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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996).
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
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COMMISSION FILE NO. 1-10466
THE ST. JOE COMPANY
(Exact name of registrant as specified in its charter)
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FLORIDA 59-0432511
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 400, 1650 PRUDENTIAL DRIVE 32207
JACKSONVILLE, FLORIDA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (904) 396-6600
Securities Registered Pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, No par value New York Stock Exchange
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Indicate by check mark whether this Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates based on the closing price on March 12, 1999, was $911,451,654.
As of March 12, 1999, there were 88,112,311 shares of Common Stock, no par
value issued and outstanding; an additional 3,585,500 shares were held in
treasury.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 11, 1999, (the "Proxy Statement") are
incorporated by reference in Part III of this Report. Other documents
incorporated by reference in this Report are listed in the Exhibit Index.
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This Form 10-K, including the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, that are not historical facts. Such forward-looking information may
include, without limitation, statements that the Company does not expect that
lawsuits, environmental costs, commitments, contingent liabilities, labor
negotiations or other matters will have a material adverse effect on its
consolidated financial condition, results of operations or liquidity and other
similar expressions concerning matters that are not historical facts, and
projections as to the Company's operating and financial results. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those anticipated in the forward-looking statements.
Important factors that could cause such differences include but are not limited
to contractual relationships, industry competition, regulatory developments,
natural events such as weather conditions, floods and earthquakes, forest fires,
the effects of adverse general economic conditions, changes in the real estate
markets and interest rates, fuel prices and the ultimate outcome of
environmental investigations or proceedings and other types of claims and
litigation. See the information set forth herein in the Sections entitled "Risks
Relating to Real Estate Operations" and "Year 2000 Compliance", and the
information set forth in the sections entitled "Risks Related to Forestry
Operations", "Risks Relating to Transportation Operations", "Environmental
Matters" and "Control by Principal Shareholder" contained in the Company's
Prospectus dated February 11, 1998.
As a result of these and other factors, the Company may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition,
operating results, and stock price. An investment in the Company involves
various risks, including those mentioned above and elsewhere in this report and
those which are detailed from time-to-time in the Company's other filings with
the Securities and Exchange Commission.
Readers should not place undue reliance on forward-looking statements,
which reflect management's view only as of the date hereof. The Company
undertakes no obligation to publicly release revisions to these forward-looking
statements that reflect events or circumstances after the date hereof or reflect
the occurrence of unanticipated events.
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PART I
ITEM 1. BUSINESS
As used throughout this Form 10-K Annual Report, the terms "St. Joe,"
"Company" and "Registrant" mean The St. Joe Company and its consolidated
subsidiaries unless the context indicates otherwise.
St. Joe 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 and
residential development.
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 has focused more closely on the development of its large land
portfolio. As part of this strategy, the Company currently operates or has plans
to operate in the following real estate industry segments:
- Community residential real estate
- Residential real estate services
- Commercial real estate and services
- Resort and leisure
St. Joe also operates in the transportation and forestry segments which are
considered "non-strategic" in light of its focus on real estate. The Company's
sugar operations are also considered a non-strategic business and are classified
as discontinued operations, due to the Company's plan to sell this operation.
St. Joe's strategy is seeking to extract the maximum value out of its
non-strategic assets. As a result:
- In March 1999, the Company announced it intends to sell up to
approximately 800,000 acres of its northwest Florida timberlands and
an auction process is expected to begin in 1999 to sell the first
100,000 acres. The sale of additional parcels, typically 100,000 acres
will be grouped, sized and timed in order to seek maximum value. All
sales are subject to receipt of an acceptable bid, including price,
terms and conditions.
- In December 1998, the Company closed in escrow on the sale of
approximately 48,000 acres of sugarcane lands to The Nature
Conservancy and the federal government for $133.5 million in cash. In
March 1999 the rights to farm the sugar lands were sold for $19.0
million and the $133.5 million escrow funds were released from escrow.
- In May 1996, the Company sold its linerboard mill and container
plants.
- In April 1996, the Company sold the stock of St. Joe Communications,
Inc. and its interests in three cellular limited partnerships.
- The Company continues to evaluate methods and means to extract the
embedded value from its other non-strategic assets, including its
timber and transportation holdings.
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 subsequently expanded into
other lines of business primarily by acquiring companies in financial difficulty
whose assets the Company perceived to be undervalued. Since 1940, the Company
has continued to purchase
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additional parcels of real property located throughout Florida and over time has
acquired a sizable portfolio of land. Included in these holdings are thousands
of acres in northwestern Florida that the Company has identified as potentially
suitable for development over the near to long term. For a presentation of
certain financial data on a segment by segment basis, see Item
7 -- "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMMUNITY RESIDENTIAL REAL ESTATE
The Company's community residential real estate operations include the
development of large-scale mixed-use communities, primarily on Company-owned
lands. 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
development in the future. 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 is developing smaller scale residential
projects that offer productive use 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. ("St. Joe/Arvida"). The principal assets acquired were the "Arvida" name,
proprietary information systems and the Arvida management team. The Company
directs its residential development efforts through St. Joe/Arvida and conducts
the majority of its residential development activity under the Arvida trademark.
The Company initiated home building through St. Joe/ Arvida in 1998.
At the end of 1998, the Company's community development arm, Arvida,
managed a total of 23 communities in various stages of planning and development,
including five communities owned by Arvida/ JMB Partners, L.P.
Five of these large-scale communities require a state Development of
Regional Impact (DRI), which is part of Florida's master plan approval process.
If and when entitled, these five communities could support over 16,000 housing
units. These five communities are:
- Seagrove, Walton County, Northwest Florida:
Seagrove is a 498-acre parcel of land located adjacent to Seaside
and Grayton State Recreation Area. Plans include a southern coastal
resort community with a 160-room resort hotel and a planned community
with approximately 1,140 housing units. As part of the DRI process, a
Preliminary Development Agreement was received in January. Construction
under the Preliminary Development Agreement is scheduled to begin in
July 1999, pending local approvals.
- Southwood, Tallahassee, North Florida:
Southwood is currently undergoing DRI review and a final DRI
hearing is presently scheduled for April 1999.
- Victoria Park, Volusia County, Central Florida:
Located on 1,859 acres in central Florida just off Interstate 4
near DeLand, this master-planned, mixed-use community on Company
controlled property has plans that could support approximately 3,800
housing units with a neo-traditional town center. Planned prices will
range from the low $100,000's to more than $300,000. A new elementary
school is scheduled to open adjacent to Victoria Park for the 2000-2001
school year.
- Riverton, St. Johns County, Northeast Florida:
Riverton is being planned as a New Town that fully embraces the St.
Johns River, on which it is located. South of Jacksonville, Riverton
encompasses over 4,300 wooded acres long-held by the Company. In the
fourth quarter of 1998, the Company agreed to sell 120 acres in Riverton
for a new St. Johns County high school expected to open for the
2000-2001 school year.
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- Ball Tract, St. Johns County, Northeast Florida:
A preliminary market study is underway for this 2,150 acre tract
owned by Gran Central Corporation ("GCC"), a wholly owned subsidiary of
Florida East Coast Industries, Inc. ("FECI"), in which the Company has a
54% interest. The site is located in St. Johns County and includes
frontage on the Intracoastal Waterway.
Of the 13 community development projects that do not require a DRI,
11 are on long-held Company property, one is on optioned land and one is
under a staged take down. These 13 planned community developments could
support approximately 3,500 units upon complete build-out. Five of these
communities, the Retreat, James Island, Summerwood, Woodrun and Camp
Creek Point have infrastructure or housing construction underway and
could support, at full build-out, approximately 750 units.
- St. Johns Golf & Country Club, St. Johns County, Northeast Florida:
This community development project will include a total of 799
housing units and an 18-hole championship golf course. Construction is
expected to begin in 1999 and most homes will be located adjacent to
golf, conservation land, lakes or natural wooded areas. Prices are
expected to range from $130,000 to more than $400,000.
- Camp Creek North, Walton County, Northwest Florida:
A golf resort, Camp Creek North is located approximately four miles
east of Seagrove. Plans include 36 holes of golf, bordered by a
residential village. A development agreement application is scheduled
for submission to the County in May 1999.
- Camp Creek, Walton County, Northwest Florida:
Camp Creek is located approximately three miles east of Seagrove,
with over a mile of beachfront on the Gulf of Mexico. Plans for this
beach resort community include a resort hotel, beach club and
approximately 265 vacation homes.
- Camp Creek Point, Walton County, Northwest Florida:
Camp Creek Point is an exclusive residential community bordering on
Camp Creek Lake. Five lots have been sold at an average price of
$484,000. Five lots remain with prices starting in excess of $400,000.
- The Retreat, Walton County, Northwest Florida:
The Retreat is a planned beach club resort community which will
include 90 single-family housing units on 87 acres with beach access.
Lot prices are expected to average $400,000. Site construction is on
schedule for completion in March 1999 and sales are scheduled to begin
in April 1999.
- Bay New Town, Bay County, Northwest Florida:
A mixed-use development, Bay New Town is planned to be located on
long held Company land. Preliminary plans for initial development
activities are for approximately 800 new housing units.
- Woodrun, Bay County, Northwest Florida:
Woodrun, located in the town of Lynn Haven near Panama City, will
consist of 51 single-family housing units situated around an
environmental preserve. The community will offer single family homes
priced from $170,000 to $240,000. Grand opening is scheduled for March
1999.
- Timberwood, Bay County, Northwest Florida:
Timberwood, a 400 acre residential community located in east Bay
County, is expected to support approximately 325 housing units at full
build-out. Construction is scheduled to begin in late 1999.
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- Summerwood, Bay County, Northwest Florida:
Summerwood, located in Panama City Beach, is an existing community
consisting of 222 homesites in three phases with Phases II and III
encompassing 154 housing units, now under development. The Community
will offer a variety of single family homes priced from $121,000 to
$163,000. All 68 lots of Phase I have been sold. Phase II has presold 13
homes with a Grand Opening for the public set for March 1999.
Development of Phase III is scheduled to begin in June 1999.
- Heron Landing, Bay County, Northwest Florida:
A single-family home community, Heron Landing is planned for
approximately 330 new housing units at build-out located in the Cedar
Grove area of Panama City. Home prices are expected to start at
approximately $100,000, with construction scheduled to begin in late
1999.
- Oak Ridge, Bay County, Northwest Florida:
A residential community located in the Panama City area, Oak Ridge
is planned to include 53 multi-family garden homes. Construction is
expected to begin in early 2000.
- Osprey Landing, Bay County, Northwest Florida:
Osprey Landing, set on 221 acres, is a single-family development
with plans for approximately 240 new housing units at build-out with
prices expected to range from $115,000 to $160,000. Construction is
expected to begin in early 2000.
- James Island, Duval County, Northeast Florida:
James Island is a 194 acre community in Jacksonville located within
three miles of I-95 and close to new elementary and middle schools.
Prices will range from $180,000 to over $300,000. At full build-out the
community is expected to encompass approximately 365 housing units.
Model homes are currently under construction and a Grand Opening is
scheduled for April 1999.
In December 1998, the Company acquired a 26 percent interest in Arvida/JMB
Partners, L.P. The partnership's assets consist primarily of land that is being
developed into five master-planned communities: three in Florida, one near
Atlanta, and one in western North Carolina. The key master-planned community in
the portfolio is Weston, located in Broward County, Florida.
Several of the planned developments described above are in the midst of the
entitlement process or are in the master-planning stage. 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. 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.
RESIDENTIAL REAL ESTATE SERVICES
On July 31, 1998, the Company completed the purchase of Arvida Realty
Services (Arvida Realty), formerly known as Prudential Florida Realty. Arvida
Realty is the largest residential real estate brokerage, sales and services
company in the state of Florida and the fifth largest in the United States
(based on rankings of the trade publication Real Trends).
Arvida Realty offers a complete array of real estate services, including
residential real estate sales, asset management, title and mortgage services,
annual and seasonal rentals and international real estate marketing through its
80 offices located throughout south and central Florida. Between its acquisition
by the Company on July 31, 1998 and December 31, 1998, Arvida Realty closed over
13,000 real estate transactions valued at $2.2 billion. On an annualized basis,
Arvida Realty generated 1998 revenues of more than $150 million.
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COMMERCIAL REAL ESTATE
The Company's commercial real estate operations include the development and
management of commercial and industrial properties through an asset management
agreement with GCC, and through direct subsidiaries and related joint ventures
of the Company. In September, 1998 the Company acquired Goodman Segar Hogan
Hoffler, L.P. ("Goodman Segar GVA"), one of the southeast's largest diversified
commercial real estate services firms.
As of December 31, 1998, GCC had almost 800,000 square feet under
construction, a 65% increase from December 31, 1997, located primarily in its
Jacksonville, Orlando and Miami parks (the "Gran Parks"). GCC also owns
approximately 16,000 acres of unentitled land that management believes may be
suitable for future development, primarily situated adjacent to the Florida East
Coast Railway Company ("FEC") rights-of-way in Florida markets that the Company
believes will have significant growth opportunities.
In late 1997, the Company accelerated its commercial development program by
entering into several partnerships. These partnerships allow the Company to
enter new markets and to pursue development opportunities that were previously
unavailable to the Company.
In December 1997, the Company and Orlando-based CNL Group, Inc. ("CNL")
formed a joint venture to invest in and develop office and industrial properties
in the central Florida area. In February 1998, the Company and Weeks Corporation
("Weeks") completed a transaction whereby the companies each purchased a
one-third interest in the Codina Group, Inc. ("Codina Group"). The Company is
developing commercial properties in south Florida though its investment in the
Codina Group. The Company has also formed partnerships with Hines Interest, L.P.
("Hines") to develop properties in Atlanta, Georgia, and Means Knaus, L.L.C.
("Means Knaus") to develop properties in Texas.
As of December 31, 1998, the Company through all its holdings had over 1.3
million square feet of commercial property under development and .9 million
square feet in pre-development in Florida, Georgia and Texas. Consistent with
the Company's operating strategy, the majority of these facilities are on St.
Joe or GCC property.
Major St. Joe Commercial projects include:
- HomeSide Lending, Inc. -- Jacksonville, Florida: St. Joe is developing
the expansion of HomeSide's corporate campus with a new three-story,
140,000-square-foot building immediately adjacent to HomeSide's existing
headquarters in South Jacksonville. Phase I is scheduled for completion
in August 1999, and Phase II is scheduled to be completed in October
1999.
- CNL Center -- Orlando, Florida: The St. Joe/CNL Realty Group partnership
is at the midpoint in construction of a new 14-story, 335,000-square-foot
building in downtown Orlando, located off Interstate 4 and adjacent to
City Hall. With approximately 70 percent of its space leased, it is
scheduled for completion in late 1999.
- Legacy Point -- Orlando, Florida: St. Joe with St. Joe/CNL Realty Group
purchased a 31-acre site early in the fourth quarter of 1998 with plans
for a four-building, 750,000 square foot Class-A office campus. The
project is located in an area of high traffic with approximately 4,000
feet of linear frontage along Interstate 4. Construction of Phase I, a
six-story, 155,000-square-foot office building is scheduled for
completion in early 2000.
- Westchase Corporate Center -- Houston, Texas: In partnership with
Means/Knaus, St. Joe is developing a six-story Class-A
181,000-square-foot office building located on a 5.4-acre tract with
frontage along Richmond Avenue, two blocks east of the Westbelt.
Completion is set for July 1999.
Projects managed by The St. Joe Commercial Group for Gran Central include:
- Gran Park at SouthPark -- Orlando, Florida: Development plans for this
Gran Central multi-use corporate campus include eight buildings totaling
approximately 850,000 square feet. Phase one, which includes a
four-story, Class-A office building and one office, showroom and
warehouse building, is currently open. Both buildings are experiencing
strong leasing activity, including a lease signed in the
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fourth quarter with Lockheed Martin for over 38,000 square feet of space.
Phase Two, also under construction, includes an additional 150,000
square-foot office building. Completion is scheduled for April 1999.
- Gran Park at Deerwood Park North -- Jacksonville, Florida: St. Joe is
managing and developing Gran Central's Deerwood Park North project,
with plans to develop four Class-A office buildings for a total of
513,000 square feet. Building one, currently under construction, is a
five-story, 139,000-square-foot office building, with completion
scheduled for July 1999.
- Bombardier Capital, Inc.; Gran Park at Jacksonville -- Jacksonville,
Florida: St. Joe is developing for Gran Central a new
one-million-square-foot business park for Bombardier Capital. This
project, which was launched in the third quarter of 1998, is a
component of Gran Central's Gran Park at Jacksonville. Bombardier is
taking all of the first 125,000-square-foot building along with
options for up to 500,000 additional square feet. Construction is
approximately 50 percent complete on the first building with
completion expected in June 1999.
- Gran Park at Jacksonville -- Jacksonville, Florida: Atlantic Mortgage
(AMIC) occupied a new 134,085 square foot Gran Central office,
showroom and warehouse building in the fourth quarter of 1998.
- Beacon Pointe at Weston -- Weston, Florida: Gran Central is in a
venture with Weeks Corporation (NYSE: WKS) in Weston, Florida.
Development plans over five years include four office buildings
totaling 375,000 square feet and a hotel site. Beacon Pointe is
located in the Weston Park of Commerce in west Broward County.
Currently under construction is the first 100,000-square-foot Class-A
office building. Completion is scheduled for summer 1999.
- Beacon Station at Gran Park -- Miami, Florida: Development is underway
at Beacon Station for three Gran Central industrial buildings totaling
540,000 square feet jointly ventured with Weeks Corporation (NYSE:
WKS). The first of the three buildings should be completed in the
spring of 1999, and site preparation is currently underway for the
second and third buildings. Beacon Station is located near Miami
International Airport and entitled for 6.5 million square feet of
office and industrial space.
The Company has acquired interests in commercial properties in Atlanta,
Houston and in south Florida (Boca Raton) for future development.
A summary of the Company's development activity as of December 31, 1998,
follows:
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NET RENTABLE START
STATUS OWNER PROPERTY DESCRIPTION SQUARE FEET DATE
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<S> <C> <C> <C> <C>
Predevelopment......... St. Joe HomeSide Lending, Inc. 140,000 Jan. 1999
Under construction..... St. Joe/CNL CNL Center 335,000 May 1998
Predevelopment......... St. Joe/CNL Legacy Point I 155,000 Feb. 1999
Under construction..... St. Joe/Means Knaus Westchase Corporate Center 181,000 Aug. 1998
Predevelopment......... St. Joe/Hines Deerfield Commons 130,000 March 1999
Under construction..... GCC Gran Park at Jacksonville 222,000 July 1998
Under construction..... GCC Gran Park at Deerwood 139,000 Oct. 1998
Under construction..... GCC Gran Park at SouthPark 282,000 Aug. 1998
Predevelopment......... GCC Gran Park at SouthPark 132,000 TBD
Under construction..... GCC/Weeks Beacon Station 540,000 Sept. 1998
Predevelopment......... GCC/Weeks Beacon Station 360,000 TBD
Under construction..... GCC/Weeks Beacon Pointe at Weston 100,000 June 1998
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Total........................................................... 2,224,000
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In the commercial real estate services sector, the Company manages GCC's
office and industrial building portfolio which consists of 62 properties with
6.2 million rentable square feet. This represents a 10% increase since December
31, 1997. These buildings were 87% occupied at year-end 1998 compared to 82% at
the end of
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1997. Buildings placed in service for more than one year had occupancy of 91% in
1998 compared to 83% in 1997.
On September 24, 1998, the Company acquired Goodman Segar GVA, a commercial
real estate services company based in Norfolk, Virginia. Goodman Segar GVA
manages over 10 million square feet of commercial property in the southeast
United States and during 1998 brokered real estate transactions valued at nearly
$1 billion annually, a 25% increase from 1997. A construction subsidiary also
provides construction services for corporate clients and third-party owners. On
December 21, 1998, the Company purchased the assets of Florida Real Estate
Advisors, Inc. ("FREA"), a commercial real estate services company based in
Tampa, Florida. FREA manages approximately 4 million square feet of commercial
property in central and south Florida.
The acquisitions of Goodman Segar GVA and FREA supplement the Company's
management of the GCC portfolio and diversify real estate markets in which the
Company operates; as described in the table below:
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# OF NET RENTABLE % OF
STATE PROPERTIES SQUARE FEET PORTFOLIO
- ----- ---------- ------------ ---------
<S> <C> <C> <C>
Florida................................................ 86 9,345,000 46%
Virginia............................................... 119 8,464,000 42%
North Carolina......................................... 28 1,692,000 8%
Georgia................................................ 6 832,000 4%
--- ---------- ---
239 20,333,000 100%
=== ========== ===
</TABLE>
These acquisitions also diversify the types of properties managed by the
Company; as set forth in the table below:
<TABLE>
<CAPTION>
# OF NET RENTABLE % OF
TYPE OF PROPERTY PROPERTIES SQUARE FEET PORTFOLIO
- ---------------- ---------- ------------ ---------
<S> <C> <C> <C>
Office................................................. 124 9,002,000 44%
Industrial............................................. 59 6,366,000 31%
Retail................................................. 50 4,792,000 24%
Other.................................................. 6 173,000 1%
--- ---------- ---
239 20,333,000 100%
=== ========== ===
</TABLE>
RESORT AND LEISURE
The Company's resort and leisure operations consist of the development of
hotel and beach club facilities on St. Joe's beachfront property in west Florida
in conjunction with its residential development projects (see "Community
Residential Real Estate") and its ownership in ENTROS, Inc. ("ENTROS").
On February 25, 1998, the Company acquired a 44% interest in ENTROS, a
location-based entertainment company headquartered in Seattle, Washington.
ENTROS creates and produces interactive games in club settings and produces
game-based programming for corporate events. During the fourth quarter of 1998,
ENTROS opened its second location in San Francisco, California; the original
location is in Seattle.
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 nearly 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. Consistent with the
Company's plans to extract value from its non-strategic assets, in March 1999,
the Company announced its intentions to sell approximately 800,000 acres of its
timberlands and an auction process is expected to begin in 1999 to sell the
first 100,000 acres. The sale of additional parcels, expected to be 100,000
acres each, will be grouped, sized and timed in order to seek maximum value. A
study
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commissioned by the Company has identified these timberlands as having little
real estate development potential in the next 15 to 20 years. No assurances can
be given that any of the property can be sold at an acceptable price within an
acceptable time period.
The Company estimates that its standing pine inventory on December 31, 1998
totaled 10.8 million tons and its hardwood inventory totaled 5.9 million tons.
The timberlands are harvested by local independent contractors pursuant to
agreements that are generally renewed annually. The principal product of the
Company's forestry operations is softwood pulpwood, but the Company also
produces and sells softwood and hardwood sawtimber.
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 customers on a cost-efficient
basis. The Company's principal productive timberlands are near the facilities of
The Florida Coast Paper Company, L.L.C. ("FCP") in Port St. Joe, the Company's
major pulpwood 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.
In 1997, the Company renegotiated its 15-year supply contract with FCP 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 in order
to extend growing periods for certain portions of its timber. FCP told the
Company that it shut down its operations on August 15, 1998 due to market
conditions resulting from the Asian economic crisis. In late November, the
Company resumed wood fiber deliveries to FCP, which are being shipped at FCP's
expense to another mill in Panama City, Florida.
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. 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.
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 900,000 acres of its timberlands to
private clubs and state agencies for hunting, 300 acres in north Gadsden County
for the mining of Fullers earth, and 600 acres to Martin Marietta for the mining
of limerock. The Company has not conducted an exhaustive survey of its
timberlands for potential mineral reserves.
TRANSPORTATION
FECI's subsidiary, Florida East Coast Railway Company ("FEC"), operates a
railroad along 350 miles of main line track between Jacksonville and Miami and
along 91 miles of branch track between Ft. 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. To complement and facilitate its railroad
operations, FEC also provides drayage and interstate trucking services through
its wholly owned subsidiary International Transit, Inc. ("ITI").
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 that originates elsewhere in the United
States. In 1998, a significant portion of FEC's revenues were attributable to
traffic that originated on other railroads, whereas a small percentage was
attributable to traffic that originated on FEC but was bound for other
destinations and 48% were attributable to traffic that both originated and
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<PAGE> 11
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 with economic conditions in southern
Florida, rising as the economy of southern Florida expands and declining as it
contracts.
In 1998, FEC principally transported automotive vehicles, aggregates,
cement, trailers-on-flatcars, containers-on-flatcars and basic consumer goods
such as foodstuffs. Movement is relatively stable throughout the year with
heaviest traffic ordinarily occurring during the first and last quarters of the
year.
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.
In addition to its rail and other related services, FEC leases the use of
its rights-of-way to various tenants, including several telecommunications
companies' fiber optics systems, pursuant to long-term leases.
The Company also owns the Apalachicola Northern Railroad Company ("ANRR"),
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. Although it is a common carrier, most of ANRR's business in recent
years consisted 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 FCP's paper
mill in Port St. Joe, Florida. As noted above, the FCP mill shutdown on August
15, 1998. The other items carried by ANRR are tall oil, chemicals, stone and
clay products and recyclable items.
ANRR is a party to a coal delivery contract with Seminole that expires in
2004, but, in January 1999, Seminole halted shipments of coal and Seminole also
filed a lawsuit in circuit court in Gulf County, Florida, seeking to terminate
its contract with ANRR. Management believes ANRR has fully performed its
obligations under the contract and is prepared to complete the contract term.
Pending resolution of the litigation, ANRR's workforce has been reduced
significantly, commensurate with its loss in traffic, but the railroad still
intends to operate a minimal schedule sufficient to provide service to existing
customers.
The Company continues to evaluate methods to extract the embedded value
from its transportation holdings.
DISCONTINUED OPERATIONS
The Company owns Talisman Sugar Corporation ("Talisman"), a grower of
sugarcane located in south central Florida. Talisman owns approximately 48,000
acres of agricultural land and leases approximately 6,000 acres. The Company
also operates a sugar mill at which sugarcane is converted into raw sugar.
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.
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 substantially all of the sugar lands
that the Company owns or leases for $133.5 million in cash. Talisman retained
the right to farm the land through the 2003 crop year. In December 1998, that
sale was closed in escrow pending the resolution of a lawsuit filed in Federal
District Court in Washington, D.C. seeking to invalidate the sale. On March 25,
1999 Talisman entered into an Exchange Agreement ("The Exchange Agreement") with
The South Florida Water Management District; United States Sugar Corporation;
Okeelanta Corporation; South Florida Industries, Inc.; Florida Crystals
Corporation; Sugar Cane Growers Cooperative of Florida (collectively the "Sugar
Companies"); The United States Department of Interior; and The Nature
Conservancy. The Agreement allows Talisman to exit the sugar business. Talisman
assigned its right to farm the land to the Sugar Companies. In return, the
lawsuit was dismissed and the other parties agreed to pay Talisman $19.0
million.
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<PAGE> 12
Talisman retains ownership of the sugar mill and is presently evaluating
the best manner to dispose of the mill. Talisman is responsible for the cleanup
of the mill site. Talisman is obligated to complete certain defined
environmental remediation (the "Remediation"). Approximately $5.0 million of the
purchase price will be held in escrow pending the completion of the Remediation.
Talisman must use its funds to pay the costs of the Remediation. Based upon the
current environmental studies, Talisman does not believe the costs of the
Remediation will exceed the amount held in escrow. Talisman will receive the
fund when all the Remediation is complete. In the event other environmental
matters are discovered, the Sugar Companies will be responsible for the first
$.5 million of the cleanup. Talisman will be responsible for the next $4.5
million, thereafter the parties shall share the costs equally.
In addition, approximately $1.7 million is being held in escrow,
representing the value of the land subject to the Remediation. As Talisman
completes the cleanup of a particular parcel, an amount equal to the land value
on that parcel will be released from escrow.
On May 30, 1996, the Company sold its linerboard mill and container plants.
The Company remains contingently liable for up to $10 million relating to
On-Site Environmental Liabilities, as defined in the sales agreement. The
Company further agreed to reimburse up to $1 million for certain remediation
activities at the linerboard mill, if such activities were required under
environmental laws.
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. SJCI also sold its interests in three remaining cellular
limited partnerships. The Company had previously sold one cellular limited
partnership in 1995. These sales represented the Company's entire Communications
segment.
Approximately $359.3 million of proceeds from these sales was distributed
to shareholders in 1997. See "Item 6 -- Selected Consolidated Financial Data,
note 3."
REGULATION
Real Estate. 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 Development
of Regional Impact ("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 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, in some instances, can significantly affect 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 can delay or prevent the issuance of
permits. Consequently, the Growth Management Act could adversely affect the
ability of Florida developers, including the Company and GCC, to develop real
estate projects.
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<PAGE> 13
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 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 conditions, standards or requirements
that 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 impose significant limitations on the Company's ability to develop its real
estate holdings.
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 may 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.
Forestry. Forestry operations generate air emissions through controlled
burning. The forestry operations are subject to regulation under the Endangered
Species Act ("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.
Transportation. 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
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<PAGE> 14
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; and Jacksonville, Florida. 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 assurances that such liabilities or costs would not have a material
adverse effect on the Company in the future.
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.
RISK RELATING TO REAL ESTATE OPERATIONS
Market Risks. There can be no assurance that the US economy, in general,
or the economy of the Southeast in particular, will continue to experience
positive growth rates or that the United States, in general, or the Southeast in
particular, will not be affected by a recession in the future. Certain
significant expenditures associated with the development, management and
servicing of real estate (such as real estate taxes, maintenance costs, and debt
payments) would generally not be reduced if an economic downturn caused a
reduction in revenues from the Company's properties.
Development Risks. 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.
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
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<PAGE> 15
be jointly or severally liable for the debts and liabilities of the joint
ventures. In addition, the Company's joint venture partners may dedicate time
and resources to commitments and responsibilities outside the joint venture.
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.
COMPETITION
Real Estate. The real estate industry is generally characterized by
significant competition. The Company plans to continue to expand through a
combination of residential and commercial developments throughout the southeast
but concentrated 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 (e.g., when the development is on Company-owned land). There are a
number of residential and commercial developers and real estate services
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 sell homes,
and attract and retain tenants. 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 will 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.
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<PAGE> 16
PATENTS, TRADEMARK AND LICENSES
St. Joe acquired the "Arvida" trademark in 1997 but did not obtain any new
patents or trademarks in 1998. The Company has four pending applications for
trademarks.
SEASONALITY
The Company's operations are generally not seasonal, however the operations
of Arvida Realty are seasonal with the volume of transactions increasing in the
spring and summer due to housing relocations. This seasonality is somewhat
offset by the vacation home (second home) market which is active in the winter
months.
The sugarcane production and processing operations are seasonal with one
sugarcane crop being harvested each year.
CUSTOMERS
The Company is not dependent on any significant customer in its real estate
operations.
ANRR's largest customers have been FCP and Seminole. ANRR's business has
been adversely affected by the significant reductions in businesses and reduced
shipments of commodities transported by it for FCP and Seminole.
The FCP linerboard mill, which was sold in 1996, remains the largest major
customer of the forestry segment pursuant to the wood fiber supply agreement. As
discussed previously, the Company renegotiated its contract with FCP in 1997 to
provide for lower supply obligations in the future. While FCP continues to
accept shipments of fiber pursuant to the agreement, there can be no assurances
FCP will continue to perform under the agreement.
In January 1999, Seminole halted shipments of coal and Seminole also filed
a lawsuit in circuit court in Gulf County, Florida, seeking to terminate its
contract with ANRR.
In the sugar segment, Talisman has a contract with Everglades Sugar
Refinery, Inc. to purchase the entire raw sugar production. This contract runs
through the 1998/1999 crop year and is automatically renewed for each crop
thereafter. Either party can decline to renew by giving notice to the other
party no later than October 1 of the fourth year prior to the termination date.
EMPLOYEES
St. Joe (excluding FECI) had approximately 2,100 employees at December 31,
1998 reflecting a substantial increase in employees from 1997 due to the
acquisitions of Arvida Realty, Goodman Segar GVA and FREA. These employees work
in the following segments:
<TABLE>
<S> <C> <C>
- - Residential real estate..................................... 40
- - Residential real estate services............................ 800
- - Commercial real estate...................................... 360
- - Resorts and leisure......................................... 10
- - Forestry.................................................... 30
- - Transportation (ANRR only).................................. 80
- - Other -- Sugar.............................................. 700
- - Other -- including corporate................................ 80
</TABLE>
170 Talisman employees are covered by collective bargaining agreements and
are represented by the International Association of Machinists and Aerospace
Workers. Talisman believes its relations with its employees to be good.
At December 31, 1998, FECI had approximately 1,036 employees, which
included 1,028 transportation employees. The majority of FEC and ANRR employees
are covered by collective bargaining agreements that set wage levels and
establish work rules and working conditions. Most of FEC's non-salaried
employees are
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<PAGE> 17
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 good.
ITEM 2. PROPERTIES
The material physical properties of the Company at December 31, 1998 are
addressed below. All properties shown are owned in fee simple, except where
otherwise indicated.
CORPORATE FACILITIES
The Company occupies approximately two floors of a four-story building
owned by its subsidiary, GCC in Jacksonville, Florida.
COMMUNITY RESIDENTIAL REAL ESTATE
The Company owns a significant number of acres in northwestern Florida and
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.
Arvida's administrative offices are located in Boca Raton, Florida and are
leased from a third party.
RESIDENTIAL REAL ESTATE SERVICES
The administrative offices of Arvida Realty are located in Clearwater,
Florida. These offices as well as brokerage offices based in 80 locations
throughout central and south Florida are leased from third parties.
COMMERCIAL REAL ESTATE
At December 31, 1998 St. Joe Commercial owned two buildings with 21,000
square feet, of which 85% was leased. On the same date, GCC owned 62 buildings
with 6,152,000 square feet of which 87% was leased.
GCC owns and manages 18,839 acres of land of which 16,414 acres have not
yet been developed. These properties are held for lease, development and/or sale
and are located in fourteen counties across the state of Florida as follows:
<TABLE>
<CAPTION>
COUNTY ACREAGE
------ -------
<S> <C>
Volusia..................................................... 3,584
Flagler..................................................... 3,464
St. Johns................................................... 3,386
Brevard..................................................... 2,546
Dade........................................................ 1,715
Duval....................................................... 1,546
Manatee..................................................... 897
Martin...................................................... 656
St. Lucie................................................... 610
Palm Beach.................................................. 197
Putnam...................................................... 87
Orange...................................................... 85
Broward..................................................... 61
Indian River................................................ 5
------
18,839
======
</TABLE>
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Included above are approximately 1,600 acres that have been or are being
developed into commercial properties. Further, approximately 1,200 acres listed
above are owned by FEC but are not required for the operations of the railroad.
The administrative offices of Goodman Segar GVA and FREA are located in
Atlanta, Georgia and Tampa, Florida, respectively. These offices as well as all
brokerage offices are leased from third parties.
FORESTRY
The Company owns 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. St. Joe Timberland Company's administrative
offices are based in Port St. Joe, Florida and it owns forestry management
facilities, chip plants and pulpwood procurement offices in the following
locations:
<TABLE>
<CAPTION>
FORESTRY MANAGEMENT FACILITIES CHIP PLANTS
------------------------------ ---------------------------
<S> <C>
Albany, Georgia......................................... Lowry, Florida
Hosford, Florida........................................
Newport, Florida........................................ Pulpwood Procurement Office
Port St. Joe, Florida................................... Port St. Joe, Florida
West Bay, Florida.......................................
Wewahitchka, Florida....................................
</TABLE>
TRANSPORTATION
FEC owns three four-story buildings in downtown St. Augustine, Florida that
it uses for its corporate headquarters. Its transportation facilities include
350 miles of main line track between Jacksonville and Miami, Florida, 172 miles
of branch line and yard tracks, and 102 miles of secondary mainline tracks. The
mainline track is constructed of #132 rail and other track materials on concrete
crossties. FEC owns 82 diesel electric locomotives, approximately 2,633 freight
cars, 1,141 trailer units for highway service, and as well as work equipment and
automotive vehicles.
ANRR owns a three-story building in Port St. Joe that is partially used for
its administrative offices. 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, 273 freight cars, and as well as work equipment and
automotive vehicles.
ITEM 3. LEGAL 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 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. The
Company believes that it does not have any liability and continues to vigorously
oppose 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 also been named as a PRP at several USEPA Superfund Sites.
Compliance with federal, state and local laws and regulations is a
principal goal of St. Joe. The Company, through its subsidiaries, has entered
into a number of consent orders with state regulatory agencies to
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<PAGE> 19
remediate certain identified sites. The Company continues to cooperate with
federal, state and local agencies to ensure its facilities are operated in
compliance with applicable environmental laws and regulations. The Company is
not aware of any monetary sanctions to be imposed, 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.
From time to time, the Company is involved in litigation incidental to its
business. In the Company's opinion, no litigation to which the Company is
currently a party, if decided adversely to the Company, is likely to have a
material adverse effect on the Company's results of operation or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
17
<PAGE> 20
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company had 1,263 common stockholders of record as of March 12, 1999.
The Company's Common Stock is quoted on the New York Stock Exchange ("NYSE")
Composite Transactions Tape under the symbol "JOE."
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>
1998
First Quarter............................................... $36 5/8 $30 1/8
Second Quarter.............................................. 34 1/8 26 15/16
Third Quarter............................................... 28 1/16 18 7/8
Fourth Quarter.............................................. 26 3/4 20
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
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
</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.
On March 12, 1999, the sale price of the Company's common stock on the NYSE
was $25 3/8.
DIVIDENDS
The Company paid aggregate annual cash dividends of approximately $.08 per
share to holders of the Common Stock in 1998, and $.07 in 1997 and 1996. 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. The Company
determined in February 1999 that it would be appropriate to change its practice
and pay dividends, if any, annually rather than quarterly. 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.
18
<PAGE> 21
ITEM 6. 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 herein.
The statement of income data with respect to the years ended December 31, 1998,
1997, and 1996 and the balance sheet data as of December 31, 1998 and 1997 have
been derived from the financial statements of the Company included herein, which
have been audited by KPMG LLP. The statement of income data with respect to the
years ended December 31, 1995 and 1994 and the balance sheet data as of December
31, 1996, 1995 and 1994 have been derived from the financial statements of the
Company previously filed with the SEC, and have also been audited by KPMG LLP.
Historical results are not necessarily indicative of the results to be expected
in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 1996 1995 1994
-------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues (1)................................... $392,181 $296,977 $376,693 $277,377 $276,005
Operating expenses................................... 286,973 215,941 210,385 213,847 193,897
Corporate expense.................................... 6,569 6,514 (4,363) 3,052 2,465
Depreciation and amortization........................ 38,893 28,732 27,831 26,870 26,007
Impairment losses.................................... 10,238 -- -- -- --
-------- -------- -------- -------- --------
Operating profit..................................... 49,508 45,790 142,840 33,608 53,636
Other income......................................... 31,921 41,982 41,773 20,681 27,156
-------- -------- -------- -------- --------
Income from continuing operations before income taxes
and minority interest.............................. 81,429 87,772 184,613 54,289 80,792
Income tax expense................................... 36,180 37,971 79,311 20,209 30,273
-------- -------- -------- -------- --------
Income from continuing operations before minority
interest........................................... 45,249 49,801 105,302 34,080 50,519
Minority interest.................................... 19,117 18,401 14,002 12,194 15,827
-------- -------- -------- -------- --------
Income from continuing operations.................... 26,132 31,400 91,300 21,885 34,692
Income (loss) from discontinued operations (2)....... 2,706 4,053 (3,919) 51,933 7,417
Gain on sale of discontinued operations (2).......... -- -- 88,641 -- --
Net income........................................... $ 28,838 $ 35,453 $176,022 $ 73,819 $ 42,109
======== ======== ======== ======== ========
PER SHARE DATA:
Basic
Income from continuing operations.................... $ 0.29 $ 0.34 $ 0.99 $ 0.24 $ 0.38
Earnings (loss) from discontinued operations (2)..... 0.03 0.05 (0.04) 0.57 0.08
Gain on the sale of discontinued operations (2)...... -- -- 0.97 -- --
Net income........................................... $ 0.32 $ 0.39 $ 1.92 $ 0.81 $ 0.46
======== ======== ======== ======== ========
Diluted
Income from continuing operations.................... $ 0.28 .$ 0.34 $ 0.99 $ 0.24 $ 0.38
Earnings (loss) from discontinued operations (2)..... 0.03 0.04 (0.04) 0.57 0.08
Gain on the sale of discontinued operations (2)...... -- -- 0.97 -- --
Net income........................................... $ 0.31 $ 0.38 $ 1.92 $ 0.81 $ 0.46
======== ======== ======== ======== ========
Dividends paid....................................... 0.08 0.07 0.07 0.07 0.07
Special distribution (3)............................. -- 3.67 -- -- --
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments (4).................. 305,395 516,422 819,761 303,500 276,131
Investment in real estate................. 548,101 465,436 425,718 340,316 316,206
Property, plant & equipment, net.......... 358,916 350,072 363,483 418,049 392,594
Total assets.............................. 1,604,269 1,536,768 1,794,811 1,442,952 1,411,923
Total stockholders' equity................ 883,297 906,804 1,196,941 1,016,067 936,982
EBITDA (Gross) (5)........................ 136,428 120,578 110,259 164,776 107,572
EBITDA (Net) (5).......................... 91,960 82,040 78,382 134,508 72,905
</TABLE>
- ---------------
(1) Total revenues includes real estate revenues from brokerage commissions on
sales of real estate, property sales, rental revenue and management service
fees, timber sales and transportation revenues. Net sales for 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 sugar segment, communications segment,
linerboard mill and container plants are shown separately as income (loss)
from discontinued operations for all years presented.
(2) Net operating results of the sugar segment, communications segment,
linerboard mill and container plants are shown separately as income (loss)
from discontinued operations for all years presented. (See Note 5 to the
Consolidated Financial Statements.)
(3) 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.
(4) Includes cash, cash equivalents, marketable securities and short-term
investments.
(5) The Company uses a supplemental performance measure along with net income to
report its operating results. This measure is Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA). EBITDA is not a measure of
operating results or cash flows from operating activities as defined by
generally accepted accounting principles. Additionally, EBITDA 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 EBITDA provides relevant information
about its operations and along with net income, is useful in understanding
its operating results. Depreciation, amortization, interest expense and
income taxes are excluded from EBITDA (Gross) as well as gains on sales of
discontinued operations and gains on the sale of non-strategic land and
other assets. Earnings from discontinued operations have been included in
EBITDA (Gross). Impairment losses have been excluded from EBITDA. EBITDA
(Net) excludes 46% of FECI's and 26% of St. Joe/Arvida's, pre-tax income,
depreciation, amortization and interest representing the equity therein not
owned by St. Joe.
ITEM 7. 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, Item 1. "Business," and Item 2. "Properties,"
included elsewhere herein. The following discussion contains forward-looking
statements. The Company's actual results may differ significantly from those
projected in the forward-looking statements.
OVERVIEW
The St. Joe Company is a diversified company engaged in the real estate,
forestry, transportation, and leisure and resort industries. During the fourth
quarter of 1998, the Company began treating its sugar operations as a
discontinued operation for accounting purposes. Until the second quarter of
1996, the Company was also engaged in communications and the manufacture and
distribution of paper products.
20
<PAGE> 23
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 the forestry and
transportation segments, are also influenced by the general health of the
national economy. The Company's real estate operations are cyclical and are
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 recently underwent 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.
RECENT EVENTS
Consistent with the Company's plans to extract value from its non-strategic
assets, in March 1999, the Company announced its intentions to sell
approximately 800,000 acres of its timberlands and an auction process is
expected to begin in 1999 to sell the first 100,000 acres. The sale of
additional parcels, expected to be 100,000 acres each, will be grouped, sized
and timed in order to seek maximum value. A study commissioned by the Company
has identified these timberlands as having little real estate development
potential in the next 15 to 20 years. No assurance can be given that any of the
property can be sold at an acceptable price within an acceptable time period.
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 substantially all of the sugar lands
that the Company owns or leases for $133.5 million in cash. Talisman retained
the right to farm the land through the 2003 crop year. In December 1998, that
sale was closed in escrow pending the resolution of a lawsuit filed in Federal
District Court in Washington, D.C. seeking to invalidate the sale. On March 25,
1999 Talisman entered into an Exchange Agreement ("The Exchange Agreement") with
The South Florida Water Management District; United States Sugar Corporation;
Okeelanta Corporation; South Florida Industries, Inc.; Florida Crystals
Corporation; Sugar Cane Growers Cooperative of Florida (collectively the "Sugar
Companies"); The United States Department of Interior; and The Nature
Conservancy. The Agreement allows Talisman to exit the sugar business. Talisman
assigned its right to farm the land to the Sugar Companies. In return, the
lawsuit was dismissed and the other parties agreed to pay Talisman $19.0
million.
Talisman retains ownership of the sugar mill and is presently evaluating
the best manner to dispose of the mill. Talisman is responsible for the cleanup
of the mill site. Talisman is obligated to complete certain defined
environmental remediation (the "Remediation"). Approximately $5.0 million of the
purchase price will be held in escrow pending the completion of the Remediation.
Talisman must use its funds to pay the costs of the Remediation. Based upon the
current environmental studies. Talisman does not believe the costs of the
Remediation will exceed the amount held in escrow. Talisman will receive the
fund when all the Remediation is complete. In the event other environmental
matters are discovered, the Sugar Companies will be responsible for the first
$.5 million of the cleanup. Talisman will be responsible for the next $4.5
million, thereafter the parties shall share the costs equally.
21
<PAGE> 24
In addition, approximately $1.7 million is being held in escrow,
representing the value of the land subject to the Remediation. As Talisman
completes the cleanup of a particular parcel, an amount equal to the land value
on that parcel will be released from escrow.
The estimated gain on the combined sale of the land and harvesting rights
is expected to be between $40.0 million to $45.0 million, after tax (unaudited),
subject to finalization of reserves and other adjustments.
RESULTS OF OPERATIONS
Results for 1998 Compared to 1997
The Company reports revenues from real estate transactions, timber sales,
and transportation operations. Real estate revenues are generated from brokerage
commissions from sales of real estate, property sales, rental revenues and
service fees from management of commercial properties. The Company also reports
its equity in earnings of unconsolidated affiliates as revenues. Revenues
increased $95.2 million, or 32.1% from $297.0 million in 1997 to $392.2 million
in 1998. All segments reported increased revenues when comparing 1998 to 1997.
Residential real estate services revenue generated since the acquisition of
Arvida Realty Services as of July 31, 1998 accounted for $79.3 million of this
increase. Commercial real estate revenues increased $3.1 million, or 4.6% as a
result of increased rents, placing new buildings in service and higher lease
rates on buildings already in service. Community residential real estate
revenues from property sales in 1998 increased $.8 million, or 17.0%.
Transportation revenues in 1998 were up $9.7 million, or 5.0% as a result of
increased shipments. Forestry revenues in 1998 increased $2.1 million, or 6.6%,
primarily from bulk land and timber sales. Resort and leisure was up $.2
million.
Operating expenses in 1998 for all segments totaled $287.0 million, an
increase of $71.1 million, or 32.9%, from $215.9 million in 1997. Operating
expenses in the residential real estate services business of Arvida Realty
Services since July 31, 1998 accounted for $73.4 million of the increase.
Residential real estate operating expenses in 1998 increased $6.8 million, or
over 100%. Commercial real estate operating expenses in 1998 decreased $1.6
million, or 3.9% due to the cost of sales on property in 1997. Transportation
operating expenses increased $1.2 million, less than 1%. Forestry operating
expenses in 1998 decreased $9.2 million, or 32.9%. Leisure and resort operating
expenses in 1998 increased $.5 million.
Corporate expense, which represents general and administrative expenses,
remained relatively stable at $6.5 million in 1998. Included in 1998 corporate
expense is prepaid pension income of $12.8 million compared to $10.7 million in
1997. This $2.1 million positive effect on corporate expense was offset by
comparative increases in corporate overhead. Included in the 1997 corporate
expense was $1.3 million of severance costs associated with an early retirement
program implemented that year. Additionally, costs incurred by the Company,
excluding costs expensed directly by FECI, related to corporate transaction
proposals involving FECI and the Company totaling approximately $2.0 million
were expensed in 1997.
Depreciation and amortization increased $10.2 million, or 35.5%, of which
$3.3 million pertained to amortization of goodwill resulting from acquisitions
and the remainder resulted from increased depreciation primarily from buildings
placed into service in 1998.
The Company recorded impairment losses totaling $10.2 million on certain
assets when it was determined that recoverability of their net carrying amount
was impaired. See Transportation Segment and Resort and Leisure Segment.
Other income decreased $10.1 million from $42.0 million in 1997 as a result
of uses of cash for other investment purposes, principally acquisitions of
Arvida Realty Services and Goodman Segar GVA, and the purchase of common shares.
In August 1998, the St. Joe Board of Directors authorized $150 million for
the purchase of outstanding common stock through open-market purchases. At the
end of 1998, the Company had expended $55.1 million of that authorization,
purchasing 2.6 million shares at an average share price of $21.40.
Income tax expense on continuing operations for 1998 totaled $36.2 million,
for an effective rate of 44.5% compared to income tax expense in 1997 totaling
$38.0 million, representing an effective rate of 43.3%. These
22
<PAGE> 25
rates exceed statutory rates primarily because of the 50% excise tax on prepaid
pension cost totaling $ 6.4 million in 1998 and $5.4 million in 1997. The excise
tax on prepaid pension costs totaled $13.2 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 1998 was $28.8 million, or $.31 per diluted share, compared
to $35.5 million, or $.38 per diluted share in 1997. Net income in 1996 totaled
$176.0 million, or $1.92 per diluted share. Results for 1996 included income
from discontinued operations of the mill and container companies of $84.1
million, net of tax, net income from the discontinued sugar operation of $.6
million, and condemnation proceeds, of $60.0 million, net of tax.
Results for 1997 Compared to 1996
Revenues decreased $79.7 million in 1997, or 21.1% from $376.7 million in
1996. Net 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 other residential real estate
increased $3.1 million, from $1.6 million in 1996. Commercial real estate
revenues increased $30.5 million, or 86.9%, from $35.1 million in 1996. Of this
increase, $26.0 million was attributable to increased property sales and $4.5
million was attributable to increased rental revenues. Forestry sales decreased
$25.0 million from $56.7 million in 1996 to $31.7 million in 1997 due primarily
to the FCP linerboard mill shutdown and lower sales under the supply agreement
with FCP. Transportation revenues increased $9.4 million, or 5.1% from $185.5
million, due to increased shipments.
Operating expenses for all segments increased $5.5 million in 1997, or 2.6%
from $210.4 million in 1996. Community residential real estate costs increased
$1.4 million. Commercial real estate expenses increased $26.2 million. Cost of
real estate sales comprised $22.6 million of this increase. Increased operating
costs on rental revenues comprised the remaining $3.6 million increase. Forestry
operating expenses decreased $24.9 million, or 47% as a result of reduced timber
sales and lower cost of sales. Transportation costs increased $2.8 million, or
2.0%.
Corporate expense in 1997 was $6.5 million, an increase of $10.9 million,
compared to 1996. Changes in senior management and increases in staffing to
refocus the direction of the Company were the primary causes of such an
increase, as well as the severance costs and corporate transaction expenses
previously mentioned. Partially offsetting these corporate costs in 1997 is
prepaid pension income of approximately $10.7 million in 1997 versus prepaid
pension income in 1996 of $5.5 million.
Depreciation and amortization increased $.9 million, or 3.2%, from 1996 to
1997.
Other income increased $.2 million in 1997, less than 1% from $41.8 million
in 1996 due to gains on sales and dispositions of assets offset by a decrease in
interest income as a result of lower invested balances during 1997. Invested
balances decreased in 1997 because of distributions to stockholders of $3.67 per
share during the year.
Income tax expense in 1997 totaled $38.0 million in 1997, representing an
effective rate of 43.3% compared to $79.3 million for an effective statutory
rate of 43.0% in 1996.
Net income for 1997 was $35.5 million, or $.38 per diluted share compared
to net income in 1996 of $176.0 million, or $1.92 per diluted share. Results for
1996 included income from discontinued operations of the mill and container
companies of $84.1 million, net of tax, net income from the discontinued sugar
operation of $.6 million, and condemnation proceeds, of $60.0 million, net of
tax.
DISCONTINUED OPERATIONS
As a result of the sale of Talisman in March 1999, sugar operations are reported
as a discontinued operation for all periods presented. Revenues for sugar
decreased $8.3 million, or 16.8% from $49.3 million in 1997 primarily due to
timing of shipments. Operating expenses decreased $5.6 million, or 13.7% from
$40.8 million in 1997. Operating expenses as a percentage of revenues increased
from 82.8% to 85.9% as a result of higher
23
<PAGE> 26
harvesting costs in 1998. Net income for 1998 was $2.7 million as compared to
$4.1 million in 1997. Revenues for sugar in 1997 decreased $5.2 million, or 9.5%
as compared to 1996 due to fewer tons shipped. Operating costs as a percentage
of revenues decreased from 87.3% in 1996 to 82.8% in 1997. The 1996 operating
expenses were unusually high due to the spending of $2.5 million on advertising
and public relations costs related to the opposition and defeat of the proposed
Florida sugar sales tax referendum in 1996.
Residential Real Estate Services
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1998 1997 1996
----- ----- -----
($ IN MILLIONS)
<S> <C> <C> <C>
Revenues.................................................... $79.3 -- --
Operating expenses.......................................... 73.4 -- --
Depreciation and amortization............................... 2.2 -- --
Other income (expense)...................................... .2 -- --
Pre-tax income from continuing operations................... 3.8 -- --
EBITDA, Gross............................................... 6.4 -- --
</TABLE>
On July 31, 1998, the company completed the acquisition of Prudential
Florida Realty ("PFR"). PFR provides complete real estate brokerage services,
including, asset management, rental, property management, property inspection,
mortgage, relocation and title services. In early 1999, this operation's name
was changed to Arvida Realty Services.
Realty brokerage net sales and operating revenues of $79.3 million since
August 1, 1998 are attributable to 13,236 closed real estate transaction sales,
representing $2.2 billion of sales volume, 4,402 title policies issued and
$152.4 million of mortgage loans originated representing 1,349 units. Operating
expenses of $73.4 million are attributable to commissions paid on real estate
transactions and underwriting fees on title policies.
Community Residential Real Estate
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997 1996
---- ---- -----
($ IN MILLIONS)
<S> <C> <C> <C>
Revenues.................................................... $5.5 $4.7 $99.4
Operating expenses.......................................... 10.3 3.5 2.1
Depreciation and amortization............................... .2 .2 .1
Other income (expense)...................................... (.1) -- --
Pre-tax income from continuing operations................... (5.1) 1.0 97.2
EBITDA, Gross............................................... (4.9) 1.2 97.3
</TABLE>
Results for 1998 compared to 1997
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. ("St. Joe/Arvida")
In December, 1998, the Company purchased a 26% interest in Arvida/JMB
Partners, L.P., ("Arvida/JMB") for $46 million. Arvida/JMB is currently
developing five residential communities located in Florida, Georgia and North
Carolina. The Company will record net earnings of this investment under the
equity method.
24
<PAGE> 27
The Company's residential real estate operations currently consist of
community residential development through St. Joe/Arvida and equity in its
Arvida/JMB investment. Total revenues increased $.8 million, or 17.0%, from $4.7
million in 1997. Revenues from real estate sales for 1998 totaled $5.0 million,
an increase of $.6 million, or 13.6% as compared to $4.4 million in 1997. Cost
of real estate sales was $1.3 million for 1998 and 1997, respectively. During
1998, the Company sold 40 lots, located in the Summerwood, Camp Creek, Deerwood
and Woods Phase III developments, all of which are communities in west Florida.
Revenues of $.5 million were also generated from management fees and rental
income in 1998 as compared to $.2 million in 1997.
Other operating expenses were $9.0 million, an increase of $6.8 million
from 1997, greater than 100%, due to non-capitalized start-up costs and internal
overhead related to the development activity in west Florida previously
discussed.
Results for 1997 compared to 1996
Total revenues decreased $94.7 million from $99.4 million in 1997. Real
estate sales decreased $94.8 million, from $99.4 million in 1996. Cost of real
estate sales increased $.9 million, from $.4 million in 1996 to $1.3 million in
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.
Other revenues, generated mostly from rental revenues were $.2 million in 1997
compared to $.1 million in 1996.
Commercial Real Estate
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1998 1997 1996
----- ---- -----
($ IN MILLIONS)
<S> <C> <C> <C>
Revenues.................................................... $68.7 65.7 $35.1
Operating expenses.......................................... 39.7 41.3 15.1
Depreciation and amortization............................... 13.1 8.2 7.7
Other income (expense)...................................... .3 (.4) --
Pre-tax income from continuing operations................... 16.2 15.8 12.3
EBITDA, Gross............................................... 29.5 21.4 17.5
</TABLE>
Results for 1998 compared to 1997
Rental revenues comprised $45.0 million of total commercial revenues in
1998, an increase of $6.4 million, or 16.6% compared to 1997. The increase in
rental revenues for 1998 was caused by a $2.6 million increase in rental rates,
a $3.0 million increase in related occupancy and $2.0 million generated from new
buildings placed into service since 1997. Partially offsetting these increases
were reductions in revenues due to net reductions in rent recoverable from
tenants. Operating expenses on rental revenues, excluding depreciation, were
$17.8 million as compared to $15.1 million in 1997, an increase of $2.7 million,
or 17.9% mostly attributable to increased expenses including management expenses
and increased property taxes on existing buildings. New buildings placed into
service since last year contributed an additional $.8 million in operating
expenses.
Revenues from sales of land and buildings totaled $8.0 million, a decrease
of $18.9 million, as compared to $26.9 million in 1997. Total cost of sales in
1998 was $2.6 million as compared to $22.6 million in 1997.
Commercial real estate services revenues generated by Goodman Segar GVA
since its acquisition in September, 1998 totaled $14.5 million. Costs associated
with these fees totaled $9.5 million.
Equity in earnings of unconsolidated subsidiaries, consisting of the
Company's investments in Codina, Deerfield and CNL, totaled $1.2 million in 1998
as compared to $.1 million in 1997.
25
<PAGE> 28
General and administrative expenses for the commercial/industrial segment,
which are included in operating expenses, totaled $9.8 million, an increase of
$6.1 million, greater than 100%, from $3.7 million in 1997. Expenses associated
with Goodman Segar GVA accounted for $4.0 million of this increase. The
remaining $2.0 million represents increased asset management costs.
Depreciation and amortization increased $4.9 million, or 60.0% to $13.1
million from $8.2 million in 1997 due to new buildings placed in service.
During 1998, five office, and office/showroom/warehouse buildings were
placed in service, adding 610,000 leasable square feet. Three of these buildings
were located in Jacksonville, Florida and two were located in Orlando, Florida.
As of December 31, 1998 there are 66 operating buildings with total rentable
square footage of 6,223,000 square feet. Occupancy levels overall are at an
average of 87% compared to 82% at December 31, 1997. Under construction at
December 31, 1998 is 1.3 million square feet of office and industrial space
located in Florida and Texas. Additionally, approximately .4 million square feet
is in the predevelopment stage and are expected to commence construction in the
first quarter of 1999.
Results for 1997 Compared to 1996
Rental revenues comprised $38.6 million of total segment revenues, an
increase of $4.5 million, or 13.2%, from $34.1 million in 1996. Operating
expenses attributable to rental revenues were $18.8 million, an increase of
24.5% compared to $15.1 million in 1996. The increase in expenses in 1997 was
primarily due to additional property taxes on new buildings placed in service in
1997 and additional operating and management costs. Depreciation and
amortization was $8.2 million, or $.5 million higher than in 1997 due to new
buildings placed into service.
During 1997 eight buildings were placed in service adding approximately
973,000 leasable square feet. In 1997, land and building sales totaled $26.9
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 land and building sales was $22.6 million in 1997. At December 31,1997, GCC
had 59 buildings in service with approximately 5.6 million square feet of
rentable space. At December 31, 1996 GCC had 55 commercial/industrial buildings
in service with approximately 4.7 million square feet of rentable space.
Forestry
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1998 1997 1996
----- ----- -----
($ IN MILLIONS)
<S> <C> <C> <C>
Revenues.................................................... $33.8 $31.7 $56.7
Operating expenses.......................................... 18.8 28.0 52.9
Depreciation and amortization............................... 2.4 1.4 1.5
Other income (expense)...................................... 2.2 4.4 2.1
Pre-tax income from continuing operations................... 14.8 6.7 4.4
EBITDA, Gross............................................... 17.1 6.3 5.6
</TABLE>
Results for 1998 compared to 1997
Total timber revenues increased $2.1 million, or 6.6 %, from $31.7 million
in 1997 to $33.8 million in 1998. Bulk land and timber sales were $2.8 million
in 1998. Total sales to FCP were $19.1 million in 1998 compared to $20.6 million
in 1997. Since August 1998 the FCP mill has been shutdown, and there is no
indication when it will reopen. Under the terms and conditions of the amended
fiber supply agreement with FCP, the Company began redirecting the volumes of
pulpwood from the FCP mill in Port St. Joe to another mill, resuming sales of
pulpwood in November 1998. Sales to other customers totaled $12.0 million
(474,085 tons) in 1998 compared to $11.1 million (409,912 tons) in 1997. Sales
to other customers were higher this year as the Company experienced more lump
sum bid timber sales due to increased demand in the first quarter of 1998.
26
<PAGE> 29
Cost of timber sales, excluding depletion, decreased $8.5 million, or 32.9%
from $25.8 million in 1997 to $17.3 million in 1998. Cost of sales as a
percentage of sales was 51.2% in 1998 compared to 81.4 % in 1997 due primarily
to bulk land sales with a low basis and less timber being purchased from outside
sources. The Company procured approximately 13,700 tons of wood in 1998 to
fulfill the requirements of its timber supply agreement with FCP compared to
180,477 tons in 1997. The cost of sales of procured wood was approximately
$30/ton in 1998 and in 1997. Cost of sales of timber grown on Company land and
sold to FCP decreased by $5/ton to approximately $21/ton as a result of a
different product mix of sales to FCP, shifting from chips to pulpwood. The cost
of sales for timber sold to other customers also decreased this year due to
sales of bid timber, which do not require cutting and hauling. Cost of sales on
sales to other customers was $10/ton, which was approximately $8/ton less than
last year.
Other general operating expenses were $2.3 million, relatively consistent
with 1997. General operating expenses in 1997 included $.5 million of
nonrecurring expenses related to severance payments made to terminated
employees. Included in 1998 is a nonrecurring payment of $.4 million for
settlement of property tax litigation.
Other income for 1998 and 1997 was derived primarily from various land
leases, such as hunting leases, not related to the sale of timber. Other income
in 1997 also included $1.8 million from gains on sales of machinery and
equipment.
Results for 1997 compared to 1996
Total timber revenues decreased $25.0 million, or 44.1%, from $56.7 million
in 1996 to $31.7 million in 1997. This decrease is attributable to a FCP
linerboard mill shutdown which lasted from April 1997 through September 1997 and
to decreased sales as a result of the renegotiated terms of the wood fiber
supply agreement with FCP. Cost of sales decreased 48.2% from $52.4 million in
1996 to $27.1 million in 1997 due to declining sales. Cost of sales as a
percentage of sales also improved because the Company sold more timber grown by
it with higher margins and less procured wood. General operating costs increased
$.4 million from $1.9 million in 1996 to $2.3 million in 1997 primarily due to
severance payments of approximately $1.2 million paid to 62 terminated
employees, offset by reductions in ongoing staffing levels.
On August 25, 1997, the Company renegotiated certain terms of its wood
fiber supply agreement with FCP. Under the new agreement, the Company will
supply 700,000 tons per year from May 30, 1998 through December, 2011 with two
five-year renewal periods at the option of FCP. Under the previous agreement, up
to 1.6 million tons per year were to be provided to FCP.
Transportation
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C>
Revenues.................................................... $204.7 $195.0 $185.5
Operating expenses.......................................... 144.2 143.0 140.2
Depreciation and amortization............................... 18.8 18.6 18.5
Impairment loss............................................. 8.0 -- --
Other income (expense)...................................... .8 2.8 2.0
Pre-tax income from continuing operations................... 34.5 36.2 28.8
EBITDA, Gross............................................... 61.0 55.9 47.6
</TABLE>
The Company's transportation operations consist of Florida East Coast
Railway Company ("FEC"), Apalachicola Northern Railroad Company ("ANRR") and
International Transit, Inc. ("ITI").
Results for 1998 compared to 1997
Operating revenues in the transportation segment were $204.7 million in
1998, an increase of $9.7 million, or 5.0 % compared to 1997. Total FEC
transportation operating revenues were $194.8 million, an
27
<PAGE> 30
increase of $9.8 million from $185.0 million in 1997. Approximately $3.8 million
of this increase was attributable to fiber optic income, which includes a $3.0
million gain recognized in the second quarter of 1998 related to a non-monetary
exchange negotiated with Williams Network in which FEC received the right to
control 36 fiber optic communications fibers along FEC's right-of-way, in
exchange for the surrender of certain future operating lease payments. The rail
segment of FEC contributed a $3.0 million increase in revenues compared to 1997
and the trucking segment contributed a $2.9 million increase. The increase in
rail revenues was primarily attributed to an 11.1% increase in shipments of
aggregate products and a 24.5% increase in automobile carload traffic caused by
a robust Florida economy. This was offset by a 4.8% decrease in shipments of
intermodal traffic and other types of carload traffic.
ANRR's transportation revenues remained relatively constant at $9.9 million
during 1998. As previously discussed, the FCP mill shut down again in August
1998. In addition, ANRR's largest customer, Seminole Electric Cooperative, Inc,
halted shipments of coal in January 1999, and filed a lawsuit in circuit court
in Gulf County, Florida, seeking to terminate its contract with ANRR to provide
transportation of coal from Port. St. Joe to Chattahoochee, Florida. Although
the contract between ANRR and Seminole extends until November 2004, Seminole has
asked the court to terminate the agreement with ANRR. ANRR has fully performed
its obligations under the contract and is prepared to complete the contract
term. ANRR's workforce has been reduced significantly, commensurate with its
loss of traffic, but the railroad intends to operate a minimal schedule
sufficient to provide service to existing customers.
Overall operating expenses increased to $144.2 million, a $1.2 million
increase, less than 1%, from $143.0 million in 1997. Transportation expenses
related to FEC increased $1.5 million, ANRR transportation expenses decreased
$.1 million and general and administrative expenses decreased $.2 million. The
increase in FEC's transportation expenses primarily relates to increases in
repair and maintenance cost, train operations cost and ancillary transportation
services offset by decreases in fuel expense of approximately $2.1 million.
As a result of the uncertainty surrounding future operations of ANRR,
management has determined that the existing carrying value of ANRR's net assets
should be reduced by approximately $8.0 million to management's estimate of fair
value, and accordingly, an impairment loss totaling that amount has been
recorded in the fourth quarter of 1998.
Results for 1997 compared to 1996
Revenues in the transportation segment were $195.0 million in 1997, an
increase of 5.1% over 1996 operating revenue of $185.6 million. Total FEC
transportation operating revenues increased $12.0 million, or 6.9%, from $173.0
million in 1996 to $185.0 million in 1997. This increase was attributable to
significant increases in shipments of rock, intermodal and carload traffic
handled in 1997 versus 1996. Traffic increased by approximately 35,600
shipments, or 7.8%, in 1997, reflecting the strong Florida economy. ANRR's
operating revenues were $10.0 million in 1997, $2.5 million lower than in 1996
due to the five-month shutdown of the FCP linerboard mill, its largest customer.
Operating expenses for this segment were $143.0 million, $2.8 million, or 2%
higher than in 1996 as a result of a $2.5 million decrease in casualty insurance
costs and overall reductions in operating expenses. Casualty and insurance costs
in 1996 included an accrual for an adverse legal judgment against the Company of
approximately $2.2 million, which was subsequently reversed on appeal in 1997.
General operating expenses in 1997 included special charges of $3.5 million for
expenses concerning the various proposals from the Company regarding FECI.
28
<PAGE> 31
Resort and Leisure
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Total revenues.............................................. $ .2 $ -- --
Operating expenses.......................................... .7 .1 --
Depreciation and amortization............................... -- -- --
Impairment loss............................................. 2.2 -- --
Other income(expense)....................................... -- -- --
Pre-tax income from operations.............................. (2.7) (.1) --
EBITDA, Gross............................................... (.3) -- --
</TABLE>
The resorts and leisure segment continues to work on land planning and
concept designs for hotel and beach club facilities on the Company's beachfront
property in west Florida. In January 1999, the Company sold its golf management
operation for a loss of $2.2 million, which was recorded as an impairment loss
in 1998.
FINANCIAL POSITION AND CAPITAL RESOURCES
Total cash and cash equivalents decreased 75.3% from $158.5 million at
December 31, 1997 to $39.1 million at December 31, 1998 primarily as a result of
investments in business acquisitions and joint ventures totaling $148.9 million
and repurchase of common stock, net of reissuances, totaling $54.5 million. The
Company also made capital expenditures for real estate and property, plant and
equipment totaling $135.1 million. These expenditures were primarily funded from
operations and existing investments. Total unrestricted cash, cash equivalents,
short-term investments and marketable securities were $305.4 million at December
31, 1998.
Stockholders' equity at December 31, 1998 was $9.90 per share, an increase
of $.01 per share from December 31, 1997. The increase in stockholders' equity
attributable to net income of $28.8 million and other accumulated comprehensive
income of $8.6 million, was offset by the repurchase of common stock and payment
of dividends.
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. On March 10, 1999, the Company established a revolving line of
credit with Bankers Trust for $65 million to be used for working capital
purposes. The revolving line of credit bears interest at LIBOR plus 50 basis
points and matures on January 14, 2000. As of March 15, 1999 there was
approximately $50 million available under this revolving line of credit.
YEAR 2000 COMPLIANCE
The Company has created a Year 2000 Project Team to address potential
problems within the Company's operations which could result from the century
change in the Year 2000. The project team is led by the Senior Vice President of
Finance and consists of representatives of the Company's Information Systems
Departments or financial departments for each subsidiary, and has access to key
associates in all areas of the Company's operations. The project team has used
and continues to use outside consultants on an as-needed basis.
As part of the project the Company has been examining all software
information technology ("IT") and non-IT systems which may have embedded
technology. The project team's methodology for addressing both the IT and non-IT
areas consists of five phases:
(1) an Assessment Phase to inventory computer based systems and
applications (including embedded systems) and to determine what revisions
or replacements would be necessary for Year 2000 Readiness;
29
<PAGE> 32
(2) a Remediation Phase to repair or replace components to enable them
to successfully transition to the Year 2000;
(3) a Test Phase to test components after remediation to verify that
the Remediation Phase was successful;
(4) an Implementation Phase to transition the Year 2000 Ready systems
back into production environment;
(5) and a Check-off Phase to formally signoff that a component,
system, process or procedure is Year 2000 Ready.
Excluding the Company's FECI subsidiary, which is discussed separately
below, management believes that the five phases are currently approximately 95%,
65%, 45%, 40% and 30% complete, and that all critical systems will be Year 2000
Ready by the end of 1999.
The Company expects to spend up to $1.0 million to address and modify Year
2000 problems, excluding FECI. Approximately $.21 million has been spent by the
Company through December 31, 1998.
As a part of the Year 2000 review, the Company is examining its
relationships with certain key outside vendors and others with whom it has
significant business relationships to determine to the extent practical the
degree of such parties' Year 2000 compliance. The Company has received or is
seeking assurance from several third party vendors that they are or will be Year
2000 Ready. Management believes that the failure of any other third party
vendors to be Year 2000 Ready will not have a material adverse effect on the
Company.
Should the Company or a third party with whom the Company deals have a
systems failure due to the century change, the Company believes that the most
significant impact would likely be the inability to timely process its payments
for services and receipts of revenues. The Company does not expect any such
impact to be material.
The Company is in the process of developing contingency plans for Year 2000
matters. These plans include identification of and communications with, mission
critical vendors, suppliers, service providers and customers. These plans also
include preparations for the Year 2000 event as well as for the potential
problems that could occur with major suppliers or customers of the Company that
could impact Company operations.
The Company has been advised by FECI that its Year 2000 Project efforts are
proceeding on schedule and it anticipates that all "mission critical" systems
should be Year 2000 capable by the third quarter of 1999.
FECI expects to spend approximately $7.2 million for its Year 2000 effort
of which approximately one half has been committed or already expended through
December 31, 1998. FECI has informed St. Joe that the Year 2000 problem is not
expected to materially affect its day-to-day operations, nor will it adversely
affect its financial position or results of operations. FECI has informed St.
Joe that it believes its Year 2000 planning effort is adequate to address all
major risks. FECI has implemented reasonable measures, engaged experienced Year
2000 consultants and personnel, and established a high level of awareness
concerning Year 2000 issues. FECI believes that it has provided an environment,
which will enable it to adequately review and update its systems to become Year
2000 ready by the end of 1999.
ITEM 7A. MARKET RISK
The Company is exposed to the impact of interest rate changes and changes
in the market value of its investments.
POLICIES AND PROCEDURES
In the normal course of business, the Company follows established policies
and procedures to manage its exposure to changes in interest rates and
fluctuations in the value of its marketable securities.
30
<PAGE> 33
The Company's objective in managing its exposure to interest rate changes
is to limit the impact of interest rate changes on earnings and cash flow. To
achieve this objective, the Company invests primarily in low risk short-term
fixed income securities.
The Company's objective in managing its exposure to market value changes is
to limit the impact of market value changes on its marketable securities. To
achieve this objective, the Company has entered into a series of put and call
options on its equity securities. The cost of the purchased put is offset by the
premium earned on the sold calls. This hedging strategy creates an equity collar
that locks in the market value of the equity securities within a specified
range.
It is the Company's policy to enter into hedging transactions only to the
extent considered necessary to meet its objectives stated above. The Company
does not enter into any such transactions for speculative purposes.
QUANTITATIVE DISCLOSURES
The table below presents principal amounts and related weighted average
interest rates by year of maturity for the Company's investment portfolio. The
weighted average interest rates for the various fixed rate investments are based
on the actual rates as of December 31, 1998.
<TABLE>
<CAPTION>
EXPECTED CONTRACTUAL MATURITIES
--------------------------------------------- FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
------- ------ ------- ------- ------ ---------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term Investments
Trading:
Tax Exempt Municipal Bonds......... $19,253 $2,724 $12,850 $ -- $ -- $ -- $34,827 $34,765
Wtd. Avg. Interest Rate.......... 4.18% 5.69% 6.22% 5.05%
Available-For-Sale:
Commercial Paper................... 17,613 17,613 17,613
Wtd. Avg. Interest Rate.......... 4.85% 4.85%
Tax Exempt Municipal Bonds......... 12,811 12,811 12,817
Wtd. Avg. Interest Rate.......... 3.65% 3.65%
Other Investments
Available-For-Sale:
U.S. Government Securities......... 1,000 2,000 600 3,600 3,707
Wtd. Avg. Interest Rate.......... 6.63% 7.04% 7.25% 6.96%
Tax Exempt Municipal Bonds......... 4,557 10,582 13,721 3,569 16,776 49,205 50,791
Wtd. Avg. Interest Rate.......... 5.00% 5.47% 5.78% 5.81% 7.25% 5.62%
Equity Securities and Options...... 1,681 143,976
Other Debt Securities.............. 2,062 2,062 2,528
Wtd. Avg. Interest Rate.......... 5.00% 5.00%
</TABLE>
As the table incorporates only those exposures that exist as of December
31, 1998, it does not consider exposures or positions that could arise after
that date. As a result, the Company's ultimate realized gain or loss will depend
on future changes in interest rate and market values.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements on page F-2 to F-24, inclusive and the Independent
Auditors' Report on page F-1 are filed as part of this Report and incorporated
herein by reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
31
<PAGE> 34
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information to be set forth in the section
entitled "Election of Directors" in the definitive proxy statement involving the
election of directors in connection with the Annual Meeting of Stockholders of
St. Joe to be held on May 11,1999 (the "Proxy Statement"), which section is
incorporated herein by reference. The Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after December 31,
1998, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information to be set forth in the sections
entitled "Executive Compensation" in the Proxy Statement, which sections are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information to be set forth in the sections
entitled "Common Stock Ownership of Certain Beneficial Owners" and "Common Stock
Ownership of Management" in the Proxy Statement, which sections are incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information set forth in the section entitled
"Certain Transactions" in the Proxy Statement, which section is incorporated
herein by reference.
32
<PAGE> 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. Financial Statements
The financial statements listed in the accompanying Index to Financial
Statements and Financial Statement Schedules and Independent Auditors'
Report are filed as part of this Report.
2. Financial Statement Schedules
The financial statement schedules and Independent Auditors' Report
listed in the accompanying Index to Financial Statements and Financial
Statement schedules are filed as part of this report.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this Report.
(B) Reports on Form 8-K
None
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Item 14(A) 1. And 2.
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Balance Sheets................................. F-2
Consolidated Statements of Income........................... F-3
Consolidated Statements of Changes in Stockholders'
Equity.................................................... F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to Consolidated Financial Statements.................. F-6
Independent Auditors' Report - Financial Statement
Schedules................................................. S-1
Schedule II -- Valuation and Qualifying Accounts............ S-2
Schedule III -- Real Estate and Accumulated Depreciation.... S-3
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission on the
schedule or because the information required is included in the Consolidated
Financial Statements, and the Notes to the Consolidated Financial Statements.
33
<PAGE> 36
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C> <C>
2.01 -- Limited Partnership Agreement of St. Joe/Arvida Company,
L.P. (incorporated herein by reference to Exhibits filed
with the Company's Prospectus filed February 11, 1998 under
Rule 424 (b))
2.02 -- Agreement of Limited Partnership of St. Joe/CNL Development,
Ltd. (incorporated herein by reference to Exhibits filed
with the Company's Prospectus filed February 11, 1998 under
Rule 424 (b))
2.03 -- Stock Purchase Agreement dated as of September 1, 1995
between St. Joe Industries Inc. and TPG Communications, Inc.
(incorporated herein by reference to 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 in 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)
2.06 -- Agreement for Purchase and Sale of Assets and Stock between
St. Joe Real Estate Services, Inc. et.al. and CMT Holding,
Ltd. (incorporated herein by reference to Exhibits filed in
the Registrant's Quarterly Report on Form 10-Q for the
second quarter ended June 30, 1998)
2.07 -- Purchase Agreement by and among Dominion Capital, Inc.,
Goodman-Segar-Hogan-Hoffler, Inc et.al. and St. Joe
Commercial Property Services, Inc dated September 24, 1998
(incorporated herein by reference to Exhibits filed in the
Registrant's Quarterly Report on Form 10-Q for the third
quarter ended September 30, 1998)
2.08 -- Purchase and Sale Agreement by and between Talisman Sugar
Corporation and The Nature Conservancy*
2.09 -- Credit Agreement among St. Joe Capital I, Inc. and Bankers
Trust Company dated March 9, 1999*
3.01 -- Articles of Incorporation, as amended (incorporated herein
by reference to Exhibits filed with the Company's Prospectus
filed February 11, 1998 under Rule 424 (b))
3.02 -- Articles of Amendment dated January 8, 1998 (incorporated
herein by reference to Exhibits filed with the Company's
Prospectus filed February 11, 1998 under Rule 424 (b)
3.03 -- Amended and Restated Bylaws dated February 23, 1999*
3.04 -- Restated and Amended Articles of Incorporation of the St.
Joe Company dated May 12, 1998 (incorporated herein by
reference to Exhibits filed in the Registrant's Quarterly
Report on Form 10-Q for the first quarter ended March 31,
1998
4.01 -- Registration Rights Agreement between the Registrant and the
Alfred I. DuPont Testamentary Trust, dated December 16, 1997
(incorporated herein by reference to Exhibits filed with the
Company's Prospectus filed February 11, 1998 under Rule 424
(b))
10.01 -- Employment Agreement of Peter Rummell, dated January 7,
1997(incorporated herein by reference to Exhibits filed with
the Company's Prospectus filed February 11, 1998 under Rule
424 (b))
10.02 -- Employment Agreement of Robert M. Rhodes, dated November 5,
1997 (incorporated herein by reference to Exhibits filed
with the Company's Prospectus filed February 11, 1998 under
Rule 424 (b))
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C> <C>
10.03 -- Employment Agreement of J. Malcolm Jones, dated February 26,
1997 (incorporated herein by reference to Exhibits filed
with the Company's Prospectus filed February 11, 1998 under
Rule 424 (b))
10.04 -- Employment Agreement of Michael F. Bayer, dated February 1,
1997 (incorporated herein by reference to Exhibits filed
with the Company's Prospectus filed February 11, 1998 under
Rule 424 (b))
10.05 -- Form of Severance Agreement (incorporated herein by
reference to Exhibits filed with the Company's Prospectus
filed February 11, 1998 under Rule 424 (b))
10.06 -- Employment Agreement of Kevin M. Twomey, dated January 27,
1999*
21.01 -- Subsidiaries of The St. Joe Company*
23.01 -- Consent of Independent Accountants*
27.01 -- Financial Data Schedule (for SEC use only)*
99.01 -- Supplemental Calculation of Selected Consolidated Financial
Data*
</TABLE>
- ---------------
* Filed herewith
35
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE ST. JOE COMPANY
By: KEVIN M. TWOMEY
------------------------------------
Kevin M. Twomey
President, Chief Financial Officer
(Principal Financial Officer)
Date: March 25, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/S/ PETER S. RUMMELL Chairman of the Board, Chief March 25, 1999
- ------------------------------------- Executive Officer
Peter S. Rummell
/S/ KEVIN M. TWOMEY President, Chief Financial Officer March 25, 1999
- ------------------------------------- (Principal Financial Officer)
Kevin M. Twomey
/S/ JANNA L. CONNOLLY Controller March 25, 1999
- -------------------------------------
Janna L. Connolly
/S/ MICHAEL L. AINSLIE Director March 25, 1999
- -------------------------------------
Michael L Ainslie
/S/ JACOB C. BELIN Director March 25, 1999
- -------------------------------------
Jacob C. Belin
/S/ RUSSELL B. NEWTON, JR. Director March 25, 1999
- -------------------------------------
Russell B. Newton, Jr.
/S/ JOHN J. QUINDLEN Director March 25, 1999
- -------------------------------------
John J. Quindlen
/S/ WALTER L. REVELL Director March 25, 1999
- -------------------------------------
Walter L. Revell
/S/ FRANK S. SHAW, JR. Director March 25, 1999
- -------------------------------------
Frank S. Shaw, Jr.
/S/ WINFRED L. THORNTON Director March 25, 1999
- -------------------------------------
Winfred L. Thornton
/S/ JOHN D. UIBLE Director March 25, 1999
- -------------------------------------
John D. Uible
</TABLE>
36
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
The St. Joe Company:
We have audited the accompanying consolidated balance sheets of The St. Joe
Company and subsidiaries as of December 31, 1998 and 1997, 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, 1998.
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 The St. Joe
Company and subsidiaries as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Jacksonville, Florida
February 23, 1999
F-1
<PAGE> 40
THE ST. JOE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 39,108 $ 158,478
Short-term investments.................................... 65,285 51,034
Accounts receivable....................................... 38,691 40,108
Inventory................................................. 11,006 12,382
Other assets.............................................. 13,234 8,563
---------- ----------
Total current assets.............................. 167,324 270,565
INVESTMENTS AND OTHER ASSETS:
Marketable securities..................................... 201,002 306,910
Prepaid pension asset..................................... 53,683 40,861
Other assets.............................................. 9,301 7,995
Investment in unconsolidated affiliates................... 70,235 7,200
Goodwill.................................................. 123,389 12,954
Net assets of discontinued operations..................... 72,318 74,775
---------- ----------
Total investments and other assets................ 529,928 450,695
Investment in real estate................................... 548,101 465,436
Property, plant & equipment, net............................ 358,916 350,072
---------- ----------
Total assets...................................... $1,604,269 $1,536,768
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 26,497 $ 13,676
Accrued liabilities....................................... 43,173 29,730
Income tax (receivable) payable........................... (1,212) 2,150
Current portion of long-term debt......................... 24,953 --
---------- ----------
Total current liabilities......................... 93,411 45,556
Reserves and other liabilities.............................. 11,946 13,643
Deferred income taxes....................................... 289,359 272,299
Long-term debt.............................................. 9,947 --
Minority interest in consolidated subsidiaries.............. 316,309 298,466
Commitments and contingencies (Notes 10, 15)
---------- ----------
Total liabilities................................. 720,972 629,964
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 180,000,000 shares authorized;
91,697,811 issued at December 31, 1998 and 1997........ 13,054 13,054
Retained earnings......................................... 839,227 817,663
Accumulated other comprehensive income.................... 88,200 79,559
Restricted stock deferred compensation.................... (2,604) (3,472)
Treasury stock at cost, 2,543,590 shares held at December
31, 1998............................................... (54,580) --
---------- ----------
Total stockholders' equity........................ 883,297 906,804
---------- ----------
Total liabilities and stockholders' equity........ $1,604,269 $1,536,768
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 41
THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
(DOLLARS IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Total revenues.............................................. $392,181 $296,977 $376,693
-------- -------- --------
Expenses
Operating expenses........................................ 286,973 215,941 210,384
Corporate expense, net.................................... 6,569 6,514 (4,363)
Depreciation and amortization............................. 38,893 28,732 27,831
Impairment losses......................................... 10,238 -- --
-------- -------- --------
Total expenses.................................... 342,673 251,187 233,853
-------- -------- --------
Operating profit.................................. 49,508 45,790 142,840
-------- -------- --------
Other income (expense)
Investment income......................................... 20,118 30,695 33,317
Gains on sales and other dispositions of assets........... 2,441 4,438 3,423
Other, net................................................ 9,362 6,849 5,033
-------- -------- --------
Total other income................................ 31,921 41,982 41,773
-------- -------- --------
Income from continuing operations before income taxes and
minority interest......................................... 81,429 87,772 184,613
-------- -------- --------
Income tax expense
Current................................................... 23,569 24,731 30,288
Deferred.................................................. 12,611 13,240 49,023
-------- -------- --------
Total income tax expense.......................... 36,180 37,971 79,311
-------- -------- --------
Income from continuing operations before minority
interest.................................................. 45,249 49,801 105,302
Minority interest........................................... 19,117 18,401 14,002
-------- -------- --------
Income from continuing operations........................... 26,132 31,400 91,300
-------- -------- --------
Income from discontinued operations
Earnings (loss) from discontinued operations (net of
income taxes of $1,699, $2,550, and $1,021
respectively).......................................... 2,706 4,053 (3,919)
Gain on sale of discontinued operations, net of income
taxes of $48,705....................................... -- -- 88,641
-------- -------- --------
Net income........................................ $ 28,838 $ 35,453 $176,022
======== ======== ========
EARNINGS PER SHARE
Basic
Income from continuing operations........................... $ 0.29 $ 0.34 $ 0.99
Earnings (loss) from discontinued operations................ 0.03 0.05 (0.04)
Gain on sale of discontinued operations..................... -- -- 0.97
-------- -------- --------
Net income........................................ $ 0.32 $ 0.39 $ 1.92
======== ======== ========
Diluted
Income from continuing operations........................... $ 0.28 $ 0.34 $ 0.99
Earnings (loss) from discontinued operations................ 0.03 0.04 (0.04)
Gain on sale of discontinued operations..................... -- -- 0.97
-------- -------- --------
Net income........................................ $ 0.31 $ 0.38 $ 1.92
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 42
THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED OTHER RESTRICTED STOCK
-------------------- RETAINED COMPREHENSIVE DEFERRED TREASURY
SHARES AMOUNT EARNINGS INCOME COMPENSATION SHARES TOTAL
---------- ------- ---------- ----------------- ---------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995... 91,495,950 $ 8,714 $ 955,239 $52,114 $ -- $ -- $1,016,067
Comprehensive income:
Net income................... -- -- 176,022 -- -- -- 176,022
Increase in net unrealized
gain on available-for-sale
securities, net of tax of
$9,428..................... -- -- -- 10,952 -- -- 10,952
----------
Total comprehensive
income............... 186,974
----------
Dividends ($.07 per share)..... -- -- (6,100) -- -- -- (6,100)
---------- ------- ---------- ------- ------- -------- ----------
Balance at December 31, 1996... 91,495,950 8,714 1,125,161 63,066 -- -- 1,196,941
---------- ------- ---------- ------- ------- -------- ----------
Comprehensive income:
Net income................... -- -- 35,453 -- -- -- 35,453
Increase in net unrealized
gain on available-for-sale
securities, net of tax of
$10,590.................... -- -- -- 16,493 -- -- 16,493
----------
Total comprehensive
income............... 51,946
----------
Dividends ($.07 per share)..... -- -- (6,113) -- -- -- (6,113)
Special distributions ($3.67
per share)................... -- -- (336,838) -- -- -- (336,838)
Increase in restricted stock
deferred compensation........ 201,861 4,340 -- -- (4,340) -- --
Amortization of restricted
stock deferred
compensation................. -- -- -- -- 868 -- 868
---------- ------- ---------- ------- ------- -------- ----------
Balance at December 31, 1997... 91,697,811 13,054 817,663 79,559 (3,472) -- 906,804
---------- ------- ---------- ------- ------- -------- ----------
Comprehensive income:
Net income................... -- -- 28,838 -- -- -- 28,838
Increase in net unrealized
gain on available-for-sale
securities, net of tax
$4,781..................... -- -- -- 8,641 -- -- 8,641
----------
Total comprehensive
income............... 37,479
----------
Dividends ($.08 per share)..... -- -- (7,274) -- -- -- (7,274)
Amortization of restricted
stock deferred
compensation................. -- -- -- -- 868 -- 868
Purchase of treasury shares,
net.......................... (2,543,590) (54,580) (54,580)
---------- ------- ---------- ------- ------- -------- ----------
Balance at December 31, 1998... 89,154,221 $13,054 $ 839,227 $88,200 $(2,604) $(54,580) $ 883,297
========== ======= ========== ======= ======= ======== ==========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 43
THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 28,838 $ 35,453 $ 176,022
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 38,893 28,732 27,831
Minority interest in income............................ 19,117 18,401 14,002
Gain on sale of property and investments............... (8,363) (4,817) (3,423)
Equity in unconsolidated affiliates.................... (1,925) -- --
Gain on sale of discontinued operations................ -- -- (88,641)
Deferred income tax expense............................ 12,611 13,240 49,023
Impairment losses...................................... 10,238 -- --
Purchases and sales of trading investments, net........ (34,755) -- --
Changes in operating assets and liabilities:
Accounts receivable.................................. 6,676 2,178 (11,287)
Inventory............................................ 1,376 (483) (704)
Other assets......................................... (17,221) (8,158) (10,964)
Accounts payable, accrued liabilities, casualty
reserves and other................................ 3,490 8,424 6,774
Income taxes payable................................. (3,513) (16,060) 11,979
Discontinued operations-noncash charges and working
capital changes................................... 2,457 (3,238) (52,827)
---------- --------- ---------
Net cash provided by operating activities................... 57,919 73,673 117,785
Cash flows from investing activities:
Purchases of property, plant and equipment................ (135,079) (64,137) (65,198)
Investing activities of discontinued operations........... -- (305) (3,840)
Purchases of investments:
Available for sale..................................... (972,047) (87,796) (21,928)
Held to maturity....................................... -- (100,350) (180,797)
Investments in joint ventures and purchase business
acquisitions, net of cash received..................... (148,859) (20,154) --
Proceeds from dispositions of assets...................... 6,897 14,384 9,743
Proceeds from sale of discontinued operations............. -- -- 445,055
Maturities and redemptions of investments:
Available for sale..................................... 1,134,449 108,810 18,291
Held to maturity....................................... -- 119,644 121,111
Proceeds from sale of note receivable..................... -- 10,400 --
---------- --------- ---------
Net cash provided by/(used in) investing activities......... (114,639) (19,505) 322,437
Cash flows from financing activities:
Proceeds from long-term debt, net......................... 872 -- --
Dividends and special distributions paid to
stockholders........................................... (7,274) (342,950) (6,100)
Dividends paid to minority interest....................... (1,668) (1,664) (1,666)
Treasury stock purchased.................................. (54,580) -- --
Financing activities of discontinued operations........... -- -- (245)
---------- --------- ---------
Net cash used in financing activities....................... (62,650) (344,614) (8,011)
Net increase (decrease) in cash and cash equivalents........ (119,370) (290,445) 432,211
Cash and cash equivalents at beginning of year.............. 158,478 448,923 16,712
---------- --------- ---------
Cash and cash equivalents at end of year.................... $ 39,108 $ 158,478 $ 448,923
========== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 44
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. NATURE OF OPERATIONS
The St. Joe Company, formerly known as St. Joe Corporation (the "Company")
is a diversified corporation engaged in residential and commercial real estate,
forestry, resort and leisure development, and transportation operations. Until
recently the Company also had ongoing sugar operations. While the Company's real
estate operations are in various states throughout the Southeast, the majority
of the real estate operations, as well as the transportation operation, are
principally within the state of Florida. Forestry has operations in both Florida
and Georgia. Consequently, the Company's performance, and particularly that of
its real estate operations, is significantly affected by the general health of
the Florida economy.
Real Estate
The Company currently conducts its real estate operations in three
principal segments: commercial development and management, community residential
development, and residential real estate services. The Company owns, leases, and
manages office, industrial and retail properties in the southeastern United
States through its wholly-owned subsidiary, St. Joe Commercial Property
Services, Inc. ("SJCPS"), through Gran Central Corporation ("GCC"), a
wholly-owned subsidiary of Florida East Coast Industries, Inc. ("FECI"), a 54%
owned subsidiary of the Company, and through several partnership ventures. SJCPS
manages approximately 14 million square feet of commercial property in the
Southeast. GCC owns approximately 6 million square feet of commercial/industrial
facilities located in Jacksonville, Miami, and Orlando which is managed by the
Company pursuant to a management agreement. The Company is also a partner in
several joint ventures that develop and manage commercial property in Florida,
Georgia and Texas. The Company's community residential division owns large
tracts of land in west Florida near Tallahassee, Florida and northwest Florida,
including significant Gulf of Mexico frontage. The Company is developing and
managing residential communities on certain lands owned by the Company, through
its 74% owned limited partnership, St. Joe/Arvida Company, L.P. ("Arvida"). The
Company also recently purchased a 26% interest in Arvida/JMB Partners, L.P., a
limited partnership that is developing residential communities, three in
Florida, one near Atlanta, Georgia and one in North Carolina. The Company owns a
residential real estate brokerage, sales and services business in Florida
through its recent acquisition of Prudential Florida Realty, which has since
changed its name to Arvida Realty Services ("ARS"). ARS was broker to 13,000
real estate transactions since its acquisition in July 1998 through its 80
locations in south and central Florida.
Forestry
The Company is the largest private owner of timberlands in Florida. The
principal product of the Company's forestry operations is softwood pulpwood. In
addition, the Company produces and sells sawtimber. Prior to 1998, the majority
of the wood harvested by the Company was sold under a long term wood fiber
supply agreement to the Company's former linerboard mill, which it sold to
Florida Coast Paper Company, L.L.C. ("FCP") in May, 1996.
After the closure of the mill for several months in 1997, the Company
renegotiated its 15 year supply contract with FCP 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.
F-6
<PAGE> 45
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On March 1, 1999 the Company announced that it intends to sell
approximately 800,000 acres of its northwest Florida timberlands with the first
100,000 acres going on the market immediately. Under the Company's development
plans, none of the timberland to be offered for sale has significant real estate
development potential in the next 15 to 20 years. No assurances can be given
that any of the property can be sold at an acceptable price within an acceptable
time period.
Transportation
FECI's subsidiary, Florida East Coast Railway ("FEC"), provides rail and
freight service between Jacksonville and Miami, Florida and 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. The principal
commodities carried by rail include trailers-on-flatcar, containers-on-flatcar,
crushed stone, cement, automobile vehicles and parts. FEC also has a trucking
operation which is an interstate, irregular route, common carrier with terminals
located throughout the eastern half of the United States. The Company continues
to evaluate methods and means to extract the embedded value from its
transportation holdings. The Company also owns the Apalachicola Northern
Railroad Company ("ANRR"), a short-line railroad that operates between Port St.
Joe and Chattahoochee, Florida. Its principal commodities include coal,
pulpwood, pulpboard woodchips, and tall oil chemicals. ANRR's workforce has been
reduced significantly as a result of loss of rail traffic recently, but the
railroad continues to operate at a minimal schedule to service its existing
customers.
2. 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, 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. Investments in joint ventures in
which the Company does not have financial control are accounted for by the
equity method. All significant intercompany transactions and balances have been
eliminated except for sales of continuing operations of $18,988 derived from
discontinued operations in the year ended December 31, 1996 and intercompany
interest with its discontinued sugar operation of $483 and $1,035 in 1997 and
1996, respectively. The unrealized profit in ending inventories relating to
these sales has been eliminated.
Revenue Recognition
Revenues from real estate property sales and brokerage commissions earned
therefrom are recognized upon closing of sales contracts or upon settlement of
condemnation proceedings. Rental revenues are recognized upon commencement of
rental and lease contracts, using the straight-line basis over the life of the
contract. Transportation revenues are substantially recognized upon completion
of transportation services at destination. Revenues from sales of forestry
products are recognized generally on delivery of the product to the customer.
F-7
<PAGE> 46
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Inventories
Inventories consist of transportation materials and supplies and 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.
Investment in Real Estate
Investment in real estate is carried at lower of cost or net realizable
value. Depreciation is computed on straight-line and accelerated methods over
the useful lives of the assets ranging from 15 to 40 years. 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.
Property, Plant and Equipment
Depreciation is computed using both straight-line and accelerated methods
over the useful lives of various assets. Railroad properties are depreciated and
amortized using the straight-line method. Gains and losses on normal retirements
of these items are credited or charged to accumulated depreciation.
Goodwill and Deferred Compensation
Goodwill associated with the Company's business combinations is being
amortized on a straight-line basis over periods ranging from 15 years to 30
years. Deferred compensation is being amortized on a straight-line basis over a
five-year vesting period, which is deemed to be the period for which services
are performed. Periodically the Company evaluates the realizability of its
intangibles to determine if an impairment in value has occurred. During 1998,
the Company wrote off $2,238 of intangible assets determined to be unrealizable.
Earnings Per Common Share
Earnings per common share ("EPS") are based on the weighted average number
of common shares outstanding during the year as adjusted for the three-for-one
stock split effective January 12, 1998. The Company applies the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". Diluted EPS assumes weighted average options to purchase 1,323,498
shares of common stock in 1998 and 1,379,495 shares of common stock in 1997 have
been exercised using the treasury stock method. In August, 1998, the Company's
Board of Directors authorized $150,000 for the repurchase of the Company's
outstanding common stock from time to time on the open market. As of December
31, 1998, the Company had repurchased 2,543,590 shares. Weighted average basic
and diluted shares, taking into consideration shares repurchased and the
weighted average options used in calculating EPS for each of the years presented
is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Basic.............................................. 90,961,941 91,695,046 91,495,950
Diluted............................................ 92,285,439 93,074,541 91,495,950
</TABLE>
Stock-Based Compensation
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,
F-8
<PAGE> 47
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
"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 required by SFAS No. 123.
Comprehensive Income
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income", effective January 1, 1998. This Statement establishes
standards for reporting and display of comprehensive income and its components.
The Company's comprehensive income differs from net income due to changes in the
net unrealized gains on marketable securities available for sale. The Company
has elected to disclose comprehensive income in its Consolidated Statement of
Changes in Stockholders' Equity and has restated all prior periods accordingly.
Segment Reporting
The Company adopted the provisions SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", effective January 1, 1998.
This Statement requires that the Company report a measure of segment profit,
segment assets, and certain related items according to how management makes
decisions about asset performance and allocation of resources to those segments.
Segment information for all periods presented has been restated to conform to
SFAS No. 131 disclosure requirements.
Income Taxes
The Company follows the asset and liability method of accounting for income
taxes in accordance with SFAS No. 109 "Accounting for Income Taxes." Under SFAS
No. 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 No. 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 No.
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 No. 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.
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
F-9
<PAGE> 48
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
securities are excluded from earnings and are reported as a separate component
of stockholders' equity and comprehensive income until realized.
The Company accounts for hedges against its equity securities at fair
value. Unrealized gains or losses are reported as a separate component of
stockholders' equity along with the underlying equity securities' net unrealized
gain or loss.
A decline in the market value 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, including hedges against equity securities, are included
in earnings and are derived using the specific identification method for
determining the cost of securities sold.
Long-Lived Assets
The Company complies with the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This Statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the asset. The Company has recorded an
$8,000 write-down of transportation property, plant and equipment owned by its
wholly-owned subsidiary, Apalachicola Northern Railroad ("ANRR") in 1998.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
Supplemental Cash Flow Information
The Company paid $543, $389 and $1,009 for interest and $29,690, $33,686
and $120,789 for income taxes in 1998, 1997, and 1996, respectively.
The Company's non-cash activities included assets acquired and liabilities
assumed of approximately $30,000 each.
3. BUSINESS COMBINATIONS
On July 31, 1998, the Company completed the purchase of Prudential Florida
Realty ("PFR") from CMT Holding, Ltd. PFR is a residential real estate
brokerage, sales and services company in Florida. Under the terms of the
purchase and sale agreement, the Company acquired certain assets of CMT Holding,
Ltd. for a total purchase price of $98,815, of which $88,815 was paid in cash
and $10,000 was paid in the form of a two-year note. Additionally, a contingent
payment of $10,000 will be paid over a three-year period (2001 through 2003) if
certain performance targets are met. The PFR acquisition has been accounted for
under the purchase method of accounting and the resulting goodwill of $89,167 is
being amortized on a straight-line basis over 20 years.
On September 24, 1998, the Company acquired Goodman Segar Hogan Hoffler,
L.P. ("GSHH"), a commercial, retail, office and industrial real estate services
company based in Norfolk, Virginia. GSHH manages approximately 10 million square
feet of commercial property in the southeastern United States and brokers real
estate transactions valued at nearly $1,000,000 annually. Under the terms of the
purchase agreement, the Company acquired all outstanding partnership interests
of GSHH for a total purchase price of
F-10
<PAGE> 49
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$15,650, of which $11,190 was paid in cash at closing and $4,480 was paid in the
form of a three-year note. The GSHH acquisition has been accounted for under the
purchase method of accounting and the resulting goodwill of $16,904 is being
amortized on a straight-line basis over 15 years. Subsequent to the acquisition,
GSHH has become a subsidiary of SJCPS.
On December 21, 1998, the Company purchased the assets of Florida Real
Estate Advisors, Inc. ("FREA"), a commercial, retail, office and industrial real
estate services company based in Tampa, Florida. FREA manages approximately 4
million square feet of commercial property in central and south Florida. Under
the terms of the purchase and sale agreement, the Company acquired certain
assets of FREA for a total purchase price of $8,550, of which approximately
$6,000 was paid in cash at closing and the remainder was paid in the form of a
three-year note. The FREA acquisition has been accounted for under the purchase
method of accounting and the resulting goodwill of $8,257 is being amortized on
a straight-line basis over 15 years. Subsequent to the acquisition, FREA has
been merged into SJCPS.
On November 12, 1997, the Company purchased certain assets, including
management and proprietary information systems, of Arvida Company through a
joint venture formed for the purpose of developing and managing residential
communities. The Company owns 74% of the new limited partnership, St. Joe/Arvida
Company, L.P. , which is based in Boca Raton, Florida. Under the terms of the
limited partnership agreement, the Company paid $12,240 in cash for its interest
in the partnership. This acquisition has been accounted for under the purchase
method of accounting and the resulting goodwill of $11,500 is being amortized on
a straight-line basis over 30 years.
The results of operations of the acquired companies are included in the
consolidated statements of income from the dates of their respective
acquisitions. Following is a summary of the unaudited pro forma results of
operations of the Company for the years ended December 31, 1998 and 1997
assuming the PFR, GSHH and FREA acquisitions had occurred on January 1, 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Total revenues.............................................. $534,840 $487,340
Net income.................................................. 28,942 34,156
Earnings per share:
Basic..................................................... .32 .37
Diluted................................................... .31 .37
</TABLE>
Adjustments to the Company's results of operations to reflect proforma results
include goodwill amortization, and reductions in interest income for the use of
invested cash. The pro forma results do not necessarily represent results of
operations that would have occurred if the acquisitions had taken place on the
basis assumed above, nor are they necessarily indicative of the results of
future combined operations. The amounts are based upon certain assumptions and
estimates, and do not reflect any benefit from economies that might be achieved
from combined operations.
4. INVESTMENT IN UNCONSOLIDATED AFFILIATES
Investments in unconsolidated affiliates as of December 31, consist of:
<TABLE>
<CAPTION>
OWNERSHIP 1998 1997
--------- ------- ------
<S> <C> <C> <C>
Arvida/JMB Partners, L.P.................................. 26% $45,938 --
Codina Group, Inc......................................... 33 9,758 --
Deerfield Park, L.L.C..................................... 61 6,002 $5,618
ENTROS, Inc............................................... 44 5,091 --
WBP One, L.P.............................................. 50 1,705 --
St. Joe/CNL Realty Group, LTD............................. 50 1,597 1,438
Al-Zar, LTD............................................... 1 144 144
------- ------
$70,235 $7,200
======= ======
</TABLE>
F-11
<PAGE> 50
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Any differences between the cost of the investments and the underlying equity in
an unconsolidated investee's net assets are being amortized over the remaining
lives of the investee's assets, ranging from five to fifteen years.
Summarized financial information for the unconsolidated affiliates on a
combined basis, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
BALANCE SHEET:
Investment property, net.................................... $208,659 $ 8,681
Other assets................................................ 204,100 14,689
-------- -------
Total assets...................................... 412,759 23,370
-------- -------
Notes payable and other debt................................ 81,948 5,510
Other liabilities........................................... 89,378 1,050
Equity...................................................... 241,433 16,810
-------- -------
Total liabilities and equity...................... $412,759 $23,370
======== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
STATEMENT OF INCOME:
Total revenues.............................................. $36,730 $5,254
------- ------
Total expenses.............................................. 32,368 5,123
------- ------
Net income........................................ $ 4,362 $ 131
======= ======
</TABLE>
5. DISCONTINUED OPERATIONS
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 substantially all of the sugar lands
that the Company owns or leases for $133.5 million in cash. Talisman retained
the right to farm the land through the 2003 crop year. In December 1998, that
sale was closed in escrow pending the resolution of a lawsuit filed in Federal
District Court in Washington, D.C. seeking to invalidate the sale. On March 25,
1999 Talisman entered into an Exchange Agreement ("The Exchange Agreement") with
The South Florida Water Management District; United States Sugar Corporation;
Okeelanta Corporation; South Florida Industries, Inc.; Florida Crystals
Corporation; Sugar Cane Growers Cooperative of Florida (collectively the "Sugar
Companies"); The United States Department of Interior; and The Nature
Conservancy. The Agreement allows Talisman to exit the sugar business. Talisman
assigned its right to farm the land to the Sugar Companies. In return, the
lawsuit was dismissed and the other parties agreed to pay Talisman $19.0
million.
Talisman retains ownership of the sugar mill and is presently evaluating
the best manner to dispose of the mill. Talisman is responsible for the cleanup
of the mill site. Talisman is obligated to complete certain defined
environmental remediation (the "Remediation"). Approximately $5.0 million of the
purchase price will be held in escrow pending the completion of the Remediation.
Talisman must use its funds to pay the costs of the Remediation. Based upon the
current environmental studies, Talisman does not believe the costs of the
Remediation will exceed the amount held in escrow. Talisman will receive the
fund when all the Remediation is complete. In the event other environmental
matters are discovered, the Sugar Companies will be responsible for the first
$.5 million of the cleanup. Talisman will be responsible for the next $4.5
million, thereafter the parties shall share the costs equally.
In addition, approximately $1.7 million is being held in escrow,
representing the value of the land subject to the Remediation. As Talisman
completes the cleanup of a particular parcel, an amount equal to the land
F-12
<PAGE> 51
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value on that parcel will be released from escrow. The Company has reported its
sugar operations as discontinued operations for all periods presented. Revenues
from Talisman were $40,955, $49,320, and $54,496 in 1998, 1997 and 1996
respectively. Net income for Talisman was $2,706, $4,053, and $609 in 1998, 1997
and 1996, respectively. The estimated gain on the combined sale of the land and
harvesting rights is expected to be between $40.0 million and $45.0 million,
after tax, (unaudited), subject to finalization of reserves and other
adjustments.
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 also sold its interest in three remaining
cellular partnerships for an aggregate of $25,113. The Company recorded a
$39,154 gain on the sales net of tax. SJCI's revenues through the April 11, 1996
sale date were $9,335. Earnings for SJCI were $1,120 for 1996.
Forest Products
On May 30, 1996, the Company sold its linerboard mill and container plants.
Proceeds from the sale included $323,844 cash and a $10,000 senior subordinated
note, (the Promissory Note). 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. Earnings (loss) for the linerboard mill and container plants were
$(5,648) for 1996. On November 25, 1997, the Company sold the Promissory Note to
an unrelated third party for approximately $10,400 which resulted in a pre-tax
gain of approximately $400.
On March 31, 1997, a special distribution of a portion of the net proceeds
of the sales of $3.33 per share was paid to shareholders of record on March 21,
1997, and on December 30, 1997, the remaining net proceeds of $.34 per share
were distributed to shareholders of record on December 19, 1997.
F-13
<PAGE> 52
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVESTMENTS
Investments as of December 31, 1998, consist of:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED FAIR HOLDING HOLDING
COST VALUE GAIN LOSS
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Short term investments (maturing within one
year)
Trading
Cash...................................... $ 90 90 -- --
Tax exempt municipal bonds................ 34,827 34,765 -- (62)
------- ------- ------- ---
34,917 34,855 -- (62)
------- ------- ------- ---
Available for sale
Commercial paper.......................... 17,613 17,613 -- --
Tax exempt municipal bonds................ 12,811 12,817 6 --
------- ------- ------- ---
65,341 65,285 6 (62)
======= ======= ======= ===
Marketable securities
Available for sale
U.S. Government securities
Maturing in one to five years........... 3,600 3,707 107
Tax exempt municipals
Maturing in one to five years........... 32,429 33,155 726
Maturing in five to ten years........... 12,010 12,896 886 --
Maturing in more than ten years......... 4,766 4,740 -- (26)
Equity securities and options............. 1,681 143,976 142,295 --
Other corporate debt
Maturing in one to five years........... 2,062 2,528 466 --
------- ------- ------- ---
$56,548 201,002 144,480 (26)
======= ======= ======= ===
</TABLE>
F-14
<PAGE> 53
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in short term investments is $17,000 of restricted commercial
paper collateralizing the PFR line of credit. (See Note 10. Long-Term Debt)
Investments as of December 31, 1997, consist of:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED FAIR HOLDING HOLDING
COST VALUE GAIN LOSS
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Short term investments (maturing within one
year)
Available for sale
U. S. Government securities.............. $ 48,902 $ 48,940 $ 38 $ --
Other corporate debt securities.......... 2,094 2,094 -- --
-------- -------- -------- ----
$ 50,996 51,034 $ 38 --
======== ======== ======== ====
Marketable securities
Available for sale
U. S. Government securities
Maturing in one to five years.......... $107,659 $108,242 $ 583 $ --
Maturing in five to ten years.......... 767 788 21 --
Tax exempt municipal bonds
Maturing in one to five years.......... 19,750 20,158 408 --
Maturing in five to ten years.......... 18,326 19,304 978 --
Maturing in more than ten years........ 3,408 3,388 -- (20)
Equity securities........................ 17,351 146,349 128,998 --
Mortgage-backed securities
Maturing in one to five years.......... 110 110 -- --
Maturing in five to ten years.......... 833 845 12 --
Maturing in more than ten years........ 3,443 3,512 69 --
Other corporate debt securities
Maturing in one to five years.......... 2,358 2,345 -- (13)
Maturing in five to ten years.......... 857 1,761 904 --
Maturing in more than ten years........ 95 108 13 --
-------- -------- -------- ----
$174,957 $306,910 $131,986 $(33)
======== ======== ======== ====
</TABLE>
In 1998, gross realized gains were $8,079 and realized losses were $1,185
on available for sale investments. Prior years' gross realized gains and losses
were not significant.
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.
On June 24, 1998, the Company entered into put and call options to hedge
the market value of certain equity securities. The cost of the purchased put was
exactly offset by the premium earned on the sold calls, thus no consideration
was exchanged. The value of these securities and the related collars is subject
to inherent market risk caused by the volatility of the equity markets.
The put options have strike prices set at 90% of the average price of the
stocks as of the contract date. The call options have strike prices ranging from
114% to 121% of the average price of the stocks as of the contract date. This
hedging strategy locked in the market value of the equity securities within this
range as of the contract date. The Company may settle obligations arising from
the collars with cash or shares of the underlying equity securities. The net
fair value of the puts and the calls at December 31, 1998, which is included in
the fair value of equity securities, was $23,764 and $2,137, respectively. The
Company can settle the options at any time prior to the expiration date which is
June 24, 1999.
F-15
<PAGE> 54
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unrealized gains and losses for the designated equity securities and the
associated hedge are presented as a separate component of stockholders' equity.
Any realized gains and losses on the combined position will be reflected in
income in the period in which the stock is sold or the hedge is executed.
7. INVESTMENT IN REAL ESTATE
Real estate as of December 31 consists of:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Operating property.......................................... $569,258 $502,127
Development property........................................ 13,560 1,182
Investment property......................................... 20,176 4,470
-------- --------
602,994 507,779
-------- --------
Accumulated depreciation.................................... 54,893 42,343
-------- --------
$548,101 $465,436
======== ========
</TABLE>
Included in operating property is the Company's timberlands, and land and
buildings used for commercial rental purposes. Development property consists of
community residential land currently under development. Investment property is
the Company's land held for future use. Real estate properties having net book
value of $258,600 at December 31, 1998 are leased under non-cancelable operating
leases with expected aggregate rentals of $164,103 of which $41,200, $36,300,
$31,000, $21,900, and $13,000 is due in the years 1999 through 2003,
respectively and $20,703 is due thereafter through 2012.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, as of December 31 consists of:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1998 1997
----------- -------- --------
<S> <C> <C> <C>
Transportation property and equipment.................. 12-30 $593,410 $571,470
Machinery and equipment................................ 12-30 26,879 21,292
Office equipment....................................... 10 3,368 1,877
Autos, trucks, and airplane............................ 3-10 3,001 3,098
-------- --------
626,658 597,737
-------- --------
Accumulated depreciation............................... 267,742 247,665
-------- --------
$358,916 $350,072
======== ========
</TABLE>
9. ACCRUED LIABILITIES
Accrued liabilities as of December 31 consist of:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Payroll and benefits........................................ $11,483 $ 5,164
Payroll taxes............................................... 149 42
Property and other taxes.................................... 9,029 8,800
Accrued casualty reserves................................... 18,869 21,924
Other accrued liabilities................................... 15,589 7,443
------- -------
55,119 43,373
Less: noncurrent accrued casualty reserves and other
liabilities............................................... 11,946 13,643
------- -------
$43,173 $29,730
======= =======
</TABLE>
F-15
<PAGE> 55
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. LONG-TERM DEBT
Long-term debt and credit agreements at December 31, 1998 consisted of the
following:
<TABLE>
<CAPTION>
1998
-------
<S> <C>
Revolving credit agreement, interest payable monthly at 1.5%
per annum; secured by restricted short-term investments;
matures July 31, 1999..................................... $17,000
Non-interest bearing note payable to CMT Holding, Ltd. due
in equal annual installments beginning July 28, 1999, net
of discount of $.6 million imputed at 6%.................. 9,396
Non-interest bearing notes payable to former owners of
Goodman Segar GVA due in three annual installments
beginning September 24, 1999, net of discount of $.3
million imputed at 6%..................................... 4,101
Non-interest bearing note payable to former owners of
Florida Real Estate Advisors due in three annual
installments beginning December 21, 1999, net of discount
of $.3 million imputed at 6%.............................. 2,272
Various secured and unsecured notes and capital leases,
bearing interest at rates from Prime to 11.25%............ 2,131
-------
Total long-term debt.............................. 34,900
-------
Less: current portion....................................... 24,953
-------
Net long-term debt................................ $ 9,947
=======
</TABLE>
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1998 are as follows; 1999, $24,953; 2000, $8,261;
2001, $1,584; 2002, $39; 2003, $63. Based on the current terms and rates of the
Company's long-term debt, carrying value approximates fair value, except for the
revolving credit agreement. The terms and conditions of the revolving credit
agreement are commensurate with the nature of the underlying security.
11. INCOME TAXES
Total income tax expense for the years ended December 31 was allocated as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Income from continuing operations........................ $36,180 $37,971 $ 79,311
Earnings (loss) from discontinued operations............. 1,699 2,550 1,021
Gain on the sale of discontinued operations.............. -- -- 48,705
Stockholders' equity, for recognition of unrealized gain
on debt and marketable equity securities............... 4,781 10,590 9,428
------- ------- --------
$42,660 $51,111 $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 of 35% to income from continuing operations before taxes and minority
interest as a result of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Tax at the statutory federal rate......................... $28,500 $30,720 $64,615
Dividends received deduction and tax free interest........ (2,890) (1,752) (4,311)
Excise tax on reversion of prepaid pension asset.......... 6,411 5,352 13,228
State income taxes (net of federal benefit)............... 3,178 3,144 4,610
Undistributed earnings of FECI............................ 1,513 1,382 1,262
Other, net................................................ (532) (875) (93)
------- ------- -------
$36,180 $37,971 $79,311
======= ======= =======
</TABLE>
F-16
<PAGE> 56
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities as of December 31
are presented below:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued casualty and other reserves....................... $ 9,056 $ 8,715
Impairment loss........................................... 3,086 --
Other..................................................... 1,950 1,531
-------- --------
Total deferred tax assets......................... 14,092 10,246
-------- --------
Deferred tax liabilities:
Tax in excess of book depreciation........................ 110,062 107,887
Deferred gain on land sales and involuntary conversions... 73,306 72,939
Deferred gain on subsidiary's defeased bonds.............. 1,444 1,700
Unrealized gain on debt and marketable equity
securities............................................. 55,701 50,920
Prepaid pension asset recognized for financial
reporting.............................................. 47,549 36,192
Other..................................................... 12,254 9,440
-------- --------
Total gross deferred tax liabilities.............. 300,316 279,078
-------- --------
Net deferred tax liability........................ $286,224 $268,832
======== ========
</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 assets of $3,135 and $3,467 are recorded in other
current assets as of December 31, 1998 and 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, 1998, the undistributed
earnings of the subsidiary for which no deferred tax liability was provided were
approximately $48,454.
12. EMPLOYEE BENEFITS PLANS
The Company sponsors defined benefit pension plans which cover
substantially all of its salaried employees excluding FECI. 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 complies with the
minimum funding requirements of ERISA.
F-17
<PAGE> 57
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the net periodic pension credit follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Service cost................................................ $ 312 $ 184
Interest cost............................................... 7,558 7,322
Expected return on assets................................... (16,499) (14,052)
Transition (asset) obligation............................... (2,566) (2,500)
Actuarial (gain) loss....................................... (2,220) (360)
Prior service costs......................................... 593 50
Curtailment loss............................................ -- 604
Settlement (gain)........................................... -- (1,951)
-------- --------
Total pension income.............................. $(12,822) $(10,703)
======== ========
</TABLE>
A reconciliation of projected benefit obligation as of December 31 follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Projected benefit obligation, beginning of year............. $112,487 $108,726
Service cost................................................ 312 184
Interest cost............................................... 7,558 7,322
Actuarial (gain) loss....................................... (3,587) 8,614
Benefits paid............................................... (8,857) (11,280)
Plan amendment.............................................. 6,999 --
Curtailments................................................ -- 604
Settlements................................................. -- (1,951)
Special termination benefits................................ -- 268
-------- --------
Projected benefit obligation, end of year................... $114,912 $112,487
======== ========
</TABLE>
A reconciliation of plan assets as of December 31 follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Fair value of assets, beginning of year..................... $231,790 $194,156
Actual return on assets..................................... 19,185 48,914
Benefits paid............................................... (8,857) (11,280)
-------- --------
Fair value of assets, end of year........................... $242,118 $231,790
======== ========
</TABLE>
A reconciliation of funded status as of December 31 follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Pension benefit obligation
Accumulated benefit obligation............................ $ 113,452 $ 111,567
Projected benefit obligation.............................. 114,912 112,487
Market value of assets...................................... 242,118 231,790
Funded status............................................... (127,206) (119,303)
Unrecognized net transition (asset) obligation.............. 6,159 8,725
Unrecognized prior service costs............................ (6,519) (114)
Unrecognized net gain (loss)................................ 73,883 69,830
--------- ---------
(Prepaid) pension cost...................................... $ (53,683) $ (40,861)
========= =========
</TABLE>
The weighted-average discount rates for the plans were 7% in 1998 and 1997.
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 1998 and 1997. The expected long-term rates of return on
assets was 8% in 1998 and 1997.
F-18
<PAGE> 58
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 also recognized in 1997 a
settlement gain of $2,000 ($200 net of tax) resulting from certain lump-sum
distributions paid during the year.
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.
The Company recognized a curtailment loss of approximately $600 ($100 net of
tax)as a result of those who elected early retirement.
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 and settlement loss. The Company has no immediate plans to
terminate the pension plans and is in the process of evaluating other
alternatives.
Deferred Compensation Plans and ESOP
The Company also has other defined contribution plans that 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 $951, $963, and $1,081, in 1998, 1997, and
1996, respectively.
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 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.
Stock Based Compensation Plans
Effective January 6, 1997, the Company 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 recorded deferred compensation of approximately
$3,500 for the unamortized portion of this grant as of December 31, 1997.
Compensation expense related to this grant totaled approximately $900 each in
1998 and 1997.
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 6,030,000 shares. The options are exercisable in equal
installments on the first anniversaries of the date of grant and expire
generally 10 years after date of grant.
Stock option activity during the period indicated is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1996............................... -- --
Granted.................................................... 5,643,480 $21.69
--------- ------
Balance at December 31, 1997............................... 5,643,480 21.69
Forfeited.................................................. (252,000) 24.10
--------- ------
Balance at December 31, 1998............................... 5,391,480 $21.57
========= ======
</TABLE>
F-19
<PAGE> 59
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The options were granted with exercise prices equal to the current market price
of the Company's common stock on the date of grant and ranged from $19.14 to
$31.83.
No options were granted during 1998. The per share weighted-average fair
value of stock options granted during 1997 was $10.39 on the date of grant using
the Black Scholes option-pricing model with the following weighted average
assumptions: .8% expected dividend yield, risk-free interest rate of 5.89%,
weighted average expected volatility of 23.06% and an expected life of 7.5
years.
The Company applies APB Opinion No. 25 in accounting for its Incentive Plan
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Had the Company determined
compensation costs based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below:
Net income -- pro forma -- $ 22,540 in 1998 and $29,600 in 1997
Per share -- pro forma -- $.25 and $.24 per basic and diluted share in
1998 and $.32 per basic and diluted share in 1997
The following table presents information regarding all options outstanding
at December 31, 1998.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF REMAINING RANGE OF WEIGHTED AVERAGE
OPTIONS OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICES EXERCISE PRICE
- ------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
4,422,480 8.1 years $19.14 - $24.92 $19.46
969,000 8.8 years $28.23 - $31.83 $31.25
---------
5,391,480 8.3 years $19.14 - $31.83 $21.57
</TABLE>
The following table presents information regarding options exerciseable at
December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS RANGE OF WEIGHTED AVERAGE
EXERCISEABLE EXERCISE PRICES EXERCISE PRICE
- ------------ --------------- ----------------
<S> <C> <C>
884,496 $19.14 - $24.92 $19.46
193,800 $28.23 - $31.83 $31.25
---------
1,078,296 $19.14 - $31.83 $21.57
</TABLE>
On February 24, 1998, the Company adopted the 1998 Stock Incentive Plan
(the "1998 Incentive Plan") whereby awards may be granted to employees and
non-employee directors of the Company in the form of restricted shares of
Company stock, options to purchase Company stock or stock appreciation rights
(SAR's). Awards are discretionary and are determined by the Compensation
Committee of the Board of Directors. The total amount of restricted shares,
options, and stock appreciation rights available for grant under the 1998
Incentive Plan is one million. As of December 31, 1998 SAR's were granted to
certain employees and non-employee directors. The Company records compensation
expense in the amount by which the quoted market value of the shares covered by
the SARs exceeds the SAR grant price over the related service period. SARs
outstanding at December 31, 1998 totaled 698.
F-20
<PAGE> 60
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------ ------- --------
<S> <C> <C> <C> <C>
1998
Total revenues...................................... $138,490 $108,329 $75,406 $69,956
Operating profit.................................... 5,615 19,374 15,261 9,258
Net income from continuing operations............... 2,293 9,730 8,455 5,654
Income (loss) from discontinued operations.......... 1,779 (493) (407) 1,827
Net income.......................................... 4,072 9,237 8,048 7,481
Earnings per share -- Basic......................... .05 .10 .09 .08
Earnings per share -- Diluted....................... .05 .10 .09 .08
1997
Total revenues...................................... $ 70,633 $ 69,231 $80,408 $76,705
Operating profit.................................... 6,486 16,788 13,687 8,829
Net income from continuing operations............... 4,704 9,584 9,812 7,300
Income (loss) from discontinued operations.......... 2,469 (528) 1,402 710
Net Income.......................................... 7,173 9,056 11,214 8,010
Earnings per share -- Basic......................... .09 .10 .12 .09
Earnings per share -- Diluted....................... .09 .10 .12 .08
</TABLE>
14. SEGMENT INFORMATION
The Company conducts primarily all of its business in six reportable
operating segments, which are residential real estate services, community
residential real estate, commercial real estate, transportation, forestry, and
leisure and resort. Residential real estate services provides complete real
estate brokerage services, including asset management, rental, property
management, property inspection, mortgage brokerage, relocation and title
services. The community residential real estate segment develops and manages
residential communities on certain lands owned by the Company. The commercial
real estate segment owns, leases, and manages commercial, retail, office and
industrial properties throughout the Southeast. Transportation consists of the
railroad and trucking operations of FEC and ANRR. The forestry segment's
operations produce and sell softwood pulpwood and sawtimber. Leisure and Resort
is in the infancy stages of resort development.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Total revenues represent sales
to unaffiliated customers, as reported in the Company's consolidated income
statements and intercompany sales that occurred principally between the Forestry
and Transportation segments and discontinued operations in 1996. All other
intercompany transactions have been eliminated. The Company evaluates a
segment's performance based on EBITDA. EBITDA is defined as earnings before
interest expense, income taxes, depreciation and amortization and is considered
a key financial measurement in the industries that the Company operates. EBITDA
excludes gains from discontinued operations and gains on sales of non-strategic
lands and other assets. The "Other" EBITDA primarily consists of investment
income, net of general and administrative expenses.
The Company's reportable segments are strategic business units that offer
different products and services. They are each managed separately and decisions
about allocations of resources are determined by management based on these
strategic business units.
F-21
<PAGE> 61
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information by business segment follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
TOTAL REVENUES:
Residential real estate services................. $ 79,255 $ -- $ --
Residential real estate.......................... 5,516 4,685 99,434
Commercial real estate........................... 68,688 65,614 35,096
Transportation................................... 204,662 194,961 185,484
Forestry......................................... 33,844 31,700 56,679
Leisure and resort............................... 216 17 --
---------- ---------- ----------
Total revenues........................... $ 392,181 $ 296,977 $ 376,693
========== ========== ==========
EBITDA:
Residential real estate services................. $ 6,369 $ -- $ --
Residential real estate.......................... (4,909) 1,161 97,321
Commercial real estate........................... 29,505 21,403 17,535
Transportation................................... 60,961 55,856 47,583
Forestry......................................... 17,088 6,291 5,619
Leisure and resort............................... (305) (18) --
Other............................................ 21,907 27,754 41,562
---------- ---------- ----------
EBITDA................................... 130,616 112,447 209,620
ADJUSTMENTS TO RECONCILE TO INCOME FROM CONTINUING
OPERATIONS:
Depreciation and amortization.................... (38,893) (28,732) (27,831)
Other income (expense)........................... 748 4,446 2,389
Interest expense................................. (804) (389) 435
Impairment loss.................................. (10,238) -- --
Income taxes..................................... (36,180) (37,971) (79,311)
Minority interest................................ (19,117) (18,401) (14,002)
---------- ---------- ----------
Income from continuing operations........ $ 26,132 $ 31,400 $ 91,300
========== ========== ==========
TOTAL ASSETS:
Residential real estate services................. $ 128,870 $ -- $ --
Residential real estate.......................... 33,830 10,166 61,541
Commercial real estate........................... 476,716 434,870 312,258
Transportation................................... 471,723 433,336 413,100
Forestry......................................... 137,406 121,758 114,710
Leisure and resort............................... (144) 1,711 --
Unallocated corporate assets (primarily
investments).................................. 283,554 460,152 820,803
Discontinued operations.......................... 72,318 74,775 72,399
---------- ---------- ----------
Total assets............................. $1,604,269 $1,536,768 $1,794,811
========== ========== ==========
CAPITAL EXPENDITURES:
Residential real estate services................. $ 639 $ -- $ --
Residential real estate.......................... 29,964 1,036 2,672
Commercial real estate........................... 66,820 45,806 41,036
Transportation................................... 31,332 13,549 15,800
Forestry......................................... 3,305 3,156 4,672
Leisure and resort............................... 342 109 --
Other............................................ 2,677 481 1,018
---------- ---------- ----------
Total capital expenditures............... $ 135,079 $ 64,137 $ 65,198
========== ========== ==========
</TABLE>
F-22
<PAGE> 62
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. 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 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 guarantor on two credit obligations entered into by
partnerships in which the Company owns equity interests. The maximum amount of
the guaranteed debt totals $74,900; the amount outstanding at December 31, 1998
totaled $25,263.
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.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of 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 confidence. Aggregate
environmental-related accruals were $7,261 and $7,270 as of December 31, 1998
and 1997, respectively.
F-23
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Stockholders
The St. Joe Company:
Under date of February 23, 1999, we reported on the consolidated balance
sheets of The St. Joe Company and subsidiaries as of December 31, 1998 and 1997,
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, 1998, as contained in this annual report on Form 10-K for the year
1998. In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedules as listed in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statement schedules based on our
audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
KPMG LLP
Jacksonville, Florida
February 23, 1999
S-1
<PAGE> 64
THE ST. JOE COMPANY
SCHEDULE II (CONSOLIDATED)
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
------------------------------------------------
BALANCE AT ADDITIONS
BEGINNING CHARGED BALANCE AT
OF YEAR TO EXPENSE PAYMENTS END OF YEAR
---------- ---------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
RESERVES INCLUDED IN LIABILITIES
1998
Casualty and other reserves...................... 21,924 6,223 9,278 18,869
1997
Casualty and other reserves...................... 25,096 5,316 8,488 21,924
1996
Casualty and other reserves...................... 13,548 19,698 8,150 25,096
</TABLE>
- ---------------
All periods presented have been restated to exclude discontinued operations.
(a) 1996 additions include $5,272 related to discontinued operations and charged
to expense in prior years.
S-2
<PAGE> 65
THE ST. JOE COMPANY
SCHEDULE III (CONSOLIDATED) -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY CARRIED AT CLOSE OF PERIOD
------------------------------------- -----------------------------------------------------
COSTS
CAPITALIZED BUILDINGS
BUILDINGS & SUBSEQUENT TO LAND & LAND AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION IMPROVEMENTS IMPROVEMENTS TOTAL
- ----------- ------------ ------- ------------ ------------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bay County, Florida
Land w/Infrastructure.......... 0 517 -- 10,753 11,270 -- 11,270
Office and Misc. Buildings..... 0 2 -- 2,102 -- 2,102 2,102
Timberlands.................... 0 4,125 -- 14,585 18,710 -- 18,710
Brevard County, Florida
Unimproved Land................ 0 9,387 -- -- 9,387 -- 9,387
Broward County, Florida
Rail Warehouse................. 0 85 -- 1,708 405 1,388 1,793
Land w/Infrastructure.......... 0 5,431 -- 370 5,801 -- 5,801
Unimproved Land................ 0 2,418 -- 1 2,419 -- 2,419
Leasehold improvements......... 0 -- 292 -- -- 292 292
Calhoun County, Florida
Timberlands.................... 0 1,199 -- 4,239 5,438 -- 5,438
Dade County, Florida
Double Front Load Warehouse.... 0 972 -- 6,176 1,986 5,162 7,148
Rail Warehouses................ 0 4,283 -- 25,158 8,119 21,322 29,441
Office/Showroom/Warehouses..... 0 2,442 -- 17,584 5,766 14,260 20,026
Office/Warehouses.............. 0 4,444 -- 31,923 9,345 27,022 36,367
Front Load Warehouses.......... 0 4,819 -- 26,067 9,782 21,104 30,886
Office/Service Center.......... 0 344 -- 3,495 873 2,966 3,839
Cross Dock..................... 0 137 -- 1,018 137 1,018 1,155
Transit Warehouse.............. 0 3 -- 217 3 217 220
Land w/Infrastructure.......... 0 25,223 -- 10,327 35,550 -- 35,550
Unimproved Land & Misc.
Assets....................... 0 13,816 -- 394 14,210 -- 14,210
Leasehold improvements......... 0 -- 228 -- -- 228 228
Construction in Progress....... 0 -- -- 6,137 -- 6,137 6,137
Duval County, Florida
Office Buildings............... 0 6,550 -- 71,144 12,930 64,764 77,694
Office/Showroom/Warehouses..... 0 2,931 -- 43,329 6,758 39,502 46,260
Office/Warehouses.............. 0 1,806 -- 9,935 3,833 7,908 11,741
Front Load Warehouse........... 0 30 -- 2,546 409 2,167 2,576
Rail Warehouses................ 0 36 -- 2,865 694 2,207 2,901
Land w/Infrastructure.......... 0 4,504 -- 6,163 10,667 -- 10,667
Unimproved Land & Misc.
Assets....................... 0 6,969 416 991 6,969 1,407 8,376
City & Residential Lots........ 0 351 82 -- 351 82 433
Timberlands.................... 0 96 -- 340 436 -- 436
Construction in Progress....... 0 -- -- 15,927 -- 15,927 15,927
Flagler County, Florida
Unimproved Land................ 0 4,403 -- -- 4,403 -- 4,403
Franklin County, Florida
Timberlands.................... 0 1,306 -- 4,618 5,924 -- 5,924
Gadsden County, Florida
Timberlands.................... 0 1,504 -- 5,317 6,821 -- 6,821
Gulf County, Florida
Misc. Buildings................ 0 -- 978 157 -- 1,135 1,135
Timberlands.................... 0 5,342 -- 18,890 24,232 -- 24,232
Jefferson County, Florida
Misc. Buildings................ 0 -- -- 181 -- 181 181
Timberlands.................... 0 2,002 -- 7,080 9,082 -- 9,082
Leon County, Florida
Land w/Infrastructure.......... 0 603 -- 1,878 2,481 -- 2,481
Misc. Buildings................ 0 -- -- 69 -- 69 69
Timberlands.................... 0 1,218 -- 4,307 5,525 -- 5,525
<CAPTION>
DEPRECIABLE LIFE
USED
IN CALCULATION
IN
ACCUMULATED DATE CAPITALIZED LATEST INCOME
DESCRIPTION DEPRECIATION OR ACQUIRED STATEMENT
- ----------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Bay County, Florida
Land w/Infrastructure.......... 13 1998 20 years
Office and Misc. Buildings..... 463 Various 10 to 30 years
Timberlands.................... 240 Various 20 years
Brevard County, Florida
Unimproved Land................ -- Various --
Broward County, Florida
Rail Warehouse................. 751 1986 3 to 40 years
Land w/Infrastructure.......... 4 1992 3 to 40 years
Unimproved Land................ -- Various --
Leasehold improvements......... 23 Various Lesser of lease
term to 5 years
Calhoun County, Florida
Timberlands.................... 70 Various 20 years
Dade County, Florida
Double Front Load Warehouse.... 1,442 1993 3 to 40 years
Rail Warehouses................ 5,425 1988 3 to 40 years
Office/Showroom/Warehouses..... 4,850 1988 3 to 40 years
Office/Warehouses.............. 4,791 1990 3 to 40 years
Front Load Warehouses.......... 5,255 1991 3 to 40 years
Office/Service Center.......... 427 1994 3 to 40 years
Cross Dock..................... 327 1987 3 to 40 years
Transit Warehouse.............. 3 Various 3 to 40 years
Land w/Infrastructure.......... 1,754 Various 3 to 40 years
Unimproved Land & Misc.
Assets....................... -- Various 3 to 40 years
Leasehold improvements......... 19 Various Lesser of lease
term to 5 years
Construction in Progress....... -- 1998 --
Duval County, Florida
Office Buildings............... 11,413 1985 3 to 40 years
Office/Showroom/Warehouses..... 8,006 1987 3 to 40 years
Office/Warehouses.............. 1,382 1994 3 to 40 years
Front Load Warehouse........... 101 1998 3 to 40 years
Rail Warehouses................ 118 1998 3 to 40 years
Land w/Infrastructure.......... 1,014 1998 3 to 40 years
Unimproved Land & Misc.
Assets....................... 222 1998 5 years
City & Residential Lots........ 132 Various 10 to 20 years
Timberlands.................... 6 Various 20 years
Construction in Progress....... -- 1998 --
Flagler County, Florida
Unimproved Land................ -- Various --
Franklin County, Florida
Timberlands.................... 76 Various 20 years
Gadsden County, Florida
Timberlands.................... 88 Various 20 years
Gulf County, Florida
Misc. Buildings................ 253 Various 10 to 30 years
Timberlands.................... 364 Various 20 years
Jefferson County, Florida
Misc. Buildings................ -- Various 10 to 30 years
Timberlands.................... 308 Various 20 years
Leon County, Florida
Land w/Infrastructure.......... 17 Various 20 years
Misc. Buildings................ 34 Various 10 to 30 years
Timberlands.................... 71 Various 20 years
</TABLE>
S-3
<PAGE> 66
THE ST. JOE COMPANY
SCHEDULE III (CONSOLIDATED) -- REAL ESTATE AND
ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY CARRIED AT CLOSE OF PERIOD
------------------------------------- -----------------------------------------------------
COSTS
CAPITALIZED BUILDINGS
BUILDINGS & SUBSEQUENT TO LAND & LAND AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION IMPROVEMENTS IMPROVEMENTS TOTAL
- ----------- ------------ ------- ------------ ------------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Liberty County, Florida
Misc. Buildings................ 0 -- -- 73 -- 73 73
Timberlands.................... 0 2,385 -- 8,436 10,821 -- 10,821
Martin County, Florida
Land w/Infrastructure.......... 0 3,638 -- 1,514 5,152 -- 5,152
Unimproved Land................ 0 1,414 -- -- 1,414 -- 1,414
Orange County, Florida
Office Building................ 0 1,276 -- 12,123 2,274 11,125 13,399
Office/Showroom/Warehouse...... 0 1,543 -- 6,006 2,411 5,138 7,549
Land w/Infrastructure.......... 0 17,510 -- 844 18,167 187 18,354
Leasehold improvements......... 0 -- 24 -- -- 24 24
Construction in Progress....... 0 -- -- 6,521 -- 6,521 6,521
Palm Beach County, Florida
Office/Showroom/Warehouse...... 0 217 -- 2,880 599 2,498 3,097
Rail Warehouses................ 0 461 -- 4,241 557 4,145 4,702
Cross Docks.................... 0 274 -- 3,629 1,262 2,641 3,903
Unimproved Land................ 0 2,433 -- -- 2,433 -- 2,433
Leasehold improvements......... 0 -- 269 -- -- 269 269
Seminole County, Florida
Unimproved Land................ 0 2 -- -- 2 -- 2
Leasehold improvements......... 0 -- 32 -- -- 32 32
St. Johns County, Florida
Land w/Infrastructure.......... 0 6,862 -- 1,016 7,878 -- 7,878
Volusia County, Florida
Unimproved Land................ 0 3,627 -- -- 3,627 -- 3,627
Wakulla County, Florida
Misc. Buildings................ 0 -- -- 71 -- 71 71
Timberlands.................... 0 1,238 -- 4,380 5,618 -- 5,618
Walton County, Florida
Land w/Infrastructure.......... 0 71 -- 1,119 1,190 -- 1,190
Timberlands.................... 0 466 -- 1,647 2,113 -- 2,113
Other Florida Counties
Unimproved Land................ 0 747 -- -- 747 -- 747
Misc. Land..................... 0 5,552 -- 2,217 7,769 41 7,809
Leasehold improvements......... 0 -- 334 -- -- 334 334
Timberlands.................... 0 864 -- 3,058 3,922 -- 3,922
Fulton County, Georgia
Leasehold improvements......... 0 -- 16 -- -- 16 16
Other Georgia Counties
Misc. Buildings................ 0 -- -- 141 -- 141 141
Timberlands.................... 0 897 -- 3,176 4,073 -- 4,073
Durham County, North Carolina
Leasehold improvements......... 0 -- 23 -- -- 23 23
Virginia Cities and Counties
Leasehold improvements......... 0 -- 86 -- -- 86 86
White County, Tennessee
Unimproved Land................ 0 36 -- -- 36 -- 36
<CAPTION>
DEPRECIABLE LIFE
USED
IN CALCULATION
IN
ACCUMULATED DATE CAPITALIZED LATEST INCOME
DESCRIPTION DEPRECIATION OR ACQUIRED STATEMENT
- ----------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Liberty County, Florida
Misc. Buildings................ 46 Various 10 to 30 years
Timberlands.................... 139 Various 20 years
Martin County, Florida
Land w/Infrastructure.......... 278 Various 3 to 40 years
Unimproved Land................ -- Various --
Orange County, Florida
Office Building................ 394 Various 3 to 40 years
Office/Showroom/Warehouse...... 128 Various 3 to 40 years
Land w/Infrastructure.......... 11 1995, 1998 3 to 40 years
Leasehold improvements......... 2 Various Lesser of lease
term to 5 years
Construction in Progress....... -- 1998 --
Palm Beach County, Florida
Office/Showroom/Warehouse...... 1,089 Various 3 to 40 years
Rail Warehouses................ 1,486 Various 3 to 40 years
Cross Docks.................... 1,323 Various 3 to 40 years
Unimproved Land................ -- Various --
Leasehold improvements......... 22 Various Lesser of lease
term to 5 years
Seminole County, Florida
Unimproved Land................ -- Various --
Leasehold improvements......... 3 Various Lesser of lease
term to 5 years
St. Johns County, Florida
Land w/Infrastructure.......... -- Various --
Volusia County, Florida
Unimproved Land................ -- Various --
Wakulla County, Florida
Misc. Buildings................ -- Various --
Timberlands.................... 136 Various 20 years
Walton County, Florida
Land w/Infrastructure.......... -- Various --
Timberlands.................... 27 Various 20 years
Other Florida Counties
Unimproved Land................ -- Various --
Misc. Land..................... 147 Various 20 years
Leasehold improvements......... 26 Various Lesser of lease
term to 5 years
Timberlands.................... 50 Various 20 years
Fulton County, Georgia
Leasehold improvements......... 1 Various Lesser of lease
term to 5 years
Other Georgia Counties
Misc. Buildings................ -- Various --
Timberlands.................... 114 Various 20 years
Durham County, North Carolina
Leasehold improvements......... 2 Various Lesser of lease
term to 5 years
Virginia Cities and Counties
Leasehold improvements......... 6 Various Lesser of lease
term to 5 years
White County, Tennessee
Unimproved Land................ -- Various --
</TABLE>
S-4
<PAGE> 67
THE ST. JOE COMPANY
SCHEDULE III (CONSOLIDATED) -- REAL ESTATE AND
ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY CARRIED AT CLOSE OF PERIOD
------------------------------------- -----------------------------------------------------
COSTS
CAPITALIZED BUILDINGS
BUILDINGS & SUBSEQUENT TO LAND & LAND AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION IMPROVEMENTS IMPROVEMENTS TOTAL
- ----------- ------------ ------- ------------ ------------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Harris County, Texas
Land w/Infrastructure.......... 0 1,817 -- 352 2,169 -- 2,169
Construction in Progress....... 0 -- -- 6,109 -- 6,109 6,109
District of Columbia
Leasehold improvements......... 0 -- 4 -- -- 4 4
-- ------- ----- ------- ------- ------- -------
TOTALS.................... 0 172,629 2,784 427,543 324,950 278,044 602,994
== ======= ===== ======= ======= ======= =======
<CAPTION>
DEPRECIABLE LIFE
USED
IN CALCULATION
IN
ACCUMULATED DATE CAPITALIZED LATEST INCOME
DESCRIPTION DEPRECIATION OR ACQUIRED STATEMENT
- ----------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Harris County, Texas
Land w/Infrastructure.......... -- 1998 --
Construction in Progress....... -- 1998 --
District of Columbia
Leasehold improvements......... 1 Various Lesser of lease
term to 5 years
------
TOTALS.................... 54,893
======
</TABLE>
- ---------------
Notes:
(A) The aggregate cost of real estate owned at December 31, 1998 for federal
income tax purposes is approximately $442,852,000.
(B) Reconciliation of real estate owned (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at Beginning of
Year......................... $507,779 $474,438 $403,974
Amounts Capitalized........... 109,915 50,410 75,832
Amounts Retired or Adjusted... (14,700) (17,069) (5,368)
Balance at Close of Period.... $602,994 $507,779 $474,438
</TABLE>
(C) Reconciliation of accumulated depreciation (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at Beginning of
Year......................... $ 42,343 $ 36,025 $ 28,383
Depreciation Expense.......... 12,784 8,878 7,710
Amounts Retired or Adjusted... (234) (2,560) (68)
Balance at Close of Period.... $ 54,893 $ 42,343 $ 36,025
</TABLE>
(D) The timberland properties have been included as investment properties and
prior year amounts have been reclassified to conform to this presentation.
S-5
<PAGE> 1
EXHIBIT 2.08
PURCHASE AND SALE AGREEMENT
by and between
TALISMAN SUGAR CORPORATION,
a Florida corporation
("Seller")
and
THE NATURE CONSERVANCY,
a District of Columbia non-profit corporation
("Buyer")
joined by
THE UNITED STATES DEPARTMENT OF THE INTERIOR,
("DOI")
and joined by
THE ST. JOE COMPANY, a Florida
corporation, ("St. Joe")
-i-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Sale of Property........................................................................................... 1
1.1 Real Property........................................................................................... 1
1.2 Real Property Outparcels................................................................................ 2
1.3 Leases.................................................................................................. 2
1.4 Map of Real Property and Leased Property................................................................ 2
1.5 Included in Conveyance.................................................................................. 3
1.6 Personal Property to be Transferred..................................................................... 3
1.7 Sugar Mill Parcel; Deferred Parcels..................................................................... 4
1.8 Excluded Items.......................................................................................... 5
2. Purchase Price and Payment................................................................................. 5
2.1 Earnest Money........................................................................................... 5
2.2 Cash to Close........................................................................................... 6
2.3 Designated Transferees.................................................................................. 6
2.4 Waiver of Relocation Assistance......................................................................... 7
3. Seller's Deliveries, Evidence of Title, Leases and Other Information....................................... 7
3.1 Title, Lease and Other Information from Seller.......................................................... 7
3.2 Documents............................................................................................... 8
3.3 Inspection Period....................................................................................... 9
3.4 Access by Buyer......................................................................................... 11
3.5 Survey.................................................................................................. 12
3.6 Title................................................................................................... 13
3.6.1 Title Review...................................................................................... 13
3.6.2 Curing Title Defects.............................................................................. 15
3.6.3 Title Costs....................................................................................... 17
4. Environmental Matters...................................................................................... 17
4.1 Definitions............................................................................................. 17
(a) Environmental Claims and Liabilities................................................................. 17
(b) Environmental Laws................................................................................... 18
(c) Pollutants........................................................................................... 18
4.2 Notice of Deferred Parcels.............................................................................. 19
4.3 Seller's Remediation.................................................................................... 20
(a) Seller's Duty to Remediate........................................................................... 20
(b) Notice of Proposed Remediation Plan.................................................................. 20
(c) Buyer's Second Environmental Notice.................................................................. 21
(d) Notice of Completion................................................................................. 21
4.4 Remediation Escrow Fund................................................................................. 23
4.5 Indemnification by Seller............................................................................... 25
5. Reservations of Use and Occupancy....................................................................... 26
5.1 Reservations............................................................................................ 26
5.2 Reservation Conditions.................................................................................. 26
5.3 Termination of the Reservations......................................................................... 27
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
5.4 Sugar Mill; Excluded Items; and Removed Structures...................................................... 28
5.5 Planting................................................................................................ 29
5.6 Conveyance of Property Without Reservations............................................................. 29
5.7 Indemnification......................................................................................... 29
6. Conditions Precedent to Closing............................................................................ 30
7. Closing.................................................................................................... 33
7.1 Closing................................................................................................. 33
7.2 Title Transfer and Payment of Purchase Price............................................................ 34
7.3 Prorations, Taxes and Assessments....................................................................... 35
7.4 Real Property Operating Expenses........................................................................ 35
7.5 Lease Payments and Security Deposits.................................................................... 36
7.6 Excise, Transfer, Sales Taxes and Closing Costs......................................................... 36
7.7 Insurance............................................................................................... 36
7.8 Reciprocal Real Estate Brokerage Indemnities............................................................ 37
7.9 Closing Documents....................................................................................... 37
7.9.1 General Warranty Deed............................................................................. 37
7.9.2 Assignment of Leases.............................................................................. 38
7.9.3 Seller's Affidavit................................................................................ 38
7.9.4 Assignments of Documents.......................................................................... 38
7.9.5 Non-Foreign Status Affidavit...................................................................... 38
7.9.6 Beneficial Interest and Disclosure Affidavit...................................................... 38
7.9.7 Updated Estoppel Letters as Described in Paragraph 3.1............................................ 39
7.9.8 Certificates of Consent........................................................................... 39
7.9.9 Certificate....................................................................................... 39
7.9.10 Bill of Sale...................................................................................... 39
7.9.11 Other Documents................................................................................... 39
7.10 Other Deliveries..................................................................................... 40
7.10.1 Title Policy...................................................................................... 40
7.10.2 Evidence of Authority............................................................................. 40
7.10.3. Other Documents................................................................................... 40
7.11 Deferred Closing; Designated Transferee(s)........................................................... 41
8. Representations and Warranties............................................................................. 41
8.1 Seller.................................................................................................. 41
8.2 Continuing Nature of Seller's Representation and Warranties............................................. 47
8.3 Buyer................................................................................................... 48
-----
9. Defaults................................................................................................... 48
9.1 Buyer................................................................................................... 48
9.2 Seller.................................................................................................. 48
9.3 Default Notice.......................................................................................... 49
10. Jurisdiction and Venue..................................................................................... 49
11. Preservation of Property; Risk of Loss..................................................................... 50
13. Miscellaneous.............................................................................................. 51
13.1 Time................................................................................................. 51
13.2 Notices.............................................................................................. 51
13.3 Attorney's Fees...................................................................................... 52
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
13.4 Entire Agreement and Modification.................................................................... 53
13.5 Binding Effect....................................................................................... 53
13.6 Assignment........................................................................................... 53
13.7 Headings............................................................................................. 53
13.8 Governing Law........................................................................................ 53
13.9 Full Execution....................................................................................... 53
13.10 Radon Disclosure..................................................................................... 54
13.11 Escrow Agent......................................................................................... 54
13.12 Severability......................................................................................... 55
13.13 Third Parties........................................................................................ 55
13.14 Counterparts......................................................................................... 56
13.15 Waiver............................................................................................... 56
13.17 Construction......................................................................................... 56
13.18 Recordation.......................................................................................... 56
13.19 Further Assurances; Additional Documents............................................................. 56
13.20 Survival............................................................................................. 57
</TABLE>
-iii-
<PAGE> 5
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the
Effective Date (as defined below), by and between TALISMAN SUGAR CORPORATION, a
Florida corporation ( "Seller"), joined by THE ST. JOE COMPANY, a Florida
corporation, the sole shareholder of Seller ("St. Joe") and THE NATURE
CONSERVANCY, a District of Columbia non-profit corporation or such of its
affiliates as it may determine ("Buyer"), joined by the United States Department
of the Interior, ("DOI"). The "Effective Date" of this Agreement shall be the
date the last of Seller or Buyer causes this Agreement to be executed on its
behalf. Each of Seller and Buyer shall furnish to the other an original of this
Agreement executed on its behalf promptly after such execution.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements set forth
herein, Seller and Buyer hereby agree as follows:
1. SALE OF PROPERTY
Seller agrees to sell and Buyer agrees to purchase the following real
and personal property subject to the terms and conditions stated
herein:
1.1 REAL PROPERTY. Those certain tracts of land situated in Palm
Beach County, Florida and Hendry County, Florida, which are
more particularly described in EXHIBIT A attached hereto as a
part hereof (consisting of approximately 45,635 acres)
together with all and singular the rights, tenements,
hereditaments and appurtenances thereto belonging or in
anywise appertaining (collectively "Real Property").
-1-
<PAGE> 6
1.2 REAL PROPERTY OUTPARCELS. All and singular of Seller's title,
rights, tenements, hereditaments and appurtenances, if any,
belonging or in anywise appertaining to those certain tracts
of land in Palm Beach and Hendry Counties, Florida (consisting
of approximately 205 acres) which are more particularly
described on EXHIBIT B attached hereto as a part hereof ("Real
Property Outparcels"). Notwithstanding any provision of this
Agreement to the contrary, Seller makes no representations nor
warranties with respect to its ownership of the Real Property
Outparcels. Seller shall, within thirty (30) days after the
Effective Date, cause the Title Company, as hereinafter
defined, to issue and deliver to Buyer an ownership and
encumbrance report with legible copies of all instruments
affecting title attached thereto.
1.3 LEASES. All right, title, and interests of Seller, as tenant
or lessee, in, to, or under any and all leases, subleases,
licenses, tenancies, or occupancy agreements (the "Leases")
consisting of approximately 5,121 acres which constitutes all
of Seller's leasehold interests in lands (collectively,
"Leased Property"). A list of the Leases is described on
EXHIBIT C attached hereto as a part hereof.
1.4 MAP OF REAL PROPERTY AND LEASED PROPERTY. A map of the Real
Property and the Leased Property is attached hereto for
illustration purposes only as EXHIBIT D. The approximate area
of the Real Property is identified as Parcels A, B, D, E, F,
H, I, J, K and "Ranch," on EXHIBIT D but excluding the 12.9
acre canal parcel identified on Exhibit A. The approximate
area of the Leased Property is identified as "Talisman Leases"
on EXHIBIT D. In the event of a conflict between the map
attached hereto as EXHIBIT D and the legal descriptions in the
documents referenced in the attached EXHIBIT A, EXHIBIT B, and
EXHIBIT C, the legal descriptions shall control. The Real
-2-
<PAGE> 7
Property and the Leased Property are herein sometimes
collectively referred to as the "Property."
1.5 INCLUDED IN CONVEYANCE. The conveyance of the Property will
include the following: all fixtures, improvements, dikes and
all rights with respect to the Property, including but not
limited to all logs and timber rights, all water rights, all
mineral rights, all oil and gas rights, all crops, including
cane stubble, all pasturage rights, all grazing rights and all
other rights connected with the beneficial use and enjoyment
of the Property; as well as, all right, title and interest in
any streams, canals, ditches and other water bodies located on
the Property, appurtenant to the Property or which may provide
access to the Property; and all rights, title, and interest in
any alleys, roads, streets, and easements included within the
Property, appurtenant to the Property or which may provide
access to the Property. It is the intention of the parties
hereto that, in this transaction, Seller shall convey, at the
Closing (as defined herein), all of Seller's real estate
interests in Palm Beach and Hendry Counties, Florida, subject
to the reservations of occupancy and use rights specifically
defined herein as the "Reservations", subject to the rights of
The United States of America and the State of Florida in and
to submerged lands, if any, and subject to the "Permitted
Exceptions", (as defined herein) and except for: (i) parcels
of property containing approximately 3,000 acres identified as
Parcels C, G and L on EXHIBIT E (the "Excluded Real
Property".); and (ii) the Excluded Items as defined in
Paragraph 1.8 below.
1.6 PERSONAL PROPERTY TO BE TRANSFERRED. Subject to Seller's use
in conjunction with the Reservations, Seller shall convey to
Buyer at Closing by bill of sale all irrigation and drainage
systems, including all pumps, pump motors, pump houses, and
piping,
-3-
<PAGE> 8
and such other equipment and structures, other than the
Excluded Items (defined below), as may be specifically
designated by Buyer during the Inspection Period ("Personal
Property").
1.7 SUGAR MILL PARCEL; DEFERRED PARCELS. The sugar mill parcel
("Sugar Mill Parcel"), which consists of the parcel of Real
Property more particularly described in F attached hereto as a
part hereof, and certain other parcels which may be designated
by Buyer five (5) days prior to Closing as having uncured
Title Objections which Seller is obligated to cure pursuant to
Paragraph 3.6.2, or requiring Remediation pursuant to
Paragraph 4.2, below, are collectively referred to as the
"Deferred Parcels". Title to each Deferred Parcel shall, at
Buyer's option be conveyed: (i) within fifteen (15) days after
Buyer's receipt of Seller's Notice of Completion (as defined
in Paragraph 4.3(d) below) and the cure of any Title
Objections of each such Deferred Parcel has been completed; or
(ii) at an earlier date designated by Buyer, or such later
date as Buyer and Seller shall agree (a "Deferred Closing").
The portion of the Purchase Price allocated to the Deferred
Parcels shall not be paid to Seller at Closing but shall be
paid to and held by the Escrow Agent pursuant to Paragraph 7.2
until the Deferred Closing(s) at which time it shall be paid
to Seller. Such portion of the Purchase Price shall be
computed based on the Deferred Parcel acreage multiplied by
the applicable price per acre to be determined by the parties
at the time the Deferred Parcels are identified; provided
however in the event the parties fail to agree, then the
applicable per acre price shall be determined by dividing the
Purchase Price by 45,635. Prerequisites and procedures
applicable by this Agreement to the Closing
-4-
<PAGE> 9
shall, unless specifically excepted in this Agreement, be
deemed to apply to every Deferred Closing.
1.8 EXCLUDED ITEMS. Excluded from conveyance or transfer under
this Agreement are items which include the mill structure,
accessory buildings, equipment and vehicles on the Sugar Mill
Parcel ("Sugar Mill") and, except as provided below, all other
structures, and all personal property other than the Personal
Property ("Excluded Items"). The Excluded Items and all other
structures shall be removed by Seller ("Removed Structures")
unless such of the other structures are designated by Buyer in
writing during the Inspection Period to remain. The Removed
Structures shall be and remain property of Seller.
2. PURCHASE PRICE AND CASH TO CLOSE. The consideration from Buyer
to Seller for the purchase of the Property and Personal
Property is the negotiated purchase price in the amount of ONE
HUNDRED THIRTY-THREE MILLION FOUR HUNDRED FIFTY FOUR THOUSAND
EIGHT HUNDRED AND NO/100 DOLLARS ($133,454,800.00),
hereinafter referred to as the "Purchase Price."
2.1 EARNEST MONEY. Within five (5) days after the Effective Date,
Buyer shall deposit the sum of ONE THOUSAND AND NO/100 DOLLARS
($1,000.00) as the Earnest Money ("Earnest Money Deposit")
with Chicago Title Insurance Company whose address is 2701
Gateway Drive, Pompano Beach, Florida 33069 ("Escrow Agent").
Unless Buyer terminates this Agreement in accordance with the
terms and provisions hereof, the Earnest Money Deposit shall
be deemed fully earned by Seller. Promptly after Escrow
Agent's receipt of the Earnest Money Deposit (which receipt
shall be deemed to occur on clearance of funds), Escrow Agent
shall deposit the Earnest
-5-
<PAGE> 10
Money Deposit in a non-interest bearing account. At Closing
(as defined herein), the Earnest Money Deposit shall be paid
to Seller and applied against the Purchase Price.
2.2 CASH TO CLOSE. Buyer agrees to cause the Purchase Price to be
delivered to Escrow Agent, no later than one (1) day before
the Closing, subject to, or together with, as the case may be,
the prorations, adjustments, and closing expenses set forth in
this Agreement charged or credited to Buyer ("Cash to Close")
in immediately available U.S. funds by wire transfer as more
particularly set forth in this Agreement and shall be
disbursed pursuant to Paragraph 7.2 below.
2.3 DESIGNATED TRANSFEREES. Seller acknowledges that Buyer will be
involved in land transactions among various third parties in
the Everglades Agricultural Area, which transactions will
include some of the Property (the "EAA Transactions"). Seller
agrees to cooperate in the EAA Transactions and to convey
parcels of Real Property and/or assign interests under the
Leases to third parties that are designated in writing by
Buyer ("Designated Transferee(s)") at least ten (10) business
days before Closing or, before a Deferred Closing. Seller
shall furnish to Designated Transferees those closing
documents, including appropriate representations and
warranties contained in a seller's affidavit which shall
include those representations and warranties contained in
Paragraph 8.1 (c), (d), (e), (f), (g), (p) and (q) below.
Conveyances of parcels of the Real Property to Designated
Transferees may occur simultaneously with or after, but not
before Closing and except as provided in Paragraph 5.6 below,
shall be conveyed subject to the Reservations. The EAA
Transactions shall not in any way affect the aggregate
Purchase Price or the manner of payment thereof and Seller
shall not be responsible for any additional costs associated
with any EAA Transactions.
-6-
<PAGE> 11
2.4 WAIVER OF RELOCATION ASSISTANCE. In consideration of the
negotiated Purchase Price, Seller hereby waives any rights or
claims it may have under the Uniform Relocation Assistance and
Real Property Acquisition Policy Act of 1970, as amended. (42
U.S.C. ss. 4601 et seq.).
3. SELLER'S DELIVERIES, EVIDENCE OF TITLE, LEASES AND OTHER INFORMATION.
3.1 TITLE, LEASE AND OTHER INFORMATION FROM SELLER. Within fifteen
(15) days after the Effective Date, Seller shall (at its sole
cost and expense) deliver or cause to be delivered to Buyer
copies of: (a) all deeds by which Seller acquired title to the
Real Property, (b) all existing title insurance policies
insuring title to any portion of the Property (Buyer
acknowledges that Seller does not have an existing title
insurance policy for portions of the Real Property), (c) all
Leases, (d) all surveys, environmental or engineering reports,
studies, inspections or analyses, copies of all historical
over flight photographs, Material Safety Data Sheets,
hazardous waste shipment manifests or invoices and other
physical inspections or reports conducted with respect to the
Property or on behalf of Seller or otherwise, if any, which
are in Seller's possession or control, (e) a list of any such
documents or information described in (d) above not in
Seller's possession or control but of which Seller has
knowledge, and (f) a list of litigation or, proceedings,
pending or threatened with respect to the Property. Any such
inspections, tests and studies prepared by third parties and
delivered to Buyer shall be given by Seller without
representation or warranty of any kind, and shall at all times
be subject to the rights of the professionals and other third
party preparers of such inspections, tests and studies;
provided, however, Seller has no knowledge of any inaccuracies
contained in the documents delivered except as specifically
pro-
-7-
<PAGE> 12
vided in writing by Seller and delivered to Buyer
contemporaneously with the delivery of such items. In the
event that Seller subsequently determines that there are
inaccuracies contained in the documents delivered, Seller
shall disclose to Buyer any errors or misstatements contained
in such inspections, tests or studies of which Seller has
knowledge. Seller shall attempt to obtain and deliver to Buyer
estoppel letters (in the form attached hereto as EXHIBIT G)
from the lessors under the Leases within sixty (60) days after
the Effective Date. In the event the Seller is unable to
obtain an estoppel letter for any Lease, the required estoppel
information regarding the status of such Lease may be provided
by a certificate from Seller in the form attached hereto as
EXHIBIT H delivered to Buyer within sixty (60) days after the
Effective Date, which shall state that upon Closing, Buyer or
its designated assignee of the Lease shall be indemnified by
Seller against any lessor claims not disclosed by such
certificate. In the event that Seller is in default of any of
the Leases, Seller shall cure any such default(s) at or prior
to Closing.
3.2 DOCUMENTS. Within fifteen (15) days after the Effective Date,
Seller shall (at its sole cost and expense) deliver or cause
to be delivered to Buyer copies of the following documents
(the "Documents") if any, which are in Seller's possession or
control: (a) all service contracts, warranties, guarantees
pertaining to the Property and Personal Property in effect on
the Effective Date; (b) all plans and specifications
pertaining to improvements, including borrow pits, irrigation
systems and structures located on the Property; (c) all
licenses, variances, waivers, permits (including, without
limitation, South Florida Water Management District permits),
authorizations and approvals required by law or otherwise
issued by governmental or private authority
-8-
<PAGE> 13
having jurisdiction over the Property, or any portion thereof
("Governmental Approvals") as well as all unrecorded
instruments and agreements that relate to the use or operation
of the Property and (d) a list of any such documents or
information described in (a) - (c) above not in Seller's
possession or control but of which Seller has knowledge. In
complying with this Paragraph 3.2, Seller shall not be
required to furnish financial information to Buyer. Any such
Documents prepared by third parties and delivered to Buyer
shall be given by Seller without representation or warranty of
any kind, and shall at all times be subject to the rights of
the professionals and other third party preparers of such
Documents; provided, however, Seller has no knowledge of any
inaccuracies contained in the Documents delivered except as
specifically provided in writing by Seller and delivered to
Buyer contemporaneously with the delivery of such items. In
the event that Seller subsequently determines that there are
inaccuracies contained in the Documents delivered, Seller
shall disclose to Buyer any errors or misstatements contained
in such Documents of which Seller has knowledge. Buyer shall
have the right to direct Seller to cancel any or all of the
service contracts, such cancellation to be effective not later
than the Termination of the Reservations described in
Paragraph 5.3 below.
3.3 INSPECTION PERIOD. Buyer shall have one hundred fifty (150)
days after the Effective Date of this Agreement (hereinafter
referred to as the "Inspection Period") for Buyer or Buyer's
Representatives (as defined below) and those persons or
entities designated by Buyer as potential purchasers of
Buyer's interest in the Property ("Buyer's Potential
Purchasers") to make such investigations, studies and tests of
the Property and Personal Property including, but not limited
to, conducting engineering inspec-
-9-
<PAGE> 14
tions, making soil and substrate drillings and borings,
installing piezometers and temporary or permanent groundwater
monitoring wells, collecting soil, sediment, surface water and
groundwater samples, measuring water levels, and performing
environmental inspections and any other inspections, tests,
studies, investigations which Buyer deems necessary or
advisable, in its sole and absolute discretion, in order to
determine the condition and compliance of the Property under
Environmental Laws and the suitability of the Property for
Buyer's intended use, uses and purposes for agriculture flood
control, water supply, water storage, water quality, water
management and environmental restoration and for sales,
exchanges with or transfers to Designated Transferees and
others ("Buyer's Intended Purposes"). Buyer will use its best
efforts to complete its environmental inspections, evaluations
and assessments, which assessment shall include an estimate of
the cost of Remediation (as defined in Paragraph 4.3(a)) which
estimate may include the removal of solid waste ("Buyer's
Environmental Assessment") of the Property at the earliest
date possible, but in no event later than one hundred fifty
(150) days after the Effective Date. Buyer shall keep Seller
continuously informed of the results of its assessment
throughout the Inspection Period and shall provide an initial
draft of Buyer's Environmental Assessment to Seller within
ninety (90) days of the Effective Date. If Buyer determines in
its sole discretion during this Inspection Period that the
Real Property, Leased Property or Personal Property is
unsuitable for Buyer's Intended Purposes, then, upon written
notice given to Seller and Escrow Agent on or before 5:00 p.m.
on the last day of the Inspection Period, Buyer shall have the
right to terminate this Agreement and receive immediate
payment of the Earnest Money Deposit held by the Escrow Agent,
except
-10-
<PAGE> 15
for One Hundred and No/100 Dollars ($100.00), which shall be
paid to Seller as consideration for entering into this
Agreement and thereafter this Agreement shall be null and void
and neither party shall have any further liability to the
other under this Agreement. In the absence of such notice from
Buyer, then this Agreement shall remain in full force and
effect. If Buyer shall terminate this Agreement at any time
prior to the scheduled Closing Date, Buyer shall furnish the
results of all inspections, tests and studies to Seller within
ten (10) days after furnishing Seller with notice of
termination of this Agreement. Buyer shall deliver to Seller
copies of all such inspections, tests and studies, but such
delivery shall be without representation or warranty from
Buyer of any kind, and shall at all times be subject to the
rights of the professionals and other preparers of such
inspections, tests and studies. The term "Buyer's
Representatives" shall mean any and all officers, employees,
contractors and agents of Buyer, the U.S. Department of the
Interior, the Environmental Protection Agency, the Florida
Department of Environmental Protection, and the South Florida
Water Management District ("District") .
3.4 ACCESS BY BUYER. Seller agrees (i) on and after the Effective
Date, Buyer and Buyer's Representatives and Buyer's Potential
Purchasers shall have access to the Property for the purpose
of making environmental surveys or other inspections and
independent investigations; and (ii) Seller shall make other
good faith efforts upon Buyer's reasonable request to provide
Buyer with other relevant or necessary information with
respect to the Property. Seller shall make access available to
Buyer, Buyer's Representatives, and Buyer's Potential
Purchasers, and their agents and consultants, within
twenty-four (24) hours of Seller's receipt of written request
for access which
-11-
<PAGE> 16
written request shall be delivered by facsimile transmission
to Miguel Cevera at (561) 996-6915 and J. Malcolm Jones, Jr.
at 904-398-8620. Seller represents that it has the authority
to grant to Buyer, Buyer's Representatives, and Buyer's
Potential Purchasers, the access rights described in this
paragraph. Buyer, to the extent permitted by law, agrees to
hold Seller harmless from any personal injury or property
damage caused by Buyer, Buyer's Representatives, or Buyer's
Potential Purchasers, arising out of Buyer's, Buyer's
Representatives' or Buyer's Potential Purchasers', access to
the Property. If, for any reason whatsoever, this transaction
does not close, Buyer agrees to correct any damage to the
Property arising from Buyer's investigations and to restore
the Property to its condition prior to such inspection and
investigation except Buyer shall not be required to remove any
permanent monitoring wells. The indemnity set forth in this
paragraph shall survive a termination of this Agreement.
3.5 SURVEY. Buyer shall have the right to have all or any portion
of the Property surveyed, at Buyer's sole expense, and, until
one hundred and twenty (120) days after the Effective Date of
this Agreement, to notify Seller in writing of its objections
to any matters indicated by the survey(s) (the "Survey") which
render title objectionable to Buyer ("Survey Objection
Notice"). Any and all defects expressly stated in the Survey
Objection Notice shall be treated as Title Objections (as
herein defined) under this Agreement. The Survey, if any,
shall: (a) be made by a duly licensed Florida surveyor, and
shall be prepared in accordance with the minimum technical
standards set forth by the Florida Board of Land Surveyors
pursuant to Section 472.027, Florida Statutes, and Chapter
61G17, Florida Administrative Code, (b) locate all matters
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described by documents referred to in the Title Binder (as
defined herein), easements and rights-of-way (identified by
recording data if applicable), (c) reflect any encroachments
or protrusions and any other matters referenced in the Title
Binder (as defined herein), (d) contain an appropriate legal
description of the Real Property and the Leased Property, and
(e) contain a certificate in favor of Seller, Seller's
counsel, Buyer, Buyer's counsel, and the Title Company (as
defined herein).
3.6 TITLE.
3.6.1 TITLE INFORMATION DELIVERY AND REVIEW. Seller shall
have forty-five (45) days after the Effective Date to
cause a title insurance company or companies,
including re-insurers approved by Buyer
(collectively, "Title Company") to issue and deliver
to Buyer a binder or binders with legible copies of
all instruments affecting title attached thereto
(collectively, "Title Binder"), committing the Title
Company to issue in Buyer's or Buyer's Designated
Transferees' favor a policy or policies of title
insurance insuring the marketability of fee title to
the Real Property, and the leasehold interest under
the Leases in amounts aggregating the Purchase Price.
Buyer shall have sixty (60) days after receipt of the
Title Binder to review and to notify Seller in
writing of any objections ("Title Objection Notice")
to anything contained in the Title Binder ("Title
Objections"). The Title Binder shall commit to issue
ALTA title insurance policy or policies (Owner's Form
"B" and Leasehold as to Buyer and all Designated
Transferees, except the United States shall be issued
an ALTA U.S. Policy-9/28/91) insuring Buyer's and
Buyer's Designated Transferees' interest in the
Property substantially in the form of the
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blank title insurance policy form attached hereto as
Exhibit I. All title insurance shall be issued by
Mark J. Boulris, P.A. ("Title Agent") as agent or
approved attorney for the Title Company and both
Seller and Buyer hereby waive any conflict which may
exist by virtue of the Title Agent also serving as
legal counsel to Seller. Taxes for the year of
Closing or Deferred Closing(s), zoning and land use
regulations, and any items to which Buyer does not
object in the Title Objection Notice or the Survey
Objection Notice or waives, shall be deemed to be
"Permitted Exceptions" to title under this Agreement.
If Buyer does not timely and in accordance with this
Agreement deliver a Title Objection Notice or Survey
Objection Notice, Buyer shall be conclusively deemed
to have waived any objection to the title to the
Property which are disclosed in the Title Binder.
Seller shall not grant, convey, encumber, lease or
allow the imposition of any lien on any portion of
the Property at any time prior to Closing. Seller
will not execute or record any instrument in any way
affecting the title to the Property at any time prior
to Closing or a Deferred Closing, as may be
applicable, without Buyer's prior written consent. At
the Closing or Deferred Closing, Seller shall convey
title to the Real Property and assign an insurable
leasehold interest under the Leases to Buyer and/or
Buyer's Designated Transferee(s), free of
Marketability Defects (as defined in Paragraph 3.6.2)
and subject only to the Permitted Exceptions. Prior
to or at Closing or Deferred Closing, Seller shall
undertake such actions, pay such amounts of money,
and execute such documents, as may be necessary to
satisfy all requirements set forth in the Title
Binder, and to delete all of the standard exceptions
set forth in the Title
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<PAGE> 19
Binder, but subject to matters of survey if a Survey
is obtained by Buyer pursuant to Paragraph 3.5 above.
3.6.2 CURING TITLE DEFECTS. Seller shall have sixty (60)
days ("Cure Period") from the receipt of the Title
Objection Notice or the Survey Objection Notice to
cure and remove Title Objections. Seller shall be
obligated to and shall use diligent effort, including
the bringing of necessary suits to cure and remove
Title Objections that render title unmarketable by
standards adopted under authority of the Florida Bar,
under Florida Law (as modified by the terms of this
Agreement) and the U.S. Department of Justice
Standards and Regulations for the preparation of
Title Evidence (1970) ("Marketability Defect").
Seller's obligation to cure Marketability Defects:
(i) caused by the existence of Title Objections not
created by or resulting from the act or omission of
Seller; and (ii) affecting only those portions of the
Property for which Seller has no title insurance
policy insuring its interest, shall include the
bringing of necessary suits but shall be limited to
the expenditure of $150,000.00 in the aggregate for
all such Title Objections. Seller shall not be
obligated to remove any of the following interests in
the Property held by third parties not affiliated,
controlled or owned by Seller: canal, drainage and
access easements, utility easements and reservations
of interests in mineral rights in the Property;
provided, however, the existence of such interest may
be objected to by Buyer and, in such event, shall
constitute a Title Objection which may be considered
by Buyer in determining, during the Inspection
Period, whether
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the Property is suitable for the Buyer's Intended
Purposes. If Seller shall not have cured and removed
all Title Objections which it is obligated to cure
pursuant to this Paragraph by the end of the Cure
Period or three (3) business days before December 31,
1998 (the "Outside Closing Date"), whichever occurs
first, then with respect to the parcel(s) of the
Property affected by the uncured Title Objection(s)
which Seller is obligated to cure pursuant to this
Paragraph (the "Defect Parcel(s)"), Buyer shall have
the option of:
(a) accepting title to the Defect
Parcel(s) as it then is; or
(b) designating the Defect Parcel(s) as
a Deferred Parcel(s) and requiring
Seller to continue to diligently
pursue the cure of any
Marketability Defect until the
Proration Date (as defined in
Paragraph 5.3 and thus extending
the Cure Period for said amount of
time and have Seller place an
executed General Warranty Deed(s)
(as hereinafter defined) in escrow
with the Escrow Agent pursuant to
the terms of the Escrow Agreement
(as hereinafter defined); or
(c) rejecting any Defect Parcels and
proceeding to Closing on the rest
of the Property (other than the
Deferred Parcels) with an
apportioned reduction in the
Purchase Price as provided in
Paragraph 1.7; provided, however,
if the rejected Defect Parcels
exceed in the aggregate 1,000 acres
of the Property, then Seller may
terminate this Agreement and the
Earnest Money Deposit shall be
immediately returned to Buyer and
thereafter
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<PAGE> 21
this Agreement shall be null and
void and neither party shall have
any further liability to the other
under this Agreement; or.
(d) declining to accept title to the
Defect Parcel(s), whereupon this
Agreement shall be terminated and
the Earnest Money Deposit shall be
immediately returned to Buyer and
thereafter this Agreement shall be
null and void and neither party
shall have any further liability to
the other under this Agreement.
3.6.3 TITLE COSTS. Seller shall pay any and all costs
(including, without limitation, search charges and
premiums) required for the issuance of the Title
Binder (and periodic updates, continuations and
extensions thereof as to Deferred Parcels) and
policies and for the issuance of any desired or
applicable endorsements requested by Buyer.
4. ENVIRONMENTAL MATTERS.
4.1 DEFINITIONS. The following terms when used in this Agreement
shall have the following meanings:
(a) ENVIRONMENTAL CLAIMS AND LIABILITIES. The term
"Environmental Claims and Liabilities" shall mean any
notices of investigation or potential liability,
demands for payment, law suits for damages, penalties
or injunctive relief, or any other claims of any sort
whatsoever of any nature, kind, or description which
in any way arise out of, are connected with, pertain
to, refer to, or relate to either directly or
indirectly or which may result in whole or in part
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<PAGE> 22
from the presence of Pollutants on or under or
emanating from the Property in violation of any
Environmental Laws.
(b) ENVIRONMENTAL LAWS. "Environmental Laws" shall mean
any federal, state, regional, or local laws,
statutes, ordinances, rules, regulations or other
governmental restrictions now or hereinafter enacted
regulating or governing the use, handling, storage,
disposal, presence, acceptable concentrations, impact
assessment, or remediation of Pollutants including,
but not limited to, the Comprehensive Environmental
Response, Compensation & Liability Act, 42 U.S.C. ss.
9601 et seq., the Resource Conservation & Recovery
Act, 42 U.S.C.ss. 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C.ss. 1251 et seq., the
Toxic Substances Control Act, 15 U.S.C.ss. 2601 et
seq., the Emergency Planning and Community Right to
Know Act of 1986, 42 U.S.C.ss. 11001 et seq., the
Clean Air Act, 42 U.S.C.ss. 7401 et seq., the
Endangered Species Act, 16 U.S.C.ss. 1521 et seq.,
the Occupational Safety and Health Act, 29 U.S.C.ss.
651 et seq., the Safe Drinking Water Act, 42
U.S.C.ss. 300(f) et seq., the Hazardous Materials
Transportation Act, 40 U.S.C.ss. 1801 et seq., the
Pollution Prevention Act of 1990, 42 U.S.C.ss. 13101
et seq., and Chapters 376 and 403, Florida Statutes,
including the rules promulgated thereunder, as all of
the foregoing statutes have been and hereafter may be
amended on or before completion of Remediation.
(c) POLLUTANTS. The term "Pollutant" or "Pollutants"
shall mean any hazardous or toxic substance; solid
waste, or waste of any kind; or any material,
con-
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<PAGE> 23
taminant, petroleum, petroleum product or petroleum
by-product as defined or regulated by Environmental
Laws.
4.2 NOTICE OF DEFERRED PARCELS. In the event that Buyer does not
elect to terminate this Agreement pursuant to Paragraph 3.3 of
this Agreement, it shall, by no later than 5:00 p.m. on the
last day of the Inspection Period, provide Seller with written
notice identifying the Deferred Parcels, if any, which shall
be those parcels of the Property requiring Remediation (as
defined in Paragraph 4.3(a) below). Such notice shall include
copies of Buyer's Environmental Assessment and other reports
on the Deferred Parcels. The Deferred Parcels shall be
identified with sufficient particularity so that they may be
excluded from that portion of the Property that will be
transferred at the Closing. If the Buyer identifies more than
seven hundred and fifty (750) acres as Deferred Parcels, then
Seller may, within ten (10) days of its receipt of written
notice from the Buyer identifying the Deferred Parcels, elect
to terminate the Agreement and, upon payment to Buyer of
one-half (1/2) of the cost incurred in acquiring Buyer's
Environmental Assessment and the return to Buyer of the Escrow
Deposit, this Agreement shall be null and void and neither
party shall have any further liability to the other under this
Agreement. Buyer's failure to designate any particular portion
of the Property as a Deferred Parcel during the Inspection
Period shall not adversely affect Buyer's right to give
Buyer's Second Environmental Notice or Buyer's Final
Environmental Notice for all or any part of the Property and
to require Remediation at the times set forth in Paragraphs
4.3 (c), (d) and (e), and 5.3 and 5.4 below and Sections 12
and 20 of the Reservation Conditions.
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<PAGE> 24
4.3 SELLER'S REMEDIATION.
(a) SELLER'S DUTY TO REMEDIATE. Seller shall, at its sole
cost and expense, complete any and all necessary
additional assessments, clean up and monitoring of
the Pollutants at the Deferred Parcels required by
Buyer's Environmental Assessment and take all action
necessary to bring the Deferred Parcels into, and to
cause all of the Property to be maintained in
compliance with all Environmental Laws and to satisfy
Buyer's Second Environmental Notice, and Buyer's
Final Environmental Notice ("Remediation"). Seller
shall cause Remediation of all the Property, except
the Sugar Mill Parcel to be completed prior to the
Termination of the Reservations (as defined in
Paragraph 5.3). Notwithstanding anything herein to
the contrary, the time for Remediation of the Sugar
Mill Parcel shall be governed by Paragraph 5.4.
(b) NOTICE OF PROPOSED REMEDIATION PLAN. As to each
Deferred Parcel, Seller shall provide to Buyer a copy
of a proposed plan to accomplish Remediation
including an estimate of the cost of such Remediation
(a "Remediation Plan") at least forty-five (45) days
prior to initiating the work contemplated by such
plan but in no event later than one hundred eighty
(180) days prior to Termination of the Reservations.
Buyer may provide comments to Seller on the proposed
Remediation Plan. Seller may consider any such
comments but the ultimate content of the Remediation
Plan shall be in the sole discretion of Seller, as
long as the implementation of the Remediation is
reasonably expected to bring Deferred Parcels into,
and to cause all other portions of the
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<PAGE> 25
Property to be maintained in, compliance with all
Environmental Laws and satisfy the requirements of
the Buyer's Environmental Assessment.
(c) BUYER'S SECOND ENVIRONMENTAL NOTICE. Prior to the
Termination of Reservations, Buyer may at Buyer's
sole cost and expense conduct further environmental
investigations of all or any part of the Property
("Buyer's Second Environmental Assessment") and give
Seller a second notice of any environmental problems
requiring Remediation ( "Buyer's Second Environmental
Notice"). Buyer's Second Environmental Notice shall
be delivered to Seller on or before one hundred
eighty (180) days prior to the Termination of
Reservations or, in the event of early Termination of
Reservations, within sixty (60) days after Buyer's
receipt of Seller's notice of such early Termination
of Reservations. Buyer shall, upon application to the
Escrow Agent, be reimbursed from the Remediation
Escrow Fund (as defined in Paragraph 4.4) the costs
(up to a maximum of $100,000) incurred by Buyer in
conducting Buyer's Second Environmental Assessment.
(d) NOTICE OF COMPLETION. Seller shall provide to Buyer
written notice of Seller's completion of its
Remediation obligations under this Paragraph 4.3 as
to the Property ("Seller's Notice of Completion").
For all of the Property, excluding the Sugar Mill
Parcel, the Seller's Notice of Completion shall be
delivered to Buyer no later than the date of
Termination of the Reservations and shall include:
(i) Seller's statement that it has completed it
obligations of Remediation; and (ii) written
confirmation from the Florida Department of
Environmental Protection ("DEP"), and any state or
local governmental
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<PAGE> 26
agency with regulatory jurisdiction and, if
applicable, any Federal regulatory authority, over
the environmental condition of the Property, as
applicable, indicating that, having reviewed Buyer's
Environmental Assessments, Seller's Remediation Plans
and Remediation actions, no further action is
required by such agency or agencies (collectively
"Governmental Confirmation"). A "deactivation letter"
or completion report from an agency shall be deemed
to be a confirmation that no further action is
required by such agency. Not withstanding the
foregoing, Seller, Buyer, and Buyer's Representatives
shall use their best efforts and cooperation to
arrange for DEP to act as a clearing house and assume
lead responsibility for acquiring the above
confirmations from other state and local regulatory
authorities and, if applicable Federal regulatory
authorities. If DEP agrees to assume lead
responsibility, then written confirmation from DEP
shall be deemed to be conclusory evidence of
Governmental Confirmation. For all of the Property,
excluding the Sugar Mill Parcel, the written
confirmations required by this Paragraph 4.3(d) shall
be issued as of the date of, or not more than thirty
(30) days prior to, Termination of the Reservations.
(e) BUYER'S FINAL ENVIRONMENTAL NOTICE. At any time
within thirty (30) days after the later of the date a
Deferred Parcel is conveyed to Buyer or a Designated
Transferee, or the Terminations of Reservations,
Buyer may conduct a final environmental assessment
("Buyer's Final Environmental Assessment") and
deliver to Seller a final environmental notice
specifying matters requiring Remediation ("Buyer's
Final Environmental Notice"). If Seller
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does not complete such additional Remediation in
accordance with the provisions of Paragraphs 4.3, 5.3
and 5.4 of this Agreement and Sections 12 and 20 of
the Reservation Conditions, within thirty (30) days
after receipt of Buyer's Final Environmental Notice,
then, in addition to all other remedies for Seller's
failure to complete Remediation as required, Buyer
may cause such Remediation to be completed and
withdraw from the Remediation Escrow Fund all costs
and expenses incurred with respect thereto.
4.4 REMEDIATION ESCROW FUND.
(a) At Closing, Escrow Agent shall withhold from the
portion of the Purchase Price paid to Seller at
Closing and deposit in an interest bearing escrow
account funds to guarantee Seller's obligations in
Sections 4.3 and 5.3 and 5.4 of the Agreement and
Sections 12 and 20 of the Reservation Conditions (the
"Remediation Escrow Fund"). The amount of the funds
to be deposited in the Remediation Escrow Fund shall
be equal to Buyer's estimate of the cost of
Remediation of Deferred Parcels.
(b) If the Buyer's estimate of the cost of Remediation
exceeds Five Million and No/100 Dollars
($5,000,000.00), then Seller may, within ten (10)
days of its receipt of written notice from the Buyer
of its estimate, elect to terminate this Agreement
and, upon payment to Buyer of one-half (1/2) the cost
incurred in acquiring the environmental assessment
and the return to Buyer of the Escrow Deposit, this
Agreement shall be null and void and neither party
shall have any further liability to the other under
this Agreement.
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<PAGE> 28
(c) The Remediation Escrow Fund shall be administered by
an escrow agent acceptable to both Buyer and Seller
pursuant to the terms of an escrow agreement ("Escrow
Agreement") to be entered into by and among Seller,
Buyer and the Escrow Agent. The parties shall
cooperate and use best efforts to develop and approve
the form of the Escrow Agreement within forty-five
(45) days of the Effective Date.
(d) Upon Seller's: (i) completion of Remediation of all
Deferred Parcels and other Property in accordance
with Sections 4.3, 5.3 and 5.4 of the Agreement and
Sections 12 and 20 of the Reservation Conditions; and
(ii) Termination of the Reservations (as herein
defined), Seller shall submit to Buyer a written
request for disbursement of the balance of the
Remediation Escrow Fund for such Remediation.
(e) No later than thirty (30) days after Buyer's receipt
of a proper request for disbursement, Buyer shall
issue a letter of disbursement authorization to the
escrow agent ordering the escrow agent to disburse to
the Seller the balance of the Remediation Escrow
Fund.
(f) If Seller has not completed Remediation of all of the
Property as set forth in 4.3, 5.3 and 5.4 of this
Agreement and Sections 12 and 20 of the Reservation
Conditions, , then in addition to any other remedies
at law or in equity, and without limiting Buyer's
common law or statutory rights, Buyer shall be
entitled to withdraw funds from the balance of the
Remediation Escrow Fund to be used for completing
Remediation and for payment of any and all costs
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and charges incurred by Buyer arising from Seller's
failure to complete such Remediation.
4.5 INDEMNIFICATION BY SELLER. Seller shall absolutely,
irrevocably, and forever indemnify, defend and hold harmless
Buyer and those of Buyer's Designated Transferees which are
governmental bodies, and their successors and/or assigns which
are either not-for-profit organizations or governmental
bodies, of and from any and all Environmental Claims and
Liabilities, including court costs, reasonable attorney fees,
and other reasonable costs of defense, including expert
consultant and witness fees and costs. Buyer shall notify
Seller in writing, and while Seller is in possession of any of
the Property Seller shall notify Buyer in writing, of any
action, notice, demand, claim, administrative or legal
proceeding or investigation to which Seller's obligation to
indemnify and to hold harmless pursuant to this Paragraph 4.5,
may apply and Seller, at Seller's sole expense, shall assume
on behalf of Buyer and conduct with due diligence and good
faith the defense thereof with counsel satisfactory to Buyer
in its reasonable discretion; provided, however, that Buyer
shall have the right, at its option, to be represented in such
matters by advisory counsel of its own selection at its own
expense. In the event of failure by Seller to fully perform in
accordance with this Paragraph 4.5, Buyer, at its option and
without relieving Seller of its obligations hereunder, may so
perform, but all costs and expenses so incurred by Buyer in
such event shall be reimbursed by Seller to Buyer, together
with interest on the same from the date any such expenses were
paid by Buyer until reimbursed by Seller, at the highest
nonusurious rate of interest which may be contracted for,
charged or received in the State of Florida at such time.
Seller hereby agrees, represents and warrants that
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it has been represented by counsel of its choosing in the
preparation of this Agreement and that it has had this
Paragraph 4.5 fully explained by such counsel and that the
Seller is fully aware of its content and legal effect. Seller
acknowledges and agrees that it has received valuable
consideration for providing the indemnification, defense, and
hold harmless agreement pursuant to this Paragraph 4.5.
Provisions of Paragraph 4.5 shall survive the Closing and the
Deferred Closings. While this Agreement establishes
contractual liability for the Seller regarding Pollutants on
the Property, it does not alter or diminish any statutory or
common law liability of the Seller for such pollution.
5. RESERVATIONS OF USE AND OCCUPANCY.
5.1 RESERVATIONS. Except as provided in Paragraph 5.6, the General
Warranty Deed(s) conveying the Real Property and the
Assignment(s) of Leases (together, "Conveyance Documents")
shall contain a reservation ("Reservation") in favor of
Seller, allowing Seller to retain possession and use of the
Property through a period of time ending not later than March
31, 2003. The Reservations shall be for Seller's right to
remain in exclusive possession of the Real Property, Leased
Property and improvements thereon solely to: (a) plant,
cultivate, farm and grow sugar cane on the Real Property and
the Leased Property; (b) operate the Sugar Mill and activities
ancillary thereto in any lawful manner on the Sugar Mill
Parcel; and (c) harvest, fertilize, remove, use and sell sugar
cane.
5.2 RESERVATION CONDITIONS. Seller's rights under the Reservations
shall be subject to conditions more specifically set forth in
EXHIBIT J, attached hereto as a part hereof
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(the "Reservation Conditions"). The Reservation Conditions
shall also be stated in the Conveyance Documents.
5.3 TERMINATION OF THE RESERVATIONS. Unless the Reservations have
been sooner terminated with respect to any of the Property
pursuant to Seller's election or Paragraph 5.6 below, Seller's
rights under the Reservations shall terminate on March 31,
2003 ("Termination of the Reservations"). At or prior to the
Termination of the Reservations, Seller shall:
(a) vacate the Property; subject to the right of
entry on and over the Property as is
necessary to reasonably carry out the
obligations of Seller set forth in Paragraph
5.4;
(b) provide Buyer with current Conveyance
Documents and other closing documents
including, without limitation, a Seller's
Affidavit, an updated Title Binder as to all
Deferred Parcels, and a statement that the
Documents provided to Buyer pursuant to
Paragraph 3.2 of this Agreement are current
or, alternatively, if not current, that
Seller is simultaneously providing Buyer
with current copies of the Documents;
(c) provide Buyer with an accounting for
Operating Expenses (described in Paragraph
7.4 below);
(d) arrange for final utility meter readings and
facilitate the transfer of utility accounts
to Buyer; and
(e) cause the Personal Property to be placed in
good working order; and
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(f) complete Seller's Remediation obligations
under this Agreement and the Reservation
Conditions, exclusive of the Sugar Mill
Parcel. The date when the last of the events
in subparagraphs (a) through (f) have been
completed shall be the "Proration Date" for
purposes of Paragraph 7.3 below.
5.4 SUGAR MILL; EXCLUDED ITEMS; AND REMOVED STRUCTURES. Seller
shall have a period of twelve (12) months from the date of
Termination of the Reservations in which to remove the Sugar
Mill from the Property and, provided Seller has timely
completed such removals within said twelve (12) month period,
a period of up to twelve (12) additional months from the date
of completion of such removal to complete Remediation of the
Sugar Mill Parcel (the "Sugar Mill Remediation Period").
Structures other than the Sugar Mill which Buyer desires to
have remain on the Property shall be designated by Buyer in
written notice delivered to Seller on or before the earlier of
September 30, 2002 or, in the event of the early Termination
of Reservations within thirty (30) days after Buyer's receipt
of Seller's notice of Termination of Reservations. The Sugar
Mill and other Removed Structures shall be removed from the
Property so that nothing more than bare foundations remain,
and any and all salvage and residual value of the Removed
Structures shall remain the property of Seller. The
Remediation of the Sugar Mill Parcel shall be conducted
pursuant to Paragraph 4.3, except that: (i) Seller's
Remediation Plan shall be updated and provided to Buyer no
later than ten (10) months after the Termination of the
Reservations; and (ii) Seller's Notice of Completion of its
Remediation obligations and the written confirmations required
pursuant to Paragraph 4.3(d) shall be furnished to Buyer
within
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thirty (30) days of the date Seller completes its Remediation
obligations, but in no event later than the last day of the
Sugar Mill Remediation Period.
5.5 PLANTING. As of Termination of the Reservations, and in no
event later than March 31, 2003, unless otherwise instructed
by Buyer, Seller shall, at Seller's expense and in accordance
with the planting schedule for the Property replace harvested
sugarcane (with the exception of areas or fields scheduled to
be fallow for that growing season or fields of ratoon, which
will regrow during the immediately following growing season
from the root stock of the harvested sugarcane) with newly
planted sugarcane for the next harvest season.
5.6 CONVEYANCE OF PROPERTY WITHOUT RESERVATIONS. Upon the request
of Buyer, Seller shall release from the Reservations at any
time after Closing, up to a cumulative total of five thousand
(5,000) acres of the Property. Buyer shall notify Seller of
the designation of acres to be released at least sixty (60)
days prior to the date Buyer desires the release to become
effective; provided however, the effective date of such
release shall not be: (i) prior to March 31, 1999, or (ii)
during the months of September through March. Buyer and Seller
will cooperate in good faith to identify as many of the acres
to be so released at least thirty (30) days prior to Closing
and thereafter at least thirty (30) days prior to the date
designated by Buyer for release.
5.7 INDEMNIFICATION. Seller shall indemnify and hold harmless
Buyer, any not-for-profit or governmental successor of Buyer,
and every Buyer's Representative who becomes a Designated
Transferee, and their respective officers, shareholders,
directors, employees, agents, successors and assigns, from and
against any and all damages, claims, suits, judgments, liens
and liabilities whatsoever arising from or related to,
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directly or indirectly, Seller's ownership, occupancy and/or
use of the Property, or any part thereof.
6. CONDITIONS PRECEDENT TO CLOSING.
6.1 In addition to all other conditions precedent to Buyer's
obligation to consummate the purchase and sale contemplated
herein provided elsewhere in this Agreement, the following
shall be additional conditions precedent to Buyer's obligation
to close at Closing or a Deferred Closing, as the case may be
("Conditions Precedent"):
(a) The physical condition of the Property, except as
otherwise specifically provided herein, shall be the
same as it was on the Effective Date of this
Agreement, reasonable wear and tear excepted.
(b) At Closing, there should be no litigation or
administrative action or other governmental
proceedings of any kind whatsoever, other than those
filed or maintained by Buyer's Representatives (to
which Seller hereby reserves the right to object and
defend), pending or threatened, which, after Closing,
would adversely affect Buyer's Intended Purposes.
(c) The Property shall be in compliance with all
applicable Federal, State and local laws, ordinances,
statutes, rules and regulations, codes or
requirements, licenses, permits and authorizations.
(d) All of the representations and warranties of Seller
contained in this Agreement, including but not
limited to those contained in Paragraph 8, shall be
true and correct.
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(e) The transactions contemplated by this Agreement shall
not be in violation of, or prohibited by, any private
restriction, governmental law, ordinances, statute,
rule or regulation.
(f) There are no adverse title matters affecting the
Property since the Effective Date of the Title Binder
other than Permitted Exceptions.
(g) On or before July 24, 1998 Buyer has obtained
approval of this Agreement from its Board of
Governors.
(h) On or before July 24, 1998 Buyer has entered into a
cooperative agreement by and between Buyer, the
District and DOI (the "Cooperative Agreement")
pursuant to which DOI has, or DOI and the District
have, agreed to provide the Purchase Price for the
acquisition of the Property pursuant to this
Agreement.
(i) In the event that any third party files a lawsuit or
other proceeding or action challenging the authority
of DOI to fund the Purchase Price out of the monies
made available under Section 390 of the Federal
Agricultural Improvement and Reform Act of 1996
(Public Law 104-127), or the authority of Buyer to
enter into or perform under this Agreement, or
otherwise challenging the validity or enforceability
of this Agreement or the Cooperative Agreement,
Seller and Buyer agree to cooperate, to the extent,
and so long as, a party, in its sole discretion deems
such action and cooperation appropriate, to defend
all rights and obligations under this Agreement and
under the Cooperative Agreement, with Seller and
Buyer each being responsible for its own attorneys'
fees and costs, if any, through all appeals. If,
prior to Closing,
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such lawsuit, action, or proceeding is filed and a
court of competent jurisdiction enters an order
prohibiting the Closing, then, in such event, unless
prohibited by law or action of court, Closing shall
be delayed as provided in Paragraph 7.1 below and the
Cash to Close and the Deed(s) and other closing
documents shall be delivered to Escrow Agent pending
resolution of the lawsuit, action, or proceeding.
Notwithstanding any of the foregoing, Buyer shall not
object to Seller intervening as an interested party
to defend its interests against any such lawsuit,
action, or proceeding challenging this Agreement or
the Cooperative Agreement, or to Seller's filing any
and all actions and counterclaims, including, without
limitation, a claim for tortious interference with
this Agreement or the Cooperative Agreement (provided
that same is brought and maintained at Seller's
expense), but excluding crossclaims or other actions
filed by Seller against Buyer or Buyer's
Representatives or which otherwise challenge the
validity or enforceability of this Agreement or the
Cooperative Agreement. This Paragraph shall not be
binding on the United States if the United States
becomes the Buyer under this Agreement.
6.2 Should any of the Conditions Precedent provided in
Paragraph 6.1(a)-(g) above fail to occur as of
Closing or a Deferred Closing, then Buyer shall have
the right, in Buyer's sole and absolute discretion,
to reject the Property affected by such failure,
reduce the Purchase Price attributable to such parcel
in accordance with Paragraph 1.7, and proceed with a
closing on the rest of the Property; provided,
however, that if more than five percent (5%) of all
the Property is affected by failure of the Conditions
Precedent as of Closing, then Buyer may, in its sole
discretion, terminate this
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Agreement upon which both parties shall be released
of all obligations under this Agreement with respect
to each other, except for matters expressly stated
herein as surviving termination of this Agreement,
and, upon notice to Escrow Agent, the Earnest Money
Deposit shall be returned to Buyer.
6.3 Should any of the Conditions Precedent provided in
Paragraph 6.1(h) and (i) above fail to timely occur,
then either Seller or Buyer shall have the right, in
its sole and absolute discretion to terminate this
Agreement, upon which both parties shall be released
of all obligations under this Agreement with respect
to each other, except for matters expressly stated
herein as surviving termination of this Agreement,
and, upon notice to Escrow Agent, the Earnest Money
Deposit shall be returned to Buyer.
7. CLOSING. Buyer and Seller hereby agree that the transaction
contemplated by this Agreement shall be consummated as follows:
7.1 CLOSING. Except for Deferred Closings, the transaction shall
be closed, the deed and other documents delivered and recorded
and the Cash to Close disbursed pursuant to this Agreement on
December 17, 1998 ("Closing"), unless such date is extended as
a result of a curative act (related to a breach or title
defect). Buyer shall notify Seller in writing no later than
ten (10) days prior to the Closing as to the Designated
Transferees to be inserted in the General Warranty Deed(s) or
Special Warranty Deeds (as hereinafter defined) for the
various portions of the Property and which portions of the
Property are to be conveyed directly to Buyer. Except as
provided below and in Paragraph 6.1(j), if all Conditions
Precedent are otherwise satisfied, Closing shall occur no
later than December 31, 1998 (the "Outside Closing Date"). If
the Closing has been delayed pursuant to Paragraph 6.1(j) and
has not occurred by March 31,
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2003, then either party may elect to terminate this Agreement,
upon which both parties shall be released of all obligations
under this Agreement with respect to each other, except for
matters expressly stated herein as surviving termination of
this Agreement, and, upon notice to Escrow Agent, the Earnest
Money Deposit shall be returned to Buyer. The Closing shall
take place at 10:00 a.m. local time in the West Palm Beach,
Florida offices of The South Florida Water Management
District.
7.2 TITLE TRANSFER AND PAYMENT OF PURCHASE PRICE. Seller shall
convey to Buyer title to the Real Property by General Warranty
Deed(s), subject to the Permitted Exceptions and to all of the
Leased Property by assignment(s) of Leases subject to the
Reservations, and title to the Real Property Outparcels by
Quit Claim Deed. At Closing, the deeds and assignments for
conveyance of all of the Property and the Real Property
Outparcels, except the Deferred Parcels, shall be recorded and
the portion of the Purchase Price allocated pursuant to
Paragraph 1.7 for disbursement to Seller for such conveyances
(less Seller's prorations and adjustments, funding of the
Remediation Escrow Fund and Seller's closing expenses) and for
payment of closing expenses for such conveyances, shall be
immediately released and paid from escrow upon the Title
Company's issuance of an endorsement or mark-up of the Title
Binder deleting the Schedule B-1 requirements and the
pre-printed exceptions other than the exception for taxes for
the year of Closing and for the survey exception in the event
Buyer elects not to obtain a survey or, if Buyer elects to
obtain a survey, the survey exception shall be modified to
include survey matters which are Permitted Exceptions, and
agreeing to issue the owner's policy or policies or title
insurance subject only to the Permitted Exceptions. The
balance of the Cash to Close allocated to the Deferred
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Parcels, if any, pursuant to Paragraph 1.7, shall be held by
the Escrow Agent in an interest bearing escrow account (which
interest shall accrue and be paid to the United States) and
disbursed pursuant to the Escrow Agreement.
7.3 PRORATIONS, TAXES AND ASSESSMENTS. After Closing and any
Deferred Closing, Seller shall continue to pay when due all
real and personal property taxes (whether ad valorem or non-ad
valorem and including, without limitation, taxes and fees
levied by the South Florida Water Management District) as well
as all pending, certified, confirmed and ratified special
assessment liens levied against the Property together with all
other expenses of the Property through the Proration Date,
following Termination of the Reservation, in accordance with
Paragraph 5.3 above. Taxes shall be prorated based on the tax
for the year of Termination of Reservations (except for the
Sugar Mill Parcel which shall be the year of completion of
Remediation for the Sugar Mill Parcel) with due allowance made
for exemptions (if any). If the assessment for the year of
Termination of Reservations (or in the case of the Sugar Mill
Parcel, the year in which Remediation of the Sugar Mill Parcel
is completed) is not available, then taxes will be prorated on
the prior year's tax. Any tax proration based on an estimate
shall be subsequently readjusted at the request of either
party upon receipt of a tax bill.
7.4 REAL PROPERTY OPERATING EXPENSES. All Property operating
expenses shall be paid by Seller through the Proration Date
for that Property. Seller shall pay all utility charges and
other operating expenses attributable to the Property (the
"Operating Expenses") to and including the Proration Date and
Buyer shall pay all utility charges and other operating
expenses attributable to the Property after the Proration
Date.
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Seller shall provide Buyer with a list of all utility services
and companies servicing the Property at least thirty (30)
business days prior to the date of Termination of Reservations
for that Property.
7.5 LEASE PAYMENTS AND SECURITY DEPOSITS. All lease payments
(including, without limitation, rentals, sales taxes, and real
estate taxes, if appropriate) with respect to the Leases, and
all expenses pertaining to the Leased Property shall be
prorated as of the Proration Date for such Leased Property.
All security deposits and advance rent for periods after the
Proration Date paid by Seller under the Leases shall be
credited to Seller on the Proration Date.
7.6 EXCISE, TRANSFER, SALES TAXES AND CLOSING COSTS. The cost of
any excise, transfer and sales taxes and all recording fees
and documentary stamps and other closing costs imposed with
respect to the transaction shall be paid by Seller at Closing.
7.7 INSURANCE. Seller shall maintain all insurance coverage for
the Property until the Termination of the Reservations in the
types and amounts set forth in the Reservation Conditions.
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7.8 RECIPROCAL REAL ESTATE BROKERAGE INDEMNITIES. Seller agrees to
indemnify Buyer and hold Buyer harmless from any loss,
liability, damage, cost, or expense (including, without
limitation, court costs, and reasonable attorneys fees) paid
or incurred by Buyer by reason of any claim to any brokers,
finders, agents or other fee in connection with the
transaction by any party claiming by, through or under Seller.
Buyer agrees to indemnify Seller and hold Seller harmless from
any loss, liability, damage, cost or expense (including
without limitation, court costs, and reasonable attorneys
fees) paid or incurred by Seller by reason of any claim to any
brokers, finders, agents or other fee in connection with the
transaction by any party claiming by, through or under Buyer.
These indemnities shall survive Closing or termination of this
Agreement.
7.9 CLOSING DOCUMENTS. At the Closing and each Deferred Closing,
Seller shall deliver or cause to be delivered to Buyer the
following documents:
7.9.1 GENERAL WARRANTY DEED. A Statutory General Warranty
Deed or Deeds conveying to Buyer or, as the case may
be, to Buyer's Representative all of Seller's right,
title and interest in and to the Real Property,
subject to the Reservations, the Reservation
Conditions and Permitted Exceptions ("General
Warranty Deed")
7.9.2 SPECIAL WARRANTY DEED. A Special Warranty Deed or
Deeds conveying to Buyer's Designated Transferees
(other than Buyer's Representatives) all of Seller's
right, title and interest in and to the Real
Property, subject to the Reservations and the
Reservation Conditions ("Special Warranty Deed").
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7.9.3 QUIT CLAIM DEED. A Quit Claim Deed or Deeds conveying
to Buyer all of Seller's right, title and interest,
if any, in and to the Real Property Outparcels ("Quit
Claim Deed").
7.9.4 ASSIGNMENT OF LEASES. Seller shall assign the Leases
to Buyer by an assignment or assignments, subject to
the Reservations, the Reservation Conditions, and
Permitted Exceptions.
7.9.5 SELLER'S AFFIDAVIT. An affidavit in favor of Buyer
and the Title Company sufficient to enable the Title
Company to delete from the Title Binder the standard
exceptions concerning the rights of parties in
possession or for leases, construction liens, taxes,
and assessments for years prior to the year of
Closing, unrecorded easements other than as shown on
the Survey (i.e., matters shown on the Survey which
do not render title unmarketable may be Schedule B-II
exceptions to the policy or policies issued pursuant
to the Title Binder), and the "gap."
7.9.6 ASSIGNMENTS OF DOCUMENTS. Seller shall assign to
Buyer to the extent assignable and designated by
Buyer to be assigned, all of Seller's right, title
and interest in and to the Documents (as defined in
Paragraph 3.2 above).
7.9.7 NON-FOREIGN STATUS AFFIDAVIT. A non-foreign status
affidavit as required by Paragraph 1445 of the
Internal Revenue Code.
7.9.8 BENEFICIAL INTEREST AND DISCLOSURE AFFIDAVIT. A
Beneficial Interest and Disclosure Affidavit attached
hereto as EXHIBIT K as required by Florida Statute
286.23.
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<PAGE> 43
7.9.9 SELLER'S CERTIFICATION AS TO LEASES AND UPDATED
ESTOPPEL LETTERS AS DESCRIBED IN PARAGRAPH 3.1. A
certificate executed by Seller confirming that the
estoppel letters furnished to Buyer pursuant to
Paragraph 3.1 remain true and correct as of Closing
and, with respect to Deferred Parcels, new estoppel
letters, updated as of no later than ten (10) days
prior to a Deferred Closing Date, as described in
Paragraph 3.1 from the lessors under the Leases.
7.9.10 CERTIFICATES OF CONSENT. Certificates of Consent, in
recordable form, from all of the lessors of the
Leases to be assigned to Buyer in this transaction
which by their terms require the lessor's consent.
7.9.11 CERTIFICATE. Certificate that all of the
representations and warranties and covenants made in
this Agreement by Seller are still in full force and
effect as of the Closing Date.
7.9.12 BILL OF SALE. Bill of Sale conveying to Buyer all of
Seller's right, title and interest in and to the
Personal Property ("Bill of Sale"), subject to the
Reservations and Reservation Conditions.
7.9.13 OTHER DOCUMENTS. Such other documents or instruments
as may be reasonably required by the Buyer or the
Title Company to consummate and close the
transaction.
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7.10 OTHER DELIVERIES. At the Closing and each Deferred
Closing, the following shall occur:
7.10.1 TITLE POLICY. Provided that Seller has complied with
the requirements of the Title Binder, The Title Agent
shall issue title insurance as agent for the Title
Company, and shall cause the Title Company to mark-up
the Title Binder, commit to furnish to Buyer and the
Designated Transferees (at Seller's sole cost and
expense) owner's and leasehold policy or policies of
title insurance (collectively, the "Title Policy")
consistent with the terms of this Agreement, in the
form promulgated by the State Department of Insurance
of the State of Florida, issued on the Title Company
and insuring Buyer's or the Designated Transferees'
title to the applicable parcels of Real Property and
the Buyer's leasehold interest in the Leased
Property, subject only to the Permitted Exceptions,
in the aggregate amount of the Purchase Price. Seller
shall pay all premiums and expenses arising from or
in connection with the Title Binder, and the Title
Policy.
7.10.2 EVIDENCE OF AUTHORITY. Seller and Buyer shall deliver
to the Title Company such documents as may be
reasonably required by the Title Company and the
other party's counsel to evidence the capacity of the
parties hereto and the authority of the persons
executing any documents on behalf of the parties
hereto. Seller shall provide an opinion of its
counsel as to the matters set forth in Paragraph
8.1(g).
7.10.3. OTHER DOCUMENTS. Such other documents as may be
reasonably required by the Title Company or as may be
agreed upon by Seller and Buyer.
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7.11 DEFERRED CLOSING; DESIGNATED TRANSFEREE(S). The foregoing
procedures and requirements for closing shall apply to any and
all Deferred Closings for the Deferred Parcels; provided,
however, all closing documents necessary to convey title to
Buyer and the Designated Transferees and the funds necessary
to record the General Warranty Deed(s), Special Warranty
Deed(s) and Assignments of Lease and to pay all the closing
costs imposed with respect to the Deferred Parcels and the
Defect Parcels, shall be held in escrow pursuant to the terms
of the Escrow Agreement. The Outside Closing Date does not
apply to Deferred Closings. References to "Buyer" in this
Paragraph 7 shall be construed as also applying to Buyer's
Designated Transferees.
8. REPRESENTATIONS AND WARRANTIES.
8.1 SELLER. As a material inducement to Buyer entering into this
Agreement, Seller represents and warrants to and covenants
with Buyer that the following matters are true as of the
Effective Date and that they will also be true as of Closing
and any Deferred Closing:
(a) The description of the Property set forth in this
Agreement constitutes, to the best knowledge and
belief of Seller, all of Seller's real estate
interests in Palm Beach and Hendry Counties, Florida,
except the Excluded Real Property.
(b) Seller is the legal fee simple title holder of the
Real Property and has good and marketable title to
the Real Property free and clear of all liens,
encumbrances, mortgages and security interests,
except those which shall be discharged prior to
Closing or which are Permitted Exceptions. There
shall be
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no change in the ownership, operation or control of
any party constituting Seller from the Effective Date
through the final Termination of Reservations.
(c) Seller is the Lessee of the Leased Property and all
of the Leases are in full force and effect with no
defaults by either the Lessee or Lessor upon any of
said Leases.
(d) At Closing, Seller shall not be in default, nor any
circumstances exist which would give rise to a
default under any of the documents, recorded or
unrecorded, referred to in the Title Binder.
(e) Seller, the Property and the occupancy, use and
operation thereof are, in compliance with all
applicable federal, state and local governmental
laws, ordinances, regulations, licenses, permits, and
authorizations, including, without limitation,
applicable zoning and environmental laws and
regulations and Governmental Approvals.
(f) There is no pending, or to Seller's knowledge,
threatened federal, state or local judicial, county
or administrative proceedings affecting the Property
or in which Seller is or will be party by reason of
either Seller's ownership of the Real Property or any
portion thereof, or Seller's interests in the Leased
Property or any portion thereof including, without
limitation, proceedings for or involving zoning
violations, or personal injuries or property damage
alleged to have occurred on the Property or by reason
of the condition or use of the Property. No
attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are pending or,
to Seller's best knowledge, threatened against
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Seller. In the event any proceeding of the character
described in this subparagraph is initiated prior to
Closing, Seller shall promptly advise Buyer in
writing.
(g) The execution and delivery of this Agreement by the
signatories hereto, and all the documents to be
delivered by Seller to Buyer at Closing by the
signatories thereto, on behalf of Seller, and the
performance of this Agreement by Seller have been
duly authorized by Seller and Seller's shareholder
and this Agreement is binding on Seller and St. Joe
and enforceable against Seller and St. Joe in
accordance with its terms, conditions and provisions.
No consent to such execution, delivery and
performance is required from any person, beneficiary,
partner, limited partner, shareholder, creditor,
investor, judicial or administrative body,
governmental authority or other party other than any
such consent which already has been unconditionally
given. Neither the execution of this Agreement nor
the consummation of the transaction contemplated
hereby will violate any restriction, court order or
agreement to which Seller, St. Joe or the Property is
subject.
(h) As to the condition of the Property:
(1) For purposes of this Agreement, disposal
("Disposal") shall mean the release,
storage, use, handling, discharge, or
disposal of Pollutants (as defined in
Paragraph 4.1(c)).
(2) The Seller has obtained and is in compliance
with any and all permits regarding the
Disposal of Pollutants on the Property.
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(3) The Seller is not aware nor does it have any
actual notice of any past or present
conditions, activities or practices, or
unrecorded instruments which: (i) may give
rise to any Environmental Claims and
Liabilities on the Property, except as
disclosed by the Environmental Concerns
Summary for Talisman Sugar Property prepared
by Dames & Moore, dated May 13, 1996, and
the Phase I and Phase II Environmental
Assessment for the Property Known as The
Plant, Palm Beach County and Hendry County,
Florida, prepared by CRB Geological &
Environmental Services, Inc., dated March
25, 1996, and Groundwater Sampling and
Analysis Reports for Talisman Sugar
Corporation prepared by Professional Service
Industries, Inc., dated April 2, 1998, and
May 13, 1998; or (ii) otherwise materially
impairs use or operation of the Property for
agricultural purposes. For purposes of the
foregoing subparagraph (ii), a condition
shall not be deemed "material" unless the
cost to cure exceeds Twenty Five Thousand
Dollars ($25,000.00). Seller will
immediately notify Buyer in writing should
it obtain any actual notice regarding any
such additional activities, practices or
conditions upon any portion of the Property.
(4) There is no civil, criminal or
administrative action, suit, claim, demand,
investigation, or notice of violation
pending or threatened against the Seller
relating in any way to the Disposal of
Pollutants on the Property which has not
been disclosed in writing to Buyer.
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<PAGE> 49
(i) At all times prior to the Termination of the
Reservations, Seller shall perform when due all of
Seller's obligations in accordance with applicable
laws, ordinances, rules and regulations affecting the
Property.
(j) All action required pursuant to this Agreement which
is necessary to effectuate the transaction
contemplated herein will be taken promptly and in
good faith by Seller.
(k) Seller has delivered to Buyer all information
reports, studies and other documents required by this
Agreement to be furnished by Seller to Buyer.
(l) Seller shall promptly notify Buyer of any material
change in any condition with respect to the Property
or of any event or circumstance which makes any
representation or warranty of Seller to Buyer under
this Agreement untrue or misleading, or in any
covenant of Seller under this Agreement incapable or
less likely of being performed, it being understood
that the Seller's obligation to provide notice to
Buyer under this subparagraph shall in no way relieve
Seller of any liability for a breach by Seller or any
of its representations, warranties, or covenants
under this Agreement.
(m) Seller has not entered into other agreements for
purchase and sale applicable to the Property other
than this Agreement.
(n) All items delivered pursuant to this Agreement which
have been prepared by Seller pursuant to this
Agreement, are and will be true, correct and complete
in all material respects and fairly represent the
information set forth therein; no such items omit
information necessary to make the information
contained therein or herein true and correct.
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(o) Seller warrants that there is legal access, ingress
and egress between the Property and public roads.
(p) Seller represents and warrants that there are no
parties other than Seller in occupancy or possession
of any part of the Property and no person or entity,
except to the interest of one (1) tenant disclosed to
Buyer whose tenancy shall be terminated prior to
Closing, has any right to occupy, possess or lease
any portion of the Real Property or, subject to the
interest of lessors, the Leased Property.
(q) Except as disclosed by the Title Binder and except
for Seller's negotiation with the South Florida Water
Management District as to a 12.9 acre canal to be
used for stormwater water management, Seller hereby
represents and warrants that there are no pending
applications, permits, petitions, contracts,
approvals, or other proceedings with any governmental
or quasi-governmental authority, including but not
limited to municipalities, counties, districts,
utilities, and/or federal or state agencies,
concerning the use or operation of, or title to the
Property or any portion thereof, and Seller has not
granted nor is obligated to grant any interest in the
Property to any of the foregoing entities.
(r) Seller represents and warrants that neither Seller
nor any subsidiary of or entity otherwise controlled
by Seller is a party to any agreement with laborers,
workers, employees, organized labor groups or
independent contractors that is binding upon a
transferee of any interest in any portion of the
Property, whether or not such transferee is or
becomes engaged in business activities
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on or concerning the Property that are similar to
such activities now or hereafter conducted by Seller
on or concerning the Property, and that any and every
agreement with such third parties shall be terminated
not later than the Termination of the Reservations
for that portion of the Property affected by any such
agreement.
8.2 CONTINUING NATURE OF SELLER'S REPRESENTATION AND WARRANTIES.
The representations and warranties made in this Agreement by
Seller shall be continuing and shall be deemed remade by
Seller as of Closing and any Deferred Closing with the same
force and effect as if in fact made at that time and shall
survive the closing of this transaction. Seller shall be
liable to Buyer before and after Closing or any Deferred
Closing for any loss, damages, liability, or cost (including
but not limited to reasonable attorney's fees and costs) that
Buyer incurs directly, indirectly or proximately as a result
of any warranty or representation made by Seller in this
Agreement not being true and correct as of Closing and any
Deferred Closing due to gross negligence or intentional
misrepresentations or omission on the part of Seller.
Notwithstanding anything to the contrary herein, the effect of
the representations and warranties made in this Agreement
shall not be diminished or deemed to be waived by any
inspections, tests or investigations made by Buyer or Buyer's
Representatives. For purposes of these representations and
warranties, Seller's knowledge is limited to the actual
knowledge of J. Malcolm Jones, Jr., as Senior Vice President,
and Miguel Cevera, as General Manager and Vice President, of
Talisman Sugar Corporation. Seller represents Miguel Cevera
has been a manager of the Property and Personal Property for
Seller for a period of approximately thirty (30) years during
which pe-
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<PAGE> 52
riod he has had a direct supervisory position regarding the
Property and activities conducted upon the Property and that
J. Malcolm Jones has been the Senior Vice President in charge
of operations of Seller for a period of approximately one (1)
year.
8.3 BUYER. Buyer represents and warrants to Seller that Buyer has
full legal power and authority to enter into this Agreement
and the person executing this Agreement on behalf of Buyer has
been duly authorized and empowered to execute this Agreement,
subject to approval of Buyer's Board of Governors as provided
in Paragraph 6.1 (h).
9. DEFAULTS.
9.1 BUYER. In the event Buyer breaches its obligation to close on
the purchase of the Property, then Seller's sole remedy shall
be to terminate this Agreement by giving notice thereof to
Buyer with a copy to Escrow Agent and to receive from the
Escrow Agent, as full liquidated damages (the parties hereby
agreeing that the actual damages to the Seller in such
circumstances will be difficult, if not impossible, to
ascertain) the Earnest Money Deposit. Upon such termination
and payment by the Escrow Agent, this Agreement shall be
deemed null and void and of no force or effect and no party
hereto shall have any further rights, obligations or
liabilities hereunder.
9.2 SELLER. In the event Seller breaches its obligation to close
on the sale of the Property, then Buyer's sole remedies shall
be to: (a) seek specific performance of Seller's obligations
or (b) terminate this Agreement by giving notice thereof to
Seller with a copy to Escrow Agent and to receive from the
Escrow Agent the Earnest Money Deposit. Upon such termination
and payment by the Escrow Agent, this Agreement shall be
deemed null and void and of no force or effect and no party
hereto shall have any further rights, obligations or
liabilities hereunder. If the Seller breaches Paragraph
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8, either before or after Closing, or if the Seller fails or
neglects to perform any of the terms, conditions, covenants or
provisions of this Agreement after Closing, in addition to any
other remedies available at law or equity, the Buyer shall
have the right to seek specific performance of Seller's
obligations, without thereby waiving any action for damages
resulting from Seller's breach.
9.3 DEFAULT NOTICE. In all cases (other than the failure of Buyer
to pay the Cash to Close or the failure by Buyer or Seller to
execute and deliver the items required to be executed and
delivered by same at Closing or a Deferred Closing or the
failure of Seller to timely vacate the Property and timely
complete its Remediation obligations), each party shall, prior
to exercising any remedy for a default hereunder, give the
other party and the Escrow Agent advance written notice of the
acts or omissions alleged to have constituted a default. The
party receiving such default notice shall have a period of
thirty (30) days after receipt of such notice to cure the
default, if any. If same is not cured within such period, then
the parties may exercise any remedies set forth in this
Agreement to the extent applicable to the subject act or
omission.
10. JURISDICTION AND VENUE. The parties acknowledge that a substantial
portion of negotiations and anticipated performance and execution of
this Agreement occurred or shall occur in Palm Beach County, Florida,
and that, therefore, each of the parties irrevocably and
unconditionally (i) agrees that except for a forcible entry and
detainer suit or similar suit for possession of the Real Property or
the Leased Property, or as required by law to be filed in the
appropriate state court in Palm Beach County, Florida or Hendry County,
Florida, as determined by the situs of the Real Property or Leased
Property out of which the dispute arises, any suit, action, or legal
proceeding arising out of or related to this Agreement may be brought
in the
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<PAGE> 54
courts of record of the State of Florida in Palm Beach County or the
court of the United States, Southern District of Florida; (ii) consents
to the jurisdiction of each such court in any suit, action or
proceeding; and (iii) waives any objection which it may have to the
laying of venue of any such suit, action or proceeding in any of such
courts. With respect to the United States as a party to any litigation
under this Paragraph, nothing shall be construed (a) to establish venue
except in accordance with the federal law, or (b) to constitute a
waiver of the requirements of federal law that jurisdiction and claims
against the United States lies only in federal court.
11. PRESERVATION OF PROPERTY; RISK OF LOSS. Seller assumes all risk of loss
or damage to the Property prior to the Closing Date and warrants as a
condition of Closing or Deferred Closing, as applicable, that the
Property shall be transferred and conveyed to Buyer in the same
condition as of the date of Seller's execution of this Agreement,
ordinary wear and tear excepted. This covenant expressly precludes any
cutting of timber on the Property. However, in the event the condition
of the Property is altered by an act of God or other natural force
beyond the control of Seller in a manner which has a material adverse
affect on Buyer's intended use of the Property, Buyer may elect, at its
sole option to terminate this Agreement and receive the refund of the
Earnest Money Deposit and neither party shall have any further
obligations under this Agreement. In the event Buyer elects not to
terminate this Agreement, the Purchase Price shall be reduced by the
reduction in appraised value of the Property and any casualty insurance
proceeds shall belong to Seller. After Closing, Seller's possession and
use of the Property shall be in accordance with the Reservation
Conditions.
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12. MISCELLANEOUS.
12.1 TIME. Time is of the essence with regard to every term,
condition and provision set forth in this Agreement. Time
periods shall be calculated in calendar days unless otherwise
specified. Time periods herein of less than six (6) days shall
in the computation exclude Saturdays, Sundays and state or
national legal holidays, and any time period provided for
herein which shall end on Saturday, Sunday or a legal holiday
shall extended to 5:00 p.m. of the next business day.
12.2 NOTICES. Any notice, request, demand, instruction, or other
communications to be given to either party here under (except
those required to be delivered at Closing), shall be in
writing and shall be deemed to be delivered upon the earlier
to occur of (i) actual receipt if delivered by hand or by
commercial courier to the address indicated or if faxed with
confirmation of receipt, or (ii) the first attempted delivery
by registered or certified United Stated Postal Service mail,
return receipt requested, postage prepaid, addressed as
follows:
If to Buyer: The Nature Conservancy
222 S. Westmonte Drive, Suite 300
Altamonte Springs, FL 32714-4269
Attention: Robert L. Bendick, Jr.
Telefax: (407) 682-3077
With a copy to: South Florida Water Management District
3301 Gun Club Road
West Palm Beach, Florida 33406
Attention: Bill Malone
Telefax: (561) 681-6233
The Nature Conservancy
222 S. Westmonte Drive, Suite 300
Altamonte Springs, FL 32714-4269
Attention: Regional Attorney
Telefax: (407) 682-3077
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<PAGE> 56
If to Seller: Talisman Sugar Corporation
Suite 400, duPont Center1650
Prudential Drive
Jacksonville, Florida 32207
Attention: J. Malcolm Jones, Jr.
Senior Vice President
Telefax: (904) 858-5237
With a copy to: The St. Joe Company
Suite 400 duPont Center
1650 Prudential Drive
Jacksonville, Florida 32207
Attention: Robert M. Rhodes, Esquire
General Counsel
Telefax: (904) 858-5237
Mark J. Boulris, P.A.
2730 S.W. Third Avenue
Suite 403
Miami, Florida 33129
Telefax: (305) 858-4266
If to Escrow Agent: Chicago Title Insurance Company
2701 Gateway Drive
Pompano Beach, Florida 33609
Attention: James W. Harvey III
Telefax: (954) 971-2050
The addresses for the purpose of this Paragraph may be changed
by either party by giving written notice of such change to the
other party in the manner provided herein.
12.3 ATTORNEY'S FEES. In the event it becomes necessary for either
Buyer or Seller to file a suit to enforce this Agreement or
any provisions contained herein, the prevailing party in such
suit shall be entitled to recover, in addition to all other
remedies set forth herein, reasonable attorney's fees, and
costs of court incurred in connection with such suit including
all appeals.
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<PAGE> 57
12.4 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes
the entire agreement between Buyer and Seller and supersedes
all prior agreements and understandings (if any) relating to
the subject matter hereof, including, without limitation, the
Agreement in Concept dated December 6, 1997. This Agreement
cannot be amended, modified or altered except by an agreement
in writing executed by both Buyer and Seller.
12.5 BINDING EFFECT. This Agreement shall be binding upon and shall
insure to the benefit of the parties hereto, and their
respective successors, permitted assigns and legal
representatives.
12.6 ASSIGNMENT. The rights and privileges granted by this
Agreement are not assignable except as specifically provided
in this Paragraph 12.6. Buyer may only assign its rights and
privileges granted by this Agreement to Buyer's
Representatives or a successor not-for-profit organization and
may assign its rights to acquire portions of the Property to
Designated Transferees as provided in Paragraph 2.3. Seller
may assign its Reservations, in whole or in part, without
Buyer's approval; provided, however, any such assignment shall
be subject to the Reservation Conditions.
12.7 HEADINGS. Paragraph headings are for convenience of reference
only and shall in no way affect the interpretation of this
Agreement.
12.8 GOVERNING LAW. The substantive laws of the State of Florida,
and the laws and standards of the United States of America,
shall govern the validity, construction, performance,
enforcement and interpretation of this Agreement.
12.9 FULL EXECUTION. This Agreement shall be deemed fully executed
and binding upon Buyer and Seller when both Buyer and Seller
have executed this Agreement as set
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<PAGE> 58
forth below and are in possession of the original, a photocopy
or faxed copy of the fully executed Agreement. Escrow Agent's
execution of this Agreement shall not be required for full
execution of this Agreement, but shall merely evidence
acceptance by Escrow Agent of the provisions relating to the
Escrow Agent set forth in this Agreement.
12.10 RADON DISCLOSURE. In accordance with Florida law, the
following disclosure is hereby made: RADON GAS: Radon is a
naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may
present health risk to persons who are exposed to it over
time. Levels of radon that exceed federal and state guidelines
have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained
from your county public health unit.
12.11 ESCROW AGENT. Unless otherwise agreed by the parties, the
"Escrow Agent" shall act as such for the convenience of the
parties without fee or other charges for such services as
Escrow Agent and pursuant to the following terms. The Escrow
Agent shall not be liable to any party or person for
misdelivery to Buyer or Seller or items subject to this
Escrow, unless such misdelivery is due to willful breach of
this Agreement or gross negligence of Escrow Agent. In the
event that competing demands are made on Escrow Agent for the
disposition of the Earnest Deposit (or so much thereof as may
be paid by Buyer), the Escrow Agent shall give written notice
to the Seller and the Buyer advising that, in the absence of
written instructions, signed by both Seller and Buyer received
within the next ten (10) days, Escrow Agent shall interplead
the Earnest Money Deposit by filing an interpleader action in
a court permitted by this Agreement (to the jurisdiction of
which both parties do
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<PAGE> 59
hereby consent). If Escrow Agent receives the aforesaid
written instruction, it shall continue to hold the paid
portion of the Earnest Money Deposit pursuant to such written
instruction. If Escrow Agent does not receive the aforesaid
written instruction, it shall pay in to the registry of the
court the paid portion of the Earnest Money Deposit including
all interest earned thereon, whereupon such Escrow Agent shall
be relieved and released from any further liability as Escrow
Agent hereunder. No Earnest Money Deposit shall be disbursed,
except at Closing, without five (5) days' prior written notice
from Escrow Agent to both parties.
12.12 SEVERABILITY. If any provision of this Agreement or any other
Agreement entered into pursuant hereto is contrary to,
prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent as contrary, prohibited or invalid, but
the remainder hereof shall not be invalidated thereby and
shall be given full force and effect so far as possible. If
any provision of this Agreement may be construed in two or
more ways, one of which would render the provision invalid or
otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision
shall have the meaning which renders it valid and enforceable.
12.13 THIRD PARTIES. Unless expressly stated herein to the contrary
nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason
of this Agreement on any person other than the parties hereto
and their respective legal representatives, successors and
permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligation or liability of any third
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<PAGE> 60
persons to any party to this Agreement, not shall any
provision give any this persons any right of subrogation or
action over or against any party to this Agreement.
12.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument. A photocopy or facsimile copy of this Agreement
and any signature hereon shall be considered for all purposes
as originals.
12.15 WAIVER. Failure of Buyer to insist upon strict performance of
any covenant or condition of this Agreement, or to exercise
any right herein contained, shall not be construed as a waiver
or relinquishment for the future enforcement of any such
covenant, condition or right; but the same shall remain in
full force and effect.
12.16 CONSTRUCTION. The parties acknowledge that they have had equal
bargaining strength, and that any rule of construction to the
effect that ambiguities are to be resolved against one party
or the other shall not apply in the interpretation of this
Agreement.
12.17 RECORDATION. A memorandum of this Agreement shall be recorded
at Closing in the Public Records of Palm Beach and Hendry
counties ("Memorandum"). Said Memorandum shall be indexed in
the grantor index both counties under all names in which title
to the Property may be held.
12.18 FURTHER ASSURANCES; ADDITIONAL DOCUMENTS. In the event that it
is ever asserted, claimed or held that Seller has any
remaining interests in the Property or Personal Property or
has any remaining real estate interests in Palm Beach or
Hendry Counties, Florida, other than the Excluded Real
Property, and the Excluded Property.
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<PAGE> 61
Seller agrees to execute any and all documents necessary to
convey such right, title or interest to Buyer or Buyer's
Designated Transferees.
12.19 SURVIVAL. All express representations, warranties and
indemnifications in this Agreement, as well as all obligations
that, by their terms, may or must be performed after a
closing, shall survive the Closing, Deferred Closings and
Termination of the Reservations.
12.20 TAX DEFERRED EXCHANGE. Buyer and Seller hereby acknowledge
that it is the intention of Seller that the transaction
contemplated by this Agreement qualify as a tax-free exchange
within the meaning of Section 1031 of the Internal Revenue
Code of 1986, as amended from time to time. Buyer agrees to
assist and cooperate with Seller in effectuating such tax-free
exchange, provided however, Seller hereby agrees that (a)
Seller shall pay directly for any additional expense caused to
the Buyer as a result of actions taken by Buyer for the
purpose of facilitating such exchange, and (b) the Buyer's
agreement to facilitate such exchange will not require it to
take title to any property other than the Property.
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<PAGE> 62
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto in multiple counterparts and is effective as of the date of Seller's
execution hereof as set forth below.
SELLER:
-------
TALISMAN SUGAR CORPORATION, a Florida
corporation
Witness: By:
------------------------- -------------------------------------
Name: J. Malcolm Jones, Jr.
As its: Senior Vice President
Witness: Date of Execution:
------------------------- ----------------------
BUYER:
THE NATURE CONSERVANCY, a District of
Columbia non-profit corporation
Witness: By:
------------------------- -------------------------------------
Name: Mike Dennis
As its: Vice President
Witness: Date of Execution:
------------------------- ----------------------
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<PAGE> 63
The undersigned joins in this Agreement for the sole purpose of
confirming that it will fund the Purchase Price in accordance with this
Agreement upon execution of a Cooperative Agreement with Buyer that provides for
such funding.
Nothing in the preceding sentence shall be used by any Party to either
this Agreement or the Cooperative Agreement to create, enhance or limit a cause
of action or remedy at law or equity.
THE UNITED STATES DEPARTMENT OF
THE INTERIOR
Witness: By:
---------------------------- ---------------------------------
Name: Curtis Bohlen
Its: Duly Authorized Principal
Negotiator
Date of Execution:
-------------------
The undersigned joins in this Agreement to absolutely, continuously,
irrevocably, and unconditionally guaranty Seller's payment and performance, and
not a guaranty of collection, under this Agreement. No set-off, counterclaim,
recoupment, reduction, or diminution of any obligation, or any defense of any
kind or nature which Seller may have against Buyer or any other party, or which
St. Joe may have against Seller, Buyer, or any other party, shall be available
to, or shall be asserted by, St. Joe against Buyer or any subsequent beneficiary
of this guaranty. If acceleration of the time for payment by Seller of all or
any portion of Seller's obligations under this Agreement is stayed upon the
insolvency, bankruptcy, or reorganization of Seller, such obligations shall
nonetheless be payable by St. Joe hereunder forthwith on demand by Buyer.
THE ST. JOE COMPANY
Witness: By:
--------------------------- ------------------------------
Name: Robert M. Rhodes
As Its: Senior Vice President and
General Counsel
Witness: Date of Execution:
--------------------------- ----------------
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<PAGE> 64
The undersigned hereby executes this Agreement for the following sole and
limited purposes to: (i) acknowledge receipt of the Earnest Money Deposit and a
copy of this Agreement; and (ii) evidence its agreement to hold in trust and/or
disburse the Earnest Money Deposit in accordance with the terms of this
Agreement.
ESCROW AGENT:
By:
-------------------------------------------
Name:
-----------------------------------------
As its:
---------------------------------------
Date:
-----------------------------------------
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<PAGE> 65
EXHIBIT LIST
[To Be Revised]
Exhibit A Real Property
Exhibit B Real Property Outparcels
Exhibit C Leases
Exhibit D Map of Real Property and Leased Property
Exhibit E Excluded Real Property
Exhibit F Sugar Mill Parcel
Exhibit G Estoppel Letters
Exhibit H Seller's Certificate
Exhibit I Title Insurance Policy
Exhibit J Reservation Conditions
Exhibit K Beneficial Interest and Disclosure Affidavit
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<PAGE> 1
EXHIBIT 2.09
$65,000,000
CREDIT AGREEMENT
AMONG
ST. JOE CAPITAL I, INC.
THE BANKS NAMED HEREIN
AND
BANKERS TRUST COMPANY,
AS AGENT
----------------------------------
Dated as of March 9, 1999
----------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
ARTICLE I
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
<S> <C> <C>
1.1 Defined Terms..................................................................................1
1.2 Principles of Construction.....................................................................9
ARTICLE II
AMOUNT AND TERMS OF CREDIT
2.1 The Loans......................................................................................9
2.2 Notes.........................................................................................11
2.3 Interest on the Loans.........................................................................11
2.4 Adjustments for Withholding, Increased Costs, Capital Adequacy, Etc...........................15
2.5 Use of Proceeds...............................................................................15
2.6 Special Tax Provisions........................................................................16
2.7 Special Provisions Governing LIBOR Rate Loans.................................................16
ARTICLE III
FEES
3.1 Fees..........................................................................................19
ARTICLE IV
PREPAYMENTS; PAYMENTS
4.1 Prepayments; Mandatory Reduction of Commitment................................................19
4.2 Method and Place of Payment...................................................................20
4.3 Net Payments..................................................................................20
4.4 Application of Prepayments....................................................................20
4.5 Apportionment of Payments.....................................................................20
4.6 Voluntary Reduction of Commitments............................................................21
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(continued)
ARTICLE V
CONDITIONS PRECEDENT
<TABLE>
<S> <C> <C>
5.1 Conditions to Effectiveness...................................................................21
5.2 Conditions to all Loans.......................................................................23
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
6.1 Corporate Status..............................................................................24
6.2 Power and Authority...........................................................................24
6.3 No Violation..................................................................................24
6.4 Governmental Approvals........................................................................25
6.5 Financial Statements; Financial Condition; Undisclosed Liabilities; etc.......................25
6.6 Litigation....................................................................................25
6.7 True and Complete Disclosure..................................................................26
6.8 Use of Proceeds; Margin Regulations...........................................................26
6.9 Tax Returns and Payments......................................................................26
6.10 Subsidiaries..................................................................................26
6.11 Compliance with Statutes, etc.................................................................26
6.12 Investment Company Act........................................................................27
6.13 Public Utility Holding Company Act............................................................27
6.14 No Material Adverse Change....................................................................27
6.15 Solvency......................................................................................27
6.16 Year 2000.....................................................................................27
ARTICLE VII
AFFIRMATIVE COVENANTS
7.1 Information Covenants.........................................................................28
7.2 Books, Records and Inspections................................................................29
7.3 Franchises....................................................................................29
7.4 Compliance with Statutes, etc.................................................................30
7.5 Payment of Taxes and Claims...................................................................30
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C> <C>
7.6 Year 2000 Compliance..........................................................................30
7.7 Further Assurances............................................................................30
ARTICLE VIII
NEGATIVE COVENANTS
8.1 Liens.........................................................................................31
8.2 Consolidation, Merger, Sale of Assets, etc....................................................31
8.3 Indebtedness, Contingent Obligations and Leases...............................................32
8.4 Transactions with Affiliates..................................................................32
8.5 Net Worth.....................................................................................32
8.6 Modifications of Certificate of Incorporation and Collar Documents............................32
8.7 Advances, Investments and Loans...............................................................32
8.8 Distributions.................................................................................32
8.9 Business......................................................................................32
ARTICLE IX
EVENTS OF DEFAULT
9.1 Payments......................................................................................33
9.2 Representations, etc..........................................................................33
9.3 Covenants.....................................................................................33
9.4 Default Under Other Agreements................................................................33
9.5 Bankruptcy, etc...............................................................................34
9.6 ERISA.........................................................................................34
9.7 Failure of Credit Documents...................................................................35
9.8 Change of Control.............................................................................35
9.9 Judgments.....................................................................................35
9.10 Swap Default..................................................................................35
ARTICLE X
THE AGENT
10.1 Appointment...................................................................................36
</TABLE>
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<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C> <C>
10.2 Nature of Duties..............................................................................36
10.3 Lack of Reliance on the Agent.................................................................36
10.4 Certain Rights of the Agent...................................................................37
10.5 Reliance......................................................................................37
10.6 Indemnification...............................................................................37
10.7 The Agent in its Individual Capacity..........................................................37
10.8 Holders.......................................................................................38
10.9 Resignation by the Agent......................................................................38
10.10 Credit Documents..............................................................................38
ARTICLE XI
MISCELLANEOUS
11.1 Payment of Expenses, etc......................................................................39
11.2 Right of Setoff...............................................................................40
11.3 Notices.......................................................................................40
11.4 Benefit of Agreement..........................................................................40
11.5 No Waiver; Remedies Cumulative................................................................41
11.6 Payments Pro Rata.............................................................................42
11.7 Calculations; Computations....................................................................42
11.8 Consent to Jurisdiction and Service of Process; Governing Law; Waiver of Jury Trial...........42
11.9 Counterparts..................................................................................44
11.10 Headings Descriptive..........................................................................44
11.11 Amendment or Waiver...........................................................................44
11.12 Survival......................................................................................44
11.13 Domicile of Loans.............................................................................44
</TABLE>
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<PAGE> 6
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of March 9, 1999 (as amended,
supplemented or otherwise modified from time to time, this "Credit Agreement"),
is by and among ST. JOE CAPITAL I, INC., a Delaware corporation (the
"Borrower"), BANKERS TRUST COMPANY ("BTCo") and any other financial institution
which may become a lender hereunder (each a "Bank" and, collectively, the
"Banks") and BANKERS TRUST COMPANY, acting in the manner and to the extent
described in Article X (in such capacity, the "Agent").
R E C I T A L S
WHEREAS, the Borrower has requested certain extensions of
credit from the Banks and the Banks are willing to make such extensions only on
the terms and conditions set forth below;
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the Borrower, the Banks
and the Agent agree as follows:
ARTICLE I
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1 DEFINED TERMS.
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Adjusted LIBOR Rate" shall mean, on any particular Interest
Rate Determination Date, the rate determined by dividing (i) the per annum rate
of interest equal to the offered rates for deposits in Dollars for the
applicable Interest Period which appear on Dow Jones Page 3750 or other similar
system as of approximately 11:00 A.M. (London time) on such Interest Rate
Determination Date, except as provided below, by (ii) an amount equal to one
minus the stated maximum rate (expressed as a decimal) of all reserve
requirements (including any marginal, emergency, supplemental, special or other
reserves) that is specified on the first day of such Interest Period by the
Board of Governors of the Federal Reserve System (or any successor agency ) for
determining the maximum reserve requirement with respect to eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) maintained by a member bank of such System. If more than one
offered rate appears on Dow Jones Page 3750 or
1
<PAGE> 7
similar system, the rate in respect of the applicable Interest Rate
Determination Date will be the arithmetic mean of such offered rates. Each
determination by the Agent of the Adjusted LIBOR Rate shall be conclusive and
binding on the Borrower in the absence of manifest error on the part of the
Agent.
"Affiliate" shall mean, with respect to any Person, any other
Person (other than an individual) directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such Person;
provided, however, that for purposes of subsection 8.6, an Affiliate of the
Borrower shall include any Person (including an individual) that directly or
indirectly owns more than 5% of the Borrower and any officer or director of the
Borrower or any such Person. A Person shall be deemed to control another Person
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Agent
appointed pursuant to subsection 10.9.
"Agreement" shall mean this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Bank" shall mean each of BTCo and its successors and
assignees pursuant to subsection 11.4.
"Bankruptcy Code" shall have the meaning provided in
subsection 9.5.
"Base Rate" shall mean, at any time, the higher of (i) the
Prime Lending Rate and (ii) the rate which is 1/2 of 1% in excess of the
Federal Funds Effective Rate.
"Base Rate Loans" shall mean Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection 2.3(a).
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"BTCo" shall have the meaning provided in the first paragraph
of this Agreement.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close, and (ii) with respect to all notices, determinations, fundings and
payments in connection with the Adjusted LIBOR Rate or any LIBOR Rate Loans,
any day that is a Business Day described in clause (i) above and
2
<PAGE> 8
that is also a day for trading by and between banks in Dollar deposits in the
London interbank market.
"Certificate of Exemption" shall have the meaning assigned to
that term in subsection 2.6.
"Closing Date" shall mean the initial date on or before March
9, 1999 on which all of the conditions to the effectiveness of this Agreement
set forth in subsection 5.1 are satisfied or waived.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collar Collateral" shall have the meaning set forth in the
Pledge and Security Agreement.
"Collar Documents" shall mean, collectively, the Master
Agreement and the Confirmations, as any of the same may from time to time be
amended, supplemented or otherwise modified to the extent permitted under
subsection 8.6.
"Collar Event of Default" shall mean an "Event of Default," a
"Termination Event" or an "Additional Termination Event" (as such terms are
defined in the Collar Documents).
"Collar Transactions" shall mean the put and call option(s)
evidenced by the Confirmations, forming a part of the Collar Documents.
"Collar Value" shall mean on any day the amount (which shall
be expressed as a negative number), if any, estimated by the Agent in good
faith and in a commercially reasonable manner consistent with customary
industry practice, which would be payable by the Borrower to BTCo under the
Collar Documents, if the Collar Transactions then in effect were terminated as
of such date, as the result of a Collar Event of Default with respect to the
Borrower, and a payment was due to BTCo under the Collar Documents, or, if no
such amount would be payable by the Borrower, the amount (which shall be
expressed as a positive number), if any, estimated by the Agent in good faith
and in a commercially reasonable manner consistent with customary industry
practice, which would be payable by BTCo to the Borrower under the Collar
Documents, if the Collar Transactions then in effect were terminated as of such
date, as the result of a Collar Event of Default with respect to the Borrower,
and a payment was due to the Borrower under the Collar Documents. The Agent may
rely, in the absence of manifest error, on valuations provided by the
calculation agent under the Collar Documents in determining Collar Value.
"Collateral" shall mean, collectively, all of the property
(including capital stock) in which Liens are purported to be granted pursuant
to the Pledge and Security Agreement as security for the Obligations.
3
<PAGE> 9
"Commitment" or "Commitments" shall mean the commitment or
commitments of a Bank or the Banks to make Loans as set forth in subsection
2.1(a).
"Confirmations" shall mean the equity option transactions
under the Master Agreement evidenced by the confirmations identified on
Schedule II annexed to the Pledge and Security Agreement.
"Contingent Obligation" shall mean, as to any Person, (A) any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the holder of such primary obligation against loss in respect
thereof; provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business; and (B) any obligations of such Person under any Interest
Rate Agreement or any future, swap, currency contract, forward contract or
financial derivative. The amount of any Contingent Obligation shall be deemed
to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Credit Documents" shall mean this Agreement, each Note and
the Pledge and Security Agreement.
"Credit Parties" shall mean the Borrower and each other
Person (other than the Agent or any Bank) party to any Credit Document.
"Credit Parties" shall mean the Borrower and each other
Person (other than the Agent or any Bank) party to any Credit Document.
"Dollars" and "$" shall mean the lawful money of the United
States of America.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time. Section references to ERISA are to
ERISA, as in effect at the date of this Agreement, and to any subsequent
provisions of ERISA, amendatory thereof, supplemental thereto or substituted
therefor.
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"ERISA Affiliate" shall mean any person (as defined in
Section 3(9) of ERISA) which together with the Borrower would be a member of
the same "controlled group" within the meaning of Section 414(b), (m), (c) and
(o) of the Code.
"Event of Default" shall have the meaning provided in Article
IX.
"Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with the members
of the Federal Reserve System arranged by Federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred
to in subsection 3.1.
"Foreign Bank" shall have the meaning assigned to that term
in subsection 2.6.
"Funding Date" shall mean the date of the funding of a Loan.
"Government Acts" shall have the meaning assigned to such
term in subsection 2.7(h).
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, fees and charges) of
such Person for borrowed money or for the deferred purchase price of property
or services, (ii) the undrawn amount of or unreimbursed amount under all
letters of credit issued for the account of such Person and all drafts drawn
thereunder, (iii) all liabilities secured by any Lien on any property owned by
such Person, whether or not such liabilities have been assumed by such Person,
(iv) the aggregate amount required to be capitalized under generally accepted
accounting principles under leases under which such Person is the lessee and
(v) all Contingent Obligations of such Person.
"Interest Payment Date" means (i) with respect to any Base
Rate Loan, the last day of each calendar month, commencing on the first such
date to occur after the Closing Date, and (ii) with respect to any LIBOR Rate
Loan, the last day of each Interest Period applicable to such Loan; provided
that in the case of each Interest Period of longer than three months "Interest
Payment Date" shall also include the date that is three months, or an integral
multiple thereof, after the commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in
subsection 2.3(b).
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"Interest Rate Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement or other similar agreement or
arrangement designed to protect the Borrower against fluctuations in interest
rates hereunder.
"Interest Rate Determination Date" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
"Lending Office" shall mean, with respect to each Bank, the
office of such Bank specified opposite its signature below as its lending
office or such other office, Subsidiary or Affiliate of such Bank as such Bank
may from time to time specify as such to the Borrower and the Agent.
"Letter of Non-Exemption" shall have the meaning assigned to
that term in subsection 2.6.
"LIBOR Rate Loans" shall mean Loans bearing interest at rates
determined by reference to the Adjusted LIBOR Rate as provided in subsection
2.3(a).
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the UCC or any other similar recording or notice statute, any agreement to give
any security interest and any lease having substantially the same effect as any
of the foregoing).
"Loans" shall mean the Loans made by the Banks on or after
the Closing Date pursuant to subsection 2.1(a).
"Loan to Collateral Value Ratio" shall mean, as of any date
of determination, the ratio of (x) the sum of (1) 50% of the Market Value of
the Collateral consisting of Margin Stock plus (2) the fair market value of all
other Collateral to (y) the principal amount of all outstanding Loans on such
date; provided that for purposes of this definition, the Market Value and fair
market value of any equity securities or debt obligations of Parent held by the
Borrower shall be zero.
"Margin Stock" shall have the meaning provided in Regulation
U of the Board of Governors of the Federal Reserve System.
"Market Value" shall mean the value calculated on the basis
of the closing price per share or other unit of the Collateral being valued as
reported in The Wall Street Journal or the last sale price as reported on the
securities exchange or other market where the unit of Collateral being valued
is primarily traded.
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"Master Agreement" shall mean the ISDA Master Agreement,
dated as of June 15, 1998, and any Schedules and Annexes thereto, between BTCo
and the Borrower (BT Master Agreement No. 1N866).
"Net Worth" shall mean the excess of assets over liabilities
based upon the fair market value of such assets and liabilities, it being
assumed that the value of the Collar Transactions shall be the Collar Value.
"Notes" shall mean the promissory notes of the Borrower
issued in favor of the Banks pursuant to subsection 2.2 to evidence the Loans,
substantially in the form of Exhibit B annexed hereto.
"Notice of Borrowing" shall mean a notice substantially in
the form of Exhibit A annexed hereto with respect to a proposed borrowing.
"Notice of Conversion/Continuation" shall mean a notice
substantially in the form of Exhibit B annexed hereto with respect to a
proposed conversion or continuation of the applicable basis for determining the
interest rate with respect to the Loans specified therein.
"Notice Office" shall mean the office of the Agent located at
One Bankers Trust Plaza, 14th Floor, New York, New York 10006, or such other
office as the Agent may hereafter designate in writing as such to the other
parties hereto.
"Obligations" shall mean all amounts owing to the Agent or
any Bank pursuant to the terms of this Agreement or any other Credit Document.
"Parent" shall mean The St. Joe Company, a Florida
corporation.
"Payment Office" shall mean the office of the Agent
located at One Bankers Trust Plaza, New York, New York 10006, Attention:
Commercial Loan Division Ref: St. Joe Capital I, Inc., or such other office as
the Agent may hereafter designate in writing as such to the other parties
hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA or any successor thereto.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" shall mean any multiemployer plan or single-employer
plan as defined in Section 4001 of ERISA, which is maintained or contributed
to, or at any time during the five calendar years preceding the date of this
Agreement was maintained or contributed to, by the Borrower or by an ERISA
Affiliate.
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"Pledge and Security Agreement" shall mean that certain
Pledge and Security Agreement dated the Closing Date between the Agent and the
Borrower, in substantially the form of Exhibit D annexed hereto, as such
agreement may thereafter be amended, supplemented or otherwise modified from
time to time.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, and the Prime Lending Rate shall
change when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"Pro Rata Share" shall mean, with respect to each Bank, the
percentage designated as such Bank's Pro Rata Share set forth opposite the name
of such Bank on Schedule I; provided that Schedule I shall be amended and the
Banks' Pro Rata Shares shall be adjusted from time to time to give effect to
the addition of any new Banks and any reallocations among existing Banks
necessary to reflect assignments pursuant to subsection 11.4. The sum of the
Pro Rata Shares of all Banks at any date of determination shall equal 100%.
"Required Banks" shall mean, at any time, the Banks holding
51% or more of the aggregate Commitments (or, if the Commitments have been
terminated, the aggregate unpaid principal amount of the Loans).
"Subsidiary" shall mean, as to any Person, (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person and/or
one or more Subsidiaries of such Person and (ii) any partnership, association,
joint venture or other entity in which such Person and/or one or more
Subsidiaries of such Person has more than a 50% equity interest at the time.
"Termination Date" shall mean the earlier of (a) January 14,
2000 and (b) the date upon which the Commitments are terminated pursuant to
subsection 4.1, 4.6 or 9.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.
"Unfunded Current Liability" shall mean, as to any Plan, the
amount, if any, by which the present value of the accrued benefits under such
Plan as of the close of its most recent plan year determined in accordance with
Section 412 of the Code exceeds the fair market value of the assets allocable
thereto.
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"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock is at the time owned by such Person
and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity
interest at such time.
1.2 PRINCIPLES OF CONSTRUCTION.
(A) All references to sections, schedules and exhibits
are to sections, schedules and exhibits in or to this Agreement unless
otherwise specified. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(B) All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
in conformity with those used in the preparation of the financial statements
referred to in subsection 6.5.
ARTICLE II
AMOUNT AND TERMS OF CREDIT
2.1 THE LOANS.
(A) LOANS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower set forth herein, each Bank hereby severally agrees, subject to the
limitations set forth below with respect to the maximum amount of Loans
permitted to be outstanding from time to time, to make Loans to the Borrower in
an amount not exceeding its Pro Rata Share of the aggregate Commitments (as
defined below) for the purposes identified in subsection 2.5. Each Bank's
commitment to make Loans to the Borrower pursuant to this subsection 2.1(a) is
hereby called its "Commitment" and such commitments of all Banks in the
aggregate are herein called the "Commitments". The initial amount of each
Bank's Commitment is set forth in Schedule I annexed hereto and the aggregate
initial amount of all Commitments is $65,000,000. The amount of the Commitments
shall be reduced by the amount of all reductions thereof required or otherwise
made pursuant to subsections 4.1 and 4.6 through the date of determination. In
no event shall the aggregate principal amount of the Loans from any Bank
outstanding at any time exceed the amount of its Commitment then in effect.
Each Bank's Commitment shall expire on the Termination Date and all Loans and
all other amounts owed hereunder with respect to the Loans, the Commitments, or
otherwise shall be paid in full no later than that date.
All Loans under this Agreement shall be made by the Banks
simultaneously and proportionately to their respective Pro Rata Shares, it
being understood that no Bank shall be responsible for any default by any other
Bank in that other Bank's obligation to make Loans hereunder nor shall the
Commitment of any Bank be increased or decreased as a result of the default by
any other Bank in that other Bank's
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obligation to make Loans hereunder. Amounts borrowed by the Borrower under this
subsection 2.1(a) may be repaid and, through but excluding the Termination
Date, reborrowed.
(B) NOTICE OF BORROWING. Subject to subsection 2.1(a),
whenever the Borrower desires to borrow Loans under this subsection 2.1, it
shall deliver to the Agent a Notice of Borrowing no later than 10:00 A.M. (New
York time) at least three Business Days in advance of the proposed Funding Date
in the case of a LIBOR Rate Loan or at least one Business Day in advance of the
proposed Funding Date in the case of a Base Rate Loan. The Notice of Borrowing
shall specify (a) the proposed Funding Date (which shall be a Business Day),
(b) the amount of the proposed borrowing, (c) whether such Loans shall be Base
Rate Loans or LIBOR Rate Loans, (d) in the case of any Loans requested to be
made as LIBOR Rate Loans, the initial Interest Period therefor, (e) the
proposed use of proceeds and (f) that the aggregate principal amount of
outstanding Loans (after giving effect to the Loans then requested) will not
exceed the Commitments then in effect. Loans shall be made in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess of that
amount. In lieu of delivering the above-described Notice of Borrowing, the
Borrower may give the Agent telephonic notice by the required time of any
proposed borrowing of Loans under this subsection 2.1; provided that such
notice shall be promptly confirmed in writing by delivery of a Notice of
Borrowing to the Agent on or prior to the Funding Date of the requested Loans.
Neither the Agent nor any Bank shall incur any liability to
the Borrower in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of the Borrower or for otherwise acting
in good faith under this subsection 2.1, and upon funding of Loans by the Banks
in accordance with this Agreement pursuant to any such telephonic notice, the
Borrower shall have effected Loans hereunder.
Except as otherwise provided in subsections 2.7(b), 2.7(c)
and 2.7(f), a Notice of Borrowing for a LIBOR Rate Loan (or telephonic notice
in lieu thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and the Borrower shall be bound to make a borrowing in
accordance therewith.
(C) DISBURSEMENT OF FUNDS. Promptly after receipt of a
Notice of Borrowing related to a Loan pursuant to subsection 2.1(b) (or
telephonic notice thereof), the Agent shall notify each Bank of the proposed
borrowing. Each Bank shall make the amount of its Loan available to the Agent,
in same day funds, at its Payment Office not later than 1:00 P.M. (New York
time) on the Funding Date. Upon satisfaction or waiver of the conditions
precedent specified in Article V, as applicable, the Agent shall make the
proceeds of such Loans available to the Borrower on such Funding Date by
causing an amount of same day funds equal to the proceeds of all such Loans
received by the Agent to be credited to the account of the Borrower at such
office of the Agent.
Unless the Agent shall have been notified by any Bank in
writing prior to any Funding Date in respect of any Loans that such Bank does
not intend to make
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available to the Agent such Bank's Loan on such Funding Date (which such
notice, if so received by the Agent, shall promptly be communicated to the
Borrower), the Agent may assume that such Bank has made such amount available
to the Agent on such Funding Date and the Agent in its sole discretion may, but
shall not be obligated to, make available to the Borrower a corresponding
amount on such Funding Date. If such corresponding amount is not in fact made
available to the Agent by such Bank, the Agent shall be entitled to recover
such corresponding amount on demand from such Bank together with interest
thereon, for each day from such Funding Date until the date such amount is paid
to the Agent, at the customary rate set by the Agent for the correction of
errors among banks for three Business Days and thereafter at the Base Rate. If
such Bank does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Agent. Nothing in this
subsection 2.1(c) shall be deemed to relieve any Bank from its obligation to
fulfill its Commitment hereunder or to prejudice any rights that the Borrower
may have against any Bank as a result of any default by such Bank hereunder.
2.2 NOTES.
The Borrower shall execute and deliver to each Bank (or to
the Agent for that Bank) on the Closing Date a Note substantially in the form
of Exhibit C annexed hereto to evidence that Bank's Loans, in the principal
amount of that Bank's Commitment and with other appropriate insertions. Each
Bank will note on its internal records the amount of each Loan made by it and
each payment in respect thereof and will prior to any transfer of any of its
Notes endorse on the reverse side thereof the outstanding principal amount of
the Loans evidenced thereby. Failure to make any such notation shall not affect
the Borrower's obligations in respect of such Loans.
2.3 INTEREST ON THE LOANS.
(A) RATE OF INTEREST. Subject to the provisions of
subsections 2.4 and 2.7, each Loan shall bear interest on the unpaid principal
amount thereof from the date made until paid in full (whether by acceleration
or otherwise) at a rate determined by reference to the Base Rate or the
Adjusted LIBOR Rate, as the case may be. The applicable basis for determining
the rate of interest with respect to any Loan shall be selected by the Borrower
initially at the time a Notice of Borrowing is given with respect to such Loan
pursuant to subsection 2.1(b), and the basis for determining the interest rate
with respect to any Loan may be changed from time to time pursuant to
subsection 2.3(c). If on any day a Loan is outstanding with respect to which
notice has not been delivered to the Agent in accordance with the terms of this
Agreement specifying the applicable basis for determining the rate of interest,
then for that day that Loan shall bear interest determined by reference to the
Base Rate.
Subject to the provisions of subsections 2.3(c) and 2.4,
the Loans shall bear interest until paid in full as follows:
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(i) if a Base Rate Loan, then at the Base Rate
per annum; or
(ii) if a LIBOR Rate Loan, then at the sum of
the Adjusted LIBOR Rate plus .50% per annum.
(B) INTEREST PERIODS. In connection with each LIBOR Rate
Loan, the Borrower may, pursuant to the applicable Notice of Borrowing or
Notice of Conversion/Continuation, as the case may be, select an interest
period (each an "Interest Period") to be applicable to such Loan, which
Interest Period shall be, at the Borrower's option, either a one, two, three or
six month period; provided that:
(i) the initial Interest Period for any LIBOR
Rate Loan shall commence on the Funding Date in respect of such Loan,
in the case of a Loan initially made as a LIBOR Rate Loan, or on the
date specified in the applicable Notice of Conversion/Continuation, in
the case of a Loan converted to a LIBOR Rate Loan;
(ii) in the case of immediately successive
Interest Periods applicable to a LIBOR Rate Loan continued as such
pursuant to a Notice of Conversion/Continuation, each successive
Interest Period shall commence on the day on which the next preceding
Interest Period expires;
(iii) if an Interest Period would otherwise
expire on a day that is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day; provided that, if any
Interest Period would otherwise expire on a day that is not a Business
Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iv) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clause (v) of this subsection
2.3(b), end on the last Business Day of a calendar month;
(v) no Interest Period with respect to any
portion of the Loans shall extend beyond the Termination Date;
(vi) there shall be no more than four Interest
Periods outstanding at any time; and
(vii) in the event the Borrower fails to specify
an Interest Period for any LIBOR Rate Loan in the applicable Notice of
Borrowing or Notice of Conversion/Continuation, the Borrower shall be
deemed to have selected an Interest Period of one month.
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(C) CONVERSION OR CONTINUATION. Subject to the
provisions of subsection 2.7, the Borrower shall have the option (i) to convert
at any time all or any part of the outstanding Loans equal to $500,000 and
integral multiples of $100,000 in excess of that amount from Loans bearing
interest at a rate determined by reference to one basis to Loans bearing
interest at a rate determined by reference to an alternative basis or (ii) upon
the expiration of any Interest Period applicable to a LIBOR Rate Loan, to
continue all or any portion of such Loan equal to $500,000 and integral
multiples of $100,000 in excess of that amount as a LIBOR Rate Loan; provided,
however, that a LIBOR Rate Loan may only be converted into a Base Rate Loan on
the expiration date of an Interest Period applicable thereto.
The Borrower shall deliver a Notice of
Conversion/Continuation to the Agent no later than 10:00 A.M. (New York time)
at least one Business Day in advance of the proposed conversion date (in the
case of a conversion to a Base Rate Loan) and at least three Business Days in
advance of the proposed conversion/continuation date (in the case of a
conversion to, or a continuation of, a LIBOR Rate Loan). A Notice of
Conversion/Continuation shall specify (i) the proposed conversion/continuation
date (which shall be a Business Day), (ii) the amount and type of the Loan to
be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a LIBOR Rate Loan, the requested Interest Period, and (v) in the case of a
conversion to, or a continuation of, a LIBOR Rate Loan, that no Default or
Event of Default has occurred and is continuing. In lieu of delivering the
above-described Notice of Conversion/Continuation, the Borrower may give the
Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.3(c); provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to the Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.3(c), the Agent
shall promptly transmit such notice by telefacsimile or telephone to each Bank.
Neither the Agent nor any Bank shall incur any liability to
the Borrower in acting upon any telephonic notice referred to above that the
Agent believes in good faith to have been given by a duly authorized officer or
other person authorized to act on behalf of the Borrower or for otherwise
acting in good faith under this subsection 2.3(c), and upon conversion or
continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice the Borrower shall have effected a conversion or
continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.7(b), 2.7(c)
and 2.7(f), a Notice of Conversion/Continuation for conversion to, or
continuation of, a LIBOR Rate Loan (or telephonic notice in lieu thereof) shall
be irrevocable on and after the related Interest Rate Determination Date, and
the Borrower shall be bound to effect a conversion or continuation in
accordance therewith.
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(D) INTEREST PAYMENTS. Subject to subsection 2.3(e),
interest shall be payable on the Loans in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity.
(E) DEFAULT RATE. Upon the occurrence and during the
continuation of any Event of Default, the outstanding principal amount of all
Loans and, to the extent permitted by applicable law, any interest payments
thereon not paid when due and any fees and other amounts then due and payable
hereunder, shall thereafter bear interest (including post-petition interest in
any proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable upon demand at a rate that is 2% per annum in excess of the interest
rate otherwise payable under this Agreement with respect to the applicable
Loans (or, in the case of any such fees and other amounts, at a rate which is
2% per annum in excess of the interest rate otherwise payable under this
Agreement for Base Rate Loans); provided that, in the case of LIBOR Rate Loans,
upon the expiration of the Interest Period in effect at the time any such
increase in interest rate is effective such LIBOR Rate Loans shall thereupon
become Base Rate Loans and shall thereafter bear interest payable upon demand
at a rate which is 2% per annum in excess of the interest rate otherwise
payable under this Agreement for Base Rate Loans. Payment or acceptance of the
increased rates of interest provided for in this subsection 2.3(e) is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or an amendment to this Agreement otherwise prejudice or
limit any rights or remedies of the Agent or any Bank.
(F) COMPUTATION OF INTEREST. Interest on the Loans shall
be computed (i) in the case of Base Rate Loans, on the basis of a 365-day or
366-day year, as the case may be, and (ii) in the case of LIBOR Rate Loans, on
the basis of a 360-day year, in each case for the actual number of days elapsed
in the period during which it accrues. In computing interest on any Loan, the
date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a LIBOR Rate Loan, the date of conversion of such LIBOR Rate Loan to such
Base Rate Loan, as the case may be, shall be included, and the date of payment
of such Loan or the expiration date of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted to a LIBOR Rate Loan,
the date of conversion of such Base Rate Loan to such LIBOR Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
day on which it is made, one day's interest shall be paid on that Loan.
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2.4 ADJUSTMENTS FOR WITHHOLDING, INCREASED COSTS,
CAPITAL ADEQUACY, ETC. In the event that any Bank, in its sole discretion,
determines that the enactment, adoption or issuance of any applicable law,
rule, regulation, order or decree or any change in any existing law or any
existing interpretation or application thereof, or compliance by such Bank with
any request or directive (whether or not having the force of law) from any
governmental, fiscal, monetary or other authority:
(i) subjects such Bank to any tax, duty, charge
or withholding on or from payments due from the Borrower not in effect
or whose equivalent is not in effect on the date of this Agreement
(excluding taxation on the overall net income of such Bank); or
(ii) imposes, modifies or holds applicable or
changes any reserve requirement (including, without limitation, basic,
supplemental, marginal, special or emergency reserves but not
including reserve requirements already taken into account in
calculating the interest rate hereunder), special deposit, compulsory
deposit or similar requirement with respect to assets of, deposits
with or for the account of advances or loans by, other credit extended
by, or any other acquisition of funds by, such Bank (including,
without limitation, all eurocurrency funding and all "Eurocurrency
liabilities" as defined in Regulation D); or
(iii) affects the amount of capital required or
expected to be maintained by such Bank in respect of the Loans made by
such Bank to the Borrower hereunder; or
(iv) does or shall impose on such Bank any other
condition or change therein;
and the result of any of the foregoing is to increase the cost to such Bank of
making available to the Borrower, converting from or to, or maintaining, any
Loans hereunder, then, and in any such event, such Bank shall notify the
Borrower in writing of such occurrence setting forth in reasonable detail the
basis for and amounts of such increased costs, and, if such Bank demands such a
payment, the Borrower shall pay to such Bank, within five (5) Business Days
after demand (but in no event prior to the date such Bank becomes liable for,
suffers or incurs such increased cost), such amounts as will compensate such
Bank for such increased costs. The certificate of such Bank as to any amounts
payable pursuant to this subsection 2.4 shall, absent manifest error, be final,
conclusive and binding on the Borrower. The obligations of the Borrower under
this subsection 2.4 shall survive for six (6) months after the making and
repayment of the Loans and the termination of the Commitments.
2.5 USE OF PROCEEDS.
(A) LOANS. The proceeds of the Loans shall be
applied to make intercompany loans to Parent to be used by Parent to
purchase publicly traded equity securities of Parent and for working
capital and general corporate purposes.
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(B) MARGIN REGULATIONS. No portion of the
proceeds of any borrowing under this Agreement shall be used by the
Borrower to purchase or carry any Margin Stock in any manner that
might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of the
Board or to violate the Securities Exchange Act of 1934, in each case
as in effect on the date or dates of such borrowing and such use of
proceeds.
2.6 SPECIAL TAX PROVISIONS. Each Bank organized under
the laws of a jurisdiction outside of the United States (referred to in this
subsection 2.6 as a "Foreign Bank") as to which payments to be made hereunder
or under the Notes are exempt from United States withholding tax or are subject
to such tax at a reduced rate under an applicable statute or tax treaty shall
provide to the Borrower and the Agent (x) a properly completed and executed
Internal Revenue Service Form 4224 or Form 1001 or other applicable form,
certificate or document prescribed by the Internal Revenue Service of the
United States certifying as to such Foreign Bank's entitlement to such
exemption or reduced rate with respect to payments to be made to such Foreign
Bank hereunder and under the Notes (referred to in this subsection 2.6 as a
"Certificate of Exemption") or (y) a letter from such Foreign Bank stating that
it is not entitled to any such exemption or reduced rate (referred to in this
subsection 2.6 as a "Letter of Non-Exemption"). Each Foreign Bank shall provide
such a Certificate of Exemption or a Letter of Non-Exemption on or before the
Closing Date; provided, however, that each Foreign Bank that becomes a Bank
pursuant to the proviso in the definition of "Bank" shall provide a Certificate
of Exemption or a Letter of Non-Exemption on the date such Foreign Bank becomes
a Bank. Until the Borrower and the Agent have received from such Foreign Bank a
Certificate of Exemption, the accuracy of which shall be reasonably
satisfactory to the Borrower, the Borrower shall be entitled to withhold taxes
from such payments to such Foreign Bank at the statutory rate applicable to
amounts to be paid hereunder to such Foreign Bank.
2.7 SPECIAL PROVISIONS GOVERNING LIBOR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to LIBOR Rate Loans as to the
matters covered:
(A) DETERMINATION OF APPLICABLE INTEREST RATE. As soon
as practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, the Agent shall determine (which determination shall,
absent manifest error, be final, conclusive and binding upon all parties) the
interest rate that shall apply to the LIBOR Rate Loans for which an interest
rate is then being determined for the applicable Interest Period and shall
promptly give notice thereof (in writing or by telephone confirmed in writing)
to the Borrower and each Bank.
(B) INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In
the event that the Agent shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any LIBOR Rate Loans, that by reason of
circumstances affecting the London interbank
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market adequate and fair means do not exist for ascertaining the interest rate
applicable to such Loans on the basis provided for in the definition of
Adjusted LIBOR Rate, the Agent shall on such date give notice (by telefacsimile
or by telephone confirmed in writing) to the Borrower and each Bank of such
determination, whereupon (i) no Loans may be made as, or converted to, LIBOR
Rate Loans until such time as the Agent notifies the Borrower and Banks that
the circumstances giving rise to such notice no longer exist and (ii) any
Notice of Borrowing or Notice of Conversion/Continuation given by the Borrower
with respect to the Loans in respect of which such determination was made shall
be deemed to be rescinded by the Borrower.
(C) ILLEGALITY OR IMPRACTICABILITY OF LIBOR RATE LOANS.
In the event that on any date any Bank shall have determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with the Borrower and the Agent) that
the making, maintaining or continuation of its LIBOR Rate Loans (i) has become
unlawful as a result of compliance by such Bank in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not
be unlawful) or (ii) has become impracticable, or would cause such Bank
material hardship, as a result of contingencies occurring after the date of
this Agreement which materially and adversely affect the London interbank
market or the position of such Bank in that market, then, and in any such
event, such Bank shall be an "AFFECTED BANK" and it shall on that day give
notice (by telefacsimile or by telephone confirmed in writing) to the Borrower
and the Agent of such determination (which notice the Agent shall promptly
transmit to each other Bank). Thereafter (a) the obligation of the Affected
Bank to make Loans as, or to convert Loans to, LIBOR Rate Loans shall be
suspended until such notice shall be withdrawn by the Affected Bank, (b) to the
extent such determination by the Affected Bank relates to a LIBOR Rate Loan
then being requested by the Borrower pursuant to a Notice of Borrowing or a
Notice of Conversion/Continuation, the Affected Bank shall make such Loan as
(or convert such Loan to, as the case may be) a Base Rate Loan, (c) the
Affected Bank's obligation to maintain its outstanding LIBOR Rate Loans (the
"AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration
of the Interest Period then in effect with respect to the Affected Loans or
when required by law, and (d) the Affected Loans shall automatically convert
into Base Rate Loans on the date of such termination. Notwithstanding the
foregoing, to the extent a determination by an Affected Bank as described above
relates to a LIBOR Rate Loan then being requested by the Borrower pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, the Borrower shall
have the option, subject to the provisions of subsection 2.7(d), to rescind
such Notice of Borrowing or Notice of Conversion/Continuation as to all Banks
by giving notice (by telefacsimile or by telephone confirmed in writing) to the
Agent of such rescission on the date on which the Affected Bank gives notice of
its determination as described above (which notice of rescission the Agent
shall promptly transmit to each other Bank). Except as provided in the
immediately preceding sentence, nothing in this subsection 2.7(c) shall affect
the obligation of any Bank other than an Affected Bank to
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make or maintain Loans as, or to convert Loans to, LIBOR Rate Loans in
accordance with the terms of this Agreement.
(D) COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF
INTEREST PERIODS. The Borrower shall compensate each Bank, upon written request
by that Bank (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including any
interest paid by that Bank to lenders of funds borrowed by it to make or carry
its LIBOR Rate Loans and any loss, expense or liability sustained by that Bank
in connection with the liquidation or re-employment of such funds) which that
Bank may sustain: (i) if for any reason (other than a default by that Bank) a
borrowing of any LIBOR Rate Loan does not occur on a date specified therefor in
a Notice of Borrowing or a telephonic request for borrowing, or a conversion to
or continuation of any LIBOR Rate Loan does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment or other principal payment
or any conversion of any of its LIBOR Rate Loans occurs on a date prior to the
last day of an Interest Period applicable to that Loan, (iii) if any prepayment
of any of its LIBOR Rate Loans is not made on any date specified in a notice of
prepayment given by the Borrower, or (iv) as a consequence of any other default
by the Borrower in the repayment of its LIBOR Rate Loans when required by the
terms of this Agreement.
(E) ASSUMPTIONS CONCERNING FUNDING OF LIBOR RATE LOANS.
Calculation of all amounts payable to a Bank under this subsection 2.7 and
under subsection 2.4 shall be made as though that Bank had actually funded each
of its relevant LIBOR Rate Loans through the purchase of a LIBOR deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted LIBOR Rate in an amount equal to the amount of such LIBOR Rate Loan
and having a maturity comparable to the relevant Interest Period and through
the transfer of such LIBOR deposit from an offshore office of that Bank to a
domestic office of that Bank in the United States of America; provided,
however, that each Bank may fund each of its LIBOR Rate Loans in any manner it
sees fit and the foregoing assumptions shall be utilized only for the purposes
of calculating amounts payable under this subsection 2.7 and under subsection
2.4.
(F) LIBOR RATE LOANS AFTER DEFAULT. After the occurrence
of and during the continuation of a Default or an Event of Default, (i) the
Borrower may not elect to have a Loan be made or maintained as, or converted
to, a LIBOR Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.7(d)
any Notice of Borrowing or Notice of Conversion/Continuation given by the
Borrower with respect to a requested borrowing or conversion/continuation that
has not yet occurred shall be deemed to be rescinded by the Borrower.
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ARTICLE III
FEES
3.1 FEES.
(A) UNDERWRITING FEES. On the Closing Date, the Borrower
agrees to pay to BTCo such underwriting fees as have been mutually agreed upon.
(B) COMMITMENT FEES. The Borrower agrees to pay to the
Agent, for distribution to each Bank in proportion to its Pro Rata Share,
commitment fees for the period from and including the Closing Date to but
excluding the Termination Date equal to the average of the daily unused portion
of the Commitments multiplied by 1/8 of 1% per annum, such commitment fees to
be calculated on the basis of a 360-day year and the actual number of days
elapsed and to be payable monthly in arrears on and to the last day of each
calendar month, commencing on the first such date occurring after the Closing
Date, and upon the termination of the Commitments. Anything contained in this
Agreement to the contrary notwithstanding, for the purposes of calculating the
commitment fees payable by the Borrower pursuant to this subsection 3.1(b), the
"unused portion of the Commitments", as of any date of determination, shall be
an amount equal to the aggregate amount of Commitments as of such date minus
the aggregate principal amount of all outstanding Loans on such date, and the
unused portion of the Commitments shall not be reduced for the purposes of
calculating commitment fees by reason of the Borrower's inability to satisfy
the conditions precedent set forth in Article V and consequent inability to
borrow Loans hereunder.
ARTICLE IV
PREPAYMENTS; PAYMENTS
4.1 PREPAYMENTS; MANDATORY REDUCTION OF COMMITMENT.
(A) OPTIONAL PREPAYMENTS. The Borrower shall have the
right to prepay the Loans in the minimum amount of $500,000 and integral
multiples of $100,000 in excess thereof (or such lesser amount as constitutes
the remaining principal amount of the Loans outstanding), without premium or
penalty, in whole or in part from time to time, upon at least one Business
Days' prior written notice of its intent to prepay the Loans, which notice
shall be delivered to the Agent at its Notice Office and shall specify the
amount of such prepayment. The Agent shall promptly transmit a copy of each
such notice to each of the Banks.
(B) MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
The Borrowers shall make prepayments on the Loans necessary so that on any
date, the Loan to Collateral Value Ratio shall be no less than 1.00:1.00. In
the event of any termination, expiration or amendment of any components of the
Collar Transactions, (x) the Commitments shall be automatically reduced (such
reduction to reduce the Commitment of each Bank proportionately to its Pro Rata
Share) to the extent necessary so that the ratio of the Commitments to the
notional value of the put options then effective and
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included in the Collar Transactions (calculated as the option price multiplied
by the number of shares covered by the option) shall not exceed 0.90:1.00, and
(y) the Borrower shall make prepayments on the Loans to the extent necessary so
that after giving effect to such reduction, the outstanding principal amount of
the Loans shall not exceed the Commitments.
4.2 METHOD AND PLACE OF PAYMENT.
Except as otherwise specifically provided herein, all
payments under this Agreement or any Note shall be made to the Agent for the
account of the Bank or Banks entitled thereto not later than 2:00 P.M. (New
York time) on the date when due and shall be made in Dollars in immediately
available funds at the Payment Office of the Agent. Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder or under any Note or of the
commitment or other fees hereunder, as the case may be.
4.3 NET PAYMENTS.
All payments made by the Borrower hereunder or under any Note
will be made without setoff, counterclaim or other defense.
4.4 APPLICATION OF PREPAYMENTS.
All prepayments shall include payment of accrued interest on
the principal amount so prepaid other than with respect to any voluntary
prepayment of the Loans and shall be applied to the payment of interest before
application to principal. Any prepayment of Loans shall be applied first to
Base Rate Loans to the full extent thereof before application to LIBOR Rate
Loans, in a manner which minimizes the amount of any payments required to be
made by the Borrower pursuant to subsection 2.7(d).
4.5 APPORTIONMENT OF PAYMENTS
Aggregate principal and interest payments shall be
apportioned among all outstanding Loans to which such payments relate, and such
payments shall be apportioned ratably to the Banks, proportionately to the
Banks' respective Pro Rata Shares. The Agent shall promptly distribute to each
Bank at its primary address set forth below its name on the appropriate
signature page hereof or such other address as any Bank may request its share
of all such payments received by the Agent and the commitment fees of such Bank
when received by the Agent pursuant to subsection 3.1(b).
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4.6 VOLUNTARY REDUCTION OF COMMITMENTS.
The Borrower shall have the right, at any time and from time
to time, to terminate in whole or permanently reduce in part, without premium
or penalty, the Commitments in an amount up to the amount by which the
Commitments exceed the principal amount of outstanding Loans. The Borrower
shall give not less than one Business Day's prior written notice to the Agent
designating the date (which shall be a Business Day) of such termination or
reduction and the amount of any partial reduction. Promptly after receipt of a
notice of such termination or partial reduction, the Agent shall notify each
Bank of the proposed termination or reduction. Such termination or partial
reduction of the Commitments shall be effective on the date specified in the
Borrower's notice and shall reduce the Commitment of each Bank proportionately
to its Pro Rata Share. Any such partial reduction of the Commitments shall be
in an aggregate minimum amount of $500,000 and integral multiples of $100,000
in excess of that amount unless the remaining amount of the Commitments is less
than $100,000 in which case such reduction shall be in the amount of the then
remaining Commitments.
ARTICLE V
CONDITIONS PRECEDENT
The effectiveness of this Agreement and the obligations of
the Banks to maintain and make Loans hereunder are subject to the satisfaction
of the following conditions.
5.1 CONDITIONS TO EFFECTIVENESS.
This Agreement shall become effective only upon satisfaction
of all of the following conditions:
(A) EXECUTION OF AGREEMENT, NOTES AND OTHER CREDIT
DOCUMENTS. The Agent shall have received duly copies of each of the
following, duly executed by each party thereto:
(1) this Agreement;
(2) Notes made to the order of each of the
Banks; and
(3) the Pledge and Security Agreement.
The Borrower shall also have delivered to the Agent all
instruments (together with undated stock powers, duly endorsed in blank), if
any, representing securities pledged pursuant to the Pledge and Security
Agreement, and shall have executed and delivered UCC-1 financing statements and
taken all such further action as the Agent may request in order to create a
valid and perfected first priority Lien in favor of the Agent for the benefit
of the Banks on the Collateral.
(b) NO DEFAULT; REPRESENTATION AND WARRANTIES. All
representations and warranties of each Credit Party set forth in each of Credit
Documents
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to which such Credit Party is a party shall be true, correct and complete in
all material respects on and as of the Closing Date after giving effect to the
transactions contemplated to occur on such date, and the Borrower shall have
delivered to the Agent an officer's certificate, dated as of the Closing Date,
signed by the President or Vice President of the Borrower, and attested to by
the Secretary or any Assistant Secretary of the Borrower, in form and substance
satisfactory to the Agent, to the effect that on and as of the Closing Date and
after giving effect to the transactions contemplated to occur on such date, (i)
no Default or Event of Default shall have occurred and be continuing and (ii)
all representations and warranties of the Credit Parties contained herein and
in the other Credit Documents are true, correct and complete in all material
respects.
(C) CORPORATE DOCUMENTS; PROCEEDINGS.
(1) On the Closing Date, the Agent shall have
received a certificate, dated the Closing Date, signed by an authorized officer
of the Borrower, in form and substance satisfactory to the Agent, certifying
(i) resolutions of the Board of Directors of the Borrower authorizing and
approving the execution and delivery by the Borrower of this Agreement and the
Note and the other Credit Documents to which it is a party and the transactions
contemplated hereby and thereby, (ii) the certificate or articles of
incorporation of the Borrower, and (iii) the bylaws of the Borrower.
(2) On the Closing Date, the Agent shall have
received, with respect to the Borrower, a good standing certificate from its
jurisdiction of incorporation, dated a recent date prior to the Closing Date.
(3) All corporate and legal proceedings and
all instruments and agreements in connection with the transactions contemplated
by this Agreement and the other Credit Documents shall be satisfactory in form
and substance to the Banks, and the Agent shall have received all information
and copies of all documents and papers, including records of corporate
proceedings and governmental approvals, if any, which any Bank reasonably may
have requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate or governmental authorities.
(D) PAYMENT OF FEES. The Borrower shall have paid the
Fees required by subsection 3.1 to be paid on the Closing Date and the
reasonable fees and expenses of O'Melveny & Myers LLP, counsel to the Agent,
as of the Closing Date.
(E) PRO FORMA BALANCE SHEET. On or before the Closing
Date, Banks shall have received from the Borrower a pro forma balance sheet as
at the Closing Date, prepared in accordance with generally accepted accounting
principles and reflecting the consummation of the transactions contemplated by
the Credit Documents, which pro forma financial statements shall be in form and
substance satisfactory to the Banks.
(F) OPINIONS OF COUNSEL. On the Closing Date, the Agent
shall have received from internal counsel to the Borrower and Latham & Watkins,
special New York counsel to the Borrower, opinions in form and substance
satisfactory to the Agent,
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addressed to each of the Banks and dated the date of delivery, covering such
matters incident to the transactions contemplated herein as the Agent may
reasonably request. The Borrower hereby acknowledges that it has requested such
counsel to deliver such opinions to the Agent and the Banks.
(G) AMENDMENTS TO COLLAR DOCUMENTS. On or prior to the
Closing Date, the Agent shall have received copies of fully executed amendments
to the Collar Documents, in form and substance reasonably satisfactory to the
Agent, providing for (i) BTCo's right to tender any unpaid portion of the
Obligations as payment for the purchase price under any of the Collar
Transactions and (ii) acknowledgment by the parties to the Collar Documents of
the modification to the credit support annex thereunder which is effected by
the Pledge and Security Agreement.
All the Notes, certificates, legal opinions and other
documents and papers referred to in this Article V, unless otherwise specified,
shall be delivered to the Agent at the Agent's Notice Office for the account of
each of the Banks and, except for the Notes, in sufficient counterparts for
each of the Banks and shall be satisfactory in form and substance to the Banks.
5.2 CONDITIONS TO ALL LOANS.
The obligations of the Banks to make Loans on each Funding
Date are subject to the following further conditions precedent:
(A) The Agent shall have received, in accordance with
the provisions of subsection 2.1(b), an originally executed Notice of Borrowing
signed by a duly authorized officer of the Borrower.
(B) As of the Funding Date:
(1) The representations and warranties
contained herein shall be true, correct and complete in all material respects
on and as of that Funding Date to the same extent as though made on and as of
that date;
(2) No event shall have occurred and be
continuing or would result from the consummation of the borrowing contemplated
by such Notice of Borrowing that would constitute a Default or an Event of
Default;
(3) The Borrower shall have performed in all
material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed by it on or before that Funding Date;
(4) No order, judgment or decree of any
court, arbitrator or governmental authority shall purport to enjoin or restrain
any Bank from making the Loans; and
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(5) The making of the Loans requested on such
Funding Date shall not (x) violate any law, including, without limitation,
Regulation T, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System or (y) cause the Loan to Collateral Value Ratio to be
less than 1.00:1.00.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
In order to induce the Banks to enter into this Agreement and
to maintain and make the Loans, the Borrower makes the following
representations, warranties and agreements, which shall survive the execution
and delivery of this Agreement and the Notes and the making of Loans.
6.1 CORPORATE STATUS.
Each Credit Party (i) is a corporation duly incorporated and
existing in good standing under the laws of its jurisdiction of incorporation,
(ii) has the power and authority to own its property and assets and to transact
the business in which it is engaged and (iii) is duly qualified as a foreign
corporation and in good standing in each jurisdiction where the ownership,
leasing or operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of such
Credit Party.
6.2 POWER AND AUTHORITY.
Each Credit Party has the corporate power to execute, deliver
and perform the terms and provisions of each of the Credit Documents to which
it is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of such Credit Documents.
Each Credit Party and has duly executed and delivered each of the Credit
Documents to which it is party, and each of such Credit Documents constitutes
the legal, valid and binding obligation of such Credit Party, enforceable
against such Credit Party in accordance with its terms except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
6.3 NO VIOLATION.
Neither the execution, delivery or performance by any Credit
Party of the Credit Documents to which it is a party, nor compliance by it with
the terms and provisions of any such Credit Documents, (i) will contravene any
provision of any law, statute, rule or regulation or any order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default
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under, or result in the creation or imposition of (or the obligation to create
or impose) any Lien (other than Liens permitted under subsection 8.1) upon any
of the property or assets of any Credit Party pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement, loan agreement or any
other agreement, contract or instrument to which such Credit Party is a party
or by which it or any of its property or assets is bound or to which it may be
subject or (iii) will violate any provision of the articles or certificate of
incorporation or by-laws of any Credit Party.
6.4 GOVERNMENTAL APPROVALS.
No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as have been
obtained or made prior to the Closing Date), or exemption by, any governmental
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, (i) the execution, delivery and
performance by any Credit Party of any Credit Document to which it is a party,
or (ii) the legality, validity, binding effect or enforceability of any such
Credit Document.
6.5 FINANCIAL STATEMENTS; FINANCIAL CONDITION;
UNDISCLOSED LIABILITIES; ETC.
(A) The audited consolidated balance sheet of Parent and
its Subsidiaries as at December 31, 1997 heretofore furnished to the Banks is
true and correct and presents fairly the financial condition (including without
limitation total assets, total liabilities, (including contingent liabilities),
shareholders' equity (defined as shareholder capital and not shareholder loans)
and Net Worth of the Borrower) of the Parent and its Subsidiaries on a
consolidated basis at the date of such balance sheet. Such balance sheet has
been prepared in accordance with generally accepted accounting principles and
practices consistently applied.
(B) Except as fully reflected in the financial
statements described in subsection 6.5(a), there were as of the Closing Date no
liabilities or obligations with respect to the Borrower of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, would be material to the
Borrower. As of the Closing Date the Borrower does not know of any basis for
the assertion against the Borrower of any liability or obligation of any nature
whatsoever that is not fully reflected in the financial statements described in
subsection 6.5(a) which, either individually or in the aggregate, would be
material to the Borrower.
6.6 LITIGATION.
There is no action, suit or arbitration or other proceeding
pending or, to the best knowledge of the Borrower, threatened with respect to
(i) any Credit Document, (ii) any tax return, or (iii) any other matter that,
if adversely determined, is reasonably
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likely to materially and adversely affect the business, operations, property,
assets, condition (financial or otherwise) or prospects of any Credit Party.
6.7 TRUE AND COMPLETE DISCLOSURE.
All factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of the Borrower or any Credit Party
in writing to any Bank (including, without limitation, all information
contained in the Credit Documents) for purposes of or in connection with this
Agreement or any transaction contemplated herein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of the
Borrower in writing to any Bank will be, true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading at such time in light of the circumstances
under which such information was provided.
6.8 USE OF PROCEEDS; MARGIN REGULATIONS.
All proceeds of the Loans have been and will be used by the
Borrower for the purposes set forth in subsection 2.5. Neither the making of
any Loan nor the use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations T, U or X of the Board of Governors of the
Federal Reserve System.
6.9 TAX RETURNS AND PAYMENTS.
Each of the Credit Parties has filed all tax returns required
to be filed by it and has paid all income taxes payable by it which have become
due pursuant to such tax returns and all other taxes and assessments payable by
it which have become due, other than those not yet delinquent, those being
contested in good faith.
6.10 SUBSIDIARIES.
The Borrower has no Subsidiaries. The Borrower is a
Wholly-Owned Subsidiary of Parent.
6.11 COMPLIANCE WITH STATUTES, ETC.
The Borrower is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), except such noncompliances as would not, in the aggregate, have a
material adverse effect on the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower.
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6.12 INVESTMENT COMPANY ACT.
Neither the Borrower nor Parent is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
6.13 PUBLIC UTILITY HOLDING COMPANY ACT.
Neither the Borrower nor Parent is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
6.14 NO MATERIAL ADVERSE CHANGE.
Since December 31, 1997, there has been no material adverse
change in the business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Borrower.
6.15 SOLVENCY.
The Borrower is not, and upon the incurrence of any
Obligations hereunder on any date will not be, insolvent, and the pledge of the
Collateral pursuant to the Pledge and Security Agreement shall not result in
the insolvency of the Borrower.
6.16 YEAR 2000.
All Information Systems and Equipment are either Year 2000
Compliant or any reprogramming, remediation, or any other corrective action,
including the internal testing of all such Information Systems and Equipment,
will be completed prior to any material adverse effect on the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of the Borrower which could reasonably be expected to result from failure to
take such action. Further, to the extent that such reprogramming/remediation
and testing action is required, the cost thereof, as well as the cost of the
reasonably foreseeable consequences of failure to become Year 2000 Compliant,
to Parent and its Subsidiaries (including, without limitation, reprogramming
errors and the failure of other systems or equipment) will not result in an
Event of Default or a material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Borrower. As used in this subsection, "Year 2000 Compliant" means that all
Information Systems and Equipment accurately process date data (including, but
not limited to, calculating, comparing and sequencing) before, during and after
the year 2000, as well as same and multi-century dates, or between the years
1999 and 2000, taking into account all leap years, including the fact that the
year 2000 is a leap year, and further, that when used in combination with, or
interfacing with, other Information Systems and Equipment, shall accurately
accept, release and exchange date data, and shall in all material respects
continue to function in the same manner as it performs today and shall not
otherwise impair the accuracy or functionality of
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Information Systems and Equipment; and "Information Systems and Equipment"
means all computer hardware, firmware and software, as well as other
information processing systems, or any equipment containing embedded
microchips, whether directly owned, licensed, leased, operated or otherwise
controlled by Borrower or any of its Subsidiaries, including through
third-party service providers, and which, in whole or in part, are used,
operated, relied upon, or integral to, Borrower's or any of its Subsidiaries'
conduct of their business.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that on and after the
Closing Date and until the Loans and the Notes, together with interest, Fees
and all other obligations incurred hereunder and thereunder, are paid in full
and the Commitments have terminated:
7.1 INFORMATION COVENANTS.
The Borrower will furnish to each Bank:
(A) INTERIM FINANCIAL STATEMENTS. As soon as available
and in any event within ten days after the end of the Borrower's first three
fiscal quarters, copies of the balance sheets of the Borrower as of the end of
such fiscal quarter in reasonable detail, prepared in accordance with generally
accepted accounting principles, containing the certification of and signed on
behalf of the Borrower by the chief operating officer, president, chief
financial officer or other executive officer reasonably acceptable to the
Agent. All such balance sheets shall set forth in comparative form figures from
the preceding year end.
(B) ANNUAL FINANCIAL STATEMENTS. As soon as available
and in any event within thirty days after the end of each fiscal year of the
Borrower, copies of the balance sheets of the Borrower as of the end of such
fiscal year setting forth in comparative form the figures for the preceding
fiscal year of the Borrower, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, accompanied by an
unqualified opinion rendered by the Parent's regularly retained nationally
recognized independent certified public accountants satisfactory to the Agent
and containing the certification of and signed by on behalf of the Borrower by
its chief operating officer, president, chief financial officer or other
executive officer reasonably acceptable to the Agent.
(C) OFFICER'S CERTIFICATES. At the time of the delivery
of the financial statements provided for in subsections 7.1(a) and 7.1(b), a
certificate of the chief executive officer or the chief financial officer of
the Borrower, to the effect that, to the best of his knowledge, no Default or
Event of Default has occurred and is continuing or, if any Default or Event of
Default has occurred and is continuing, specifying the nature and extent
thereof, which certificate shall set forth the calculations required to
establish
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whether the Borrower was in compliance with the provisions of subsection 8.7 at
the end of such fiscal quarter or year, as the case may be.
(D) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in
any event within three Business Days after any officer of the Borrower obtains
knowledge thereof, notice of (i) the occurrence of any event which constitutes
a Default or an Event of Default, (ii) any litigation or governmental or
arbitration proceeding pending (x) against any Credit Party which could
materially and adversely affect the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower or the ability
of any Credit Party to perform its obligations under any Credit Document to
which it is a party or (y) with respect to any Credit Document, (iii) any
material changes in the status of any litigation or other proceeding reported
by the Borrower pursuant to subsection 6.6 or subsection 7.1(d)(ii), and (iv)
any other event which could materially and adversely affect the business,
operations, property, assets, condition (financial or otherwise) or prospects
of the Borrower or the ability of any Credit Party to perform its obligations
under any Credit Document to which it is a party.
(E) REPORTS OF PARENT. Promptly upon their
becoming available, copies of (i) all financial statements, reports, notices
and proxy statements sent or made available generally by Parent to its security
holders, (ii) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Parent or any of its Subsidiaries with the
Securities and Exchange Commission (including, without limitation, any Form
10-K or 10-Q), and (iii) all other press releases and other statements made
available generally by Parent or any of its Subsidiaries to the public
concerning material developments in the business of Parent or any of its
Subsidiaries.
(F) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) as any Bank may reasonably
request.
7.2 BOOKS, RECORDS AND INSPECTIONS.
The Borrower will keep proper books of record and account in
which full, true and correct entries in conformity with generally accepted
accounting principles and all requirements of law shall be made of all dealings
and transactions in relation to its business and activities. The Borrower will
permit officers and designated representatives of the Agent or any Bank to
visit and inspect, under guidance of officers of the Borrower, any of the
properties of the Borrower, and to examine the books of record and account of
the Borrower and discuss the affairs, finances and accounts of the Borrower
with, and be advised as to the same by, its and their officers and independent
accountants, all at such reasonable times and intervals and to such reasonable
extent as the Agent or such Bank may request.
7.3 FRANCHISES.
The Borrower will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and its material
rights, licenses and permits.
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7.4 COMPLIANCE WITH STATUTES, ETC.
The Borrower will comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies in respect of the conduct of its business and the ownership
of its property, except such noncompliances as could not, in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or prospects
of the Borrower.
7.5 PAYMENT OF TAXES AND CLAIMS.
The Borrower will pay or cause to be paid all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its franchises, business, income
or property before any material penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a material Lien upon any of its properties or assets, prior to the time
when any material penalty or fine shall be incurred with respect thereto;
provided that so long as no property or assets (other than money for such
charge or claim and the interest or penalty accruing thereof) of the Borrower
are in danger of being lost or forfeited as a result thereof, no such charge or
claim need be paid if it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such reserve or
other appropriate provision, if any, as shall be required in conformity with
generally accepted accounting principles shall have been made therefor.
7.6 YEAR 2000 COMPLIANCE.
The Borrower will ensure that its Information Systems and
Equipment are at all times Year 2000 Compliant, except insofar as the failure
to do so will not result in a material adverse effect on the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of the Borrower, and shall notify the Agent and any Bank promptly upon
detecting any failure of the Information Systems and Equipment to be Year 2000
Compliant. In addition, the Borrower shall provide the Agent and any Bank with
such information about its year 2000 computer readiness (including, without
limitation, information as to contingency plans, budgets and testing results)
as the Agent or such Bank shall reasonably request.
7.7 FURTHER ASSURANCES.
At any time and from time to time upon the request of the
Agent, the Borrower shall execute and deliver such further documents and do
such other acts and things as the Agent may reasonably request in order to
effect fully the purposes of this Agreement and the other Credit Documents and
to provide for payment of the Obligations in accordance with the terms of this
Agreement and the other Credit Documents.
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ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees that on and after the
Closing Date and until the Loans and the Notes, together with interest, Fees
and all other obligations incurred hereunder and thereunder, are paid in full
and the Commitments have terminated:
8.1 LIENS.
The Borrower will not create, incur, assume or permit to
exist any Lien upon or with respect to any property or assets (real or
personal, tangible or intangible) of the Borrower, whether now owned or
hereafter acquired; provided that the provisions of this subsection 8.1 shall
not prevent the creation, incurrence, assumption or existence of:
(i) Liens for taxes not yet due, or Liens for taxes
being contested in good faith and by appropriate proceedings for which adequate
reserves have been established;
(ii) Liens in respect of property or assets of the
Borrower or any of its Subsidiaries imposed by law, which were incurred in the
ordinary course of business, such as carriers', warehousemen's and mechanics'
liens and other similar Liens arising in the ordinary course of business and
(x) which do not in the aggregate materially detract from the value of such
property or assets or materially impair the use thereof in the operation of the
business of the Borrower or any of its Subsidiaries or (y) which are being
contested in good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property or assets subject
to any such Lien;
(iii) Easements, rights-of-way, restrictions, minor
defects or irregularities of title and other similar charges or encumbrances
not interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries; and
(iv) Liens in favor of the Agent and Banks.
8.2 CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Borrower will not wind up, liquidate or dissolve its
affairs or enter into any transaction of merger or consolidation, or convey,
sell, lease or otherwise dispose of (or agree to do any of the foregoing at any
future time) all or any part of its property or assets, or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets of any Person or make any capital expenditure, except that
the Borrower may enter into transactions permitted under subsection 8.9.
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8.3 INDEBTEDNESS, CONTINGENT OBLIGATIONS AND LEASES.
The Borrower will not contract, create, incur, assume or
suffer to exist any Indebtedness, Contingent Obligation, obligation with
respect to any lease or any other obligation of any nature whatsoever, except
obligations of the Borrower incurred under the Credit Documents and the Collar
Documents.
8.4 TRANSACTIONS WITH AFFILIATES.
The Borrower will not enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of the Borrower, other than on terms and conditions substantially
as favorable to the Borrower as would be obtainable by the Borrower at the time
in a comparable arm's-length transaction with a Person other than an Affiliate.
8.5 NET WORTH. The Borrower shall not permit its
Net Worth at any time to be less than $80,000,000.
8.6 MODIFICATIONS OF CERTIFICATE OF INCORPORATION AND
COLLAR DOCUMENTS.
The Borrower will not (i) amend, modify or change any of its
organizational documents in any manner which would adversely affect the Agent
or the Banks or (ii) amend or modify the Collar Documents or the Collar
Transactions or enter into or modify any "Transaction" (as defined in the
Collar Documents) unless consented to by the Agent and Required Banks in their
sole discretion, nor exercise any right under the Collar Documents which would
adversely affect the value thereof or the Agent's Lien thereon.
8.7 ADVANCES, INVESTMENTS AND LOANS. The Borrower will
not lend money or credit or make advances to any Person, or purchase or acquire
any stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any other Person, except that (i) the Borrower may
purchase and hold publicly traded equity securities and (ii) the Borrower may
make intercompany Loans to Parent with the proceeds of Loans, to be used to
purchase publicly traded equity securities of Parent and for working capital
and general corporate purposes of Parent.
8.8 DISTRIBUTIONS. The Borrower will not authorize,
declare, make or pay any distribution or payment (whether in cash or property
and whether as compensation for services, management fees, return of capital,
distributions from income or retained earnings or otherwise) to its
shareholders.
8.9 BUSINESS.
The Borrower will not engage (directly or indirectly) in any
business activity except purchasing and holding the capital stock of Parent and
other publicly
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traded equity securities and such activities which are incidental to entering
into the Credit Documents and the Collar Documents and performing its
obligations thereunder.
ARTICLE IX
EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events
(each an "Event of Default");
9.1 PAYMENTS.
The Borrower shall (i) default in the payment when due of any
principal of any Loan or any Note or (ii) default, and such default shall
continue unremedied for five Business Days, in the payment when due of interest
on any Loan, any Fees or any other amounts owing hereunder or under any Note;
or
9.2 REPRESENTATIONS, ETC.
Any representation, warranty or statement made by the
Borrower herein or in any other Credit Document or in any certificate delivered
pursuant hereto or thereto shall prove to be untrue in any material respect on
the date as of which made or deemed made; or
9.3 COVENANTS.
The Borrower shall (i) default in the due performance or
observance by it of any term, covenant or agreement contained in subsection
7.1(d)(i) or Article VIII or (ii) default in the due performance or observance
by it of any term, covenant or agreement (other than those referred to in
subsections 9.1 and 9.2 and clause (i) of this subsection 9.3) contained in
this Agreement and such default shall continue unremedied for a period of 30
days after written notice to the Borrower by the Agent or after the Borrower
otherwise becomes aware of such default; or
9.4 DEFAULT UNDER OTHER AGREEMENTS.
Any of the Borrower or Parent shall (i) default in any
payment of any Indebtedness (other than the Notes) beyond the period of grace
(not to exceed 30 days), if any, provided in the instrument or agreement under
which such Indebtedness was created or (ii) default in the observance or
performance of any agreement or condition relating to any Indebtedness (other
than the Notes) or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, any such Indebtedness to become due
prior to its stated maturity; or any Indebtedness of any of the Borrower or
Parent shall be declared to be due and payable, or
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required to be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof; or
9.5 BANKRUPTCY, ETC.
Either the Borrower or Parent shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against any of the
Borrower or Parent, and the petition is not controverted within 10 days, or is
not dismissed within 60 days, after commencement of the case (provided that the
Borrower expressly authorizes the Agent and each Bank to appear in any court
conducting any such proceeding during such 60 day period to preserve, protect
and defend their rights under this Agreement and the other Credit Documents);
or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of any of the Borrower or
Parent; or any of the Borrower or Parent commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to any of the Borrower or Parent;
or there is commenced against any of the Borrower or Parent any such proceeding
which remains undismissed for a period of 60 days; or any of the Borrower or
Parent is adjudicated insolvent or bankrupt, or any order of relief or other
order approving any such case or proceeding is entered; or any of the Borrower
or Parent suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or of the Borrower or Parent makes a general assignment for
the benefit of creditors; or any action is taken by any of the Borrower or
Parent for the purpose of effecting any of the foregoing; or
9.6 ERISA.
Any Plan shall fail to maintain the minimum funding standard
required for any plan year or part thereof or a waiver of such standard or
extension of any amortization period is sought or granted under Section 412 of
the Code; any Plan is, shall have been or is likely to be terminated or the
subject of a termination proceeding under ERISA; any Plan shall have an
Unfunded Current Liability, or the Borrower or any ERISA Affiliates has
incurred or is likely to incur a liability to or on account of a Plan under
Sections 502(c), (i) or (l), 515, 4062, 4063, 4064, 4071, 4201 or 4204 of ERISA
or Chapter 43 of the Code; and there shall result from any such event or events
the imposition of a Lien upon or the granting of a security interest in the
assets of the Borrower, or a liability or a material risk of incurring a
liability to the PBGC or a Plan or a trustee appointed under ERISA, which will
have a material adverse effect upon the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower; or
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9.7 FAILURE OF CREDIT DOCUMENTS.
The Pledge and Security Agreement or any provision thereof
shall cease to be in full force and effect for any reason other than the
satisfaction in full of all Obligations and the termination of this Agreement,
or is declared to be null and void, or shall cease to give the Agent for the
benefit of the Banks the Liens, rights, powers and privileges purported to be
created thereby; or any Credit Party party to the Pledge and Security Agreement
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant thereto; or any
Credit Party party to the Pledge and Security Agreement denies that it has any
further liability or obligations thereunder or gives notice to such effect; or
there shall not exist in favor of the Agent for the benefit of the Banks a
first priority Lien in any of the rights or property of the Borrower purported
to be encumbered under the Pledge and Security Agreement; or
9.8 CHANGE OF CONTROL. .
The Borrower shall cease to be Wholly-Owned Subsidiary of
Parent; or
9.9 JUDGMENTS.
One or more judgments, decrees or arbitration awards shall be
entered against the Borrower involving in the aggregate for the Borrower a
liability (not paid or fully covered by insurance) of $250,000 or more, and all
such judgments, decrees or awards shall not have been vacated, discharged or
stayed or bonded pending appeal within 60 days after the entry thereof; or
9.10 SWAP DEFAULT.
A Collar Event of Default shall have occurred or the Borrower
shall have otherwise defaulted beyond the applicable cure period, if any, under
the Collar Documents:
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent, upon the written request of
Required Banks, shall by written notice to the Borrower (provided, that, if an
Event of Default specified in subsection 9.5 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Agent to the Borrower as hereafter shall occur automatically without the giving
of any such notice) declare the principal of and any accrued interest in
respect of all Loans and the Notes and all obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower, and the obligation of each Bank to make any
Loan shall thereupon terminate.
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ARTICLE X
THE AGENT
10.1 APPOINTMENT.
The Banks hereby designate BTCo as the Agent (for purposes of
this Article X, the term "Agent" shall include BTCo in its capacity as the
Agent pursuant to any Credit Document) to act as specified herein and in the
other Credit Documents. Each Bank hereby irrevocably authorizes, and each
holder of any Note by the acceptance of such Note shall be deemed irrevocably
to authorize, the Agent to take such action on its behalf under the provisions
of this Agreement, the other Credit Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof and such other powers
as are reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its officers, directors, agents or employees.
10.2 NATURE OF DUTIES.
The Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and the other Credit Documents.
Neither the Agent nor any of its officers, directors, agents or employees shall
be liable for any action taken or omitted by it or them hereunder or under any
other Credit Document or in connection herewith or therewith, unless caused by
its or their gross negligence or willful misconduct. The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not have by
reason of this Agreement or any other Credit Document a fiduciary relationship
in respect of any Bank or the holder of any Note; and nothing in this Agreement
or any other Credit Document, expressed or implied, is intended to or shall be
so construed as to impose upon the Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein.
10.3 LACK OF RELIANCE ON THE AGENT.
Independently and without reliance upon the Agent, each Bank
and the holder of each Note, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Borrower and the other Credit Parties in
connection with the making and the continuance of the Loans and the taking or
not taking of any action in connection herewith and (ii) its own appraisal of
the creditworthiness of the Borrower and the other Credit Parties and, except
as expressly provided in this Agreement, the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or
at any time or times thereafter. The Agent shall not be responsible to any Bank
or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution,
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effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of the Borrower or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or the
financial condition of the Borrower or the existence or possible existence of
any Default or Event of Default.
10.4 CERTAIN RIGHTS OF THE AGENT.
If the Agent shall request instructions from Required Banks
with respect to any act or action (including failure to act) in connection with
this Agreement or any other Credit Document, the Agent shall be entitled to
refrain from such act or taking such action unless and until the Agent shall
have received instructions from Required Banks; and the Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Bank or the holder of any Note shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder or under any other Credit Document in accordance with the
instructions of Required Banks.
10.5 RELIANCE.
The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by any Person that
the Agent believed to be the proper Person, and, with respect to all legal
matters pertaining to this Agreement and any other Credit Document and its
duties hereunder and thereunder, upon advice of counsel selected by it.
10.6 INDEMNIFICATION.
To the extent the Agent is not reimbursed and indemnified by
the Borrower, the Banks will reimburse and indemnify the Agent, in proportion
to their respective proportionate shares of the aggregate amount of the
Commitments as of the date of determination, for and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses or disbursements of whatsoever kind or nature
which may be imposed on, asserted against or incurred by the Agent in
performing its duties hereunder or under any other Credit Document, or in any
way relating to or arising out of this Agreement or any other Credit Document;
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgment, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct.
10.7 THE AGENT IN ITS INDIVIDUAL CAPACITY.
With respect to its obligation to maintain and make Loans
under this Agreement, the Agent shall have the rights and powers specified
herein for a "Bank" and
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may exercise the same rights and powers as though it were not performing the
duties specified herein; and the term "Banks," "Required Banks," "holders of
Notes" or any similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, and generally engage in any kind of banking,
trust or other business with the Borrower, any Credit Party or any other
Affiliate of the Borrower as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Borrower and the
other Credit Parties for services in connection with this Agreement and the
other Credit Documents and otherwise without having to account for the same to
the Banks.
10.8 HOLDERS.
The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person who,
at the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
10.9 RESIGNATION BY THE AGENT.
(A) The Agent may resign from the performance of all
its functions and duties hereunder and/or under the other Credit Documents at
any time by giving 15 Business Days prior written notice to the Borrower and
the Banks. Such resignation shall take effect upon the appointment of a
successor Agent pursuant to clauses (b) and (c) below or as otherwise provided
below.
(B) Upon any such notice of resignation, the Banks
shall appoint a successor Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrower.
(C) If no successor Agent has been appointed pursuant
to clause (b) above by the 20th Business Day after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Banks shall thereafter perform all the duties of the Agent
hereunder and/or under any other Credit Documents until such time, if any, as
the Banks appoint a successor Agent as provided above.
10.10 CREDIT DOCUMENTS.
Each Bank hereby authorizes the Agent to enter into the
Pledge and Security Agreement on behalf of and for the benefit of that Bank.
Each Bank hereby acknowledges and consents to and agrees to be bound by the
terms of the Pledge and Security Agreement and hereby authorizes and empowers
the Agent to take all actions under, and to act on behalf of and for the
benefit of that Bank for all purposes under, the Pledge and Security Agreement;
provided, however, that the Agent shall not enter into
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or consent to any amendment, modification, termination or waiver of any
provisions contained in the Pledge and Security Agreement without the prior
consent of the Banks. Each Bank agrees that no Bank shall have any right
individually to enforce or realize on the security granted by the Pledge and
Security Agreement, it being understood and agreed that such rights and
remedies may be exercised by the Agent for the benefit of the Banks and the
Agent upon the terms and conditions set forth in the Pledge and Security
Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 PAYMENT OF EXPENSES, ETC.
The Borrower shall: (i) whether or not the transactions
herein contemplated are consummated, pay all reasonable out-of-pocket costs and
expenses (x) of the Agent (including, without limitation, the reasonable fees
and disbursements of O'Melveny & Myers LLP, special counsel to the Agent) in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents and the documents and instruments referred to herein
and therein and any amendment, waiver or consent relating hereto or thereto and
(y) of the Agent and each of the Banks in connection with the enforcement of
this Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable
fees and disbursements of O'Melveny & Myers LLP, special counsel to the Agent,
and for each of the Banks) and (z) of any consultants or accountants chosen by
Required Banks, to investigate, test or review such matters relating to the
Borrower and its Subsidiaries as the Agent shall designate; provided that the
fees of such consultants or accountants shall be subject to the prior approval
of the Borrower, which approval shall not be unreasonably withheld; (ii) pay
and hold each of the Banks harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save each of the Banks harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to such Bank) to pay such taxes; and (iii) indemnify the Agent and
each Bank, its officers, directors, employees, representatives and agents from
and hold each of them harmless against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs, expenses
and disbursements incurred by any of them as a result of, or arising out of, or
in any way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not the Agent or any Bank is a party thereto) related to
the entering into and/or performance of this Agreement or any other Credit
Document or the use of the proceeds of any Loans hereunder or the consummation
of any transactions contemplated herein or in any other Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such liabilities, obligations, losses, etc., to
the extent incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified).
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11.2 RIGHT OF SETOFF.
In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of an Event of Default, each Bank is hereby authorized at
any time or from time to time, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply (x) any
and all deposits (general or special) of the Borrower, (y) any other
Indebtedness at any time held or owing by such Bank (including without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of the Borrower and (z) any marketable securities
owned by the Borrower and held by such Bank and, in the case of BTCo, any
obligations of BTCo to the Borrower under the Collar Documents, against and on
account of the Obligations and liabilities of the Borrower to such Bank under
this Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Bank pursuant to
subsection 11.6(b), and all other claims of any nature or description arising
out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not such Bank shall have made any demand hereunder
and although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
11.3 NOTICES.
Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
telegraphic, telex, telecopier or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to the Borrower, at its address
specified opposite its signature below; if to any Bank, at its office specified
opposite its signature below; and if to the Agent, at its Notice Office; or, as
to the Borrower or the Agent, at such other address as shall be designated by
such party in a written notice to the other parties hereto and, as to each
other party, at such other address as shall be designated by such party in a
written notice to the Borrower and the Agent. All such notices and
communications shall, when mailed, telegraphed, telexed, telecopied, or cabled
or sent by overnight courier, be effective when deposited in the mails,
delivered to the telegraph company, cable company or overnight courier, as the
case may be, or sent by telex or telecopier, except that notices and
communications to the Agent shall not be effective until received by the Agent.
11.4 BENEFIT OF AGREEMENT.
(A) This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto; provided, however, that the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of each Bank.
(B) BTCo may assign its rights and delegate its
obligations under this Agreement, and each of such assignees shall be deemed to
be a "Bank" and may further
40
<PAGE> 46
assign its rights and delegate its obligations under this Agreement upon the
prior written consent of the Agent and the Borrower (which consents shall not
be unreasonably withheld). Each Bank further may sell participations in all or
any part of any Loan made by it or any other interest herein or in its Note to
another bank or other entity. Thereupon (i) in the case of an assignment, upon
notice thereof by such Bank to the Borrower and the Agent, the assignee shall
have, to the extent of such assignment (unless otherwise provided thereby), the
same rights and benefits as it would have if it were a Bank hereunder and the
holder of a Note and, if the assignee has expressly assumed, for the benefit of
the Borrower, the assignor Bank's obligations hereunder, such assignor Bank
shall be relieved of its obligations hereunder to the extent of such assignment
and assumption, and (ii) in the case of a participation, (A) the participant
shall not have any rights under this Agreement or any Note or any other
document delivered in connection herewith and all amounts payable by the
Borrower under subsections 2.4, 2.6, 2.7(g) and 4.3 hereof shall be determined
as if the Bank had not sold such participation and (B) the participant, other
than an Affiliate of such Bank, shall not be entitled to require such Bank to
take or omit to take any action hereunder except action directly affecting the
extension of the final maturity of the principal amount of a Loan or the
Commitments or a reduction of the principal amount of or the decrease in the
rate of interest payable on the Loans or any fees related thereto. At the time
any Bank makes an assignment of any of its rights hereunder, such assignor Bank
shall pay to the Agent for its own account an administrative transfer fee of
$3,500. Any Bank may furnish any information concerning the Borrower in the
possession of such Bank from time to time to Affiliates of such Bank and to
assignees and participants (including prospective assignees and participants);
provided, however, that the furnishing of such information (and the nature,
manner and extent thereof) by any Bank to its Affiliates and such assignees and
participants shall be governed by the relevant agreement, assignment or
participation agreement relating to such arrangement, assignment or
participation, as the case may be. Notwithstanding the foregoing provisions of
this subsection 11.4 to the contrary, each Bank may at any time pledge or
assign any portion of its rights under this Agreement and its Note to any
Federal Reserve Bank without notice to or consent of the Borrower or the Agent
and without the payment of any fee to the Agent; provided that no such pledge
or assignment shall otherwise release such Bank from its obligations hereunder.
11.5 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Bank or
the holder of any Note in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between the Borrower
and the Agent or any Bank or the holder of any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which the Agent or any Bank or the holder of any
Note would otherwise have. No notice to or demand on the Borrower in any case
shall entitle the
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Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or any Bank or
the holder of any Note to any other or further action in any circumstances
without notice or demand.
11.6 PAYMENTS PRO RATA.
(a) The Agent agrees that promptly after its receipt of
each payment from or on behalf of the Borrower in respect of any Obligations of
the Borrower hereunder, it shall distribute such payment to the Banks pro rata
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Each of the Banks agrees that, if it should receive
any amount hereunder (whether by voluntary payment, by realization upon
security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, by the enforcement of any right under the Credit
Documents, or otherwise), which is applicable to the payment of the principal
of, or interest on, the Loans, of a sum which with respect to the related sum
or sums received by other Banks is in a greater proportion than the total
amount of such Obligation then owed and due to such Bank bears to the total
amount of such Obligation then owed and due to all of the Banks immediately
prior to such receipt, then such Bank receiving such excess payment shall
purchase for cash without recourse or warranty from the other Banks an interest
in the Obligations of the Borrower to such Banks in such amount as shall result
in a proportional participation by all the Banks in such amount; provided,
however, that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
11.7 CALCULATIONS; COMPUTATIONS.
The financial statements to be furnished to the Banks
pursuant hereto shall be made and prepared in accordance with generally
accepted accounting principles in the United States consistently applied
throughout the periods involved (except as set forth in the notes thereto or as
otherwise disclosed in writing by the Borrower to the Banks); provided that,
except as otherwise specifically provided herein, all computations determining
compliance with Article VIII shall utilize accounting principles and policies
in conformity with those used to prepare the historical financial statements
delivered to the Banks pursuant to subsection 6.5.
11.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS;
GOVERNING LAW; WAIVER OF JURY TRIAL.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY
OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
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EXECUTING AND DELIVERING THIS AGREEMENT, THE BORROWER, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SUBSECTION 11.3; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE
(III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE BORROWER IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT THE BANKS RETAIN THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES
THAT THE PROVISIONS OF THIS SUBSECTION 11.8 RELATING TO JURISDICTION AND VENUE
SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW
YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE. EACH OF THE PARTIES
TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR
ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP
THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 11.9 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
CREDIT DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
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11.9 COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts by facsimile or
otherwise, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set
of counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
11.10 HEADINGS DESCRIPTIVE.
The headings of the several sections and subsections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
11.11 AMENDMENT OR WAIVER.
No approval, consent, amendment or waiver of this Agreement
or any of the Credit Documents shall be effective unless it is in writing
signed by the Agent and Required Banks; provided, however, that any such
approval, consent, amendment or waiver, which (a) reduces the amount of any
interest, principal or fees owing to any Bank hereunder, including, without
limitation, amounts payable under subsection 3.1; (b) extends the date on which
any sum is due hereunder; (c) releases any Person from all or any portion of
its liabilities under any Credit Document; (d) amends any provisions of this
subsection 11.11; (e) changes the definition of the term "Required Banks"; or
(f) by the terms of any provision of this Agreement requires the approval of
all the Banks shall be effective only if it is in writing signed by all the
Banks.
11.12 SURVIVAL.
All indemnities set forth herein including, without
limitation, in subsections 2.4, 10.6 and 11.1 shall survive the execution and
delivery of this Agreement and the Notes and the making and repayment of the
Loans.
11.13 DOMICILE OF LOANS.
Each Bank may transfer and carry its Loans at, to or for the
account of any office, Subsidiary or Affiliate of such Bank.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
ST. JOE CAPITAL I, INC.
By
----------------------------------
Name: David F. Childers III
Title: President
Notice Address:
St. Joe Capital I, Inc.
c/o
Griffin Corporate Services
300 Delaware Avenue
9th Floor
Wilmington, Delaware 19801
Attention: Kurt Krahnke
Facsimile: (302) 552-3128
With a copy to:
DuPont Center
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
Attention: David F. Childers III
Facsimile: (904) 396-4042
Telephone: (904) 858-5209
S-1
<PAGE> 51
BANKERS TRUST COMPANY,
Individually and as Agent
By
-----------------------------------
Name:
Title:
Notice Address:
One Bankers Trust Plaza
25th Floor
New York, New York 10006
Attention: Howard Guja
Facsimile: (212) 669-0752
With a copy to:
Lending Office:
Bankers Trust Co.
One Bankers Trust Plaza
25th Floor
New York, New York 10006
Attention: Credit Officer
Facsimile: (212) 669-0752
<PAGE> 1
EXHIBIT 3.03
AMENDED AND RESTATED BY-LAWS
OF
THE ST. JOE COMPANY
ARTICLE I - SHARES
1. Certificates for Shares. The shares of the Company shall be
certificated. Certificates shall be signed by the Chairman or the President and
the Secretary of the Company and may be sealed with the seal of the Company or a
facsimile thereof. The signatures of the officers of the Company upon a
certificate may be facsimiles if the certificate is countersigned by the
transfer agent and registrar, provided that the Company is not the transfer
agent and registrar.
2. Transfer of Shares. Transfers of shares of stock shall be made only
on the books of the Company, in person or by attorney, upon surrender of the
certificate evidencing the shares sought to be transferred, properly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer. The certificate so surrendered shall be canceled as and when the new
certificate or certificates are issued.
ARTICLE II - SHAREHOLDERS
1. Annual Meeting.
(a) The Annual Meeting of the Shareholders of this Company
shall be held on the second Tuesday in May of each year. The Annual Meeting
shall be held in Jacksonville, Florida, unless the Board of Directors designates
another place in or out of the State of Florida.
(b) The only business that may be brought before the Annual
Meeting is (i) business described in the Notice of Annual Meeting; (ii) other
business that the
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Board brings before the meeting; and (iii) business that an eligible
Shareholder brings before the meeting in compliance with this Section.
(c) A Shareholder may bring business before an Annual Meeting
only if the Shareholder (i) gives the notice required by this Section; and (ii)
is a Shareholder of record both on the date the notice is given and on the
record date for determining Shareholders entitled to vote at the Annual Meeting
at which the Shareholder intends to bring the business before the Shareholders.
(d) An eligible Shareholder may bring business before an
Annual Meeting only if the Shareholder gives notice of intent to bring the
business before the meeting to the Secretary. The notice must be (i) in writing;
(ii) delivered or mailed to the Secretary at the principal executive office of
the Company; (iii) timely; and (iv) in proper form.
(e) A notice of intent is timely if it is actually received at
the Secretary's office not less than 120 days nor more than 150 days before the
anniversary of the date of the Notice of Annual Meeting and Proxy Statement for
the immediately preceding year. If an Annual Meeting is called for a date that
is more than 30 days before or after the anniversary date of the previous Annual
Meeting, the notice of intent must be received not more than 10 business days
after (i) the date of the Company's Notice of the Annual Meeting; or (ii) the
date the Company publicly discloses the date of that Annual Meeting, whichever
is first.
(f) A notice of intent is in proper form only if it states,
with respect to each item of business that the Shareholder proposes to bring
before the meeting:
(i) the Shareholder's name and address of record;
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<PAGE> 3
(ii) the number of shares of the Company's stock the
Shareholder owns beneficially and of record as of the date of
the notice; and
(iii) all other information relating to the
Shareholder that the Company would be required to disclose
pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated under it.
(g) The Chairman may declare any item of business a
Shareholder seeks to bring before an Annual Meeting out of order if the
Shareholder has not complied with the provisions of this Section, or applicable
law.
2. Special Meetings. Special meetings of the Shareholders may be called
at any time by resolution of the Board of Directors. Special meetings shall be
called for any purpose upon written request by holders of record of at least 30%
of the Company's issued and outstanding stock both on the date the Special
Meeting is requested and on the record date for determining Shareholders
entitled to vote at a Special Meeting. Special Meetings may be held at any place
in or out of the State of Florida. The only business that may be conducted at a
Special Meeting of Shareholders is business described in the notice of the
meeting.
3. Notice of Meeting. Notice of Shareholders' meetings of the Company
shall be in writing and signed by the Chairman, the President or a Senior Vice
President or a Vice President or the Secretary or an Assistant Secretary of the
Company. Such notice shall state the purpose or purposes for which the meeting
is called; and the time and place where it is to be held. A copy of such notice
shall be served upon or mailed to each Shareholder of record entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before such
meeting. If mailed, it shall be directed to the
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Shareholder at his or her address as it appears upon the records of the Company.
Notice duly served upon or mailed to a Shareholder in accordance with the
provisions of this by-law shall be deemed sufficient, and in the event of the
transfer of his or her stock after such service and prior to the holding of the
meeting, it shall not be necessary to serve notice of the meeting upon the
transferee. Any meeting of Shareholders may be held either within or without the
State of Florida. Any Shareholder may waive notice of any meeting either before,
at or after the meeting.
4. Quorum. A quorum at any meeting of the Shareholders shall consist of
a majority of the stock of the Company represented in person or by proxy, and a
majority of such quorum shall decide any question that may properly come before
the meeting.
5. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the shareholders may be taken without a meeting, without
prior notice, and without a vote if the action is taken by the holders of a
majority of the Company's issued and outstanding stock or such other percentage
as may be required by applicable law. In order to be effective, the action must
be evidenced by one or more written consents describing the action taken, dated
and signed by approving shareholders having the requisite number of votes, and
delivered to the Secretary at the Company's principal office in Florida. No
written consent shall be effective to take corporate action unless, within sixty
(60) days of the date of the earliest dated consent delivered in the manner
required by this section, written consents signed by the number of holders
required to take action are delivered to the Company. Any written consent may be
revoked before the date that the Company receives the required number of
consents to authorize the proposed action. Within ten (10) days after obtaining
authorization by written consent,
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<PAGE> 5
notice must be given to those shareholders who have not consented in writing or
who are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action.
ARTICLE III - DIRECTORS
1. General Powers; Number. The business and property of the Company
shall be managed under the direction of a Board of not less than nine nor more
than fifteen Directors, the number to be determined by the Board of Directors of
the Company. The Board of Directors shall have full control over the affairs of
the Company and shall be authorized to exercise all of its corporate powers
unless otherwise provided in these by-laws. The Directors shall be elected at
the Annual Meeting of the Shareholders by a plurality of the votes cast at such
election, for the term of one year, and shall serve until the election and
acceptance of their duly qualified successors.
2. Vacancies. Vacancies in the Board of Directors shall be filled by
majority vote of the remaining Directors. A majority of the full Board between
Annual Meetings may increase the number of Directors and elect Directors to the
Board. Any additional service by a Director elected in this manner shall be
subject to election at the next annual meeting of Shareholders.
3. Chairman of the Board. A Chairman of the Board of Directors shall be
selected, who shall be considered an officer of the Company.
4. Regular Meeting. A regular meeting of the Board of Directors shall
be held immediately upon adjournment of the Annual Meeting of the Shareholders
each year at the place where the Annual Meeting of the Shareholders is held that
year.
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<PAGE> 6
5. Special Meetings. Special meetings of the Board of Directors may be
held in or out of the State of Florida, and can be called at any time or place
by the Chairman of the Board of Directors or by any three members of the Board.
Notice of the meeting, stating a place, date, and hour, shall be given to each
Director by mail not less than three days before the date of the meeting.
Alternatively, notice may be given personally to each Director or by telephone,
telegram, facsimile, telecopy, fax, or similar means of communication not less
than twenty-four hours before the date of the meeting. Emergency meetings may be
convened on such shorter notice as the Chairman or Board members calling the
meeting deem necessary and appropriate under the circumstances. A special
meeting may be held at any time or place without notice by unanimous written
consent of all Directors or the presence of all Directors at such meeting.
6. Committees of the Board. The Board of Directors, by resolution
adopted by a majority of the full Board, may establish from among its members
one or more committees. As allowed by general law and as provided in the
resolution establishing the committee, each committee shall have and may
exercise the powers and authority delegated to it by the Board of Directors to
manage the business affairs of the Company.
Each committee must have three or more members who will serve at the
pleasure of the Board of Directors. The Board, by resolution, may also designate
one or more Directors as alternate members of any committee.
The Board of Directors shall prescribe the manner in which committee
proceedings shall be conducted. Unless the Board otherwise provides, regular and
special meetings and other actions of any committee shall be governed by the
provisions of these by-laws applicable to meetings and actions of the Board of
Directors. Each
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<PAGE> 7
committee shall keep minutes of meetings, copies of which shall be furnished to
all Directors. Each committee shall report all actions to the Board of
Directors.
7. Quorum. A quorum at any meeting shall consist of a majority of the
Board. A majority of such quorum shall decide any questions that may come before
the meeting. If at any meeting less than a quorum is present, the Directors
present, or a majority of them, may adjourn the meeting to another time and/or
place.
8. Indemnification of Directors and Officers. The Company shall
indemnify and reimburse and advance expenses for each Director and officer,
whether or not then in office, and his or her executor, administrator and heirs,
and may indemnify and reimburse and advance expenses to employees and agents of
the Company, 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, officer, employee or agent of the Company or that he or she
was serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise.
9. Meetings by Means of Conference Telephone Call or Similar
Communications Equipment. Meetings of the Board of Directors or committees of
the Board may be held by means of a telephone conference call or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation by such means constitutes presence by
such person at a meeting.
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<PAGE> 8
10. Nomination of Directors.
(a) A person is eligible to be elected to the Board of
Directors only if the person is nominated as provided in this Section.
(b) A person may be nominated at any Annual Meeting of
Shareholders, or at any Special Meeting of Shareholders called for the purpose
of electing directors.
(c) A person may only be nominated (i) by the Board of
Directors; or (ii) by a Shareholder (A) who has given the notice required by
this Section; and (B) who is a shareholder of record both on the date the notice
is given and on the record date for determining Shareholders entitled to vote at
the meeting at which the Shareholder will make the nomination.
(d) A Shareholder may make a nomination only if the
Shareholder gives notice of intent to make a nomination to the Secretary. The
notice must be (i) in writing; (ii) delivered or mailed to the Secretary at the
principal executive office of the Company; (iii) timely; and (iv) in proper
form.
(e) A notice of intent is timely only if it is actually
received at the Secretary's office within the applicable time specified below:
(i) If the Shareholder intends to make a nomination
at an Annual Meeting of Shareholders, the notice of intent
must be received not less than 90 days before the anniversary
of the date of the Notice of the Annual Meeting and Proxy
Statement for the immediately preceding year. If an Annual
Meeting is called for a date that is more than 30 days before
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<PAGE> 9
or after the anniversary date of the previous Annual Meeting,
the notice of intent must be received not more than 10
business days after (A) the date of the Notice of the Annual
Meeting, or (B) the date the Company publicly discloses the
date of that Annual Meeting, whichever is first.
(ii) If the Shareholder intends to make a nomination
at a Special Meeting of Shareholders called for the purpose of
electing directors, the notice of intent must be received not
more than 10 days after the date on which the Company mails
notice of the Special Meeting to Shareholders or the date the
Company publicly disclosed the date of the Special Meeting of
Shareholders, whichever is first.
(f) A notice of intent is in proper form only if it
(i) states as to the Shareholder giving the notice:
(A) the Shareholder's name and address of
record;
(B) the number of shares of the Company's
stock the Shareholder owns beneficially and of record
as of the date of the notice;
(C) a description of all arrangements or
understandings between the Shareholder and each
proposed nominee and with any other person or persons
(including their names) under which the Shareholder
is acting in making the nomination;
(D) a representation that the Shareholder
intends to appear in person at the meeting to
nominate the persons named in the notice; and
9
<PAGE> 10
(E) all other information relating to the
Shareholder that the Company would be required to
disclose in a proxy statement or other filing
required in soliciting proxies for election of
directors under Section 14 of the Exchange Act and
the rules and regulations promulgated under it; and
(ii) states as to each person whom the Shareholder
proposes to nominate for election as a director:
(A) the person's name, age, business address
and residence address;
(B) the person's principal occupation or
employment;
(C) the number of shares of the Company's
stock the person owns beneficially and of record on
the date of the notice; and
(D) all other information about the person
that the Company would be required to disclose in a
proxy statement or other filing in soliciting proxies
for election of directors under Section 14 of the
Exchange Act, and the rules and regulations
promulgated under it.
(g) A nomination is not valid unless it is made in accordance
with the foregoing procedures.
ARTICLE IV - OFFICERS
1. Officers. The officers of the Company shall be a Chairman of the
Board of Directors and Chief Executive Officer, a President and Chief Operating
Officer, one or
10
<PAGE> 11
more Senior Vice Presidents and Vice Presidents, a Secretary and
one or more Assistant Secretaries, a Treasurer and one or more Assistant
Treasurers, and a Controller. Any person may hold two or more offices except
that the Chairman of the Board of Directors shall not be also the Secretary or
an Assistant Secretary of the Company. The Board of Directors shall appoint all
officers of the Company, and shall approve the compensation of the Chairman and
Chief Executive Officer, President and Senior Vice Presidents of the Company.
The Chairman and Chief Executive Officer shall have the authority to appoint all
officers of the Company's subsidiaries.
2. Chairman and Chief Executive Officer. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Company, and subject to
the control of the Board of Directors, shall supervise, control and manage all
the business affairs of the Company. The Chairman shall preside at all meetings
of the Shareholders and the Board of Directors. In addition, the Chairman shall
possess and may exercise the powers and authority, and perform the duties that
are assigned to him or her by the Board of Directors. The Chairman may delegate
any of his or her powers to any other officer of the Company, subject to the
Chairman's overall supervision and responsibility.
3. President. The President shall report and be responsible to the
Chairman of the Board of Directors. The President shall have the powers and
perform the duties that are assigned or delegated to him or her by the Board of
Directors or the Chairman.
During the absence or disability of the Chairman, or at the request of
the Chairman, the President shall perform the duties and exercise the powers of
the Chairman. In the absence or disability of both the Chairman and the
President, the Senior Vice President or Vice President designated by the
Chairman, or if no one is designated
11
<PAGE> 12
by the Chairman, the Senior Vice President or Vice President designated by the
Board of Directors shall perform the duties and exercise the powers of the
Chairman.
4. Senior Vice President and Vice Presidents. Senior Vice Presidents
and Vice Presidents shall have the powers and perform the duties that are
assigned or delegated to them by the Board of Directors or the Chairman.
5. Secretary. The Secretary shall keep the minutes of all meetings;
shall have charge of the seal and the corporate books; shall execute with the
President, Senior Vice President or Vice President such instruments as require
such signatures; and shall make such reports and perform such other duties as
are incident to his or her office, or are properly required of him or her by the
Board of Directors. The Chairman may appoint one or more Assistant Secretaries,
and in the absence, disqualification or disability of the Secretary, any such
Assistant Secretary shall exercise the functions of the Secretary.
6. Treasurer. The Treasurer shall have the custody of all moneys and
securities of the Company and shall keep regular books of account under the
direction of the Board of Directors or the Chairman. He or she shall deposit all
funds and moneys of the Company in banks to be designated by the Board of
Directors or the Chairman, and shall perform such other duties as may be
required of him or her by the Board of Directors or the Chairman. The Board of
Directors may appoint one or more Assistant Treasurers, and in the absence,
disqualification or disability of the Treasurer, or at his or her direction, any
such Assistant Treasurer shall exercise the functions of the Treasurer.
7. Controller. The Controller shall maintain adequate records of all
assets, liabilities, and transactions of the Company, shall see that adequate
audits thereof are currently and regularly made, and, in conjunction with other
officers and department
12
<PAGE> 13
heads, shall initiate and enforce measures and procedures whereby the business
of the Company shall be conducted with the maximum safety, efficiency, and
economy. He or she shall attend such meetings of the Directors and Shareholders
of the Company and shall make such reports to the Chairman, the President and
the Board of Directors as the Chairman, the President or the Board of Directors
may prescribe, and shall perform such other duties as may be required of him or
her by the Board of Directors or Chairman.
8. Removal of Officers. Any officer of the Company may be removed from
his or her respective office or position at any time, with or without cause, by
the Chairman or the Board of Directors. The Chairman may be removed, with or
without cause, by the Board of Directors.
9. Other Officers and Employees. Each officer and employee of the
Company shall possess and may exercise authority, and shall perform duties that
are assigned to him or her by the Board of Directors or the Chairman and Chief
Executive Officer.
ARTICLE V - GENERAL PROVISIONS
1. Dividends. Dividends shall be declared only at such times and in
such amounts as the Board of Directors shall direct.
2. Seal. The corporate seal of the Company shall consist of two
concentric circles, between which is the following: "THE ST. JOE COMPANY", and
in the center shall be inscribed "Seal - Incorporated 1936."
13
<PAGE> 14
ARTICLE VI - AMENDMENTS
1. Amendments. These by-laws may be amended or repealed and new by-laws
adopted at any meeting of the Board of Directors by a majority vote. The fact
that the power to amend or repeal the by-laws has been conferred upon the Board
of Directors shall not divest the Shareholders of the same power.
Adopted by the Board of Directors this 23rd day of February, 1999.
14
<PAGE> 1
EXHIBIT 10.06
THE ST. JOE COMPANY
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32201-1380
January 27, 1999
Mr. Kevin M. Twomey
1601 Emerald Bay PERSONAL & CONFIDENTIAL
Laguna Beach, CA 91108
Dear Kevin:
The St. Joe Company (the "Company") is pleased to offer you employment
on the following terms.
1. Position. You will serve in a full-time capacity as President and Chief
Financial Officer for St. Joe and its wholly owned subsidiaries. You
will report directly to Peter S. Rummell. Your duties will include
those as assigned by the Chief Executive Officer.
2. Salary. You will be paid a salary at the annual rate of $450,000 (the
"Base Salary"), payable in accordance with the Company's standard
payroll practices for salaried employees. This salary will be subject
to reevaluation on each April 1, commencing April 1, 2000. It may be
increased but not reduced during your employment, pursuant to the
Company's employee compensation policies in effect from time to time.
You will also receive a car allowance of $1,000 per month (gross) in
addition to your base salary. This allowance constitutes the full and
complete reimbursement of all car expenses by the Company. This
allowance will not be included as wages in the calculation of any
benefits or compensation plans.
3. Bonus. You will be eligible to participate in the Company's annual
discretionary bonus plan,
<PAGE> 2
Page 2
which is based on overall Company performance, Division performance and
individual performance for the calendar year with an award range of 0%
to 75% of your Base Salary. This award range will not be reduced during
your employment with the Company.
4. Stock Options. Subject to the approval of the Company's Board of
Directors, you will be granted a nonstatutory option to purchase
500,000 shares of the Company's Common Stock. The exercise price per
share will be equal to the closing price on the date previous to the
date the Committee grants the option. Twenty percent of the option
shares vest on the first anniversary of the vesting commencement date
(February 12, 1999) and an additional twenty percent will vest on each
subsequent anniversary of the vesting commencement date. The option
will have a 10-year term.
5. Restricted Stock. Subject to the approval of the Company's Board of
Directors, you will be granted 100,000 shares of restricted common
stock. Forty percent of the restricted shares vest on the second
anniversary of the vesting commencement date (February 12, 1999) and an
additional twenty percent of the restricted shares will vest on each
subsequent anniversary of the vesting commencement date. Except as
provided below, any non-vested Restricted Shares automatically revert
to the Company (without any payment) when your service as an employee
of the Company or a subsidiary of the Company terminates.
6. Effect of Change in Control, Termination, Disability or Death. In the
event of a change in
<PAGE> 3
Page 3
control of the Company as defined in Exhibit A (attached) or a
termination of Employee's employment without cause, or disability, or
upon Employee's death, subject to Section 13 and 14 herein, the vesting
of the nonstatutory stock option and restricted stock will accelerate,
and Employee will be owner and holder of such stock option and
restricted stock without restrictions. In the event of the involuntary
termination of Employee's employment for cause as set forth in Section
12 herein, or the Employee's voluntary termination of his employment,
all of the nonstatutory stock options and restricted stock that had not
vested in Employee at that time will lapse, and Employee will have no
right in same. All of the option shares will be registered under the
Securities Act of 1933 on or before the date when the first installment
of the option vests.
7. Stock Options Plans. The terms of the St. Joe Company 1997 and/or 1998
Stock Incentive Plans shall apply to this Agreement, and shall control
in all instances except where specifically in conflict with the
language of this Agreement in which case the language of this Agreement
shall control.
8. Benefits. You and your family will be eligible for all benefit programs
and perquisites that are offered from time to time to similarly
situated officers of the Company.
9. Expense Reimbursement. You will be eligible for reimbursement of
necessary and reasonable business expenses subject to Company policy.
<PAGE> 4
Page 4
10. Relocation Benefits. Your relocation package will include packing and
shipment of your office and household goods from Laguana Beach,
California to Jacksonville and storage for up to 180 days,
reimbursement of all reasonable and customary expenses associated with
the sale of your primary residence in Laguana Beach and the purchase of
a primary residence in Jacksonville. This includes up to two mortgage
points to "buy down" your mortgage and up to one point in origination
fees. In the event that you purchase a home in Jacksonville prior to
the sale of your home in Laguana Beach the Company will provide you
with an interest free "bridge loan" equivalent to the down payment on
the purchase of your new home. This loan is to be reimbursed upon the
sale of your home in Laguana Beach. You will receive temporary housing
(not including meals and incidentals) in a Company apartment in
Jacksonville through April 30, 1999. This date may be extended by the
Company. Prior to shipment of your primary household goods, we will
ship two automobiles from Laguana Beach and a partial shipment of
household goods to Jacksonville. We will provide a rental automobile in
Jacksonville until these cars arrive. You will be entitled to receive
from the Company a gross-up payment equal to all federal and state
taxes imposed on the reimbursement of nondeductible relocation costs
and on the gross-up payment itself. The intent of the preceding
sentence is to hold you harmless, in an after-tax basis, from the tax
impact of all reimbursements of nondeductible relocation costs.
11. Period of Employment. Your employment with the Company will be "at
will," meaning that
<PAGE> 5
Page 5
either you or the Company will be entitled to terminate your employment
at any time and for any reason, with or without cause, upon 30 days'
written notice. Any contrary representations which may have been made
to you are superseded by this offer. Except for other specific
provisions of this Agreement relating to termination, this is the full
and complete Agreement between you and the Company on this term. The
"at will" nature of your employment may only be changed in an express
written agreement signed by you and a duly authorized officer of the
Company.
12. Severance Pay. Notwithstanding Paragraph 11, in the event that the
Company terminates your employment without your consent for any reason
other than cause or disability, you will receive severance pay in a
lump sum in an amount equal to 150% of your Base Salary at the rate in
effect at the time of your termination, plus 50% of the amount of any
bonus awarded you the prior year (in the event that you are terminated
under this paragraph prior to receiving any bonus payment, you will be
entitled to a payment equivalent to 30% of your then current base
salary); less any severance payments under the Company's standard
severance program, provided; however, if you receive or are entitled to
receive payment under a severance agreement with the Company that
provides payments or benefits under a Change in Control then no
payments shall be made to you under this Paragraph 9.
If termination of your employment is subject to this paragraph, the
Company will provide you and your family health insurance coverage,
including, if applicable, COBRA
<PAGE> 6
Page 6
reimbursement and disability insurance coverage under the applicable
Company plans for a period of 12 months following termination or until
you start other full time employment, whichever is earlier. For
purposes of this Agreement, "cause" means gross negligence, misconduct,
non-feasance, a material breach of this Agreement, conviction following
final disposition of any available appeal of a felony, or pleading
guilty or no contest to a felony.
13. Termination Upon Death. In the event of your death during your
employment, this Agreement shall terminate and the Company shall only
be obligated to pay your estate or legal representative the Base Salary
provided for herein to the extent earned by you prior to such event.
However, the Company may pay your estate or legal
representative a bonus which you may have earned prior to your death.
14. Disability. If you are unable to perform the services required of you
as a result of any disability and such disability continues for a
period of 120 or more consecutive days or an aggregate of 180 or more
days during any 12-month period during your employment, the Company
shall have the right, at its option, to terminate your employment.
Unless and until so terminated, during any period of disability during
which you are unable to perform the services required of you, your
salary shall be payable to the extent of, and subject to, Company's
policies and practices then in effect with regard to sick leave and
<PAGE> 7
Page 7
disability benefits.
15. Insurance and Indemnification. The Company will indemnify you for your
actions as a Company employee or officer pursuant to Company policy
and, prior to commencement of your service, will confirm it has in
place adequate insurance coverage acceptable to you for your actions as
a Company employee or officer.
16. Outside Activities. While employed by the Company, you will not engage
in any other employment, or business activity for compensation without
the written consent of the Company. While employed by the Company, you
also will not compete with or assist any person or organization in
competing with the Company, in preparing to compete with the Company,
or in hiring any employees of the Company.
17. Withholding Taxes. All forms of compensation referred to in this
Agreement are subject to reduction to reflect applicable withhold and
payroll taxes.
18. Entire Agreement. This Agreement contains all of the terms of your
employment with the Company and supersedes any prior understandings or
agreements, whether oral or written, between you and the Company.
19. Amendment and Governing Law. This Agreement may only be amended or
modified by
<PAGE> 8
Page 8
an express written agreement signed by you and a duly authorized
officer of the Company. The terms of this Agreement and the resolution
of any disputes will be governed by Florida law.
We hope that you find the foregoing terms acceptable. You may indicate
your agreement with these terms and accept this offer by signing and dating the
enclosed duplicate original of this letter and returning it to me. As required
by law, your employment with the Company is also contingent upon your providing
legal proof of your identity and authorization to work in the United States.
This offer, if not accepted, will expire at the close of business on Monday,
February 1, 1999.
Very truly yours,
THE ST. JOE COMPANY
By:
---------------------------------------
Michael F. Bayer
Vice President - HR and Administration
I have read and accept this employment offer:
- -----------------------------
Signature of Kevin M. Twomey
Dated: , 1999
----------------
<PAGE> 1
EXHIBIT 21.01
The St. Joe Company
Subsidiaries Listing
The St. Joe Company
Florida East Coast Industries, Inc.
Gran Central Corporation
Florida East Coast Railway Company
Advantis Real Estate Services Company
St. Joe Timberland Company
Apalachicola Northern Railroad Company
Talisman Sugar Corporation
St. Joe/Arvida Company, Inc.
St. Joe Real Estate Services, Inc.
St. Joe Capital I (Incorporated in Delaware)
St. Joe Capital II (Incorporated in Delaware)
<PAGE> 2
- - All subsidiaries unless otherwise noted are incorporated in the State of
Florida
<PAGE> 1
EXHIBIT 23.01
Independent Auditors' Consent
The Board of Directors
The St. Joe Company:
We consent to the incorporation by reference in the registration statements (No.
333-23571 and 333-43007) on Form S-8 of The St. Joe Company of our reports dated
February 23, 1999, relating to the consolidated balance sheet of St. Joe Company
and subsidiaries as of December 31, 1998 and 1997, 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, 1998, and related
schedules, which reports appear in the December 31, 1998 annual report on Form
10-K of The St. Joe Company.
KPMG LLP
Jacksonville, Florida
March 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ST. JOE CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 39,108
<SECURITIES> 201,002
<RECEIVABLES> 38,691
<ALLOWANCES> 0
<INVENTORY> 11,006
<CURRENT-ASSETS> 167,324
<PP&E> 626,658
<DEPRECIATION> (261,802)
<TOTAL-ASSETS> 1,604,269
<CURRENT-LIABILITIES> 93,411
<BONDS> 0
0
0
<COMMON> 13,054
<OTHER-SE> 870,243
<TOTAL-LIABILITY-AND-EQUITY> 1,604,269
<SALES> 392,181
<TOTAL-REVENUES> 392,181
<CGS> 332,434
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,238
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 81,429
<INCOME-TAX> 36,179
<INCOME-CONTINUING> 26,132
<DISCONTINUED> 2,706
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,838
<EPS-PRIMARY> 0.317
<EPS-DILUTED> 0.312
</TABLE>
<PAGE> 1
EXHIBIT 99.01
The St. Joe Company
Supplemental Calculation of Selected Consolidated Financial Data
The following table calculates EBITDA (Gross) and EBITDA (Net) as set
forth in Note (9) to Item 6. Selected Consolidated Financial Data.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from continuing and discontinued
operations before income taxes and
minority interest 85,834 94,374 181,715 136,664 91,873
Add back:
Depreciation and amortization 40,340 30,233 28,758 28,551 27,612
Interest expense 804 389 600 2,235 1,982
Less:
Gain on sales of other assets (788) (4,417) (3,423) (2,674) (13,895)
Impairment losses 10,238
Condemnation sales (97,391)
---------------------------------------------------------
EBITDA - Gross 136,428 120,578 110,259 164,776 107,572
---------------------------------------------------------
Less minority interest % of FECI
Income before income taxes (31,261) (28,911) (22,134) (19,574) (25,609)
Depreciation and amortization (13,225) (10,243) (10,813) (10,254) (10,004)
Interest expense (163) (179) (276) (1,028) (912)
Gain on sales of other assets 181 795 1,346 589 1,857
---------------------------------------------------------
EBITDA - Net 91,960 81,149 78,382 134,508 72,905
---------------------------------------------------------
</TABLE>
