Employment Agreement between Richard G. Smith and Florida East Coast Industries, Inc. dated December 21, 2000

Summary

This agreement is between Richard G. Smith and Florida East Coast Industries, Inc. It outlines Mr. Smith’s employment as Executive Vice President and Chief Financial Officer, including his duties, compensation, and benefits. The contract specifies salary, bonus opportunities, and a grant of restricted stock, as well as terms for termination, confidentiality, non-competition, and dispute resolution. It also addresses what happens in the event of a change in control of the company. The agreement is effective January 1, 2001, and continues until terminated by either party.

EX-10.A 2 g67604ex10-a.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10(a) ================================================================================ EMPLOYMENT AGREEMENT BETWEEN RICHARD G. SMITH AND FLORIDA EAST COAST INDUSTRIES, INC. ================================================================================ DATED: DECEMBER 21, 2000 2 TABLE OF CONTENTS 1. EMPLOYMENT PERIOD.................................................. 1 2. TERMS OF EMPLOYMENT................................................ 1 (a) Position and Duties....................................... 1 (b) Compensation.............................................. 2 3. TERMINATION OF EMPLOYMENT.......................................... 5 (a) Death or Disability....................................... 5 (b) Cause..................................................... 5 (c) Good Reason............................................... 6 (d) Termination for Other Reasons............................. 6 (e) Notice of Termination..................................... 6 (f) Date of Termination....................................... 6 4. OBLIGATIONS OF EMPLOYER UPON TERMINATION........................... 7 (a) Accelerating Event........................................ 7 (b) Good Reason; Other than for Cause, Death or Disability.... 7 (c) Death..................................................... 7 (d) Cause; Other Than for Good Reason......................... 8 (e) Disability................................................ 8 (f) Nondisclosure to Media.................................... 8 5. CHANGE IN CONTROL.................................................. 8 (a) Defined................................................... 8 (b) Entitlement to Benefits................................... 8 (c) Accelerating Event........................................ 9 (d) Supplemental Payment to Executive......................... 9 6. NON-EXCLUSIVITY OF EXECUTIVE'S RIGHTS.............................. 9 7. CONFIDENTIAL INFORMATION........................................... 9 8. NON-COMPETITION ;NON-SOLICITATION.................................. 10 9. REMEDIES FOR EXECUTIVE'S BREACH.................................... 11 10. DISPUTE............................................................ 11 11. NO CONFLICTING OBLIGATIONS OF EXECUTIVE............................ 11 12. INDEMNITY OF EXECUTIVE............................................. 11 13. SUCCESSORS......................................................... 12 14. MISCELLANEOUS...................................................... 12 3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of December 21, 2000, between RICHARD G. SMITH, an individual (the "Executive") and FLORIDA EAST COAST INDUSTRIES, INC. ("Employer"), a Florida corporation, recites and provides as follows: WHEREAS, the Board of Directors of Employer (the "Board") desires that Employer retain the services of the Executive, and the Executive desires to be employed with Employer, all on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, Employer and the Executive agree as follows: 1. EMPLOYMENT PERIOD. Employer hereby agrees to employ the Executive, and the Executive hereby agrees to accept employment by Employer, in accordance with the terms and provisions of this Agreement, commencing January 1, 2001 (the "Effective Date") and continuing until terminated by either party hereto (the "Employment Period"). 2. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Employment Period, the Executive shall serve as Executive Vice President and Chief Financial Officer of Employer and shall have such authority and perform such executive duties as are commensurate with such position and as are otherwise assigned by the Board. (ii) The Executive's services shall be performed primarily at the headquarters of Employer and its subsidiaries in St. Augustine, Florida and otherwise at such location(s) as Employer reasonably may select. (iii) During the Employment Period, and excluding any periods of vacation and leave to which the Executive is entitled, the Executive agrees to devote his full business attention and time to the business and affairs of Employer and, to the extent necessary to discharge the duties assigned to the Executive hereunder, to use the Executive's reasonable efforts to perform faithfully such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic, charitable, and professional association boards or committees, subject to the approval of the Chairman of Employer, in each instance, which approval shall not be unreasonably withheld, (B) deliver lectures or fulfill speaking engagements and (C) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive's responsibilities as an employee of EMPLOYER in accordance with the Agreement. 4 (b) COMPENSATION. (i) Base Salary. During the Employment Period, the Executive shall receive a base salary ("Annual Base Salary"), which shall be paid in equal installments on a semi-monthly basis, at the annual rate of not less than Two Hundred Seventy Five Thousand Dollars ($275,000) per year. During the Employment Period, the Annual Base Salary shall be reviewed at least annually by the Board. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced and the term "Annual Base Salary" as used in this Agreement shall mean the Annual Base Salary as so increased. (ii) Short-Term Incentive Bonus. In addition to Annual Base Salary, during the Employment Period commencing January 1, 2001, the Executive shall participate in an annual incentive bonus plan. Such plan shall provide the Executive with the opportunity to earn a bonus based on achievement of performance criteria. The incentive bonus plan shall be structured such that the Executive shall receive up to fifty percent (50%) of Annual Base Salary ("Target") for attainment of certain target performance goals (prorated for any partial year of employment), with a maximum bonus of one hundred percent (100%) of Target for extraordinary performance (prorated for any partial year of employment). The Compensation Committee will establish the performance criteria and goals in consultation with the Executive. The bonus payable pursuant to this Section 2(b)(ii) for any fiscal year shall be paid to the Executive no later than the 30th day following the issuance of the audited financial statements of Employer for such year. (iii) Long-Term Incentives: Restricted Stock. The Executive shall receive a grant of restricted stock for seven thousand five hundred (7,500) shares of Employer's common stock issued under the FECI Stock Incentive Plan. Such shares shall be subject to restrictions which shall provide that the Executive shall not transfer such shares during the restriction period and shall forfeit such shares if during the restriction period he is discharged by Employer for Cause (as hereinafter defined in Section 3(b)) or resigns from employment with Employer without Good Reason (as hereinafter defined in Section 3(c)). The restriction period shall lapse with respect to such shares in five (5) equal annual installments on each of the first through fifth anniversaries of the Effective Date. Notwithstanding the foregoing, the restriction period shall lapse immediately as to all such shares in the event that an Accelerating Event (as hereinafter defined in Section 4(a)) occurs. The Executive shall be entitled to receive any dividends or other distributions payable with respect to such shares of restricted stock beginning on the date of award of such shares. Such stock award shall be evidenced by a written restricted stock award agreement between Employer and the Executive, the terms of which shall be agreed to by the parties in good faith as soon as practical. (iv) Long-Term Incentives: Basic Stock Options. The Executive shall receive a grant of non-statutory stock options on seventy five thousand (75,000) shares of FECI common stock issued under the FECI Stock Incentive Plan. The options shall have a term of ten (10) years (subject to earlier expiration as hereinafter provided), shall have an exercise price equal to one hundred percent (100%) of the fair market value, as of the close of trading on the next preceding business day prior to the date of this Agreement (being $34.125 per share) of the shares of common stock of EMPLOYER, and shall vest and become exercisable in 2 5 five (5) equal annual installments on the first through fifth anniversaries of the Effective Date; provided, however, that such stock options shall vest immediately and become exercisable in their entirety in the event that an Accelerating Event (as hereinafter defined in Section 4(a)) occurs. To the extent not previously exercised, all such stock options shall expire immediately following the Date of Termination (as hereinafter defined in Section 3(f)); provided, however, that the Executive, or his heirs or legal representatives in the event of the Executive's death, may exercise all or any part of such stock options as were exercisable as of the close of business on the Date of Termination for a period of two (2) years following such Date of Termination in the event (i) an Accelerating Event (as hereinafter defined in Section 4(a)) occurs; or (ii) the Executive retires at normal retirement age under any retirement plan of Employer. Such stock options shall include a provision for adjustment in the option price to reflect an extraordinary distribution made with respect to the common stock during the term of the options. In the event of a capital adjustment resulting from a stock dividend, stock split, reorganization, merger, consolidation, spin off, a combination or exchange of shares or other transaction having a similar substantive effect, the number shares of stock subject to the stock options and the option price shall be equitably adjusted. Such stock options shall be evidenced by a written stock option award agreement between Employer and the Executive, the terms of which shall be agreed to by the parties in good faith as soon as practical. (v) Long-Term Incentives: Subsequent Option Grants. During the Employment Period, the Executive shall be entitled to participate in long-term equity incentive plans and programs applicable generally to other peer executives of Employer. Such participation shall commence with respect to Employer's 2001 fiscal year. Such plans and programs shall be structured such that the Executive shall receive option grants with targeted annual grant value (using valuation methods consistent with those used by Employer for financial reporting purposes) between seventy-five (75%) and one hundred percent (100%) of Annual Base Salary for attainment of certain target performance goals (prorated for any partial year of employment). The Employer will establish the performance criteria and goals in consultation with the Executive. (vi) Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all savings and retirement plans, practices, policies and programs applicable generally to other peer executives of Employer. (vii) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family and dependents, as the case may be, shall be eligible for participation in and shall receive all benefits under all welfare benefit plans, practices, policies and programs provided by Employer (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of Employer. (viii) Expenses. The Executive shall be entitled to receive prompt reimbursement for all employment-related expenses incurred by the Executive during the Employment Period in accordance with the most favorable policies, practices and procedures of Employer as in effect generally from time after the Effective Date with respect to other peer executives of Employer. 3 6 (ix) Fringe Benefits. During the Employment Period, the Executive and/or the Executive's family and dependents shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of Employer as in effect generally from time to time after the Effective Date with respect to other peer executives of Employer. (x) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office and support staff at the Employer's headquarters at least equal to the most favorable of the foregoing provided generally from time to time after the Effective Date with respect to other peer executives of Employer. (xi) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of Employer as in effect generally from time to time after the Effective Date with respect to other peer executives of Employer. (xii) Car Allowance. During the Employment Period, the Executive shall be entitled to a car allowance in accordance with Employer's car allowance policy, in lieu of expenses associated with the operation of his automobile. (xiii) Relocation Expense. Employer shall make the Executive whole by reimbursing him for all reasonable costs associated with his relocation from the Marietta, Georgia area to the St. Augustine, Florida area whether incurred before or after the Effective Date, but only to the extent that such costs are incurred prior to the first anniversary of the Effective Date. Such costs shall include, without limitation, closing costs associated with the sale of the Executive's Marietta, Georgia residence and closing costs associated with the Executive's purchase and financing of a new primary residence in the St. Augustine area. For purpose of this Section, "closing costs" shall mean loan origination fees, appraisal fees, credit report fees, assumption fees, settlement or closing fees, title examination fees, title insurance binder, document preparation fees, notary fees, attorneys' fees, real estate brokers' commissions, title insurance fees, recording fees, tax stamps, transfer taxes, survey fees and costs of pest, radon and home inspections. Employer shall also arrange for and pay for the move of the Executive's household goods and personal effects (including packing, reasonable storage charges and unpacking charges) from his Marietta, Georgia residence to his new primary residence in Florida. Employer shall pay for the Executive's reasonable temporary living costs in the St. Augustine area for a period as necessary to accomplish the relocation but not later than April 1, 2001 (or such later time as may be requested by the Executive and approved by the Chairman of Employer, which approval shall not be unreasonably withheld) until Executive is moved into his new residence in Florida. Employer will pay the costs associated with a reasonable number of trips to St. Augustine for the Executive and his spouse to look for a new residence. In addition, in the event that the Executive's Marietta, Georgia residence is placed on the market for sale at a reasonable price and is not sold within ninety (90) days after being placed on the market, at the Executive's request Employer shall provide the Executive with an interest-free bridge loan for a term of up to twelve (12) months for an amount up to the asking price of the Marietta, Georgia residence, which loan shall be repayable upon the earlier of five (5) days following the closing of the sale of the Marietta, Georgia residence or the first anniversary of the making of such loan. In addition, Employer shall pay the Executive an amount determined by its accountants equal to the Executive's federal, state and local taxes on the foregoing reimbursement and imputed 4 7 interest under the aforesaid loan (the "Tax Gross-up") and the federal, state and local taxes on the Tax Gross-up, all to the end that the Executive be held harmless, on an after-tax basis, from the tax impact thereof. (xiv) Golden Parachute Excise Tax. If any amounts payable under this Agreement are subject to the excise tax imposed under Section 4999 of the Internal Revenue Code on "excess parachute payments," Employer will in good faith compute the excise tax imposed under Code Section 4999 and shall pay that amount to the Executive, including any federal, state, local and exercise taxes imposed on the foregoing payment under this Section 2(b)(xiv). The determination will be made before the taxes are due and payable by the Executive, to the extent possible. The calculation under this Section will be made in a manner consistent with the requirements of Code Section 280G and 4999, as in effect at the time the calculations are made. (xv) Right to Change Plans. Executive shall not be obligated to institute, maintain or refrain from changing, amending or discontinuing any benefit plan, program, or perquisite referred to in Sections 2(b)(vi), 2(b)(vii), 2(b)(ix) and 2(b)(xii), so long as such changes are similarly applicable to other executives of Employer. 3. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If Employer determines in good faith that the Disability of the Executive has occurred (pursuant to the definition of disability set forth below), it may give to the Executive notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with Employer shall terminate upon a date selected by Employer and set forth in such notice (the "Disability Effective Date"), provided that, prior to such date, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with Employer on a full-time basis for one hundred eighty (180) consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by Employer or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) CAUSE. Employer may terminate the Executive's employment for Cause. For purposes of this Agreement, "Cause" shall mean (i) a material breach by the Executive of the Executive's obligations under this Agreement (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of Employer and which is not remedied in a reasonable period of time after receipt of notice from Employer specifying such breach; (ii) the conviction of the Executive for committing an act of fraud, embezzlement, theft or other act constituting a felony or the guilty or nolo contendere plea of the Executive to such a felony; (iii) insubordination or the willful engaging by Executive in gross misconduct or the willful violation of an Employer policy which results in material and demonstrable injury to Employer; or (iv) a material act of dishonesty or breach of trust on the part of the Executive resulting or intending to result directly or indirectly in material personal gain or enrichment at the expense of Employer. Any act, or failure to act, 5 8 based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for Employer shall be conclusively presumed to done, or omitted to be done, by the Executive in good faith and in the best interests of Employer. (c) GOOD REASON. The Executive may terminate his employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, in the absence of the consent of the Executive, a reasonable determination by the Executive that any of the following has occurred: (i) the assignment to the Executive of any duties inconsistent in any material respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2(a) of this Agreement, or any other action by Employer which results in a material diminution of such position, authority, duties or responsibilities, excluding for this purpose an isolated and insubstantial action not taken in bad faith and which is remedied by Employer promptly after receipt of notice thereof given by the Executive; or (ii) any failure by Employer to comply with any of the provisions of this Agreement applicable to it, other than any isolated and insubstantial failure not occurring in bad faith and which is remedied promptly after notice thereof from the Executive. (d) TERMINATION FOR OTHER REASONS. Employer may terminate the employment of the Executive without Cause by giving notice to the Executive, which notice shall set forth the Date of Termination. The Executive may resign from his employment without Good Reason hereunder by giving notice to Employer at least thirty (30) days prior to the Date of Termination. (e) NOTICE OF TERMINATION. Any termination shall be communicated by Notice of Termination to the other party. For purposes of this Agreement, a "Notice of Termination" means a notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) in the case of a termination under Section 3(b) or 3(c), to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated (the failure by the Executive or Employer to set forth in the Notice of Termination any fact or circumstance shall not waive any right of the Executive or Employer hereunder or preclude the Executive or Employer from asserting such fact or circumstance in enforcing the Executive's or Employer's rights hereunder), and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall not be more than fifteen (15) days after the giving of such notice, unless otherwise required by Section 3(f)). (f) DATE OF TERMINATION. "Date of Termination" shall mean (i) if the Executive's employment is terminated by Employer due to the Executive's Disability, the Date of Termination shall be the Disability Effective Date, (ii) if the Executive's employment is terminated by reason of the Executive's death, the Date of Termination shall be the date of death of the Executive, and (iii) in all other case, the date of receipt of the Notice of Termination or any permitted later date specified therein, as the case may be. 6 9 4. OBLIGATIONS OF EMPLOYER UPON TERMINATION. (a) ACCELERATING EVENT. As used in this Agreement, the term "Accelerating Event" shall mean any of the following: (i) the Executive's employment terminates under the circumstances described in Section 3(a), (ii) the Executive is discharged without Cause, (iii) the Executive resigns with Good Reason, or (iv) a Change in Control Entitlement (as defined in Section 5(b)) occurs. (b) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, Employer shall terminate the Executive's employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason: (i) Employer shall pay to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination the sum of (A) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid; (B) to the extent not theretofore paid, any annual bonus payable to the Executive for any prior completed fiscal year; (C) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) to the extent not theretofore paid; and (D) any accrued vacation pay, expenses reimbursement and any other entitlements accrued by the Executive under Section 2(b) to the extent not theretofore paid (the sum of the amount described in clauses (A), (B), (C) and (D) shall be hereinafter referred to as the "Accrued Obligations"); and (ii) Employer shall pay to the Executive in eighteen (18) monthly installments beginning thirty (30) days following the Date of Termination an amount equal to the sum of one hundred fifty percent (150%) of the Executive's Annual Base Salary plus fifty percent (50%) of the payment made under Section 2(b)(ii), if any, with respect to the most recently completed fiscal year of Employer; and (iii) For eighteen (18) months following the Date of Termination, or such longer period as any plan, program, practice or policy may provide, Employer shall continue benefits to the Executive and/or the Executive's family and dependents at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 2(b)(vii) if the Executive's employment had not been terminated, in accordance with the most favorable plans, practices, programs or policies of Employer as in effect generally at any time thereafter with respect to other peer executives of Employer and their families ("Welfare Benefit Continuation"). If the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under any other employer-provided plan, the medical and other welfare benefits herein shall be secondary to those provided under such other plan during such applicable period of eligibility. (c) DEATH. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligation to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation. 7 10 (d) CAUSE: OTHER THAN FOR GOOD REASON. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason, this Agreement shall terminate without further obligation to the Executive other than the obligation to pay to the Executive the Accrued Obligations (which shall be paid in cash within thirty (30) days of the Date of Termination). (e) DISABILITY. If the Executive's employment shall be terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligation to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Welfare Benefit Continuation. Accrued Obligations shall be paid to the Executive in a lump sum in cash within thirty (30) days of the Date of Termination. The Executive shall be entitled after the Disability Effective Date to receive disability and other benefits as in effect at the Disability Effective Date with respect to other peer executives of Employer and their families. (f) NONDISCLOSURE TO MEDIA. After the Date of Termination, the Executive and Employer agree that they will not discuss the Executive's employment and resignation or termination (including the terms of this Agreement) with any representatives of the media, either directly or indirectly, without the consent of the other party hereto. 5. CHANGE IN CONTROL. (a) DEFINED. For purposes of this Agreement, a "Change in Control" of Employer shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have occurred: (i) Any corporation, partnership or other entity other than an Affiliate of Employer, becomes the owner either in a single transaction or in a series of transactions, directly or indirectly, of at least fifty percent (50%) or more of Employer's operating assets or fifty percent (50%) or more of the stock of FECI; provided that a Change in Control shall not have occurred if a change in ownership of the stock of Employer occurs in connection with a distribution of the shares of Employer to the owners of any Employer affiliate, in a broad public distribution or in a transaction the result of which the shares of Employer are distributed to the shareholders of Employer's majority owner. (ii) Employer's Board of Directors (the "Board") approves; (a) a plan of complete or substantial liquidation of Employer; or (b) a merger, consolidation or reorganization, as defined under Florida state law, of Employer with or into another corporation, partnership or entity other than an Employer Affiliate. (b) ENTITLEMENT TO BENEFITS. The Executive shall be entitled to certain additional benefits upon a Change in Control if: (i) within two (2) years following a Change in Control, either (A) the Employer substantially reduces the duties or responsibilities of the Executive from those in effect immediately prior to such occurrence or (B) the Employer terminates the Executive's 8 11 employment other than for Cause, Death or Disability, or (c) the Executive resigns with Good Reason; or (ii) within the period which is the last ninety (90) days of the first year after the occurrence of a Change in Control, the Executive voluntarily resigns his employment hereunder for any reason. The accrual of such entitlements is referred to herein as "Change in Control Entitlement." (c) ACCELERATING EVENT. A Change in Control Entitlement shall be an Accelerating Event as defined in Section 4(a). (d) SUPPLEMENTAL PAYMENT TO EXECUTIVE. Upon the accrual of Change in Control Entitlement, Employer shall pay to the Executive in a lump sum in cash within thirty (30) days of the date of such Change in Control, an amount equal to two (2) times the Annual Base Salary. 6. NON-EXCLUSIVITY OF EXECUTIVE'S RIGHTS. Except as provided in Sections 4(b)(iii), 4(c) and 4(e), nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by Employer and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with Employer. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with Employer at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 7. CONFIDENTIAL INFORMATION. (a) The Executive shall hold in a fiduciary capacity for the benefit of Employer all secret or confidential information, knowledge or data relating to Employer or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by Employer or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with Employer, the Executive shall not, without the prior written consent of Employer or except as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than Employer and those designated by it. In no event shall an asserted violation of the provisions of this Section 7 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. (b) All records, files, memoranda, reports, price lists, customer lists, drawings, designs, proposals, plans, sketches, documents, computer programs, CAD systems, CAM systems, disks, computer printouts and the like (together with all copies thereof) relating to the business of Employer, which Executive shall use or prepare or otherwise have in his possession in the course of, or as a result of, his employment hereunder shall, as between the parties hereto, remain the sole property of Employer. Executive shall use such materials solely for the benefit of Employer and shall not divulge any such materials other than in furtherance of 9 12 Employer's interests. Executive hereby agrees that he will return all such materials, including copies, to Employer upon demand, or upon the cessation of his employment. (c) Any termination of the Executive's employment hereunder or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. NON-COMPETITION ; NON-SOLICITATION. (a) In consideration of Employer undertaking to employ the Executive under the terms provided for herein, including, without limitation, the grant of the substantial number of shares of restricted stock options provided for in Section 2(b), and to protect the Employer's valuable trade secrets and other business and professional information and its relationships with existing and prospective customers and suppliers, the Executive agrees that, except as is set forth below, for a period commencing on the Effective Date hereof and ending on the first anniversary of the date the Executive ceases to be employed by Employer (the "Non-Competition Period"), the Executive shall not, directly or indirectly, either for himself or any other person, own, manage, control, materially participate in, invest in, permit his 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 Employer's business at the date the Executive ceases to be employed by the Employer (a "Competitor"). Notwithstanding the foregoing, the restrictions set forth above shall immediately terminate and shall be of no further force or effect (i) in the event of a default by Employer of the performance of any of the obligations hereunder, which default is not cured within ten (10) days after notice thereof, or (ii) if the Executive's employment has been terminated by Employer other than for Cause, or (iii) if the Executive resigns for Good Reason. Nothing herein shall prohibit the Executive from being a passive owner of not more than five percent (5%) of the equity securities of an enterprise engaged in such business which is publicly traded, so long as he has no active participation in the business of such enterprise. (b) During the Non-Competition Period, the Executive shall not, directly or indirectly, (i) induce or attempt to induce or aid others in inducing an employee of Employer to leave the employ of Employer, or in any way interfere with the relationship between Employer and an employee thereof except in the proper exercise of the Executive's authority, or (ii) in any way interfere with the relationship between Employer and any customer, supplier, licensee or other business relation thereof. (c) If, at the time of enforcement of this Section 8, a court shall hold that the duration, scope, area or other restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or other restrictions reasonable under such circumstances shall be substituted for the stated duration, scope, area or other restrictions. (d) The covenants made in this Section 8 shall be construed as an agreement independent of any other provisions of this Agreement, and shall survive the termination of this Agreement. Moreover, the existence of any claim or cause of action of the Executive against Employer or any of its affiliates, whether or not predicted upon the terms of this Agreement, shall not constitute a defense to the enforcement of these covenants. 10 13 9. REMEDIES FOR EXECUTIVE'S BREACH. In the event Executive violates any provisions of Section 7 or 8 and such violation continues after notice thereof to the Executive and the expiration of a reasonable opportunity to cure, then Employer may thereafter terminate the payment of any post-termination benefits hereunder, and Employer will have no further obligation to Executive under this Agreement. The parties acknowledge that any violation of Section 7 or 8 can cause substantial and irreparable harm to Employer. Therefore, Employer shall be entitled to pursue any and all legal and equitable remedies, including but not limited to any injunctions. 10. DISPUTE. Any dispute or controversy arising under or in connection with this Agreement shall be settled by binding arbitration, which shall be the sole and exclusive method of resolving any questions, claims or other matters arising under this Agreement or any claim that Employer has in any way violated the non-discrimination and/or other provisions of Title VII or the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, as amended; the American with Disabilities Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1974, as amended; and, in general, any federal law or the law of the State of Florida. Such proceeding shall be conducted by final and binding arbitration before a panel of one or more arbitrators under the administration of the American Arbitration Association, and in a location mutually agreed to by the Executive and Employer. The Federal and State courts located in the United States of America are hereby given jurisdiction to render judgment upon, and to enforce, each arbitration award, and the parties hereby expressly consent and submit to the jurisdiction of such courts. Notwithstanding the foregoing, in the event that a violation of the Agreement would cause irreparable injury, FECI and the Executive agree that in addition to the other rights and remedies provided in this Agreement (and without waiving their rights to have all other matters arbitrated as provided above) the other party may immediately take judicial action to obtain injunctive relief. 11. NO CONFLICTING OBLIGATIONS OF EXECUTIVE. Executive represents and warrants that he is not subject to any duties or restrictions under any prior agreement with any previous employer or any other person, and that he has no rights or obligations expect as previously disclosed to Employer which may conflict with the interests of Employer or with the performance of the Executive's duties and obligations under this Agreement. Executive agrees to notify Employer immediately if any such conflicts occur in the future. 12. INDEMNITY OF EXECUTIVE. Employer shall indemnify and defend the Executive against all claims relating to the performance of his duties hereunder to the fullest extent permitted by Employer's Articles of Incorporation and Bylaws, the relevant provisions of which shall not be amended in their application to the Executive to be any less favorable to him than as at present, except as required by law. During the continuance of the Executive's employment hereunder, Employer shall maintain in effect uninterrupted standard directors and officers liability insurance coverage insuring the Executive against such claims, with limits of coverage of not less than Ten Million Dollars ($10,000,000) per occurrence, which insurance shall include a standard SEC coverage endorsement. 11 14 13. SUCCESSORS. (a) This Agreement is personal to the Executive and without the prior consent of Employer shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon Employer and its successors and assigns. (c) Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Employer to assume expressly and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform if it no such succession had taken place. As used in this Agreement, "Employer" shall mean Employer as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 14. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand deliver to the other party or by registered or certified mail, return receipt requested, postage prepaid, or by telecopier, or by courier, addressed as follows: If to the Executive to: If to Employer to: Richard G. Smith Florida East Coast Industries, Inc. 303 Chase Lane Attention: Corporate Secretary Marietta, GA 30068 One Malaga St. St. Augustine, FL 32085 Facsimile: 904 ###-###-#### or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto including, without limitation, that certain Confidentiality Agreement between the Employer and Executive dated December 22, 2000. 12 15 (d) In the event of a dispute arising out of this Agreement, any party receiving any monetary or injunctive remedy, whether at law or in equity, which is final and not subject to appeal shall be entitled to its reasonable attorneys' fees and costs incurred with respect to obtaining such remedy from the other party. (e) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) Employer may withhold from any amounts payable under this Agreement such Federal, state or local taxes, as shall be required to be withheld, pursuant to any applicable law or regulation. (g) The Executive's or Employer's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or Employer may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (h) Any entitlements to the Executive under Section 2(b) shall be contract rights to the extent not prohibited by law, except as provided in Section 2(b)(xv). IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, Employer has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. COMPANY: FLORIDA EAST COAST INDUSTRIES, INC. By /s/ Robert W. Anestis ----------------------------------------- Robert W. Anestis Chairman and Chief Executive Officer EXECUTIVE: By /s/ Richard G. Smith ----------------------------------------- Richard G. Smith 13 16 BASIC STOCK OPTION AGREEMENT Between FLORIDA EAST COAST INDUSTRIES, INC. and RICHARD G. SMITH Dated: December 21, 2000 17 THIS AGREEMENT, dated December 21, 2000 between Florida East Coast Industries, Inc. ("FECI") ("Company"), and Richard G. Smith (the "Employee") is made pursuant to the provisions of Section 2(b)(iv) of that certain Employment Agreement of even date herewith between the Company and the Employee (the "Employment Agreement"). In fulfillment of the aforesaid provisions of the Employment Agreement, the parties agree as follows: 1. Non-Statutory Option. Under the Company's Stock Incentive Plan, as amended (the "Plan"), the Company hereby grants the Employee a non-statutory option ("NSO") to purchase from the Company seventy-five thousand 75,000 shares of the Company's Common Stock. The exercise price of the NSO is $34.125 per share, being the fair market value of the Company's Common Stock on the next preceding business day prior to the date of this Agreement. 2. Entitlement to Exercise the NSO. The grant of the NSO is subject to the following terms and conditions: (a) Vesting. One-fifth of the NSO, 15,000 shares, shall vest on and may be exercised at any time on or after December 20, 2001. Another one-fifth of the NSO, 15,000 shares, shall vest on and may be exercised at any time on or after December 20, 2002. Another one-fifth of the NSO, 15,000 shares, shall vest and may be exercised at any time on or after December 20, 2003. Another one-fifth of the NSO, 15,000 shares, shall vest on and may be exercised at any time on or after December 20, 2004. The remaining one-fifth of the NSO, 15,000 2 18 shares shall, vest on and may be exercised at any time on or after December 20, 2005. In addition, all of the NSO shall vest on and may be exercised at any time on or after an Accelerating Event (as defined in Section 4(a) of the Employment Agreement). The vesting of any portion of the NSO is conditioned on the Employee's continued employment by the Company or a parent or subsidiary of the Company as of the relevant vesting date. (b) Exercise Period. Except as otherwise stated in this Agreement, the vested portion of the NSO may be exercised, in whole or in part, from the dates described in subsections (a) above until the earliest of (i) December 20, 2010, (ii) two years following the effective date that the Employee's employment terminates by reason of an Accelerating Event (as defined in Section 4(a) of the Employment Agreement) or normal retirement (as determined under any retirement plan of the Company), or (iii) the effective date that the Employee terminates employment for any other reason (but in no event earlier than two years following the accrual of Change in Control Entitlement (as defined in Section 5(b) of the Employment Agreement). (c) Exercise Following Death. If the Employee dies while employed by the Company or a parent or subsidiary corporation, then the person to whom the Employee's rights under the NSO shall have passed by will or by the laws of distribution may exercise any of the NSO within two years after the Employee's death. 3 19 3. Payment Under NSO. Payment of the NSO price may be made in cash, in shares of the Company's Common Stock, or in any combination thereof. If shares of the Company's Common Stock are delivered to make any such payment, the shares shall be valued at the fair market value (as defined below) thereof on the date of exercise of the NSO. For purposes of this Agreement, "fair market value" means, as of any given date, the closing price of the Company's Common Stock on such date as quoted in the NYSE Composite Transactions Reporting the Wall Street Journal. If there were no sales reported as of a particular date, fair market value will be computed as of the last date preceding such date on which a sale was reported. 4. Limited Transferability of NSO. The NSO is not transferable (other than by will or by the laws of descent and distribution) and, except as otherwise stated in this Agreement, may be exercised during the Employee's lifetime only by the Employee. 5. Adjustments. The NSO shall be equitably adjusted with respect to the exercise price to reflect any extraordinary distribution made with respect to the Company's Common Stock during the term of the options. In the event of a capital adjustment resulting from a stock dividend, stock split, reorganization, merger, consolidation, spinoff, a combination or exchange of shares or other transaction having a similar substantive effect, the number of shares of stock subject to the NSO and the exercise price shall be equitably adjusted. 6. Exercise. The vested portion of the NSO may be exercised in whole or in part, but only with respect to whole shares of the Company's Common Stock, and may be exercised more than once until all shares which are subject to the NSO have been 4 20 purchased. An NSO may be exercised by deliver to the Company of written notice stating the number of shares elected to be purchased, and by payment to the Company as described in paragraph 3. 7. Withholding. By signing this Agreement, the Employee agrees to make arrangements satisfactory to the Company to comply with any income tax withholding requirements that may apply upon the exercise of the NSO or the disposition of the Company's Common Stock received upon the exercise of the NSO. The Employee will be entitled to elect to satisfy his tax withholding obligation by the withholding by the Company, at the appropriate time, of shares of the Company's Common Stock otherwise issuable to the Employee under this Agreement in a number sufficient, based upon the fair market value (as defined above) of such Common Stock on the relevant date, to satisfy such tax withholding requirements. 8. Delivery of Certificates. The Company may delay delivery of the certificate for shares purchased pursuant to the exercise of an NSO until (i) the admission of such shares to listing on any stock exchange on which the Company's Common Stock may then be listed, (ii) completion of any registration or other qualification of such shares under any state or federal law regulation that the Company's counsel shall determine as necessary or advisable, and (iii) receipt by the Company of advice by counsel that all applicable legal requirements have been complied with. 9. Dispute Resolution. Any dispute or controversy arising under on in connection with this Agreement shall be settled by binding arbitration, which shall be the sole and exclusive method of resolving any questions, claims or other matters arising 5 21 under this Agreement. Such proceeding shall be conducted by final and binding arbitration before a panel of one or more arbitrators under the administration of the American Arbitration Association, and in a location mutually agreed to by the Employee and the Company. The Federal and State courts located in the United States of America are hereby given jurisdiction to render judgment upon, and to enforce, each arbitration award, and the parties hereby expressly consent and submit to the jurisdiction of such courts. 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) This Agreement and Section 12 of the Employment Agreement constitute the entire agreement between the parties with respect to the subject matter hereof. In the event of any inconsistency between the provision of this Agreement and the provisions of the Plan, the provisions of this Agreement shall govern. (c) All notice and other communications hereunder shall be in writing and shall be given by hand deliver to the other party or by registered or certified mail, return receipt requested, postage prepaid, or by telecopier, or by courier, addressed as follows: 6 22 If to the Employee to: If to the Company to: --------------------- -------------------- Richard G. Smith Florida East Coast Industries, Inc. 303 Chase Lane. One Malaga Street Marietta, Georgia 30068 St. Augustine, FL 32084 Facsimile: 904 ###-###-#### or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (d) In the event of a dispute arising out of this Agreement, any party receiving any monetary or injunctive remedy, whether at law or in equity, which is final and not subject to appeal shall be entitled to its reasonable attorneys' fees and costs incurred with respect to obtaining such remedy from the other party. (e) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) The Employee's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to asset any right the Employee or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. 7 23 FLORIDA EAST COAST INDUSTRIES, INC. By /s/ Robert W. Anestis ------------------------------------ Robert W. Anestis Chairman and Chief Executive Officer Agreed and Accepted: /s/ Richard G. Smith - -------------------- Richard G. Smith 8 24 RESTRICTED STOCK AGREEMENT (Long Term Incentive) between FLORIDA EAST COAST INDUSTRIES, INC. and RICHARD G. SMITH December 21, 2000 25 THIS AGREEMENT, dated December 21, 2000 between Florida East Coast Industries, Inc.("FECI") (the "Company"), and Richard G. Smith (the "Employee") is made pursuant to the provisions of Section 2(b)(iii) of that certain Employment Agreement of even date herewith between the Company and the Employee (the "Employment Agreement"). In fulfillment of the aforesaid provisions of the Employment Agreement, the parties agree as follows: 1. Grant of Restricted Stock. Under the Company's Stock Incentive Plan, as amended (the "Plan"), the Company hereby grants to the Employee, subject to the terms and conditions herein set forth, seven thousand five hundred (7,500) shares of the Company's Common Stock (the "Restricted Stock"). 2. Terms and Conditions. The Restricted Stock is subject to the following terms and conditions: (a) Limited Nontransferability. This Restricted Stock shall be nontransferable during the term of the Restrictions (as hereinafter set forth) except by will or by the laws of descent and distribution. 2 26 (b) Restrictions and Lapse of Restrictions. The Restricted Stock shall be subject to the Employee's continued employment by the Company or a parent or subsidiary corporation (the "Restrictions"), which shall lapse according to the following schedule as of the stated yearly anniversaries of the date hereof (each an "Anniversary Date"): ANNIVERSARY UNRESTRICTED DATE PERCENTAGE ----------- ------------ First 20% Second 40% Third 60% Fourth 80% Fifth 100% Notwithstanding the foregoing, upon the occurrence of an Accelerating Event (as defined in Section 4(a) of the Employment Agreement), all Restrictions shall lapse upon the date of such Accelerating Event. 3. Forfeiture of Restricted Stock Upon Termination of Employment. The rights of the Employee and his successors in interest in Restricted Stock on which the Restrictions have not lapsed pursuant to paragraph 2(b) shall terminate in full when the Employee's employment with the Company or a parent or subsidiary corporation is terminated by the Company for Cause (as defined in Section 3(b) of the Employment Agreement) or by the Employee without Good Reason (as defined in Section 3(c) of the Employment Agreement). 3 27 4. Dividends/Distributions. The Company shall pay to the Employee any dividends or other distributions payable with respect to the Restricted Stock, notwithstanding the Restrictions, beginning on the date hereof but not beyond the date of any forfeiture thereof pursuant to the provisions of paragraph 3. 5. Withholding. The Employee agrees to make arrangements satisfactory to the Company to comply with any income tax withholding requirements that may apply upon the lapse of the Restrictions on the Restricted Stock. The Employee will be entitled to elect to satisfy his tax withholding obligation by the withholding by the Company, at the appropriate time, of shares of the Company's Common Stock from the Restricted Stock in a number sufficient, based upon the fair market value (as defined below) of such Common Stock on the relevant date, to satisfy such tax withholding requirements. For purposes of this Agreement, "fair market value" means, as of any given date, the closing price of the Company's Common Stock on such date as quoted in the NYSE Composite Transactions Report in the Wall Street Journal. If there were no sales reported as of a particular date, fair market value will be computed as of the last date preceding such date on which a sale was reported. 6. Delivery of Certificates. The Company may delay delivery of the certificate for shares granted hereunder until (i) the admission of such shares to listing on any stock exchange on which the Company's Common Stock may then be listed, (ii) completion of any registration or other qualification of such shares under any state or federal law regulation that the Company's counsel shall determine as necessary or advisable, and (iii) 4 28 receipt by the Company of advice by counsel that all applicable legal requirements have been complied with. 7. Dispute Resolution. Any dispute or controversy arising under or in connection with this Agreement shall be settled by binding arbitration, which shall be the sole and exclusive method of resolving any questions, claims or other matters arising under this Agreement. Such proceeding shall be conducted by final and binding arbitration before a panel of one or more arbitrators under the administration of the American Arbitration Association, and in a location mutually agreed to by the Employee and the Company. The Federal and State courts located in the United States of America are hereby given jurisdiction to render judgement upon, and to enforce, each arbitration award, and the parties hereby expressly consent and submit to the jurisdiction of such courts. 8. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) This Agreement and Section 12 of the Employment Agreement constitute the entire agreement between the parties with respect to the subject matter hereof. In the 5 29 event of any inconsistency between the provisions of this Agreement and the provisions of the Plan, the provisions of this Agreement shall govern. (c) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, or by telecopier, or by courier, address as follows: If to the Employee to: If to the Company to: ---------------------- --------------------- Richard G. Smith Florida East Coast Industries, Inc. 303 Chase Lane One Malaga Street Marietta, Georgia 30068 St. Augustine, FL 32084 Facsimile: 904 ###-###-#### or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (d) In the event of a dispute arising out of this Agreement, any party receiving any monetary or injunctive remedy, whether at law or in equity, which is final and not subject to appeal shall be entitled to its reasonable attorneys' fees and costs incurred with respect to obtaining such remedy from the other party. (e) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) The Employee's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Employee or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. 6 30 FLORIDA EAST COAST INDUSTRIES, INC. By: /s/ Robert W. Anestis ------------------------------------ Robert W. Anestis Chairman and Chief Executive Officer Agreed and Accepted: /s/ Richard G. Smith - -------------------- Richard G. Smith 7