SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
[ ] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section
240.14a-11(c) or Section 240.14a-12
FLORIDA EAST COAST INDUSTRIES, INC.
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(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Florida East Coast Industries, Inc.
One Malaga Street
St. Augustine, FL 32084
[ ]
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
shareholders of Florida East Coast Industries, Inc. ("FECI") to be held on
[ ], at 10:00 a.m., at [ ].
This is an important Special Meeting that affects your
investment in FECI.
At the Special Meeting, you will be asked to consider and vote
upon two proposals. Both of these proposals will facilitate the tax-free
distribution by The St. Joe Company ("St. Joe") to its common shareholders of
all of the shares of FECI common stock held by St. Joe (the "Distribution").
As of October 27, 1999, St. Joe owned 19,609,216 shares of FECI common stock,
representing approximately 53.9% of the outstanding shares of FECI common
stock and following the Distribution, St. Joe will not own any FECI common
stock.
The Distribution will remove St. Joe as the controlling
shareholder of FECI. As an independent company, FECI believes it will derive
numerous benefits from the Distribution. For example, the Distribution is
expected to, among other things:
o allow FECI to establish a capital structure independent of St. Joe that
is optimal for FECI's businesses which may include, as appropriate, the
incurrence of debt and the issuance or repurchase of equity in the future;
o allow FECI to pursue its business interests independent of St. Joe,
particularly with respect to acquisitions, business and asset sales and
corporate opportunities;
o increase the liquidity and public float of FECI common stock, which is
expected to increase the average trading volume of FECI common stock and
enhance FECI's ability to attract equity research coverage;
o facilitate the use of FECI common stock for future acquisitions and as a
source of capital;
o increase the ability of FECI to engage in future corporate transactions,
if desirable, such as establishing a REIT or effecting a spinoff of
certain businesses, which would be more difficult so long as a majority
of the FECI common stock is held by St. Joe;
o restructure FECI's real estate relationship with St. Joe in a manner that
will allow FECI to capitalize on the high quality services provided by
St. Joe while increasing FECI's direct control over its portfolio as well
as facilitating market diversification; and
o improve the focus of FECI's management team by providing a more stable
platform for retaining and recruiting top quality management and
increasing flexibility in employee compensation tied to shareholder value
creation.
As a result of tax constraints relating to the Distribution,
FECI's ability to engage in future corporate transactions, including some of
those listed above, may be limited for a period of time.
In order for the Distribution to be tax-free to St. Joe and its
shareholders, current tax law requires that the shares of FECI common stock to
be distributed to St. Joe's shareholders in the Distribution have the right to
elect at least 80% of the FECI Board. Accordingly, the proposal provides for
the recapitalization of FECI (the "Recapitalization") so that St. Joe will
become the holder of all the shares of a new class of FECI common stock,
called Class B Common Stock, having the right to elect, as a class, at least
80% of the FECI Board. All the shares of Class B Common Stock will be
distributed to St. Joe's shareholders as promptly as practicable following the
Recapitalization. Except with respect to the election or removal of directors
and the ability to receive in a merger transaction shares with the same voting
attributes, the Class B Common Stock and the existing FECI common stock will
be identical.
As a technical matter, you will be voting to adopt a plan of
merger and an articles of merger to which the plan of merger is attached as an
exhibit (together, the "Plan of Merger") as a means to effect the
Recapitalization. The Plan of Merger contemplates that a wholly-owned
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subsidiary of St. Joe will merge with and into FECI with FECI as the surviving
corporation. It will be pursuant to the Plan of Merger that all shares of
FECI common stock held by St. Joe will be exchanged for an equal number of
shares of Class B Common Stock. All other shares of FECI common stock will be
re-designated as Class A Common Stock.
You will also be asked to consider and approve amendments to
FECI's Articles of Incorporation (the "Amended Charter") that are necessary to
effect the Recapitalization. In addition, the FECI Board believes that
certain of the proposed amendments are advisable to foster FECI's growth as an
independent company following the Distribution and, in particular, to help
protect FECI shareholders from unsolicited takeover proposals which unfairly
discriminate between common shareholders. The FECI Board has also considered
and approved related amendments to FECI's By-laws.
The accompanying proxy statement provides detailed information
about the proposed transactions and the Amended Charter. The FECI Board
encourages you to read the entire proxy statement and the appendices
carefully.
Under Florida law, the Plan of Merger must be approved by
holders of a majority of the outstanding shares of FECI common stock. In
addition, FECI's existing Articles of Incorporation require that amendments to
the Articles, such as would be effected by the Amended Charter, must be
approved by holders of at least two-thirds of the outstanding shares of FECI
common stock. Although not required by law or the existing FECI Articles of
Incorporation, the FECI Board and St. Joe have agreed to condition the
Recapitalization (which consists of the Plan of Merger and the Amended Charter)
on the approval by holders of a majority of the shares of FECI common stock
other than the shares held by St. Joe or its affiliates. The accompanying
proxy statement sets forth two proposals for your approval which relate to the
adoption of the Plan of Merger and the Amended Charter and which are called
respectively, "Proposal One: Adoption of the Plan of Merger" and "Proposal
Two: Adoption of the Amended Charter." The Recapitalization will not be
implemented unless both the Plan of Merger Proposal and the Amended Charter
Proposal are approved in such manner. Together with the expected approval of
St. Joe and its affiliates, the approval of a majority of the remaining
shareholders of each proposal will also satisfy the requirements of Florida
law and the existing Articles of Incorporation.
In connection with the proposed Recapitalization, GCC has
entered into a Master Agreement with St. Joe which contemplates the
restructuring of the real estate arrangements currently existing between GCC
and St. Joe (the "Real Estate Transactions"). The approval of the FECI
shareholders is not required to effect the Real Estate Transactions.
Nevertheless, the Real Estate Transactions will not take effect unless the
Recapitalization and the Distribution are consummated.
The FECI Board, including a specially constituted committee of
the independent directors of FECI (the "Special Committee"), has given full
consideration to the Plan of Merger and the Amended Charter and has determined
that they are advisable and in the best interests of FECI and its
shareholders, including the FECI shareholders other than St. Joe. The FECI
Board, including the Special Committee acting unanimously, has approved the
Plan of Merger and the Amended Charter and recommends that you vote "FOR" the
adoption of the Plan of Merger and the Amended Charter and urges you to sign,
date and mail the enclosed proxy in the reply envelope at your earliest
convenience.
Thank you for your continued support.
Very truly yours,
/s/ Robert W. Anestis
ROBERT W. ANESTIS
Chairman, President and
Chief Executive Officer
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YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE YOUR PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. YOU MAY WITHDRAW YOUR PROXY
AT ANY TIME BEFORE IT IS VOTED. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED
"FOR" ADOPTION OF EACH OF THE PROPOSALS. DO NOT SEND ANY STOCK CERTIFICATES OF
FLORIDA EAST COAST INDUSTRIES, INC. IN YOUR PROXY ENVELOPE.
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Florida East Coast Industries, Inc.
One Malaga Street
St. Augustine, FL 32084
[ ]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ]
A special meeting of shareholders of Florida East Coast
Industries, Inc. ("FECI") (including any adjournments or postponements
thereof, the "Special Meeting") will be held at 10:00 a.m. on [ ], at [ ], for
the following purposes:
1. Plan of Merger Proposal. To consider and vote upon a proposal to adopt a
Plan of Merger which will be filed with the Florida Secretary of State as an
exhibit to the related Articles of Merger (collectively, as amended,
supplemented or otherwise modified from time to time, the "Plan of Merger"),
among FECI, The St. Joe Company ("St. Joe") and [ ], a wholly owned subsidiary
of St. Joe ("Merger Sub"), providing for the merger of Merger Sub with and
into FECI, with FECI as the surviving corporation (the "Merger"). As a result
of the Merger, St. Joe will become the holder of shares of a new class of FECI
common stock having the right to elect, as a class, at least 80% of the FECI
Board, all of which shares will be distributed by St. Joe to its common
shareholders as promptly as practicable following the Merger, while all other
shares of FECI common stock will be entitled to elect, as a class, up to 20% of
the FECI Board;
2. Amended Charter Proposal. To consider and vote upon a proposal to amend
and restate FECI's Articles of Incorporation to make changes necessary to
effect the Recapitalization and to adopt corporate governance provisions
designed to foster FECI's growth as an independent company following the
Distribution and, in particular, to help protect FECI shareholders from
unsolicited takeover bids which unfairly discriminate between common
shareholders. These proposed amendments are discussed in detail in the
accompanying Proxy Statement; and
3. To transact such other business as may properly come before the Special
Meeting.
The Recapitalization and the Distribution will not be
implemented unless both the Plan of Merger and the Amended Charter are
approved.
The Board of Directors has fixed the close of business on [ ]
as the record date for determining those shareholders who will be entitled to
notice of and to vote at the meeting. The holders of a majority of the
outstanding shares entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum.
All shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ Heidi J. Eddins
Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
PROXY CARD ENCLOSED WITH THIS NOTICE AT YOUR EARLIEST CONVENIENCE.
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TABLE OF CONTENTS
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Page
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SUMMARY........................................................................1
THE SPECIAL MEETING............................................................7
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.....................9
CERTAIN CONSIDERATIONS.........................................................9
The Class B Common Stock May Render FECI More Vulnerable to Unsolicited
Takeover Bids, Including Bids Which Unfairly Discriminate Between FECI
Shareholders.............................................................9
Potential Anti-Takeover Effects of the Amended Charter and Rights
Plan....................................................................10
Ownership of FECI Common Stock by the Charities............................10
The Tax-free Distribution May Result in Significant Limitations on FECI's
Ability to Engage in Certain Transactions...............................10
Stock Sales Following the Distribution May Affect FECI's Stock
Price...................................................................11
BACKGROUND AND REASONS FOR THE TRANSACTIONS...................................12
Description of FECI, St. Joe and Merger Sub................................12
Background of the Transactions.............................................13
FECI's Reasons for the Transactions........................................17
Description of the DLJ Fairness Opinion....................................20
Board of Directors Recommendation..........................................23
PROPOSAL ONE: ADOPTION OF THE PLAN OF MERGER.................................24
Plan of Merger.............................................................24
Recommendation of the FECI Board...........................................24
Required Vote..............................................................24
Ownership of FECI Common Stock Following the Distribution..................24
Effects of the Recapitalization on Outstanding Shares......................25
Tax Matters................................................................26
FECI Board Following the Recapitalization..................................27
New York Stock Exchange Approvals..........................................27
Federal Securities Law Consequences........................................27
No Appraisal Rights........................................................28
PROPOSAL TWO: ADOPTION OF THE AMENDED CHARTER................................29
Amendments Necessary to Effect the Recapitalization........................29
Corporate Governance Amendments.........................................30
Other Amendments........................................................35
Description of the Amended By-laws.........................................35
Comparison of Existing Charter and Existing By-laws with
Amended Charter and Amended By-laws.....................................37
Certain Provisions of the Florida Business Corporation Act.................40
Recommendation of the FECI Board...........................................41
Required Vote..............................................................41
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DESCRIPTION OF THE TRANSACTION DOCUMENTS......................................42
Distribution Agreement.....................................................42
Plan of Merger.............................................................47
Shareholders Agreement.....................................................48
Rights Plan................................................................49
REAL ESTATE TRANSACTIONS......................................................52
General....................................................................52
Expected Benefits of the Real Estate Transactions..........................52
Description of Real Estate Agreements......................................53
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF FECI.........................................................56
BOARD OF DIRECTORS AND MANAGEMENT.............................................58
Board of Directors.........................................................58
Executive Officers.........................................................59
Interests of Certain Persons in the Transactions...........................59
SHAREHOLDER PROPOSALS.........................................................59
EXPERTS.......................................................................60
WHERE YOU CAN FIND MORE INFORMATION...........................................60
INDEX OF DEFINED TERMS........................................................61
Appendix A -- Distribution and Recapitalization Agreement....................A-1
Appendix B -- Plan of Merger.................................................B-1
Appendix C -- Shareholders Agreement.........................................C-1
Appendix D -- Proposed Amended and Restated Articles of Incorporation........D-1
Appendix E -- Amended and Restated By-laws...................................E-1
Appendix F -- Master Agreement...............................................F-1
Appendix G -- Donaldson, Lufkin & Jenrette Securities Corporation Opinion....G-1
Appendix H -- Form of Proxy.................................................H-1
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SUMMARY
This Proxy Statement is being distributed to the shareholders
of Florida East Coast Industries, Inc., a Florida corporation ("FECI"), in
connection with the solicitation of proxies by the Board of Directors of FECI
(the "FECI Board") for use at a special meeting of shareholders of FECI to be
held on [ ], at 10:00 a.m., local time, at [ ] (including any adjournments or
postponements thereof, the "Special Meeting").
The St. Joe Company ("St. Joe") is currently the holder of
approximately 53.9% of the outstanding common stock of FECI. On October 27,
1999, FECI and St. Joe announced their intention to separate by means of a
tax-free distribution of all of the shares of FECI owned by St. Joe to St.
Joe's common shareholders (the "Distribution"). At the Special Meeting,
shareholders of FECI will be asked to vote on two proposals which will
facilitate the Distribution: (1) to approve a merger to effect a
recapitalization of FECI and (2) to approve amendments to FECI's Articles of
Incorporation (the "Amended Charter"). As more fully described below, the
proposed Distribution is expected to provide numerous benefits to FECI and its
shareholders.
The Recapitalization and Distribution
The Recapitalization is being effected because current tax law
requires that in order for the Distribution to be tax-
free to St. Joe and its shareholders, St. Joe is required to own, at the time
of the Distribution, capital stock of FECI having the right to elect at least
80% of the FECI Board, and is required to distribute such stock to its
shareholders in a single transaction. As of October 27, 1999, St. Joe held
19,609,216 shares of FECI common stock, representing approximately 53.9% of
the total voting power of FECI. Accordingly, FECI's Articles of Incorporation
will be amended to create a new class of common stock called Class B Common
Stock, no par value per share (the "Class B Common Stock"), having the right
to elect, as a class, 80% of the FECI Board. The Class B Common Stock will be
issued to St. Joe in exchange for the total number of shares of FECI common
stock held by St. Joe, by means of the merger of [ ], a wholly owned
subsidiary of St. Joe ("Merger Sub"), with and into FECI, with FECI as the
surviving corporation (the "Merger"). The Class B Common Stock held by St.
Joe will represent the same economic interest in FECI as that held by St. Joe
prior to the Recapitalization.
All other outstanding shares of FECI common stock will be
re-designated in the Merger as Class A Common Stock, no par value per share,
of FECI (the "Class A Common Stock"). Except for voting rights with respect to
the election or removal of directors, and the ability to receive in a merger
transaction shares with the same voting attributes, the Class B Common Stock
and the Class A Common Stock will be identical (including with respect to
voting rights on fundamental transactions affecting FECI). Following the
Recapitalization, St. Joe will promptly distribute to its common shareholders,
on a pro-rata basis, all of the shares of Class B Common Stock that it
receives in the Recapitalization.
The Merger, together with the adoption of the Amended Charter,
is referred to in this Proxy Statement as the "Recapitalization." The
Recapitalization and Distribution are collectively referred to as the
"Transactions."
The obligations of each of FECI and St. Joe with respect to the
Recapitalization and the Distribution are set forth in the Recapitalization
and Distribution Agreement dated as of October 26, 1999 between FECI and St.
Joe (as amended, supplemented or otherwise modified from time to time, the
"Distribution Agreement"). The Distribution Agreement is attached hereto as
Appendix A. The Distribution Agreement and the documents attached as exhibits
thereto are collectively referred to as the "Transaction Documents." For a
summary for each of the Transaction Documents, see "Description of the
Transaction Documents."
Benefits of the Transactions
The Transactions will remove St. Joe as the controlling
shareholder of FECI. As an independent company, FECI believes it will derive
numerous benefits from the Transactions. For example, the Transactions are
expected to, among other things:
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o allow FECI to establish a capital structure independent of St. Joe that
is optimal for FECI's businesses which may include, as appropriate,
the incurrence of debt and the issuance or repurchase of equity in
the future;
o allow FECI to pursue its business interests independent of St. Joe,
particularly with respect to acquisitions, business and asset sales
and corporate opportunities;
o increase the liquidity and public float of FECI common stock, which is
expected to increase the average trading volume of FECI common stock
and enhance FECI's ability to attract equity research coverage;
o facilitate the use of FECI common stock for future acquisitions and as
a source of capital;
o increase the ability of FECI to engage in future corporate
transactions, if desirable, such as establishing a REIT or effecting a
spinoff of certain businesses, which would be more difficult so long as
a majority of the FECI common stock is held by St. Joe; and
o provide a more stable platform for retaining and recruiting top quality
management and increase flexibility in employee compensation tied to
shareholder value creation.
As a result of tax constraints relating to the Distribution and
certain related restrictions contained in the Distribution Agreement, FECI's
ability to engage in future corporate transactions, including some of those
listed above, may be limited for a period of time. For a more detailed
description of the benefits of the Transactions and the related tax
constraints, see "Background and Reasons for the Transactions -- FECI's
Reasons for the Transactions" and "Proposal One: Adoption of the Plan of
Merger -- Tax Matters."
Real Estate Transactions
In connection with the Transactions, FECI and St. Joe announced
that Gran Central Corporation, a wholly-owned subsidiary of FECI ("GCC"), has
entered into a Master Agreement with St. Joe dated October 26, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Master
Agreement"). Pursuant to the Master Agreement and additional agreements
contemplated by the Master Agreement (collectively, the "Real Estate
Agreements"), the parties have agreed to restructure their and their
affiliates' real estate relationships (the "Real Estate Transactions"). The
Master Agreement was approved by the Board of Directors of GCC at a meeting on
October 26, 1999. The Real Estate Transactions will restructure FECI's real
estate relationship with St. Joe in a manner that will allow FECI to
capitalize on the high quality services provided by St. Joe while increasing
FECI's direct control over its portfolio as well as facilitating market
diversification. While shareholder approval is not required to effect the
Real Estate Transactions, the Real Estate Transactions will only take effect
upon consummation of the Transactions. For a discussion of the Real Estate
Agreements, including the expected benefits to FECI from the Real Estate
Transactions, see "Real Estate Transactions." Because no shareholder approval
is required, a description of the Real Estate Transactions is included in this
Proxy Statement for informational purposes only.
Proposal One: Adoption of the Plan of Merger
As a technical matter, FECI shareholders will be asked to
approve a Plan of Merger which will be filed with the Florida Secretary of
State as an exhibit to the related Articles of Merger (collectively, as
amended, supplemented or otherwise modified from time to time, the "Plan of
Merger") among FECI, St. Joe and Merger Sub providing for the recapitalization
of FECI, as described above. It will be pursuant to the Plan of Merger that
all shares of FECI common stock held by St. Joe will be exchanged for an equal
number of shares of Class B Common Stock. All other shares of FECI common
stock will be re-designated as Class A Common Stock. The Plan of Merger
serves as an exhibit to the Distribution Agreement and is attached hereto as
Appendix B. For a summary of the Plan of Merger, see "Description of the
Transaction Documents - Plan of Merger."
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Proposal Two: Adoption of the Amended Charter
The Amended Charter includes changes to FECI's existing
Articles of Incorporation (the "Existing Charter") that are necessary to
effect the Recapitalization. In addition, the FECI Board believes that
certain provisions of the Amended Charter and the proposed Rights Plan
described below are advisable to foster FECI's growth as an independent
company following the Distribution and, in particular, to help protect FECI
shareholders from unsolicited takeover proposals which unfairly discriminate
between common shareholders.
The FECI Board has also adopted the Amended and Restated
By-laws (the "Amended By-laws"), which will become effective upon consummation
of the Recapitalization, substantially in the form as attached hereto as
Appendix E. See "Proposal Two: Adoption of the Amended Charter -- Description
of the Amended By-laws." The following is a summary of the material terms of
the Amended Charter.
Amendments Necessary to Effect the Recapitalization
The following amendments provide for the necessary changes to
FECI's Existing Charter in order to effect the Recapitalization. For a more
detailed description of these amendments, see "Proposal Two: Adoption of the
Amended Charter -- Amendments Necessary to Effect the Recapitalization."
Authorization of Class A Common Stock and Class B Common Stock.
The Amended Charter will reclassify FECI common stock into two classes: (1)
Class A Common Stock, which will entitle the holders thereof (together with the
holders of voting preferred stock of FECI ("Preferred Stock"), if any) to
vote, as a class, for the election of 20% of the directors of FECI and (2)
Class B Common Stock, which will entitle the holders thereof to vote, as a
class, for the election of at least 80% of the directors of FECI.
Shareholders in each class will still be able to cumulate votes for the
election of directors.
Creation of Class A and Class B Directors. Upon consummation
of the Recapitalization, two directors of FECI, [ ] and [ ], will be
designated as "Class A Directors" and the remaining eight directors will be
designated as "Class B Directors." Thereafter, the Class A Directors will be
elected by the holders of the Class A Common Stock (and the holders of voting
Preferred Stock, if any) and the Class B Directors will be elected by the
holders of the Class B Common Stock.
Increased Board Size. The Amended Charter will increase the
minimum number of directors on the FECI Board from three to five, and require
any increases thereafter to be only in whole-number multiples of five (subject
to vacancies occurring in the ordinary course which must be filled no later
than the next annual meeting of shareholders). This provision will ensure that
the holders of the Class A Common Stock (together with the holders of voting
Preferred Stock, if any) will have the right to elect at least one director
for every four directors to be elected by the holders of the Class B Common
Stock. The Amended By-laws will fix the size of the FECI Board at ten
directors.
Authorized Capital. The Amended Charter will increase FECI's
authorized capital to 150,000,000 shares of common stock consisting of
50,000,000 shares of Class A Common Stock and 100,000,000 shares of Class B
Common Stock. In addition, the Amended Charter will authorize 20,000,000
shares of Preferred Stock. The FECI Board believes that such an increase in
FECI's authorized capital and the authorization of Preferred Stock will ensure
that there remains a sufficient authorized number of shares of common stock
and Preferred Stock after the Recapitalization for (1) future sales of FECI's
securities to raise additional capital, (2) future acquisitions of other
companies or their businesses or assets, (3) establishing strategic
relationships with third parties and (4) providing options or other stock
incentives to FECI employees or others. In addition, the authorization of
Preferred Stock and the large number of shares of authorized Class B Common
Stock relative to the number of shares of authorized Class A Common Stock will
be necessary for the adoption of the proposed Rights Plan (and the exercise of
any rights under the Rights Plan).
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Corporate Governance Provisions
The FECI Board has determined that the following corporate
governance amendments are in the best interests of FECI and its shareholders.
The FECI Board believes that the Recapitalization may make it possible for a
third party to acquire control of FECI by purchasing control of the
outstanding shares of Class B Common Stock without acquiring Class A Common
Stock (except to the extent mitigated by the Class B Significant Holder Voting
Limitation described below). The following corporate governance amendments
are intended to make it more difficult for a potential acquirer of FECI to
take advantage of FECI's new capital structure by means of a transaction which
is not negotiated with the FECI Board, and thus reduce the vulnerability of
FECI to an unsolicited takeover proposal which discriminates between holders
of Class A and Class B Common Stock. For a more detailed discussion of these
amendments, see "Proposal Two: Adoption of the Amended Charter -- Corporate
Governance Amendments."
Limitations on Voting Rights of Significant Holders of Class B
Common Stock. In order to reduce the ability of an unsolicited acquirer
gaining control of the FECI Board solely by virtue of owning a large block of
Class B Common Stock, the Amended Charter will limit such an acquirer's
ability to freely vote its shares of Class B Common Stock with respect to the
election or removal of FECI directors. Specifically, if any person or entity
or group of persons or entities acting in concert (any such person, entity or
group, a "Significant Holder") beneficially owns 15% or more of the
outstanding shares of Class B Common Stock, the Amended Charter will provide
that the Significant Holder may only freely vote the number of shares of Class
B Common Stock as would allow the Significant Holder to elect the number of
directors on the FECI Board which is proportionate with the economic interest
in FECI represented by the Significant Holder's shares of Class B Common Stock
in relation to all outstanding shares of FECI common stock as of the
Distribution (the "Class B Significant Holder Voting Limitation"). The vote
relating to the Significant Holder's remaining shares of Class B Common Stock
will be applied pro rata in accordance with the votes of all other shares of
Class B Common Stock (other than by other Significant Holders).
Removal of Directors for Cause. The Amended Charter will
provide that FECI directors may only be removed from office (other than at
the expiration of their annual term) for "cause." However, under Florida law,
a director may not be removed, even for cause, if the number of shareholders
voting against his or her removal would have been sufficient to elect such
director under cumulative voting. Only Class A shareholders may remove a
Class A Director and only Class B shareholders may remove a Class B Director.
Amendment of Articles of Incorporation. The Amended Charter
will require the approval of a majority of the FECI Board plus 75% of the
votes entitled to elect directors (voting together as a single class) to amend
the Amended Charter (other than certain provisions which, if amended, would
not have the effect of increasing FECI's exposure to an unsolicited takeover).
Other Amendments. In addition to the amendments listed above,
the Amended Charter, if adopted, will include provisions which (1) provide for
the indemnification of FECI's directors and officers to the fullest extent
permitted by Florida law, (2) limit the personal liability of directors to
FECI or its shareholders for monetary damages, except in specified
circumstances required by Florida law and (3) require shareholders to follow
advance notice procedures to conduct business at a shareholder meeting. See
"Proposal Two: Adoption of the Amended Charter - Corporate Governance
Amendments - Other Amendments."
Further, if the Amended Charter is adopted, holders of a
majority of the total outstanding common stock (voting together as a single
class) will be able to effect a further recapitalization of FECI so as to
eliminate the two-class structure of FECI's common stock (including the
special rights to FECI Board representation). The effectiveness of this
provision is contingent on the receipt of an appropriate IRS ruling (which is
being sought in connection with the Transactions). However, it is not a
condition to the Transactions that this provision become effective. Moreover,
even if the provision becomes effective after receipt an IRS ruling, under the
Distribution Agreement FECI may not implement such a future recapitalization
without first obtaining an additional IRS ruling or an appropriate legal
opinion from tax counsel. See "Description of the Transaction Documents -
Distribution Agreement."
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Additional Effects of Corporate Governance Provisions. In
addition to discouraging unsolicited takeover attempts which unfairly
discriminate between holders of Class A Common Stock and Class B Common Stock,
the corporate governance provisions described above may, in general, render
more difficult or discourage any attempt to assume control of FECI by means of
a merger or tender offer which is not negotiated with the FECI Board. The
FECI Board believes that companies can be and are acquired, and that changes
in control of companies can and do occur, at prices below realistically
achievable levels when boards do not have measures in place to require an
acquirer to negotiate the terms of any acquisition directly with the board.
Many companies, with stockholder approval, have put provisions in place, such
as those described above, which effectively require such negotiations. See
"Proposal Two: Adoption of the Amended Charter - Corporate Governance
Amendments."
Ownership of FECI Common Stock Following the Distribution
As of October 27, 1999, the Nemours Foundation ("Nemours")
beneficially owned approximately 5.0% of the outstanding common stock of FECI
which will be re-designated as Class A Common Stock in the Merger. In
addition, as of October 27, 1999, Nemours and the Alfred I. duPont
Testamentary Trust ("duPont Trust" and together with Nemours, the "Charities"
and each, a "Charity") beneficially owned approximately 59.6% of the
outstanding shares of St. Joe, and will beneficially own an equal percentage
of the Class B Common Stock upon the Distribution. The Charities have entered
into a Shareholders Agreement with FECI dated as of October 26, 1999 (as
amended, supplemented or otherwise modified from time to time, the
"Shareholders Agreement"), which among other things, imposes restrictions on
the Charities' ability to dispose of their shares of FECI common stock or
purchase additional shares of FECI common stock after the Distribution or
purchase additional common shares of St. Joe prior to the Distribution. In
addition, as negotiated with the Charities, the Charities will be restricted
in their ability to freely vote their shares of Class B Common Stock by the
Class B Significant Holder Voting Limitation. See "Proposal One: Adoption of
the Plan of Merger -- Ownership of FECI Common Stock Following the
Distribution" and "Description of the Transaction Documents -- Shareholders
Agreement."
Rights Plan
Pursuant to the Distribution Agreement, it is a condition to
FECI's obligation to consummate the Recapitalization that the FECI Board adopt
a rights plan substantially in accordance with the terms described in an
exhibit to the Distribution Agreement (the "Rights Plan"). The proposed Rights
Plan is designed primarily to discourage the unsolicited acquisition of
control of FECI through only the purchase of shares of Class B Common Stock.
If adopted, it will also discourage the unsolicited acquisition of a
substantial amount of Class A Common Stock. The thresholds for triggering the
proposed Rights Plan will be set above the expected percentage ownership by
the Charities of Class A Common Stock and Class B Common Stock. However, the
Rights Plan will not apply to any unsolicited takeover proposal which treats
all holders of Class A Common Stock and Class B Common Stock equally. While
the FECI Board intends, subject to its fiduciary duties, to adopt the Rights
Plan, the Rights Plan cannot become effective without the approval of the
Amended Charter because the Rights Plan contemplates the authorization of
Preferred Stock and Class B Common Stock. If adopted, the Rights Plan will
become effective only upon the consummation of the Recapitalization. Specific
shareholder approval of the Rights Plan, however, is not required. See
"Description of the Transaction Documents - Rights Plan." Pursuant to the
Shareholders Agreement, the Charities have each agreed to support and to use
their best efforts to cause their respective representatives on the FECI
Board, subject to the fiduciary duties of such representatives, to vote in
favor of the proposed Rights Plan. See "Description of the Transaction
Documents - Shareholders Agreement."
Conditions to the Transactions
In addition to shareholder approval of both the Plan of Merger
and the Amended Charter, the Transactions are subject to a number of
conditions, including consents to the Transactions by each of the senior
employees of FECI (including Robert W. Anestis, Chairman, President and Chief
Executive Officer of FECI, who delivered such a consent letter upon the
execution of the Distribution Agreement) and receipt by St. Joe of an
appropriate IRS ruling regarding the tax-free nature of the Transactions. The
IRS ruling may impose certain restrictions on FECI's ability to engage in
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future corporate transactions. For a description of the consent letters, the
IRS ruling and the other conditions to the consummation of the Transactions,
see "Description of the Transaction Documents - Distribution Agreement" and
"Proposal One: Adoption of the Plan of Merger - Tax Matters."
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THE SPECIAL MEETING
Date, Time and Place of Special Meeting
The Special Meeting of shareholders of FECI will be held on
[ ], at 10:00 a.m., at [ ].
Record Date and Shares Entitled to Vote
The FECI Board has fixed the close of business on [ ] as the
record date for determining the shareholders having the right to vote at the
Special Meeting (the "Record Date"). At the meeting, each share of FECI common
stock is entitled to one vote. At the close of business on the Record Date,
there were [ ] shares of FECI common stock outstanding and entitled to vote at
the meeting.
Voting of Proxies
This Proxy Statement is furnished in connection with the
solicitation of proxies by the FECI Board for use at the Special Meeting. All
shares will be voted in accordance with the instructions contained in the
proxy, but if the proxies which are signed and returned do not specify a vote
for any proposal, the proxies will be voted "FOR" the adoption of each of the
two proposals described in this Proxy Statement. Any proxy may be revoked by
a shareholder at any time before it is exercised by providing written notice
of revocation to the Secretary of FECI (at the address set forth above), by
executing a proxy bearing a later date, or by voting in person at the Special
Meeting. The mailing of this Proxy Statement and accompanying form of proxy is
expected to commence on or about [ ].
Required Vote
Under Florida law, adoption of the Plan of Merger requires
approval by a majority of the outstanding shares of FECI common stock,
including shares held by St. Joe. In addition, although not required by law,
the FECI Board has required and St. Joe has agreed that the Transactions will
be implemented only if the Plan of Merger is also adopted by the holders of a
majority of the shares of FECI common stock, other than the shares held by St.
Joe or its affiliates (including the Charities). The Plan of Merger will not
be implemented by FECI unless the Amended Charter is also approved.
In accordance with the existing Articles of Incorporation of
FECI, approval of the Amended Charter requires the affirmative vote of at
least two-thirds of the outstanding shares of FECI common stock. In addition,
although not required by law, the FECI Board and St. Joe have agreed that the
Transactions will be implemented only if the Amended Charter is also adopted
by the holders of a majority of the shares of FECI common stock other than the
shares held by St. Joe or its affiliates. The Amended Charter will not be
implemented by FECI unless the Plan of Merger is also approved. The
Recapitalization will be effected only if both of the Plan of Merger and the
Amended Charter are approved.
As of the Record Date, St. Joe owned [ ] shares of FECI common
stock, representing approximately [ ]% of the shares outstanding as of such
date. Pursuant to the Distribution Agreement, St. Joe has agreed to vote its
shares of FECI common stock to adopt each of the two proposals described in
this Proxy Statement. Accordingly, together with the expected approval of St.
Joe and its affiliates, the approval of each proposal by a majority of the
remaining shareholders will also satisfy the requirements of Florida law and
the Existing Charter. In addition, as of the Record Date, executive officers
and directors of FECI beneficially owned [ ] shares of FECI common stock,
representing less than [ ]% of the shares outstanding as of such date.
Quorum; Abstentions and Broker Non-votes
The required quorum for the transaction of business at the
Special Meeting is a majority of the issued and outstanding shares of FECI
common stock on the Record Date. Abstentions and broker non-votes each will be
included in determining the number of shares present at the Special Meeting
for the purpose of determining the presence of a quorum. Because FECI is
seeking the affirmative vote of the holders of a majority of the outstanding
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shares of FECI common stock entitled to vote thereon (and a majority of the
shares of FECI common stock entitled to vote thereon other than the shares
held by St. Joe and its affiliates) to adopt the Plan of Merger and the
affirmative vote of the holders of at least two-thirds of the outstanding
shares entitled to vote thereon of FECI common stock to adopt the Amended
Charter, abstentions and broker non-votes will have the same effect as votes
against both proposals.
THE ACTIONS PROPOSED IN THIS PROXY STATEMENT ARE NOT MATTERS
THAT CAN BE VOTED ON BY BROKERS HOLDING SHARES FOR A BENEFICIAL OWNER WITHOUT
THE OWNER'S SPECIFIC INSTRUCTIONS. ACCORDINGLY, ALL BENEFICIAL OWNERS OF FECI
COMMON STOCK ARE URGED TO RETURN THE ENCLOSED PROXY CARD MARKED TO INDICATE
THEIR VOTES OR TO CONTACT THEIR BROKERS TO DETERMINE HOW TO VOTE.
Solicitation of Proxies and Expenses
In addition to solicitations of proxies by mail, FECI's
officers, directors or employees may solicit proxies by telephone or personal
communication. All costs of soliciting proxies will be borne by FECI. In
addition, FECI has retained [ ] to assist in the solicitation of proxies and
will pay such firm a fee estimated not to exceed $[ ], plus reimbursement of
expenses. Following the original mailing of this Proxy Statement and other
solicitation materials, FECI will request brokers, custodians, nominees and
other record holders to forward copies of this Proxy Statement and other
solicitation materials to persons for whom they hold shares of FECI common
stock and to request authority for the exercise of proxies. In such cases,
FECI, upon the request of the record holders, will reimburse such holders for
their reasonable expenses.
Board of Directors Recommendation
The FECI Board, including the Special Committee, has given full
consideration to the Plan of Merger and the Amended Charter and has determined
that they are advisable and in the best interests of FECI and its
shareholders, including the FECI shareholders other than St. Joe. The FECI
Board, including the Special Committee acting unanimously, has approved the
Plan of Merger and the Amended Charter and recommends that you vote "FOR" the
adoption of the Plan of Merger and the Amended Charter.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF
GREAT IMPORTANCE TO THE SHAREHOLDERS OF FECI. ACCORDINGLY, SHAREHOLDERS ARE
URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT AND THE ATTACHMENTS HERETO, AND TO COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
No Exchange of Stock Certificates
The stock certificates you currently hold will continue to
represent an equal number of shares of Class A Common Stock of FECI. No
physical exchange of stock certificates is necessary.
YOU SHOULD NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS.
Who to Call for More Information
If you have any questions about this Proxy Statement or its
contents, please call either:
Florida East Coast Industries, Inc. [PROXY SOLICITOR]
One Malaga Street or [CONTACT INFORMATION]
St. Augustine, FL 32084
Attention: Heidi J. Eddins
Telephone: (904) 829-3421
Facsimile: (904) 826-2379
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Statements in this proxy statement referring to the expected
future plans and performance of FECI or statements preceded by, followed by or
otherwise including the words "believes," "expects," "anticipates," "intends,"
"estimates," or similar expressions, are forward-looking statements. For those
statements, FECI claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
Actual future results may differ materially from such statements. Factors that
could affect future performance of FECI include, but are not limited to:
contractual relationships, industry competition, regulatory developments,
natural events such as weather conditions, floods and earthquakes, forest
fires, the effects of adverse general economic conditions, changing
competition and technology, changes in the real estate markets and interest
rates, fuel prices and the ultimate outcome of environmental investigations or
proceedings and other types of claims and litigation. For more information see
FECI's other filings with the Securities and Exchange Commission. See "Where
You Can Find More Information." The occurrence or non-occurrence of the
Transactions depends on the satisfaction of a number of conditions, including
the receipt by St. Joe of an appropriate IRS ruling regarding the tax-free
nature of the Transactions. See "Description of the Transaction Documents -
Distribution Agreement." The anticipated benefits of the Transactions may be
affected by general economic conditions, economic developments that have a
particularly adverse effect on FECI or conditions in the securities markets on
which FECI common stock trades.
CERTAIN CONSIDERATIONS
FECI shareholders should carefully consider the factors
described below before voting on the two Proposals set forth in this Proxy
Statement.
The Class B Common Stock May Render FECI More Vulnerable to Unsolicited
Takeover Bids, Including Bids Which Unfairly Discriminate Between FECI
Shareholders
Following the Recapitalization, holders of the Class B Common
Stock will be entitled to elect 80% of the FECI Board. If any person or group
of persons acquires the ability to control the voting of the outstanding
shares of Class B Common Stock, that person or group will be able to obtain
control of FECI. Currently, due to its approximately 53.9% interest in FECI,
St. Joe can only control in a proxy contest the election of 5 out of 9
directors (assuming that all other FECI shareholders effectively cumulate
their votes). Accordingly, the creation and issuance of the Class B Common
Stock could render FECI more susceptible to unsolicited takeover bids from
third parties. In particular, an unsolicited third party may be willing to
pay a premium for shares of Class B Common Stock not offered to holders of
shares of Class A Common Stock. See "Proposal Two: Adoption of the Amended
Charter -- Corporate Governance Amendments -- Amendments Designed to Protect
FECI Shareholders From Unsolicited Takeover Attempts That Unfairly
Discriminate Between FECI Shareholders."
In addition, because St. Joe currently owns approximately 53.9%
of the outstanding shares of FECI common stock, there is at present no
possibility of a person other than St. Joe gaining control of the FECI Board
without St. Joe's consent. After consummation of the Transactions, St. Joe
will no longer be the majority shareholder of FECI and approximately 62.9% of
the outstanding FECI common stock will be publicly held (although the
Charities will own, in the aggregate, approximately 37.1% of the outstanding
equity of FECI). Accordingly, the Transactions could render FECI more
susceptible to unsolicited takeover bids from third parties, including offers
below the intrinsic value of FECI or other offers that would not be in the
best interests of all of FECI's shareholders.
The risk of an unsolicited takeover attempt may be mitigated in
part by provisions of the Amended Charter that make it more difficult for
third parties to gain control over the FECI Board, including through the
acquisition of a controlling block of Class B shares. For example, the Class
B Significant Holder Voting Limitation may have the effect of discouraging
unsolicited takeover attempts. See "Proposal Two: Adoption of the Amended
Charter -- Corporate Governance Amendments -- Additional Effects of Corporate
Governance Amendments."
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The Amended Charter, however, does not provide an absolute
deterrent against unsolicited takeover attempts. For example, an unsolicited
acquirer may condition its takeover proposal on acquiring all, but not less
than all, of the outstanding shares of Class B Common Stock. Notwithstanding
the Class B Significant Holder Voting Limitation, there would be no other
holder of Class B Common Stock to vote against the acquirer. If the
unsolicited acquirer were successful in acquiring all outstanding shares of
Class B Common Stock, it would then be able to control the election of all
eight Class B Directors at the next annual meeting of shareholders. See
"Proposal Two: Adoption of the Amended Charter -- Corporate Governance
Amendments -- Amendments Designed to Protect FECI Shareholders From
Unsolicited Takeover Attempts That Unfairly Discriminate Between FECI
Shareholders." In part to discourage this type of unsolicited acquisition, it
is a condition to FECI's obligation to consummate the Recapitalization that the
proposed Rights Plan be adopted by the FECI Board. The Rights Plan may not
become effective without the approval of the Amended Charter because the
Rights Plan contemplates the authorization of Preferred Stock and Class B
Common Stock. See "Description of the Transaction Documents - Rights Plan."
Potential Anti-takeover Effects of the Amended Charter and Rights Plan
The Amended Charter, together with the Amended By-laws, may
hinder efforts by FECI shareholders to remove incumbent directors or influence
the actions of FECI. An overall impact of these provisions, together with the
proposed Rights Plan, may be to render more difficult or discourage attempts
to assume control of FECI by means of a merger or tender offer which is not
negotiated with the FECI Board (even if such a transaction would result in a
premium over the market price for the shares of common stock held by FECI
shareholders or is otherwise favorable to the interests of FECI shareholders).
See "Proposal Two: Adoption of the Amended Charter -- Corporate Governance
Amendments", " -- Description of the Amended By-laws" and "Description of the
Transaction Documents -- Rights Plan."
Ownership of FECI Common Stock by the Charities
Upon consummation of the Transactions, Nemours and the duPont
Trust will each own a significant percentage of the outstanding common stock
of FECI. Given that Nemours and the duPont Trust are each affiliates of one
another (due to the fact that many of the same individuals serve as directors
of Nemours and trustees of the duPont Trust), FECI expects that the Charities
will vote their shares of FECI common stock in concert.
As of October 27, 1999, Nemours held 1,800,896 shares of FECI
common stock, representing approximately 5.0% of the equity of FECI. Upon the
Merger, the common stock held by Nemours will be re-designated as Class A
Common Stock, which will represent approximately 10.8% of the outstanding
shares of Class A Common Stock (such Class A Common Stock will still reflect
approximately 5.0% of the equity of FECI). In addition, as of October 27,
1999, the Charities, in the aggregate, held approximately 59.6% of the equity
securities of St. Joe and will therefore own an equal percentage of the
outstanding shares of Class B Common Stock following the Distribution,
representing approximately 32.1% of the outstanding equity of FECI.
Accordingly, upon consummation of the Distribution, the Charities will
beneficially own, in the aggregate, approximately 37.1% of the outstanding
equity of FECI. As a result of their holdings of FECI common stock,
particularly duPont Trust's expected ownership of a majority of the
outstanding shares of Class B Common Stock, the Charities may be expected to
exert substantial influence over the election of FECI directors and other
actions of FECI following the Distribution. See "Proposal One: Adoption of
the Plan of Merger -- Ownership of FECI Common Stock Following the
Distribution."
The Tax-free Distribution May Result in Significant Limitations on FECI's
Ability to Engage in Certain Transactions
Pursuant to the Distribution Agreement, FECI has agreed that
until two years after the Distribution, it will not enter into any acquisition
transaction or permit any acquisition transaction to occur, in either case
involving the acquisition of more than 5% of its stock pursuant to either (1)
a redemption of rights under a stockholders rights plan, (2) a determination
that a tender offer for the stock of FECI is a "permitted offer" under a
rights plan or (3) the approval of any transaction involving the acquisition
of another corporation or business by FECI or the acquisition by another
person of FECI, unless prior to taking any such action it obtains a legal
opinion or an IRS ruling that such transaction will not result in the
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Distribution failing to qualify as a tax-free distribution. In addition, FECI
has agreed to indemnify St. Joe for taxes that may become payable by St. Joe
or its shareholders if the Distribution loses its tax-free status due to any
action taken by FECI, its affiliates or stockholders. This indemnification
obligation may render FECI less attractive to a potential acquirer. Also as a
result of this indemnification obligation, FECI may be reluctant to undertake
acquisitions using stock as consideration or effect a sale of FECI,
particularly within the two-year period following the Distribution. See
"Proposal One: Adoption of the Plan of Merger -- Tax Matters."
Stock Sales Following the Distribution May Affect FECI's Stock Price
Some of the common shareholders of St. Joe may sell all or a
substantial portion of the shares of Class B Common Stock they receive in the
Distribution in the public market, which could result in downward pressure on
FECI's stock price. Pursuant to the Shareholders Agreement, however, the
Charities are subject to restrictions on the number of shares of FECI common
stock they may sell for the two-year period following the Distribution. See
"Description of the Transaction Documents -- Shareholders Agreement --
Restrictions on Transfer."
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BACKGROUND AND REASONS FOR THE TRANSACTIONS
Description of FECI, St. Joe and Merger Sub
FECI
FECI is engaged, through four wholly-owned subsidiaries, in
transportation services (i.e., rail and trucking operations), real estate
operations (i.e., ownership, development and management) and wholesale
telecommunications services. Its rail operations connect many of the major
population centers and port facilities of Florida and provide efficient
service for its customers through multiple competitive connections to the rest
of North America. The railroad handles construction aggregate (crushed stone
and sand), automobiles, intermodal freight and other rail carload commodities.
Through GCC, FECI's real estate subsidiary, FECI has extensive and valuable
real estate holdings in Florida, totaling as of September 30, 1999
approximately 18,000 acres, including 5.8 million square feet of commercial
and industrial space in 58 buildings owned by FECI, 11 buildings in
development, consisting of 670,000 square feet under construction and 880,000
square feet in pre-development stages, and unimproved land, including certain
land with relevant development permits authorizing the construction of 14
million square feet of additional industrial and commercial space. As of
September 30, 1999, FECI also owned fiber optic cable and telecommunications
assets comprising a 780-mile "telecommunications loop" that will reach 12 of
Florida's 15 largest population centers and 73% of its total population.
St. Joe acquired its interest in FECI through its purchase of
mortgage bonds of Florida East Coast Railway ("FEC") in the early 1940's. FEC
was reorganized under a plan of reorganization, effective January 1, 1961,
through which St. Joe, as a significant bondholder, became the majority
shareholder of FEC. In 1984, FEC was restructured by the creation of FECI as
a holding company to facilitate the development of the Company's major Florida
real estate holdings.
St. Joe
The St. Joe Company is a publicly traded company (NYSE: JOE)
based in Jacksonville, Florida and owns more than 1.1 million acres, or
approximately 3 percent of the state's land area -- an area slightly smaller
than Delaware. St. Joe, one of the largest real estate operating companies in
the Southeastern United States, is the single largest private landowner in the
State of Florida.
St. Joe was organized in 1936 by the executors of the A.I.
duPont Estate as St. Joe Paper Company. St. Joe changed its name to St. Joe
Corporation in 1996 and to its current name in 1998. St. Joe recently added a
new management team with real estate development expertise to focus and
accelerate the development of its core asset -- its substantial inventory of
private land in one of the nation's fastest-growing states. St. Joe is also
pursuing commercial, industrial, residential, resort, entertainment, and
recreational opportunities.
Prior to 1990, the duPont Trust owned approximately 86% of St.
Joe and has been the controlling shareholder of St. Joe since St. Joe's
incorporation. Since 1990, the duPont Trust has pursued a strategy to
diversify its investments to fund its various charitable endeavors through a
number of means. As a result of public offerings, as of October 27, 1999, the
duPont Trust owned approximately 57.0% and Nemours owned approximately 2.6% of
St. Joe.
Merger Sub
Merger Sub will be, upon incorporation, a wholly-owned
subsidiary of St. Joe incorporated under the laws of Florida solely to effect
the Merger. Merger Sub will not have any operations and its only assets as of
the Merger will be all of the shares of FECI common stock beneficially owned
by St. Joe.
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Background of the Transactions
During the past four years, St. Joe has considered various
transactions to rationalize its majority ownership of FECI, including the
possible exchange of St. Joe's FECI stock for FECI's real estate portfolio,
the sale of the railroad, and the purchase of the minority interest in FECI.
As St. Joe has divested other non-core businesses, its intentions to divest
its interests in FECI have become more focused.
In mid-March 1999, Peter S. Rummell, Chairman and Chief
Executive Officer of St. Joe and a member of the FECI Board, approached Mr.
Anestis to discuss St. Joe's business objectives with respect to FECI. Mr.
Rummell informed Mr. Anestis that St. Joe was evaluating the possibility of
distributing to St. Joe's common shareholders, on a tax-free basis, all or a
portion of its equity interest in FECI. Mr. Rummell explained that St. Joe
intended to concentrate on its core business of real estate development and
operations and exercise prudent measures to exit non-core businesses. He
stated that FECI was a non-core business to St. Joe and that after a careful
review of a number of options pursuant to which St. Joe could exit this
non-core business, St. Joe determined to propose a tax-free "spin-off"
transaction. Mr. Rummell further explained his assessment that neither St.
Joe nor FECI's trading values were benefitting from the existing ownership
structure.
On April 1, 1999, a meeting was held in New York City at which
representatives of the investment banking firm of Morgan Stanley & Co.
Incorporated, financial advisor to St. Joe ("Morgan Stanley"), and
representatives of the law firm of Sullivan & Cromwell, legal advisor to St.
Joe ("S&C"), on behalf of St. Joe discussed, on a preliminary basis, the
proposed transaction and its potential benefits with senior management of
FECI, representatives of the law firm of Davis Polk & Wardwell, legal counsel
to FECI ("DP&W"), and representatives of the law firm of Kirkpatrick &
Lockhart, LLP, Florida legal counsel to FECI ("K&L").
At a meeting of the FECI Board held on April 19, 1999, Mr.
Anestis invited Mr. Rummell, together with representatives of Morgan Stanley,
to provide on behalf of St. Joe a preliminary overview of the proposed
transaction and its potential benefits. Mr. Rummell and the Morgan Stanley
representatives summarized the preliminary views of St. Joe with respect to
the transaction expressed at the April 1, 1999 meeting.
In order to ensure a full and fair evaluation of the proposed
transaction, at the April 19, 1999 meeting, the FECI Board formed a special
committee of its unaffiliated and disinterested directors (the "Special
Committee") consisting of Mr. Anestis (Chairman), J. N. Fairbanks, R. S.
Ellwood, A. C. Harper, A. Henriques and J. J. Parish, III. The Special
Committee then immediately convened and formally retained DP&W as its
independent legal advisor and the investment banking firm of Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJ") as its independent financial
advisor, to assist the Special Committee in evaluating the proposed
transaction, including the effect of the proposed transaction from a financial
point of view on the shareholders of FECI other than St. Joe. The Special
Committee then preliminarily discussed with its advisors the potential
benefits and detriments of the proposed transaction.
Senior management of FECI, assisted by DP&W and DLJ, provided
regular updates to the Special Committee about the progress of negotiations
concerning the proposed transaction. DP&W, DLJ and K&L provided advice and
assistance with respect to the structuring, planning and negotiation of the
principal terms of, and conditions to, the Transactions. DP&W, DLJ and K&L
will receive customary fees for their services to the Special Committee in
connection with the Transactions. K&L also provides advice to FECI from time
to time on other matters, for which it receives customary fees.
On April 22, 1999 the Special Committee met by telephone and
discussed possible terms of the proposed transaction that would be acceptable
to FECI. Representatives of DLJ reported that an initial examination of
historical trading prices of public companies with dual classes of common
stock with voting power disparities revealed that, while both positive and
negative price disparities exist with respect to some companies, the data was
inconclusive concerning the expected impact of the proposed transaction on
FECI's common stock. The members of the Special Committee expressed concern
over the possibility of trading disparities between the Class A Common Stock
and the Class B Common Stock after the Distribution. In order to compensate
the public shareholders other than St. Joe and its affiliates (the "minority
FECI shareholders") for the risk that the Class A Common Stock might trade at
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lower prices than the Class B Common Stock, the Special Committee determined
to seek from St. Joe agreement to transfer additional economic value to the
minority FECI shareholders as part of the proposed transaction. In addition,
the Special Committee concluded that it would be advisable for FECI to seek
approval for any agreed upon transaction from a majority of the minority FECI
shareholders. The Special Committee also determined to pursue the adoption of
numerous corporate governance provisions which it believed were appropriate to
protect the interests of the holders of Class A Common Stock.
Based on the internal discussions of the Special Committee,
FECI forwarded to St. Joe and the Charities a summary of proposed terms for
the transaction (the "FECI Proposal"). Representatives of FECI made clear
that any agreement with St. Joe regarding the FECI Proposal would be
conditioned on agreement by the Charities to the proposed corporate governance
provisions. In addition to the corporate governance terms, the FECI Proposal
provided that FECI's obligation to consummate the proposed transaction would
be conditioned on the approval of the transaction by a majority of the
minority FECI shareholders. The FECI Proposal also required that economic
value be transferred to the minority FECI shareholders (the "Economic
Adjustment") either through (1) a special cash dividend paid only to the
holders of Class A Common Stock after the Distribution or (2) St. Joe
accepting less than one share of Class B Common Stock for every share of
common stock it beneficially owns prior to the Merger (thereby increasing the
minority FECI shareholders' equity interest in FECI). The FECI Proposal also
provided that St. Joe pay all of FECI's expenses relating to the proposed
transaction.
Additional meetings and telephone conversations were held
between the parties throughout the following week.
On April 28, 1999, Mr. Anestis received a letter from Mr.
Rummell reflecting St. Joe's response to the FECI Proposal. As stated in the
letter, St. Joe was not yet prepared to accept, as a condition to the proposed
transaction, that FECI obtain the approval of the majority of the minority
FECI shareholders. Moreover, St. Joe did not feel that FECI's request for an
Economic Adjustment was compelling in light of the significant economic and
other benefits to be derived by the FECI shareholders from the proposed
transaction without any such adjustment. With respect to transaction related
expenses, Mr. Rummell noted that, as the owner of approximately 54% of FECI,
St. Joe would already be de facto paying that percentage of FECI's expenses
and that St. Joe was unwilling to pay the additional expenses FECI had
requested of St. Joe. Mr. Rummell's letter also stated that St. Joe desired a
five year extension of the existing Management Agreement dated as of January
1, 1998 between St. Joe and GCC (the "Existing Management Agreement").
During the next two weeks, representatives of FECI held
numerous telephone conversations with representatives of St. Joe in an effort
to resolve the outstanding issues relating to the proposed transaction.
On May 3, 1999, a Special Committee meeting was held in Miami,
Florida during which the Special Committee was updated on St. Joe's response
to the FECI Proposal and the ensuing conversations between the parties.
During the meeting, the Special Committee expressed concern over granting the
right to elect 80% of the FECI Board to a new class of stock and stressed the
importance of adopting appropriate corporate governance provisions in the
Amended Charter and Amended Bylaws to protect the interests of the minority
FECI shareholders. In addition, the Special Committee concluded that a
five-year extension of the Existing Management Agreement was undesirable but
that a more limited extension would be appropriate.
On May 6, 1999, representatives of FECI met with
representatives of St. Joe in order to discuss the existing real estate
relationship between GCC and St. Joe and modifications proposed by FECI to the
Existing Management Agreement. Discussions concerning the real estate
relationship continued through the week of May 9, 1999.
A meeting of the Special Committee was held on May 12, 1999, at
which FECI senior management, with the assistance of FECI's outside legal and
financial advisors, updated the Special Committee on the status of negotiations
concerning the proposed transaction.
On May 13, 1999, Mr. Rummell informed Mr. Anestis that St. Joe
had decided to suspend negotiations of the proposed transaction due to the
parties' inability to agree on the fundamental issues of whether the approval
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of a majority of the minority FECI shareholders would be required, the need
for an Economic Adjustment and the appropriate modifications to the Existing
Management Agreement.
On August 23, 1999, Mr. Anestis received a telephone call from
Mr. Rummell during which Mr. Rummell expressed St. Joe's desire to reconsider
the proposed recapitalization and spin-off.
On August 25, 1999, senior management of FECI and St. Joe,
respectively, met to discuss the proposed transaction. Mr. Rummell
acknowledged that the condition requested by FECI concerning the approval of
the majority of the minority FECI shareholders would be an important aspect of
ensuring the procedural fairness of the proposed transaction to such
shareholders. However, St. Joe was still unwilling to agree to an Economic
Adjustment. St. Joe also provided FECI with an initial summary of proposed
terms for a restructured real estate relationship between GCC and St. Joe.
The summary of terms detailed proposed modifications to the Existing
Management Agreement and proposed agreements to cover the property management
and development management services being developed by St. Joe.
Throughout the negotiations between the parties of the
Transactions, representatives of FECI, GCC and St. Joe, respectively,
participated in numerous telephone discussions and meetings, on an almost
daily basis, concerning the Real Estate Transactions. These negotiations were
rigorous with FECI having the goal of continuing to capitalize on the high
quality services provided by St. Joe, at competitive market rates, while
increasing GCC's direct control over its portfolio and facilitating GCC's
market diversification. The Special Committee, which includes all of the
members of the GCC Board, received frequent reports and updates from FECI and
GCC management on the status of the real estate negotiations on an ongoing
basis. The results of the real estate negotiations are embodied in the Real
Estate Agreements.
In particular, meetings of the Special Committee were held by
telephone on September 7, 1999, September 16, 1999 and September 23, 1999 at
which times FECI management reported on the status of negotiations with St.
Joe. FECI's legal and financial advisers participated in the telephonic
meeting on September 23, 1999. During that meeting, in addition to discussing
the status of the real estate negotiations, the Special Committee discussed
the impact of the corporate governance issues on the Charities as well as the
potential tax effects and restrictions on FECI which could result from the
proposed transaction.
On September 23, 1999, Mr. Rummell contacted Mr. Anestis and
reiterated St. Joe's firm position that it was unwilling to agree to an Economic
Adjustment. However, Mr. Rummell indicated that St. Joe would be willing to make
a $4.5 million payment to GCC as additional consideration for GCC's willingness
to enter into certain of the Real Estate Agreements. Mr. Anestis expressed
interest in the $4.5 million payment and indicated his intention to negotiate
that amount and suggested that Morgan Stanley and DLJ continue their analyses to
facilitate St. Joe's and FECI's efforts to reach consensus as to the likely
trading effects of the dual class structure.
Between September 23 and October 7, 1999, the parties and their
legal and financial advisors held a number of discussions concerning the need
for an Economic Adjustment. After lengthy discussions and review of historical
trading data, the parties ultimately concluded that there would be no way to
predict with confidence what trading differences, if any, would likely arise
between the two classes of FECI common stock after consummation of the
proposed transactions and whether any such differences would be material.
A meeting of the Special Committee was held by telephone on
October 7, 1999 and was joined by FECI management and FECI's legal and
financial advisors. The Special Committee received a full update as to the
status of negotiations. In light of the many expected benefits of the
proposed transaction to the minority FECI shareholders and the parties'
discussions concerning the historical trading data, the Special Committee
decided not to insist on obtaining a separately identified Economic
Adjustment. The Special Committee also took note of the fact that, through
the course of negotiations, St. Joe was now willing to increase its proposed
payment to GCC to $6 million as additional consideration for GCC's agreement
to enter into certain of the Real Estate Agreements. Nevertheless, the Special
Committee determined not to consider approving the proposed transaction until
complete definitive documentation had been agreed by all parties. In
particular, the Special Committee noted that substantive agreement had yet to
be reached with the Charities concerning the corporate governance provisions
to be reflected in the Shareholders Agreement and the Amended Charter. The
Special Committee believed that agreement with the Charities was critical to
protecting the interests of the minority FECI shareholders.
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During the first two weeks of October, representatives of FECI
held a number of discussions with representatives of the Charities. The
Charities expressed discomfort in approving any corporate governance
provisions beyond those necessary to effect the Recapitalization. The
Charities desired to maintain as much flexibility as possible with respect to
their holdings of FECI stock after the Distribution, subject to the applicable
tax rules.
On October 15, 1999, senior management of FECI, along with
FECI's financial and legal advisors, met in New York with representatives of
St. Joe to discuss the proposed corporate governance provisions, including
FECI's desire to adopt a rights plan. At the meeting, FECI expressed the view
of the Special Committee that it was critical that the proposed transaction
include protections for the minority FECI shareholders from an unsolicited
acquirer gaining control of FECI through the purchase of only shares of Class
B Common Stock. FECI expressed particular concern that such an unsolicited
acquisition could occur at a time when the outstanding shares of Class B
Common Stock no longer represent a majority of the equity in FECI.
Accordingly, FECI noted that its commitment to pursue the proposed
recapitalization had always been conditioned on the approval of appropriate
governance provisions, including the Significant Holder Class B Voting
Limitation, the requirement that FECI directors only be removed for cause and
the adoption of an appropriate rights plan. While St. Joe's representatives
were sympathetic to FECI's views, they expressed concern over the uncertainty
which may be caused by having the requested provisions serve as conditions to
FECI's obligations to consummate the proposed transaction. FECI and St. Joe
agreed to resume their discussions after the weekend in order for
representatives of the Charities to participate.
On October 18, 1999, senior management of each of FECI, St. Joe
and the Charities, together with their respective financial and legal
advisors, met in Jacksonville, Florida to resolve the issues discussed at the
meeting on October 15, 1999. At the meeting, the Charities expressed a
willingness to accept the proposed governance provisions but discomfort with
the proposed terms of the rights plan. At the request of the Charities, FECI
agreed to exempt from the triggers under the proposed rights plan "qualified"
tender or exchange offers for all, but not less than all, of the outstanding
common stock of FECI. In order to be "qualified," a tender or exchange offer
would need to provide identical per share consideration to holders of Class A
Common Stock and holders of Class B Common Stock. FECI also accepted the
Charities' request that persons who acquire FECI common stock from either of
the Charities in the future not be deemed to trigger any rights under the
rights plan solely as a result of a previous stock repurchase or redemption by
FECI. In addition, FECI agreed to cap the "threshold amounts" under the
rights plan at percentages above the Charities' potential holdings of FECI
common stock upon the Distribution (after giving effect to St. Joe's
previously announced share repurchase program).
In order to provide greater comfort to FECI as to the
Charities' maximum potential ownership of Class B Common Stock upon the
Distribution, the Charities agreed not to purchase any additional shares of
capital stock in St. Joe until after the Distribution. In addition, the
Charities agreed to support the adoption of the agreed upon Rights Plan. Once
FECI and the Charities reached agreement on the issues, St. Joe expressed its
willingness to condition FECI's obligations to consummate the proposed
recapitalization on the adoption of certain key provisions of the Amended
Charter and proposed Rights Plan, as requested by FECI, so long as FECI would
agree to use its best efforts, subject to the fiduciary duties of the FECI
directors, to obtain approval of the Rights Plan. FECI agreed to so use its
best efforts.
On October 21, 1999, final drafts of all agreements relating to
the Transactions were circulated to each of the directors or trustees, senior
management and legal and financial advisors of each of the parties.
On October 25, 1999, the Board of Directors of Nemours and the
Trustees of the duPont Trust separately convened and approved the Shareholders
Agreement and a related agreement with St. Joe.
On October 26, 1999, the Special Committee met and reviewed
each of the proposed Transaction Documents and Real Estate Agreements with the
participation of management and its legal and financial advisors. The Special
Committee discussed the benefits of the Transactions and the Real Estate
Transactions as described more fully below. See " -- FECI's Reasons for the
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Transactions" and "Real Estate Transactions - Expected Benefits of the Real
Estate Transactions." In addition, DLJ presented to the Special Committee its
oral opinion (which was later confirmed in writing dated October 26, 1999)
that the Recapitalization and the Distribution, taken as a whole, are fair
from a financial point of view to the minority FECI shareholders. After full
consideration of the Transactions, the Special Committee unanimously (1)
determined that the Transactions are advisable and in the best interests of
FECI and its shareholders, including the minority FECI shareholders, (2)
approved the Transactions and the Transaction Documents and recommended that
the FECI Board approve the Transactions and the Transaction Documents and (3)
recommended that the FECI shareholders vote "FOR" approval of the Plan of
Merger and the Amended Charter.
Immediately following the Special Committee's unanimous
recommendation, the FECI Board, with the exception of Jacob C. Belin who could
not attend due to personal reasons (but who had been previously briefed and
had expressed his approval of the Transactions to Mr. Anestis), met on
October 26, 1999 and unanimously (1) determined that the Transactions are
advisable and in the best interests of FECI and its shareholders, including
the minority FECI shareholders, (2) approved the Transactions and the
Transaction Documents and (3) recommended that the FECI shareholders vote
"FOR" approval of the Plan of Merger and the Amended Charter.
Immediately following the meeting of the FECI Board, the GCC
Board met and approved the Real Estate Transactions and the Real Estate
Agreements.
Immediately following the meeting of the GCC Board, the Board
of Directors of St. Joe met to consider the Transactions and unanimously
approved the Distribution, the Distribution Agreement (including the Plan of
Merger), the Real Estate Agreements and a related agreement with the Charities.
On October 27, 1999, FECI and St. Joe announced the proposal to
effect the Transactions on the terms set forth in this Proxy Statement.
FECI's Reasons for the Transactions
The FECI Board, upon the unanimous recommendation of the
Special Committee, has determined that the Transactions are advisable and in
the best interests of FECI and its shareholders, including the FECI
shareholders other than St. Joe. In arriving at this determination, the FECI
Board and the Special Committee considered a number of factors, which are
listed below.
Expected Benefits of the Transactions to FECI and its
Shareholders. The Special Committee and the FECI Board considered the
following expected benefits of the Transactions:
o the Transactions will allow FECI to establish a capital structure
independent of St. Joe that is optimal for FECI's businesses which may
include, as appropriate, the incurrence of debt and the issuance or
repurchase of equity in the future (without concern for the impact of
such actions on the consolidated financial statements of St. Joe);
o the Transactions will allow FECI to pursue its business interests
independent of St. Joe, particularly with respect to acquisitions,
business and asset sales and corporate opportunities;
o the Transactions will eliminate St. Joe as a controlling shareholder of
FECI and increase the liquidity and public float of FECI common stock
(from approximately 14.9 million shares to approximately 22.7 million
shares), which is expected to increase the average trading volume of
FECI common stock and enhance FECI's ability to attract research
coverage;
o the Transactions are expected to facilitate the use of FECI common stock
for future acquisitions and as a source of capital;
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o the Transactions are expected to increase the ability of FECI to engage
in future corporate transactions, if desirable, such as establishing a
REIT or effecting a spinoff of certain businesses, which would be more
difficult so long as a majority of the FECI common stock is held by St.
Joe; and
o the Transactions will provide a more stable platform for retaining and
recruiting top quality management and increase flexibility in employee
compensation tied to shareholder value creation.
As a result of tax constraints relating to the Distribution and
certain related restrictions contained in the Distribution Agreement, FECI's
ability to engage in future corporate transactions, including some of those
listed above, may be limited for a period of time. See "Proposal One:
Adoption of the Plan of Merger - Tax Matters."
Economic and Financial Factors. The Special Committee and the
FECI Board considered economic and financial factors associated with the
Transactions, such as the effect of the Transactions on the expected trading
price of both classes of FECI common stock following the Distribution and the
impact of the Transactions on FECI's financial position following the
Distribution. In this regard they considered the following factors:
o the Transactions are structured to be tax-free to FECI shareholders;
o the opinion of DLJ that the Recapitalization and Distribution, taken as
a whole, are fair from a financial point of view to the shareholders of
FECI other than St. Joe. See " -- Description of the DLJ Fairness
Opinion";
o the advice of DLJ as to the potential effect of having two classes of
common stock and the analysis of the historical trading values of the
stock of other companies having a dual class structure. See " --
Description of the DLJ Fairness Opinion";
o the advice of DLJ that, following the Transactions, FECI would be more
likely to gain equity research coverage;
o the advice of DLJ concerning the potential adverse impact on the market
price of the FECI common stock for an indeterminate period following the
Distribution due to sales of the Class B Common Stock by shareholders of
St. Joe;
o the restructuring of FECI's real estate relationship with St. Joe in a
manner that will allow FECI to capitalize on the high quality services
provided by St. Joe while increasing FECI's direct control over its
portfolio as well as facilitating market diversification;
o the Transactions will provide FECI with greater flexibility with respect
to managing capital risk through third-party equity or debt investment,
as appropriate at FECI's discretion, independent of St. Joe's control;
and
o the Real Estate Transactions will provide GCC with $6,000,000 in three
equal installments as additional consideration for GCC's willingness to
enter into certain of the Real Estate Agreements with St. Joe.
Tax Restrictions. The Special Committee and the FECI Board
considered that, as a result of the Transactions, FECI will be subject to a
number of tax restrictions with respect to which FECI has provided indemnities
to St. Joe. In that regard they considered the following factors:
o the restrictions on the ability of FECI to undertake certain
transactions involving the issuance or acquisition of its shares
following the Distribution, which, if undertaken, could impair the
tax-free status of the Distribution to St. Joe and its shareholders, as
well as the reduced likelihood of such a transaction because of the
potential liability to FECI associated with the loss of such status;
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o FECI's obligation to indemnify St. Joe in the event that FECI or its
shareholders takes any actions which result in the Distribution failing
to qualify as a tax-free distribution;
o The limitations in the Shareholders Agreement on the ability of the
Charities to dispose of FECI stock, which is intended to prevent the
Distribution from losing its tax free status due to actions by the
Charities; and
o the benefits of having the protections of the Amended Charter and
Amended By-laws in place following the Distribution when FECI may be
vulnerable to an unsolicited takeover proposal, particularly during the
first two years following the Distribution, when the risk to FECI of
liability under the tax indemnity is greatest.
Governance Matters. The Special Committee and the FECI Board
considered that, as a result of the Transactions, FECI might be more
vulnerable to third parties seeking to acquire control of FECI and/or the FECI
Board. In that regard they considered the following factors:
o the potential impact of the Amended Charter and Amended By-laws and the
proposed Rights Plan generally on the ability of a third party to
acquire control of FECI or the FECI Board;
o the risk that the dual class structure could lead to a person or group
gaining control of the FECI Board through acquisitions of only the Class
B Common Stock and the fact that the risk is mitigated by the Amended
Charter, Amended By-laws and proposed Rights Plan;
o that the ability of the holders of Class B Common Stock to elect at
least 80% of the FECI Board will not provide such holders with
materially different rights than St. Joe currently possesses because St.
Joe presently has the ability to elect the entire FECI Board (other than
in the event that other FECI shareholders effectively cumulate their
votes, in which case St. Joe would still possess the ability to elect a
majority of the FECI directors);
o that the Amended Charter would not be implemented unless the Plan of
Merger was adopted as described under "Proposal One: Adoption of the
Plan of Merger -- Required Vote"; and
o that after the Recapitalization, subject to the restrictions of the
Distribution Agreement, holders of a majority of the total outstanding
common stock (voting together as a single class) can effect a further
recapitalization of FECI so as to eliminate the two-class structure and
that the effectiveness of this provision in the Amended Charter will be
expressly conditioned on the receipt of IRS approval (and that the
receipt of IRS approval for this provision is not a condition to FECI's
obligation to consummate the Recapitalization).
Other Factors Considered. The Special Committee and the FECI
Board considered additional factors in making their determination that the
Transactions are advisable and in the best interests of FECI and its
shareholders, including the FECI shareholders other than St. Joe. In this
regard, they considered the following factors:
o that St. Joe had considered and rejected alternative transactions with
respect to rationalizing its ownership of FECI;
o that St. Joe could accomplish a spin-off of FECI without the approval of
the FECI Board or the FECI shareholders (through the creation of a
holding company structure) and that such a transaction would merely
replace St. Joe with a new controlling shareholder of FECI and therefore
would not provide the FECI shareholders with many of the expected
benefits of the Transactions;
o the detriments of maintaining the status quo with FECI continuing as a
majority-owned subsidiary of St. Joe;
o the limitations on seeking alternatives to the Distribution because of
St. Joe's control of a majority of the outstanding shares of FECI common
stock;
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o the holders of the Class A Common Stock (together with holders of voting
Preferred Stock, if any) will be assured of the right to elect at least
two directors compared with their current inability to control the
election of any FECI directors in light of St. Joe's control of a
majority of the shares of FECI common stock (other than through
cumulative voting, which could result in their control of the election
of four directors but would require considerable concerted action among
the shareholders);
o the director and trustee overlap among FECI, St. Joe and the Charities;
o the terms of the Distribution Agreement (including the Plan of Merger
and the proposed Rights Plan), the Shareholders Agreement, the Amended
Charter, the Amended By-laws and the Real Estate Agreements and the
likelihood that the conditions to the Transactions would be satisfied;
o that the Real Estate Agreements may limit FECI's flexibility in pursuing
real estate transactions;
o each of the considerations described above under "Certain
Considerations";
o the condition to the Recapitalization that the Plan of Merger and the
Amended Charter be approved by a majority of the outstanding shares of
FECI common stock not held by St. Joe or its affiliates; and
o the condition to the Recapitalization that the Amended Charter be
approved by at least two-thirds of the outstanding shares of FECI common
stock.
After a detailed consideration of these factors, the Special
Committee and the FECI Board concluded that the Transactions are advisable and
in the best interests of FECI and its shareholders, including the FECI
shareholders other than St. Joe. The discussion and factors described above
were the factors considered by the Special Committee and by the FECI Board in
their assessment of the Transactions. The Special Committee and the FECI Board
did not quantify or attach any particular weight to the various factors that
they considered in reaching their respective determinations. Different members
may have assigned different weights to different factors. In reaching their
respective determinations, the Special Committee and the FECI Board took the
various factors into account collectively and did not perform a
factor-by-factor analysis.
Description of the DLJ Fairness Opinion
The Special Committee engaged DLJ to act as its financial
advisor in connection with the proposed Recapitalization and Distribution and
to evaluate the effect from a financial point of view on the holders of FECI
common stock other than St. Joe, of the Recapitalization and Distribution. On
October 26, 1999, DLJ presented to the Special Committee its oral opinion
(which was later confirmed in writing dated October 26, 1999, the "DLJ
Opinion") that, as of such date, and based on and subject to the assumptions,
limitations and qualifications as set forth in the DLJ Opinion, the
Recapitalization and Distribution, taken as a whole, are fair from a financial
point of view to the shareholders of FECI other than St. Joe.
The full text of the DLJ Opinion is attached hereto as Appendix
G to this Proxy Statement. The summary of the DLJ Opinion set forth below is
qualified in its entirety by reference to the full text of the DLJ Opinion.
FECI shareholders are urged to read the DLJ Opinion carefully and in its
entirety for the procedures followed, assumptions made, other matters
considered and limitations of the review by DLJ in connection with such
opinion.
The DLJ Opinion was prepared for the Special Committee and was
directed only to the fairness from a financial point of view to holders of
FECI common stock other than St. Joe, as of the date thereof, of the
Recapitalization and the Distribution. The DLJ Opinion does not address the
relative merits of the Recapitalization and Distribution and the other
business strategies being considered by the FECI Board nor does it express any
opinion as to the FECI Board's decision to proceed with the Recapitalization.
Insofar as the Real Estate Agreements are concerned, DLJ is not an expert in
real estate management or development and did not participate in the
negotiations among FECI, GCC and St. Joe relating to the Real Estate
Agreements. Consequently, DLJ expressed no opinion as to the effect of the
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Real Estate Agreements, individually or as a whole, on any stockholders of
FECI. DLJ also expressed no opinion as to the price at which the Class A
Common Stock or Class B Common Stock will actually trade at any time. The DLJ
Opinion does not constitute a recommendation to any FECI shareholder as to how
such shareholder should vote on the Plan of Merger or the Amended Charter.
The Special Committee selected DLJ as its financial advisor
because DLJ is an internationally recognized investment banking firm that is
familiar with FECI and its business. As part of its investment banking
business, DLJ is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
In arriving at its opinion, DLJ reviewed the various
Transaction Documents, the Amended Charter and the Amended By-laws, each in
the form distributed to the Special Committee on October 22, 1999 and reviewed
financial and other information that was publicly available or furnished to
DLJ by FECI (including information provided during discussions with FECI
management), GCC or their respective representatives. In addition, DLJ
conducted such financial studies, analyses and investigations as DLJ deemed
appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the
accuracy and completeness of all of the financial and other information that
was available to DLJ from public sources and that was provided to DLJ by FECI,
GCC or their respective representatives or that was otherwise reviewed by DLJ.
DLJ did not assume any responsibility for making any independent evaluation of
any assets or liabilities of FECI or for making any independent verification
of any of the information reviewed by DLJ.
In rendering its opinion, DLJ considered the factors described
in detail above in "- FECI's Reasons for the Transactions." DLJ also
considered the pro forma ownership of FECI common stock after giving effect to
the Transactions and in particular the impact of the expected significant
ownership of FECI Class B Common Stock by the Charities as described under
"Proposal One: Adoption of the Plan of Merger - Ownership of FECI Common Stock
Following the Distribution." DLJ also reviewed the corporate governance
provisions, economic terms and stock price trading patterns relating to
certain recent transactions with similar dual class ownership structures.
Dual Class Analysis
DLJ also examined the historical trading prices of 14 public
companies with dual classes of common stock. Based on the dual class analysis
described below, DLJ concluded that there would be no way to predict with
confidence what trading differences, if any, would likely arise between the
two classes of FECI common stock after consummation of the Transactions and
whether any such differences would be material. For purposes of DLJ's
analysis, DLJ eliminated as a precedent any public company which
(notwithstanding its dual class structure):
o did not have a market capitalization for each class of common stock
of at least $250 million;
o provided a dividend preference to one class of common stock;
o was subject, at any time during the period reviewed for this
analysis, to a tender offer or other merger activity; or
o experienced an unusually large disparity in the average daily trading
volume of one class of common stock versus the other class.
The factors described above were used to exclude companies from
the analysis performed by DLJ because DLJ believed that such factors were
likely to have a significant impact on the stock performance of the companies
in question, leading to an inconclusive result as to the specific impact of
the dual class structure on the relative stock price performance.
Furthermore, none of the factors described above are expected to be applicable
to FECI upon consummation of the Transactions.
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The analysis performed by DLJ produced the following results:
o for a one-month period prior to October 22, 1999 for stock with
superior voting rights ("high vote stock") relative to the other
class of stock, the trading disparity reflected a mean discount of
0.7%, a median discount of 0.3%, a high premium of 11.8% and a low
discount of 9.9% for the period;
o for a three-month period prior to October 22, 1999 for high vote
stock, the trading disparity reflected a mean discount of 0.4%, a
median discount of 0.1%, a high premium of 13.7% and a low discount of
9.2% for the period;
o for a six-month period prior to October 22, 1999 for high vote stock,
the trading disparity reflected a mean discount of 0.5%, a median
discount of 0.6%, a high premium of 14.2% and a low discount of 9.0%
for the period;
o for a nine-month period prior to October 22, 1999 for high vote
stock, the trading disparity reflected a mean discount of 0.2%, a
median discount of 0.4%, a high premium of 14.1% and a low discount of
8.8% for the period;
o for a one-year period prior to October 22, 1999 for the high vote
stock, the trading disparity reflected a mean premium of 0.0%, a median
discount of 0.4%, a high premium of 14.1% and a low discount of 7.7%
for the period;
o for a three-year period prior to October 22, 1999 for the high vote
stock, the trading disparity reflected a mean premium of 0.0%, a median
discount of 0.2%, a high premium of 9.6% and a low discount of 5.2% for
the period; and
o for a five-year period prior to October 22, 1999 for high vote stock,
the trading disparity reflected a mean discount of 0.4%, a median
discount of 0.4%, a high premium of 8.5% and a low discount of 5.3% for
the period.
The summary set forth above describes, in summary form, the
material factors considered by DLJ in rendering the DLJ Opinion and the
material elements of the presentation made by DLJ to the Special Committee on
October 26, 1999. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of analysis and
the application of these methods to the particular circumstances and,
therefore, such an opinion is not readily susceptible to summary description.
Pursuant to the terms of its engagement agreement with DLJ,
FECI agreed to pay DLJ an aggregate fee of $1.5 million in connection with the
Transactions ($1.25 million upon delivery of the DLJ Opinion to the Special
Committee and $250,000 due upon consummation of the Transactions). In
addition, FECI agreed to reimburse DLJ, upon request by DLJ from time to time,
for all out-of-pocket expenses, including the reasonable fees and expenses of
counsel, incurred by DLJ in connection with its engagement, and to indemnify
DLJ and certain related persons against certain liabilities in connection with
the engagement, including liabilities under the United States federal
securities laws. DLJ and FECI management negotiated the terms of the fee
arrangement, and the FECI Board, including the Special Committee, was aware of
such arrangement.
In the ordinary course of business, DLJ and its affiliates may
own or actively trade the securities of FECI for their own accounts and for
the accounts of their customers and, accordingly, may at any time hold a long
or short position in FECI securities.
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Board of Directors Recommendation
The FECI Board, including the Special Committee, has given full
consideration to the Plan of Merger and the Amended Charter and has determined
that they are advisable and in the best interests of FECI and its
shareholders, including the FECI shareholders other than St. Joe. The FECI
Board, including the Special Committee acting unanimously, has approved the
Plan of Merger and the Amended Charter and recommends that you vote "FOR" the
adoption of the Plan of Merger and the Amended Charter.
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PROPOSAL ONE: ADOPTION OF THE PLAN OF MERGER
Plan of Merger
As a technical matter, the Recapitalization will be implemented
through the merger of FECI and Merger Sub. Pursuant to the Distribution
Agreement, FECI, St. Joe and Merger Sub will enter into the Plan of Merger,
which sets forth the mechanics of the Recapitalization. As a result of the
Merger, all shares of FECI common stock held by St. Joe will be exchanged for
an equal number of shares of Class B Common Stock. All other shares of FECI
common stock will be re-designated in the Merger as Class A Common Stock. The
Transactions cannot be consummated without the appropriate approval by the
FECI shareholders of the Plan of Merger.
For a description of the Plan of Merger, see "Description of
the Transaction Documents - Plan of Merger."
Recommendation of the FECI Board
THE FECI BOARD, INCLUDING THE SPECIAL COMMITTEE, HAS GIVEN FULL
CONSIDERATION TO THE PLAN OF MERGER AND HAS DETERMINED THAT IT IS ADVISABLE
AND IN THE BEST INTERESTS OF FECI AND ITS SHAREHOLDERS, INCLUDING THE FECI
SHAREHOLDERS OTHER THAN ST. JOE. THE FECI BOARD, INCLUDING THE SPECIAL
COMMITTEE ACTING UNANIMOUSLY, HAS APPROVED THE PLAN OF MERGER AND RECOMMENDS
THAT YOU VOTE "FOR" THE ADOPTION OF THE PLAN OF MERGER.
Required Vote
Each outstanding share of FECI common stock is entitled to one
vote on each matter which may properly come before the Special Meeting. Under
Florida law, adoption of the Plan of Merger requires approval by a majority of
the outstanding shares of FECI common stock. As of October 27, 1999, St. Joe
owned approximately 53.9% of FECI's outstanding common stock and has agreed to
vote such shares in favor of adoption of the Plan of Merger and Nemours owned
approximately 5.0% of FECI's outstanding common stock and is likewise expected
to vote in favor of such adoption. Accordingly, approval of the Plan of
Merger by a majority of the outstanding shares of FECI common stock is
expected. In addition, although not required by law, the FECI Board and St.
Joe have agreed that the Recapitalization will be implemented only if the Plan
of Merger is also adopted by the holders of a majority of the shares of FECI
common stock, other than shares held by St. Joe or its affiliates (including
the Charities).
Ownership of FECI Common Stock Following the Distribution
Upon consummation of the Transactions, Nemours and the duPont
Trust will each own a significant percentage of the outstanding common stock
of FECI. Given that Nemours and the duPont Trust are each affiliates of one
another (due to the fact that many of the same individuals serve as directors
of Nemours and trustees of the duPont Trust), FECI expects that the Charities
will vote their shares of FECI common stock in concert.
As of October 27, 1999, Nemours held approximately 1,800,896
shares of the common stock of FECI, representing approximately 5.0% of the
equity of FECI. Upon the Merger, the common stock held by Nemours will be
re-designated as Class A Common Stock, will represent approximately 10.8% of
the outstanding shares of Class A Common Stock (and such Class A Common Stock
will still reflect approximately 5.0% of the equity of FECI). In addition, as
of October 27, 1999, the Charities held, in the aggregate, approximately 59.6%
of the equity securities of St. Joe and will therefore own an equal percentage
of the outstanding shares of Class B Common Stock following the Distribution,
representing approximately 32.1% of the outstanding equity of FECI.
Accordingly, upon consummation of the Distribution, the Charities are expected
to beneficially own, in the aggregate, approximately 37.1% of the outstanding
equity of FECI. As a result of their holdings of FECI common stock,
particularly the expected holding by the duPont Trust of a majority of the
outstanding shares of Class B Common Stock, the Charities may be expected to
exert substantial influence over the election of FECI directors and the
affairs of FECI following the Distribution.
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Notwithstanding the fact that the Charities are expected to
own, in the aggregate, approximately 59.6% of the outstanding shares of Class
B Common Stock, because of the operation of the Class B Significant Holder
Voting Limitation, the Charities will be restricted in their ability to freely
vote their shares of Class B Common Stock. In accordance with the formula
contained in the Amended Charter, based on their expected holdings, the
Charities will only be permitted to freely vote up to 7,875,551 of their
11,681,210 shares of Class B Common Stock. The remaining 3,805,659 shares of
Class B Common Stock expected to be held by the Charities will be deemed voted
pro rata in accordance with the votes of all other holders of Class B Common
Stock (other than other Significant Holders, if any). See "Proposal Two:
Adoption of the Amended Charter -- Corporate Governance Amendments --
Limitation on Voting Rights of Significant Holders of Class B Common Stock."
Based on the Charities' expected holdings, the shares which the
Charities' may vote freely as of the Distribution will represent approximately
40.2% of the outstanding shares of Class B Common Stock. Accordingly, in any
proxy contest for the election of FECI directors, the Charities should be able
to control the election of three directors (through cumulative voting). The
Charities' ability to control the election of three directors of what will be
a ten-director FECI Board (30%) equates with the 32.1% "economic interest"
represented by all of the shares of Class B Common Stock expected to be owned
by the Charities upon the Distribution in relation to all outstanding shares
of FECI common stock expected to be outstanding at such time. Without the
Class B Significant Holder Voting Limitation, the Charities would have been
able to control in any proxy contest for the election of FECI directors five
directors (through cumulative voting).
Nemours will be able to freely vote all of its shares of Class
A Common Stock.
Pursuant to the Shareholders Agreement, the Charities will be
subject to restrictions on their ability to transfer or acquire additional
shares of FECI common stock. See "Description of the Transaction Documents --
Shareholders Agreement."
Effects of the Recapitalization on Outstanding Shares
Each outstanding share of FECI common stock (other than shares
held by St. Joe) will be re-designated in the Merger as a share of Class A
Common Stock. Each share of FECI common stock held by St. Joe will be
converted in the Merger into one share of Class B Common Stock. The Class A
Common Stock and Class B Common Stock will be substantially identical in all
respects except for voting rights with respect to the election or removal of
FECI directors. The holders of Class A Common Stock (voting together with
holders of voting Preferred Stock, if any) will be entitled to elect that
number of directors that constitutes 20% of the authorized number of members
of the FECI Board (or, if such 20% is not a whole number, then the nearest
lower whole number). Each director elected by the holders of the Class A
Common Stock and Preferred Stock, if any, will be designated a "Class A
Director." Each share of Class A Common Stock (and Preferred Stock, if any)
will have one vote in the election of Class A Directors. The holders of Class
B Common Stock will be entitled to elect the remaining directors of FECI, each
of which will be designated a "Class B Director." Each share of Class B
Common Stock will have one vote in the election of Class B directors. Holders
of FECI common stock will be permitted to cumulate their votes with respect to
the election of directors of the appropriate class. Holders of 15% or more of
the outstanding shares of Class B Common Stock will be subject to the Class B
Significant Holder Voting Limitation.
Class A Directors will only be able to be removed from office
(other than at the expiration of their terms) for cause upon the affirmative
vote of the holders of at least a majority of the outstanding shares of Class
A Common Stock (and voting Preferred Stock, if any). Class B Directors will
only be able to be removed from office (other than at the expiration of their
terms) for cause upon the affirmative vote of the holders of at least a
majority of the outstanding shares of Class B Common Stock. However, no FECI
director will be able to be removed from office if the number of votes of the
appropriate class sufficient to elect the director under cumulative voting is
voted against his or her removal.
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Tax Matters
St. Joe is in the process of requesting a ruling from the
Internal Revenue Service (the "IRS Ruling") to the effect that the
Recapitalization and the Distribution will qualify as tax-free transactions
for U.S. federal income tax purposes under Sections 354 and 355 of the
Internal Revenue Code of 1986, as amended (the "Code"), respectively. St. Joe
expects to receive this IRS Ruling, the receipt of which is a condition to the
consummation of the Transactions.
Implementation of the Recapitalization will be tax-free for
federal income tax purposes to FECI and its stockholders based upon the facts
and law as of the date of this Proxy Statement. To preserve the tax-free
status of the Distribution, FECI has agreed (1) to comply with and otherwise
not take action inconsistent with each representation and statement made to
the Internal Revenue Service in the request for the IRS Ruling and (2) not to
take or fail to take any action after the Distribution that could prevent the
Distribution from qualifying as a tax-free transaction or, have a material
adverse impact on the known tax consequences of the Distribution to St. Joe.
If FECI fails to comply with these obligations or takes or fails to take any
other action (including those described below without regard to when such
actions occur) and such failure, act or omission contributes to the
Distribution not being tax-free to St. Joe or its stockholders, FECI will
generally be required to indemnify St. Joe and each member of the consolidated
group of which St. Joe is a member, for any taxes incurred by St. Joe, any
member of its group or any stockholder of St. Joe, arising therefrom.
One of the ways the Distribution can lose its tax-free status
to St. Joe is pursuant to Section 355(e) of the Code, which provides that the
Distribution will be taxable to St. Joe (but not to its shareholders) if it is
part of a plan (or series of related transactions) pursuant to which one or
more persons acquire directly or indirectly stock representing a 50% or
greater interest (based on either vote or value) in St. Joe or FECI. Pursuant
to 355(e), acquisitions that occur during the two-year period before the
Distribution or the two-year period after the Distribution are subject to a
rebuttable presumption that they are "part of a plan." Recently promulgated
proposed Treasury Regulations would, if finalized, provide a safe harbor for
certain acquisitions occurring more than six months after the Distribution.
There is no assurance as to when and in what form these regulations will be
finalized. If St. Joe becomes subject to tax under Section 355(e), its tax
liability will be based upon the difference between the fair market value of
the Class B Common Stock at the time of the Distribution and its adjusted
basis in such stock at that time, and will be substantial.
Accordingly, in order to preserve the tax-free status of the
Distribution (both pursuant to Section 355(e) as well as other subsections of
Section 355 of the Code), in addition to the general covenants discussed
above, the Distribution Agreement contains a number of specific restrictions
on FECI in the post-Distribution period. Included among those restrictions
are limitations on FECI's ability to undertake the following actions unless
its obtains an opinion of tax counsel or an IRS ruling that such action will
not cause the Distribution to lose its tax-free status:
o Changing its Articles of Incorporation or By-laws regarding (1) the
composition or size of its Board of Directors, (2) the manner in
which its Board is elected and (3) the duties and responsibilities of
its Board;
o Amending its Articles of Incorporation or take any other action that
will provide for (1) the conversion of any class of stock into a
different class of stock, (2) a change in the voting rights of any
class of stock, or (3) any action having a similar effect to (1) and
(2) above; and
o During the two-year period following the Distribution:
-- Voluntarily dissolving or liquidating, or otherwise discontinuing
the conduct of any portion of its active trade or business if
such action would cause a dissolution or liquidation of FECI and
(ii) except in the ordinary course of business, disposing of more
than 60% of its gross assets or 60% of the consolidated business
assets of it and its subsidiaries;
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-- Buying back its stock unless the buyback is motivated by a
corporate business purpose, the stock repurchased is widely held,
the acquisition is made on the open market and less than 20% of
FECI's stock is repurchased;
-- Buying back stock if such buyback would cause the shares of Class
B Common Stock to constitute less than 80% of the total combined
voting power of all outstanding voting stock of FECI;
-- Issuing any stock (other than in employee related issuances in
the ordinary course of business) if as a result of such stock
issuances the number of shares of Class B Common Stock
distributed to St. Joe's shareholders will constitute less than
80% of the voting power of all FECI voting stock; and
-- Entering into any acquisition transaction or permitting any
acquisition transaction to occur, in either case involving the
acquisition of more than 5% of its stock pursuant to either (1) a
redemption of rights under a stockholders rights plan, (2) a
determination that a tender offer for the stock of FECI is a
"permitted offer" under a rights plan or (3) the approval of any
transaction involving the acquisition of another corporation or
business by FECI or the acquisition by another person of FECI.
In addition, for the two-year period following the
Distribution, FECI has agreed to continue to conduct the "active trade or
business" required in order to receive the IRS Ruling primarily through
officers and employees of FECI and its subsidiaries who are not also officers
or employees of St. Joe or its affiliates. See "Description of the Transaction
Documents - The Distribution Agreement - Indemnification and Other
Agreements." The above summary of the tax covenants included in the
Distribution Agreement is qualified in its entirety by the Distribution
Agreement which is attached as Appendix A.
FECI Board Following the Recapitalization
If the Merger is consummated, in accordance with the Amended
By-laws, the FECI Board will be expanded from nine to ten directors. In
addition, Mr. Rummell will tender his resignation from the FECI Board
effective upon consummation of the Merger. In order to fill the resulting two
director vacancies, the remaining FECI directors expect to appoint two new
independent directors to the FECI Board.
In addition, [ ] and [ ] will be designated as Class A
Directors and the remaining eight directors will be designated as Class B
Directors. Thereafter, the Class A Directors will be elected by the holders
of the Class A Common Stock (and the holders of voting Preferred Stock, if
any) and the Class B Directors will be elected by the holders of the Class B
Common Stock.
New York Stock Exchange Approvals
Approval from the New York Stock Exchange, Inc. (the "NYSE") is
required to effect the Recapitalization. The FECI common stock is currently
listed on the NYSE under the symbol "FLA." Following the Recapitalization and
Distribution, the Class A Common Stock is expected to be listed on the NYSE
under the symbol "[ ]" and the Class B Common Stock is expected to be listed
on the NYSE under the symbol "[ ]"
Federal Securities Law Consequences
All shares of Class B Common Stock received by shareholders of
St. Joe following the Recapitalization and Distribution will be freely
transferable, except that shares of Class B Common Stock received by persons
who are deemed to be affiliates of FECI may be resold by them only in
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transactions permitted by the resale provision of Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), or otherwise in
compliance with (or pursuant to an exemption from) the registration
requirements of the Securities Act. Persons deemed to be affiliates of FECI
are those individuals or entities that control, are controlled by, or are
under common control with, FECI and generally include the executive officers
and directors of FECI.
Pursuant to the Shareholders Agreement, the Charities will be
subject to additional restrictions on their ability to transfer shares of
Class A Common Stock or Class B Common Stock. See "Description of the
Transaction Documents -- Shareholders Agreement -- Restrictions on Transfer."
No Appraisal Rights
Holders of FECI common stock are not entitled to appraisal
rights under Section 607.1302 of the Florida Business Corporation Act (the
"FBCA") in connection with any aspect of the Transactions.
THE FECI BOARD, INCLUDING THE SPECIAL COMMITTEE ACTING
UNANIMOUSLY, RECOMMENDS THAT YOU VOTE "FOR" ADOPTION OF THE PLAN OF MERGER.
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PROPOSAL TWO: ADOPTION OF THE AMENDED CHARTER
The Amended Charter includes changes to the Articles of
Incorporation of FECI that are necessary to effect the Recapitalization. In
addition, the FECI Board believes that certain of the provisions in the
Amended Charter are advisable to foster FECI's growth as an independent
company following the Distribution and, in particular, to help protect FECI
shareholders from unsolicited takeover proposals which unfairly discriminate
between FECI shareholders.
The following description of the Amended Charter is not
complete and is qualified in its entirety by reference to the proposed Amended
and Restated Articles of Incorporation, a copy of which is attached hereto as
Appendix D. All shareholders are urged to read carefully the proposed Amended
and Restated Articles of Incorporation in its entirety.
Amendments Necessary to Effect the Recapitalization
Authorization of Class A Common Stock and Class B Common Stock
In order to effect the Recapitalization, the FECI common stock
will be reclassified into two classes of common stock: (1) the Class A Common
Stock, which will entitle the holders thereof (together with the holders of
voting Preferred Stock, if any) to vote, separately as a single class, for the
election of 20% (rounded downward, if necessary, to the nearest whole number)
of the directors of FECI (but in no event less than one director) and (2) the
Class B Common Stock, which will entitle the holders thereof to vote,
separately as a class, for the election of at least 80% of the directors of
FECI (but in no event less than four directors).
For all matters other than the election or removal of
directors, the Class A Common Stock and Class B Common Stock are identical and
vote together as a single class, with one vote per share, except as required
by law. For example, the Class A Common Stock and the Class B Common Stock
are entitled to identical per share dividends and consideration upon a merger
or liquidation of FECI.
Creation of Class A and Class B Directors
Upon consummation of the Recapitalization, two directors of
FECI will be designated as "Class A Directors" and the remaining eight
directors will be designated "Class B Directors." [ ] and [ ] will become the
Class A Directors upon consummation of the Recapitalization. Thereafter, the
Class A Directors will be elected by the holders of the Class A Common Stock
(and the holders of voting Preferred Stock, if any) and the Class B Directors
will be elected by the holders of the Class B Common Stock. Shareholders will
be permitted to cumulate their votes in connection with the election (or
removal) of directors.
Increased Board Size
The Amended Charter proposes to increase the minimum number of
directors on the FECI Board from three to five, and requires any increase in
the number of directors to be only in whole-number multiples of five. This
provision of the Amended Charter will ensure that the holders of the Class A
Common Stock (together with the holders of voting Preferred Stock, if any)
will have the right to elect at least one director for every four directors
elected by the holders of the Class B Common Stock. The Amended By-laws fix
the size of the FECI Board at ten directors.
Authorized Capital
The Amended Charter increases FECI's authorized capital from
50,000,000 to 150,000,000 shares of common stock (consisting of 50,000,000
shares of Class A Common Stock and 100,000,000 shares of Class B Common Stock)
and 20,000,000 shares of Preferred Stock. The FECI Board believes that such
an increase in FECI's authorized capital and the authorization of Preferred
Stock will ensure that there remains a sufficient authorized number of shares
of common stock and Preferred Stock after the Recapitalization for (1) future
sales of FECI's securities to raise additional capital, (2) future
acquisitions of other companies or their businesses or assets, (3)
establishing strategic relationships with third parties and (4) providing
options or other stock incentives to FECI employees, consultants or others. In
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addition, the authorization of Preferred Stock and the large number of shares
of authorized Class B Common Stock relative to the number of authorized shares
of Class A Common Stock will be necessary for the adoption of the proposed
Rights Plan (and the exercise of any rights under the Rights Plan).
Corporate Governance Amendments
Amendments Designed to Protect FECI Shareholders From Unsolicited
Takeover Attempts That Unfairly Discriminate Between FECI Shareholders
The proposed Transactions may make it easier for a single
person or group of related persons to gain control of the FECI Board. Prior to
the Transactions, a person seeking to elect a majority of the FECI Board would
need to hold or control the vote of a majority of the total outstanding shares
of FECI common stock. Following the Recapitalization, however, holders of
Class B Common Stock will have the right to elect 80% of the FECI Board. Thus,
a person or group of persons could gain control of the FECI Board by acquiring
control of the vote of the outstanding Class B Common Stock. Although the
Class B Significant Holder Voting Limitation (and cumulative voting) should
significantly reduce the ability of any person to acquire control of the vote
of the outstanding Class B Common Stock, a person or group may still acquire
100% of the outstanding shares of Class B Common Stock. In such a scenario,
notwithstanding the Class B Significant Holder Voting Limitation, there would
be no other holder of Class B Common Stock to vote against the acquirer.
Accordingly, the acquirer would be able to control the election of all eight
Class B Directors at the next annual meeting of shareholders.
Upon the consummation of the Recapitalization, the Class B
Common Stock will represent approximately 53.9% of the outstanding equity of
FECI, based on St. Joe's ownership of FECI common stock as of October 27,
1999. If at any time FECI issues additional shares of Class A Common Stock,
without issuing at least an equal number of shares of Class B Common Stock,
the equity interest in FECI represented by the Class B Common Stock will be
diluted. Thus, over time, shares of Class B Common Stock may no longer
represent a majority of the outstanding FECI equity. Nevertheless, in order
to preserve the tax-free status of the Transactions, the Class B Common Stock
will at all times be entitled to elect 80% of the FECI Board. The FECI Board
was concerned that, in order to take control of FECI, an unsolicited acquirer
may attempt to purchase all of the outstanding shares of Class B Common Stock
and pay a "control premium" over the market price for such shares without
making any offer to the holders of the Class A Common Stock who at such time
may own a majority of the outstanding equity in FECI. The Class B Significant
Holder Voting Limitation is designed to discourage the acquisition of control
of FECI through the purchase of less than all of the outstanding shares of
Class B Common Stock.
The FECI Board recommends the adoption of the proposed Amended
Charter, which together with the Amended By-laws and proposed Rights Plan, are
designed, in part, to mitigate the concerns described above. The provisions of
the Amended Charter described below, together with the Amended By-laws and
proposed Rights Plan, are intended to make it more difficult for a potential
acquirer of FECI to take advantage of FECI's new capital structure by means
of a transaction which is not negotiated with the FECI Board, and thus reduce
the vulnerability of FECI to an unsolicited takeover proposal which
discriminates between holders of Class A and Class B Common Stock. These
amendments are designed to enable FECI, particularly in the initial years of
its existence as a corporation independent from St. Joe, to develop its
business in a manner which will foster its growth without the threat of a
takeover not deemed by the FECI Board to be in the best interests of FECI and
all of its shareholders, and to reduce to the extent practicable the potential
disruption entailed by such a threat. Separating FECI from St. Joe as a
result of the Distribution would, absent these amendments, increase FECI's
vulnerability to such attempted takeovers.
Additional Effects of Corporate Governance Amendments
Because St. Joe currently owns approximately 53.9% of the
outstanding FECI common stock, there is at present no possibility of a person
other than St. Joe gaining control of the FECI Board without St. Joe's
consent. After consummation of the Transactions, St. Joe will no longer be
the majority shareholder of FECI and approximately 62.1% of the outstanding
FECI common stock will be publicly held. Accordingly, the Transactions could
render FECI more
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susceptible to unsolicited takeover bids from third parties that would not be
in the best interests of FECI and its shareholders.
The FECI Board believes that, when public companies do not have
measures in place to address unsolicited takeover bids, such companies can be
and are acquired, and that changes in control of companies can and do occur at
prices below the best price that might otherwise be attainable. Many public
companies have adopted provisions which effectively require negotiations with
the board of directors of the company. The FECI Board desires to provide FECI
with the flexibility to grow its business without being subject to either
unsolicited takeover proposals at an inadequate price or unfair takeover
tactics such as those which would discriminate between the holders of Class A
and Class B Common Stock.
In addition, as discussed above under "Proposal One: Adoption of
the Plan of Merger -- Tax Matters," FECI has agreed to indemnify St. Joe for
tax liabilities in certain circumstances if the Distribution becomes subject to
Federal tax (including under certain circumstances if FECI is acquired).
Accordingly, the Amended Charter, the Amended By-laws and the proposed Rights
Plan also help protect FECI and its shareholders from the significant potential
liabilities resulting from the loss of the tax-free status of the Distribution.
The overall impact of the Amended Charter, together with the
Amended By-laws and the proposed Rights Plan, may be to deter attempts to gain
control of FECI through control of the FECI Board, the use of shareholder
action or amendment of FECI's Articles of Incorporation or By-laws. In
addition to discouraging unsolicited takeover attempts which unfairly
discriminate between holders of FECI common stock, these provisions may
generally render more difficult or discourage attempts to assume control of
FECI through a merger or tender offer which is not negotiated with the FECI
Board. At the same time, these proposals may reduce the ability of
shareholders to influence the governance of FECI (although they do not
preclude proxy contests for election to the FECI Board). While it is possible
for the proposed corporate governance amendments and the Rights Plan to be
misused by FECI to resist reasonable takeover proposals which would be in the
interests of all FECI shareholders, the FECI Board is aware of, and is
committed to, its fiduciary obligations not to misuse such provisions.
Increase in Authorized Capital Stock
As described above, the increase in authorized capital stock
provided for in the Amended Charter is designed to ensure that there remains a
sufficient authorized number of shares of common stock and Preferred Stock
after the Recapitalization for various corporate purposes. If the Amended
Charter is adopted, the FECI Board would be able to issue such additional
shares without further shareholder approval, except as may be required by
applicable law or exchange rules. In addition, FECI shareholders have no
statutory preemptive rights with respect to future issuances of FECI common
stock or preferred stock. The FECI Board has no present agreement or
arrangement, plan or understanding with respect to the issuance of any such
additional shares, other than under its existing employee benefits plans. The
increase in FECI's authorized capital will not have any immediate effect on
the rights of existing FECI shareholders. To the extent that the additional
authorized shares are issued in the future, however, they will decrease the
then-existing shareholders' percentage equity ownership and, depending on the
price at which they are issued, could be dilutive to the then-existing
shareholders. Shares of FECI's authorized and unissued common stock could
(within the limits imposed by applicable law and NYSE rules) be issued in one
or more transactions that would make a change in control more difficult, and
therefore less likely. The issuance of additional shares by FECI would,
however, be limited by tax constraints relating to the Distribution. See
"Proposal One: Adoption of the Plan of Merger -- Tax Matters."
Authorization of "Blank Check" Preferred Stock
The Amended Charter allows the FECI Board to issue at any time
up to 20,000,000 shares of "blank check" Preferred Stock, which means that the
Board may designate the rights and terms of such stock at any time, without
further shareholder approval. The FECI Board believes that this ability to
issue one or more series of Preferred Stock, which is a common financing tool
used by many public companies, will provide flexibility in structuring
possible future financings and acquisitions, and in meeting other corporate
needs. In addition, the authorization of Preferred Stock
31
<PAGE>
provided for in the Amended Charter will be necessary for FECI to adopt the
proposed Rights Plan. See "Description of the Transaction Documents - Rights
Plan."
Although the FECI Board has no present plans to issue any
preferred stock, it could issue a series of preferred stock that could impede
the completion of a merger, tender offer or other takeover attempt.
Limitation on Voting Rights of Significant Holders of Class B
Common Stock
In order to reduce the ability of an unsolicited acquirer
gaining control of the FECI Board solely by virtue of owning a large block of
Class B Common Stock, the Class B Significant Holder Voting Limitation will
limit such an acquirer's ability to freely vote its shares of Class B Common
Stock with respect to the election or removal of FECI directors. The Class B
Significant Holder Voting Limitation provides that if any Significant Holder
beneficially owns 15% or more of the outstanding shares of Class B Common
Stock, the Significant Holder will be entitled to vote, in its sole
discretion, any shares of Class B Common Stock up to the Significant Holder's
"Applicable Shares" (as described below). Any shares of Class B Common Stock
in excess of the number of Applicable Shares (the "Excess Shares") may be
voted by the Significant Holder only in accordance with the votes of all other
shares of Class B Common Stock by other holders (or with respect to other
holders who are Significant Holders, in accordance only with the votes of the
Applicable Shares of the other Significant Holders) on a pro rata basis for
each director candidate.
A Significant Holder's "Applicable Shares" are the number of
shares of Class B Common Stock equal to (1) the Significant Holder's "Economic
Interest" (as described below), (2) divided by 0.80 and (3) multiplied by the
total number of outstanding shares of Class B Common Stock rounded to the
nearest whole number. The total number of outstanding shares of Class B
Common Stock immediately upon consummation of the Distribution is expected to
be 19,609,216 shares, based on St. Joe's ownership of FECI common stock as of
October 27, 1999. Accordingly, the Applicable Shares of any Significant
Holder as of the Distribution, expressed in terms of a formula, would be:
Economic Interest
Applicable Shares = ----------------- x 19,609,216
0.80
A Significant Holder's "Economic Interest" is equal to (1) the
number of shares of Class B Common Stock beneficially owned by the Significant
Holder and (2) divided by the total number of shares outstanding of all classes
of capital stock of FECI immediately upon consummation of the Distribution.
The denominator is fixed as of the date of the Distribution for tax reasons
relating to Section 355(e) of the Code. Because of the fixed denominator,
even if FECI issues additional shares of Class A Common Stock in the future, a
Significant Holder's Economic Interest for purposes of the above formula will
not be diluted. The total number of shares outstanding of all classes of
capital stock of FECI immediately upon consummation of the Distribution is
expected to be 36,353,160 shares, based on the number of oustanding shares of
FECI common stock as of October 27, 1999. Accordingly, the Economic Interest
of any Significant Holder, expressed in terms of a formula, would be:
Shares of Class B Common Stock owned by Significant Holder
Economic Interest = ----------------------------------------------------------
36,353,160
Immediately upon consummation of the Distribution, the Charities are expected
to become Significant Holders due to their expected ownership, in the
aggregate, of approximately 59.6% of the outstanding shares of Class B Common
Stock (approximately 11,681,210 shares). The Charities will therefore be
restricted by the Class B Significant Holder Voting Limitation. Based on the
formula described above, the Economic Interest evidenced by the shares of
Class B Common Stock expected to be owned by the Charities will be as follows:
32
<PAGE>
11,681,210
Charities' Economic Interest = -------------- = 0.3213
36,353,160
Accordingly, the expected number of Applicable Shares that the Charities will
be entitled to freely vote, as of the date of the Distribution, will be as
follows:
0.3213
Charities' Applicable Shares = ------ x 19,609,216 = 7,875,551
0.80
The remaining 3,805,659 shares expected to be owned by the Charities will be
Excess Shares and will be treated as voted pro rata in accordance with the
votes of all other holders of Class B Common Stock.
The Class B Significant Holder Voting Limitation does not
require any shareholder to vote, or limit any shareholder's right not to vote,
any shares of Class B Common Stock. However, if any Significant Holder votes
less than all of the shares of Class B Common Stock that it beneficially owns,
a portion of the voted shares will be treated as having been voted as
Applicable Shares and a portion of the voted shares will be treated as having
voted as Excess Shares in the same ratio as the Significant Holder's total
number of Applicable Shares to Excess Shares. For example, because the ratio
of the Charities' expected Excess Shares (3,805,659) to the Charities'
expected Applicable Shares (7,875,551) is approximately 1:2.07, if the
Charities choose to vote less than all of their shares of Class B Common
Stock, one share for every 2.07 shares voted will be treated as if it were an
Excess Share (and will be voted pro rata in accordance with the votes of all
other holders of Class B Common Stock).
The purpose of the Class B Significant Holder Voting Limitation
is to restrict the number of shares of Class B Common Stock that a Significant
Holder may freely vote to the number of shares that would allow the Significant
Holder to elect the number of directors on the FECI Board which is
proportionate with the Economic Interest in FECI represented by the
Significant Holder's shares of Class B Common Stock. The Class B Significant
Holder Voting Limitation significantly reduces the ability of any Significant
Holder of Class B Common Stock acquiring control of the FECI Board solely by
virtue of owning shares of Class B Common Stock. However, if a Significant
Holder acquires all of the issued and outstanding shares of Class B Common
Stock, the Significant Holder would control the election of the eight Class B
Directors notwithstanding the Class B Significant Holder Voting Limitation
(because there would be no other holder of Class B Common Stock to vote
against the Significant Holder).
Removal of Directors for Cause
The Amended Charter provides that directors may only be
removed from office (other than at the expiration of their annual term) for
"cause." However, under Florida law, a director may not be removed, even for
cause, if the number of shareholders voting against his or her removal would
have been sufficient to elect such director under cumulative voting. Only
Class A shareholders may remove a Class A Director and only Class B
shareholders may remove a Class B Director. This provision is designed to
make it more difficult to remove incumbent directors (other than at the annual
meeting of FECI shareholders) and may therefore discourage an attempt to
obtain control of FECI through the removal of FECI's incumbent directors
(other than at the annual meeting of FECI shareholders).
Equal Consideration upon a Merger
The Amended Charter provides that holders of Class A Common
Stock and holders of Class B Common Stock will be entitled to equal
consideration upon a merger or consolidation of FECI (except holders of each
class of common stock may receive shares with the same voting attributes as
those of the class of common stock they hold). This requirement is designed
to impede takeover attempts which would unfairly discriminate between the
holders of the two classes of FECI common stock.
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<PAGE>
Vacancies to be Filled Only by Class
The Amended Charter provides that any vacancy in the office of
a Class A Director or Class B Director may be filled only by the vote of the
majority of the remaining directors in the class in which the vacancy exists
(or the sole remaining director in the class), unless there are no remaining
directors in the class, in which case the vacancy will be filled by the vote
of the majority of all remaining directors. All newly created directorships
resulting from an increase in the authorized number of directors will be
allocated between Class A Directors and Class B Directors such that at all
times the number of directorships reserved for Class A Directors shall be 20%
of the authorized number of directors and the remaining directorships are
reserved for Class B Directors. This provision may preclude a third-party from
removing incumbent directors and simultaneously gaining control of the FECI
Board by filling the resulting vacancies with its own nominees.
Advance Notice for Nomination of Director Candidates
The Amended Charter requires shareholders to follow certain
advance notice procedures to nominate individuals for election to the FECI
Board in competition with the nominees recommended by the FECI Board. In
general, notice of intent to nominate a director must be received by FECI
between 60 and 180 days before the first anniversary of the date of FECI's
notice of the previous year's annual meeting or the date of that annual
meeting, and must contain certain information concerning the person to be
nominated and the shareholder submitting the nomination. This provision is
designed to provide the FECI Board with more time to respond to a competing
nomination.
Shareholder Meetings
The Amended Charter provides that special shareholder meetings
may only be called by (1) a majority of the directors, (2) the Chairman of the
FECI Board or (3) not less than 30% of all shareholder votes entitled to be
cast on the issue for which the meeting is called (if for the election or
removal of directors, taking into account the Class B Significant Holder
Voting Limitation). The Amended Charter also requires shareholders to follow
certain advance notice procedures to call a special meeting. The Existing
By-laws, in contrast, provides that shareholder meetings may be called by the
Chairman, the President, the Board of Directors, the Executive Committee, or
the holders of not less than 10% of all of the outstanding shares entitled to
vote at the meeting. These provisions are intended to make it more difficult
for an unsolicited acquirer to control the actions of FECI through special
shareholder meetings. In addition, they may limit the ability of a minority
shareholder to call special meetings.
Shareholder Action by Written Consent
This provision explicitly prohibits any shareholder action by
written consent. This provision prevents controlling shareholders from taking
action without calling a formal meeting of shareholders. Because of the
limitations contained in the Amended Charter on the ability of shareholders to
call special meetings, this provision may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting of FECI.
See " - Shareholder Meetings."
Amendment of By-laws
The Amended Charter requires the affirmative vote of at least
two-thirds of the FECI Board or at least two-thirds of all of the outstanding
FECI capital stock (voting together as a single class) to amend the FECI
By-laws. Together with the requirements for amending the Amended Charter,
this provision makes it more difficult to change the existing rules and
procedures of FECI, including the provisions which have the effect of delaying
or preventing a change in control discussed in this section.
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<PAGE>
Amendment of Articles of Incorporation
The Amended Charter requires the approval of a majority of the
FECI Board plus 75% of the votes entitled to elect directors (voting together
as a single class) to amend the material provisions of the Amended Charter,
except as follows. The following provisions do not require super-majority
vote for amendment: Article I (name and address of FECI), Article II
(corporate purpose of FECI), Article III (term of FECI), Article IV
(registered office of FECI), Article VI, Section 1 (amount of authorized
capital stock) and Article VI, Section 2(a) (dividends). This provision makes
it difficult to change the provisions of the Amended Charter, other than
provisions which, if amended, would not have the effect of increasing FECI's
exposure to an unsolicited takeover.
Other Amendments
Indemnification. The Existing Charter states that FECI "shall
indemnify any officer, director, or any former officer or director, to the
full extent permitted by law." The Amended Charter adds detailed provisions
which expand on the fundamental principle stated in the Existing Charter. The
Amended Charter provides a non-exclusive, contractual right to indemnification
for all directors and officers of FECI and those serving as directors,
officers, employees or agents of another corporation at FECI's request. Such
indemnification is granted to the fullest extent authorized by Florida law.
The provision also includes the right to be paid all expenses incurred in
defending an action in advance of final disposition. If any claims are not
paid by FECI within 60 days of receipt of written notice by FECI (or within 20
days for expenses incurred in advance of final disposition), then the
indemnitee may bring suit against FECI. If such indemnitee is successful in
such suit, then he or she shall also be entitled to recover the costs of
bringing such action against FECI. In any such action, FECI has the burden of
proving that the indemnitee is not entitled to indemnification.
Limitation of Liability. The Amended Charter provides that no
director shall be personally liable to FECI or its shareholders for monetary
damages, unless the director breached or failed to perform his or her duties
as a director and the director's breach of, or failure to perform, those
duties constitutes certain egregious conduct enumerated in Florida law. The
Amended Charter provides explicit protection to FECI's directors from personal
liability.
Shareholder Proposals. The Amended Charter requires
shareholders to follow certain advance notice procedures to conduct business
at a shareholder meeting. This provision makes it more difficult to bring
shareholder proposals and other business at a shareholder meeting and provides
the FECI Board with more time to prepare and respond to such a proposal or
other business.
Future Recapitalization. The Amended Charter provides that the
holders of a majority of the total outstanding common stock (voting together as
a single class) can effect a further recapitalization of FECI so as to
eliminate the two-class structure (including the special rights to Board
representation). The effectiveness of this provision in the Amended Charter is
expressly contingent on the receipt of an appropriate IRS ruling (which is
being sought in connection with the Transactions). However, it is not a
condition to the Transactions that this provision become effective. Moreover,
even if the provision becomes effective after receipt of an IRS ruling, under
the Distribution Agreement FECI may not implement such a future
recapitalization without first obtaining an additional IRS ruling or an
appropriate legal opinion from tax counsel. See "Description of the Transaction
Documents - Distribution Agreement."
Description of the Amended By-laws
The following description of FECI's Amended and Restated
By-laws does not purport to be complete and is qualified in its entirety by
reference to the Amended By-Laws, a copy of which is attached hereto as
Appendix E. All shareholders are urged to read carefully the Amended By-Laws
in their entirety.
The Amended By-laws were adopted by the FECI Board at its
October 26, 1999 meeting, and will become effective only upon the consummation
of the Merger. Under the terms of FECI's existing By-laws, the directors of
FECI have the power to amend the By-laws without shareholder approval. As a
result, no shareholder approval was required to adopt the Amended By-laws. A
description of the Amended By-laws is included in this Proxy Statement for
informational purposes only.
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<PAGE>
The Amended By-laws primarily contain (1) changes necessary to
conform the By-laws to the Amended Charter and (2) expansions of the current
By-laws to include typical provisions of widely held public companies. In
particular, the Amended By-laws fix the number of directors at ten and
eliminate provisions explicitly protecting transactions where there were
director conflicts of interest.
Shareholder Meetings
This provision has been revised to conform the By-Laws to the
Amended Charter by providing, among other things, that only those persons
identified in the Amended Charter may call a special shareholder meeting. See
"- Corporate Governance Amendments - Shareholder Meetings."
Board of Directors
The Amended By-laws fix the size of FECI's Board at ten
members. This provision is consistent with the Amended Charter's requirements
that FECI's Board consist of a whole number multiple of five members (subject
to vacancies). Vacancies may be filled in accordance with the Amended
Charter, which provides that vacancies may be filled only by the vote of
majority of the remaining directors in the class in which the vacancy exists.
Compensation of Board Members
The compensation to be paid to non-employee members of FECI's
Board will remain the same, except that the options to be granted to such
members will apply to shares of Class A Common Stock. Upon first being
elected to FECI's Board, a non-employee member will receive an option to
purchase 2,000 shares of Class A Common Stock and upon re-election an option
to purchase 1,000 shares of Class A Common Stock.
Indemnification of officers and directors
The indemnification provision related to FECI's officers and
directors has been removed from the Amended By-
laws. Indemnification is now provided for in the Amended Charter. This
provides greater protection to FECI's officers and directors by making it more
difficult for unsolicited acquirers or others to change or eliminate the
indemnification provision. See "- Corporate Governance Amendments - Other
Amendments - Indemnification."
Removal of Directors
The provisions relating to the removal of directors with or
without cause has been eliminated. Removal is only permitted in accordance
with the Amended Charter, which provides for removal only for cause. See "-
Corporate Governance Amendments - Removal of Directors for Cause."
Amendment of By-Laws
The provisions dealing with the revocation, alteration,
amendment or repeal of the By-laws has been eliminated. The By-laws may only
be amended in accordance with the Amended Charter. See "- Corporate Governance
Amendments - Amendment of By-laws."
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<PAGE>
Comparison of Existing Charter and Existing By-laws with Amended Charter and
Amended By-laws
The following is a general description of provisions of FECI's
Existing Charter and Existing By-laws compared to the same provisions as they
will be amended pursuant to the terms of the Recapitalization. We encourage
you to review the proposed Amended Charter attached to this document as
Appendix D and Amended By-laws attached to this document as Appendix E.
<TABLE>
<CAPTION>
FECI ARTICLES OF INCORPORATION AND BYLAWS
-----------------------------------------
CURRENT PROVISION PROPOSED PROVISION
----------------------------- --------------------------------
<S> <C> <C>
Authorized Capital Stock 50,000,000 shares: 170,000,000 shares:
Common Stock............... 50,000,000 shares of - 50,000,000 shares of Class A
common stock Common stock
- 100,000,000 shares of Class B
Common stock
Preferred Stock............ No preferred stock - 20,000,000 shares of Preferred
authorized Stock, issuable in series
Voting Rights
Election of Directors...... Each share of common Holders of Class A common
stock is entitled to one vote stock, voting as a separate class,
in the election of directors will (together with holders of
and all shares of common voting Preferred Stock, if any) be
stock vote together as a entitled to elect 20% of the
single class. Holders may directors, and in no event less
cumulate votes. than one director.
Holders of Class B common
stock, voting as a separate class,
will be entitled to elect 80% of
the directors, and in no event less
than four directors.
Cumulative voting applies within
each class.
After the Distribution, a
Significant Holder of Class B
Common Stock will be restricted
by the Class B Significant Holder
Voting Limitation.
All Other Matters.......... Each share of common Each share of Class A Common
stock is entitled to one vote Stock and Class B Common
in all other matters Stock is entitled to one vote,
submitted to a vote of voting together as a single class,
shareholders. in all other matters submitted to a
vote of shareholders (except as
otherwise required by law).
At any time, the holders of a
majority of the total outstanding
common stock, voting together as
a single class, can effect a further
recapitalization of FECI so as to
eliminate the dual class structure.
Dividends.................. At present, only one class Holders of Class A Common
of stock Stock and holders of Class B
Common Stock are entitled to
identical per share dividends.
Mergers and Liquidations... At present, only one class Holders of Class A Common
of stock Stock and holders of Class B
Common Stock are entitled to
identical consideration upon a
merger or consolidation of FECI
(except holders of each class of
common stock may receive
shares with the same voting
attributes as those of the class of
common stock they hold).
Holders of both classes of
common stock participate equally
per share in any distribution to
shareholders upon the
liquidation, dissolution or
winding up of FECI.
Directors
Number of Directors........ The FECI Board consists of The FECI Board consists of not
not less than three directors, less than five directors and may
with the exact number to be only be increased by whole
determined by the FECI number multiples of five
Board. directors. The Amended By-laws
fix the number of directors at ten.
Removal of Directors....... The Existing By-laws Directors may only be removed
require a 90% shareholder with cause. However, a director
vote to remove directors may not be removed, even for
(cause is not required). cause, if the number of
shareholders voting against his or
her removal would have been
sufficient to elect the director
under cumulative voting. Only
holders of Class A Common
Stock may remove a Class A
Director and only holders of
Class B Common Stock may
remove a Class B Director.
Nomination of Directors.... No advance notice Shareholders must follow certain
procedures to nominate advance notice procedures to
directors. nominate directors.
Classification of Initial At present, there is no Upon consummation of the
Class A Director........... Class A Director. Merger, [ ] and [ ] will be
initially designated as Class A
Directors.
Shareholder Matters
Shareholder Meetings....... Special shareholder Special shareholder meetings
meetings may only be may only be called by (1) a
called by (1) the Chairman, majority of the directors, (2) the
(2) the President, (3) the Chairman of the FECI Board or
FECI Board, (4) the (3) not less than 30% of all
executive committee of the shareholder votes entitled to be
FECI Board or (5) holders cast on the issue for which the
of not less than 10% of all meeting is called. Shareholders
outstanding shares entitled are also required to follow certain
to vote at the meeting. advance notice procedures.
Written Consent............ Shareholders may take Shareholders may not take action
action by written consent. by written consent.
Amendment of By-laws........ Requirements to amend By- Requires a vote of at least two-
laws are contained in the thirds of the FECI Board or at
By-laws. The By-laws least two-thirds of all of the
require a vote of at least outstanding capital stock voting
two-thirds of the FECI together as a single class.
Board present and voting at
any regular or special
meeting. Under Florida
law, at least a majority of
all of the outstanding
capital stock may amend
the By-laws.
Amendment of Articles of
Incorporation............... Requires vote of two-thirds Requires approval by a majority
of the shares outstanding to of the directors plus 75% of the
amend the Articles of votes entitled to elect directors
Incorporation. (voting together as a single class)
to amend the Amended charter
(other than certain provisions
which, if amended, would not
have the effect of increasing
FECI's exposure to an
unsolicited takeover).
Indemnification of
Directors and Officers...... Current and former FECI will indemnify its directors,
directors and officers will officers, employees and agents
be indemnified by FECI "to and reimburse all expenses
the full extent permitted by incurred by an indemnitee in
law." defending an action in advance of
final disposition.
Limitation of Director
Liability................... At present, there is no A director shall not be personally
explicit protection against liable to FECI or its shareholders
personal liability for for monetary damages, unless the
directors other than the director breached its fiduciary
general principle regarding duty and such breach constitutes
indemnification described egregious conduct enumerated
above. under Florida law.
Shareholder Proposals....... At present, there are no Shareholders are required to
specific advance notice follow certain advance notice
requirements for procedures to conduct business at
shareholder proposals. a shareholder meeting.
(Table to be continued)
<PAGE>
(Table continued)
PURPOSE AND EFFECTS OF
AMENDMENT
---------------------------------------
<S> <C>
Authorized Capital Stock The amendments authorize two classes
of common stock to effect the
Common Stock............... Recapitalization. Preferred stock is
authorized to provide flexibility in
structuring possible future financings
and acquisitions, and in meeting other
corporate needs (including for the
exercise of rights under the Rights
Plan).
Preferred Stock............
Voting Rights
Election of Directors...... The purpose of this amendment is to
effect the Recapitalization. The
purpose of the Class B Significant
Holder Voting Limitation is to limit a
Significant Holder's ability to acquire
control of FECI through the
accumulation of Class B Common
Stock without the Significant Holder
having a majority equity interest in
FECI through its shares of Class B
Common Stock.
All Other Matters.......... The effectiveness of the provision
regarding future recapitalization is
expressly contingent on the receipt of
the IRS Ruling. It is not a condition to
the Transactions that this provision
become effective.
Dividends.................. The purpose of this provision is to
ensure that the two classes of common
stock represent equal economic
interests on a per share basis in FECI.
This provision may have the effect of
discouraging takeover attempts that
unfairly discriminate between holders
of the two classes of common stock.
Mergers and Liquidations... The purpose of this provision is to
ensure that the two classes of common
stock represent equal economic
interests on a per share basis in FECI.
This provision may have the effect of
discouraging takeover attempts that
unfairly discriminate between holders
of the two classes of common stock.
Directors
Number of Directors........ This provision insures that the holders
of that Class A Common Stock
(together with holders of voting
Preferred Stock, if any) will always
have the right to elect one director for
every four directors elected by holders
of Class B Common Stock.
Removal of Directors....... The purpose of this provision is to
force an unsolicited acquirer to wait
until the next annual meeting of
shareholders before making any
attempt to remove incumbent directors
on the FECI Board.
Nomination of Directors.... The purpose of this provision is to
provide the FECI Board with
sufficient time to respond to a
competing nomination.
Shareholder Matters
Shareholder Meetings....... The purpose of this provision is to
make it more difficult for an
unsolicited acquirer to control the
actions of FECI through special
shareholder meetings.
Written Consent............ The purpose of this provision is to
prevent controlling shareholders from
taking shareholder action without
calling a formal meeting of
shareholders.
Amendment of By-laws........ Since it is more difficult to amend the
Amended Charter than it is to amend
the Amended By-laws, moving the
By-laws amendment provision to the
Amended Charter makes it more
difficult to change this provision, and
consequently more difficult to amend
the Amended By-laws.
Amendment of Articles of
Incorporation............... This provision makes it more difficult
to change certain provisions of the
Amended Charter.
Indemnification of
Directors and Officers...... The Amended Charter adds detailed
provisions to build upon the
fundamental principle stated in the
Existing Charter.
Limitation of Director
Liability................... This provision provides directors with
more protection from personal liability
than that which exists under the
Existing Charter.
Shareholder Proposals....... This provision is intended to establish
procedures for processing shareholder
proposals, which provides the FECI
Board with more time to prepare for
and respond to such proposals.
</TABLE>
<PAGE>
Certain Provisions of the Florida Business Corporation Act
Control-Share Acquisitions
FECI is subject to the FBCA which contains provisions
eliminating the voting rights of "control shares," which are defined as shares
which give any person, directly or indirectly, ownership of, or the power to
direct the exercise of voting power with respect to, 20% or more of the
outstanding voting power of an "issuing public corporation." Pursuant to the
FBCA, FECI will be an issuing public corporation prior to the Recapitalization.
The FBCA provides that, notwithstanding the general rule
described above, the voting rights of control shares are not to be eliminated
if the articles of incorporation or the bylaws of the issuing public
corporation prior to the acquisition provide that the control-share provisions
of the statute do not apply. None of the Existing Charter, the Existing
By-laws, the Amended Charter or the Amended By-laws include such a provision.
In addition, the FBCA provides that voting rights are not to be eliminated if
the acquisition of the control shares has been approved by the issuing public
corporation's board of directors or pursuant to a merger. Accordingly, the
voting limitations imposed by the control-share acquisition provisions of the
FBCA will not limit the voting rights of the shares of Class B Common Stock to
be received by the duPont Trust in the Distribution because the issuance of
such shares has been approved by FECI's Board and will be pursuant to a merger.
Affiliated Transactions
The FBCA also restricts "affiliated transactions" (mergers,
consolidations, transfers of assets and other transactions) between
"interested shareholders" (the beneficial owners of 10% or more of a Florida
corporation's outstanding shares) and the Florida corporation or any of its
subsidiaries. Affiliated transactions must be approved by two-thirds of the
voting shares not beneficially owned by the interested shareholder or by a
majority of the corporation's "disinterested" directors. The statutory
restrictions do not apply in certain circumstances.
40
<PAGE>
At the time of the Merger, Merger Sub will own approximately
53.9% of FECI's outstanding shares of common stock and therefore will be
considered an "interested shareholder" under the affiliated transactions
provision of the FBCA. However, because the Merger has been unanimously
approved by the Special Committee, which is composed entirely of FECI's
independent directors, the affiliated transactions provision of the FBCA will
not apply to the Merger.
Recommendation of the FECI Board
THE FECI BOARD, INCLUDING THE SPECIAL COMMITTEE, HAS GIVEN FULL CONSIDERATION
TO THE AMENDED CHARTER AND HAS DETERMINED THAT IT IS ADVISABLE AND IN THE BEST
INTERESTS OF FECI AND ITS SHAREHOLDERS, INCLUDING THE FECI SHAREHOLDERS OTHER
THAN ST JOE. THE FECI BOARD, INCLUDING THE SPECIAL COMMITTEE ACTING
UNANIMOUSLY, HAS APPROVED THE AMENDED CHARTER AND RECOMMENDS THAT YOU VOTE
"FOR" THE ADOPTION OF THE AMENDED CHARTER.
Required Vote
The shareholders of FECI are being asked to adopt the Amended
Charter at the Special Meeting. In accordance with the existing Articles of
Incorporation of FECI, approval of the Amended Charter requires the
affirmative vote of two-thirds of the outstanding shares of FECI common stock.
As of October 27, 1999, St. Joe owned approximately 53.9% of FECI's
outstanding common stock and has agreed to vote such shares in favor of
adoption of the Amended Charter and Nemours owned approximately 5.0% of FECI's
outstanding common stock and is likewise expected to vote in favor of such
adoption. In addition, although not required by law or the existing Articles
of Incorporation, the FECI Board and St. Joe have agreed to condition the
Recapitalization on approval of the Amended Charter by holders of a majority
of the shares of FECI common stock other than the shares held by St. Joe or
its affiliates (including the Charities). Together with the expected approval
of St. Joe and its affiliates, the approval of a majority of the remaining
shareholders will also satisfy the requirements of the Existing Charter.
However, unless the Plan of Merger is adopted by the holders of FECI common
stock as described under "Proposal One: Adoption of the Plan of Merger --
Required Vote", the Amended Charter will not be implemented by FECI.
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DESCRIPTION OF THE TRANSACTION DOCUMENTS
Distribution Agreement
The following description of the Distribution Agreement does
not purport to be complete and is qualified in its entirety by reference to
the Distribution Agreement, a copy of which is attached hereto as Appendix A.
All shareholders are urged to read carefully the Distribution Agreement in its
entirety.
The Recapitalization
The Distribution Agreement obligates FECI, subject to the
conditions described below, to effect the Recapitalization. As of October 27,
1999, all 19,609,216 shares of FECI common stock owned by St. Joe were held
indirectly through St. Joe Capital II, Inc. Corporation, a Delaware
corporation and wholly owned subsidiary of St. Joe ("Delaware Sub"). Prior to
the Merger, St. Joe will cause Delaware Sub to merge with and into St. Joe
with St. Joe as the surviving corporation. In addition, prior to the Merger,
St. Joe will incorporate Merger Sub as a direct wholly owned Florida
subsidiary of St. Joe. St. Joe will then contribute all of its shares of FECI
common stock to Merger Sub prior to the Merger. The Recapitalization will
then be accomplished through the Merger in accordance with the terms of the
Plan of Merger. See " -- Plan of Merger."
The Distribution
The Distribution Agreement obligates St. Joe, subject to the
conditions described below, to effect the Distribution. The Board of
Directors of St. Joe will declare the Distribution on a date following the
satisfaction or waiver of all conditions to the Distribution (the "Declaration
Date"). St. Joe will appoint a distribution agent to effect the Distribution
(the "Distribution Agent") and will cause the Distribution Agent to
distribute, on or as soon as practicable following the Declaration Date (the
"Distribution Date"), on a pro-rata basis to the holders of record of St. Joe
common stock on the record date for the Distribution, all the shares of Class
B Common Stock held by St. Joe on the Distribution Date. The Distribution
Agent will aggregate and sell all fractional shares and distribute a pro rata
portion of the net proceeds from such sales to each shareholder of St. Joe who
would otherwise have received a fractional share.
Conditions to the Recapitalization and Distribution
The respective obligations of each of FECI and St. Joe to
effect the Recapitalization and the Distribution, are subject to the
satisfaction or waiver of a number of conditions, including those described
below. Each of the conditions are for the sole benefit of the relevant party
and do not give rise to or create any duty on the part of either party to waive
or not waive any such condition.
Mutual Conditions. The Distribution Agreement provides that
the obligations of FECI and St. Joe to consummate the Recapitalization and the
Distribution are subject to the satisfaction or waiver of the following mutual
conditions:
o Any approvals and consents of any governmental authority necessary to
consummate the Distribution, Recapitalization and the other
transactions contemplated by the Distribution Agreement shall have
been obtained and shall be in full force and effect and any waiting
periods required by any governmental authority shall have expired or
been terminated;
o No actions or suits by any governmental authority or third party
against either FECI or St. Joe shall be pending with respect to, and
FECI and St. Joe shall not be subject to any injunctions, judgments,
decrees or orders which enjoin or rescind, the Transactions or
otherwise prevent them from complying with the terms of the
Transaction Documents (which, in the case of any pending action or
suit, raise substantial issues of law or fact, and have, in the
judgment of the party not invoking this condition, a reasonable
probability of success), and no other event outside the control of
the relevant party shall have occurred or failed to occur that
prevents the consummation of the Transactions;
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o The Transactions shall be in compliance with applicable federal and
state securities and other applicable laws;
o The Recapitalization shall have been approved by a majority of the
outstanding shares of FECI common stock not beneficially owned by St.
Joe or any affiliate of St. Joe;
o The Class B Common Stock shall have been approved for listing on the
New York Stock Exchange, subject to official notice of issuance; and
o The Master Agreement and each of the related Real Estate Agreements
shall be in full force and effect and there shall not be any default
of any of their material terms.
Additional FECI Conditions. FECI's obligation to consummate
the Recapitalization is subject to the satisfaction or waiver of the following
additional conditions:
o The IRS Ruling shall have been received by St. Joe and shall not (1)
have imposed material restrictions on FECI that would not have been
reasonably anticipated by FECI at the time of the Ruling Request and
such ruling shall not have been revoked, and (2) have been
conditioned on material modification of the Distribution Agreement,
the Shareholders Agreement, the Amended Charter or the proposed
Rights Plan, which adversely affects the substantive benefits to FECI
and its shareholders under such documents taken as a whole;
o The Shareholders Agreement shall have been executed and delivered and
in full force and effect;
o The Rights Plan having substantially the same terms as that attached
to the Distribution Agreement shall have been approved and shall be
in effect;
o The Recapitalization shall have been approved by the number of
outstanding shares of FECI common stock as required under applicable
Florida law;
o St. Joe shall have received any consents required under any
agreements or arrangements with third parties required by reason of
the execution of the Distribution Agreement or the consummation of
the Transactions;
o Each of St. Joe's representations and warranties set forth in the
Distribution Agreement shall have been true and correct in all
material respects when made and shall be true and correct in all
material respects as of the Declaration Date and St. Joe shall have
complied in all material respects with all of its obligations under
the Distribution Agreement; and
o All conditions to St. Joe's obligations to consummate the
Distribution shall have been satisfied and no circumstances shall
exist that may prevent the declaration of the Distribution
concurrently with the consummation of the Recapitalization.
Additional St. Joe Conditions. St. Joe's obligation to
consummate the Distribution is subject to the satisfaction or waiver of the
following additional conditions:
o (1) The IRS Ruling shall have been received from the IRS in form and
substance reasonably satisfactory to St. Joe providing that, among
other things, the Transactions will qualify as tax-free transactions
for federal income tax purposes under Sections 354 and 355 of the
Code and the IRS Ruling shall continue in effect; and (2) St. Joe and
FECI shall have complied with all provisions, statements or
representations set forth in the IRS Ruling, the request for any
supplemental IRS Ruling, if St. Joe has determined to seek a
supplemental IRS Ruling in accordance with the Distribution
Agreement, and, if granted prior to such time, such supplemental IRS
Ruling, in each case, that are required to be complied with prior to
the Distribution;
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o An Indemnity Agreement in the form attached as an exhibit to the
Distribution Agreement among St. Joe and the Charities (relating to,
among other things, the allocation of potential tax liabilities
arising from the Distribution) shall have been executed and
delivered;
o St. Joe shall have received the consents of senior FECI employees
that the Transactions will not trigger any change-in-control benefits
under their employment agreements and related equity grants;
o A Form 8-A or other appropriate form of registration statement
relating to the Class B Common Stock shall have been filed with the
Securities and Exchange Commission (the "Commission");
o FECI shall have received any consents required under any agreements
or arrangements with third parties by reason of the execution of the
Distribution Agreement or the consummation of the Transactions.
o Each of FECI's representations and warranties set forth in the
Distribution Agreement shall have been true and correct in all
material respects when made and shall be true and correct in all
material respects as of the Declaration Date and FECI shall have
complied in all material respects with all of its obligations under
the Distribution Agreement; and
o All conditions to FECI's obligations to consummate the
Recapitalization shall have been satisfied and no circumstances shall
exist that may prevent the consummation of the Recapitalization
concurrently with the declaration of the Distribution.
Representations and Warranties
Each of the parties has made customary representations and
warranties.
Covenants
Pursuant to the Distribution Agreement, FECI and St. Joe have
agreed to typical covenants (e.g. regarding access to information,
confidentiality, each party's obligation to use reasonable efforts to
consummate the transaction and fulfill other covenants). In addition, FECI
specifically agreed:
o to prepare and file with the Commission this Proxy Statement and call
the Special Meeting as soon as reasonably practicable;
o to use all reasonable efforts to list the Class B Common Stock on the
NYSE;
o to prepare and file the form 8-A and use all reasonable efforts to
cause it to become effective;
o to use all reasonable efforts to obtain the required consents to the
transactions from senior employees of FECI; and
o to use its best efforts to adopt the Rights Plan (provided that the
FECI Board shall not be required to adopt the Rights Plan if it
determines in good faith, based upon the advice of outside counsel,
that the adoption of such plan would not comply with its fiduciary
duties).
In addition, St. Joe agreed, as a FECI shareholder, to vote to
approve the Plan of Merger and the Amended Charter at the Special Meeting.
Standstill Agreement. In addition to the agreements described
above, each of FECI and St. Joe has agreed not to solicit, initiate, encourage
or continue any negotiations with any third party with respect to a competing
transaction. Either party may, however, respond to unsolicited inquiries or
proposals by indicating that it is bound by this provision. Nevertheless,
either party may negotiate with a third party if, in the good faith opinion of
its Board of Directors (based
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on the advice of outside counsel), it must do so to comply with its fiduciary
duties under applicable law (and, in the case of St. Joe, the third-party
proposal must contemplate equivalent consideration for all shares of FECI
common stock).
Indemnification and Other Agreements
In addition to the agreements described above, the Distribution
Agreement contains other agreements of FECI and St. Joe as outlined below:
Indemnification Against Certain Liabilities.
Mutual Indemnification: Each of FECI and St. Joe has agreed to indemnify
the other party (including their respective directors, officers and
employees) generally for liabilities the other party incurs related to
(1) the indemnifying party's operation of its business and ownership of
its assets (whether arising before or after the Distribution) and (2)
breaches of FECI's or St. Joe's, as the case may be, respective
representations, warranties, covenants and agreements under the
Distribution Agreement. The Distribution Agreement provides for
customary indemnification procedures.
Indemnification by FECI: In addition to the mutual indemnification, FECI
indemnifies St. Joe for the liabilities listed below:
o Liabilities of St. Joe as a "controlling person" with respect to this
Proxy Statement and any other previous or future SEC filing by FECI;
o Failure by FECI to comply with any representation made by it in
connection with the IRS Ruling Request;
o Any taxes imposed by reason of any action or inaction of FECI, its
affiliates or shareholders which causes the Distribution to fail to
qualify as a tax-free transaction (including actions affecting the
relative voting rights of the separate classes of FECI stock and any
acquisition of stock or assets of FECI or of any of its affiliates);
and
o Any taxes imposed by reason of a withdrawal of the IRS Ruling due to
a breach by FECI (or any FECI affiliate) of any provision of the
Distribution Agreement.
Indemnification by St. Joe: In addition to the mutual indemnification,
St. Joe indemnifies FECI for the liabilities listed below:
o Any breach by St. Joe of any fiduciary duty under applicable law as a
controlling shareholder of FECI;
o Any taxes resulting from the Recapitalization; and
Any liability arising from the failure by St. Joe to comply with its
representations made to the IRS in connection with the IRS Ruling
Request.
Limitation on Indemnity: The indemnification provisions contained in the
Distribution Agreement are not applicable with respect to any FECI or
St. Joe liability for which there exists (or will exist) a separate
indemnity arrangement under any Real Estate Agreement. Accordingly, any
special indemnities contained in any Real Estate Agreement will still be
enforceable.
FECI Tax Covenants. FECI agrees (with respect to itself and
its affiliates):
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o to comply with and otherwise not to take or fail to take any
action inconsistent with any statement in the IRS Ruling; and
o not to take or fail to take any action after the Distribution that
could (1) prevent the Distribution from qualifying as a tax-free
transaction, or (2) have a material adverse impact on the known tax
consequences of the Distribution to St. Joe.
Unless FECI obtains an appropriate opinion of tax counsel or an
IRS ruling that such action will not cause the Distribution to lose its
tax-free status, FECI agrees (whether or not two years have expired):
o not to change its Articles of Incorporation or By-laws (other than
the Amended Charter and the Amended By-laws) regarding (1) the
composition or size of its Board of Directors, (2) the manner in
which its Board is elected and (3) the duties and responsibilities
of its Board; and
o not to amend its Articles of Incorporation (other than the Amended
Charter) or take any other action that will provide for (1) the
conversion of any class of stock into a different class of stock,
(2) a change in the voting rights of any class of stock, or (3)
any action having a similar effect to (1) and (2) above.
For the two-year period following the Distribution, FECI has
agreed to:
o continue to conduct the "active trade or business" required in
order to receive the IRS Ruling. In addition, unless FECI obtains
an appropriate tax opinion or an IRS ruling, it may not (1)
liquidate or dispose of its active trade or business or (2)
dispose of any business or assets in a manner inconsistent with
the business purposes for the distribution set forth in the IRS
Ruling request; and
o conduct the active trade or business (referred to above) primarily
through officers and employees of FECI and its subsidiaries who
are not also officers or employees of St. Joe or its affiliates.
Unless FECI obtains an appropriate tax opinion or IRS ruling,
for the two-year period following the Distribution it will not:
o (1) voluntarily dissolve or liquidate, or otherwise discontinue
the conduct of any portion of its active trade or business if such
action would cause a dissolution or liquidation of FECI and (2)
except in the ordinary course of business, dispose of more than
60% of its gross assets or 60% of the consolidated business assets
of it and its subsidiaries;
o buy back its stock unless the buyback is motivated by a corporate
business purpose, the stock repurchased is widely held, the
acquisition is made on the open market and less than 20% of FECI's
stock is repurchased;
o issue any non-voting stock or issue any stock (other than in
employee related issuances in the ordinary course of business) if
as a result of such stock issuances the number of shares of Class B
Common Stock distributed to St. Joe's shareholders will constitute
less than 80% of the voting power of all FECI voting stock;
o buy back stock if such buyback would cause the shares of Class B
Common Stock to constitute less than 80% of the total combined
voting power of all outstanding voting stock of FECI; or
o enter into any acquisition transaction or permit any acquisition
transaction to occur, in either case involving the acquisition of
more than 5% of its stock pursuant to either (1) a redemption of
rights under a stockholders rights plan, (2) a determination that
a tender offer for the stock of FECI is a
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"permitted offer" under a rights plan or (3) the approval of any
transaction involving the acquisition of another corporation or
business by FECI or the acquisition by another person of FECI.
Termination
Prior to the filing of the Articles of Merger, the Distribution
Agreement may be terminated:
o by St. Joe and FECI by mutual consent.
o upon 15 days' written notice to the other party, if the other
party is materially in breach of, or has materially failed to
comply with, any of its representations, warranties, covenants or
agreements in the Distribution Agreement or in the Plan of Merger
and such breach or failure to comply would materially impair the
benefits to be derived from the Transactions, unless such breach
or failure to comply is cured within 15 days of the notice.
o by FECI, if, following the receipt of an Acquisition Proposal (as
defined in the Distribution Agreement), the FECI Board in good
faith determines, based upon the advice of its outside counsel,
that it must terminate the Distribution Agreement in order to
comply with its fiduciary duties under applicable law.
o by St. Joe if, following receipt of a proposal for a competing
transaction which contemplates a transaction in which all shares
of FECI common stock are to receive equivalent consideration, the
Board of Directors of St. Joe in good faith determines, based upon
advice of its outside counsel, that it must terminate the
Distribution Agreement in order to comply with its fiduciary
duties under applicable law.
o by St. Joe if the FECI Board shall or shall resolve to (1) not
recommend, or withdraw its approval of recommendation of, the
Recapitalization, the Plan of Merger, the Distribution Agreement
or any of the transactions contemplated thereby, (2) modify any
such approval or recommendation in a manner adverse to St. Joe or
(3) approve, recommend or enter into an agreement for any proposal
for a competing transaction.
o by FECI if St. Joe shall or shall resolve to (1) not vote in favor
of the Distribution Agreement and the Transactions or (2) approve,
recommend or enter into an agreement for any proposal for a
competing transaction.)
o by St. Joe if St. Joe in good faith believes that the IRS Ruling
in form and content substantially identical to the rulings
requested in the request for the IRS Ruling submitted to the IRS
will not be forthcoming prior to the date of declaration of the
Distribution or, in the case of any supplemental IRS Ruling that
is requested prior to the date of declaration of the Distribution
and that is necessary to clarify that material adverse
consequences would not attach to St. Joe or its affiliates as a
result of the Distribution, that such supplemental IRS Ruling in
form and content substantially identical to the rulings requested
in the request for the supplemental IRS Ruling submitted to the
IRS will not be forthcoming prior to the date of declaration of
the Distribution.
o by St. Joe or FECI if the Recapitalization is not consummated by
August 1, 2000.
Plan of Merger
The following description of the Plan of Merger does not
purport to be complete and is qualified in its entirety by reference to the
Plan of Merger, a copy of which is attached hereto as Appendix B. All
shareholders are urged to read carefully the Plan of Merger in its entirety.
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In accordance with the Distribution Agreement, FECI, St. Joe
and Merger Sub will enter into the Plan of Merger pursuant to which the
Recapitalization will be implemented. The Distribution Agreement provides that
prior to the consummation of the Recapitalization, St. Joe will (1) merge its
subsidiary currently holding all of St. Joe's FECI shares with and into St.
Joe with St. Joe as the surviving corporation, (2) incorporate Merger Sub as a
direct wholly-owned Florida subsidiary of St. Joe and (3) contribute all of
its shares of FECI common stock (the "Contributed Shares") to Merger Sub.
Effective upon the filing of the Plan of Merger with the Department of State
of the State of Florida (the "Effective Time"), Merger Sub will be merged with
and into FECI, its separate corporate existence will cease and FECI will be
the surviving corporation. All of the shares of Merger Sub common stock
outstanding immediately prior to the Effective Time will be converted into
fully paid and non-assessable shares of FECI's Class B Common Stock; each of
the Contributed Shares will automatically be canceled and will cease to exist;
and each other share of FECI common stock (including shares of FECI common
stock held in the treasury of FECI) other than the Contributed Shares will be
converted into one share of Class A Common Stock. As a result of the Merger,
St. Joe will own 19,609,216 shares of Class B Common Stock, all of which
shares will be distributed by St. Joe to its common shareholders as promptly as
practicable following the Merger. Each other shareholder of FECI will own the
same number of shares of Class A Common Stock as the number of shares of FECI
common stock such shareholder owned prior to the Recapitalization.
The Amended Charter and the Amended By-laws will be attached as
exhibits to the Plan of Merger and will become effective at the Effective Time.
Shareholders Agreement
The following description of the Shareholders Agreement does
not purport to be complete and is qualified in its entirety by reference to
the Shareholders Agreement, a copy of which is attached hereto as Appendix C.
The Shareholders Agreement does not require shareholder approval. A
description of the Shareholders Agreement is included in this Proxy Statement
for informational purposes only.
General. The Shareholders Agreement provides for restrictions
on transfers or purchases by the Charities of FECI stock, restrictions on
purchases by the Charities of St. Joe stock, demand and "piggyback"
registration rights for the Charities and the Charities' obligation to support
the proposed Rights Plan. It is a condition to FECI's obligation to
consummate the Recapitalization that the Shareholders Agreement remain in full
force and effect. The Shareholders Agreement may only be amended with the
consent of a majority of the independent directors of FECI and each of the
Charities.
Restrictions on Transfer. The restrictions on transfers by the
Charities contained in the Shareholders Agreement are designed primarily to
prevent the Charities from taking certain actions which, when combined with
other actions which may be taken by FECI in the future, would cause the
Distribution not to be tax free. See "Proposal One: Adoption of the Plan of
Merger - Tax Matters."
The transfer restrictions applicable to the Charities are as
follows:
o Neither Charity may sell any shares of Class A Common Stock
or Class B Common Stock for the 6 months following the
Distribution.
o After 6 months and until the second anniversary of the
Distribution, the Charities are limited to sales, in the
aggregate, of up to 10% of all outstanding common stock of
FECI (Class A Common Stock and Class B Common Stock)
measured as of the date of the Distribution. In order to
sell more than the 10% threshold, the Charities must obtain
an appropriate IRS ruling or tax opinion of counsel that
the sale would not be taken into account for purposes of
applicable Internal Revenue Code restrictions.
Restrictions on Purchase. The Shareholders Agreement also
contains provisions restricting the ability of the Charities to purchase
additional shares of capital stock of FECI or St. Joe. These provisions are
as follows:
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o For the three years following the Distribution, neither
Charity (nor any of their respective affiliates) may
acquire any additional common stock of FECI (Class A Common
Stock or Class B Common Stock) or join any group with
respect to voting any securities of FECI. However, if FECI
issues more shares of Class B Common Stock in the future,
the Charities may acquire additional shares of Class B
Common Stock solely to maintain their ownership percentage
in the outstanding shares of Class B Common Stock at such
time. As a result of this provision, other than due to any
reduction in the outstanding share capital of FECI (e.g. as
a result of any stock redemption by FECI), the ownership
percentage held by the Charities of the outstanding Class A
Common Stock and the outstanding Class B Common Stock
should not increase for at least the three years following
the Distribution.
o Until the Distribution, neither Charity (nor any of their
respective affiliates) may acquire any shares of capital
stock of St. Joe. This provision ensures that, other than
as a result of any reduction in the outstanding share
capital of St. Joe (e.g. as a result of stock redemptions
by St. Joe), the Charities will own on the date of the
Distribution no higher of a percentage of St. Joe capital
stock than currently owned by the Charities. Accordingly,
other than as a result of a reduction in the outstanding
share capital of St. Joe prior to the Distribution, the
Charities will receive in the Distribution no higher of a
percentage of the outstanding Class B Common Stock than
their current percentage ownership of St. Joe capital stock
(approximately 59.6% as of October 27, 1999).
Registration Rights. In addition to the restrictions on
transfer described above (see "- Restrictions on Transfer"), because the
Charities will be affiliates of FECI after the Distribution, they will be
subject to securities laws limitations on their ability to sell shares of
Class A Common Stock or Class B Common Stock. Accordingly, FECI has granted
the Charities three "demand" registration rights (in the aggregate) and
unlimited incidental or "piggyback" registration rights with respect to FECI
common stock. The registration rights granted to the Charities are applicable
only with respect to shares of Class A Common Stock or Class B Common Stock
owned by the Charities at the time of the Distribution.
With respect to any exercise of registration rights by either
Charity, FECI will be required to pay all related registration expenses. With
respect to any exercise of demand registration rights only, the Charity
exercising the demand will also have the right to select the managing
underwriter, if any, who must be reasonably satisfactory to FECI. FECI and
the Charities (on a several and not joint basis) indemnify each other with
respect to liabilities arising out of any related registration. The Charities
may only assign their registration rights to a person acquiring at least 4
million shares of Class B Common Stock.
Rights Plan. The Charities each agree to support and to use
their best efforts to cause their respective representatives on the FECI
Board, subject to the fiduciary duties of such representatives, to vote in
favor of the proposed Rights Plan. See "- Rights Plan."
Rights Plan
General. Pursuant to the Distribution Agreement, it is a
condition to the obligation of FECI to consummate the Recapitalization that
the FECI Board adopt the Rights Plan substantially in accordance with the
terms described below. Pursuant to the Shareholders Agreement, the Charities
agree to use their best efforts to support and cause their representatives on
the FECI Board, subject to the fiduciary duties of such representatives, to
support and vote in favor of the adoption of the Rights Plan. While the FECI
Board intends, subject to its fiduciary duties, to adopt the Rights Plan, the
proposed Rights Plan cannot become effective without the approval of the
Amended Charter because the proposed Rights Plan contemplates the
authorization of Preferred Stock and Class B Common Stock. If adopted, the
proposed Rights Plan will become effective only upon the consummation of the
Recapitalization. The proposed Rights Plan will improve the ability of the
FECI Board to protect and advance the interests of FECI and its shareholders
in the event of an unsolicited proposal to acquire a significant interest in
FECI. In particular, the proposed Rights Plan is designed primarily to
discourage the unsolicited acquisition of control of FECI through only the
purchase of shares of Class B Common Stock. If adopted, it will also
discourage the unsolicited acquisition of a substantial amount of Class
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A Common Stock Specific shareholder approval of the Rights Plan, however, is
not required. A description of the proposed Rights Plan is included in this
Proxy Statement for informational purposes only.
Rights. The proposed Rights Plan is expected to provide that a
right (a "Right") to purchase 1/100 of a share of Preferred Stock of FECI (to
be newly designated) will be issued by FECI to holders of FECI's outstanding
common stock in the form of a dividend of one Right for each share of common
stock (irrespective of class). The Rights also will be attached to all future
issuances of common stock until the Rights Distribution Date (as defined
below). Rights become exercisable on the date (the "Rights Distribution Date")
that is the earlier of: (1) the tenth business day following the public
announcement that a person or group (an "Acquiring Person") has acquired
beneficial ownership of at least either of the "Threshold Amounts" (as defined
below) of FECI common stock or (2) the tenth business day following the
commencement of a tender offer or exchange offer by any person which would
result in such person owning at least either of the Threshold Amounts.
Nevertheless, a person will not be deemed to be an Acquiring Person with
respect to any "Qualified Offer." See "- Qualified Offer."
The Threshold Amounts will be specified percentages of the
outstanding shares of Class B Common Stock and of the total outstanding shares
of Class A Common Stock and Class B Common Stock. The two percentages will be
fixed above the percentages of FECI Common Stock expected to be beneficially
owned by the Charities (in the aggregate) on the date of the Distribution (but
no higher than 62% and 39%, respectively). Because the Charities are
restricted by the Shareholders Agreement from purchasing additional shares of
St. Joe capital stock until after the Distribution, the expected beneficial
holdings of the Charities of FECI common stock upon the Distribution is
expected not to be higher than the maximum Threshold Amounts. See "-
Shareholders Agreement - Restrictions on Purchase." Accordingly, Rights are
not expected to become exercisable as a result of the Charities' holdings
immediately after the Distribution.
Redemption of Rights. Rights will be redeemable at a price of
$.01 per Right, by the affirmative vote of at least 80% of the FECI Board or
two-thirds of the holders of all outstanding shares of FECI common stock (with
holders of Class A Common Stock and Class B Common Stock voting together as a
single class), at any time prior to the time a person becomes an Acquiring
Person.
Flip-In. Except pursuant to a Qualified Offer, in the event
that any person becomes an Acquiring Person, each holder of a Right (other
than Rights held by the Acquiring Person, which will thereupon become void)
will thereafter have the right to receive, at the then-current exercise price,
that number of shares of Class B Common Stock having a market value on that
date of two times the exercise price of the Right (the "flip-in right"). If
the flip-in right is exercised, the Acquiring Person's voting and economic
interest in FECI would be dramatically diluted by the issuance by FECI of
large numbers of shares of Class B Common Stock to its current shareholders
other than the Acquiring Person at a reduced price.
Flip-Over. Except with respect to a person who acquires shares
of FECI common stock pursuant to a Qualified Offer (and where the proposed
business combination offers per share consideration in a form identical to and
at a price no less than that paid in the Qualified Offer), if after any person
becomes an Acquiring Person FECI is involved in a merger or other business
combination where FECI is not the surviving corporation or where its common
stock is exchanged for other securities or assets, each holder of a Right will
thereafter have the right to receive (upon exercise of the Right), at the
then-current exercise price, that number of shares of common stock of the
other party to such transaction having a market value on that date of two
times the exercise price of the Right (the "flip-over right"). If the
flip-over right is exercised, the voting and economic interest of all
shareholders of such other party would be dramatically diluted by the issuance
by such party of large numbers of shares of common stock of the other party to
the FECI shareholders other than the Acquiring Person at a reduced price.
Qualified Offer. A "Qualified Offer" will be any public tender
offer or exchange offer to purchase all, but not less than all, of the
outstanding shares of FECI common stock in which all holders of FECI common
stock, irrespective of the class of their stock, are offered the identical per
share consideration. Accordingly, the proposed Rights Plan will not
discourage unsolicited takeover proposals for FECI which treat all holders of
Class A Common Stock and Class B Common Stock equally.
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Stock Redemptions by FECI. The proposed Rights Plan will not
be triggered by a shareholder's ownership increasing above either of the
Threshold Amounts exclusively due to a stock redemption or repurchase by FECI.
In addition, if the affected shareholder is either of the Charities, the
affected Charity will be able to transfer its holdings of FECI common stock to
a third-party without the third-party triggering rights under the Rights Plan
exclusively as a result of the stock redemption or repurchase by FECI, to the
extent such transferee would not end up holding more than the maximum
specified percentages of FECI permitted under the Rights Plan prior to the
redemption.
Amendment of Rights Plan. For so long as the Rights are
redeemable, the proposed Rights Plan may be amended only upon the affirmative
vote of at least 80% of the FECI Board or two-thirds of the holders of all
outstanding shares of FECI common stock (with holders of Class A Common Stock
and Class B Common Stock voting together as a single class). Once the Rights
are no longer redeemable, the proposed Rights Plan may be amended only upon
the affirmative vote of at least 80% of the FECI Board and only in a manner
that would not adversely affect the holders of Rights (other than an Acquiring
Person) or make the Rights again redeemable.
51
<PAGE>
REAL ESTATE TRANSACTIONS
General
In connection with the Transactions, FECI and St. Joe have
previously announced that GCC has entered into the Master Agreement with St.
Joe. Pursuant to the Master Agreement and the other Real Estate Agreements
(attached as exhibits to the Master Agreement), the parties have agreed to
effect the Real Estate Transactions. In addition to the Master Agreement, the
Real Estate Agreements include: (1) the Amended and Restated Asset Management
Agreement (the "Amended Management Agreement"), (2) the Property Management
and Leasing Agreement (the "Property Management Agreement"), (3) the
Development Services Agreement (the "Development Agreement"), (4) the Florida
East Coast Railway Agreement (the "FECR Agreement") and (5) the Project
Partnership Agreement (the "PPA"). All of the Real Estate Agreements are
between GCC and St. Joe, except for the FECR Agreement which is between the
Florida East Coast Railway Company and its affiliates (collectively, "FECR")
and St. Joe.
The Master Agreement is attached hereto as Appendix F.
GCC develops, leases and manages over 5.0 million square feet
of office, service and warehouse space, including a number of industrial and
commercial parks in Jacksonville, Orlando and Miami, Florida and it owns
approximately 18,000 acres of real estate primarily along the east coast of
Florida. St. Joe is a diversified company engaged in community, commercial,
industrial, leisure and resort development, along with residential and
commercial real estate services. St. Joe is one of the largest real estate
operating companies in the southeastern United States and is the single
largest private landowner in Florida.
GCC and St. Joe's current real estate relationship is governed
by the Existing Management Agreement, which will be amended on the date of the
Distribution as described below. Under the Existing Management Agreement, St.
Joe provides (a) asset management services for improved and unimproved
property owned by GCC and (b) property management and leasing services for
improved property owned by GCC. The Existing Management Agreement
contemplates that any further development responsibilities requested of St.
Joe be provided for under separate agreements to be negotiated between the
parties. Under the Existing Management Agreement, St. Joe and its affiliates
have provided development services for GCC's portfolio at Jacksonville,
Orlando, Miami and Weston, Florida.
On the date of the Distribution, GCC and St. Joe will enter
into the additional Real Estate Agreements (the parties have already entered
into the Master Agreement). Pursuant to the Real Estate Agreements, which have
terms extending for up to three years from the date of the Distribution, GCC
will continue to retain St. Joe and its affiliates to develop and manage
certain commercial real estate holdings of GCC. In addition, GCC and St. Joe
have agreed to form a joint venture (governed by the Master Agreement) in
order to develop certain properties they each own, and plan to seek and
commence other new commercial real estate development opportunities.
Expected Benefits of the Real Estate Transactions
FECI, through GCC, expects to realize several benefits as a
result of entering into the Real Estate Agreements. Primarily, GCC expects
that the Real Estate Transactions will:
o restructure its real estate relationship with St. Joe in a
manner that will allow GCC to capitalize on the high
quality services provided by St. Joe while increasing GCC's
direct control over its portfolio as well as facilitating
market diversification;
o increase GCC's flexibility to manage capital risk through
third-party equity or debt investment, as appropriate at
GCC's discretion, independent of St. Joe's control;
o provide GCC with $6,000,000 in three equal installments as
additional consideration for GCC's willingness to enter
into certain of the Real Estate Agreements with St. Joe;
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<PAGE>
o provide GCC with services at competitive market rates; and
o require that St. Joe meet high standards of performance.
Description of the Real Estate Agreements
Set forth below are descriptions of the real estate agreements
that will effect the Real Estate Transactions. Other than regarding GCC's
immediate right to access information concerning specified St. Joe properties,
the Real Estate Transactions will only take effect upon consummation of the
Transactions. Shareholder approval is not required to effect the Real Estate
Transactions. The following descriptions of the Real Estate Agreements do not
purport to be complete and are qualified in their entirety be reference to the
agreements themselves, copies of which are attached hereto as Appendix F.
In general, the Real Estate Agreements contemplate the
following:
o pursuant to the Master Agreement, GCC and St. Joe will
jointly own and develop certain properties presently owned
or to be acquired in the future by GCC or St. Joe;
o pursuant to the Amended Management Agreement, the parties
will transition the performance of asset management
services from St. Joe to GCC between the date of the
Distribution and December 31, 2000 and revise the Existing
Management Agreement with respect to the asset management
services to be performed by St. Joe during that time
period;
o pursuant to the Property Management Agreement, St. Joe will
provide property management services for all improved
properties owned by GCC located at duPont Center, Gran Park
at Jacksonville, Gran Park at Avenues, Interstate South,
Deerwood South, Deerwood North, Section 6 Miami, Section 32
Miami, South Park, and Weston for a period of three years
following the date of the Distribution; and
o pursuant to the Development Agreement, St. Joe will, at
market based rates, become the designated developer for
specific GCC properties for which St. Joe has already
provided pre-development financial analysis and development
services for a period of three years following the date of
the Distribution.
Master Agreement. The Master Agreement sets forth the terms
for the future development of certain properties now owned or hereafter
acquired by GCC or St. Joe (the "Properties"). Pursuant to the Master
Agreement, on the date of the Distribution GCC and St. Joe have agreed to
contribute the Properties to separate limited partnerships (each a "Limited
Partnership") to be equally owned by GCC and St. Joe. GCC and St. Joe have
already agreed to the form of the PPA which will provide for 50% ownership and
control by each of GCC and St. Joe over major decisions regarding the limited
partnerships.
GCC has agreed to contribute parcels of properties in the
following developments to Limited Partnerships: Deerwood North, Jacksonville;
SouthPark, Orlando and Beacon Station-Section 6, Miami.
St. Joe has agreed to contribute properties of equivalent value
which have been preliminarily identified as Legacy Point, Orlando and 355
Alhambra, Coral Gables. St. Joe may, if requested by GCC, contribute other
properties substantially equivalent in value to the properties contributed by
GCC.
In addition, if GCC acquires additional property in Orlando
called SouthPark II, St. Joe may purchase a 50% interest in one-half of the
entitled floor area ratio of the SouthPark II development. If St. Joe
provides an investment opportunity to GCC equivalent in value to the entire
SouthPark II property, and GCC accepts such investment, then St. Joe may
purchase a 50% interest in the remaining SouthPark II development.
53
<PAGE>
GCC and St. Joe have also identified portions of the following
GCC developments as potential joint development opportunities (the "Additional
GCC Properties"): duPont Center, Deerwood North, GranPark at Jacksonville,
Beacon Station-Section 6 and Miami CBD.
During the three years from the date of the Distribution, St.
Joe intends to acquire additional properties for development and offer GCC a
right to participate in the ownership and development of those properties; if
GCC accepts such an opportunity, which it may do in its sole discretion, then
GCC will offer St. Joe a right to participate in the ownership and development
of certain of the Additional GCC Properties. In addition, if GCC seeks
outside cash equity investment in the Additional GCC Properties, GCC will give
St. Joe an opportunity to invest in such property on the same terms and
conditions.
Amended Management Agreement. On the date of the Distribution,
GCC and St. Joe will enter into the Amended Management Agreement generally as
follows:
o St. Joe's obligations will become limited to performance of
asset management services, including pre-development
marketing and financial analysis in accordance with
strategic objectives and direction as established by GCC.
The property management services and certain development
management services will be governed by separate agreements
between GCC and St. Joe, both of which will become
effective upon the date of the Distribution;
o The Amended Management Agreement will be effective from the
date of Distribution until December 31, 2000;
o The following properties will be covered by the Amended
Management Agreement: duPont Center, Gran Park at
Jacksonville, Gran Park at Avenues, Interstate South,
Deerwood South, Deerwood North, Section 6 Miami, Section 32
Miami, South Park and Weston; and
o The fee for the services to be provided under the Amended
Management Agreement will be $1,750,000, which will be
adjusted pro rata if the term of the Amended Management
Agreement is less than one year and also to be reduced, on
a per annum basis, pro rata by one-half percent (.5%) of
the value of any property sold during the term of the
Amended Management Agreement.
Property Management Agreement. On the date of the
Distribution, GCC and St. Joe will enter into the Property Management
Agreement generally as follows:
o St. Joe will be the exclusive property management services
provider with respect to all completed buildings owned by
GCC located at duPont Center, Gran Park at Jacksonville,
Gran Park at Avenues, Interstate South, Deerwood South,
Deerwood North, Section 6 Miami, Section 32 Miami, South
Park and Weston;
o The Property Management Agreement provides that property
management services will equal or exceed the standards of
quality generally established for first class property
managers of buildings similar in quality to those under
management and will, at a minimum, meet the standards of
the Building Owners and Managers Association (BOMA) . St.
Joe also agrees that it will use all commercially
reasonable efforts to pursue new leases, renewals and
extensions for the managed buildings;
o St. Joe will be paid two and one-half percent (2.5%) of
collected receipts (subject to customary exclusions) for
property management services for each managed property
during the term of the Property Management Agreement
beginning on the date of the Distribution, unless GCC and
St. Joe agree to a different rate;
o St. Joe will be paid market rates for leasing commissions
ranging from one percent (1%) to seven percent (7%) of
fixed rent (subject to customary exclusions) for each
managed property during the term of the Property Management
Agreement beginning on the date of the Distribution; and
54
<PAGE>
o The term of the Property Management Agreement will be for
three years beginning on the date of the Distribution.
Development Agreement. On the date of the Distribution, GCC
and St. Joe will enter into the Development Agreement generally as follows:
o St. Joe will be the development management services
provider with respect to the following properties: duPont
Center, Gran Park at Jacksonville, Section 6, Beacon
Station, South Park, Deerwood North and Weston;
o St. Joe will provide services customary and usual for
development managers for projects similar to those under
management;
o St. Joe will be paid a fee for development management
services equal to the actual project cost (which will mean
all hard and soft costs of development and construction
including the accounting book value of the land) of each
project multiplied by four percent (4%), unless a different
rate is agreed to by St. Joe and GCC. This fee will be paid
in installments through design and construction, with the
final 30% conditioned on St. Joe's satisfaction of lease up
requirements;
o When St. Joe becomes aware of any opportunity for
commercial or industrial development that is suitable for
any property that St. Joe is providing development or asset
management services for GCC, St. Joe will use commercially
reasonable efforts to promote such commercial or industrial
development; and
o The term of the Development Management Agreement will be
for three years (the "Development Term").
FECR Agreement. With respect to the property owned by FECR,
comprising approximately 433 acres (the "Hialeah Rail Yard"), St. Joe
acknowledges and agrees that the ownership, use, and potential development of
the Hialeah Rail Yard is within the exclusive control of FECR. However, if
FECR determines during the Development Term, that (a) it desires to pursue
commercial development of the Hialeah Rail Yard or portion thereof, and (b)
such development is not part of a larger transaction with other parties
related to an acquisition of and/or relocation of operations on a portion of
the Hialeah Rail Yard and (c) FECR determines to utilize the services of a
third party development manager, then FECR agrees to provide St. Joe a first
opportunity to provide such development management services.
55
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF FECI
The following table sets forth information as of October 27,
1999 with respect to the beneficial ownership of FECI common stock prior to
and after the Transactions by (1) each person known to FECI to own
beneficially more than 5% of the outstanding shares of FECI common stock or
St. Joe common stock, (2) each director of FECI, (3) each executive officer of
FECI and (4) all current executive officers and directors as a group. There
may be other persons that own shares of both FECI common stock and St. Joe
common stock who would own, collectively, following the Distribution, in
excess of 5% of the total voting power of Class A Common Stock and Class B
Common Stock. Except as indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to all
shares shown as beneficially owned by them, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
Percent of
Total
Common
Stock
Owned After
Beneficial Ownership Beneficial Ownership the
Name of Beneficial Owner Prior to the Transactions* After the Transactions* Transactions
- ------------------------------- ------------------------------ ---------------------------------------- --------------------
Class A Class B
Common Stock Common Stock Common Stock
------------------------------ ------------------- -------------------
Shares % Shares % Shares %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
St. Joe Capital II, Inc.(1)
300 Delaware Ave.
Wilmington, DE 19801........ 19,609,216 53.9 -- -- -- -- --
Franklin Resources Inc.
51 J.F.K. Parkway
Short Hills, NJ 07078....... 5,263,600 14.5 5,263,600 31.4 890,844 4.5 16.9
The Nemours Foundation
1650 Prudential Drive
Jacksonville, FL 32207...... 1,800,896 5.0 1,800,896 10.8 501,996 2.6 6.3
Alfred I. duPont
Testamentary Trust
1650 Prudential Drive
Jacksonville, FL 32207...... -- -- -- -- 11,179,214 57.0 30.8
Robert W. Anestis(2).......... 120,000 ** 120,000 ** -- -- **
J. Nelson Fairbanks(3)........ 3,000 ** 3,000 ** -- -- **
Jacob C. Belin(3)(4).......... 6,200 ** 6,200 ** 11,681,210 59.6 37.1
Allen C. Harper(3)............ 3,000 ** 3,000 ** -- -- **
Adolpho Henriques(3).......... 3,000 ** 3,000 ** -- -- **
J.J. Parrish III(3)........... 3,000 ** 3,000 ** -- -- **
W.L. Thornton(3)(5)........... 5,236 ** 5,236 ** 11,681,210 59.6 37.1
Richard S. Ellwood(3)......... 3,400 ** 3,400 ** -- -- **
Peter S. Rummell(6)***........ -- -- -- -- [42,503] [**] [**]
John McPherson (7)............ 14,300 ** 14,300 ** -- -- **
Robert H. Nazarian(8)......... 9,000 ** 9,000 ** -- -- **
Robert F. MacSwain(9)......... 7,500 ** 7,500 ** -- -- **
Heidi J. Eddins(10)........... 5,000 ** 5,000 ** -- -- **
Carl F. Zellers, Jr.(11)...... -- ** -- -- -- -- **
T. Neal Smith(11)............. -- ** -- -- -- -- **
Gregory P. West(11)(12)....... 6,727 ** 6,727 -- -- -- **
All current executive officers
and directors as a group (13
persons)...................... 182,636 ** 182,636 ** [42,503] [**] [**]
</TABLE>
56
<PAGE>
- ---------
* Includes shares of restricted stock beneficially owned by executive
officers which are subject to forfeiture under certain circumstances.
** Less than 1%.
*** To resign as of the consummation of the Merger.
(1) All outstanding stock of St. Joe Capital II, Inc. is owned by The St. Joe
Company.
(2) Includes 40,000 shares of restricted stock and vested options to acquire
80,000 shares of common stock. In addition, Mr. Anestis holds unvested
options to acquire 460,000 shares awarded under an employment contract.
The options vest at various intervals and are subject to expiration in
accordance with the contract.
(3) Includes vested options to acquire 3,000 shares of common stock.
(4) Includes 3,200 shares held by Mr. Belin's wife, as to which Mr. Belin
disclaims beneficial ownership. Also includes 11,179,214 shares of Class B
Common Stock held by the Alfred I. duPont Testamentary Trust, of which Mr.
Belin is a Trustee and 501,996 shares of Class B Common Stock held by the
Nemours Foundation, of which Mr. Belin is a Director.
(5) Includes 11,179,214 shares of Class B Common Stock held by the Alfred I.
duPont Testamentary Trust, of which Mr. Thornton is a Trustee and 501,996
shares of Class B Common Stock held by the Nemours Foundation, of which
Mr. Thornton is a Director.
(6) Mr. Rummell is Chairman of the Board of Directors and CEO of The St. Joe
Company.
(7) Includes 14,300 shares of restricted stock. Mr. McPherson also holds
unvested options to acquire 110,000 shares awarded under an employment
contract. The options vest at various intervals and are subject to
expiration in accordance with the contract.
(8) Includes 9,000 shares of restricted stock. Mr. Nazarian also holds
unvested options to acquire 75,000 shares awarded under an employment
contract. The options vest at various intervals and are subject to
expiration in accordance with the contract.
(9) Includes 7,500 shares of restricted stock. Mr. MacSwain also holds
unvested options to acquire 83,000 shares awarded under an employment
contract. The options vest at various intervals and are subject to
expiration in accordance with the contract.
(10) Includes 5,000 shares of restricted stock. Ms. Eddins also holds unvested
options to acquire 58,000 shares awarded under an employment contract. The
options vest at various intervals and are subject to expiration in
accordance with the contract.
(11) These individuals are no longer executive officers of FECI.
(12) Includes vested options to acquire 5,000 shares of common stock.
57
<PAGE>
BOARD OF DIRECTORS AND MANAGEMENT
Board of Directors
Set forth below are the names, ages at December 2, 1999 and principal
occupations for the last five years of each director of FECI.
NAME AGE PRINCIPAL OCCUPATION
- -------------------- --- ---------------------
Robert W. Anestis... 54 Chairman, President and Chief Executive Officer
J. Nelson Fairbanks. 64 Director
Jacob C. Belin...... 85 Director
Allen C. Harper..... 55 Director
Adolfo Henriques.... 46 Director
J.J. Parrish, III... 46 Director
W.L. Thornton....... 71 Director
Richard S. Ellwood.. 68 Director
Peter S. Rummell*... 54 Director
- ---------
* To resign as of the consummation of the Merger.
Robert W. Anestis. Mr. Anestis has been a director and
Chairman, President and Chief Executive Officer of FECI since January 1999.
Previously, he has served as President of Anestis & Company, an investment
banking and financial advisory firm. He is also a director of Champion
Enterprises Inc. and a member of the Board of Advisors of CHB Capital
Partners, L.P.
J. Nelson Fairbanks. Mr. Fairbanks has been a director of FECI
since 1989. He is President and a director of U.S. Sugar Corporation.
Jacob C. Belin. Mr. Belin has been a director of FECI since
1984. He is also a director of St. Joe, a trustee of the duPont Trust and a
director of Nemours. He is a former Chairman of the Board of St. Joe Paper
Company.
Allen C. Harper. Mr. Harper has been a director of FECI since
1994. He is Chairman, President and Chief Executive Officer of First Reserve,
Inc., a holding company of Esslinger-Wooten-Maxwell, Inc., a residential and
commercial real estate brokerage and management firm based in Coral Gables,
Florida. He is also a director of Tri- County Railroad Authority. Mr. Harper
also served as Chairman and Chief Executive Officer of First American Railways,
Inc. from April 1996 until July 2, 1996 and prior thereto, served in similar
capacities with that company's predecessor.
Adolfo Henriques. Mr. Henriques has been a director of FECI
since 1998. He has served as President and Chief Executive Officer of Union
Planters Bank-Florida since February 1998. He served as Chairman of South
Florida NationsBank from October 1997 to February 1998 and prior thereto,
served as President of NationsBank-Dade County from January 1996 to October
1997 and Executive Vice President from August 1992 to January 1996.
J.J. Parrish, III. Mr. Parrish has been a director of FECI
since 1993. He is President of Jesse J. Parrish, Inc., a privately owned
citrus producing firm. He is also Vice-Chairman of Parrish Medical Center and
a director of Barnett Bank of Central Florida.
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<PAGE>
W.L. Thornton. Mr. Thornton has served as a director of FECI
since 1984. He is also a director of St. Joe, a trustee of the duPont Trust
and a director of Nemours. Until May 21, 1997, he served as Chairman of the
Board and Chief Executive Officer of FECI. Prior to May 1995, he served as
Chairman and President of FECI.
Richard S. Ellwood. Mr. Ellwood has been a director of FECI
since 1998. He is President of R. S. Ellwood & Co., Incorporated, a real
estate investment banking firm. He is also a director of FelCor Lodging Trust
Incorporated and Apartment Investment and Management Company.
Peter S. Rummell. Mr. Rummell has been a director of FECI
since 1998. He has served as Chairman and CEO of St. Joe since January 1997.
From 1985 to 1996 he served as President of Disney Development Company and
Chairman of Walt Disney Imagineering.
Executive Officers
Set forth below are the names, ages at December 2, 1999 and
principal occupations of each executive officer of FECI who is not also a
director of FECI. All such persons have been elected to serve until the next
annual election of officers and their successors are elected or until their
earlier resignation or removal.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
John McPherson................. 53 Executive Vice President and Chief Operating Officer -- Railway
Robert H. Nazarian............. 49 Executive Vice President, Chief Financial Officer and Treasurer
Robert F. MacSwain............. 56 Executive Vice President - Special Projects
Heidi J. Eddins................ 43 Senior Vice President, Secretary and General Counsel
</TABLE>
Interests of Certain Persons in the Transactions
In considering the recommendation of the FECI Board, FECI's
shareholders should be aware that certain directors of FECI may have certain
interests in the Transactions that are or may be different from, or in
addition to, the interests of the FECI public shareholders. Three directors
of FECI, Mr. Belin, Mr. Thornton and Mr. Rummell, also serve as directors or
officers of St. Joe and/or the Charities. Mr. Belin serves as a director of
St. Joe, a trustee of the duPont Trust and a director of Nemours. Mr.
Thornton also serves as a director of St. Joe, a trustee of the duPont Trust
and a director of Nemours. Mr. Rummell is the Chairman and Chief Executive
Officer of St. Joe. Mr. Rummell will tender his resignation from the FECI
Board effective upon consummation of the Merger. Mr. Belin, Mr. Thornton and
Mr. Rummell did not serve on the Special Committee.
As of the Record Date, the directors and executive officers of
FECI beneficially owned an aggregate of [less than 1%] of the outstanding
shares of FECI common stock, including shares that may be acquired upon the
exercise of outstanding stock options exercisable within 60 days of the Record
Date. As of the Record Date, [none] of the directors or executive officers of
FECI (other than Peter Rummell) owned any shares of common stock of St. Joe.
As of the Record Date, Peter Rummell owned an aggregate of [less than
approximately 3%] of the outstanding shares of St. Joe common stock, including
shares that may be acquired upon the exercise of outstanding stock options
exercisable within 60 days of the Record Date. See "Stock Ownership of
Certain Beneficial Owners and Management of FECI."
SHAREHOLDER PROPOSALS
The FECI Board knows of no other matters which are likely to be
brought before the Special Meeting. If any other matters should be properly
brought before the meeting, it is the intention of the persons named in the
enclosed proxy to vote, or otherwise act, in accordance with their judgment on
such matters.
59
<PAGE>
FECI will hold a 2000 Annual Meeting of shareholders in May
2000 (the "Annual Meeting"). In order for shareholder proposals which are
submitted pursuant to Rule 14a-8 of the Exchange Act to be considered by FECI
for inclusion in the proxy material for the Annual Meeting, they must be
received by the Secretary of FECI by January 4, 2000. If notice of a
shareholder proposal submitted outside the processes of Rule l4a-8 of the
Exchange Act is received by FECI after [ ], then FECI's proxy for the Annual
Meeting may confer on the holder of the proxy discretionary authority to vote
on the proposal without any discussion of such proposal in the proxy statement
for the Annual Meeting.
All communications to the Secretary of FECI must be in writing
and must be received by FECI at its principal executive offices (One Malaga
Street, St. Augustine, Florida 32084) by the applicable date.
EXPERTS
KPMG LLP served as the independent accountants for FECI for the
fiscal year ended December 31, 1998. They have audited the financial
statements included in FECI's Annual Report on Form 10-K for the year ended
December 31, 1998, as set forth in their report, which is incorporated in this
Proxy Statement by reference. The financial statements are incorporated by
reference in reliance upon their report given on their authority as experts in
accounting and auditing. Representatives of KPMG LLP will not be present at
the Special Meeting.
WHERE YOU CAN FIND MORE INFORMATION
FECI is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. The reports, proxy statements and
other information filed by FECI with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, 13th floor, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material also can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, Washington,
D.C. 20549. Information regarding the Public Reference Room may be obtained
by calling the Commission at (800) 732-0330. In addition, FECI is required to
file electronic versions of such material with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Existing
FECI common stock is listed on the NYSE under the symbol "FLA" and reports
and other information concerning FECI can also be inspected at the offices of
the NYSE, 20 Broad Street, New York, NY 10005.
No persons have been authorized to give any information or to
make any representation other than those contained in this Proxy Statement in
connection with the solicitations of proxies or the offering of securities
made hereby and, if given or made, such information or representation must not
be relied upon as having been authorized by FECI or any other person. This
Proxy Statement does not constitute an offer to sell, or a solicitation of an
offer to buy, any securities, or the solicitation of a proxy in any
jurisdiction to or from any person to whom it is not lawful to make any such
offer or solicitation in such jurisdiction.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ HEIDI J. EDDINS
Heidi J. Eddins
Secretary
Dated: [ ]
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INDEX OF DEFINED TERMS
TERM PAGE
Acquiring Person...........................................................50
Additional GCC Properties..................................................54
affiliated transactions....................................................40
Amended By-laws.............................................................3
Amended Charter.............................................................1
Amended Management Agreement...............................................52
Annual Meeting.............................................................60
Applicable Shares..........................................................32
Charities...................................................................5
Class A Common Stock........................................................1
Class A Directors...........................................................3
Class B Common Stock........................................................1
Class B Directors...........................................................3
Class B Significant Holder Voting Limitation................................4
Code.......................................................................26
Commission.................................................................44
Contributed Shares.........................................................48
control shares.............................................................40
Declaration Date...........................................................42
Delaware Sub...............................................................42
Development Agreement......................................................52
Development Term...........................................................55
Distribution................................................................1
Distribution Agent.........................................................42
Distribution Agreement......................................................1
Distribution Date..........................................................42
DLJ........................................................................13
DLJ Opinion................................................................20
DP&W.......................................................................13
duPont Trust................................................................5
Economic Adjustment........................................................14
Economic Interest..........................................................32
Effective Time.............................................................48
Excess Shares..............................................................32
Existing Charter............................................................3
FBCA.......................................................................28
FECI........................................................................1
FECI Board..................................................................1
FECI Proposal..............................................................14
FECR.......................................................................52
FECR Agreement.............................................................52
flip-in right..............................................................50
flip-over right............................................................50
GCC.........................................................................2
GCC Board..................................................................17
Hialeah Rail Yard..........................................................55
interested shareholders....................................................40
IRS Ruling.................................................................26
Limited Partnership........................................................53
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Master Agreement............................................................2
Merger......................................................................1
Merger Sub..................................................................1
minority FECI shareholders.................................................13
Morgan Stanley.............................................................13
Nemours.....................................................................5
NYSE.......................................................................27
Plan of Merger..............................................................2
Preferred Stock.............................................................3
Properties.................................................................53
Property Management Agreement..............................................52
Qualified Offer............................................................50
Real Estate Agreements......................................................2
Real Estate Transactions....................................................2
Recapitalization............................................................1
Record Date.................................................................7
Right......................................................................50
Rights Distribution Date...................................................50
Rights Plan.................................................................5
S&C........................................................................13
Securities Act.............................................................27
Shareholders Agreement......................................................5
Significant Holder..........................................................4
Special Committee..........................................................13
Special Meeting.............................................................1
St. Joe.....................................................................1
Threshold Amounts..........................................................50
Transaction Documents.......................................................1
Transactions................................................................1
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APPENDIX A
DISTRIBUTION AND RECAPITALIZATION AGREEMENT
DISTRIBUTION AND RECAPITALIZATION AGREEMENT, dated as of October 26,
1999 (this "Agreement"), between The ST. JOE COMPANY, a Florida company ("St.
Joe"), and FLORIDA EAST COAST INDUSTRIES, INC., a Florida corporation ("FEC")
(each a "Party" and collectively, "Parties").
WHEREAS, St. Joe owns, indirectly through St. Joe Capital II, Inc.
Corporation, a Delaware corporation and a wholly owned subsidiary of St. Joe
(the "Delaware Sub"), as of the close of business on the date hereof, 19,609,216
shares of common stock, no par value per share, of FEC ("FEC Common Stock");
WHEREAS, prior to the Declaration Date (as defined herein), Delaware
Sub will merge with and into St. Joe with St. Joe as the surviving corporation
(the "Delaware Sub Merger");
WHEREAS, prior to the Declaration Date, St. Joe will contribute all of
its shares of FEC Common Stock to which it will have direct title to and
ownership of as a result of the Delaware Sub Merger, to a Florida corporation
which will be incorporated prior to the Declaration Date and will be a direct
wholly owned Subsidiary of St. Joe ("Merger Sub");
WHEREAS, FEC and Merger Sub, expect to enter into Articles of Merger
substantially in the form attached hereto as Exhibit A (the "Articles of
Merger"), pursuant to which, among other things, Merger Sub will merge with and
into FEC with the consequent capital stock changes resulting in (i) all of the
outstanding share capital in Merger Sub being exchanged for 19,609,216 shares of
a new Class B Common Stock, no par value per share, of FEC ("Class B Common
Stock"), which new class of stock shall be entitled to elect 80% of the members
of the board of directors of FEC and in all other respects shall be
substantially identical to the FEC Common Stock, (ii) all of the shares of FEC
Common Stock held by Merger Sub being canceled and (iii) all other stockholders
of FEC retaining all their shares of FEC Common Stock, which class of stock will
be re-designated as Class A Common Stock and shall be entitled to elect 20% of
the members of the board of directors of FEC (such merger and the transactions
(including, without limitation, the amended and restated Articles of
Incorporation and Bylaws of FEC specified therein) contemplated by the Articles
of Merger, the "Recapitalization");
WHEREAS, the Board of Directors of St. Joe has determined that it is
appropriate, desirable and in the best interests of St. Joe and its stockholders
to distribute on the Distribution Date (as defined herein) all the shares of
Class B Common Stock that
St. Joe will receive in the Recapitalization, on the terms and subject to the
conditions set forth in this Agreement, to the holders of record of the common
stock, no par value per share, of St. Joe ("St. Joe Common Stock"), as of the
Distribution Record Date (as defined herein), on a pro rata basis (the
"Distribution");
WHEREAS, the Board of Directors of FEC has determined that it is
appropriate, desirable and in the best interests of FEC and its stockholders
that the Distribution be consummated, and the Recapitalization is a necessary
and desirable means to enable the Distribution to occur;
WHEREAS, St. Joe is in the process of applying for a ruling from the
Internal Revenue Service to the effect that the Distribution will be a tax-free
distribution within the meaning of Section 355 of the Code (as defined herein);
WHEREAS, each of St. Joe and FEC has determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect the Distribution and the Recapitalization; and
WHEREAS, each of St. Joe and FEC has determined that it is necessary
and desirable to set forth certain additional agreements that will govern
certain matters following the Distribution, including relating to (i) the
restructuring of the asset, property and development management relationship
between the Parties and (ii) certain agreements between FEC and certain of its
shareholders after the Distribution.
NOW, THEREFORE, in consideration of the mutual representations and
warranties, covenants, agreements, and conditions contained in this Agreement,
the Parties hereby agree as follows,
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ARTICLE I.
DEFINITIONS
SECTION 1.1 General. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Action" shall mean any action, suit, arbitration,
inquiry, proceeding or investigation by or before any court, any
Governmental Authority or any arbitration tribunal.
(b) "Affiliate" shall mean, when used with respect to a
specified Person, another Person that controls, is controlled by, or is
under common control with the Person specified. As used herein,
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and
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policies of such Person, whether through the ownership of voting
securities or other interests, by contract or otherwise.
(c) "Agreement Disputes" shall have the meaning set forth in
Section 5.1.
(d) "Articles of Merger" shall have the meaning set forth in
the recitals hereto.
(e) "Assets" shall mean assets, properties and rights
(including goodwill) , wherever located (including in the possession of
vendors or other third parties or elsewhere), whether real, personal or
mixed, tangible, intangible or contingent, in each case whether or not
recorded or reflected or required to be recorded or reflected on the
books and records or financial statements of any Person.
(f) "Business Entity" shall mean any corporation, partnership,
limited liability company or other entity which may legally hold title
to Assets.
(g) "Class B Common Stock" shall have the meaning set forth in
the recitals hereto.
(h) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury regulations promulgated thereunder, including
any successor legislation.
(i) "Declaration Date" shall mean the date, mutually agreed
between St. Joe and FEC, on which (i) the St. Joe Board of Directors
shall declare the Distribution, and (ii) the Articles of Merger
effecting the Recapitalization shall be filed with the Department of
State of the State of Florida.
(j) "Distribution" shall have the meaning set forth in the
recitals hereto.
(k) "Distribution Agent" shall mean the distribution agent
selected by St. Joe to effect the Distribution, which may be FEC's
stock transfer agent.
(l) "Distribution Date" shall mean the date following the
consummation of the Recapitalization determined by the Board of
Directors of St. Joe for the mailing of certificates of Class B Common
Stock to stockholders of St. Joe in the Distribution. The Distribution
Date shall be a date as soon as practicable, but in any event not more
than thirty days, after the filing of the Articles of Merger relating
to the Recapitalization.
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(m) "Distribution Record Date" shall mean the date determined
by the Board of Directors of St. Joe as the record date for the
determination of the holders of record of St. Joe Common Stock entitled
to receive shares of Class B Common Stock in the Distribution.
(n) "Effective Time" shall mean immediately prior to the
midnight, New York time, that ends the 24-hour period comprising the
Distribution Date.
(o) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(p) "FBCA" shall mean the Florida Business Corporation Act, as
amended.
(q) "FEC Common Stock" shall have the meaning set forth in the
recitals hereto.
(r) "FEC" shall have the meaning set forth in the heading of
this Agreement.
(s) "FEC Business" shall mean each and every business
conducted at any time prior to, on or after the Effective Time by FEC
or any current, former, or future Subsidiary of FEC or other Business
Entity controlled by FEC, whether or not such Subsidiary is a
Subsidiary of FEC or such Business Entity is controlled by FEC on the
date hereof.
(t) "FEC Business Entity" shall mean any Business Entity a
majority of the equity interests of which are owned, directly or
indirectly, by FEC.
(u) "FEC Group" shall mean FEC and each Person that is a
Subsidiary of FEC immediately prior to the Effective Time.
(v) "FEC Indemnitees" shall mean, each member of the FEC
Group, each of their respective present and former directors, officers,
employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing.
(w) "FEC Liabilities" shall mean, collectively, any and all
Liabilities whatsoever that arise from, relate to or are in the nature
of the operation of the FEC Business or the ownership of the Assets of
the FEC Business by FEC, any current, former or future Subsidiary of
FEC or any Business Entity controlled by FEC, whether such Liabilities
arise before, on or after the Effective Time and
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whether known or unknown, fixed or contingent, and, without limiting
the generality of the foregoing, shall include and be deemed to
include:
(i) any and all Liabilities to which St. Joe or its
predecessors and successors may become subject arising from or
based upon its status or alleged status as a "controlling
person" (as defined under Section 15 of the Securities Act and
Section 20 of the Exchange Act) of FEC relating to (a) the
Proxy Statement (or any amendment thereto) (except for
liabilities which FEC incurs solely as a result of written
information relating to St. Joe supplied by St. Joe expressly
for inclusion in the Proxy Statement) or (b) any other report
or document filed by FEC with the SEC at any time before, on
or after the Effective Time (except for liabilities which FEC
incurs solely as a result of written information relating to
St. Joe or the St. Joe Business supplied by St. Joe expressly
for inclusion in such report or document); and
(ii) any Liabilities arising from, relating to or in
the nature of a breach or failure to perform by FEC of any
representation, warranty, covenant or agreement of FEC herein
or in the Articles of Merger;
(x) "FEC Required Consents" shall have the meaning set forth
in Section 2.2(a)(iv) hereto.
(y) "Form 8-A" shall mean an FEC registration statement on
Form 8-A pursuant to which the Class B Common Stock shall be registered
under the Exchange Act, including all amendments thereto.
(z) "Governmental Authority" shall mean any federal, state,
local, foreign or international court, government, department,
commission, board, bureau, agency, official, body or other regulatory,
administrative or governmental authority or, with respect to any
Person, any securities exchange or association on which shares of such
Person are listed or registered or any self regulating organization of
which such Person is a member.
(aa) "HSR Act" shall have the meaning set forth in Section
2.2(a)(iii).
(bb) "Indemnifying Party" shall have the meaning set forth in
Section 3.3.
(cc) "Indemnitee" shall have the meaning set forth in
Section 3.3.
(dd) "IRS" shall mean the United States Internal Revenue
Service.
(ee) "IRS Ruling" shall have the meaning set forth in Section
2.1(c) (i).
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(ff) "IRS Supplemental Ruling" shall have the meaning set
forth in Section 4.4.
(gg) "Liabilities" shall mean any and all losses, claims,
charges, debts, demands, actions, causes of action, suits, damages,
obligations, payments, costs and expenses, sums of money, accounts,
reckonings, bonds, specialties, indemnities and similar obligations,
exonerations, covenants, contracts, controversies, agreements,
promises, doings, omissions, variances, guarantees, make-whole
agreements and similar obligations, and other liabilities, including
all contractual obligations, whether absolute or contingent, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever arising, and including those arising under any law,
rule, regulation, Action, threatened or contemplated Action (including
the costs and expenses of demands, assessments, judgments, settlements
and compromises relating thereto and attorneys' fees and any and all
costs and expenses, whatsoever reasonably incurred in investigating,
preparing or defending against any such Actions or threatened or
contemplated Actions) , order or consent decree of any Governmental
Authority or any award of any arbitrator or mediator of any kind, and
those arising under any contract, commitment or undertaking, including
those arising under this Agreement or the Articles of Merger, in each
case, whether or not recorded or reflected or required to be recorded
or reflected on the books and records or financial statements of any
Person.
(hh) "Master Agreement" shall mean the Master Agreement
between Gran Central Corporation ("GCC") and St. Joe, dated October 26,
1999.
(ii) "NYSE" shall mean the New York Stock Exchange, Inc.
(jj) "NYSE Listing Application" shall mean the application to
be submitted by FEC to the NYSE for the listing of the Class B Common
Stock.
(kk) "Person" shall mean any natural person, Business Entity,
corporation, business trust, joint venture, association, company,
partnership, other entity or government, or any agency or political
subdivision thereof.
(ll) "Proxy Statement" shall have the meaning set forth in
Section 4.3(d) hereof.
(mm) "Real Estate Agreements" shall mean each of the
agreements attached as exhibits to the Master Agreement.
(nn) "Recapitalization" shall have the meaning set forth in
the recitals hereto.
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(oo) "Rights Plan" shall have the meaning set forth in Section
2.1(d)(xvi) hereof.
(pp) "St. Joe Business" shall mean each and every business
conducted at any time prior to, on or after the Effective Time by St.
Joe or any current, former or future Subsidiary of St. Joe (other than
FEC and its Subsidiaries), including Merger Sub, or other Business
Entity controlled by St. Joe (other than FEC and its Subsidiaries),
whether or not such Subsidiary is a Subsidiary of St. Joe or such
Business Entity is controlled by St. Joe on the date hereof.
(qq) "St. Joe Business Entity" shall mean any Business Entity
a majority of the equity interests of which are owned, directly or
indirectly, by St. Joe.
(rr) "St. Joe Common Stock" shall mean the common stock, no
par value per share, of St. Joe.
(ss) "St. Joe Group" shall mean St. Joe and each Person (other
than any member of the FEC Group) that is a Subsidiary of St. Joe
immediately prior to the Effective Time.
(tt) "St. Joe Indemnitees" shall mean each member of the St.
Joe Group, each of their respective stockholders, present and former
directors, officers, employees and agents and each of the heirs,
executors, successors and assigns of any of the foregoing.
(uu) "St. Joe Liabilities" shall mean, collectively, any and
all Liabilities whatsoever that arise out of, result from or are
related to the operation of the St. Joe Business or the ownership of
the Assets of the St. Joe Business by St. Joe, any predecessor entity
of St. Joe (and all predecessors thereto) or any Subsidiary of or
Business Entity controlled by any such predecessor, any current,
former, or future Subsidiary of St. Joe or any Business Entity
controlled by St. Joe (other than, in each case, FEC and its
Subsidiaries) whether such Liabilities arise before, on or after the
Effective Time and whether known or unknown, fixed or contingent, and,
without limiting the generality of the foregoing, shall include and be
deemed to include:
(i) any Liabilities arising from, relating to or in the
nature of a breach or failure to perform by St. Joe or Merger
Sub of any representation, warranty, covenant or agreement of
St. Joe herein or in the Articles of Merger;
(ii) any and all Liabilities which FEC incurs solely as
a result of written information relating to St. Joe or the St.
Joe Business supplied by
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St. Joe for the express purpose of inclusion in the Proxy
Statement or any report or document filed by FEC with the SEC;
(iii) any and all Liabilities arising from or relating
to any breach by St. Joe of any fiduciary duty under
applicable law as a controlling shareholder of FEC.
(vv) "St. Joe Required Consents" shall have the meaning set
forth in Section 2.2(b)(iv) hereto.
(ww) "SEC" shall mean the United States Securities and
Exchange Commission.
(xx) "Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
(yy) "Subsidiary" shall mean any corporation, partnership or
other entity of which another entity (i) owns, directly or indirectly,
ownership interests sufficient to elect a majority of the Board of
Directors (or persons performing similar functions) (irrespective of
whether at the time any other class or classes of ownership interests
of such corporation, partnership or other entity shall or might have
such voting power upon the occurrence of any contingency) or (ii) is a
general partner or an entity performing similar functions (e.g., a
trustee).
(zz) "Tax Authority" shall have the meaning set forth in
Section 2.2(a)(ix).
(aaa) "Third-Party Claim" shall have the meaning set forth in
Section 3.3.
(bbb) "Trust" shall mean the Alfred I. duPont Testamentary
Trust.
SECTION 1.2 References; Interpretation. References in this Agreement to
any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation". Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement. Unless the context otherwise requires, the words "hereof",
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
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ARTICLE II.
RECAPITALIZATION, DISTRIBUTION, AND OTHER TRANSACTIONS;
CERTAIN COVENANTS, REPRESENTATIONS AND WARRANTIES
SECTION 2.1 The Recapitalization, Distribution and Other Transactions.
(a) The Recapitalization. Subject to the conditions set forth in
Section 2.1(d) of this Agreement, FEC shall effect the Recapitalization on the
Declaration Date in accordance with the terms of the Articles of Merger,
including duly executing and filing the Articles of Merger with the Department
of State of the State of Florida and filing or recording all other documents or
material required by the FBCA in connection with the Recapitalization; provided
that FEC shall not, and shall not be obligated to, file the Articles of Merger
until (i) Merger Sub shall have duly executed the Articles of Merger and (ii)
St. Joe shall have consented to the filing of the Articles of Merger with the
Department of State of the State of Florida.
(b) The Distribution. Subject to the conditions set forth in Sections
2.1(c) of this Agreement, on the Declaration Date the Board of Directors of St.
Joe shall (i) declare the Distribution upon the terms set forth in this
Agreement, (ii) cause Merger Sub to duly execute the Articles of Merger and
(iii) consent to the filing by FEC of the Articles of Merger with the Department
of State of the State of Florida. To effect the Distribution, St. Joe shall
cause the Distribution Agent to distribute, on or as soon as practicable
following the Distribution Date, on a pro rata basis to the holders of record of
St. Joe Common Stock on the Distribution Record Date, all shares of Class B
Common Stock received by St. Joe in the Recapitalization. During the period
commencing on the date the certificates representing shares of Class B Common
Stock are delivered to the Distribution Agent and ending upon the date(s) on
which certificates evidencing such shares are mailed to holders of record of St.
Joe Common Stock on the Distribution Record Date or on which fractional shares
of Class B Common Stock are sold on behalf of such holders, St. Joe shall cause
the Distribution Agent to hold the certificates representing shares of Class B
Common Stock on behalf of such holders. St. Joe shall deliver to the Agent the
share certificates representing the shares of Class B Common Stock held by St.
Joe which are to be distributed to the holders of St. Joe Common Stock in the
Distribution. St. Joe agrees to reimburse the Distribution Agent for its
reasonable costs, expenses and fees in connection with the Distribution. FEC
agrees, if required by St. Joe, to provide all certificates evidencing shares of
Class B Common Stock that St. Joe shall require in order to effect the
Distribution.
(c) Conditions to the Distribution. The obligation of St. Joe to (1)
declare the Distribution on the Declaration Date, (2) cause Merger Sub to duly
execute the Articles of Merger and (3) consent to the filing of the Articles of
Merger with the Department of
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State of the State of Florida, is, in each case, subject to the satisfaction or
waiver by St. Joe as determined by St. Joe in its sole discretion, of the
conditions set forth below:
(i) (a) A private letter ruling, the request for which shall
have been prepared by counsel for St. Joe in consultation with counsel
for FEC, shall have been received from the IRS in form and substance
reasonably satisfactory to St. Joe providing that, among other things,
the Recapitalization and the Distribution will qualify as tax-free
transactions for federal income tax purposes under Sections 354 and 355
of the Code, respectively (the "IRS Ruling") and the IRS Ruling shall
continue in effect; and (b) St. Joe and FEC shall have complied with
all provisions, statements or representations set forth in the IRS
Ruling, the request for an IRS Supplemental Ruling, if St. Joe has
determined to seek an IRS Supplemental Ruling in accordance with
Section 4.4, and which request shall have been prepared by counsel for
St. Joe in consultation with counsel for FEC and, if granted prior to
such time, the IRS Supplemental Ruling, in each case, that are required
to be complied with prior to the Declaration Date;
(ii) Any approvals and consents of any Governmental Authority
necessary to consummate the Distribution, Recapitalization and the
other transactions contemplated hereby and by the Articles of Merger
shall have been obtained and shall be in full force and effect, and any
waiting periods or extensions thereof required by any Governmental
Authority or with respect to any such approvals or consents shall have
expired or been terminated;
(iii) No actions or suits by any Governmental Authority or
third party against either of the Parties shall be pending with respect
to, and the Parties shall not be subject to any injunctions, judgments,
decrees or orders which enjoin or rescind, the transactions
contemplated by this Agreement or the Articles of Merger or otherwise
prevent either of the Parties from complying with the terms and
provisions of this Agreement or the Articles of Merger (and which, in
the case of any pending action or suit, raise substantial issues of law
or fact and have, in the judgment of St. Joe, a reasonable probability
of success), and no other event outside the control of St. Joe shall
have occurred or failed to occur that prevents the lawful consummation
of the Distribution, the Recapitalization and the other transactions
contemplated hereby;
(iv) The Recapitalization and the Distribution shall be in
compliance with applicable federal and state securities and other
applicable laws;
(v) All conditions to the Recapitalization set forth in
Section 2.1(d) (other than the condition contained in Section
2.1(d)(iv)) shall have been satisfied or waived and no circumstances
shall exist that may prevent the consummation of
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the Recapitalization concurrently with the declaration of the
Distribution pursuant to the terms hereunder;
(vi) The Indemnity Agreement attached hereto as Exhibit B,
shall have been duly executed and delivered by each of Trust and the
Nemours Foundation, a Florida foundation (the "Foundation"), to St.
Joe;
(vii) The Class B Common Stock shall have been approved for
listing on the NYSE, subject to official notice of issuance;
(viii) The Recapitalization and related transactions shall
have been approved by the holders of a majority of outstanding shares
of FEC Common Stock not beneficially owned by St. Joe or any Affiliate
of St. Joe;
(ix) The Master Agreement and each of the Real Estate
Agreements shall be in full force and effect as of the Distribution
Date in accordance with their terms and there shall be existing no
default by the parties thereto of any material terms thereof;
(x) Each of the Senior FEC Employee Consents shall have been
duly executed and delivered to St. Joe;
(xi) FEC shall have obtained the FEC Required Consents;
(xii) Each of the representations and warranties of FEC set
forth in this Agreement shall have been true and correct in all
material respects when made and shall be true and correct in all
material respects as of the Declaration Date; and FEC shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or
prior to the Declaration Date; and St. Joe shall have received a
certificate of the chief executive officer of FEC as to the foregoing;
(xiii) St. Joe shall have received a secretary's certificate
certifying and attaching the articles and bylaws of FEC as amended as
of the Distribution Date and all resolutions of FEC and evidence of FEC
shareholder votes with respect to the transactions contemplated hereby,
as of the Distribution Date;
(xiv) The Form 8-A shall have been filed with the Commission
and there shall be no impediment to the certification by the NYSE to
the Commission of the listing of the Class B Common Stock; and
(xv) All actions and other documents and instruments
reasonably necessary from or by Persons other than St. Joe in
connection with the
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transactions contemplated hereby shall have been taken or executed, as
the case may be, in form and substance reasonably satisfactory to
St. Joe.
The foregoing conditions are for the sole benefit of St. Joe and shall not give
rise to or create any duty on the part of St. Joe to waive or not waive any such
condition.
(d) Conditions to the Recapitalization. The obligation of FEC to effect
the Recapitalization on the Declaration Date is subject to the satisfaction or
waiver by FEC, as determined by FEC in its sole discretion, of the conditions
set forth below:
(i) Any approvals and consents of any Governmental Authority
necessary to consummate the Distribution, the Recapitalization and the
other transactions contemplated hereby and by the Articles of Merger
shall have been obtained and shall be in full force and effect, and any
waiting periods or extensions thereof required by any Governmental
Authority or with respect to any such approvals or consents shall have
expired or been terminated;
(ii) No actions or suits by any Governmental Authority or
third party against either of the Parties shall be pending with respect
to, and the Parties shall not be subject to any injunctions, judgments,
decrees or orders which enjoin or rescind, the transactions
contemplated by this Agreement or the Articles of Merger or otherwise
prevent either of the Parties from complying with the terms and
provisions of this Agreement or the Articles of Merger (and which, in
the case of any pending action or suit, raise substantial questions of
law or fact and have, in the judgment of FEC, a reasonable probability
of success), and no other event outside the control of FEC shall have
occurred or failed to occur that prevents the lawful consummation of
the Distribution, the Recapitalization or the other transactions
contemplated hereby;
(iii) The Recapitalization and the Distribution shall be in
compliance with applicable federal and state securities and other
applicable laws;
(iv) All conditions to the Distribution set forth in Section
2.1(c) (other than the condition contained in Section 2.1(c)(v)) shall
have been satisfied or waived and no circumstances shall exist that may
prevent the declaration of the Distribution concurrently with the
consummation of the Recapitalization pursuant to the terms hereunder;
(v) The Recapitalization shall have been approved by a
majority of the outstanding shares of FEC Common Stock not beneficially
owned by St. Joe or any Affiliate of St. Joe;
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(vi) The Recapitalization shall have been approved by the
outstanding shares of FEC Common Stock as required under applicable
Florida law;
(vii) The Shareholders Agreement, substantially in the form
attached hereto as Exhibit C, shall have been duly executed and
delivered to FEC by Trust and the Nemours Foundation and shall be in
full force and effect;
(viii) St. Joe shall have obtained the St. Joe Required
Consents;
(ix) Each of the representations and warranties of St. Joe set
forth in this Agreement shall have been true and correct in all
material respects when made and shall be true and correct in all
material respects as of the Declaration Date; and St. Joe shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or
prior to the Declaration Date; and FEC shall have received a
certificate of the chief executive officer of St. Joe as to the
foregoing;
(x) FEC shall have received a secretary's certificate
certifying and attaching the articles and bylaws of St. Joe and all
resolutions of St. Joe with respect to the transactions contemplated
hereby, as of the Declaration Date;
(xi) The Class B Common Stock shall have been approved for
listing on the NYSE, subject to official notice of issuance;
(xii) (A) The IRS Ruling shall have been received by St. Joe,
shall not have imposed material restrictions on FEC that would not have
been reasonably anticipated by FEC at the time the request for the IRS
Ruling was made, and such IRS Ruling shall not have been revoked and
(B) the IRS shall not have conditioned the delivery of the IRS Ruling
on a material modification of any of this Agreement, the Shareholders
Agreement, the Articles of Incorporation of FEC attached to the
Articles of Merger or the Rights Plan, which adversely affects the
substantive benefits to FEC and FEC's shareholders under such
instruments taken as a whole;
(xiii) The Master Agreement and each of the Real Estate
Agreements shall be in full force and effect as of the Declaration Date
in accordance with their terms and there shall be existing no default
by the parties thereto of any material terms thereof;
(xiv) Merger Sub shall own, beneficially and of record, all
right, title and interest, free and clear of any claims, liens or
encumbrances, to all shares of FEC Common Stock owned, directly or
indirectly, by St. Joe as of the date of the Recapitalization;
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(xv) prior to the execution of this Agreement, Donaldson,
Lufkin & Jenrette shall have delivered to FEC its opinion, in form and
substance satisfactory to the Board of Directors of FEC, as to the
effect from a financial point of view of the Recapitalization and
related transactions on the shareholders of FEC, other than St. Joe and
its affiliates; and
(xvi) The FEC Rights Plan, having substantially the terms set
forth on Exhibit D hereto (the "Rights Plan"), shall have been duly
approved by all necessary corporate action and shall be in effect;
provided that the Board of Directors of FEC has complied with the
provisions contained in Section 4.3(r) hereof; and
(xvii) All actions and other documents and instruments
reasonably necessary from or by Persons other than FEC in connection
with the transactions contemplated hereby shall have been taken or
executed, as the case may be, in form and substance reasonably
satisfactory to FEC.
The foregoing conditions are for the sole benefit of FEC and shall not give rise
to or create any duty on the part of FEC to waive or not waive any such
condition.
SECTION 2.2 Representations and Warranties. (a) FEC hereby represents
and warrants, as of the date hereof and as of the Distribution Date (except as
otherwise specified below), to St. Joe as follows:
(i) Organization; Good Standing; Capitalization. FEC is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Florida and has all corporate power
required to consummate the transactions contemplated hereby and by the
Articles of Merger. Subject to the changes in capitalization of FEC
contemplated by the Articles of Merger, the authorized and outstanding
shares of capital stock of FEC is set forth on Schedule 2.2(a)(i)
hereto.
(ii) Authorization. The execution, delivery and performance by
each of FEC (or in the case of certain of the Real Estate Agreements,
an Affiliate of FEC) and GCC, as the case may be, of this Agreement,
the Articles of Merger, the Master Agreement and the Real Estate
Agreements and the consummation by FEC (including by such Affiliates)
and GCC, as applicable, of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on
the part of FEC (including by such Affiliates) and GCC, as applicable,
other than the approval of the Recapitalization and related
transactions by the stockholders of FEC and the approval of the Rights
Plan by the Board of Directors of FEC. This Agreement and the Master
Agreement constitute, and the Articles of Merger, the Real Estate
Agreements and each other agreement or
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instrument executed and delivered or to be executed and delivered by
FEC or an Affiliate of FEC, as applicable, pursuant to this Agreement,
the Articles of Merger or the Master Agreement will, upon such
execution and delivery, constitute, a legal, valid and binding
obligation of FEC and each Affiliate of FEC, as applicable, enforceable
against FEC and each Affiliate of FEC, as applicable, in accordance
with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(iii) Consents and Filings. Except (t) for the NYSE Listing
Application, (u) the IRS Ruling, (v) as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (x) for the filing of a registration statement on Form 8-A
with respect to the Class B Common Stock and (y) for the filing of the
Proxy Statement and any other reports or documents required to be filed
under the Exchange Act and (z) the filing of the Articles of Merger
with the Department of State of the State of Florida in accordance with
the FBCA, no material consent of, or filing with, any Governmental
Authority which has not been obtained or made is required for or in
connection with the execution and delivery of this Agreement or the
Articles of Merger by FEC, and the consummation by FEC of the
transactions contemplated hereby or thereby.
(iv) Noncontravention. The execution, delivery and performance
of this Agreement and the Articles of Merger by FEC does not, and the
consummation by FEC of the transactions contemplated hereby and thereby
will not, (x) violate any applicable federal, state or local statute,
law, rule, order, arbitration award, judgment, decree or regulation or
permit (y) violate any provision of the Articles of Incorporation or
By-Laws of FEC, or (z), except as set forth on Schedule 2.2(a)(iv) (any
waivers or consents needed by virtue of such matters, the "FEC Required
Consents"), conflict with, result in the breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument,
mortgage, lien, franchise, instrument, or other arrangement to which
any of FEC or its Subsidiaries is a party or by which it is bound or to
which any of its Assets is subject (or result in the imposition of any
encumbrance of any nature upon any of FEC's Assets or operations),
other than as expressly contemplated hereby (including under Section
2.2(a)(iii)).
(v) Litigation. As of the date of this Agreement, there are no
actions or suits against FEC pending with respect to, and FEC is not
subject to any injunctions, judgments, decrees or orders which enjoin
or rescind, the transactions contemplated by this Agreement or the
Articles of Merger or otherwise prevent
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FEC from complying with the terms and provisions of this Agreement or
the Articles of Merger.
(vi) Change of Control Adjustments. Except as set forth on
Schedule 2.2(a)(vi), neither of the Recapitalization or Distribution or
any of the other transactions contemplated hereby or by the Articles of
Merger will constitute a "change of control" or otherwise result in the
increase or acceleration of any benefits, including to employees of
FEC, under any agreement to which FEC or any of its Subsidiaries is a
party or by which it or any of its Subsidiaries is bound.
(vii) Certain Transactions. Except for transactions or other
actions that occurred prior to March 1, 1999 or that are described in
Schedule 2.2(a)(vii) , neither FEC nor any other member of the FEC
Group has engaged in any transaction or taken any other action through
the date hereof involving or relating to issuance or disposition of the
stock of FEC or options, warrants or other rights to acquire stock of
FEC. None of the transactions and other actions described in Schedule
2.2(a)(vii) were undertaken by FEC in contemplation of the Distribution
or are related to the Distribution (the Parties agree that the concept
of the Distribution was solely conceived by St. Joe and first
communicated to FEC on or about March 1, 1999), and all transactions
and actions by FEC described in Schedule 2.2(a)(vii) were undertaken in
the ordinary course of business.
(viii) Issuance of Class B Common Stock. Upon issuance, the
Class B Common Stock will have been duly authorized and validly issued
by all necessary corporate action and will be fully paid and
non-assessable, free and clear of all pledges, liens, encumbrances and
preemptive rights of any nature.
(ix) Information in Ruling Documents. As each becomes
available, FEC will have examined the application for the IRS Ruling
and the appendices and exhibits thereto, and any supplemental filings
or other materials subsequently submitted to the Service in connection
with the Distribution (and any related transactions) or any similar
filings submitted to any Governmental Authority or any subdivision
agency, commission or authority thereof, or any quasi-governmental or
private body having jurisdiction over the assessment, determination,
collection or imposition of any tax (collectively "any Tax Authority")
in connection with the Distribution and any related transactions
(collectively the "Ruling Documents"), and the facts presented and the
representations made therein, when made, to the extent descriptive of
FEC and its affiliates and the businesses of FEC and its affiliates
(including, without limitation, the business purposes for the
Distribution and the representations in the IRS Ruling Documents to the
extent that they relate to the businesses of FEC and its affiliates,
but not including any representation made by an affiliate of FEC to the
extent descriptive of such affiliate) will be true, correct and
complete in all
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material respects, as of the date such documents or material are
submitted to the applicable Tax Authority.
(x) Approval. FEC's Board of Directors has resolved to
recommend that the stockholders of FEC vote in favor of the approval of
the Recapitalization and related transactions.
(xi) Proxy Statement. FEC's Proxy Statement, the form of proxy
and any other solicitation material used in connection therewith and
any oral solicitations of proxies made by FEC shall not contain any
statement which, at the time and in the light of the circumstances
under which it is made, is false or misleading with respect to any
material fact, or which omits to state any material fact necessary in
order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with
respect to any solicitation of a proxy for any of the matters to be
voted upon at the FEC stockholders meeting with respect to the
transactions contemplated hereby, which has become false or misleading,
except that no representation or warranty is made by FEC with respect
to written information relating to St. Joe or St. Joe's Business for
inclusion in the Proxy Statement or any such proxy material or oral
solicitation.
(xii) Certificates. All Certificates to be furnished by FEC to
St. Joe hereunder pursuant to a covenant, condition or otherwise are
and will be true and correct as of the dates so furnished.
(b) St. Joe hereby represents and warrants to FEC, as of the date
hereof and as of the Distribution Date (except with respect to Merger Sub, the
representations and warranties with respect to which are made only as of the
Distribution Date and except as otherwise specified below), as follows:
(i) Organization; Good Standing. Each of St. Joe, Delaware Sub
is, and Merger Sub will be upon incorporation, a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Florida, or Delaware in the case of Delaware Sub, and has
or will have all corporate power required to consummate the
transactions contemplated hereby and by the Articles of Merger.
(ii) Authorization. The execution, delivery and performance by
each of St. Joe (or, in the case of certain of the Real Estate
Agreements, an Affiliate of St. Joe), Delaware Sub, and Merger Sub of
this Agreement, the Articles of Merger, the Master Agreement and the
Real Estate Agreements, as the case may be, and the consummation by
each of St. Joe (including by such Affiliates), Delaware Sub and Merger
Sub, as applicable, of the transactions contemplated hereby and thereby
have been, or in the case of Merger Sub will have been prior to the
Declaration Date, duly authorized by all necessary corporate action on
the part
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of each of St. Joe (including by such Affiliates), Delaware Sub and
Merger Sub, other than the formal declaration of the Distribution. This
Agreement and the Master Agreement constitutes and, when executed and
delivered, the Articles of Merger, the Real Estate Agreements and each
other agreement or instrument executed and delivered or to be executed
and delivered by each of St. Joe, an Affiliate of St. Joe, Delaware Sub
and Merger Sub pursuant to this Agreement will, upon such execution and
delivery, constitute, a legal, valid and binding obligation of each of
St. Joe, each Affiliate of St. Joe, Delaware Sub and Merger Sub,
enforceable against each of St. Joe, each Affiliate of St. Joe,
Delaware Sub and Merger Sub in accordance with its terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(iii) Consents and Filings. Except (x) for the IRS Ruling, and
(y) as required under the HSR Act and any other reports or documents
required to be filed under the Exchange Act, no material consent of, or
filing with, any Govern mental Authority which has not been obtained or
made is required to be obtained or made by each of St. Joe, Delaware
Sub and Merger Sub for or in connection with the execution and delivery
of this Agreement or the Articles of Merger by each of St. Joe and
Merger Sub, and the consummation by each of St. Joe, Delaware Sub and
Merger Sub of the transactions contemplated hereby or thereby.
(iv) Noncontravention. The execution and delivery of this
Agreement by St. Joe and the performance of this Agreement by St. Joe,
Delaware Sub and Merger Sub does not, and the consummation by St. Joe,
Delaware Sub and Merger Sub of the transactions contemplated hereby and
thereby will not, (x) violate any applicable federal, state or local
statute, law, rule, order, arbitration award, judgment, decree or
regulation or permit (y) violate any provision of the Articles of
Incorporation or By-Laws of St. Joe, Delaware Sub and Merger Sub, or
(z) except as set forth on Schedule 2.2(b)(iv) (any waivers or consents
needed by virtue of such matters, the "St. Joe Required Consents"),
conflict with, result in the breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, mortgage, lien,
franchise, instrument, or other arrangement to which any of St. Joe,
Delaware Sub and Merger Sub is a party or by which it is bound or to
which any of its Assets is subject (or result in the imposition of any
encumbrance of any nature upon any of St. Joe's, Delaware Sub's and
Merger Sub's Assets or operations), other than as expressly
contemplated hereby.
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(v) Litigation. As of the date of this Agreement, there are no
actions or suits against St. Joe or Delaware Sub pending with respect
to, and St. Joe or Delaware Sub is not subject to any injunctions,
judgments, decrees or orders which enjoin or rescind, the transactions
contemplated by this Agreement or the Articles of Merger or otherwise
prevent each of St. Joe, Delaware Sub and Merger Sub from complying
with the terms and provisions of this Agreement or the Articles of
Merger.
(vi) Ownership of Delaware Sub and Merger Sub. St. Joe owns,
and in the case of Merger Sub will own upon Merger Sub's incorporation,
all outstanding equity interests of Delaware Sub and Merger Sub free
and clear of any claims, liens or encumbrances and no other person
holds any equity interests of Delaware Sub or Merger Sub nor has any
right to acquire any equity interests in Delaware Sub or Merger Sub.
(vii) Merger Sub's Title to FEC Common Stock. As of the date
hereof, St. Joe owns beneficially and of record, directly or indirectly
(including through Delaware Sub), all right, title and interest, free
and clear of any claims, liens or encumbrances, 19,609,216 shares of
FEC Common Stock. All right and title to all shares of FEC Common Stock
owned directly or indirectly by St. Joe or Delaware Sub as of the date
hereof will have been contributed to Merger Sub prior to the
Declaration Date, and Merger Sub will then own beneficially and of
record, free and clear of any claims, liens or encumbrances, such
stock.
(viii) Purpose of Merger Sub. Merger Sub was formed by St. Joe
solely for the purposes of effecting the Recapitalization upon the
terms and conditions of this Agreement and the Articles of Merger and
will have no Assets as of the Effective Time other than the shares of
FEC Common Stock owned by St. Joe through a wholly owned Subsidiary as
of the date hereof.
(ix) Certificates. All certificates to be furnished by St.
Joe, Delaware Sub and Merger Sub to FEC hereunder pursuant to a
covenant, condition or otherwise are and will be true and correct as of
the dates so furnished.
(x) Information Furnished by St. Joe for Proxy Statement. The
information in FEC's Proxy Statement which has been furnished by St.
Joe to FEC for the purpose of inclusion therein shall not contain any
statement which, at the time and in the light of the circumstances
under which it is made, is false or misleading with respect to any
material fact, or which omits to state any material fact necessary in
order to make the statements therein not false or misleading or has
become false or misleading, provided that FEC has complied with its
obligations set forth in the third, fourth and fifth sentences of
Section 4.3(d).
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ARTICLE III.
INDEMNIFICATION
SECTION 3.1 Indemnification by FEC. (a) FEC shall indemnify, defend and
hold harmless the St. Joe Indemnitees from and against any and all FEC
Liabilities or third-party allegations of FEC Liabilities to which, in any case,
the St. Joe Indemnitees become subject.
(b) FEC shall indemnify, defend and hold harmless the St. Joe
Indemnitees from and against any Liability to which, in any case, the St. Joe
Indemnitees become subject arising from, relating to or in the nature of any
inaccuracy in, or failure by FEC to comply with, any representation or statement
made by FEC to St. Joe or the IRS in connection with the requests by St. Joe for
the IRS Ruling and the IRS Supplemental Ruling; provided, however, that,
notwithstanding the foregoing, FEC shall not indemnify St. Joe, any St. Joe
Indemnitee or any shareholder of St. Joe for any liability that results from any
inaccuracy or incompleteness in any representation or statement made by St. Joe
to the IRS in connection with requests for the IRS Ruling or the IRS
Supplemental Ruling or failure by St. Joe to comply with any representation or
statement made by St. Joe to the IRS in connection with the requests for the IRS
Ruling or the IRS Supplemental Ruling.
(c) FEC shall indemnify, defend and hold harmless the St. Joe
Indemnitees from and against one hundred percent (100%) of any taxes imposed
upon the St. Joe Indemnitees arising from, relating to or in the nature of the
failure of the Distribution to qualify under Section 355 of the Code (including
without limitation, any tax attributable to the application of Section 355(d) or
Section 355(e) of the Code to the Distribution) or corresponding provisions of
the laws of other jurisdictions, using the highest statutory marginal tax
corporate tax rates for the relevant taxable period (the "Distribution
Restructuring Taxes"), in any case arising from, relating to or in the nature
of, any actions or inactions of FEC or FEC's Affiliates or FEC's shareholders
relating directly to FEC, FEC's Subsidiaries or FEC stock without regard to
whether such action or inaction would constitute a breach of any covenant under
Section 4.4 hereof, including, without limitation, the following actions:
i. Any action or inaction on the part of FEC or any FEC affiliate
after the Distribution (including, without any limitation, any
amendment to FEC's Articles of Incorporation (or other
organizational documents)), whether through a stockholder vote or
otherwise, affecting the relative voting rights of the separate
classes of FEC stock (including without limitation, through the
conversion of one class of FEC stock into another class of FEC
stock.)
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ii. Any acquisition of stock of FEC or of stock of any FEC affiliate by
any Person or Persons (including, without limitation, as a result
of an issuance of FEC stock or a merger of another entity with and
into FEC or any FEC affiliate) or any acquisition of Assets of FEC
or any FEC affiliate (including, without limitation, as a result of
a merger) by any Person or Persons.
(d) If any Tax Authority withdraws all or any portion of the IRS Ruling
or any IRS Supplemental Ruling issued to St. Joe in connection with the
Distribution arising from, relating to or in the nature of a breach or failure
to comply by FEC or any FEC affiliate of any representation, warranty, covenant
or agreement made in this Agreement relating directly to FEC, FEC's Subsidiaries
or FEC stock, FEC shall indemnify, defend and hold harmless the St. Joe
Indemnitees from and against one hundred percent (100%) of any Distribution
Restructuring Taxes arising from, relating to or in the nature of such breach or
failure to comply.
SECTION 3.2 Indemnification by St. Joe. (a) St. Joe shall indemnify,
defend and hold harmless the FEC Indemnitees from and against any and all St.
Joe Liabilities or third-party allegations of St. Joe Liabilities to which, in
any case, the FEC Indemnitees become subject.
(b) St. Joe shall indemnify, defend and hold harmless the FEC
Indemnitees from and against (i) any and all federal, state and local taxes,
including any interest, penalties or additions to tax, that result solely from
the Recapitalization and (ii) any liability of any member of the FEC Group,
arising from, relating to or in the nature of any inaccuracy in, or failure by
St. Joe to comply with, any representation made by St. Joe to the IRS in
connection with the requests by St. Joe for the IRS Ruling and the IRS
Supplemental Ruling; provided, however, that, notwithstanding the foregoing, St.
Joe shall not indemnify FEC or any FEC Indemnitee for any liability that results
from any inaccuracy or incompleteness in any representation made by FEC to the
IRS in connec tion with requests for the IRS Ruling or the IRS Supplemental
Ruling or failure by FEC to comply with any representation made by FEC to the
IRS in connection with the requests for the IRS Ruling or the IRS Supplemental
Ruling or for any liability of the FEC Indemnitees arising under Sections
3.1(b), (c) or (d).
SECTION 3.3 Procedures for Indemnification in Third-Party Claims.
(a) Third-Party Claims. If a claim or demand is made against a FEC
Indemni tee or an St. Joe Indemnitee (each, an "Indemnitee") by any Person who
is not a party to this Agreement, including, without limitation, any
Governmental Authority with respect to taxes (a "Third-Party Claim"), as to
which such Indemnitee may be entitled to indemnification pursuant to this
Agreement, such Indemnitee shall notify the party which is or may be required
pursuant to the terms hereof to make such indemnification (the
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"Indemnifying Party") in writing, and in reasonable detail, of the Third-Party
Claim promptly (and in any event within 30 business days) after receipt by such
Indemnitee of written notice of the Third-Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. Thereafter, the Indemnitee shall deliver
to the Indemnifying Party, promptly (and in any event within 15 business days)
after the Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the Third-Party
Claim.
If a Third-Party Claim is made against an Indemnitee with respect to
which a claim for indemnification is made pursuant to Section 3.1 or Section 3.2
hereof, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges in writing its obligation to
indemnify the Indemnitee therefor, to assume the defense thereof with counsel
selected by the Indemnifying Party; provided that such counsel is not reasonably
objected to by the Indemnitee. Should the Indemni fying Party so elect to assume
the defense of a Third-Party Claim, the Indemnifying Party shall, within 30 days
(or sooner if the nature of the Third-Party Claim so requires), notify the
Indemnitee of its intent to do so, and if counsel to the Indemnifying Party has
not been properly rejected by the Indemnitee, the Indemnifying Party shall after
a reasonable transition period not be liable to the Indemnitee for legal or
other expenses subsequently incurred by the Indemnitee in connection with the
defense thereof; provided that such Indemnitee shall have the right to employ
counsel to represent such Indemnitee if, in such Indemnitee's reasonable
judgment, a conflict of interest between such Indemnitee and such Indemnifying
Party exists in respect of such claim which would make representation of both
such parties by one counsel inappropriate, or the Third-Party Claim seeks
injunctive relief for other than money damages, and in such event the fees and
expenses of such separate counsel shall be paid by such Indemnifying Party.
Subject to the preced ing sentence, if the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall control such defense. The Indemnifying Party shall be liable for the
fees and expenses of counsel employed by the Indemnitee for any period during
which the Indemnifying Party has failed to assume the defense thereof. If the
Indemnifying Party so elects to assume the defense of any Third-Party Claim, all
of the Indemnitees shall reasonably cooperate with the Indemnifying Party in the
defense or prosecution thereof, including by providing or causing to be
provided, records and wit nesses as soon as reasonably practicable after
receiving any request therefor from or on behalf of the Indemnifying Party.
In no event will the Indemnitee admit any liability with respect to, or
settle, com promise or discharge, any Third-Party Claim without the Indemnifying
Party's prior written consent (which will not be unreasonably withheld);
provided, however, that the
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Indemnitee shall have the right to settle, compromise or discharge such
Third-Party Claim without the consent of the Indemnifying Party if the
Indemnitee releases the Indemnifying Party from its indemnification obligation
hereunder with respect to such Third-Party Claim and such settlement, compromise
or discharge would not otherwise adversely affect the Indemnifying Party. If the
Indemnifying Party acknowledges in writing liability for a Third-Party Claim (as
between the Indemnifying Party and the Indemnitee), the Indemnitee will agree
to any settlement, compromise or discharge of a Third-Party Claim that the
Indemnifying Party may recommend and that by its terms obligates the
Indemniying Party to pay the full amount of the liability in connection with
such Third-Party Claim and releases the Indemnitee effective immediately,
completely and unconditionally (with no prospective limitations or changes in
status of the Indemnitee of any nature) with respect to such Third-Party Claim
and that would not otherwise adversely affect the Indemnitee; provided,
however, that the Indemnitee may refuse to agree to any such settlement,
compromise or discharge if the Indemnitee agrees that the Indemnifying Party's
indemnification obligation with respect to such Third-Party Claim shall not
otherwise exceed the amount that would have been required to have been paid by
or on behalf of the Indemnifying Party pursuant to such proposed settlement,
compromise or discharge. If an Indemnifying Party elects not to assume the
defense of a Third-Party Claim, or fails to notify an Indemnitee of its
election to do so as provided herein, such Indemnitee may compromise, settle
or defend such Third-Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to assume the defense of any Third-Party Claim (and shall be liable for
the fees and expenses of counsel incurred by the Indemnitee in defending such
Third-Party Claim) if the Third-Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the Indemnitee
which the Indemnitee reasonably determines, after conferring with its counsel,
cannot be separated from any related claim for money damages. If such equitable
relief or other relief portion of the Third-Party Claim can be so separated from
that for money damages, the Indemnifying Party shall be entitled to assume the
defense of the portion relating to money damages.
(b) Subrogation. Subject in all respects to the terms of Section 3.3(a)
above, in the event of payment by an Indemnifying Party to any Indemnitee in
connection which any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third-Party Claim against any claimant or plaintiff asserting
such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right or claim.
(c) Remedies Not Exclusive. The remedies provided in this Article III
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the
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seeking of any and all other remedies against any Indemnifying Party; provided
that no Person may recover more than once for a Liability it has incurred.
SECTION 3.4 Indemnification Payments Timing; Quantification.
Indemnification required by this Article III shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or loss, liability, claim, damage or expense is
incurred. All indemnification payments made or to be made under this Agreement
shall be quantified on an after-tax basis, taking into account, without
limitation, any withholding taxes deducted from the indemnity payment and any
taxes incurred by the Indemnified Party on the indemnity payment.
SECTION 3.5 Limitation of Indemnity. The indemnification provisions
contained in this Article III shall not be applicable with respect to any FEC
Liability or St. Joe Liability with respect to which there exists or may exist
any separate indemnity arrangement set forth in any of the Real Estate
Agreements, the Management Agreement between GCC and St. Joe, dated as of
January 1, 1998, any agreement contemplated by the Real Estate Agreements or the
Management Agreement or any agreements between St. Joe or any of its
Subsidiaries and FEC or any of its Subsidiaries relating to property management,
real estate development or real estate brokerage.
ARTICLE IV.
COVENANTS
SECTION 4.1 Access to Information. (a) Other than in circumstances in
which indemnification is sought pursuant to Article III (in which event the
provisions of such Article will govern to the extent in direct conflict with the
provisions of this Section 4.1), from and after the Distribution Date, each of
FEC and St. Joe shall afford to the other and its authorized accountants,
counsel and other designated representatives reasonable access during normal
business hours, subject to appropriate restrictions for classified, privileged
or confidential information, to the personnel, properties, books and records of
such party and its Subsidiaries insofar as such access is reasonably required by
the other party and relates to such other party's performance of its obligations
under this Agreement or the Articles of Merger or such party's financial, tax
and other reporting obligations.
(b) A party providing information or access to information to the other
party under this Article IV shall be entitled to receive from the recipient,
upon the presentation of invoices therefor, payments for such amounts, relating
to supplies, disbursements and other out-of-pocket expenses, as may be
reasonably incurred in providing such information or access to information.
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SECTION 4.2 Confidentiality. Each of FEC, its Subsidiaries and their
Affiliates and St. Joe, its Subsidiaries and their Affiliates shall keep, and
shall cause their respective employees, consultants, advisors and agents to
keep, confidential all information concerning the other Party in its possession,
its custody or under its control (except to the extent that (A) such information
is then in the public domain through no fault of such party or (B) such
information has been lawfully acquired from other sources by such party or (C)
this Agreement or the Articles of Merger or any other agreement entered into
pursuant hereto or thereto permits the use or disclosure of such information) to
the extent such information (i) relates to or was acquired during the period up
to the Effective Time or pursuant to Section 4.1, or (ii) is based upon or is
derived from information described in the preceding clause (i), and each party
shall not (without the prior written consent of the other) otherwise release or
disclose such information to any other Person, except such party's auditors and
attorneys, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by law and such
party has used all reasonable efforts to consult with the other affected Party
or Parties prior to such disclosure.
SECTION 4.3 Standstill; Additional Covenants.
(a) Standstill. Each of St. Joe and FEC, including on behalf of their
respective Affiliates and agents, agrees not to solicit, initiate or encourage
the commencement of negotiations or continue any current negotiations regarding
any proposal for the acquisition by any third party of any outstanding shares of
capital stock of FEC (other than issuances of FEC Common Stock by FEC pursuant
to employee stock plans in the ordinary course of business) or the acquisition
of FEC through any other means including a merger or purchase of Assets (an
"Acquisition Proposal") until the earlier to occur of the termination of this
Agreement or the time at which the Distribution is consummated; provided,
however, that (i) either Party may respond to any unsolicited inquiries or
proposals solely to indicate that it is bound by this Section 4.3(a) and (ii)
either St. Joe or FEC may, after its receipt of a bona fide written Acquisition
Proposal, commence discussions or negotiations with the Person making such
Acquisition Proposal, if the Board of Directors of St. Joe or FEC, as
applicable, in good faith determines, based upon the advice of its outside
counsel, that the respective Board of Directors must do so in order to comply
with its fiduciary duties under applicable law and, in the case of St. Joe, such
Acquisition Proposal contemplates a transaction in which all shares of FEC
Common Stock are to receive equivalent consideration.
(b) Sale of Fractional Shares. St. Joe shall appoint the Distribution
Agent as agent for each holder of record of St. Joe Common Stock who would
receive in the Distribution any fractional share of Class B Common Stock. The
Distribution Agent shall aggregate all such fractional shares and sell them in
an orderly manner after the Distribu tion Date in the open market and, after
completion of such sales, distribute a pro rata portion of the net proceeds from
such sales, based upon the gross selling price of all such
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fractional shares net of all selling expenses, to each stockholder of St. Joe
who would otherwise have received a fractional share. St. Joe shall reimburse
the Distribution Agent for its reasonable costs, expenses and fees (other than
selling expenses) in connection with the sale of fractional shares of Class B
Common Stock and the distribution of the proceeds thereof in accordance with
this Section 4.3(b).
(c) Shareholder Meeting. FEC shall, as soon as reasonably practicable
following the date of this Agreement, duly call, give notice of, convene and
hold, a meeting of its stockholders (the "Stockholders Meeting") for the purpose
of considering the approval of the Recapitalization and related transactions.
FEC, through its Board of Directors, shall resolve to recommend, shall recommend
and shall continue to recommend to its stockholders approval of the
Recapitalization and related transactions and shall not withdraw such
recommendation; provided, however, that, FEC's Board of Directors may withdraw
or modify such recommendation if it determines in good faith, based upon the
advice of outside counsel, that it must do so to comply with its fiduciary
duties under applicable law.
(d) Proxy Statement. Subject to the provisions of this Agreement and
the Articles of Merger, FEC shall, as soon as reasonably practicable following
the date of this Agreement, prepare and file with the SEC a proxy statement for
the solicitation of proxies in favor of the transactions and agreements referred
to in Section 4.3(c) (the "Proxy Statement"). FEC shall use all reasonable
efforts to have the Proxy Statement cleared by the SEC for mailing in definitive
form as promptly as practicable after such filing. FEC and St. Joe shall
cooperate with each other in the preparation of the Proxy Statement and any
amendment or supplement thereto. FEC shall notify St. Joe of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information,
and shall provide to St. Joe promptly copies of all correspondence between the
SEC and FEC or any of its advisors with respect to the Proxy Statement. FEC
shall give St. Joe and its counsel reasonably appropriate advance opportunity to
review the Proxy Statement and all responses to requests for additional
information by and replies to comments of the SEC, and incorporate therein any
reasonable comments St. Joe may timely deliver to FEC with respect thereto,
before such Proxy Statement, response or reply is filed with or sent to the SEC.
FEC agrees to use all reasonable efforts, after consultation with St. Joe and
its advisors, to respond promptly to all such comments of, and requests by, the
SEC and to cause the Proxy Statement to be mailed to the holders of FEC Common
Stock entitled to vote at the Stockholders Meeting as soon as reasonably
practicable following the execution hereof. St. Joe shall provide FEC such
information concerning the business and affairs of St. Joe and Merger Sub as is
reasonably required for inclusion in the Proxy Statement.
(e) St. Joe Mailings. It is understood that St. Joe may, but shall not
be required hereunder, prepare and mail, at such time as determined by St. Joe,
to the holders
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of St. Joe Common Stock, such information concerning FEC, its business,
operations and management, the Distribution and the tax consequences thereof and
such other matters as St. Joe shall reasonably determine is advisable or as may
be required by law. In such event, St. Joe shall give FEC and its counsel
reasonably appropriate advance opportunity to review such documents and shall
consider in good faith any comments FEC timely delivers to St. Joe with respect
to such information. FEC agrees to cooperate with St. Joe in the preparation of,
and provide any information reasonably requested by St. Joe for inclusion in,
such mailing. St. Joe and FEC will prepare, and FEC will, to the extent required
under applicable law, file with the SEC any such documentation, including any
no-action letters or other requests for interpretive or regulatory assistance,
if any, which St. Joe reasonably determines are necessary or desirable to
effectuate the Distribution and the other transactions contemplated hereby and
by the Articles of Merger and St. Joe and FEC shall each use all reasonable
efforts to cooperate with each other with respect thereto and to obtain all
necessary approvals from the SEC with respect thereto as soon as practicable.
(f) Actions Regarding Securities Laws. St. Joe and FEC shall take all
such action as may be necessary or appropriate under the securities or blue sky
laws of the United States (and any comparable laws under any foreign
jurisdiction) in connection with the Distribution, the Recapitalization and the
other transactions contemplated hereby and by the Articles of Merger.
(g) Listing of Class B Common Stock. FEC shall prepare and file, and
shall use all reasonable efforts to have approved, an application for the
listing on the NYSE of the Class B Common Stock to be distributed in the
Distribution, subject to official notice of issuance. St. Joe shall provide,
upon request by FEC, information reasonably necessary to FEC for its preparation
and filing of such application.
(h) Opportunity for St. Joe to Review Filings. Until the Distribution
Date, FEC agrees that prior to filing with the SEC any report or other document
that contains any disclosure relating to the Distribution, this Agreement, the
Articles of Merger or any of the transactions contemplated hereby or thereby, it
shall give St. Joe and its counsel reasonably appropriate advance opportunity to
review such report or other document and shall consider in good faith any
comments St. Joe may deliver to FEC with respect to or for inclusion in such
report or document.
(i) No Amendment to Articles or By-Laws of FEC. Prior to the
Distribution Date, FEC shall not amend, and the FEC Board of Directors shall not
approve any amendment to, FEC's Articles of Incorporation or By-Laws, other than
the Amended and Restated Articles of Incorporation and By-Laws of FEC that will
become effective upon the filing of the Articles of Merger with the Department
of State of the State of Florida in connection with the Recapitalization.
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(j) St. Joe Vote in Favor of Transactions. St. Joe hereby agrees to be
present in person or by proxy at each and every stockholders meeting of FEC at
which any aspect of the transactions contemplated by this Agreement are
submitted to the stockholders of FEC for consideration at such meeting, and to
vote, or cause to be voted, all shares of FEC Common Stock owned directly or
indirectly by it and its Subsidiaries in accordance with the recommendation of
the Board of Directors of FEC referred to in Section 4.3(c) in favor of the
Recapitalization and related transactions; provided that the Recapitalization
and such related transactions are to become effective solely upon the
Declaration of the Distribution; and similarly to execute any written consent
submitted to stockholders by FEC in favor of the Recapitalization and related
transactions.
(k) Creation of Merger Sub; Contribution of Shares. St. Joe shall (i)
incorporate Merger Sub and (ii) contribute the shares of FEC Common Stock held
by Delaware Sub as of the date hereof to Merger Sub, subsequent to the Delaware
Sub Merger and prior to the Declaration Date.
(l) Opportunity to Review Releases. In addition to the limitations in
Section 4.3(h) above, each of St. Joe and FEC agrees that no public release or
announcement concerning the Distribution, the Recapitalization or the
transactions contemplated by this Agreement or the Articles of Merger shall be
issued by either party without the prior written consent of the other (which
shall not be unreasonably withheld), except as such release or announcement may
be required by law, in which case the party required to make the release or
announcement shall use all reasonable efforts to allow each other party
reasonable time to comment on each release or announcement in advance of such
issuance.
(m) Senior FEC Employee Consents. FEC shall use all reasonable efforts
to obtain from each of Robert W. Anestis (Chairman, President and Chief
Executive Officer of FEC), Robert F. MacSwain (Executive Vice President Special
Projects of FEC), John D. McPherson (Chief Operating Officer of FEC), Heidi J.
Eddins (Senior Vice President, General Counsel and Secretary of FEC) and Robert
Nazarian (Executive Vice President and Chief Financial Officer of FEC) a letter
agreement in favor of St. Joe in the form attached as Exhibit E hereto (the
"Senior FEC Employee Consents").
(n) Efforts to Obtain Consents. Each of St. Joe and FEC shall use all
reasonable efforts to obtain all of the consents, waivers or authorizations
required in connection with the completion of the Recapitalization and the
Distribution from any third party or Governmental Authorities;
(o) Efforts to Oppose Contrary Orders, Injunctions and Decrees. Each of
St. Joe and FEC shall use all reasonable efforts to procure that no order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or
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prohibition preventing the consummation of the Distribution, the
Recapitalization and the other transactions contemplated hereby and by the
Articles of Merger shall be in effect;
(p) Filing of Press Release. St. Joe and FEC will issue jointly, prior
to 8:30 a.m. New York City time, on October 27, 1999, the press release attached
as Exhibit F to this Agreement.
(q) Preparation and Filing of Form 8-A. FEC shall prepare and file the
Form 8-A (which may include or incorporate by reference information contained in
the Proxy Statement) with the Commission as promptly as practicable following
the date hereof, and shall use all reasonable efforts to cause the Form 8-A to
become effective under the Exchange Act immediately following the consummation
of the Recapitalization or as soon thereafter as practicable. St. Joe shall
provide, upon request by FEC, information reasonably necessary to FEC for its
preparation and filing of such Form 8-A. FEC shall give St. Joe and its counsel
reasonably appropriate advance opportunity to review the Form 8-A and all
responses to requests for additional information by and replies to comments of
the SEC with respect thereto, and shall incorporate therein any reasonable
comments St. Joe may timely deliver to FEC with respect thereto, before such
Form 8-A, response or reply is filed with or sent to the SEC.
(r) Approval of Rights Plan. FEC shall use its best efforts to effect
the adoption of the Rights Plan; provided, however, that, FEC's Board of
Directors shall not be required to effect the adoption of the Rights Plan if it
determines in good faith, based upon the advice of outside counsel, that the
adoption of such Rights Plan would not be in compliance with its fiduciary
duties under applicable law.
(s) Reasonable Efforts. Without limiting any other obligations
hereunder, each of St. Joe and FEC will cooperate with each other and use (and
shall cause their respective Affiliates directors, officers, employees and
agents to use) all their respective reasonable efforts to take or cause to be
taken all actions, including executing any further documents and making other
filings with Governmental Authorities, and to do or cause to be done all things,
necessary or advisable in order to consummate and make effective, as promptly as
practicable after the date hereof, the transactions contemplated hereby and by
the Articles of Merger, including the satisfaction, but not waiver, of all
applicable conditions.
SECTION 4.4 Taxes: Cooperation; Right to Supplemental Ruling;
Preservation of Rulings. (a) St. Joe and FEC will cooperate and take any and all
actions reasonably requested of each other in the preparation and filing of an
application for the IRS Ruling. In addition, St. Joe will have the right to
obtain, and FEC will have the right, after the original IRS Ruling has been
issued by the IRS, to require St. Joe to seek to obtain, a supplemental private
letter ruling from the IRS in connection with the Distribution and any related
transactions, or any similar ruling issued by any Tax Authority other than the
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IRS in connection with the Distribution (an "IRS Supplemental Ruling") as St.
Joe or FEC determines, is necessary to effect the tax treatment of the
Distribution contemplated by this Agreement. If either party determines that an
IRS Supplemental Ruling shall be requested pursuant to this Section 4.4(a), that
other party will cooperate with the requesting party and take any and all
actions reasonably requested by the requesting party in connection with
obtaining the IRS Supplemental Ruling (including, without limitation, by making
any representation or covenant or providing any materials or information
requested by any Tax Authority). On or prior to the Distribution Date, each of
St. Joe and FEC shall take those actions and consummate those other transactions
in connection with the Distribution that are contemplated by the IRS Ruling, the
ruling request therefor or any related submissions by St. Joe to the IRS (which
shall have been reviewed by FEC), including, to the extent applicable, the IRS
Supplemental Ruling and the request therefor.
(b) FEC will not take or fail to take, or permit, to the extent it is
in FEC's power to prevent such actions, any FEC affiliate to take or fail to
take, any action, where such action or inaction would be inconsistent with any
material, information, covenant or representation in the IRS Ruling, any Ruling
Documents, any IRS Supplemental Ruling or any IRS materials, appendices and
exhibits submitted or filed therewith (the "Supplemental Ruling Documents").
(c) FEC will not take or fail to take, or permit, to the extent it is
in FEC's power to prevent such actions, any of its affiliates to take or fail to
take, any action or inaction after the Distribution that could reasonably be
expected to prevent the Distribution from qualifying as a tax-free distribution
under Section 355 of the Code. In addition, FEC will not take or fail to take,
or permit any of its affiliates to take or fail to take, any action or inaction
after the Distribution that could reasonably be expected to have a material
adverse impact on the known tax consequences of the Distribution to St.
Joe.
(d) Other than as contemplated by this Agreement or the Articles of
Merger (including the exhibits thereto), FEC will make no amendment or changes
to its Articles of Incorporation or Bylaws that would affect the composition or
size of its Board of Directors, the manner in which its Board of Directors is
elected, and the duties and responsibilities of its Board of Directors unless
FEC obtains an IRS Supplemental Ruling in conjunction with St. Joe pursuant to
(a) above that such amendment will not affect the treatment of the Distribution
under Section 355 of the Code or FEC obtains an opinion (reasonably acceptable
to St. Joe) of nationally recognized tax counsel that such amendment will not
affect the treatment of the Distribution under Section 355 of the Code.
(e) Other than as contemplated by this Agreement or the Articles of
Merger (including the exhibits thereto), FEC will not propose a plan of
recapitalization or amendment to its Articles of Incorporation, or any other
action providing for any of the
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following, unless (i) the IRS Ruling provides or (ii) FEC obtains an IRS
Supplemental Ruling in conjunction with St. Joe pursuant to (a) above that
provides that such recapitalization or amendment will not affect the treatment
of the Distribution under Section 355 of the Code or FEC obtains an opinion
(reasonably acceptable to St. Joe) of nationally recognized tax counsel that
such recapitalization or amendment will not affect the treatment of the
Distribution under Section 355 of the Code:
i. The conversion of shares of any class of FEC stock into a
different class of FEC stock.
ii. A change in the absolute or relative voting rights of any
class of FEC stock from the rights existing at the time
of the Distribution.
iii. Any other action having an effect similar to that
described in (i) or (ii).
(f) Until the first day after the two-year anniversary of the
Distribution:
i. FEC will continue to conduct the active trade or business
relied upon in the IRS Ruling (the "Active Trade or
Business") in a manner that satisfies the requirement of
Section 355(b) of the Code.
ii. Unless FEC obtains an IRS Supplemental Ruling in
conjunction with St. Joe pursuant to (a) above that the
following action or actions will not affect the treatment
of the Distribution under Section 355 of the Code or FEC
obtains an opinion (reasonably acceptable to St. Joe) of
nationally recognized tax counsel that such action or
actions will not affect the treatment of the Distribution
under Section 355 of the Code, FEC will not do either of
the following:
(A) Liquidate, dispose of, or otherwise discontinue the
conduct of any portion of the Active Trade or
Business.
(B) Dispose of any business or Assets that would cause
FEC to be operated in a manner inconsistent in any
material respect with the business purposes for the
Distribution as set forth in the Ruling Documents.
(g) During the two-year period following the Distribution, FEC will
conduct the Active Trade or Business primarily through officers and employees of
FEC or its
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subsidiaries (and not primarily through independent contractors) who are not
also officers or employees of St. Joe or its Affiliates.
(h) During the two-year period following the Distribution, FEC will
not, and will not undertake to, voluntarily dissolve or liquidate, or liquidate,
dispose of, or otherwise discontinue the conduct of any portion of the Active
Trade or Business if such liquidation, disposition or discontinuation of the
Active Trade or Business would cause a dissolution or liquidation of FEC, and
except in the ordinary course of business, neither FEC nor any Subsidiaries of
FEC will sell, transfer, or otherwise dispose of, or agree to dispose of, Assets
(including, for such purpose, any capital stock of such subsidiaries) that, in
the aggregate, constitute more than (x) sixty percent (60%) of the gross Assets
of FEC or (y) sixty percent (60%) of the consolidated gross Assets of FEC and
such subsidiaries, unless prior to the consummation of such transaction FEC
obtains an IRS Supplemental Ruling in conjunction with St. Joe pursuant to (a)
above that such transaction will not affect the treatment of the Distribution
under Section 355 of the Code or FEC obtains an opinion (reasonably acceptable
to St. Joe) of nationally recognized tax counsel that such transaction will not
affect the treatment of the Distribution under Section 355 of the Code.
(i) FEC will not reacquire its shares during the two-year period
following the distribution unless FEC obtains an IRS Supplemental Ruling in
conjunction with St. Joe pursuant to (a) above that such reacquisition will not
affect the treatment of the Distribution under Section 355 of the Code or FEC
obtains an opinion (reasonably acceptable to St. Joe) of nationally recognized
tax counsel that such reacquisition will not affect the treatment of the
Distribution under Section 355 of the Code, except if the reacquisition meets
all of the following conditions:
i. The reacquisition is for a corporate business purpose;
ii. The stock acquired is widely held;
iii. The acquisition is made on the open market;
iv. There is no plan or intention to reacquire more than
twenty percent (20%) of FEC stock by vote or value.
(j) Until the first day after the two-year anniversary of the
Distribution FEC will not enter into any proposed stock issuance transaction
(other than in employee related issuances in the ordinary course of business)
if, as a result of such proposed stock issuance transaction, FEC would issue a
number of shares of FEC stock that, when aggregated with all other shares of FEC
stock issued pursuant to any stock issuance transaction or transactions
occurring prior to or simultaneously with such proposed stock issuance
transaction, would cause either: (a) the number of shares of Class B Common
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Stock distributed to the shareholders of St. Joe in the Distribution to
constitute less than eighty percent (80%) of the total combined voting power of
all outstanding FEC voting stock with respect to the election of directors of
FEC or (b) the issuance of outstanding shares of any class or series of FEC
stock other than stock of FEC entitling the holders thereof to vote, unless FEC
obtains an IRS Supplemental Ruling that such transaction will not affect the
treatment of the Distribution under Section 355 of the Code or FEC obtains an
opinion (reasonably acceptable to St. Joe) of nationally recognized tax counsel
that such transaction will not affect the treatment of the Distribution under
Section 355 of the Code.
(k) Until the first day after the two-year anniversary of the
Distribution, FEC will not enter into any proposed stock buyback transaction if,
as a result of such proposed stock buyback transaction the then outstanding
shares of Class B Common Stock would constitute less than eighty percent (80%)
of the total combined voting power of all outstanding voting stock of FEC with
respect to the election of directors, unless FEC obtains an IRS Supplemental
Ruling that such transaction will not affect the treatment of the Distribution
under Section 355 of the Code or FEC obtains an opinion (reasonably acceptable
to St. Joe) of nationally recognized tax counsel that such transaction will not
affect the treatment of the Distribution under Section 355 of the Code. For
purposes of the preceding sentence, any option (including an option issued to
employees or in connection with the performance of services), warrant or other
security that would permit or require a Person to acquire shares of voting stock
of FEC or any other FEC capital stock (including the option, right or obligation
of FEC or a FEC affiliate to acquire shares of FEC capital stock), or any
security convertible into or exchangeable for shares of voting stock of FEC or
other FEC capital stock, shall be treated as if it had been fully exercised,
converted or exchanged at the time of issuance, whether or not such security is
by its terms exercisable at such time.
(l) Until the first day after the two-year anniversary of the
Distribution, FEC shall not enter into (x) any proposed acquisition transaction
which, together with all proposed acquisition transactions agreed to or entered
into during the two-year period following the Distribution, is of more than 5%
of the stock of FEC (in vote or in value) or, (y) to the extent FEC has the
right to prohibit any proposed acquisition transaction, permit any proposed
acquisition transaction which, together with all proposed acquisition
transactions agreed to or entered into during the two-year period following the
Distribution, is of more than 5% of the Stock of FEC (in vote or in value), in
each case occurring pursuant to any of the following actions:
i. The redemption of rights under a stockholders' rights
plan;
ii. The determination that a tender offer for the stock of
FEC is a "permitted offer" or similar permitted
acquisition under any such
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plan or otherwise causing any such plan to be
inapplicable or neutralized with respect to any proposed
acquisition transaction;
iii. The approval of any proposed transaction or transactions
involving the acquisition by FEC of another corporation
or business or the acquisition by another Person of FEC.
unless prior to the consummation of such proposed acquisition transaction or
transactions FEC obtains an IRS Supplemental Ruling that such transaction or
transactions will not affect the treatment of the Distribution under Section 355
of the Code or FEC obtains an opinion (reasonably acceptable to St. Joe) of
nationally recognized tax counsel that such transaction or transactions will not
affect the treatment of the Distribution under Section 355 of the Code.
ARTICLE V.
DISPUTE RESOLUTION
SECTION 5.1 Negotiation. In the event of a controversy, dispute or
claim arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Agreement (but not any
controversy, dispute or claim in any way relating to or arising from any of the
contracts referred to in, or attached as Schedules or Exhibits to, this
Agreement), including any claim based on contract, tort, statute or constitution
(but excluding any controversy, dispute or claim between a party hereto and a
third-party beneficiary hereof) (collectively, "Agreement Disputes"), the
general counsels of the Parties shall negotiate in good faith for a reasonable
period of time to settle such Agreement Dispute; provided such reasonable period
shall not, unless otherwise agreed by the Parties in writing, exceed 30 days
from the time the Parties begin such negotiations; provided further that in the
event of any arbitration pursuant to Section 5.2 below, the Parties shall not
assert the defenses of statute of limitations and laches arising for the period
beginning after the date the Parties began negotiations hereunder, and any
contractual time period or deadline under this Agreement or the Articles of
Merger to which such Agreement Dispute relates shall not be deemed to have
passed until such Agreement Dispute has been resolved.
SECTION 5.2 Arbitration. If after such reasonable period such general
counsels are unable to settle such Agreement Dispute (and in any event, unless
otherwise agreed in writing by the Parties, after 30 days have elapsed from the
time the Parties began such negotiations), such Agreement Dispute shall be
determined, at the request of any party, by arbitration conducted in New York
City, before and in accordance with the then-existing International Arbitration
Rules of the American Arbitration Association (the "Rules"). In any dispute
between the parties, the number of arbitrators shall be one. Any judgment or
award rendered by the arbitrator shall be final, binding and nonappealable
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(except upon grounds specified in 9 U.S.C. Sec.10(a) as in effect on the date
hereof). If the Parties are unable to agree on the arbitrator, the arbitrator
shall be selected in accordance with the Rules; provided that the arbitrator
shall be a U.S. national. Any controversy concerning whether an Agreement
Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived,
whether an assignee of this Agreement is bound to arbitrate, or as to the
interpretation of enforceability of this Article V shall be determined by the
arbitrator. In resolving any dispute, the Parties intend that the arbitrator
apply the substantive laws of the State of Florida, without regard to the choice
of law principles thereof. The Parties intend that the provisions to arbitrate
set forth herein be valid, enforceable and irrevocable. The Parties agree to
comply with any award made in any such arbitration proceeding that has become
final in accordance with the Rules and agree to enforcement of or entry of
judgment upon such award, by any court of competent jurisdiction, including (a)
the Circuit Court of the State of Florida, Duval County, or (b) the United
States District Court for the Middle District of Florida, in accordance with
Section 6.16 hereof. The arbitrator shall be entitled, if appropriate, to award
any remedy in such proceedings, including monetary damages, specific performance
and all other forms of legal and equitable relief; provided, however, the
arbitrator shall not be entitled to award punitive damages. Without limiting the
provisions of the Rules, unless otherwise agreed in writing by or among the
Parties or permitted by this Agreement, the Parties shall keep confidential all
matters relating to the arbitration or the award, provided such matters may be
disclosed (i) to the extent reasonably necessary in any proceeding brought to
enforce the award or for entry of a judgment upon the award and (ii) to the
extent otherwise required by law. Notwithstanding Article 32 of the Rules, the
party other than the prevailing party in the arbitration shall be responsible
for all of the costs of the arbitration, including legal fees and other costs
specified by such Article 32. Nothing contained herein is intended to or shall
be construed to prevent any party, in accordance with Article 22(3) of the Rules
or otherwise, from applying to any court of competent jurisdiction for interim
measures or other provisional relief in connection with the subject matter of
any Agreement Disputes.
SECTION 5.3 Continuity of Performance. Unless otherwise agreed in
writing, the Parties will continue to honor all other commitments under this
Agreement and the Articles of Merger during the course of arbitration or other
dispute resolution pursuant to the provisions of this Article V with respect to
all matters not subject to such dispute, controversy or claim.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.1 Complete Agreement; Construction. This Agreement and the
Articles of Merger, including the Exhibits and Schedules hereto and thereto,
shall constitute the entire agreement between the Parties with respect to the
subject matter
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<PAGE>
hereof and thereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
SECTION 6.2 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the Parties and delivered to the other Parties.
SECTION 6.3 Survival of Agreements. Except as otherwise expressly
contem plated by this Agreement, all covenants, representations, warranties and
agreements of the Parties contained in this Agreement shall survive the
Distribution Date.
SECTION 6.4 Expenses. All costs and expenses incurred in connection
with the preparation, execution, delivery and implementation of this Agreement
and the Articles of Merger, and the Distribution and the other transactions
contemplated hereby and thereby shall be charged to and paid by the party
incurring such costs and expenses.
SECTION 6.5 Notices. All notices and other communications hereunder
shall be in writing, shall be effective when received, and shall in any event be
deemed to have been received (i) upon hand delivery, (ii) three (3) days after
deposit in U.S. mail, postage prepaid, for first class delivery, (iii) one (1)
business day following the business day of timely deposit with Federal Express
or similar carrier, freight prepaid, for next business day delivery, and (iv)
one (1) business day after the date of the transmission if sent by facsimile;
provided that confirmation of transmission and receipt is confirmed and copy is
promptly sent by first class mail, postage prepaid, and shall be sent to each
party at the following respective address (or at such other address for a party
as shall be specified by like notice):
To St. Joe:
The St. Joe Company
1650 Prudential Drive
Jacksonville, FL 32207
Telecopy: 904 858-5265
Attn: Robert Rhodes
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with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telecopy: 212 558-3588
Attn: Donald Walkovik
To FEC:
Florida East Coast Industries, Inc..
One Malaga Street
St. Augustine, FL 32084
Telecopy: 904 826-2379
Attn: Heidi Eddins
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy: 212 450-4800
Attn: Winthrop Conrad, Jr.
SECTION 6.6 Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 6.7 Amendments. Subject to the terms of Section 6.10 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties, and in the case of FEC, approved by a majority of
the directors of FEC independent of St. Joe and its Affiliates..
SECTION 6.8 Assignment. This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by any party hereto without the prior
written consent of the other party hereto, and any attempt to assign any rights
or obligations arising under this Agreement without such consent shall be void.
SECTION 6.9 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the Parties
and their respective successors and permitted assigns.
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<PAGE>
SECTION 6.10 Termination. (a) Prior to the filing of the Articles of
Merger, this Agreement may be terminated
(i) by St. Joe and FEC by mutual consent;
(ii) upon 15 days' written notice to the other Party, by St.
Joe or FEC if the other Party is materially in breach of, or has
materially failed to comply with, any of its representations,
warranties, covenants or agreements hereunder or in the Articles of
Merger and such breach or failure to comply would materially impair the
benefits to be derived from the Recapitalization or the Distribution,
unless, with respect to any breach or failure to comply which is
reasonably susceptible to cure, the Party whose failure or breach it is
has effected a cure prior to the end of such 15 day notice period;
(iii) by FEC if, following receipt of an Acquisition Proposal,
the Board of Directors of FEC in good faith determines, based upon the
advice of its outside counsel that it must terminate this Agreement in
order to comply with its fiduciary duties under applicable law;
(iv) by St. Joe if, following receipt of an Acquisition
Proposal which contemplates a transaction in which all shares of FEC
Common Stock are to receive equivalent consideration, the Board of
Directors of St. Joe in good faith determines, based upon advice of its
outside counsel, that it must terminate this Agreement in order to
comply with its fiduciary duties under applicable law;
(v) by St. Joe if the Board of Directors of FEC shall or shall
resolve to (i) not recommend, or withdraw its approval or
recommendation of, the Recapi talization, the Articles of Merger, this
Agreement or any of the transactions contemplated thereby or hereby,
(ii) modify any such approval or recommendation in a manner adverse to
St. Joe or (iii) approve, recommend or enter into an agreement for any
Acquisition Proposal;
(vi) by FEC if St. Joe shall or shall resolve to (i) not vote
in favor of this Agreement and related transactions as contemplated by
Section 4.3(j) hereof or (ii) approve, recommend or enter into an
agreement for any Acquisition Proposal;
(vii) by St. Joe if St. Joe in good faith believes that the
IRS Ruling in form and content substantially identical to the rulings
requested in the request for the IRS Ruling submitted to the IRS will
not be forthcoming prior to the Declaration Date or, in the case of an
IRS Supplemental Ruling that is requested prior to the Declaration Date
and that is necessary to clarify that material adverse consequences
would not attach to St. Joe or its affiliates as a result of the
Distribution, that the IRS Supplemental Ruling in form and content
substantially identical to the rulings
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<PAGE>
requested in the request for the IRS Supplemental Ruling submitted to
the IRS will not be forthcoming prior to the Declaration Date; or
(viii) by St. Joe or FEC if the Recapitalization is not
consummated by August 1, 2000.
(b) No party shall have any further liability, except for liabilities
then accrued but not discharged, of any kind to any other party or any other
Person as a result of the termination of this Agreement under paragraphs (a)
(vii) and (a)(viii) above. After the filing of the Articles of Merger relating
to the Recapitalization, this Agreement may not be terminated except by an
agreement in writing signed by both Parties.
SECTION 6.11 Subsidiaries. Each of the parties shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary, including the
merger of Delaware Sub with and into St. Joe pursuant to the Delaware Sub
Merger, of such party or by any entity that is contemplated to be a Subsidiary
of such party on or after the Distribution Date, except that, for purposes of
this Section 6.11, FEC shall not be considered a Subsidiary of St. Joe.
SECTION 6.12 Third-Party Beneficiaries. Except as provided in Article
III relating to Indemnitees, this Agreement is solely for the benefit of the
parties and their respective Subsidiaries and Affiliates and should not be
deemed to confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference to
this Agreement.
SECTION 6.13 Title and Headings. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
SECTION 6.14 Exhibits and Schedules. The Exhibits and Schedules shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
SECTION 6.15 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF FLORIDA.
SECTION 6.16 Consent to Jurisdiction. Without limiting the provisions
of Article VI hereof, each of the Parties irrevocably submits to the exclusive
jurisdiction of (a) the Circuit Court of the State of Florida, Duval County, and
(b) the United States District Court for the Middle District of Florida, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby. Each of the Parties
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agrees to commence any action, suit or proceeding relating hereto either in the
United States District Court for the Middle District of Florida or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Circuit Court of the State of Florida, Duval County. Each of the
Parties further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth above shall
be effective service of process for any action, suit or proceeding in Florida
with respect to any matters to which it has submitted to jurisdiction in this
Section 6.16. Each of the Parties irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) the Circuit
Court of the State of Florida, Duval County, or (ii) the United States District
Court for the Middle District of Florida, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 6.17 Severability; Representations and Warranties Cumulative.
In the event any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby; provided, however,
that the consummation of the Recapitalization is conditioned upon and is not
severable from the Distribution, and that the Distribution is not severable from
the Recapitalization. The Parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions. Each representation , warranty, covenant
and agreement hereunder shall apply in accordance with its terms, whether or not
it may relate to or cover information and matters which are the subject of other
representations, warranties, covenants or agreements herein.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the day and year first above written.
THE ST. JOE COMPANY
By:
-----------------------------------
Name:
Title:
FLORIDA EAST COAST INDUSTRIES, INC.
By:
-----------------------------------
Name:
Title:
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SCHEDULES AND EXHIBITS
----------------------
Schedule 2.2(a)(i):
None.
Schedule 2.2(a)(iv):
In 1998 FEC adopted a stock incentive plan (the "Plan") which
authorizes the grant of non-qualified stock options and restricted stock to
certain management employees and outside Directors. The Plan is administered by
the Board's Compensation Committee. The number of shares authorized for the Plan
is 1.6 million. Grants of restricted stock total 75,800 shares and options to
acquire 1,134,172 shares have been issued and 30,000 shares have been issued
upon exercise of such options. Options vest ratably from 1 to 5 years. Annual
issuances are determined by the Compensation Committee subject to the
requirements of employment agreements with FEC senior executives. Pursuant to
the Plan, options granted under the Plan are subject to accelerated vesting upon
a change in control. Options for 44,000 shares will be subject to accelerated
vesting, the balance of outstanding options are either subject to the Senior FEC
Employee Consents or have already vested. Prior to the Distribution Date, FEC
will not have granted additional restricted stock or options or issued
additional shares in connection with the options described above, other than in
the ordinary course of business.
Schedule 2.2(a)(vi):
None.
Schedule 2.2(a)(vii):
FEC is contemplating the acquisition of a transportation services
company. If such acquisition in consummated, the consideration paid to the
seller may include stock of FEC issued for such transaction or options to
acquire stock of FEC in an aggregate amount not to exceed 2% of the stock of FEC
(in vote or in value). In addition, the information set forth in Schedule
2.2(a)(iv) above is incorporated herein by reference.
Schedule 2.2(b)(iv):
None.
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Exhibit A - Articles of Merger
------------------------------
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Exhibit B - Indemnity Agreement
-------------------------------
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Exhibit C - Shareholders Agreement
----------------------------------
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Exhibit D - FEC Rights Plan Term Sheets
---------------------------------------
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<PAGE>
Exhibit E - Senior FEC Employee Consent
---------------------------------------
[to come]
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Exhibit F - Press Release
-------------------------
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<PAGE>
APPENDIX B
Articles of Merger of [name to be inserted upon incorporation],
a Florida corporation ("Merging Corporation"),
with and into
Florida East Coast Industries, Inc., a Florida corporation
("Surviving Corporation")
Pursuant to the provisions of Sections 607.1101 and 607.1105 of the
Florida Business Corporation Act, the undersigned corporations adopt and the
Surviving Corporation delivers for filing the following Articles of Merger for
the purpose of merging them into one of such corporations:
First: The plan of merger attached hereto as Exhibit A (the "Plan of
Merger") was approved by the shareholders of each of the undersigned
corporations in the manner prescribed by the Florida Business Corporation Act.
Second: The Surviving Corporation is Florida East Coast Industries,
Inc., the corporate name of which will remain the same.
Third: The Effective Date of the merger described herein shall be the
date on which these Articles of Merger are filed with the Florida Department of
State.
Fourth: The Shareholders of each of Merging Corporation and Surviving
Corporation adopted the Plan of Merger on ____________, 1999 and __________,
1999 respectively.
Dated: _____________, 1999
FLORIDA EAST COAST
INDUSTRIES, INC.
By:_________________________
_________________, President
[name to be inserted upon
incorporation]
By:_________________________
_________________, President
<PAGE>
EXHIBIT A
THIS PLAN OF MERGER ("Plan of Merger"), between FLORIDA EAST COAST
INDUSTRIES, INC. ("FEC", and after the Merger (as defined below), the "Surviving
Corporation"), a Florida corporation, and [name to be inserted upon
incorporation] ("Merger Sub"), a Florida corporation, has been approved, and is
hereby filed and made effective pursuant to and as contemplated by that certain
Distribution Agreement entered into between FEC and The St. Joe Company ("St.
Joe") dated as of October 26, 1999 (the "Distribution Agreement"). The Merger
(defined below) is intended to constitute a reorganization within the meaning of
Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended.
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. (a) Effective upon filing with the Department
of State of the State of Florida (the "Effective Time") of this Plan of Merger,
Merger Sub shall be merged with and into FEC (the "Merger") in accordance with
the Florida Business Corporation Act of the State of Florida (the "FBCA"),
whereupon the separate corporate existence of Merger Sub shall cease, and FEC
shall be the surviving corporation (the "Surviving Corporation").
(b) At and after the Effective Time, the Merger shall have the effects
set forth in the FBCA. Without limiting the foregoing and subject thereto, from
and after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises and be subject to all of the
restrictions, disabilities and duties of FEC and Merger Sub, all as provided
under the FBCA.
SECTION 1.2. Effect on Capital Stock. At the Effective Time:
(a) All of the shares of common stock, no par value per share, of
Merger Sub outstanding immediately prior to the Effective Time("Merger Sub
Common Stock"), shall be converted in the aggregate into and become 19,609,216
fully paid and non-assessable shares of a new Class B Common Stock, no par value
per share ("Class B Common Stock") of the Surviving Corporation, and shall have
the rights and privileges as set forth in the Surviving Corporation Articles of
Incorporation, as amended and restated hereby;
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<PAGE>
(b) each of the shares of common stock, no par value per share of FEC
("Common Stock") held by Merger Sub as of the Effective Time (the shares so
held, "Contributed Shares") shall automatically be canceled and retired and
shall cease to exist, and no stock of the Surviving Corporation or other
consideration shall be delivered in exchange therefor;
(c) each share of Common Stock (other than the shares to be canceled in
accordance with Section 1.2(b)) shall be converted, without any action on the
part of holders thereof, into one share of a new Class A Common Stock, no par
value per share ("Class A Common Stock"), shall remain issued and outstanding
and shall have the rights and privileges as set forth in the Surviving
Corporation Articles of Incorporation, as amended and restated hereby; and
(d) each share of Common Stock that is held in the treasury of FEC
shall remain in the treasury of FEC and not be affected by the Merger, except
that each share of Common Stock held in the treasury of FEC at the Effective
Time shall be converted into one share of new Class A Common Stock and shall
have the rights and privileges as set forth in the Surviving Corporation
Articles of Incorporation, as amended hereby.
SECTION 1.3. Share Certificates. (a) As soon aspracticable after the
Effective Time,
(i) the Surviving Corporation shall deliver, or cause to be delivered,
to St. Joe, as holder of all oustanding Merger Sub Common Stock prior to the
Effective Time, a number of certificates issued in the names of such persons, in
each case, as St. Joe shall direct, representing in the aggregate 19,609,216
shares of Class B Common Stock which St. Joe has the right to receive upon
conversion of shares of Merger Sub Common Stock pursuant to the provisions of
Section 1.2(a) hereof;
(ii) the Surviving Corporation shall cancel the share certificate or
certificates representing the shares of Common Stock owned directly by Merger
Sub; and
(iii) the share certificates representing shares of Common Stock which
are to be converted into shares of new Class A Common Stock and remain issued
and outstanding under Section 1.2(c) hereof or that remain treasury shares under
Section 1.2(d) hereof, shall represent new Class A Common Stock but such
certificates shall not be exchanged for
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<PAGE>
certificates specifically referring to the new Class A Common Stock and shall
represent an equal number of shares of new Class A Common Stock of the Surviving
Corporation without physical substitution of share certificates of the Surviving
Corporation for such existing share certificates of FEC.
(b) Any dividend or other distribution declared or made with respect to
any shares of capital stock of FEC, whether the record date for such dividend or
distribution is before or after the Effective Time, shall be paid to the holder
of record of such shares of capital stock on such record date, regardless of
whether such holder has received certificates representing Class B Common Stock
pursuant to Section l.3(a)(i).
ARTICLE II
ORGANIZATIONAL DOCUMENTS OF THE SURVIVING CORPORATION
SECTION 2.1. Articles of Incorporation. At the Effective Time, the
Articles of Incorporation of FEC as in effect immediately prior to the Effective
Time shall be amended and restated in their entirety as set forth in Exhibit A-l
hereto (the "Surviving Corporation Articles of Incorporation").
SECTION 2.2. By-laws. The By-laws of FEC as in effect immediately prior
to the Effective Time shall be amended and restated in their entirety as set
forth in Exhibit A-2 hereto (the "Surviving Corporation By-laws").
SECTION 2.3. Directors and Officers. From and after the Effective Time,
until the earlier of their removal or resignation or until their successors are
duly appointed and qualified in accordance with applicable law and the Surviving
Corporation By-laws, the directors of FEC shall be the directors of the
Surviving Corporation. From and after the Effective Time, until the earlier of
their removal or resignation or until their successors are duly appointed and
qualified in accordance with applicable law and the Surviving Corporation
By-laws, the officers of FEC shall be the officers of the Surviving Corporation.
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ARTICLE IV
RIGHTS OF PARTIES WITH RESPECT TO THE MERGER
SECTION 4.1. Rights of Parties with Respect to the Merger. All rights
and obligations as between any of St. Joe, FEC and Merger Sub with respect to
the Merger, are set forth in the Distribution Agreement.
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APPENDIX C
SHAREHOLDERS AGREEMENT
dated as of
October 26, 1999
among
ALFRED I. DUPONT TESTAMENTARY TRUST
NEMOURS FOUNDATION
AND
FLORIDA EAST COAST INDUSTRIES INC.
<PAGE>
TABLE OF CONTENTS
-------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions................................................2
ARTICLE 2
RESTRICTIONS ON TRANSFER AND PURCHASE
SECTION 2.01. General....................................................4
SECTION 2.02. Restrictions on Transfers..................................4
SECTION 2.03. Indemnification by Shareholders............................5
SECTION 2.04. Restrictions on Purchase...................................5
ARTICLE 3
REGISTRATION RIGHTS
SECTION 3.01. Demand Registration........................................6
SECTION 3.02. Piggyback Registration.....................................8
SECTION 3.03. Holdback Agreements........................................9
SECTION 3.04. Registration Procedures....................................9
SECTION 3.05. Indemnification by the Company............................13
SECTION 3.06. Indemnification by Participating Shareholder..............14
SECTION 3.07. Conduct of Indemnification Proceedings....................15
SECTION 3.08. Contribution..............................................16
SECTION 3.09. Participation in Public Offering..........................17
SECTION 3.10. No Transfer of Registration Rights........................17
ARTICLE 4
MISCELLANEOUS
SECTION 4.01. Approval of Rights Plan...................................18
SECTION 4.02. Entire Agreement..........................................18
SECTION 4.03. Binding Effect; Benefit...................................18
SECTION 4.04. Assignability.............................................18
SECTION 4.05. Amendment; Waiver; Effectiveness..........................18
SECTION 4.06. Notices...................................................19
SECTION 4.07. Headings..................................................20
SECTION 4.08. Counterparts..............................................20
SECTION 4.09. Applicable Law............................................20
SECTION 4.10. Specific Enforcement......................................20
SECTION 4.11. Severability..............................................21
<PAGE>
SHAREHOLDERS AGREEMENT
AGREEMENT dated as of October 26, 1999 by and among Florida East Coast
Industries, Inc. a Florida Corporation (the "Company"), the Alfred I. duPont
Testamentary Trust (the "Trust") and The Nemours Foundation, a Florida
corporation (the "Foundation").
W I T N E S S E T H :
WHEREAS, the Company and The St. Joe Company, a Florida corporation
("St. Joe"), have entered into a Distribution and Recapitalization Agreement
dated as of the date hereof (the "Distribution Agreement"; capitalized terms
contained herein and not otherwise defined herein shall have the meanings
ascribed to them in the Distribution Agreement);
WHEREAS, subject to the terms of the Distribution Agreement, the
Company and St. Joe will effect the Recapitalization pursuant to which, inter
alia, (i) each outstanding share of the Common Stock, no par value, of the
Company ("Old Common Stock"),other than shares of Common Stock of the Company
beneficially owned by St. Joe, will be re-designated as Class A Common Stock
(the "Class A Stock") and (ii) each outstanding share of Old Common Stock
beneficially owned by St. Joe will be exchanged for one share of a new series of
Class B Common Stock, no par value, of the Company (the "Class B Stock" and
together with the Class A Common Stock, "Common Stock");
WHEREAS, subject to the terms of the Distribution Agreement, St. Joe
will effect the Distribution pursuant to which St. Joe will distribute to its
stockholders on the Distribution Date all of the shares of Class B Stock
received in connection with the Recapitalization;
WHEREAS, the Trust is the holder of 49,643,292 shares of Common Stock
of St. Joe and will therefore receive shares of Class B Common Stock in the
Distribution;
WHEREAS, the Foundation is the holder of 2,232,408 shares of Common
Stock of St. Joe and will therefore receive shares of Class B Common Stock in
the Distribution;
WHEREAS, the Foundation is the holder of 1,800,896 shares of Old Common
Stock which will be re-designated into 1,800,896 shares of Class A Common Stock
upon consummation of the Recapitalization;
<PAGE>
WHEREAS, the parties hereto desire to enter into this Agreement in
order to preserve the tax-free nature of the Distribution and to govern certain
of their rights, duties and obligations after consummation of the Distribution.
NOW, THEREFORE, the parties hereto agree as follows,
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person, provided that no securityholder of the Company shall be deemed an
Affiliate of any other securityholder solely by reason of any investment in the
Company and no individual trustee of the Trust or individual director of the
Foundation, acting in his or her individual or separate corporate capacity and
not in concert with any other trustee of the Trust, director of the Foundation
or shareholder of the Company, shall be deemed an Affiliate of the Trust or an
Affiliate of the Foundation solely by virtue of his or her position as a trustee
or director of such entity. For the purpose of this definition, the term
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Beneficially Own" shall have the meaning set forth in Rule 13d-3 of
the Exchange Act.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Company Securities" means any securities issued by the Company
including, but not limited to, the Common Stock.
"Equity Securities" means Common Stock, securities convertible into or
exchangeable for Common Stock and options, warrants or other rights to acquire
Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2
<PAGE>
"Financial Expert" means a nationally recognized investment banking
firm that specializes in providing valuation and valuation related services
selected by the Company.
"Original Shares" means (i) shares of Class A Common Stock currently
owned by either of the Shareholders as of the date hereof, (ii) those shares of
Class B Common Stock received by the Shareholders in connection with the
Distribution and (iii) any other securities issuable with respect to such shares
of Class A Common Stock or Class B Common Stock by way of stock dividend or
stock split or in connection with a merger, recapitalization, consolidation,
combination of shares or other form of reorganization.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means any shares of preferred stock of the Company
issued after the date hereof.
"Public Offering" means any primary or secondary public offering of
equity securities of the Company pursuant to an effective registration statement
under the Securities Act other than pursuant to a registration statement filed
in connection with a transaction of the type described in Rule 145 of the
Securities Act or for the purpose of issuing securities pursuant to an employee
benefit plan.
"Registration Expenses" means (i) all registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the securities registered), (iii) printing expenses, (iv)
internal expenses of the Company (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), (v) reasonable fees and disbursements of counsel for the Company and
customary fees and expenses for independent certified public accountants
retained by the Company (including expenses relating to any comfort letters or
costs associated with the delivery by independent certified public accountants
of a comfort letter or comfort letters requested pursuant to Section 3.04(i)
hereof), (vi) the reasonable fees and expenses of any special experts retained
by the Company in connection with such registration, (vii) fees and expenses in
connection with any review of underwriting arrangements by the National
Association of Shares Dealers, Inc. (the "NASD") including fees and expenses of
any "qualified independent underwriter", and (viii) any other fees and expenses
customarily paid by issuers in connection with public offerings provided,
however, that the term "Registration Expenses" shall not include any
underwriting fees, discounts or commissions attributable to the sale of
3
<PAGE>
Original Shares, or any out-of-pocket expenses of the Shareholders or any fees
and expenses of underwriter's counsel.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder" means each of the Trust and the Foundation, so long as
such Person shall beneficially own any Common Stock.
"Shares" means shares of Class B Stock held by the Shareholders.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person.
"Underwritten Public Offering" means a firmly underwritten Public
Offering of securities of the Company pursuant to an effective registration
statement under the Securities Act.
ARTICLE 2
RESTRICTIONS ON TRANSFER AND PURCHASE
SECTION 2.01. General. (a) Each Shareholder agrees that it will not,
directly or indirectly, sell, assign, transfer, grant a participation in, pledge
or otherwise dispose of ("transfer") any Common Stock (or solicit any offers to
buy or otherwise acquire, or take a pledge of any Common Stock) except in
compliance with the Securities Act and the terms and conditions of this
Agreement.
(b) Any attempt to transfer any Common Stock not in compliance with
this Agreement shall be null and void and the Company shall not, and shall cause
any transfer agent not to, give any effect in the Company's stock records to
such attempted transfer.
SECTION 2.02. Restrictions on Transfers.
(a) Neither Shareholder may transfer, agree to transfer or negotiate
regarding a transfer or agreement to transfer any shares of Common Stock during
the time period beginning on the date of this Agreement and ending six months
after the Distribution Date (the "Six-month Anniversary").
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(b) Any time after the Six-month Anniversary until the date which is
two years after the Distribution Date (the "Two-year Anniversary"), the
Shareholders may transfer, in one transaction or in a series of transactions, up
to an aggregate for all such transfers of the number of shares of Common Stock
equal to 10% of the total number of shares of Common Stock as are outstanding
immediately upon consummation of the Distribution. At any time after the Two-
year Anniversary, each Shareholder may transfer, agree to transfer or negotiate
regarding a transfer or agreement to transfer any of its shares of Common Stock.
(c) Other than the transfers permitted by Section 2.02(b) of this
Agreement, neither Shareholder may transfer, agree to transfer or negotiate
regarding a transfer or agreement to transfer any shares of Common Stock during
the time period beginning six months after the date of the Distribution and
ending two years after the date of the Distribution unless such Shareholder
receives a ruling from the Internal Revenue Service or an opinion of nationally
recognized tax counsel, reasonably satisfactory to the Company, to the effect
that the transfer of such Common Stock will not be treated as part of a "plan"
or "series of related transactions" involving the Distribution within the
meaning of Section 355(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), and any regulations thereunder.
SECTION 2.03. Indemnification by Shareholders. In addition to the
rights of the Company under Section 4.10 hereof, each Shareholder shall
severally and not jointly indemnify, defend and hold harmless the FEC
Indemnitees from and against any and all Liability (including (i) any liability
for which the Company may be obligated to indemnify the St. Joe Indemnitees
under the Distribution Agreement relating to the application of Section 355 of
the Code because of a failure to comply with the restrictions or transfer in
Section 2.02 hereof and (ii) any lost financing or other corporate opportunity
of the Company related to the Company's inability to issue stock or engage in a
transaction without violating Section 355 of the Code to the extent that the
Company could have issued such stock or engaged in such transaction without so
violating Section 355 had there not been a violation by the Shareholders of this
Article 2) to which the FEC Indemnitees may become subject, arising from any
failure by such Shareholder to comply with its obligations under Article 2 of
this Agreement.
SECTION 2.04. Restrictions on Purchase. (a) Subject to Section 2.04(b),
until the date which is three years after the Distribution Date, neither
Shareholder nor any of their respective Affiliates (nor any Person acting on
behalf of or in concert with either Shareholder or either Shareholder's
respective Affiliates) may, directly or indirectly, (i) acquire or agree to
acquire any voting securities of the Company or (ii) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) with respect to any voting securities of the Company.
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(b) If at any time after the Distribution Date the Company issues any
shares of Class B Common Stock, Section 2.04(a)(i) shall not restrict either
Shareholder or any of their respective Affiliates to the extent (and only to the
extent) that such Person acquires shares of Class B Common Stock solely to
maintain the same percentage ownership of the then outstanding shares of Class B
Common Stock as such Person owned immediately prior to the issuance by the
Company of shares of Class B Common Stock.
(c) From the date hereof until the Distribution is consummated, neither
Shareholder nor any of their respective Affiliates (nor any person acting on
behalf of or in concert with either Shareholder or either Shareholder's
respective Affiliates) may, directly or indirectly, acquire or agree to acquire
any shares of capital stock of St. Joe.
ARTICLE 3
REGISTRATION RIGHTS
SECTION 3.01. Demand Registration. (a) Subject to Article 2 hereof, if
the Company receives a written request by either or both Shareholders (a
"Demanding Shareholder") that the Company effect a registration under the
Securities Act of all or a portion of the Shareholder's Original Shares, and
specifying the intended method of disposition thereof, the Company will use its
best efforts to effect, as expeditiously as possible, the registration (a
"Demand Registration") under the Securities Act of such Original Shares. It is
understood that one Demand Registration may cover Original Shares of both
Demanding Shareholders.
(b) Notwithstanding Section 3.01(a) and subject to Article 2, the
Company shall not be obligated to effect more than three Demand Registrations
and the Company shall not be obligated to effect a Demand Registration unless
the aggregate proceeds expected to be received from the sale of the Original
Shares requested to be included in such Demand Registration, in the reasonable
opinion of a Financial Expert exercised in good faith, have a fair market value
of at least $50 million (provided that in connection with a Demand Registration
pursuant to which the Demanding Shareholder intends to sell all but not less
than all of its remaining Original Shares, the expected aggregate proceeds of
such registration may be less than $50 million unless, in the opinion of the
Company, such lesser amount is not reasonable in light of the expected
Registration Expenses or does not have a reasonable likelihood of being
successfully sold). In no event will the Company be required to effect more than
one Demand Registration within any six-month period.
(c) A registration requested pursuant to this Section 3.01 shall not
be deemed to have been effected (and therefore not requested for purposes of the
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limitations in Section 3.01(b) on the number of the registrations that can be
made pursuant to Section 3.01(a)), (i) unless a registration statement with
respect thereto has become effective under the Securities Act and has remained
effective for a period of at least 180 days (or such shorter period in which all
Original Shares included in such registration statement have actually been sold
thereunder), provided that a registration which does not become effective after
the Company has filed a registration statement with respect thereto solely by
reason of the refusal to proceed by the Demanding Shareholder (other than a
refusal to proceed based upon the advice of counsel relating to a material
adverse change in, or other material development relating to, the business
properties, financial conditions or results of operations of the Company) shall
be deemed to have been effected by the Company at the request of the Demanding
Shareholder unless the Demanding Shareholder shall have elected to pay all
Registration Expenses in connection with such registration, (ii) if, after it
has becomes effective, such registration statement becomes subject to any stop
order, injunction or other order or requirement of the SEC or other governmental
agency or court for any reason, or (iii) if the conditions to closing specified
in the purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied, other than solely by reason of some
act or omission by the Demanding Shareholder.
(d) The Company will pay all Registration Expenses in connection with
any Demand Registration.
(e) If a Demand Registration involves an Underwritten Public Offering
and the managing underwriter shall advise the Company and the Demanding
Shareholder that, in its view, the number of Original Shares to be included in
such registration (including Common Stock which the Company proposes to be
included exceeds the largest number of shares which can be sold without having a
materially adverse effect on such offering, including the price at which such
shares can be sold (the "Maximum Offering Size"), the Company will include in
such registration, in the priority listed below, up to the Maximum Offering
Size:
(A) first, all Original Shares requested to be registered
by the Shareholders;
(B) second, any Common Stock proposed to be registered by
the Company.
(f) Upon written notice to the Requesting Shareholder, the Company may
postpone effecting a registration pursuant to this Section 3.01 on one occasion
during any period of six consecutive months for a reasonable time specified in
the notice but not exceeding 90 days (which period may not be extended or
renewed), if (1) a Financial Expert shall advise the Company and the
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Demanding Shareholder in writing that effecting the registration would
materially and adversely affect an offering of securities of the Company the
preparation of which had then been commenced or (2) the Company is in possession
of material non-public information the disclosure of which during the period
specified in such notice the Company believes would not be in the best interests
of the Company.
SECTION 3.02. Piggyback Registration. (a) Subject to Article 2 hereof,
if the Company proposes to register any of its Common Stock in a Public Offering
under the Securities Act, whether or not for sale for its own account, it will
each such time, subject to the provisions of Section 3.02(b) and Section 3.02(c)
hereof, give prompt written notice at least 20 days prior to the anticipated
filing date of the registration statement relating to such registration to the
Shareholders, which notice shall set forth the Shareholders' rights under this
Section 3.02 and shall offer each Shareholder the opportunity to include in such
registration statement such number of Original Shares as each such Shareholder
may request (a "Piggyback Registration"). Upon the written request of either
Shareholder (a "Requesting Shareholder") made within 10 days after the receipt
of notice from the Company (which request shall specify the number of Original
Shares intended to be disposed of by such Shareholder), the Company will use
best efforts to effect the registration under the Securities Act of all Original
Shares which the Company has been so requested to register by such Requesting
Shareholder, to the extent requisite to permit the disposition of the Original
Shares so to be registered; provided that (i) if such registration involves an
Underwritten Public Offering, the Requesting Shareholder must sell its Original
Shares to the underwriters selected as provided in Section 3.04(h) on the same
terms and conditions as apply to the Company, as applicable (taking into account
any differences with respect to Class A Stock and Class B Stock), and (ii) if,
at any time after giving written notice of its intention to register any stock
pursuant to this Section 3.02(a) and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such stock, the Company shall
give written notice to the Requesting Shareholders and, thereupon, shall be
relieved of its obligation to register any Original Shares in connection with
such registration, provided that the Company shall reimburse each Requesting
Shareholder for its reasonable out-of-pocket expenses in connection with such
registration. No registration effected under this Section 3.02 shall relieve the
Company of its obligations to effect a Demand Registration to the extent
required by Section 3.01 hereof. The Company will pay all Registration Expenses
in connection with each registration of Original Shares requested pursuant to
this Section 3.02.
(b) If a registration pursuant to this Section 3.02 involves an
Underwritten Public Offering and the managing underwriter advises the Company in
writing that, in its view, the number of shares of Common Stock which the
Company and the Requesting Shareholders intend to include in such registration
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exceeds the Maximum Offering Size, the Company will include in such
registration, in the following priority, up to the Maximum Offering Size:
(i) first, so much of the Common Stock proposed to be registered
for the account of the Company as would not cause the offering to
exceed the Maximum Offering Size; and
(ii) second, all Original Shares requested to be included in such
registration by any Requesting Shareholder pursuant to Section 3.02
(allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata among the Requesting Shareholders on the basis
of the relative number of Original Shares so requested to be included
in such registration).
(c) If a Requesting Shareholder requests, pursuant to this Section
3.02, the registration of a class of Common Stock different from the class of
Common Stock proposed to be registered by the Company and the managing
underwriter (if any) advises the Company in writing that, in its view, the
inclusion in the offering of such class of Common Stock requested by the
Requesting Shareholder will materially adversely effect the success of the
proposed offering, the Company shall not be required to include in such offering
any shares of the differing class of Common Stock requested by such Requesting
Shareholder.
SECTION 3.03. Holdback Agreements. With respect to each and every
firmly underwritten Public Offering, each Shareholder agrees not to effect any
public sale or distribution under the Securities Act, of any shares of Common
Stock (except for Shares, if any, sold in that Public Offering) during the 7
days prior to the effective date of the applicable registration statement
(except as part of such registration) or during the period after such effective
date equal to the lesser of: (i) 90 days or (ii) any such other period as the
Company, the Demanding Shareholders (if any), the Requesting Shareholders (if
any) and the managing underwriters of an Underwritten Public Offering agree).
SECTION 3.04. Registration Procedures. Whenever a Shareholder requests
that any Original Shares be registered pursuant to Section 3.01 or 3.02 hereof,
the Company will, subject to the provisions of such Sections, use its best
efforts to effect the registration and the sale of such Original Shares in
accordance with the intended method of disposition thereof and in connection
with any such request.
(a) The Company will prepare and file with the SEC a registration
statement on any form selected by counsel for the Company and which form shall
be available for the sale of the Original Shares to be registered thereunder in
accordance with the intended method of distribution thereof, and use its best
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efforts to cause such filed registration statement to become and remain
effective for a period of not less than 180 days (or such shorter period in
which all of the Original Shares included in such registration statement shall
have actually been sold thereunder).
(b) The Company will, prior to filing a registration statement or
prospectus or any amendment or supplement thereto, furnish to each Shareholder
holding Original Shares covered by such registration statement (each, a
"Participating Shareholder") and each underwriter, if any, copies of such
registration statement as proposed to be filed, and thereafter the Company will
furnish to such Shareholder and underwriter, if any, such number of copies of
such registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Shareholder or
underwriter may reasonably request in order to facilitate the disposition of the
Original Shares owned by such Shareholder. Each Participating Shareholder shall
have the right to request that the Company modify any information contained in
such registration statement, amendment and supplement thereto pertaining to such
Participating Shareholder and the Company shall use its best efforts to comply
with such request, provided, however that, subject to the last sentence of this
paragraph (b), the Company shall not have any obligation to so modify any
information if so doing would cause, in the Company's sole discretion, the
prospectus to contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Company will not file any registration
statement or amendment thereto or any supplement to which a Participating
Shareholder or its underwriter or underwriters, if any, shall reasonable object.
(c) If any such registration statement refers to a Participating
Shareholder by name or otherwise as the holder of any securities of the Company,
then the Participating Shareholder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to the
Participating Shareholder, to the effect that the holding by the Participating
Shareholder of such securities does not necessarily make the Participating
Shareholder a "controlling person" of the Company with the meaning of the
Securities Act (if appropriate based on the advice of the Participating
Shareholder's counsel and concurrence therewith by counsel to the Company), such
holding is not to be construed as a recommendation by the Participating
Shareholder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that the Participating Shareholder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to the Participating Shareholder by name or
otherwise is not required by the Securities Act or rules and regulations
promulgated thereunder and concurrence with such
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position by counsel to the Company, the deletion of the reference to the
Participating Shareholder.
(d) In connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement, the Company will
give the Participating Shareholders, their underwriter or underwriters, if any,
and their respective counsel, financial advisors and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such
reasonable access during normal business hours to its books and records and such
opportunities to discus the business of the Company with its officers, legal
counsel and the independent public accountants necessary, in the opinion of such
Participating Shareholders' and their underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
(e) After the filing of the registration statement, the Company will
promptly notify each Participating Shareholder holding Original Shares covered
by such registration statement of any stop order issued or threatened by the SEC
or any state securities commission under state blue sky laws and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered.
(f) The Company will use its best efforts to (i) register or qualify
the Original Shares covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as the
Participating Shareholder holding such Original Shares reasonably (in light of
such Participating Shareholder's intended plan of distribution) requests and
(ii) cause such Original Shares to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Participating
Shareholder to consummate the disposition of the Original Shares owned by such
Participating Shareholder; provided that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (e), (B) subject itself
to taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.
(g) The Company will immediately notify each Participating Shareholder
holding such Original Shares covered by such registration statement, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered to
the
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purchasers of such Original Shares, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
promptly prepare and make available to each such Participating Shareholder and
file with the SEC any such supplement or amendment.
(h) In connection with any Demand Registration, the Company shall
appoint the managing underwriter, if any, chosen by the Demanding Shareholder,
provided that such managing underwriter shall be reasonably satisfactory to the
Company. In connection with any other registration statement contemplated by
this Article 3, the Company shall be free to choose the managing underwriter, if
any, in its sole discretion. The Company will enter into customary agreements
(including an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Original Shares, including the engagement of a "qualified
independent underwriter" in connection with the qualification of the
underwriting arrangements with the NASD.
(i) Upon execution of confidentiality agreements in form and substance
reasonably satisfactory to the Company, the Company will make available for
inspection by any Participating Shareholder and any underwriter participating in
any disposition pursuant to a registration statement being filed by the Company
pursuant to this Article 3 and any attorney, accountant or other professional
retained by any such Participating Shareholder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably requested by any such Person, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
Inspectors in connection with such registration statement.
(j) The Company will furnish to each such Participating Shareholder
and to each underwriter, if any, a signed counterpart, addressed to such
underwriter and the Participating Shareholders, of (i) an opinion or opinions of
counsel to the Company and (ii) a comfort letter or comfort letters from the
Company's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions or comfort letters, as
the case may be, as a majority of such Participating Shareholders or the
managing underwriter therefor reasonably requests.
(k) The Company will otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of
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the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(l) The Company may require each such Shareholder to promptly furnish
in writing to the Company information regarding the distribution of the Original
Shares as the Company may from time to time reasonably request and such other
information as may be legally required in connection with such registration.
(m) Each such Shareholder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3.04(g) hereof, such Shareholder will forthwith discontinue disposition of
Original Shares pursuant to the registration statement covering such Original
Shares until such Shareholder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.04(g) hereof, and, if so directed
by the Company, such Shareholder will deliver to the Company all copies, other
than any permanent file copies then in such Shareholder's possession, of the
most recent prospectus covering such Original Shares at the time of receipt of
such notice. In the event that the Company shall give such notice, the Company
shall extend the period during which such registration statement shall be
maintained effective (including the period referred to in Section 3.04(a)
hereof) by the number of days during the period from and including the date of
the giving of notice pursuant to Section 3.04(g) hereof to the date when the
Company shall make available to such Shareholder a prospectus supplemented or
amended to conform with the requirements of Section 3.04(g) hereof.
SECTION 3.05. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Shareholder holding Original Shares covered by
a registration statement, its officers, trustees, directors, employees, partners
and agents, and each Person, if any, who controls such Shareholder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities caused by
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Original Shares (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission so made in strict
conformity with information furnished in writing to the Company by such
Shareholder or on such Shareholder's behalf expressly for use therein; provided
that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any prospectus,
as the case may be, the
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indemnity agreement contained in this paragraph shall not apply to the extent
that any such loss, claim, damage, liability or expense results from the fact
that a current copy of the prospectus (as amended or supplemented) was not sent
or given to the Person asserting any such loss, claim, damage, liability or
expense at or prior to the written confirmation of the sale of the Original
Shares concerned to such Person if it is determined that the Company has
provided such prospectus to such Shareholder in a timely manner prior to such
sale and it was the responsibility of such Shareholder under the Securities Act
to provide such Person with a current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) and such current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense, it being understood that the limitation contained in this provision
shall not apply in the case of an Underwritten Public Offering or a Public
Offering otherwise effected through a securities agent, broker or dealer where
it was the contractual or other legal responsibility of such agent, broker or
dealer to deliver to such Person a current copy of the prospectus. The Company
also agrees to indemnify any underwriters of the Original Shares, their officers
and directors and each person who controls such underwriters on substantially
the same basis as that of the indemnification of the Shareholders provided in
this Section 3.05.
SECTION 3.06. Indemnification by Participating Shareholder. Each
Shareholder holding Original Shares included in any registration statement
agrees, severally but not jointly, to indemnify and hold harmless the Company,
its officers, directors and agents and each Person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Shareholder, but only (i) with respect to information furnished
in writing by such Shareholder or on such Shareholder's behalf expressly for use
in any registration statement or prospectus relating to the Original Shares, or
any amendment or supplement thereto, or any preliminary prospectus or (ii) to
the extent that any loss, claim, damage, liability or expense described in
Sections 3.05 results from the fact that a current copy of the prospectus (as
amended or supplemented) was not sent or given to the Person asserting any such
loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Original Shares concerned to such Person if it
is determined that it was the responsibility of such Shareholder to provide such
Person with a current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) and such current copy of the prospectus (or such
amended or supplemented prospectus, as the case may be) would have cured the
defect giving rise to such loss, claim, damage, liability or expense, it being
understood that the indemnification contained in this clause (ii) shall not
apply in the case of an Underwritten Public Offering or a Public Offering
otherwise effected through a securities agent, broker or dealer where it was the
contractual or other legal
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responsibility of such agent, broker or dealer to deliver to such Person a
current copy of the prospectus. Each such Shareholder shall be prepared, if
required by the underwriting agreement, to indemnify and hold harmless
underwriters of the Original Shares, their officers and directors and each
person who controls such underwriters on substantially the same basis as that of
the indemnification of the Company provided in this Section 3.06. As a condition
to including Original Shares in any registration statement filed in accordance
with Article 3 hereof, the Company may require that it shall have received an
undertaking reasonably satisfactory to it from any underwriter to indemnify and
hold it harmless to the extent customarily provided by underwriters with respect
to similar securities.
SECTION 3.07. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
this Article 3, such Person (an "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses as incurred, including
reasonable costs of investigation; provided that the failure of any Indemnified
Party so to notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations hereunder except to the extent that the Indemnifying
Party is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any and all losses, claims, damages, liabilities and expenses or
liability (to the extent stated above) by reason of such settlement or judgment.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Party is or could have
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been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such proceeding.
SECTION 3.08. Contribution. If the indemnification provided for in this
Article 3 is held by a court of competent jurisdiction to be unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
as between the Company and the Participating Shareholders and their related
Indemnified Parties on the one hand and the underwriters and their related
Indemnified Parties on the other, in such proportion as is appropriate to
reflect the relative benefits received by the Company and such Participating
Shareholders on the one hand and the underwriters on the other, from the
offering of the Participating Shareholders' Original Shares, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and such Participating Shareholders on the one hand and of
such underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (ii) as between the Company and
their related Indemnified Parties on the one hand and each Participating
Shareholder and their related Indemnified Parties on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
each such Participating Shareholder in connection with such statements or
omissions, as well as any other relevant equitable considerations. Any
contribution by a Participating Shareholder shall be several in the proportion
that the number of Original Shares of such Participating Shareholder sold
pursuant to the registration statement giving rise to the contribution
obligation bears to the total number of shares sold by all Participating
Shareholders pursuant to such registration statement. The relative benefits
received by the Company and such Participating Shareholders on the one hand and
such underwriters on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and such
Participating Shareholders bear to the total underwriting discounts and
commissions received by such underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of the Company and
such Participating Shareholder on the one hand and of such underwriters on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and such Participating Shareholders or by such underwriters. The relative fault
of the Company on the one hand and of each such Shareholder on the other shall
be determined by reference to, among other things,
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whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Shareholders agree that it would not be just and
equitable if contribution pursuant to this Section 3.08 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 3.08, no underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to Common Stock purchased by such underwriter in such offering, less
the aggregate amount of any damages which such underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no Participating Shareholder shall be required to
contribute any amount in excess of the amount by which the total proceeds
received in respect of the Original Shares of such Participating Shareholder
(without deduction for any underwriting discount) exceeds the amount of any
damages which such Participating Shareholder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Each
Participating Shareholder's obligation to contribute pursuant to this Section
3.08 is several in the proportion that the proceeds of the offering received by
such Participating Shareholder bears to the total proceeds of the offering
received by all such Shareholders and not joint.
SECTION 3.09. Participation in Public Offering. No Person may
participate in any Underwritten Public Offering hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and the provisions of
this Agreement in respect of registration rights.
SECTION 3.10. No Transfer of Registration Rights. None of the rights
of Shareholders under this Article 3 shall be assignable by any Shareholder
other
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than to a Person acquiring at least four million shares of Class B Stock,
provided that such assignment is in form and substance reasonably acceptable to
the Company and that under no circumstances shall the Company be required under
this Agreement to effect more than three Demand Registrations in the aggregate.
ARTICLE 4
MISCELLANEOUS
SECTION 4.01. Approval of Rights Plan. The Shareholders each
acknowledge that, as soon as practicable after the date hereof, the Company will
present to the Board for its approval the adoption of a "Rights Plan" (the
"Rights Plan") substantially in accordance with the terms attached hereto as
Exhibit A. Each of the Shareholders agrees to support, and to use its best
efforts to cause each of its respective representatives on the Board, subject to
the fiduciary duties of such representatives, to support and vote in favor of,
the adoption of the Rights Plan.
SECTION 4.02. Entire Agreement. This Agreement and the transactions
contemplated hereby constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements and understandings, both oral and written, between
the parties with respect to the subject matter hereof and thereof.
SECTION 4.03. Binding Effect; Benefit. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto, and their respective heirs, successors, legal
representatives and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 4.04. Assignability. Other than as permitted by Section 3.10
hereof, neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by any Shareholder.
SECTION 4.05. Amendment; Waiver; Effectiveness. (a) No provision of
this Agreement may be waived except by an instrument in writing executed by the
party against whom the waiver is to be effective. No provision of this Agreement
may be amended or otherwise modified except by an instrument in writing executed
by the Company with approval of the Board (including at least a majority of the
directors who are not Affiliates or designees of either Shareholder) and each of
the Shareholders.
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(b) This Agreement (other than Section 2.04(c) and Section 4.01) shall
become effective immediately upon the consummation of the Distribution. Section
2.04(c) and Section 4.01 hereof shall become effective immediately upon
execution of this Agreement.
SECTION 4.06. Notices. All notices and other communications given or
made pursuant hereto or pursuant to any other agreement among the parties,
unless otherwise specified, shall be in writing and shall be deemed to have been
duly given and received when sent by fax (with confirmation in writing via first
class U.S. mail) or delivered personally or on the third Business Day after
being sent by registered or certified U.S. mail (postage prepaid, return receipt
requested) to the parties at the fax number or address set forth below or at
such other addresses as shall be furnished by the parties by like notice:
if to the Company to:
Florida East Coast Industries, Inc
One Malaga Street
St. Augustine, Fl. 32084
Attention: Heidi Eddins
Telecopy: (904) 826-2379
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Winthrop B. Conrad, Jr.
Fax: (212) 450-4800
if to the Trust to:
Alfred I. duPont Testamentary Trust
Suite 400 du Pont Center
1650 Prudential Drive
Jacksonville, FL 32202
Attention: Chairman
Fax: 904-858-3124
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with a copy to:
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: William J. Strickland
Fax: 804-775-1061
if to the Foundation to:
The Nemours Foundation
Suite 400
duPont Center
1650 Prudential Drive
Jacksonville, Florida 32202
Attention: Chairman
Fax: 904-858-3124
with a copy to
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: William J. Strickland
Fax: 804-775-1061
SECTION 4.07. Headings. The headings contained in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
SECTION 4.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
SECTION 4.09. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Florida, without regard
to the conflicts of laws rules of such state.
SECTION 4.10. Specific Enforcement. Each party hereto acknowledges that
the remedies at law of the other parties for a breach or threatened breach of
this Agreement would be inadequate and, in recognition of this fact, any party
to this Agreement, without posting any bond, and in addition to all other
remedies
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which may be available, shall be entitled to obtain equitable relief in the form
of specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.
SECTION 4.11. Severability. If one or more provisions of this Agreement
are held to be unenforceable to any extent under applicable law, such provision
or provisions shall be interpreted as if it or they were written so as to be
enforceable to the maximum possible extent so as to effectuate the parties'
intent to the maximum possible extent, and the balance of the Agreement shall be
interpreted as if such provision or provisions were so excluded and shall be
enforceable in accordance with its terms to the maximum extent permitted by law.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
FLORIDA EAST COAST INDUSTRIES, INC
By:
-------------------------------------
Name:
Title:
ALFRED I. DUPONT
TESTAMENTARY TRUST
By:
-------------------------------------
Name:
Title:
THE NEMOURS FOUNDATION
By:
-------------------------------------
Name:
Title:
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APPENDIX D
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FLORIDA EAST COAST INDUSTRIES, INC.
- --------------------------------------------------------------------------------
Pursuant to Sections 607.1003 and 607.1007 of the Florida Business
Corporation Act, FLORIDA EAST COAST INDUSTRIES, INC. (the "Corporation")
hereby adopts the following Amended and Restated Articles of Incorporation:
ARTICLE I.
NAME AND ADDRESS
The name of the Corporation is FLORIDA EAST COAST INDUSTRIES, INC. The
Corporation's principal office and mailing address is One Malaga Street, St.
Augustine, Florida 32084.
ARTICLE II.
PURPOSE
The Corporation is organized for the purpose of transacting any and
all lawful business for corporations organized under the Florida Business
Corporation Act (the "FBCA").
ARTICLE III.
TERM
The duration of the Corporation shall be perpetual.
ARTICLE IV.
REGISTERED OFFICE
The street address of the Corporation's registered office and the
name of the registered agent at such office are:
Heidi J. Eddins, Esq.
One Malaga Street
St. Augustine, Florida 32084
<PAGE>
ARTICLE V.
BOARD OF DIRECTORS
The Board of Directors shall consist of five (5) or more members,
provided that at all times the Board of Directors shall consist of a whole
number multiple of five (5) members (subject to vacancies occurring in the
ordinary course, which vacancies shall be filled no later than the next annual
meeting of the shareholders of the Corporation).
ARTICLE VI.
CAPITAL STOCK
1. Authorized Stock. The aggregate number of shares of all classes
of stock which the Corporation shall have authority to issue is one hundred
seventy million (170,000,000) shares, consisting of:
(a) fifty million (50,000,000) shares of Class A Common
Stock, no par value (the "Class A Common Stock");
(b) one hundred million (100,000,000) shares of Class B
Common Stock, no par value (the "Class B Common Stock"); and
(c) twenty million (20,000,000) shares of Preferred Stock,
no par value (the "Preferred Stock").
2. Common Stock. Except as otherwise expressly provided herein, the
Class A Common Stock and the Class B Common Stock shall be identical in all
respects, and the relative powers, preferences, rights, qualifications,
limitations and restrictions of the shares of Class A Common Stock and Class B
Common Stock shall be as follows:
(a) Cash or Property Distributions. Subject to the rights and
preferences of the Preferred Stock as set forth in any resolution or
resolutions of the Corporation's Board of Directors (the "Board of
Directors"), providing for the issuance of such stock pursuant to this Article
VI, and except as otherwise provided for herein, the holders of Class A Common
Stock and Class B Common Stock are entitled to receive dividends out of assets
legally available therefor at such times and in such per share amounts as the
Board of Directors may from time to time determine, provided that whenever a
dividend is paid, the same dividend shall be paid in respect of each
outstanding share of Class A Common Stock and Class B Common Stock.
(b) Stock Subdivisions and Combinations. The Corporation
shall not subdivide, reclassify or combine either Class A Common Stock or
Class B Common Stock without at the same time making a proportionate
subdivision, reclassification or combination of the other class.
(c) Voting. Voting power shall be divided between the Class
A Common Stock and the Class B Common Stock as follows:
(i) With respect only to the election of directors, holders
of Class A Common Stock and holders of Voting Preferred Stock (as defined
below), voting together, shall be entitled to elect that number of directors
which constitutes 20% of the authorized number of
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members of the Board of Directors (or, if such 20% is not a whole number, then
the nearest lower whole number of directors that is closest to 20% of such
membership) (the "Class A Directors"). Each share of Class A Common Stock
shall have one vote for each nominee in the election of the Class A Directors
and each share of Voting Preferred Stock shall have a number of votes in the
election of the Class A Directors as specified in the resolution or
resolutions of the Board of Directors authorizing such Voting Preferred Stock.
Holders of Class B Common Stock shall be entitled to elect the remaining
directors (the "Class B Directors"). Each share of Class B Common Stock shall
have one vote for each nominee in the election of such directors. Holders of
Class A Common Stock, Class B Common Stock and Voting Preferred Stock shall be
entitled to cumulate their votes for directors. For purposes of this Section
(2)(c) and Section (2)(d) of this Article VI, references to the authorized
number of members of the Board of Directors (or the remaining directors) shall
not include any directors which the holders of any shares of Preferred Stock
may have the right to elect upon the failure of the Corporation to pay regular
dividends on such Preferred Stock as and when due for a specified period of
time. "Voting Preferred Stock" means shares of each series of Preferred Stock
upon which the right to vote for directors has been conferred in accordance
with Section (3) of this Article VI, except for any right to elect directors
which may be provided upon the failure of the Corporation to pay regular
dividends on such Preferred Stock as and when due for a specified period of
time.
(ii) At a meeting of shareholders, a Class A Director of the
Board of Directors may be removed only for cause by the affirmative vote of
the holders of at least a majority of the total voting power of all shares of
the Class A Common Stock and the holders of Voting Preferred Stock, voting
together as a class, provided the notice of the meeting states that the
purpose, or one of the purposes, of the meeting is removal of the Class A
Director. A Class A Director may not be removed if the number of votes
sufficient to elect the Class A Director by the holders of Class A Common
Stock under cumulative voting is voted against his or her removal. At a
meeting of shareholders, a Class B Director may be removed only for cause by
the affirmative vote of the holders of at least a majority of the total voting
power of all shares of Class B Common Stock provided the notice of the meeting
states that the purpose, or one of the purposes, of the meeting is removal of
the Class B Director. A Class B Director may not be removed if the number of
votes sufficient to elect the Class B Director by the holders of Class B
Common Stock under cumulative voting is voted against his or her removal.
(iii) (A) Notwithstanding any other provision of these
Amended and Restated Articles of Incorporation, with respect to the election
or removal of directors of the Corporation, if any person or entity or group
of persons or entities acting in concert (any such person, entity or group, a
"Significant Holder") beneficially owns 15% or more of the outstanding shares
of Class B Common Stock, such Significant Holder shall be entitled to vote any
shares of Class B Common Stock beneficially owned by such Significant Holder
only as follows:
(1) Any shares of Class B Common Stock up to the
number of such Significant Holder's Applicable Shares (as defined below) may
be voted by such Significant Holder in its sole discretion.
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(2) Any shares of Class B Common Stock in excess of
the number of such Significant Holder's Applicable Shares ("Excess Shares")
may be voted by such Significant Holder only in accordance with the votes of
all other shares of Class B Common Stock by other holders (or, with respect to
other holders who are Significant Holders, in accordance only with the votes
of Applicable Shares of such Significant Holders) on a pro rata basis for each
director candidate.
(B) A Significant Holder's "Applicable Shares" shall be such
number of shares of Class B Common Stock equal to (i) such Significant Holder's
Economic Interest (as defined below), (ii) divided by 0.80 and (iii) multiplied
by the total number of outstanding shares of Class B Common Stock rounded to the
nearest whole number.
(C) A Significant Holder's "Economic Interest" shall be equal to
(i) the number of shares of Class B Common Stock of the Corporation beneficially
owned by such Significant Holder, (ii) divided by the total number of shares
outstanding of all classes of capital stock of the Corporation immediately upon
consummation of the Distribution (as defined in the Distribution Agreement).
(D) Nothing contained in this Section 2(c)(ii) shall require any
shareholder to vote, or limit any shareholder's right not to vote, any shares of
Class B Common Stock, provided that if any Significant Holder votes less than
all of the shares of Class B Common Stock beneficially owned by such Significant
Holder, a portion of such voted shares shall be treated as having been voted as
Applicable Shares and a portion of such voted shares shall be treated as having
been voted as Excess Shares pro rata with the total number of such Principal
Holder's Applicable Shares to Excess Shares.
(iv) Except as otherwise specifically provided herein, the
holders of Class A Common Stock and holders of Class B Common Stock (x) shall
in all matters not otherwise specified in Section (2)(c) of this Article VI
vote together (including, without limitation, with respect to increases or
decreases in the authorized number of shares of any class of Common Stock),
with each share of Class A Common Stock and Class B Common Stock having one
vote and (y) shall be entitled to vote as separate classes only when required
by law to do so under mandatory statutory provisions that may not be excluded
or overridden by a provision in these Amended and Restated Articles of
Incorporation.
(v) Except as set forth in this Section (2)(c) of Article VI,
the holders of Class A Common Stock shall have exclusive voting power (except
for any voting powers of any Preferred Stock) on all matters at any time when no
Class B Common Stock is issued and outstanding, and the holders of Class B
Common Stock shall have exclusive voting power (except for any voting powers of
any Preferred Stock) on all matters at any time when no Class A Common Stock is
issued and outstanding.
(d) Shareholder Vote for Certain Recapitalization. The
Corporation may, upon the affirmative vote of at least a majority of the
voting power of all shares of the Corporation's capital stock then entitled to
vote, voting together as a single class, effect a Recapitalization (a
"Recapitalization") of the Corporation pursuant to which all shares of Class A
Common Stock and Class B Common Stock will be re-designated as a single class
of Common Stock. All such shares of newly designated Common Stock shall be
identical in all respects, including with respect to the election or removal
of directors. Upon any such Recapitalization, each share of old Class A Common
Stock and old Class B Common Stock shall
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remain issued and outstanding as Common Stock and share certificates
evidencing such old shares of Class A Common Stock or old shares of Class B
Common Stock shall automatically be deemed to evidence an equal number of
shares of newly designated Common Stock (unless and until such share
certificates are exchanged for new share certificates).
(e) Vacancies; Increase or Decreases in Size of the Board of
Directors. Any vacancy in the office of a director created by the death,
resignation or removal of a director elected by (or appointed on behalf of)
the holders of the Class B Common Stock or the holders of the Class A Common
Stock and Voting Preferred Stock voting together as a class, as the case may
be, may be filled by the vote of the majority of the directors (or the sole
remaining director) elected by (or appointed on behalf of) such holders of
Class B Common Stock or Class A Common Stock and Voting Preferred Stock (or on
behalf of whom that director was appointed), as the case may be, unless there
are no such directors, in which case such vacancy may be filled by the vote of
the majority of the directors or by the sole remaining director, regardless,
in each instance, of any quorum requirements set out in the Corporation's
bylaws. Any director elected by some or all of the directors to fill a vacancy
shall hold office for the remainder of the full term of the director whose
vacancy is being filled and until such director's successor shall have been
elected and qualified unless removed and replaced pursuant to Section
2(c)(iii). All newly-created directorships or vacancies resulting from an
increase or decrease in the authorized number of directors shall be allocated
between Class A Directors and Class B Directors such that at all times the
number of directorships reserved for Class A Directors shall be 20% of the
authorized number of members of the Board of Directors (or, if such 20% is not
a whole number, then the nearest lower whole number of directors that is
closest to 20% of such membership) and the remaining directorships are
reserved for Class B Directors. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(f) Shareholder Nominations of Director Candidates. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors at an annual or special meeting of
shareholders may be made by or at the direction of the Board of Directors by
any nominating committee or person appointed by the Board of Directors or by
any shareholder of the Corporation entitled to vote for the election of
directors at such meeting who complies with the procedures set forth in this
Section 2(f) of Article VI, provided that nominations of persons for election
to the Board of Directors at a special meeting may be made only if the
election of directors is one of the purposes described in the special meeting
notice required by Section 607.0705 of the FBCA. Nominations of persons for
election at a special meeting, other than nominations made by or at the
direction of the Board of Directors, shall be made pursuant to notice in
writing delivered to or mailed and received by the Secretary of the
Corporation at its principal executive offices not later than the close of
business on the tenth (10th) day following the date on which notice of such
meeting is given to shareholders or made public, whichever occurs first.
Nominations of persons for election at an annual meeting, other that
nominations made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered to or mailed and
received by the Secretary of the Corporation at the principal executive
offices of the Corporation not less than sixty (60) days nor more than 180
days prior to
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the first anniversary of the date of the Corporation's notice of annual
meeting provided with respect to the previous year's annual meeting, provided
that if no annual meeting was held in the previous year or the date of the
annual meeting has been changed to be more than thirty (30) calendar days
earlier than the date contemplated by the previous year's notice of annual
meeting, such notice by the shareholder to be timely must be so delivered or
received not later than the close of business on the fifth day following the
date on which notice of the date of the annual meeting is given to shareholder
or made public, whichever first occurs. Such shareholder's notice to the
Secretary shall set forth the following information: (a) as to each person
whom the shareholder proposed to nominate for election or re-election as a
director at the annual or special meeting, (i) the name, age, business address
and residence address of the proposed nominee, (ii) the principal occupation
or employment of the proposed nominee, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the proposed
nominee and (iv) any other information relating to the proposed nominee that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to Regulation 14a promulgated under the Securities Exchange
Act of 1934, as amended; and (b) as to the shareholder giving the notice of
nominees for election at the annual or special meeting, (i) the name and
record address of the shareholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
shareholder. The Corporation may require any proposed nominee for election at
an annual or special meeting of shareholders to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility
of such proposed nominee to serve as a director of the Corporation. No person
shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the requirements of this
Section 2(f), and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(g) Merger or Consolidation. In case of any consolidation of
the Corporation with one or more other corporations or a merger of the
Corporation with another corporation, each holder of a share of Class A Common
Stock shall be entitled to receive with respect to such share the same kind
and amount of shares of stock and other securities and property (including
cash) receivable upon such consolidation or merger by a holder of a share of
Class B Common Stock, and each holder of a share of Class B Common Stock shall
be entitled to receive with respect to such share the same kind and amount of
shares of stock and other securities and property (including cash) receivable
upon such consolidation or merger by a holder of a share of Class A Common
Stock, provided that, in any such transaction, the holders of shares of Class
A Common Stock and the holders of shares of Class B Common Stock may receive
different kinds of shares of stock if the only difference in such shares is
the inclusion of voting rights which continue the Special Voting Rights (as
defined herein). For purposes hereof, "Special Voting Rights" means the
different voting rights of the holders of Class A Common Stock, holders of
Class B Common Stock and holders of Voting Preferred Stock with respect to the
election of the applicable percentage of the authorized number of members of
the Board of Directors as described in Section (2)(c)(i) of Article VI.
(h) Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, the holders of the Class A
Common Stock and Class B Common Stock shall participate equally per share in
any distribution to shareholders, without distinction between classes.
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(i) Internal Revenue Service Ruling. Section 2(d) of Article
VI shall be effective only following the receipt of a private letter ruling
from the Internal Revenue Service to the effect that the terms of such Section
2(d) will not have any adverse effect on the tax-free nature of the
Distribution pursuant to Section 355 of the Internal Revenue Code of 1986, as
amended.
3. Preferred Stock. Any Preferred Stock not previously designated as
to series may be issued from time to time in one or more series pursuant to a
resolution or resolutions providing for such issue duly adopted by the Board
of Directors (authority to do so being hereby expressly vested in the Board of
Directors), and such resolution or resolutions shall also set forth the voting
powers, full or limited or none, of each such series of Preferred Stock and
shall fix the designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions of
each such series of Preferred Stock. The Board of Directors is authorized to
alter the designation, rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock and,
within the limits and restrictions stated in any resolution or resolutions of
the Board of Directors originally fixing the number of shares constituting any
series of Preferred Stock, to increase or decrease (but not below the number
of shares of any such series then outstanding) the number of shares of any
such series subsequent to the issue of shares of that series. Each share of
Preferred Stock issued by the Corporation, if reacquired by the Corporation
(whether by redemption, repurchase, conversion to Common Stock or other
means), shall upon such reacquisition resume the status of authorized and
unissued shares of Preferred Stock, undesignated as to series and available
for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
ARTICLE VII.
BYLAWS
In furtherance of and not in limitation of the powers conferred by
applicable law, the Board of Directors is expressly authorized to amend or
repeal the bylaws of the Corporation or adopt new bylaws of the Corporation by
the affirmative vote of at least two-thirds of the entire Board of Directors.
In addition to the right of the Board of Directors to amend or repeal the
bylaws of the Corporation and in furtherance and not in limitation of the
powers conferred by applicable law, the Corporation's shareholders may amend
or repeal the bylaws or adopt new bylaws by the affirmative vote of at least
two-thirds of the voting power of all shares of the Corporation's capital
stock entitled to vote voting together as a single class.
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ARTICLE VIII.
SHAREHOLDERS' MEETINGS
1. Call of Special Shareholders Meeting. Except as otherwise
required by law, the Corporation shall not be required to hold a special
meeting of shareholders of the Corporation unless (in addition to any other
requirements of law): (a) the meeting is called by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors; (b) the meeting is called by the Chairman of the Board of Directors
or (c) the meeting is called by the holders of not less than 30% of all votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting (taking into account the provision of Article VI(2)(c) in the
case of a special meeting for the election or removal of directors) by a
writing signed, dated and delivered to the Corporation's Secretary containing
one or more demands for the meeting and particularly describing the purpose or
purposes for which it is to be held. Only business within the purpose or
purposes described in the special meeting notice required by section 607.0705
of the FBCA may be conducted at a special shareholders' meeting.
2. Advance Notice of Shareholder-Proposed Business for Annual
Meeting. At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, or (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a shareholder. In addition to any other
applicable requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received by the
Secretary of the Corporation at the principal executive offices of the
Corporation, not less than sixty (60) days nor more than one hundred eighty
(180) days prior to the first anniversary of the date of the Corporation's
notice of annual meeting provided with respect to the previous year's annual
meeting, provided that if no annual meeting was held in the previous year or
the date of the annual meeting has been changed to be more than thirty (30)
calendar days earlier than the date contemplated by the previous year's notice
of annual meeting, such notice by the shareholder to be timely must be so
delivered or received not later than the close of business on the tenth (10th)
day following the date on which notice of the date of the annual meeting is
given to shareholders or made public, whichever first occurs. Such
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (b) the
name and record address of the shareholder proposing such business, (c) the
class and number of shares of capital stock of the Corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. The Chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the requirements of
this Section 2 of Article VIII, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
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ARTICLE IX.
WAIVER OF MONETARY DAMAGES
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of
care or any other duty as a director, except as provided by Section 607.0831
of the FBCA. If the FBCA is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the FBCA, as amended. If any of the provisions
of this Article IX (including any provision within a single sentence) are held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions are severable and shall remain
enforceable to the fullest extent permitted by law. No amendment to or repeal
of this Article IX shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
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ARTICLE X.
INDEMNIFICATION
1. 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 FBCA (including by
any amendment to the FBCA, 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 the Indemnitee's heirs, executors and
administrators; provided, that, except as provided in Paragraph (2) of this
Article X, with respect to Proceedings to enforce rights to indemnification,
the Corporation shall indemnify 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. The right to
indemnification conferred in this Article X 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, that, if the FBCA 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 Article X or otherwise.
2. Right of Indemnitee to Bring Suit. If a claim under Paragraph (1)
of this Article X 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 also be
paid 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
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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 Article X or otherwise shall be on
the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its shareholders) 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 FBCA, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its shareholders) that 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.
3. 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 Article X shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, these
Articles of Incorporation, the Corporation's By-Laws, agreement, vote of
shareholders or disinterested directors or otherwise.
4. 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 FBCA.
5. 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 Article X with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
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ARTICLE XI.
AMENDMENT
The Corporation hereby reserves the right from time to time to amend,
alter, change or repeal any provision contained in these Amended and Restated
Articles of Incorporation in any manner permitted by law and all rights and
powers conferred upon shareholders, directors and officers herein are granted
subject to this reservation. Except as provided in Section 2(d) of Article VI
(and any amendment to these Amended and Restated Articles of Incorporation
necessary to effect the type of Recapitalization described in such Section
2(d)), in addition to any vote otherwise required by law, any amendment,
alteration, change or repeal of any provision of Article V, Article VI (other
than Section 1 thereof), Article VII, Article VIII, Article XI or Article XII
of these Amended and Restated Articles of Incorporation shall require approval
of both (a) the Board of Directors by the affirmative vote of a majority of
the members then in office and (b) the Corporation's shareholders by the
affirmative vote of at least seventy five percent (75.0%) of the voting power
of all shares of the Corporation's capital stock then entitled to vote
generally in the election of directors, voting together as a single class
(taking into account the provisions of Article VI(2)(c)).
ARTICLE XII.
NO WRITTEN CONSENT
Any action required or permitted to be taken at any annual or special
meeting of shareholders of the Corporation may be taken only upon the vote of
shareholders at a duly convened meeting of shareholders in accordance with
these Amended and Restated Articles of Incorporation, and may not be taken by
written consent of shareholders.
IN ACCORDANCE with Sections 607.1003 and 607.1007 of the Florida
Business Corporation Act, these Amended and Restated Articles of Incorporation
were approved by the shareholders at a duly called meeting held on
____________, 1999. The number of votes cast in favor of the Amended and
Restated Articles of Incorporation by the shareholders was sufficient for its
approval.
IN WITNESS WHEREOF, the Secretary of the Corporation has executed
these Amended and Restated Articles of Incorporation as of ________________,
1999.
FLORIDA EAST COAST INDUSTRIES, INC.
By:
---------------------------------
Name:
-------------------------------
Title: Secretary
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CERTIFICATE OF REGISTERED AGENT
OF
FLORIDA EAST COAST INDUSTRIES, INC.
Having been named to accept service of process for FLORIDA EAST COAST
INDUSTRIES, INC. at the place designated in the foregoing Amended and Restated
Articles of Incorporation, _______________ agrees to act in this capacity and
is familiar with and accepts the obligations provided in Section 607.0505 of
the Florida Business Corporation Act.
Date: ______________, 1999 ________________________
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APPENDIX E
AMENDED AND RESTATED BY-LAWS OF
FLORIDA EAST COAST INDUSTRIES, INC.
ARTICLE I.
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation shall be in the City of St. Augustine, County of St. Johns, State of
Florida.
Section 1.2. Corporate Headquarters. The corporate headquarters of the
Corporation shall be in the City of St. Augustine, Florida.
Section 1.3. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Florida as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine.
ARTICLE II.
SHAREHOLDERS' MEETINGS
Section 2.1. Place of Meetings. Meetings of the shareholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Florida, as shall be designated
from time to time by the Board of Directors or the officer of the Corporation
calling the meeting as authorized by the Corporation's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. Each annual meeting of shareholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting.
Section 3.3. Special Meetings. Special meetings of the shareholders,
other than those required by statute, may be called only as provided, and for
the purposes specified, in the Articles of Incorporation.
Section 4.4. Notice of Meeting. Written notice of the place, date, and
time of all meetings of the shareholders shall be given not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each shareholder entitled to vote at such meeting, except as otherwise
provided herein or as required from time to time by the
<PAGE>
Florida Business Corporation Act, as hereafter amended and modified (the
"FBCA"), or the Articles of Incorporation. The notice of a special meeting
shall also state the purpose or purposes for which the meeting is called.
Section 2.5. Quorum; Adjournment. At any meeting of the shareholders,
the holders of a majority of all of the shares of the stock entitled to vote at
the meeting (or, with respect to a meeting for the purpose of electing or
removing a director, the holders of a majority of all shares of the class of
stock entitled to vote for the election or removal of such director), present in
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be required by law or the
Articles of Incorporation. If a quorum shall fail to attend any meeting, the
chairman of the meeting or the holders of a majority of the shares of stock
entitled to vote who are present, in person or by proxy, may adjourn the meeting
to another place, date, or time without notice other than announcement at the
meeting, until a quorum shall be present or represented.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 2.6. Proxies and Voting. At any meeting of the shareholders,
every shareholder entitled to vote may vote in person or by proxy authorized by
an instrument in writing or in such manner as may be prescribed by the FBCA
filed in accordance with the procedure established for the meeting.
Each shareholder shall have one vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided in the Articles of Incorporation or as
required by law. Each shareholder shall have the voting rights provided in the
Articles of Incorporation.
All voting, including on the election of directors but excepting where
otherwise provided herein or required by law or the Articles of Incorporation,
may be by a voice vote; provided, however, that upon demand therefor by a
shareholder entitled to vote or such shareholder's proxy, or at the discretion
of the chairperson of the meeting, a stock vote shall be taken. Every stock vote
shall be taken by ballots, each of which shall state the name of the shareholder
or proxy voting and such other information as may be required under the
procedure established for the meeting. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the Board of Directors or the
chairperson of the meeting.
All elections shall be performed in compliance with the Articles of
Incorporation.
Section 2.7. Inspectors. At every election of directors, the officer
presiding at the meeting shall appoint Inspectors of Election ("Inspectors of
Election") to serve at such meeting. Inspectors of Election need not be
shareholders and shall not be directors, officers or employees of the
Corporation or candidates for election as directors. It shall be the duty of
Inspectors of Election 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
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Inspector of Election, before he or she enters on his or her duties of office,
shall take and subscribe an oath, before a person authorized to take oaths in
the State of Florida, that he or she is qualified to be an Inspector of
Election, and that he or she 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 of Election 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 shareholder 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 shareholder of record be
not present in person, neither proxy shall be entitled to vote.
Section 2.8. Stock List. A complete list of shareholders entitled to
vote at any meeting of shareholders, arranged in alphabetical order for each
class of stock and showing the address of each such shareholder and the number
of shares registered in such shareholder's name, shall be open to the
examination of any such shareholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
shareholder who is present. The stock list shall presumptively determine the
identity of the shareholders entitled to vote at the meeting and the number of
shares held by each of them.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. General Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not directed or required by law, the Articles of Incorporation or these By-Laws
to be exercised or done by the shareholders.
Section 3.1.1. Number and Term of Office. The Board of Directors
shall consist of ten (10) members elected in accordance with the Articles of
Incorporation. The directors shall be elected at the annual meeting of the
stockholders by written ballot and each director so elected shall hold office
until his or her successor is elected and qualified or until his or her earlier
death, resignation or removal in accordance with the Articles of Incorporation.
Section 3.2. Vacancies. Any vacancy in the office of a director
created by the death, resignation or removal of a director elected by (or
appointed on behalf of) the shareholders of the Corporation may be filled as
provided in the Articles of Incorporation.
Section 3.3. Presiding Officer. At all meetings of the Board of
Directors, the Chairman of the Board of Directors (the "Chairman") or, in his or
her absence, the President or, in the
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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
(the "Secretary") or, in his or her absence, an Assistant Secretary or, in the
absence of both, any person appointed by the presiding officer, shall act as
secretary.
Section 3.4. Meetings. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Florida. The first
meeting of each newly-elected Board of Directors shall be held immediately
following the annual meeting of shareholders and no notice of such meeting shall
be necessary to be given the newly-elected directors in order legally to
constitute the meeting, provided a quorum shall be present. Regular meetings of
the Board of Directors may be held without notice at such time and at such place
as may from time to time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the Chairman of the Board,
the President or a majority of the directors then in office. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight (48) hours before the date of the
meeting, by telephone, telegram or facsimile transmission on twenty-four (24)
hours' notice, or on such shorter notice as the person or persons calling such
meeting may deem necessary or appropriate in the circumstances. Meetings may be
held at any time without notice if all the directors are present or if all those
not present waive such notice in accordance with Section 10.2 of these By-Laws.
Section 3.5. Actions by Directors by Means of Conference Telephone.
The Chairman or the President may call a meeting of the Board of Directors 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 3.6. Quorum and Vote. Except as may be otherwise specifically
provided by law, the Articles of Incorporation or these By-Laws, at all meetings
of the Board of Directors, a majority of the entire Board of Directors 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 of Directors. If a quorum shall
not be present at any meeting of the Board of Directors, 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 3.7. Action Without a Meeting. Unless otherwise provided by
the Articles of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 3.8. Compensation. (a) Each director of the Corporation shall
be entitled to receive transportation and other reasonable expenses incident to
his or her attendance at any meeting of the Board of Directors or of any
committee thereof, of which he or she may be a member, (b) Each non-management
director shall be entitled to an annual retainer of twenty
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thousand dollars ($20,000) payable quarterly in arrears for any quarter or part
thereof, which he or she 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 or she is in attendance at each Board
of Directors meeting. Each non-management director serving as a member of any
committee of the Board of Directors shall be entitled to a fee of one thousand
dollars ($1,000) per day for each day or portion thereof, in which he or she is
in attendance at each committee meeting on a day other than the day of a Board
of Directors meeting. Each non-management director shall further, upon first
being elected to the Board of Directors after May 19, 1998, be entitled to
participate in the Corporation's 1998 Stock Incentive Plan (as amended) as it
then exists and shall receive an initial grant of an option to purchase two
thousand (2,000) shares of Class A Common Stock ("Class A Common Stock"). Upon
reelection to the Board of Directors, each director is entitled to a grant of an
option to purchase one thousand (1,000) shares of Class A Common Stock, and (c)
Directors who are employees of the Corporation shall not be entitled to
compensation for serving on the Board of Directors or any committee of the
Board.
Section 3.9. Committees. The Board of Directors, from their number,
may elect an Executive Committee (the "Executive Committee") of not less than
three (3) and not more than five (5) members, which shall always include the
Chairman. The Board of Directors may appoint such other committees as from time
to time the Board of Directors deems necessary. The Chairman of the Board of
Directors shall call meetings of the Executive Committee when he or she deems it
necessary, and shall preside at the meetings of said Executive 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 of Directors shall be vested with such rights and
responsibilities as the Board of Directors may set forth in resolutions creating
same.
Section 3.10. 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 (Emeritus) 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,
but shall have none of the other privileges, or the rights or liabilities of a
director. Each Director (Emeritus) shall receive the
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compensation that Board of Directors members receive for each meeting of the
Board of Directors that they are invited to attend.
Section 3.11. Indemnification. The Corporation shall indemnify its
directors and officers as provided in the Articles of Incorporation.
Section 3.12. Nominations. Nominations of persons for election to the
Board of Directors may only be made as specified in the Articles of
Incorporation.
Section 3.13. Removal. Any director may be removed from office only as
provided in the Articles of Incorporation.
ARTICLE IV.
OFFICERS
Section 4.1. Officers. The officers of the Corporation 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 4.2. Election; Term of Office. The Board of Directors at its
first meeting held after each annual meeting of shareholders shall elect a
Chairman or a President, or both, a Secretary and a Treasurer (or a position
with the duties and responsibilities of a Treasurer), and may also elect at that
meeting or any other meeting, such other officers and agents as it shall deem
necessary or appropriate. Each officer of the Corporation shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors together with the powers and duties customarily exercised by
such officer, and each officer of the Corporation shall hold office until such
officer's successor is elected and qualified or until such officer's earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. The Board of Directors may at any time, with or without
cause, by the affirmative vote of a majority of directors then in office, remove
any officer.
Section 4.3. 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 of
Directors. Unless the Board of Directors shall otherwise direct, he or she shall
preside at all meetings of the Board of Directors and of the shareholders at
which he or she shall be present.
Section 4.4. 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 Corporation, and shall report to, and be
subject to the direction and supervision of, the Chairman. In the absence or
disability of the Chairman, he or she shall call meetings of the Board of
Directors
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when directed upon request of a majority of the Executive Committee. He or she
may, after approval or ratification by the Board of Directors, or by the
Chairman, appoint such officers and assistants (not elected or appointed by the
Board of Directors) as he or she may require, who shall perform such duties as
from time to time may be assigned to them by him or her, and after like
approval, he or she may at any time remove any officer or assistant so appointed
by him or her. In the absence of the Chairman, he or she shall preside at all
meetings of the Board of Directors and the shareholders at which he or she shall
be present. If the Board of Directors 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 4.5. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements 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 or she shall disburse the funds of the Corporation as may be ordered by the
Board of Directors , making proper vouchers for such disbursements, and shall
render to the President and the directors at regular meetings of the Board of
Directors, or whenever they require it, an account of all of his or her
transactions as Treasurer and of the financial condition of the Corporation. He
or she shall perform such other duties as are incident to the office or may from
time to time be imposed on him or her by law, these By-Laws or by the President
or Board of Directors. He or she shall give the Corporation a bond in a sum, and
with one or more sureties, satisfactory to the Board of Directors for the
faithful performance of the duties of his or her office and for the restoration
to the Corporation in the case of his or her death, resignation, retirement, or
removal from office of all books, papers, vouchers, money and other properties
of whatever kind in his or her possession or under his or her 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 of Directors.
Section 4.6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders 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 or she shall
give or cause to be given notice of all meetings of shareholders 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 or her by law, by these By-Laws, or by the President or the Board of
Directors. He or she shall keep in safe custody the seal of the Corporation. His
or her office may be combined with that of the Treasurer, but not if the office
of the Treasurer is combined with that of the Chief Accounting Officer.
Section 4.7. 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 of Directors may, by general or special
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resolution, provide. In the absence or disability of the Treasurer or Secretary,
the President shall designate an Assistant Treasurer or Assistant Secretary who
shall perform the duties of Treasurer or Secretary.
Section 4.8. 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.
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 Florida law.
Section 5.3. Record Date. In order that the Corporation may determine
the shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action. A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply to
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any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
Section 5.4. 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 5.5. 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 issued of the same tenor and for the same number of shares as
the one alleged to have been lost or destroyed, but always subject to such rules
and regulations as the Board of Directors may prescribe.
Section 5.6. 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
shareholders 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
shareholders 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.
ARTICLE VI.
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 Corporation 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)
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months immediately preceding his or her 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 Corporation,
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.
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 by 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 Corporation of bonds, notes, certificates, or
other evidence of indebtedness secured by a mortgage, lease or other instrument
duly executed by authorized officers of the Corporation 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 Corporation 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 him or herself), to cast the
votes which the Corporation may be entitled to cast as a shareholder 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 Corporation 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
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.
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 the 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.
ARTICLE X.
NOTICE
Section 10.1. Notice. Whenever written notice is required by law, the
Articles of Incorporation or these By-Laws, to be given to any director, member
of a committee or shareholder, such notice may be given by mail, addressed to
such director, member of a committee or shareholder, at such person's address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by facsimile transmission and such notice shall be deemed to be given at the
time of receipt thereof if given personally or at the time of transmission
thereof if given by facsimile transmission.
Section 10.2. 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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APPENDIX F
MASTER AGREEMENT
THIS MASTER AGREEMENT (the "Agreement") is made and entered into as of
this 26th day of October, 1999, by and among THE ST. JOE COMPANY, a Florida
corporation ("St. Joe"), and GRAN CENTRAL CORPORATION, a Florida corporation
("GCC").
WHEREAS pursuant to that certain Distribution and Recapitalization
Agreement of even date herewith by and between St. Joe and Florida East Coast
Industries, Inc. (FEC) (the "Distribution Agreement") and subject to all the
terms and conditions set forth in the Distribution Agreement, FEC intends to
effect a Recapitalization as described therein and St. Joe intends to effect a
Distribution as described therein ("Distribution"), and
WHEREAS GCC, a wholly owned subsidiary of FEC, and St. Joe (and certain
affiliates of each) intend to enter into certain real estate agreements ("Real
Estate Agreements" as defined in the Distribution Agreement), including this
Agreement each of which is to become effective only upon the Distribution Date,
as defined in the Distribution Agreement ("Distribution Date"), except for the
requirements set forth in Section 9.21 of this Agreement which are effective
upon execution of this Agreement.
WHEREAS GCC owns various parcels of real property located in the State
of Florida and more particularly described on Exhibit A attached hereto
(collectively the "GCC Properties"; individually, a "GCC Property").
WHEREAS St. Joe owns various partnership interests in and parcels of
real property in the State of Florida and more particularly described in Exhibit
B attached hereto (collectively, "St. Joe Properties"; individually, a "St. Joe
Property").
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WHEREAS GCC and St. Joe have entered into this Agreement for the
purpose of setting forth the terms and conditions under which, on or after the
Distribution Date; (a) GCC and St. Joe will jointly own and develop the GCC
Properties and the St. Joe Properties, (b) GCC and St. Joe may in the future
jointly own and develop certain other properties; and (c) St. Joe, or its
affiliates, will provide continuing management and development services to GCC
and to the other properties jointly owned by GCC and St. Joe pursuant to the
terms of this Agreement.
WHEREAS GCC and St. Joe intend to enter into separate, single asset
project partnership agreements for the purpose of owning and developing each
parcel of property to be jointly developed.
NOW, THEREFORE, in consideration of the foregoing premises, and the
mutual covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
Development of GCC and St. Joe Properties
1.1 GCC Properties. On the Effective Date (as hereinafter defined), GCC
and St. Joe shall form and cause their respective affiliates to form, a limited
partnership ("Project Partnership") under the terms and conditions of the
limited partnership agreement attached as Exhibit D hereto ("Project Partnership
Agreement") for each of the GCC Properties. Upon formation of such Project
Partnerships, GCC shall cause each GCC Property to be contributed to a Project
Partnership. Upon contribution of each GCC Property to a Project Partnership,
GCC shall receive a credit to its capital account in each Project Partnership in
an amount equal to the fair market value of the GCC Property
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contributed to that Project Partnership. The fair market value of such GCC
Property shall be determined by appraisal. Upon contribution of a GCC Property
to a Project Partnership, St. Joe shall contribute to such Project Partnership
cash in an amount equal to the fair market value of the GCC Property contributed
by GCC to such Project Partnership.
1.2 St. Joe Properties.
(a) On the Effective Date, GCC and St. Joe shall form and cause their
respective affiliates to form a Project Partnership pursuant to the Project
Partnership Agreement for each of the St. Joe Properties. Upon formation of such
Project Partnerships, subject to the provisions of Section 1.2(b) below, St. Joe
shall cause each St. Joe Property to be contributed to a Project Partnership.
Upon contribution of each St. Joe Property to a Project Partnership, St. Joe
shall receive a credit to its capital account in each Project Partnership in an
amount equal to the fair market value of the St. Joe Property contributed to
that Project Partnership. The fair market value of such property shall be
determined by appraisal. Upon contribution of a St. Joe Property to a Project
Partnership, GCC shall contribute to such Project Partnership, cash in an amount
equal to the fair market value of the St. Joe Property contributed by St. Joe to
such Project Partnership.
(b) It is the intention of the parties that St. Joe contributes to
Project Partnerships real property and/or partnership interests in real property
substantially equivalent in value to the fair market value of the GCC Properties
contributed by GCC to Project Partnerships. As of the date of this Agreement,
GCC has not performed sufficient due diligence to determine whether it desires
to enter into Project Partnerships with respect to the St. Joe Properties listed
on Exhibit B attached hereto - that is, 355
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Alhambra ("Alhambra") and Legacy Point ("Legacy"). In the event that GCC
determines that it does not desire to enter into a Project Partnership with
respect to either Alhambra or Legacy, or both, it shall within thirty (30) days
of the date of this Agreement, notify St. Joe in writing of such determination.
GCC's failure to notify St. Joe of its rejection of either Alhambra or Legacy
within such thirty-day period shall be deemed to be GCC's acceptance of such St.
Joe Properties. In the event that GCC rejects either Alhambra or Legacy, St. Joe
shall be obligated to present for consideration by GCC one or more substitute
properties (each a "Substitute Property") for such rejected St. Joe Property,
with at least one (1) Substitute Property being presented for GCC's
consideration prior to the Effective Date. In the event a Substitute Property is
proposed to and accepted by GCC, a Project Partnership shall be formed and the
Substitute Property shall be contributed to a Project Partnership as set forth
in Section 1.2(a). In the event that a Substitute Property is proposed to GCC
and rejected by GCC, St. Joe may elect to submit GCC's rejection decision to
arbitration pursuant to the provisions of Section 1.2(c) below. In the event
that the arbitrator(s) determines that GCC's rejection of such Substitute
Property was reasonable, St. Joe shall continue to be obligated to promptly
using all commercially reasonable efforts present Substitute Properties for
consideration by GCC. If on the other hand, the arbitrator(s) finds that GCC's
rejection of such Substitute Property was not reasonable, (i) St. Joe shall be
deemed to have satisfied its Property contribution obligation to the extent of
the fair market value of such Substitute Property and St. Joe will continue to
use commercially reasonable efforts to present additional Substitute Properties
until it has met its requirements in this Section 1.2(b), and (ii) GCC shall
elect within fifteen (15) days after the arbitrator(s) decision to either (a)
enter into a Project Partnership with St. Joe on the Effective Date to jointly
own and
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develop the Substitute Property or (b) pass on the opportunity to jointly own
and develop with St. Joe the Substitute Property, in which latter event St. Joe
shall be free to take whatever course of action it deems appropriate with
respect to such Substitute Property, including proceeding to develop the
Substitute Property in a manner that is competitive with any other Project
Partnership. In all events, St. Joe's obligation to present Substitute
Properties for consideration by GCC shall terminate three (3) years after the
Effective Date.
(c) In the event St. Joe challenges the reasonableness of the rejection
by GCC of a Substitute Property, such matter shall be submitted to and settled
by arbitration provided and conducted in accordance with the expedited
procedures in the Commercial 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(s) who shall be selected jointly by the parties. If the
parties cannot agree to an arbitrator(s) within 15 days after either party
demands arbitration, a panel of three arbitrators shall be selected in
accordance with the Commercial Rules of the American Arbitration Association.
Meetings with the arbitrator(s) shall be held in Jacksonville, Florida. The
decision of the arbitrator(s) shall be binding upon the parties and shall not be
subject to appeal. Each party shall bear its own expenses in connection with any
arbitration proceeding hereunder. In making his, her or its decision on whether
GCC was reasonable in rejecting a Substitute Property, the arbitrator or
arbitrators shall consider as controlling factors regarding the issue of
reasonableness whether the Substitute Property has present value and development
potential and yield comparable to that of the GCC Properties.
(d) In the event GCC rejects Alhambra or Legacy, or both, and
Substitute Properties acceptable to GCC and sufficient to fulfill St. Joe's
contribution obligation
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have not been identified by the Effective Date, GCC nonetheless shall be
required to contribute on the Effective Date the GCC Properties to Project
Partnerships pursuant to Section 1.1 and St. Joe shall be required to contribute
on the Effective Date St. Joe Properties and Substitute Properties which have
been accepted by GCC to Project Partnership pursuant to Section 1.2(b).
1.3 Additional Partner Contributions. If, at the time of contribution
of a parcel to a Project Partnership, there are ongoing improvements that have
been and are being made to such parcel, the party which did not contribute the
parcel shall, in addition to its obligation to contribute cash in an amount
equal to the value of the parcel, be obligated to contribute cash equal to fifty
percent (50%) of the investment by the other party in such improvements prior to
the contribution of such parcel to the Project Partnership. If, at the time of
contribution of a parcel to a Project Partnership, there exists recourse debt
associated with ongoing improvements that have been or are being made to such
parcel, the partner which did not contribute the parcel shall assume the
obligation for its pro-rata share of such debt and any guarantees of such debt.
1.4 Standstill. GCC and St. Joe agree to hold title to the GCC
Properties and the St. Joe Properties, respectively, subject to this Agreement.
Until such time as each GCC Property and St. Joe Property has been contributed
to a Project Partnership or released from this Agreement as a result of GCC's
rejection thereof pursuant to Section 1.2(b), the party owning such property
shall not sell, transfer, pledge, encumber or otherwise dispose of such property
(or any interest therein) without the prior written consent of the other party
to this Agreement.
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ARTICLE 2
Future Development
2.1 Intentions of the Parties. St. Joe is currently evaluating the
acquisition and development of the Coral Cables Property described in Exhibit C
attached hereto ("Coral Gables Project"). GCC is currently negotiating through
St. Joe pursuant to St. Joe's responsibilities under the Management Agreement
dated as of January 1, 1998 between St. Joe and GCC, the acquisition of
SouthPark II Property described in Exhibit C attached hereto with estimated
entitlements to build 1.8 million square feet of office space (the "SouthPark II
Project"). It is the expectation of GCC and St. Joe that the present value,
development potential and yield of the Coral Gables Project and the SouthPark II
Project are of substantially equal value. GCC and St. Joe intend to create a
relationship whereby each entity, through affiliates or subsidiaries, will be a
fifty percent partner in development projects that will be of substantially
equal value presently contemplated to be the Coral Gables Project and the
SouthPark II Project. It is presently unknown whether (a) St. Joe will acquire
the Coral Gables Property or if it does, whether GCC will, after conducting due
diligence, desire to be a 50% partner in the Coral Gables Project and (b)
whether GCC will consummate the acquisition of the SouthPark II Property. St.
Joe and GCC acknowledge that their respective decisions about acquisitions by
St. Joe of the Coral Gables property and GCC's investment therein and by GCC
about the SouthPark II Property will not happen at the same time and that the
acquisition of the SouthPark II Property will likely happen first. The parties
intend to create by the provisions herein a relationship that will facilitate
the development of the property acquired while affording the parties the
opportunity to identify, evaluate and decide upon opportunities including
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but not limited to the Coral Gables Project which have a substantially
equivalent value to the SouthPark II Project
2.2 SouthPark II.
(a) St. Joe will continue to negotiate, on GCC's behalf, a purchase and
sale agreement for the SouthPark II Property. Subject to the execution and
consummation of an acceptable purchase and sale agreement, GCC or an affiliated
limited liability company ("GCC LLC") to be established for the purpose of
utilizing proceeds from a sale of other property pursuant to section 1031(d) of
the Internal Revenue Code ("IRC"), shall purchase the SouthPark II Property. If
GCC LLC purchases the SouthPark II Property then St. Joe will have the right to
acquire an interest in GCC LLC corresponding to a right to participate in the
development of fifty percent (50%) of the entitled floor area ratio ("FAR"),
currently estimated at 900,000 square feet. If St. Joe agrees to acquire such
interest then it shall contribute to the capital of GCC LLC an amount equal to
fifty percent (50%) of the acquisition and closing costs for the SouthPark II
Property, and GCC and St. Joe will enter into a LLC agreement with the same
terms and conditions as a Project Partnership Agreement.
2.3 St. Joe's Obligations
(a) St. Joe shall continue its review and determinations with
respect to the Coral Gables Property. If St. Joe acquires the Coral Gables
Property it will offer GCC a fifty percent (50%) partnership in the Coral Gables
Project, which GCC in the exercise of commercially reasonable judgment may
accept or reject.
During the period commencing on the Effective Date and ending
three (3) years thereafter (the "Joint Development Period"), if: (i) St. Joe
does not acquire the Coral Gables Property or (ii) if St. Joe acquires the Coral
Gables Property and GCC does
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not accept the Coral Gables Project; or (iii) St. Joe acquires the Coral Cables
Property and GCC invests in the Coral Gables Project but GCC, in its reasonable
judgment determines that the Coral Gables Property is not equivalent in total
value to the SouthPark II Property, but only partially equivalent in value, then
St. Joe shall use its commercially reasonable efforts to present to GCC other
opportunities to participate in the ownership and development of land now owned
or hereafter acquired by St. Joe the ("Equivalent Development Opportunity")
substantially equivalent in value, in the aggregate, to the then fair market
value of the SouthPark II Property (as if unimproved) and at least equivalent in
development potential and yield to the SouthPark II Project. Upon GCC accepting
Equivalent Development Opportunities as described herein then GCC and St. Joe
will contribute the remaining SouthPark II property and the Equivalent
Development Opportunities owned by St. Joe, and will execute a Project
Partnership Agreement .
In the event that by the end of the Joint Development Period,
GCC has not accepted Equivalent Development Opportunities presented by St. Joe
the land value of which is, in the aggregate, substantially equivalent to the
fair market value for the SouthPark II Property; including its development
potential and yield, then in such event, at GCC's election upon written notice
to St. Joe within sixty (60) days of the end of the Joint Development Period,
St. Joe's right to participate in the ownership and development of any SouthPark
II Property in excess of buildings totaling fifty percent (50%) of the entitled
FAR square feet shall terminate at GCC's option
(b) GCC shall be commercially reasonable in its evaluation of
any Equivalent Development Opportunity presented to it by St. Joe. In the event
GCC rejects any such Equivalent Development Opportunity, St. Joe shall have the
right to challenge
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such rejection and have the matter submitted to arbitration in accordance with
the principles and procedures set forth in Section 1.2(b) and (c) above, except
that the comparable property shall be the SouthPark II Property. In the event
the arbitrator(s) determine that GCC's rejection of a Equivalent Development
Opportunity was commercially reasonable, St. Joe shall continue to use
commercially reasonable efforts to present Equivalent Development Opportunities
to GCC. In the event the arbitrator(s) finds that GCC's rejection was not
commercially reasonable, (i) St. Joe shall be deemed to have satisfied its
obligation to present Equivalent Development Opportunities to the extent of the
fair market value of the land comprising such Equivalent Development Opportunity
and St. Joe will continue to use commercially reasonable efforts to present
additional Substitute Properties until it has met its requirements in this
Section 2.3(b), and (ii) GCC shall elect within fifteen (15) days after the
arbitrator(s) decision to either (a) enter into a Project Partnership with St.
Joe to jointly own and develop the Equivalent Development Opportunity or (b)
pass on the opportunity to jointly own and develop with St. Joe the Equivalent
Development Opportunity, in which latter event St. Joe shall be free to take
whatever course of action it deems appropriate with respect such Equivalent
Development Opportunity, including proceeding to develop same in a manner that
is competitive with any other Project Partnership.
(c) In the event that St. Joe presents to GCC one or more
Equivalent Development Opportunities and GCC accepts any such Equivalent
Development Opportunities, then in such event St. Joe and GCC shall enter into a
Project Partnership with respect such Equivalent Development Opportunity. Upon
formation of such Project Partnership, St. Joe shall receive a credit to its
capital account in such Project Partnership an amount equal to the fair market
value of such property and GCC shall contribute to
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such Project Partnership cash in an amount equal to the fair market value of
such property. The fair market value of any property comprising a Equivalent
Development Opportunity shall be determined by appraisal, unless such property
is being purchased in order to proceed with such Development Opportunity in
which event the fair market value shall be the acquisition cost.
(d) The GCC LLC, and any Project Partnership entered into
pursuant to this Section 2.3,shall each enter into a Development Management
Agreement and Property Management Agreement with St. Joe, or its affiliates, to
provide development management services at four percent (4%) and property
management services at two and a one-half percent (2 1/2%) for a period of three
(3) years from the Effective Date and, thereafter, at the then market rates
unless different rates are mutually agreed to by GCC and St. Joe in writing.
4. Future Development of Additional GCC Property. In addition to the
GCC Property, GCC owns additional parcels of real property more particularly
described on Exhibit E attached hereto (the "Additional GCC Properties") which
GCC and St. Joe have identified as potential joint development opportunities.
(a) During the three (3) years from the Effective Date, it is the
intention of St. Joe to identify and acquire additional properties for
development which are not currently owned by St. Joe (the "Additional St. Joe
Properties") and to offer GCC a right to participate in the ownership and
development of the Additional St. Joe Properties (a "St. Joe Development
Opportunity"). In the event that GCC determines, in its sole discretion, to
participate in a St. Joe Development Opportunity, then in such event GCC shall,
in return, offer St. Joe a right to participate in the ownership and development
of certain of the Additional GCC Properties corresponding in terms of value to
the value of
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the St. Joe Opportunity. St. Joe and GCC shall at the time mutually agree as to
which of the Additional GCC Properties shall be jointly owned and developed.
With respect to any joint ownership and development of a Project under this
Section 4(a), and unless the parties otherwise agree, GCC and St. Joe, or its
affiliates, shall have equal ownership interests therein. GCC and St. Joe shall
enter into a Project Partnership Agreement, and the Project Partnership shall
enter into a Development Management Agreement and a Property Management
Agreement with St. Joe, or its affiliates, to provide development management
services and property management services at the rates provided in Section
2.3(d) above. The right to participate set forth in this paragraph shall not be
applicable to any Additional GCC Property or portion thereof which from and
after the date hereof, GCC has sold, contracted to sell a controlling interest
or contracted to develop, subject to St. Joe's rights to act as a development
manager under the Development Management Services Agreement that will commence
on the Effective Date pursuant to Section 6.1 below and to St. Joe's rights
under 2.4(b) below.
(b) In the event that, during the three-year period from the Effective
Date, GCC determines to seek third-party cash equity investment in one or more
of the Additional GCC Properties (a "GCC Development Investment Opportunity"),
GCC shall deliver a notice (the "Development Notice") to St. Joe notifying it of
the GCC Development Investment Opportunity and identifying all of the material
terms of, and facts relating to, the investment sought by GCC in the GCC
Development Investment Opportunity. For a period of thirty (30) days after
receipt of such Development Notice (the "Development Notice Period"), St. Joe
shall have the right to invest in such GCC Development Investment Opportunity
upon the terms and conditions as set forth in the Development Notice. If St. Joe
does not exercise the right granted hereunder with respect
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to a particular GCC Development Investment Opportunity, GCC will have the right
to solicit and obtain third party equity investment on such terms as GCC and
such third party investor may agree on, provided that GCC shall not contract
with such third party investor on terms that are materially more advantageous to
such third party investor than the terms offered to St. Joe. In addition, if GCC
has not actively engaged in the development of such GCC Development Investment
Opportunity within one year after St. Joe fails to exercise its right to
participate or has not within such year entered into an agreement with a third
party investor for such GCC Development Investment Opportunity and GCC, in its
sole discretion, intends to pursue development of such GCC Development
Investment Opportunity and decides to again seek third-party cash equity
investment, then GCC shall be obligated to present such GCC Development
Investment Opportunity to St. Joe to participate in again in accordance with the
aforesaid thirty-day notice procedure. For the purpose of this section "actively
engaged in development" shall mean the expenditure or commitment for expenditure
of more than Two Hundred Fifty Thousand Dollars ($250,000) during such one-year
period. With respect to any GCC Development Investment Opportunity in which St.
Joe elects to participate under this Section 2.1(b), GCC and St. Joe shall enter
into a Project Partnership Agreement as modified by the terms and conditions of
the GCC Development Investment Opportunity and the Project Partnership shall
enter into a Development Management Agreement and a Property Management
Agreement with St. Joe, or its affiliates, to provide development management
services and property management services at market based rates.
(c) Notwithstanding the rights granted under this Section 2.4(b), those
rights shall not apply to proposals or transactions that include other material
considerations or
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material benefits beyond the investment of cash in a GCC Development Investment
Opportunity.
(d) If St. Joe has declined to participate in greater than three GCC
Development Investment Opportunities that each have a total development budget
of at least Seven Million Five Hundred Thousand Dollars ($7,500,000) and GCC is
successful in attracting third party cash equity investment in such GCC
Development Investment Opportunities in accordance with the provisions set forth
herein, then GCC may terminate the right of St. Joe to invest as provided in (b)
above and GCC shall have no further obligations to St. Joe under this right to
invest. In addition, St. Joe shall have no right to invest with respect to the
Additional GCC Properties which GCC has sold or contracted to sell.
ARTICLE 3
Assignment and Institutional Debt
3.1 By St. Joe. St. Joe shall not have the right to assign or transfer
its rights or obligations under this Agreement or any interest therein without
obtaining the prior written consent of GCC, which consent may be arbitrarily
withheld for any reason or no reason at all. Notwithstanding the foregoing, St.
Joe shall be permitted to assign its rights and obligations under this
Agreement, without the consent of GCC, to affiliates and subsidiaries that are
wholly-owned and controlled by St. Joe; provided, however, the assignor shall,
as precondition of any such assignment, unconditionally guarantee the assignee's
performance of the assignor's obligations hereunder.
3.2 By GCC. GCC shall not have the right to assign or transfer its
rights or obligations under this Agreement or any interest therein, without
obtaining the prior written consent of St. Joe, which consent may be arbitrarily
withheld for any reason or no
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reason at all. Notwithstanding the foregoing, GCC shall be permitted to assign
its rights and obligations under this Agreement, without the consent of any
other party to this Agreement, to affiliates and/or subsidiaries thereof that
are wholly-owned and controlled by GCC; provided, however, the assignor shall,
as precondition of any such assignment, unconditionally guarantee the assignee's
performance of the assignor's obligations hereunder.
3.3 Institutional Equity and Debt. GCC and St. Joe agree that the other
party may transfer to an institutional investor up to fifty percent (50%) of its
equity position in any development occurring on any of the properties they
decide to jointly own and develop pursuant to this Agreement provided that no
change in control in the transferring party occurs. GCC and St. Joe also agree
that any proposed joint development described herein may include an amount of
debt as may be agreed to from time to time by GCC and St. Joe.
ARTICLE 4
Asset Management
4.1 On the Effective Date, GCC and St. Joe shall execute and deliver
the Amended and Restated Asset Management Agreement attached as Exhibit F
hereto.
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ARTICLE 5
Property Management
5.1 On the Effective Date, GCC and St. Joe shall execute and deliver
the Property Management and Leasing Agreement attached as Exhibit G hereto.
ARTICLE 6
Development Management
6.1 On the Effective Date, GCC and St. Joe shall execute and deliver to
Development Management Services Agreement attached as Exhibit H hereto.
ARTICLE 7
Hialeah Rail Yard
7.1 On the Effective Date, St. Joe shall, and GCC shall cause Florida
East Coast Railway Company to, execute and deliver the Florida East Coast
Railway Agreement attached as Exhibit I hereto.
ARTICLE 8
Consideration
8.1 Consideration. In consideration of the execution and delivery of
the Amended and Restated Asset Management Agreement, the Property Management and
Leasing Agreement and the Development Management Services Agreement, St. Joe
shall pay to GCC the sum of Six Million Dollars ($6,000,000) in three (3) equal
annual installments, the first installment being due and payable on the
Effective Date and the next two installments on the first and second anniversary
of the Effective Date, respectively. In the event St. Joe fails to pay any
installment when due, and such failure continues for a period of thirty (30)
days after written notice to such effect from GCC to St. Joe, GCC shall, in
addition to its remedies at law or in equity, have the right to offset
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against fees next becoming due to St. Joe, or its affiliates, under the Property
Management and Leasing Agreement referred to in Section 5.1 hereof and the
Development Management Services Agreement referred to in Section 6.1 hereof.
ARTICLE 9
Miscellaneous
9.1 Entire Agreement. This Agreement, together with the Exhibits
attached hereto, all of which are incorporated herein by reference, represents
the entire understanding and agreement between the parties with respect to the
subject matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties which are merged into
this Agreement.
9.2 Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
9.3 Severability. If any provision of this Agreement or any other
agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be inapplicable
and deemed omitted to the extent that it is contrary, prohibited or invalid, but
the remainder hereof shall not be invalidated thereby and shall be given full
force and effect so far as possible. If any provision of this Agreement may be
construed in two or more ways, one of which would render the provision invalid
or otherwise voidable or unenforceable and another of which would render the
provision valid and enforceable, such provision shall have the meaning which
renders it valid and enforceable.
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9.4 Binding Effect. All of the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by the
parties and their respective legal representatives, successors and permitted
assigns, whether so expressed or not.
9.5 Third Parties. Unless expressly stated herein to the contrary,
nothing in this Agreement, whether express or implied, is intended to confer any
rights or remedies under or by reason of this Agreement on any persons other
than the parties hereto and their respective legal representatives, successors
and permitted assigns. Nothing in this Agreement is intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.
9.6 Headings. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part of the Agreement
and shall not limit or otherwise affect in any way the meaning or interpretation
of this Agreement.
9.7 No Construction Against Drafter. The parties acknowledge that this
is a negotiated agreement, and that in no event shall the terms hereof be
construed against either party on the basis that such party, or its counsel,
drafted this Agreement.
9.8 Brokers. Each of the parties represents and warrants that such
party has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement, and, insofar as such party knows,
no broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions. The parties each agree to indemnify
and hold harmless one another against any loss, liability, damage, cost, claim
or expense incurred by reason of any brokerage commission or finder's fee
alleged to be payable because of any act, omission or statement of the
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indemnifying party. The provisions of this Section shall survive each conveyance
of a parcel or assignment of partnership interests, as applicable, and the
delivery of the deeds or assignments in connection therewith.
9.9 Further Assurances. The parties hereby agree from time to time to
execute and deliver such further and other transfers, assignments and documents
and do all matters and things which may be convenient or necessary to more
effectively and completely carry out the intentions of this Agreement.
9.10 Outside Businesses. Except as expressly prohibited by the terms of
this Agreement, nothing contained in this Agreement shall be construed to
restrict or prevent, in any manner, any party or any party's representatives or
principals from engaging in any other businesses or investments.
9.11 Recordation. The parties agree not to record this Agreement or any
memorandum or other evidence hereof in the public records of any jurisdiction.
Any attempt to record this Agreement or any evidence hereof shall be deemed to
be null and void and shall be deemed to be a Default under this Agreement.
9.12 Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida.
9.13 Enforcement Costs. If any civil action, arbitration or other legal
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the parties shall be responsible for their own
costs and expenses including, without limitation, fees of experts and attorneys.
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9.14 Jurisdiction and Venue. Any civil action or legal proceeding
arising out of or relating to this Agreement shall be brought in the courts of
record of the State of Florida in St. Johns County or the United States District
Court, Middle District of Florida. Each party consents to the jurisdiction of
such court in any such civil action or legal proceeding in such court. Service
of any court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws,
rules of procedure or local rules.
9.15 JURY WAIVER. IN ANY CIVIL ACTION, COUNTERCLAIM, OR PROCEEDING,
WHETHER AT LAW OR IN EQUITY, WHICH ARISES OUT OF, CONCERNS, OR RELATES TO THIS
AGREEMENT, ANY AND ALL TRANSACTIONS CONTEMPLATED HEREUNDER, THE PERFORMANCE
HEREOF, OR THE RELATIONSHIP CREATED HEREBY, WHETHER SOUNDING IN CONTRACT, TORT,
STRICT LIABILITY, OR OTHERWISE, TRIAL SHALL BE TO A COURT OF COMPETENT
JURISDICTION AND NOT TO A JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OF A
COPY OF THIS AGREEMENT WITH ANY COURT, AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO OF THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. NEITHER PARTY HAS
MADE OR RELIED UPON ANY ORAL REPRESENTATIONS TO OR BY ANY OTHER PARTY REGARDING
THE ENFORCEABILITY OF THIS PROVISION. EACH PARTY HAS READ AND UNDERSTANDS THE
EFFECT OF THIS JURY WAIVER PROVISION.
9.16 ADVICE OF COUNSEL. EACH PARTY ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY ITS OWN COUNSEL WITH RESPECT TO THE
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TRANSACTIONS GOVERNED BY THIS AGREEMENT, AND SPECIFICALLY WITH RESPECT TO THE
TERMS OF SECTION 4.15, WHICH CONCERNS THE WAIVER OF EACH PARTY'S RIGHT TO TRIAL
BY JURY.
9.17 Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including
electronic transmission) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, electronically
transmitted or mailed (airmail if international) by registered or certified mail
(postage prepaid), return receipt requested, addressed to:
ST. JOE:
The St. Joe Company
c/o St. Joe Commercial, Inc.
David D. Fitch, President
Suite 400 du Pont Center
1650 Prudential Drive
Jacksonville, Florida 32207
Telephone: 904/396-6600
Telecopy: 904/396-4042
with a copy to:
Robert M. Rhodes, Esq.
Executive Vice President and General Counsel
The St. Joe Company
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
GCC:
Robert W. Anestis, President
Gran Central Corporation
One Malaga Street, P.O. Drawer 1048
St. Augustine, Florida 32085-1048
Telephone: 904/826-2202
Telecopy: 904/826-2376
with a copy to:
Heidi J. Eddins, Esq.
Secretary and General Counsel
Gran Central Corporation
One Malaga Street, P.O. Drawer 1048
St. Augustine, Florida 32085-1048
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or such other addresses as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date of transmission with
confirmed answer back if by electronic transmission; and (c) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
9.18 Confidentiality. No party hereto, without the written approval of
the other party, during the period of time this Agreement is in effect or
thereafter divulge to any person not a party hereto, other than its attorneys,
accountants, employees and professional advisers, any information concerning the
content of this Agreement, unless (i) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (ii) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval, or (iii) furnishing of such information is required by law;
provided, however, that in the event of disclosure pursuant to (ii) or (iii)
hereof, such disclosing party shall agree to provide prompt written notice to
the other parties hereto prior to disclosure, if practicable, and to disclose
only that portion of the confidential information which is legally required or
otherwise necessary.
9.19 Counterparts. This Agreement, and any document or instrument
entered into, given or made pursuant to this Agreement or authorized hereby, and
any amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appear on a single document. Any signature page of this Agreement or
of such amendment, supplement,
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document or instrument may be detached from any counterpart without impairing
the legal effect of any signatures thereof, and may be attached to another
counterpart identical in form thereto but having attached to it one or more
additional signatures pages.
9.20 Survival. The provisions of this Agreement shall survive each
conveyance of a parcel to a Project Partnership.
9.21 Effective Date. Pursuant to that certain Distribution and
Recapitalization Agreement (the "Distribution Agreement") of even date herewith
by and between St. Joe and Florida East Coast Industries, Inc. ("FEC"), of which
GCC is a wholly owned subsidiary, and subject to all the terms and conditions
set forth in the Distribution Agreement, FEC intends to effect a
recapitalization as described therein and St. Joe intends to effect a
distribution as described therein (the "Distribution"). It is the intention of
GCC and St. Joe and it is hereby agreed that, except solely for the provisions
of Section 1.2(b), (c) and (d) regarding due diligence by GCC and the
profffering of Substitute Property by St. Joe, this Agreement shall not become
legally effective unless and until the Distribution Date shall occur, as that
term is described in the Distribution Agreement (herein the "Effective Date").
If for any reason whatsoever the Distribution Agreement is terminated or the
Distribution does not occur by August 1, 2000, this Agreement including all
Exhibits hereto shall be of no further force and effect and neither GCC
(including affiliates) nor St. Joe (including affiliates) shall have any further
rights or obligations hereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WITNESS: GRAN CENTRAL:
GRAN CENTRAL CORPORATION,
/s/ Heidi Eddins a Florida corporation
- -------------------------------
Name: Heidi Eddins By: /s/ Robert W. Anestis
----------------------------------
/s/ Lawrence Paine Name: Robert W. Anestis
- ------------------------------- Title: Chairman
Name: Lawrence Paine
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
24
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THE ST. JOE COMPANY, a Florida
/s/ Lawrence Paine corporation
- -------------------------------
Name: Lawrence Paine By: /s/ Peter S. Rummell
----------------------------------
/s/ Joan Tannous Name: Peter S. Rummell
- ------------------------------- Title: Chairman
Name: Joan Tannous
25
<PAGE>
APPENDIX G
October 26, 1999
Special Committee of the Board of Directors
Florida East Coast Industries Inc.
One Malaga Street
St. Augustine, Florida 32084
Dear Sirs:
You have requested our opinion as to the effect from a financial
point of view, of the proposed separation of Florida East Coast Industries
("FECI") from the St. Joe Company ("Joe"), the present owner of approximately
54% of the outstanding common stock of FECI. The separation is to be
accomplished by means of (i) a recapitalization of FECI whereby (a) all of the
shares of FECI common stock owned by Joe will be exchanged for an equal number
of shares of FECI Class B common stock, which new class will be entitled to
elect 80% of the members of the Board of Directors of FECI and in all other
respects be identical to the FECI Class A common stock and (b) all other
shareholders of FECI will retain all their shares of FECI common stock, which
will be re-designated as Class A common stock and shall be entitled to elect
20% of the members of the Board of Directors of FECI and (c) Amended and
Restated Articles of Incorporation and Bylaws of FECI will be adopted (the
"Recapitalization") and (ii) the distribution by Joe to its shareholders of
the shares of Class B common stock of FECI that Joe will receive in the
Recapitalization (the "Distribution"). The Recapitalization and Distribution
are to be accomplished pursuant to the terms of a Distribution and
Recapitalization Agreement between FECI and Joe and certain related agreements
and documents referred to below.
In arriving at our opinion, we have reviewed the drafts of the
following agreements (each of these drafts were in the form distributed on
October 22, 1999 to the Special Committee of the Board of FECI): The
Distribution and Recapitalization Agreement between FECI and Joe including the
Exhibits thereto (the "Distribution Agreement)", the Master Agreement between
Joe and GranCentral Corporation ("GCC"), a wholly-owned subsidiary of "FECI"
(the "Master Agreement"), the Limited Partnership Agreement between Joe and
GCC (the "Limited Partnership Agreement"), the Amended and Restated Asset
Management Agreement (the "Asset Management Agreement"), the Property
Management and Leasing Agreement between GCC and Joe (the "Property Management
and Leasing Agreement"), the Development Services Agreement between Joe and
GCC (the "Development Services Agreement") and the Florida East Coast Railway
Agreement between Florida East Coast Railway Company, a wholly-owned
subsidiary of FECI and Joe (the "Florida East Coast Railway Agreement"). In
addition we have reviewed financial and other information that was publicly
available or furnished to us by FECI and GCC, including information provided
during discussions with management of FECI and GCC. The Master Agreement, the
Limited Partnership Agreement, the Property Management and Leasing Agreement,
the Development Services Agreement and the Florida East Coast Railway
Agreement are hereinafter referred to collectively as the Real Estate
Agreements. In addition, we have conducted such financial studies, analyses
and investigations as we deemed appropriate for purposes of this opinion.
<PAGE>
Special Committee of the Board of Directors
Florida East Coast Industries Inc.
Page 2 October 26, 1999
In rendering our opinion, we have relied upon and assumed the accuracy
of all of the financial and other information that was available to us from
public sources, that was provided to us by FECI, GCC or its representatives or
that was otherwise reviewed by us. Insofar as the Real Estate Agreements are
concerned, we are not experts in real estate management or development nor have
we participated in the negotiations among FECI, GCC and Joe relating to the Real
Estate Agreements. Consequently, we are expressing no opinion as to the effect
of the Real Estate Agreements, individually or as a whole, on any stockholders
of FECI. We understand that FECI has consulted other advisors with respect to
determining an appropriate course of action regarding FECI's real estate related
businesses. We have not assumed any responsibility for making an independent
evaluation of any assets or liabilities of FECI or for making any independent
verification of any information reviewed by us. We understand that the
Recapitalization and Distribution will be conditioned upon receiving a ruling
from the Internal Revenue Service to the effect that the Distribution will be
tax-free to Joe and the holders of Joe common stock receiving Class B common
stock. We have also assumed that the Recapitalization and Distribution will be
completed in accordance with the terms of the above-referenced agreements
(including the exhibits thereto).
Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us
as of the date of this letter. It should be understood that, although
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm this opinion. We are expressing no opinion
herein as to the prices at which the FECI Class A common stock and Class B
common stock will actually trade at any time. Our opinion does not address the
merits of the Recapitalization and Distribution nor does it address the
Board's decision to proceed with the Recapitalization. Our opinion does not
constitute a recommendation to any shareholder as to how such shareholder
should vote on the proposed Recapitalization.
Donaldson, Lufkin & Jenrette Securities Corporation as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant,
we are of the opinion that the Recapitalization and the Distribution, taken as
a whole, are fair from a financial point of view to the shareholders of FECI
other than Joe.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
APPENDIX H
FLORIDA EAST COAST INDUSTRIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD FOR THE
[ ] SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints R. W. Anestis, R. F. MacSwain and R. H. Nazarian
and each of them Proxies with power of substitution to vote all shares of stock
of Florida East Coast Industries, Inc., which the undersigned is entitled to
vote at the Special Meeting of Shareholders of Florida East Coast Industries,
Inc., to be held in [ ], on [ ], at [ ], and at any adjournment or adjournments
thereof, with discretionary authority, as provided in the Proxy Statement.
The shares covered by this proxy will be voted in accordance with the choices
made. When no choice is made, this proxy will be voted for Proposals 1 and 2.
1. Approval of the Plan of Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approval of the Amended Charter.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Recapitalization and the Distribution will not be implemented unless both
the Plan of Merger and the Amended Charter are approved.
Please sign exactly as name appears. If stock is held in name of joint holders,
each should sign. If you are signing as a trustee, executor, etc., please so
indicate.
DATED: ,
----------------------------- ---
-----------------------------------------
SIGNATURE
-----------------------------------------
SIGNATURE IF HELD JOINTLY
PLEASE MARK, SIGN, DATE AND MAIL
THIS CARD PROMPTLY IN THE POSTAGE
PAID RETURN ENVELOPE PROVIDED.
