ST JOE PAPER CO, S-3/A, 1998-01-16

ST JOE PAPER CO
S-3/A, 1998-01-16
PAPERBOARD MILLS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998

REGISTRATION NO. 333-42397

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------------

AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

---------------------

ST. JOE CORPORATION
(Exact name of Registrant as specified in its charter)

---------------------

<TABLE>
<S> <C> <C>
FLORIDA 1-10466 59-0432511
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or File No.) Identification No.)
organization)
</TABLE>

1650 PRUDENTIAL DRIVE
JACKSONVILLE, FLORIDA 32207
(904) 396-6600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

ROBERT M. RHODES
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
1650 PRUDENTIAL DRIVE
JACKSONVILLE, FLORIDA 32207
(904) 396-6600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

---------------------

COPIES TO:

<TABLE>
<S> <C>
MARC D. BASSEWITZ, ESQ. JEFFREY SMALL, ESQ.
LATHAM & WATKINS DAVIS POLK & WARDWELL
233 SOUTH WACKER DRIVE, SUITE 5800 450 LEXINGTON AVENUE
CHICAGO, ILLINOIS 60606 NEW YORK, NEW YORK 10017
TELEPHONE: (312) 876-7700 TELEPHONE: (212) 450-4000
</TABLE>

---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

================================================================================
<PAGE> 2

EXPLANATORY NOTE

This registration statement contains two forms of prospectus: one to be
used in connection with a United States offering of the shares of Common Stock
(the "U.S. Prospectus") and one to be used in connection with a concurrent
international offering of the shares of Common Stock (the "International
Prospectus" and together with the U.S. Prospectus, the "Prospectuses"). The
International Prospectus will be identical to the U.S. Prospectus except that it
will have a different front cover page. The alternate front cover page for the
International Prospectus included herein has been labeled "Alternate Cover Page
for International Prospectus."
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

PROSPECTUS (Subject To Completion)

Issued January 16, 1998

12,000,000 Shares

St. Joe Corporation
COMMON STOCK
------------------------

OF THE 12,000,000 SHARES OF COMMON STOCK OFFERED HEREBY, 10,200,000 ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS (THE
"U.S. OFFERING") AND 1,800,000 ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS (THE "INTERNATIONAL
OFFERING," AND TOGETHER WITH THE U.S. OFFERING, THE "OFFERINGS"). SEE
"UNDERWRITERS." ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD
BY THE ALFRED I. DUPONT TESTAMENTARY TRUST (THE "SELLING STOCKHOLDER" OR THE
"TRUST"). SEE "ALFRED I. DUPONT TESTAMENTARY TRUST." ST. JOE CORPORATION (THE
"COMPANY" OR "ST. JOE") WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF THE
SHARES BEING OFFERED HEREBY. THE COMPANY'S COMMON STOCK IS LISTED ON THE NEW
YORK STOCK EXCHANGE UNDER THE SYMBOL "SJP." ON JANUARY 15, 1998, THE LAST
REPORTED SALE PRICE OF THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS
$33.4375 PER SHARE.

------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

PRICE $ A SHARE
------------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDER
-------- -------------- -----------
<S> <C> <C> <C>
Per Share................................................. $ $ $
Total(2).................................................. $ $ $
</TABLE>

- ------------

<TABLE>
<S> <C>
(1) The Company and the Selling Stockholder have agreed to
indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as
amended.
(2) The Selling Stockholder has granted to the U.S. Underwriters
an option, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of 1,800,000 additional Shares
of Common Stock at the price to public less underwriting
discounts and commissions for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise
such option in full, the total price to public, underwriting
discounts and commissions and proceeds to the Selling
Stockholder will be $ , $ and $ ,
respectively. See "Underwriters."
</TABLE>

------------------------

The Shares of Common Stock are offered, subject to prior sale, when, as,
and if accepted by the Underwriters named herein, and subject to approval of
certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It
is expected that delivery of the shares of Common Stock will be made on or about
, 1998, at the offices of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately available
funds.
------------------------

MORGAN STANLEY DEAN WITTER

DONALDSON, LUFKIN & JENRETTE

Securities Corporation

MERRILL LYNCH & CO.

RAYMOND JAMES & ASSOCIATES, INC.

, 1998
<PAGE> 4

[MAP OF THE STATE OF FLORIDA SHOWING THE LOCATION OF THE COMPANY'S PROPERTIES]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT THE COMMON STOCK IN CONNECTION
WITH THE OFFERINGS, AND MAY BID FOR AND PURCHASE THE SHARES OF THE COMMON STOCK
IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

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<PAGE> 5

NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, BY THE SELLING STOCKHOLDER OR BY
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK OFFERED HEREBY TO ANY PERSON IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE ANY SUCH OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

There are restrictions on the offer and sale of the Common Stock offered
hereby in the United Kingdom. All applicable provisions of the Public Offers of
Securities Regulations of 1995, the Financial Services Act of 1986 and the
Companies Act of 1985 with respect to anything done by any person in relation to
the Common Stock in, from or otherwise involving the United Kingdom must be
complied with. See "Underwriters."
------------------------

TABLE OF CONTENTS

<TABLE>
<S> <C>
Statement Regarding Forward Looking Disclosure.............. ii
Available Information....................................... iii
Incorporation Of Certain Documents By Reference............. iii
Prospectus Summary.......................................... 1
Risk Factors................................................ 8
Dividends................................................... 16
Market For Common Stock..................................... 16
Alfred I. duPont Testamentary Trust......................... 17
Selected Consolidated Financial Data........................ 19
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations................................. 22
Business And Properties..................................... 27
Management.................................................. 55
Principal and Selling Stockholders.......................... 63
Certain Transactions........................................ 64
Description Of Common Stock................................. 64
Tax Consequences To Non-U.S. Holders........................ 65
Underwriters................................................ 68
Legal Matters............................................... 71
Experts..................................................... 71
Index To Consolidated Financial Statements.................. F-1
</TABLE>

STATEMENT REGARDING FORWARD LOOKING DISCLOSURE

Certain statements contained under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business and Properties" and elsewhere in this Prospectus,
including, without limitation, those concerning implementation of the Company's
new business strategy, its expansion plans, economic performance and financial
condition, the Company's ability to obtain appropriate entitlements relating to
its real estate operations, the scope and profitability of the Company's
developable land, the ability of the Company to optimize the value of its assets
(including, without limitation, through dispositions or otherwise), projected
harvesting levels and the ability of the Company to successfully integrate
existing or future joint venture and/or acquisition candidates into its
operations are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and
the Company intends that such forward-looking statements be subject to the safe
harbor protection provided thereby. Such forward-looking statements may be
identified by use of forward-looking terminology, such as "may," "intend,"
"will," "expect," "anticipate," "estimate," "continue" or the negative thereof
or other variations thereon or comparable terminology. Because such statements
involve risks and uncertainties,

ii
<PAGE> 6

actual results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause such differences include,
but are not limited to, those discussed under "Risk Factors."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C., and at the Commission's regional
offices at 75 Park Place, New York, New York and at Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois, and copies may be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Such reports, proxy statements and other information may
also be inspected and copied at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York. The Commission also maintains a site on the
World Wide Web at "http://www.sec.gov" that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock offered hereby. This Prospectus, which
constitutes part of the Registration Statement, omits certain of the information
contained in the Registration Statement and the exhibits and schedules thereto
on file with the Commission pursuant to the Securities Act and the rules and
regulations of the Commission thereunder. In addition, certain documents filed
by the Company with the Commission have been incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference." The
Registration Statement, including exhibits and schedules thereto and such
incorporated documents, may be inspected and copied at the public reference
facilities maintained by the Commission at its principal office in Washington,
D.C. or at its regional offices. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, filed with the Commission by the Company pursuant
to the Exchange Act, are incorporated herein by reference and made part of this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "1996 10-K"); (ii) the portions of the Company's
1996 Annual Report to Stockholders that have been incorporated by reference into
the 1996 10-K; (iii) the portions of the Company's 1996 definitive Proxy
Statement for its Annual Meeting of Stockholders dated April 11, 1997 that have
been incorporated by reference into the 1996 10-K; (iv) the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 30, 1997, June 30, 1997 and
September 30, 1997; and (v) the Company's Current Reports on Form 8-K dated
November 25, 1997 and December 10, 1997.

Each document filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of all shares of Common Stock to which
this Prospectus relates shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be

iii
<PAGE> 7

incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information that are incorporated by reference,
unless such exhibits are specifically incorporated by reference in such
information) will be provided without charge to each person, including any
beneficial owner, to whom this Prospectus (or the applicable Prospectus
Supplement) is delivered upon written or oral request. Requests for such
documents should be directed to St. Joe Corporation, 1650 Prudential Drive,
Jacksonville, Florida 32207, Attention: Investor Relations (telephone: (904)
396-6600).

iv
<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Per share data appearing in this Prospectus has
been restated to reflect the 3-for-1 split of the Company's Common Stock on
January 12, 1998. Unless otherwise indicated, all information in this Prospectus
is presented on the assumption that the over-allotment option granted to the
U.S. Underwriters has not been exercised. As used herein, the terms "Company"
and "St. Joe" refer to St. Joe Corporation and its subsidiaries.

THE COMPANY

St. Joe Corporation is a diversified company engaged in the real estate,
forestry, transportation and sugar industries in the State of Florida. The
Company is the single largest private landowner in Florida, owning more than 1.1
million acres, or approximately 3% of the land area of the state (an area
slightly smaller than the land area of the State of Delaware). Although the vast
majority of the Company's properties consist of timberlands, St. Joe owns a
large portfolio of income producing properties and sizable tracts suitable for
commercial, industrial and residential as well as resort and entertainment
development. The Company is currently engaged in four principal lines of
business:

- Real Estate -- the development, ownership and management of commercial,
industrial and residential properties as well as the prospective
development of resort and entertainment properties;

- Forestry -- the management and harvesting of extensive timberland
holdings;

- Transportation -- the operation of two railroads within Florida; and

- Sugar -- the cultivation, harvesting and processing of sugar cane.

St. Joe is currently undergoing a number of important changes in its mix of
businesses and its overall business strategy. In early 1997, the Company hired a
new chairman and chief executive officer, Peter Rummell, the former President of
Disney Development Company and Chairman of Walt Disney Imagineering, as well as
several other senior members of management with strong backgrounds in
large-scale real estate development, the complex Florida entitlement process,
and financial and asset management. Under the direction of this new management
team, the Company intends to focus more closely on the development of its large
land portfolio. In addition, the Company is implementing a new strategy in its
forestry segment by extending the harvest rotation of certain sections of its
timberlands in order to effect a shift toward higher-margin products. In order
to focus more closely on its core assets, the Company sold its linerboard mill
as well as its container and communications businesses in 1996. In addition, on
December 6, 1997, management announced that it had reached an agreement in
principle to sell the Company's sugar lands to certain federal and state
government agencies on or before June 6, 1998, although the Company will retain
the right to farm the sugar lands through the 2002-2003 crop year.

Management believes that the Company has a number of key business strengths
and competitive advantages, including, in its opinion, the largest inventory of
private land suitable for development in the State of Florida, a very low cost
basis in its land assets, a strong cash position and no material indebtedness,
which management believes will allow St. Joe the financial flexibility to
aggressively pursue development opportunities. Management is also focusing on
optimizing the value of the Company's other operating assets and may employ
financially-driven strategies to improve returns, such as acquisitions, joint
ventures and dispositions.

OPERATIONS

Real Estate. The Company currently conducts its real estate operations in
two principal segments: commercial/industrial development and management and
community/residential development.

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<PAGE> 9

approximately 5.6 million square feet of rentable commercial/industrial space.
On the same date, GCC's buildings in service for one year or more were 91%
leased (82% for its portfolio as a whole, including newly constructed
buildings). GCC's buildings are primarily Class "A" office space and high
quality commercial/ industrial facilities constructed after 1987 and are
well-located in business parks near major transportation hubs, primarily in the
Jacksonville and Miami, Florida areas. At October 30, 1997, GCC had an
additional 479,000 square feet under construction and had entitlements to
develop an additional approximately 14.2 million square feet of buildings,
primarily in its Miami, Jacksonville and Orlando parks. GCC also owns over
15,400 acres of unentitled land that management believes are suitable for future
commercial, industrial and residential development, primarily situated adjacent
to the Florida East Coast Railway right-of-ways in attractive markets that the
Company believes will provide significant growth opportunities.

In the community/residential real estate sector, the Company intends to
develop large-scale mixed-use communities, primarily on Company-owned land. The
Company's land holdings include large tracts near Tallahassee, the state
capital, and in northwestern Florida that the Company believes to be well-suited
for community/residential as well as resort and second-home development. These
holdings include significant Gulf of Mexico frontage (with over five miles of
white sand beaches), and bay and riverfront properties, as well as properties
adjacent to existing communities. The Company intends to design and entitle
well-conceived master plans, install major infrastructure improvements and
either sell permitted lots to merchant builders for construction or build and
sell finished residential units to end purchasers. The Company recently
initiated master-planning of 800 acres with over 7,000 feet of white sand beach
frontage in south Walton County near the Town of Seaside for development as
second-home and resort communities and 3,000 acres of a Tallahassee parcel for
development as a mixed-use residential community. The Company is currently
evaluating other properties for development as resort and second-home
communities and believes that its holdings in northwestern Florida offer unique
opportunities to create high amenity projects, with gulf, lake and river access,
at comparatively low costs due to the Company's low basis in its long-term land
holdings.

In order to increase the pace of community/residential development and to
gain a foothold in the home building industry, the Company recently acquired the
personnel, trademark and selected assets of the Arvida Company ("Arvida")
through a majority-owned joint venture (the "Arvida Venture"). Arvida is a
prominent Florida-based community and residential real estate developer, which
in 1996 and the first nine months of 1997 closed contracts on 2,077 houses and
566 lots.

Forestry. The Company is the largest private owner of timberlands in
Florida, with over 700,000 acres of planted pine forests, primarily in
northwestern Florida, and an additional 300,000 acres of mixed timberland,
wetlands and lake and canal properties. The principal product of the Company's
forestry operations is softwood pulpwood. In addition, the Company produces and
sells sawtimber. The Company estimates that it can increase its long-term
sustainable yearly harvest over the next decade to 1.6 million tons of softwood
pulpwood and .9 million tons of softwood sawtimber. The major customer for the
Company's timber has been and continues to be the Company's former linerboard
mill, which it sold to Florida Coast Paper Company, L.L.C. ("Florida Coast") in
May 1996. In 1996, the Company harvested 697,398 tons of timber, of which
610,418 tons were sold to Florida Coast, and the balance to a number of other
market participants, including Georgia-Pacific Corporation, Champion
International Corporation and Louisiana-Pacific Corporation.

After the closure of the mill for several months in 1997, the Company
renegotiated its 15 year supply contract with Florida Coast to allow it to
supply pulpwood to the mill at a level (700,000 tons per year beginning June 1,
1998) significantly lower than historical levels. The Company sought to reduce
its obligation to supply pulpwood under the agreement and intends to extend
growing periods for certain portions of its timber and to sell such timber in
the form of higher-margin products, which the Company anticipates will increase
the long-term profitability of its forestry operations. The Company estimates
that its standing pine inventory on January 1, 1998 totaled 10.6 million tons
and its hardwood inventory totaled 5.9 million tons.

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<PAGE> 10

between Jacksonville and West Palm Beach, Florida and is the exclusive
rail-service provider to the Port of Palm Beach, Port Everglades and the Port of
Miami. Principal commodities carried by FEC, by weight, include
trailers-on-flatcars, containers-on-flatcars, crushed stone, foodstuffs,
vehicles and cement. FEC is pursuing a number of opportunities to enhance
returns, including through leasing its right-of-ways for the laying of
fiber-optic conduit and the construction of communications towers. The Company
also owns the Apalachicola Northern Railroad Company ("ANRR"), a short-line
railroad that operates on 96 miles of track between Port St. Joe and
Chattahoochee, Florida.

Sugar. Talisman Sugar Corporation ("Talisman"), a wholly-owned subsidiary
of the Company, grows sugarcane on over 52,000 acres in the Belle Glade region
of south central Florida. Talisman processes this sugarcane at its mill facility
and sells all of the output of raw sugar to the Everglades Sugar Refinery, Inc.,
a wholly owned subsidiary of Savannah Foods & Industries, Inc. During the
1996-1997 crop year, Talisman produced 117,000 tons of raw sugar. As part of its
efforts to focus more intently on the Company's core assets, the Company has
agreed in principle to sell its sugar lands to certain federal and state
government agencies on or before June 6, 1998 for $133.5 million in cash. In the
event the proposed sale is consummated, Talisman would retain the right to farm
the sugar lands through the 2002-2003 crop year. The proposed transaction is
subject to both government and board approval.

KEY BUSINESS STRATEGIES

The Company's principal objective is to optimize the value of its
substantial asset base. The Company's management team is focused on the
following key strategies:

Increase the Pace of Development. Through its new management team,
the Company intends to take a more aggressive approach to the development
of its properties. In the commercial/industrial sector, GCC has secured
entitlements to develop an additional 14.2 million square feet of
buildings. In the community/residential development sector, the Company's
inventory includes approximately 51,000 acres, including land adjacent to
existing developments and prime gulf-front properties as well as numerous
lake and riverfront parcels that management believes can be developed in a
variety of formats. As part of its strategy to increase the pace of
development, St. Joe intends to initiate home-building activity, primarily
through the Arvida Venture. During the near term, the Arvida Venture will
accelerate development through the acquisition of land from third parties.
Over the longer term, management believes the Company's large raw land
portfolio will allow the Company to maintain low development costs relative
to its competitors and that its existing large portfolio of
income-producing properties, together with its other businesses, will
generate cash to fund a significant portion of its long-term projects.

Pursue Strategic Acquisitions and Joint Ventures in Real Estate. The
Company believes that its diverse capabilities and access to capital
provide a competitive advantage in identifying and acquiring additional
development opportunities. The Company intends to pursue such development
opportunities through potential acquisitions, joint ventures and other
strategic alliances, particularly with established Florida-based
developers. Management believes that joint venture relationships will
provide the Company with immediate access to the human resources, local
market expertise and information systems necessary to enable the Company to
compete effectively for development opportunities. As part of this
strategy, the Company recently entered into the Arvida Venture. The Company
also recently formed a joint venture with CNL Group, Inc. ("CNL"), a large
privately held real estate investment, finance and development company, to
develop commercial properties primarily in the central Florida region along
the U.S. Interstate Highway 4 corridor, including Tampa, Orlando and
Daytona Beach. On December 9, 1997, the Company entered into a letter of
intent with Codina Group, Inc. ("Codina") and Weeks Corporation ("Weeks")
under which the Company and Weeks, among other things, each agreed to
purchase a one-third interest in Codina, a commercial/industrial developer
active principally in southern Florida.

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<PAGE> 11

development projects. The Company believes it has the land inventory
(including attractive beach and other waterfront properties) necessary to
enter the resort development business effectively. As part of the Company's
strategy to enter the resort development business, in December 1997 the
Company acquired the Riverside Golf Management Company, which manages three
daily fee public golf courses in Jacksonville, Florida, Atlanta, Georgia
and Clemson, South Carolina. In addition, the Company is evaluating
potential development opportunities in the location-based entertainment
business, both inside and outside of Florida, to be developed by the
Company alone or in conjunction with joint venture partners. Location-based
entertainment takes the form of stand alone facilities, often part of
regional or national chains, that provide entertainment, food and beverage
and/or retail experiences. The Company's management has extensive
experience in the resort and entertainment segments of the real estate
development industry and is seeking avenues to take advantage of that
expertise.

Aggressively Pursue the Entitlement Process. The Company believes
that the complex Florida land entitlement process can be a significant
entry barrier to less capitalized developers. In developing new residential
real estate projects, the Company intends to capitalize on its large
existing land portfolio by, if appropriate, deeding or donating portions of
its existing properties in exchange for long-term development rights. The
Company believes its large, established land inventory provides an
advantage relative to competitors that must purchase real estate before
beginning development projects.

Enhance Operating Performance. The Company believes it can improve
its operating performance through the following means:

Implement Aggressive Leasing Policy. Due to currently favorable
market conditions, the Company believes that it can generate incremental
earnings through enhanced management of its existing rental portfolio
and through more aggressive leasing. Leases for approximately 73% of
GCC's 4.6 million rented square feet expire over the next five years. In
exercising this strategy, the Company intends to balance rental revenue
with occupancy levels in order to optimize project revenues.

Increase Long-Term Profitability of Forestry Operations. The
Company intends to improve returns in its forestry operations by growing
portions of its timber for longer periods in order to capitalize on
higher margins for older-growth timber. In 1996, the Company shed the
lower-margin component of its forestry operations through the sale of
its linerboard mill and container facilities, and in 1997, the Company
reduced employment in its forestry operations by 72% through
outsourcing. In addition, the Company is considering potential
transactions to increase the nearer term value of the Company's
timberlands, such as asset swaps, sales, joint ventures or lease
arrangements.

Achieve Cost Reductions in Transportation Operations. The Company
believes it can improve the profitability of its transportation segment
through reductions in its cost structure, including more efficient use
of its railyards and equipment.

Capital Structure and Financing Strategy. The Company has
historically financed expansion with internally generated funds, held large
cash balances and avoided the incurrence of debt. Although the Company
expects to continue to employ conservative financing policies, management
intends to use the Company's balance of cash and cash equivalents to invest
more aggressively in development, acquisitions and joint ventures and to
incur debt in appropriate circumstances in order to more effectively
leverage the value of the Company's assets. The Company had cash, cash
equivalents and marketable securities of approximately $505 million at
January 12, 1998.

THE FLORIDA ECONOMY

has been 2.0%, while the average U.S. rate of population growth has been
approximately 1.0%. According to the Bureau of Economic and Business Research at
the University of Florida (the "Bureau"), Florida's population will increase 26%
between 1995 and 2010 compared to a U.S. Census Bureau projection of 13.5% for
the United States as a whole. Population growth rates on the eastern coast of
Florida, where many of GCC's properties are located, are projected by the Bureau
to be significantly higher than the statewide rate. With the exception of Walton
County (where population growth rates have exceeded those of the State of
Florida), population growth rates in northwestern Florida, where most of the
Company's properties are located, have not been as high as those of the State as
a whole, but have still exceeded the national average. The Bureau estimates that
employment in Florida grew at an average annual rate of 3.5% from 1980 to 1995
and will continue to increase at an average annual rate of 2.2% from 1996 to
2010. According to the Bureau, personal incomes in Florida grew at 4.1% from
1980 to 1995 and are expected to continue to grow at approximately 2.9% per year
from 1996 to 2010. Florida's population, job and income growth have created
substantial demand for new residential and commercial construction. According to
a study conducted by the Bureau, in 1995 Florida ranked first in the nation with
respect to the number of housing units permitted for construction and second in
the nation on a value per unit basis. Housing starts in the state of Florida are
expected to reach an aggregate level of 113,200 for 1996 and 1997 combined and
to increase to 116,000 for 1998 alone. Management expects Florida's economic and
population growth to continue and believes that St. Joe is well positioned to
benefit from increasing demand for housing as well as office and industrial
space in the Florida real estate market.

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock Offered by the Trust:
U.S. Offering............................................. 10,200,000 shares
International Offering.................................... 1,800,000 shares
Total:............................................ 12,000,000 shares
Common Stock Outstanding(1)................................. 91,697,811 shares
Use of Proceeds............................................. No proceeds will be
received by the Company.
New York Stock Exchange Symbol.............................. "SJP"
</TABLE>

- ---------------

(1) As of January 12, 1998. Does not reflect 5,845,341 shares of Common Stock
issuable upon the exercise of options. A total of 185,139 additional shares
of Common Stock are reserved for issuance under the Company's stock option
plan. See Note 10 to the Consolidated Financial Statements.

THE ALFRED I. DUPONT TESTAMENTARY TRUST

The Company currently is, and following the Offerings will continue to be,
controlled by the Alfred I. duPont Testamentary Trust (the "Selling Stockholder"
or the "Trust"). The Trust was established under the Last Will and Testament of
Alfred I. duPont (the "Will") to provide certain testamentary dispositions
specified in the Will and to establish and benefit The Nemours Foundation (the
"Nemours Foundation"), a charitable foundation for the care and treatment of
crippled, but not incurable, children and certain elderly. Prior to the
Offerings, the Trust and the Nemours Foundation together beneficially owned
68.8% (after giving effect to management stock options exercisable within the
next 60 days) of the outstanding Common Stock, and after the Offerings the Trust
and the Nemours Foundation together will own 54.0% of the outstanding Common
Stock (assuming exercise of the U.S. Underwriters' over-allotment option). Two
of the six trustees of the Trust serve as directors of the Company and FECI. The
Trust is selling the Common Stock in order to diversify the Trust's assets and
to reinvest the proceeds of the Offerings in assets which produce higher current
income. See "Alfred I. duPont Testamentary Trust" and "Management."

5
<PAGE> 13

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
-------- --------- -------- -------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales(1).............................. $155,122 $ 150,564 $245,704 $173,401 $ 79,566
Operating revenues(2)..................... 175,784 184,360 185,485 162,307 172,328
-------- --------- -------- -------- ---------
Total revenues.................. 330,906 334,924 431,189 335,708 251,894
Cost of sales............................. 111,014 116,014 112,163 64,765 63,282
Operating expenses........................ 133,091 139,875 139,640 120,524 118,493
Selling, general and administrative
expenses................................ 26,836 31,718 31,215 24,373 28,103
-------- --------- -------- -------- ---------
Operating profit........................ 59,965 47,317 148,171 126,046 42,016
Other income.............................. 25,164 18,770 40,857 32,005 32,650
-------- --------- -------- -------- ---------
Income from continuing operations before
income taxes and minority interest...... 85,129 66,087 189,028 158,051 74,666
Provision for income taxes................ 31,446 24,535 83,117 71,211 32,981
-------- --------- -------- -------- ---------
Income from continuing operations before
minority interest....................... 53,683 41,552 105,911 86,840 41,685
Minority interest......................... 15,827 12,194 14,002 9,922 13,404
-------- --------- -------- -------- ---------
Income from continuing operations......... 37,856 29,358 91,909 76,918 28,281
Income (loss) from discontinued
operations(3)........................... 4,253 44,461 (4,528) (4,528) --
Gain on sale of discontinued
operations(3)........................... -- -- 88,641 95,644 --
-------- --------- -------- -------- ---------
Net income...................... $ 42,109 $ 73,819 $176,022 $168,034 $ 28,281
======== ========= ======== ======== =========
PER SHARE DATA(4):
Income from continuing operations......... $ 0.41 $ 0.32 $ 1.00 $ 0.84 $ 0.31
Earnings (loss) from discontinued
operations.............................. 0.05 0.49 (0.05) (0.05) --
Gain on the sale of discontinued
operations.............................. -- -- 0.97 1.05 --
-------- --------- -------- -------- ---------
Net income................................ $ 0.46 $ 0.81 $ 1.92 $ 1.84 $ 0.31
======== ========= ======== ======== =========
Dividends paid(5)......................... $ 0.07 $ 0.07 $ 0.07 $ 0.05 $ 0.05
Special distribution(6)................... -- -- -- -- 3.33
OTHER OPERATING DATA:
EBDDT(7).................................. $ 58,327 $ 73,992 $ 72,682 $ 55,701 $ 60,938
Capital expenditures...................... 65,450 78,816 64,271 41,135 53,256
Cash flows provided by (used in)
Operating activities.................... 102,718 154,082 117,345 136,818 75,237
Investing activities(6)................. (82,750) (137,115) 322,877 344,437 (11,773)
Financing activities(6)................. (11,143) (46,554) (8,011) (6,065) (311,491)
</TABLE>

6
<PAGE> 14

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
----------------------- -------------------
1995 1996 1997
---------- ---------- -------------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(8).......................... $ 303,590 $ 819,851 $ 576,712
Total property, plant and equipment, net.............. 804,974 834,167 853,217
Total assets.......................................... 1,530,994 1,806,238 1,584,860
Total stockholders' equity............................ 1,016,067 1,196,941 934,606
</TABLE>

(1) Net sales includes real estate, land and building sales, forestry and timber
sales and sugar sales. Net sales for the nine months ended September 30,
1996 included two related one-time condemnation sales of land to the State
of Florida in exchange for $97.8 million in cash plus certain limited
development rights. Net operating results of the communications segment,
linerboard mill and container plants are shown separately as income (loss)
from discontinued operations for all years presented.
(2) Operating revenues includes real estate rental revenue and transportation
revenue.
(3) Net operating results of the communications segment, linerboard mill and
container plants are shown separately as income (loss) from discontinued
operations for all years presented. The gain on sale of discontinued
operations declined by approximately $7.0 million during the fourth quarter
of 1996 as a result of finalizing the post closing working capital
adjustments, closing expenses and pension curtailment gain, which had been
previously estimated. See Note 3 to the Consolidated Financial Statements.

(4) Per share data is rounded to the nearest $.01 to reflect the 3-for-1 split
of the Company's Common Stock on January 12, 1998.

(5) On December 30, 1997, the Company paid a dividend of $.02 per share.

(6) Approximately $359.3 million of proceeds from the sales of the
communications segment, linerboard mill and container plants were held in
special accounts during 1996. A special distribution of a portion of the net
proceeds of the sales of $3.33 per share was paid on March 25, 1997, for
stockholders of record on March 21, 1997. The Company made a special
distribution of the remaining net proceeds of $.34 per share on December 30,
1997 to stockholders of record on December 19, 1997.

(7) The Company uses a supplemental performance measure along with net income to
report its operating results. This measure, Earnings Before Depreciation and
Deferred Taxes (EBDDT), is not a measure of operating results or cash flows
from operating activities as defined by generally accepted accounting
principles. Additionally, EBDDT is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative
to cash flows as a measure of liquidity. However, the Company believes that
EBDDT provides relevant information about its operations and is necessary,
along with net income, for an understanding of its operating results.
Depreciation, amortization and deferred income taxes are excluded from EBDDT
as they represent non-cash charges. Earnings and gains on sales of
discontinued operations and gains on the sale of non-strategic land and
other assets represent non-operating, unusual and/or nonrecurring items and
are therefore excluded from EBDDT.

(8) Includes cash, cash equivalents, marketable securities and short-term
investments.

7
<PAGE> 15

RISK FACTORS

The following risk factors should be considered carefully in conjunction
with the other information contained in this Prospectus or incorporated by
reference herein in evaluating the Company and its businesses before purchasing
the Common Stock offered hereby.

IMPLEMENTATION OF NEW BUSINESS STRATEGY

The Company is currently undergoing a number of important changes in its
mix of businesses and its overall business strategy. In the first quarter of
1997, the Company hired a new chairman and chief executive officer as well as
several other senior members of management with strong backgrounds in
large-scale real estate planning and development and financial and asset
management. Under the direction of this new management team, the Company intends
to focus more closely on the development of its large land portfolio. Management
is also implementing a new strategy in the Company's forestry operations
pursuant to which the Company intends to extend the harvest rotation of certain
forest sections in order to effect a shift toward higher-margin products. As
part of the Company's strategy to focus more closely on core assets, the Company
sold its linerboard mill and container facilities as well as its communication
businesses in 1996. In addition, management has reached an agreement in
principle to sell the Company's sugar lands to certain federal and state
government agencies.

Management expects the Company's new business strategy will result in a
larger portion of the Company's overall revenues being attributable to real
estate operations. However, many of the Company's proposed projects will require
a lengthy development process before lots or residential units can be sold or
otherwise generate revenue. See "Business and Properties -- Real
Estate -- Community and Residential Development." In addition, during the aging
of the Company's timberlands, management expects near-term revenues will remain
flat or fall to levels below those achieved by the business in earlier years.
See "Business and Properties -- Forestry." While the Company believes that its
new business strategy will enable it to enhance the value of its asset base as
well as improve its long-term financial results, there can be no assurance that
this new strategy will be successful, that the anticipated benefits of this new
strategy will be realized, or that management will be able to implement its
strategy on a timely basis.

RISKS RELATING TO REAL ESTATE OPERATIONS

General Real Estate Investment Risks. In general, real property
investments are subject to varying degrees of risk. The yields available from
real estate investments depend on the amount of income earned and capital
appreciation generated by the related properties as well as the expenses
incurred in connection therewith. If the Company's properties do not generate
income sufficient to meet operating expenses, the Company's financial
performance could be adversely affected. The Company's properties intended for
residential development are primarily located in northwestern Florida and GCC's
commercial/industrial properties are primarily located in or near Miami, Orlando
and Jacksonville, Florida. Income from and the performance of the Company's
properties may therefore be adversely affected by the general economic climate
of these regions, including unemployment rates and local conditions such as the
supply of and demand for real estate in the area, the attractiveness of the
Company's properties to potential residents or tenants, zoning or other
regulatory restrictions, competition from other available properties, the
affordability of homes and comparable commercial/industrial properties, and the
potential of increased operating costs (including real estate taxes). Over the
last decade, the growth of Florida's economy has substantially outperformed that
of the U.S. economy. Northwestern Florida's growth is also expected to continue,
although at a lesser rate than is expected for the rest of the state. However,
there can be no assurance that the Florida economy (including the northwest
region) will continue to experience positive growth rates or that Florida will
not be affected by a recession in the future. Certain significant expenditures
associated with an investment in real estate (such as real estate taxes,
maintenance costs and debt payments) would generally not be reduced if
circumstances in the local economy caused a reduction in revenue from the
Company's properties. Accordingly, if growth rates for the Florida economy begin
to decline or if a recession in the Florida economy occurs, the Company's
financial results could be adversely affected.

8
<PAGE> 16

Development Risks. Any existing or future development activities of the
Company will entail certain risks, including the expenditure of funds on and
devotion of management's time to projects which may not come to fruition; the
risk that development or redevelopment costs of a project may exceed original
estimates, possibly making the project uneconomical; the risk that occupancy
rates or rents at a completed project will be less than anticipated or that
there will be vacant space at the project; the risk that expenses at a completed
development will be higher than anticipated; and the risk that permits and other
governmental approvals will not be obtained. In addition, the Company's real
estate development activities require significant capital expenditures. The
Company will be required to obtain funds for its capital expenditures and
operating activities through cash flow from operations, property sales or
financings. There can be no assurances that funds available from cash flow,
property sales and financings will be sufficient to fund the Company's required
or desired capital expenditures for development. If the Company were unable to
obtain sufficient funds, it might have to defer or otherwise limit certain
development activities. Further, any new development or any rehabilitation of
older projects can require compliance with new building codes and other
regulations. The Company cannot estimate the cost of complying with such codes
and regulations, and such costs can make a new project or some otherwise
desirable uses of an existing project uneconomic.

Before the Company can develop property, it must obtain a variety of
approvals (entitlements) from local governments with respect to such matters as
zoning, subdivision, environmental and other issues. The Company must also
obtain a variety of approvals from state and federal governments with respect to
matters that may include issues related to the environment, special status
species, the public trust and others. Because of the discretionary nature of
these approvals and concerns that may be raised by various governmental
officials, public interest groups and other interested parties during both the
approval and development process, the Company's ability to develop properties
and realize income from its projects could be delayed, reduced or eliminated.
See "Business and Properties -- Real Estate -- Regulation."

Joint Venture Risks. The Company has direct or indirect equity interests
in several joint ventures and may initiate future joint venture projects as part
of its overall development strategy. A joint venture may involve special risks
associated with the possibility that (i) the venture partner at any time may
have economic or business interests or goals that are inconsistent with those of
the Company, (ii) the venture partner may take actions contrary to the
instructions or requests of the Company or contrary to the Company's policies or
objectives with respect to its real estate investments or (iii) the venture
partner could experience financial difficulties. Actions by the Company's
venture partners may have the result of subjecting property owned by the joint
venture to liabilities in excess of those contemplated by the terms of the joint
venture agreement or have other adverse consequences. In its role as a general
partner of certain joint ventures, the Company may be jointly or severally
liable for the debts and liabilities of the joint ventures. The Company may not
be able to control decisions made by its joint ventures. In addition, the
Company's joint venture partners may dedicate time and resources to existing
commitments and responsibilities. See "Business and Properties -- Real
Estate -- Community and Residential Development -- Other."

Risks Related to Acquisition Financing. A significant portion of the
Company's resources may be used for acquisitions of joint ventures or other
entities. The timing, size and success of the Company's acquisition efforts and
any associated capital commitments cannot be readily predicted. The Company may
finance future acquisitions by using shares of its Common Stock, cash or a
combination of Common Stock and cash. If the Common Stock does not maintain a
sufficient market value, or if potential acquisition candidates are otherwise
unwilling to accept Common Stock as part of the consideration for the sale of
their businesses, the Company may be required to utilize more of its cash
resources, if available, in order to initiate and maintain its acquisition
program. If the Company does not have sufficient cash resources, its growth
could be limited unless it is able to obtain additional capital through debt or
equity financings. There can be no assurance that the Company will be able to
obtain additional financing it may need for its acquisition program on terms
that the Company deems acceptable. To the extent the Company uses Common Stock
for all or a portion of the consideration to be paid for future acquisitions,
dilution may be experienced by existing stockholders, including the purchasers
of Common Stock in the Offerings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "-- Control by Principal Shareholder."

9
<PAGE> 17

Natural Disasters. Natural disasters, such as hurricanes, floods or fires,
or unexpected climactic conditions, such as unusually heavy or prolonged rain,
particularly in Florida, where the Company's assets are concentrated, may have
an adverse impact on the ability of the Company to develop its properties and
realize income from its projects.

Regulation. The Company's current and past ownership and operation of real
property are subject to environmental laws and regulations generally applicable
to all businesses. The Company may be liable for the costs of remediating
hazardous materials contamination on its properties, regardless of fault, and
the Company's ability to sell or develop its properties may be severely
restricted by various federal, state and local environmental laws, including
laws relating to the protection of wetlands and endangered species. See "--
Environmental Matters" and "Business and Properties -- Real
Estate -- Regulation."

Rental Income and Competition for Tenants. Because of the Company's
substantial investment in rental properties, the Company's overall financial
performance would be adversely affected if a significant number of the Company's
tenants were unable to meet their obligations to the Company. In addition, when
space becomes available at its properties, the Company is subject to risks that
the leases may not be renewed and that the terms of the renewal or reletting
(including the cost of required renovations or concessions to tenants) may be
less economically advantageous to the Company. The Company has established
annual property budgets, including estimates of costs for renovation and
reletting expenses, that it believes are reasonable in light of each property's
situation, but no assurance can be given that estimates will sufficiently cover
all expenses. If the Company is unable to promptly lease all or substantially
all of the space at its properties, if the rental rates are significantly lower
than expected or if the Company's reserves for these purposes prove inadequate,
there could be an adverse effect on the Company's financial performance. See
"Business and Properties -- Commercial and Industrial Development -- Leasing."

RISKS RELATED TO FORESTRY OPERATIONS

Committed Product Purchases by Florida Coast; Possible Inability to Develop
New Markets. The major customer for the timber harvested from the Company's
timberlands has been and continues to be the Company's former linerboard mill,
which was sold on May 30, 1996 to Florida Coast. Sales to the mill accounted for
87% of the segment's sales from timber harvested on Company lands in 1996. The
mill was temporarily shut down from April through September 1997 due to soft
market conditions in the paper industry. As a result of the shutdown, the
Company's forestry net sales decreased 48.2% from $44.6 million in the
nine-month period ending September 30, 1996 to $23.1 million in the comparable
period in 1997. The mill was reopened in September 1997 and the existing supply
agreement was renegotiated on a reduced tonnage basis. Although management
believes the mill will continue to operate, there can be no assurances regarding
the ability of the mill to satisfy its obligations, particularly on a long-term
basis, under the existing agreement. See "Business and
Properties -- Forestry -- Sales and Marketing."

As tonnage required to be supplied under the agreement decreases, the
Company intends to allow its forests to grow for longer periods, shifting the
usage of its timber to higher-margin products. However, the performance of the
forestry segment may decline in the near term as that shift occurs. While
management believes that there is significant demand for the Company's timber
and wood fiber products from users other than the mill, no assurance can be
given that such demand exists, that the forestry operations will be able to
develop new customers on a timely basis, if at all, or that it will be able to
sell its products to third parties at market prices. Any excess supply of timber
and wood fiber that results from the inability of the Company to sell its
products to users other than the mill could result in lower prices for its
products, which could have a material adverse effect on the net sales, operating
income and cash flow of the Company's forestry operations.

Factors Affecting Supply and Demand. The results of operations of the
Company's forestry segment are and will continue to be affected by cyclical
supply and demand factors related to the forest products industry. The supply of
timber is significantly affected by land use management policies of the United
States government. Government agencies historically have been major suppliers of
timber to the United States forest products industry, but timber sales by such
government agencies currently are at historically low levels. Any reversal of
government land use management policies that substantially increases sales of
timber by United

10
<PAGE> 18

States government agencies could significantly reduce prices for forest
products. The demand for wood products also has been, and in the future can be
expected to be, subject to cyclical fluctuations. Demand is primarily affected
by the level of housing starts, repair and remodeling activity, industrial wood
product use, competition from non-wood products, and the demand for pulp and
paper products. These factors are subject to fluctuations due to changes in
economic conditions, interest rates, population growth, weather conditions,
competitive pressures and other factors. Any decrease in the level of industry
demand for wood products generally can be expected to result in lower net sales,
operating income and cash flow of the Company's forestry operations. See
"Business and Properties -- Forestry -- Pricing."

Harvesting Limitations. Weather conditions, timber growth cycles, access
limitations and regulatory requirements associated with the protection of
wildlife and water resources may restrict harvesting on the Company's forestry
lands. Timber harvests also may be affected by various natural factors,
including damage by fire, insect infestation, disease, prolonged drought, severe
weather conditions and other causes. The effects of such natural disasters may
be particularly damaging to young timber. Although damage from such natural
causes usually is localized and affects only a limited percentage of the timber,
there can be no assurance that any damage affecting the Company's forestry lands
will in fact be so limited. Any of the above factors could materially limit the
ability of the Company to harvest timber and could have a significant adverse
impact on the net sales, operating income and cash flow of the Company's
forestry operations.

Commodity Price Fluctuations and Markets. The forestry operations' results
of operations are highly dependent upon the prices received for wood products.
Although most of the Company's forestry operations' sales are currently made
pursuant to a long-term contract with Florida Coast, this contract includes a
price adjustment provision which permits an increase or decrease at specified
times in contract price to reflect changes in certain price or other economic
indices, taxes and other charges. In addition, the industry could experience
significant price declines from current levels as a result of natural market
forces. Any significant decline in prices for wood products could have a
material adverse effect on the Company's forestry operations.

Regulation. In conducting its harvesting activities, the Company
voluntarily complies with the "Best Management Practices" recommended by the
Florida Division of Forestry. From time to time, proposals have been made in
state legislatures regarding the regulation of timber harvesting methods. There
can be no assurance that such proposals, if adopted, will not adversely affect
the Company or its ability to harvest and sell logs or timber in the manner
currently contemplated. The forestry operations are also subject to
environmental and endangered species laws and regulations. See "-- Environmental
Matters" and "Business and Properties -- Forestry -- Regulation."

RISKS RELATING TO TRANSPORTATION OPERATIONS

Relationships With Other Railroads. Most of the traffic on the Company's
railroads is interchanged with other railroads. The Company's ability to provide
service to its customers depends in part upon its ability to maintain
cooperative relationships with connecting railroads with respect to, among other
matters, joint line rates, car supply, and interchange and haulage rights. In
addition, the Company's future revenues could be adversely affected by a
significant deterioration in the operational or financial condition of its
connecting carriers. See "Business and Properties -- Transportation."

Regulation. The Company's transportation operations are subject to
environmental, safety, health and other regulations generally applicable to all
businesses. In addition, the Company's railroads, like other rail common
carriers, are subject to regulation by the Surface Transportation Board, the
Federal Railroad Administration, state departments of transportation and other
state and local regulatory agencies. Government regulation of the railroad
industry is a significant determinant of the competitiveness and profitability
of railroads.

FEC is a party to various proceedings before state regulatory agencies
relating to compliance with environmental laws. In addition, the Company's
present and historic ownership and operation of real property, including yards
and maintenance facilities, in connection with its transportation operations
involve the storage, use or disposal of hazardous substances that have
contaminated and may in the future contaminate the environment. The Company may
also be liable for the costs of cleaning up a site at which it has disposed

11
<PAGE> 19

(intentionally or unintentionally by virtue of, for example, an accident,
derailment or leak) or to which it has transported hazardous substances. The
Company is currently involved in various remediations of properties relating to
its transportation operations. See "-- Environmental Matters," "Business and
Properties -- Transportation -- Regulation" and "Business and
Properties -- Environmental Proceedings."

Liability for Casualty Losses. The Company's railroads, like other freight
railroads, are liable for damage to freight, for losses arising from personal
injury and for property damage in the event of derailments or other accidents or
occurrences. The Company has obtained insurance covering many of these risks;
however, under catastrophic circumstances, particularly those involving
transportation of hazardous materials, such liability could exceed the Company's
insurance limits. Also, insurance is available from only a very limited number
of insurers and there can be no assurance that insurance protection at the
Company's current levels will continue to be available or, if available, will be
obtainable by the Company on acceptable terms. To the extent payments required
in connection with losses or other liabilities arising from derailments or other
causes are not covered by insurance or exceed the Company's insurance limits,
the financial condition of the Company could be adversely affected. See
"Business and Properties -- Transportation."

Fluctuations in Revenues and Expenses. The Company has historically
experienced fluctuations in revenues and expenses due to unpredictable events
such as customer plant expansions and shut-downs, accidents and derailments. The
occurrence of such events in the future could cause further fluctuations in
revenues and expenses and negatively affect the Company's financial performance.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Transportation."

Customer Concentration. In 1996, FEC's five largest customers accounted
for approximately 31.0% of FEC's operating revenues. FEC's two largest customers
in 1996 were Rinker Materials Corporation and Tarmac-Florida, Inc., which
accounted for 11.9% and 7.8% of operating revenues, respectively, in the
transportation segment. The Company's business could be adversely affected if
its customers suffer significant reductions in their businesses or reduce
shipments of commodities transported by the Company. See "Business and
Properties -- Transportation."

RISKS RELATED TO SUGAR OPERATIONS

The Company's sugar operations are located in the Florida Everglades, which
are the subject of extensive environmental review by a variety of governmental
entities. In 1994 the State of Florida enacted the Everglades Forever Act, which
significantly affects agriculture in the Everglades Agriculture Area ("EAA").
The Act calls for the creation of six Stormwater Treatment Areas ("STAs") as
buffers between the Everglades Protection Area and the EAA. The Act imposes
substantial taxes on the Company's sugar operations (approximately $1.3 million
was paid in each of 1995 and 1996) and other agricultural interests to pay for
construction of the STAs. No assurances can be given that compliance costs with
the EAA will not increase materially in the future. The Company also must
maintain compliance with other environmental laws, including the federal Clean
Water Act and the federal Clean Air Act. See "-- Environmental Matters" and
"Business and Properties -- Sugar -- Regulation."

On December 6, 1997, the Company reached an agreement in principle with
certain federal and state government agencies for the sale of the Company's
sugar lands. The Company will be required to deliver the lands in compliance
with all federal and state environmental laws and be responsible for and bear
the expenses of the cleanup of such lands and the sugar mill. No assurances can
be given that cleanup costs will not materially affect the Company.

ENVIRONMENTAL MATTERS

The Company's current and past railroad, forestry and sugar operations, its
past paper operations and its current and past ownership, operation and leasing
of real property, are subject to extensive and changing local, state and federal
environmental laws and regulations governing, among other things, emissions into
the air, discharges into waters, the use, handling, transportation and disposal
of hazardous substances, the protection, investigation and remediation of soil
and groundwater contamination and employee health and safety. Such

12
<PAGE> 20

laws include, but are not limited to, the federal Clean Water Act, the federal
Clean Air Act, the Endangered Species Act of 1973 ("ESA"), the Resource
Conservation and Recovery Act of 1978, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Federal Insecticide,
Fungicide and Rodenticide Act and the Toxic Substances Control Act. Such laws
can impose criminal and civil penalties, remediation expenses, natural resource
damages and injunctive relief. The Company has made and will continue to make
expenditures to comply with such laws. Liability under such laws and regulations
may be imposed on current and prior owners and operators of property without
regard to fault and without regard to knowledge about the condition or action
causing the liability. The Company may also be contractually liable for
indemnification of environmental clean-up costs in connection with the sale of
its assets, businesses or real property, including the sale of its former
linerboard mill to Florida Coast and container plants to Four M Corporation, and
will be contractually required to bear the expenses of any environmental
clean-up costs in connection with the sale of its sugar lands. In addition, the
Company may potentially incur substantial costs relating to the clean-up of
contamination caused by hazardous substances. The presence of hazardous
substances on a property may also adversely affect the Company's ability to sell
or develop such property or to borrow using such property as collateral. The
presence, use or release of hazardous materials could also lead to claims for
personal injury, damages to natural resources or property damage. In addition,
the ESA protects species threatened with possible extinction and restricts the
Company's harvesting activities on certain of the timberlands on which the bald
eagle and the red cockaded woodpecker are present.

The Company has previously owned or operated other businesses or real
property, including those relating to the operation of paper mill and container
plants, which may have adversely affected the environment. As a prior owner or
operator of those facilities, the Company could have liability for environmental
damage, even though it is no longer the owner or operator. Subject to certain
deductibles and sharing provisions, which are not expected to have a material
adverse effect on the Company, the Company believes the purchaser of the paper
mill and container plants will be responsible to the Company for costs relating
to environmental damage; however, should the purchaser not be responsible, the
Company would be liable for such costs. The Company may also be liable for the
costs of cleaning up a site at which it has disposed (intentionally or
unintentionally by virtue of, for example, an accident, derailment or leak), or
over or to which it has transported, hazardous substances. The Company is
currently a party to, or involved in, legal proceedings directed at the clean-up
of certain off-site locations, including sites which are listed on the National
Priorities List under CERCLA or other similar federal or state lists.

The Company accrues for the total estimated clean-up costs for the sites at
which it has clean-up responsibilities when those costs become probable and when
amounts (or at least a minimum amount) can be reasonably estimated. In accruing
those amounts, the Company considers currently available information and
management's evaluation of whether other potentially responsible parties are
reasonably likely to contribute to the cost of a clean-up. As of September 30,
1997, the Company's aggregate environmental accruals were $7.0 million. Based on
presently available information, the Company does not expect to incur amounts in
excess of its accruals that are likely to have a material adverse effect on its
financial position, liquidity or results of operations. However, it is not
possible to quantify environmental costs with certainty because future laws,
ordinances or regulations could impose material environmental liability, and new
or different facts about the Company's operations or its ownership, operation or
leasing of real property could arise in the future. In addition, the Company has
incomplete technical information concerning environmental conditions at certain
sites. See "Business and Properties -- Environmental Proceedings."

COMPETITION

Real Estate. The real estate industry is generally characterized by
significant competition. The Company plans to continue to expand through a
combination of office, industrial and residential developments in Florida where
the acquisition and/or development of property would, in the opinion of
management, result in a favorable risk-adjusted return on investment. There are
a number of office, industrial and residential developers and real estate
companies that compete with the Company in seeking properties for acquisition,
resources for development and prospective tenants. Competition from other real
estate developments may adversely affect the Company's ability to attract and
retain tenants, rental rates and expenses of operation

13
<PAGE> 21

(particularly in light of the higher vacancy rates of many competing properties
which may result in lower-priced space being available in such properties). The
Company may compete with other entities that have greater financial and other
resources than the Company. There can be no assurance that the existence of such
competition could not have a material adverse effect on the Company's business,
operations and cash flow.

Forestry. The forest products industry is highly competitive in terms of
price and quality. Many of the Company's competitors are fully integrated
companies with substantially greater financial and operating resources than the
Company. The products of the Company are also subject to increasing competition
from a variety of non-wood and engineered wood products. In addition, the
Company is subject to a potential increase in competition from lumber products
and logs imported from foreign sources. Any significant increase in competitive
pressures from substitute products or other domestic or foreign suppliers could
have a material adverse effect on the Company.

Transportation. Although each of the Company's railroads is typically the
only rail carrier directly serving its customers, the Company's railroads
compete directly with other railroads that could potentially deliver freight to
their markets and customers via different routes. The Company's railroads also
compete directly with other modes of transportation, including motor carriers
and, to a lesser extent, ships and barges. Competition is based primarily upon
the rate charged and the transit time required, as well as the quality and
reliability of the service provided. Any improvement in the cost or quality of
these alternate modes of transportation could increase competition from these
other modes of transportation and adversely affect the Company's business.

Sugar. The sugar industry is highly competitive. The Company competes with
foreign and domestic sugarcane and sugar beet processors, as well as
manufacturers of corn sweeteners and artificial sweeteners such as aspartame and
saccharin. Sugar is a volatile commodity subject to wide price fluctuations in
the marketplace.

CONTROL BY PRINCIPAL SHAREHOLDER

After consummation of the Offerings, the Trust and the Nemours Foundation
will collectively continue to own 50,075,700 shares of Common Stock or
approximately 54% of the outstanding voting securities of the Company (assuming
exercise of the U.S. Underwriters' over-allotment option and giving effect to
management stock options exercisable within 60 days). See "Principal and Selling
Stockholders." Accordingly, the Trust is and will continue to be able to control
the election of the Company's directors and to determine the corporate and
management policies of the Company, including decisions relating to any mergers
or acquisitions by the Company, sales of all or substantially all of the
Company's assets and other significant corporate transactions. In addition, the
Company has entered into a registration rights agreement with the Trust (the
"Registration Rights Agreement"), under which the Company has agreed that for a
period of one year from the completion of the Offerings it will not issue any
shares of Common Stock or options or securities convertible into Common Stock
that would cause the Trust's and the Nemours Foundation's collective ownership
in the Company to fall below 51% on a fully diluted basis. As a result, during
such period the Company will not be able to issue shares of Common Stock in
connection with acquisitions or other financings without the consent of the
Trust. Pursuant to the Registration Rights Agreement, the Trust will also have
the right to nominate two members of the Company's Board of Directors so long as
the Trust and the Nemours Foundation collectively own in excess of 20% of the
Company's outstanding Common Stock, and one member so long as such entities
collectively own in excess of 5%. See "Alfred I. duPont Testamentary Trust --
Registration Rights Agreement."

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends to a significant extent upon the
leadership and performance of its executive officers and key employees. See
"Management." The loss of the services of any of these individuals could have a
material adverse effect on the Company's business, financial performance and
results of operations. While the Company has entered into employment agreements
with Peter S. Rummell, Charles A. Ledsinger, Jr., Robert M. Rhodes and other
members of senior management, the Company cannot assure that

14
<PAGE> 22

such individuals will remain with the Company throughout the terms of the
agreements, or thereafter. As the Company continues to grow, it will continue to
hire, appoint or otherwise change senior managers and other key executives.
There can be no assurance that the Company will be able to retain its executive
officers and key personnel or attract additional qualified members to its
management team in the future. The Company does not maintain any policies of key
person life insurance on the lives of its senior management personnel.

SHARES AVAILABLE FOR FUTURE SALE

On completion of the Offerings, the Trust and the Nemours Foundation
together will own 54% of the shares of Common Stock outstanding (assuming
exercise of the U.S. Underwriters' over-allotment option and giving effect to
management stock options exercisable within 60 days). No prediction can be made
as to the effect, if any, that future sales of shares, or the availability of
shares for future sale, will have on the market price of the Common Stock. Sales
of substantial amounts of shares of Common Stock in the public market or the
perception that such sales might occur could adversely affect the market price
of the shares of Common Stock. In the event of any future issuance of equity
securities, the interests of holders of Common Stock, including the shares of
Common Stock offered hereby, could be diluted. In addition, the Trust, the
Company, and certain of the Company's officers, directors and other stockholders
have agreed, except in certain limited circumstances, not to offer, sell,
contract to sell, or otherwise dispose of any Common Stock or securities
exercisable for, convertible into or exchangeable for Common Stock, for a period
of 180 days after the date of this Prospectus, without the prior written consent
of Morgan Stanley & Co. Incorporated. See "Underwriters."

15
<PAGE> 23

DIVIDENDS

The Company paid aggregate annual cash dividends of approximately $.07 per
share to holders of the Common Stock in 1995, 1996 and 1997. In addition, the
Company distributed net proceeds of $3.33 per share to stockholders of record on
March 21, 1997 and $.34 per share to stockholders of record on December 19,
1997, in each case arising from the sale of the Company's linerboard and
container facilities and its communications business. Although the Company has
historically paid quarterly cash dividends of approximately $.02 per share,
there can be no assurance that such practice will continue in the future.

MARKET FOR COMMON STOCK

The Company had 938 common stockholders of record as of January 12, 1998.
The Company's Common Stock is quoted on the New York Stock Exchange ("NYSE")
Composite Transactions Tape under the symbol "SJP".

The range of high and low sales prices for the Common Stock as reported on
the NYSE Composite Transactions Tape for the periods indicated is set forth
below.

<TABLE>
<CAPTION>
COMMON STOCK PRICE(1)
---------------------
HIGH LOW
-------- -------
<S> <C> <C> <C> <C>
1995
First Quarter............................................... $ 22 11/16 $17 3/4
Second Quarter.............................................. 22 1/16 20
Third Quarter............................................... 21 1/2 20
Fourth Quarter.............................................. 21 9/16 17 1/2
1996
First Quarter............................................... 20 3/4 17 15/16
Second Quarter.............................................. 21 15/16 19 5/16
Third Quarter............................................... 21 15/16 19 15/16
Fourth Quarter.............................................. 23 3/16 21 3/16
1997
First Quarter............................................... 31 21 1/16
Second Quarter.............................................. 28 1/4 23 5/16
Third Quarter............................................... 33 5/8 27
Fourth Quarter.............................................. 38 5/16 29 5/16
1998
First Quarter(2)............................................ 34 9/16 30 1/8
</TABLE>

- ---------------

(1) Prices are rounded to the nearest 1/16th and reflect the 3-for-1 split of
the Company's Common Stock on January 12, 1998.

(2) Through January 15, 1998.

A recently reported sale price of the Company's common stock on the NYSE is
set forth on the cover page of this Prospectus.

16
<PAGE> 24

ALFRED I. DUPONT TESTAMENTARY TRUST

The Trust was established under the Last Will and Testament of Alfred I.
duPont (the "Will") to provide testamentary dispositions to persons named in the
Will and otherwise to benefit the Nemours Foundation, a charitable foundation
provided for under the Will for the care and treatment of crippled, but not
incurable, children and certain elderly. The Trust has been the controlling
stockholder of the Company since 1940.

The Trust and the Nemours Foundation together currently own 63,875,700
shares or 68.8% of the outstanding Common Stock (after giving effect to
management options exercisable within the next 60 days) and upon consummation of
the Offerings will own 50,075,700 shares or 54.0% of the outstanding Common
Stock (assuming exercise of the U.S. Underwriters' over-allotment option), and
thus will continue to control the Company. The trustees of the Trust as of
November 30, 1997 were W. L. Thornton, Chairman, J. C. Belin, H. H. Peyton, J.
F. Porter, W. T. Thompson, III and Wachovia Bank, N.A. One trustee position is
currently vacant due to the recent death of Alfred duPont Dent, who had been a
trustee for 32 years.

REASONS FOR THE OFFERINGS

The Trust has concluded that it is desirable to sell a portion of its
holdings of the Company's Common Stock to diversify its assets and to enable the
Trust to invest the proceeds of the Offerings in assets that produce higher
current income. Florida law requires the Trust to distribute annually at least
3% of the fair market value of its assets, regardless of its earnings in a given
year. Under the terms of the Will, the Trust is separately required to
distribute annually all of its income. Historically, the Trust has allocated its
investments between debt securities, held to generate current income, and equity
securities, principally the Company's Common Stock, held for long-term capital
appreciation. Because the Company pays relatively low dividends on its Common
Stock, the Trust's other assets must generate income sufficient to permit the
Trust to meet its obligation to distribute annually an amount equal to 3% of the
fair market value of the Trust's total assets. As the equity securities held by
the Trust, principally the Company's Common Stock, have appreciated over time,
the fair market value of the Trust's assets has reached a level at which its
income-producing assets may not generate income equal to 3% of the fair market
value of its assets.

In the future, the Trust may sell additional shares of Common Stock, but
has agreed with the Underwriters that it will not effect any sales of Common
Stock for a period of 180 days from the date of this Prospectus without the
consent of Morgan Stanley & Co. Incorporated. See "-- Registration Rights
Agreement" and "Underwriters."

CERTAIN RELATIONSHIPS

Apart from its ownership interest in the Company's Common Stock, the Trust
owns 46,859 units, or 93.7%, of the outstanding limited partnership units of
Al-Zar, Ltd. ("Al-Zar"), a limited partnership organized by the Company for the
purpose of holding approximately 300 acres of real property in Wilmington,
Delaware. A subsidiary of the Company serves as general partner of Al-Zar and
owns 500 units, or 1%, of Al-Zar's outstanding partnership units.

In addition to their positions with the Trust, Messrs. Thornton, Belin,
Peyton, Porter, Thompson and H. M. Durden, the representative of the corporate
trustee, Wachovia Bank, N.A., also serve as directors of the Nemours Foundation.
The Nemours Foundation owns 450,224 shares, or approximately 5%, of FECI's
outstanding common stock. Mr. Belin and Mr. Thornton also serve as directors of
the Company and FECI.

CERTAIN TRANSACTIONS

The Nemours Foundation rents office space from GCC at rates approximating
market rentals. In addition, Mr. Belin and Mr. Thornton have entered into
consulting agreements with the Company. See "Certain Transactions."

17
<PAGE> 25

EXPENSES OF THE OFFERINGS

The Company will bear all expenses of the Offerings, other than
underwriting commissions and discounts, the fees and expenses of legal counsel
and financial advisors to the Trust and certain other expenses.

REGISTRATION RIGHTS AGREEMENT

Pursuant to a Registration Rights Agreement between the Trust and the
Company, the Trust may require the Company on up to five occasions to file a
registration statement under the Securities Act so long as such registration
covers not less than 10% of the Registrable Securities (as defined in the
Registration Rights Agreement) held by the Trust and the Nemours Foundation
collectively (unless the registration demand is the last demand available under
the Registration Rights Agreement, in which case it may cover less than 10% of
the Registrable Securities). The Trust may not exercise a demand registration
within six months following the effectiveness of a registration statement for an
earlier demand registration, and the Company may defer filing such a
registration statement or proceeding with an offering for up to 60 days under
certain conditions. The Offerings will constitute the first demand under the
Registration Rights Agreement. In addition, the Trust and the Nemours Foundation
have unlimited "piggy-back" registration rights under the terms of the
Registration Rights Agreement. The Registration Rights Agreement provides that
if the Trust has made a demand for registration and decides not to proceed with
the related offering, in certain circumstances such demand shall be deemed to
have been effected, unless the Trust agrees to pay all expenses of registration.

Pursuant to the Registration Rights Agreement, the Company will bear all of
the expenses of demand registrations, except that the Trust will pay with
respect to its Registrable Securities only its own underwriting discounts and
commissions, the fees and expenses of the Trust's legal counsel and financial
advisors and certain other expenses.

In the Registration Rights Agreement, the Trust and the Company have
agreed, if required by the managing underwriter of a public offering of Common
Stock by the Company or the Trust, not to effect any public sale or distribution
or otherwise dispose of any securities of the Company during the seven days
prior to, and the 90 days after, the effectiveness of the registration statement
for any such offering. In connection with the Offerings, the Company and the
Trust have agreed, subject to certain exceptions, not to effect any such sale or
disposition for a period of 180 days after the date of this Prospectus without
the prior written consent of Morgan Stanley & Co. Incorporated. See
"Underwriters."

In the Registration Rights Agreement, the Company has agreed that, so long
as the Trust and the Nemours Foundation collectively beneficially own at least
51% of the Company's issued and outstanding Common Stock calculated on a fully
diluted basis (as defined in the Registration Rights Agreement), the Company
will not for a period of one year after the closing of the Offerings, without
the prior written consent of the Trust, issue any common stock, convertible
preferred stock, stock subject to options, warrants or other rights, convertible
or exchangeable debt or equity securities or other securities which would cause
the collective beneficial ownership interests of the Trust and the Nemours
Foundation in the Company's Common Stock to fall below 51% on a fully diluted
basis. In addition, for so long as the Trust and the Nemours Foundation
collectively beneficially own at least 20% of the issued and outstanding shares
of the Company's Common Stock, the Trust will be entitled to nominate, and the
Company and the Board of Directors of the Company will support the election by
the Company's stockholders of, two individuals designated by the Trust to be
members of the Company's Board of Directors. For so long as the Trust and the
Nemours Foundation collectively own at least 5% and less than 20% of the issued
and outstanding shares of the Company's Common Stock, the Trust will be entitled
to nominate, and the Company and the Board of Directors of the Company will
support the election by the Company's stockholders of, one individual designated
by the Trust to be a member of the Company's Board of Directors. If the size of
the Company's Board of Directors is increased, the number of individuals
designated by the Trust shall be appropriately and proportionately increased.
These provisions of the Registration Rights Agreement are not intended to limit
the ability of the Trust or the Nemours Foundation to vote their shares as they
see fit with respect to the election of directors or otherwise.

Under the Registration Rights Agreement, the Trust and the Company have
also agreed to indemnify each other against certain civil liabilities, including
certain liabilities under the Securities Act.

18
<PAGE> 26

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below are qualified in
their entirety by and should be read in conjunction with the consolidated
financial statements and the notes related thereto included elsewhere in this
Prospectus. The statement of operations data with respect to the years ended
December 31, 1994, 1995 and 1996 and the balance sheet data as of December 31,
1995 and 1996 have been derived from the financial statements of the Company
included herein, which have been audited by KPMG Peat Marwick LLP. The statement
of operations data with respect to the years ended December 31, 1992 and 1993
and the balance sheet data as of December 31, 1992, 1993 and 1994 has been
derived from the financial statements of the Company previously filed with the
SEC although not incorporated by reference or included elsewhere herein, which
have also been audited by KPMG Peat Marwick LLP. The following selected
financial data for the nine months ended on September 30, 1996 and September 30,
1997 have been derived from the Company's unaudited consolidated financial
statements which, in the opinion of management, contain all adjustments
(consisting of only normal and recurring adjustments) necessary to present
fairly the Company's financial position and results of operations at such dates
and for such periods. Historical results are not necessarily indicative of the
results to be expected in the future and results for interim periods are not
necessarily indicative of results for the entire year.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales(1).............. $ 130,085 $ 135,417 $ 155,122 $ 150,564 $ 245,704 $ 173,401 $ 79,566
Operating revenues(2)..... 169,439 177,040 175,784 184,360 185,485 162,307 172,328
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues... 299,524 312,457 330,906 334,924 431,189 335,708 251,894
Cost of sales............. 95,005 105,644 111,014 116,014 112,163 64,765 63,282
Operating expenses........ 138,317 129,704 133,091 139,875 139,640 120,524 118,493
Selling, general and
administrative
expenses................ 23,269 22,145 26,836 31,718 31,215 24,373 28,103
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit........ 42,933 54,964 59,965 47,317 148,171 126,046 42,016
Other income.............. 17,860 12,330 25,164 18,770 40,857 32,005 32,650
Income from continuing
operations before income
taxes and minority
interest................ 60,793 67,294 85,129 66,087 189,028 158,051 74,666
Provision for income
taxes................... 21,837 30,328 31,446 24,535 83,117 71,211 32,981
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations before
minority interest....... 38,956 36,966 53,683 41,552 105,911 86,840 41,685
Minority interest......... 11,074 10,241 15,827 12,194 14,002 9,922 13,404
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations.............. 27,882 26,725 37,856 29,358 91,909 76,918 28,281
Cumulative effect of
change in accounting
principle(3)............ -- 20,518 -- -- -- -- --
Income (loss) from
discontinued
operations(4)........... (12,292) (14,600) 4,253 44,461 (4,528) (4,528) --
Gain on sale of
discontinued
operations(4)........... -- -- -- -- 88,641 95,644 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income....... $ 15,590 $ 32,643 $ 42,109 $ 73,819 $ 176,022 $ 168,034 $ 28,281
========== ========== ========== ========== ========== ========== ==========
</TABLE>

19
<PAGE> 27

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents(9).......... $ 201,112 $ 256,292 $ 275,417 $ 303,590 $ 819,851 $ 848,636 $ 576,712
Total property, plant and
equipment, net.......... 684,043 722,043 756,954 804,974 834,167 825,816 853,217
Total assets.............. 1,289,384 1,395,833 1,449,390 1,530,994 1,806,238 1,817,606 1,584,860
Total stockholders'
equity(10).............. 833,682 901,710 936,982 1,016,067 1,196,941 1,185,164 934,606
</TABLE>

- ---------------

(1) Net sales includes real estate, land and building sales, forestry and
timber sales and sugar sales. Net sales for the nine months ended September
30, 1996 included two related one-time condemnation sales of land to the
State of Florida in exchange for $97.8 million in cash plus certain limited
development rights. Net operating results of the communications segment,
linerboard mill and container plants are shown separately as income (loss)
from discontinued operations for all years presented.
(2) Operating revenues includes real estate rental revenue and transportation
revenue.
(3) Cumulative effect of adopting Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes."
(4) Net operating results of the communications segment, linerboard mill and
container plants are shown separately as income (loss) from discontinued
operations for all years presented. The gain on sale of discontinued
operations declined by approximately $7.0 million during the fourth quarter
of 1996 as a result of finalizing the post closing working capital
adjustments, closing expenses and pension curtailment gain, which had been
previously estimated. See Note 3 to the Consolidated Financial Statements.

20
<PAGE> 28

(5) Per share data is rounded to the nearest $.01 to reflect the 3-for-1 split
of the Company's Common Stock on January 12, 1998.

(6) On December 30, 1997, the Company paid a dividend of $.02 per share.

(7) Approximately $359.3 million of proceeds from the sales of the
communications segment, linerboard mill and container plants were held in
special accounts during 1996. A special distribution of a portion of the
net proceeds of the sales of $3.33 per share was paid on March 25, 1997,
for stockholders of record on March 21, 1997. The Company made a special
distribution of the remaining net proceeds of $.34 per share on December
30, 1997 to stockholders of record on December 19, 1997.

(8) The Company uses a supplemental performance measure along with net income
to report its operating results. This measure, Earnings Before Depreciation
and Deferred Taxes (EBDDT), is not a measure of operating results or cash
flows from operating activities as defined by generally accepted accounting
principles. Additionally, EBDDT is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative
to cash flows as a measure of liquidity. However, the Company believes that
EBDDT provides relevant information about its operations and is necessary,
along with net income, for an understanding of its operating results.
Depreciation, amortization and deferred income taxes are excluded from
EBDDT as they represent non-cash charges. Earnings and gains on sales of
discontinued operations and gains on the sale of non-strategic land and
other assets represent non-operating, unusual and/or nonrecurring items and
are therefore excluded from EBDDT. The cumulative effect in 1993 of a
change in accounting principle has also been excluded from EBDDT.

(9) Includes cash, cash equivalents, marketable securities and short-term
investments.

(10) The Company adopted the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" at December 31, 1993. This
adoption increased stockholders' equity by $41.5 million.

21
<PAGE> 29

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Management's discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and "Business and Properties" included
elsewhere in this Prospectus. The following discussion contains forward-looking
statements. The Company's actual results may differ significantly from those
projected in the forward-looking statements. Factors that might cause future
actual results to differ materially from the Company's recent results or those
projected in the forward-looking statements include, but are not limited to,
those discussed in "Risk Factors" and below.

The text below includes a discussion of the Company's results of operations
for the nine month period ended September 30, 1996 compared to the nine month
period ended September 30, 1997. For a discussion of the results of operations
for the years ended December 31, 1994, 1995 and 1996, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," in
the Company's 1996 Form 10-K, incorporated by reference herein.

OVERVIEW

St. Joe Corporation is a diversified company engaged in the real estate,
forestry, transportation and sugar industries. Until the second quarter of 1996,
the Company was also engaged in communications and the manufacture and
distribution of forest products.

The Company's assets and operations are concentrated in the state of
Florida. Consequently, the Company's performance, and particularly that of its
real estate operations, is significantly affected by the general health of the
Florida economy. The Company's businesses, particularly forestry and
transportation, are influenced by the general health of the national economy.
The Company's real estate operations are also cyclical but are primarily
affected by local demographic and general economic trends, and the supply and
rate of absorption of new construction. Although the Company has a large
portfolio of income producing properties that provide stable operating results,
the Company's earnings from period to period may be significantly affected by
the nature and timing of sales of development property and non-strategic assets.

The Company is currently undergoing a number of important changes in the
mix of its businesses and its overall business strategy. In the first quarter of
1997, the Company hired a new chairman and chief executive officer as well as
several other senior members of management with strong backgrounds in
large-scale real estate planning and development. Under the direction of this
new management team, the Company is focusing more closely on the development of
its large land portfolio. Management believes that the Company's increased focus
on real estate operations will result in a larger portion of the Company's
overall revenues being attributable to real estate operations. However, many of
the Company's proposed projects will require a lengthy process to complete the
development cycle before they are sold or otherwise generate revenue.
Nevertheless, management believes the Company's existing raw land portfolio will
allow the Company to maintain relatively low development costs and that its
existing large portfolio of income-producing properties, together with its other
businesses, will continue to generate cash to fund a significant portion of its
longer-term projects.

The Company is also undergoing certain strategic changes in its forestry
operations. The major customer for the Company's timber has been and continues
to be the Company's former linerboard mill which was sold in May, 1996. The wood
fiber supply agreement between the Company and the mill was recently
renegotiated to provide for a level of tonnage that is significantly less than
historical levels. Partly as a result of the reduced tonnage under the
agreement, the Company has decided to allow its forests to grow for longer
periods in order to age the timber and shift its focus toward higher-margin
products. However, during this transition period, management believes that
revenues in the forestry segment may remain flat or decline slightly in the near
term.

22
<PAGE> 30

RECENT EVENTS

On December 9, 1997, the Company entered into a letter of intent with
Codina Group, Inc. and Weeks Corporation under which the Company and Weeks,
among other things, each agreed to purchase a one-third interest in Codina, a
commercial/industrial developer, active principally in southern Florida. After
the consummation of the transaction, the Company intends to develop commercial,
industrial and office property in southern Florida through its interest in
Codina. The purchase price of this transaction is not material to the Company's
financial position.

On December 6, 1997, the Company announced that it had reached an agreement
in principle to sell its sugar lands to certain federal and state government
agencies for $133.5 million in cash. Under the preliminary agreement, the
Company would retain the right to farm the sugar lands through the 2002-2003
crop year. The proposed transaction is subject to both government and board
approval.

On December 3, 1997, the Company and Orlando-based CNL Group, Inc. formed a
real estate joint venture to invest in and develop office and industrial
properties primarily in the central Florida region. The Company, through two
subsidiaries, received a 50% ownership interest in the joint venture. The
Company committed to lend up to $25 million for new projects the venture
determines to develop and/or manage.

On November 21, 1997, the Company announced the withdrawal of its
outstanding offer to purchase all outstanding FECI common stock not owned by the
Company at $102 per share.

On November 12, 1997, the Company, through two subsidiaries, purchased
certain assets, including the personnel, trademark and proprietary information
systems, of Arvida Company through a newly formed limited partnership with JMB
Southeast Development, L.L.C. and JMB Southeast Development, L.P. for the
purpose of developing and/or managing residential communities on certain lands
owned by the Company, as well as the purchase of other lands for development and
management. The Company owns 74% of the new limited partnership, St. Joe/Arvida
Company, L.P. The purchase price for the 74% partnership interest in the new
entity is not material to the Company's financial position.

RESULTS OF OPERATIONS

COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997

Net sales decreased 54.1% from $173.4 million in the first nine months of
1996 to $79.6 million in the first nine months of 1997. Sales in 1996 were
unusually high due to two related condemnation sales of land to the State of
Florida in exchange for $97.8 million in cash plus certain limited development
rights. Sales of real estate totaled $30.5 million in 1997. Operating revenues
increased 6.2% from $162.3 million in 1996 to $172.3 million in 1997, primarily
due to an increase in transportation revenues of $6.8 million as well as
increases in real estate rental revenues.

Cost of sales decreased 2.3% from $64.8 million in the first nine months of
1996 to $63.3 million in the first nine months of 1997, as a result of decreases
in cost of timber and other sales of $21.9 million offset by increases in cost
of real estate sales of $20.3 million. Operating expenses decreased 1.7% from
$120.5 million in the first nine months of 1996 to $118.5 million in the first
nine months of 1997 resulting from decreases in transportation costs of $3.9
million offset in part by an increase in real estate operating costs of $1.9
million.

Selling, general and administrative expenses increased 15.3% from $24.4
million in the first nine months of 1996 to $28.1 million in the first nine
months of 1997, primarily due to a one-time write-off of approximately $2.9
million for expenses incurred in the transportation segment in connection with
the possible disposition of certain of its assets.

Other income (expense) increased 2.0% from $32.0 million in 1996 to $32.7
million in 1997. The year to date increase for the first nine months of 1997 was
due to higher average investment balances compared to the first nine months of
1996.

Income tax expense on continuing operations for the nine months ended in
September 30, 1997 totaled $33.0 million, representing an effective rate of 44%
compared to $71.2 million for a similar effective tax rate in

23
<PAGE> 31

the 1996 comparable period. These rates exceed statutory rates primarily because
of the 50% excise tax on prepaid pension cost totaling $4.2 million in 1997 and
$11.0 million in 1996. It is anticipated that as long as the Company continues
to record prepaid pension cost, an excise tax of 50% will be accrued.

Net income for the nine months ended September 30, 1997 was $28.3 million
or $0.31 per share compared to $168.0 million or $1.84 per share in 1996.
Results for 1996 included income from discontinued operations of $91.1 million,
net of tax.

Real Estate

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1997 % CHANGE
------ ----- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Net Sales and Operating Revenue............................. $124.2 $59.2 (52.3)
Cost of Sales and Operating Expense......................... 18.4 41.2 123.9
Selling, General and Administrative Expenses................ 3.1 3.4 9.7
Operating Profit............................................ 102.7 14.6 (85.8)
</TABLE>

The Company's real estate operations currently consist of commercial and
industrial development and management through GCC, a subsidiary of FECI, and
community residential development through the Southwood Properties Division of
the Company ("Southwood").

Real estate net sales and operating revenue decreased $65.0 million, or
52.3%, from $124.2 million in the first nine months of 1996 to $59.2 million in
the first nine months of 1997. Costs of sales and operating expenses increased
123.9% from $18.4 million in the first nine months of 1996 to $41.2 million in
the first nine months of 1997. The decrease in sales was largely due to two
related condemnation sales of land to the State of Florida in 1996 for $97.8
million in cash plus certain limited development rights. Costs associated with
these sales were $.1 million. The increase in costs of sales and operating
expense was due to a higher cost basis on 1997 land and building sales. Year to
date selling, general and administrative expenses increased 9.7% during 1997 due
primarily to additional salaries and related benefits.

In the commercial/industrial segment, conducted through GCC, rental
revenues increased $3.6 million, or 14.3%, from $25.1 million in the first nine
months of 1996 to $28.7 million in the first nine months of 1997. Operating
expenses in the commercial/industrial segment were $17.6 million for a 38.7%
gross margin in the 1997 period compared to $15.7 million in 1996 for a gross
margin of 37.5%. During the first nine months of 1997 eight buildings were
placed in service adding approximately 973,000 leasable square feet. In the
first nine months of 1997, land and building sales totaled $26.5 million and
included three buildings, totaling $20.1 million, one of which was developed and
constructed specifically for the purpose of resale. The total cost of these
sales was $22.4 million.

In the community/residential segment, land sales increased $2.7 million, or
207.7%, from $1.3 million in the first nine months of 1996 to $4.0 million in
the first nine months of 1997 (not including the condemnation sales). Costs of
these sales increased 200.0% from $.4 million in the first nine months of 1996
to $1.2 million in the first nine months of 1997.

As a result of these factors, operating profit decreased 85.8% from $102.7
million for the nine months ended September 30, 1996 to $14.6 million for the
comparable period in 1997.

Forestry

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1997 % CHANGE
----- ----- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Net Sales................................................... $44.6 $23.1 (48.2)
Cost of Sales............................................... 42.3 20.3 (52.0)
Selling, General and Administrative Expenses................ 1.4 1.7 21.4
Operating Profit (Loss)..................................... .9 1.1 22.2
</TABLE>

24
<PAGE> 32

Total net sales decreased $21.5 million, or 48.2%, from $44.6 million in
the first nine months of 1996 to $23.1 million the first nine months of 1997,
all of which is attributable to the Florida Coast linerboard mill shutdown which
lasted from April 1997 through September 1997. Costs of sales decreased 52% from
$42.3 million in 1996 to $20.3 million in 1997 due to declining sales, although
cost of sales as a percentage of sales continued to improve as the Company sold
more of its grown timber with higher margins than procured wood. Selling,
general and administrative costs increased $.3 million from $1.4 million in 1996
to $1.7 million in 1997 primarily due to severance payments of approximately
$1.2 million paid to 62 terminated employees, offset by reductions in ongoing
staffing levels. Operating profit increased 22.2% from $.9 million in 1996 to
$1.1 million in 1997.

On August 25, 1997, the Company renegotiated certain terms of its wood
fiber supply agreement with Florida Coast. Under the new agreement, the Company
will supply 615,400 tons of pulpwood and wood chips between August 25, 1997 and
May 30, 1998; thereafter the Company will supply 700,000 tons per year through
December, 2011 with two five year renewal periods at the option of Florida
Coast. Under the previous agreement, up to 1.6 million tons per year were to be
provided to Florida Coast. As a result of the decrease in tonnage required to be
provided to Florida Coast, management expects that the Company's revenues will
be temporarily depressed, but the change should result in higher-quality
older-growth timber in the future. The pricing mechanism for the wood remains
the same as in the original agreement.

Transportation

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1997 % CHANGE
------ ------ --------
($ IN MILLIONS)
<S> <C> <C> <C>
Operating Revenues.......................................... $137.2 $144.0 5.0
Operating Expenses.......................................... 104.8 100.9 (3.7)
Selling, General and Administrative Expenses................ 14.5 17.7 22.1
Operating Profit............................................ 17.9 25.4 41.9
</TABLE>

Operating revenues in the transportation segment were $144.0 million in
1997, an increase of 5% over the comparable period in 1996. Total FEC
transportation operating revenues increased $9.0 million, or 7.1% from $127.5
million in the first nine months of 1996 to $136.5 million in the first nine
months of 1997. This increase is attributable to a combination of an 8.2%
increase in the number of shipments handled in the first nine months of 1997
versus 1996 and various rate increases achieved since the beginning of the year.
ANRR's operating revenues were $7.5 million in 1997, $2.2 million lower than in
1996 due to the shutdown of the Florida Coast linerboard mill shutdown, its
largest customer. Operating expenses for this segment were $100.9 million, $3.9
million lower than last year as a result of decreases in casualty reserves
totaling $2.5 million and overall reductions in operating expenses. The 1996
comparable figures for casualty and insurance costs included an accrual for an
adverse legal judgment against the Company, which was subsequently reversed on
appeal, of approximately $2.2 million. Selling, general and administrative
expenses increased 22.1% over the previous year from $14.5 million in 1996 to
$17.7 million in 1997. Operating profit for the transportation segment overall
has increased from 13.0% in 1996 to 17.6% in 1997 as a result.

Sugar

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1997 % CHANGE
----- ----- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Net Sales................................................... $29.7 $25.5 (14.1)
Cost of Sales............................................... 19.9 19.3 (3.0)
Selling, General and Administrative Expenses................ 3.5 3.5 0
Operating Profit (Loss)..................................... 6.3 2.7 (57.1)
</TABLE>

Net sales decreased $4.2 million, or 14.1%, from $29.7 million in the first
nine months of 1996 to $25.5 million in the first nine months of 1997, due
primarily to a 12.4% volume decrease (8,400 tons) resulting from the timing of
shipments and fewer acres being harvested, and a sales price decrease of $7
dollars per ton. Cost

25
<PAGE> 33

of sales as a percentage of sales increased from 67.0% to 75.7% due to lower
selling price, higher direct costs including cultivation expenses, as well as
higher indirect costs compared to 1996. Selling, general and administrative
expense levels were consistent with 1996. Included in selling, general and
administrative expense is the Everglades Agricultural Privileges Tax of $905,000
and $976,000 for 1997 and 1996, respectively.

CORPORATE AND OTHER

On February 25, 1997 the Board of Directors approved an interim severance
program. The program was available to all employees (including early and regular
retirees) who elected to leave employment with the Company prior to May 2, 1997.
In total 80 employees elected to participate, and the Company incurred total
severance costs of approximately $2.5 million during 1997, of which $1.3 million
is included in corporate general and administrative expense and $1.2 million is
included in the forestry segment.

FINANCIAL POSITION AND CAPITAL RESOURCES

Total cash and cash equivalents decreased 55.2% from $449.0 million at
December 31, 1996 to $201.0 million at September 30, 1997 primarily as a result
of the special distribution of $3.33 per share paid during the first quarter
totaling approximately $305 million. The Company distributed the remaining net
proceeds of the sales of operations which occurred in 1996 of approximately $.34
per share in a special distribution on December 30, 1997. The Company has also
paid a dividend of $.02 per share on December 30, 1997. Total cash, cash
equivalents, short-term investments and marketable securities were $576 million
at September 30, 1997.

Capital expenditures for the year to date totaled $53.3 million, of which
$40.8 million related to real estate construction and land purchases. It is
anticipated that expenditures in the foreseeable future will be funded through
available cash and cash equivalents and funds from operations.

Stockholders' equity at September 30, 1997 was $10.19 per share, a decrease
of $2.89 from December 31, 1996, due to total distributions of $310.2 million,
including the special distribution and the regular $.02 per share dividend paid
each quarter.

The Company has historically not incurred debt in the development of its
various real estate projects or for other expenditures, funding instead from
internally generated cash flows. However, as the Company moves forward, debt may
be incurred in those situations where the use of financing leverage is deemed
appropriate. See "Business and Properties -- Investments."

26
<PAGE> 34

BUSINESS AND PROPERTIES

GENERAL

- Real Estate -- the development, ownership and management of commercial,
industrial and residential properties as well as the prospective
development of resort and entertainment properties;

- Forestry -- the management and harvesting of extensive timberland
holdings;

- Transportation -- the operation of two railroads within Florida; and

- Sugar -- the cultivation, harvesting and processing of sugar cane.

COMPANY BACKGROUND AND HISTORY

The Company was organized as a Florida corporation in 1936 by the executors
of the Estate of Alfred I. duPont to implement Mr. duPont's plans to establish a
paper company in northwestern Florida. The Company's Port St. Joe paper mill
began operations in 1938. The Company subsequently expanded into other lines of
business primarily by acquiring companies in financial difficulty whose assets
the Company perceived to be undervalued. For example, the Company acquired
control of FEC when it emerged from reorganization in 1961 and subsequently made
large capital investments in FEC to rehabilitate its operations.

Since 1940, the Company has continued to purchase additional parcels of
real property located throughout Florida and over time has acquired a sizable
portfolio of land. Included in these holdings are approximately 45,000 acres in
northwestern Florida that the Company has identified as potentially suitable for
development over the near to long term. For a more complete description of the
Company's land holdings, see "-- Real Estate Operations."

27
<PAGE> 35

The current ownership structure of the Company's principal lines of
business is as follows:

[GRAPH]

OPERATIONS

Real Estate. The Company currently conducts its real estate operations in
two principal segments: commercial/industrial development and management and
community/residential development.

The Company owns and manages commercial and industrial properties through
Gran Central Corporation ("GCC"), a wholly-owned subsidiary of Florida East
Coast Industries, Inc. ("FECI"), in which the Company has a 54% equity interest.
At October 30, 1997, GCC owned and operated 59 buildings with approximately 5.6
million square feet of rentable commercial/industrial space. On the same date,
GCC's buildings in service for one year or more were 91% leased (82% for its
portfolio as a whole, including newly constructed buildings). GCC's buildings
are primarily Class "A" office space and high quality commercial/industrial
facilities constructed after 1987 and are well-located in business parks near
major transportation hubs, primarily in the Jacksonville and Miami, Florida
areas. At October 30, 1997, GCC had an additional 479,000 square feet under
construction and had entitlements to develop an additional approximately 14.2
million square feet of buildings, primarily in its Miami, Jacksonville and
Orlando parks. GCC also owns over 15,400 acres of unentitled land that
management believes are suitable for future commercial, industrial and
residential development, primarily situated adjacent to the Florida East Coast
Railway right-of-ways in attractive markets that the Company believes will
provide significant growth opportunities.

28
<PAGE> 36

Transportation. FECI's subsidiary, Florida East Coast Railway Company
("FEC"), provides rail and freight service over 351 miles of main line track
between Jacksonville and Miami, Florida and 71 miles of branch line track
between Fort Pierce and Lake Harbor, Florida. FEC has the only coastal
right-of-way between Jacksonville and West Palm Beach, Florida and is the
exclusive rail-service provider to the Port of Palm Beach, Port Everglades and
the Port of Miami. Principal commodities carried by FEC, by weight, include
trailers-on-flatcars, containers-on-flatcars, crushed stone, foodstuffs,
vehicles and cement. FEC is pursuing a number of opportunities to enhance
returns, including through leasing its right-of-ways for the laying of
fiber-optic conduit and the construction of communications towers. The Company
also owns the Apalachicola Northern Railroad Company ("ANRR"), a short-line
railroad that operates on 96 miles of track between Port St. Joe and
Chattahoochee, Florida.

KEY BUSINESS STRATEGIES

The Company's principal objective is to optimize the value of its
substantial asset base. The Company's management team is focused on the
following key strategies:

29
<PAGE> 37

believes the Company's large raw land portfolio will allow the Company to
maintain low development costs relative to its competitors and that its
existing large portfolio of income-producing properties, together with its
other businesses, will generate cash to fund a significant portion of its
long-term projects.

Pursue Resort and Location-Based Entertainment Development
Opportunities. The Company plans to actively pursue the development of
resorts (including hotels, golf courses and other recreational facilities)
and location-based entertainment facilities as a new line of business.
Resort development may be in the form of stand alone projects or in
conjunction with the Company's large-scale community development projects.
The Company believes it has the land inventory (including attractive beach
and other waterfront properties) necessary to enter the resort development
business effectively. As part of the Company's strategy to enter the resort
development business, in December 1997 the Company acquired the Riverside
Golf Management Company, which manages three daily fee public golf courses
in Jacksonville, Florida, Atlanta, Georgia and Clemson, South Carolina. In
addition, the Company is evaluating potential development opportunities in
the location-based entertainment business, both inside and outside of
Florida, to be developed by the Company alone or in conjunction with joint
venture partners. Location-based entertainment takes the form of stand
alone facilities, often part of regional or national chains, that provide
entertainment, food and beverage and/or retail experiences. The Company's
management has extensive experience in the resort and entertainment
segments of the real estate development industry and is seeking avenues to
take advantage of that expertise.

Enhance Operating Performance. The Company believes it can improve
its operating performance through the following means:

30
<PAGE> 38

and in 1997, the Company reduced employment in its forestry operations
by 72% through outsourcing. In addition, the Company is considering
potential transactions to increase the nearer term value of the
Company's timberlands, such as asset swaps, sales, joint ventures or
lease arrangements.

THE FLORIDA ECONOMY

The Company's businesses are centered in Florida and the state's economic
health and growth rate will be important factors in creating demand for the
Company's products and services. According to the Bureau of Economic Analysis of
the WEFA Group, from 1992 to 1996 Florida's gross domestic product grew at an
average rate of approximately 6.1% per year compared to 5.3% per year for the
United States as a whole, and from 1997 to 2001 is expected to grow at an
average annual rate of approximately 5.8% compared to 5.3% for the nation as a
whole. According to U.S. Census Bureau statistics, Florida's annual population
growth over the last ten years has been 2.0%, while the average U.S. rate of
population growth has been approximately 1.0%. According to the Bureau of
Economic and Business Research at the University of Florida (the "Bureau"),
Florida's population will increase 26% between 1995 and 2010 compared to a U.S.
Census Bureau projection of 13.5% for the United States as a whole. Population
growth rates on the eastern coast of Florida, where many of GCC's properties are
located, are projected by the Bureau to be significantly higher than the
statewide rate. With the exception of Walton County (where population growth
rates have exceeded those of the State of Florida), population growth rates in
northwestern Florida, where most of the Company's properties are located, have
not been as high as those of the State as a whole, but have still exceeded the
national average. The Bureau estimates that employment in Florida grew at an
average annual rate of 3.5% from 1980 to 1995 and will continue to increase at
an average annual rate of 2.2% from 1996 to 2010. According to the Bureau,
personal incomes in Florida grew at 4.1% from 1980 to 1995 and are expected to
continue to grow at approximately 3% per year from 1996 to 2010. Florida's
population, job and income growth have created substantial demand for new
residential and commercial construction. According to a study conducted by the
Bureau, in 1995 Florida ranked first in the nation with respect to the number of
housing units permitted for construction and second in the nation on a value per
unit basis. Housing starts in the state of Florida are expected to reach an
aggregate level of 113,200 for 1996 and 1997 combined and to increase to 116,000
for 1998 alone. Management expects Florida's economic and population growth to
continue and believes that St. Joe is well positioned to benefit from increasing
demand for housing as well as office and industrial space in the Florida real
estate market.

REAL ESTATE

The Company conducts its real estate operations through two principal
segments: commercial/industrial development and management, and
community/residential development. In addition, the Company plans to pursue
resort and entertainment-based development in the future. The general locations
of the Company's real estate holdings are indicated on the map on the inside
front cover of this Prospectus.

31
<PAGE> 39

COMMERCIAL AND INDUSTRIAL DEVELOPMENT

The Company owns and manages commercial and industrial properties through
FECI's wholly-owned subsidiary, Gran Central Corporation. The primary focus of
GCC's development activities has been the Miami, Jacksonville and Orlando areas,
all of which are highly active with local, regional and national development
companies competing for land and tenants. The Company plans to continue
operating in these markets, and to evaluate Florida and southeastern markets to
increase the geographic diversity of its current portfolio. GCC is aggressively
pursuing commercial/industrial development opportunities on its entitled land
and actively seeks attractive land acquisition opportunities. A summary of GCC's
properties is set forth below:

GCC PROPERTY SUMMARY

<TABLE>
<S> <C>
Rentable Square Feet(1)..................................... 5,591,994
Percent Leased(1)(2)........................................ 82.4%
Rental Revenue(3)........................................... $24,116,385
Average Age of Buildings(1)................................. 5.5 yrs.
Square Feet under Construction(1)........................... 479,000
Entitled Square Feet(4)(5).................................. 14,150,000
Entitled Land (acres)(4).................................... 1,823
Unentitled Land (acres)(4).................................. 15,439
Developed Land (acres)(4)................................... 418
-----------
Total Land (acres)(4)....................................... 17,680
===========
</TABLE>

- ---------------

(1) At October 30, 1997.

(2) At October 30, 1997, buildings in service for one year or more were
approximately 91% leased.

(3) Through October 31, 1997.
(4) At December 1, 1997.
(5) Several of the Development of Regional Impact ("DRI") applications under
which GCC has vested rights to develop property contain conversion formulas.
These formulas vary the number of square feet GCC may construct in a given
project depending on the type of buildings constructed. Accordingly, actual
square footage constructed may vary significantly from currently entitled
square footage.

Because GCC was formed to conduct the real estate activities of the Florida
East Coast Railway Company, its undeveloped properties are generally located
near transportation corridors along the eastern coast of Florida. GCC's
developable holdings include sizable parcels adjacent to FEC tracks which are
suitable for development into office and industrial parks, offering both rail
and non-rail-served parcels. Certain of GCC's other holdings are in urban or
suburban locations offering opportunities for development of office building
structures or business parks containing both office building sites and sites for
flexible space structures such as office/showroom/warehouse buildings.

On December 3, 1997, the Company formed a 50/50 joint venture ("St.
Joe/CNL") with Orlando-based CNL Group, Inc. to develop and acquire commercial
real estate in the central Florida area. CNL is a large privately held real
estate, finance, and development company with substantial market knowledge and
relationships in the Orlando and central Florida commercial and industrial
markets. At September 8, 1997, according to the CNL Group, Inc., CNL and its
affiliates owned assets totaling more than $2 billion, representing more than
1,500 properties in 47 states. St. Joe/CNL's strategy is to accumulate a
portfolio of profitable, stabilized real estate assets through a combination of
development and acquisition and hold those assets in anticipation of ultimate
sale. St. Joe/CNL will initially focus on single and multi-tenant office
buildings and industrial and flex space, primarily in 17 central Florida
counties and along the U.S. Interstate Highway 4 corridor, including Tampa,
Orlando and Daytona Beach. St. Joe/CNL has significant investments planned for
the greater Orlando market, including a 14-story 345,000 square foot downtown
Orlando office building, together with an approximately 1,800 space parking
garage, which will serve as CNL's new corporate headquarters.

32
<PAGE> 40

Income Producing Projects

At October 30, 1997, GCC's commercial and industrial income-producing
portfolio included ten projects with 59 buildings aggregating 5,591,994 square
feet. At October 30, 1997, these buildings were 82.4% leased. GCC's
income-producing projects are detailed below:

GCC INCOME-PRODUCING PROJECTS

(AT OCTOBER 30, 1997)

<TABLE>
<CAPTION>
AVERAGE
NUMBER RENTABLE LEASED BASE RENT/
OF SQUARE SQUARE PERCENT MONTHLY SQUARE YEAR
LOCATION BUILDINGS TYPE FEET FEET LEASED BASE RENT FOOT BUILT
- -------- --------- ---------- --------- --------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
duPont Center............... 2 Office 162,669 157,040 96.5% $ 178,951 $13.67 1987-89
Jacksonville, FL
Gran Park at Deerwood(1).... 3 Office 385,213 302,091 78.4 406,163 16.13 1996-97
Jacksonville, FL
Gran Park at Interstate
South..................... 6 Industrial 260,064 223,247 85.8 123,598 6.64 1986-88
Jacksonville, FL
Gran Park at
Jacksonville(2)........... 3 Industrial 354,153 108,060 30.5 71,819 7.98 1997
Jacksonville, FL
Gran Park at the
Avenues(3)................ 8 Mixed use 713,877 594,741 83.3 492,723 9.94 1992-97
Jacksonville, FL
Gran Park at Riviera
Beach..................... 5 Industrial 311,392 279,935 89.9 98,810 4.24 1982-91
Riviera Beach, FL
Gran Park at McCahill(4).... 5 Industrial 878,439 566,420 64.5 249,063 5.28 1992-97
Miami, FL
Gran Park at Miami(5)....... 24 Industrial 2,422,101 2,297,185 94.8 1,060,331 5.54 1988-97
Miami, FL
Hialeah, FL................. 2 Industrial 50,150 24,075 48.0 11,975 5.97 1975/87
Pompano Beach, FL........... 1 Industrial 53,936 53,936 100.0 23,040 5.13 1987
-- --------- --------- ----- ---------- ------
Total............... 59 5,591,994 4,606,730 82.4%(6) $2,716,473 $ 7.08
== ========= ========= ===== ========== ======
</TABLE>

- ---------------

(1) An office building totaling 126,228 square feet was constructed and placed
in service during 1997 at Gran Park at Deerwood and has not yet been fully
leased.

(2) All buildings in Gran Park at Jacksonville were constructed and placed in
service in 1997.

(3) An office/showroom/warehouse building totaling 70,400 square feet was
constructed and placed in service during 1997 at Gran Park at the Avenues
and has not yet been fully leased.

(4) Two 159,520 square feet warehouse buildings were constructed and placed in
service in 1997 at Gran Park at McCahill and have not yet been fully leased.

(5) An office/warehouse building totaling 103,200 square feet was constructed
and placed in service during 1997 at Gran Park at Miami.

(6) At October 30, 1997, GCC's buildings in service for one year or more were
approximately 91% leased.

A description of the most significant existing projects in GCC's portfolio
is set forth below:

duPont Center. The duPont Center is comprised of two office buildings
totaling 162,669 rentable square feet located in downtown Jacksonville,
Florida. Its occupancy rate at October 30, 1997 was 96.5%. GCC owns an
additional 17 acres at this location of which approximately five acres,
capable of supporting an additional 160,000 square feet, have been
entitled. The remaining 12 acres which lie to the south of Interstate 95
have not been entitled; however, GCC believes that it can construct
additional office or industrial space on this site once entitlements are
secured.

Gran Park at Deerwood. Built between 1995 and 1997, Gran Park at
Deerwood ("Deerwood Park") is a 385,213 square foot Class A suburban office
complex situated on 41 acres in the Deerwood area of Jacksonville, Florida.
Deerwood Park is located in one of the fastest growing markets in
Jacksonville. When it purchased Deerwood Park in 1994, GCC obtained vested
development rights to build 540,000 square feet of office space. The three
buildings constructed at Deerwood Park to date had

33
<PAGE> 41

an occupancy rate of approximately 78.4% at October 30, 1997. A fourth
building is under construction and is expected to be completed by mid-1998.
This building will provide an additional 134,200 square feet, approximately
85,000 of which has been pre-leased to Chase Manhattan Bank, N.A. Deerwood
Park will be fully built upon completion of the fourth building.

Gran Park at Interstate South. Gran Park at Interstate South
("Interstate South") is located near the intersection of U.S. Highway 1 and
Interstate 95 in Jacksonville, Florida. Interstate South consists of six
office/showroom/warehouses totaling 260,064 rentable square feet, located
on approximately 25 acres. Its occupancy rate at October 30, 1997 was
85.8%.

Gran Park at Jacksonville. Gran Park at Jacksonville ("Jacksonville
Park") is situated upon approximately 935 acres between U.S. Highway 1 and
Interstate 95 in Jacksonville, Florida. This park is served by a rail spur
connecting to FEC's main track. During 1997, GCC constructed three
buildings at Jacksonville Park totaling 354,153 rentable square feet. By
early January 1998, the project, including a new 62,800 square foot
office/showroom/warehouse completed in January 1998, was 33.9% leased. GCC
believes that the majority of the balance of the currently vacant space
will be leased by the middle of 1998. GCC has secured entitlements to
construct a total of approximately 5.2 million square feet of industrial
space, 500,000 square feet of office space and 80,000 square feet of retail
space at Jacksonville Park, and has the flexibility to convert industrial
space to office or retail space based upon market conditions. During 1997,
GCC also completed construction of a 350,000 square foot build-to-suit rail
served warehouse at Jacksonville Park for General Motors.

Gran Park at the Avenues. Gran Park at the Avenues ("Avenues Park")
is located at the intersection of U.S. Highway 1 and Southside Boulevard in
Jacksonville, Florida. Avenues Park consists of eight buildings totaling
713,877 rentable square feet. Its occupancy rate at October 30, 1997 was
83.3%. Approximately 30% of Avenues Park's capacity is utilized as office
space while the remaining 70% is industrial. GCC completed construction of
a 70,400 square foot office/showroom/warehouse at Avenues Park in 1997. GCC
has completed additional infrastructure development at the site and has
entitlements to construct approximately 80,000 additional square feet.

Gran Park at Riviera Beach. Gran Park at Riviera Beach is a 311,392
square foot park consisting of five industrial buildings which were 89.9%
leased at October 30, 1997. The remainder of this property's 82 acres are
platted and zoned for industrial development and GCC intends to sell
individual parcels to others.

Gran Park at McCahill. Gran Park at McCahill ("McCahill Park"), a
878,439 square foot office/industrial park, is located in Dade County,
northwest of the Miami International Airport near the intersection of State
Road 826, a multi-lane limited access road, and U.S. Highway 27. At October
30, 1997, McCahill Park was 64.5% leased. GCC believes it will enter into
leases for the majority of the currently vacant space by the middle of
1998. Management believes McCahill Park is well-situated to capitalize on
saturated market conditions immediately adjacent to the airport.
Development of McCahill Park is complete.

Gran Park at Miami. The Gran Park at Miami development ("Miami Park")
consists of 24 buildings on 928 acres between U.S. Highway 27 and the
Florida Turnpike. Miami Park features over 2.4 million square feet of
rentable office, showroom and warehouse space, with an occupancy rate of
94.8% at October 30, 1997. This Park is served by a rail spur. GCC has
secured entitlements to develop an additional 7.0 million square feet at
Miami Park. Due to the scarcity of available land adjacent to the airport,
GCC believes that Miami Park is well-positioned to benefit as prospective
tenants begin seeking accessible bulk distribution space outside of the
congested airport vicinity.

New Construction

Through December 1, 1997, GCC's holdings grew significantly through the
construction and placing in rental status of eight buildings offering
approximately 973,000 square feet of leasable space. New construction in 1997
included one office building at Gran Park at Deerwood; one
office/showroom/warehouse, one front

34
<PAGE> 42

load warehouse and one rail building at Gran Park at Jacksonville; one
office/showroom/warehouse at Gran Park at the Avenues; two office/warehouses at
Gran Park at McCahill; and one office/warehouse at Gran Park at Miami.

At October 30, 1997, buildings under construction included a 134,200 square
foot office building at Gran Park at Deerwood, of which 85,000 square feet has
been pre-leased, a 62,800 square foot office/showroom/warehouse at Gran Park at
Jacksonville, and both a 150,000 square foot office building and a 132,000
square foot office/showroom/warehouse at Gran Park at Southpark, a new park
being established by the Company in Orlando, Florida. Following completion,
expected in the first half of 1998, these buildings will add approximately
479,000 square feet to GCC's total leasable space. Set forth below are details
of GCC's new construction:

GCC NEW CONSTRUCTION

<TABLE>
<CAPTION>
COMPLETION LEASED MANAGEMENT-
NUMBER OR ESTIMATED RENTABLE SQUARE ESTIMATED
OF COMPLETION SQUARE FEET BASE RENT/
LOCATION BUILDINGS TYPE DATE FEET (10/30/97) SQUARE FEET
- -------- --------- ---- ------------ -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
COMPLETED IN 1997:
Gran Park at Deerwood...... 1 Office July 1997 126,228 72,540 $17.50-$18.00
Jacksonville, FL
Gran Park at
Jacksonville............. 1 Office/Showroom/Warehouse July 1997 147,553 108,060 $9.10
Jacksonville, FL......... 1 Front Load Warehouse July 1997 98,800 -- $4.25
1 Rail Building May 1997 107,800 -- $4.50
Gran Park at the Avenues... 1 Office/Showroom/Warehouse June 1997 70,400 -- $6.75
Jacksonville, FL
Gran Park at McCahill...... 1 Office/Warehouse January 1997 159,520 159,520 $6.00-$6.50
Miami, FL................ 1 Office/Warehouse April 1997 159,520 -- $6.00-$6.50
Gran Park at Miami......... 1 Office/Warehouse July 1997 103,200 46,240 $6.00
- -------
Miami, FL
Total.............. 8 973,021
=======
UNDER CONSTRUCTION AT
OCTOBER 31, 1997:
Gran Park at Deerwood...... 1 Office May 1998 134,200 85,000 $17.50-$18.00
Jacksonville, FL
Gran Park at
Jacksonville............. 1 Office/Showroom/Warehouse January 1998 62,800 51,523 $9.50
Jacksonville, FL
Gran Park at Southpark..... 1 Office June 1998 150,000 -- $18.50
Orlando, FL.............. 1 Office/Showroom/Warehouse June 1998 132,000 -- $10.00
- -------
Total.............. 4 479,000
=======
</TABLE>

GCC has received expressions of interest from prospective tenants relating
to leasing portions of its recently completed buildings and current sites under
construction and is actively seeking to lease its currently vacant space.

In addition to those buildings presently under construction, GCC expects to
commence construction in 1998 on a 134,200 square foot office building at
Deerwood North, a 62,800 square foot office/showroom/warehouse at Gran Park at
Jacksonville and a 134,200 square foot office building at Gran Park at
Southpark. A description of new commercial/industrial parks upon which the
Company has commenced or expects to commence construction in 1998 is set forth
below:

Gran Park at Deerwood North. Gran Park at Deerwood North ("Deerwood
North") is located near Deerwood Park in Jacksonville, Florida on
approximately 35 acres purchased in 1997. As part of the purchase, GCC
obtained vested development rights to build 513,000 square feet of office
space. In addition, GCC was granted a right of first refusal to purchase
certain adjacent property. The infrastructure for this project is in the
design stage and GCC anticipates that infrastructure construction and
construction of a 134,200 square foot office building will commence during
1998.

Gran Park at Southpark. Gran Park at Southpark ("Southpark") is
situated upon approximately 85 acres near the Florida turnpike in Orlando,
Florida. GCC has commenced construction of infrastruc-

35
<PAGE> 43

ture and a 150,000 square foot office building and a 132,000 square foot
office/showroom/warehouse building. It expects to construct an additional
134,200 square foot office building in 1998. The site is zoned for
approximately 915,000 square feet of office and industrial space, of which
282,000 square feet is currently under construction.

Leasing

At October 30, 1997, approximately 4,606,730 square feet or 82.4% of GCC's
rentable square feet was leased. On the same date, in GCC's buildings in service
for one year or more, approximately 4,220,370 square feet, or 91% of rentable
square feet, was leased.

GCC's portfolio has limited tenant concentration, with the largest tenants
being Seaboard Marine, Ltd., occupying 166,400 square feet or 3.6% of leased
space, and Perfumania, occupying 138,600 square feet or 3.0% of leased space, in
each case at October 30, 1997. The following table summarizes the lease
expirations in GCC's portfolio for 1998 and thereafter:

LEASE EXPIRATION SCHEDULE

<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Square Feet................. 861,873 856,327 547,943 482,358 598,119 457,413
Percent of Rented Space
(annual).................. 18.7% 18.6% 11.9% 10.5% 13.0% 10.0%
Percent of Rented Space
(cumulative).............. 18.7 37.3 49.2 59.7 72.7 82.7
</TABLE>

Entitlements

In addition to properties under construction or upon which construction is
expected to commence in the near term, at October 30, 1997, GCC had secured
entitlements to construct up to 14,150,000 square feet of additional buildings.
The Company's entitled land is located as indicated in the table set forth
below:

GCC ENTITLED LAND SUMMARY

(AT OCTOBER 30, 1997)

<TABLE>
<CAPTION>
PROJECT ENTITLEMENTS
- ------- -------------
(SQUARE FEET)
<S> <C>
duPont Center............................................... 160,000
Jacksonville, FL
Gran Park Deerwood North.................................... 513,000
Jacksonville, FL
Gran Park at the Avenues.................................... 80,000
Jacksonville, FL
Gran Park at Jacksonville................................... 5,764,000
Jacksonville, FL
Gran Park at Southpark...................................... 633,000
Orlando, FL
Gran Park at Miami.......................................... 7,000,000
Miami, FL
----------
Total............................................. 14,150,000(1)
==========
</TABLE>

- ---------------

(1) Several of the DRIs under which GCC has vested rights to develop property
contain conversion formulas. These formulas vary the number of square feet
GCC may construct in a given project depending on the type of buildings
constructed. Accordingly, actual square footage constructed may vary
significantly from currently entitled square footage.

36
<PAGE> 44

In addition to the foregoing, GCC owns an 8.88 acre tract adjacent to the
Dade County government center in Miami. This property is subject to the
"Downtown Miami DRI", which allows construction of high rise office buildings in
the Central Business District of Miami by GCC and other property owners. GCC
previously explored the possibility of constructing one or more high rise office
buildings on this site. At that time, it was determined that the DRI would allow
the construction of two buildings totaling over one million square feet. GCC
believes that there is currently capacity under the DRI to construct at least
that amount of space. There can be no assurance, however, that this capacity
will be available at the time building permits are issued. Because this DRI
covers the entire Central Business District, other developers owning property
subject to the DRI could exhaust all the capacity prior to GCC securing permits.

Land Holdings

GCC owns approximately 17,680 acres of land within fourteen counties,
including several high-growth areas along Florida's east coast, such as West
Palm Beach, Melbourne-Titusville, Daytona Beach, Jacksonville, Miami-Hialeah and
the Fort Pierce area. GCC's land holdings were as follows at December 1, 1997:

GCC LAND HOLDINGS (ACRES)

(AT DECEMBER 1, 1997)

<TABLE>
<CAPTION>
COUNTY VACANT DEVELOPED ENTITLED TOTAL
- ------ ------ --------- -------- ------
<S> <C> <C> <C> <C>
Brevard............................................. 2,396 -- -- 2,396
Broward............................................. 46 6 -- 52
Dade................................................ 605 260 757 1,622
Duval............................................... 423 121 981 1,525
Flagler............................................. 3,462 -- -- 3,462
Indian River........................................ 5 -- -- 5
Martin.............................................. 661 -- -- 661
Manatee............................................. 897 -- -- 897
Palm Beach.......................................... 147 31 -- 178
Orange.............................................. -- -- 85 85
St. Johns........................................... 3,321 -- -- 3,321
St. Lucie........................................... 567 -- -- 567
Seminole............................................ 1 -- -- 1
Volusia............................................. 2,908 -- -- 2,908
------ --- ----- ------
Total:.................................... 15,439 418 1,823 17,680
====== === ===== ======
</TABLE>

COMMUNITY AND RESIDENTIAL DEVELOPMENT

In the community/residential development sector, the Company's strategy is
to develop large-scale mixed-use communities on Company-owned land. Development
of master-planned communities is a long-term endeavor, with build-out typically
occurring over a five- to fifteen-year period. The Company also intends to
develop smaller scale residential projects that offer good uses of existing
Company and acquired land.

On November 12, 1997 the Company purchased a 74% general partnership
interest in a limited partnership, St. Joe/Arvida Company, L.P., through a joint
venture with JMB Southeast Development, L.L.C. and JMB Southeast Development,
L.P. The principal assets acquired through the Arvida Venture were the "Arvida"
name, proprietary information systems and the Arvida management team. Through
the Arvida Venture, the Company intends to develop certain of its existing lands
as well as to acquire additional land for development. Although the Company has
not in the past built homes, the Company intends to initiate home-building
through the Arvida Venture. Between 1958 and 1996, Arvida completed more than 50
master-planned communities (including Weston, near Ft. Lauderdale, Florida;
Sawgrass at Ponte Vedra Beach, Florida; Longboat Key Club in Sarasota, Florida;
Boca West and Broken Sound in Boca Raton, Florida; and Eagle Watch in Atlanta,
Georgia) which comprised more than 35,000 new homes. Although the Company's

37
<PAGE> 45

residential development activities have historically been conducted primarily
through its Southwood Properties division, the Company expects to direct most of
its future community and residential development efforts through the Arvida
Venture and to conduct the majority of its residential development activity
under the Arvida trademark.

Company Land Holdings Identified for Residential Development

The Company owns approximately 45,000 acres in northwestern Florida and
approximately 6,435 acres in St. John's County on the northeastern coast of
Florida near Jacksonville, including substantial gulf, lake and riverfront
acreage, that it believes to be potentially suited to community/residential and
resort development. The Company continually evaluates its holdings and local
market conditions to determine the market's readiness for additional development
and, as a result, may identify additional significant developable tracts among
its over 1.1 million acres in the future.

The Company's most significant land holdings potentially suitable for
community and residential development are set forth below:

LAND HOLDINGS FOR COMMUNITY AND RESIDENTIAL DEVELOPMENT

(AT OCTOBER 30, 1997)

<TABLE>
<CAPTION>
COUNTY ACRES
- ------ ------
<S> <C>
Bay......................................................... 25,933
Franklin.................................................... 7,003
Leon........................................................ 9,556
St. John's.................................................. 6,435
Walton...................................................... 1,583
Wakulla..................................................... 1,143
</TABLE>

Approximately 244 acres listed above are currently entitled for
development.

In evaluating whether to develop a mixed-use residential community, the
Company analyzes current demographic and economic data, such as (i) population
growth, including net migration and natural increase trends, (ii) increases in
household formation, (iii) job growth and job/household imbalance, (iv) income
levels, (v) transportation, and (vi) new home occupancy levels. Once a site is
identified, the Company designs the project to meet the needs of the target
market, based on specific demographic information and the characteristics of the
site itself. Items such as project design and unit mix, construction materials
and finishes and common area amenities are reviewed in relation to the
preferences of the target market. The Company believes that market segmentation
during the planning process maximizes the overall returns of development.

Although the Company has completed a number of real estate developments and
has begun to develop certain other parcels, in the aggregate these projects
amount to a small fraction of the Company's land holdings that it believes to be
suitable for development. The Company believes there is generally a two-year lag
between the submission of a master plan to the appropriate regulatory body and
the commencement of first phase construction. Accordingly, the Company expects
that it will take many years for the Company to complete the development of
significant portions of its developable land portfolio.

New Communities and Residential Development Projects

The Company is currently master-planning two tracts of land near the Town
of Seaside and one large tract in suburban Tallahassee as part of its
development program. The master-planning of these tracts is expected to be
completed in mid-to-late 1998, and the Company anticipates submission of such
plans to the relevant entitlement authorities soon thereafter. Described below
are the Company's plans for development of these tracts:

Walton County, Seagrove and Camp Creek. The Company owns a 500 acre
tract located between the Town of Seaside to the east and the Grayton Beach
State Recreation Area to the west (the "Seagrove

38
<PAGE> 46

Tract"). The Seagrove Tract has an approximately 1,400 foot frontage on the
Gulf of Mexico as well as significant frontage on a large interior fresh
water lake, Western Lake. The Company also owns a 300 acre tract four miles
to the east of the Seagrove Tract with one mile of frontage on the Gulf of
Mexico (the "Camp Creek Tract"). These tracts constitute the largest
privately-owned undeveloped beach frontage remaining in South Walton County
and feature high dunes and white sand beaches. In addition, these tracts
are adjacent to or near the Town of Seaside, an eighty acre planned-resort
community of 350 homes that has received wide acclaim as a model resort
community and has an average home value of $460,000. Seaside is located
midway between Panama City and Pensacola on the northwestern coast of
Florida. The Company intends to develop the Seagrove and Camp Creek Tracts
as second home/resort communities, each with an image and identity separate
from the Town of Seaside, but capitalizing on the positive image Seaside
has created over the past decade. The Company's preliminary plans for the
Seagrove and Camp Creek Tracts include gulf front inns or hotels and beach
clubs to provide beach access and facilities for neighborhood property
owners and guests. Management believes the Seagrove and Camp Creek Tracts'
gulf frontage presents an opportunity for the Company to enhance the value
of several thousand acres it owns nearby that are off the beach and to the
north, by providing "windows" of beach access for such properties. The
Company anticipates that the first phase of construction of these tracts
will begin approximately two years after submission of master-plans to the
Walton County entitlement authority. The following map shows a detail of
the Seagrove and Camp Creek Tracts' locations.

Seagrove Map

Leon County, Tallahassee. The Company is currently master-planning a
3,000 acre tract located in Tallahassee for development as a residential
and mixed-use planned community (the "Tallahassee Tract"). The Tallahassee
Tract is characterized by rolling terrain, large lakes and heavily treed
areas of live oaks and other hard woods. It is located approximately six
miles from downtown Tallahassee and the State Capital building. The
Tallahassee Tract is immediately adjacent to the Capital Circle complex, a
750,000 square foot state office complex located on land previously donated
to the State by the Company. The Capital Circle complex has been entitled
to expand to 2 million square feet and, when fully constructed, will
provide employment for up to 8,000 persons. The Company anticipates that
the favorable location of the Tallahassee Tract will create demand for new
residential construction. The

39
<PAGE> 47

Company intends to commence the first phase of construction on the
Tallahassee Tract approximately two years after submission of master-plans
to the Leon County entitlement authority, expected in mid-to-late 1998. The
Company expects to engage in on-going master-planning of the Tallahassee
Tract and, on a longer-term basis, of an additional 7,000 acres that it
owns adjacent to the Tallahassee Tract in order to create a full-scale new
town adjacent to the existing Tallahassee city limits. The following map
shows a detail of the Tallahassee Tract's location.

Tallahassee Tract Map

The Company believes that its raw land inventory will provide a long-term
supply of well-situated land and waterfront properties that may be suitable for
similar developments in the future. In particular, the Company owns two
developable parcels in St. John's County, on the northeastern coast of Florida.
The Company's Riverton property, located near Jacksonville, is a 4,300 acre
parcel with 4.5 miles of riverfront on the St. John's River, which at that
location is approximately 3 miles wide. The Riverton property offers
unobstructed western views across the waterfront as well as fishing and boating
opportunities. Management believes that transportation improvements planned by
the County and State should give the Riverton property strong transportation
connections and access to employment centers in Jacksonville. The Company
anticipates that master-planning of a residential community to be built on this
tract will begin in the next year. In addition, GCC owns a 2,150 acre parcel in
St. John's County located on the Intracoastal Waterway with a view across to the
undeveloped beach front at the Guana River State Park. Management believes this
property is suitable for development into a mixed-use community and the Company
expects to begin master-planning in late 1998. As is typical of large scale
development projects, development of these tracts could require significant
infrastructure development costs and may raise environmental issues that require
mitigation.

In addition, the Company has certain smaller developments underway or
entitled in Bay and Walton counties. The Retreat, a 97-lot vacation home project
in Walton County with 2,600 feet of gulf frontage, is fully entitled and
construction is expected to begin shortly. The Company expects home values at
the Retreat will range from $375,000 to over $1,000,000. In addition, first
phase infrastructure is complete and sales are underway for Summerwood, a
200-lot subdivision in Panama City Beach intended for first and retirement home
buyers. Home values at Summerwood are expected to range from $90,000 to
$125,000. Woodrun, a 52-lot subdivision in Panama City, is currently under
construction and sales are expected to begin in January

40
<PAGE> 48

1998. Woodrun is intended to serve as primary housing for trade-up buyers, and
the Company expects home prices will range from $150,000 to $250,000. In
conjunction with the Arvida Venture, the Company intends to construct homes at
these development sites and then sell them to end purchasers.

Several of the projects described above, including the Seagrove Tract, the
Camp Creek Tract and the Tallahassee Tract, are still in the master-planning
stage and have not yet been submitted to the state and local authorities for
their review. No assurances can be given that the necessary entitlements for
development will be secured, that any of the Company's projects can be
successfully developed, if at all, or that they can be developed in a timely
manner. It is not feasible to estimate project development costs until
entitlements have been obtained.

Longer-Term Development Priorities

The Company owns several other developable properties in the northwestern
portion of Florida. A large portion of this property is situated along major
U.S. and state highways and has significant gulf, lake or river frontage. The
most significant tracts include parcels situated near Panama City Beach, Mexico
Beach, St. Joe Beach and the town of Apalachicola. The Company believes that
these properties offer significant development opportunities that it expects to
develop over the long-term.

Panama City Beach, Bay County. The Company's 5,000 acre holdings to
the north and abutting the city limits of Panama City Beach are the only
avenues for Panama City Beach to expand its limits. The City promotes
itself as the home of the "World's Most Beautiful Beaches." The Company is
currently conducting land use analyses and environmental studies to
determine the suitability of this land for development. In addition, the
Company has contracted to purchase a 1.4 acre beach-front "window" on
Panama City Beach to provide beach access for its thousands of off-beach
acres adjacent to the corporate limits of Panama City Beach. Management
believes these tracts present an opportunity for mixed-use recreation and
second home development with an entertainment/retail component.

Apalachicola, Franklin County. The Company owns 7,003 acres
surrounding the town of Apalachicola, a coastal fishing town on
Apalachicola Bay and the Gulf of Mexico that is emerging as a tourist
destination. The Company's holdings include approximately twelve miles of
frontage on the Apalachicola Bay and the Gulf of Mexico to the west of the
town. Management believes this tract presents an opportunity for the
development of vacation and second homes with a golf and water orientation.

St. Joe Beach/Mexico Beach, Gulf and Bay Counties. Company holdings
at St. Joe and Mexico Beach contain slightly over four miles of gulf
frontage. At St. Joe Beach, the white sand beaches of the Florida panhandle
begin. The Company owns several thousand acres of off-beach property behind
its beach exposure. These parcels are traversed by U.S. Highway 98, which
runs along the coast providing access east and west. Management believes
these tracts present an opportunity for the development of vacation and
second homes with a golf and water orientation.

Other

Through the Arvida Venture, the Company has acquired an option expiring
March 31, 1998 to purchase certain real estate management contracts and a
limited ownership stake in certain existing Arvida developments. The Arvida
Venture will also provide management services for a number of non-Company
large-scale residential housing projects on a cost reimbursement basis, and
accordingly it is expected that the Arvida Venture management team will dedicate
significant time and resources to non-Company projects in the near to medium
term.

RESORT AND LOCATION-BASED ENTERTAINMENT DEVELOPMENT

The Company plans actively to pursue development of resorts and
recreational facilities as a new business line. The development of resorts,
including hotels, recreation facilities and golf courses, may be in the form of
stand-alone projects or in conjunction with the Company's large scale community
developments. Resort developments may be the best use for some of the Company's
prime waterfront lands. The Company's inventory of raw land, management's
knowledge of the permitting process and extensive experience in resort

41
<PAGE> 49

development should allow the Company to begin to develop these lands in the near
future. Resort projects typically require large tracts of undeveloped land, and
regulatory agencies may require that a developer of such a property dedicate
land for public use in order to secure the requisite permits. The Company may be
able to utilize its large land holdings to facilitate the permitting process
with local communities in appropriate circumstances.

As part of its strategy to pursue resort and recreational facility
development, on December 3, 1997, the Company purchased 100% of the capital
stock of Riverside Golf Management Company ("Riverside") from Steven Melnyk.
Riverside is currently the manager of three daily fee public courses in
Jacksonville, Florida, Atlanta, Georgia and Clemson, South Carolina. The Company
acquired Riverside, its information systems, current management contracts and
the right to use the name "Champions Club" on any course it develops or manages.
Management intends to utilize Riverside in conjunction with the Arvida Venture
to create attractive residential communities with a golf course component.
Riverside will also develop golf courses unrelated to Company residential
developments.

The Company is also evaluating potential development opportunities in the
location-based entertainment business, both inside and outside of Florida, and
to be developed by the Company alone or in conjunction with joint venture
partners. Location-based entertainment takes the form of standalone facilities,
often part of regional or national chains, that provide multiple forms of
entertainment experiences in a single setting. Such facilities may offer only
entertainment or may offer a combination of entertainment, food and beverage and
retail experiences. The Company's management has extensive experience in the
entertainment segment of the real estate development industry and is seeking
avenues to take advantage of that experience.

REGULATION

Development of real property in Florida entails an extensive approval
process involving overlapping regulatory jurisdictions. Real estate projects
must generally comply with the provisions of the Local Government Comprehensive
Planning and Land Development Regulation Act (the "Growth Management Act"). In
addition, development projects that exceed certain specified regulatory
thresholds require approval of a comprehensive DRI application. Compliance with
the Growth Management Act and the DRI process is usually lengthy and costly and
can be expected to materially affect the Company's real estate development
activities.

The Growth Management Act requires counties and cities to adopt
comprehensive plans guiding and controlling future real property development in
their respective jurisdictions. After a local government adopts its
comprehensive plan, all development orders and development permits that it
issues must be consistent with the plan. Each such plan must address such topics
as future land use, capital improvements, traffic circulation, sanitation,
sewerage, potable water, drainage and solid wastes. The local governments'
comprehensive plans must also establish "levels of service" with respect to
certain specified public facilities and services to residents. Local governments
are prohibited from issuing development orders or permits if facilities and
services are not operating at established levels of service, or if the projects
for which permits are requested will reduce the level of service for public
facilities below the level of service established in the local government's
comprehensive plan. If the proposed development would reduce the established
level of services below the level set by the plan, the development order will
require that, at the outset of the project, the developer either sufficiently
improve the services to meet the required level or provide financial assurances
that the additional services will be provided as the project progresses.

The Growth Management Act is in some instances significantly affecting the
ability of developers to obtain local government approval in Florida. In many
areas, infrastructure funding has not kept pace with growth. As a result,
substandard facilities and services are delaying or preventing the issuance of
permits. The Growth Management Act could adversely affect the ability of Florida
developers, including the Company and GCC, to develop real estate projects.

The DRI review process includes an evaluation of the project's impact on
the environment, infrastructure and government services, and requires the
involvement of numerous federal, state and local environmental, zoning and
community development agencies and authorities. Local government approval of any
DRI is

42
<PAGE> 50

subject to appeal to the Governor and Cabinet by the Florida Department of
Community Affairs, and adverse decisions by the Governor or Cabinet are subject
to judicial appeal. The DRI approval process is usually lengthy and costly, and
there are no assurances as to what specific factors will be considered in the
approval process, or what conditions, standards or requirements may be imposed
on a developer with respect to a particular project. The DRI approval process is
expected to have a material impact on the Company's real estate development
activities in the future.

In addition, a substantial portion of the developable property in Florida,
including much of the Company's property, is raw land located in areas where its
development may affect the natural habitats of various endangered or protected
wildlife species or in sensitive environmental areas such as wetlands and
coastal areas, which are subject to extensive and evolving federal, state and
local regulation. Accordingly, federal, state and local wildlife protection,
zoning and land use restrictions, as well as community development requirements,
may become increasingly restrictive and, as a result, significant limitations
may be imposed on the Company's ability to develop its real estate holdings in
accordance with their most profitable uses.

The Company's ownership and development of real estate are subject to
extensive and changing federal, state and local environmental laws, the
provisions and enforcement of which are expected to become more stringent in the
future. Pursuant to those laws, the owner or operator of real estate may be
required to perform remediation regardless of whether it caused the
contamination. The sale or development of properties may also be restricted due
to environmental concerns, the protection of endangered species, or the
protection of wetlands. In addition, violations of various statutory and
regulatory programs can result in civil penalties, remediation expenses, natural
resource damages, potential injunctions, cease and desist orders and criminal
penalties.

The Company is not presently aware of any material contaminations at or any
material adverse environmental development issues relating to its real estate
operations. However, there can be no assurance that environmental issues will
not arise in the future relating to the real estate operations. See "Risk
Factors -- Environmental Matters."

FORESTRY

The Company's forestry operations, conducted through its wholly-owned
subsidiary, St. Joe Timberland Company, are in the business of growing,
harvesting and selling timber and wood fiber. The Company is the largest private
holder of timberlands in Florida, with over 700,000 acres of planted pine
forests, primarily in northwestern Florida, and an additional 300,000 acres of
mixed timberland, wetlands, lake and canal properties. Over 639,000 acres of the
Company's timberlands have been planted as managed pine plantations to
facilitate harvesting and reforestation and to maximize timber yields. Although
no detailed inventory has been conducted, the Company estimates that
approximately 150,000 acres of hardwood are located on its remaining
timberlands. Six forestry units and a wood procurement unit manage the
timberlands. The timberlands are harvested by local independent contractors
pursuant to agreements which are generally renewed annually. The Company also
owns a wood chipping facility located at Lowry, Florida. The principal product
of the Company's forestry operations is softwood pulpwood, but the Company also
produces and sells softwood and hardwood sawtimber.

On May 30, 1996, the Company sold its former linerboard mill and container
plants as part of its strategy of focusing its forestry operations on the
business of growing and harvesting timber. By divesting itself of these assets,
the Company can now focus on achieving the highest margin usage for its
products, consistent with sustainable harvest practices, without the competing
imperative of supplying fiber to manufacturing operations that typically only
operate efficiently at full capacity. As a result, the Company can now seek to
operate its forestry operations as a stable and sustainable business, shielded
from the highly cyclical nature of the conversion business.

THE TIMBERLANDS

The Company's timberlands are located in northwestern Florida and southern
Georgia, near key transportation links including roads, waterways and railroads,
allowing the Company to deliver fiber to its

43
<PAGE> 51

customers on a cost efficient basis. The Company's principal productive
timberlands are near the facilities of Florida Coast in Port St. Joe, the
Company's major customer. Numerous other major conversion facilities located
near the Company's timber assets could serve to further expand the markets for
the Company's timber products.

The Company's strategy in its forestry segment is to increase the average
age of its timber by extending growing periods before final harvesting in order
to capitalize on the higher margins of older-growth timber. The Company intends
to extend growing periods for its softwood forests from a historical average of
approximately 18-22 years to approximately 28-30 years. This change is expected
to shift the Company's product mix from approximately 85% pulpwood and 15%
higher-margin products in 1997 to approximately 60% pulpwood and 40%
higher-margin products by 2005. Although revenues in the forestry segment will
likely be flat or decline slightly in the near term, this strategy should
ultimately increase the revenues and returns of the Company's timber operations
when a sustainable harvest of older-growth timber is achieved, although there
can be no assurances in this regard. The Company will also seek to maximize
sustainable harvest volumes through the continued use and development of
genetically improved seedlings, soil mapping, extensive fertilization,
vegetation control, thinning and selective harvesting practices. In addition,
the Company is considering potential transactions to increase the nearer term
value of the Company's timberlands, such as asset swaps, sales, joint ventures
or lease arrangements.

At November 3, 1997, the distribution of the Company's pine timberland, by
age class, was as follows:

SOFTWOOD FORESTS -- FIVE YEAR AGE CLASSES

<TABLE>
<CAPTION>
AGE ACRES
- --- -------
<S> <C>
0- 5....................................................... 161,334
6-10....................................................... 174,936
11-15....................................................... 153,426
16-20....................................................... 107,164
21-25....................................................... 62,252
26-30....................................................... 20,436
31-35....................................................... 1,937
36 +........................................................ 2,115
-------
Total............................................. 683,600
=======
</TABLE>

The Company views its timberlands as a renewable resource and manages its
timberlands to achieve sustainable harvests. During the 1996-1997 planting
season, the Company planted approximately 13 million seedlings on 17,944 acres.
St. Joe maintains a research facility in Capps, Florida, which conducts research
to produce faster-growing, more disease-resistant species of pine trees.

44
<PAGE> 52

Harvest Levels

In 1996, the Company harvested 697,398 tons of softwood pulpwood and
sawtimber. The Company estimates that it can increase its long-term sustainable
yearly harvest over the next decade to 1.6 million tons of softwood pulpwood and
.9 million tons of softwood sawtimber. The Company estimates that its
timberlands will yield a sustainable harvest of approximately 2.5 million tons a
year of softwood and .3 million tons of hardwood, commencing in 2008. The
following tables set forth the Company's historical and projected annual
softwood and hardwood harvest volumes for the years 1992 to 2008:

SOFTWOOD AND HARDWOOD HARVEST PLAN
(TONS)

<TABLE>
<CAPTION>
SOFTWOOD HARDWOOD
SAWTIMBER TOTAL ANNUAL SAWTIMBER TOTAL ANNUAL
SOFTWOOD AND OTHER SOFTWOOD HARDWOOD AND OTHER HARDWOOD TOTAL ANNUAL
YEAR PULPWOOD PRODUCTS HARVEST PULPWOOD PRODUCTS HARVEST HARVEST
- ---- --------- --------- ------------ -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ACTUAL:
1992............... 773,051 195,691 968,742 * * * 968,742
1993............... 823,625 177,109 1,000,734 * * * 1,000,734
1994............... 912,979 167,502 1,080,540 * * * 1,080,540
1995............... 836,289 98,308 934,597 * * * 934,597
1996............... 610,418 86,980 697,398 * * * 697,398
PROJECTED:
1997............... 665,000 135,000 800,000 * * * 800,000
1998............... 829,000 135,000 964,000 100,000 150,000 250,000 1,214,000
1999............... 910,000 190,000 1,100,000 100,000 150,000 250,000 1,350,000
2000............... 925,000 275,000 1,200,000 125,000 175,000 300,000 1,500,000
2001............... 925,000 275,000 1,200,000 125,000 175,000 300,000 1,500,000
2002............... 950,000 350,000 1,300,000 125,000 175,000 300,000 1,600,000
2003............... 950,000 350,000 1,300,000 125,000 175,000 300,000 1,600,000
2004............... 1,000,000 500,000 1,500,000 125,000 175,000 300,000 1,800,000
2005............... 1,150,000 600,000 1,750,000 125,000 175,000 300,000 2,050,000
2006............... 1,300,000 700,000 2,000,000 125,000 175,000 300,000 2,300,000
2007............... 1,450,000 800,000 2,250,000 125,000 175,000 300,000 2,550,000
2008............... 1,600,000 900,000 2,500,000 125,000 175,000 300,000 2,800,000
</TABLE>

- ---------------

* Historically, the Company has harvested minimal amounts of hardwood.

Inventory Levels

The Company estimates that its standing inventory on January 1, 1998
totaled 10.6 million tons of softwood timber and 5.9 million tons of hardwood
timber. The following table sets forth the Company's projected standing
inventory levels by product, at January 1, 2008:

PROJECTED STANDING INVENTORY AT JANUARY 1, 2008
(TONS)

<TABLE>
<CAPTION>
SOFTWOOD HARDWOOD SOFTWOOD HARDWOOD
PULPWOOD PULPWOOD SAWTIMBER SAWTIMBER TOTAL
- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
15,938,372 2,456,869 6,904,607 6,274,983 31,574,832
</TABLE>

45
<PAGE> 53

PRICING

While the supply of timber in the United States has been subject to
constraint, demand has remained relatively strong, driven by economic expansion
and population increases, which in turn drive growth in housing starts, repair
and remodeling activities and industrial wood use. The Company expects demand
for timber to remain strong as economies in the United States and abroad
continue to expand. This stable demand in the face of a constrained supply has
resulted in real price appreciation for timber. As the following charts
illustrate, between 1988 and 1996 stumpage prices for two of the Company's
largest timber products, southern pine pulpwood and sawtimber, increased at real
compound annual growth rates of 4% and 5%, respectively.

[CHART]

The Company anticipates that increasing demand and continuing constraints
on timber supply will continue to support higher real timber prices.

SALES AND MARKETING

The major customer for the timber harvested from the Company's timberlands
has been and continues to be the Company's former linerboard mill at Port St.
Joe, Florida, which was sold on May 30, 1996 and which now operates as the
Florida Coast Paper Company, L.L.C. Pursuant to a supply contract entered into
with Florida Coast upon the sale of the mill, the Company was obligated to sell
Florida Coast between 900,000 and 1.6 million tons of pulpwood a year on a
long-term basis. However, from April to September 1997, Florida Coast shut down
due to soft market conditions in the paper industry and breached its obligations
to buy specified amounts of pulpwood from the Company. In August 1997, the
Company negotiated an amendment to the supply agreement with Florida Coast,
which will reduce the Company's supply obligations to 700,000 tons a year
beginning in June 1998 and which also contains certain protections for the
Company, including liquidated damages in the event of future shutdowns. The
Company views the reduction of its supply obligations to Florida Coast as a key
to its future business strategy because the reduction will allow the Company to
sell a greater portion of its timber in the form of higher-margin products over
the long term. The Company's amended supply contract with Florida Coast expires
in 2011, subject to two five year extensions at the option of Florida Coast.
Under the supply contract, prices for the Company's pulpwood are set at a base
level and readjusted quarterly based on a four-quarter rolling average of market
prices. Although quarterly

46
<PAGE> 54

price variation is capped at 5%, the base price level is reset every two years.
The Company mitigated the short-term financial impact of Florida Coast's
shutdown through sales to various mills and other producers in Florida, Georgia
and Mississippi in the spot market, although the shutdown adversely affected the
forestry segment's results of operations for 1997.

Although the Company has historically provided pulpwood softwood primarily
to the Florida Coast mill, management believes that wood harvested from the
Company's lands has the potential to provide products to several regional
manufacturing facilities. Several companies have consulted with the Company
regarding potential long-term timber supply contracts and the possible location
of substantial new conversion facilities near the Company's lands. In 1996, the
Company sold 697,398 tons of timber, of which approximately 610,418 tons were
sold to Florida Coast, and the balance to other customers.

OTHER BUSINESSES

As part of its strategy to maximize the cash flows from its timberlands,
the Company engages in several business activities complementary to its land
holdings. The Company leases approximately 881,000 acres of its timberlands to
private clubs and state agencies for hunting, 280 acres in north Gadsden County
for the mining of Fullers earth, and 600 acres to Martin Marietta for the mining
of limerock. Revenues from these businesses totaled $369,309 in 1996 and are
estimated to be $1,260,000 for 1997. The Company has not conducted an exhaustive
survey of its timberlands for potential mineral reserves.

REGULATION

The Company's forestry operations are subject to extensive and changing
federal, state and local environmental laws and regulations, the provisions and
enforcement of which are expected to become more stringent in the future.
Forestry operations generate air emissions through controlled burning and
discharge industrial wastewater and stormwater. The forestry operations are
subject to regulation under the ESA, the federal Clean Water Act, the federal
Clean Air Act, the Federal Insecticide, Fungicide and Rodenticide Act and the
Toxic Substances Control Act as well as similar state laws and regulations.
Violations of various statutory and regulatory programs can result in civil
penalties, remediation expenses, natural resource damages, potential
injunctions, cease and desist orders and criminal penalties. Some environmental
statues impose strict liability, rendering a person liable for environmental
damage without regard to negligence or fault on the part of such person.

The ESA and counterpart state legislation protect species threatened with
possible extinction. A number of species indigenous to the Company's timberlands
have been, and in the future may be, protected under these laws, including the
red cockaded woodpecker, the bald eagle and various other species. Protection of
endangered and threatened species may include restrictions on timber harvesting,
road building and other silvicultural activities on the Company's land
containing the affected species. There can be no assurance that such laws or
future legislation or administrative or judicial action with respect to
protection of the environment will not adversely affect the Company's forestry
operations.

In conducting its harvesting activities, the Company voluntarily complies
with the "Best Management Practices" recommended by the Florida Division of
Forestry. From time to time, proposals have been made in state legislatures
regarding the regulation of timber harvesting methods. There can be no assurance
that such proposals, if adopted, will not adversely affect the Company or its
ability to harvest and sell logs or timber in the manner currently contemplated.

The Company is not presently aware of any facts that indicate that the
Company will be required to incur material costs relating to environmental
matters in relation to its forestry operations. However, there can be no
assurances that environmental regulation or regulation relating to endangered
species or wetlands will not have a material adverse effect on the forestry
operations in the future. See "Risk Factors -- Environmental Matters."

TRANSPORTATION

The Company owns 54% of Florida East Coast Industries, Inc., which in turn
owns 100% of Florida East Coast Railway Company. The Company also owns and
operates the Apalachicola Northern Railroad Company.

47
<PAGE> 55

FLORIDA EAST COAST RAILWAY COMPANY

FEC operates a railroad along 351 miles of main line track between
Jacksonville and Miami, Florida and along 91 miles of branch track between Fort
Pierce and Lake Harbor, Florida. FEC also maintains approximately 157 miles of
switching track and 184 miles of other track. FEC has the only coastal right-of-
way between Jacksonville and West Palm Beach, Florida and is the exclusive
rail-service provider to the Port of Palm Beach, Port Everglades and the Port of
Miami. To complement and facilitate its railroad operations, FEC also provides
drayage and interstate trucking services. FEC owns 82 diesel electric
locomotives, approximately 2,633 freight cars, approximately 7 tractors, 1,352
trailer units for highway service, and numerous pieces of work equipment and
automotive vehicles. FEC also owns three four-story buildings in downtown St.
Augustine, which it uses for its corporate headquarters, and approximately
12,000 acres of land along the east coast of Florida devoted to its railroad
operation. All property and equipment owned is in good physical condition.

OPERATING STATISTICS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ----------- -----------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C>
Operating revenues........................................ $ 144,467 $ 142,858 $ 143,802
Operating income.......................................... $ 25,646 $ 22,210 $ 22,854
Operating margin.......................................... 17.3% 15.3% 15.9%
Revenue ton miles......................................... 4,388 4,122 4,098
</TABLE>

Railroad Traffic. FEC carries automotive vehicles, consumer goods and
various intermodal traffic southbound and carries aggregates and intermodal
traffic northbound. FEC's principal customers include the Ford Motor Company,
Chrysler Corporation, Tarmac-Florida, Inc., Rinker Materials Corporation, and
the United Parcel Service. In general, the volume of the railroad's traffic is
heaviest from October to May. The mix of commodities shipped by FEC and each
component's contribution to FEC's revenues have remained relatively constant
over the past five years. Set forth below is the mix of goods transported by FEC
in 1996 and the respective contribution each category made to revenues:

TRAFFIC

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
COMMODITY UNITS % REVENUE %
- --------- ------- ----- ------------ -----
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
TOFC/COFC........................................... 236.8 63% $ 51,117.1 38%
Crushed stone....................................... 88.7 24 34,509.2 26
Vehicles............................................ 18.3 5 20,116.0 15
Foodstuffs.......................................... 10.4 3 7,683.1 6
Cement.............................................. 5.0 1 3,049.1 2
Other............................................... 17.2 4 16,692.6 13
----- --- ---------- ---
Total..................................... 376.4 100% $133,167.1 100%
===== === ========== ===
</TABLE>

At Jacksonville, FEC connects with Norfolk Southern Corporation and with
CSX Transportation, Inc. ("CSXT"). FEC relies upon both of these carriers for
Florida-bound rail freight traffic which originates elsewhere in the United
States. In 1996, approximately 48% of FEC's revenues were attributable to
traffic that originated on other railroads, approximately 6% were attributable
to traffic that originated on FEC but was bound for other destinations and 46%
were attributable to traffic that both originated and terminated on FEC's
system. FEC is a terminating railroad and, consequently, does not receive
traffic from one railroad to be passed over its track to another railroad.
Because all of FEC's traffic either originates in or is bound for Florida, FEC's
revenues fluctuate seasonally and with economic conditions in southern Florida,
rising as the economy of southern Florida expands and declining as it contracts.

48
<PAGE> 56

Capital Expenditures. FEC believes that its railway system is in excellent
condition and intends to continue to reinvest a portion of the cash generated by
its operations to maintain it and to make selected additional improvements. In
1995 and 1996, FEC invested approximately $26.6 million and $14.6 million,
respectively, to upgrade and maintain its property, track, structures and
equipment. FEC has installed concrete crossties over substantially all of its
main line track and main line sidings. While installing concrete crossties is
more expensive initially, their significantly longer useful life makes them less
expensive over the long term. FEC has also installed sophisticated detection
equipment to monitor the condition of its rolling stock to detect flat wheels,
hot wheels and axles, cracked wheels, shifted loads and similar problems. Set
forth below is certain information relating to FEC's expenditures for road and
equipment for the past three years:

CAPITAL EXPENDITURES

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1994 1995 1996
------------------- ------------------- -------------------
ROAD EQUIPMENT ROAD EQUIPMENT ROAD EQUIPMENT
------- --------- ------- --------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Capital expenditures.......... $13,940 $ 7,319 $11,814 $14,758 $10,856 $ 3,741
Maintenance expense........... 22,630 33,347 24,359 30,645 24,271 27,801
------- ------- ------- ------- ------- -------
Total............... $36,570 $40,666 $36,173 $45,403 $35,127 $31,542
======= ======= ======= ======= ======= =======
</TABLE>

Competition. FEC's railroad operations are subject to intense competition
from common motor carriers and, with respect to the section of FEC's main line
track from West Palm Beach south to Miami, from CSXT. FEC also competes to some
extent with air carriers as well as barges and other vessels plying the
coastwise trade between Jacksonville and Miami. FEC's competitiveness depends
upon its ability to provide its customers with efficient, dependable service at
an attractive price. Management at FEC stresses maintaining a high level of
customer service and satisfaction.

Miscellaneous Operations. In addition to its rail and other related
services, FEC leases the use of its right-of-ways to various tenants, including
several telecommunications companies' fiber optics systems, pursuant to
long-term leases. Under such leases, FEC currently receives approximately $2.5
million per year in revenue, nearly all of which represents profit.

APALACHICOLA NORTHERN RAILROAD COMPANY

ANRR is a short-line railroad operating between Port St. Joe and
Chattahoochee, Florida, where it connects with an unaffiliated carrier. Its
transportation facilities include 96 miles of main track, 13 miles of yard
switching track and 3 miles of other track. ANRR owns 14 diesel locomotives, 274
freight cars, and numerous pieces of work equipment and automotive vehicles.
ANRR also owns a three-story building in Port St. Joe which it uses partially
for its corporate offices. All property and equipment owned is in good physical
condition.

Although it is a common carrier, most of ANRR's business consists of
carrying coal from Port St. Joe to Chattahoochee pursuant to a contract with
Seminole Electric Cooperative, Incorporated ("Seminole") and carrying wood
chips, pulpwood and linerboard used or produced at the paper mill in Port St.
Joe, Florida. The other items carried by ANRR are tall oil, chemicals, stone and
clay products and recyclable items. The mix of commodities carried by ANRR
during 1996, which is representative of the traffic carried by ANRR over the
last several years, was as follows:

TRAFFIC

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------
COMMODITY CARLOADS % REVENUE %
- --------- --------- ------ ---------- ------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Coal............................................... 30.6 70.1% $ 5,963.6 53.2%
Wood products...................................... 10.2 23.2 3,635.8 32.4
Other.............................................. 2.9 6.7 1,613.5 14.4
---- ----- --------- -----
Total.................................... 43.7 100.0% $11,212.9 100.0%
==== ===== ========= =====
</TABLE>

49
<PAGE> 57

Between April and September, 1997, the linerboard mill at Port St. Joe,
Florida shut down. Shipment of wood and wood products produces a significant
portion of ANRR's revenues. ANRR entered into a coal contract with Seminole in
order to mitigate the financial impact of the shutdown and limit its dependence
on a single customer. Nevertheless, if the linerboard mill shuts down in the
future or if Seminole does not renew its contract which expires in 2004, ANRR's
revenue, operating profit and net income would be significantly impacted.

Historically, the Company has upgraded, modernized and maintained ANRR's
road and equipment through the reinvestment of internally-generated cash without
incurring any long-term indebtedness. As with FEC's track, substantially all of
ANRR's main track is laid with concrete crossties. Certain operating statistics
are shown below:

OPERATING STATISTICS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
---------- ---------- ----------
(IN THOUSANDS EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C>
Operating revenues.................................... $12,886 $13,345 $12,589
Operating income...................................... $ 1,398 $ 2,326 $ 1,646
Operating margin...................................... 10.8% 17.4% 13.1%
Revenue ton miles..................................... 397 411 383
</TABLE>

ANRR faces competition from motor carriers and barge lines.

INTERNATIONAL TRANSIT, INC.

International Transit, Inc. ("ITI") operates a common motor carrier with
service throughout the Southeastern United States. FECI acquired an 80% interest
in ITI on April 1, 1995, and the remaining 20% on June 25, 1997, as a strategic
purchase designed to enable FEC to reach intermodal traffic not being solicited
by FEC's connections due to the short-haul nature of the traffic.

REGULATION

Both FEC and ANRR are subject to regulation by the Surface Transportation
Board of the U.S. Department of Transportation and, in some areas, the State of
Florida. These governmental agencies must approve, prior to implementation,
changes in areas served and certain other changes in operations of FEC and ANRR.

The Company's transportation operations are subject to extensive local,
state and federal environmental laws and regulations, including the federal
Clean Air Act, CERCLA and various other state and local environmental laws and
regulations. Violations of various statutory and regulatory programs can result
in civil penalties, remediation expenses, natural resource damages, potential
injunctions, cease and desist orders and criminal penalties. Some environmental
statutes impose strict liability, rendering a person liable for environmental
damage without regard to negligence or fault on the part of such person. In
addition, the Company's present and historic ownership and operation of real
property, including yards, in connection with its transportation operations
involve the storage, use or disposal of hazardous substances that have
contaminated and may in the future contaminate the environment. The Company may
also be liable for the costs of cleaning up a site at which it has disposed
(intentionally or unintentionally by virtue of, for example, an accident,
derailment or leak) or to which it has transported hazardous substances. The
Company is currently involved in various remediations of properties relating to
its transportation operations. In addition, FEC, along with many other
companies, has been named a potentially responsible party in proceedings under
Federal statutes for the clean up of designated Superfund sites at Hialeah,
Florida; Jacksonville, Florida; and Portsmouth, Virginia. See "-- Environmental
Proceedings." Based on presently available information, the Company does not
believe that the costs of addressing any known environmental issues relating to
its transportation operations will be material. However, the future cost of
complying with environmental laws and containing or remediating contamination
cannot be predicted with any certainty, and there can be no

50
<PAGE> 58

assurances that such liabilities or costs would not have a material adverse
effect on the Company in the future. See "Risk Factors -- Environmental
Matters."

SUGAR

The Company owns Talisman Sugar Corporation, a grower of sugarcane located
in the Belle Glade area in south central Florida. Talisman owns approximately
48,600 acres of agricultural land and leases approximately 6,400 acres. The
Company also operates a sugar mill at which sugar cane is converted into raw
sugar.

On December 6, 1997, the Company signed an agreement in principle with the
United States of America and the State of Florida (the "Governments"), under
which the Governments agreed to purchase the Company's sugar lands, including
45,731 acres of Company-owned land and 5,121 acres of leased land, for $133.5
million in cash. Under the agreement, the Company will retain the right to farm
the transferred lands through the 2002-2003 crop year. Thereafter, the Company
will be required to deliver the lands in compliance with all federal and state
environmental laws and will be responsible for and bear the expenses of
environmental cleanup of such lands and the sugar mill. At that time, the
Company has agreed to close its sugar mill and remove it and all associated
structures designated by the Governments. The Company will retain any salvage
value from the disposition of its mill. The Company and the Governments have
agreed to enter into an appropriate purchase agreement reflecting these terms by
June 6, 1998. The proposed transaction is subject to board and government
approval, and there can be no assurances that an agreement will be concluded or
that the sale of the Company's sugar lands will be consummated.

Talisman sells its entire production to Everglades Sugar Refinery, Inc., a
wholly-owned subsidiary of Savannah Foods & Industries, Inc., pursuant to an
annually renewed contract. The amount Talisman is paid for its sugar under the
current contract is a function of market prices.

MILL OPERATIONS

The Company's sugar mill has a grinding capacity of approximately 11,500
tons of sugarcane per day. The Company ground approximately 1,202,000 tons of
sugarcane in 1996, approximately 1,386,000 tons in 1995 and approximately
1,184,000 tons of sugarcane in 1994 from Company operated lands. Total raw sugar
production for the Company was approximately 117,000 tons in 1996, 138,000 tons
in 1995, and 111,000 tons in 1994. The sugar mill is virtually energy
self-sufficient, with almost all of its energy requirements supplied through the
use of bagasse, a by-product of the mill's cane grinding operations.

HARVESTING OPERATIONS

Sugarcane plantings generally yield two harvests before replanting is
necessary. The Company harvests its sugarcane crop in one-year cycles, as do
other Florida producers. The Company generally plants sugarcane in the fall of
each year. Harvesting of a crop generally commences in October of each year and
continues into the following March. During the 1996-1997 crop year, Talisman
grew sugarcane on approximately 43,000 acres of land.

The majority of the Florida sugarcane producers, including Talisman,
harvest sugarcane using mechanical cane harvesters which reduce significantly
the labor requirements, resulting in substantial cost savings and more efficient
and timely grinding of the sugarcane. Mechanized harvesting, however, is less
precise than manual harvesting, results in greater amounts of chaff and trash
being mixed in with the harvested sugarcane, causes small amounts of sucrose to
be lost through leaching into the trash and chaff, damages cane fields more than
manual harvesting and results in slightly lower cane yields in subsequent crops.
Yields of sucrose from such harvested sugarcane and its crop yields per acre are
generally slightly lower than those cut by hand. These negative effects,
however, are far outweighed by cost savings and other efficiencies which result
from mechanized harvesting.

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REGULATION

The Company's sugar operations are subject to and may be severely
restricted by various federal, state and local environmental laws, including,
but not limited to, the federal Clean Water Act, the federal Clean Air Act and
CERCLA. Violations of these laws can result in civil penalties, remediation
expenses, natural resource damages, potential injunctions, cease and desist
orders and criminal penalties. The Company's sugar operations are located in the
Florida Everglades, which are the subject of extensive environmental review by a
variety of government entities. In 1994, the State of Florida enacted the
Everglades Forever Act which significantly affects agriculture in the Everglades
Agricultural Area ("EAA"). The Act calls for the creation of six Stormwater
Treatment Areas ("STA") as buffers between the Everglades Protection Area and
the EAA. The Act imposes substantial taxes on Talisman (approximately $1.3
million was paid in each of 1995 and 1996) and other agricultural interests to
pay for construction of the STAs. As part of its environmental compliance
efforts, Talisman has installed equipment to monitor the quality and quantity of
water being pumped out of its pumping stations as required by the local Water
Management District.

Except as described above, the Company is not presently aware of any
material environmental issues relating to its sugar operations. However, there
can be no assurance that environmental issues that could have a material adverse
effect on the Company will not arise in the future relating to its sugar
operations. See "Risk Factors -- Environmental Matters."

INVESTMENTS

The Company, in addition to its operations, has cash, cash equivalents and
investments in U.S. government securities, corporate debt securities, municipal
securities, and common and preferred stocks. At January 12, 1998, the market
value of the Company's cash, cash equivalents, and marketable securities was
approximately $505 million, valued as follows: cash and money market deposits,
$38 million; government and municipal securities with less than a one year term,
$80 million; government and municipal securities with a greater than one year
term, $168 million; corporate debt securities with less than a one year term,
$77 million; and corporate debt securities with a greater than one year term and
corporate equity securities, $142 million.

EMPLOYEES

The Company (excluding its subsidiaries) had approximately 44 employees at
October 31, 1997. The Company effected a substantial reduction in its workforce
during 1996 primarily due to the sale of its former linerboard mill and
container operations. None of the Company's employees are covered by collective
bargaining agreements. The Company considers its relations with its employees to
be good.

The Company's forestry operations, through St. Joe Timberland Company, had
28 employees at October 31, 1997. The Company effected a 72% reduction in its
forestry workforce during 1997 in order to improve the cost structure of
forestry operations. The reduction in employment was primarily due to the
outsourcing of replanting land preparation operations to independent
contractors. The Company estimates that this outsourcing will achieve cost
savings of approximately $1 million per year on an ongoing basis.

At September 30, 1997, FECI had 9 employees, FEC had 854 employees and ANRR
had 83 employees. At October 31, 1997, Talisman had 714 employees. Most FEC and
ANRR employees are covered by collective bargaining agreements which set wage
levels and establish work rules and working conditions. Most of FEC's
non-salaried employees are represented by the United Transportation Union or the
International Brotherhood of Electrical Workers. The Company and FEC consider
their working relationship with the various unions that represent railroad
employees to be satisfactory. Approximately 160 Talisman employees are covered
by collective bargaining agreements. They are represented by the International
Association of Machinists and Aerospace Workers. Talisman believes its relations
with its employees to be satisfactory.

ENVIRONMENTAL PROCEEDINGS

The Company is named as a Potentially Responsible Party ("PRP") for the
remediation of a designated Superfund site near Tampa, Florida. The United
States Environmental Protection Agency ("USEPA") has

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alleged that the Company caused certain materials to be disposed at the site
over a period of years in the late 1970s or 1980s. The Company has provided
USEPA with certain evidence indicating the Company did not dispose of any
materials at the site. The Company has declined an invitation to join a PRP
group as a de minimis party. While the Company believes that its liability would
be de minimis, it nonetheless continues to deny liability and vigorously opposes
any attempt to impose any liability upon the Company for the remediation of the
site.

The Company received notice of potential involvement in a Superfund Site in
Sharonville, Ohio, during the third quarter of 1996. The site was formerly owned
and operated by the Company as a container plant. It was sold in the late
1970's. At this time the extent of the contamination and magnitude of the
cleanup is unknown. The Company does not believe, based on its preliminary
investigation of the Company's use of the property, that it is responsible for
the contamination, and if found partially responsible, the Company does not
believe its liability would be material.

FEC has been named as a PRP for the remediation of two designated Superfund
sites near Jacksonville, Florida. On the first site, the USEPA has alleged that
FEC caused certain materials to be disposed at the site over a period of years.
The USEPA has offered all named PRPs an opportunity to participate in the pilot
allocation program. This program is similar to binding arbitration. If FEC
participates in this program, its share of the liability for the remediation
will be fixed. The USEPA has also offered to negotiate a separate settlement
with certain parties, including FEC. FEC believes that, whichever alternative is
chosen, its liability for the remediation of the site will not be material. On
the second site, FEC was contacted by the USEPA during 1996, at which time FEC
was asked to provide certain information about the manner in which FEC disposes
of steel drums. The USEPA is attempting to determine whether or not FEC should
be a PRP at the steel drum site in Jacksonville, Florida. There is some evidence
that FEC may have sent a small number of steel drums to the site for disposal.
FEC believes its responsibility, if any, for the remediation of the site will
not be material.

FEC has been named as a PRP for the remediation of a designated Superfund
site in Portsmouth, Virginia. The USEPA has alleged that FEC caused certain
materials to be sent to the site over a period of years. These materials were
utilized by the owner of the site in the course of its business which, FEC
believes, caused the site to become contaminated. The owner of the site has
filed suit in the United States District Court for the Eastern District of
Virginia, Norfolk Division seeking to impose liability upon the defendants,
including FEC, for remediation of the site. A settlement between the owner of
the site and FEC was achieved late in 1996. The settlement as to FEC, of
approximately $.2 million, was approved by the Court and the USEPA. Unless
additional contamination is discovered at the site or it becomes necessary to
remediate areas beyond the original clean-up, FEC will have no further liability
at the site.

FEC was contacted by the USEPA during 1996, seeking reimbursement of costs
associated with the remediation of a Superfund site in Hialeah, Florida, part of
which includes a FEC right-of-way. An individual operated a business on this
site for a number of years. The owner of the business slightly encroached upon
FEC's right-of-way. Upon discovering this, FEC entered into a lease agreement
with the business owner rather than require the building be removed. The
individual has ceased doing business. The USEPA is seeking reimbursement from
FEC of the approximately $2 million spent in remediation on the grounds that FEC
was an "owner" of the site. Settlement negotiations are ongoing at this time and
the ultimate cost is not expected to be material.

The Company, through its subsidiaries, is a party to various proceedings
before state regulatory agencies relating to environmental issues. The Company
is not aware of any monetary sanctions to be proposed, which, in the aggregate,
are likely to exceed $100,000, nor does it believe that corrections, if any,
will necessitate significant capital outlays or cause material changes in the
business.

LEGAL PROCEEDINGS

Kahn

During April 1996, a shareholder of FECI instituted a class action in
Florida state court against FECI, St. Joe Industries, Inc., the Company and
members of the FECI Board of Directors (Messrs. Thornton, Belin,

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Nedley, Zellers, Fairbanks, Foster, Harper, Mercer and Parrish). Certain of the
individuals named in the action are also officers or directors of the Company.
The action, which was brought on behalf of all shareholders of FECI, other than
the defendants and their affiliates, is styled Kahn v. St. Joe Industries, Inc.,
St. Joe Paper Co., Thornton, Belin, Nedley, Zellers, Fairbanks, Foster, Harper,
Mercer, Parrish and Florida East Coast Industries, Inc., Case No. 96-01874 CA
(Circuit Court, Fourth Judicial Circuit, Duval County, Florida, Division CV-G).
On November 21, 1997 the Company withdrew its offer to purchase outstanding
shares of FECI.

In January 1998, the same plaintiffs instituted a new class action against
the Company, FECI and FECI's directors. The action is styled Kahn v. St. Joe
Corporation, Thornton, Belin, Nedley, Zellers, Fairbanks, Foster, Harper,
Mercer, Parrish and Florida East Coast Industries, Inc., Case No. 98-00025 CA
(Circuit Court, Fourth Judicial Circuit, Duval County, Florida, Division CV-G).
The complaint alleges that the defendants breached their fiduciary duties to the
minority shareholders of FECI in connection with (i) the February 26, 1996
announcement by FECI that it was considering the sale of its real estate
subsidiary, GCC, to the Company and the sale of its railroad subsidiary, FEC, to
a third party, (ii) the Company's May 5, 1997 offer to purchase all outstanding
shares of FECI's Common Stock not owned by it at $102 per share and (iii) the
Company's November 21, 1997 withdrawal of such offer. According to the
complaint, by withdrawing its offer, the Company is allegedly attempting to
coerce FECI's minority shareholders to sell their shares to the Company at an
inadequate price. The action seeks, among other things, to certify the
litigation as a class action, to appoint a receiver to assume control of FECI
for the purpose of liquidating it and to enjoin the Company from squeezing out
minority shareholders at an inadequate price. The Company believes the complaint
is without merit and intends to vigorously litigate the claims.

EXECUTIVE OFFICES

The Company's principal executive offices are located at 1650 Prudential
Drive, Jacksonville, Florida 32207 and its telephone number is (904)396-6600.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers, their ages and their
respective positions with the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Peter S. Rummell................................ 52 Chairman of the Board and Chief
Executive Officer
Charles A. Ledsinger, Jr........................ 48 Senior Vice President and Chief
Financial Officer
Robert M. Rhodes................................ 55 Senior Vice President and General
Counsel
David D. Fitch.................................. 43 Senior Vice President and General
Manager -- Commercial and Industrial
Development
J. Malcolm Jones, Jr............................ 44 Senior Vice President -- Forestry
Operations
Michael F. Bayer................................ 39 Vice President -- Human Resources and
Administration
Jacob C. Belin.................................. 83 Director
Russell B. Newton, Jr........................... 73 Director
John J. Quindlen................................ 65 Director
Walter L. Revell................................ 62 Director
Frank S. Shaw, Jr............................... 66 Director
Winfred L. Thornton............................. 69 Director
John D. Uible................................... 61 Director
Carl F. Zellers, Jr............................. 65 Director
</TABLE>

Executive officers serve at the discretion of the Board of Directors. Each
director holds office until his successor is duly elected and qualified or until
his resignation or removal. There are no family relationships among any of the
directors or executive officers of the Company.

PETER S. RUMMELL was appointed Chairman and CEO of the Company in January
1997. From 1985 until 1996, Mr. Rummell was employed by The Walt Disney Company,
most recently as Chairman of Walt Disney Imagineering, the division responsible
for Disney's worldwide creative design, real estate and research and development
activities. Mr. Rummell also served as President of Disney Development Company,
the community development arm of Walt Disney, from 1992 to 1994 and as President
of the Arvida Resort Communities Division during 1985. From 1983 until 1985, Mr.
Rummell was Vice Chairman of the Rockefeller Center Management Corporation in
New York City. Mr. Rummell was general manager and then President of Sawgrass,
near Jacksonville, Florida, from 1977 until 1983. Mr. Rummel also held
management positions for the Sea Pines Company in Hilton Head, South Carolina,
and the Amelia Island Plantation and spent two years as an employee of the Ocean
Reef Club in Key Largo, Florida.

CHARLES A. LEDSINGER, JR. was named Senior Vice President and Chief
Financial Officer in May 1997. From 1990 to 1997, Mr. Ledsinger served as Senior
Vice President and Chief Financial Officer of Harrah's Entertainment/The Promus
Companies, where from 1988 to 1990 he served as Treasurer, from 1986 to 1988 as
Vice President, Project Finance, and from 1983 to 1986 in the Embassy Suites
Division. From December 1993 to April 1997, Mr. Ledsinger served as Senior Vice
President and Treasurer of Harrah's Jazz Finance Company, a non-consolidated
special-purpose finance subsidiary of Harrah's Entertainment created in
connection with the Harrah's Jazz project, which filed for bankruptcy in
November 1995. Mr. Ledsinger was employed by Holiday Inns from 1978 to 1983,
where he held a variety of financial management positions. Prior to his
employment at Holiday Inns, Mr. Ledsinger held various management positions in
the restaurant business and was a commercial property manager for a regional
property developer in Atlanta. Mr. Ledsinger is a Director of TBC Corporation,
Perkins Management Company, Inc., Friendly Ice Cream Corporation and FelCor
Suite Hotels, Inc.

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ROBERT M. RHODES was named Senior Vice President and General Counsel in
February 1997. Prior to joining the Company, Mr. Rhodes was a partner in the law
firm of Steel, Hector and Davis L.L.P., specializing in land development. From
1985 to 1988 Mr. Rhodes served as Senior Vice President and General Counsel of
Arvida/Disney Corporation and Disney Development Company. Mr. Rhodes also served
in Florida state government as counsel to the Speaker of the Florida House of
Representatives and chaired the State's Environmental Land Management Study
Committee.

DAVID D. FITCH was named Senior Vice President and General
Manager -- Commercial and Industrial Development in September 1997. Prior to
joining the Company, Mr. Fitch served as Senior Vice President at Insignia
Financial Corporation responsible for commercial acquisitions. Mr. Fitch served
as Senior Vice President at the Paragon Group, Inc. from 1991 until Insignia's
purchase of Paragon in 1996. From 1987-91, Mr. Fitch served as Executive Vice
President at Mason Hirst Companies, a Virginia commercial developer. From
1978-1987, Mr. Fitch was a Vice President with the Cadillac Fairview
Corporation, responsible for a number of large scale commercial development
projects.

J. MALCOLM JONES, JR. was named the Company's Senior Vice
President -- Forestry Operations in April 1997. From 1995 to 1997 Mr. Jones
served as the Company's Vice President and Chief Financial Officer. Mr. Jones
served as President of AmSouth Bank of Jacksonville in 1994 and 1995 and as
President and CEO of FloridaBank from 1990 to 1994.

MICHAEL F. BAYER was named Vice President -- Human Resources and
Administration in February, 1997. From 1987 until 1995, Mr. Bayer was employed
by The Walt Disney Company in a variety of executive positions in Human
Resources. Most recently he was Vice President of Human Resources of Walt Disney
Imagineering. Previously, Mr. Bayer served as Director -- Human Resources for
the Sarasota division of the Arvida Corporation.

JACOB C. BELIN was President of the Company from 1968 to 1984, and Chairman
of the Board and Chief Executive Officer from 1982 to June 1991. He is a
director of the Company and has served as such since 1953. Mr. Belin also serves
as a member of the Board of Directors of the Nemours Foundation, and as a
Trustee of the Trust and as a director of FECI.

RUSSELL B. NEWTON, JR. has been a director of the Company since 1994. Mr.
Newton is Chairman of Timucuan Asset Management Company, which is involved in
investment portfolio management. Mr. Newton is also a director of East Coast Oil
Company and Alliance Mortgage Company, as well as other smaller, closely held
companies. Since 1981, Mr. Newton has been an investor in oil, marketing,
shipping, public utilities, construction, direct mail solicitation and cable
television. From 1975 to 1981, Mr. Newton was principal owner and Chairman of
Kern County Refineries, Inc. From 1968 to 1975, Mr. Newton was President of
Charter Oil Company. Mr. Newton spent his early employment years with Booz,
Allen & Hamilton, Management Consultants and as President of Southern Stores,
Inc.

JOHN J. QUINDLEN has been a director of the Company since 1995. Mr.
Quindlen retired as Senior Vice President and Chief Financial Officer of E. I.
duPont de Nemours & Company in 1993 ("duPont"). Mr. Quindlen worked for duPont
from 1954 until his retirement, except for three years as a naval Supply
Officer. Mr. Quindlen is a trustee of the Rodney Square Funds and the Kalmar
Pool Investment Trust. Mr. Quindlen is a member of the Finance Council of the
Archdiocese of Philadelphia and the President of its Board of Education.

WALTER L. REVELL has been a director of the Company since 1994. Mr. Revell
is presently Chairman of the Board and CEO of H. J. Ross Associates, Inc., a
consulting, engineering, architectural and planning firm in Coral Gables,
Florida, and Chairman of the Board and CEO of Revell Investments International,
Inc. and Infinity Technologies, Inc. Mr. Revell was President, CEO and Director
of Post, Buckley, Schuh and Jernigan, Inc. until 1983 after serving as Secretary
of Transportation for the State of Florida from 1972 to 1975. Mr. Revell is also
a director of Dycom Industries, Inc., RISCORP, Inc., Hotelcopy, Inc. and other
closely-held companies, and is chairman of the Greater Miami Foreign Trade Zone,
Inc.

FRANK S. SHAW, JR. has been a director of the Company since 1995. Mr. Shaw
is President of Shaw Securities, Inc., a financial services company, and of
Cherry Bluff, Inc., a northern Florida development firm

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based in Tallahassee, Florida. Mr. Shaw also serves on the Board of Directors of
First South Bank, Regional Financial Company, The Southern Scholarship
Foundation, Maclay School Foundation, Leon County Library Foundation and the
James Madison Institute.

WINFRED L. THORNTON has been a director of the Company since 1968. Mr.
Thornton was Chairman of the Board and CEO from June 1991 to January 1997, and
was President and Chief Operating Officer of the Company from 1984 to June 1991.
Mr. Thornton also serves as a member of the Board of Directors of the Nemours
Foundation, a Trustee of the Trust and a director of FECI.

JOHN D. UIBLE has been a director of the Company since 1994. Since 1990,
Mr. Uible has been an investor and Director of First Union Corporation. Mr.
Uible was Chairman of the Board and CEO of Florida National Bank from 1982 to
1990, when it was acquired by First Union Corporation. From 1976 to 1982, Mr.
Uible was Chairman of the Board and CEO of Jacksonville National Bank. Mr. Uible
was employed by the Charter Company from 1958 to 1976.

CARL F. ZELLERS, JR. has been a director of the Company since 1995. Mr.
Zellers is Chairman, President and Chief Executive Officer of FECI, and
President and a director of FEC and GCC. Mr. Zellers served as President and
Chief Operating Officer of FECI during 1996 and 1997 and as a Vice President of
FECI from 1984 to 1996.

EMPLOYMENT ARRANGEMENTS OF NEW MANAGEMENT

Peter S. Rummell. On January 7, 1997, the Company entered into an
Employment Agreement (the "Rummell Agreement") with Peter S. Rummell, its
Chairman of the Board and Chief Executive Officer. The Rummell Agreement has a
five-year term but may be terminated earlier under certain circumstances. The
Rummell Agreement provides for a salary of not less than $600,000 per year and a
performance-based incentive bonus ranging from 0% to 100% of salary, except that
the minimum bonus for the year 1997 is $250,000 and is contingent upon the
timely submission to, and acceptance by, the Board of Directors, of a business
plan for the Company. The Rummell Agreement also provides for the reimbursement
of relocation costs and related income taxes. Mr. Rummel was paid a bonus for
1997 of $300,000 on January 9, 1998.

Pursuant to the Rummell Agreement, the Company has granted Mr. Rummell an
option to purchase 4,043,520 shares of the Company's Common Stock under the St.
Joe Corporation 1997 Stock Incentive Plan (the "Incentive Plan"). The exercise
price of the options is $19.14 per share, which was equal to the closing price
of the Company's Common Stock on the day preceding the execution of the Rummell
Agreement. The exercise price shall be adjusted equitably in the event that the
Company makes a partial liquidation distribution to its shareholders. The option
becomes exercisable in equal installments on the first five anniversaries of the
date of grant, but the entire option becomes exercisable in the event that the
Company terminates Mr. Rummell's employment without cause, in the event of Mr.
Rummell's death or in the event that the Company is subject to a "change in
control" (as defined below). In the event that the Company terminates Mr.
Rummell's employment because of his disability, the option shall become
exercisable to the extent that it would have become exercisable during the 12
months immediately following such termination had Mr. Rummell's employment
continued. The option expires 10 years after the date of grant (or two years
after Mr. Rummell's death, if earlier).

Under the Rummell Agreement, the Company has also granted Mr. Rummell
201,861 restricted shares of its Common Stock under the Incentive Plan. The
restricted shares are intended to compensate Mr. Rummell for the value of the
stock options he forfeited upon resigning his position with his former employer,
based on the closing prices of the two companies' Common Stock on the day
preceding the execution of the Rummell Agreement. The restricted shares vest in
equal installments on the first five anniversaries of the date of grant but the
entire award vests in the event that the Company terminates Mr. Rummell's
employment without cause, in the event of Mr. Rummell's death or disability (as
defined in the Rummell Agreement), or in the event that the Company is subject
to a "change in control." If Mr. Rummell's employment terminates for any other
reason, he forfeits any restricted shares that have not vested.

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<PAGE> 65

The Company may terminate Mr. Rummell's employment at any time for "cause"
(as described in the Rummell Agreement), in which event no further compensation
will be due. The Company may also terminate Mr. Rummell's employment if he has
been "disabled" for more than six months, in which event no further cash
compensation is due but benefit coverage continues for the remaining term of the
Rummell Agreement and the option and restricted shares vest to the extent
described above. Following a change in control, Mr. Rummell may resign for "good
reason" (as defined in the Rummell Agreement) and receive his salary for the
balance of the term of the Rummell Agreement, subject to certain restrictions.
For one year following a resignation for good reason, the Rummell Agreement
precludes Mr. Rummell from competing with the Company in certain respects.

"Change in control" is defined in the Rummell Agreement to mean (i) 30% or
more of the outstanding voting stock of the Company is acquired by any person or
group other than the Trust and the Nemours Foundation if such person or group
owns more voting stock of the Company than the Trust and the Nemours Foundation,
(ii) stockholders of the Company other than the Trust and the Nemours Foundation
vote in a contested election for directors resulting in the replacement of 50%
or more of the Company's directors or (iii) as a result of a merger or similar
transaction the Company's stockholders own 50% or less of the surviving entity's
voting securities. The Rummell Agreement provides that notwithstanding items
(i), (ii) and (iii) above, no "change in control" shall occur as long as the
Trust and the Nemours Foundation combined own more than 50% of the voting stock
of the Company.

Charles A. Ledsinger, Jr.; Robert M. Rhodes; David D. Fitch; Michael F.
Bayer; and J. Malcom Jones, Jr. The Company has entered into employment
agreements (the "Executive Agreements") with Messrs. Ledsinger (Senior Vice
President and Chief Financial Officer), Rhodes (Senior Vice President and
General Counsel), Fitch (Senior Vice President and General Manager -- Commercial
and Industrial Development), Bayer (Vice President -- Human Resources and
Administration) and Jones (Senior Vice President -- Forestry Operations) (each,
individually, an "Executive," and collectively, the "Executives"), that are
based on substantially the same form of agreement. The specific terms of each of
the Executive Agreements are tailored to each of Messrs. Ledsinger, Rhodes,
Fitch, Bayer and Jones, while the general terms of each of the Executive
Agreements are substantially similar. The Executive Agreements of Messrs.
Ledsinger, Rhodes, Fitch, Bayer and Jones, are dated April, 1997, November 3,
1997, September 15, 1997, February 1, 1997 and February 21, 1997, respectively.

The Executive Agreements provide that each of the Executives is an "at
will" employee. The Executive Agreements further provide that each Executive
shall receive (i) a base salary and (ii) a performance based incentive bonus in
an amount equal to between 0% and 60% of the Executive's base salary. The
Executive Agreements provide that the amount of each Executive's base salary and
the range of his bonus may be increased but not decreased during his period of
employment with the Company. The base salaries provided in the Executive
Agreements for Messrs. Ledsinger, Rhodes, Fitch, Bayer and Jones are $350,000,
$275,000, $225,000, $167,500 and $170,000, respectively. On January 9, 1998,
Messrs. Ledsinger, Rhodes, Fitch, Jones and Bayer were paid bonuses for 1997 of
$210,000, $165,000, $100,000, $85,000 and $100,500, respectively. In addition,
the Executive Agreements of Messrs. Ledsinger, Rhodes, Fitch and Bayer provide
for the reimbursement of relocation costs and related income taxes.

The Executive Agreements also provide that each of the Executives shall
receive an option to purchase shares of the Company's Common Stock under the
Incentive Plan. In most cases, the exercise price of each option is equal to the
closing price of the Company's Common Stock on the day preceding the date the
Executive was granted such option. The exercise price of any unexercised option
shall be adjusted equitably in the event that the Company makes a partial
liquidation distribution to its shareholders. Each of the options becomes
exercisable in equal installments on the first five anniversaries following the
date of grant; provided, however, that the Executive's option shall become
exercisable in its entirety in the event that the Company terminates the
Executive's employment without "cause" (as defined in the respective Executive
Agreements) or the Company is subject to a "change in control" ("change in
control" is defined in the respective Executive Agreements as in the Rummell
Agreement). Each of the options expires on the tenth anniversary following the
date of grant. The per share exercise prices for the options of Messrs.
Ledsinger, Rhodes, Fitch, Bayer and Jones are $23.71, $23.00, $31.38, $22.11 and
$22.11, respectively.

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The Executive Agreements further provide that, in the event the Company
terminates the employment of any of the respective Executives for any reason
other than for cause or disability, such Executive will receive a severance
payment ("Severance Payment") in a lump sum amount equal to a specified
percentage of the Executive's base salary, plus a specified percentage of the
amount of any bonus awarded to the Executive in the year prior to the
termination. Each of Mr. Ledsinger's, Mr. Rhodes' and Mr. Fitch's Executive
Agreements provides that any Severance Payment shall be in the amount of 150% of
base salary, plus 50% of the prior year's bonus, while each of Mr. Bayer's and
Mr. Jones' Executive Agreements provides that any Severance Payment shall be in
the amount of 100% of base salary, plus 50% of the prior year's bonus. Mr.
Ledsinger's, Mr. Bayer's and Mr. Jones' Executive Agreements also provide for an
augmented Severance Payment in the event that the Executive's employment is
terminated within 12 months following a change in control of the Company,
although such provisions are superseded by their Severance Agreements to the
extent that any such Severance Agreement provides for greater payments than the
applicable Executive Agreement. See "Management -- Severance Agreements."

STOCK INCENTIVE PLAN

Effective January 7, 1997, the Company adopted the Incentive Plan which was
approved by the Company's stockholders on May 13, 1997. The principal purposes
of the Incentive Plan is to promote the long-term success of the Company and the
creation of stockholder value by (a) encouraging employees and non-employee
directors to focus on critical long-range objectives, (b) encouraging the
attraction and retention of employees and non-employee directors with
exceptional qualifications and (c) linking employees and non-employees directly
to stockholder interests through increased stock ownership. The Incentive Plan
seeks to achieve this purpose through the granting of options exercisable with
respect to, or restricted shares of, the Company's Common Stock. Under the
Incentive Plan, the maximum number of options or restricted shares that may be
awarded may not exceed 6,030,480. Furthermore, under the Incentive Plan, the
maximum number of shares of Common Stock which may be subject to options or
which may be granted as restricted shares to any individual in any fiscal year
cannot exceed 3,000,000, except that an option granted to an employee during
such employee's first year of service may be exercisable with respect to up to
4,500,000 shares of Common Stock.

The Incentive Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"). Subject to certain limitations contained
in the Incentive Plan, the Committee selects the individuals who receive awards,
determines the size of any such award and establishes the vesting and other
conditions with respect thereto. The Committee consists of at least two members
of the Board of Directors, each of whom satisfies the applicable requirements of
Rule 16b-3 under the Exchange Act and Section 162(m) of the Internal Revenue
Code of 1986, as amended. The Committee is authorized, in accordance with the
provisions of the Incentive Plan, to amend the terms of outstanding restricted
shares, to modify or extend outstanding options or to exchange new options for
outstanding options, including outstanding options with a higher exercise price
than the new options.

The Incentive Plan provides for awards in the form of restricted shares or
options.

Restricted Shares. Restricted shares are shares of Common Stock that are
subject to forfeiture in the event that the applicable vesting conditions are
not satisfied. Restricted shares, unlike options, have the same voting and
dividend rights as other shares of Common Stock.

Options. An option may be either (i) an incentive stock option ("ISO")
intended to qualify for special tax treatment under the Code, or (ii) a
nonqualified stock option ("NSO"). The Incentive Plan provides that the term of
an option cannot exceed 10 years following the date of grant, and the exercise
price must be equal to or greater than the fair market value of the Common Stock
on the most recent trading day before the date of grant. In addition, the
Incentive Plan provides that, in the case of an ISO granted to an individual who
owns more that 10% of the total combined voting power of all classes of
outstanding stock of the Company, certain additional requirements set forth in
the Code must be satisfied.

Restricted shares and NSOs may be granted to any individual who is an
employee or a non-employee director of the Company (or a parent, subsidiary or
affiliated company) and who is selected by the Committee

59
<PAGE> 67

for participation in the Incentive Plan. In contrast, ISOs may be granted to an
individual only if such individual is an employee of the Company (or a parent or
subsidiary corporation) and who is selected by the Committee for participation
in the Incentive Plan.

The exercise price of an option may be paid in any lawful form permitted by
the Committee, including (without limitation) a full-recourse promissory note or
the surrender of shares of Common Stock or restricted shares already owned by
the optionee. In addition, the Committee may permit an optionee to satisfy his
or her withholding tax obligation upon exercise of an NSO by surrendering a
portion of his or her option shares to the Company. The Committee may at any
time offer to buy out an outstanding option for cash or give an optionee the
right to surrender his or her option for cash.

The Incentive Plan provides that the terms of options granted, or
restricted shares awarded, under the Incentive Plan are to be set forth in a
written agreement. Such written agreements describe when an option becomes
exercisable, or when any restrictions with respect to restricted shares lapse,
based upon the length of the recipient's service, his or her individual
performance, the Company's performance or other appropriate criteria. Such
written agreements may provide that vesting shall be accelerated in the event of
the recipient's death, disability or retirement or in the event of a "change in
control" of the Company.

"Change in control" is defined in the Incentive Plan to mean (i) as a
result of a merger or consolidation, 50% of the surviving entity's voting stock
is owned by stockholders who were not stockholders of the Company prior to the
merger or consolidation, (ii) the sale, transfer, exchange or other disposition
of all or substantially all of the Company's assets, (iii) a change in two
thirds of the composition of the board of the Company under certain
circumstances, (iv) the liquidation or dissolution of the Company or (v) any
transaction resulting in a person (other than the Company, an affiliate, an
employee, the Trust or the Nemours Foundation) being the beneficial owner of 25%
of the Company's voting stock.

The Incentive Plan will remain in effect until it is terminated, except
that no ISO may be granted after January 6, 2007. The Board of Directors may
amend or terminate the Incentive Plan at any time and for any reason. Amendments
require the approval of the Company's shareholders only to the extent required
by applicable laws, regulations or rules.

60
<PAGE> 68

The following table discloses options granted during 1997 to the Company's
executive officers:

OPTION GRANTS IN 1997

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
-------------------------------------------------------------- ASSUMED ANNUAL RATES OF
PERCENT OF TOTAL NUMBER OF STOCK PRICE APPRECIATION
OPTIONS GRANTED SECURITIES EXERCISE OR FOR OPTION TERM
TO EMPLOYEES IN UNDERLYING BASE PRICE EXPIRATION ------------------------------
NAME FISCAL YEAR OPTIONS GRANTED ($/SH) DATE 5% ($) 10% ($)
- ---- ---------------- --------------- ------------ ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Peter S. Rummell....... 73.4% 4,043,520 $ 19.14 1/8/07 $48,683,981 $123,367,795
Chairman of the Board
and Chief Executive
Officer
Charles A. Ledsinger,
Jr................... 4.4 240,000 23.71 5/5/07 3,578,800 9,068,400
Senior V.P. and Chief
Financial Officer
Robert M. Rhodes....... 3.1 168,480 23.00 3/3/07 2,436,782 6,175,915
Senior V.P. and
General Counsel
David D. Fitch......... 2.2 120,000 31.38 9/22/07 2,367,800 6,000,600
Senior V.P. and
General
Manager -- Commercial
and Industrial
Development
J. Malcolm Jones,
Jr................... 1.5 84,240 22.11 2/25/07 1,171,217 2,968,337
Senior V.P.
Forestry Operations
Michael F. Bayer....... 1.5 84,240 22.11 2/25/07 1,171,217 2,968,337
V.P. -- Human
Resources and
Administration
</TABLE>

SEVERANCE AGREEMENTS

The Company has entered into severance agreements containing substantially
identical terms and conditions (collectively, the "Severance Agreements") with
Messrs. Rummell, Ledsinger, Rhodes, Fitch, Jones and Bayer (the "Named Executive
Officers"), pursuant to which each such executive shall be entitled to severance
benefits in the event of a "change in control" of the Company ("change of
control" is defined in the Severance Agreements as in the Incentive Plan) during
the term of his employment.

Under the terms of the Severance Agreements, if an executive who has
entered into a Severance Agreement (i) resigns for any reason during the last
six months of the first year following the date of a change in control, (ii)
resigns for "good reason" (as defined in the Severance Agreements) within the
first 36 months following a change in control, or (iii) is terminated by the
Company within 36 months following the date of a change in control, then the
Company is obligated to provide the executive with certain payments and
benefits. Such payments and benefits that the Company is obligated to provide to
the executive include (A) payment of a lump sum amount equal to the sum of three
times the executive's annual base salary plus three times the executive's bonus
(as described in the Severance Agreement), (B) payment of a lump sum
supplemental pension benefit amount, (C) payment of a pro-rated bonus for the
year during which such executive's employment is terminated, (D) continued
participation in the Company's group insurance plans, at the Company's expense,
until the expiration of three years following the change in control (or the date
of the executive's death, if earlier), (E) senior executive level outplacement
services, and (F) "gross-up" payments, if applicable, in the amount necessary to
satisfy any excise tax incurred by the executive, if any, under

61
<PAGE> 69

Section 4999 of the Code; provided, however, that if payment of such excise tax
could be avoided by reducing total payments under the Change in Control
Agreement by $50,000 or less, the total amount of such payments shall be reduced
to the level necessary to ensure that no excise tax shall be paid. In addition,
under the terms of the Severance Agreements, all stock options previously
granted to the executive shall become fully exercisable upon a change in
control, and shall remain exercisable until the earlier of the first anniversary
following such change in control or the date such options would have otherwise
expired by their terms, and any right of the Company to repurchase shares
subject to the executive's options shall lapse in full.

The Severance Agreements entered into by the executives do not supersede
the respective employment agreements entered into by such executives, except to
the extent that severance pay and benefits provided under the Severance
Agreements are greater than under the applicable employment agreement. Likewise,
the Severance Agreements do not supersede any respective stock option agreements
entered into by such executives, except to the extent that the applicable
Severance Agreement provides for earlier exercisability or a longer
post-termination exercise period than under such stock option agreement.

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<PAGE> 70

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to persons known by
the Company to be the beneficial owners of more than five percent (5%) of its
outstanding Common Stock as well as information concerning the beneficial
ownership of Common Stock by each director, Named Executive Officer and
directors and officers as a group. The information is presented as of January
12, 1998 except where expressly noted, and as adjusted to reflect the sale of
13,800,000 shares of Common Stock by the Trust (assuming exercise of the U.S.
Underwriters' over-allotment option). Under the rules of the Securities and
Exchange Commission, beneficial ownership is deemed to include shares for which
the individual, directly or indirectly, has or shares voting and/or dispositive
power.

<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
SHARES OWNED(1)
--------------------
BEFORE AFTER
NAME AND ADDRESS BENEFICIAL OWNERSHIP OFFERING OFFERING
- ---------------- --------------------- -------- --------
<S> <C> <C> <C>
Alfred I. duPont Testamentary Trust(2)(3).............. 63,875,700 68.8% 54.0%
P.O. Box 1380
Jacksonville, FL 32201
Franklin Resources, Inc.(4)............................ 5,384,325 5.8 5.8
Charles B. Johnson
Rupert H. Johnson
777 Mariners Island Blvd.
San Mateo, CA 94404
Peter S. Rummell....................................... 1,010,565(5) 1.1 1.1
Charles A. Ledsinger................................... -- -- --
Robert M. Rhodes....................................... 33,696(6) * *
David D. Fitch......................................... -- -- --
J. Malcolm Jones, Jr. ................................. 17,568(7) * *
Michael F. Bayer....................................... 16,848(8) * *
Jacob C. Belin......................................... 63,903,465(9) 68.9 54.0
Russel B. Newton, Jr. ................................. 6,000 * *
John J. Quindlen....................................... 600 * *
Walter L. Revell....................................... 300 * *
Frank S. Shaw, Jr. .................................... -- -- --
Winfred L. Thornton.................................... 63,881,733(9) 68.0 54.0
John D. Uible.......................................... 3,000 * *
Carl F. Zellers, Jr. .................................. -- * *
Directors and officers as a group (14 persons)......... 65,032,179(10) 70.1 55.2
</TABLE>

- ---------------

(1) All percentages are rounded to the nearest tenth of one percent. An
asterisk(*) indicates that the percentage is less than one percent.

(2) The Trust owns 61,643,292 shares or 66.4% in its name and the Nemours
Foundation owns 2,232,408 shares or 2.4% in its name. The Trustees
constitute the entire Board of Directors of the Nemours Foundation and,
therefore, have sole voting and sole dispositive power over these shares.

(3) Under the provisions of the Will creating the Trust, the Trustees of the
Trust having the power to vote the shares of stock specified above are J.
C. Belin, H. H. Peyton, J. F. Porter, W. T. Thompson, III, W. L. Thornton
and Wachovia Bank, N.A., a subsidiary of Wachovia Corporation. A majority
of the Trustees have the right to vote all the stock of the Company owned
by the Trust.

(4) According to Franklin Resources, Inc. ("FRI"), as of December 31, 1997, the
above shares are beneficially owned by one or more open or closed end
investment companies or other managed accounts which are advised by direct
and indirect advisory subsidiaries (the "Advisory Subsidiaries") of FRI.
Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal
Shareholders") each own in excess of 10% of the outstanding common stock of
FRI and are the principal shareholders of FRI. FRI and the

63
<PAGE> 71

Principal Shareholders may be deemed to be, for purposes of Rule 13d-3
under the 1934 Act, the beneficial owner of securities held by persons and
entities advised by FRI and it subsidiaries. FRI, the Principal
Shareholders and each of the Advisory Subsidiaries has disclaimed any
economic interest or beneficial ownership in any of the above shares.
According to the Schedule 13G, Templeton Global Advisors Limited has the
sole power to vote or to direct the vote and the sole power to dispose or
direct the disposition of 3,436,500 shares and Franklin Mutual Advisers,
Inc. has the sole power to vote or to direct the vote and the sole power to
dispose or direct the disposition of 1,947,825 shares of the Company's
Common Stock.

(5) Includes 201,861 restricted shares of Common Stock granted to Mr. Rummell
under the Company's Incentive Plan. In addition, 808,704 of his 4,043,520
options under the Incentive Plan vested on January 8, 1998.

(6) Represents 33,696 of Mr. Rhodes' 168,480 options under the Incentive Plan
that will vest on March 3, 1998.

(7) Includes 720 shares held in the Company's 401(k) plan and 16,848 options
under the Company's Incentive Plan that will vest on February 25, 1998.

(8) Represents 16,848 of Mr. Bayer's 84,240 options under the Incentive Plan
that will vest on February 25, 1998.

(9) Includes 61,643,292 shares of the Company's Common Stock owned by the
Trust, on which the named individuals serve as trustees, and 2,232,408
shares owned by the Nemours Foundation, of which the named individuals are
directors. Mr. Belin owned 27,765 shares as to which he had sole
dispositive voting power, and Mr. Thornton owned 6,033 (including those
held in the Company's 401(k) plan).

(10) Includes 33,000 shares held in the Company's 401(k) plan for which the
trustee of the plan has sole voting power and the participants have sole
dispositive power. The trustee of this plan is Merrill Lynch.

CERTAIN TRANSACTIONS

Jacob C. Belin and Winfred L. Thornton are trustees of the Trust and also
serve as directors of the Company and FECI. In addition, Carl F. Zellers, Jr.
serves as a director of the Company and of FECI.

On May 1, 1997, the Company entered into consulting agreements with Mr.
Belin and Mr. Thornton (the "Consulting Agreements"). Pursuant to the Consulting
Agreements, Messrs. Belin and Thornton will advise and counsel the Company on
various corporate matters at the request of the Chairman and Chief Executive
Officer. The Consulting Agreements provide that Messrs. Belin and Thornton will
receive annual compensation of $100,000 and $112,000, respectively, and will be
reimbursed for expenses actually incurred up to $10,000 per year.

In addition, the Nemours Foundation and the Company rent office space from
GCC at rates approximating market rentals.

DESCRIPTION OF COMMON STOCK

As of January 12, 1998 the authorized capital stock of the Company
consisted of 180,000,000 shares of common stock, no par value, of which
91,697,811 shares were issued and outstanding (not including 5,845,341 shares
subject to outstanding options).

The Company's Common Stock consists of one class of common voting stock
with each share being entitled to one vote. A majority of the holders of the
Common Stock represented at any meeting of stockholders constitutes a quorum and
a majority of such quorum is entitled to vote on any matter coming before the
meeting. Directors are elected at the annual meeting of stockholders by a
plurality of the votes cast at such election. The Company's Board of Directors
is not staggered.

Stockholders are entitled to receive such dividends as may be declared by
the Board of Directors out of funds legally available therefor and share
proportionately in any such liquidating distribution.

64
<PAGE> 72

There are no redemption, conversion or sinking fund provisions with respect
to the Common Stock. The Common Stock is not entitled to preemptive rights or
cumulative voting rights.

Transfer Agent and Registrar. The transfer agent and registrar for the
Common Stock is First Union National Bank Corporate Trust, 1525 West W.T. Harris
Blvd., 3C3, NC1153, Charlotte, North Carolina 28288-1153.

TAX CONSEQUENCES TO NON-U.S. HOLDERS

In the opinion of Latham & Watkins, counsel to the Company, the material
federal income tax consequences to Non-U.S. Holders expected to result from the
purchase, ownership and sale or other taxable disposition of the Common Stock,
under currently applicable law, are summarized below. A "Non-U.S. Holder" is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign estate or trust or a foreign
partnership as such terms are defined in the Internal Revenue Code of 1986, as
amended (the "Code").

This summary is based upon the current provisions of the Code, applicable
Treasury Regulations and judicial and administrative decisions and rulings.
There can be no assurance that the Internal Revenue Service (the "IRS") will not
take a contrary view, and no ruling from the IRS has been or will be sought.
Future legislative, judicial or administrative changes or interpretations could
alter or modify the statements set forth herein, and any such changes or
interpretations could be retroactive and could affect the tax consequences to
Non-U.S. Holders of Common Stock.

The following summary is for general information only and does not purport
to deal with all aspects of federal income taxation that may affect particular
Non-U.S. Holders in light of their individual circumstances and is not intended
for (a) stockholders other than Non-U.S. Holders, (b) Non-U.S. Holders who would
not hold the Common Stock as capital assets or (c) Non-U.S. Holders who are
otherwise subject to special treatment under the Code (including insurance
companies, tax-exempt entities, financial institutions, broker-dealers and
persons who would hold the Common Stock as part of a straddle, hedge or
conversion transaction). In addition, the summary does not consider the effect
of any applicable state, local or foreign tax laws on Non-U.S. Holders. EACH
PROSPECTIVE NON-U.S. HOLDER OF COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL AND FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.

DIVIDENDS ON COMMON STOCK

Dividends paid to a Non-U.S. Holder of Common Stock that are not
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the United States will generally be subject to withholding of
United States federal income tax at a rate of 30% of the gross amount of the
dividends unless the rate is reduced by an applicable income tax treaty. Except
to the extent that an applicable tax treaty otherwise provides, a Non-U.S.
Holder will be taxed in the same manner as United States citizens, resident
aliens and domestic corporations on dividends paid (or deemed paid) that are
effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Holder. If such Non-U.S. Holder is a foreign corporation,
it may also be subject to a United States branch profits tax on such effectively
connected income at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. However, a Non-U.S. Holder may claim exemption
from withholding under the effectively connected income exception by filing Form
4224 (Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of Business in the United States) or a successor form with the Company
or its paying agent.

Under the currently applicable Treasury regulations, dividends paid to an
address in a country other than the United States are presumed to be paid to a
resident of such country for purposes of the withholding discussed above (unless
the payor has knowledge to the contrary) and, under the current interpretation
of Treasury regulations, for purposes of determining the applicability of a
reduced rate of withholding under an

65
<PAGE> 73

income tax treaty. However, under certain recently finalized Treasury
Regulations (the "New Withholding Regulations") a Non-U.S. Holder of Common
Stock who wishes to claim the benefit of an applicable treaty rate would be
required to satisfy certain certification and other requirements. In addition,
under the New Withholding Regulations, in the case of Common Stock held by a
foreign partnership, the certification requirement would generally be applied to
the partners of the partnership and the partnership may be required to provide
certain information, including a United States taxpayer identification number.
The New Withholding Regulations also provide look-through rules for tiered
partnerships. The New Withholding Regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules.
Non-U.S. Holders are encouraged to consult with their own tax advisors with
respect to the application of the New Withholding Regulations.

Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient and the amount, if any, of the tax
withheld. A similar report is sent to the holder. Pursuant to income tax
treaties or certain other agreements, the IRS may make its reports available to
tax authorities in the recipient's country of residence.

If paid to an address outside the United States, dividends on Common Stock
held by a Non-U.S. Holder will generally not be subject to backup withholding,
provided that the payor does not have actual knowledge that the holder is a
United States person. However, under the New Withholding Regulations (which are
effective for dividends paid after December 31, 1998), dividend payments may be
subject to backup withholding imposed at a rate of 31% unless applicable
certification requirements are satisfied. See the discussion above with respect
to rules applicable to foreign partnerships under the New Withholding
Regulations.

GAIN ON DISPOSITION OF COMMON STOCK

Subject to the discussion below under "FIRPTA Treatment of Non-U.S.
Holders," a Non-U.S. Holder generally will not be subject to United States
federal income tax or withholding on gain recognized upon the sale or other
disposition of Common Stock unless (i) the gain is effectively connected with
the conduct of a trade or business within the United States by the Non-U.S.
Holder, or (ii) in the case of a Non-U.S. Holder who is a non-resident alien
individual and holds the Common Stock as a capital asset, such holder is present
in the United States for 183 or more days in the taxable year and certain other
conditions are met, or (iii) the Non-U.S. Holder is subject to tax pursuant to
the provisions of United States federal income tax law applicable to certain
United States expatriates. If a Non-U.S. Holder falls under clause (i) above,
the holder will be taxed on the net gain derived from the sale at regular
graduated United States federal income tax rates (the branch profits tax also
may apply if the Non-U.S. Holder is a corporation). If an individual Non-U.S.
Holder falls under clause (ii) above, the holder generally will be subject to a
30% tax on the gain derived from the sale, which gain may be offset by U.S.
capital losses recognized within the same taxable year of such sale.

FIRPTA TREATMENT OF NON-U.S. HOLDERS

Under the Foreign Investment in Real Property Tax Act of 1980, as amended
("FIRPTA"), and subject to the exception discussed below for 5% or less
shareholders, Non-U.S. Holders generally are subject to United States federal
income tax on capital gain realized on the disposition of Common Stock which
constitutes a United States real property interest by reason of that Company's
status as a United States real property holding corporation ("USRPHC"), as well
as United States withholding in respect to such tax equal to 10% of the amount
realized on such disposition. Under FIRPTA, a corporation is a USRPHC if the
fair market value of the United States real property interests held by the
corporation equals 50% or more of the aggregate fair market value of the
Company's real property interests and any other assets of the Company used or
held for use in a trade or business. In the event that a sale or disposition of
Common Stock constitutes a sale or disposition of a United States real property
interest, a greater than 5% Non-U.S. Holder will generally be subject to United
States tax on such sale or disposition.

The Company currently believes that, in light of the nature and extent of
its real estate interests in the United States, it is a USRPHC. Even if a
corporation meets the test for a USRPHC, a Non-U.S. Holder

66
<PAGE> 74

would generally not be subject to U.S. federal income tax on gain from a sale or
other disposition of Common Stock solely by reason of such USRPHC status if the
Common Stock is regularly traded on an established securities market during the
calendar year in which such sale or disposition occurs and such holder does not
own, actually or constructively, Common Stock with a fair market value in excess
of 5% of the fair market value of all Common Stock outstanding at any time
during the shorter of the five-year period preceding such disposition or the
holder's holding period. In addition, a Non-U.S. Holder will not be subject to
withholding in respect to such tax if the Company's Common Stock is so regularly
traded during the calendar year of such disposition. The Company believes that
the Common Stock will be treated as regularly traded on an established
securities market. Accordingly, a Non-U.S. Holder that owns more than 5% of the
fair market value of the Common Stock during the period described above may be
subject to U.S. federal income tax on a sale or disposition.

FEDERAL ESTATE TAXES

An individual Non-U.S. Holder who owns, or is treated as owning, Common
Stock at the time of his or her death or has made certain lifetime transfers of
an interest in Common Stock will be required to include the value of such Common
Stock in his gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of Common Stock effected
outside the United States by a foreign office of a "broker" (as defined in
applicable Treasury Regulations), unless such broker is (i) a United States
person, (ii) a foreign person that derives 50% or more of its gross foreign
income for certain periods from activities that are effectively connected with
the conduct of a trade or business in the United States, (iii) a controlled
foreign corporation for United States federal income tax purposes or (iv)
effective December 31, 1998, certain brokers that are foreign partnerships with
partners who are Non-U.S. Holders or that are engaged in a United States trade
or business. Payment of the proceeds of any such sale effected outside the
United States by a foreign office of any broker that is described in (i), (ii),
(iii) or (iv) of the preceding sentence will not be subject to backup
withholding tax, but will be subject to information reporting requirements
unless such broker has documentary evidence in its records that the beneficial
owner is a Non-U.S. Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption. Payment of the proceeds of
any such sale to or through the United States office of a broker is subject to
information reporting and backup withholding requirements, unless the beneficial
owner of the Common Stock either (a) provides a Form W-8 (or a suitable
substitute form) signed under penalties of perjury that includes its name and
address and certifies as to its Non-U.S. Holder status in compliance with
applicable law and regulations, or (b) otherwise establishes an exemption.
Effective for payments after December 31, 1998 (and subject to certain
transition rules), the New Withholding Regulations unify certain certification
procedures and forms and the reliance standards relating to information
reporting and backup withholding.

THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE
NON-U.S. HOLDER OF COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT
TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON
STOCK.

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<PAGE> 75

UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below for whom Morgan Stanley & Co. Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Raymond James & Associates, Inc. are acting as U.S.
Representatives, and the International Underwriters named below for whom Morgan
Stanley & Co. International Limited, Donaldson, Lufkin & Jenrette International,
Merrill Lynch International and Raymond James & Associates, Inc. are acting as
International Representatives, have severally agreed to purchase, and the Trust
has agreed to sell to them, severally, the respective number of shares of Common
Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Donaldson, Lufkin & Jenrette Securities Corporation.......
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
Raymond James & Associates, Inc...........................
----------
Subtotal.......................................... 10,200,000
International Underwriters:
Morgan Stanley & Co. International Limited................
Donaldson, Lufkin & Jenrette International................
Merrill Lynch International...............................
Raymond James & Associates, Inc...........................
----------
Subtotal.......................................... 1,800,000
----------
Total............................................. 12,000,000
==========
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Shares offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold and will not offer
or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S. Underwriter and
an International Underwriter, the foregoing representations and agreements (i)
made by it in its capacity as a U.S. Underwriter apply only to in its capacity
as a U.S. Underwriter and (ii) made by it in its capacity as an International
Underwriter apply only to it in its capacity as an International Underwriter.
The foregoing limitations do no apply to stabilization transactions or to
certain other transaction specified in the Agreement between U.S. and
International Underwriters. As used herein, "United States or Canadian Person"
means any national or resident of the United States or Canada or of any
corporation, pension, profit-

68
<PAGE> 76

sharing or other trust or other entity organized under the laws of the United
States and Canada or of any political subdivision thereof (other than branch
located outside the United States of any United States or Canadian person), and
includes any United States or Canadian branch of a person who is otherwise not a
United States or Canadian Person. All shares of Common Stock to be purchased by
the Underwriters under the Underwriting Agreement are referred to herein as the
"Shares."

Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer to sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of any resident of any province or
territory of Canada in contravention of the Securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada will be made only pursuant to an exemption from
the requirement to file a prospectus in the province or territory of Canada in
which such offer or sale is made. Each International Underwriter has further
agreed to send to any dealer who purchases from it any of the Shares a notice
stating in substance that, by purchasing such Shares, such dealer represents and
agrees that it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such Shares in any province or territory of Canada or to, or
for the benefit of, any resident or any province or territory of Canada in
contravention of the securities laws thereof and that any offer or sale of
Shares in Canada will be made only pursuant to an exemption from the requirement
to file a prospectus in the province or territory of Canada in which such offer
is made, and that such dealer will deliver to any other dealer to whom it sells
any of such Shares a notice containing substantially the same statement as is
contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
Shares to the International Underwriters, will not offer or sell, any Shares to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offerings of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.

Pursuant to the Agreement between the U.S. and International Underwriters,
each International Underwriter has further represented that it has not offered
or sold and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other

69
<PAGE> 77

dealer to whom it sells any of such Shares a notice containing substantially the
same statement as is contained in this sentence.

The Underwriters initially propose to offer part of the Shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
$ a share under the public offering price. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ a share
to other Underwriters or to certain dealers. After the initial offering of the
Shares, the offering price and other selling terms may from time to time be
varied by the Representatives.

Pursuant to the Underwriting Agreement, the Trust has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 1,800,000 additional shares of
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering overallotments, if
any, made in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as the number set
forth next to such U.S. Underwriter's name in the preceding table bears to the
total number of share of Common Stock set forth next to the names of all U.S.
Underwriters in the preceding table.

The Common Stock is listed on the New York Stock Exchange under the symbol
"SJP."

Each of the Company, the Selling Stockholder and certain other stockholders
and officers and directors of the Company has agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period ending 180 days from the date of
this Prospectus, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of shares of Common Stock or such other securities, in
cash or otherwise, other than (w) the Shares, (x) the issuance by the Company of
shares of Common Stock upon the exercise of an option or a warrant or the
conversion of a security outstanding on the date of this Prospectus of which the
Underwriters have been advised in writing, (y) the issuance of shares of Common
Stock as consideration for future acquisitions by the Company or (z) the grant
of options under the Company's stock option plans; provided such options do not
vest prior to the termination of the 180-day period referenced herein, and
provided further that, in the case of subclauses (x) and (y), the recipient of
any such issued shares agrees to be bound by the transfer restrictions set forth
herein.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offerings, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the Offerings, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The Company, the Trust and the Underwriters have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.

70
<PAGE> 78

LEGAL MATTERS

The validity of the Common Stock offered hereby and certain other legal
matters will be passed upon for the Company by Robert M. Rhodes, Senior Vice
President and General Counsel of the Company, and by Latham & Watkins, Chicago,
Illinois. Certain legal matters will be passed upon for the Trust by McGuire,
Woods, Battle & Boothe L.L.P., Richmond, Virginia. Certain legal matters will be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.

EXPERTS

The consolidated financial statements of St. Joe Corporation as of December
31, 1996 and 1995, and for each of the years in the three-year period ended
December 31, 1996, have been included herein and in the registration statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

71
<PAGE> 79

ST. JOE CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Changes in Stockholders'
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 80

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
St. Joe Corporation:

We have audited the accompanying consolidated balance sheets of St. Joe
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of St. Joe
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Jacksonville, Florida
March 7, 1997

F-2
<PAGE> 81

ST. JOE CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 16,802 $ 449,013 $ 200,986
Short-term investments.................................. 96,923 88,011 38,200
Accounts receivable..................................... 44,390 57,517 39,343
Income taxes refundable................................. 4,314 -- --
Inventories............................................. 20,592 18,677 12,692
Other assets............................................ 18,162 17,455 35,665
Net assets of discontinued operations................... 296,001 -- --
---------- ---------- ----------
Total current assets............................ 497,184 630,673 326,886
Investments and Other Assets:
Marketable securities................................... 189,865 282,827 337,526
Note receivable......................................... -- 10,000 --
Other assets............................................ 38,971 48,571 67,231
---------- ---------- ----------
Total investments and other assets.............. 228,836 341,398 404,757
Property, plant and equipment, net........................ 804,974 834,167 853,217
---------- ---------- ----------
Total assets.................................... $1,530,994 $1,806,238 $1,584,860
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................ $ 26,024 $ 28,480 $ 26,903
Accrued liabilities..................................... 18,445 21,615 25,920
Income taxes payable.................................... -- 6,864 3,876
---------- ---------- ----------
Total current liabilities....................... 44,469 56,959 56,699
Accrued casualty reserves and other liabilities........... 11,681 18,361 19,950
Deferred income taxes..................................... 192,036 254,873 279,690
Minority interest in consolidated subsidiaries............ 266,741 279,104 293,915
Stockholders' Equity:
Common stock, no par value; 180,000,000 shares
authorized; 91,495,950 shares issued and outstanding
at December 31, 1995 and 1996 and 91,697,811 at
September 30, 1997................................... 8,714 8,714 13,054
Retained earnings....................................... 955,239 1,125,161 843,198
Net unrealized gains on marketable securities available
for sale............................................. 52,114 63,066 82,043
Restricted stock deferred compensation.................. -- -- (3,689)
---------- ---------- ----------
Total stockholders' equity...................... 1,016,067 1,196,941 934,606
---------- ---------- ----------
Total liabilities and stockholders' equity...... $1,530,994 $1,806,238 $1,584,860
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 82

ST. JOE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales................................... $155,122 $150,564 $245,704 $173,401 $ 79,566
Operating revenues.......................... 175,784 184,360 185,485 162,307 172,328
-------- -------- -------- -------- --------
Total revenues.................... 330,906 334,924 431,189 335,708 251,894
Cost of sales............................... 111,014 116,014 112,163 64,765 63,282
Operating expenses.......................... 133,091 139,875 139,640 120,524 118,493
Selling, general and administrative
expenses.................................. 26,836 31,718 31,215 24,373 28,103
-------- -------- -------- -------- --------
Operating profit.................. 59,965 47,317 148,171 126,046 42,016
Other income (expense):
Dividends................................. 2,187 2,595 2,968 2,196 2,583
Interest income........................... 9,678 12,666 29,914 20,887 21,955
Interest expense.......................... (1,982) (2,235) (600) (426) (331)
Gain on sales and other dispositions of
property, plant and equipment, net..... 13,895 2,674 3,423 5,745 3,305
Other, net................................ 1,386 3,070 5,152 3,603 5,138
-------- -------- -------- -------- --------
Total other income (expense)...... 25,164 18,770 40,857 32,005 32,650
-------- -------- -------- -------- --------
Income from continuing operations before
income taxes and minority interest........ 85,129 66,087 189,028 158,051 74,666
Provision for income taxes
Current................................... 24,692 5,778 30,288 12,399 22,372
Deferred.................................. 6,754 18,757 52,829 58,812 10,609
-------- -------- -------- -------- --------
Total provision for income
taxes........................... 31,446 24,535 83,117 71,211 32,981
-------- -------- -------- -------- --------
Income from continuing operations before
minority interest......................... 53,683 41,552 105,911 86,840 41,685
Minority interest........................... 15,827 12,194 14,002 9,922 13,404
-------- -------- -------- -------- --------
Income from continuing operations........... 37,856 29,358 91,909 76,918 28,281
Income from discontinued operations:
Earnings (loss) from discontinued
operations, net of income taxes of
$2,491, $26,116, $(2,785) and $(2,785),
respectively........................... 4,253 44,461 (4,528) (4,528) --
Gain on the sale of discontinued
operations, net of income taxes of
$48,705 and $64,950, respectively...... -- -- 88,641 95,644 --
-------- -------- -------- -------- --------
Income from discontinued operations....... 4,253 44,461 84,113 91,116 --
-------- -------- -------- -------- --------
Net income.................................. $ 42,109 $ 73,819 $176,022 $168,034 $ 28,281
======== ======== ======== ======== ========
PER SHARE DATA:
Income from continuing operations........... $ 0.41 $ 0.32 $ 1.00 $ 0.84 $ 0.31
Earnings (loss) from discontinued
operations................................ 0.05 0.49 (.05) (.05) --
Gain on the sale of discontinued
operations................................ -- -- 0.97 1.05 --
-------- -------- -------- -------- --------
Net income........................ $ 0.46 $ 0.81 $ 1.92 $ 1.84 $ 0.31
======== ======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 83

ST. JOE CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------------- SEPTEMBER 30,
1994 1995 1996 1997
-------- -------- ---------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Common Stock:
Balance, at end of period (1994, 1995 and 1996 --
91,495,950 shares, September 30,
1997 -- 91,697,811)............................. $ 8,714 $ 8,714 $ 8,714 $ 13,054
======== ======== ========== ==========
Retained Earnings:
Balance, at beginning of period................... $851,511 $887,520 $ 955,239 $1,125,161
Net income........................................ 42,109 73,819 176,022 28,281
Dividends:
Cash ($.07 per share -- 1994, 1995 and 1996,
$.05 per share in 1997)...................... (6,100) (6,100) (6,100) (4,585)
Special distribution ($3.33 per share in 1997).... -- -- -- (305,659)
-------- -------- ---------- ----------
Balance, at end of period......................... $887,520 $955,239 $1,125,161 $ 843,198
======== ======== ========== ==========
Net Unrealized Gain on Marketable Securities
Available for Sale:
Balance, at beginning of period................... $ 41,485 $ 40,747 $ 52,114 $ 63,066
Increase (decrease) in net unrealized gain, net of
tax effect...................................... (738) 11,367 10,952 18,977
-------- -------- ---------- ----------
Balance, at end of period......................... $ 40,747 $ 52,114 $ 63,066 $ 82,043
======== ======== ========== ==========
Restricted stock deferred compensation:
Balance, at beginning of period................... -- -- -- --
(Increase) decrease in restricted stock deferred
compensation.................................... -- -- -- $ (3,689)
----------
Balance, at end of period......................... -- -- -- $ (3,689)
======== ======== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 84

ST. JOE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- -------- -------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net Income.................................. $ 42,109 $ 73,819 $176,022 $168,034 $ 28,281
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and depletion................ 27,612 28,551 28,758 21,232 23,635
Minority interest in income............... 15,827 12,194 14,002 9,922 13,404
Gain on sale of property.................. (13,895) (2,674) (3,423) (5,745) (3,682)
Gain on sale of discontinued operations... -- -- (88,641) (95,644) --
Deferred income tax provision............. 6,754 18,757 52,829 60,687 12,327
Changes in operating assets and
liabilities:
Accounts receivable.................... (1,375) (3,139) (13,127) (377) 18,174
Inventories............................ 6,545 (828) 1,915 3,459 5,985
Other assets........................... (406) (4,790) (8,893) (14,151) (26,870)
Accounts payable, accrued liabilities
and casualty reserves................ 3,176 (4,279) 5,435 27,121 6,971
Income taxes payable................... 4,275 (7,012) 11,178 25,537 (2,988)
Discontinued operations -- noncash
charges and working capital
changes.............................. 12,096 43,483 (58,710) (63,257) --
--------- --------- -------- -------- ---------
Cash provided by operating activities......... 102,718 154,082 117,345 136,818 75,237
--------- --------- -------- -------- ---------
Cash flows from investing activities:
Purchases of property, plant and
equipment................................. (65,450) (78,816) (64,271) (41,135) (53,256)
Investing activities of discontinued
operations................................ (19,513) (28,102) (4,327) (4,327) --
Proceeds from sales of property............. 18,135 5,119 9,743 4,806 14,904
Proceeds from sale of discontinued
operations................................ -- -- 445,055 454,949 --
Purchases of investments:
Available for sale........................ (18,851) (31,247) (21,928) (18,698) (49,615)
Held-to-maturity.......................... (105,091) (168,607) (180,797) (216,570) (100,336)
Maturity and redemption of investments:
Available for sale........................ 12,779 29,058 18,291 12,218 62,434
Held-to-maturity.......................... 95,241 135,480 121,111 153,194 114,096
--------- --------- -------- -------- ---------
Cash provided by (used in) investing
activities.................................. (82,750) (137,115) 322,877 344,437 (11,773)
--------- --------- -------- -------- ---------
Cash flows from financing activities:
Net change in short-term borrowings......... (5,437) (11,989) -- -- --
Financing activities of discontinued
operations................................ 2,092 (9,917) (245) (245)
Dividends paid to stockholders.............. (6,100) (6,100) (6,100) (4,575) (310,244)
Repayment of long-term debt................. (19) (16,893) -- -- --
Dividends paid to minority interest......... (1,679) (1,655) (1,666) (1,245) (1,247)
--------- --------- -------- -------- ---------
Cash used in financing activities............. (11,143) (46,554) (8,011) (6,065) (311,491)
--------- --------- -------- -------- ---------
Net increase (decrease) in cash and cash
equivalents................................. 8,825 (29,587) 432,211 475,190 (248,027)
Cash and cash equivalents at beginning of
period...................................... 37,564 46,389 16,802 16,802 449,013
--------- --------- -------- -------- ---------
Cash and cash equivalents at end of period.... $ 46,389 $ 16,802 $449,013 $491,992 $ 200,986
========= ========= ======== ======== =========
Supplemental disclosure of cash flow
information:
Cash paid during the period for certain
expense items:
Interest.................................... $ 3,973 $ 4,541 $ 1,009 $ 835 $ 331
Income taxes................................ $ 20,494 $ 45,283 $120,789 $ 93,172 $ 25,776
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 85

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

1. NATURE OF OPERATIONS

St. Joe Corporation (the Company) is a diversified corporation engaged in
transportation, real estate, forestry and sugar operations. Forestry has
operations in both Florida and Georgia while the remaining businesses operate
principally within the state of Florida.

Transportation

Transportation operations accounted for 43% of the Company's net sales and
operating revenues in 1996, and consist of both railway and trucking operations.
The two railroads, one serving the northwest Florida area from Port St. Joe to
Chattahoochee and the other serving the eastern seaboard of Florida from
Jacksonville to Miami, provide transportation services for the common carriage
of goods by rail between their terminating points. Since the rail operations are
within the state of Florida, more than one-half of its transportation revenue is
generated by shipments which originate and terminate within Florida.
Additionally, a significant portion of the traffic handled is received from or
transferred to other rail carriers. The principal commodities carried by rail
include crushed stone, cement, automobile vehicles and parts,
trailer-on-flatcar, container-on-flatcar, basic consumer goods such as
foodstuffs and building material, coal, pulpboard, pulpwood, woodchips, tall oil
chemicals, stone and clay products and recyclables. The trucking portion of the
Company's operation is an interstate, irregular route, common carrier with
terminals located throughout the eastern half of the United States.

Real Estate

Real estate accounted for 31% of the Company's net sales and operating
revenues in 1996, and consists of the development, construction and management
of real estate projects within the state of Florida, both for long-term
appreciation and for sale to third parties and the sale of both developed and
undeveloped land. Along Florida's east coast, the Company concentrates in
commercial property which it can manage, maintain and develop. In west Florida,
the Company has concentrated on developing parcels for residential use. The Real
Estate segment's competition is with other developers and brokers throughout its
operating area.

Forestry

Forestry accounted for 13% of the Company's net sales and operating
revenues in 1996, and consists of the growing and harvesting of timber on
approximately one million acres of timberlands in Florida and Georgia. The
majority of the wood harvested by the Company is sold under a long term wood
fiber supply agreement to one linerboard mill located in Port St. Joe, Florida.
The Company plans in the future to shift its remaining fiber production from the
Company's lands to higher margin timber products.

Wood is supplied to the mill pursuant to a negotiated wood fiber supply
agreement entered into at the time of the sale of the mill. See Note 3.
Discontinued Operations. Under that agreement, wood fiber will be supplied to
the linerboard mill for a period of fifteen years, with two five year renewal
periods. Tonnage to be provided, reduces from 1.6 million tons in year one to
1.4, 1.2, .9 million tons in years two, three and four respectively. Years four
and thereafter remain at .9 million tons. The amount of tonnage required from
Company's land is .9 million tons per year starting in the third year. At any
time, the mill can elect to reduce in increments on a permanent basis the amount
of tonnage to not less than 600,000 tons per year. Prices for the wood fiber
were negotiated at the time of the negotiation of the agreement and were
negotiated based on fixed prices from geographic zones for pulp wood and prices
tied to designated chipping facilities for wood chips. Under the wood fiber
supply agreement, prices are to be renegotiated every two years and are to be
indexed on a quarterly basis to certain published prices resulting in quarterly
adjustments that are not greater than five percent.

F-7
<PAGE> 86

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

On March 6, 1997 officials of the linerboard mill at Port St. Joe announced
that the mill would be shutdown beginning in April, 1997 for an indefinite
period of time due to soft market conditions in the paper industry.

In September 1997, the linerboard mill reopened. On August 25, 1997, the
Company renegotiated certain terms of its wood fiber supply agreement with
Florida Coast Paper Company. Under the revised agreement, the Company will
supply 615,400 tons of pulpwood and wood chips between August 25, 1997 and May
30, 1998; thereafter the Company will supply 700,000 tons per year through
December, 2011 with two five year renewal periods at the option of Florida
Coast. The financial impact to transportation (ANRR) and forestry segments
operations had a significant adverse impact on the segments' revenues, operating
profit, net income and cash flow during the shutdown period.

Sugar

Sugar accounted for 13% of the Company's net sales and operating revenues
in 1996, and consists of a sugarcane plantation and a sugar mill which processes
the sugarcane into raw sugar. The raw sugar from the mill is sold to one
customer. The sugarcane crop is subject to varying weather conditions which can
significantly reduce the harvest and crop yields.

2. MAJORITY STOCKHOLDERS

The Alfred I. duPont Testamentary Trust (the "Trust") and Nemours
Foundation (the "Foundation"), beneficiary of the Trust, collectively own
approximately 69.8% of the common stock of the Company. The Company and its
subsidiaries had no significant transactions with the Trust or the Foundation
during the period.

3. DISCONTINUED OPERATIONS

Communications

On April 11, 1996, St. Joe Industries, Inc., a wholly owned subsidiary of
the Company, sold the stock of St. Joe Communications, Inc. (SJCI) to TPG
Communications, Inc. for $96,098. TPG Communications, Inc. assumed $17,963 of
SJCI interest bearing debt. SJCI sold its interest in three remaining cellular
partnerships for an aggregate of $25,113. The Company recorded a $39,154 gain on
the sale net of tax. SJCI's revenues through the April 11, 1996 sale date were
$9,335. Revenues in 1995 and 1994 were $32,826 and $30,638, respectively. During
1995, the Company had previously sold a cellular partnership interest for
$2,104. Earnings for SJCI were $1,120, $6,767 and $4,993 for 1996, 1995 and
1994, respectively

Forest Products

On May 30, 1996, the Company sold its linerboard mill and container plants.
Proceeds from the sale include $323,844 cash and a $10,000 senior subordinated
note, (the Promissory Note). The Promissory Note bears interest at a rate of
13.25% and interest is payable quarterly in arrears commencing September 1,
1996, provided that any interest payable on its due date may, at the borrowers'
option, be added to the principal amount outstanding. To date, interest payments
have been added to the principal amount. All unpaid principal and interest is
due June 1, 2007. The Promissory Note may be prepaid without penalty at any
time. The gain on the sale was $49,487, net of tax. Revenues for the linerboard
mill and container plants through May 30, 1996 were $156,305. Revenues in 1995
and 1994 were $438,399 and $378,088, respectively. Earnings (loss) for the
linerboard mill and container plants were $(5,648), $37,694 and $(740) for 1996,
1995 and 1994, respectively.

F-8
<PAGE> 87

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Included in cash and cash equivalents at December 31, 1996 is approximately
$359,267 of proceeds from these sales which have been held in special accounts
during 1996. A formal plan of liquidation was adopted on February 25, 1997, and
a distribution of net proceeds of the sales in partial liquidation of $3.33 per
share was paid on March 31, 1997, for stockholders of record on March 21, 1997.
It is currently anticipated that remaining net proceeds of $.34 per share will
also be distributed later this year after further costs and expenses of the
sales have been accounted for. Also included in cash and cash equivalents at
December 31, 1996 is approximately $9,783 in earnings on the proceeds of sales.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and all of its majority owned subsidiaries. All significant intercompany
transactions and balances have been eliminated except for sales of continuing
operations of $18,988, $59,535 and $58,925 derived from discontinued operations
in the years ended December 31, 1996, 1995 and 1994, respectively. The
unrealized profit in ending inventories relating to these sales has been
eliminated.

Unaudited Interim Financial Information

The accompanying unaudited consolidated interim balance sheet as of
September 30, 1997 and the results of operations and cash flows for the nine
months ended September 30, 1996 and 1997 have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
and reflect only normal and recurring adjustments, which are, in the opinion of
the Company considered necessary for a fair presentation, as permitted by these
regulations. Certain information and footnotes required by generally accepted
accounting principles for complete financial statements have been condensed or
omitted pursuant to such regulations, although the Company believes that the
disclosures made are adequate to make the information presented not misleading.

Revenue Recognition

Transportation revenues are substantially recognized upon completion of
transportation services at destination. Revenues from sales of forestry products
and sugar are recognized generally on delivery of the product to the customer.
Revenue from realty land sales is recognized upon closing of sales contracts for
sale of land or upon settlement of condemnation proceedings. Rental revenues are
recognized upon completion of rental and lease contracts, using the
straight-line basis for recording the revenues over the life of the contract.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, cash and cash
equivalents include cash on hand, bank demand accounts, money market accounts,
and repurchase agreements having original maturities at acquisition date of
three months or less.

F-9
<PAGE> 88

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Inventories

Inventories are stated at the lower of cost or market. Costs for
substantially all inventories are determined under the first in, first out
(FIFO) or the average cost method.

Property, Plant and Equipment

Depreciation is computed using both straight-line and accelerated methods
over the useful lives of various assets.

Depletion of timber is determined by the units of production method. An
adjustment to depletion is recorded, if necessary, based on the continuous
forest inventory (CFI) analysis prepared every five years.

Railroad properties are depreciated and amortized using the straight-line
method at rates established by regulatory agencies. Gains and losses on normal
retirements of these items are credited or charged to accumulated depreciation.

Deferred Cane Crop Costs

Sugar cane plantings generally yield two annual harvests, depending on
weather conditions and soil quality, before replanting is necessary. New
planting costs are amortized on a straight-line basis over two years.

Earnings Per Common Share

Earnings per common share are based on the weighted average number of
common shares outstanding during the period, as adjusted for the three-for-one
stock split effective January 12, 1998.

Income Taxes

The Company follows the asset and liability method of accounting for income
taxes in accordance with Statement of Financial Accounting Standards (SFAS) No.
109 "Accounting for Income Taxes." Under SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. SFAS 109 also requires the recognition of a
deferred tax liability on the undistributed earnings of subsidiaries applied on
a prospective basis.

Investments

Investments consist principally of corporate debt securities, government
sponsored agency securities, mortgage backed securities, municipal bonds, common
stocks, preferred stocks, and U.S. Government obligations. Investments maturing
in three months to one year are classified as short term. Those having
maturities in excess of one year are classified as marketable securities.

The Company follows the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under SFAS 115, the Company
classifies its debt and marketable equity securities in one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are bought
and held principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities for which the Company has the
ability and intent to hold the security until maturity. All other securities not
included in trading or held-to-maturity are classified as available-for-sale.

F-10
<PAGE> 89

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses on trading securities are included in earnings. Unrealized holding gains
and losses, net of the related income tax effect and minority interest in
consolidated subsidiaries, on available-for-sale securities are excluded from
earnings and are reported as a separate component of stockholders' equity until
realized.

A decline in the market of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary is charged to earnings
resulting in the establishment of a new cost basis for the security.

Realized gains and losses for securities classified as available-for-sale
and held-to-maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the asset's
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company has historically reserved for
losses related to the impairment of long-term assets. The adoption of SFAS No.
121 in 1996 had no material effect on the Company's financial statements.

Stock-Based Compensation

Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, permits entities to recognize as expense over the
vesting period the fair value of all stock based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to apply the provisions of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants as if the fair-value-based method
defined in SFAS No. 123 has been applied. Under APB No. 25, compensation expense
would be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. The Company has elected to apply
the provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123. The disclosures are not required for interim
reporting.

Reclassifications

Certain prior year amounts have been reclassified to conform with the
current year's presentation.

Restatements

All share numbers and per share amounts have been restated to reflect the
three-for-one split of the Company's common stock, which became effective on
January 12, 1998.

F-11
<PAGE> 90

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

5. INVENTORIES

Inventories consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Materials and supplies................................. $12,875 $13,530 $12,399
Sugar.................................................. 7,717 5,147 293
------- ------- -------
$20,592 $18,677 $12,692
======= ======= =======
</TABLE>

6. INVESTMENTS

Investments as of December 31, 1995, consist of:

<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Short term investments (maturing
within one year)
Held to maturity
U.S. Government securities..... $ 50,077 $ 50,818 $ 51,203 $ 385 $ --
Tax exempt municipals.......... 39,135 39,179 39,150 -- 29
Mortgage backed securities..... 5,641 5,911 5,909 -- 2
Certificates of deposit........ 1,000 1,015 1,015 -- --
-------- -------- -------- ------- ----
$ 95,853 $ 96,923 $ 97,277 $ 385 $ 31
======== ======== ======== ======= ====
Marketable securities
Available for sale
U.S. Government securities
Maturing in one to five
years..................... $ 872 $ 887 $ 887 $ 15 $ --
Tax exempt municipals
Maturing in one to five
years..................... 6,968 7,181 7,181 213 --
Maturing in five to ten
years..................... 20,093 20,953 20,953 860 --
Maturing in more than ten
years..................... 5,610 5,820 5,820 210 --
Equity securities.............. 11,633 94,027 94,027 82,394 --
Mortgage backed securities
Maturing in five to ten
years..................... 3,801 3,877 3,877 76 --
Other corporate debt securities
Maturing in five to ten
years..................... 1,842 1,897 1,897 55 --
-------- -------- -------- ------- ----
50,819 134,642 134,642 83,823 --
Held to maturity
U.S. Government securities
Maturing in one to five
years..................... 45,569 45,902 46,432 530 --
Tax exempt municipals
Maturing in one to five
years..................... 1,283 113 113 -- --
Maturing in more than ten
years..................... 1,000 1,003 1,003 -- --
Mortgage backed securities
Maturing in five to ten
years..................... 6,132 6,143 6,699 556 --
Other corporate debt securities
Maturing in five to ten
years..................... 794 2,062 2,454 451 59
-------- -------- -------- ------- ----
54,778 55,223 56,701 1,537 59
-------- -------- -------- ------- ----
$105,597 $189,865 $191,343 $85,360 $ 59
======== ======== ======== ======= ====
</TABLE>

F-12
<PAGE> 91

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Investments as of December 31, 1996, consist of:

<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Short term investments (maturing
within one year)
Held to maturity
U.S. Government securities..... $ 87,007 $ 87,007 $ 87,226 $ 296 $ 77
Tax exempt municipals.......... 1,004 1,004 1,005 1 --
-------- -------- -------- -------- ------
$ 88,011 $ 88,011 $ 88,231 $ 297 $ 77
======== ======== ======== ======== ======
Marketable securities
Available for sale
U.S. Government securities
Maturing in one to five
years..................... $ 1,226 $ 1,226 $ 1,226 $ 3 $ 3
Maturing in five to ten
years..................... 152 151 151 -- 1
Tax exempt municipals
Maturing in one to five
years..................... 10,624 10,945 10,945 321 --
Maturing in five to ten
years..................... 19,726 20,336 20,336 610 --
Maturing in more than ten
years..................... 4,281 4,265 4,265 -- 16
Equity securities.............. 13,534 117,128 117,128 103,594 --
Mortgage backed securities
Maturing in one to five
years..................... 71 71 71 -- --
Maturing in five to ten
years..................... 342 343 343 1 --
Maturing in more than ten
years..................... 3,210 3,255 3,255 45 --
Other corporate debt securities
Maturing in one to five
years..................... 920 931 931 11 --
Maturing in five to ten
years..................... 463 468 468 5 --
Maturing in more than ten
years..................... 95 105 105 10 --
-------- -------- -------- -------- ------
56,644 159,224 159,224 104,600 20
Held to maturity
U.S. Government securities
Maturing within one year..... $114,371 $114,371 $113,454 $ 333 $1,250
Tax exempt municipals
Maturing in one to five
years..................... $ 7,079 $ 7,079 $ 7,121 $ 42 $ --
Maturing in more than ten
years..................... 56 56 725 669 --
Mortgage backed securities
Maturing in one to five
years..................... -- -- 400 400 --
Maturing in more than ten
years..................... 41 41 44 3 --
Other corporate debt securities
Maturing in one to five
years..................... 2,056 2,056 2,475 502 83
-------- -------- -------- -------- ------
123,603 123,603 124,219 1,949 1,333
-------- -------- -------- -------- ------
$178,247 $282,827 $283,443 $106,549 $1,353
======== ======== ======== ======== ======
</TABLE>

Marketable securities, including certain investments which mature within
one year, are held as a developmental fund created to accumulate capital
expected to be required for future improvement of the Company's real estate
properties.

F-13
<PAGE> 92

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Investments as of September 30, 1997 (unaudited), consist of:

<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Short term investments (maturing
within one year)
Available for Sale
U.S. Government securities..... $ 8,496 $ 8,495 $ 8,495 $ -- $ (1)
Other corporate debt
securities................... 29,751 29,705 29,705 -- (46)
-------- -------- -------- -------- -----
$ 38,247 $ 38,200 $ 38,200 $ -- $ (47)
======== ======== ======== ======== =====
Marketable Securities
Available for Sale
U.S. Government securities
Maturing in one to five
years..................... $135,420 $135,796 $135,796 $ 376 $ --
Maturing in five to ten
years..................... 547 558 558 11 --
Tax exempt municipals
Maturing in one to five
years..................... 19,875 19,248 19,248 -- (627)
Maturing in five to ten
years..................... 18,223 19,011 19,011 788 --
Maturing in more than ten
years..................... 3,465 3,984 3,984 519 --
Equity securities.............. 15,753 149,969 149,969 134,216 --
Mortgage backed securities
Maturing in one to five
years..................... 99 99 99 -- --
Maturing in five to ten
years..................... 396 400 400 4 --
Maturing in more than ten
years..................... 4,049 4,363 4,363 314 --
Corporate debt securities
Maturing in one to five
years..................... 3,323 3,795 3,795 472 --
Maturing in five to ten
years..................... 189 196 196 7 --
Maturing more than ten
years..................... 95 107 107 12 --
-------- -------- -------- -------- -----
$201,434 $337,526 $337,526 $136,719 $(627)
======== ======== ======== ======== =====
</TABLE>

During 1997, consistent with the Company's expected capital expenditure
needs, approximately $137,000 of securities classified as held to maturity were
transferred to available for sale. Net unrealized gains were not material.

7. ACCRUED LIABILITIES

Accrued liabilities consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and benefits.................................. $ 1,433 $ 5,716 $ 5,139
Payroll taxes......................................... 246 403 --
Property and other taxes.............................. 3,418 4,248 13,806
Accrued casualty reserves............................. 16,635 18,984 13,938
Other accrued liabilities............................. 8,394 10,625 12,988
------- ------- -------
30,126 39,976 45,871
Less: noncurrent accrued casualty reserves and other
liabilities......................................... 11,681 18,361 19,951
------- ------- -------
$18,445 $21,615 $25,920
======= ======= =======
</TABLE>

F-14
<PAGE> 93

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30, ESTIMATED
1995 1996 1997 USEFUL LIFE
---------- ---------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land and timber........................ $ 132,393 $ 134,811 $ 134,808 --
Land improvements...................... 19,149 19,770 21,107 20
Buildings.............................. 3,686 3,702 3,702 45
Machinery and equipment................ 623,183 630,847 616,447 12-30
Office equipment....................... 799 1,150 1,557 10
Autos and trucks....................... 2,375 2,829 3,044 3-6
Construction in progress............... 5,689 3,844 33,326 --
Investment property.................... 318,181 359,689 366,272 various
---------- ---------- ----------
1,105,455 1,156,642 1,180,263
Accumulated depreciation............... 300,481 322,475 327,046
---------- ---------- ----------
$ 804,974 $ 834,167 $ 853,217
========== ========== ==========
</TABLE>

Real estate properties having net book value of $196,700 million at
December 31, 1996 are leased under non-cancelable operating leases with expected
aggregate rentals of $106,200 of which $32,100, $26,500, $20,900, $15,800 and
$10,900 million is due in the years 1997 through 2001, respectively.

9. INCOME TAXES

Total income tax expense for the years ended December 31 was allocated as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Income from continuing operations........................ $31,446 $24,535 $ 83,117
Earnings (loss) from discontinued operations............. 2,491 26,116 (2,785)
Gain on the sale of discontinued operations.............. -- -- 48,705
Shareholders' equity, for recognition of unrealized gain
(loss) on debt and marketable equity securities........ (2,377) 8,778 9,428
------- ------- --------
$31,560 $59,429 $138,465
======= ======= ========
</TABLE>

Income tax expense attributable to income from continuing operations
differed from the amount computed by applying the statutory federal income tax
rate to pre-tax income as a result of the following:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Tax at the statutory federal rate......................... $29,795 $23,131 $66,159
Dividends received deduction and tax free interest........ (1,075) (1,277) (4,311)
Excise tax on reversion of prepaid pension asset.......... -- -- 13,228
State income taxes (net of federal benefit)............... 2,497 1,916 5,839
Undistributed earnings of FECI............................ 1,245 916 1,262
Other, net................................................ (1,016) (151) 940
------- ------- -------
$31,446 $24,535 $83,117
======= ======= =======
</TABLE>

F-15
<PAGE> 94

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are presented
below:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Accrued casualty and other reserves............... $ 7,451 $ 11,915 $ 10,944
Other............................................. 1,912 1,287 1,287
-------- -------- --------
Total deferred tax assets................. 9,363 13,202 12,231
-------- -------- --------
Deferred tax liabilities:
Tax in excess of financial depreciation........... 114,047 112,023 113,263
Deferred gain on land sales....................... 6,893 7,224 7,224
Deferred gain on subsidiary's defeased bonds...... 2,139 1,929 1,929
Unrealized gain on debt and marketable equity
securities..................................... 30,902 40,330 51,675
Deferred gain on involuntary conversion of land... 29,160 66,682 66,682
Prepaid pension asset recognized for financial
reporting...................................... 8,085 26,712 34,186
Other............................................. 5,620 8,042 8,966
-------- -------- --------
Total gross deferred tax liabilities...... 196,846 262,942 283,925
-------- -------- --------
Net deferred tax liability................ $187,483 $249,740 $271,694
======== ======== ========
</TABLE>

Based on the timing of reversal of future taxable amounts and the Company's
history of reporting taxable income, the Company believes that the deferred tax
assets will be realized and a valuation allowance is not considered necessary.
The current deferred tax asset of $5,133, $4,553 and $7,996 is recorded in other
current assets as of December 31, 1996 and 1995, and September 30, 1997,
respectively.

The Company has not recognized a deferred tax liability of approximately
$17,842 for the undistributed earnings of FECI that arose in 1992 and prior
years because the Company does not currently expect those unremitted earnings to
reverse and become taxable to the Company in the foreseeable future. A deferred
tax liability will be recognized when the Company expects that it will recover
those undistributed earnings in a taxable manner, such as through receipt of
dividends or sale of the investment. As of December 31, 1996, the undistributed
earnings of the subsidiary for which no deferred tax liability was provided were
approximately $48,454.

F-16
<PAGE> 95

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

10. PENSION AND RETIREMENT PLANS

The Company sponsors defined benefit pension plans which covered
approximately 10% of its employees in 1996 and 70% of its employees in 1995. The
reduction in employees covered resulted from the previously discussed sales of
the communications segment and the linerboard mill and container plants. The
benefits are based on the employees' years of service or years of service and
compensation during the last five or ten years of employment. The Company's
funding policy is to contribute annually the maximum contribution required by
ERISA.

A summary of the net periodic pension credit follows:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Service cost................................................ $ 3,450 $ 1,659
Interest cost............................................... 7,986 7,923
Actual return on assets..................................... (40,436) (26,606)
Net amortization and deferral............................... 28,221 11,555
-------- --------
Total pension income...................................... $ (779) $ (5,469)
======== ========
</TABLE>

A summary of the plan's funded status as of December 31 was:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of
$105,627 and $92,354 in 1996 and 1995, respectively....... $100,104 $106,368
======== ========
Projected benefit obligation for service rendered to date... 125,136 108,726
Plan assets at fair value, primarily listed stocks and U.S.
bonds..................................................... 177,276 193,937
-------- --------
Plan assets in excess of projected benefit obligation....... 52,140 85,211
Unrecognized net (gain) loss................................ (27,734) (42,011)
Unrecognized prior service cost............................. 12,956 768
Unrecognized transition asset............................... (15,395) (12,829)
Additional cost for special termination benefits............ -- (982)
-------- --------
Prepaid pension cost........................................ $ 21,967 $ 30,157
======== ========
</TABLE>

The weighted-average discount rates for the plans were 7% in 1996 and 1995.
The rate of increase in future compensation levels used in determining the
actuarial present value of the projected benefit obligation for salaried
employees was 6% in 1996 and 1995. The expected long-term rates of return on
assets was 8% in 1996 and 1995.

As discussed in note 3, several of the Company's operations were sold
during 1996, which significantly reduced the number of employees covered under
the defined benefit plans. The defined benefit plans' assets were not a part of
the sales. In accordance with SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits", the Company recognized a curtailment gain of
approximately $3,700 ($500 net of tax). The Company's pension plans are in an
overfunded position and with the reduction in employees resulting from the sales
of several of the Company's operations, it is unlikely that the overfunding will
be realized other than by a plan termination and reversion of excess assets.
Accordingly, a 50% excise tax has been included in the tax effects of the
prepaid asset as well as the curtailment gain. The Company has no immediate
plans to terminate the pension plans and is in the process of evaluating other
alternatives.

The Company had an Employee Stock Ownership Plan (the "ESOP") for the
purpose of purchasing stock of the Company for the benefit of qualified
employees. On November 21, 1996 the Pension Committee

F-17
<PAGE> 96

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

of the Board of Directors of the Company voted to terminate the ESOP effective
December 31, 1996. Contributions to the ESOP were limited to .5% of compensation
of employees covered under the ESOP. The Company also has other defined
contribution plans which, in conjunction with the ESOP, cover substantially all
its salaried employees. Contributions are at the employees' discretion and are
matched by the Company up to certain limits. Expense for these defined
contribution plans was $1,081, $1,322, and $1,213 in 1996, 1995 and 1994,
respectively.

On January 7, 1997, the Company adopted the 1997 Stock Incentive Plan (the
"Incentive Plan"), whereby awards may be granted to certain employees and
non-employee directors of the Company in the form of restricted shares of
Company stock or options to purchase Company stock. Awards are discretionary and
are determined by the Compensation Committee of the Board of Directors. The
total amount of restricted shares and options available for grant under the
Incentive Plan is 6.03 million shares. As of September 30, 1997 awards were
granted to certain officers of the Company totaling 5.4 million shares. The
options were granted at the Company's current market price on the date of grant
and range from $19.14 to $31.38 after adjustment for the effects of the special
distribution paid on March 31, 1997. The options are exercisable in equal
installments on the first five anniversaries of the date of grant and expire
generally 10 years after date of grant.

Effective January 6, 1997, the Company also granted Mr. Rummell, Chairman
and CEO of the Company, 201,861 restricted shares of the Company's common stock.
The restricted shares vest in equal installments on the first five anniversaries
of the date of grant. The Company has recorded deferred compensation of $3,700
for the unamortized portion of this grant as of September 30, 1997. Compensation
expense related to this grant totaled approximately $600 in 1997.

F-18
<PAGE> 97

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------- -------- ---------
<S> <C> <C> <C> <C>
1995
Net sales and operating revenues................... $89,764 $82,877 $85,905 $ 76,378
Operating profit................................... 11,888 11,745 12,857 10,827
Net income from continuing operations.............. 8,006 6,360 8,340 6,652
Income from discontinued operations................ 6,804 4,799 17,996 14,862
Net income......................................... 14,810 11,159 26,336 21,514
Net income per share............................... 0.16 0.12 0.29 0.24
1996
Net sales and operating revenues................... 95,481 84,556 80,190 170,962
Operating profit................................... 22,125 9,595 23,053 93,398
Net income from continuing operations.............. 14,991 11,449 5,790 59,679
Income (loss) from discontinued operations......... (7,003)* -- 82,227 8,889
Net income......................................... 7,988 11,449 88,017 68,568
Net income per share............................... 0.08 0.13 0.96 0.75
1997
Net sales and operating revenues................... -- 69,413 94,102 88,379
Operating profit................................... -- 15,887 15,874 10,255
Net income from continuing operations.............. -- 9,056 11,214 8,010
Income (loss) from discontinued operations......... -- -- -- --
Net income......................................... -- 9,056 11,214 8,010
Net income per share............................... $ -- $ 0.10 $ 0.12 $ 0.09
</TABLE>

- ---------------

* The total gain on discontinued operations declined by approximately $7,000
during the fourth quarter as a result of finalizing the postclosing working
capital adjustments, closing expenses and the pension curtailment gain,
previously estimated.

12. SEGMENT INFORMATION

Total net sales and operating revenues represent sales to unaffiliated
customers, as reported in the Company's consolidated income statements and
intercompany sales which occurred principally between the Forestry and
Transportation segments and discontinued operations. Operating profit is net
sales and operating revenues less directly traceable costs and expenses. In
computing operating profit, the following items have not been considered: other
income (expense) and provision for income taxes.

Identifiable assets by lines of business are those assets that are used in
the Company's operations in each segment. Other assets are composed of cash,
marketable securities and miscellaneous nonsegment assets.

F-19
<PAGE> 98

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Information by lines of business segment follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 1997
---------- ---------- ---------- ------------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales and operating
revenues:
Transportation........... $ 173,707 $ 184,450 $ 185,484 $ 137,207 $ 143,970
Real Estate.............. 42,141 32,870 134,530 124,155 59,234
Forestry................. 60,158 60,057 56,679 44,667 23,141
Sugar.................... 54,900 57,547 54,496 29,679 25,549
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 330,906 $ 334,924 $ 431,189 $ 335,708 $ 251,894
========== ========== ========== ========== ==========
Operating profit:
Transportation........... $ 27,313 $ 25,763 $ 26,711 $ 17,847 $ 25,407
Real Estate.............. 22,251 11,621 109,450 102,692 14,568
Forestry................. 6,293 (555) 2,337 921 1,049
Sugar.................... 6,329 13,310 8,281 6,231 2,711
Other.................... (2,221) (2,822) 1,392 (1,645) (1,719)
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 59,965 $ 47,317 $ 148,171 $ 126,046 $ 42,016
========== ========== ========== ========== ==========
Assets:
Transportation........... $ 424,241 $ 407,969 $ 413,100 $ 435,990 $ 436,397
Real Estate.............. 229,449 290,013 373,799 342,427 549,232
Forestry................. 91,319 111,848 114,710 117,624 122,239
Sugar.................... 93,685 72,647 77,824 75,836 73,604
Discontinued
operations............ 299,347 296,001 -- -- --
Other.................... 311,349 352,516 826,805 845,729 403,388
---------- ---------- ---------- ---------- ----------
Consolidated..... $1,449,390 $1,530,994 $1,806,238 $1,817,606 $1,584,860
========== ========== ========== ========== ==========
Capital expenditures:
Transportation........... $ 25,060 $ 28,204 $ 15,800 $ 7,077 $ 7,842
Real Estate.............. 28,354 45,029 43,708 31,013 40,822
Forestry................. 8,655 5,413 4,672 3,042 2,136
Sugar.................... 3,381 170 91 3 277
Other.................... -- -- -- -- 2,179
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 65,450 $ 78,816 $ 64,271 $ 41,135 $ 53,256
========== ========== ========== ========== ==========
Depreciation and depletion:
Transportation........... $ 18,706 $ 18,840 $ 18,067 $ 13,454 $ 13,663
Real Estate.............. 5,117 5,733 7,808 5,720 6,795
Forestry................. 2,184 2,307 1,148 760 1,177
Sugar.................... 1,605 1,671 1,735 1,297 1,217
Other.................... -- -- -- -- 783
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 27,612 $ 28,551 $ 28,758 $ 21,232 $ 23,635
========== ========== ========== ========== ==========
</TABLE>

13. CONTINGENCIES

The Company and its subsidiaries are involved in litigation on a number of
matters and are subject to certain claims which arise in the normal course of
business, none of which, in the opinion of management, is

F-20
<PAGE> 99

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.

The Company has retained certain self-insurance risks with respect to
losses for third party liability, property damage and group health insurance
provided to employees.

The Company is subject to costs arising out of environmental laws and
regulations, which include obligations to remove or limit the effects on the
environment of the disposal or release of certain wastes or substances at
various sites including sites which have been previously sold. It is the
Company's policy to accrue and charge against earnings environmental cleanup
costs when it is probable that a liability has been incurred and an amount is
reasonably estimable. As assessments and cleanups proceed, these accruals are
reviewed and adjusted, if necessary, as additional information becomes
available.

On May 30, 1996 the Company sold its linerboard mill and container plants.
As part of the sale, the Company remains contingently liable for up to $10,000
relating to On-Site Environmental Liabilities, as defined in the sales
agreement, as long as they are discovered within three years of the closing date
of the sale and the Company has, except in limited circumstances, received
invoices for them within five years of the closing date. The Company has no
obligation for costs incurred by the buyer to comply with Title V of the Clean
Air Act or the Cluster Rules. On-Site Environmental Liabilities arising from
environmental conditions caused from activities both before and after the
closing date are to be allocated among the parties based on relative
contribution. The agreement provided the exclusive remedy for On-Site
Environmental Liabilities which relate to matters within the property lines of
real property conveyed under the agreement. The Company's obligation to pay
$10,000 for On-Site Environmental Liabilities existing on the closing date is
subject to cost-sharing with the buyer according to the following schedule: the
first $2,500 by buyer, the next $2,500 by the Company; the next $2,500 by the
buyer; the next $2,500 by the company; the next $2,500 by the buyer and the next
$5,000 by the Company. The Company also agreed to reimburse up to $1,000 for
certain remediation activities at the linerboard mill, if such activities were
required under environmental laws under the following schedule: the first $200
by the Company, the next $300 by the buyer, the next $300 by the Company, the
next $300 by the buyer, the next $500 by the Company, the next $500 by the buyer
with any remaining amounts treated as On-Site Environmental Liabilities. No
known matters exist which, pursuant to this contingent liability, would require
funding or accrual in the Company's financial statements.

The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of several Superfund sites. The Company has accrued an
allocated share of the total estimated cleanup costs for these sites. Based upon
management's evaluation of the other potentially responsible parties, the
Company does not expect to incur additional amounts even though the Company has
joint and several liability. Other proceedings involving environmental matters
such as alleged discharge of oil or waste material into water or soil are
pending against the Company.

It is not possible to quantify future environmental costs because many
issues relate to actions by third parties or changes in environmental
regulation. However, based on information presently available, management
believes that the ultimate disposition of currently known matters will not have
a material effect on the financial position, results of operations or liquidity
of the Company. Environmental liabilities are paid over an extended period and
the timing of such payments cannot be predicted with any certainty. Aggregate
environmental-related accruals were $5,500 and $6,200 as of December 31, 1996
and 1995, respectively. Aggregate environmental-related accruals totaled
approximately $7,000 at September 30, 1997.

14. SUBSEQUENT EVENTS (UNAUDITED)

On January 10, 1997, the Company purchased for $5,500 a 38% limited
partnership interest in Deerfield Park, LLC, a limited partnership established
to acquire and develop 554 acres of land in Fulton County, Georgia. Costs
incurred to date have been capitalized.

F-21
<PAGE> 100

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

On November 12, 1997, the Company, through two subsidiaries, purchased
certain assets, including management and proprietary information systems, of
Arvida Company through a newly formed limited partnership with JMB Southeast
Development, L.L.C. and JMB Southeast Development, L.P. for the purpose of
developing and/or managing residential communities on certain lands owned by the
Company, as well as the purchase of other lands for development and management.
The Company owns 74% of the new limited partnership, St. Joe/Arvida Company,
L.P. The purchase price for the 74% partnership interest in the new entity is
not considered material to the Company's financial position.

On November 21, 1997, the Company announced the withdrawal of its
outstanding offer to purchase all outstanding FECI common stock owned by others
than the Company at $102 per share.

On November 25, 1997, the Company sold the Promissory Note to an unrelated
third party for approximately $10,400 which will result in a pre-tax gain of
approximately $400 in the fourth quarter of 1997.

As part of its efforts to focus more intently on the Company's core assets,
on December 6, 1997 the Company agreed in principle to sell its sugar lands to
certain federal and state governmental agencies on or before June 6, 1998 for
$133,500 in cash. In the event the proposed sale is consummated, Talisman would
retain the right to farm the sugar lands through the 2002-2003 crop season. The
Company intends to develop a formal plan of disposition and execute a definitive
agreement. The proposed transaction is subject to both government and board
approvals.

On December 3, 1997, the Company and Orlando-based CNL Group, Inc. formed a
joint venture to invest in and develop office and industrial properties in the
central Florida region. The Company, through two subsidiaries, received a 50%
ownership interest in the joint venture by contributing $5,000 in cash to the
partnership and committing to fund an additional $25,000 for new projects the
venture determines to develop and/or manage.

On December 9, 1997, the Company entered into a letter of intent with
Codina Group, Inc. ("Codina") and Weeks Corporation ("Weeks") under which the
Company and Weeks each agreed to purchase a one-third interest in Codina. The
purchase price is not material to the Company's financial position.

F-22
<PAGE> 101

[LOGO]

St. Joe Corporation
<PAGE> 102

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

PROSPECTUS (Subject To Completion)

Issued January 16, 1998

12,000,000 Shares

St. Joe Corporation
COMMON STOCK
------------------------

OF THE 12,000,000 SHARES OF COMMON STOCK OFFERED HEREBY, 1,800,000 ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS (THE "INTERNATIONAL OFFERING") AND 10,200,000 ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS (THE "U.S.
OFFERING," AND TOGETHER WITH THE INTERNATIONAL OFFERING, THE "OFFERINGS"). SEE
"UNDERWRITERS." ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD
BY THE ALFRED I. DUPONT TESTAMENTARY TRUST (THE "SELLING STOCKHOLDER" OR THE
"TRUST"). SEE "ALFRED I. DUPONT TESTAMENTARY TRUST." ST. JOE CORPORATION (THE
"COMPANY" OR "ST. JOE") WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF THE
SHARES BEING OFFERED HEREBY. THE COMPANY'S COMMON STOCK IS LISTED ON THE NEW
YORK STOCK EXCHANGE UNDER THE SYMBOL "SJP." ON JANUARY 15, 1998, THE LAST
REPORTED SALE PRICE OF THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS
$33.4375 PER SHARE.

------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
------------------------

PRICE $ A SHARE
------------------------

- ------------

------------------------

MORGAN STANLEY DEAN WITTER

DONALDSON, LUFKIN & JENRETTE INTERNATIONAL

MERRILL LYNCH INTERNATIONAL

RAYMOND JAMES & ASSOCIATES, INC.

, 1998
<PAGE> 103

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an estimate of expenses to be incurred by
the Company in connection with the distribution of the securities offered
hereby.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $128,067
Blue Sky fees and expenses.................................. 3,000
Legal fees and disbursements (estimated).................... 500,000
Printing and engraving expenses (estimated)................. 100,000
Accounting fees and expenses (estimated).................... 200,000
Transfer agent's fees....................................... 2,000
Miscellaneous............................................... 16,933
--------
Total............................................. $950,000
========
</TABLE>

The Trust will bear the underwriting commissions and discounts associated
with the Offerings, the fees and expenses of its legal counsel and financial
advisors, certain road-show expenses and certain other expenses.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Reference is hereby made to Section 607.0850 of the Florida General
Corporation Act as to indemnification by the Company of officers and directors.

Article III, Section 9 of the Company's Amended By-Laws provides as follows
with respect to the indemnification of the Company's officers and directors:

"The Corporation shall indemnify each officer and director, whether or
not then in office, (and his or her executor, administrator and heirs),
against all reasonable expenses actually and necessarily incurred,
including but not limited to, judgments, costs and counsel fees in
connection with the defense of any litigation, civil or administrative
action, suit or proceeding, to which he or she may have been made a party
because he or she is or was a director or officer of the Corporation. He or
she shall have no right to reimbursement, however, in relation to matters
as to which he or she had been adjudged liable to the Corporation for
negligence or misconduct in the performance of his or her duties or was
derelict in the performance of his or her duty as director or officer by
reason of willful misconduct, bad faith, gross negligence or reckless
disregard of the duties of his or her office or employment. The right to
indemnify for expenses shall also apply to expenses in connection with
suits that are compromised or settled if (1) the Court having jurisdiction
of the action shall approve such settlement, or (2) a majority of the Board
of Directors, excluding interested directors, votes to approve such
settlement. As used in this paragraph an "interested director or officer"
is one against whom the proceeding in question or another proceeding on the
same or similar grounds is then pending.

The foregoing right of indemnification shall be in addition to, and
not exclusive of, all other rights to which the director or officer may be
entitled."

Each Underwriter on whose behalf the agreement filed as Exhibit 1.01 to
this registration statement is executed will agree therein to indemnify the
Company's officers, directors and controlling persons against certain
liabilities which might arise under the Securities Act of 1933, as amended (the
"Act") from information furnished to the Company by or on behalf of any such
Underwriter for use in this registration statement. Pursuant to the Registration
Rights Agreement filed as Exhibit 4.01, the Trust has agreed to indemnify the
Company's officers, directors and controlling persons against certain
liabilities which might

II-1
<PAGE> 104

arise under the Act from information furnished to the Company by or on behalf of
the Trust for use in this registration statement.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.01 -- Form of Underwriting Agreement**
2.01 -- Limited Partnership Agreement of St. Joe/Arvida Company,
L.P.*
2.02 -- Agreement of Limited Partnership of St. Joe/CNL Development,
Ltd.*
2.03 -- Stock Purchase Agreement dated as of September 1, 1995
between St. Joe Industries, Inc. and TPG Communications,
Inc. (incorporated herein by reference and Exhibits filed
with the Registrant's Quarterly Report on Form 10-Q for the
third quarter ended September 30, 1995)
2.04 -- Asset Purchase Agreement dated as of November 1, 1995 by and
among St. Joe Forest Products Company, St. Joe Container
Company and St. Joe Paper Company, on the one hand and Four
M Corporation and St. Joe Paper Company on the other hand
(the "Asset Purchase Agreement") (incorporated herein by
reference and Exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the third quarter ended September
30, 1995)
2.05 -- Amendments dated December 14, 1995; December 20, 1995;
January 10, 1996 and January 12, 1996 to the Asset Purchase
Agreement (incorporated herein by reference to the
Registrant's Proxy Statement for the Special Meeting of
Stockholders on April 24, 1996)
3.01 -- Articles of Incorporation, as amended**
3.02 -- Articles of Amendment, dated January 7, 1998**
3.03 -- Amended By-Laws dated March 18, 1997 (incorporated herein by
reference to Exhibit 3(b) filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1996)
4.01 -- Registration Rights Agreement between the Registrant and the
Alfred I. duPont Testamentary Trust, dated December 16,
1997**
5.01 -- Opinion of Robert M. Rhodes*
8.01 -- Opinion of Latham & Watkins**
10.01 -- Employment Agreement of Peter Rummell, dated January 7,
1997*
10.02 -- Employment Agreement of Charles A. Ledsinger, Jr., dated
April 24, 1997*
10.03 -- Employment Agreement of Robert M. Rhodes, dated November 5,
1997*
10.04 -- Employment Agreement of David D. Fitch, dated September 19,
1997*
10.05 -- Employment Agreement of J. Malcolm Jones, dated February 26,
1997*
10.06 -- Employment Agreement of Michael F. Bayer, dated February 1,
1997*
10.07 -- Form of Severance Agreement*
23.01 -- Consent of Independent Accountants**
24.01 -- Powers of Attorney (on page II-4 of the Registration
Statement)*
</TABLE>

- ---------------

* Previously filed

** Filed herewith

II-2
<PAGE> 105

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE> 106

SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Jacksonville, Florida on the 16th day of January
1998.

St. Joe Corporation

By: /s/ CHARLES A. LEDSINGER, JR.
------------------------------------
Charles A. Ledsinger, Jr.

Title

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ PETER S. RUMMELL* Chairman of the Board and Chief January 16, 1998
- --------------------------------------------------- Executive Officer (Principal
Peter S. Rummell Executive Officer)

/s/ CHARLES A. LEDSINGER, JR. Chief Financial Officer January 16, 1998
- --------------------------------------------------- (Principal
Charles A. Ledsinger, Jr. Financial and Accounting
Officer)

/s/ JACOB C. BELIN* Director January 16, 1998
- ---------------------------------------------------
Jacob C. Belin

/s/ RUSSELL B. NEWTON, JR.* Director January 16, 1998
- ---------------------------------------------------
Russell B. Newton, Jr.

/s/ JOHN J. QUINDLEN* Director January 16, 1998
- ---------------------------------------------------
John J. Quindlen

/s/ WALTER L. REVELL* Director January 16, 1998
- ---------------------------------------------------
Walter L. Revell

/s/ FRANK S. SHAW* Director January 16, 1998
- ---------------------------------------------------
Frank S. Shaw

/s/ WINFRED L. THORNTON* Director January 16, 1998
- ---------------------------------------------------
Winfred L. Thornton

/s/ JOHN D. UIBLE* Director January 16, 1998
- ---------------------------------------------------
John D. Uible

/s/ CARL F. ZELLERS* Director January 16, 1998
- ---------------------------------------------------
Carl F. Zellers

*By: /s/ CHARLES A. LEDSINGER, JR. January 16, 1998
------------------------------------------------
Charles A. Ledsinger, Jr.
Individually and as Attorney-in-Fact
</TABLE>

II-4
<PAGE> 107

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
- ------- ----------------------- ----------------------------------------
<C> <C> <S> <C>
1.01 -- Form of Underwriting Agreement**..............
2.01 -- Limited Partnership Agreement of St.
Joe/Arvida Company, L.P.*.....................
2.02 -- Agreement of Limited Partnership of St.
Joe/CNL Development, Ltd.*....................
2.03 -- Stock Purchase Agreement dated as of September
1, 1995 between St. Joe Industries, Inc. and
TPG Communications, Inc. (incorporated herein
by reference and Exhibits filed with the
Registrant's Quarterly Report on Form 10-Q for
the third quarter ended September 30, 1995)...
2.04 -- Asset Purchase Agreement dated as of November
1, 1995 by and among St. Joe Forest Products
Company, St. Joe Container Company and St. Joe
Paper Company, on the one hand and Four M
Corporation and St. Joe Paper Company on the
other hand (the "Asset Purchase Agreement")
(incorporated herein by reference and Exhibits
filed with the Registrant's Quarterly Report
on Form 10-Q for the third quarter ended
September 30, 1995)...........................
2.05 -- Amendments dated December 14, 1995; December
20, 1995; January 10, 1996 and January 12,
1996 to the Asset Purchase Agreement
(incorporated herein by reference to the
Registrant's Proxy Statement for the Special
Meeting of Stockholders on April 24, 1996)....
3.01 -- Articles of Incorporation, as amended**.......
3.02 -- Articles of Amendment, dated January 7,
1998**........................................
3.03 -- Amended By-Laws dated March 18, 1997
(incorporated herein by reference to Exhibit
3(b) filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1996)............................
4.01 -- Registration Rights Agreement between the
Registrant and the Alfred I. duPont
Testamentary Trust, dated December 16,
1997**........................................
5.01 -- Opinion of Robert M. Rhodes*..................
8.01 -- Opinion of Latham & Watkins**.................
10.01 -- Employment Agreement of Peter Rummell, dated
January 7, 1997*..............................
10.02 -- Employment Agreement of Charles A. Ledsinger,
Jr., dated April 24, 1997*....................
</TABLE>

<PAGE> 108

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
- ------- ----------------------- ----------------------------------------
<C> <C> <S> <C>
10.03 -- Employment Agreement of Robert M. Rhodes,
dated November 5, 1997*.......................
10.04 -- Employment Agreement of David D. Fitch, dated
September 19, 1997*...........................
10.05 -- Employment Agreement of J. Malcolm Jones,
dated February 26, 1997*......................
10.06 -- Employment Agreement of Michael F. Bayer,
dated February 1, 1997*.......................
10.07 -- Form of Severance Agreement*..................
23.01 -- Consent of Independent Accountants**..........
24.01 -- Powers of Attorney*........................... Page II-4 of the Registration Statement
</TABLE>

- ---------------

* Previously filed

** Filed herewith

<PAGE> 1

EXHIBIT 1.01

12,000,000 SHARES

ST. JOE CORPORATION

COMMON STOCK, NO PAR VALUE

FORM OF
UNDERWRITING AGREEMENT

__________, 1998

<PAGE> 2

_____________, 1998

Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Raymond James and Associates, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Morgan Stanley & Co. International Limited
Donaldson, Lufkin & Jenrette International
Merrill Lynch International
Raymond James and Associates, Inc.
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England

Dear Sirs and Mesdames:

The Alfred I. duPont Testamentary Trust, a trust established under The
Last Will and Testament of Alfred I. duPont (the "SELLING STOCKHOLDER"),
proposes to sell to the several Underwriters (as defined below) an aggregate of
12,000,000 shares (the "FIRM SHARES") of the Common Stock, no par value, of St.
Joe Corporation, a Florida corporation (the "COMPANY").

It is understood that, subject to the conditions hereinafter stated,
10,200,000 Firm Shares (the "U.S. FIRM SHARES") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. UNDERWRITERS") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 1,800,000 Firm Shares (the "INTERNATIONAL SHARES") will be sold to the
several International Underwriters named in Schedule II hereto (the
"INTERNATIONAL UNDERWRITERS") in connection with the offering and sale of such

1
<PAGE> 3

International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Raymond James & Associates, Inc. shall act as
representatives (the "U.S. REPRESENTATIVES") of the several U.S. Underwriters,
and Morgan Stanley & Co. International Limited, Donaldson, Lufkin & Jenrette
International, Merrill Lynch International and Raymond James & Associates, Inc.
shall act as representatives (the "INTERNATIONAL REPRESENTATIVES") of the
several International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the "UNDERWRITERS."

The Selling Stockholder also proposes to sell to the several
Underwriters not more than an additional 1,800,000 shares of the Common Stock,
no par value, of the Company (the "ADDITIONAL SHARES") if and to the extent that
the U.S. Representatives shall have determined to exercise, on behalf of the
U.S. Underwriters, the right to purchase such shares of Common Stock granted to
the U.S. Underwriters in Section 3 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "SHARES." The outstanding
shares of Common Stock, no par value, of the Company (including the Shares) are
hereinafter referred to as the "COMMON STOCK."

The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sale of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of Shares in the United States and Canada to United States and
Canadian Persons, and the international prospectus, to be used in connection
with the offering and sale of Shares outside the United States and Canada to
persons other than United States and Canadian Persons. The international
prospectus is identical to the U.S. prospectus except for the outside front
cover page. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the "PROSPECTUS" (including,
in the case of all references to the Registration Statement and the Prospectus,
documents incorporated therein by reference). If the Company has filed an
abbreviated registration statement to register additional shares of Common Stock
pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION
STATEMENT"), then any reference herein to the term "REGISTRATION STATEMENT"
shall be deemed to include such Rule 462 Registration Statement.

<PAGE> 4

1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:

(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.

(b) (i) Each document, if any, filed or to be filed pursuant
to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
and incorporated by reference in the Prospectus complied or will comply
when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder, (ii) the
Registration Statement, when it became effective, did not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information furnished to the
Company in writing by any Underwriter through you expressly for use
therein.

(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the state of Florida
with the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and the Company is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.

(d) Each significant subsidiary of the Company as defined in
Rule 1-02(w) of Regulation S-X ( "SIGNIFICANT SUBSIDIARY") has been
duly incorporated and is an existing corporation in good standing under

<PAGE> 5

the laws of the jurisdiction of its incorporation and has the corporate
power and authority to own its property and to conduct its business as
described in the Prospectus; and each Significant Subsidiary of the
Company is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital
stock of each Significant Subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and,
except for [ ] shares of capital stock (representing approximately 46%
of the issued and outstanding shares) of Florida East Coast Industries,
Inc. ("FECI") and the capital stock of the subsidiaries of FECI, are
owned by the Company free and clear of all liens, encumbrances,
equities or claims.

(e) Each material venture partnership or material limited
liability company in which the Company has an interest is listed on
Schedule III hereto (collectively, the "JOINT VENTURES"), and each has
been duly formed and is existing and in good standing under the laws of
its state of organization, with power and authority to own, lease and
operate its properties and to conduct the business in which it is
engaged. Each Joint Venture is duly qualified or registered as a
foreign limited partnership or limited liability company to transact
business in each jurisdiction in which such qualification or
registration is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to
qualify or be registered would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.

(f) This Agreement has been duly authorized, executed and
delivered by the Company.

(g) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.

(h) The Common Stock has all been duly authorized and is
validly issued, fully paid and non-assessable.

(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene (i) any provision of applicable law or the
certificate of incorporation or by-laws of the Company, (ii) any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is

<PAGE> 6

material to the Company and its subsidiaries, taken as a whole or (iii)
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, except in the
case of clauses (ii) and (iii) above to the extent as would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement,
except such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of the Shares.

(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (as amended or supplemented).

(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.

(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.

(m) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended.

(n) With respect to each income producing property, any
development or developable property identified in the Registration
Statement and any other property in excess of 1,000 acres owned by the
Company or one of its subsidiaries, whether such property is held for
development, sale, lease or any other purpose (the "PROPERTIES"), (i)
the Company or one of its subsidiaries has good and marketable fee
simple title to the land underlying the Properties and good and
marketable title to

<PAGE> 7

the improvements thereon, subject to utility easements serving such
Properties, to zoning and similar governmental land use matters
affecting such Properties that are consistent with the current uses of
such Properties and to liens, encumbrances, defects and other matters
of title that would not have a material adverse effect on the value of
such Properties or materially interfere with their current or currently
anticipated future uses, (ii) all liens, charges, encumbrances, claims,
or restrictions on or affecting any of the Properties and the assets of
the Company which are required to be disclosed in the Prospectus are
disclosed therein; (iii) except as disclosed in the Prospectus, no
person has an option or right of first refusal to purchase all or part
of any Property or any interest therein; (iv) each of the Properties
complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes, laws and regulations and
laws relating to access to the Properties), except to the extent
disclosed in the Prospectus and except for such failures to comply that
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; and (v) the Company has no knowledge of
any pending or threatened condemnation proceedings, zoning change, or
other similar proceeding or action that would affect the size of, use
of, improvements on, construction on or access to any of the
Properties, except such proceedings or actions that would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole;

(o) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.

(p) Except as disclosed in the Prospectus, there are no costs
or liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, and any potential liabilities to
third parties)

<PAGE> 8

which would, singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries, taken as a whole.

(q) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.

(r) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.

(s) Except as described in the Prospectus, the Company has all
necessary consents, authorizations, approvals, orders, certificates and
permits of and from, and has made all declarations and filings with,
all federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use its properties and assets and to conduct
its business in the manner currently conducted, as described in the
Prospectus, except to the extent that the failure to so have, obtain or
file would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

(t) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly in all material respects the
consolidated financial position and results of operations of the
Company, at the dates and for the periods indicated, and have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except
as otherwise stated therein.

(u) Subsequent to the date as of which information is given in
the Prospectus, (i) the Company and its subsidiaries have not incurred
any material liability or obligation, direct or contingent, nor entered
into any material transaction not in the ordinary course of business;
(ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock other than ordinary and
customary dividends; and (iii) there has not been any material change
in the capital stock, short-term debt or long-term debt of the Company
and its consolidated subsidiaries, except in each case as described in
the Prospectus (as amended or supplemented).

<PAGE> 9

(v) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names currently employed by them in connection with the business
now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the Company and its subsidiaries, taken as a whole.

(w) No material labor dispute with the employees of the
Company or any of its subsidiaries exists, except as described in or
contemplated by the Prospectus, or, to the knowledge of the Company, is
imminent; and the Company is not aware of any existing, threatened or
imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that would have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

(x) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; in the past five years, neither
the Company nor any such subsidiary has been refused any insurance
coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.

(y) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses, except for such certificates, authorizations and permits
the non-possession of which would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole, and neither the
Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or

<PAGE> 10

permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.

(z) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

(aa) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers,
stockholders, customers, suppliers or contractors of the Company, on
the other hand, which is required to be described in the Prospectus
which is not so described.

2. Representations and Warranties of the Selling Stockholder. The
Selling Stockholder represents and warrants to and agrees with each of the
Underwriters that:

(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder.

(b) The execution and delivery by the Selling Stockholder of,
and the performance by the Selling Stockholder of its obligations
under, this Agreement and the Custody Agreement signed by the Selling
Stockholder and First Union National Bank Corporate Trust, as
Custodian, relating to the deposit of the Shares to be sold by the
Selling Stockholder (the "CUSTODY AGREEMENT") and the consummation of
the transactions contemplated thereby will not contravene any provision
of applicable law, or the Last Will and Testament of Alfred I. duPont,
by which the Selling Stockholder was established, or any agreement or
other instrument binding upon the Selling Stockholder or any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Selling Stockholder, and no consent, approval,
authorization or order of, or qualification with, any governmental body
or agency is required for the performance by the Selling Stockholder of
its obligations under this

<PAGE> 11

Agreement or the Custody Agreement, except such as may be required by
the securities or Blue Sky laws of the various states in connection
with the offer and sale of the Shares.

(c) The Selling Stockholder has, and on the Closing Date will
have, valid title to the Shares and the legal right and power, and all
authorization and approval required by law, to enter into this
Agreement and the Custody Agreement and to sell, transfer and deliver
the Shares.

(d) The Custody Agreement has been duly authorized, executed
and delivered by the Selling Stockholder and is a valid and binding
agreement of the Selling Stockholder.

(e) Delivery of the Shares pursuant to this Agreement will
pass title to such Shares free and clear of any security interests,
claims, liens, equities and other encumbrances.

(f) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.

(g) To the best of the knowledge of the Selling Stockholder,
after due inquiry, (i) the Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue
statements of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this paragraph 2(g) do
not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.

<PAGE> 12

(h) the statements in the Prospectus under the captions
"Summary--The Alfred I. duPont Testamentary Trust" and "The Alfred I.
duPont Testamentary Trust," the first paragraph under the caption
"Certain Transactions" and the sections relating to the Trust under the
caption "Principal and Selling Stockholders" insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein.

3. Agreements to Sell and Purchase. The Selling Stockholder hereby
agrees to sell to the several Underwriters, and each Underwriter, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Selling Stockholder at $______ a share (the "PURCHASE PRICE") the
number of Firm Shares set forth in Schedules I and II hereto opposite the name
of such Underwriter.

On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Selling Stockholder
agrees to sell to the U.S. Underwriters the Additional Shares, and the U.S.
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to 1,800,000 Additional Shares at the Purchase Price. If the U.S.
Representatives, on behalf of the U.S. Underwriters, elect to exercise such
option, the U.S. Representatives shall so notify the Selling Stockholder and the
Company in writing not later than 30 days after the date of this Agreement,
which notice shall specify the number of Additional Shares to be purchased by
the U.S. Underwriters and the date on which such shares are to be purchased.
Such date may be the same as the Closing Date (as defined below) but not earlier
than the Closing Date nor later than ten business days after the date of such
notice. Additional Shares may be purchased as provided in Section 5 hereof
solely for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares. If any Additional Shares are to be purchased, each
U.S. Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
the U.S. Representatives may determine) that bears the same proportion to the
total number of Additional Shares to be purchased as the number of U.S. Firm
Shares set forth in Schedule I hereto opposite the name of such U.S. Underwriter
bears to the total number of U.S. Firm Shares.

Each of the Company and the Selling Stockholder hereby agrees that,
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters, it will not, during the period ending 180 days after the
date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, file a registration statement or
exercise a registration

<PAGE> 13

right in respect of, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder, (B) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or a warrant or the conversion of a security outstanding on the date of the
Prospectus of which the Underwriters have been advised in writing or which are
disclosed in the Prospectus, (C) the issuance of shares of Common Stock as
consideration for future acquisitions by the Company or (D) the grant of options
under the Company's stock option plans, provided such options do not vest prior
to the termination of the 180-day period referenced in this paragraph, and
provided further that, in the case of subclauses (B) and (C), the recipient of
any such issued shares agrees in writing to be bound by the transfer
restrictions set forth herein. In addition, the Selling Stockholder, agrees
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the Underwriters, it will not, during the period ending 180 days after
the date of the Prospectus, make any demand for, or exercise any right with
respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock.

4. Terms of Public Offering. The Selling Stockholder is advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Selling
Stockholder is further advised by you that the Shares are to be offered to the
public initially at $___ a share (the "PUBLIC OFFERING PRICE") and to certain
dealers selected by you at a price that represents a concession not in excess of
$____ a share under the Public Offering Price, and that any Underwriter may
allow, and such dealers may reallow, a concession, not in excess of $___ a
share, to any Underwriter or to certain other dealers.

5. Payment and Delivery. Payment for the Firm Shares to be sold by
the Selling Stockholder shall be made to the Selling Stockholder in Federal or
other funds immediately available in New York City against delivery of such Firm
Shares for the respective accounts of the several Underwriters at 10:00 a.m.,
New York City time, on [insert date which is 3 business days after the date of
this Agreement], 1998, or at such other time on the same or such other date, not
later than [insert date which is 5 business days after the date of this
Agreement], 1998, as shall be agreed upon in writing by you, the Company and the
Selling

<PAGE> 14

Shareholder. The time and date of such payment are hereinafter referred to as
the "CLOSING DATE."

Payment for any Additional Shares shall be made to the Selling
Stockholder in Federal or other funds immediately available in New York City
against delivery of such Additional Shares for the respective accounts of the
several U.S. Underwriters at 10:00 a.m., New York City time, on the date
specified in the notice described in Section 3 or at such other time on the same
or on such other date, in any event not later than [insert date which is 10
business days after expiration of the green shoe option], 1998, as shall be
agreed upon in writing by you, the Company and the Selling Shareholder. The time
and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE."

Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.

6. Conditions to the Underwriters' Obligations. The obligations of the
Selling Stockholder to sell the Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares on the
Closing Date are subject to the condition that the Registration Statement shall
have become effective not later than 4:00 p.m. (New York City time) on the date
hereof.

The several obligations of the Underwriters are subject to the
following further conditions:

(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that, in
your judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.

<PAGE> 15

(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date, and signed by each of the chief
executive officer and the chief financial officer of the Company, to
the effect set forth in Section 6(a) above and to the effect that the
representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date, that the
Company has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied hereunder on or
before the Closing Date and with respect to certain acreage and other
real property data.

Each of the officers signing and delivering such certificate
may rely upon the best of his knowledge as to proceedings threatened.

(c) The Underwriters shall have received on the Closing Date
an opinion of Robert M. Rhodes, Senior Vice President and General
Counsel for the Company, dated the Closing Date, to the effect that:

(i) the Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
state of Florida with the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and the Company is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;

(ii) each Significant Subsidiary of the Company has
been duly incorporated and is an existing corporation in good
standing under the laws of the jurisdiction of its
incorporation with the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus, and each Significant Subsidiary of the Company is
duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole;

<PAGE> 16

(iii) the authorized capital stock of the Company
conforms as to legal matters in all material respects to the
description thereof contained in the Prospectus;

(iv) the Common Stock has been duly authorized and
is validly issued, fully paid and non-assessable;

(v) all of the issued shares of capital stock of
each Significant Subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and
non-assessable and, except for [ ] shares of capital stock
(representing approximately 46% of the issued and outstanding
shares) of FECI and the capital stock of the subsidiaries of
FECI, are owned by the Company free and clear of all liens,
encumbrances, equities or claims;

(vi) this Agreement has been duly authorized,
executed and delivered by the Company;

(vii) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement do not result in a breach or violation of the
laws of the State of Florida or the certificate of
incorporation or by-laws of the Company or, to the best of
such counsel's knowledge, any agreement or other instrument
binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a
whole, or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court of the United States or the State of Florida having
jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency of the State of Florida
is required for the performance by the Company of its
obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares;

(viii) the statements (A) in the Prospectus under the
captions "Risk Factors--Risks Relating to Real Estate
Operations--Regulation," "Risk Factors--Risks Relating to
Forestry Operations--Regulation," "Risk Factors--Risks
Relating to Transportation Operations--Regulation," "Risk
Factors--Environmental Matters," "Business and
Properties--Real Estate--

<PAGE> 17

Regulation," "Business and Properties--Forestry-- Regulation,"
"Business and Properties--Transportation--Regulation,"
"Business and Properties--Sugar--Regulation," "Business and
Properties--Environmental Proceedings," "Certain
Transactions," and "Description of Common Stock" and (B) in
the Registration Statement in Item 15, in each case insofar as
such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present
such legal matters, documents and proceedings and fairly
summarize the matters referred to therein;

(ix) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration
Statement that are not described
or filed as required;

(x) with respect to each of the properties listed on
Schedule IV hereto (the "SCHEDULED PROPERTIES"), to the best
of such counsel's knowledge, after due inquiry, (i) the
Company or one of its subsidiaries has good and marketable fee
simple title to the land underlying the Scheduled Properties
and good and marketable title to the improvements thereon,
subject, however, to utility easements serving such
Properties, to zoning and similar governmental land use
matters affecting such Scheduled Properties that are
consistent with the current uses of such Properties and to
matters of title not materially adversely affecting the
marketability of title to such Scheduled Properties, and (ii)
except as disclosed in the Prospectus no person has a
contractual option or contractual right of first refusal to
purchase all or part of any Scheduled Property or any interest
therein;

(xi) to the best of such counsel's knowledge, the
Company and its subsidiaries (A) are in material compliance
with any and all applicable Environmental Laws, (B) have
received all material permits, licenses or other approvals
required of them under applicable Environmental Laws to
conduct their respective businesses and (C) are in material
compliance with all terms and

<PAGE> 18

conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole;

(xii) the documents incorporated by reference in the
Registration Statement and Prospectus, when they were filed
(or, if an amendment with respect to any such document was
filed, when such amendment was filed), complied as to form in
all material respects with the Exchange Act (except as to the
financial statements and schedules and other financial and
statistical data contained or incorporated by reference
therein, as to which such counsel need express no opinion);
and

(xiii) the Registration Statement and Prospectus
(except for financial statements and schedules and other
financial and statistical data included therein as to which
such counsel need not express any opinion) comply as to form
in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.

Such counsel shall also state that he has no reason to believe
that (except for financial statements and schedules and other financial
and statistical data as to which such counsel need not express any
belief) the Registration Statement and the prospectus included therein
at the time the Registration Statement became effective contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and has no reason to believe that (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Prospectus contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.

(d) The Underwriters shall have received on the Closing Date
an opinion of Latham & Watkins, special counsel for the Company, dated
the Closing Date, to the effect that:

<PAGE> 19

(i) the Registration Statement has become effective
under the Act and, to the best of such counsel's knowledge, no
stop order proceedings with respect thereto are pending or
threatened under the Act;

(ii) the authorized capital stock of the Company
conforms in all material respects to the description thereof
contained in the Prospectus;

(iii) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement do not result in a breach or violation of the
federal laws of the United States or the State of New York or
the certificate of incorporation or by-laws of the Company or,
to the best of such counsel's knowledge, any agreement or
other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court of the United States or the
State of New York having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency of
the United States or the State of New York is required for the
performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the
offer and sale of the Shares;

(iv) the statements (A) in the Prospectus under the
caption "Description of Common Stock" and (B) in the
Registration Statement in Item 15, in each case insofar as
such statements constitute summaries of legal matters, are
accurate in all material respects;

(v) the Company is not and, after giving effect to
the offering and sale of the Shares, will not be an
"investment company" as such term is defined in the Investment
Company Act of 1940, as amended; and

(vi) the Registration Statement and Prospectus
(except for financial statements and schedules and other
financial data included therein as to which such counsel need
not express any opinion) comply as to form in all material
respects with the

<PAGE> 20

Securities Act and the applicable rules and regulations of the
Commission thereunder.

In addition, such counsel shall also state that no facts came
to such counsel's attention that caused such counsel to believe that
the Registration Statement, at the time it became effective, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus (including the
incorporated documents), as of its date or as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being
understood that such counsel need express no belief with respect to the
financial statements, schedules and other financial data included in
the Registration Statement or the Prospectus or incorporated therein.

(e) The Underwriters shall have received on the Closing Date
an opinion of McGuire, Woods, Battle & Boothe, L.L.P., counsel for the
Selling Stockholder, dated the Closing Date, to the effect that:

(i) this Agreement has been duly authorized,
executed and delivered by or on behalf of the Selling
Stockholder;

(ii) the execution and delivery by the Selling
Stockholder of, and the performance by the Selling Stockholder
of its obligations under this Agreement and the Custody
Agreement will not contravene (A) any provision of applicable
law, or The Last Will and Testament of Alfred I. duPont, by
which the Selling Stockholder was established, (B) to the
knowledge of such counsel, any agreement or other instrument
binding upon the Selling Stockholder or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Selling Stockholder and (C) no consent,
approval, authorization or order of, or qualification with,
any governmental body or agency is required for the
performance by the Selling Stockholder of its obligations
under this Agreement or the Custody Agreement except such as
may be required by the securities or Blue Sky laws of the
various states in connection with offer and sale of the
Shares;

(iii) the Selling Stockholder has valid title to the
Shares and the legal right and power, and all authorization
and approval

<PAGE> 21

required by law, to enter into this Agreement and the Custody
Agreement and to sell, transfer and deliver the Shares;

(iv) the Custody Agreement has been duly authorized,
executed and delivered by the Selling Stockholder and is a
valid and binding agreement of the Selling Stockholder;

(v) upon the deposit of the Shares registered in the
name of Cede & Co. or such other nominee designated by the
Depository Trust Company ("DTC"), if applicable, and payment
therefore, as provided herein, and the crediting of the Shares
to the Underwriters' accounts with DTC (assuming that Cede &
Co. or such other nominee lacks notice of any "adverse claim"
(as defined in Section 8-102 of the Uniform Commercial Code as
adopted in the State of New York (the "UCC")) to the deposited
Shares), (A) Cede & Co. or such other nominee designated by
DTC shall be a "protected purchaser" of the Shares (within the
meaning of Section 8-102 of the UCC); (B) under the UCC the
Underwriters will acquire a valid security entitlement to the
Shares; and (C) no action based on any "adverse claim" (as
defined in Section 8-102 of the UCC) may be asserted against
the Underwriters with respect to such security entitlement
(assuming that the Underwriters lack notice of any such
adverse claim); and

(vi) the statements in the Prospectus under the
captions "Summary--The Alfred I. duPont Testamentary Trust"
and "The Alfred I. duPont Testamentary Trust" in so far as
such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present
the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein.

(f) The Underwriters shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Underwriters,
dated the Closing Date, in form and substance satisfactory to the
Underwriters.

With respect to Section 6(c)(xiii) above, Robert M. Rhodes and
with respect to Section 6(d)(xii) above, Latham & Watkins, may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any

<PAGE> 22

amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification,
except as specified.

The opinions of Robert M. Rhodes, Latham & Watkins and
McGuire, Woods, Battle and Boothe, L.L.P., described in Sections 6(c),
6(d) and 6(e) above shall be rendered to the Underwriters at the
request of the Company or of the Selling Stockholder, as the case may
be, and shall so state therein.

(g) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from KPMG Peat Marwick LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.

(h) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other
dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force
and effect on the Closing Date.

The several obligations of the U.S. Underwriters to purchase Additional
Shares hereunder are subject to the delivery to the U.S. Representatives on the
Option Closing Date of such documents as you may reasonably request with respect
to the good standing of the Company, the due authorization and issuance of the
Additional Shares and other matters related to the issuance of the Additional
Shares.

7. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:

(a) To furnish to you, without charge, five signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 10:00 a.m. New York City time on the
business day next

<PAGE> 23

succeeding the date of this Agreement and during the period mentioned
in Section 7(c) below, as many copies of the Prospectus and any
supplements and amendments thereto or to the Registration Statement as
you may reasonably request.

(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.

(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters, the
Selling Stockholder and the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.

(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request, provided, however, that nothing herein shall
require the Company to qualify as a foreign corporation in any state,
to execute a general consent to service of process in any state or to
subject itself to taxation in any jurisdiction in which it is otherwise
not so subject.

(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering
the twelve-month period ending [March 31, 1999] that satisfies the

<PAGE> 24

provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.

8. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of the
obligations of the Company and the Selling Stockholder under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration and delivery of the Shares under
the Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters (except any transfer or
other taxes payable thereon, which shall be paid by the Selling Stockholder),
(iii) the cost of printing or producing any Blue Sky or Legal Investment
memorandum in connection with the offer and sale of the Shares under state
securities laws and all expenses in connection with the qualification of the
Shares for offer and sale under state securities laws as provided in Section
7(d) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky or Legal Investment memorandum, (iv) all filing
fees and the reasonable fees and disbursements of counsel to the Underwriters
incurred in connection with the review and qualification of the offering of the
Shares by the National Association of Securities Dealers, Inc., (v) the cost of
printing certificates representing the Shares, (vi) the costs and charges of any
transfer agent, registrar or depositary, and (vii) all other costs and expenses
incident to the performance of the obligations of the Company and the Selling
Stockholder hereunder for which provision is not otherwise made in this Section,
except that the Selling Stockholder shall pay (i) all fees, disbursements and
expenses of its counsel and its financial advisors and any transfer or other
taxes payable on transfer of the Shares to the Underwriters and (ii) the first
$200,000 of all costs and expenses of the Company, the Underwriters and the
Selling Stockholder relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production of road
show slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging

<PAGE> 25

expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show. It is understood, however, that except as provided in this Section,
Section 9 entitled "Indemnity and Contribution", and the last paragraph of
Section 11 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes payable
on resale of any of the Shares by them and any advertising expenses connected
with any offers they may make and all costs and expenses of the Company, the
Underwriters and the Selling Stockholder relating to investor presentations on
any "road show" in excess of $200,000.

9. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished to the Company in writing by any Underwriter through you
or by the Selling Stockholder, expressly for use therein; provided, however,
that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, the foregoing
indemnity agreement shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages or liabilities purchased
Shares, or any person controlling such Underwriter, if a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Shares to such person, and
if the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such failure
is the result of noncompliance by the Company with Section 7(a) hereof.

<PAGE> 26

(b) The Selling Stockholder agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only
with reference to information relating to such Selling Stockholder furnished in
writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto; provided, that with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus the indemnity agreement contained in this subsection (b)
shall not inure to the benefit of any Underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased any Shares, to the
extent that a prospectus relating to such Shares was required to be delivered by
such Underwriter under the Act in connection with such purchase and any such
loss, claim, damage or liability of such Underwriter results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Shares to such person, a copy of the Prospectus
if the Company had previously furnished copies thereof to such Underwriter.

(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Stockholder, the directors of the
Company, the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company or the Selling Stockholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information furnished to the Company in writing by
any Underwriter through

<PAGE> 27

you expressly for use in the Registration Statement, any preliminary prospectus,
the Prospectus or any amendments or supplements thereto.

(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 9(a), 9(b) or 9(c), such person (the "INDEMNIFIED
PARTY") shall promptly notify the person against whom such indemnity may be
sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to conflicts of interests
between them. It is understood that the indemnifying party shall not, in respect
of the legal expenses of any indemnified party in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for (i) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, (ii) the fees and expenses of more than one separate firm (in addition to
any local counsel) for the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either such Section and (iii) the fees and expenses of more than
one separate firm (in addition to any local counsel) for the Selling Stockholder
and all persons, if any, who control any Selling Stockholder within the meaning
of either such Section, and that all such fees and expenses shall be reimbursed
as they are incurred. In the case of any such separate firm for the Underwriters
and such control persons of any Underwriters, such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated. In the case of any such separate
firm for the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. In the case of
any such separate firm for the Selling Stockholder and such control persons of
the Selling Stockholder, such firm shall be designated in writing by the persons
named as attorneys-in-fact for the Selling Stockholder under the Powers of
Attorney. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party

<PAGE> 28

from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.

(e) To the extent the indemnification provided for in Section 9(a),
9(b) or 9(c) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 9(e)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 9(e)(i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholder on the one hand and the
Underwriters on the other hand in connection with the offering of the Shares
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of the Shares (before deducting expenses) received by the
Selling Stockholder and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate Public Offering Price of the
Shares. The relative fault of the Company and the Selling Stockholder on the one
hand and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Selling Stockholder or by the
Underwriters and

<PAGE> 29

the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 9 are several in proportion
to the respective number of Shares they have purchased hereunder, and not joint.

(f) The Company, the Selling Stockholder and the Underwriters agree
that it would not be just or equitable if contribution pursuant to this Section
9 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in Section 9(e).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 9 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.

(g) The indemnity and contribution provisions contained in this Section
9 and the representations, warranties and other statements of the Company and
the Selling Stockholder contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this Agreement,
(ii) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Selling Stockholder or any person controlling
the Selling Stockholder, or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.

10. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities

<PAGE> 30

of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 10(a)(i) through 10(a)(iv), such event, singly
or together with any other such event, makes it, in your judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.

11. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.

If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule II bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 11 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you, the Company and
the Selling Stockholder for the purchase of such Firm Shares are not made within
36 hours after such default, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter, the Company or the Selling
Stockholder. In any such case either you or the Selling Stockholder, shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and in the Prospectus or in any other documents or arrangements may be effected.
If, on the Option Closing Date, any Underwriter or Underwriters shall fail or
refuse to purchase Additional Shares and the aggregate number of Additional
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Additional Shares to be purchased, the non-defaulting
Underwriters shall have the option to (i) terminate

<PAGE> 31

their obligation hereunder to purchase Additional Shares or (ii) purchase not
less than the number of Additional Shares that such non-defaulting Underwriters
would have been obligated to purchase in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.

If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Selling Stockholder
or the Company to comply with the terms or to fulfill any of the conditions of
this Agreement, or if for any reason the Selling Stockholder or the Company
shall be unable to perform its obligations under this Agreement, the party whose
failure, refusal or inability to perform caused such termination will reimburse
the Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.

12. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

13. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.

<PAGE> 32

14. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.

Very truly yours,

St. Joe Corporation

By:
------------------------------------
Name:
Title:

The Alfred I. duPont Testamentary Trust

By:
------------------------------------
Trustee

<PAGE> 33

Accepted as of the date hereof

MORGAN STANLEY & CO.
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.

Acting severally on behalf of themselves and the
several U.S. Underwriters named in Schedule I
hereto.

By: Morgan Stanley & Co. Incorporated

By:
---------------------------------------------
Name:
Title:

MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
RAYMOND JAMES & ASSOCIATES, INC.

Acting severally on behalf of themselves
and the several International Underwriters
named in Schedule II hereto.

By Morgan Stanley & Co. International Limited

By:
---------------------------------------------
Name:
Title: Principal

<PAGE> 34

SCHEDULE I

U.S. UNDERWRITERS

<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
U.S. UNDERWRITER TO BE PURCHASED
- -------------------------------------------------------------- ---------------------
<S> <C>
Morgan Stanley & Co. Incorporated.............................
Donaldson, Lufkin & Jenrette Securities
Corporation..........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Raymond James & Associates, Inc...............................

---------------------
Total:...............................................
=====================
</TABLE>

<PAGE> 35

SCHEDULE II

INTERNATIONAL UNDERWRITERS

<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
INTERNATIONAL UNDERWRITER TO BE PURCHASED
- -------------------------------------------------------------- ---------------------
<S> <C>
Morgan Stanley & Co. International Limited.....................
Donaldson, Lufkin & Jenrette International ....................
Merrill Lynch International....................................
Raymond James & Associates, Inc................................

---------------------
Total:...............................................
=====================
</TABLE>

<PAGE> 36

SCHEDULE III

JOINT VENTURES

St. Joe/Arvida Company, L.P.

St. Joe/CNL Development, Ltd.

[Codina Group, Inc.]

<PAGE> 37

SCHEDULE IV

PROPERTY SCHEDULE

Properties listed below are identified using the defined terms used in
the Prospectus.

<TABLE>
<CAPTION>
Property Title Holder
- -------- ------------
<S> <C>
duPont Center GCC
Gran Park at Deerwood GCC
Gran Park at Interstate South GCC
Gran Park at Jacksonville GCC
Gran Park at the Avenues GCC
Gran Park at McCahill GCC
Gran Park at Miami GCC
Gran Park at Deerwood North GCC
Gran Park at Southwood [ ]
Seagrove Tract [ ]
Camp Creek Tract [ ]
Tallahassee Tract [ ]
Riverton property [ ]
2,150 acres St. John's County property (identified on page GCC
40 of the Prospectus)
[Those lots in Summerwood that the Company still owns]
[Those lots in the Retreat that the Company still owns]
</TABLE>

<PAGE> 38

EXHIBIT A

[FORM OF LOCK-UP LETTER]

____________, 1998

Morgan Stanley & Co. Incorporated
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette Securities
Corporation
Raymond James & Associates, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036

Morgan Stanley & Co. International Limited
Merrill Lynch International
Donaldson, Lufkin & Jenrette International
Raymond James & Associates, Inc.
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England

Dear Sirs and Mesdames:

The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") and Morgan Stanley & Co. International Limited ("MSIL")
propose to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT")
with St. Joe Corporation, a Florida corporation (the "COMPANY") and the Alfred
I. duPont Testamentary Trust, providing for the public offering (the "PUBLIC
OFFERING") by the several Underwriters, including Morgan Stanley and MSIL (the
"UNDERWRITERS"), of shares (the "SHARES") of the Common Stock, no par value, of
the Company (the "COMMON STOCK").

To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf

<PAGE> 39

of the Underwriters, it will not, during the period commencing on the date
hereof and ending 180 days after the date of the final prospectus relating to
the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise, other than (w) the Shares to the Underwriters pursuant to the
Underwriting Agreement, (x) the issuance by the Company of shares of Common
Stock upon the exercise of an option or a warrant or the conversion of a
security outstanding on the date of the Prospectus of which the Underwriters
have been advised in writing, (y) the issuance of shares of Common Stock as
consideration for future acquisitions by the Company or (z) the grant of options
under the Company's stock option plans, provided such options do not vest prior
to the termination of the 180-day period referenced herein, and provided further
that, in the case of subclauses (x) and (y), the recipient of any such issued
shares agrees in writing to be bound by the transfer restrictions set forth
herein. In addition, the undersigned agrees that, without the prior written
consent of Morgan Stanley on behalf of the Underwriters, it will not, during the
period commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.

Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.

Very truly yours,

----------------------------------------
(Name)

----------------------------------------
(Address)

<PAGE> 1

EXHIBIT 3.01

CERTIFICATE

TO WHOM IT MAY CONCERN:

The undersigned Secretary of St. Joe Paper Company does hereby certify
that on the 29th day of March, A.D. 1955, at the Annual Meeting of the
Stockholders of said corporation, held at 1524 Barnett National Bank Building,
Jacksonville, Florida, which meeting was duly held pursuant to notice, and at
which meeting the holders of more than ninety per cent (90%) of the outstanding
stock of said corporation were present in person or by valid proxies, the
following resolution to amend the Certificate of Incorporation of the company
was adopted by unanimous vote of those Stockholders present and by those
holding proxies for Stockholders not personally present:

BE IT RESOLVED by the Stockholders of St. Joe Paper Company that the
Certificate of Incorporation of this corporation be amended so that the same
shall read as follows:
<PAGE> 2
AMENDED CERTIFICATE OF INCORPORATION
OF
ST. JOE PAPER COMPANY

ARTICLE I. LAWS OF FLORIDA TO GOVERN. The Laws of Florida shall govern
the corporation.

ARTICLE II. NAME. The name of the Corporation is ST. JOE PAPER COMPANY.

ARTICLE III. GENERAL NATURE OF BUSINESS. The general nature of the
business and the objects and purposes to be transacted, promoted and carried on
by the corporation are as follows:

To manufacture, buy, sell, import, export and deal in pulp wood, wood
pulp, paper, paper board, and all raw materials thereof and products and
by-products therefrom, and articles of commerce made wholly or partly of pulp
wood, wood pulp, paper, or paper board, and to establish, operate and maintain
mills, plants and factories for such purpose;

To engage generally in the real estate business in all of its branches; to
hold, buy, own, hire, control, work, develop, sell, convey, lease, mortgage,
pledge, exchange, cultivate, improve, and otherwise deal in or dispose of real
estate and property, and any right, interest or estate therein, including
fixtures, leases, tax titles and liens and other liens, as well as mineral
rights and water rights; to plan, construct, build, erect, layout, open, repair
and improve or otherwise deal in and with public or private roads, parks,
streets, sidewalks, avenues, lanes, alleys, sewers, city, town and village sites
and any and all other convenience and facilities for the operation,
development, improvement and use of real estate and generally to do any and all
things necessary, useful or desirable for the development, operation,
improvement, sale or use of real estate; to purchase or otherwise acquire,
lease, build, hold, maintain, mortgage or otherwise lien, operate, rent and
sell or otherwise dispose of, as principal or agent, hotels, office buildings,
boarding houses, restaurants, dwelling houses, apartment houses, stores,
elevators, wharves, piers, docks, booms, tramways, bridges, and any and all
other kinds of buildings and structures, and also steamboats, steam-ships, and
all manner of water craft; to carry on and transact a real estate agency and
brokerage business, including the management of estates, and to act as agent,
broker or attorney in fact for any person, firm or corporation in buying,
selling, renting, leasing and otherwise dealing in and with real property and
any and every estate and interest therein, choses in action secured thereby or
thereon, judgments resulting therefrom and other personal property, collateral
thereto, in making and obtaining leases upon such property, in supervising,
managing protecting such property and all interest in and claims affecting the
same and in managing and conducting any legal actions, proceedings and business
relating to any of the purposes herein mentioned or referred to; to collect and
receive any profits, rents, royalties, fees, charges and/or tolls for business
conducted by the company;

1
<PAGE> 3
To manufacture, purchase or otherwise acquire and to hold, own, mortgage
or otherwise lien, pledge, lease, sell, exchange, transfer or in any manner
dispose of, and to invest, deal and trade in and with goods, wares, merchandise
and personal property of any and every class and description, within or without
the State of Florida;

To acquire the good will, rights and property and the whole or any part of
the assets and liabilities of any person, firm, association or corporation, to
pay for the same in cash, by the stock of the company, bonds or otherwise, to
hold or in any manner to dispose of the whole or any part of the property so
purchased, to conduct in any lawful manner the whole or any part of any
business so acquired and to exercise all the powers necessary or convenient in
and about the conduct and management of such business;

To construct and operate canals and waterways for the purposes of drainage,
irrigation or beautification; to grow, buy, sell and otherwise deal in all kinds
of fruits, vegetables and agricultural products, and to engage generally in
farming, planting, fruit raising and any and all branches of gardening and
horticulture; to prospect for, dig and mine all minerals and metals, including
petroleum, oil and gas, and to do all things which may be necessary, proper or
convenient in connection with prospecting for, digging and mining said minerals,
metals, petroleum, oil and gas; to build, buy, sell, own, operate, lease, hire,
use and maintain gas stations, tanks, reservoirs, storage and ice manufacturing
plants, packing houses, machine shops, boat building works, waterworks, electric
light and power works, and storage facilities of every kind, and to collect and
receive profits or tolls therefor;

To build, buy, sell, lease, manufacture, own, control, hire, charter and
operate automobiles and automobile buses and other automotive vehicles and
vessels, tramways, railways, spur tracks, side tracks, dredges, barges,
lighters, engines, cars or other vehicles and means of transportation for the
transportation of property and persons, but not to use said means of
transportation for the purpose of doing the business of a common carrier; to
construct, maintain, own, lease and operate station houses, depots, warehouses,
terminals, terminal facilities, ferries, parks, greenhouses, grounds and
pavillions for recreation and amusement and for other purposes;

To make, generate, sell, distribute and supply gas and electricity, either
or both, for lighting, heating, manufacturing or mechanical purposes, or for all
or any of such purposes, and to conduct a general gas and electrical business,
or either of them, in all their branches; to sink wells and build reservoirs,
tanks, pipes and water mains and other appliances, and to pipe, sell, store and
distribute water; to dredge and bulkhead, and to construct and maintain bridges,
viaducts, and other ways, and to retain and receive easements, licenses and
rights-of-way; to acquire, build, construct, establish, own, operate, maintain
and dispose of, water, drainage and sewer systems and all manner of public works
and to exercise the rights of eminent domain in connection with all such public
works;

To engage generally in the business of buying, selling and dealing in
stocks, bonds, and all manner of securities, both for its own account and for
the account of others, upon commission or otherwise, to draw, make, accept,
endorse, discount, execute and issue promissory notes, drafts, bills of
exchange, warrants debentures and other negotiable or transferable instruments;
to borrow, advance and lend money, and assets of all kinds upon such terms as
may seem expedient; to execute and issue debentures, debenture stocks, bonds,
obligations and securities of all kinds, and to evidence and secure the same as
may seem expedient;

2
<PAGE> 4
with full power to make the same transferable by delivery or by instrument of
transfer or otherwise and either perpetual or terminable and redeemable or
otherwise, and to charge and secure the same by mortgage or trust deed, or
otherwise on the undertaking of the corporation, or upon any specific property,
rights, present and future, of the corporation, or otherwise; to guarantee,
purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose
of the shares of the capital stock of, or any bonds, securities, or evidences
of indebtedness created by this or any other corporation or corporations of
this State or any other State or Country, Nation or Government, and while the
owner of said stock to exercise all the rights, powers and privileges of
ownership, including the right to vote thereon, to the same extent as natural
persons might or could do;

To purchase or otherwise acquire, apply for, register, hold, use, sell or
in any manner dispose of and to grant licenses or other rights in and in any
manner deal with patents, inventions, improvements, processes, formulas,
trade-marks, trade names, rights, and licenses secured under letters patent,
copyrights or otherwise;

To enter into, make and perform contracts of every kind with any person,
firm, association, or corporation, municipality, body politic, country,
territory or state;

To hold and re-issue any of the shares of its capital stock and to provide
for the redemption of said stock; to have a lien upon all of the shares of any
stockholder who may become indebted to this corporation, either individually, as
co-partner, surety or otherwise, with the right to sell and dispose of such
stock, or such portion or portions thereof, as may be necessary to pay off such
indebtedness at either public or private sale and upon notice and terms as the
Board of Directors may prescribe, and with the further right to refuse to
transfer said stock until full payment of all such indebtedness is made;

To own and/or operate mills or factories for the manufacture and/or
furnishing of building material, fixtures and supplies of all kinds; and to own
and operate newspapers and publishing plants; to raise, breed and deal in live
stock of all kinds; to construct harbors and improve the same; to improve rivers
and streams by clearing and straightening the channels thereof, closing sloughs,
erecting sluice ways, booms or dams of all kinds, and other works thereof; to
acquire, construct, lease, operate and maintain radio broadcasting stations of
any and all kinds;

To build, maintain, operate, purchase, lease, rent and sell sawmills, and
manufacture and distill turpentine, tar, pitch, rosin and other timber
products, and to make and execute any and all manner of contracts and timber
leases for logging, lumbering and naval stores operations; to carry on a
general logging and lumbering business;

And to conduct any and every mercantile, trading, mineral, prospecting,
shipping, forwarding, manufacturing and commission business at such place or
places in the State of Florida and at any and all other places in the United
States, or, outside the United States, as the corporation may determine.

3
<PAGE> 5
To do any or all of the things hereinabove set forth as principal, agent,
contractor, trustee or otherwise, alone or in company with others; to carry on
any and all of its operations and businesses and to promote its objects within
the State of Florida or elsewhere without restriction as to place or amount; to
have, use, exercise and enjoy all of the general powers of like corporations;
and to do any or all of the things hereinabove set forth to the same extent as
natural persons might or could do; and to do and perform all such other things
and acts as may be necessary, profitable or expedient in carrying on any of the
businesses or acts above named.

The intention is that none of the objects and powers hereinabove specified
and clauses contained in this Article, except where otherwise specified in this
Article, shall be in anywise limited or restricted by reference to or inference
from the terms of any other objects, powers or clauses of this or any other
Article, but that the several objects and powers specified above shall be
regarded as independent objects and powers; the broadest meaning shall be given
to each word of the foregoing enumeration of the general nature of the
businesses of this corporation and the use of no one word shall be construed to
limit the meaning or effect of any other word or words used elsewhere.

ARTICLE IV. STOCK The maximum number of shares of stock that the
corporation is authorized to have outstanding at any time is One Hundred and
Fifty Thousand (150,000) shares of the par value of One Hundred Dollars
($100.00) per share, all of which shall be common voting stock of the same
class, provided that the corporation may designate as special or restricted
stock not in excess of Two Thousand (2,000) shares of said authorized stock and
reserve to itself rights to repurchase, under the conditions required by law,
redeem and retire the same, and thereby reduce, from time to time, the amount
of its capital represented by the par value of said special or restricted stock
so retired. All stock issued shall be fully paid and non-assessable. The
corporation shall have the right to issue fractional shares.

ARTICLE V. CAPITAL The amount of capital with which the corporation shall
begin business is the aggregate par value of the shares of stock outstanding,
viz: $9,182,900.00 Additional shares of authorized stock may be issued as
provided by law.

ARTICLE VI TERM OF EXISTENCE. The corporation shall have perpetual
existence.

ARTICLE VIII. PRINCIPAL OFFICE. The principal office of the corporation
shall be located in the City of Jacksonville, County of Duval, State of
Florida.

ARTICLE VII. DIRECTORS. The number of Directors of the corporation
shall be not less than nine (9) nor more than fifteen (15)

4
<PAGE> 6
ARTICLE IX. BOARD OF DIRECTORS. The names and post office addresses of
the Board of Directors who, subject to the By-Laws of the corporation and the
Laws of Florida, shall hold office until the next annual meeting of the
stockholders of the corporation or until their successors are elected and have
qualified, are:

<TABLE>
NAME Post Office Address.
- ---- --------------------
<S> <C>
Jessie Ball duPont 1524 Barnett Bank Building, Jacksonville, Florida.
Edward Ball Box 191, Tallahassee, Florida.
Roger L. Main 1524 Barnett Bank Building, Jacksonville, Florida.
Henry W. Dew 1524 Barnett Bank Building, Jacksonville, Florida.
Elbert Dent Greenville, Wilmington, 7, Delaware
Irene Walsh 1524 Barnett Bank Building, Jacksonville, Florida.
W. H. Goodman Box 720, Jacksonville, Florida
Franics P. Gaines Washington & Lee University, Lexington, Virginia
H. P. Adair Barnett Bank Building, Jacksonville, Florida.
Harry H. Saunders St. Joe Paper Company, Port St. Joe, Florida
R. C. Brent, Jr. Box 191, Tallahassee, Florida
T. S. Coldewey St. Joe Paper Company, Port St. Joe, Florida
J. C. Belin St. Joe Paper Company, Port St. Joe, Florida
W. T. Edwards 1785 Southwood Street, Sarasota, Florida
</TABLE>

ARTICLE X. OFFICERS. The officers of the corporation shall be a
President, one or more Vice Presidents, a Secretary, a Treasurer, and such
other officers, agents and factors as may be deemed necessary. The names and
post office addresses of the President, Secretary, and Treasurer, of the
corporation, who shall hold office until the next Annual Meeting of the Board
of Directors or until their successors are elected, are:

Roger L. Main, President, 1524 Barnett Bank Building, Jacksonville, Fla.

Irene Walsh, Secretary, 1524 Barnett Bank Building, Jacksonville, Fla.

S.D. Stoneburner, Treasurer, 1524 Barnett Bank Building, Jacksonville,
Fla.

All officers, agents and factors shall be chosen in such manner, hold
their offices for such terms, and have such powers and duties as may be
prescribed by the By-Laws or determined by the Board of Directors. Any person
may hold two or more offices, except that the President shall not be also the
Secretary or an Assistant Secretary of the Corporation. Until their respective
successors shall have been duly elected and qualified, the present officers of
the St. Joe Paper Company shall be the officers of the corporation.

ARTICLE XI BY-LAWS Subject to the By-Laws, if any, adopted by the
stockholders, the Directors may make the By-Laws of the corporation.

ARTICLE XII. This amended Certificate of Incorporation contains all of
the currently effective provisions of the Charter of said corporation, it being
the purpose of this Amendment of the Certificate of Incorporation that any
previous Charter provision as set forth in the original Certificate of
Incorporation, the amendments thereto, and the agreements of merger, shall be
deemed to have been amended, modified, or revoked, so as to be consistent
with the Articles I through XI hereof.

***********

5
<PAGE> 7

THIS IS TO FURTHER CERTIFY that the said proposed Amendment was
previously approved by the Board of Directors and proposed by them to the
Stockholders at the meeting at which such resolution was adopted.

IN WITNESS WHEREOF, the undersigned Secretary of the corporation has
hereunto set her hand and has hereto affixed the corporate seal of said
corporation this 23 day of April, A.D. 1955.

ST. JOE PAPER COMPANY [SEAL]

/s/
--------------------------
SECRETARY

APPROVED:

/s/ Roger L. Main
- ---------------------
President

STATE OF FLORIDA )
:
COUNTY OF DUVAL )

Before me, an officer authorized by the laws of the State of Florida to
take acknowledgments, this day personally appeared ROGER L. MAIN, to me well
known and known to me to be the person who as President of St. Joe Paper Company
executed the above and foregoing Certificate, and who acknowledged to and before
me that he executed the same in such capacity for the purposes therein
expressed, and that the matters and things therein set forth are true.

WITNESS my hand and official seal this 23 day of April, 1955.

[SEAL]

/s/
--------------------------------
Notary Public, State of Florida
at Large.

My commission expires:_______
Notary Public, State of Florida
My commission expires Dec. 11, 1955
Bonded by American Surety Co.

6
<PAGE> 8

Certificate of Amendment

Certificate of Incorporation

ST. JOE PAPER COMPANY

Under Section 607.181 of the Florida General Corporation Act

St. Joe Paper Company, a corporation organized and existing under and by
virtue of the Florida General Corporation Act of the State of Florida (the
"Corporation"), does hereby certify:

FIRST: That at special meeting of the Corporation's Board of Directors
on February 7, 1990, resolutions were adopted setting forth a proposed
amendmant to the Certificate of Incorporation of the Corporation, declaring
said amendment to be advisable and proposing to submit said amendment to the
Alfred I. duPont Testamentary Trust (the "Trust"), as holder of 75,209 shares,
or 86.3%, of the issued and outstanding capital stock of the Corporation, for
consideration therof. The resolution setting forth the proposed amendment is
as follows:

RESOLVED, that the Board of Directors of the Corporation
does hereby declare that it is advisable to amend the
Certificate of Incorporation of the Corporation by
changing Article IV thereof so that as amended, said
Article shall be and read as follows:

1
<PAGE> 9
"ARTICLE IV. STOCK. The maximum number of shares of stock that the
corporation is authorized to have outstanding at any time is sixty
million (60,000,000) shares having no par value per share, all of
which shall be common voting stock of the same class. All shares of
common stock issued shall be fully paid and non-assessable. The
corporation shall have the right to issue fractional shares."

SECOND: That on March 21, 1990, the Trust, acting by written consent,
adopted said amendment in accordance with the provisions of Section 607.181 of
the Florida General Corporation Act of the State of Florida.

THIRD: That the stock split and change in par value provided for in said
amendment shall be effected in the following manner: at 4:00 p.m., Tallahassee,
Florida time on the date on which the amendment becomes effective in accordance
with the Florida General Corporation Act, (i) each share of the Corporation's
one hundred dollar ($100.00) par value common stock shall be changed and
reclassified into and shall become 350 shares of no par value common stock
authorized by such amendment; (ii) outstanding certificates theretofore
representing the then issued shares of the one hundred dollar ($100.00) par
value common stock shall represent the same number of shares of no par value
common stock; and (iii) each holder of record of common stock of the
Corporation at 4:00 p.m.; Tallahassee, Florida time on the date such amendment
becomes effective shall be entitled to receive a certificate for 349 additional
shares of common stock for each one share of common stock then held of record
by such holder.

-2-
<PAGE> 10
IN WITNESS WHEREOF, said St. Joe Paper Company has caused this Certificate
to be signed by Stanley D. Fraser, its Vice President and attested by Ronald A.
Anderson, its Secretary this 21st day of March, 1990.

ST. JOE PAPER COMPANY

By: /s/ Stanley D. Fraser
---------------------
Stanley D. Fraser
Vice President

ATTEST

By: /s/ Ronald A. Anderson
----------------------
Ronald A. Anderson
Secretary

-3-
<PAGE> 11
STATE OF FLORIDA

COUNTY OF DUVAL

Be it remembered that on this 21st day of March, 1990, personally came
before me, Louise T. Matthews, a notary public in and for the county and state
aforesaid, STANLEY D. FRASER, Vice President of a corporation of the State of
Florida, the corporation described in and which executed the foregoing
certificate, known to me personally to be such, and he the said STANLEY D.
FRASER as such Vice President duly executed the said certificate to be his act
and deed and the act and deed of said corporation and the facts stated therein
are true; and the signature of said Vice President of said corporation to said
foregoing certificate is in the handwriting of said Vice President of said
corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.

/s/ Louise T. Matthews
------------------------------
Notary Public

(SEAL)

-4-
<PAGE> 12
ARTICLES OF AMENDMENT

ST. JOE PAPER COMPANY

Pursuant to Section 607.1006, Florida Statutes, the Amended Articles of
Incorporation of the above-named Corporation are hereby further amended as
follows:

1. Article II is hereby amended to read as follows:

The name of the corporation is St. Joe Corporation

2. The foregoing amendment was adopted by the Board of Directors on
February 27, 1996 and the shareholders on May 14, 1996.

3. The number of votes cast for the amendment by the shareholders was
sufficient for approval.

4. This Amendment shall be effective on June 3, 1996 at 12:01 a.m.

IN WITNESS WHEREOF, these Articles of Amendment have been executed this
22nd day of May, 1996.

ST. JOE PAPER COMPANY

By:/s/ R.E. Nedley
----------------------
R.E. Nedley, President

STATE OF FLORIDA
COUNTY OF DUVAL

The foregoing instrument was acknowledged before me this 22nd day of May,
1996 by R.E. Nedley, as President of ST. JOE PAPER COMPANY, a Florida
corporation, on behalf of the corporation. He is personally known to me.

/s/ Patricia A. Pocock
--------------------------
Notary Public

OFFICIAL SEAL
[SEAL] PATRICIA A. POCOCK
My Commission Expires
Feb. 9, 1997
Comm. No. CC 258161

<PAGE> 1
EXHIBIT 3.02

ARTICLES OF AMENDMENT

ST. JOE CORPORATION

Pursuant to Section 607.10025, Florida Statutes, the Amended Articles of
Incorporation of the above-named Corporation are hereby further amended as
follows:

1. Article IV is hereby amended to read as follows:

ARTICLE IV. STOCK. The maximum number of shares of stock that the
Corporation is authorized to have outstanding at any time is one
hundred eighty million (180,000,000) shares having no par value per
share, all of which shall be common voting stock of the same class.
All shares of common stock issued shall be fully paid and
non-assessable. The Corporation shall have the right to issue
fractional shares.

2. In accordance with the above Amendment, sixty million shares of
common stock, no par value, will be divided into one hundred eighty million
shares of common stock, no par value.

3. The foregoing Amendment was adopted by the Corporation Board of
Directors on December 15, 1997.

4. The Amendment neither adversely affects the rights or preferences of
the holders of outstanding shares of any class or series, nor causes the
percentage of authorized shares that will remain unissued after the division to
exceed the percentage of authorized shares that were unissued before the
division.

5. The division of shares under the foregoing Amendment shall take effect
upon the filing of these Articles of Amendment.

IN WITNESS WHEREOF, these Articles of Amendment have been executed this
seventh day of January, 1998.

ST. JOE CORPORATION

By: /s/ Robert M. Rhodes
--------------------------
Robert M. Rhodes
Senior Vice President
& General Counsel

<PAGE> 2
STATE OF FLORIDA)

COUNTY OF DUVAL)

The foregoing instrument was acknowledged before me this 7th day of
January, 1998 by Robert M. Rhodes, Senior Vice President & General Counsel of
St. Joe Corporation, a Florida corporation, on behalf of the Corporation.

/s/ Muriel Kayter
-------------------------------
Notary Public, State of Florida

Muriel Kayter
-------------------------------
Print Name

MURIEL KAYTER
[SEAL] Notary Public, State of Florida
My Comm. Expires April 26, 1999
Comm. No. CC093605

<PAGE> 1
EXHIBIT 4.01

REGISTRATION RIGHTS AGREEMENT

BETWEEN

ALFRED I. DUPONT TESTAMENTARY TRUST

AND

ST. JOE CORPORATION

Dated as of December 16, 1997

<PAGE> 2

REGISTRATION RIGHTS AGREEMENT, dated as of December 16, 1997, between
the Alfred I. duPont Testamentary Trust (the "Trust") and St. Joe Corporation,
a Florida corporation (the "Company").

1. Introduction; Term of Agreement. The Trust Beneficially Owns approximately
69% of the issued and outstanding common stock of the Company (the "Common
Stock"). The Trust has determined that it is in the best interests of the Trust
to dispose of certain shares of the Common Stock of the Company Beneficially
Owned by the Trust primarily to diversify the Trust's assets and to reinvest
the proceeds from such sale in assets which produce higher current income. The
Company has proposed to the Trust that it accomplish this objective through one
or more secondary offerings of the shares it Beneficially Owns. The Company has
determined that it is in the best interests of the Company and its stockholders
that the proposed disposition of shares be effected in one or more public
offerings that will provide for broad distribution of the shares, thereby
enhancing the overall trading market for all of the issued and outstanding
shares of the Company's Common Stock. The Trust intends, subject to market
conditions and other factors, and upon consummation of a 3-for-1 split of the
Company's Common Stock to which the Trust hereby agrees, to sell not less than
3,000,000 shares (the "Shares") of the Common Stock (including any
overallotment option granted to underwriters) on a pre-stock split basis in a
public offering to be consummated as soon as practicable in 1998 (the "Initial
Sale". The Trust and the Company have agreed that it is in their mutual best
interests to enter into this Agreement to govern, among other things, certain
terms and conditions of the Initial Sale and any subsequent registered public
sales that may be considered by the Trust and/or its affiliate, The Nemours
Foundation. In connection with the Initial Sale, the Company has commenced
preparation of an appropriate registration statement covering the Shares and
has agreed to use its best efforts to file such registration statement with the
Commission under the Securities Act as soon as practicable in December 1997.
This agreement shall terminate and be of no further force and effect at such
time as either the Trust owns less than 1% of the outstanding shares of Common
Stock or the last Demand Request (as hereinafter defined) permitted by this
Agreement is effected pursuant hereto. Certain capitalized terms used in this
Agreement are defined in Section 4 hereof; references to sections shall be to
sections of this Agreement.

2. Registration under Securities Act, etc.

2.1 Registration on Request.

(a) Demand Request. Upon the written request of the Trust that the
Company effect the registration under the Securities Act of all or part of the
Registrable Securities
2

<PAGE> 3

Beneficially Owned by the Trust and specifying the intended method or methods
of disposition thereof and the minimum price for such Registrable Securities
acceptable to the Trust (a "Demand Request"), the Company will, subject to the
terms of this Agreement, use its best efforts to effect the registration under
the Securities Act of:

(i) the Registrable Securities which the Company has
been so requested to register by the Trust for disposition in accordance with
the intended method or methods of disposition stated in such request;

(ii) all shares of Common Stock which the Company may
elect to register in connection with the offering of Registrable Securities
pursuant to this Section 2.1, it being understood that the Company shall have
no right to elect to include shares of the Common Stock in the registration
relating to the Initial Sale; and

(iii) all shares of Common Stock which the Company may be
required to register in connection with "piggyback" or incidental registration
rights granted to any other Person, it being understood that no other Person
has any such registration rights in connection with the Initial Sale;

all to the extent requisite to permit the disposition (in accordance with the
intended method or methods of distribution specified in the Demand Request) of
the Registrable Securities and the additional shares of Common Stock, if any,
so to be registered, provided, however, that each such Demand Request shall be
for a number of shares of Common Stock which represent at least 10% of the then
outstanding shares of Common Stock, unless the Demand Request is the last
Demand Request available hereunder, in which event the Demand Request may cover
the remainder of the Registrable Securities even if such amount of Registrable
Securities is less than 10% of such then outstanding shares. Subject to the
provisions of Section 2.1(d), the Trust will have the right pursuant to this
Section 2.1(a) to make an aggregate of five Demand Requests, including the
deemed Demand Request relating to the Initial Sale referred to below in this
Section 2.1(a).

Notwithstanding anything herein to the contrary, the Company shall not be
obligated to take any action to effect any registration requested by the Trust
pursuant to this Section 2.1(a) for a period of six months after the Company
has effected one such registration pursuant to this Section 2.1 and such
registration has been declared or ordered effective, such six month period to
commence on the date the registration statement was declared or ordered
effective. In addition, no Demand Request other than with respect to the
Initial Sale may be

<PAGE> 4

delivered prior to the expiration of the Trust's "lockup" period set forth in
the underwriting agreement for the Initial Sale.

Without limiting the generality of the foregoing, the Trust and the
Company agree that the commencement of preparation by the Company of a
registration statement under the Securities Act in connection with the Initial
Sale shall automatically constitute a Demand Request entitling the Trust to all
of the benefits of this Agreement with respect to the Initial Sale, without the
Trust being required to comply with the written notice requirements of this
Section 2.1(a) or take any further action under this Agreement with respect
thereto.

(b) Registration Statement Form. Registrations under this Section
2.1 (including any registration with respect to the Initial Sale) shall be on
such appropriate registration form of the Commission (i) as shall be selected
by the Company and as shall be acceptable to the Trust and (ii) as shall permit
the disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in the request for such registration
(it being understood that the intended method of disposition with respect to
the Initial Sale shall be a firm commitment underwritten public offering);
provided, however, that the Company shall not be required by the Trust to file
with the Commission a shelf registration under Rule 415 under the Securities
Act.

(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1
(including any registration with respect to the Initial Sale and any
registration deemed not to be "effected" under Section 2.1), except that the
Trust shall pay only the underwriting discounts and commissions attributable to
the Registrable Securities Beneficially Owned by the Trust, the fees and
expenses of the Trust's legal counsel and financial advisors, transfer taxes,
if any, attributable to the Registrable Securities Beneficially Owned by the
Trust and with respect to any offering pursuant to this Section 2.1(a) any
"road show" expenses of the underwriters not paid by the underwriters pursuant
to the related underwriting agreement (such "road show" expenses payable by
the Trust not to exceed $200,000).

(d) Effective Registration Statement. A registration requested
pursuant to this Section 2.1 (including a registration statement relating to
the Initial Sale) shall not be deemed to have been effected (and therefore not
requested for purposes of the limitations in Section 2.1(a) on the number of
requests for registration that can be made pursuant to Section 2.1(a)) (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed

4
<PAGE> 5

by the Trust (other than a refusal to proceed based upon the advice of counsel
relating to a material adverse change in, or other material development
relating to, the business, properties, financial condition or results of
operations of the Company) shall be deemed to have been effected by the Company
at the request of the Trust unless the Trust shall have elected to pay all
Registration Expenses in connection with such registration, (ii) if, after it
has become effective, such registration becomes subject to any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason, or (iii) if the conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied, other than solely
by reason of some act or omission by the Trust.

(e) Selection of Underwriters. If a requested registration pursuant
to this Section 2.1 (including a registration with respect to the Initial Sale)
involves an underwritten offering, the underwriter or underwriters thereof
shall be selected by the Trust from a list of underwriters to be agreed upon by
the Trust and the Company.

(f) Priority in Requested Registrations. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to the
Trust) that, in its opinion, the number of securities requested to be included
in such registration (including securities of the Company which are not
Registrable Securities) exceeds the number which can be sold in such offering
within the price range acceptable to the Trust as set forth in the Demand
Request, the Company will include in such registration the number of shares
which the Company is so advised can be sold, in the following order of priority
(i) first, Registrable Securities requested to be included in such registration
by the Trust, and (ii) second, subject to Section 2.1(a) hereof, securities the
Company proposes to sell and other securities of the Company included in such
registration by other holders who may have "piggyback" or incidental
registration rights, it being understood that with respect to the Initial Sale,
the Company shall have no right to sell shares of its Common Stock and there
are no shares subject to "piggyback" or incidental registration rights.

(g) Delay Periods. Notwithstanding anything herein to the contrary,
except with respect to the Initial Sale, the Company shall be entitled to
postpone the filing of any registration statement otherwise required to be
prepared and filed by the Company pursuant to this Section 2.1, or suspend the
use of any effective registration statement and related prospectus under this
Section 2.1, for a reasonable period of time, but not in excess of 60 days (a
"Delay Period"), if any

<PAGE> 6

executive officer of the Company determines that in such executive officer's
reasonable good faith judgment the registration and/or distribution of the
Registrable Securities covered or to be covered by such registration statement
and related prospectus would materially interfere with any pending material
financing, acquisition or corporate reorganization or other material corporate
development involving the Company or any of its subsidiaries or would require
premature disclosure thereof and promptly gives the Trust written notice of
such determination and an approximation of the period of the anticipated delay;
provided, however, that (i) during the first year after the consummation of the
Initial Sale, the Company may invoke only one Delay Period and (ii) thereafter
the aggregate number of days included in all Delay Periods during any
consecutive 12 months shall not exceed the aggregate of 120 days. Immediately
upon receipt of a written notice of suspension, the Trust shall cease all
disposition efforts with respect to Registrable Securities held by the Trust.
If the Company shall so postpone the filing of a registration statement, the
Trust shall have the right to withdraw the request for registration by giving
written notice within 45 days after receipt of the notice of postponement or,
if earlier, the termination of such Delay Period (and, in the event of such
withdrawal, such request shall not be counted for purposes of determining the
number of Demand Requests for registration of Registrable Securities to which
the Trust is entitled pursuant to this Section 2). The time period for which the
Company is required to maintain the effectiveness of any registration statement
shall be extended by the aggregate number of days of all Delay Periods during
such registration. The Company shall not be entitled to initiate a Delay Period
unless it shall (A) to the extent permitted by agreements with other security
holders of the Company, concurrently prohibit sales by such other security
holders under registration statements covering securities held by such other
security holders and (B) in the case of a delay relating to premature
disclosure, in accordance with the Company's policies from time to time in
effect, forbid purchases and sales in the open market by executive officers and
directors of the Company.

2.2 Incidental Registration.

(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its shares of Common Stock (other than in
connection with a registration of securities which are convertible or
exchangeable into Common Stock) under the Securities Act (other than by a
registration on Form S-4 or S-8 or any successor or similar forms and other
than pursuant to Section 2.1), whether or not for sale for its own account, it
will each such time give prompt written notice to the Trust of its intention to
do so and of the Trust's rights under this Section 2.2. Upon the written request
of the Trust made within 15 days after the receipt of any such notice (which

6
<PAGE> 7

request shall specify the Registrable Securities Beneficially Owned by the
Trust intended to be disposed of and the intended method or methods of
disposition thereof), the Company will, subject to the terms of this Agreement,
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Trust, to the extent requisite to permit the disposition (in accordance
with the intended method or methods of distribution thereof specified in the
requests of the Trust) of the Registrable Securities so to be registered, by
inclusion of such Registrable Securities in the registration statement which
covers the securities which the Company proposes to register; provided that if,
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any
reason either not to register or to delay registration of such securities, the
Company shall give prompt written notice of such determination to the Trust
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
the Trust to request that such registration be effected as a registration under
Section 2.1, and ((ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Securities, for the
same period as the delay in registering such other securities. No registration
effected under this Section 2.2 shall relieve the Company of its obligation to
effect any registration upon request under Section 2.1, nor shall any such
registration hereunder be deemed to have been effected pursuant to Section 2.1.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2,
and the Trust will pay only any underwriting discounts and commissions with
respect to the Registrable Securities Beneficially Owned by the Trust and the
fees and expenses of the Trust's legal counsel and financial advisors in
connection therewith.

(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this Section 2.2 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account of the
Company, to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized standing under underwriting terms appropriate
for such a transaction and (ii) the managing underwriter of such underwritten
offering shall inform the Company and the Trust by letter of its belief that
the number of securities requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering, then the
Company will include in such registration:

7
<PAGE> 8

(i) first, all the securities the Company proposes to
sell for its own account, and

(ii) second, all Registrable Securities as to which the
Trust has made a demand for registration.

2.3 Registration Procedures. Subject to Section 2.1(a), if and whenever
the Company is required to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the Commission the requisite registration
statement to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and
regulations promulgated thereunder) and thereafter cause such registration
statement to become and remain effective for a period of at least 120 days,
provided however that the Company may discontinue any registration of its
securities which are not Registrable Securities (and, under the circumstances
specified in Section 2.2(a), its securities which are Registrable Securities)
at any time prior to the effective date of the registration statement relating
thereto;

(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of at least 120 days and to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended method or
methods of disposition by the Trust set forth in such registration statement or
such other time as is required by the Securities Act;

(c) furnish to the Trust and its underwriter or underwriters, if
any, of the securities being sold by the Trust such number of conformed copies
of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed pursuant
to Rule 424 under the Securities Act, in conformity with the requirements of
the Securities Act, and such other documents, as the Trust and its underwriter
or underwriters, if any, may reasonably request;

(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other state securities laws or

8
<PAGE> 9
blue sky laws of such jurisdictions as the Trust and its underwriter or
underwriters, if any, of the securities being sold by the Trust shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable the Trust and
its underwriter or underwriters to consummate the disposition in such
jurisdictions of the securities owned by the Trust, except that the Company
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subsection (d) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;

(e) furnish to the Trust a signed counterpart, addressed to the
Trust and its underwriter or underwriters, if any, of:

(i) an opinion of counsel for the Company (which shall be
outside counsel if outside counsel is rendering such opinion in
the transaction and otherwise may be the Company's inside
counsel), dated the effective date of such registration
statement (or, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under
the underwriting agreement), customary for a transaction of such
type, and

(ii) a "comfort" letter (or, in the case of any such Person
which does not satisfy the conditions for receipt of a
"comfort" letter specified in Statement on Auditing Standards
No. 72, an "agreed upon procedures" letter), dated the effective
date of such registration statement (or, if such registration
includes an underwritten public offering, a letter of like kind
dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified
the Company's financial statements included in such registration
statement,

covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered
to the underwriters in underwritten public offerings of securities
(with, in the case of an "agreed upon procedure" letter, such
modifications or deletions as may be required under Statement on
Auditing Standards No. 35) and, in the case of

9
<PAGE> 10

the accountants' letter, such other financial matters customarily
covered in a transaction of such type;

(f) notify the Trust and the managing underwriter or underwriters,
if any, promptly:

(i) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and,
with respect to the registration statement or any
post-effective amendment thereto, when the same has become
effective;

(ii) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or
for additional information;

(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
the initiation of any proceedings by any Person for that purpose;

(iv) if at any time the representations and warranties of the
Company made as contemplated by Section 2.4 cease to be true and
correct; and

(v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue
sky laws of any jurisdiction or the initiation or threat of any
proceeding for such purpose;

(g) notify the Trust at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon the Company's
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and at
the request of the Trust promptly prepare and furnish to the Trust and each
underwriter or underwriters, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements

10
<PAGE> 11

therein not misleading in the light of the circumstances under which they were
made;

(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement as promptly as
practicable;

(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and, if required, make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first day of the Company's first full calendar
quarter after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder, and will use its best efforts to furnish to the Trust
and any underwriter or underwriters at least one business day prior to the
filing thereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any amendment or supplement to
which the Trust shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations thereunder;

(j) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and

(k) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of the
securities of the same class as the Registrable Securities are then listed.

The Company will not file any registration statement or amendment thereto
or any prospectus or any supplement thereto to which the Trust or its
underwriter or underwriters, if any, shall reasonably object.

The Company may require the Trust to furnish the Company such information
not inconsistent with the terms of this Agreement regarding the Trust and the
distribution of Registrable Securities as the Company may from time to time
reasonably request in writing in connection with the preparation of any
registration statement pursuant to this Agreement.

The Trust agrees that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in paragraph (g) of this
Section 2.3, the Trust will forthwith discontinue the disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable

11
<PAGE> 12

Securities until the Trust's receipt of the copies of the supplemented or
amended prospectus contemplated by paragraph (g) of this Section 2.3 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in the Trust's possession of
the prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the period mentioned in paragraph (b) of this Section 2.3 shall be extended by
the length of the period from and including the date when the Trust shall have
received such notice to the date on which the Trust has received the copies of
the supplemented or amended prospectus contemplated by paragraph (g) of this
Section 2.3.

If any such registration statement refers to the Trust by name or
otherwise as the holder of any securities of the Company, then the Trust shall
have the right to require (i) the insertion therein of language, in form and
substance satisfactory to the Trust, to the effect that the holding by the
Trust of such securities does not necessarily make the Trust a "controlling
person" of the Company within the meaning of the Securities Act (if appropriate
based on the advice of the Trust's counsel and concurrence therewith by counsel
to the Company), such holding is not to be construed as a recommendation by the
Trust of the investment quality of the Company's securities covered thereby and
that such holding does not imply that the Trust will assist in meeting any
future financial requirements of the Company, or (ii) in the event that such
reference to the Trust by name or otherwise is not required by the Securities
Act or rules and regulations promulgated thereunder and concurrence with such
position by counsel to the Company, the deletion of the reference to the Trust.

2.4 Underwritten Offerings:

(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Trust pursuant to a
registration requested under Section 2.1 (including a registration statement
with respect to the Initial Sale), the Company will enter into an underwriting
or similar agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to the Company, the Trust and the
underwriters, and to contain such representations and warranties by the Company
and the Trust and such other terms as are generally prevailing in agreements of
this type. The Trust will cooperate with the Company in the negotiation of the
underwriting or similar agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof, provided that nothing
herein contained shall diminish the foregoing obligations of the Company.
Subject to the terms hereof, the Trust shall be a party to such underwriting
agreement. The Company hereby agrees that the Trust and The

12
<PAGE> 13

Nemours Foundation shall automatically have the benefit of all of the
representations and warranties by, and the other agreements on the part of, the
Company made to and for the benefit of such underwriters in connection with the
underwriting agreement. The Company shall not require the Trust to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations and warranties or agreements regarding
the Trust, the Registrable Securities Beneficially Owned by the Trust,
transactions between the Trust and its affiliates and the Trust's intended
method or methods of distribution (including lock-ups) and any other
representation required by law. In addition, the Trust shall cooperate with the
Company in an effort to provide that any such agreement will contain a
provision modifying the indemnification of the underwriter to the effect that
the Company will not be liable to any Person who participates as an underwriter
in the offering or sale of Registrable Securities with respect to any
preliminary prospectus, to the extent that any such loss, claim, damage or
liability of such underwriter results from such underwriter having sold
Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus,
if the Company has previously furnished copies thereof to such underwriter and
such final prospectus as then amended or supplemented, has corrected any such
misstatement or omission.

(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its shares of Common Stock under the Securities Act
as contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the Trust
as provided in Section 2.2 and subject to the provisions of Sections 2.2(a) and
(b), use its best efforts to arrange for such underwriters to include all the
Registrable Securities to be offered and sold by the Trust among the securities
to be distributed by such underwriters. Subject to the terms hereof, the Trust
shall be a party to the underwriting agreement between the Company and such
underwriters. The Company hereby agrees that the Trust and The Nemours
Foundation shall automatically have the benefit of all of the representations
and warranties by, and the other agreements on the part of, the Company made to
and for the benefit of such underwriters in connection with the underwriting
agreement. The Company shall not require the Trust to make any representations
or warranties to or agreements with the Company of the underwriters other than
representations, warranties of agreements regarding the Trust, the Registrable
Securities Beneficially Owned, transactions between the Trust and it affiliates
and the Trust's intended method of distribution (including lock-ups) and any
other representation required by law. In addition, the Trust shall cooperate
with the Company in an effort to provide that any such agreement will contain a
provision modifying the indemnification of the underwriter to the

13
<PAGE> 14

effect that the Company will not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities with respect to
any preliminary prospectus, to the extent that any such loss, claim, damage or
liability of such underwriter results from such underwriter having sold
Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus,
if the Company has previously furnished copies thereof to such underwriter and
such final prospectus as then amended or supplemented, has corrected any such
misstatement or omission.

(i) The Trust agrees, if and to the extent so required by the
managing underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of any securities of the Company, during the seven days prior
to and the 90 days after any underwritten registration pursuant to Section 2.1
or 2.2 has become effective, except as part of such underwritten registration,
whether or not the Trust participates in such registration.

(ii) The Company agrees (X) if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for
the purchase of, effect any public sale or distribution of or otherwise dispose
of its Common Stock or securities convertible into or exchangeable or
exercisable for any of such Common Stock during the seven days prior to and the
90 days after any underwritten registration pursuant to Section 2.1 or 2.2 has
become effective, except as part of such underwritten registration and except
pursuant to registrations on Form S-4, S-8, or any successor or similar forms
thereto, and (Y) to cause each holder of its Common Stock purchased from the
Company at any time after the date of this Agreement (other than in a public
offering) to agree not to sell, make any short sale of, loan, grant any option
for the purchase of, effect any public sale or distribution of or otherwise
dispose of such securities during such periods.

(d) Participation in Underwritten Offerings. No Person may
participate in any underwritten offering hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved, subject to the terms and conditions hereof,
by the Company and the Trust and (ii) completes and executes all
questionnaires, indemnities, underwriting agreements and other documents (other
than powers of attorney) required under the terms of such underwriting
arrangements. Notwithstanding the foregoing, no underwriting agreement (or
other agreement in connection with such offering) shall require the Trust (i)
to make any

14
<PAGE> 15

representations or warranties to or agreements with the Company other than
representations and warranties regarding the Trust, the Registrable Securities
Beneficially Owned by the Trust, transactions between the Trust and its
affiliates and the Trust's intended method or methods of distribution and any
other representation required by law or (ii) to make any agreements with the
Company with respect to indemnification of any Person or the contribution
obligations of any Person that would impose any obligation which is broader
than the indemnity furnished by the Trust pursuant to the provisions of Section
2.7.

2.5 Preparation: Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Trust, its underwriter or
underwriters, if any, and their respective counsel, financial advisors and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
each of them such reasonable access during normal business hours to its books
and records and such opportunities to discuss the business of the Company with
its officers, legal counsel and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of the
Trust's and its underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.

2.6 Rights of the Trust. The Company will not file any registration
statement relating to Common Stock under the Securities Act (other than by a
registration on Form S-4 or Form S-8 or in connection with a registration of
securities which are convertible into or exchangeable for Common Stock), unless
it shall first have given to the Trust at least 15 days prior written notice
thereof. Upon making a request within 15 days after such notice, the Trust
shall have the rights provided in Sections 2 2, 2.3, 2.5 and 2.7.

2.7 Indemnification.

(a) Indemnification by the Company. In the event of any registration
of any securities of the Company under the Securities Act, the Company will,
and hereby does, indemnity and hold harmless in the case of any registration
statement filed pursuant to Section 2.1 or 2.2, the Trust, its trustees, its
agents, legal counsel and financial advisors, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls the Trust or any such underwriter
within the meaning of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, to which the Trust, any of its trustees or
any of its agents, legal counsel or financial

15
<PAGE> 16

advisors or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse the Trust, its trustees, its agents, legal counsel or financial
advisors, underwriters and controlling persons for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
Trust or its agents or representatives, as the case may be, specifically
stating that it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Trust, or any such trustee, agent, legal counsel, financial
advisor, underwriter or controlling person and shall survive the transfer of
such securities by the Trust. The indemnity agreement contained in this Section
2.7(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, action or proceeding if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld).

(b) Indemnification by the Trust. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2.3, that the Company shall have received an
undertaking reasonably satisfactory to it from the Trust to indemnify severally
and hold harmless (in the same manner and to the same extent as set forth in
subsection (a) of this Section 2.7) the Company, each director of the Company,
each officer of the Company or its agents or representatives and each other
person, if any, who controls the Company within the meaning of the Securities
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such

16
<PAGE> 17

statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Trust or its agents or
representatives specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by the Trust. The indemnity agreement provided
for in this Section 2.7(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, action or proceeding if such settlement is
effected without the consent of the Trust (which consent shall not be
unreasonably withheld). The parties hereto hereby acknowledge and agree that,
unless otherwise expressly agreed to in writing by the Trust to the contrary,
for all purposes of this Agreement the only information furnished or to be
furnished to the Company for use in any registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto are statements specifically relating to (i)
transactions between the Trust and its affiliates, on the one hand, and the
Company, on the other hand, (ii) the Beneficial Ownership of shares of Common
Stock by the Trust, (iii) the name and address of the Trust, (iv) solely in
offerings that are underwritten offerings, the method or methods of
distribution of the Registrable Securities of the Trust, (v) the identity of
the Trust's trustees, and (vi) a description of the Trust and the reasons for
selling Registrable Securities. The indemnity provided for under this Section
2.7(b) shall be limited in amount to the net amount of proceeds actually
received by the Trust from the sale of Registrable Securities pursuant to such
registration statement.

(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subsections of this Section 2.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subsections of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying

17
<PAGE> 18

party similarly notified, to the extent that the indemnifying party may wish,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability, or a covenant not to sue, in respect of such claim
or litigation. No indemnified party shall consent to entry of any judgment or
enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying
party.

(d) Indemnification Payments. The indemnification required by this
Section 2.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.

(e) Contribution. If the indemnification provided for in the
preceding subsections of this Section 2.7 is unavailable to an indemnified
party or is otherwise insufficient in respect of any expense, loss, claim,
damage or liability referred to therein, then each indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such expense, loss, claim,
damage or liability in such proportion as is appropriate to reflect the
relative benefits and the relative fault of the Company on the one hand and the
Trust or its underwriter or underwriters, as the case may be, on the other in
connection with the distribution of the Registrable Securities and the
statements or omissions which result in any expense, loss, damage or liability,
as well as any other relevant equitable considerations. The relative fault of
the Company on the one hand and of the Trust or its underwriter or
underwriters, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the Trust, by the underwriter or underwriters and
the parties, relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

The Company and the Trust agree that it would not be just and equitable if
contribution pursuant to this subsection (e) were determined by pro rata
allocation (even if the Trust and any

18
<PAGE> 19

underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth in the preceding sentence and
subsection (c) of this Section 2.7, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim.

Notwithstanding the provisions of this subsection (e), neither the Trust
nor any underwriter or underwriters shall be required to contribute any amount
in excess of the amount by which (i) in the case of the Trust, the net proceeds
received by the Trust from the sale of Registrable Securities or (ii) in the
case of an underwriter, the total price at which the Registrable Securities
purchased by it and distributed to the public were offered to the public
exceeds, in any such case, the amount of any damages that the Trust or its
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. No party shall be liable for contribution under
this Section 2.7 except to the extent and under such circumstances as such
party would have been liable to indemnify under this Section 2.7 if such
indemnification were enforceable under applicable law.

3. Anti-Dilution, Representation on Board of Directors.

(a) The Company agrees that as long as the Trust Beneficially Owns
at least 51% of the Company's issued and outstanding Common Stock calculated on
a Fully Diluted Basis, the Company will not, without the prior written consent
of the Trust, issue any common stock, convertible preferred stock, stock
subject to options, warrants or other rights, convertible or exchangeable debt
or equity securities or any other securities which would cause the Beneficial
Ownership interest of the Trust in the Company's Common Stock to fall below 51%
on a Fully Diluted Basis, provided, however, that the agreement contained in
this Section 3(a) shall terminate automatically on the date that is one year
after the consummation of the Initial Sale.

(b) For so long as the Trust Beneficially Owns at least 20% of the
issued and outstanding shares of the Company's Common Stock, the Trust shall
be entitled to nominate, and the Company and the Board of Directors of the
Company shall support the election by the Company's stockholders of, two
individuals designated by the Trust to be members of the Company's Board of

<PAGE> 20

Directors. For so long as the Trust Beneficially Owns at least 5% and less
than 20% of the issued and outstanding shares of the Company's Common Stock,
the Trust shall be entitled to nominate, and the Company and the Board of
directors of the Company shall support the election by the Company's
stockholders of, one individual designated by the Trust to be a member of the
Company's Board of Directors. It is understood and agreed that if the size of
the Company's Board of Directors is increased, the number of individuals that
can be designated by the Trust pursuant to this Section 3(b) shall be
appropriately and proportionately increased. It is understood and agreed that
nothing contained in the Section 3(b) shall limit the ability of the Trust to
vote or cause to be voted shares of Common Stock Beneficially Owned by it in
any manner it sees fit in connection with the election of directors or
otherwise.

4. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings.

Beneficially Own or Beneficial Ownership: With respect to any
securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same
securities by the same holder, securities Beneficially Owned by a
person shall include securities Beneficially Owned by all affiliates
of such Person and all other Persons with whom such person would
constitute a "group" within the meaning of Section 13 (d) of the
Exchange Act and the rules promulgated thereunder (including, in the
case of the Trust, shares of the Common Stock owned by The Nemours
Foundation).

Commission: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.

Common Stock: As defined in Section 1.

Company: As defined in the introductory paragraph of this Agreement.

Delay Period: As defined in Section 2.1(g).

Demand Request: As defined in Section 2.1(a).

Exchange Act: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934 shall
include a

20
<PAGE> 21

reference to the comparable section, if any, of any such similar
federal statute.

Fully Diluted Basis: On any date of determination, the amount of
issued and outstanding shares of the Company's Common Stock adjusted
to give effect to the issuance of all shares of Common Stock issuable
under outstanding stock options, warrants, rights to subscribe for or
purchase shares of Common Stock or similar rights or agreements and
under all outstanding securities (whether equity, debt or otherwise)
of the Company convertible into or exchangeable for Common Stock of
the Company.

Initial Sale: As defined in Section 1.

Person: A corporation, association, partnership, organization,
business, individual, trust, Federal, state or local government or
governmental or political subdivision thereof or governmental agency.

Registrable Securities: The Common Stock and any securities issued or
issuable with respect to any Common Stock by way of stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidations or other reorganization or
otherwise Beneficially Owned by the Trust and its affiliate, The
Nemours Foundation. As to any particular Registrable Securities, once
issued, such securities shall cease to be Registrable Securities when
(a) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and
such securities have been disposed of in accordance with such
registration statement, (b) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (c) a disposition of all of them by the holder thereof
shall not require registration or qualification of them under the
Securities Act or shall be eligible for disposition under Rule 144, or
(d) they shall have ceased to be outstanding.

Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2, including, without
limitation, all registration, filing and NASD fees, all stock exchange
listing fees, all fees and expenses of complying with securities or
blue sky laws, all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, and any fees and
disbursements of underwriters customarily paid by issuers or sellers
of

21
<PAGE> 22

securities, but excluding underwriting discounts and commissions
attributable to the Registrable Securities Beneficially Owned by the
Trust, the fees and expenses of the Trust's legal counsel and
financial advisors, transfer taxes, if any, attributable to the
Registrable Securities Beneficially Owned by the Trust, and with
respect to any offering pursuant to Section 2.1, the "road show"
expenses of the underwriters agreed to be paid by the Trust pursuant
to Section 2.1(c) hereof.

Securities Act: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder,
all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar
Federal statute.

Shares: As defined in Section 1.

Trust. As defined in Section 1.

5. Rule 144. The Company shall timely file the reports required to
be filed by it under the Securities Act and the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder and will take such further action as the Trust may reasonably
request, all to the extent required from time to time to enable the Trust to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as it may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the Commissions. Upon the request of the
Trust, the Company will (a) deliver to the Trust a written statement as to
whether it has complied with the requirements of this Section 5 or (b) take
such action as is necessary to allow transfer of such Registrable Securities in
accordance with the provisions of Rule 144(k) (or any successor provision)
under the Securities Act, if applicable, including without limitation, if
necessary, the issuance of new certificates for such Registrable Securities
bearing a legend restricting further transfer.

6. Amendments and Waivers The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, without the mutual written
agreement or consent of the parties hereto.

22
<PAGE> 23

7. Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of the Trust, by
mail or courier addressed to the Alfred I. duPont Testamentary Trust, 1650
Prudential Drive, Suite 300 duPont Center, Jacksonville, Florida 32207, to the
attention of Winfred L. Thornton, Chairman, or at such other address as it
shall have furnished to the Company in writing, or by facsimile transmission to
the Trust at (904) 858-3124, to the attention of Winfred L. Thornton, Chairman,
or (b) in the case of the Company, by mail or courier addressed to St. Joe
Corporation, 1650 Prudential Drive, Suite 400 duPont Center, Jacksonville,
Florida 32207, to the attention of its General Counsel, or by facsimile
transmission to the Company at (904) 858-5265, to the attention of its General
Counsel, or at such other address, or to the attention of such other officer,
as the Company shall have furnished to the Trust. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours after
such communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including without
limitation, by air courier), when delivered at the address specified above,
provided that any such notice, request or Communication to the Trust shall not
be effective until received.

8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.

9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.

10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS
OF THE STATE OF FLORIDA WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF
LAWS.

11. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.

12. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.

23
<PAGE> 24

13. Severability. If any provision of this Agreement, or the application
of such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provisions to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.

ALFRED I. DUPONT TESTAMENTARY TRUST

By: /s/ W. L. Thornton
--------------------------------------

ST. JOE CORPORATION

By: /s/
--------------------------------------

<PAGE> 1
EXHIBIT 8.01

LATHAM & WATKINS
ATTORNEYS AT LAW
SEARS TOWER, SUITE 5800
CHICAGO, ILLINOIS 60606
TELEPHONE (312) 876-7700
FAX (312) 993-9767

PAUL R. WATKINS (1899-1973)
DANA LATHAM (1898-1974)

January __, 1998

St. Joe Corporation
1650 Prudential Drive
Jacksonville, Florida 32207

Re: Registration Statement on Form S-3

Ladies and Gentlemen:

You have requested our opinion as to the material federal income tax
consequences to Non-U.S. Holders expected to result from the purchase, ownership
and sale or other taxable disposition of the Common Stock (the "Common Stock")
of St. Joe Corporation, a Florida corporation (the "Company"). The facts, as we
understand them, are set forth in the above-referenced Registration Statement on
Form S-3 and exhibits thereto filed with the Securities and Exchange Commission
(as amended, the "Registration Statement"). Capitalized terms not defined herein
have the meanings ascribed to them in the Registration Statement.

Based on such facts, it is our opinion that the material federal income tax
consequences to Non-U.S. Holders expected to result from the purchase, ownership
and sale or other taxable disposition of the Common Stock, under currently
applicable law, are as set forth under the caption "Tax Consequences to Non-U.S.
Holders" on pages [65] thought [67] of the Prospectus included in the
Registration Statement. You have not requested, and we do not express, an
opinion concerning any other tax consequences of ownership of the Common Stock.

This opinion is based on current provisions of the Internal Revenue Code of
1986, as amended, applicable Treasury Regulations, and judicial and
administrative decisions and rulings, all of which are subject to change either
prospectively or retroactively. Also, any
<PAGE> 2
St. Joe Corporation
January __, 1998
Page 2

variation or difference in the facts as incorporated herein might affect the
conclusion stated herein.

We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of the name of our firm under the headings "Tax
Consequences to Non-U.S. Holders" and "Legal Matters" in the Prospectus included
in the Registration Statement.

Very truly yours,

<PAGE> 1

EXHIBIT 23.01

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.

KPMG Peat Marwick LLP

Jacksonville, Florida

January 15, 1998