposition of property, and
approximately $.8 million in interest income offset by an increase in dividend
income of approximately $.5 million.
When comparing third quarter 1998 with second quarter 1998, other income
decreased approximately $.9 million. This decrease was primarily attributed to
approximately $.4 million in interest income, and approximately $.5 million in
gain on sale and other disposition of properties.
Net Income - Net income increased approximately $3.7 million when comparing the
first nine months of 1998 with 1997. Comparing third quarter 1998 with third
quarter 1997, net income increased by approximately $1.0 million. Comparing
third quarter with second quarter 1998, net income increased by approximately
$1.3 million.
Stock Split - At the Annual Meeting of Shareholders on May 20, 1998, the
shareholders approved an increase in the authorized number of shares of the
Company's common stock from 9,360,000 shares to 50,000,000 shares, and approved
a four-for-one stock split to holders of record on June 1, 1998, payable on June
15, 1998.
LIQUIDITY AND CAPITAL RESOURCES
FECI's principal sources of liquidity include cash generated by operations;
earnings on invested cash; and earnings on its investment portfolio, consisting
largely of U. S. Treasury securities for its short-term investments, and
approximately $49.7 million being actively managed in other diversified
investment funds.
Current cash generations are used for capital expenditures in the transportation
and realty sectors and for payment of dividends. The investment portfolio is
informally dedicated to major real estate development.
Cash and cash equivalents increased approximately $19.6 million to $50.5 million
at September 30, 1998 from $30.8 million at year-end 1997. The investment
portfolios decreased $18.7 million at September 30, 1998 from $72.3 million at
year-end 1997. The Company's working capital position changed from a ratio of
2.4 to 1 at year-end 1997 to a ratio of 2.3 to 1 at September 30, 1998.
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There was no significant change in debt, reserves or other liabilities during
the nine-month period and capital projects at September 30, 1998 amounted to
approximately $77.3 million authorized and outstanding from $34.0 million
authorized and outstanding at December 31, 1997. Of the $77.3 million of capital
projects, development projects represent approximately 84%.
Year 2000 Compliance - The Company has created a program management office to
direct the project's effort in achieving year 2000 compliance. A Year 2000
Compliance Steering Committee has been established that is sponsored by the CEO
and comprised of senior management as active participants in the project.
The project contains four phases to address the year 2000 issues: (1) an
inventory phase to identify all computer-based systems and applications which
might not be year 2000 compliant; (2) an assessment phase to determine what
revisions or replacements would be needed to achieve compliance, and the
priority of each correction in assuring that business strategies and goals are
met; (3) a conversion phase to implement the actions necessary to achieve
compliance, and to conduct tests necessary to verify that the systems are
operational; and (4) an implementation phase to transition the compliant systems
into the everyday operations of the Company. Management believes that the four
phases are approximately 70%, 50%, 20% and 10%, respectively, complete, and that
all critical systems will be compliant with the century change by third quarter
1999.
The Company has budgeted approximately $250,000 to address the year 2000
remediation issues, which includes the estimated costs of modifications and
consultant fees addressing these issues. Of this amount, approximately $63,000
has been expended through September 1998. By third quarter 1999, the major
business applications will have been replaced with new compliant versions at a
cost of approximately $4.4 million, which is not a part of the remediation
budget.
As part of the year 2000 review, the Company is examining vendor and customer
relationships to determine, to the extent practical, the degree of such parties'
year 2000 compliance, and to develop strategies for working with such parties
through the system changes.
Should the Company have problems with outside parties, the area most likely to
be affected centers around shipments received from and/or forwarded to
connecting rail carriers. Contingency plans are being developed to address this
possibility.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal or regulatory proceedings pending or known to be contemplated
which, in the opinion of the General Attorney of the Registrant, are other than
normal and incidental to the
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kinds of businesses conducted by the Registrant.
Item 5. Other Information
(a) The Company's Board of Directors has adopted several amendments to the
Company's By-Laws. A composite copy of the By-Laws, as in effect on date hereof,
is filed as Exhibit 3(ii) to this 10-Q.
(b) On January 1, 1998, Gran Central Corporation entered into a Management
Agreement with St. Joe Corporation respecting the management of certain of Gran
Central's real estate interests. A copy of the Management Agreement is being
filed as Exhibit 10 to this 10-Q.
Item 6. Exhibits and Reports
(a) Exhibit 3(ii). Composite copy of the Company's By-Laws as amended through
August 17, 1998.
(b) Exhibit 10. Management Agreement dated January 1, 1998 between Gran Central
Corporation and St. Joe Company.
(c) Exhibit 27.1 Financial Data Schedule, September 30, 1998.
(d) Exhibit 27.2 Financial Data Schedule, restated December 31, 1997.
SIGNATURES
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 thereunto duly authorized.
FLORIDA EAST COAST INDUSTRIES, INC.
(Registrant)
Date: 11-11-98 /s/ C. F. Zellers, Jr.
-------------- -----------------------------------
C. F. Zellers, Jr.
Chairman, President and CEO
Date: 11-11-98 /s/ T. N. Smith
-------------- -----------------------------------
T. N. Smith
Vice President and Secretary
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EXHIBIT 3(ii)
Florida East Coast Industries, Inc.
BY-LAWS
of May 17, 1995
AS AMENDED
through August 17, 1998
<PAGE> 2
RECORD OF AMENDMENTS
March 26, 1998: Article II, Section 2.12 was amended to revise Directors'
meeting fees, Committees' meeting fees and outside Directors' quarterly retainer
fees.
April 13, 1998: Article II, Section 2.13 amended the provision for the Executive
Committee; adoption of Article II, Section 2.14 providing for Director,
Emeritus; and Article IV, Section 4.4 covering indemnification.
August 17, 1998: Article II, Section 2.2, was amended to give the Board the
power to fix the number of Directors.
<PAGE> 3
Florida East Coast Industries, Inc.
BY-LAWS
as amended through August 17, 1998
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1.1 ANNUAL MEETINGS. The Annual Meeting of the
Stockholders for the election of Directors and such other business as may
lawfully come before it may be held at any place in the State of Florida, on a
date in May of each year; such place, time and date to be fixed by either the
Chairman of the Board of Directors or the President.
Section 1.2 SPECIAL MEETINGS. Special Meetings of the
Stockholders may be called by the Chairman, the President, the Board of
Directors, the Executive Committee, or the holders of not less than one-tenth of
all of the outstanding shares entitled to vote at the meeting.
Section 1.3 TIME AND PLACE OF MEETING. All Special Meetings of
the Stockholders shall be held at such time and place in the State of Florida as
shall be fixed by the Board of Directors and specified in the Notice of Meeting.
If the Board of Directors shall fail to fix the place of any meeting, such
meeting shall be held in the City of Jacksonville, Florida.
Section 1.4 NOTICE OF MEETING. Written or printed Notice of each
meeting of stockholders, stating the place, day and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be mailed at least
ten (10) days, and not more than fifty (50) days prior to the date set for such
meeting, by first-class United States Mail to each stockholder of record on a
date set by the Board of Directors, not exceeding fifty (50) days preceding the
date of any meeting of stockholders, at his address as it appears on the records
of the corporation. Any stockholder may waive notice of any meeting either
before or after the meeting.
Notice in such form shall also be published once in each week for
at least two consecutive weeks before such meeting, in a newspaper of general
circulation and published in the county wherein the principal office of the
corporation is located, and in a newspaper of general circulation and published
in each city or county where an agency for transfer of the corporation's stock
is maintained.
Section 1.5 QUORUM. A quorum for any business to be transacted at
a meeting of stockholders shall consist of the holders of a majority of the
outstanding shares entitled to vote at the meeting, present in person or by
proxy, provided that in no case shall a quorum for the transaction of any
business consist of less than the number of shares
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required by law, the Articles of Incorporation or these By-Laws for the
transaction of such business.
In the absence of a quorum, the meeting may be adjourned from
time to time to a specified date not more than ninety (90) days after such
adjournment, by the vote of the holders of a majority of the shares present at
the meeting in person or by proxy and entitled to vote, without any notice
otherwise than by announcement at such meeting. At any such adjourned meeting at
which a quorum is present, any business may be trans acted which might have been
transacted at the meeting as originally called had a quorum for the transaction
of such business been present.
Section 1.6 VOTING. At any meeting of the stockholders, only
stockholders of record on a date set by the Board of Directors, not exceeding
fifty (50) days preceding the date of any meeting of the stockholders, shall be
entitled to vote. A quorum being present, all matters coming before such meeting
shall be decided by the vote of a majority of the shares present in person or by
proxy, unless a larger vote is required by law, by the Articles of Incorporation
or these By-Laws. A stockholder may vote either in person or by proxy appointed
by an instrument in writing by the stockholder or his duly authorized
attorney-in-fact. No proxy shall be valid for more than eleven (11) months from
the date of its execution unless otherwise expressly provided in the proxy. In
the event that any such instrument shall designate two or more persons to act as
proxy, a majority of such persons present at the meeting or, if only one be
present, that one shall have all of the powers conferred by the instrument upon
all of the persons so designated unless the instrument shall otherwise provide.
Section 1.7 INSPECTORS. At every election of Directors, the
officer presiding at the meeting shall appoint Inspectors of Election to serve
at such meeting. Inspectors of Election need not be stockholders and shall not
be Directors, officers or employees of the corporation or candidates for
election as Directors. It shall be the duty of Inspectors to receive and canvass
the votes cast at such meeting and certify the result to the presiding officer.
Any two of such Inspectors of Election shall be competent to act. Each
Inspector, before he enters on his duties of office, shall take and subscribe an
oath, before a person authorized to take oaths in the State of Florida, that he
is qualified to be an Inspector of Election, and that he will well, faithfully
and truly perform and discharge the duties of such office without fear, bias or
discrimination. In all cases where the right to vote any share or shares of
stock in the corporation shall be questioned, it shall be the duty of the
Inspectors to examine the transfer books of the corporation to determine in
whose name such shares were registered on the record date. As between
conflicting claims of the right to vote any share, the stockholder of record on
the record date shall prevail over any proxy, and the proxy of the later date
over any proxy of an earlier date. If two proxies bear the same date and the
stockholder of record be not present in person, neither proxy shall be entitled
to vote.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1 GENERAL POWERS. The Board of Directors shall control
and manage the affairs, property and business of the corporation and, from time
to time, shall determine the duties and responsibilities and fix the
compensation of all officers elected or appointed by the Board.
Section 2.2 NUMBER AND TERM OF OFFICE. The Board shall consist of
such number of Directors (not less than three) as may be fixed from time to time
by the Board of Directors. All Directors shall be of full age and at least one
shall be a citizen of the United States and a resident of Florida. Each Director
shall hold office for a term of one year and until his respective successor is
chosen as herein provided.
Section 2.3 ELECTION OF DIRECTORS. The Directors shall be elected
at each Annual Meeting of the Stockholders. Voting shall be by written ballot
and each stockholder may cast as many votes in the aggregate as shall equal the
number of voting shares which he is entitled to vote, multiplied by the number
of Directors to be elected at the meeting, and each stockholder may cast the
whole number of votes for one candidate or distribute them among two or more
candidates, and the Directors shall be those persons, in a number equal to the
vacancies to be filled, who shall receive the greatest number of votes. The
foregoing (relating to cumulative voting) shall not be subject to revocation,
alteration, amendment or repeal, except pursuant to an amendment of the Articles
of Incorporation of the corporation.
The polls for such election shall open at 11:00 a.m. and shall
remain open for not less than 15 minutes.
Section 2.4 PRESIDING OFFICER. At all meetings of the Board of
Directors, the Chairman or, in his absence, the President or, in the absence of
both the Chairman and the President, a chairman chosen by a majority of the
Directors present, shall preside, and the Secretary of the corporation or, in
his absence, an Assistant Secretary or, in the absence of both, any person
appointed by the presiding officer, shall act as Secretary.
Section 2.5 VACANCIES. Any vacancy in the Board of Directors may
be filled by a majority of the remaining Directors for the unexpired portion of
the term with respect to which such vacancy relates.
Section 2.6 REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held immediately following each Annual Meeting of the
Stockholders.
Section 2.7 SPECIAL MEETINGS. Special Meetings of the Board of
Directors may be held whenever called by the Chairman of the Board of Directors,
the Executive
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Committee, the President, or by at least one-fourth of the total Board of
Directors. The Secretary shall give notice of any Special Meeting, stating the
purposes for which called and the time and place thereof, either by mailing
notice thereof to each Director at his usual place of business at least five (5)
days before the meeting, or by personal delivery of such notice, or by
telephonic notice at least one (1) day before the meeting.
Section 2.8 PLACE OF MEETING. Special Meeting of the Board of
Directors may be held at any place within or without the State of Florida.
Section 2.9 ACTIONS BY DIRECTORS BY MEANS OF CONFERENCE TELE-
PHONE. The Chairman or the President may call a meeting of the Board which may
participate in the meeting by means of a conference telephone, or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Action taken in such matters shall
have the same force and effect as any other action of the Board of Directors.
Section 2.10 QUORUM AND VOTE. At all meetings of the Board, a
majority of the entire Board shall constitute a quorum, and any act of a
majority present at a meeting at which there is a quorum shall be the act of the
Board, except as may be otherwise provided by law, the Articles of Incorporation
or the By-Laws. If a quorum shall not be present, a majority of the Directors
present at any meeting may adjourn such meeting from time to time, without any
other notice thereof, until a quorum shall be present.
Section 2.11 ORGANIZATION. The Board of Directors, at its first
meeting immediately after the Annual Meeting of Stockholders, or as soon
thereafter as a quorum can be convened, shall be organized by the election from
its members, of a Chairman and a President. It shall also elect a Secretary and
such other officers of the corporation as it shall deem best.
Section 2.12 COMPENSATION. (a) Each Director of the Company shall
be entitled to receive transportation and other reasonable expenses incident to
his attendance at any meeting of the Board or of any committee thereof, of which
he may be a member. (b) Each non-management Director shall be entitled to an
annual retainer of twenty-thousand dollars ($20,000) payable quarterly in
arrears for any quarter or part thereof, which he serves as a Director. Each
non-management Director shall further be entitled to a fee of one-thousand
dollars ($1,000) per day for each day or portion thereof, in which he is in
attendance at each Board meeting. Each non-management Director serving as a
member of any committee of the Board shall be entitled to a fee of one-thousand
dollars ($1,000) per day for each day or portion thereof, in which he is in
attendance at each committee meeting on a day other than the day of a Board
meeting. Each non-management Director shall further, upon first being elected to
the Board after May 19, 1998 be entitled to participate in the Company's Stock
Option Plan as it then exists and shall receive an initial grant of an option on
two-thousand (2,000) shares. Upon reelection to the Board of Directors, each
Director is entitled to a grant of an option of one-thousand (1,000) shares.
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(c) Management Directors shall not be entitled to compensation for serving on
the Board or any Committee of the Board.
Section 2.13 EXECUTIVE COMMITTEE. The Board of Directors, from
their number, may elect an Executive Committee of not less than three (3) and
not more than five (5), which shall always include the Chairman of the Board of
Directors. The Board may appoint such other committees as from time to time the
Board deems necessary. The Chairman of the Board of Directors shall call
meetings of the Executive Committee when he deems it necessary, and shall
preside at the meetings of said Committee. The Executive Committee, when the
Board of Directors is not in session, shall have full power to control and
manage the affairs, business and property of the corporation; and a majority of
the Executive Committee shall constitute a quorum, for the transaction of
business coming before the Executive Committee. The Executive Committee, by
unanimous action of all members thereof, shall have power to change or reverse a
previous action or direction of the Board of Directors unless the exercise of
such discretion shall have been previously forbidden by resolution of the Board
of Directors. The Board of Directors, by a two-thirds majority of those present
and voting, shall have the power to limit or enlarge the powers of the Executive
Committee, to change membership therein, to fill vacancies in it or to dissolve
it. The Executive Committee may make rules for the conduct of said business and
may appoint such assistants as it may from time to time deem necessary. The
duties of each other committee deemed necessary by the Board shall be vested
with such rights and responsibilities as the Board may set forth in resolutions
creating same.
Section 2.14 DIRECTOR, EMERITUS. The Board of Directors may by
resolution confer upon any former Director the honorary title of Director,
Emeritus. The designation, number and term (which may be at the pleasure of the
Board of Directors) of each Director, Emeritus shall be within the discretion of
the Board of Directors. Directors, emeriti shall not be members of the Board of
Directors for any purpose, nor counted toward a quorum thereof. A Director,
Emeritus shall have the privilege of attending, without vote, any meeting of the
Board of Directors to which he or she is invited by the Chairman of the Board,
but shall have none of the other privileges, or the rights or liabilities of a
Director. Directors, emeriti shall receive the compensation that Board members
receive for each meeting of the Board of Directors that they are invited to
attend.
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ARTICLE III
OFFICERS
Section 3.1 OFFICERS. The officers of the Company shall be the
Chairman, the President, a Secretary and one or more Assistant Secretaries, a
Treasurer and one or more Assistant Treasurers, and such others as the Board of
Directors shall from time to time determine. The offices of the Chairman and
President may be combined. The Board may establish the office of one or more
Vice Presidents and provide for their election by the Board, or their
appointment by the Chairman or the President.
Section 3.2 TERM OF OFFICE. The tenure of the Chairman and the
President shall continue from the date of election until the first regular
meeting of the Board thereafter, or until a successor shall be elected, or
until he shall resign or be removed. The tenure of the other officers shall be
during the pleasure of the Board, the Chairman, and the President, as the Board
by resolution from time to time shall provide.
Section 3.3 CHAIRMAN. The Chairman shall be the Chief Executive
Officer of the corporation, subject to the provisions of these By-Laws, and
perform such other duties as may from time to time be assigned by the Board.
Unless the Board shall otherwise direct, he shall preside at all meetings of the
Board of Directors and of the stockholders at which he shall be present.
Section 3.4 PRESIDENT AND VICE PRESIDENT. The President, subject
only to the Board of Directors, the Executive Committee, and the Chairman of the
Board of Directors, shall conduct and have general supervision and management of
the property and business of the company, and shall report to, and be subject to
the direction and supervision of, the Chairman of the Board of Directors. In the
absence or disability of the Chairman of the Board, he shall call meetings of
the Board of Directors when directed upon request of a majority of the Executive
Committee. He may, after approval or ratification by the Board of Directors, or
by the Chairman of the Board of Directors, appoint such officers and assistants
(not elected or appointed by the Board of Directors) as he may require, who
shall perform such duties as from time to time may be assigned to them by him,
and after like approval, he may at any time remove any officer or assistant so
appointed by him. In the absence of the Chairman, he shall preside at all
meetings of the Board of Directors and the stockholders at which he shall be
present. If the Board shall appoint one or more Vice Presidents, it shall
establish the order in which each, in the absence of the President, shall
perform the duties of the President. The Vice Presidents otherwise shall perform
such duties as may from time to time be assigned to them by the President or the
Board of Directors, and shall have such descriptive titles as the Board may from
time to time determine.
Section 3.5 TREASURER. The Treasurer shall have the custody of
the corporate funds and securities, and shall keep full and accurate accounts of
receipts and disburse-
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ments in the books belonging to the corporation, and shall deposit all monies
and valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the corporation as may be ordered by the Board, making proper
vouchers for such disbursements, and shall render to the President and the
Directors at regular meetings of the Board, or whenever they require it, an
account of all of his transactions as Treasurer and of the financial condition
of the corporation. He shall perform such other duties as are incident to the
office or may from time to time be imposed on him by law, these By-Laws or by
the President or Board of Directors. He shall give the corporation a bond in a
sum, and with one or more sureties, satisfactory to the Board for the faithful
performance of the duties of his office and for the restoration to the
corporation in the case of his death, resignation, retirement, or removal from
office of all books, papers, vouchers, money and other properties of whatever
kind in his possession or under his control belonging to the corporation. The
duties of the Treasurer may be combined into a single officer with the duties of
the Chief Accounting Officer under the title "Vice President-Finance," "Vice
President and Comptroller," or other suitable title as determined from time to
time by the Board.
Section 3.6 SECRETARY. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders and act as clerk
thereof and record all votes and minutes of all proceedings in books to be kept
for that purpose, and shall perform like duties for the Executive Committee and
all standing committees of the Board of Directors when required. He shall give
or cause to be given notice of all meetings of stockholders and of the Board of
Directors and all committees thereof, and shall perform such additional duties
as are incident to the office or may from time to time be imposed upon him by
law, by these By-Laws, or by the President or the Board of Directors. He shall
keep in safe custody the seal of the corporation. His office may be combined
with that of the Treasurer, but not if the office of the Treasurer be combined
with that of the Chief Accounting Officer.
Section 3.7 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
Assistant Treasurers and Assistant Secretaries may be elected or appointed, and
their duties prescribed by the Board of Directors, the Chairman, or the
President, as the Board may, by general or special resolution, provide. In the
absence or disability of the Treasurer or Secretary, the President shall
designate an Assistant, who shall perform the duties of Treasurer or Secretary.
Section 3.8 SALARIES. The Board of Directors shall from time to
time determine the compensation of the Chairman, the President, the Secretary
and all other officers, and it may authorize the Chairman or the President from
time to time to fix, increase or reduce the compensation of any officer or
employee of the corporation.
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ARTICLE IV
OTHER MATTERS PERTAINING TO DIRECTORS AND OFFICERS
Section 4.1 RESIGNATION. A Director or officer may resign at any
time. Resignations shall be in writing and shall be delivered to the President
or Secretary. A resignation shall become effective upon receipt unless the
resignation shall require acceptance or set a later date.
Section 4.2 REMOVAL OF OFFICERS. The Chairman or the President
may be removed by the Board of Directors at any time with or without cause. The
Board of Directors may authorize the Chairman or the President to remove other
officers.
Section 4.3 REMOVAL OF DIRECTORS. A Director may be removed at
any time with or without cause by: (1) an instrument in writing duly executed
(and filed with the Secretary and served upon such Director within thirty (30)
days after the date of such instrument) by the holders of not less than 90% of
all of the shares of stock outstanding as of the last day of the month preceding
the date of such instrument; (2) the vote at any meeting of the holders of not
less than 90% of all the shares of stock outstanding and entitled to vote at
said meeting, if no notice of such proposed action be given in the call for such
meeting; or (3) the vote of the holders of not less than 90% of the shares of
stock present at any meeting in the call of which notice of such proposed action
was duly given.
Section 4.4 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of
the fact that he or she is or was a Director or officer of the
corporation or is or was serving at the request of the
corporation as a Director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans (an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a Director, officer,
employee or agent or in any other capacity while serving as a
Director, officer, employee or agent, shall be indemnified and
held harmless by the corporation to the fullest extent authorized
by the Florida Business Corporation Act, as the same exists or
may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the corporation to
provide broader indemnification rights than such law permitted
the corporation to provide prior to such amendment) against all
expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification
shall continue as to an indemnitee who has ceased to be a
Director, officer, employee or agent and shall inure to the
benefit of
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the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in paragraph (B) hereof with
respect to proceedings to enforce rights to indemnification, the
corporation shall indemnify any an indemnitee in connection with
a proceeding (or part thereof) initiated by the indemnitee only
if such proceeding (or part thereof) was authorized by the Board
of Directors of the corporation. The right to indemnification
conferred in this By-Law shall be a contract right and shall
include the right to be paid by the corporation the expenses
(including attorneys' fees), incurred in defending a proceeding
in advance of its final disposition; provided, however, that, if
the Florida General Corporation Act requires, the payment of such
expenses incurred by an indemnitee in his or her capacity as a
Director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) in advance of
the final disposition of a proceeding, shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of
such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which
there is no further right to appeal that such indemnitee is not
entitled to be indemnified for such expenses under this By-Law or
otherwise.
B. Right of Indemnitee to Bring Suit. If a claim under paragraph (A)
of this By-Law is not paid in full by the corporation within
sixty (60) days after a written claim has been received by the
corporation, except in the case of a claim for expenses incurred
in defending a proceeding in advance of its final disposition, in
which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit or in a suit
brought by the corporation to recover payments by the corporation
of expenses incurred by an indemnitee in defending, in his or her
capacity as a Director or officer, a proceeding in advance of its
final disposition, the indemnitee shall be entitled to be paid
also the expense of prosecuting or defending such claim. In any
action brought by the indemnitee to enforce a right to
indemnification hereunder (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding
in advance of its final disposition where the required
undertaking, if any, has been tendered to the corporation) or by
the corporation to recover payments by the corporation of
expenses incurred by an indemnitee in defending, in his or her
capacity as a Director or officer, a proceeding in advance of its
final disposition, the burden of proving that the indemnitee is
not entitled to be indemnified under this By-Law or otherwise
shall be on the corporation. Neither the failure of the corpora-
tion (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior
to the commencement of such action that indemnification of the
indemnitee is proper in the circumstances because the indemnitee
has met the applicable standard of indemnitee conduct set forth
in the Florida Business Corporation Act, nor an actual
determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that
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the indemnitee has not met such applicable standard of conduct,
shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such an action
brought by the indemnitee, be a defense to the action.
C. Non-Exclusivity of Rights: The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance
of its final disposition conferred in this By-Law shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, the Articles of
Incorporation, By-Law, agreement, vote of stockholders or
disinterested Directors or otherwise.
D. Insurance. The corporation may maintain insurance, at its expense
to protect itself and any Director, officer, employee or agent of
the corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability
or loss, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss
under the Florida Business Corporation Act.
E. Indemnification of Employees and Agents of the Corporation. The
corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to be
paid by the corporation the expenses incurred in defending any
proceeding in advance of its final disposition, to any employee
or agent of the corporation to the fullest extent of the
provisions of this By-Law with respect to the indemnification and
advancement of expenses of Directors and officers of the
corporation.
Section 4.5 DIRECTOR CONFLICTS OF INTEREST. No contract or other
transaction between this corporation, and one or more of its Directors or any
other corporation, firm, association or entity in which one or more of the
Directors are officers or are financially interested, shall be either void or
voidable because of such relationship or interest or because such Director or
Directors are present at the meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction or
because his or their votes are counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed or known to the Board
of Directors or committee which authorizes, approves or ratifies the contract or
transaction by a vote or consent sufficient for the purpose without counting the
votes or consents of such interested Directors; or
(b) The fact of such relationship or interest is disclosed or known to be
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable as to the corporation at
the time it is authorized by the Board, a committee or the shareholder.
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Common or interested Directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves or ratifies such contract or transaction.
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ARTICLE V
CERTIFICATES OF STOCK
Section 5.1 CERTIFICATES OF STOCK. The certificates of stock of
the corporation shall be numbered and registered as they are issued. They shall
exhibit the holder's name and the number of shares and shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary or by
the Treasurer or an Assistant Treasurer and shall bear the corporate seal which
may be impressed, or a facsimile thereof which may be printed or engraved
thereon. When the certificate is signed by a Transfer Agent and by a Registrar,
the signatures of any of the above officers may be facsimile. In case any
officer of the corporation who has signed, or whose facsimile signature has been
used on any stock certificate shall have ceased to be such officer before the
certificate is issued, such certificate shall be deemed adopted by the
corporation and may be issued as if the person, who signed it or whose facsimile
signature has been used thereon, had not ceased to be such officer of the
corporation.
Section 5.2 RECORD OWNERSHIP. Upon surrender to the corporation
or a duly designated Transfer Agent of the corporation of a certificate for
shares of stock of the corporation, duly endorsed or accompanied by proper
evidence of succession, assignment, or authority to transfer, a new certificate
shall be issued to the person entitled thereto, the old certificate shall be
canceled and the transaction recorded on the books of the corporation. The
corporation shall be entitled to treat the holder of record, on the books of the
corporation, of any share or shares of stock as the lawful and absolute owner
thereof and entitled to receive dividends thereon and, accordingly, shall not be
liable for failure to recognize any equitable or other claim to, or interest in,
any such share on the part of any other person, whether or not it shall have
express or other notice thereof, save and except only as expressly provided by
the laws of Florida.
Section 5.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors
may make such rules and regulations as it may deem expedient concerning the
issue, transfer and registration of stock of the corporation. It may appoint one
or more Transfer Agents and one or more Registrars and, except as otherwise
required by the laws of Florida, may delegate to it or them such duties with
respect to the transfer and registration of shares of stock of the corporation
as it may deem desirable.
Section 5.4 LOST OR DESTROYED CERTIFICATES. Any person claiming
that a certificate for shares of stock of the corporation has been lost or
destroyed shall make an affidavit or affirmation of the fact and, if the Board
of Directors so requires, advertise the same in such manner as the Board of
Directors may direct, and shall give the corporation a bond indemnifying the
corporation, its Transfer Agents and Registrars, in such form and amount, and
with such sureties as may be satisfactory to the Board; whereupon a new
certificate may be satisfactory to the Board; whereupon a new certificate may be
issued of the same tenor and for the same number of shares as the one alleged to
have been lost
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or destroyed, but always subject to such rules and regulations as the Board of
Directors may prescribe.
Section 5.5 POWER TO CLOSE TRANSFER BOOKS. The Board of Directors
shall have power to close the transfer books of the corporation for a period not
exceeding thirty (30) days preceding the date of payment of any dividend, or the
date for the allotment of rights, or the date when any change, conversion, or
exchange of shares shall become effective; provided, however, that in lieu of
closing the transfer books as aforesaid, the Board of Directors may fix in
advance a date, not less than ten (10) nor more than thirty (30) days preceding
any such date, as the record date for the purpose of determining the
stockholders entitled to receive payment of such dividend, or to such allotment
of rights, or to exercise the rights in respect of such change, conversion, or
exchange of shares; and, in such event, only such persons as shall be
stockholders of record on the date on which the transfer books are closed, or on
the record date so fixed, shall be entitled to receive payment of such dividend,
or to such allotment of rights, or to exercise the rights in respect of such
change, conversion, or exchange of shares, as the case may be, notwithstanding
any prior or subsequent assignment or transfer of such shares.
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ARTICLE VI
CORPORATE BOOKS
Section 6.1 CORPORATE BOOKS. The corporation shall keep at its
principal office in the City of St. Augustine, Florida (and in such other places
as the Board of Directors shall from time to time determine) books and records
of its accounts, minute books, and the names and places of residence of its
officers. The Transfer Agent for the capital stock of the Company shall maintain
and keep stock books in which shall be recorded the number of shares of stock of
the corporation subscribed, the names (alphabetically arranged) and addresses
of the owners of the shares, the numbers owned by them, respectively, the amount
of shares paid and by whom, the transfer of said shares, with the date of
transfer. The stock books shall be open for at least three (3) business hours in
each business day for inspection by any judgment creditor or any person who
shall have been for at least six (6) months immediately preceding his demand a
holder of record of 1% or more of the outstanding shares of the corporation, or
by any officer, Director or any committee or persons holding or authorized in
writing by the holders of record of at least 5% of its outstanding shares, with
the right to make extracts therefrom. Upon the demand of any person entitled to
do so, the Company, upon the payment of the fees of the Transfer Agent therefor,
shall furnish, or cause to be furnished, a certified copy of such stock list to
such person.
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ARTICLE VII
CORPORATE INSTRUMENTS
Section 7.1 CHECKS, NOTES, ETC. All checks, notes, drafts, bills
of exchange and all other orders for payment by the corporation shall be signed
in such manner, and by such officer or officers (or when drawn on an account
opened for a special or limited purpose, by such person or persons) as the Board
of Directors or the Executive Committee may from time to time determine.
Section 7.2 OTHER INSTRUMENTS. Any deed, mortgage, lease, pledge,
bond, contract, agreement, power of attorney, proxy, evidence of obligation or
an interest in property, or other instrument may be executed on behalf of the
corporation any person, whether an officer, or not, expressly so authorized,
either by general resolution of the Board of Directors, or by a resolution
authorizing the particular act. In all cases, the due execution of any such
instrument on behalf of the corporation shall be sufficiently evidenced if
executed in its name by the President or one of the Vice Presidents, with the
corporate seal affixed, and attested by the Secretary or an Assistant Secretary;
provided, that execution by the Company of bonds, notes, certificates, or other
evidence of indebtedness secured by a mortgage, lease or other instrument duly
executed by authorized officers of the Company which require authentication
thereof by the trustee or trustees of said mortgage, lease or other instrument
of indebtedness may be evidenced by the facsimile signature of the authorized
officers of the Company in lieu of their manual signatures.
Section 7.3 PROXIES. Unless otherwise provided by resolution of
the Board of Directors, the President may from time to time, in the name and on
behalf of the corporation, appoint an attorney or attorneys, or other agent or
agents of the corporation (who may be or include himself), to cast the votes
which the corporation may be entitled to cast as a stockholder or otherwise in
any other corporation, any of whose stock or other securities may be held by the
corporation, at meetings of the holders of the stock or other securities of such
other corporations, or to consent in writing to any action by such other
corporation; may instruct the person or persons so appointed as to the casting
of such votes or giving such consent; and may execute or cause to be executed,
in the name and on behalf of the Company and under its corporate seal, all such
written proxies or other instruments as may be necessary or proper to evidence
the appointment of such attorneys or agents.
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ARTICLE VIII
CORPORATE SEAL
Section 8.1 CORPORATE SEAL. The seal of the corporation shall be
circular in shape, with the words "Corporate Seal 1983" in the center, encircled
by the words, "Florida East Coast Industries, Inc., *Florida*." The corporation
may have duplicate seals and the seal, and all duplicates thereof, shall be kept
in the custody of the Secretary or of such officer or officers as may from time
to time be designated by the Board of Directors.
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ARTICLE IX
ACCOUNTS
Section 9.1 FISCAL YEAR. The fiscal year of the corporation shall
begin on the first day of January each year.
Section 9.2 AUDIT. The Board of Directors, or Chairman of the
Board, shall cause a detailed examination, verification, or restatement of the
accounts, income statement and balance sheet of the corporation to be made at
such times as they may desire, by a firm of certified public accountants
authorized to practice in the State of Florida or New York.
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ARTICLE X
WAIVER OF NOTICE
Section 10.1 WAIVER OF NOTICE. Whenever any notice is required to
be given under these By-Laws or the Articles of Incorporation, a waiver thereof,
in writing, by the person entitled thereto, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
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ARTICLE XI
REVOCATION, ALTERATION, AMENDMENT
OR REPEAL OF BY-LAWS
Section 11.1 REVOCATION, ALTERATION, AMENDMENT OR REPEAL OF
BY-LAWS. Subject to the provisions of the Articles of Incorporation of the
corporation, these By-Laws may be revoked, altered, amended, or repealed, or
additional provisions may be added thereto by a two-thirds majority of the Board
of Directors present and voting at any regular meeting at which a quorum is
present; or at any Special Meeting, provided notice of the proposed action shall
have been given in accordance with these By-Laws; except that this Article XI
may not be subject to revocation, alteration, amendment, or repeal by the Board
of Directors.
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EXHIBIT 10
MANAGEMENT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS OF FACT..................................................................................................1
AGREEMENT.........................................................................................................3
ARTICLE 1 - DEFINITIONS..........................................................................................3
1-1. "Agreement"............................................................................3
1-2. "Annual Budget"........................................................................3
1-3. "Annual Fee"...........................................................................3
1-4. "Annual Report"........................................................................3
1-5. "Approval".............................................................................3
1-6. "Asset Management" or "Asset Management Services"......................................3
1-7. "Authorized Representative"............................................................4
1-8. "Effective Date".......................................................................4
1-9. "Entitlements".........................................................................4
1-10. "FECI".................................................................................5
1-11. "GCC"..................................................................................5
1-12. "General Development Plan".............................................................5
1-13. "Monthly Report".......................................................................5
1-14. "Notice"...............................................................................5
1-15. "Operating Properties".................................................................5
1-16. "Properties"...........................................................................6
1-17. "Property Management" or "Property Management Services"................................6
1-18. "Properties Under Development".........................................................7
1-19. "Quarterly Report".....................................................................7
1-20. "St. Joe"..............................................................................7
1-21. "Standards"............................................................................7
1-22. "Vacant Lands".........................................................................7
ARTICLE 2 - APPOINTMENT AND AUTHORITY.............................................................................7
2-1. Appointment and Authority..............................................................7
2-2. Control by GCC.........................................................................8
2-3. Agency and Fiduciary Obligation........................................................8
ARTICLE 3 - GENERAL DUTIES........................................................................................9
ARTICLE 4 - DUTIES AS ASSET MANAGER OF ALL PROPERTIES............................................................10
4-1. St. Joe's Asset Management Responsibilities...........................................10
</TABLE>
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<TABLE>
<S> <C>
4-2. Accounting Functions..................................................................10
ARTICLE 5 - DUTIES AS PROPERTY MANAGER...........................................................................10
5-1. General...............................................................................10
5-2. Management of Operating Properties....................................................11
5-2-1. Services.....................................................................11
5-2-2. Management of Services Provided by Contractors...............................11
5-3. Management of the Vacant Lands........................................................12
5-3-1. Provide or Contract for Services.............................................12
5-3-2. Management of Services Provided by Contractors...............................12
5-4. Property Management Fees..............................................................12
ARTICLE 6 - DUTIES WITH RESPECT TO DEVELOPMENT...................................................................13
6-1. General...............................................................................13
6-2. Updates of General Development Plans..................................................13
6-3. No Development Responsibilities.......................................................13
6-4. Management of Developed Properties....................................................14
ARTICLE 7 - STANDARDS OF PERFORMANCE.............................................................................14
ARTICLE 8 - FEES AND EXPENSES...................................................................................14
8-1. Amount of Fee.........................................................................14
8-2. Determination of Value................................................................15
8-3. Pro rata Adjustments..................................................................15
8-4. Payment of Annual Fee.................................................................16
8-5. Expenses..............................................................................16
8-6. Adjustments...........................................................................17
8-7. Service Obligations Dependent on Availability of Funds................................18
8-8. No Liability for GCC's Obligations....................................................18
ARTICLE 9 - ANNUAL BUSINESS PLAN AND BUDGET......................................................................18
9-1. Preparation and Submission of Annual Budget...........................................18
9-2. Limitation on Expenditures............................................................19
9-3. Budget Revisions......................................................................19
9-4. Emergencies...........................................................................19
ARTICLE 10 - BOOKS, RECORDS, REPORTS AND REMITTANCES.............................................................20
10-1. Financial and Other Records...........................................................20
10-2. Generally Accepted Accounting Practices; Access.......................................20
10-3. Monthly Reports.......................................................................20
10-4. Quarterly Reports.....................................................................21
10-5. Annual Reports........................................................................21
10-6. Attendance at GCC Board Meetings......................................................21
10-7. Access to GCC Records.................................................................22
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 11 - BANK ACCOUNTS AND PAYMENT OF EXPENSES..............................................................22
ARTICLE 12 - EXECUTION OF DEEDS, LEASES AND OTHER DOCUMENTS.....................................................24
ARTICLE 13 - GCC APPROVALS......................................................................................24
13-1. Requests for Approval.................................................................24
13-2. Approval Procedure...................................................................24
13-3. Approval Procedures for Annual Budgets................................................25
ARTICLE 14 - RISK OF LOSS, INSURANCE LITIGATION AND INDEMNITY....................................................26
14-1. GCC's Risk of Loss....................................................................26
14-2. GCC's Insurance.......................................................................26
14-2-1. Property Insurance.........................................................26
14-2-2. Liability Insurance........................................................26
14-3. St. Joe's Insurance...................................................................27
14-4. Claims Management.....................................................................27
14-5. Litigation............................................................................27
14-6. Indemnity.............................................................................28
ARTICLE 15 - TERM AND TERMINATION................................................................................28
15-1. Term..................................................................................28
15-2. Termination...........................................................................28
15-2-1. Events of Default..........................................................28
15-2-2. Remedies Upon Default......................................................29
15-3. Option to Terminate...................................................................30
15-4. Duties Upon Termination...............................................................30
15-4-1. Delivery of Property.......................................................30
15-4-2. Retention of Copies........................................................30
15-4-3. GCC's Financial Obligations After Termination..............................31
15-5. Vesting of Right to Compensation......................................................31
ARTICLE 16 - ARBITRATION.........................................................................................31
ARTICLE 17 - GENERAL............................................................................................32
17-1. Related Party Transactions............................................................32
17-2. No Employment or Partnership Relationship.............................................32
17-3. Representations and Warranties........................................................33
17-3-1. GCC's Representations and Warranties.......................................33
17-3-2. St. Joe's Representations and Warranties...................................34
17-4. Notices...............................................................................35
17-5. Severability..........................................................................36
17-6. Successors and Assigns................................................................36
17-7. Governing Law.........................................................................36
17-8. Entire Agreement......................................................................36
</TABLE>
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MANAGEMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between GRAN CENTRAL CORPORATION,
a Florida corporation ("GCC") and THE ST. JOE COMPANY, a Florida corporation
("St. Joe").
RECITALS OF FACT
GCC is in the real estate business and owns Properties in various
locations in the State of Florida. It is a wholly-owned subsidiary of Florida
East Coast Industries, Inc. ("FECI"). FECI's primary other business is owning
and operating the Florida East Coast Railroad (the "Railroad"), and its
expertise is mainly in the transportation business. St. Joe owns a majority of
FECI's issued and outstanding shares of common stock. St. Joe's principal
business is developing and managing complex real estate developments. It has
considerable expertise in that field.
FECI and GCC have determined that it would be in their best interests
for GCC to appoint St. Joe as GCC's agent to provide asset management and other
services to GCC upon the terms contained in this agreement.
FECI and GCC believe that St. Joe's services will:
significantly enhance the value of GCC's Properties;
bring St. Joe's real estate, financial and management
expertise to bear directly on GCC's real estate
operations;
enable FECI's management personnel to concentrate their
efforts on managing the Railroad; and
optimize the return on GCC's real estate.
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GCC holds three categories of Properties: Operating Properties, which
are mostly office and industrial buildings held for lease, Vacant Lands, and
Properties Under Development. GCC desires that St. Joe (a) assume Asset
Management responsibilities with respect to all of the Properties, (b) take
appropriate actions as approved by GCC to enhance the long-term value of all of
the Properties and to create or increase cash flow from all of the Properties,
including, where feasible, the Vacant Lands, (c) provide Property Management
Services or engage third-party contractors to provide those services for all of
the Properties except Properties Under Development, (d) carefully monitor the
services of third-party contractors to ensure that the management and other
services they provide meet the Standards contained in this Agreement, (e)
identify the Vacant Lands that are most suitable for development and make
recommendations concerning how they should be developed, (f) market any of the
Properties that are not reasonably suitable for retention or development, (g)
provide all internal accounting services required for GCC's operations, and (h)
make periodic reports to GCC on its activities under this Agreement.
St. Joe has agreed to accept appointment as GCC's asset manager, and it
shall provide the services described in the preceding paragraph and use its best
efforts to increase the cash flow from the Properties and otherwise enhance
their long-term value.
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AGREEMENT
IN CONSIDERATION of the mutual promises contained in this Agreement,
the parties agree as follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the terms set forth in this Article
have the meanings ascribed to them in the following definitions:
1-1. "Agreement" means this Management Agreement.
1-2. "Annual Budget" means the annual budget prepared by St. Joe under
section 9-1 of this Agreement as modified by any revisions approved by GCC under
section 9-3.
1-3. "Annual Fee" means the annual fee GCC is obligated to pay St. Joe
for its services under this Agreement computed as provided in section 8-1.
1-4. "Annual Report" means the annual report on GCC's financial
condition and the results of its operations prepared in accordance with section
10-5.
1-5. "Approval" when used in relation to GCC means approval given by
GCC as provided in Article 13.
1-6. "Asset Management" or "Asset Management Services" means services
with respect to a portfolio of real estate assets in which real estate,
financial and management expertise are integrated in creating and implementing
strategies to enhance the value of the assets in the portfolio by taking actions
that include, without limitation: (a) analyzing properties in the portfolio to
determine whether they are being put to their highest and
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<PAGE> 7
best uses, (b) determining what actions can be taken to enhance the cash flow
from properties in the portfolio, (c) identifying vacant lands in the portfolio
that may be suitable for development, those that should be held for future
development and those that should be sold, (d) assessing market conditions for
the optimal development of tracts identified as suitable for development in
light of the various components of risk to determine what kinds of improvements
are likely to best enhance their long-term value, (e) estimating the cost of
development, the income and expenses of operating or marketing the property
after it is developed and the resulting rate of return on the cost of the
development, (f) making recommendations on the timing of proposed developments,
(g) recommending optimal financing for proposed developments, (h) creating and
implementing plans for marketing the Properties resulting from development and
(i) selecting and managing property managers to carry on the day-to-day
management of all of the Properties in the portfolio.
1-7. "Authorized Representative" with reference to GCC means GCC's
President and Chief Executive Officer or a person whom he designates to act in
his place in a Notice given to St. Joe.
1-8. "Effective Date" with reference to this Agreement means the date
on which this Agreement is executed as shown in its first unnumbered paragraph.
1-9. "Entitlements" means benefits available with respect to a property
under laws, governmental rules and regulations and private contracts and
includes rights of use under zoning and similar regulations, rights to
development under orders and permits
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<PAGE> 8
issued by governmental authority, rights to special tax treatment and other
economic benefits under state or local programs providing tax or other
incentives to encourage development, and all other similar rights or benefits.
1-10. "FECI" means Florida East Coast Industries, Inc., a Florida
corporation.
1-11. "GCC" means Gran Central Corporation.
1-12. "General Development Plan" means a plan for the development of a
tract or tracts of Vacant Land prepared and updated as provided in Article 6
which describes the proposed development in general terms but also in sufficient
detail to permit GCC to estimate whether the reasonably expected risk-adjusted
rate of return from the development will be high enough to justify making an
investment in preparing the more detailed plans and projections needed to
support a final development decision.
1-13. "Monthly Report" means the financial report that St. Joe is
required to make to GCC in accordance with section 10-3 on the results of GCC's
operations for the preceding month.
1-14. "Notice" means a communication of information by either party to
the other that meets the requirements of section 17-4.
1-15. "Operating Properties" means the Operating Properties listed on
Schedule A., as the same may be amended from time to time as GCC adds Operating
Properties by giving Notice to St. Joe, including properties that are added to
the category of Operating Properties after they have been developed as provided
in section 6-4; or deletes properties after GCC has sold them.
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1-16. "Properties" means all of the GCC buildings and lands listed on
Schedules A and B. The term "Properties" includes the Operating Properties and
Vacant Lands, but it does not include Properties Under Development.
1-17. "Property Management" or "Property Management Services" means
management services provided to an owner of real property with respect to
specific properties or groups of properties by a manager whose responsibilities
depend upon and vary with the nature of the specific properties under management
but may include, without limitation, (a) serving as leasing agent for properties
held in whole or in part for lease, (b) constructing or arranging for the
construction of tenant improvements, (c) constructing or arranging for the
construction of capital improvements intended to upgrade the property to enhance
its marketability, (d) providing or contracting with others to provide tenant
services, (e) collecting rent and other payments due from tenants, (f)
maintaining the property in good condition and repair, (g) providing or
contracting with others to provide services such as cleaning, security,
landscaping, pest control and similar services, (h) arranging for and
maintaining in force on behalf of the owner insurance coverage that is
appropriate to the risks involved in owning or operating the property, (i)
making sure that the property and its use comply with all applicable laws,
regulations and similar requirements, (j) monitoring tax assessments and the
bases for other charges against the property and taking action to ensure that
the property is treated equitably, (k) making timely payment of all taxes and
other charges against the properties, (l) ensuring that any entitlements related
to the property are not jeopardized or
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diminished by management actions or omissions, (m) accounting for receipts and
expenditures, and (n) taking such other actions on behalf of the owner that a
knowledgeable owner of the property would take in managing the property on its
own behalf.
1-18. "Properties Under Development" means properties the development
of which has been approved by GCC as provided in section 6-1. Properties Under
Development are not covered by this Agreement. A tract of land is "under
development" from the date GCC approves its development until the development is
complete.
1-19. "Quarterly Report" means a financial report that St. Joe is
required to make to GCC in accordance with section 10-4 on the results of GCC's
operations for the preceding quarter.
1-20. "St. Joe" means The St. Joe Company, or its assignee which is a
wholly owned subsidiary.
1-21. "Standards" means the standards of performance that St. Joe and
contractors must meet as required by Sections 5-2 and 5-3 and Article 7.
1-22. "Vacant Lands" means the vacant Properties listed on Schedule B.
ARTICLE 2 - APPOINTMENT AND AUTHORITY
2-1. Appointment and Authority. GCC appoints St. Joe as GCC's exclusive
agent to provide Asset Management Services for GCC's real estate assets listed
on Schedules A and B (collectively the "Properties") with the objective of
increasing the cash flow from the Properties and otherwise enhancing their
long-term values, and,
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subject to the limitations in this Agreement, grants to St. Joe authority on its
behalf to take all actions St. Joe consistent with this Agreement deems
necessary or appropriate to carry out those responsibilities; provided, however,
but nothing in the exclusive agency created hereby shall preclude GCC from
retaining and consulting real estate consultants, advisors or other
professionals to advise it, its management and its board of directors concerning
the Properties or the services performed or to be performed under this
Agreement.
2-2. Control by GCC. St. Joe's actions under this Agreement shall be
subject at all times to GCC's supervision and control as provided in this
Agreement. Except as otherwise provided in this Agreement, all actions,
approvals, consents or notices taken or given by GCC under this Agreement will
be in writing and signed by GCC's Authorized Representative.
2-3. Agency and Fiduciary Obligation. In performing its duties under
this Agreement, St. Joe shall be an agent for GCC and shall at all times have a
fiduciary obligation to act in good faith, with due care, and solely in the
interests of GCC.
Without limiting the foregoing, St. Joe acknowledges that such
obligation includes a requirement that corporate and business opportunities
belonging to GCC be appropriately identified and protected, and agrees to confer
with GCC concerning circumstances which may give rise to such opportunities.
Notwithstanding anything in this Agreement to the contrary, St. Joe
shall not have the authority to take any of the following actions without the
prior approval of the Board
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of Directors of GCC, as certified to St. Joe by the GCC Authorized
Representative unless such actions have been approved pursuant to an Annual
Budget: (a) sell, exchange or otherwise dispose of, or enter into an agreement,
arrangement or understanding with respect to the sale, exchange or other
disposition of, a Property; (b) lease, or agree to lease, all or a substantial
portion of a property owned by GCC to one lessee and for a term (including, for
this purpose, any renewal options) of more than twenty-five years; (c) lease, or
agree to lease, a property owned by GCC or any portion thereof or interest
therein to St. Joe or any of its affiliates or associates; (d) purchase, lease
(as lessor) or otherwise acquire any land or buildings or any interest therein,
or enter into any agreement, arrangement or understanding with respect thereto;
(e) borrow money, or enter into any agreement, arrangement or understanding with
respect thereto; (f) settle, compromise or otherwise obligate GCC to pay any
amount in connection with any claim, action, suit or proceeding by or against
GCC in excess of $250,000; or (g) enter into any agreement, arrangement or
understanding with St. Joe or any of its affiliates or associates involving in
excess of $50,000.
ARTICLE 3 - GENERAL DUTIES
St. Joe shall (a) provide Asset Management Services for all of the
Properties, (b) provide Property Management Services or engage third-party
contractors to provide those services for all of the Properties, and (c) develop
plans for the sale of specific Properties that GCC has determined are not
reasonably suitable for development or retention. Except as specifically
provided in this Agreement, St. Joe shall have no development
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responsibilities under this Agreement. The parties contemplate that after GCC
accepts a recommendation by St. Joe concerning the development of specific
Vacant Lands the parties may but shall not be obligated to negotiate a separate
agreement defining the terms on which St. Joe will manage the development on
GCC's behalf.
ARTICLE 4 - DUTIES AS ASSET MANAGER OF ALL PROPERTIES
4-1. St. Joe's Asset Management Responsibilities. Upon the terms and
subject to the conditions in this Agreement, St. Joe shall provide Asset
Management Services with respect to the all of the Properties. The parties
intend that St. Joe shall:
(a) assume and perform all of GCC's day-to-day responsibilities as
owner of the Properties, subject to GCC's reserved right under this Agreement
(i) to make certain management decisions, and (ii) to control St. Joe's actions,
and
(b) keep GCC continuously informed of its actions by making the reports
required by this Agreement and as may otherwise be requested by GCC from time to
time so that GCC will have the information it needs to carry out the
responsibilities of oversight and control which it has retained.
4-2. Accounting Functions. St. Joe shall also assume and perform all of
GCC's internal accounting functions and provide GCC with the accounting reports
described in this Agreement.
ARTICLE 5 - DUTIES AS PROPERTY MANAGER
5-1. General. Upon the terms and subject to the conditions in this
Agreement,
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St. Joe shall provide Property Management Services with respect to the all of
the Properties. It may, in its discretion, (a) perform all required Property
Management Services itself, (b) engage third-party contractors to provide all of
those services, or (c) perform some of those services itself and engage
third-party contractors to provide others. In any case, St. Joe shall be
responsible for ensuring that all of the Property Management Services required
by this Agreement are provided with respect to each of the Properties and that
the services meet the Standards set forth in Article 7.
5-2. Management of Operating Properties.
5-2-1. Services. The Property Management Services that St. Joe
and the third-party contractors with whom it contracts provide to the Operating
Properties shall meet the high standards of quality established by first class
Property Managers of buildings similar to those under management and shall meet
the Standards set forth in Article 7.
5-2-2. Management of Services Provided by Contractors. St. Joe
shall (a) carefully monitor the performance of all third party contractors who
provide Property Management Services and other services with respect to the
Operating Properties, (b) ensure that all contracts with all third party
contractors who provide Property Management Services and other services with
respect to the Operating Properties require all such contractors to meet the
Standards, and (c) ensure that their performance meets the Standards provided
for in this Agreement and in its contracts with them.
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5-3. Management of the Vacant Lands.
5-3-1. Provide or Contract for Services. The Property
Management Services that St. Joe and the third-party contractors with whom it
contracts provide to the Vacant Lands shall be appropriate to the needs of each
parcel or tract of Vacant Land and shall meet the Standards set forth in Article
7. In providing Property Management Services, one of St. Joe's principal
objectives shall be to create and, where feasible, implement strategies that
will generate or increase cash flow from the Vacant Lands.
5-3-2. Management of Services Provided by Contractors. St. Joe
shall (a) carefully monitor the provision of services by third party
contractors, (b) ensure that all contracts for the provision of services by
third party contractors require all such contractors to meet the Standards, and
(c) ensure that their performance meets the Standards provided for in this
Agreement and in its contracts with them.
5-4. Property Management Fees. The fees that are payable to St. Joe
under Article 8 for its Asset Management services shall be St. Joe's only
compensation for contracting with third party property managers and supervising
the Property Management Services they provide. St. Joe shall be entitled to
charge separately for Property Management Services that it provides under this
Article. The terms on which St. Joe renders Property Management Services shall
be governed by Article 17 and stated in writings copies of which shall be
provided to GCC promptly after the terms are established.
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ARTICLE 6 - DUTIES WITH RESPECT TO DEVELOPMENT
6-1. General. St. Joe shall prepare General Development Plans for the
development of Vacant Lands that it has determined to be suitable for
development. Those plans shall describe the type of development that St. Joe
believes to be most appropriate and state the assumptions on which its
determination is based. The plans shall also include estimates of (a) the total
cost of the development, (b) the income that will be generated after development
is complete, (c) the expenses of operating the developed property, and (d) the
rate of return GCC would realize from the development. St. Joe shall submit all
General Development Plans to GCC for its approval.
6-2. Updates of General Development Plans. Until GCC has approved a
General Plan for Development St. Joe has submitted for approval, St. Joe shall
prepare and submit to GCC for its consideration such modifications, updates and
revisions to the General Plan for Development as it determines are dictated by
changes in economic, development and market conditions and by other factors.
6-3. No Development Responsibilities. Except as provided in the
preceding sections of this Article, St. Joe shall have no responsibilities under
this Agreement for the actual development of Vacant Lands. The parties
contemplate that any further development responsibilities of St. Joe will be
provided for in other agreements that may be negotiated to take into account the
distinctive issues that development of specific properties may create.
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6-4. Management of Developed Properties. Unless the parties otherwise
agree, Properties that are developed during the term will be added to the
category of Operating Properties when their development is complete.
ARTICLE 7 - STANDARDS OF PERFORMANCE
The Asset Management Services that St. Joe provides to GCC under this
Agreement shall comply with the provisions of Article 4 and meet the high
standards of quality of services generally provided for similar properties by
first-class asset managers of real property assets. The Property Management
Services provided with respect to the Operating Properties shall meet the high
standards of quality of services generally provided by managers of first class
buildings of the type under management. The Property Management Services
provided with respect to the Vacant Lands shall meet the high quality standards
generally provided by first class managers of Vacant Lands of the type under
management.
ARTICLE 8 - FEES AND EXPENSES
8-1. Amount of Fee. As compensation for its Asset Management Services
under this Agreement, GCC shall pay to St. Joe an Annual Fee in an amount equal
to the product of (a) the aggregate fair market value of the Properties as of
the first day of the year for which the fee is to be determined (b) multiplied
by .005 (one half of 1%). As provided in Section 5-4, St. Joe shall be entitled
to charge additional reasonable fees for any Property Management Services it
renders.
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8-2. Determination of Value. Based on appraisals in their possession
and such other information as they deemed relevant, the parties have determined
that the aggregate fair market of the Properties as of January 1, 1998 was
$425,000,000. The annual fee for 1998 shall be based on that value. For each
calendar year after 1998, the fair market value shall be determined by an
independent appraiser who shall value the Properties as of the first day of the
calendar year. The appraiser shall be selected by GCC on or before December 1 of
the previous year from a list of at least three independent appraisers
recommended by St. Joe. If none of the appraisers on the list is satisfactory to
GCC, St. Joe shall provide another list or, if GCC elects to do so, it may
select an appraiser other than one suggested by St. Joe. GCC shall bear the cost
of appraisals provided for in this section. In the event St. Joe disagrees with
an appraisal it shall provide Notice to GCC with 10 days that it elects to
institute the arbitration provisions of Article 16 of this Agreement.
8-3. Pro rata Adjustments. The Annual Fee for 1998 shall be prorated
based on the number of days from the Effective Date of this Agreement through
December 31, 1998. If any properties are added to the list of Properties during
a year, the parties shall mutually agree on the fair market value of any added
properties as of the date it is added to the list, and the Annual Fee shall be
increased by the product of that value multiplied both by .005 and by the
fraction in which the numerator is the number of days remaining in the year and
the denominator is the number of days in the year. If any property is sold
during the year, the value of that property shall be subtracted from the
aggregate value of
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the Properties, and the Annual Fee shall be adjusted appropriately. If this
Agreement is terminated at any time other than the end of any calendar year, the
Annual Fee shall be computed to cover only the period from the first day of the
year until the date termination is effective.
8-4. Payment of Annual Fee. GCC will pay the Annual Fee in monthly
installments on or before the tenth day of each month. Each installment shall be
in an amount equal to one-twelfth of the Annual Fee. If in any year in which the
aggregate value of the Properties is required to be determined by appraisal the
appraisal has not been completed in time to compute any monthly installment, the
installment shall be in the amount of one-twelfth of the Annual fee for the
previous year, subject to adjustment within 15 days after the appraisal is
completed. The amount of any additional fees paid when the fee is adjusted shall
be increased by interest from the date the installment was due until the date it
is paid at the rate equal to the prime rate or rates for commercial banks
reported in the Wall Street Journal for the period during which interest has
accrued.
8-5. Expenses. Subject to the condition that expenditures may not
exceed by more than 5% the aggregate amount provided in the Annual Budget, GCC
shall pay or reimburse St. Joe for all expenses and all capital expenditures
that St. Joe makes or incurs in performing Asset Management or Property
Management Services that are specifically related to the management or
improvement of specific Properties. Except as otherwise provided in this
Agreement, St. Joe shall bear (a) all of its overhead expenses, (b) all expenses
it incurs in performing obligations under this Agreement that are not directly
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related to the management, improvement or development of specific Properties,
and (c) the cost of all expenditures which exceed during any period covered by
any Annual Budget by more than 5% the aggregate amount in such Annual Budget.
The expenses and capital expenditures that are directly related to specific
Properties and will be borne by GCC include without limitation out-of-pocket
expenses and capital expenditures incurred for: (a) services performed by
third-party contractors; (b) advertising and marketing specific Properties; (c)
legal fees of outside law firms directly related to transactions (sales,
mortgages, etc.) or litigation involving specific Properties; (d) architectural
and engineering services directly related to specific Properties; (e) repairs,
supplies, taxes, insurance premiums, utilities, computer or data processing
charges of third party providers; (f) capital improvements; and (g) any other
expenses or expenditures directly related to the management operation or
improvement of specific Properties and properly incurred under this Agreement.
8-6. Adjustments. All amounts used in calculating fees paid to or owing
to St. Joe under this Agreement shall be determined from the financial records
and reports maintained, delivered and reviewed in accordance with Article 10. If
the accounting firm conducting any of the reviews or audits of St. Joe's records
determines that amounts upon which payments to St. Joe have been calculated were
inaccurate, an appropriate adjustment will be made, and the party from whom
payment is due shall promptly pay the amount required to correct the error. If
any dispute should arise between GCC and St. Joe in connection with any such
amounts, it shall be submitted to and resolved by
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arbitration in accordance with Article 16.
8-7. Service Obligations Dependent on Availability of Funds.
Notwithstanding any other provision of this Agreement to the contrary, St. Joe
may but shall not be obligated to advance funds to GCC when funds that are
needed to provide services or make capital expenditures provided for in this
Agreement are not available in the bank account or accounts described in Article
11 or are not otherwise provided by GCC. Funds so advanced shall bear interest
at the rate equal to the prime rate or rates for commercial banks reported in
the Wall Street Journal for the period during which interest has accrued.
8-8. No Liability for GCC's Obligations. In contracting with
third-party contractors for services to be provided with respect to specific
Properties, St. Joe shall be acting as agent for GCC and not for its own account
and, provided its actions are authorized by this Agreement, GCC shall be solely
responsible for all obligations it incurs in connection with specific Properties
or their operation.
ARTICLE 9 - ANNUAL BUSINESS PLAN AND BUDGET
9-1. Preparation and Submission of Annual Budget. Within 90 days after
the execution of this Agreement and, thereafter, not later than 45 days before
the end of each calendar year during the term of this Agreement, St. Joe will
prepare and submit to GCC for approval, a business plan and operating budget for
the coming calendar year, broken down by month, treating the Operating
Properties and the Vacant Lands separately. Each Annual Budget shall contain (a)
pro forma estimates of all receipts and operating
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expenditures on a monthly basis for each Operating Property and each tract of
Vacant Land, (b) an annual capital budget showing projected expenditures on a
monthly basis for anticipated construction, capital improvements or renovations
contemplated for each Property, and (c) a plan for the marketing and sale of
each Property the sale of which is recommended by St. Joe.
9-2. Limitation on Expenditures. Except as otherwise provided in
section 9-4, St. Joe shall be responsible for aggregate expenditures made or
incurred by St. Joe on GCC's behalf in any year with respect to a specific
Property that exceed by more than 5% the aggregate amounts set forth in the
approved Annual Budget for that year.
9-3. Budget Revisions. If, due to changes in economic, development and
market conditions or other factors, St. Joe determines it is desirable to incur
expenses or make investments that exceed by more than 5% those provided for in
the Annual Budget, it may prepare and submit to GCC for approval such proposed
revisions to the Annual Budget as may be required to take the proposed changes
into account. Upon GCC's approval, the Annual Budget shall be deemed modified to
include any changes made by the revision. The term "Annual Budget" means the
Annual Budget provided for in section 9-1 as modified by any revisions approved
by GCC.
9-4. Emergencies. Notwithstanding the provisions of this Agreement
limiting reimbursable expenses, St. Joe shall be entitled to make such emergency
expenditures as it reasonably determines are required to protect the Properties
or GCC from serious damage. St. Joe shall immediately advise GCC by telephone of
the nature of the
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emergency and of the expenditures it has made and shall confirm its advice in
writing.
ARTICLE 10 - BOOKS, RECORDS, REPORTS AND REMITTANCES
10-1. Financial and Other Records. St. Joe shall perform all accounting
services that GCC requires for operating, tax, and financial reporting purposes.
It shall keep detailed financial and other appropriate records with respect to
the Properties, their development, operation, management, maintenance, marketing
and sale.
10-2. Generally Accepted Accounting Practices; Access. All books and
records shall be maintained in accordance with generally accepted accounting
principles and methods of accounting approved by (i) GCC, (ii) by the accounting
firm or firms engaged to audit St. Joe's accounts and, if applicable, (iii) by
any lender to GCC and/or FECI. GCC, St. Joe and the accounting firm or firms
shall have reasonable access to and the right to examine and copy all such books
at any time during normal business hours.
10-3. Monthly Reports. Within 30 days after the end of each month, St.
Joe shall cause to be prepared and deliver to GCC a detailed financial statement
showing the total receipts collected or accrued and expenditures made or
incurred during the month. Each monthly statement shall include at least the
following information: (a) a revenue schedule showing all revenues and receipts;
(b) a comparison for the month and for the year to date of actual and budgeted
operating results, and (c) St. Joe's comments regarding any line item variance
which exceeds by more than 5% the budgeted amount for the line item; and (d) a
report on the status of any significant delinquent accounts for the month and
for the year to date.
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10-4. Quarterly Reports. Within 30 days after the end of each calendar
quarter, St. Joe shall cause to be prepared and deliver to GCC (a) a balance
sheet for GCC as of the end of the quarter, (b) statements of income and (c)
statements of cash flow for the year to date and for the three months ended at
the end of the quarter. The balance sheet, and statement of income shall set
forth comparisons with the corresponding items in the Budgets applicable to such
periods. All financial statements prepared pursuant to this Section 10-4 shall
treat Operating Properties and Vacant Lands separately.
10-5. Annual Reports. Within 75 days after the end of each calendar
year, St. Joe shall cause to be prepared and deliver to GCC a balance sheet
showing all of GCC's assets, liabilities and net worth as of the end of the year
together with statements of its income and cash flow for the preceding year. The
statements of income shall contain comparisons with the corresponding items in
the Annual Budget for the year and with corresponding figures for the preceding
year. Each such statement shall treat Operating Properties and Vacant Lands
separately. The financial statements prepared pursuant to this section 10-5
shall fairly reflect GCC's financial position and the results of its operations
in accordance with generally accepted accounting principles and procedures
consistently applied.
10-6. Attendance at GCC Board Meetings. If GCC or FECI desires to have
St. Joe report on St. Joe's performance under this Agreement at any meeting of
the Board of Directors of FECI or GCC, GCC shall, at least 10 days before each
such meeting give Notice to St. Joe of the date and time of the meeting. In such
event, St. Joe shall cause a
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St. Joe officer who is familiar with St. Joe's performance under this Agreement
(a) to prepare and submit to GCC at least 3 days before the meeting a written
report for distribution to members of the board on St. Joe's activities and the
status of any ongoing projects and (b) to be available at the place of the
meeting to report orally and answer questions on St. Joe's performance.
10-7. Access to GCC Records. GCC shall confidentially give St. Joe
access to or copies of all of GCC's operating, tax, and financial reporting
records relating to the Properties for all time periods before the date of this
Agreement.
St. Joe agrees that it shall use such records, and any of the
information contained therein, only to perform its obligations pursuant to this
Agreement and St. Joe shall keep all such records and information confidential:
provided, however, that St. Joe may disclose such records and information to its
officers and employees who need to know such information to discharge its
obligations hereunder. Any officers or employees of St. Joe that are provided
such records and information shall be advised of this confidentiality agreement
and St. Joe will ensure that such officers and employees will act in accordance
herewith. St. Joe shall give the GCC Authorized Representative prompt Notice of
any request to disclose such records or information (or any portion thereof) in
any proceeding and shall cooperate with GCC in connection with any such request.
ARTICLE 11 - BANK ACCOUNTS AND PAYMENT OF EXPENSES
GCC shall establish and maintain the following bank accounts all of
which St. Joe shall manage on GCC's behalf: (i) a Petty Cash Account for
expenditures of up to
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$1,000, (ii) an Operating Account into which St. Joe shall deposit promptly all
funds that are collected in operating or selling Properties and from which St.
Joe will make withdrawals to pay operating expenses, pay for capital
improvements, replenish the Petty Cash Account and make emergency expenditures;
and (iii) a Controlled Disbursement Account from which it will make withdrawals
to replenish the Operating Account. St. Joe is hereby authorized to withdraw
funds from all of such accounts in order to make payments authorized by this
Agreement. From time to time, St. Joe shall notify GCC of the names of St. Joe
officers whom it has authorized sign checks or other instruments withdrawing
funds from the accounts. Upon receipt of such notices, GCC shall execute and
deliver any authorizations to the bank or banks in which the accounts are
maintained that the banks may require to permit the St, Joe personnel so
designated to sign checks and other instruments drawn on the accounts. St. Joe
shall be fully responsible to GCC for all GCC funds handled by St. Joe officers,
employees and contractors. St. Joe will ensure that no GCC funds are commingled
with any of St. Joe's own funds or with funds belonging to any other person. Any
banking institution may act in reliance on the provisions of this section with
respect to the GCC bank accounts described in this section, and the parties
shall hold it harmless for any actions it takes in reliance on this Article.
Notwithstanding the foregoing, GCC may from time to time supplement or modify
the accounts and the procedures for handling GCC's funds by giving Notices to
St. Joe describing any changes it desires to make (a "Change Notice"). To the
extent of any conflict or inconsistency between the terms of any Change Notice
and this section,
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the instructions and procedures stated in the Notices shall govern.
ARTICLE 12 - EXECUTION OF DEEDS, LEASES AND OTHER DOCUMENTS
Subject to the limitations set forth in this Agreement, St. Joe is
hereby appointed GCC's attorney-in-fact to execute and deliver in GCC's name and
on its behalf all contracts, deeds, leases, notes, mortgages and other documents
or instruments execution of which is necessary or desirable in connection with
the management, development, improvement, maintenance, sale, leasing, or
mortgaging of any of the Properties. Any person dealing with St. Joe as manager
of GCC's properties shall be entitled to rely on any instrument signed by St.
Joe in GCC's name without inquiring further into St. Joe's authority to act for
GCC. GCC shall at St. Joe's request execute multiple copies of a form of power
of attorney for recording in the public records and for delivery to persons who
deal with it as agent for GCC.
ARTICLE 13 - GCC APPROVALS
13-1. Requests for Approval. All requests by St. Joe to GCC for
approval of St. Joe's proposals for future action under this Agreement (an
"Approval Request") shall be in writing and shall be made to the Authorized
Representative. Such Approval Requests include but are not limited to requests
for approval of Annual Budgets, General Development Plans and any other actions
under this Agreement that require GCC's approval.
13-2. Approval Procedure . Within 30 days after GCC receives an
Approval Request from St. Joe, GCC shall either (i) approve the Approval Request
by giving
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Notice of approval to St. Joe, or (ii) give Notice to St. Joe that it does not
approve. If GCC fails to do either within the 30-day period after St. Joe
submits an Approval Request, the proposed activities shall be deemed
disapproved. If GCC disapproves any future activity St. Joe has proposed, (i) it
shall give St. Joe a written statement in reasonable detail setting forth the
basis for its decision and (ii) if requested by GCC St. Joe may submit a revised
request within a reasonable time. Within thirty (30) days after GCC receives a
revised Approval Request, GCC shall either (I) approve the Approval Request by
giving Notice of approval to St. Joe, or (ii) give notice to St. Joe that it
does not approve. In the event an Approval Request relates to a tenant lease and
it is disapproved, St. Joe shall not be prohibited from providing such tenant
any other services on properties not owned by GCC.
13-3. Approval Procedure for Annual Budgets. If by the end of any
calendar year, GCC has not approved an Annual Budget that St. Joe has proposed
for the succeeding year, the budget for the preceding year shall continue in
full force until an Annual Budget for the new year is approved; provided that
(i) until the Annual Budget for the new year is approved, St. Joe shall be
authorized to incur all reasonable costs and expenses that it deems reasonably
necessary to continue the operation, management, maintenance, marketing and sale
of the Properties at the level approved by GCC in the Annual Budget for the
previous year and St. Joe shall be entitled to reimbursement for the same, and
(ii) upon its approval, the new Annual Budget shall become effective
retroactively as of the beginning of the new year.
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ARTICLE 14 - RISK OF LOSS, INSURANCE,
LITIGATION AND INDEMNITY
14-1. GCC's Risk of Loss. GCC shall bear all risk of loss or damage to
the Properties and all liability in connection with the Properties or the
ownership or management of the Properties not caused by St.
Joe's (a) gross negligence and (b) willful misconduct.
14-2. GCC's Insurance. St. Joe will arrange for and maintain for GCC,
in GCC's name, and at GCC's expense, such property, general liability, and motor
vehicle liability insurance as it reasonably determines to be adequate and
appropriate. Such insurance shall include the following types of insurance:
14-2-1. Property Insurance. Property insurance covering loss
or damage by fire, flood, earthquake and other casualties to the Properties and
any personal property and equipment used in connection with the Properties,
under an "all risk" insurance policy with extended coverage and with broad form
endorsements covering the full replacement cost of all improvements on the
Properties and related personal property. Such insurance policy or policies
shall have a deductible of not more than $100,000 per occurrence;
14-2-2. Liability Insurance. (i) Comprehensive general public
liability insurance naming GCC as insured with limits of not less than
$1,000,000 per occurrence and a $2,000,000 general aggregate coverage limit;
(ii) Comprehensive automobile liability insurance naming GCC as insured with
limits for bodily injury and property damage of not less than $1,000,000 per
occurrence. The comprehensive motor vehicle
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liability policy shall include blanket non-owned coverage. Any of the foregoing
insurance coverage may be provided under policies acquired solely for GCC or the
Properties or as part of blanket policies covering other properties or entities
either in which GCC has, or its affiliates have, an interest
14-3. St. Joe's Insurance. St. Joe shall obtain for itself and maintain
in force for the term of this Agreement, at St. Joe's expense, worker's
compensation and unemployment insurance with statutory limits as required by the
State of Florida or any other jurisdiction in which St. Joe shall have providing
Asset Management Services. Any such insurance coverage may be provided pursuant
to policies acquired solely for St. Joe or the Properties or as a part of
blanket policies covering other properties or entities which St. Joe or its
affiliates have an interest or for which St. Joe or its affiliates provide
services.
14-4. Claims Management. St. Joe shall (a) make such claims, give such
notices and take such other actions on GCC's behalf as may be necessary or
desirable to ensure that GCC receives all benefits to which it is entitled under
the insurance policies provided for in this Article and (b) take such actions on
GCC's behalf as may be optimal to assert any other claims GCC may have against
third parties.
14-5. Litigation. Subject to section 2-4, St. Joe shall manage all
litigation brought by or against GCC relating to the Properties, take reasonable
steps to ensure that GCC is represented effectively and at optimal cost, and
keep GCC informed of all developments in any litigation that has a significant
effect on GCC's interests.
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14-6. Indemnity. St. Joe shall indemnify and hold GCC harmless against
all damages, claims, losses, harms, liabilities and expenses, including
reasonable attorneys fees, which GCC may suffer on account of St. Joe's (a)
negligence and (b) willful misconduct.
ARTICLE 15 - TERM AND TERMINATION
15-1. Term. The term of this Agreement will commence on the Effective
Date and continue until December 31, 1999, or until the term is sooner
terminated as provided in this Article. This Agreement shall be automatically
renewed for 1-year terms ending on December 31st of each succeeding year unless
either party gives notice to the other at least 120 days before the end of any
term that it has decided that the Agreement will not be renewed at the end of
the term.
15-2. Termination.
15-2-1. Events of Default. The happening of any of the
following events with respect to either of the parties shall be deemed a default
by that party and cause for termination by the other party: (a) the filing of a
petition for relief by or against a party as a debtor or bankrupt under the
Bankruptcy Code except a petition contested by the party and dismissed within 90
days; insolvency of a party as finally determined in a court proceeding; the
filing by a party of a petition for the appointment of a receiver or a trustee
for the party or a substantial part of its assets; (b) commencement of any
proceedings by or against a party seeking reorganization, arrangement,
insolvency, adjustment of debt or liquidation under the law of any jurisdiction
except a proceeding
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that is filed by another person and finally dismissed within 120 days; (c) the
failure by a party to perform any of its obligations under this Agreement and to
remedy the failure within 30 days after written notice from the other party; or
(d) the dissolution or liquidation of a party (other than a dissolution or
liquidation after which the business of the party is continued by a
successor-in-interest).
15-2-2. Remedies Upon Default. Upon the occurrence of any
event of default and the expiration of any applicable cure period, the party not
in default may elect, by giving Notice to the defaulting party, to terminate
this Agreement and exercise such other remedies as may be provided by law under
the circumstances. The remedies granted to the party not in default by this
Agreement or otherwise available to that party shall be cumulative, and the
exercise of any remedy shall not be considered as an election by that party of a
remedy, or as a waiver of any other remedy available to it, except as this
Agreement expressly provides. Moreover, except as otherwise provided in this
Agreement, the recitation of remedies in this Agreement shall not be deemed to
exclude a party not in default from any other legal or equitable remedy or
remedies which it may have. Failure by a party not in default to enforce any of
the rights granted in the Agreement upon the occurrence of an event of default
by the other party shall not operate as an estoppel or as a waiver against the
party not in default or prevent that party at any later time from electing to
exercise all or any of such rights upon any later default.
15-3. Option to Terminate. At any time during any term of this
Agreement that begins after December 31, 1999, either party may terminate this
Agreement without
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cause by giving the other party Notice of its intention to terminate.
Termination under this subsection shall be effective upon the expiration of 120
days after the date the Notice is given. Upon termination under this section and
after compliance by the parties with their obligations under Article 8 and all
other provisions of this Agreement intended to remain in effect after
termination or to become effective upon termination, all obligations of the
parties to each other under this Agreement shall cease and be deemed to have
been fully satisfied, and neither party shall have any additional obligation or
liability to the other under this Agreement.
15-4. Duties Upon Termination.
15-4-1. Delivery of Property. Upon termination of this
Agreement and regardless of the reason for termination, St. Joe shall deliver to
GCC, or to any person or agent of GCC at GCC's direction, such of the following
that St. Joe may have in its possession: (a) all funds in the bank accounts
maintained for GCC to which GCC is entitled under this Agreement through the
date of termination; (b) any escrow accounts, subject to the applicable terms of
the escrow agreements; (c) all books and records St. Joe has maintained as agent
for GCC; and (d) all contracts, agreements, plans, specifications, and other
documents and property relating to the Properties and belonging to GCC.
15-4-2. Retention of Copies. St. Joe shall be entitled to
retain copies of all such books, records and documents; provided, however, that
St. Joe shall use such books, records and documents only to perform its
obligations pursuant to this Agreement
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and keep such books, records and documents, and the information contained
therein, confidential.
15-4-3. GCC's Financial Obligations After Termination. If this
Agreement is terminated for any reason, GCC shall promptly fulfill its financial
obligations to St. Joe under this Agreement, including obligations set forth in
Article 8, and shall be responsible for all reimbursable expenses that St. Joe
incurred on GCC's behalf prior to the date termination is effective. After
termination, St. Joe shall promptly remit to GCC any amounts received by St. Joe
which properly belong to GCC. GCC shall thereafter be responsible for and be
deemed to have assumed all obligations, commitments and other liabilities that
St. Joe shall have properly incurred or made on its behalf under this Agreement
or in connection with the termination of this Agreement.
15-5. Vesting of Right to Compensation. If this Agreement is terminated
for any reason, the amount of fees GCC is obligated to pay to St. Joe under
Article 8 shall be calculated to the date of termination and GCC shall pay St.
Joe all fees that may be owing through that date.
ARTICLE 16 - ARBITRATION
All disputes between the parties arising under this Agreement and any
other agreements and instruments executed and delivered by GCC and St. Joe
pursuant to this Agreement shall be submitted to and resolved by arbitration
provided and conducted in accordance with the rules as of the date of submission
of the American Arbitration Association. In the event of any such arbitration,
there shall be only one arbitrator who
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shall be selected jointly by the parties. If the parties cannot agree to an
arbitrator within 30 days after either party demands arbitration, the arbitrator
shall be selected by the American Arbitration Association. Meetings with the
arbitrator shall be held in Jacksonville, Florida. The decision of the
arbitrator shall be binding upon the parties and shall not be subject to appeal.
The party against whom the arbitration decision is rendered shall pay the
prevailing party an amount equal to all reasonable expenses the prevailing party
has incurred in connection with the arbitration, including but not limited to
reasonable attorneys fees. If the arbitrator's decision does not in all respects
favor the position of one party, the arbitrator shall either (a) designate in
his or her decision a prevailing party and the percentage of its expenses to be
paid by the other party or (b) provide that each party shall bear its own
expenses.
ARTICLE 17 - GENERAL
17-1. Related Party Transactions. Subject to section 2-4, St. Joe shall
have the right to enter into agreements or other arrangements to purchase for
GCC's benefit or for any property managed under this Agreement goods and
services from itself or from any affiliate or subsidiary if (a) the compensation
paid or promised for such goods or services is reasonable (i.e., at fair market
value) and is paid only for goods or services actually furnished, (b) the goods
or services to be furnished are necessary or appropriate for the operation,
management, maintenance, sale or leasing of any property and (c) the terms on
which the goods or services are furnished are at least as favorable to GCC as
would be obtainable in an arms length transaction with any third party who would
be
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providing comparable services within the greater metropolitan area of the city
in which the specific property is located. St. Joe shall fully disclose to GCC
the material terms of any such transactions with St. Joe or any of its
affiliates entered into on GCC's behalf.
17-2. No Employment or Partnership Relationship. Notwithstanding any
other provisions of this Agreement, St. Joe shall not be GCC's agent with
respect to employer-employee relationships between St. Joe and personnel who are
on St. Joe's payroll in connection with the payment of compensation or benefits,
terms or conditions of employment, liability for any form of contribution or
payroll taxes, compliance with statutes governing employment practices, or
workmen's compensation insurance. All personnel on St. Joe's payroll shall be
employees of St. Joe and not of GCC. Nothing in this Agreement shall be
construed (a) to create a partnership or joint venture between GCC and St. Joe,
(b) to give St. Joe any interest in the Properties, (c) to make the parties or
their respective officers and employees partners, officers or employees of the
other, or (d) to authorize either party to act for or bind the other, except as
specified in this Agreement.
17-3. Representations and Warranties.
17-3.1. GCC's Representations and Warranties. GCC hereby makes
the following representations and warranties to St. Joe, all of which shall
survive the execution and delivery of this Agreement:
(a) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary actions on the part of GCC;
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(b) this Agreement constitutes a legal, valid and
binding agreement of GCC, enforceable against GCC in accordance with its terms,
except as may be limited by bankruptcy, insolvency, receivership and similar
laws relating to creditors' rights from time to time in effect; and
(c) GCC has the corporate power and authority to
enter into this Agreement, has the authority to own and manage each Property,
and has the further authority to contract with St. Joe to manage and operate
each of its properties in accordance with the terms of this Agreement.
17-3.2. St. Joe's Representations and Warranties. St. Joe
hereby makes the following representations, warranties and covenants to GCC, all
of which shall survive the execution and delivery of this Agreement:
(a) St. Joe is duly organized, is validly existing
and is in good standing under the laws of the State of Florida and has complied
with all applicable laws in order to conduct business in the State of Florida.
St. Joe has all power and authority required to execute, deliver and perform
this Agreement. St. Joe has sufficient expertise, staff and other resources to
carry out St. Joe's duties hereunder in a prompt, efficient and diligent manner
consistent with the Standards.
(b) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the part of St.
Joe;
(c) this Agreement constitutes a legal, valid and
binding agreement of St. Joe, enforceable against St. Joe in accordance with its
terms, except as
34
<PAGE> 38
may be limited by bankruptcy, insolvency, receivership or similar laws relating
to creditors' rights from time to time in effect;
(d) St. Joe has or will obtain all licenses and
permits, including all governmental licenses and permits, necessary to legally
and validly execute, deliver and perform this Agreement; and
(e) St. Joe is a licensed broker under the laws of
the State of Florida so as to enable it to act as leasing agent.
17-4. Notices. Any notice given under this Agreement ("Notice") shall
be deemed sufficient when it is delivered in writing to the party to be notified
at its address set forth below, or, when it is mailed addressed to such party at
the address given below, provided it is mailed by registered or certified mail,
postage prepaid,. Any party may, by giving notice to the other in the manner
provided for in this section, change its address for receiving notices. All
notices and other communications on behalf of a party shall be signed by a duly
authorized officer of that party.
Address for notices to GCC:
Gran Central Corporation
One Malaga Street
St. Augustine, Florida 32084
Attention: Mr. Carl F. Zellers, Jr., President
Copy to: A. Gilchrist Sparks, III
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
Wilmington, Delaware 19899
35
<PAGE> 39
Address for notices to St. Joe:
The St. Joe Company
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207.
Attention: David D. Fitch, Senior Vice President
Copy to: Mr. Robert M. Rhodes
Senior Vice President and General Counsel
The St. Joe Company
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207.
17-5. Severability. If any provision of this Agreement is held to be
unenforceable or enforceable only to a limited extent, the ineffectiveness of
that provision shall not affect the validity or enforceability of this Agreement
as a whole or of any other provision of this Agreement. Any provision that is
held enforceable only to a limited extent may be enforced to that extent with
the same effect as if the provision had expressly so provided.
17-6. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors, but
neither party may delegate or assign its duties under this Agreement by
operation of law or otherwise, in whole or in part, without the prior written
consent of the other party. Notwithstanding the foregoing, any party may assign
any benefits due to it under this Agreement without consent to any corporation
or other entity all of the outstanding capital stock or other equity interest in
which is owned by that party, provided the assignee expressly assumes all the
obligations of the assignor in a writing delivered to the other party, and if
the assignor executes such writing and agrees to remain primarily liable to the
other party for
36
<PAGE> 40
the performance by the assignee of its obligations. Sale of a majority of the
capital stock of St. Joe shall not be deemed to be an assignment within the
meaning of this section.
17-7. Governing Law. This Agreement shall be construed, performed and
enforced in accordance with the laws of the State of Florida.
17-8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the matters treated in it and supersedes any
and all prior agreements or understandings between the parties whether written
or oral. This Agreement may not be changed or modified except by an instrument
in writing signed by the parties and stating that it amends this Agreement.
Article and section headings shall have no effect in interpreting this
Agreement.
IN WITNESS WHEREOF, GCC and St. Joe have caused this Agreement to be
executed by their respective duly authorized officers, as of the date and year
first above written.
GRAN CENTRAL CORPORATION
/s/Patricia Jewell By: /s/ Carl F. Zellers, Jr.
/s/ Mary C. Mueller Carl F. Zellers, Jr.
President
THE ST. JOE COMPANY
/s/Alison D. Kennedy By: /s/David Fitch
/s/Peggy G. Hawkins Name: David Fitch
Title: Senior Vice President
37
<PAGE> 41
SCHEDULE "A"
DEVELOPED LAND
<TABLE>
<CAPTION>
Location Number of Buildings
- -------- -------------------
<S> <C>
- -----------------------------------------------------------------------
duPont Center 2
Jacksonville, FL
- -----------------------------------------------------------------------
Gran Park at Deerwood 4
Jacksonville, FL
- -----------------------------------------------------------------------
Gran Park at Interstate South 6
Jacksonville, FL
- -----------------------------------------------------------------------
Gran Park at Jacksonville 5
Jacksonville, FL
- -----------------------------------------------------------------------
Gran Park at the Avenues 8
Jacksonville, FL
- -----------------------------------------------------------------------
Gran Park at Riviera Beach 5
Riviera Beach, FL
- -----------------------------------------------------------------------
Gran Park at McCahill 5
Miami, FL
- -----------------------------------------------------------------------
Gran Park at Southpark 2
Orlando
- -----------------------------------------------------------------------
Gran Park at Miami 25
Miami, FL
- -----------------------------------------------------------------------
Hialeah, FL 2
- -----------------------------------------------------------------------
Pompano Beach, FL 1
- -----------------------------------------------------------------------
TOTAL: 65
</TABLE>
38
<PAGE> 42
SCHEDULE "B"
VACANT LAND
<TABLE>
<CAPTION>
COUNTY ACRES
- ------ -----
<S> <C>
- -----------------------------------------------------------------------
Brevard 2,396
- -----------------------------------------------------------------------
Broward 46
- -----------------------------------------------------------------------
Dade 605
- -----------------------------------------------------------------------
Duval 423
- -----------------------------------------------------------------------
Flagler 3,462
- -----------------------------------------------------------------------
Indian River 5
- -----------------------------------------------------------------------
Martin 661
- -----------------------------------------------------------------------
Manatee 897
- -----------------------------------------------------------------------
Palm Beach 147
- -----------------------------------------------------------------------
Orange ---
- -----------------------------------------------------------------------
St. Johns 3,321
- -----------------------------------------------------------------------
St. Lucie 567
- -----------------------------------------------------------------------
Seminole 1
- -----------------------------------------------------------------------
Volusia 2,908
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
TOTAL: 15,439
- -----------------------------------------------------------------------
</TABLE>
39
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 48,466
<SECURITIES> 2,507
<RECEIVABLES> 29,854
<ALLOWANCES> 0
<INVENTORY> 10,719
<CURRENT-ASSETS> 101,361
<PP&E> 970,298
<DEPRECIATION> (268,234)
<TOTAL-ASSETS> 862,482
<CURRENT-LIABILITIES> 45,116
<BONDS> 0
0
0
<COMMON> 60,802
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 862,482
<SALES> 182,561
<TOTAL-REVENUES> 190,624
<CGS> 0
<TOTAL-COSTS> 138,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 52,328
<INCOME-TAX> 19,422
<INCOME-CONTINUING> 32,906
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,906
<EPS-PRIMARY> 0.91
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 30,845
<SECURITIES> 258
<RECEIVABLES> 31,045
<ALLOWANCES> 0
<INVENTORY> 11,789
<CURRENT-ASSETS> 81,924
<PP&E> 916,593
<DEPRECIATION> (252,921)
<TOTAL-ASSETS> 825,490
<CURRENT-LIABILITIES> 34,366
<BONDS> 0
0
0
<COMMON> 57,946
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 825,490
<SALES> 250,520
<TOTAL-REVENUES> 261,155
<CGS> 0
<TOTAL-COSTS> 198,198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 62,957
<INCOME-TAX> 22,822
<INCOME-CONTINUING> 40,135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,135
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 0
</TABLE>
