PERSONAL AND CONFIDENTIAL

 

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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