Exhibit 10.12
SEVERANCE AGREEMENT
     THIS AGREEMENT is entered into as of April 1, 1999, by and between Stephen
W. Solomon (the “Employee”) and THE ST. JOE COMPANY, a Florida corporation (the
“Company”).
     1. Term of Agreement
         This Agreement shall remain in effect from the date hereof until:

  a)   The date when the Company has met all of its obligations under this
Agreement following a termination of the Employee’s employment with the Company
for a reason described in Section 5.

     2. Definition of Change in Control.
     For all purposes under this Agreement, “Change in Control” shall mean the
occurrence of any of the following events after the date of this Agreement:

  a)   The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if 50% or more of the
combined voting power, directly or indirectly, of the continuing or surviving
entity’s securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other reorganization;
    b)   The sale, transfer, exchange or other disposition of all or
substantially all of the Company’s assets;     c)   A change in the composition
of the Board, as a result of which fewer than two-thirds of the incumbent
directors are directors who either (i) had been directors of the Company on the
date 24 months prior to the date of the event that may constitute a Change in
Control (the “original directors”) or (ii) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office at the time of the
election or nomination and the directors whose election or nomination was
previously so approved;     d)   The liquidation or dissolution of the Company;
or     e)   Any transaction as a result of which any person is the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of the Company representing at
25% of the total voting power represented by the

 

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      Company’s then outstanding voting securities. For purposes of this
Paragraph (e), the term “person” shall have the same meaning as when used in
sections 13(d) and 14(d)of such Act but shall exclude (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a.
parent or subsidiary of the Company, (ii) a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the common stock of the Company, (iii) the
Alfred I. duPont Testamentary Trust and (iv) the Nemours Foundation.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company’s securities immediately before such transaction.
     3. Definition of Good Reason.
For all purposes under this Agreement, “Good Reason” shall mean that the
Employee:

  a)   A demotion in title with the Company from that in effect immediately
prior to the Change in Control which demotion results in a substantial and
material reduction in responsibilities with the Company from those in effect
immediately prior to the Change in Control;     b)   Has incurred a reduction in
his total compensation as an employee of the Company (consisting of base salary
and maximum bonus potential);     c)   Has been notified that his principal
place of work as an employee of the Company will be relocated outside the
Jacksonville, Florida area; or     d)   Is employed by a successor to the
Company that has failed to comply with Section 10(a).

     4. Definition of Continuation Period.
     For all purposes under this Agreement, “Continuation Period” shall mean the
period commencing on the date when the termination of the Employee’s employment
under Section 5 is effective and ending on the earlier of:

  a)   The later of (1) the date 36 months after the date when the employment
termination was effective; or     b)   The date of the Employee’s death.

 

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     5. Entitlement to Severance Pay and Benefits.
     The Employee shall be entitled to receive the severance pay described in
Section 6 and the benefits in sections 7 and 8 from the Company if, and only if,
one of the following events occurs:

  a)   Within the period which is the last six months of the first year after
the occurrence of a Change in Control, the Employee voluntarily resigns the
Employee’s employment for any reason;     b)   Within the first 36 month period
after the occurrence of a Change in Control, the Employee voluntarily resigns
the Employee’s employment for Good Reason; or     c)   Within the first 36 month
period after the occurrence of a Change in Control, the Company terminates the
Employee’s employment for any reason.

The determination of whether the Employee’s employment has terminated shall be
made without regard to whether the Employee continues to provide services to the
Company as a member of its Board of Directors or otherwise in the capacity of an
independent contractor. A transfer of the Employee’s employment from the Company
to a successor of the company shall not be considered a termination of
employment, if such successor complies with the requirements of Section 10(a).
     6. Amount of Severance Pay.
     Within five business days after the termination of the Employee’s
employment under Section 5, the Company shall pay the Employee a lump sum equal
to the product of:

  a)   The number of years (with a partial year counted as the appropriate
fraction) between the date of the termination of the Employee’s employment under
section 5 and the later of (1) the date 36 months after the date of the
employment termination times:     b)   The sum of:

  (i)   The Employee’s base compensation at the greater of (A) the annual rate
in effect on the date when the termination of the Employee’s employment with the
Company is effective or (B) the annual rate in effect on the date of the Change
in Control; plus     (ii)   The greater of (A) the Employee’s annual bonus for
the most recent year completed prior to the date when the termination of

 

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      the Employee’s employment with the Company is effective or (B) the amount
of the Employee’s maximum bonus potential then in effect, provided, however,
that if the employee has earned a bonus for any three completed years prior to
the date when termination of the Employee’s employment with the Company is
effective, then this paragraph (ii) shall be the average of the three most
recent completed years for which a bonus was earned.

     7. Supplemental Pension Benefit.

  a)  
Payment of Benefit. In the event of an employment termination described in
section 5, in lieu of accruing additional pension benefits under the Company’s
Salaried Employees Pension Plan and any other funded or unfunded defined-benefit
pension plans now or hereafter maintained by the Company (collectively, the
“Pension Plans”) during the Continuation Period, the Employee shall be entitled
to receive an unfunded supplemental pension benefit under this Agreement (the
“Supplemental Benefit”). The Supplemental Benefit shall be calculated under
Subsection (b) below and shall be paid in a lump sum within five business days
after a termination of the Employee’s employment under Section 5.
    b)  
Calculation of Benefit. The Supplemental Benefit shall be the actuarial
equivalent of a monthly pension benefit equal to the difference between:

  (i)   The amount of the hypothetical monthly pension benefit that would be
payable to the employee as a single-life annuity under the Pension Plans had the
Employee (A) continued to be employed as an employee of the Company during the
Continuation Period and (B) received compensation equal to the amount described
in Section 6(b) during the Continuation Period; minus     (ii)   the amount of
the actual monthly pension benefit payable to the Employee as a single-life
annuity under the Pension Plans.

For purposes of this subsection (b), actuarial equivalence shall be determined
by applying the actuarial assumptions then set forth in the Company’s principal
funded pension plan for salaried employees.
     8. Stock, Bonus, Group Insurance and Outplacement Services.

  a)  
Stock Options and Stock Subject to Repurchase. In the event of a Change in
Control, (i) all stock options granted to the Employee by the Company before or
after the date of this Agreement shall immediately become exercisable in full
(regardless of whether such stock options

 

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      previously were vested} and (ii) any right of the Company to repurchase
shares of its Common Stock from employee shall immediately lapse in full.
Following a termination of the Employee’s employment under Section 5, the
Employee shall remain entitled to exercise each stock option granted to the
Employee by the Company before or after the date of this Agreement until the
earlier of (i) the first anniversary of the employment termination date or
(ii) the date when such option would have expired by its terms if the Employee’s
employment had not terminated.     b)  
Bonus. In the event of an employment termination described in Section 5, the
Company shall pay the Employee a bonus for the year in which such termination
occurs. Such bonus shall not be less than the greater of (i) the Employee’s
annual bonus for the most recent year completed prior to the date when the
termination of the Employee’s employment with the Company is effective or
(ii) the amount of the Employee’s maximum bonus potential then in effect, in
either case prorated to reflect the portion of such year during which the
Employee was employed by the Company.
    c)  
Group Insurance. During the Continuation Period, the Employee (and, where
applicable, the Employee’s dependents) shall be entitled to continue
participation in the group insurance plans maintained by the Company, including
life, disability and health insurance programs, at the Company’s expense. Where
applicable, the Employee’s salary for purposes of such plans shall be determined
at the greater of (i) the annual rate in effect on the date when the termination
of the Employee’s employment with the company is effective or (ii) the annual
rate in effect on the date of the Change in Control. To the extent that the
Company finds it impossible to cover the Employee under its group insurance
policies during the Continuation Period, the Company shall provide the Employee
with individual policies which offer at least the same level of coverage and
which impose not more than the same costs on the Employee. The foregoing
notwithstanding, in the event that the Employee becomes eligible for comparable
group insurance coverage in connection with new employment, the coverage
provided by the Company under this Subsection (c) shall terminate immediately.
Any group health continuation coverage that the Company is required to offer
under the Consolidate Omnibus Budget Reconciliation Act of 1986 shall commence
when coverage under this Subsection (a) terminates.
    d)  
Outplacement Services. If one of the events described in Section 5 has occurred,
the Employee shall be entitled to senior-executive level outplacement services
at the Company’s expense. Such services shall be provided by a firm selected by
the Employee from a list compiled by the Company.

 

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     9. Excise Taxes.

  a)   Gross-Up Payment. If it is determined that any payment or distribution of
any type to or for the benefit of the Employee by the Company, any of its
affiliates, any person who acquires ownership or effective control of the
Company or ownership of a substantial portion of the Company’s assets (within
the meaning of section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), and the regulations thereunder) or any affiliate of such person,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the “Total Payments”), would be subject to the
excise tax imposed by section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax and any such interest or penalties
are collectively referred to as the “Excise Tax”), then the Employee shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount
calculated to ensure that after payment by the Employee of all taxes (and any
interest or penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Gross-Up Payment, the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.
Payments under his section are payable to the Employee, even if the Employee is
not eligible for employment termination benefits under this Agreement.     b)  
Determination by Accountant. All determinations and calculations required to be
made under this Section 9 shall be made by an independent accounting firm
selected by the Employee from among the largest six accounting firms in the
United States (the “Accounting Firm”), which shall provide its determination
(the “Determination”), together with detailed supporting calculations regarding
the amount of any Gross-Up Payment and any other relevant matter, both to the
company and the Employee within five days of the termination of the Employee’s
employment, if applicable, or such earlier time as is requested by the Company
or the Employee (if the Employee reasonably believes that any of the Total
Payments may be subject to the Excise Tax). If the Accounting firm determines
that no Excise Tax is payable by the Employee, it shall furnish the Employee
with a written statement that such Accounting Firm has concluded that no Excise
Tax is payable (including the reasons therefor) and that the Employee has
substantial authority not to report any Excise Tax on the Employee’s federal
income tax return. If a gross-Up payment is determined to be payable, it shall
be paid to the Employee within five days after the Determination is delivered to
the Company or the Employee. Any determination by the Accounting Firm shall be
binding Upon the Company and the Employee, absent manifest error.

 

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  c)   Over- and Underpayments. As a result of uncertainty in the application of
section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the
Company should have been made (“Underpayment”), or that Gross-Up Payments will
have been made by the Company which should not have been made (“Overpayments”).
In either such event, the Accounting Firm shall determine the amount of the
Underpayment or Overpayment that has occurred. In the case of an Underpayment,
the amount of such Underpayment shall be promptly paid by the Company to or for
the benefit of the Employee. In the case of an Overpayment, the Employee shall,
at the direction and expense of the Company, take such steps as are reasonably
necessary (including the filing of returns and claims for refund), follow
reasonable instructions from, and procedures established by, the Company, and
otherwise reasonably cooperate with the Company to correct such Overpayment,
provided, however, that (i) the Employee shall in no event be obligated to
return to the Company an amount greater than the net after-tax portion of the
Overpayment that the Employee has retained or has recovered as a refund from the
applicable taxing authorities and (ii) this provision shall be interpreted in a
manner consistent with the intent of Subsection (a) above, which is to make the
Employee whole, on an after-tax basis, from the application of the Excise Tax,
it being understood that the correction of an Overpayment may result in the
Employee’s repaying to the Company an amount which is less that the Overpayment.
    d)   Limitation on Parachute Payments. Any other provision of this Section 9
notwithstanding, if the Excise Tax could be avoided by reducing the Total
Payments by $50,000 or less, then the Total Payments shall be reduced to the
extent necessary to avoid the Excise Tax and no Gross-Up Payment shall be made.
If the Accounting Firm determines that the total Payments are to be reduced
under the preceding sentence, then the Company shall promptly give the Employee
notice to that effect and a copy of the detailed calculation thereof. The
Employee may then elect, in the Employee’s sole discretion, which and how much
of the total Payments are to be eliminated or reduced (as long as after such
election no Excise Tax will be payable) and shall advise the Company in writing
of the Employee’s election within 10 days of receipt of notice. If no such
election is made by the Employee within such 10 day period, then the Company may
elect which and how much of the total Payments are to be eliminated or reduced
(as long as after such election no Excise Tax will be payable) and shall notify
the Employee promptly of such election.

 

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     10. Successors.

  a)   Company’s Successors. The Company shall require any successor (whether
direct or indirect by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company’s business or assets, by
an agreement in substance and form satisfactory to the Employee, to assume this
Agreement and to agree expressly to perform this Agreement in the same manner
and to the same extent as the Company would be required to perform it in the
absence of a succession. F or all purposes under this Agreement, the term
“Company” shall include any successor to the business or assets of the Company
which executes and delivers the assumption agreement described in this
Subsection (a) or which becomes bound by this Agreement by operation of law.

  b)   Employee’s Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee’s
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

     11. Miscellaneous Provisions.

  a)   Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to the Employee at the home address which the
Employee most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Secretary.     b)  
Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed
by the Employee and by an authorized officer of the Company (other than the
Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.     c)   Other Agreements; Amendments. This
Agreement does not supersede the Employment Agreement dated April 1, 1999,
between

 

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      the Employee and the company, except to the extent that the severance pay
and benefits provided in Sections 6, 7 and 8 of this Agreement (and the related
definitions) are greater than the severance pay and benefits provided by such
Employment Agreement. In no event shall the Employee be entitled to severance
pay both under this Agreement and under such Employment Agreement following a
termination of employment. This Agreement does not supersede any stock option or
restricted stock agreement between the Employee and the Company, except to the
extent that Section 8(a) of this Agreement provides for earlier exercisability
or vesting or a longer post-termination exercise period than such stock option
or restricted stock agreement. This Agreement may be amended only in writing, by
an instrument executed by both parties.     d)   No Setoff; Withholding Taxes.
There shall be no right of setoff or counterclaim, with respect to any claim,
debt or obligation, against payments to the Employee under this Agreement.
Except as provided in Section 9, all payments made under this Agreement shall be
subject to reduction to reflect taxes required to be withheld by law. The
payments received under this Agreement shall be in lieu of, and not in addition
to, any payments received in connection with any Employment Agreement by and
between the Employee and the Company under any Company’s general severance plan
covering all its employees and should any payment be made under such Employment
Agreement or severance plan, the amounts payable hereunder shall be reduced by
such payments.     e)   Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Florida, except their choice-of-law provisions.     f)  
Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision hereof, which shall remain in full force and effect.     g)  
Arbitration. Except as otherwise provided in Section , any controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in Jacksonville, Florida, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be the exclusive remedy for resolving disputes arising under
this Agreement. Discovery shall be permitted to the same extent as in a
proceeding under the Federal Rules of Civil Procedure. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. All fees and expenses of the arbitrator and such Association shall be
paid as determined by the arbitrator.

 

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  h)   Legal Fees. In the event of any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, the company shall pay the
reasonable fees and costs of the Employee’s attorneys attributable to such
controversy or claim, provided that the Employee prevails on at least one
material issue arising in such controversy or claim.     i)   No Assignment The
rights of any person to payments or benefits under this Agreement shall not be
made subject to option or assignment, either by voluntary or involuntary
assignment or by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor’s process, and any action in violation
of this Subsection (i) shall be void.

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.

                         EMPLOYEE       THE ST. JOE COMPANY    
 
                   
   By:
  /s/ Stephen W. Solomon       By:   /s/ Michael F. Bayer    
 
                   
 
  Stephen W. Solomon           Michael F. Bayer        Title:           Title:
Vice President Human    
 
                                Resources & Administration    
 
                       Date: April 25, 1999       Date: March 31, 1999