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Exhibit 10 (b)
February 10, 2005
PERSONAL AND CONFIDENTIAL
Mr. Robert W. Anestis
c/o Florida East Coast Industries, Inc.
One Malaga Street
St. Augustine, FL 32084
Dear Bob:
The purpose of this letter agreement (the "Agreement") is to
acknowledge, and set forth the terms of,
our agreement with regard to your
termination of employment with Florida East
Coast Industries, Inc. ("FECI") and
its subsidiaries, affiliates successors and
assigns (the "Company").
1. Resignation. (a) You hereby confirm your resignation as Chairman
of
the Board of Directors of FECI (the
"Board") and as a director and an officer of
the Company and your resignation from
employment with the Company (each of the
above being a "Termination" for purposes of
this Agreement), each effective as
of the date of the 2005 annual meeting of
shareholders of FECI or, if earlier,
the earlier of (x) such date as a new Chief
Executive Officer of FECI or
Chairman of the Board of FECI is elected
and commences employment with the
Company or (y) termination of your
employment under the employment agreement
between you and FECI dated as of October
30, 1998, as amended as of March 6,
2003 and as further amended as of February
26, 2004 (the "Employment Agreement")
for any other reason pursuant to its terms
(other than voluntary resignation
without "good reason" or termination for
cause) (the "Termination Date"). The
Termination will be classified as a
termination for good reason for purposes of
the Employment Agreement. In addition,
effective as of the Termination Date, you
hereby confirm your resignation from all
offices, directorship, trusteeships,
committee memberships and fiduciary
capacities held with, or on behalf of, the
Company or any benefit plans of the
Company. On and after the Termination Date,
you will not be eligible for any benefits
or compensation, other than as
specifically provided herein.
(b) During the period between the date hereof and the Termination
Date,
you will continue in all of your current
capacities with the Company, including
as Chairman of the Board of FECI and Chief
Executive Officer of FECI with your
current duties, responsibilities and
authority.
2. Severance Payments and Benefits. Subject to Sections 3, 4 and 5,
you
will be entitled to receive the following
payments and benefits as promptly as
practicable after the Termination Date,
other than those expressly payable on a
deferred or other basis:
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Mr. Robert W. Anestis
February 10, 2005
Page 2
(a) Cash Severance Payments.
(i) A lump sum cash payment equal to the sum of (A) your base
salary through the later of the Termination Date and the scheduled
date
of the 2005 annual meeting of shareholders of FECI to the extent
not
theretofore paid; (B) to the extent not theretofore paid, any
annual
bonus payable to you for any fiscal year completed prior to the
Termination Date; (C) the product of (x) the greater of any
annual
bonus paid or payable, including by reason of any deferral, to you
for
the most recently completed fiscal year, if any, and the
average
annualized
bonus paid or payable, including by reason of any deferral,
to you by the Company in respect of the three fiscal years
immediately
preceding the fiscal year in which the Termination Date occurs
(such
greater amount will be hereinafter referred to as the "Highest
Annual
Bonus") and (y) a fraction, the numerator of which is the number
of
days in the current fiscal year through the later of the
Termination
Date or the scheduled date of the 2005 annual meeting of
shareholders
of FECI, and the denominator of which is 365; (D) any
compensation
previously deferred by you (together with any accrued interest
or
earnings thereon) to the extent not theretofore paid; and (E)
accrued
vacation pay of $119,000, expense reimbursement and any other
entitlements accrued by you under Section 2(b) of the
Employment
Agreement, to the extent not theretofore paid;
(ii) A lump sum in cash equal to two times the sum of your
base salary plus Highest Annual Bonus; provided, however, that
the
foregoing will be subject to automatic adjustment to the extent
required by Section 409A of the Internal Revenue Code of 1986,
as
amended (the "Code"), provided that the Company will be deemed to
have
amended the Employment Agreement with regard to the severance
payments
in this Section 2(a)(ii) to permit you to elect the aforesaid lump
sum
payment under Q&A 20 of Internal Revenue Service Notice
2005-1.
(b) Continued Benefits. (i) Until December 31, 2005 or such
longer
period as any plan, program, practice or
policy may provide, continued benefits
for you and your spouse at least equal to
those which would have been provided
in accordance with the plans, programs,
practices and policies described in
Section 2(b)(viii) of the Employment
Agreement if your employment had not been
terminated, in accordance with the most
favorable plans, practices, programs or
policies of the Company as in effect
generally at any time thereafter with
respect to other peer executives of the
Company and their families. If allowed
under the applicable plan, for purposes of
determining eligibility (but not the
time of commencement of benefits), you will
be considered to have remained
employed until December 31, 2005 and to
have retired on the last day of such
period. In addition, you and your spouse
will continue to be covered by the
Company's health benefit plan (including,
without limitation, medical, dental,
vision and prescription drug
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Mr. Robert W. Anestis
February 10, 2005
Page 3
benefits) on an insured basis within the
meaning of Section 105(h) of the Code
until each of you attain age sixty-five,
subject to your continued copayment of
premiums which will not exceed the level of
copayment made by the active
employees of the Company.
(ii) Notwithstanding the foregoing, if, in the good faith
judgment of the Company, coverage under subparagraph (i) cannot
be
provided under the Company's benefit plans without jeopardizing the
tax
status of such plans, for underwriting reasons or because of the
tax
impact on you, the Company will pay you an amount equal to the cost
to
the Company for a similarly situated active employee fully
grossed-up
to cover taxes on such amount and the gross-up payment, except that
in
no case can the Company substitute a cash payment for health
benefits.
(iii) If you become reemployed with another employer and are
eligible to receive medical or other welfare benefits under
another
employer-provided plan, the medical and other welfare benefits
described herein will be secondary (to the extent permitted under
the
applicable medical plans) to those provided under such other
plan
during such applicable period of eligibility.
(c) 2004 Performance Share Grant. Except as provided in the
last
sentence of Section 2(d), below, the
Company will grant you a 2004 performance
share award at the time such awards are
normally made in February, 2005, but in
no event later than the Termination Date,
consistent with past practices as to
form (including the right to reduction of
shares for withholding purposes) and
methodology of determining the amount,
except that such grant will be fully
vested at the time of grant. The parties
agree that the number of shares of FECI
common stock to be granted pursuant to this
Section 2(c) will be determined
based on the formula and performance
targets previously approved by the
Compensation Committee with regard to the
annual cash incentive and long term
incentive plans (subject to adjustment to
reflect changes in the capital
structure or other corporate events
affecting FECI common stock).
(d) 2005 Equity Grant. Prior to the Termination Date, the Company
will
grant you a pro-rata portion of the stock
options or other equity awards that
you would have received in 2005 (including
any portion which would otherwise be
awarded in February, 2006) had your
employment not been terminated consistent
with past practices as to form (including
the right to reduction of shares for
withholding purposes) and methodology of
determining the amount (which will be
based on the same level of corporate
performance that the award in February,
2005 will be awarded), based on a fraction,
the numerator of which is the number
of days in the 2005 fiscal year through the
scheduled date of the 2005 annual
meeting of shareholders of FECI, and the
denominator of which is 365, except
that such grant will be fully vested at the
time of grant and if, in the form of
options, will remain exercisable for a
period of five years following the
Termination Date. Notwithstanding the
foregoing, the Company may pay you a lump
sum cash payment, within 30 days after the
Termination Date, representing the
value of the
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Mr. Robert W. Anestis
February 10, 2005
Page 4
performance share award that would
otherwise be granted pursuant to Section
2(c), above, and the pro-rata portion of
the stock options or other equity
awards that would otherwise be granted
pursuant to this Section 2(d), provided
that the Company notifies you in writing,
at the time the grants would otherwise
have been made, of its election to make
such lump sum cash payment.
(e) Treatment of Outstanding Equity. Upon the Termination Date,
(i)
each stock option outstanding (including
any stock option granted pursuant to
Section 2(d) hereof) will become fully
vested and will remain exercisable for a
period of five years following the
Termination Date, but in no event beyond the
stated term of such stock option, and (ii)
the restricted period on each share
of restricted stock outstanding will lapse.
In addition, effective immediately
each outstanding stock option will be fully
transferable by you; provided,
however, that (x) any stock option that is
transferred may not be subsequently
transferred, except by will or by the laws
of descent and distribution, (y) no
such transfer may be made unless such
transfer is approved by the General
Counsel, which approval will not be
unreasonably withheld and (z) no such
transfer will be permitted unless the
General Counsel of the Company has
concluded that, without further action by
the Company, such transfer and the
subsequent exercise of the stock option by
the transferee will not involve any
violation of applicable Federal or state
law, including securities laws.
(f) Outplacement Services. The Company will provide you with
outplacement services at a level
commensurate with your position for a period of
not less than one year following the
Termination Date, but in no event extending
beyond the date on which you commence other
full time employment.
(g) Tax and Financial Planning Assistance. The Company will
reimburse
you for the expenses incurred in connection
with obtaining professional tax and
financial planning advice for a period of
two years following the Termination
Date, which aggregate amount will not
exceed $26,000.
(h) Relocation. Within 30 days after the Termination Date, you
will
receive a housing relocation benefit
payment in the amount of $175,000.
(i) Golden Parachute Payments. In the event any portion of your
payments or benefits hereunder constitutes
a "parachute payment" within the
meaning of Section 280G of the Code, the
provision of Exhibit A to the Change in
Control Agreement between you and FECI
dated as of August 1, 2001 (the "Change
in Control Agreement") will apply hereto as
if set forth in full herein.
(j) Other Payments, Benefits, etc. Notwithstanding anything herein
to
the contrary, you will be entitled to
receive all other payments, benefits or
fringe benefits to which you may be
entitled under the terms of any applicable
compensation arrangement or benefit, equity
or fringe benefit plan or program or
grant.
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Mr. Robert W. Anestis
February 10, 2005
Page 5
3. Full Discharge. You agree and acknowledge that the payments
and
benefits provided in Section 2 above and
the other entitlements hereunder (a)
are in full discharge of any and all
liabilities and obligations of the Company
to you, monetarily or with respect to
employee benefits or otherwise, including,
without limitation, any and all obligations
arising under any alleged written or
oral employment agreement, policy, plan or
procedure of the Company and/or any
alleged understanding or arrangement
between you and the Company or any of its
officers or directors; and (b) exceed any
payment, benefit, or other thing of
value to which you might otherwise be
entitled but for this Agreement under any
policy, plan or procedure of the Company or
any prior agreement between you and
the Company.
4. General Release. Promptly after the Termination Date, the
parties
will execute and exchange the mutual
release in the form attached as Exhibit A
hereto. Company choice of either mutual
releases or no releases.
5. Confidential Information; Non-Compete; Non-Solicitation;
Non-Disparagement. (a) You hereby
acknowledge the existence and applicability of
the restrictions set forth in Sections 7
and 9 of the Employment Agreement.
(b) (i) Except as is set forth below, for a period commencing on
the
Termination Date and ending on the first
anniversary thereof (the
"Post-Employment Period"), you will not,
directly or indirectly, either for
yourself or any other person, own, manage,
control, materially participate in,
invest in, permit your name to be used by,
act as consultant or advisor to,
render material services for (alone or in
association with any person, firm,
corporation or other business organization)
or otherwise assist in any manner
any business which is a competitor of a
substantial portion of the Company's
business at the Termination Date including
but not limited to the acquisition of
railroad properties or rights to operate
railroad properties in Florida or
Georgia (collectively, a "Competitor"). In
addition, you will not, directly or
indirectly, either for yourself or any
other person, own, manage, control,
materially participate in, invest in,
permit your name to be used by, act as
consultant or advisor to, render material
service for (alone or in association
with any person, firm, corporation or other
business organization) or otherwise
assist in any manner any initiative,
project or matter related to the use by
others for transportation or other purposes
of the Company's railroad
properties. In the event of a violation of
this Section 5(b)(i), in addition to
any other remedies available to the Company
as provided in Section 5(d)
