<PAGE>
                                                                   Exhibit 10.25


EXECUTION DRAFT

================================================================================

                               THE ST. JOE COMPANY

      $18,000,000 5.64% Senior Secured Notes, Series A due February 7, 2005
     $67,000,000 6.66% Senior Secured Notes, Series B, due February 7, 2007
     $15,000,000 7.02% Senior Secured Notes, Series C, due February 7, 2009
     $75,000,000 7.37% Senior Secured Notes, Series D, due February 7, 2012

                             NOTE PURCHASE AGREEMENT

                          Dated as of February 7, 2002

================================================================================
<PAGE>


                                TABLE OF CONTENTS

                          (Not a part of the Agreement)

<TABLE>
<CAPTION>
        SECTION                                        HEADING                                  PAGE
-------------------    ----------------------------------------------------------------------   ----
<S>                    <C>                                                                      <C>
SECTION 1.             AUTHORIZATION OF NOTES................................................     1

SECTION 2.             SALE AND PURCHASE OF NOTES; GUARANTY..................................     1
       Section 2.1.    Purchase and Sale of Notes............................................     1
       Section 2.2.    Subsidiary Guaranty, Pledge Agreement and Intercreditor Agreement.....     2

SECTION 3.             CLOSING...............................................................     3

SECTION 4.             CONDITIONS TO CLOSING.................................................     3

       Section 4.1.    Representations and Warranties........................................     3
       Section 4.2.    Performance; No Default...............................................     3
       Section 4.3.    Compliance Certificates...............................................     4
       Section 4.4.    Opinions of Counsel...................................................     4
       Section 4.5.    Purchase Permitted By Applicable Law, Etc.............................     4
       Section 4.6.    Sale of Other Notes...................................................     5
       Section 4.7.    Payment of Special Counsel Fees.......................................     5
       Section 4.8.    Private Placement Number..............................................     5
       Section 4.9.    Changes in Corporate Structure........................................     5
       Section 4.10.   Consent...............................................................     5
       Section 4.11.   Subsidiary Guaranty, Etc..............................................     5
       Section 4.12.   Funding Instructions..................................................     5
       Section 4.13.   Proceedings and Documents.............................................     5

SECTION 5.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................     5

       Section 5.1.    Organization; Power and Authority.....................................     6
       Section 5.2.    Authorization, Etc....................................................     6
       Section 5.3.    Disclosure............................................................     6
       Section 5.4.    Organization and Ownership of Shares of Subsidiaries; Affiliates......     6
       Section 5.5.    Financial Statements..................................................     7
       Section 5.6.    Compliance with Laws, Other Instruments, Etc..........................     7
       Section 5.7.    Governmental Authorizations, Etc......................................     7
       Section 5.8.    Litigation; Observance of Agreements, Statutes and Orders.............     8
       Section 5.9.    Taxes.................................................................     8
       Section 5.10.   Title to Property; Leases.............................................     8
       Section 5.11.   Licenses, Permits, Etc................................................     8
       Section 5.12.   Compliance with ERISA.................................................     9
</TABLE>

                                       -i-

<PAGE>

<TABLE>
<S>                                                                                              <C>
       Section 5.13.   Private Offering by the Company.......................................    10
       Section 5.14.   Use of Proceeds; Margin Regulations...................................    10
       Section 5.15.   Existing Indebtedness; Future Liens...................................    10
       Section 5.16.   Foreign Assets Control Regulations, Etc...............................    10
       Section 5.17.   Status under Certain Statutes.........................................    11
       Section 5.18.   Notes Rank Pari Passu.................................................    11
       Section 5.19.   Environmental Matters.................................................    11

SECTION 6.             REPRESENTATIONS OF THE PURCHASER......................................    12

       Section 6.1.    Purchase for Investment...............................................    12
       Section 6.2.    Source of Funds.......................................................    12

SECTION 7.             INFORMATION AS TO THE COMPANY.........................................    13

       Section 7.1.    Financial and Business Information....................................    13
       Section 7.2.    Officer's Certificate.................................................    16
       Section 7.3.    Inspection............................................................    16

SECTION 8.             PREPAYMENT OF THE NOTES...............................................    17

       Section 8.1.    Required Prepayments..................................................    17
       Section 8.2.    Optional Prepayments with Make-Whole Amount...........................    17
       Section 8.3.    Change in Control.....................................................    17
       Section 8.4.    Allocation of Partial Prepayments.....................................    20
       Section 8.5.    Maturity; Surrender, Etc..............................................    20
       Section 8.6.    Purchase of Notes.....................................................    20
       Section 8.7.    Make-Whole Amount.....................................................    20

SECTION 9.             AFFIRMATIVE COVENANTS.................................................    22

       Section 9.1.    Compliance with Law...................................................    22
       Section 9.2.    Insurance.............................................................    22
       Section 9.3.    Maintenance of Properties.............................................    22
       Section 9.4.    Payment of Taxes and Claims...........................................    22
       Section 9.5.    Corporate Existence, Etc..............................................    23
       Section 9.6.    [Reserved]............................................................    23
       Section 9.7.    Notes to Rank Pari Passu..............................................    23
       Section 9.8.    Guaranty by Subsidiaries..............................................    23

SECTION 10.            NEGATIVE COVENANTS....................................................    24

       Section 10.1.   Consolidated Net Worth................................................    24
       Section 10.2.   Leverage Ratio........................................................    24
       Section 10.3.   Unencumbered Assets Ratio.............................................    24
       Section 10.4.   Fixed Charges Coverage Ratio..........................................    24
       Section 10.5.   Limitations on Indebtedness...........................................    24
       Section 10.6.   Limitation on Liens...................................................    25
       Section 10.7.   Mergers, Consolidations, Etc..........................................    27
</TABLE>

                                      -ii-

<PAGE>

<TABLE>
<S>                                                                                              <C>
       Section 10.8.   Sale of Assets, Etc...................................................    28
       Section 10.9.   Transactions with Affiliates..........................................    29
       Section 10.10.  Nature of Business....................................................    29

SECTION 11.            EVENTS OF DEFAULT.....................................................    30

SECTION 12.            REMEDIES ON DEFAULT, ETC..............................................    32

       Section 12.1.   Acceleration..........................................................    32
       Section 12.2.   Other Remedies........................................................    33
       Section 12.3.   Rescission............................................................    33
       Section 12.4.   No Waivers or Election of Remedies, Expenses, Etc.....................    33

SECTION 13.            REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.........................    33

       Section 13.1.   Registration of Notes.................................................    33
       Section 13.2.   Transfer and Exchange of Notes........................................    34
       Section 13.3.   Replacement of Notes..................................................    34
       Section 13.4.   Legend................................................................    34

SECTION 14.            PAYMENTS ON NOTES.....................................................    35

       Section 14.1.   Place of Payment......................................................    35
       Section 14.2.   Home Office Payment...................................................    35

SECTION 15.            EXPENSES, ETC.........................................................    35

       Section 15.1.   Transaction Expenses..................................................    35
       Section 15.2.   Survival..............................................................    36

SECTION 16.            SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT..........    36

SECTION 17.            AMENDMENT AND WAIVER..................................................    36

       Section 17.1.   Requirements..........................................................    36
       Section 17.2.   Solicitation of Holders of Notes......................................    37
       Section 17.3.   Binding Effect, Etc...................................................    37
       Section 17.4.   Notes Held by Company, Etc............................................    37

SECTION 18.            NOTICES...............................................................    38

SECTION 19.            REPRODUCTION OF DOCUMENTS.............................................    38

SECTION 20.            CONFIDENTIAL INFORMATION..............................................    39

SECTION 21.            SUBSTITUTION OF PURCHASER.............................................    40
</TABLE>

                                      -iii-

<PAGE>

<TABLE>
<S>                                                                                              <C>
SECTION 22.            MISCELLANEOUS.........................................................    40

       Section 22.1.   Successors and Assigns................................................    40
       Section 22.2.   Payments Due on Non-Business Days.....................................    40
       Section 22.3.   Severability..........................................................    40
       Section 22.4.   Construction..........................................................    40
       Section 22.5.   Counterparts..........................................................    41
       Section 22.6.   Governing Law.........................................................    41

Signature....................................................................................    42
</TABLE>

                                      -iv-

<PAGE>

<TABLE>
<S>                    <C>
SCHEDULE A        --   INFORMATION RELATING TO PURCHASERS

SCHEDULE B        --   DEFINED TERMS

SCHEDULE 2.2(a)   --   Subsidiary Guarantors

SCHEDULE 4.9      --   Changes in Corporate Structure

SCHEDULE 5.4      --   Subsidiaries of the Company and Ownership of Subsidiary Stock

SCHEDULE 5.5      --   Financial Statements

SCHEDULE 5.11     --   Patents, Etc.

SCHEDULE 5.14     --   Use of Proceeds

SCHEDULE 5.15     --   Existing Indebtedness

SCHEDULE 10.6     --   Existing Liens

EXHIBIT 1(a)      --   Form of 5.64% Senior Secured Note, Series A, due February 7, 2005

EXHIBIT 1(b)      --   Form of 6.66% Senior Secured Note, Series B, due February 7, 2007

EXHIBIT 1(c)      --   Form of 7.02% Senior Secured Note, Series C, due February 7, 2009

EXHIBIT 1(d)      --   Form of 7.37% Senior Secured Note, Series D, due February 7, 2012

EXHIBIT 2.2(a)    --   Form of Subsidiary Guaranty

EXHIBIT 2.2(c)    --   Form of Intercreditor Agreement

EXHIBIT 4.4(a)    --   Form of Opinion of Special Counsel for the Company

EXHIBIT 4.4(b)    --   Form of Opinion of Special Counsel for the Purchasers
</TABLE>

                                       -v-

<PAGE>

                               THE ST. JOE COMPANY
                        1650 PRUDENTIAL DRIVE, SUITE 400
                           JACKSONVILLE, FLORIDA 32207

     $18,000,000 5.64% Senior Secured Notes, Series A, due February 7, 2005
     $67,000,000 6.66% Senior Secured Notes, Series B, due February 7, 2007
     $15,000,000 7.02% Senior Secured Notes, Series C, due February 7, 2009
     $75,000,000 7.37% Senior Secured Notes, Series D, due February 7, 2012

                                                    Dated as of February 7, 2002

TO THE PURCHASER LISTED IN THE ATTACHED
SCHEDULE A WHO IS A SIGNATORY HERETO:

Ladies and Gentlemen:

         THE ST. JOE COMPANY, a Florida corporation (the "Company"), agrees with
you as follows:

SECTION 1. AUTHORIZATION OF NOTES.

         The Company will authorize the issue and sale of $18,000,000 aggregate
principal amount of its 5.64% Senior Secured Notes, Series A, due February 7,
2005 (the "Series A Notes"), (b) $67,000,000 aggregate principal amount of its
6.66% Senior Secured Notes, Series B, due February 7, 2007 (the "Series B
Notes"), (c) $15,000,000 aggregate principal amount of its 7.02% Senior Secured
Notes, Series C, due February 7, 2009 (the "Series C Notes") and (d) $75,000,000
aggregate principal amount of its 7.37% Senior Secured Notes, Series D, due
February 7, 2012 (the "Series D Notes"; the Series A Notes, the Series B Notes,
the Series C Notes and the Series D Notes being hereinafter collectively
referred to as the "Notes," such term to include any such notes issued in
substitution therefor pursuant to SECTION 13 of this Agreement or the Other
Agreements (as hereinafter defined)). The Notes shall be substantially in the
form set out in EXHIBIT 1(a), 1(b), 1(c) and 1(d), respectively with such
changes therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in SCHEDULE B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.

SECTION 2. SALE AND PURCHASE OF NOTES; GUARANTY.

         Section 2.1. Purchase and Sale of Notes. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to you and you
will purchase from the Company, at the Closing provided for in SECTION 3, Notes
in the principal amount and of the series specified opposite your name in
SCHEDULE A at the purchase price of 100% of the principal amount thereof.
Contemporaneously with entering into this Agreement, the Company is entering
into separate Note Purchase Agreements (the "Other Agreements") identical with
this Agreement with each of the other purchasers named in SCHEDULE A (the "Other
Purchasers"), providing for

<PAGE>

the sale at such Closing to each of the Other Purchasers of Notes in the
principal amount and of the series specified opposite its name in SCHEDULE A.
Your obligation hereunder, and the obligations of the Other Purchasers under the
Other Agreements, are several and not joint obligations, and you shall have no
obligation under any Other Agreement and no liability to any Person for the
performance or nonperformance by any Other Purchaser thereunder.

         Section 2.2. Subsidiary Guaranty, Pledge Agreement and Intercreditor
Agreement. (a) The payment by the Company of all amounts due with respect to the
Notes and the performance by the Company of its obligations under this Agreement
and the Other Agreements will be absolutely and unconditionally guaranteed by
the entities identified on SCHEDULE 2.2(a) (together with any additional
Subsidiary who delivers a guaranty pursuant to SECTION 9.8, the "Subsidiary
Guarantors") pursuant to the guaranty agreement substantially in the form of
EXHIBIT 2.2 (a) attached hereto and made a part hereof (as the same may be
amended, modified, extended or renewed, the "Subsidiary Guaranty").

         (b) The Notes will be entitled to the benefit of and will be secured by
the Amended and Restated Pledge Agreement dated as of February 7, 2002 (as the
same may be further amended, supplemented, restated or otherwise modified from
time to time, the "Pledge Agreement") by and between St. Joe Finance Company, a
Florida corporation (the "Pledgor"), and First Union National Bank, as
collateral agent.

         (c) The enforcement of the rights and benefits in respect of the
Subsidiary Guaranty and the Pledge Agreement and the allocation of proceeds
thereof shall be subject to an intercreditor agreement substantially in the form
of EXHIBIT 2.2(c) attached hereto and made a part hereof (as the same may be
amended, modified, extended or renewed, the "Intercreditor Agreement").

         (d) The holders of the Notes acknowledge and agree that such holders
will discharge and release any Subsidiary Guarantor from the Subsidiary Guaranty
to which it is a party pursuant to the written request of the Company, provided
that (i) such Subsidiary Guarantor has been released and discharged as an
obligor and guarantor under and in respect of all Indebtedness of the Company
pursuant to the Bank Credit Agreement and the Company so certifies to the
holders of the Notes in a certificate which accompanies such request for release
and discharge, (ii) any such release and discharge shall be expressly
conditioned upon receipt by the holders of the Notes of a written agreement
executed by the Subsidiary Guarantor to be released pursuant to which such
Subsidiary Guarantor shall agree that if, for any reason whatsoever, it
thereafter becomes an obligor or guarantor under and in respect of any
Indebtedness of the Company pursuant to the Bank Credit Agreement, then such
Subsidiary Guarantor shall contemporaneously provide written notice thereof to
the holders of the Notes accompanied by an executed Subsidiary Guaranty of such
Subsidiary Guarantor, and (iii) at the time of such release and discharge, the
Company shall deliver a certificate of a Responsible Officer to the holders of
the Notes to the effect that no Default or Event of Default exists.

         (e) The Company agrees that it will not, nor will it permit any
Subsidiary or any Affiliate which the Company controls to, directly or
indirectly, pay or cause to be paid any consideration or remuneration, whether
by way of supplemental or additional interest, fee or

                                       -2-

<PAGE>

otherwise, to any creditor of the Company or of any Subsidiary Guarantor as
consideration for or as an inducement to the entering into by any such creditor
of any release or discharge of any Subsidiary Guarantor with respect to any
liability of such Subsidiary Guarantor as an obligor or guarantor under or in
respect of Indebtedness of the Company, unless such consideration or
remuneration is concurrently paid, on the same terms, ratably to the holders of
all of the Notes then outstanding.

SECTION 3. CLOSING.

         The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, at 10:00 a.m. Chicago time, at a closing (the
"Closing") on February 7, 2002. At the Closing the Company will deliver to you
the Notes of the series to be purchased by you in the form of a single Note (or
such greater number of Notes in denominations of at least $100,000 as you may
request) dated the date of the Closing and registered in your name (or in the
name of your nominee), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 2112620925448 at First Union National Bank, Jacksonville,
Florida, ABA #063000021. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this SECTION 3, or any of the conditions
specified in SECTION 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.

SECTION 4. CONDITIONS TO CLOSING.

         Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:

         Section 4.1. Representations and Warranties. (a) The representations
and warranties of the Company in this Agreement shall be correct when made and
at the time of the Closing.

         (b) The representations and warranties of each Subsidiary Guarantor in
the Subsidiary Guaranty shall be correct when made and at the time of Closing.

         Section 4.2. Performance; No Default. (a) The Company shall have
performed and complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing, and after giving effect to the issue and sale of the Notes (and the
application of the proceeds thereof as contemplated by SCHEDULE 5.14), no
Default or Event of Default shall have occurred and be continuing. Neither the
Company nor any Subsidiary shall have entered into any transaction since the
date of the Memorandum that would have been prohibited by SECTION 10 hereof had
such Section applied since such date.

                                       -3-

<PAGE>

         (b) Each Subsidiary Guarantor shall have performed and complied with
all agreements and conditions contained in the Subsidiary Guaranty required to
be performed and complied with by it prior to or at the Closing, and after
giving effect to the issue and sale of Notes (and the application of the
proceeds thereof as contemplated by SCHEDULE 5.14), no Default or Event of
Default shall have occurred and be continuing.

         Section 4.3. Compliance Certificates.

         (a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in SECTIONS 4.1(a), 4.2(a) and 4.9 have been fulfilled.

         (b) Subsidiary Guarantor Officer's Certificate. Each Subsidiary
Guarantor shall have delivered to you a certificate of an authorized officer,
dated the date of the Closing, certifying that the conditions set forth in
SECTION 4.1(b), 4.2(b) and 4.9 have been fulfilled.

         (c) Secretary's Certificate. The Company shall have delivered to you a
certificate certifying as to the true, correct and complete resolutions attached
thereto and to other corporate proceedings relating to the authorization,
execution and delivery of the Notes and the Agreements.

         (d) Subsidiary Guarantor Secretary's Certificate. Each Subsidiary
Guarantor shall have delivered to you a certificate certifying as to the true,
correct and complete resolutions attached thereto and to other corporate
proceedings relating to the authorization, execution and delivery of the
Subsidiary Guaranty.

         Section 4.4. Opinions of Counsel. You shall have received opinions in
form and substance satisfactory to you, dated the date of the Closing (a) from
Foley & Lardner, counsel for the Company and the Subsidiary Guarantors, covering
the matters set forth in EXHIBIT 4.4(a) and covering such other matters incident
to the transactions contemplated hereby as you or your counsel may reasonably
request (and the Company and Subsidiary Guarantors hereby instruct its counsel
to deliver such opinion to you) and (b) from Chapman and Cutler, your special
counsel in connection with such transactions, substantially in the form set
forth in EXHIBIT 4.4(b) and covering such other matters incident to such
transactions as you may reasonably request.

         Section 4.5. Purchase Permitted By Applicable Law, Etc. On the date of
the Closing your purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (b) not violate any applicable law or
regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System) and (c) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.

                                       -4-

<PAGE>

         Section 4.6. Sale of Other Notes. Contemporaneously with the Closing,
the Company shall sell to the Other Purchasers, and the Other Purchasers shall
purchase, the Notes to be purchased by them at the Closing as specified in
SCHEDULE A.

         Section 4.7. Payment of Special Counsel Fees. Without limiting the
provisions of SECTION 15.1, the Company shall have paid on or before the Closing
the fees, charges and disbursements of your special counsel referred to in
SECTION 4.4 to the extent reflected in a statement of such counsel rendered to
the Company at least one Business Day prior to the Closing.

         Section 4.8. Private Placement Number. A Private Placement Number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for each series of the Notes.

         Section 4.9. Changes in Corporate Structure. Except as specified in
SCHEDULE 4.9, the Company and the Subsidiary Guarantors shall not have changed
their respective jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in SCHEDULE 5.5.

         Section 4.10. Consent. You shall have received true, correct and
complete copies, certified by a Responsible Officer of the Company of: (a) the
Bank Credit Agreement, (b) the Pledge Agreement and (c) any necessary
amendments, consents or waivers to each of the Bank Credit Agreement and the
Pledge Agreement to permit the issuance and sale of the Notes.

         Section 4.11. Subsidiary Guaranty, Etc. The Subsidiary Guaranty, the
Pledge Agreement and the Intercreditor Agreement shall be in full force and
effect and shall constitute the legal, valid and binding obligations of all of
the parties thereto.

         Section 4.12. Funding Instructions. At least three Business Days prior
to the date of the Closing, you shall have received written instructions
executed by a Responsible Officer of the Company directing the manner of the
payment of funds and setting forth (a) the name and address of the transferee
bank, (b) such transferee bank's ABA number, (c) the account name and number
into which the purchase price for the Notes is to be deposited, and (d) the name
and telephone number of the account representative responsible for verifying
receipt of such funds.

         Section 4.13. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to you that:

                                       -5-

<PAGE>

         Section 5.1. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Other
Agreements and the Notes and to perform the provisions hereof and thereof.

         Section 5.2. Authorization, Etc. This Agreement, the Other Agreements
and the Notes have been duly authorized by all necessary corporate action on the
part of the Company, and this Agreement constitutes, and upon execution and
delivery thereof each Note will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

         Section 5.3. Disclosure. The Company, through its agent, Wachovia
Securities, has delivered to you and each Other Purchaser a copy of a Private
Placement Memorandum, dated December, 2001 (the "Memorandum"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. This Agreement, the Memorandum, the
documents, certificates or other writings delivered to you by or on behalf of
the Company in connection with the transactions contemplated hereby and the
financial statements listed in SCHEDULE 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Since December 31, 2000, there has
been no change in the financial condition, operations, business, properties or
prospects of the Company or any Subsidiary except changes that individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.

         Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) SCHEDULE 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) of
the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.

                                       -6-

<PAGE>

         (b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in SCHEDULE 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in SCHEDULE 5.4).

         (c) Each Subsidiary identified in SCHEDULE 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.

         (d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement, the agreements listed
on SCHEDULE 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.

         Section 5.5. Financial Statements. The Company has delivered to each
Purchaser copies of the financial statements of the Company and its Subsidiaries
listed on SCHEDULE 5.5. All of said financial statements (including in each case
the related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such financial statements and the consolidated
results of their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).

         Section 5.6. Compliance with Laws, Other Instruments, Etc. The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Subsidiary is bound or by
which the Company or any Subsidiary or any of their respective properties may be
bound or affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (c) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.

         Section 5.7. Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in

                                       -7-

<PAGE>

connection with the execution, delivery or performance by the Company of this
Agreement or the Notes.

         Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) There are no actions, suits or proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company or any Subsidiary or
any property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

         (b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

         Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (a) the amount
of which is not individually or in the aggregate Material or (b) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are adequate. The Federal
income tax liabilities of the Company and its Subsidiaries have been determined
by the Internal Revenue Service and paid for all fiscal years up to and
including the fiscal year ended December 31, 1999. The Federal tax returns of
the Company and its Subsidiaries for the fiscal year ended December 31, 2000
have been submitted to the Internal Revenue Service though they have not
audited.

         Section 5.10. Title to Property; Leases. The Company and its
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in SECTION 5.5 or
purported to have been acquired by the Company or any Subsidiary after said date
(except as sold or otherwise disposed of in the ordinary course of business), in
each case free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.

         Section 5.11. Licenses, Permits, Etc. Except as disclosed in SCHEDULE
5.11,

                  (a) the Company and its Subsidiaries own or possess all
         licenses, permits, franchises, authorizations, patents, copyrights,
         service marks, trademarks and trade

                                       -8-

<PAGE>

         names, or rights thereto, that individually or in the aggregate are
         Material, without known conflict with the rights of others;

                  (b) to the best knowledge of the Company, no product of the
         Company or any of its Subsidiaries infringes any license, permit,
         franchise, authorization, patent, copyright, service mark, trademark,
         trade name or other right owned by any other Person where the
         infringement would be likely to result in a Material Adverse Effect;
         and

                  (c) to the best knowledge of the Company, there is no
         violation by any Person of any right of the Company or any of its
         Subsidiaries with respect to any patent, copyright, service mark,
         trademark, trade name or other right owned or used by the Company or
         any of its Subsidiaries where the violation would be likely to result
         in a Material Adverse Effect.

         Section 5.12. Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.

         (b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in Section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in Section 3 of ERISA.

         (c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

         (d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is not Material.

         (e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406 of

                                       -9-

<PAGE>

ERISA or in connection with which a tax could be imposed pursuant to Section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first
sentence of this SECTION 5.12(e) is made in reliance upon and subject to the
accuracy of your representation in SECTION 6.2 as to the sources of the funds
used to pay the purchase price of the Notes to be purchased by you.

         Section 5.13. Private Offering by the Company. Neither the Company nor
anyone acting on its behalf has offered the Notes, Subsidiary Guaranty or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, any Person
other than you, the Other Purchasers and not more than 50 other Institutional
Investors, each of which has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes or
the Subsidiary Guaranty to the registration requirements of Section 5 of the
Securities Act.

         Section 5.14. Use of Proceeds; Margin Regulations. The Company will
apply the proceeds of the sale of the Notes as set forth in SCHEDULE 5.14. No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 2% of the value of the consolidated assets of the Company
and its Subsidiaries and the Company does not have any present intention that
margin stock will constitute more than 2% of the value of such assets. As used
in this Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in said Regulation U.

         Section 5.15. Existing Indebtedness; Future Liens. (a) SCHEDULE 5.15
sets forth a complete and correct list of all outstanding Indebtedness of the
Company and its Subsidiaries as of December 31, 2001, since which date there
have been no Material changes in the amounts, interest rates, sinking funds,
installment payments or maturities of the Indebtedness of the Company or any
Subsidiary. Neither the Company nor any Subsidiary is in default and no waiver
of default is currently in effect, in the payment of any principal or interest
on any Indebtedness of the Company or such Subsidiary and no event or condition
exists with respect to any Indebtedness of the Company or any Subsidiary that
would permit (or that with notice or the lapse of time, or both, would permit)
one or more Persons to cause such Indebtedness to become due and payable before
its stated maturity or before its regularly scheduled dates of payment.

         (b) Except as disclosed in SCHEDULE 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by SECTION 10.6.

         Section 5.16. Foreign Assets Control Regulations, Etc. Neither the sale
of the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the

                                      -10-

<PAGE>

Enemy Act, as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto. Without limiting
the foregoing, neither the Company nor any of its Subsidiaries (a) is or will
become a blocked person described in Section 1 of Executive Order 13224 of
September 23, 2001 Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49049 (2001))
or (b) engages or will engage in any dealings or transactions, or be otherwise
associated, with any such blocked person.

         Section 5.17. Status under Certain Statutes. Neither the Company nor
any Subsidiary is an "investment company" registered or required to be
registered or subject to regulation under the Investment Company Act of 1940, as
amended, or is subject to regulation under the Public Utility Holding Company
Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the
Federal Power Act, as amended.

         Section 5.18. Notes Rank Pari Passu. The obligations of the Company
under this Agreement and the Notes rank at least pari passu in right of payment
with all other Senior Indebtedness (actual or contingent) of the Company,
including, without limitation, all senior Indebtedness of the Company described
in SCHEDULE 5.15 hereto.

         Section 5.19. Environmental Matters. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to you in writing:

                  (a) neither the Company nor any Subsidiary has knowledge of
         any facts which would give rise to any claim, public or private, of
         violation of Environmental Laws or damage to the environment emanating
         from, occurring on or in any way related to real properties now or
         formerly owned, leased or operated by any of them or to other assets or
         their use, except, in each case, such as could not reasonably be
         expected to result in a Material Adverse Effect;

                  (b) neither the Company nor any of its Subsidiaries has stored
         any Hazardous Materials on real properties now or formerly owned,
         leased or operated by any of them or has disposed of any Hazardous
         Materials in a manner contrary to any Environmental Laws in each case
         in any manner that could reasonably be expected to result in a Material
         Adverse Effect; and

                  (c) all buildings on all real properties now owned, leased or
         operated by the Company or any of its Subsidiaries are in compliance
         with applicable Environmental Laws, except where failure to comply
         could not reasonably be expected to result in a Material Adverse
         Effect.

                                      -11-

<PAGE>

SECTION 6. REPRESENTATIONS OF THE PURCHASER.

         Section 6.1. Purchase for Investment. (a) You represent that you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof; provided that the disposition of
your or their property shall at all times be within your or their control. In
addition, you represent that you are an Institutional Accredited Investor within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.

         (b) You acknowledge that you have received such information concerning
the Company and the Notes and have been given the opportunity to ask such
questions of and receive answers from representatives of the Company as you deem
sufficient, based on information provided by the Company to you, to make an
informed investment decision with respect to the Notes.

         Section 6.2. Source of Funds. You represent that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:

                  (a) the Source is an "insurance company general account"
         within the meaning of Department of Labor Prohibited Transaction
         Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
         benefit plan, treating as a single plan, all plans maintained by the
         same employer or employee organization, with respect to which the
         amount of the general account reserves and liabilities for all
         contracts held by or on behalf of such plan, exceed ten percent (10%)
         of the total reserves and liabilities of such general account
         (exclusive of separate account liabilities) plus surplus, as set forth
         in the NAIC Annual Statement filed with your state of domicile; or

                  (b) the Source is either (i) an insurance company pooled
         separate account, within the meaning of PTE 90-1 (issued January 29,
         1990), or (ii) a bank collective investment fund, within the meaning of
         the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed
         to the Company in writing pursuant to this paragraph (b), no employee
         benefit plan or group of plans maintained by the same employer or
         employee organization beneficially owns more than 10% of all assets
         allocated to such pooled separate account or collective investment
         fund; or

                  (c) the Source constitutes assets of an "investment fund"
         (within the meaning of Part V of the QPAM Exemption) managed by a
         "qualified professional asset manager" or "QPAM" (within the meaning of
         Part V of the QPAM Exemption), no employee benefit plan's assets that
         are included in such investment fund, when combined with the assets of
         all other employee benefit plans established or maintained by the same
         employer or by an affiliate (within the meaning of Section V(c)(1) of
         the QPAM

                                      -12-

<PAGE>

         Exemption) of such employer or by the same employee organization and
         managed by such QPAM, exceed 20% of the total client assets managed by
         such QPAM, the conditions of Part l(c) and (g) of the QPAM Exemption
         are satisfied, neither the QPAM nor a Person controlling or controlled
         by the QPAM (applying the definition of "control" in Section V(e) of
         the QPAM Exemption) owns a 5% or more interest in the Company and (i)
         the identity of such QPAM and (ii) the names of all employee benefit
         plans whose assets are included in such investment fund have been
         disclosed to the Company in writing pursuant to this paragraph (C); or

                  (d) the Source is a governmental plan; or

                  (e) the Source is one or more employee benefit plans, or a
         separate account or trust fund comprised of one or more employee
         benefit plans, each of which has been identified to the Company in
         writing pursuant to this paragraph (E); or

                  (f) the Source does not include assets of any employee benefit
         plan, other than a plan exempt from the coverage of ERISA.

         As used in this SECTION 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.

SECTION 7. INFORMATION AS TO THE COMPANY.

         Section 7.1. Financial and Business Information. The Company shall
deliver to each holder of Notes that is an Institutional Investor:

                  (a) Quarterly Statements -- within 60 days after the end of
         each quarterly fiscal period in each fiscal year of the Company (other
         than the last quarterly fiscal period of each such fiscal year),
         duplicate copies of:

                           (i) a consolidated balance sheet of the Company and
                  its Subsidiaries as at the end of such quarter, and

                           (ii) consolidated statements of income, changes in
                  shareholders' equity and cash flows of the Company and its
                  Subsidiaries for such quarter and (in the case of the second
                  and third quarters) for the portion of the fiscal year ending
                  with such quarter,

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments; provided that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements

                                      -13-

<PAGE>

therefor and filed with the Securities and Exchange Commission shall be deemed
to satisfy the requirements of this SECTION 7.1(a);

                  (b) Annual Statements -- within 105 days after the end of each
         fiscal year of the Company, duplicate copies of,

                           (i) a consolidated balance sheet of the Company and
                  its Subsidiaries, as at the end of such year, and

                           (ii) consolidated statements of income, changes in
                  shareholders' equity and cash flows of the Company and its
                  Subsidiaries, for such year,

         setting forth in each case in comparative form the figures for the
         previous fiscal year, all in reasonable detail, prepared in accordance
         with GAAP, and accompanied by:

                                    (1) an opinion thereon of independent
                           certified public accountants of recognized national
                           standing, which opinion shall state that such
                           financial statements present fairly, in all material
                           respects, the financial position of the companies
                           being reported upon and their results of operations
                           and cash flows and have been prepared in conformity
                           with GAAP, and that the examination of such
                           accountants in connection with such financial
                           statements has been made in accordance with generally
                           accepted auditing standards, and that such audit
                           provides a reasonable basis for such opinion in the
                           circumstances, and

                                    (2) a certificate of such accountants
                           stating that they have reviewed this Agreement and
                           stating further whether, in making their audit, they
                           have become aware of any condition or event that then
                           constitutes a Default or an Event of Default, and, if
                           they are aware that any such condition or event then
                           exists, specifying the nature and period of the
                           existence thereof (it being understood that such
                           accountants shall not be liable, directly or
                           indirectly, for any failure to obtain knowledge of
                           any Default or Event of Default unless such
                           accountants should have obtained knowledge thereof in
                           making an audit in accordance with generally accepted
                           auditing standards or did not make such an audit),

         provided that the delivery within the time period specified above of
         the Company's Annual Report on Form 10-K for such fiscal year (together
         with the Company's annual report to shareholders, if any, prepared
         pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
         with the requirements therefor and filed with the Securities and
         Exchange Commission, together with the accountant's certificate
         described in clause (2) above, shall be deemed to satisfy the
         requirements of this SECTION 7.1(b);

                  (c) SEC and Other Reports -- promptly upon their becoming
         available, one copy of (i) each financial statement, report, notice or
         proxy statement sent by the Company or any Subsidiary to public
         securities holders generally, and (ii) each regular or

                                      -14-

<PAGE>

         periodic report, each registration statement (without exhibits except
         as expressly requested by such holder), and each prospectus and all
         amendments thereto filed by the Company or any Subsidiary with the
         Securities and Exchange Commission and of all press releases and other
         statements made available generally by the Company or any Subsidiary to
         the public concerning developments that are Material;

                  (d) Notice of Default or Event of Default -- promptly, and in
         any event within five days after a Responsible Officer becoming aware
         of the existence of any Default or Event of Default or that any Person
         has given any notice or taken any action with respect to a claimed
         default hereunder or that any Person has given any notice or taken any
         action with respect to a claimed default of the type referred to in
         SECTION 11(f), a written notice specifying the nature and period of
         existence thereof and what action the Company is taking or proposes to
         take with respect thereto;

                  (e) ERISA Matters -- promptly, and in any event within five
         days after a Responsible Officer becoming aware of any of the
         following, a written notice setting forth the nature thereof and the
         action, if any, that the Company or an ERISA Affiliate proposes to take
         with respect thereto:

                           (i) with respect to any Plan, any reportable event,
                  as defined in Section 4043(c) of ERISA and the regulations
                  thereunder, for which notice thereof has not been waived
                  pursuant to such regulations as in effect on the date hereof;
                  or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under Section 4042 of ERISA for the termination of, or the
                  appointment of a trustee to administer, any Plan, or the
                  receipt by the Company or any ERISA Affiliate of a notice from
                  a Multiemployer Plan that such action has been taken by the
                  PBGC with respect to such Multiemployer Plan; or

                           (iii) any event, transaction or condition that could
                  result in the incurrence of any liability by the Company or
                  any ERISA Affiliate pursuant to Title I or IV of ERISA or the
                  penalty or excise tax provisions of the Code relating to
                  employee benefit plans, or in the imposition of any Lien on
                  any of the rights, properties or assets of the Company or any
                  ERISA Affiliate pursuant to Title I or IV of ERISA or such
                  penalty or excise tax provisions, if such liability or Lien,
                  taken together with any other such liabilities or Liens then
                  existing, could reasonably be expected to have a Material
                  Adverse Effect;

                  (f) Notices from Governmental Authority -- promptly, and in
         any event within 30 days of receipt thereof, copies of any notice to
         the Company or any Subsidiary from any Federal or state Governmental
         Authority relating to any order, ruling, statute or other law or
         regulation that could reasonably be expected to have a Material Adverse
         Effect; and

                                      -15-

<PAGE>


                  (g) Requested Information -- with reasonable promptness, such
         other data and information relating to the business, operations,
         affairs, financial condition, assets or properties of the Company or
         any of its Subsidiaries or relating to the ability of the Company to
         perform its obligations hereunder and under the Notes as from time to
         time may be reasonably requested by any such holder of Notes, including
         without limitation, such information as is required by Rule 144A under
         the Securities Act to be delivered to the prospective transferee of the
         Notes.

         Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to SECTION 7.1(a) or SECTION 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:

                  (a) Covenant Compliance -- (1) the information (including
         detailed calculations) required in order to establish whether the
         Company was in compliance with the requirements of SECTION 10.1 through
         SECTION 10.8 hereof, inclusive, during the quarterly or annual period
         covered by the statements then being furnished (including with respect
         to each such Section, where applicable, the calculations of the maximum
         or minimum amount, ratio or percentage, as the case may be, permissible
         under the terms of such Sections, and the calculation of the amount,
         ratio or percentage then in existence) and (2) the information required
         in order to establish whether the Company was in compliance with the
         requirements of SECTION 9.8 hereof during the quarterly or annual
         period covered by the statements then being furnished (including with
         respect to such Section, a list of each of the existing Subsidiary
         Guarantors and their respective jurisdictions of organization); and

                  (b) Event of Default -- a statement that such officer has
         reviewed the relevant terms hereof and has made, or caused to be made,
         under his or her supervision, a review of the transactions and
         conditions of the Company and its Subsidiaries from the beginning of
         the quarterly or annual period covered by the statements then being
         furnished to the date of the certificate and that such review shall not
         have disclosed the existence during such period of any condition or
         event that constitutes a Default or an Event of Default or, if any such
         condition or event existed or exists (including, without limitation,
         any such event or condition resulting from the failure of the Company
         or any Subsidiary to comply with any Environmental Law), specifying the
         nature and period of existence thereof and what action the Company
         shall have taken or proposes to take with respect thereto.

         Section 7.3. Inspection. The Company shall permit the representatives
of each holder of Notes that is an Institutional Investor:

                  (a) No Default -- if no Default or Event of Default then
         exists, at the expense of such holder and upon reasonable prior notice
         to the Company, to visit the principal executive office of the Company,
         to discuss the affairs, finances and accounts of the Company and its
         Subsidiaries with the Company's officers, and (with the consent of the
         Company, which consent will not be unreasonably withheld) its
         independent public accountants, and (with the consent of the Company,
         which consent will not be

                                      -16-

<PAGE>


         unreasonably withheld) to visit the other offices and properties of the
         Company and each Subsidiary, all at such reasonable times and as often
         as may be reasonably requested in writing; and

                  (b) Default -- if a Default or Event of Default then exists,
         at the expense of the Company, to visit and inspect any of the offices
         or properties of the Company or any Subsidiary, to examine all their
         respective books of account, records, reports and other papers, to make
         copies and extracts therefrom, and to discuss their respective affairs,
         finances and accounts with their respective officers and independent
         public accountants (and by this provision the Company authorizes said
         accountants to discuss the affairs, finances and accounts of the
         Company and its Subsidiaries), all at such times and as often as may be
         requested.

SECTION 8. PREPAYMENT OF THE NOTES.

         Section 8.1. Required Prepayments. No regularly scheduled prepayment of
the principal of any series of the Notes is required prior to the final maturity
date thereof.

         Section 8.2. Optional Prepayments with Make-Whole Amount. The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes, in an amount not less than 10% of the
aggregate principal amount of the Notes then outstanding in the case of a
partial prepayment (but if in the case of a partial prepayment, then against
each series of Notes in proportion to the aggregate principal amount outstanding
on each series), at 100% of the principal amount so prepaid, together with
interest accrued thereon to the date of such prepayment, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this SECTION 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date, the aggregate principal amount of each series of the Notes to be
prepaid on such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with SECTION 8.4), and the interest to be
paid on the prepayment date with respect to such principal amount being prepaid,
and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to such
prepayment, the Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.

         Section 8.3. Change in Control. (a) Notice of Change in Control or
Control Event. The Company will, within five Business Days after any Responsible
Officer has knowledge of the occurrence of any Change in Control or Control
Event, give written notice of such Change in Control or Control Event to each
holder of Notes unless notice in respect of such Change in Control (or the
Change in Control contemplated by such Control Event) shall have been given
pursuant to subparagraph (B) of this SECTION 8.3. If a Change in Control has
occurred, such notice shall contain and constitute an offer to prepay Notes as
described in subparagraph (C) of

                                      -17-

<PAGE>

this SECTION 8.3 and shall be accompanied by the certificate described in
subparagraph (g) of this SECTION 8.3.

         (b) Condition to Company Action. The Company will not take any action
that consummates or finalizes a Change in Control unless (i) at least 30 days
prior to such action it shall have given to each holder of Notes written notice
containing and constituting an offer to prepay Notes as described in
subparagraph (c) of this SECTION 8.3, accompanied by the certificate described
in subparagraph (g) of this SECTION 8.3, and (ii) contemporaneously with such
action, it prepays all Notes required to be prepaid in accordance with this
SECTION 8.3. It is understood that the Company does not control the Alford I.
Dupont Testimentary Trust.

         (c) Offer to Prepay Notes. The offer to prepay Notes contemplated by
subparagraphs (A) and (B) of this SECTION 8.3 shall be an offer to prepay, in
accordance with and subject to this SECTION 8.3, all, but not less than all, the
Notes held by each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on a date specified in such offer (the "Proposed
Prepayment Date"). If such Proposed Prepayment Date is in connection with an
offer contemplated by subparagraph (A) of this SECTION 8.3, such date shall be
not less than 30 days and not more than 120 days after the date of such offer
(if the Proposed Prepayment Date shall not be specified in such offer, the
Proposed Prepayment Date shall be the first Business Day after the 45th day
after the date of such offer).

         (d) Rejection. A holder of Notes may accept the offer to prepay made
pursuant to this SECTION 8.3 by causing a notice of such acceptance to be
delivered to the Company not later than 15 Business Days after receipt by such
holder of the most recent offer of prepayment. A failure by a holder of Notes to
respond to an offer to prepay made pursuant to this SECTION 8.3 shall be deemed
to constitute a rejection of such offer by such holder.

         (e) Prepayment. Prepayment of the Notes to be prepaid pursuant to this
SECTION 8.3 shall be at 100% of the principal amount of such Notes, together
with interest on such Notes accrued to the date of prepayment, but without
Make-Whole Amount or other premium. The prepayment shall be made on the Proposed
Prepayment Date except as provided in subparagraph (f) of this SECTION 8.3.

         (f) Deferral Pending Change in Control. The obligation of the Company
to prepay Notes pursuant to the offers required by subparagraph (C) and accepted
in accordance with subparagraph (D) of this SECTION 8.3 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control has
not occurred on the Proposed Prepayment Date in respect thereof, the prepayment
shall be deferred until, and shall be made on, the date on which such Change in
Control occurs. The Company shall keep each holder of Notes reasonably and
timely informed of (i) any such deferral of the date of prepayment, (ii) the
date on which such Change in Control and the prepayment are expected to occur,
and (iii) any determination by the Company that efforts to effect such Change in
Control have ceased or been abandoned (in which case the offers and acceptances
made pursuant to this SECTION 8.3 in respect of such Change in Control shall be
deemed rescinded).

                                      -18-

<PAGE>

         (g) Officer's Certificate. Each offer to prepay the Notes pursuant to
this SECTION 8.3 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
SECTION 8.3; (iii) the principal amount of each Note offered to be prepaid; (iv)
the interest that would be due on each Note offered to be prepaid, accrued to
the Proposed Prepayment Date; (v) that the conditions of this Section have been
fulfilled; and (vi) in reasonable detail, the nature and date or proposed date
of the Change in Control.

         (h) [Reserved].

         (i) Certain Definitions. "Change in Control" shall be deemed to have
occurred if any person (as such term is used in Section 13(d) and Section
14(d)(2) of the Exchange Act as in effect on the date of the Closing) or related
persons constituting a group (as such term is used in Rule 13d-5 under the
Exchange Act),

                  (i) become the "beneficial owners" (as such term is used in
         Rule 13d-3 under the Exchange Act as in effect on the date of the
         Closing), directly or indirectly, of more than 50% of the total voting
         power of all classes then outstanding of the Company's Voting Stock, or

                  (ii) acquire after the date of the Closing (x) the power to
         elect, appoint or cause the election or appointment of at least a
         majority of the members of the board of directors of the Company or (y)
         all or substantially all of the properties and assets of the Company.

In making any numerical calculation under clause (i) of this definition of
"Change in Control", Voting Stock beneficially owned by the Current Management
Group shall not be included in the numerator of such calculation, but shall be
included as outstanding Voting Stock in the determining the denominator of such
calculation.

         "Control Event" means:

                  (i) the execution by the Company or any of its Subsidiaries or
         Affiliates of any agreement or letter of intent with respect to any
         proposed transaction or event or series of transactions or events
         which, individually or in the aggregate, may reasonably be expected to
         result in a Change in Control,

                  (ii) the execution of any written agreement which, when fully
         performed by the parties thereto, would result in a Change in Control,
         or

                  (iii) the making of any written offer by any person (as such
         term is used in Section 13(d) and Section 14(d)(2) of the Exchange Act
         as in effect on the date of the Closing) or related persons
         constituting a group (as such term is used in Rule 13d-5 under the
         Exchange Act as in effect on the date of the Closing) to the holders of
         the stock of the Company, which offer, if accepted by the requisite
         number of holders, would result in a Change in Control.

                                      -19-

<PAGE>

         (j) All calculations contemplated in this SECTION 8.3 involving the
capital stock of any Person shall be made with the assumption that all
convertible Securities of such Person then outstanding and all convertible
Securities issuable upon the exercise of any warrants, options and other rights
outstanding at such time were converted at such time and that all options,
warrants and similar rights to acquire shares of capital stock of such Person
were exercised at such time.

         Section 8.4. Allocation of Partial Prepayments. In the case of each
partial prepayment of the Notes pursuant to SECTION 8.2, the principal amount of
the Notes to be prepaid shall be (a) allocated among each series of Notes in
proportion to the aggregate unpaid principal amount of each such series of Notes
and (b) allocated pro rata among all of the holders of each series of Notes at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment. All
partial prepayments made pursuant to SECTION 8.3 shall be applied only to the
Notes of the holders who have elected to participate in such prepayment.

         Section 8.5. Maturity; Surrender, Etc. In the case of each prepayment
of Notes pursuant to this SECTION 8 and subject to any deferral pursuant to
SECTION 8.3(f), the principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date and the applicable
Make-Whole Amount, if any. From and after such date, unless the Company shall
fail to pay such principal amount when so due and payable, together with the
interest and Make-Whole Amount, if any, as aforesaid, interest on such principal
amount shall cease to accrue. Any Note paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued, and no Note
shall be issued in lieu of any prepaid principal amount of any Note.

         Section 8.6. Purchase of Notes. The Company will not, and will not
permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any series of the outstanding Notes or any part or portion of any
series thereof except upon the payment or prepayment of each series of the Notes
in accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.

         Section 8.7. Make-Whole Amount. The term "Make-Whole Amount" means,
with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal; provided that
the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:

                  "Called Principal" means, with respect to any Note, the
         principal of such Note that is to be prepaid pursuant to SECTION 8.2 or
         has become or is declared to be immediately due and payable pursuant to
         SECTION 12.1, as the context requires.

                  "Discounted Value" means, with respect to the Called Principal
         of any Note, the amount obtained by discounting all Remaining Scheduled
         Payments with respect to such

                                      -20-

<PAGE>

         Called Principal from their respective scheduled due dates to the
         Settlement Date with respect to such Called Principal, in accordance
         with accepted financial practice and at a discount factor (applied on
         the same periodic basis as that on which interest on the Notes is
         payable) equal to the Reinvestment Yield with respect to such Called
         Principal.

                  "Reinvestment Yield" means, with respect to the Called
         Principal of any Note, 0.50% over the yield to maturity implied by (a)
         the yields reported, as of 10:00 A.M. (New York City time) on the
         second Business Day preceding the Settlement Date with respect to such
         Called Principal, on the display designated as "Page PX-1" of the
         Bloomberg Financial Markets Services Screen (or, if not available, any
         other national recognized trading screen reporting on-line intraday
         trading in the U.S. Treasury securities) for actively traded on-the-run
         U.S. Treasury securities having a maturity equal to the Remaining
         Average Life of such Called Principal as of such Settlement Date, or
         (b) if such yields are not reported as of such time or the yields
         reported as of such time are not ascertainable, the Treasury Constant
         Maturity Series Yields reported, for the latest day for which such
         yields have been so reported as of the second Business Day preceding
         the Settlement Date with respect to such Called Principal, in Federal
         Reserve Statistical Release H.15 (519) (or any comparable successor
         publication) for actively traded on-the-run U.S. Treasury securities
         having a constant maturity equal to the Remaining Average Life of such
         Called Principal as of such Settlement Date. Such implied yield will be
         determined, if necessary, by (i) converting U.S. Treasury bill
         quotations to bond-equivalent yields in accordance with accepted
         financial practice and (ii) interpolating linearly between (1) the
         actively traded on-the-run U.S. Treasury security with the maturity
         closest to and greater than the Remaining Average Life and (2) the
         actively traded on-the-run U.S. Treasury security with the maturity
         closest to and less than the Remaining Average Life.

                  "Remaining Average Life" means, with respect to any Called
         Principal, the number of years (calculated to the nearest one-twelfth
         year) obtained by dividing (a) such Called Principal into (b) the sum
         of the products obtained by multiplying (i) the principal component of
         each Remaining Scheduled Payment with respect to such Called Principal
         by (ii) the number of years (calculated to the nearest one-twelfth
         year) that will elapse between the Settlement Date with respect to such
         Called Principal and the scheduled due date of such Remaining Scheduled
         Payment.

                  "Remaining Scheduled Payments" means, with respect to the
         Called Principal of any Note, all payments of such Called Principal and
         interest thereon that would be due after the Settlement Date with
         respect to such Called Principal if no payment of such Called Principal
         were made prior to its scheduled due date; provided that if such
         Settlement Date is not a date on which interest payments are due to be
         made under the terms of the Notes, then the amount of the next
         succeeding scheduled interest payment will be reduced by the amount of
         interest accrued to such Settlement Date and required to be paid on
         such Settlement Date pursuant to SECTION 8.2 or 12.1.

                  "Settlement Date" means, with respect to the Called Principal
         of any Note, the date on which such Called Principal is to be prepaid
         pursuant to SECTION 8.2 or has

                                      -21-

<PAGE>

         become or is declared to be immediately due and payable pursuant to
         SECTION 12.1, as the context requires.

SECTION 9. AFFIRMATIVE COVENANTS.

         The Company covenants that so long as any of the Notes are outstanding:

         Section 9.1. Compliance with Law. The Company will, and will cause each
of its Subsidiaries to, comply with all laws, ordinances or governmental rules
or regulations to which each of them is subject, including, without limitation,
ERISA and all Environmental Laws, and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

         Section 9.2. Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.

         Section 9.3. Maintenance of Properties. The Company will, and will
cause each of its Subsidiaries to, maintain and keep, or cause to be maintained
and kept, their respective properties in good repair, working order and
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times; provided that
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

         Section 9.4. Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, file all tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and payable
on such returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets, income or franchises,
to the extent such taxes, assessments, charges or levies have become due and
payable and before they have become delinquent and all claims for which sums
have become due and payable that have or might become a Lien on properties or
assets of the Company or any Subsidiary; provided that neither the Company nor
any Subsidiary need pay any such tax, assessment charge, levy or claim if (a)
the amount, applicability or validity thereof is contested by the Company or
such Subsidiary on a timely basis in good faith and in appropriate proceedings,
and the Company or a Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary or (b) the
nonpayment

                                      -22-

<PAGE>

of all such taxes, assessments, charges, levies and claims in the aggregate
could not reasonably be expected to have a Material Adverse Effect.

         Section 9.5. Corporate Existence, Etc. Subject to SECTION 10.7, the
Company will at all times preserve and keep in full force and effect its
corporate existence. Subject to SECTION 10.7, the Company will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights
and franchises of the Company and its Subsidiaries unless, in the good faith
judgment of the Company, the termination of or failure to preserve and keep in
full force and effect such corporate existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.

         Section 9.6. [Reserved].

         Section 9.7. Notes to Rank Pari Passu. The Notes and all other
obligations under this Agreement of the Company are and at all times shall rank
at least pari passu in right of payment with all other present and future Senior
Indebtedness (actual or contingent) of the Company which is not expressed to be
subordinate or junior in rank to any other Indebtedness of the Company.

         Section 9.8. Guaranty by Subsidiaries. The Company will cause each
Subsidiary which delivers a Guaranty to the Agent or any other lender which is a
party to the Bank Credit Agreement concurrently to enter into a Subsidiary
Guaranty, and within three Business Days thereafter will deliver to each of the
holders of the Notes the following items:

                  (a) an executed counterpart of such Subsidiary Guaranty or
         joinder agreement in respect of an existing Subsidiary Guaranty, as
         appropriate;

                  (b) a certificate signed by the President, a Vice President or
         another authorized Responsible Officer of such Subsidiary making
         representations and warranties to the effect of those contained in
         SECTIONS 5.1, 5.2, 5.6 and 5.7, but with respect to such Subsidiary and
         such Subsidiary Guaranty, as applicable;

                  (c) such documents and evidence with respect to such
         Subsidiary as any holder of the Notes may reasonably request in order
         to establish the existence and good standing of such Subsidiary and the
         authorization of the transactions contemplated by such Subsidiary
         Guaranty;

                  (d) an opinion of counsel satisfactory to the Required Holders
         to the effect that such Subsidiary Guaranty has been duly authorized,
         executed and delivered and constitutes the legal, valid and binding
         contract and agreement of such Subsidiary enforceable in accordance
         with its terms, except as an enforcement of such terms may be limited
         by bankruptcy, insolvency, reorganization, moratorium and similar laws
         affecting the enforcement of creditors' rights generally and by general
         equitable principles; and

                                      -23-

<PAGE>

                  (e) an executed counterpart of an intercreditor agreement or
         joinder agreement in respect of the Intercreditor Agreement among the
         holders of the Notes and each such Person to which a Subsidiary is then
         delivering a Guaranty giving rise the requirements of this SECTION 9.8,
         which agreement or joinder agreement, as the case may be, shall provide
         that the proceeds from the enforcement of any such Guaranty shall be
         shared on an equal and ratable basis with the holders of the Notes.

SECTION 10. NEGATIVE COVENANTS.

         The Company covenants that so long as any of the Notes are outstanding:

         Section 10.1. Consolidated Net Worth. The Company and its Subsidiaries
will at all times keep and maintain Consolidated Net Worth at an amount not less
than the sum of (a) $425,000,000 plus (b) an amount equal to one hundred percent
(100%) of net proceeds from any issuance by the Company of shares of its Capital
Stock or other equity interest occurring after the Closing. Without limiting the
foregoing, the exercise by a present or former employee, officer or director of
any stock option issued pursuant to a stock incentive plan, stock option plan or
other equity based compensation plan or arrangement shall in no event be deemed
or construed to constitute the issuance of shares of the Capital Stock of the
Company.

         Section 10.2. Leverage Ratio. The Company and its Subsidiaries will not
as at the end of each fiscal quarter permit the ratio of Consolidated
Indebtedness to Consolidated Total Assets to exceed 0.45 to 1.00.

         Section 10.3. Unencumbered Assets Ratio. The Company and its
Subsidiaries will not permit as at the end of each fiscal quarter the ratio of
Unsecured Indebtedness to Unencumbered Assets to exceed 0.50 to 1.00.

         Section 10.4. Fixed Charges Coverage Ratio. The Company and its
Subsidiaries will not permit as at the end of each fiscal quarter the ratio of
Consolidated Net Earnings Available for Fixed Charges for the two immediately
preceding fiscal quarters (taken as a single accounting period) to Consolidated
Fixed Charges for such two fiscal quarter periods to be less than 2.5 to 1.0.

         Section 10.5. Limitations on Indebtedness. (a) The Company will not,
and will not permit any Subsidiary to, create, issue, assume, guarantee or
otherwise incur or in any manner be or become liable in respect of any
Indebtedness, except:

                  (i) Indebtedness evidenced by the Notes and the Subsidiary
         Guaranty;

                  (ii) Indebtedness of a Subsidiary Guarantor evidenced by the
         Guaranty delivered pursuant to the Bank Credit Agreement; provided that
         the Indebtedness evidenced by any such Guaranty constitutes Qualified
         Subsidiary Indebtedness;

                  (iii) Indebtedness of the Company and its Subsidiaries
         outstanding as of the date of this Agreement and described on SCHEDULE
         5.15 hereto;

                                      -24-

<PAGE>

                  (iv) additional Indebtedness of the Company and its
         Subsidiaries; provided that at the time of creation, issuance,
         assumption, guarantee or incurrence thereof and after giving effect
         thereto and to the application of the proceeds thereof:

                           (1) the ratio of Consolidated Indebtedness to
                  Consolidated Total Assets as at such date shall not exceed
                  0.45 to 1.00; and

                           (2) in the case of the issuance of any Indebtedness
                  of the Company or its Subsidiaries secured by Liens permitted
                  by SECTION 10.6(i) and any Indebtedness of a Subsidiary (other
                  than (A) Qualified Subsidiary Indebtedness and (B)
                  Indebtedness of any Subsidiary described on SCHEDULE 5.15 and
                  any renewal, extension, refinancing, replacement or refunding
                  of such Indebtedness), the sum of (A) the aggregate amount of
                  all Indebtedness secured by Liens permitted by SECTION 10.6(I)
                  plus (B) the aggregate amount of all Indebtedness of
                  Subsidiaries (other than (A) Qualified Subsidiary Indebtedness
                  and (B) Indebtedness of any Subsidiary described on SCHEDULE
                  5.15 and any renewal, extension, refinancing, replacement or
                  refunding of such Indebtedness), shall not exceed 33% of
                  Consolidated Total Assets as at such date; and

                  (v) Indebtedness of a Subsidiary to the Company or to a
         Wholly-owned Subsidiary and Indebtedness of the Company to a
         Wholly-owned Subsidiary.

         (b) Indebtedness existing within the limitations of SECTION
10.5(a)(iii) may be renewed, extended, refinanced, replaced or refunded (without
increase in principal amount) without regard to the limitations of SECTION
10.5(a)(iv).

         (c) Any Person which becomes a Subsidiary after the date hereof shall
for all purposes of this SECTION 10.5 be deemed to have created, issued, assumed
or incurred at the time it becomes a Subsidiary all Indebtedness of such Person
existing immediately after it becomes a Subsidiary.

         Section 10.6. Limitation on Liens. The Company will not, and will not
permit any Subsidiary to, create or incur, or suffer to be incurred or to exist,
any Lien on its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or transfer any property for
the purpose of subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree to acquire,
or permit any Subsidiary to acquire, any property or assets upon conditional
sales agreements or other title retention devices, except:

                  (a) Liens for taxes and assessments or governmental charges or
         levies; provided that payment thereof is not at the time required by
         SECTION 9.4;

                  (b) Liens of or resulting from any judgment or award (i) the
         time for the appeal or petition for rehearing of which shall not have
         expired or (ii) in respect of which the Company or a Subsidiary shall
         at any time in good faith be prosecuting an appeal or proceeding for a
         review and in respect of which a stay of execution pending such appeal

                                      -25-

<PAGE>

         or proceeding for review shall have been secured; provided that the
         Company or such Subsidiary (i) is contesting such judgment or award on
         a timely basis, in good faith and in appropriate proceedings, and (ii)
         has established adequate reserves therefor in accordance with GAAP on
         the books of the Company or such Subsidiary;

                  (c) statutory Liens of landlords and Liens of carriers,
         warehousemen, mechanics, materialmen and suppliers and other Liens
         imposed by law or pursuant to customary reservations or retentions of
         title arising in the ordinary course of business, provided that (i)
         such Liens secure only amounts not yet due and payable or the payment
         of which is being contested in good faith by appropriate actions or
         proceedings and (ii) such Liens do not materially impair the business
         of the Company and its Subsidiaries;

                  (d) minor survey exceptions or minor encumbrances, leases or
         subleases granted to others, easements or reservations, or rights of
         others for rights-of-way, utilities and other similar purposes, or
         zoning or other restrictions as to the use of real properties, (i)
         which are necessary for the conduct of the activities of the Company
         and its Subsidiaries or which customarily exist on properties of
         Persons engaged in similar activities and similarly situated and (ii)
         which do not in any event in the aggregate Materially impair the use of
         such properties in the operation of the business of the Company and its
         Subsidiaries, taken as a whole, or the value of such properties;

                  (e) Liens incidental to the conduct of business or the
         ownership of properties and assets (including pledges, deposits or
         Liens in connection with worker's compensation, unemployment insurance
         and other like social security laws, attorneys' liens and statutory
         landlords' liens) and Liens to secure the performance of bids, tenders
         or trade contracts, or to secure statutory obligations, supersedeas,
         surety or appeal bonds or other Liens of like general nature, in any
         such case incurred in the ordinary course of business and not in
         connection with the borrowing of money; provided in each case, the
         obligation secured is not overdue or, if overdue, is being contested in
         good faith by appropriate actions or proceedings and any Lien securing
         such obligation does not in any event materially impair the operation
         of the business of the Company and its Subsidiaries;

                  (f) Liens securing Indebtedness of the Company or a Subsidiary
         to a Wholly-owned Subsidiary or the Company or of the Company to a
         Wholly-owned Subsidiary;

                  (g) Liens of the Company and its Subsidiaries existing as of
         the date of Closing and described on SCHEDULE 10.6 hereto, including,
         without limitation, the Lien of the Pledge Agreement;

                  (h) Liens created or incurred after the date of the Closing on
         an Installment Sale Note given to secure a Company Promissory Note;
         provided that (i) Indebtedness secured by any such Lien shall have been
         incurred within the limitations provided in SECTION 10.5(a)(iv) (1) and
         (ii) at the time of creation, issuance, assumption, guarantee or

                                      -26-

<PAGE>

         incurrence of the Indebtedness secured by such Lien and after giving
         effect thereto and to the application of the proceeds thereof, no
         Default or Event of Default would exist; and

                  (i) Liens created or incurred after the date of the Closing
         given to secure Indebtedness of the Company or any Subsidiary in
         addition to the Liens permitted by the preceding clauses (A) through
         (H) hereof; provided that (i) all Indebtedness secured by such Liens
         shall have been incurred within the limitations provided in SECTIONS
         10.5(A)(IV)(1) and (2) and (ii) at the time of creation, issuance,
         assumption, guarantee or incurrence of the Indebtedness secured by such
         Lien and after giving effect thereto and to the application of the
         proceeds thereof, no Default or Event of Default would exist.

         Section 10.7. Mergers, Consolidations, Etc. The Company will not, and
will not permit any Subsidiary to, consolidate with or be a party to a merger
with any other Person, or sell, lease or otherwise dispose of all or
substantially all of its assets; provided that:

                  (a) any Subsidiary may merge or consolidate with or into the
         Company or any Wholly-owned Subsidiary so long as in (i) any merger or
         consolidation involving the Company, the Company shall be the surviving
         or continuing corporation and (ii) in any merger or consolidation
         involving a Wholly-owned Subsidiary (and not the Company), a
         Wholly-owned Subsidiary shall be the surviving or continuing
         corporation, so long as in the case of any merger or consolidation
         involving a Subsidiary Guarantor, the surviving or continuing
         corporation shall have affirmed in writing its obligations under the
         Subsidiary Guaranty;

                  (b) the Company may consolidate or merge with or into any
         other Person if (i) the Person which results from such consolidation or
         merger (the "Surviving Corporation") is a solvent corporation organized
         under the laws of any state of the United States or the District of
         Columbia, (ii) the due and punctual payment of the principal of and
         premium, if any, and interest on all of the Notes, according to their
         tenor, and the due and punctual performance and observation of all of
         the covenants in the Notes and this Agreement to be performed or
         observed by the Company are expressly assumed in writing by the
         Surviving Corporation and the Surviving Corporation shall furnish to
         the holders of the Notes an opinion of counsel satisfactory to such
         holders to the effect that the instrument of assumption has been duly
         authorized, executed and delivered and constitutes the legal, valid and
         binding contract and agreement of the Surviving Corporation enforceable
         in accordance with its terms, except as enforcement of such terms may
         be limited by bankruptcy, insolvency, reorganization, moratorium and
         similar laws affecting the enforcement of creditors' rights generally
         and by general equitable principles, (iii) each Subsidiary Guarantor
         shall have affirmed in writing its obligations under the Subsidiary
         Guaranty to which it is a party, and (iv) at the time of such
         consolidation or merger and immediately after giving effect thereto,
         (1) no Default or Event of Default would exist and (2) the Surviving
         Corporation would be permitted by the provisions of SECTION
         10.5(a)(iv)(1) to incur at least $1.00 of additional Indebtedness;

                  (c) the Company may sell or otherwise dispose of all or
         substantially all of its assets (other than as provided in SECTIONS
         10.7(a) and (b) and SECTION 10.8) to any

                                      -27-

<PAGE>

         Person for consideration which represents the fair market value of such
         assets (as determined in good faith by the Board of Directors of the
         Company) at the time of such sale or other disposition if (i) the
         acquiring Person is a corporation organized under the laws of any state
         of the United States or the District of Columbia, (ii) the due and
         punctual payment of the principal of and premium, if any, and interest
         on all the Notes, according to their tenor, and the due and punctual
         performance and observance of all of the covenants in the Notes and in
         this Agreement to be performed or observed by the Company are expressly
         assumed in writing by the acquiring corporation and the acquiring
         corporation shall furnish to the holders of the Notes an opinion of
         counsel satisfactory to such holders to the effect that the instrument
         of assumption has been duly authorized, executed and delivered and
         constitutes the legal, valid and binding contract and agreement of such
         acquiring corporation enforceable in accordance with its terms, except
         as enforcement of such terms may be limited by bankruptcy, insolvency,
         reorganization, moratorium and similar laws affecting the enforcement
         of creditors' rights generally and by general equitable principles,
         (iii) each Subsidiary Guarantor shall have affirmed in writing its
         obligations under the Subsidiary Guaranty to which it is a party, and
         (iv) at the time of such sale or disposition and immediately after
         giving effect thereto, (1) no Default or Event of Default would exist
         and (2) the acquiring Person would be permitted by the provisions of
         SECTION 10.5(a)(iv)(1) to incur at least $1.00 of additional
         Indebtedness;

                  (d) any Subsidiary may merge or consolidate with or into any
         Person so long as (i) the Person which results from such consolidation
         or merger is a solvent corporation, (ii) the disposition of any of
         assets of the Company or any Subsidiary (including the stock of such
         merging Subsidiary) in connection with such merger is permitted by the
         limitations of SECTION 10.8(b) and (iii) at the time of such merger and
         after giving effect thereto, no Default or Event of Default would
         exist; and

                  (e) any Subsidiary may sell or otherwise dispose of all or
         substantially all of its assets so long as (i) the acquiring Person is
         a solvent corporation, (ii) the disposition of any of assets of the
         Company or any Subsidiary in connection with such sale or disposition
         is permitted by the limitations of SECTION 10.8(b) and (iii) at the
         time of such sale or disposition and after giving effect thereto, no
         Default or Event of Default would exist.

Nothing contained in this SECTION 10.7 shall be deemed or construed to qualify,
amend or otherwise modify the rights of the holders of the Notes under SECTION
8.3 of this Agreement.

         Section 10.8. Sale of Assets, Etc. The Company will not, and will not
permit any Subsidiary to, sell, lease, transfer, abandon or otherwise dispose of
assets (except assets sold in the ordinary course of business for fair market
value or pursuant to SECTION 10.7(a), (b) or (c)); provided that the foregoing
restrictions do not apply to:

                  (a) the sale, lease, transfer or other disposition of assets
         of a Subsidiary to a Wholly-owned Subsidiary or the Company, as the
         case may be; or

                                      -28-

<PAGE>

                  (b) the sale of assets for cash or other property (including
         without limitation any disposition of assets as contemplated by SECTION
         10.7(d) and (e)), to a Person or Persons if all of the following
         conditions are met:

                           (i) such assets (valued , in the case of Timberland,
                  at $750 per acre or, otherwise, at net book value) do not,
                  together with all other assets of the Company and its
                  Subsidiaries previously disposed of during the same fiscal
                  year (other than (A) any sale in the ordinary course of
                  business and (B) any sale within the limitations of clause (a)
                  of this SECTION 10.8), exceed 15% of Consolidated Total
                  Assets, determined as of the end of the immediately preceding
                  fiscal quarter;

                           (ii) in the opinion of the Company's Board of
                  Directors, the sale is for fair value and is in the best
                  interests of the Company; and

                           (iii) immediately after the consummation of the
                  transaction and after giving effect thereto, (A) no Default or
                  Event of Default would exist, and (B) the Company would be
                  permitted by the provisions of SECTION 10.5(a)(iv)(1) to incur
                  at least $1.00 of additional Indebtedness;

         provided, however, that for purposes of the foregoing calculation,
         there shall not be included any assets the net cash proceeds of which
         are applied within twelve months of the date of sale of such assets to
         either (A) the acquisition of assets useful and intended to be used in
         the operation of the business of the Company and its Subsidiaries as
         described in SECTION 10.10 and having a fair market value (as
         determined in good faith by the Board of Directors of the Company) at
         least equal to that of the assets so disposed of or (B) the prepayment
         at any applicable prepayment premium, on a pro rata basis, of Senior
         Indebtedness of the Company, in an amount equal to such net cash
         proceeds less those amounts used to purchase other assets pursuant to
         clause (A) above. It is understood and agreed by the Company that any
         such proceeds paid and applied to the prepayment of the Notes as
         hereinabove provided shall be prepaid as and to the extent provided in
         SECTION 8.2.

         Section 10.9. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into or be a party to any transaction
or arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would be obtainable in a comparable arm's-length transaction with a Person
other than an Affiliate.

         Section 10.10. Nature of Business. Neither the Company nor any
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Subsidiaries, would be substantially changed from the
general nature of the business engaged in by the Company and its Subsidiaries on
the date of this Agreement.

                                      -29-

<PAGE>

SECTION 11. EVENTS OF DEFAULT.

         An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:

                  (a) the Company defaults in the payment of any principal or
         Make-Whole Amount, if any, on any Note when the same becomes due and
         payable, whether at maturity or at a date fixed for prepayment or by
         declaration or otherwise; or

                  (b) the Company defaults in the payment of any interest on any
         Note for more than five Business Days after the same becomes due and
         payable; or

                  (c) the Company defaults in the performance of or compliance
         with any term contained in SECTIONS 10.1 through 10.9; or

                  (d) the Company defaults in the performance of or compliance
         with any term contained herein (other than those referred to in
         paragraphs (a), (b) and (c) of this SECTION 11) and such default is not
         remedied within 30 days after the earlier of (i) a Responsible Officer
         obtaining actual knowledge of such default and (ii) the Company
         receiving written notice of such default from any holder of a Note (any
         such written notice to be identified as a "notice of default" and to
         refer specifically to this paragraph (D) of SECTION 11); or

                  (e) any representation or warranty made in writing by or on
         behalf of the Company, a Subsidiary Guarantor or the Pledgor or by any
         officer of the Company, a Subsidiary Guarantor or the Pledgor in this
         Agreement, the Subsidiary Guaranty or the Pledge Agreement or in any
         writing furnished in connection with the transactions contemplated
         hereby or thereby proves to have been false or incorrect in any
         material respect on the date as of which made; or

                  (f) (i) the Company or any Subsidiary is in default (as
         principal or as guarantor or other surety) in the payment of any
         principal of or premium or make-whole amount or interest on any
         Indebtedness that is outstanding in an aggregate principal amount of at
         least $10,000,000 beyond any period of grace provided with respect
         thereto, or (ii) the Company or any Subsidiary is in default in the
         performance of or compliance with any term of any evidence of any
         Indebtedness in an aggregate outstanding principal amount of at least
         $10,000,000 or of any mortgage, indenture or other agreement relating
         thereto or any other condition exists, and as a consequence of such
         default or condition such Indebtedness has become, or has been
         declared, due and payable before its stated maturity or before its
         regularly scheduled dates of payment, or (iii) as a consequence of the
         occurrence or continuation of any event or condition (other than the
         passage of time or the right of the holder of Indebtedness to convert
         such Indebtedness into equity interests), (1) the Company or any
         Subsidiary has become obligated to purchase or repay Indebtedness
         before its regular maturity or before its regularly scheduled dates of
         payment in an aggregate outstanding principal amount of at least
         $10,000,000, or (2) one

                                      -30-

<PAGE>

         or more Persons have the right to require the Company or any Subsidiary
         so to purchase or repay such Indebtedness; or

                  (g) the Company or any Significant Subsidiary (i) is generally
         not paying, or admits in writing its inability to pay, its debts as
         they become due, (ii) files, or consents by answer or otherwise to the
         filing against it of, a petition for relief or reorganization or
         arrangement or any other petition in bankruptcy, for liquidation or to
         take advantage of any bankruptcy, insolvency, reorganization,
         moratorium or other similar law of any jurisdiction, (iii) makes an
         assignment for the benefit of its creditors, (iv) consents to the
         appointment of a custodian, receiver, trustee or other officer with
         similar powers with respect to it or with respect to any substantial
         part of its property, (v) is adjudicated as insolvent or to be
         liquidated, or (vi) takes corporate action for the purpose of any of
         the foregoing; or

                  (h) a court or Governmental Authority of competent
         jurisdiction enters an order appointing, without consent by the Company
         or any of its Significant Subsidiaries, a custodian, receiver, trustee
         or other officer with similar powers with respect to it or with respect
         to any substantial part of its property, or constituting an order for
         relief or approving a petition for relief or reorganization or any
         other petition in bankruptcy or for liquidation or to take advantage of
         any bankruptcy or insolvency law of any jurisdiction, or ordering the
         dissolution, winding-up or liquidation of the Company or any of its
         Significant Subsidiaries, or any such petition shall be filed against
         the Company or any of its Significant Subsidiaries and such petition
         shall not be dismissed within 60 days; or

                  (i) a final judgment or judgments for the payment of money
         aggregating in excess of $10,000,000 are rendered against one or more
         of the Company and its Subsidiaries and which judgments are not, within
         45 days after entry thereof, bonded, discharged or stayed pending
         appeal, or are not discharged within 45 days after the expiration of
         such stay; or

                  (j) if (i) any Plan shall fail to satisfy the minimum funding
         standards of ERISA or the Code for any plan year or part thereof or a
         waiver of such standards or extension of any amortization period is
         sought or granted under Section 412 of the Code, (ii) a notice of
         intent to terminate any Plan shall have been or is reasonably expected
         to be filed with the PBGC or the PBGC shall have instituted proceedings
         under ERISA Section 4042 to terminate or appoint a trustee to
         administer any Plan or the PBGC shall have notified the Company or any
         ERISA Affiliate that a Plan may become a subject of any such
         proceedings, (iii) the aggregate "amount of unfunded benefit
         liabilities" (within the meaning of Section 4001(a)(18) of ERISA) under
         all Plans, determined in accordance with Title IV of ERISA, shall
         exceed $10,000,000, (iv) the Company or any ERISA Affiliate shall have
         incurred or is reasonably expected to incur any liability pursuant to
         Title I or IV of ERISA or the penalty or excise tax provisions of the
         Code relating to employee benefit plans, (v) the Company or any ERISA
         Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
         any Subsidiary establishes or amends any employee welfare benefit plan
         that provides post-employment welfare benefits in a manner that would
         increase the liability of the Company or any Subsidiary thereunder;

                                      -31-

<PAGE>

         and any such event or events described in clauses (i) through (vi)
         above, either individually or together with any other such event or
         events, could reasonably be expected to have a Material Adverse Effect;
         or

                  (k) any Subsidiary Guaranty or the Pledge Agreement shall
         cease to be in full force and effect for any reason whatsoever,
         including, without limitation, a determination by any Governmental
         Authority that such Subsidiary Guaranty or Pledge Agreement is invalid,
         void or unenforceable or any Subsidiary Guarantor which is a party to
         such Subsidiary Guaranty or the Pledgor, as applicable, shall contest
         or deny in writing the validity or enforceability of any of its
         obligations under such Subsidiary Guaranty or the Pledge Agreement, but
         excluding any Subsidiary Guaranty which ceases to be in full force and
         effect in accordance with and by reason of the express provisions of
         SECTION 2.2(d); or

                  (l) any event of default shall have occurred and be continuing
         under the Pledge Agreement.

As used in SECTION 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

SECTION 12. REMEDIES ON DEFAULT, ETC.

         Section 12.1. Acceleration. (a) If an Event of Default with respect to
the Company described in paragraph (g) or (h) of SECTION 11 (other than an Event
of Default described in clause (i) of paragraph (g) or described in clause (vi)
of paragraph (g) by virtue of the fact that such clause encompasses clause (i)
of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.

         (b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 51% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.

         (c) If any Event of Default described in paragraph (a) or (b) of
SECTION 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.

         Upon any Note's becoming due and payable under this SECTION 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, plus (i) all accrued and unpaid
interest thereon and (ii) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically

                                      -32-

<PAGE>

provided for), and that the provision for payment of a Make-Whole Amount by the
Company in the event that the Notes are prepaid or are accelerated as a result
of an Event of Default, is intended to provide compensation for the deprivation
of such right under such circumstances.

         Section 12.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under SECTION 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.

         Section 12.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of SECTION 12.1, the
holders of not less than 66 2/3% in principal amount of the Notes then
outstanding, by written notice to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of and Make-Whole Amount, if any, on any
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and Make-Whole Amount,
if any, and (to the extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
SECTION 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this SECTION 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.

         Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under SECTION 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this SECTION 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.

SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

         Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a

                                      -33-

<PAGE>

Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.

         Section 13.2. Transfer and Exchange of Notes. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or its attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, of the same series and in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form of EXHIBIT 1(a), EXHIBIT 1(b), EXHIBIT
1(c) or EXHIBIT 1(d), as applicable. Each such new Note shall be dated and bear
interest from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have been
paid thereon. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than $1,000,000;
provided that if necessary to enable the registration of transfer by a holder of
its entire holding of Notes, one Note may be in a denomination of less than
$1,000,000. Any transferee, by its acceptance of a Note registered in its name
(or the name of its nominee), shall be deemed to have made the representation
set forth in SECTION 6.2.

         Section 13.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and

                  (a) in the case of loss, theft or destruction, of indemnity
         reasonably satisfactory to it (provided that if the holder of such Note
         is, or is a nominee for, an original purchaser or another holder of a
         Note with a minimum net worth of at least $25,000,000, such Person's
         own unsecured agreement of indemnity shall be deemed to be
         satisfactory), or

                  (b) in the case of mutilation, upon surrender and cancellation
         thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.

         Section 13.4. Legend. Upon issuance of the Notes and until such time,
if any, as the same is no longer required under applicable securities laws, the
Notes shall bear the following legend:

                  THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
                  SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE

                                      -34-

<PAGE>

                  SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE SOLD OR OTHERWISE
                  TRANSFERRED UNLESS REGISTERED OR EXEMPT FROM REGISTRATION
                  UNDER SAID ACT OR SUCH OTHER LAWS.

Any holder of a Note may, upon surrender of its Notes to the Company together
with an opinion of counsel (which counsel may be internal counsel to such
holder) to the effect that the foregoing legend is no longer required under
applicable securities laws, obtain a like Note in exchange for its Note without
such legend.

SECTION 14. PAYMENTS ON NOTES.

         Section 14.1. Place of Payment. Subject to SECTION 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York, New York at the principal office of a bank
or trust company in such jurisdiction which the Company agrees to designate at
any time when there is any holder of any Note not entitled to the benefits of
SECTION 14.2 in such jurisdiction. The Company may at any time, by notice to
each holder of a Note, change the place of payment of the Notes so long as such
place of payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.

         Section 14.2. Home Office Payment. So long as you or your nominee shall
be the holder of any Note, and notwithstanding anything contained in SECTION
14.1 or in such Note to the contrary, the Company will pay all sums becoming due
on such Note for principal, Make-Whole Amount, if any, and interest by the
method and at the address specified for such purpose below your name in SCHEDULE
A, or by such other method or at such other address as you shall have from time
to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to SECTION 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes of the same series
pursuant to SECTION 13.2. The Company will afford the benefits of this SECTION
14.2 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this SECTION 14.2.

SECTION 15. EXPENSES, ETC.

         Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by you and each Other Purchaser or
holder of a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement, the

                                      -35-

<PAGE>

Notes, the Subsidiary Guaranty, the Pledge Agreement or the Intercreditor
Agreement (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement, the Notes, the Subsidiary Guaranty, the Pledge Agreement
or the Intercreditor Agreement, or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement, the Notes, the Subsidiary Guaranty, the Pledge Agreement or the
Intercreditor Agreement, or by reason of being a holder of any Note, (b) the
costs and expenses, including financial advisors' fees, incurred in connection
with the insolvency or bankruptcy of the Company or any Subsidiary or in
connection with any work-out or restructuring of the transactions contemplated
hereby, by the Notes, the Subsidiary Guaranty, the Pledge Agreement and the
Intercreditor Agreement, and (c) the fees and costs incurred in connection with
the initial filing of this Agreement and all related documents and financial
information and all subsequent annual and interim filings of documents and
financial information related to this Agreement, with the Securities Valuation
Office of the National Association of Insurance Commissioners or any successor
organization acceding to the authority thereof. The Company will pay, and will
save you and each other holder of a Note harmless from, all claims in respect of
any fees, costs or expenses, if any, of brokers and finders (other than those
retained by you).

         Section 15.2. Survival. The obligations of the Company under this
SECTION 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, the Notes, the
Subsidiary Guaranty or the Pledge Agreement, and the termination of this
Agreement.

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

         All representations and warranties contained herein or in the
Subsidiary Guaranty or the Pledge Agreement shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by you of any
Note or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of a
Note. All statements contained in any certificate or other instrument delivered
by or on behalf of the Company, any Subsidiary Guarantor or the Pledgor pursuant
to this Agreement, the Subsidiary Guaranty or the Pledge Agreement shall be
deemed representations and warranties of the Company, the Subsidiary Guarantors
or the Pledgor under this Agreement, the Subsidiary Guaranty or the Pledge
Agreement. Subject to the preceding sentence, this Agreement, the Notes, the
Subsidiary Guaranty and the Pledge Agreement embody the entire agreement and
understanding between you, the Company, the Subsidiary Guarantors and the
Pledgor and supersede all prior agreements and understandings relating to the
subject matter hereof.

SECTION 17. AMENDMENT AND WAIVER.

         Section 17.1. Requirements. This Agreement and the Notes, may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of SECTION 1, 2, 3, 4, 5,

                                      -36-

<PAGE>

6 or 21 hereof, or any defined term (as it is used therein), will be effective
as to you unless consented to by you in writing, and (b) no such amendment or
waiver may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of SECTION 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of SECTIONS 8, 11(a), 11(b), 12, 17 or 20. The Subsidiary
Guaranty, the Pledge Agreement and the Intercreditor Agreement may be amended in
accordance with the terms thereof.

         Section 17.2. Solicitation of Holders of Notes.

         (a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this SECTION 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.

         (b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.

         Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to
as provided in this SECTION 17 applies equally to all holders of each series of
Notes and is binding upon them and upon each future holder of any Note of any
series and upon the Company without regard to whether such Note has been marked
to indicate such amendment or waiver. No such amendment or waiver will extend to
or affect any obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right consequent thereon. No course of
dealing between the Company and the holder of any Note of any series nor any
delay in exercising any rights hereunder or under any Note of any series shall
operate as a waiver of any rights of any holder of such Note. As used herein,
the term "this Agreement" and references thereto shall mean this Agreement as it
may from time to time be amended or supplemented.

         Section 17.4. Notes Held by Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal

                                      -37-

<PAGE>

amount of Notes then outstanding, Notes of any series directly or indirectly
owned by the Company or any of its Affiliates shall be deemed not to be
outstanding.

SECTION 18. NOTICES.

         All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

                  (i) if to you or your nominee, to you or it at the address
         specified for such communications in SCHEDULE A, or at such other
         address as you or it shall have specified to the Company in writing,

                  (ii) if to any other holder of any Note, to such holder at
         such address as such other holder shall have specified to the Company
         in writing, or

                  (iii) if to the Company, to the Company at its address set
         forth at the beginning hereof to the attention of the Chief Financial
         Officer (with a copy to the General Counsel), or at such other address
         as the Company shall have specified to the holder of each Note in
         writing.

Notices under this SECTION 18 will be deemed given only when actually received.

SECTION 19. REPRODUCTION OF DOCUMENTS.

         This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This SECTION 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.

                                      -38-

<PAGE>

SECTION 20. CONFIDENTIAL INFORMATION.

         For the purposes of this SECTION 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified in writing when received by you as being
confidential information of the Company or such Subsidiary; provided that such
term does not include information that (a) was publicly known or otherwise known
to you prior to the time of such disclosure, (b) subsequently becomes publicly
known through no act or omission by you or any Person acting on your behalf, (c)
otherwise becomes known to you other than through disclosure by the Company or
any Subsidiary or (d) constitutes financial statements delivered to you under
SECTION 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you; provided that you may deliver or disclose Confidential
Information to (i) your directors, trustees, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this SECTION 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this SECTION 20), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this SECTION 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process (provided that you shall, unless
prohibited by applicable law or regulation, use commercially reasonable efforts
to notify the Company of any disclosure pursuant to this clause (x) as far in
advance as is reasonably practicable under such circumstances to enable the
Company to seek an appropriate protective order), (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes, this Agreement, the
Subsidiary Guaranty and the Pledge Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this SECTION 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this SECTION 20.

                                      -39-

<PAGE>

SECTION 21. SUBSTITUTION OF PURCHASER.

         You shall have the right to substitute any one of your affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
affiliate, shall contain such affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such affiliate of the accuracy
with respect to it of the representations set forth in SECTION 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this SECTION 21), such word shall be deemed to refer to such affiliate in lieu
of you. In the event that such affiliate is so substituted as a purchaser
hereunder and such affiliate thereafter transfers to you all of the Notes then
held by such affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this SECTION
21), such word shall no longer be deemed to refer to such affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.

SECTION 22. MISCELLANEOUS.

         Section 22.1. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.

         Section 22.2. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or Make-Whole Amount or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.

         Section 22.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

         Section 22.4. Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.

         Where the character or amount of any asset or liability or item of
income or expense is required to be discussed or any consolidation or other
accounting computation is required to be made by the Company for the purposes of
this Agreement, the same shall be done by the Company in accordance with GAAP,
to the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.

                                      -40-

<PAGE>

         Section 22.5. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.

         SECTION 22.6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW
OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.

                                    * * * * *

                                      -41-

<PAGE>

         If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.

                                    Very truly yours,

                                    THE ST. JOE COMPANY

                                    By _________________________________________
                                       Title

Accepted as of ____________________.

                                    [VARIATION]

                                    By _________________________________________
                                       Its

                                      -42-

<PAGE>

                                  DEFINED TERMS

         As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:

         "Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any Person of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.

         "Agent" means First Union National Bank, as Administrative Agent under
the Bank Credit Agreement.

         "Bank Credit Agreement" means that certain First Amended and Restated
Credit Agreement dated May 18, 2001 among the Company, the lenders named therein
and First Union National Bank as Administrative Agent, as amended, modified,
refinanced or supplemented.

         "Bulk Timberland Sales Transactions" means a transaction or series of
transactions by which the Company or its Subsidiaries: (i) sells a timber parcel
or parcels to an unrelated third party; (ii) such unrelated third party delivers
an installment note (an "Installment Sale Note") to the Company or its
Subsidiaries in exchange therefor; (iii) the Company or its Subsidiaries receive
cash or other consideration from a lender, person or other entity in exchange
for a note from the Company or its Subsidiaries (a "Company Promissory Note")
secured by the Installment Sale Note; and (iv) the sole recourse for the payment
of the Company Promissory Note is the principal and income generated by the
Installment Sale Note. A Bulk Timberland Sales Transaction shall also include
any other transaction or series of transactions utilizing a substantially
similar structure.

         "Business Day" means (a) for the purposes of SECTION 8.7 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York or Jacksonville, Florida are
required or authorized to be closed.

         "Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

                                   SCHEDULE B
                          (to Note Purchase Agreement)

<PAGE>

         "Capital Stock" means (a) in the case of a corporation, capital stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (c) in the case of a partnership, partnership interests (whether
general or limited), (d) in the case of a limited liability company, membership
interests and (e) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.

         "Closing" is defined in SECTION 3.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

         "Company" means The St. Joe Company, a Florida corporation, and any
Person who succeeds to all, or substantially all, of the assets and business of
The St. Joe Company.

         "Company Promissory Note" is defined in the definition of "Bulk
Timberland Sales Transactions."

         "Confidential Information" is defined in SECTION 20.

         "Consolidated Fixed Charges" for any period means on a consolidated
basis the sum of (a) all Rentals (other than Rentals on Capital Leases) payable
during such period by the Company and its Subsidiaries, and (b) all Interest
Expense on all Indebtedness of the Company and its Subsidiaries payable during
such period.

         "Consolidated Indebtedness" means, without duplication, the sum of all
Indebtedness of the Company and its Subsidiaries, determined on a consolidated
basis eliminating intercompany items less (a) Indebtedness attributable to the
STARS Transaction and (b) Indebtedness attributable to any Company Promissory
Note issued pursuant to a Bulk Timberland Sales Transaction to the extent
neither the Company nor any Subsidiary is liable therefor.

         "Consolidated Net Earnings" means, with reference to any period and
without duplication, the net earnings (or loss) of the Company and its
Subsidiaries for such period (taken as a cumulative whole), as determined in
accordance with GAAP, after eliminating extraordinary gains and losses.

         "Consolidated Net Earnings Available for Fixed Charges" for any period
means without duplication, the Consolidated Net Earnings for the Company and its
Subsidiaries, plus: (a) provisions for federal, state, local, and foreign income
taxes for the Company and its Subsidiaries; (b) Consolidated Fixed Charges for
the Company and its Subsidiaries; and (c) consolidated depreciation, depletion
and amortization for the Company and its Subsidiaries.

         "Consolidated Net Worth" means, as of the date of any determination
thereof the net worth of the Company and its Subsidiaries as determined in
accordance with GAAP.

                                       B-2

<PAGE>

         "Consolidated Total Assets" means as of the date of any determination
thereof and without duplication, the sum of total assets of the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP less (a)
assets attributable to the STARS Transaction and (b) any Installment Sale Note
received by the Company to the extent the Company or any Subsidiary receives
cash or other consideration in exchange for a Company Promissory Note secured by
such Installment Sale Note; provided, that for purposes of any determination of
Consolidated Total Assets, Timberland shall be valued at $750 per acre.

         "Current Management Group" means (a) Peter S. Rummell, Kevin M. Twomey,
Robert M. Rhodes, J. Everitt Drew, Frank W. Herring, Jr., James D. Motta, Robert
L. Shinn, Clay Smallwood, Michael N. Regan, Stephen W. Solomon; (b) the heirs,
lineal descendants or blood relatives to the third degree of consanguinity of
any of the Persons named in clause (a); (c) trusts for the benefit of the
Persons named in clauses (a) and (b); and (d) any trust which has as its
principal income beneficiaries or remaindermen any combination of any of the
Persons described in clauses (a) through (c).

         "Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.

         "Default Rate" means, for any series of Notes, that rate of interest
that is the greater of (i) 2% per annum above the rate of interest stated in
clause (a) of the first paragraph of the Notes of such series or (ii) 2% over
the rate of interest publicly announced by First Union National Bank in New
York, New York as its "base" or "prime" rate.

         "Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

         "ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.

         "Event of Default" is defined in SECTION 11.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Foreign Person" means a Person which is organized in a jurisdiction
other than the United States or any state thereof.

                                       B-3

<PAGE>

         "Foreign Subsidiary" means a Subsidiary which is organized in a
jurisdiction other than the United States or any state thereof.

         "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.

         "Governmental Authority" means

                  (a) the government of

                        (i) the United States of America or any State or other
                  political subdivision thereof, or

                        (ii) any jurisdiction in which the Company or any
                  Subsidiary conducts all or any part of its business, or which
                  asserts jurisdiction over any properties of the Company or any
                  Subsidiary, or

                  (b) any entity exercising executive, legislative, judicial,
         regulatory or administrative functions of, or pertaining to, any such
         government.

         "Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:

                  (a) to purchase such Indebtedness or obligation or any
         property constituting security therefor;

                  (b) to advance or supply funds (i) for the purchase or payment
         of such Indebtedness or obligation, or (ii) to maintain any working
         capital or other balance sheet condition or any income statement
         condition of any other Person or otherwise to advance or make available
         funds for the purchase or payment of such Indebtedness or obligation;

                  (c) to lease properties or to purchase properties or services
         primarily for the purpose of assuring the owner of such Indebtedness or
         obligation of the ability of any other Person to make payment of the
         Indebtedness or obligation; or

                  (d) otherwise to assure the owner of such Indebtedness or
         obligation against loss in respect thereof.

In any computation of the Indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

                                       B-4

<PAGE>

         "Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances, including all substances listed in or regulated
in any Environmental Law that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, regulated, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

         "holder" or "Holder" means, with respect to any Note, the Person in
whose name such Note is registered in the register maintained by the Company
pursuant to SECTION 13.1.

         "Indebtedness" with respect to any Person means, at any time, without
duplication,

                  (a) its liabilities for borrowed money;

                  (b) its liabilities for the deferred purchase price of
         property acquired by such Person (excluding accounts payable arising in
         the ordinary course of business but including all liabilities created
         or arising under any conditional sale or other title retention
         agreement with respect to any such property);

                  (c) all liabilities appearing on its balance sheet in
         accordance with GAAP in respect of Capital Leases;

                  (d) all liabilities for borrowed money secured by any Lien
         with respect to any property owned by such Person (whether or not it
         has assumed or otherwise become liable for such liabilities);

                  (e) all its liabilities in respect of letters of credit or
         instruments serving a similar function issued or accepted for its
         account by banks and other financial institutions (whether or not
         representing obligations for borrowed money); and

                  (f) any Guaranty of such Person with respect to liabilities of
         a type described in any of clauses (a) through (e) hereof.

Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (f) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.

         "Installment Sale Note" is defined in the definition of "Bulk
Timberland Sales Transactions."

         "Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.

                                       B-5

<PAGE>

         "Intercreditor Agreement" is defined in SECTION 2.2(C).

         "Interest Expense" means all amounts which would, in accordance with
GAAP, be deducted in computing net income on account of interest on
Indebtedness, including imputed interest in respect of Capital Lease
obligations, amortization of debt discounts and expenses, fees and commissions
for letters of credit and bankers' acceptance financing and the net interest
costs of interest rate swaps and hedges.

         "Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).

         "Make-Whole Amount" is defined in SECTION 8.7.

         "Material" means material in relation to the business, operations,
affairs, financial condition, assets or properties of the Company and its
Subsidiaries taken as a whole.

         "Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the Notes, or (c) the
validity or enforceability of this Agreement or the Notes.

         "Memorandum" is defined in SECTION 5.3.

         "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).

         "Notes" is defined in SECTION 1.

         "Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.

         "Other Agreements" is defined in SECTION 2.1.

         "Other Purchasers" is defined in SECTION 2.1.

         "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

         "Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

                                       B-6

<PAGE>

         "Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

         "Pledge Agreement" is defined in SECTION 2.2(B).

         "Pledgor" is defined in SECTION 2.2(B).

         "property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

         "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.

         "Qualified Subsidiary Indebtedness" means Indebtedness of a Subsidiary
Guarantor, provided that the obligee of such Indebtedness shall have entered
into the Intercreditor Agreement.

         "Rentals" means and includes as of the date of any determination
thereof, without duplication, all fixed payments (including as such all payments
which the lessee is obligated to make to the lessor on termination of the lease
or surrender of the property) payable by the Company or a Subsidiary, as lessee
or sublessee under a lease of real or personal property, but shall be exclusive
of any amounts required to be paid by the Company or a Subsidiary (whether or
not designated as rents or additional rents) on account of maintenance, repairs,
insurance, taxes and similar charges. Fixed rents under any so-called
"percentage leases" shall be computed solely on the basis of the minimum rents,
if any, required to be paid by the lessee regardless of sales volume or gross
revenues.

         "Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).

         "Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time.

         "Senior Indebtedness" means, without duplication, all Indebtedness of
the Company which is not expressed to be subordinate or junior in rank to any
other Indebtedness of the Company.

         "Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

                                       B-7

<PAGE>

         "Series A Notes" is defined in SECTION 1.

         "Series B Notes" is defined in SECTION 1.

         "Series C Notes" is defined in SECTION 1.

         "Series D Notes" is defined in SECTION 1.

         "Significant Subsidiary" means, at any time, any Subsidiary which (i)
is a Subsidiary Guarantor, (ii) constitutes more than 1% of Consolidated Total
Assets or (iii)(1) contributed more than 1% of Consolidated Net Earnings for any
period of four consecutive fiscal quarters at any time in the three previous
fiscal years or (2) contributed on an aggregate basis more than 2% of the
cumulative Consolidated Net Earnings for the preceding five year period.

         "STARS Transaction" means the three-year forward sale transaction with
Bank of America entered into by the Company on October 15, 1999 involving
certain equity securities owned by the Company with a market value on October
15, 1999 of $139.4 million; provided, that the transaction is "settled" by
October 15, 2002. The transaction may be "settled" by delivering either cash or
a number of shares to Bank of America. All of such shares have been pledged to
Bank of America. At October 15, 2002, the settlement amount is to be determined
by a set of formulae that limit the Company's obligation if stock values fall
and allow the Company to keep some appreciation if stock values rise.
Specifically, if stock values fall, the Company may settle its obligation by
delivering all of the pledged shares. If stock value rise, the Company may
retain an amount of the shares that represents appreciation up to 20 percent of
the value of the securities on October 15, 1999.

         "Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.

         "Subsidiary Guarantor" is defined in SECTION 2.2(a) and shall include
any Subsidiary which becomes a Subsidiary Guarantor pursuant to SECTION 9.8.

         "Subsidiary Guaranty" is defined in SECTION 2.2(a) and shall include
any Subsidiary Guaranty delivered pursuant to SECTION 9.8.

         "Timberland" means undeveloped real estate on which the Company
conducts active silvicultural operations.

                                       B-8

<PAGE>

         "Unencumbered Assets" means all assets (valued at $750 per acre in the
case of Timberland) of the Company or its Subsidiaries which are not subject to
a Lien securing any Indebtedness of the Company or any of its Subsidiaries.

         "Unsecured Indebtedness" means all Indebtedness of the Company or its
Subsidiaries which is not secured by a Lien on any asset of the Company or any
of its Subsidiaries.

         "Voting Stock" means Capital Stock or interests of any class or
classes, the holders of which are ordinarily, in the absence of contingencies,
entitled to elect the directors (or Persons performing similar functions) of a
Person.

         "Wholly-owned Subsidiary" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-owned Subsidiaries at such time.

                                       B-9

<PAGE>

                                 [FORM OF NOTE]

         THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS AND,
ACCORDINGLY, MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER SAID ACT OR SUCH OTHER LAWS.

                               THE ST. JOE COMPANY

            5.64% SENIOR SECURED NOTE, SERIES A, DUE FEBRUARY 7, 2005

No. [_________]                                                           [Date]
$[____________]                                                    PPN 790148A*1

FOR VALUE RECEIVED, the undersigned, THE ST. JOE COMPANY (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Florida, hereby promises to pay to [________________], or registered assigns,
the principal sum of [________________] DOLLARS on February 7, 2005, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 5.64% per annum from the date
hereof, payable semiannually, on the seventh day of February and August in each
year, commencing with the February 7 or August 7 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 7.64% or (ii) 2% over the rate of interest publicly
announced by First Union National Bank from time to time in New York, New York
as its "base" or "prime" rate.

         Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at First Union National Bank in New York, New York or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreements referred to below.

         This Note is one of a series of the 5.64% Senior Secured Notes, Series
A, due February 7, 2005 (the "Series A Notes") of the Company in the aggregate
principal amount of $18,000,000 which, together with the Company's $67,000,000
aggregate principal amount 6.66% Senior Secured Notes, Series B, due February 7,
2007 (the "Series B Notes"), $15,000,000 aggregate principal amount 7.02% Senior
Secured Notes, Series C, due February 7, 2009 (the "Series C Notes") and
$75,000,000 aggregate principal amount 7.37% Senior Secured Note, Series D, due
February 7, 2012 (the "Series D Notes"; said Series D Notes, Series C Notes and
Series B Notes together with the Series A Notes being hereinafter referred to
collectively as the "Notes") issued pursuant to separate Note Purchase
Agreements, dated as of February 7, 2002 (as from time to time amended, the
"Note Purchase Agreements"), between the Company and the respective purchasers
named therein and is entitled to the benefits thereof. Each holder of this Note
will be

                                  EXHIBIT 1(a)
                          (to Note Purchase Agreement)

<PAGE>

deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in SECTION 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in SECTION 6.2 of the Note Purchase
Agreements.

         This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

         This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.

                                    E-1(a)-2

<PAGE>

         THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS AND PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE WHICH WOULD REQUIRE
APPLICATION OF THE LAWS OF THE JURISDICTION OTHER THAN SUCH STATE.

                                       THE ST. JOE COMPANY

                                       By _____________________________________
                                          Title

                                    E-1(a)-3

<PAGE>

                                 [FORM OF NOTE]

         THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS AND,
ACCORDINGLY, MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER SAID ACT OR SUCH OTHER LAWS.

                               THE ST. JOE COMPANY

            6.66% SENIOR SECURED NOTE, SERIES B, DUE FEBRUARY 7, 2007

No. [_________]                                                           [Date]
$[____________]                                                   PPN 790148 A@9

FOR VALUE RECEIVED, the undersigned, THE ST. JOE COMPANY (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Florida, hereby promises to pay to [________________], or registered assigns,
the principal sum of [________________] DOLLARS on February 7, 2007, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 6.66% per annum from the date
hereof, payable semiannually, on the seventh day of February and August in each
year, commencing with the February 7 or August 7 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 8.66% or (ii) 2% over the rate of interest publicly
announced by First Union National Bank from time to time in New York, New York
as its "base" or "prime" rate.

         Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at First Union National Bank in New York, New York or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreements referred to below.

         This Note is one of a series of the 6.66% Senior Secured Notes, Series
B, due February 7, 2007 (the "Series B Notes") of the Company in the aggregate
principal amount of $67,000,000 which, together with the Company's $18,000,000
aggregate principal amount 5.64% Senior Secured Notes, Series A, due February 7,
2005 (the "Series A Notes"), $15,000,000 aggregate principal amount 7.02% Senior
Secured Notes, Series C, due February 7, 2009 (the "Series C Notes") and
$75,000,000 aggregate principal amount 7.37% Senior Secured Notes, Series D, due
February 7, 2012 (the "Series D Notes"; said Series D Notes, Series C Notes and
Series A Notes, together with the Series B Notes, being hereinafter referred to
collectively as the "Notes") issued pursuant to separate Note Purchase
Agreements, dated as of February 7, 2002 (as from time to time amended, the
"Note Purchase Agreements"), between the Company and the respective purchasers
named therein and is entitled to the benefits thereof. Each holder of this Note
will be

                                  EXHIBIT 1(b)
                          (to Note Purchase Agreement)

<PAGE>

deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in SECTION 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in SECTION 6.2 of the Note Purchase
Agreements.

         This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

         This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.

                                    E-1(b)-2
<PAGE>

         THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS AND PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE WHICH WOULD REQUIRE
APPLICATION OF THE LAWS OF THE JURISDICTION OTHER THAN SUCH STATE.

                                         THE ST. JOE COMPANY

                                         By ___________________________________
                                            Title

                                    E-1(b)-3

<PAGE>

                                 [FORM OF NOTE]

         THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS AND,
ACCORDINGLY, MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER SAID ACT OR SUCH OTHER LAWS.

                               THE ST. JOE COMPANY

            7.02% SENIOR SECURED NOTE, SERIES C, DUE FEBRUARY 7, 2009

No. [_________]                                                           [Date]
$[____________]                                                   PPN 790148 A#7

FOR VALUE RECEIVED, the undersigned, THE ST. JOE COMPANY (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Florida, hereby promises to pay to [________________], or registered assigns,
the principal sum of [________________] DOLLARS on February 7, 2009, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 7.02% per annum from the date
hereof, payable semiannually, on the seventh day of February and August in each
year, commencing with the February 7 or August 7 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.02% or (ii) 2% over the rate of interest publicly
announced by First Union National Bank from time to time in New York, New York
as its "base" or "prime" rate.

         Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at First Union National Bank in New York, New York or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreements referred to below.

         This Note is one of a series of the 7.02% Senior Secured Notes, Series
C, due February 7, 2009 (the "Series C Notes") of the Company in the aggregate
principal amount of $15,000,000 which, together with the Company's $18,000,000
aggregate principal amount 5.64% Senior Secured Notes, Series A, due February 7,
2005 (the "Series A Notes"), $67,000,000 aggregate principal amount 6.66% Senior
Secured Notes, Series B, due February 7, 2007 (the "Series B Notes") and
$75,000,000 aggregate principal amount 7.37% Senior Secured Notes, Series D, due
February 7, 2012 (the "Series D Notes"; said Series D Notes, Series B Notes and
Series A Notes, together with the Series C Notes, being hereinafter referred to
collectively as the "Notes") issued pursuant to separate Note Purchase
Agreements, dated as of February 7, 2002 (as from time to time amended, the
"Note Purchase Agreements"), between the Company and the respective purchasers
named therein and is entitled to the benefits thereof. Each holder of this Note
will be

                                  EXHIBIT 1(c)
                          (to Note Purchase Agreement)

<PAGE>

deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in SECTION 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in SECTION 6.2 of the Note Purchase
Agreements.

         This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

         This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.

                                    E-1(c)-2

<PAGE>

         THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS AND PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE WHICH WOULD REQUIRE
APPLICATION OF THE LAWS OF THE JURISDICTION OTHER THAN SUCH STATE.

                                         THE ST. JOE COMPANY

                                         By ___________________________________
                                            Title

                                    E-1(c)-3
<PAGE>

                                 [FORM OF NOTE]

         THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS AND,
ACCORDINGLY, MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER SAID ACT OR SUCH OTHER LAWS.

                               THE ST. JOE COMPANY

            7.37% SENIOR SECURED NOTE, SERIES D, DUE FEBRUARY 7, 2012

No. [_________]                                                           [Date]
$[____________]                                                   PPN 790148 B*O

FOR VALUE RECEIVED, the undersigned, THE ST. JOE COMPANY (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Florida, hereby promises to pay to [________________], or registered assigns,
the principal sum of [________________] DOLLARS on February 7, 2012, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 7.37% per annum from the date
hereof, payable semiannually, on the seventh day of February and August in each
year, commencing with the February 7 or August 7 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.37% or (ii) 2% over the rate of interest publicly
announced by First Union National Bank from time to time in New York, New York
as its "base" or "prime" rate.

         Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at First Union National Bank in New York, New York or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreements referred to below.

         This Note is one of a series of the 7.37% Senior Secured Notes, Series
D, due February 7, 2012 (the "Series D Notes") of the Company in the aggregate
principal amount of $75,000,000 which, together with the Company's $18,000,000
aggregate principal amount 5.64% Senior Secured Notes, Series A, due February 7,
2005 (the "Series A Notes"), $67,000,000 aggregate principal amount 6.66% Senior
Secured Notes, Series B, due February 7, 2007 (the "Series B Notes") and
$15,000,000 aggregate principal amount 7.02% Senior Secured Notes, Series C, due
February 7, 2009 (the "Series C Notes"; said Series C Notes, Series B Notes and
Series A Notes, together with the Series D Notes, being hereinafter referred to
collectively as the "Notes") issued pursuant to separate Note Purchase
Agreements, dated as of February 7, 2002 (as from time to time amended, the
"Note Purchase Agreements"), between the Company and the respective purchasers
named therein and is entitled to the benefits thereof. Each holder of this Note
will be

                                  EXHIBIT 1(d)
                          (to Note Purchase Agreement)

<PAGE>

deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in SECTION 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in SECTION 6.2 of the Note Purchase
Agreements.

         This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

         This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.

                                    E-1(d)-2

<PAGE>

         THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS AND PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE WHICH WOULD REQUIRE
APPLICATION OF THE LAWS OF THE JURISDICTION OTHER THAN SUCH STATE.

                                               THE ST. JOE COMPANY

                                               By ___________________________
                                                  Title

                                    E-1(d)-3