<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Florida East Coast Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
FLORIDA EAST COAST INDUSTRIES, INC.
ONE MALAGA STREET
ST. AUGUSTINE, FL 32084
April 26, 1999
Dear Florida East Coast Industries, Inc. Shareholder:
You are cordially invited to our Annual Shareholders' Meeting on May 19,
1999 at 10:30 A.M. The meeting will be held in the Flagler Ballroom at Flagler
College, 74 King Street, St. Augustine, Florida. Historic St. Augustine is the
location of the Company's headquarters.
I believe that the Annual Meeting provides an excellent opportunity for
shareholders to become acquainted with FECI and its Directors and officers,
particularly the new senior management team of which I am a part.
Whether or not you plan to attend, it is important that you vote your proxy
promptly in accordance with the voting instructions on the enclosed card.
Sincerely,
Robert W. Anestis
Chairman, President and
Chief Executive Officer
<PAGE> 3
FLORIDA EAST COAST INDUSTRIES, INC.
ONE MALAGA STREET
ST. AUGUSTINE, FL 32084
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1999
---------------------
The Annual Meeting of the Shareholders of Florida East Coast Industries,
Inc. ("Industries" or the "Company") will be held in the Flagler College
Ballroom, 74 King Street, St. Augustine, Florida, on Wednesday, May 19, 1999, at
10:30 A.M., Eastern Daylight Saving Time.
The Annual Meeting will consider the following business, which is described
in the accompanying Proxy Statement:
1. The election of nine (9) Directors to hold office until the Annual
Meeting of Shareholders in 2000, or until their successors are elected and
qualified.
2. The approval of certain amendments to Florida East Coast
Industries, Inc.'s 1998 Stock Incentive Plan.
3. The ratification of the appointment of independent public
accountants for 1999.
4. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 2, 1999 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.
The attached Proxy Statement contains important information regarding the
matters to be acted upon at the Annual Meeting.
By Order of the Board of Directors.
/s/ Heidi J. Eddins
Secretary
Dated: April 26, 1999
---------------------
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.
<PAGE> 4
FLORIDA EAST COAST INDUSTRIES, INC.
ONE MALAGA STREET
ST. AUGUSTINE, FLORIDA 32084
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is being mailed or otherwise furnished to shareholders
on or about April 21, 1999, in connection with the solicitation by the Board of
Directors of Florida East Coast Industries, Inc. ("Industries" or the
"Company"), a Florida corporation, of proxies to be voted at the Annual Meeting
of Shareholders of Industries to be held on May 19, 1999 and at any adjournment
thereof (the "Annual Meeting").
The principal business address of Industries is One Malaga Street, St.
Augustine, Florida 32084, and the telephone number is (904)829-3421.
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is being solicited by order of the Board of Directors of
the Company for use in connection with the Annual Meeting of the Company's
shareholders to be held May 19, 1999. The expense of printing and mailing this
Proxy Statement will be borne by the Company. In addition to solicitation of
proxies by mail, the Company may reimburse brokers and other nominees for the
expenses of forwarding proxy materials to the beneficial owners of stock held in
their names. Directors, officers and employees of the Company may solicit
proxies on behalf of the Board of Directors personally, by mail, by telephone or
by telegraph, but it is estimated that the expense of any such solicitation will
be nominal, and that no compensation will be paid specifically for such
solicitation.
A proxy may be revoked by a shareholder at any time prior to its being
voted by written notice to the Secretary of the Company or by attendance and
voting in person at the Annual Meeting by ballot. If a proxy is properly signed
and is not revoked by the shareholder, the shares it represents will be voted at
the meeting in accordance with the instructions of the shareholder. If no
instructions are given, proxies will be voted in accordance with the
recommendations of the Board of Directors.
MATTERS TO BE CONSIDERED
Company shareholders will consider and act upon proposals: (i) to elect
nine (9) Directors to serve until the Annual Meeting of Shareholders in 2000 or
until their respective successors are elected and qualified; (ii) to approve
certain amendments of the 1998 Stock Incentive Option Plan; (iii) to ratify the
appointment of independent public accountants for 1999, and (iv) to transact
such other business as may properly come before the meeting or any adjournment
thereof.
<PAGE> 5
VOTING SECURITIES
The Board of Directors of the Company has designated April 2, 1999 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof. On that date, the
Company had 36,286,360 shares of Common Stock, no par value, (the "Common
Stock") issued and outstanding. The Common Stock is the Company's only voting
security. Each share is entitled to one vote at the Annual Meeting, except for
the election of Directors. With respect to the election of Directors, each
shareholder is entitled to cumulate his or her shares and to give one candidate
as many votes as the number of Directors multiplied by the number of his shares
shall equal, or a shareholder may distribute his share votes on the same
principle among as many candidates as such holder sees fit.
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. Under the
rules of the New York Stock Exchange, Inc. (the "NYSE"), brokers holding shares
for customers have the authority to vote on certain matters when they have not
received instructions from the beneficial owners and do not have such authority
as to certain other matters (so-called "broker non-votes"). It is not presently
anticipated that any matter which might be the subject of a broker non-vote will
come before the Annual Meeting. With regard to the election of Directors, votes
may be cast in favor or withheld. For purposes of determining the presence of a
quorum, abstentions on allowed matters, other than the election of the Board of
Directors, will be included in the computation of the number of shares of Common
Stock that is present. Any proxy marked "withhold authority" with respect to the
election of a particular nominee for Director or "abstain" with respect to any
other matter will be counted as shares present and entitled to vote and,
accordingly, any such marking of a proxy will have the same effect as a vote
against the proposal to which it relates.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, nine (9) Directors of the Company are to be elected
to serve until the next annual election or until their successors are duly
elected and qualified. The Board of Directors recommends that shareholders vote
for these nominees.
NOMINEES
The nine (9) persons named below are the nominees for election as
Directors. The proxies named in the accompanying proxy, who have been designated
by the Board of Directors, intend to vote for the election to the Board of
Directors of the persons named below, all of whom are now Directors of the
Company. Certain information concerning such nominees is set forth below. The
enclosed proxy will be voted for the election of these Directors unless
otherwise indicated by the shareholder.
The Board knows of no reason why any nominee for Director would be unable
to serve as a Director. If any nominee should, for any reason, be unable to
serve, the shares represented by all valid proxies would be voted for the
election of such other persons as the Board of Directors may designate, or the
Board may reduce the number of Directors to eliminate the vacancy.
2
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR EMPLOYMENT FOR THE
NAME SINCE AGE PAST FIVE YEARS -- OTHER DIRECTORSHIPS
- ---- -------- --- ------------------------------------------
<S> <C> <C> <C>
Robert W. Anestis........................ 1999 53 Chairman, President and CEO, FECI, Inc.,
since January 1999; Formerly President,
Anestis & Company, an investment banking
and financial advisory firm. Also
Director, Champion Enterprises Inc.;
Member, Board of Advisors, CHB Capital
Partners, LP.
Jacob C. Belin........................... 1984 84 Director, The St. Joe Company; Trustee,
Alfred I. duPont Testamentary Trust;
Director, The Nemours Foundation. Former
Chairman of the Board, St. Joe Paper
Company.
Richard S. Ellwood....................... 1998 67 President, R. S. Ellwood & Co.,
Incorporated, a real estate investment
banking firm. Also Director, FelCar Suite
Hotels, Inc.
J. Nelson Fairbanks...................... 1989 63 President and Director, U. S. Sugar
Corporation.
Allen C. Harper.......................... 1994 54 Chairman, President and Chief Executive
Officer, 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. Director,
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.(1)
Adolfo Henriques......................... 1998 45 President and Chief Executive Officer,
Union Planters Bank-Florida since February
1998. Chairman, South Florida NationsBank
from October 1997 to February 1998 and
prior thereto, President, NationsBank-Dade
County from January 1996 to October 1997
and Executive Vice President from August
1992 to January 1996.
J. J. Parrish, III....................... 1984 45 President, Jesse J. Parrish, Inc., a
privately owned citrus producing firm.
Also Vice-Chairman of Parrish Medical
Center and a Director of Barnett Bank of
Central Florida.
Peter S. Rummell......................... 1998 53 Chairman and CEO, The St. Joe Company
since January 1997. From 1985 to 1996,
President of Disney Development Company,
Chairman of Walt Disney Imagineering.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR EMPLOYMENT FOR THE
NAME SINCE AGE PAST FIVE YEARS -- OTHER DIRECTORSHIPS
- ---- -------- --- ------------------------------------------
<S> <C> <C> <C>
W. L. Thornton........................... 1984 70 Director, The St. Joe Company; Trustee,
Alfred I. duPont Testamentary Trust;
Director, The Nemours Foundation. Prior to
May 21, 1997, Chairman of the Board and
Chief Executive Officer, the Company.
Prior to May 1995, Chairman and President,
the Company.
</TABLE>
- ---------------
(1) First American Railway, Inc. filed a petition under federal bankruptcy laws
in October 1998.
BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board holds one regular meeting following the Annual Shareholders'
Meeting and other meetings when called in accordance with the Company's By-laws.
During 1998, the Board held twelve (12) meetings. To assist it in carrying out
its duties, the Board has authority to appoint committees. Under that authority,
the Board has three standing committees.
COMMITTEES OF THE BOARD
The Audit Committee is currently composed of J. J. Parrish, III (Chair),
Adolfo Henriques and W. L. Thornton. The Audit Committee reviews and makes
recommendations to the Board regarding services provided by the independent
accountants; reviews with the independent accountants the scope and results of
their annual examinations of the Company's consolidated financial statements and
any recommendations they may have; and makes recommendations to the Board with
respect to the engagement of the independent accountants. The Audit Committee
also reviews the Company's procedures with respect to maintaining books and
records; the adequacy and implementation of internal auditing, accounting and
financial controls; and the Company's policies concerning financial reporting
and business practices. The Audit Committee met twice during the fiscal year
ended December 31, 1998.
The Compensation Committee is currently composed of J. Nelson Fairbanks
(Chair), Allen C. Harper and Richard S. Ellwood. The Compensation Committee
periodically reviews the compensation philosophy, policies, practices and
procedures of the Company, and makes recommendations to the Board concerning
changes, as appropriate; periodically reviews the performance of the Company's
Chairman, President and Chief Executive Officer; annually reviews changes in the
Company's employee benefit plans, and savings and retirement plans and reports
thereon to the Board; administers the Company's stock and short-term incentive
and deferred compensation plans; and approves and recommends to the Board of
Directors for approval compensation of officers of the Company. The Compensation
Committee held four (4) meetings in 1998.
The Finance Committee is currently comprised of Richard S. Ellwood, Adolfo
Henriques and W. L. Thornton. The Finance Committee supervises investment
polices of the Company; makes recommendations as to dividends; reviews the
Company's business plan; reviews organizational changes and proposals to buy or
sell significant assets; and makes recommendations regarding the issuance of the
Company's securities.
4
<PAGE> 8
Due to the frequency of full Board of Directors' meetings, during which matters
within the purview of the Committee were handled, the Finance Committee did not
meet in 1998.
The Company does not have a Nominating Committee.
All members of the Board of Directors attended at least seventy-five
percent (75%) of the total number of Board meetings and meetings held by
committees on which each served.
COMPENSATION OF DIRECTORS
In 1998, the Board retained an external consulting firm to review existing
Board compensation. Based upon the report of the consulting firm, and after
discussion between senior management of the Company and the Board of Directors,
the Board compensation package was revised, effective June 1998, to provide
competitive cash compensation compared to firms of similar market capitalization
and, in accordance with the 1998 Stock Incentive Plan approved by shareholders
at the 1998 Annual Meeting, to provide Directors with part of their annual
compensation paid in the form of stock options.
Under the Directors' compensation program approved in 1998, non-management
Directors are entitled to a retainer of $20,000 per year, a fee of $1,000 for
each Board meeting attended, and a fee of $1,000 for each committee meeting
attended if not held on the same day as a Board meeting. In addition to these
standard fees, Directors are reimbursed for transportation and other reasonable
expenses incident to attendance at Board and committee meetings. Upon election,
new Directors are entitled to receive options for 2,000 shares and 1,000 shares
upon reelection at an exercise price equal to the fair market value as of the
most recent trading day before the date of the grant, vesting and exercisable
one year following the date of the grant and expiring ten years following the
date of the grant. Directors were each awarded options in 1998 for 2,000 shares
at an exercise price of $29.375 per share, the closing price of the Common Stock
on the NYSE on the most recent trading day prior to the date of grant. Such
options are first exercisable on July 15, 1999 and expire July 14, 2008.
Management Directors do not receive any cash payment or option award for their
services as a Director.
Under the former Directors' compensation program, non-management Directors
received a quarterly retainer of $1,000, payment of $650 for each Board meeting
attended, and $200 for each committee meeting attended, as well as reimbursement
for transportation and other reasonable expenses incident to attendance at Board
and committee meetings. Management Directors, under the former arrangement, were
not eligible for a retainer, but received $450 for each Board meeting attended.
5
<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of April 2, 1999,
concerning the ownership of the outstanding Common Stock by those persons
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) known to the Company to be the beneficial owner
of more than five percent (5%) of shares of Common Stock of the Company, each
Director or nominee for Director, each of the Executive Officers named in the
Summary Compensation Table, and all Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAMES AND ADDRESSES BENEFICIAL OWNERS CLASS(1)
- ------------------- ----------------- ----------
<S> <C> <C>
St. Joe Capital II, Inc.(2)................................. 19,609,216 54.0%
300 Delaware Ave., 9th Floor
Wilmington, Delaware 19801
The Nemours Foundation(3)................................... 1,800,896 4.96%
1650 Prudential Drive
Jacksonville, FL 32207
Franklin Mutual Advisers, Inc............................... 5,263,600 14.5%
51 J.F.K. Parkway
Short Hills, NJ 07078
DIRECTORS AND EXECUTIVE OFFICERS
Jacob C. Belin(2)(3)(4)(5).................................. 3,200 *
Peter S. Rummell(2)(6)...................................... --
W. L. Thornton(2)(3)(5)..................................... 2,236 *
Robert W. Anestis(7)........................................ 40,000 *
Richard S. Ellwood.......................................... 400 *
J. Nelson Fairbanks......................................... --
Allen C. Harper............................................. --
Adolfo Henriques............................................ --
J. J. Parrish, III.......................................... --
Heidi J. Eddins(7).......................................... 5,000 *
Robert F. MacSwain(7)....................................... 7,500 *
T. Neal Smith............................................... --
Gregory P. West(8).......................................... 1,727 *
All Directors and Executive
Officers as a group (13 people)........................... 60,063
</TABLE>
- ---------------
* Less than one percent.
(1) All percentages shown are rounded to the nearest one-tenth percent.
6
<PAGE> 10
(2) All outstanding stock of St. Joe Capital II, Inc. is owned by The St. Joe
Company ("St. Joe"). The Alfred I. duPont Testamentary Trust (the "Trust"),
through Swamp Hall Properties, L.P., a Delaware limited partnership, owns
49,643,292 shares of common stock of St. Joe, representing 56.5% of the
shares of St. Joe issued and outstanding as of March 31, 1999.
(3) The Directors of the Nemours Foundation are J. C. Belin, Herbert Peyton,
John Porter, W. T. Thompson, III, W. L. Thornton and Wachovia Bank, N.A., a
subsidiary of Wachovia Corporation, by Hugh M. Durden. All the Directors of
The Nemours Foundation are Trustees of the Trust.
(4) 3,200 shares are held by Mr. Belin's wife, as to which he disclaims
beneficial ownership.
(5) Mr. Belin and Mr. Thornton are Trustees of the Trust, Directors of The
Nemours Foundation, and Directors of The St. Joe Company.
(6) Mr. Rummell is Chairman of the Board of Directors and CEO of The St. Joe
Company.
(7) See "Employment and Consulting Agreements" at pages 11-12.
(8) Shares are held on behalf of Mr. West in the Company's 401(k) Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and Directors, and
any persons owning more than 10 percent (10%) of a class of the Company's stock,
to file certain reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange.
During 1998, the executive officers and Directors of the Company filed with the
SEC on a timely basis all required reports relating to transactions involving
equity securities of the Company beneficially owned by them. The Company has
relied on the written representation of its executive officers and Directors and
copies of the reports they have filed with the SEC in providing this
information.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for the Company's
most highly compensated executive officers (the "Named Executive Officers"),
during the three-year period ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------- -------------------------------------
SECURITIES
OTHER UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS ANNUAL COMPENSATION OPTIONS/SARS(1) COMPENSATION(2)
POSITION YEAR ($) ($) ($) # ($)
- ------------------ ---- -------- -------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Carl F. Zellers,
Jr.................. 1998 $275,000 $110,000 -- 30,000 $214,939
Chairman, President 1997 $215,250 $100,000 -- 0 $ 3,275
and CEO (3) 1996 $157,500 $ 30,000 -- 0 $ 3,275
T. Neal Smith......... 1998 $106,000 $ 31,800 -- 11,227 $ 2,227
Vice President -- 1997 $ 95,000 $ 24,000 -- 0 $ 1,707
Accounting and Finance 1996 $ 90,000 $ 5,625 -- 0 $ 1,584
Gregory P. West....... 1998 $ 85,000 $ 21,250 -- 9,003 $ 2,902
Treasurer 1997 $ 80,750 $ 20,188 -- 0 $ 2,178
1996 $ 75,000 $ 4,453 -- 0 $ 6,465
</TABLE>
- ---------------
(1) Stock option awards granted in 1998 to Mr. Smith and Mr. West have an
exercise price of $29.375 per share equal to the fair market value per share
of the Common Stock on the most recent trading day prior to the date of the
grant, July 15, 1998, vest after one year and expire after ten years. Mr.
Zellers' stock option award was granted on October 6, 1998 and has an
exercise price of $27.375 per share equal to the fair market value per share
of the Common Stock on the most recent trading day prior to the date of the
grant. The options were exercisable as of December 31, 1998 and expire on
December 31, 2003.
(2) Consists of Company matching contributions to the Company's 401(k) plan. For
Mr. Zellers, includes $211,539 paid to him upon his retirement from the
Company in 1998. For Mr. West, includes in 1996, the payment of $4,375 for
certain accrued vacation pay.
(3) Mr. Zellers retired effective December 31, 1998.
8
<PAGE> 12
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS GRANT DATE
UNDERLYING GRANTED TO EXERCISE OR BASE PRESENT
NAME AND OPTIONS/SARS EMPLOYEES IN PRICE VALUE(1)
PRINCIPAL POSITION AWARDED FISCAL YEAR ($/SHARE) EXPIRATION DATE $
- ------------------ ------------ ------------ ---------------- -------------------- ----------
<S> <C> <C> <C> <C> <C>
Carl F. Zellers, Jr., 30,000 4.7% $27.375 December 31, 2003(2) $318,900
Chairman, President
and CEO............
T. Neal Smith, Vice 11,227 1.8% $29.375 July 15, 2008 $118,108
President,
Accounting and
Finance............
Gregory P. West, 9,003 1.4% $29.375 July 15, 2008 $ 94,712
Treasurer..........
Total Granted to 637,872 100.0%
Employees in Fiscal
Year...............
</TABLE>
- ---------------
(1) This estimate of value has been developed solely for purposes of comparative
disclosure in accordance with the rules and regulations of the SEC, and does
not necessarily reflect the Company's view of the appropriate value or
methodology for purposes of financial reporting.
(2) The award expires five years from the date of Mr. Zellers' December 31, 1998
retirement.
For awards to Messrs. Smith and West, the hypothetical value of the award
was determined using the Black Scholes model and is based on the following
assumptions: exercise price is equal to the market value on the most recent
trading day prior to the date of day of grant; estimated dividend yield of
0.36%; weighted-average expected volatility of 26%; risk-free interest rate of
4.8% (the rate applicable to a six-year treasury security at the time of the
award); an expected option term of 6.3 years, representing a projected duration
based upon experience of other companies from date of grant to exercise. For the
award to Mr. Zellers, differing assumptions from above include an expected
option term of 5 years. These assumptions are based upon historical experience
or, in the instance of average option term, on the general experience of other
companies and, as such, are not a forecast of future performance or of future
dividend policy. THERE IS NO ASSURANCE THE VALUE REALIZED BY AN EXECUTIVE WILL
BE AT OR NEAR THE VALUE ESTIMATED BY THE BLACK SCHOLES MODEL.
The actual value of options will depend on the market value of the
Company's common stock on the dates the options are exercised. No realization of
value from the option is possible without an increase in the price of the
Company's common stock, which would benefit all shareholders.
9
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END-OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END(#) FISCAL YEAR END($)(1)
ACQUIRED ---------------------- ---------------------
NAME AND PRINCIPAL ON VALUE EXERCISABLE/ EXERCISABLE/
POSITION EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
- ------------------ ------------ --------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Carl F. Zellers, Jr.......... 0 $0 30,000/0 $234,375/$0
Chairman, President and CEO
T. Neal Smith................ 0 0 0/11,227 0/65,257
Vice President,
Accounting and Finance
Gregory P. West.............. 0 0 0/9,003 0/52,330
Treasurer
</TABLE>
- ---------------
(1) Market value of shares covered by in-the-money options on December 31, 1998
less option exercise price.
EXECUTIVE RETIREMENT PLAN
In December 1998, the Company and its subsidiaries adopted an unfunded,
non-contributory defined benefit pension plan (the "Supplemental Executive
Retirement Plan" or the "SERP") for nine senior officers employed by the Company
on December 31, 1998. This plan provides post-employment income to the eligible
executives based upon their final average compensation multiplied by their years
of credited service. Executive officers with employment dates on and after
January 1, 1999, including Robert W. Anestis, Robert F. MacSwain and Heidi J.
Eddins are not eligible to participate.
The following table shows the estimated annual benefits payable under the
SERP upon normal retirement (age 62), including the Named Executive Officers, to
participants in a range of salary and years-of-service classifications:
ANNUAL BENEFIT AT NORMAL RETIREMENT (1)
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------------------------------------------
FINAL AVERAGE EARNINGS 5 10 15 20 25 30 35
---------------------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000................ $ 7,500 $15,000 $22,500 $30,000 $ 37,500 $ 45,000 $ 50,000
$150,000................ $11,250 $22,500 $33,750 $45,000 $ 56,250 $ 67,500 $ 75,000
$200,000................ $15,000 $30,000 $45,000 $60,000 $ 75,000 $ 90,000 $100,000
$250,000................ $18,750 $37,500 $56,250 $75,000 $ 93,750 $112,500 $125,000
$300,000................ $22,500 $45,000 $67,500 $90,000 $112,500 $135,000 $150,000
</TABLE>
- ---------------
(1) The amounts above reflect benefits payable on a single-life annuity basis
with no survivor benefits. As of December 31, 1998, the credited years of
service covered under the Company's retirement plans for
10
<PAGE> 14
the Named Executive Officers were as follows: Mr. Zellers, 30 years; Mr.
Smith, 31 years; Mr. West, 14 years.
"Final Average Earnings" for purposes of the SERP includes salary and bonus
as shown in the SUMMARY COMPENSATION TABLE, including salary and bonus deferred
at the election of an executive officer under the Company's 401(k) plan.
Individual benefit levels are calculated based upon the greater of (a) 1.5%
of average monthly salary and bonus paid during the final 60 months of
employment, or (b) 1.5% of the participant's monthly salary, excluding bonus,
paid for the last full month of employment multiplied by the years of credited
service. Notwithstanding above, benefits cannot exceed 50% of a participant's
monthly salary at the time of retirement. There are no offsets for social
security or railroad pension. In the instance of an involuntary termination (as
defined in the plan) prior to age 62, participants will be credited with up to 5
years of additional service, not to exceed the years of credit the executive
would be entitled to at age 62.
Mr. Zellers will become eligible to receive benefit payments under the SERP
commencing at the conclusion of his Consulting Agreement described in
"Employment and Consulting Agreements" on pages 11 - 12 hereof. Under the SERP,
Mr. Zellers will receive an annual benefit of $127,531.
EMPLOYMENT AND CONSULTING AGREEMENTS
During 1998, T. Neal Smith and Gregory P. West were the only Named
Executive Officers who were parties to employment agreements with the Company.
Messrs. Smith and West are employed by the Company under substantially
similar employment agreements, each with a term commencing August 24, 1998 and
ending August 23, 2003. Mr. Smith's agreement provides for his employment as
Vice President -- Accounting and Finance of the Company at a base salary of not
less than $106,000 per year. Mr. West's agreement provides for his employment as
Treasurer of the Company at a base salary of not less than $85,000 per year.
Messrs. Smith and West are also entitled to participate in the Company's annual
incentive plan, car allowance and employee benefit plans, programs and
arrangements in accordance with the terms of such plans, programs and
arrangements.
Under the employment agreements of Messrs. Smith and West, if the Company
terminates the executive's employment for any reason other than cause or if the
executive resigns subsequent to a substantial employment change, defined as a
substantial change in duties or responsibilities or a reduction in the
executive's base salary, the executive will receive (i) a severance payment
equal to one and one-half times his base salary in effect on his termination
date, and (ii) continued coverage under the Company's group health plan until
the earlier of (a) one and one-half years from the date of the executive's
termination, or (b) the date the executive begins receiving coverage under a
group health plan of another employer. If the executive resigns within two years
following a change in control, the executive will receive (i) a severance
payment equal to two and one-half times his base salary in effect on his
termination date, and (ii) continued coverage under the Company's group health
plan until the earlier of (a) two and one-half years from the date of the
executive's termination, or (b) the date the executive begins receiving coverage
under a group health plan of another employer.
11
<PAGE> 15
On November 12, 1998, the Company entered into an agreement for
professional services with Mr. Zellers pursuant to which Mr. Zellers was
retained as a consultant to the Company for a three-year term commencing January
1, 1999. The agreement entitles Mr. Zellers to an annual retainer of $137,500
for professional fees, plus reimbursement of expenses, for satisfactory
performance of services. The agreement further provides that Mr. Zellers may
not, for the term of the agreement, accept employment or engage in any
representation or consultation that may directly or indirectly conflict with or
be adverse to any interest of the Company. Mr. Zellers will serve as an
independent contractor and not be an employee of the Company. As such, he will
not participate in the Company's various employee benefit plans and programs.
Effective during 1999, the Company employed the following new executive
officers: Robert W. Anestis, Robert F. MacSwain and Heidi J. Eddins. Brief
summaries of the employment arrangements of these individuals are set forth
below.
On October 30, 1998, the Company entered into an employment agreement with
Robert W. Anestis pursuant to which Mr. Anestis became employed as the Company's
Chairman, President and Chief Executive Officer for a five-year term commencing
January 1, 1999. The agreement entitles Mr. Anestis to a base salary of not less
than $400,000 per year, a bonus of up to 100% of base salary based upon the
attainment of performance goals (with a minimum bonus for 1999 of 30% of base
salary) and participation in the Company's various employee benefit plans and
programs. The employment agreement provides for the grant to Mr. Anestis of
40,000 shares of restricted stock subject to vesting in installments of 8,000
shares each year for five years, such vesting to accelerate upon the occurrence
of certain events. Pursuant to the Company's 1998 Stock Incentive Plan, as
amended, the agreement also provides for the grant to Mr. Anestis of
non-statutory stock options with respect to an aggregate of 500,000 shares of
Common Stock with various vesting requirements and an exercise price of $29.375
per share. In the event the Company terminates Mr. Anestis' employment other
than for cause, death or disability or Mr. Anestis terminates his employment for
good reason, the employment agreement obligates the Company to, among other
things, continue payments to Mr. Anestis for two years of his base salary and
highest annual bonus ("termination payment") and continue his benefit plan
participation for the remaining term of the agreement (determined without regard
to the termination of employment). The employment agreement also contains change
in control provisions which, if triggered, require the Company to make a
supplemental payment to Mr. Anestis equal to the excess of $5 million over the
sum of (i) the current fair market value as of the date of the change in control
of all restricted stock on which restrictions have lapsed, (ii) the sum of the
difference between the fair market value of vested stock options over the
exercise price, and (iii) the termination payment. The agreement also obligates
the Company to provide Mr. Anestis a "gross-up" bonus to cover, on an after-tax
basis, any change in control excise taxes payable by him.
On February 2, 1999, the Company entered into substantially similar
employment agreements with Mr. MacSwain and Mrs. Eddins. Mr. MacSwain is
employed as the Company's Executive Vice President -- Special Projects at a base
salary of not less than $225,000 per year, and Mrs. Eddins is employed effective
March 15, 1999 as the Company's Senior Vice President, General Counsel and
Secretary at a base salary of not less than $180,000 per year. Mr. MacSwain and
Mrs. Eddins are entitled to participate in the Company's Annual Incentive Plan
with a bonus of up to 100% of base salary based upon the attainment of
performance goals. Mrs. Eddins is entitled to a minimum bonus of $50,000 in
1999. The
12
<PAGE> 16
employment agreements entitle the executives to participate in the Company's
various short-term incentive bonus, long-term equity incentive, savings,
retirement, welfare, fringe, relocation and car allowance plans, programs and
arrangements to the extent they are eligible to do so. Pursuant to the Company's
1998 Stock Incentive Plan, as amended, the employment agreements provide for the
grant to Mr. MacSwain and Mrs. Eddins non-statutory stock options to purchase
75,000 and 50,000 shares of Common Stock, respectively, with various vesting
requirements and an exercise price equal to the fair market value of the
underlying shares on the date of the employment agreement, and 7,500 and 5,000
shares of restricted stock, respectively, subject to ratable annual vesting over
five years, such vesting to accelerate upon the occurrence of certain events. In
the event the Company terminates the executive's employment other than for
cause, death or disability, or the executive terminates his or her employment
for good reason, the employment agreement obligates the Company to, among other
things, (i) continue payments to the executive for eighteen months of an amount
equal to the sum of 150% of the executive's base salary and 50% of the
executive's bonus for the most recently completed fiscal year, and (ii) continue
the executive's benefit plan participation for such 18-month period. The
employment agreement also contains change in control provisions which, if
triggered, require the Company to make a lump sum payment to the executive equal
to two times his or her then-current base salary. The agreements also obligate
the Company to provide each of the executives a "gross-up" bonus to cover, on an
after-tax basis, any change in control excise taxes payable by such executive.
COMPENSATION COMMITTEE REPORT
During 1997 and 1998, the Compensation Committee of the Board of Directors
(the "Committee") retained an independent compensation consulting firm to review
the compensation practices of the Company and its subsidiaries as they relate to
the executive officers. Based upon the final report of the consultant and
subsequent discussions between the Chief Executive Officer ("CEO") and the
Committee, the Committee adopted the philosophy and programs described below.
Executive Compensation Philosophy
The Committee believes that the maximization of corporate performance and,
in turn, shareholder value, depend on close alignment of the financial interests
of shareholders and those of the Company's employees, including its senior
managers. Accordingly, the Committee adheres to a practice whereby compensation
for management is tied directly to the Company's business objectives and to the
sustained creation of shareholder value. Therefore, the Company's compensation
program reflects both annual tactical results and long-term shareholder value
creation.
13
<PAGE> 17
For 1998, the Company's compensation program consists of three components:
(i) base salary, (ii) annual cash incentive awards, and (iii) equity in the form
of stock options. The program is designed to emphasize risk-based compensation
that rewards Company and individual performance. Each of these components is
described below:
Base Salary
It is the Company's policy to maintain salary levels that are generally
competitive with those paid to senior managers with comparable responsibilities
at comparable railroad and related corporations. Individual executive officer
salary levels are determined by several factors, including the individual's
contribution to Company performance and the relative position of the executive's
salary versus competitive pay levels.
The Committee reviews the salary of the CEO and all other executive
officers annually. As disclosed in the 1997 proxy, Mr. Zellers' 1998 salary was
increased to $275,000 effective January 1, 1998, and was unchanged through his
retirement on December 31, 1998. Beginning January 1, 1999, Robert W. Anestis
was elected Chairman, President and Chief Executive Officer of the Company at a
base salary of $400,000 per year. For a complete explanation of arrangements
with both Mr. Zellers and Mr. Anestis, see "Employment and Consulting
Agreements" at pages 11 - 12.
Annual Incentive Awards
The Company desires to pay annual cash incentives that directly link
executive cash compensation to achievement of critical annual objectives. No
awards are paid if specified threshold performance levels are not met.
Each year, the Committee approves annual cash incentive targets and
performance objectives under the Company's Annual Incentive Plan (the "Annual
Plan") for the Company's Chief Executive Officer and other executive officers.
The Annual Plan for 1998 allowed an annual incentive award of up to 40 percent
of base salary for the CEO and up to 35 percent of base salary for the other
executive officers, based on the Company's achievement of specific results. For
1998, the performance objective was based 100% on the Company's July through
December adjusted railway operating profit objective.
The Committee retains the ability to adjust annual incentive awards based
upon their consideration of additional factors, including individual performance
and exceptional circumstances. No such adjustment was made in 1998.
The Company exceeded the performance objective established by the
Committee. Consequently, the Committee granted Mr. Zellers a maximum incentive
award of $110,000 under the Annual Plan with respect to fiscal year 1998.
Stock Options
At the 1998 Annual Meeting, shareholders approved the 1998 Stock Incentive
Plan. This program is intended to motivate senior management to improve the
long-term performance of the Company's stock price and total return to
shareholders through providing executives an equity interest in the form of
stock
14
<PAGE> 18
options. Through stock options, any gains to executives are directly related to
the gains realized by all shareholders over the same period.
The maximum option award which could be made in 1998 to a participant under
this program is 50,000 shares, and 75,000 in the instance of a newly-hired
participant. All awards in 1998 consisted of non-qualified stock options granted
at fair market value as of the most recent trading day prior to the date of
grant, vest after one year and expire after ten years.
For 1998, the Committee considered each executive's relative level of
responsibility and individual performance, as well as the performance of the
Company in determining individual awards. Based upon the CEO's outstanding
individual performance in 1997, his role in developing the Company during his
tenure as both CEO and President, and his assistance in ensuring a smooth
transition to his successor, Mr. Anestis, the Committee awarded Mr. Zellers
options for 30,000 shares.
With respect to 1999 and beyond, it is the belief of the Committee that
cash compensation (salary plus annual incentive) paid by the Company may be well
below the competitive rate typically commanded for the caliber of executive
recruited. It is the Committee's intent to compensate for any competitive
shortfall in annual cash compensation through the aggressive award of equity
based compensation. The Company has proposed amending the 1998 Stock Incentive
Plan as of October 1, 1998 for purposes of allowing: (i) the grant of restricted
shares, and (ii) to increase the maximum option award in any given year to
500,000 for an individual, and 750,000 in the instance of a newly-hired
participant. See Proposal No. 2. Approval of certain amendments to Florida East
Coast Industries, Inc. 1998 Stock Incentive Plan at pages 15 - 18.
Non-deductible Compensation
The Committee does not currently anticipate that any executive officer's
non-performance-based compensation will exceed $1 million. For 1998, no
executive officer received non-performance-based compensation that exceeded $1
million. It is anticipated that all executive's compensation to be paid in 1999
will be fully deductible as well. However, the Committee and the Board of
Directors retain the discretion to grant non-deductible compensation if such
action would be in the best interests of the Company and shareholders under the
circumstances.
Submitted by the Compensation Committee.
J. Nelson Fairbanks, Chairman
Richard S. Ellwood, Member
Allen C. Harper, Member
15
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends) to Florida East Coast Industries, Inc.'s
("FECI") shareholders during the five-year period ended December 31, 1998, as
well as an overall stock market index (Russell 1000) and the FECI's peer group
consisting of the Value Line Railroad Index which includes ten (10) railroad
companies and three (3) railroad suppliers. The graph assumes $100 invested at
the per share closing price of the common stock on the New York Stock Exchange
Composite Tape on December 31, 1993 in FECI and each of the other indices.
COMPARISON OF FIVE -- YEAR CUMULATIVE TOTAL RETURN
FLORIDA EAST COAST INDUSTRIES, RUSSELL 1000 INDEX
AND VALUE LINE RAILROAD INDEX
(PERFORMANCE RESULTS THROUGH 12/31/98)
<TABLE>
<CAPTION>
FLORIDA
EAST VALUE LINE
MEASUREMENT PERIOD COAST RUSSELL 1000 RAILROAD
(FISCAL YEAR COVERED) INDS INDEX INDEX
<S> <C> <C> <C>
1993 100 100 100
1994 101 94 86
1995 105 125 117
1996 135 153 142
1997 149 202 175
1998 220 257 135
</TABLE>
The Company has made previous filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that incorporate
future filings, including this Proxy Statement, in whole or in part. However,
the foregoing Performance Graph and the Report of the Compensation Committee of
the Board of Directors shall not be incorporated by reference into any such
filings.
16
<PAGE> 20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, Messrs. Fairbanks, Ellwood and Harper served as members of the
Board's Compensation Committee. No member of the Committee was, or ever has
been, an officer or employee of the Company.
PROPOSAL NO. 2
APPROVAL OF CERTAIN AMENDMENTS TO THE 1998 STOCK OPTION PLAN
At the 1998 Annual Meeting, the shareholders approved and adopted the
Florida East Coast Industries, Inc.'s Stock Incentive Plan ("Plan"). On October
1, 1998, the Board of Directors adopted, subject to shareholder approval,
amendments to the Plan effective on that day.
DESCRIPTION OF AMENDED PLAN
The following is a summary of the principal provisions of the Plan, as
amended. The summary is qualified in its entirety by reference to the full text
of the Plan, set forth as Exhibit A to this Proxy Statement.
SHARES AVAILABLE FOR OPTIONS
The maximum number of shares of Common Stock of the Company that may be
made the subject of awards under the Plan is 1.6 million shares, less any shares
which may have been the subject of options previously granted and have either
been exercised or remain outstanding. In the event there is any change in the
number of issued shares of Common Stock of the Company without consideration to
the Company (such as by stock dividends or stock splits), the number of shares
reserved for issuance under the Plan, the number of shares subject to any
outstanding options and the option price per share under each outstanding stock
option will be appropriately adjusted by the Board of Directors. Similarly, if
the Company shall be a party to a merger, consolidation, reorganization, sale or
similar occurrence, equitable adjustments to any outstanding option may be made.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Compensation Committee appointed by the
Board of Directors and consisting of not less than two (2) Directors.
The Committee shall determine the type, number and vesting requirements of
awards under the Plan.
AWARDS OF OPTIONS AND RESTRICTED STOCK TO EMPLOYEES
Options, including incentive stock options ("ISO") and non-qualified stock
options ("NSO") and Restricted Stock, may be granted under the Plan to all
employees of the Company and its subsidiaries.
17
<PAGE> 21
There is a specific limitation on the number of shares of Common Stock with
respect to which options may be granted to any individual under the Plan. Under
the Amended Plan, no employee may receive options for more than 500,000 shares
in any year; or, in the case of a newly-hired employee, 750,000 shares in the
fiscal year in which the employee commences his/her employment. Within the limit
specified above, the Compensation Committee will designate for such year the
number of shares of Common Stock of the Company which will be made the subject
of options with respect to employee participants. The award of options to each
employee participant will be determined by the Committee.
Employees and outside Directors are eligible for NSOs and grants of
restricted stock. Only employees are eligible for the grant of an ISO. No
employee who is the beneficial owner of more than 10% of the outstanding Common
Stock of the Company, or any of the Company's affiliates, is eligible for an
ISO.
AWARDS OF OPTIONS TO OUTSIDE DIRECTORS
Under the Plan as amended, awards are granted to each outside Director at a
rate of options for 2,000 shares upon a Director's initial election to office
and an annual award of options for 1,000 shares annually upon such Director's
reelection.
The following awards were granted to the Company's outside Directors in
1998:
<TABLE>
<CAPTION>
NAME OF DIRECTOR INITIAL GRANT EXERCISE PRICE
- ---------------- ------------- --------------
<S> <C> <C>
Richard S. Ellwood...................................... 2,000 $29.375
J. Nelson Fairbanks..................................... 2,000 $29.375
Allen C. Harper......................................... 2,000 $29.375
Adolfo Henriques........................................ 2,000 $29.375
J. J. Parrish, III...................................... 2,000 $29.375
W. L. Thornton.......................................... 2,000 $29.375
</TABLE>
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<PAGE> 22
NEW EXECUTIVE OFFICER AWARDS
The following table sets forth awards to the executive officers hired by
the Company with employment dates of January 1, 1999 for Mr. Anestis, February
1, 1999 for Mr. MacSwain and March 15, 1999 for Mrs. Eddins:
<TABLE>
<CAPTION>
NON-QUALIFIED OPTION RESTRICTED
NAME AND POSITION STOCK OPTION EXERCISE PRICE STOCK
- ----------------- ------------- -------------- ----------
<S> <C> <C> <C>
Robert W. Anestis............................. 500,000 $29.9375 40,000
Chairman, President and
Chief Executive Officer
Robert F. MacSwain............................ 75,000 $27.4375 7,500
Executive Vice President--
Special Projects
Heidi J. Eddins............................... 50,000 $27.4375 5,000
Senior Vice President,
Secretary and General Counsel
</TABLE>
PERIOD OF PLAN; AMENDMENTS
The Plan will continue in effect through May 31, 2008 unless earlier
terminated by the Board of Directors. The Board of Directors of the Company may
amend the Plan from time to time or terminate the Plan at any time, provided
that no such amendment may affect or impair an option previously granted. In
addition, except certain circumstances, no amendment may, without the approval
of the Company's shareholders: (i) increase the maximum number of shares which
may be optioned and sold under the Plan; (ii) change the option price or the
manner of determining the option price; or (iii) permit the granting of options
for periods longer than ten (10) years.
EXERCISE PERIOD
Options granted may be exercised within ten (10) years after the date of
the grant, or within such shorter period as may be determined by the Board of
Directors.
TERMINATION OF EMPLOYMENT AND DEATH
If the employment of an employee holding options under the Plan shall
terminate, or if the office of a Director who is not a full-time employee of the
Company shall terminate, in either case for any reason whatsoever (including
retirement, resignation, dismissal or death), the term of each option so held
may be subject to accelerated exercisability.
OPTION PRICE
The Plan provides that the option price with respect to each option shall
be the "fair market value" (as determined in the Plan) of the Common Stock of
the Company as of the most recent trading day before the
19
<PAGE> 23
date of the grant. Payment of the option price may be made in cash or by
delivery of shares of Common Stock then owned by the optionee, or by a
combination of cash and such shares.
NON-TRANSFERABILITY
Options granted under the Plan are not transferable by the holder, except
by will or the laws of descent and distribution.
RESTRICTED STOCK
The Committee may award to a participant shares of Common Stock subject to
specified restrictions ("Restricted Shares"). The Restricted Shares are subject
to forfeiture if the participant does not meet certain conditions determined by
the Committee. Participants who have been awarded Restricted Shares will have
all of the rights of a holder of outstanding shares of Common Stock, including
the right to vote such shares and to receive dividends. During the forfeiture
period, the Restricted Shares are non-transferable and may be held in custody by
the Company or its designated agent, or if the certificate is properly legended,
by the participant. The Committee, at its sole discretion, may waive all
restrictions with respect to a Restricted Share award under certain
circumstances (including the death, disability, or retirement of a participant,
or the occurrence of a change in control), subject to such terms and conditions
as it deems appropriate.
FEDERAL INCOME TAX TREATMENT OF STOCK OPTIONS
No income is recognized by an optionee when a non-qualified stock option is
granted. Upon exercise of a non-qualified stock option, an optionee is treated
as having received ordinary income at the time of exercise in an amount equal to
the difference between the option price paid and the then fair market value of
the stock acquired. The Company is entitled to a deduction at the same time and
in a corresponding amount. The optionee's basis in the Common Stock acquired
upon exercise of a non-qualified stock option is equal to the option price plus
the amount of ordinary income recognized, and any gain or loss thereafter
recognized upon disposition of the Common Stock is treated as capital gain or
loss.
In the case of incentive stock options, although no income is recognized
upon exercise and the Company is not entitled to a deduction, the excess of the
fair market value of the Common Stock on the date of exercise over the exercise
price is counted in determining the participant's alternative minimum taxable
income. If the participant does not dispose of the shares acquired on the
exercise of an incentive stock option within one (1) year after their receipt
and within two (2) years after the grant of the incentive stock option, gain or
loss recognized on the disposition of the shares will be treated as long-term
capital gain or loss. In the event of an earlier disposition of shares acquired
upon the exercise of an incentive stock option, the participant may recognize
ordinary income and, if so, the Company will be entitled to a deduction in a
like amount.
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<PAGE> 24
FEDERAL INCOME TAX TREATMENT OF AWARDS OF RESTRICTED STOCK
Recipients of restricted stock will generally recognize income upon the
lapse of the restrictions. Upon the lapse of the restrictions, the participant
will recognize ordinary taxable income in an amount equal to the fair market
value of the Common Stock as to which the restrictions have lapsed, and the
Company will be entitled to a deduction in the same amount. However, a
participant may elect under Section 83(b) of the Internal Revenue Code of 1986,
as amended, to recognize taxable ordinary income in the year the restricted
shares are awarded in an amount equal to the fair market value of the shares at
that time, determined without regard to the restrictions. In such event, the
Company will then be entitled to a deduction in the same amount. Any gain or
loss subsequently recognized by the participant will be a capital gain or loss.
The employee will be entitled to elect to satisfy his or her tax withholding
obligation by the withholding by the Company, at the appropriate time, of shares
of Common Stock from the restricted shares in a number sufficient to satisfy
such tax withholding requirements.
RECOMMENDATION OF BOARD OF DIRECTORS
On October 30, 1998, The St. Joe Company, the owner of a majority of the
shares of the Common Stock, executed an undertaking, irrevocably and
unconditionally agreeing to vote in favor of the amendments to the Stock Option
Plan.
The Board of Directors recommends that the shareholders vote FOR approval
of the Amendments to the Florida East Coast Industries, Inc.'s 1998 Stock
Incentive Plan.
PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS FOR 1999
Pursuant to the recommendation of the Audit Committee, composed of
independent members, the Board of Directors has appointed KPMG LLP as
independent accountants for the Company for 1999. The Board of Directors
recommends shareholders ratify such appointment by voting FOR such proposal.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gran Central Corporation ("Gran Central") is a wholly-owned subsidiary of
the Company which owns, develops, leases and manages commercial and industrial
properties throughout Florida. Effective as of January 1, 1998, The St. Joe
Company ("St. Joe") and Gran Central entered into a management agreement
("Agreement") pursuant to which Gran Central appointed St. Joe as its agent to
provide asset management, property management, property development, and
construction coordination services for Gran Central's real estate business. The
Agreement has an initial two-year term ending December 31, 1999, and is
terminable on or after that date upon 120 days' prior notice. In 1998, Gran
Central paid The St. Joe Company and certain of its affiliates the following
amounts: $2.13 million for asset management services, $2.05 million for property
management services, $1.83 million in development fees and $1.80 million in
21
<PAGE> 25
construction coordination fees and leasing commissions. The St. Joe Company owns
directly 54% of the outstanding stock of the Company.
Anestis & Company, of which Mr. Robert W. Anestis, the Company's current
Chairman, President and Chief Executive Officer, was President, served as a
consultant to the Company in 1998. Anestis & Company received a total of
$725,600 in fees and $103,172 in expenses during 1998. Mr. Anestis was not an
executive officer of the Company at any time during 1998.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG LLP served as the independent accountants for the Company
for the fiscal year ending December 31, 1998. Representatives of KPMG LLP will
be present at the Annual Meeting of Shareholders to respond to appropriate
questions.
FINANCIAL STATEMENTS
A copy of the Annual Report of the Company for the year ended December 31,
1998 is enclosed. Such report is not part of this Proxy Statement.
SHAREHOLDER PROPOSALS
Shareholders of the Company may present proposals for consideration at the
2000 Annual Meeting of Shareholders by following the procedures outlined in Rule
14a-8 of the Exchange Act and the Company's By-laws. Proposals of shareholders,
which are the proper subject for inclusion in the Proxy Statement and for
consideration at the 2000 Annual Meeting, must be submitted in writing and must
be received by the Company's Secretary no later than January 4, 2000.
OTHER MATTERS
The Board of Directors does not know of any other business to be presented
at the Annual Meeting; however, if any other matters come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote pursuant to the proxies in accordance with their judgment in such matters.
By Order of the Board of Directors.
Heidi J. Eddins
Secretary
Dated: April 26, 1999
22
<PAGE> 26
EXHIBIT A
FLORIDA EAST COAST INDUSTRIES, INC.
1998 STOCK INCENTIVE PLAN
(ADOPTED EFFECTIVE JUNE 1, 1998)
(AMENDED EFFECTIVE OCTOBER 1, 1998)
A-1
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1. INTRODUCTION.............................................. A-4
ARTICLE 2. ADMINISTRATION............................................ A-4
2.1 Committee Composition....................................... A-4
2.2 Committee Responsibilities.................................. A-4
ARTICLE 3. SHARES AVAILABLE FOR GRANTS............................... A-5
3.1 Basic Limitations........................................... A-5
3.2 Additional Shares........................................... A-5
ARTICLE 4. ELIGIBILITY............................................... A-5
4.1 Non-statutory Stock Options................................. A-5
4.2 Incentive Stock Options..................................... A-5
4.3 Prospective Employees....................................... A-5
4.4 Restricted Stock............................................ A-5
ARTICLE 5. OPTIONS................................................... A-5
5.1 Stock Option Agreement...................................... A-5
5.2 Number of Shares............................................ A-6
5.3 Exercise Price.............................................. A-6
5.4 Exercisability and Term..................................... A-6
5.5 Effect of Change in Control................................. A-6
5.6 Modification or Assumption of Options....................... A-6
5.7 Buyout Provisions........................................... A-6
ARTICLE 6. PAYMENT FOR OPTION SHARES................................. A-6
6.1 General Rule................................................ A-6
6.2 Surrender of Stock.......................................... A-7
6.3 Exercise/Sale............................................... A-7
6.4 Exercise/Pledge............................................. A-7
6.5 Promissory Note............................................. A-7
6.6 Other Forms of Payment...................................... A-7
ARTICLE 7. PROTECTION AGAINST DILUTION............................... A-7
7.1 Adjustments................................................. A-7
7.2 Dissolution or Liquidation.................................. A-7
7.3 Reorganization.............................................. A-8
ARTICLE 8. LIMITATION ON RIGHTS...................................... A-8
8.1 Retention Rights............................................ A-8
8.2 Stockholders' Rights........................................ A-8
8.3 Regulatory Requirements..................................... A-8
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 9. WITHHOLDING TAXES......................................... A-8
9.1 General..................................................... A-8
9.2 Share Withholding........................................... A-9
ARTICLE 10. FUTURE OF THE PLAN....................................... A-9
10.1 Term of the Plan............................................ A-9
10.2 Amendment or Termination.................................... A-9
ARTICLE 11. RESTRICTED STOCK......................................... A-9
11.1 Restricted Stock Grants..................................... A-9
11.2 Transferability............................................. A-9
11.3 Rights as a Stockholder..................................... A-9
11.4 Terms and Conditions of Award............................... A-10
11.5 Modifications of Restricted Stock Awards.................... A-10
ARTICLE 12. DEFINITIONS.............................................. A-10
ARTICLE 13. EXECUTION................................................ A-12
SCHEDULE A........................................................... A-1
</TABLE>
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FLORIDA EAST COAST INDUSTRIES, INC.
STOCK INCENTIVE PLAN
ARTICLE I
INTRODUCTION
The Plan was adopted by the Board effective March 26, 1998. The purpose of
the Plan is to promote the long-term success of the Company and the creation of
stockholder value by (a) encouraging Employees and Outside Directors to focus on
critical long-range objectives, (b) encouraging the attraction and retention of
Employees and Outside Directors with exceptional qualifications and (c) linking
Employees and Outside Directors directly to stockholder interests through
increased stock ownership. The Plan seeks to achieve this purpose by providing
for Awards in the form of Options and Restricted Stock.
The Plan shall be governed by, and construed in accordance with, the laws
of the State of Florida (excluding their choice-of-law provisions).
ARTICLE II
ADMINISTRATION
2.1 Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more Directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish
for Outside Directors acting under plans intended to qualify for exemption
under Section 162(m)(4)(C) of the Code.
2.2 Committee Responsibilities. The Committee shall (a) select the
Employees and Outside Directors who are to receive Awards under the Plan, (b)
determine the type, number, vesting requirements and other features and
conditions of such Awards, (c) interpret the Plan, and (d) make all other
decisions relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons. The Committee may make any other provision in individual Awards,
including provisions for dispute resolution, that the Committee deems
appropriate.
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ARTICLE III
SHARES AVAILABLE FOR GRANTS
3.1 Basic Limitations. Common Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares. The aggregate number of
Options awarded under the Plan shall not exceed 1,600,000. The limitations of
this Section 3.1 shall be subject to adjustment pursuant to Article 7.
3.2 Additional Shares. If Awards are forfeited or terminated for any
reason, then the corresponding Common Shares shall again become available for
the grant of Awards under the Plan.
ARTICLE IV
ELIGIBILITY
4.1 Non-statutory Stock Options. Only Employees and Outside Directors
shall be eligible for the grant of NSOs.
4.2 Incentive Stock Options. Only Employees who are common-law employees
of the Company, a parent, or a subsidiary shall be eligible for the grant of
ISOs. In addition, an Employee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company or any of its
parents or subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in Section 422(c)(6) of the Code are satisfied.
4.3 Prospective Employees. For purposes of this Article 4, the terms
"Employee" shall include a prospective Employee who receives an Award after
accepting a written offer of employment from the Company, a parent or a
subsidiary. If an ISO is granted to a prospective Employee, the date when his or
her service as an Employee commences shall be deemed to be the date of grant of
such ISO for all purposes under the Plan (including, without limitation, Section
5.3). No Award granted to a prospective Employee shall become exercisable or
vested unless and until his or her service as an Employee commences.
4.4 Restricted Stock. Only Employees and Outside Directors shall be
eligible for the grant of Restricted Stock.
ARTICLE V
OPTIONS
5.1 Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are consistent with the Plan. The Stock Option
Agreement shall specify whether the Option is an ISO or an NSO. The provisions
of the various Stock Option Agreements entered into under the Plan need not be
identical. Options may be granted in consideration of a cash payment, or in
consideration of a reduction in the Optionee's other compensation.
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5.2 Number of Shares. Each Stock Option Agreement shall specify the number
of Common Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 9. Options granted to any Optionee in a
single fiscal year of the Company shall not cover more than 500,000 Common
Shares, except that Options granted to a new Employee in the fiscal year of the
Company in which his or her service as an Employee first commences shall not
cover more than 750,000 Common Shares. The limitations set forth in the
preceding sentence shall be subject to adjustment in accordance with Article 7.
5.3 Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price; provided that the Exercise Price shall in no event be less than 100% of
the Fair Market Value of a Common Share on the most recent trading day before
the date of grant. In the case of an NSO, a Stock Option Agreement may specify
an Exercise Price that varies in accordance with a predetermined formula while
the NSO is outstanding.
5.4 Exercisability and Term. Each Stock Option Agreement shall specify the
date or event when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an Option shall in no event exceed 10 years
from the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service.
5.5 Effect of Change in Control. The Committee may determine, at the time
of granting an Option or thereafter, that all or part of such Option shall
become exercisable as to all Common Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company.
5.6 Modification or Assumption of Options. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding Options or may
accept the cancellation of outstanding Options (whether granted by the Company
or by another issuer) in return for the grant of new Options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
5.7 Buyout Provisions. The Committee may at any time (a) offer to buy out
for a payment in cash or cash equivalents an Option previously granted, or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
ARTICLE VI
PAYMENT FOR OPTION SHARES
6.1 General Rule. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash or cash equivalents at the time
when such Common Shares are purchased, except that the Stock Option Agreement
may specify that payment may be made in any form(s) described in this Article 6.
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6.2 Surrender of Stock. To the extent that this Section 6.2 is applicable,
payment for all or any part of the Exercise Price may be made with Common Shares
which are already owned by the Optionee. Such Common Shares shall be valued at
their Fair Market Value on the most recent trading day before the date when the
new Common Shares are purchased under the Plan. Except as otherwise provided in
an Award, the Optionee shall not surrender Common Shares in payment of the
Exercise Price if such surrender would cause the Company to recognize
compensation expense with respect to the Option for financial reporting
purposes.
6.3 Exercise/Sale. To the extent that this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares, and to deliver all or a part of the sales proceeds to the Company
in payment of all or part of the Exercise Price and any withholding taxes.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Common Shares to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part of
the loan proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes.
6.5 Promissory Note. To the extent that this Section 6.5 is applicable,
payment may be made with a full-recourse promissory note.
6.6 Other Forms of Payment. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE VII
PROTECTION AGAINST DILUTION
7.1 Adjustments. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spin-off or a similar occurrence,
the Committee shall make such equitable adjustments as it, in its sole
discretion, deems appropriate in one or more of (a) the number of Common Shares
available for future Awards under Article 3, (b) the limitations set forth in
Section 5.2, (c) the number of Common Shares covered by each outstanding Option
or (d) the Exercise Price under each outstanding Option. Except as provided in
this Article 7, a Participant shall have no right by reason of any issue by the
Company of stock of any class or securities convertible into stock of any class,
any subdivision or consolidation of shares of stock of any class, the payment of
any stock dividend, or any other increase or decrease in the number of shares of
stock in any class.
7.2 Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Committee shall notify each Optionee as soon
as practicable prior to the effective date of such proposed transaction. The
Committee, at its discretion, may provide for an Optionee to have the right to
exercise his or her Options until 10 days prior to such transaction as to some
or all of the Common
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<PAGE> 33
Shares covered thereby, including Common Shares as to which the Options would
not otherwise be exercisable. In addition, the Committee may provide that any
Company repurchase options applicable to any Shares purchased upon exercise of
an Option shall lapse as to some or all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent not previously exercised, Options shall terminate
immediately prior to the consummation of such proposed action.
7.3 Reorganization. In the event that the Company is a party to a merger
or other reorganization, outstanding Awards shall be subject to the agreement of
merger or reorganization. Such agreement may provide, without limitation, for
the continuation of outstanding Awards by the Company (if the Company is a
surviving corporation), for their assumption by the surviving corporation or its
parent or subsidiary, for the substitution by the surviving corporation or its
parent or subsidiary of its own awards for such Awards, for accelerated vesting
and accelerated expiration, or for settlement in cash or cash equivalents.
ARTICLE VIII
LIMITATION ON RIGHTS
8.1 Retention Rights. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee or
Outside Director. The Company and its parents, subsidiaries and affiliates
reserve the right to terminate the service of any Employee or Outside Director
at any time, with or without cause, subject to applicable laws, the Company's
Certificate of Incorporation and By-Laws and a written Employment Agreement (if
any).
8.2 Stockholders' Rights. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the time when a stock certificate for such
Common Shares is issued or, in the case of an Option, the time when he or she
become entitled to receive such Common Shares by filing a notice of exercise and
paying the Exercise Price. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to such time, except as
expressly provided in the Plan or in the Award.
8.3 Regulatory Requirements. Any other provision of the Plan,
notwithstanding the obligation of the Company to issue Common Shares under the
Plan, shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE IX
WITHHOLDING TAXES
9.1 General. To the extent required by applicable federal, state, local or
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any
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withholding tax obligations that arise in connection with the Plan. The Company
shall not be required to issue any Common Shares or make any cash payment under
the Plan until such obligations are satisfied.
9.2 Share Withholding. The Committee may permit a Participant to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the most recent trading day before the date when taxes
otherwise would be withheld in cash.
ARTICLE X
FUTURE OF THE PLAN
10.1 Term of the Plan. The Plan, as set forth herein, shall become
effective on June 1, 1998. The Plan shall remain in effect until it is
terminated under Section 10.2, except that no ISOs shall be granted after May
31, 2008.
10.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Awards shall be granted under the Plan
after the termination thereof. The termination of the Plan, or any amendment
thereof, shall not affect any Award previously granted under the Plan.
ARTICLE XI
RESTRICTED STOCK
11.1 Restricted Stock Grants. The Committee may make grants of Restricted
Stock to Participants. Whenever the Committee deems it appropriate to grant
Restricted Stock, notice shall be given to the Participant, stating the number
of shares of Restricted Stock granted and the terms and conditions to which the
Restricted Stock is subject. This notice, when accepted in writing by the
Participant, shall become an Award Agreement between the Company and the
Participant. Restricted Stock may be awarded by the Committee at its discretion
without cash consideration.
11.2 Transferability. No shares of Restricted Stock may be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered or disposed of until
the restrictions on such shares, as set forth in the Participant's Award
Agreement, have lapsed or been removed pursuant to Section 11.4 below.
11.3 Rights as a Stockholder. Upon the acceptance by a Participant of an
Award of Restricted Stock, such Participant shall, subject to the restrictions
set forth in the Award, have all the rights of a shareholder with respect to
such shares of Restricted Stock, including, but not limited to, the right to
vote such shares of Restricted Stock and the right to receive all dividends and
other distributions paid thereon. Certificates representing Restricted Stock
shall bear a legend referring to the restrictions set forth in the Plan and
Participant's Award Agreement.
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11.4 Terms and Conditions of Award. The Committee shall establish as to
each Award of Restricted Stock the terms and conditions upon which the
restrictions above shall lapse. Such terms and conditions may include, without
limitation, the lapsing of such restrictions as a result of the disability,
death or retirement of the Participant or the occurrence of a Change in Control.
Notwithstanding the provisions of Section 11.2 above, the Committee may at any
time, at its sole discretion, accelerate the time at which any or all
restrictions will lapse or remove any and all such restrictions.
11.5 Modifications of Restricted Stock Awards. The Committee may modify or
extend Awards of Restricted Stock, or may accept the cancellation of an
outstanding Award in return for the grant of a new Award of Restricted Stock.
The foregoing notwithstanding, no modification of an Award of Restricted Stock
shall, with but the consent of the Participant, alter or impair his or her
rights or obligations under the Award.
ARTICLE XII
DEFINITIONS
12.1 "Affiliate" means any entity other than a subsidiary, if the Company
and/or one or more subsidiaries own not less than 80% of such entity.
12.2 "Award" means any award of an Option or Restricted Stock under the
Plan.
12.3 "Board" means the Company's Board of Directors, as constituted from
time to time.
12.4 "Change in Control" means that:
(a) 30% or more of the outstanding vote stock of the Company is
acquired by any person or group other than The St. Joe Company, except that
this Subsection (a) shall not apply as long as The St. Joe Company owns
more voting stock than such person or group; or
(b) Stockholders of the Company, other than The St. Joe Company, vote
in a contested election for Directors of the Company and through exercise
of their votes cause the replacement of 50% or more of the Company's
Directors (the mere change of 50% or more of the members of the Board does
not cause a Change in Control unless it occurs as a result of a contested
election); or
(c) The Company is a party to a merger or similar transaction as a
result of which the Company's stockholders own 50% or less of the surviving
entity's voting securities after such merger or similar transaction; or
(d) In connection with the execution of an Employment Agreement for
senior officers of the Company, the Committee may approve an Award which
defines "Change in Control" to mean:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Act"), other
than the present majority owner, The St. Joe Company, or any
majority-owned subsidiary of The St. Joe Company becomes the "beneficial
owner" (as defined in Rule 13-d under the Act) directly or indirectly,
of securities
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representing more than fifty percent (50%) of the total voting power
represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board, as a result of which
fewer than a majority of the Directors are Incumbent Directors.
"Incumbent Directors" shall mean Directors who either (a) are Directors
of the Company as of the date hereof, or (b) are elected or nominated
for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or
nomination is in connection with an actual or threatened proxy contest
relating to the election of Directors of the Company); or
(iii) The Company merges or consolidates with any other
corporation, including The St. Joe Company or any subsidiary thereof, or
the Company adopts, and the stockholders approve, if necessary, a plan
of complete liquidation of the Company, or the Company sells or disposes
of substantially all of its assets.
A transaction shall not constitute a Change in Control if its sole purpose
is to change the state of the Company's incorporation or to create a holding
company that will be owned insubstantially the same proportions by the persons
who held the Company's securities immediately before such transaction.
12.5 "Code" means the Internal Revenue Code of 1986, as amended.
12.6 "Committee" means the Compensation Committee of the Board, as further
described in Article 2.
12.7 "Common Share" means one share of the common stock of the Company.
12.8 "Company" means Florida East Coast Industries, Inc., a Florida
corporation.
12.9 "Employee" means a common-law employee of the Company, a parent, a
subsidiary or an affiliate.
12.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
12.11 "Exercise Plan" means the amount for which one Common Share may be
purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement.
12.12 "Fair Market Value" means the closing price of Common Shares, as
stated in The New York Stock Exchange Composite Transactions Report and reported
in The Wall Street Journal. If a closing price of Common Shares is not stated in
The New York Stock Exchange Composite Transactions Report, the Fair Market Value
of Common Shares shall be determined by the Committee in good faith on such
basis as it deems appropriate. The determination of Fair Market Value by the
Committee shall be conclusive and binding on all persons.
12.13 "ISO" means an incentive stock option described in Section 422(b) of
the Code.
12.14 "NSO" means a stock option not described in Sections 422 or 423 of
the Code.
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12.15 "Option" means an ISO or NOS granted under the Plan and entitling the
holder to purchase Common Shares.
12.16 "Optionee" means an individual or estate who holds an Option.
12.17 "Outside Director" means a member of the Board who is not an
Employee. Service as an Outside Director shall be considered employment for all
purposes of the Plan other than Section 4.2.
12.18 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 80% or more of the
total combined voting power of all classes of stock in one or the other
corporations in such chain. A corporation that attains the status of a parent on
a date after the adoption of the Plan shall be considered a parent commencing as
of such date.
12.19 "Participant" means an individual or estate who holds an Award.
12.20 "Plan" means this Florida East Coast Industries' 1998 Stock Incentive
Plan, as amended from time to time.
12.21 "Stock Option Agreement" means the agreement between the Company and
an Optionee that contains the terms, conditions and restrictions pertaining to
his or her Option.
12.22 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 80% or more of the total combined voting power of all classes of
stock in one or the other corporations in such chain. A corporation that attains
the status of a subsidiary on a date after the adoption of the Plan shall be
considered a subsidiary commencing as of such date.
12.23 "Restricted Stock" means Common Stock awarded upon the terms and
subject to the restrictions set forth in Article 12.
ARTICLE XIII
EXECUTION
To record the adoption of the Plan by the Board, the Company has caused it
duly authorized officer to affix the corporate name and seal thereto.
FLORIDA EAST COAST INDUSTRIES, INC.
By:
---------------------------------------
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SCHEDULE A
PERFORMANCE CRITERIA
<TABLE>
<S> <C>
Cash Flow Expense Reduction
Earnings Revenue Growth
Earnings Per Share Stock Price Increase
Operating Income
Return on Assets
Return on Equity
Return on Invested Capital
Total Shareholder Return
Growth in any of the above
measures
</TABLE>
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<PAGE> 39
APPENDIX A
FLORIDA EAST COAST INDUSTRIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD FOR THE
MAY 19, 1999 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints R. W. Anestis, R. F. MacSwain and G. P. West 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 Annual Meeting of Stockholders of Florida East Coast Industries, Inc., to
be held in the Flagler Ballroom, Flagler College, 74 King St., St. Augustine,
Florida, on Wednesday, May 19, 1999, at 10:30 A.M., Eastern Daylight Saving
Time, 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 all listed nominees
for Directors and for Proposals 2 and 3. In the event of cumulative voting,
unless otherwise indicated below, a vote for nominees of the Board of Directors
will give the persons named in the proxy discretionary authority to cumulate all
votes as to which the shareholder is entitled and allocate such votes in favor
of one or more nominees of the Board voted for by the shareholder, as the
proxyholders may determine.
1. THE ELECTION OF DIRECTORS:
R. W. ANESTIS, J. C. BELIN, R. S. ELLWOOD, J. N. FAIRBANKS, A. C. HARPER,
A. HENRIQUES, J. J. PARRISH, III, P. S. RUMMELL, W. L. THORNTON
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS
to vote for all nominees listed
To withhold authority to vote for any individual nominee, mark the "Exceptions"
box and write that nominee's name in the space provided below.
Exceptions _____________________________________________________________________
To cumulate votes as to a particular nominee (or nominees) as explained in the
Proxy Statement, indicate the names(s) and the number of votes to be given to
such nominee(s).
Cumulate _______________________________________________________________________
<PAGE> 40
2. Approval of amendments to the Florida East Coast Industries, Inc. 1998 Stock
Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of appointment of KPMG LLP as independent public accountants for
1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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: ____________________________, 1999
________________________________________
SIGNATURE
________________________________________
SIGNATURE IF HELD JOINTLY
PLEASE MARK, SIGN, DATE AND MAIL THIS CARD
PROMPTLY IN THE POSTAGE PAID RETURN
ENVELOPE PROVIDED.
