SEC Filing | The St. Joe Company

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ST. JOE CORPORATION
(Exact name of Registrant as specified in its charter)
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FLORIDA 1-10466 59-0432511
(State or other jurisdiction of (Commission (I.R.S. Employer
of incorporation or File No.) Identification No.)
organization)

1650 PRUDENTIAL DRIVE
JACKSONVILLE, FLORIDA 32207
(904) 396-6600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

ROBERT M. RHODES
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
1650 PRUDENTIAL DRIVE
JACKSONVILLE, FLORIDA 32207
(904) 396-6600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------

COPIES TO:

MARC D. BASSEWITZ, ESQ. JEFFREY SMALL, ESQ.
LATHAM & WATKINS DAVIS POLK & WARDWELL
233 SOUTH WACKER DRIVE, SUITE 5800 450 LEXINGTON AVENUE
CHICAGO, ILLINOIS 60606 NEW YORK, NEW YORK 10017
TELEPHONE: (312) 876-7700 TELEPHONE: (212) 450-4000

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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

=====================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------------------

Common Stock, no par value......... 4,600,000 Shares $94.375 $434,125,000 $128,066.88
=====================================================================================================================

(1) Includes 600,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
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EXPLANATORY NOTE

This registration statement contains two forms of prospectus: one to be
used in connection with a United States offering of the shares of Common Stock
(the "U.S. Prospectus") and one to be used in connection with a concurrent
international offering of the shares of Common Stock (the "International
Prospectus" and together with the U.S. Prospectus, the "Prospectuses"). The
International Prospectus will be identical to the U.S. Prospectus except that it
will have a different front cover page. The alternate front cover page for the
International Prospectus included herein has been labeled "Alternate Cover Page
for International Prospectus."
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

PROSPECTUS (Subject To Completion)

Issued December , 1997

4,000,000 Shares

St. Joe Corporation
COMMON STOCK
------------------------

OF THE 4,000,000 SHARES OF COMMON STOCK OFFERED HEREBY, 3,400,000 ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS (THE
"U.S. OFFERING") AND 600,000 ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS (THE "INTERNATIONAL
OFFERING," AND TOGETHER WITH THE U.S. OFFERING, THE "OFFERINGS"). SEE
"UNDERWRITERS." ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD
BY THE ALFRED I. DUPONT TESTAMENTARY TRUST (THE "SELLING STOCKHOLDER" OR THE
"TRUST"). SEE "ALFRED I. DUPONT TESTAMENTARY TRUST." ST. JOE CORPORATION (THE
"COMPANY" OR "ST. JOE") WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF THE
SHARES BEING OFFERED HEREBY. THE COMPANY'S COMMON STOCK IS LISTED ON THE NEW
YORK STOCK EXCHANGE UNDER THE SYMBOL "SJP." ON DECEMBER 15, 1997, THE LAST
REPORTED SALE PRICE OF THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS
$94.75 PER SHARE.
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE $ A SHARE
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDER
-------- -------------- -----------

Per Share................................................. $ $ $
Total(2).................................................. $ $ $

- ------------

(1) The Company and the Selling Stockholder have agreed to
indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as
amended.
(2) The Selling Stockholder has granted to the U.S. Underwriters
an option, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of 600,000 additional Shares of
Common Stock at the price to public less underwriting
discounts and commissions for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise
such option in full, the total price to public, underwriting
discounts and commissions and proceeds to the Selling
Stockholder will be $ , $ and $ ,
respectively. See "Underwriters."

------------------------

The Shares of Common Stock are offered, subject to prior sale, when, as,
and if accepted by the Underwriters named herein, and subject to approval of
certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It
is expected that delivery of the shares of Common Stock will be made on or about
, 1998, at the offices of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately available
funds.
------------------------

MORGAN STANLEY DEAN WITTER

DONALDSON, LUFKIN & JENRETTE
Securities Corporation

MERRILL LYNCH & CO.

RAYMOND JAMES & ASSOCIATES, INC.

, 1998
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[MAP OF NORTHWESTERN FLORIDA SHOWING THE COMPANY'S LAND HOLDINGS AND THE LAND
HOLDINGS OF THE STATE OF FLORIDA]

[FOLDOUT MAP OF THE STATE OF FLORIDA SHOWING THE LOCATION OF THE COMPANY'S
PROPERTIES]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT THE COMMON STOCK IN CONNECTION
WITH THE OFFERINGS, AND MAY BID FOR AND PURCHASE THE SHARES OF THE COMMON STOCK
IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

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NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, BY THE SELLING STOCKHOLDER OR BY
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK OFFERED HEREBY TO ANY PERSON IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE ANY SUCH OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

There are restrictions on the offer and sale of the Common Stock offered
hereby in the United Kingdom. All applicable provisions of the Public Offers of
Securities Regulations of 1995, the Financial Services Act of 1986 and the
Companies Act of 1985 with respect to anything done by any person in relation to
the Common Stock in, from or otherwise involving the United Kingdom must be
complied with. See "Underwriters."
------------------------

TABLE OF CONTENTS

Statement Regarding Forward Looking Disclosure.............. ii
Available Information....................................... iii
Incorporation Of Certain Documents By Reference............. iii
Prospectus Summary.......................................... 1
Risk Factors................................................ 8
Dividends................................................... 16
Market For Common Stock..................................... 16
Alfred I. duPont Testamentary Trust......................... 17
Selected Consolidated Financial Data........................ 19
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations................................. 22
Business And Properties..................................... 27
Management.................................................. 55
Principal and Selling Stockholders.......................... 63
Certain Transactions........................................ 64
Description Of Common Stock................................. 64
Tax Consequences To Non-U.S. Holders........................ 65
Underwriters................................................ 68
Legal Matters............................................... 71
Experts..................................................... 71
Index To Financial Statements............................... F-1

STATEMENT REGARDING FORWARD LOOKING DISCLOSURE

Certain statements contained under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business and Properties" and elsewhere in this Prospectus,
including, without limitation, those concerning implementation of the Company's
new business strategy, its expansion plans, economic performance and financial
condition, the Company's ability to obtain appropriate entitlements relating to
its real estate operations, the scope and profitability of the Company's
developable land, the ability of the Company to optimize the value of its assets
(including, without limitation, through dispositions or otherwise), projected
harvesting levels and the ability of the Company to successfully integrate
existing or future joint venture and/or acquisition candidates into its
operations are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and
the Company intends that such forward-looking statements be subject to the safe
harbor protection provided thereby. Such forward-looking statements may be
identified by use of forward-looking terminology, such as "may," "intend,"
"will," "expect," "anticipate," "estimate," "continue" or the negative thereof
or other variations thereon or comparable terminology. Because such statements
involve risks and uncertainties,

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actual results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause such differences include,
but are not limited to, those discussed under "Risk Factors."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C., and at the Commission's regional
offices at 75 Park Place, New York, New York and at Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois, and copies may be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Such reports, proxy statements and other information may
also be inspected and copied at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York. The Commission also maintains a site on the
World Wide Web at "http://www.sec.gov" that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock offered hereby. This Prospectus, which
constitutes part of the Registration Statement, omits certain of the information
contained in the Registration Statement and the exhibits and schedules thereto
on file with the Commission pursuant to the Securities Act and the rules and
regulations of the Commission thereunder. In addition, certain documents filed
by the Company with the Commission have been incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference." The
Registration Statement, including exhibits and schedules thereto and such
incorporated documents, may be inspected and copied at the public reference
facilities maintained by the Commission at its principal office in Washington,
D.C. or at its regional offices. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, filed with the Commission by the Company pursuant
to the Exchange Act, are incorporated herein by reference and made part of this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "1996 10-K"); (ii) the portions of the Company's
1996 Annual Report to Stockholders that have been incorporated by reference into
the 1996 10-K; (iii) the portions of the Company's 1996 definitive Proxy
Statement for its Annual Meeting of Stockholders dated April 11, 1997 that have
been incorporated by reference into the 1996 10-K; (iv) the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 30, 1997, June 30, 1997 and
September 30, 1997; and (v) the Company's Current Reports on Form 8-K dated
November 25, 1997 and December 10, 1997.

Each document filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of all shares of Common Stock to which
this Prospectus relates shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be

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incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information that are incorporated by reference,
unless such exhibits are specifically incorporated by reference in such
information) will be provided without charge to each person, including any
beneficial owner, to whom this Prospectus (or the applicable Prospectus
Supplement) is delivered upon written or oral request. Requests for such
documents should be directed to St. Joe Corporation, 1650 Prudential Drive,
Jacksonville, Florida 32207, Attention: Investor Relations (telephone: (904)
396-6600).

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus is presented on the assumption that the over-allotment option
granted to the U.S. Underwriters has not been exercised. As used herein, the
terms "Company" and "St. Joe" refer to St. Joe Corporation and its subsidiaries.

THE COMPANY

St. Joe Corporation is a diversified company engaged in the real estate,
forestry, transportation and sugar industries in the State of Florida. The
Company is the single largest private landowner in Florida, owning more than 1.1
million acres, or approximately 3% of the land area of the state (an area
slightly smaller than the land area of the State of Delaware). Although the vast
majority of the Company's properties consist of timberlands, St. Joe owns a
large portfolio of income producing properties and sizable tracts suitable for
commercial, industrial and residential as well as resort and entertainment
development. The Company is currently engaged in four principal lines of
business:

- Real Estate -- the development, ownership and management of commercial,
industrial and residential properties as well as the prospective
development of resort and entertainment properties;

- Forestry -- the management and harvesting of extensive timberland
holdings;

- Transportation -- the operation of two railroads within Florida; and

- Sugar -- the cultivation, harvesting and processing of sugar cane.

St. Joe is currently undergoing a number of important changes in its mix of
businesses and its overall business strategy. In early 1997, the Company hired a
new chairman and chief executive officer, Peter Rummell, the former President of
Disney Development Company and Chairman of Walt Disney Imagineering, as well as
several other senior members of management with strong backgrounds in
large-scale real estate development, the complex Florida entitlement process,
and financial and asset management. Under the direction of this new management
team, the Company intends to focus more closely on the development of its large
land portfolio. In addition, the Company is implementing a new strategy in its
forestry segment by extending the harvest rotation of certain sections of its
timberlands in order to effect a shift toward higher margin products. In order
to focus more closely on its core assets, the Company sold its linerboard mill
as well as its container and communications businesses in 1996. In addition, on
December 6, 1997, management announced that it had reached an agreement in
principle to sell the Company's sugar lands to certain federal and state
government agencies on or before June 6, 1998, although the Company will retain
the right to farm the sugar lands through the 2002-2003 crop year.

Management believes that the Company has a number of key business strengths
and competitive advantages, including, in its opinion, the largest inventory of
private land suitable for development in the State of Florida, a very low cost
basis in its land assets, a strong cash position and no material indebtedness,
which management believes will allow St. Joe the financial flexibility to
aggressively pursue development opportunities. Management is also focusing on
optimizing the value of the Company's other operating assets and may employ
financially-driven strategies to improve returns, such as acquisitions, joint
ventures and dispositions.

OPERATIONS

Real Estate. The Company currently conducts its real estate operations in
two principal segments: commercial/industrial development and management and
community/residential development.

buildings in service for one year or more were 91% leased (82% for its portfolio
as a whole, including newly constructed buildings). GCC's buildings are
primarily Class "A" office space and high quality commercial/ industrial
facilities constructed after 1987 and are well-located in business parks near
major transportation hubs, primarily in the Jacksonville and Miami, Florida
areas. At December 1, 1997, GCC had an additional 479,000 square feet under
construction and had entitlements to develop an additional approximately 14.3
million square feet of buildings, primarily in its Miami, Jacksonville and
Orlando parks. GCC also owns over 15,300 acres of unentitled land that
management believes are suitable for future commercial, industrial and
residential development, primarily situated adjacent to the Florida East Coast
Railway right-of-ways in attractive markets that the Company believes will
provide significant growth opportunities.

In the community/residential real estate sector, the Company intends to
develop large-scale mixed-use communities, primarily on Company-owned land. The
Company's land holdings include large tracts near Tallahassee, the state
capital, and in northwestern Florida that the Company believes to be well-suited
for community/residential as well as resort and second-home development. These
holdings include significant Gulf of Mexico frontage (with over five miles of
white sand beaches), and bay and riverfront properties, as well as properties
adjacent to existing communities. The Company intends to design and entitle
well-conceived master plans, install major infrastructure improvements and
either sell permitted lots to merchant builders for construction or build and
sell finished residential units to end purchasers. The Company recently
initiated master-planning of 800 acres with over 7,000 feet of white sand beach
frontage in south Walton County near the Town of Seaside for development as
second-home and resort communities and 3,000 acres of a Tallahassee parcel for
development as a mixed-use residential community. The Company is currently
evaluating other properties for development as resort and second-home
communities and believes that its holdings in northwestern Florida offer unique
opportunities to create high amenity projects, with gulf, lake and river access,
at comparatively low costs due to the Company's low basis in its long-term land
holdings.

In order to increase the pace of community/residential development and to
gain a foothold in the home building industry, the Company recently acquired the
personnel, trademark and selected assets of the Arvida Company ("Arvida")
through a majority-owned joint venture (the "Arvida Venture"). Arvida is a
prominent Florida-based community and residential real estate developer, which
in 1996 and the first nine months of 1997 closed contracts on 2,077 houses and
566 lots.

Forestry. The Company is the largest private owner of timberlands in
Florida, with over 700,000 acres of planted pine forests, primarily in
northwestern Florida, and an additional 300,000 acres of mixed timberland,
wetlands and lake and canal properties. The principal product of the Company's
forestry operations is softwood pulpwood. In addition, the Company produces and
sells sawtimber. The Company estimates that it can increase its long-term
sustainable yearly harvest over the next decade to 1.6 million tons of softwood
pulpwood and .9 million tons of softwood sawtimber. The major customer for the
Company's timber has been and continues to be the Company's former linerboard
mill, which it sold to Florida Coast Paper Company, L.L.C. ("Florida Coast") in
May 1996. In 1996, the Company harvested 697,398 tons of timber, of which
610,418 tons were sold to Florida Coast, and the balance to a number of other
market participants, including Georgia-Pacific Corporation, Champion
International Corporation and Louisiana-Pacific Corporation.

After the closure of the mill for several months in 1997, the Company
renegotiated its 15 year supply contract with Florida Coast to allow it to
supply pulpwood to the mill at a level (700,000 tons per year beginning June 1,
1998) significantly lower than historical levels. The Company sought to reduce
its obligation to supply pulpwood under the agreement and intends to extend
growing periods for certain portions of its timber and to sell such timber in
the form of higher margin products, which the Company anticipates will increase
the long-term profitability of its forestry operations. The Company estimates
that its standing pine inventory on January 1, 1998 will total 10.6 million tons
and its hardwood inventory will total 5.9 million tons.

Beach, Port Everglades and the Port of Miami. Principal commodities carried by
FEC, by weight, include trailers-on-flatcars, containers-on-flatcars, crushed
stone, foodstuffs, vehicles and cement. FEC is pursuing a number of
opportunities to enhance returns, including through leasing its right-of-ways
for the laying of fiber-optic conduit and the construction of communications
towers. The Company also owns the Apalachicola Northern Railroad ("ANRR"), a
short-line railroad that operates on 96 miles of track between Port St. Joe and
Chattahoochee, Florida.

Sugar. Talisman Sugar Corporation ("Talisman"), a wholly-owned subsidiary
of the Company, grows sugarcane on over 52,000 acres in the Belle Glade region
of south central Florida. Talisman processes this sugarcane at its mill facility
and sells all of the output of raw sugar to the Everglades Sugar Refinery, Inc.,
a wholly owned subsidiary of Savannah Foods & Industries, Inc. During the
1996-1997 crop year, Talisman produced 117,000 tons of raw sugar. As part of its
efforts to focus more intently on the Company's core assets, the Company has
agreed in principle to sell its sugar lands to certain federal and state
government agencies on or before June 6, 1998 for $133.5 million in cash. In the
event the proposed sale is consummated, Talisman would retain the right to farm
the sugar lands through the 2002-2003 crop year. The proposed transaction is
subject to both government and board approval.

KEY BUSINESS STRATEGIES

The Company's principal objective is to optimize the value of its
substantial asset base. The Company's management team is focused on the
following key strategies:

Increase the Pace of Development. Through its new management team,
the Company intends to take a more aggressive approach to the development
of its properties. In the commercial/industrial sector, GCC has secured
entitlements to develop an additional 14.3 million square feet of
buildings. In the community/residential development sector, the Company's
inventory includes approximately 51,000 acres, including land adjacent to
existing developments and prime gulf-front properties as well as numerous
lake and riverfront parcels that management believes can be developed in a
variety of formats. As part of its strategy to increase the pace of
development, St. Joe intends to initiate home-building activity, primarily
through the Arvida Venture. During the near term, the Arvida Venture will
accelerate development through the acquisition of land from third parties.
Over the longer term, management believes the Company's large raw land
portfolio will allow the Company to maintain low development costs relative
to its competitors and that its existing large portfolio of
income-producing properties, together with its other businesses, will
generate cash to fund a significant portion of its long-term projects.

Pursue Strategic Acquisitions and Joint Ventures. The Company
believes that its diverse capabilities and access to capital provide a
competitive advantage in identifying and acquiring additional development
opportunities. The Company intends to pursue such development opportunities
through potential acquisitions, joint ventures and other strategic
alliances, particularly with established Florida-based developers.
Management believes that joint venture relationships will provide the
Company with immediate access to the human resources, local market
expertise and information systems necessary to enable the Company to
compete effectively for development opportunities. As part of this
strategy, the Company recently entered into the Arvida Venture. The Company
also recently formed a joint venture with CNL Group, Inc. ("CNL"), a large
privately held real estate investment, finance and development company, to
develop commercial properties in the central Florida region along the U.S.
Interstate Highway 4 corridor, including Tampa, Orlando and Daytona Beach.
On December 10, 1997, the Company entered into a letter of intent with
Codina Group, Inc. ("Codina") and Weeks Corporation ("Weeks") under which
the Company and Weeks each agreed to purchase a one-third interest in
Codina, a commercial/industrial developer active principally in southern
Florida.

expertise in these development areas and the Company believes it has the
land inventory (including attractive beach and other waterfront properties)
necessary to enter these new markets effectively. As part of this strategy,
in December 1997, the Company acquired the Riverside Golf Management
Company, which manages three daily fee public golf courses in Jacksonville,
Florida, Atlanta, Georgia and Clemson, South Carolina, and a 50% interest
in the Champions Club Golf Course at Alaqua Lakes in Orlando, Florida.

Aggressively Pursue the Entitlement Process. The Company believes
that the complex Florida land entitlement process can be a significant
entry barrier to less capitalized developers. In developing new residential
real estate projects, the Company intends to capitalize on its large
existing land portfolio by, if appropriate, deeding or donating portions of
its existing properties in exchange for long-term development rights. The
Company believes its large, established land inventory provides an
advantage relative to competitors that must purchase real estate before
beginning development projects.

Enhance Operating Performance. The Company believes it can improve
its operating performance through the following means:

Implement Aggressive Leasing Policy. Due to currently favorable
market conditions, the Company believes that it can generate incremental
earnings through enhanced management of its existing rental portfolio
and through more aggressive leasing. Leases for approximately 73% of
GCC's 5.6 million rentable square feet expire over the next five years.
In exercising this strategy, the Company intends to balance rental
revenue with occupancy levels in order to optimize project revenues.

Increase Long-Term Profitability of Forestry Operations. The
Company intends to improve returns in its forestry operations by growing
portions of its timber for longer periods in order to capitalize on
higher margins for older-growth timber. In 1996, the Company shed the
lower margin component of its forestry operations through the sale of
its linerboard mill and container facilities, and in 1997, the Company
reduced employment in its forestry operations by 72% through
outsourcing. In addition, the Company is considering potential
transactions to increase the nearer term value of the Company's
timberlands, such as asset swaps, sales, joint ventures or lease
arrangements.

Achieve Cost Reductions in Transportation Operations. The Company
believes it can improve the profitability of its transportation segment
through reductions in its cost structure, including more efficient use
of its railyards and equipment.

Capital Structure and Financing Strategy. The Company has
historically financed expansion with internally generated funds, held large
cash balances and avoided the incurrence of debt. Although the Company
expects to continue to employ conservative financing policies, management
intends to use the Company's balance of cash and cash equivalents to invest
more aggressively in development, acquisitions and joint ventures and to
incur debt in appropriate circumstances in order to more effectively
leverage the value of the Company's assets. The Company had cash and cash
equivalents of $560 million at December 4, 1997.

THE FLORIDA ECONOMY

With the exception of Walton County (where population growth rates have exceeded
those of the State of Florida), population growth rates in northwestern Florida,
where most of the Company's properties are located, have not been as high as
those of the State as a whole, but have still exceeded the national average. The
Bureau estimates that employment in Florida grew at an average annual rate of
3.5% from 1980 to 1995 and will continue to increase at an average annual rate
of 2.2% from 1996 to 2010. According to the Bureau, personal incomes in Florida
grew at 4.1% from 1980 to 1995 and are expected to continue to grow at
approximately 2.9% per year from 1996 to 2010. Florida's population, job and
income growth have created substantial demand for new residential and commercial
construction. According to a study conducted by the Bureau, in 1995 Florida
ranked first in the nation with respect to the number of housing units permitted
for construction and second in the nation on a value per unit basis. Housing
starts in the state of Florida are expected to reach an aggregate level of
113,200 for 1996 and 1997 combined and to increase to 116,000 for 1998 alone.
Management expects Florida's economic and population growth to continue and
believes that St. Joe is well positioned to benefit from increasing demand for
housing as well as office and industrial space in the Florida real estate
market.

THE OFFERINGS

Common Stock Offered by the Trust:
U.S. Offering............................................. 3,400,000 shares
International Offering.................................... 600,000 shares
Total:............................................ 4,000,000 shares
Common Stock Outstanding(1)................................. 30,565,937 shares
Use of Proceeds............................................. No proceeds will be
received by the Company.
New York Stock Exchange Symbol.............................. "SJP"

- ---------------

(1) As of December 15, 1997. Does not reflect 1,836,447 shares of Common Stock
issuable upon the exercise of options. A total of 173,713 additional shares
of Common Stock are reserved for issuance under the Company's stock option
plan. See Note 10 to the Consolidated Financial Statements.

THE ALFRED I. DUPONT TESTAMENTARY TRUST

The Company currently is, and following the Offerings will continue to be,
controlled by the Alfred I. duPont Testamentary Trust (the "Selling Stockholder"
or the "Trust"). The Trust was established under the Last Will and Testament of
Alfred I. duPont (the "Will") to provide certain testamentary dispositions
specified in the Will and to establish and benefit The Nemours Foundation (the
"Nemours Foundation"), a charitable foundation for the care and treatment of
crippled, but not incurable, children and certain elderly. Prior to the
Offerings, the Trust and the Nemours Foundation together beneficially owned
68.9% (after giving effect to management stock options exercisable within the
next 60 days) of the outstanding Common Stock, and after the Offerings the Trust
and the Nemours Foundation together will own 54.0% of the outstanding Common
Stock (assuming exercise of the U.S. Underwriters' over-allotment option). Two
of the six trustees of the Trust serve as directors of the Company and FECI. The
Trust is selling the Common Stock in order to diversify the Trust's assets and
to reinvest the proceeds of the Offerings in assets which produce higher current
income. See "Alfred I. duPont Testamentary Trust" and "Management."
5
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SUMMARY CONSOLIDATED FINANCIAL DATA

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
-------- --------- -------- -------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Net sales(1).............................. $155,122 $ 150,564 $245,704 $173,401 $ 79,566
Operating revenues(2)..................... 175,784 184,360 185,485 162,307 172,328
-------- --------- -------- -------- ---------
Total revenues.................. 330,906 334,924 431,189 335,708 251,894
Cost of sales............................. 111,014 116,014 112,163 64,765 63,282
Operating expenses........................ 133,091 139,875 139,640 120,524 118,493
Selling, general and administrative
expenses................................ 26,836 31,718 31,215 24,373 28,103
-------- --------- -------- -------- ---------
Operating profit........................ 59,965 47,317 148,171 126,046 42,016
Other income.............................. 25,164 18,770 40,857 32,005 32,650
-------- --------- -------- -------- ---------
Income from continuing operations before
income taxes and minority interest...... 85,129 66,087 189,028 158,051 74,666
Provision for income taxes................ 31,446 24,535 83,117 71,211 32,981
-------- --------- -------- -------- ---------
Income from continuing operations before
minority interest....................... 53,683 41,552 105,911 86,840 41,685
Minority interest......................... 15,827 12,194 14,002 9,922 13,404
-------- --------- -------- -------- ---------
Income from continuing operations......... 37,856 29,358 91,909 76,918 28,281
Income (loss) from discontinued
operations(3)........................... 4,253 44,461 (4,528) (4,528) --
Gain on sale of discontinued
operations(3)........................... -- -- 88,641 95,644 --
-------- --------- -------- -------- ---------
Net income...................... $ 42,109 $ 73,819 $176,022 $168,034 $ 28,281
======== ========= ======== ======== =========
PER SHARE DATA:
Income from continuing operations......... $ 1.24 $ 0.96 $ 3.01 $ 2.52 $ 0.93
Earnings (loss) from discontinued
operations.............................. 0.14 1.46 (0.15) (0.15) --
Gain on the sale of discontinued
operations.............................. -- -- 2.91 3.14 --
-------- --------- -------- -------- ---------
Net income................................ $ 1.38 $ 2.42 $ 5.77 $ 5.51 $ 0.93
======== ========= ======== ======== =========
Dividends paid(4)......................... $ 0.20 $ 0.20 $ 0.20 $ 0.15 $ 0.15
Special distribution(5)................... -- -- -- -- 10.00
OTHER OPERATING DATA:
EBDDT(6).................................. $ 58,327 $ 73,992 $ 72,682 $ 55,701 $ 60,938
Capital expenditures...................... 65,450 78,816 64,271 41,135 53,256
Cash flows provided by (used in)
Operating activities.................... 102,718 154,082 117,345 136,818 75,237
Investing activities(5)................. (82,750) (137,115) 322,877 344,437 (11,773)
Financing activities(5)................. (11,143) (46,554) (8,011) (6,065) (311,491)

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AS OF DECEMBER 31, AS OF SEPTEMBER 30,
----------------------- -------------------
1995 1996 1997
---------- ---------- -------------------
(UNAUDITED)
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents(7).......................... $ 303,590 $ 819,851 $ 576,712
Total property, plant and equipment, net.............. 804,974 834,167 853,217
Total assets.......................................... 1,530,994 1,806,238 1,584,860
Total stockholders' equity............................ 1,016,067 1,196,941 934,606

(1) Net sales includes real estate, land and building sales, forestry and timber
sales and sugar sales. Net sales for the nine months ended September 30,
1996 included two related one-time condemnation sales of land to the State
of Florida in exchange for $97.8 million in cash plus certain limited
development rights. Net operating results of the communications segment,
linerboard mill and container plants are shown separately as income (loss)
from discontinued operations for all years presented.
(2) Operating revenues includes real estate rental revenue and transportation
revenue.
(3) Net operating results of the communications segment, linerboard mill and
container plants are shown separately as income (loss) from discontinued
operations for all years presented. The gain on sale of discontinued
operations declined by approximately $7.0 million during the fourth quarter
of 1996 as a result of finalizing the post closing working capital
adjustments, closing expenses and pension curtailment gain, which had been
previously estimated. See Note 3 to the Consolidated Financial Statements.
(4) On December 15, 1997, the Company declared a dividend of $.05 per share to
stockholders of record on December 24, 1997, payable on December 30, 1997.
(5) Approximately $359.3 million of proceeds from the sales of the
communications segment, linerboard mill and container plants were held in
special accounts during 1996. A special distribution of a portion of the net
proceeds of the sales of $10.00 per share was paid on March 25, 1997, for
stockholders of record on March 21, 1997. The Company has announced its
intention to distribute the remaining net proceeds of $1.02 per share in a
special distribution to stockholders of record on December 19, 1997, payable
on December 30, 1997.
(6) The Company uses a supplemental performance measure along with net income to
report its operating results. This measure, Earnings Before Depreciation and
Deferred Taxes (EBDDT), is not a measure of operating results or cash flows
from operating activities as defined by generally accepted accounting
principles. Additionally, EBDDT is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative
to cash flows as a measure of liquidity. However, the Company believes that
EBDDT provides relevant information about its operations and is necessary,
along with net income, for an understanding of its operating results.
Depreciation, amortization and deferred income taxes are excluded from EBDDT
as they represent non-cash charges. Earnings and gains on sales of
discontinued operations and gains on the sale of non-strategic land and
other assets represent non-operating, unusual and/or nonrecurring items and
are therefore excluded from EBDDT.
(7) Includes cash, cash equivalents, marketable securities and short-term
investments.
7
15

RISK FACTORS

The following risk factors should be considered carefully in conjunction
with the other information contained in this Prospectus or incorporated by
reference herein in evaluating the Company and its business before purchasing
the Common Stock offered hereby.

IMPLEMENTATION OF NEW BUSINESS STRATEGY

The Company is currently undergoing a number of important changes in its
mix of businesses and its overall business strategy. In the first quarter of
1997, the Company hired a new chairman and chief executive officer as well as
several other senior members of management with strong backgrounds in
large-scale real estate planning and development and financial and asset
management. Under the direction of this new management team, the Company intends
to focus more closely on the development of its large land portfolio. Management
is also implementing a new strategy in the Company's forestry operations
pursuant to which the Company intends to extend the harvest rotation of certain
forest sections in order to effect a shift toward higher margin products. As
part of the Company's strategy to focus more closely on core assets, the Company
sold its linerboard mill and container facilities as well as its communication
businesses in 1996. In addition, management has reached an agreement in
principle to sell the Company's sugar lands to certain federal and state
government agencies.

Management expects the Company's new business strategy will result in a
larger portion of the Company's overall revenues being attributable to real
estate operations. However, many of the Company's proposed projects will require
a lengthy development process before lots or residential units can be sold or
otherwise generate revenue. See "Business and Properties -- Real
Estate -- Community and Residential Development." In addition, during the aging
of the Company's timberlands, management expects near-term revenues will remain
flat or fall to levels below those achieved by the business in earlier years.
See "Business and Properties -- Forestry." While the Company believes that its
new business strategy will enable it to enhance the value of its asset base as
well as improve its long-term financial results, there can be no assurance that
this new strategy will be successful, that the anticipated benefits of this new
strategy will be realized, or that management will be able to implement its
strategy on a timely basis.

RISKS RELATING TO REAL ESTATE OPERATIONS

General Real Estate Investment Risks. In general, real property
investments are subject to varying degrees of risk. The yields available from
real estate investments depend on the amount of income earned and capital
appreciation generated by the related properties as well as the expenses
incurred in connection therewith. If the Company's properties do not generate
income sufficient to meet operating expenses, the Company's financial
performance could be adversely affected. The Company's properties intended for
residential development are primarily located in northwestern Florida and GCC's
commercial/industrial properties are primarily located in or near Miami, Orlando
and Jacksonville, Florida. Income from and the performance of the Company's
properties may therefore be adversely affected by the general economic climate
of these regions, including unemployment rates and local conditions such as the
supply of and demand for real estate in the area, the attractiveness of the
Company's properties to potential residents or tenants, zoning or other
regulatory restrictions, competition from other available properties, the
affordability of homes and comparable commercial/industrial properties, and the
potential of increased operating costs (including real estate taxes). Over the
last decade, the growth of Florida's economy has substantially outperformed that
of the U.S. economy. Northwestern Florida's growth is also expected to continue,
although at a lesser rate than is expected for the rest of the state. However,
there can be no assurance that the Florida economy (including the northwest
region) will continue to experience positive growth rates or that Florida will
not be affected by a recession in the future. Certain significant expenditures
associated with an investment in real estate (such as real estate taxes,
maintenance costs and debt payments) would generally not be reduced if
circumstances in the local economy caused a reduction in revenue from the
Company's properties. Accordingly, if growth rates for the Florida economy begin
to decline or if a recession in the Florida economy occurs, the Company's
financial results could be adversely affected.

8
16

Development Risks. Any existing or future development activities of the
Company will entail certain risks, including the expenditure of funds on and
devotion of management's time to projects which may not come to fruition; the
risk that development or redevelopment costs of a project may exceed original
estimates, possibly making the project uneconomical; the risk that occupancy
rates or rents at a completed project will be less than anticipated or that
there will be vacant space at the project; the risk that expenses at a completed
development will be higher than anticipated; and the risk that permits and other
governmental approvals will not be obtained. In addition, the Company's real
estate development activities require significant capital expenditures. The
Company will be required to obtain funds for its capital expenditures and
operating activities through cash flow from operations, property sales or
financings. There can be no assurances that funds available from cash flow,
property sales and financings will be sufficient to fund the Company's required
or desired capital expenditures for development. If the Company were unable to
obtain sufficient funds, it might have to defer or otherwise limit certain
development activities. Further, any new development or any rehabilitation of
older projects can require compliance with new building codes and other
regulations. The Company cannot estimate the cost of complying with such codes
and regulations, and such costs can make a new project or some otherwise
desirable uses of an existing project uneconomic.

Before the Company can develop property, it must obtain a variety of
approvals (entitlements) from local governments with respect to such matters as
zoning, subdivision, environmental and other issues. The Company must also
obtain a variety of approvals from state and federal governments with respect to
matters that may include issues related to the environment, special status
species, the public trust and others. Because of the discretionary nature of
these approvals and concerns that may be raised by various governmental
officials, public interest groups and other interested parties during both the
approval and development process, the Company's ability to develop properties
and realize income from its projects could be delayed, reduced or eliminated.
See "Business and Properties -- Real Estate -- Regulations."

Joint Venture Risks. The Company has direct or indirect equity interests
in several joint ventures and may initiate future joint venture projects as part
of its overall development strategy. A joint venture may involve special risks
associated with the possibility that (i) the venture partner at any time may
have economic or business interests or goals that are inconsistent with those of
the Company, (ii) the venture partner may take actions contrary to the
instructions or requests of the Company or contrary to the Company's policies or
objectives with respect to its real estate investments or (iii) the venture
partner could experience financial difficulties. Actions by the Company's
venture partners may have the result of subjecting property owned by the joint
venture to liabilities in excess of those contemplated by the terms of the joint
venture agreement or have other adverse consequences. In its role as a general
partner of certain joint ventures, the Company may be jointly or severally
liable for the debts and liabilities of the joint ventures. The Company may not
be able to control decisions made by its joint ventures. In addition, the
Company's joint venture partners may dedicate time and resources to existing
commitments and responsibilities. See "Business and Properties -- Community and
Residential Development -- Other."

Risks Related to Acquisition Financing. A significant portion of the
Company's resources may be used for acquisitions of joint ventures or other
entities. The timing, size and success of the Company's acquisition efforts and
any associated capital commitments cannot be readily predicted. The Company may
finance future acquisitions by using shares of its Common Stock, cash or a
combination of Common Stock and cash. If the Common Stock does not maintain a
sufficient market value, or if potential acquisition candidates are otherwise
unwilling to accept Common Stock as part of the consideration for the sale of
their businesses, the Company may be required to utilize more of its cash
resources, if available, in order to initiate and maintain its acquisition
program. If the Company does not have sufficient cash resources, its growth
could be limited unless it is able to obtain additional capital through debt or
equity financings. There can be no assurance that the Company will be able to
obtain additional financing it may need for its acquisition program on terms
that the Company deems acceptable. To the extent the Company uses Common Stock
for all or a portion of the consideration to be paid for future acquisitions,
dilution may be experienced by existing stockholders, including the purchasers
of Common Stock in the Offerings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "-- Control by Principal Shareholder."

9
17

Natural Disasters. Natural disasters, such as hurricanes, floods or fires,
or unexpected climactic conditions, such as unusually heavy or prolonged rain,
particularly in Florida, where the Company's assets are concentrated, may have
an adverse impact on the ability of the Company to develop its properties and
realize income from its projects.

Regulation. The Company's current and past ownership and operation of real
property are subject to environmental laws and regulations generally applicable
to all businesses. The Company may be liable for the costs of remediating
hazardous materials contamination on its properties, regardless of fault, and
the Company's ability to sell or develop its properties may be severely
restricted by various federal, state and local environmental laws, including
laws relating to the protection of wetlands and endangered species. See "--
Environmental Matters" and "Business and Properties -- Real
Estate -- Regulation."

Rental Income and Competition for Tenants. Because of the Company's
substantial investment in rental properties, the Company's overall financial
performance would be adversely affected if a significant number of the Company's
tenants were unable to meet their obligations to the Company. In addition, when
space becomes available at its properties, the Company is subject to risks that
the leases may not be renewed and that the terms of the renewal or reletting
(including the cost of required renovations or concessions to tenants) may be
less economically advantageous to the Company. The Company has established
annual property budgets, including estimates of costs for renovation and
reletting expenses, that it believes are reasonable in light of each property's
situation, but no assurance can be given that estimates will sufficiently cover
all expenses. If the Company is unable to promptly lease all or substantially
all of the space at its properties, if the rental rates are significantly lower
than expected or if the Company's reserves for these purposes prove inadequate,
there could be an adverse effect on the Company's financial performance. See
"Business and Properties -- Commercial and Industrial Development -- Leasing."

RISKS RELATED TO FORESTRY OPERATIONS

Committed Product Purchases by Florida Coast; Possible Inability to Develop
New Markets. The major customer for the timber harvested from the Company's
timberlands has been and continues to be the Company's former linerboard mill,
which was sold on May 30, 1996 to Florida Coast. Sales to the mill accounted for
89% of the segment's sales in 1996. The mill was temporarily shut down from
April through September 1997 due to soft market conditions in the paper
industry. As a result of the shutdown, the Company's forestry net sales
decreased 48.2% from $44.6 million in the nine-month period ending September 30,
1996 to $23.1 million in the comparable period in 1997. The mill was reopened in
September 1997 and the existing supply agreement was renegotiated on a reduced
tonnage basis. Although management believes the mill will continue to operate,
there can be no assurances regarding the ability of the mill to satisfy its
obligations, particularly on a long-term basis, under the existing agreement.
See "Business and Properties -- Forestry -- Sales and Marketing."

As tonnage required to be supplied under the agreement decreases, the
Company intends to allow its forest to grow for longer periods, shifting the
usage of its timber to higher margin products. However, the performance of the
forestry segment may decline in the near term as that shift occurs. While
management believes that there is significant demand for the Company's timber
and wood fiber products from users other than the mill, no assurance can be
given that such demand exists, that the forestry operations will be able to
develop new customers on a timely basis, if at all, or that it will be able to
sell its products to third parties at market prices. Any excess supply of timber
and wood fiber that results from the inability of the Company to sell its
products to users other than the mill could result in lower prices for its
products, which could have a material adverse effect on the net sales, operating
income and cash flow of the Company's forestry operations.

Factors Affecting Supply and Demand. The results of operations of the
Company's forestry segment are and will continue to be affected by cyclical
supply and demand factors related to the forest products industry. The supply of
timber is significantly affected by land use management policies of the United
States government. Government agencies historically have been major suppliers of
timber to the United States forest products industry, but timber sales by such
government agencies currently are at historically low levels. Any reversal of
government land use management policies that substantially increases sales of
timber by United

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States government agencies could significantly reduce prices for forest
products. The demand for wood products also has been, and in the future can be
expected to be, subject to cyclical fluctuations. Demand is primarily affected
by the level of housing starts, repair and remodeling activity, industrial wood
product use, competition from non-wood products, and the demand for pulp and
paper products. These factors are subject to fluctuations due to changes in
economic conditions, interest rates, population growth, weather conditions,
competitive pressures and other factors. Any decrease in the level of industry
demand for wood products generally can be expected to result in lower net sales,
operating income and cash flow of the Company's forestry operations. See
"Business and Properties -- Forestry -- Pricing."

Harvesting Limitations. Weather conditions, timber growth cycles, access
limitations and regulatory requirements associated with the protection of
wildlife and water resources may restrict harvesting on the Company's forestry
lands. Timber harvests also may be affected by various natural factors,
including damage by fire, insect infestation, disease, prolonged drought, severe
weather conditions and other causes. The effects of such natural disasters may
be particularly damaging to young timber. Although damage from such natural
causes usually is localized and affects only a limited percentage of the timber,
there can be no assurance that any damage affecting the Company's forestry lands
will in fact be so limited. Any of the above factors could materially limit the
ability of the Company to harvest timber and could have a significant adverse
impact on the net sales, operating income and cash flow of the Company's
forestry operations.

Commodity Price Fluctuations and Markets. The forestry operations' results
of operations are highly dependent upon the prices received for wood products.
Although most of the Company's forestry operations' sales are made pursuant to a
long-term contract with Florida Coast, this contract includes a price adjustment
provision which permits an increase or decrease at specified times in contract
price to reflect changes in certain price or other economic indices, taxes and
other charges. In addition, the industry could experience significant price
declines from current levels as a result of natural market forces. Any
significant decline in prices for wood products could have a material adverse
effect on the Company's forestry operations.

Regulation. In conducting its harvesting activities, the Company
voluntarily complies with the "Best Management Practices" recommended by the
Florida Division of Forestry. From time to time, proposals have been made in
state legislatures regarding the regulation of timber harvesting methods. There
can be no assurance that such proposals, if adopted, will not adversely affect
the Company or its ability to harvest and sell logs or timber in the manner
currently contemplated. The forestry operations are also subject to
environmental and endangered species laws and regulations. See "-- Environmental
Matters" and "Business and Properties -- Forestry -- Regulation."

RISKS RELATING TO TRANSPORTATION OPERATIONS

Relationships With Other Railroads. Most of the traffic on the Company's
railroads is interchanged with other railroads. The Company's ability to provide
service to its customers depends in part upon its ability to maintain
cooperative relationships with connecting railroads with respect to, among other
matters, joint line rates, car supply, and interchange and haulage rights. In
addition, the Company's future revenues could be adversely affected by a
significant deterioration in the operational or financial condition of its
connecting carriers. See "Business and Properties -- Transportation."

Regulation. The Company's transportation operations are subject to
environmental, safety, health and other regulations generally applicable to all
businesses. In addition, the Company's railroads, like other rail common
carriers, are subject to regulation by the Surface Transportation Board ("STB"),
the Federal Railroad Administration, state departments of transportation and
other state and local regulatory agencies. Government regulation of the railroad
industry is a significant determinant of the competitiveness and profitability
of railroads.

FEC is a party to various proceedings before state regulatory agencies
relating to compliance with environmental laws. In addition, the Company's
present and historic ownership and operation of real property, including yards
and maintenance facilities, in connection with its transportation operations
involve the storage, use or disposal of hazardous substances that have
contaminated and may in the future contaminate the environment. The Company may
also be liable for the costs of cleaning up a site at which it has disposed

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(intentionally or unintentionally by virtue of, for example, an accident,
derailment or leak) or to which it has transported hazardous substances. The
Company is currently involved in various remediations of properties relating to
its transportation operations. See "-- Environmental Matters," "Business and
Properties -- Transportation -- Regulation" and "Business and
Properties -- Environmental Proceedings."

Liability for Casualty Losses. The Company's railroads, like other freight
railroads, are liable for damage to freight, for losses arising from personal
injury and for property damage in the event of derailments or other accidents or
occurrences. The Company has obtained insurance covering many of these risks;
however, under catastrophic circumstances, particularly those involving
transportation of hazardous materials, such liability could exceed the Company's
insurance limits. Also, insurance is available from only a very limited number
of insurers and there can be no assurance that insurance protection at the
Company's current levels will continue to be available or, if available, will be
obtainable by the Company on acceptable terms. To the extent payments required
in connection with losses or other liabilities arising from derailments or other
causes are not covered by insurance or exceed the Company's insurance limits,
the financial condition of the Company could be adversely affected. See
"Business and Properties -- Transportation."

Fluctuations in Revenues and Expenses. The Company has historically
experienced fluctuations in revenues and expenses due to unpredictable events
such as customer plant expansions and shut-downs, accidents and derailments. The
occurrence of such events in the future could cause further fluctuations in
revenues and expenses and negatively affect the Company's financial performance.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Transportation."

Customer Concentration. In 1996, FEC's five largest customers accounted
for approximately 31.0% of FEC's operating revenues. FEC's two largest customers
in 1996 were Rinker Materials Corporation and Tarmac-Florida, Inc., which
accounted for 11.9% and 7.8% of operating revenues, respectively, in the
transportation segment. The Company's business could be adversely affected if
its customers suffer significant reductions in their businesses or reduce
shipments of commodities transported by the Company. See "Business and
Properties -- Transportation."

RISKS RELATED TO SUGAR OPERATIONS

The Company's sugar operations are located in the Florida Everglades, which
are the subject of extensive environmental review by a variety of governmental
entities. In 1994 the State of Florida enacted the Everglades Forever Act, which
significantly affects agriculture in the Everglades Agriculture Area ("EAA").
The Act calls for the creation of six Stormwater Treatment Areas ("STAs") as
buffers between the Everglades Protection Area and the EAA. The Act imposes
substantial taxes on the Company's sugar operations (approximately $1.3 million
was paid in each of 1995 and 1996) and other agricultural interests to pay for
construction of the STAs. No assurances can be given that compliance costs with
the EAA will not increase materially in the future. The Company also must
maintain compliance with other environmental laws, including the federal Clean
Water Act and the federal Clean Air Act. See "-- Environmental Matters" and
"Business and Properties -- Sugar -- Regulation."

On December 6, 1997, the Company reached an agreement in principle with
certain federal and state government agencies for the sale of the Company's
sugar lands. The Company will be required to deliver the lands in compliance
with all federal and state environmental laws and be responsible for and bear
the expenses of the cleanup of such lands and the sugar mill. No assurances can
be given that cleanup costs will not materially affect the Company.

ENVIRONMENTAL MATTERS

The Company's current and past railroad, forestry and sugar operations, its
past paper operations and its current and past ownership, operation and leasing
of real property, are subject to extensive and changing local, state and federal
environmental laws and regulations governing, among other things, emissions into
the air, discharges into waters, the use, handling, transportation and disposal
of hazardous substances, the protection, investigation and remediation of soil
and groundwater contamination and employee health and safety. Such

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20

laws include, but are not limited to, the federal Clean Water Act, the federal
Clean Air Act, the Endangered Species Act of 1973 ("ESA"), the Resource
Conservation and Recovery Act of 1978, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Federal Insecticide,
Fungicide and Rodenticide Act and the Toxic Substances Control Act. Such laws
can impose criminal and civil penalties, remediation expenses, natural resource
damages and injunctive relief. The Company has made and will continue to make
expenditures to comply with such laws. Liability under such laws and regulations
may be imposed on current and prior owners and operators of property without
regard to fault and without regard to knowledge about the condition or action
causing the liability. The Company may also be contractually liable for
indemnification of environmental clean-up costs in connection with the sale of
its assets, businesses or real property, including the sale of its former
linerboard mill and container plants to Florida Coast, and will be contractually
required to bear the expenses of any environmental clean-up costs in connection
with the sale of its sugar lands. In addition, the Company may potentially incur
substantial costs relating to the clean-up of contamination caused by hazardous
substances. The presence of hazardous substances on a property may also
adversely affect the Company's ability to sell or develop such property or to
borrow using such property as collateral. The presence, use or release of
hazardous materials could also lead to claims for personal injury, damages to
natural resources or property damage. In addition, the ESA protects species
threatened with possible extinction and restricts the Company's harvesting
activities on certain of the timberlands on which the bald eagle and the red
cockaded woodpecker are present.

The Company has previously owned or operated other businesses or real
property, including those relating to the operation of paper mill and container
plants, which may have adversely affected the environment. As a prior owner or
operator of those facilities, the Company could have liability for environmental
damage, even though it is no longer the owner or operator. Subject to certain
deductibles and sharing provisions, which are not expected to have a material
adverse effect on the Company, the Company believes the purchaser of the paper
mill and container plants will be responsible to the Company for costs relating
to environmental damage; however, should the purchaser not be responsible, the
Company would be liable for such costs. The Company may also be liable for the
costs of cleaning up a site at which it has disposed (intentionally or
unintentionally by virtue of, for example, an accident, derailment or leak), or
over or to which it has transported, hazardous substances. The Company is
currently a party to, or involved in, legal proceedings directed at the clean-up
of certain off-site locations, including sites which are listed on the National
Priorities List under CERCLA or other similar federal or state lists.

The Company accrues for the total estimated clean-up costs for the sites at
which it has clean-up responsibilities when those costs become probable and when
amounts (or at least a minimum amount) can be reasonably estimated. In accruing
those amounts, the Company considers currently available information and
management's evaluation of whether other potentially responsible parties are
reasonably likely to contribute to the cost of a clean-up. As of September 30,
1997, the Company's aggregate environmental accruals were $7.3 million. Based on
presently available information, the Company does not expect to incur amounts in
excess of its accruals that are likely to have a material adverse effect on its
financial position, liquidity or results of operations. However, it is not
possible to quantify environmental costs with certainty because future laws,
ordinances or regulations could impose material environmental liability, and new
or different facts about the Company's operations or its ownership, operation or
leasing of real property could arise in the future. In addition, the Company has
incomplete technical information concerning environmental conditions at certain
sites. See "Business and Properties -- Environmental Proceedings."

COMPETITION

Real Estate. The real estate industry is generally characterized by
significant competition. The Company plans to continue to expand through a
combination of office, industrial and residential developments in Florida where
the acquisition and/or development of property would, in the opinion of
management, result in a favorable risk-adjusted return on investment. There are
a number of office, industrial and residential developers and real estate
companies that compete with the Company in seeking properties for acquisition,
resources for development and prospective tenants. Competition from other real
estate developments may adversely affect the Company's ability to attract and
retain tenants, rental rates and expenses of operation

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21

(particularly in light of the higher vacancy rates of many competing properties
which may result in lower-priced space being available in such properties). The
Company may compete with other entities that have greater financial and other
resources than the Company. There can be no assurance that the existence of such
competition could not have a material adverse effect on the Company's business,
operations and cash flow.

Forestry. The forest products industry is highly competitive in terms of
price and quality. Many of the Company's competitors are fully integrated
companies with substantially greater financial and operating resources than the
Company. The products of the Company are also subject to increasing competition
from a variety of non-wood and engineered wood products. In addition, the
Company is subject to a potential increase in competition from lumber products
and logs imported from foreign sources. Any significant increase in competitive
pressures from substitute products or other domestic or foreign suppliers could
have a material adverse effect on the Company.

Transportation. Although each of the Company's railroads is typically the
only rail carrier directly serving its customers, the Company's railroads
compete directly with other railroads that could potentially deliver freight to
their markets and customers via different routes. The Company's railroads also
compete directly with other modes of transportation, including motor carriers
and, to a lesser extent, ships and barges. Competition is based primarily upon
the rate charged and the transit time required, as well as the quality and
reliability of the service provided. Any improvement in the cost or quality of
these alternate modes of transportation could increase competition from these
other modes of transportation and adversely affect the Company's business.

Sugar. The sugar industry is highly competitive. The Company competes with
foreign and domestic sugarcane and sugar beet processors, as well as
manufacturers of corn sweeteners and artificial sweeteners such as aspartame and
saccharin. Sugar is a volatile commodity subject to wide price fluctuations in
the marketplace.

CONTROL BY PRINCIPAL SHAREHOLDER

After consummation of the Offerings, the Trust and the Nemours Foundation
will collectively continue to own 16,691,900 shares of Common Stock or
approximately 54% of the outstanding voting securities of the Company (assuming
exercise of the U.S. Underwriters' over-allotment option and giving effect to
management stock options exercisable within 60 days). See "Principal and Selling
Stockholders." Accordingly, the Trust is and will continue to be able to control
the election of the Company's directors and to determine the corporate and
management policies of the Company, including decisions relating to any mergers
or acquisitions by the Company, sales of all or substantially all of the
Company's assets and other significant corporate transactions. In addition, the
Company has entered into a registration rights agreement with the Trust (the
"Registration Rights Agreement"), under which the Company has agreed that for a
period of one year from the completion of the Offerings it will not issue any
shares of Common Stock or options or securities convertible into Common Stock
that would cause the Trust's and the Nemours Foundation's collective ownership
in the Company to fall below 51% on a fully diluted basis. As a result, during
such period the Company will not be able to issue shares of Common Stock in
connection with acquisitions or other financings without the consent of the
Trust. Pursuant to the Registration Rights Agreement, the Trust will also have
the right to nominate two members of the Company's Board of Directors so long as
the Trust and the Nemours Foundation collectively own in excess of 20% of the
Company's outstanding Common Stock, and one member so long as such entities
collectively own in excess of 5%. See "Alfred I. duPont Testamentary Trust --
Registration Rights Agreement."

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends to a significant extent upon the
leadership and performance of its executive officers and key employees. See
"Management." The loss of the services of any of these individuals could have a
material adverse effect on the Company's business, financial performance and
results of operations. While the Company has entered into employment agreements
with Peter S. Rummell, Charles A. Ledsinger, Jr., Robert M. Rhodes and other
members of senior management, the Company cannot assure that

14
22

such individuals will remain with the Company throughout the terms of the
agreements, or thereafter. As the Company continues to grow, it will continue to
hire, appoint or otherwise change senior managers and other key executives.
There can be no assurance that the Company will be able to retain its executive
officers and key personnel or attract additional qualified members to its
management team in the future. The Company does not maintain any policies of key
person life insurance on the lives of its senior management personnel.

SHARES AVAILABLE FOR FUTURE SALE

On completion of the Offerings, the Trust and the Nemours Foundation
together will own 54% of the shares of Common Stock outstanding (assuming
exercise of the U.S. Underwriters' over-allotment option and giving effect to
management stock options exercisable within 60 days). No prediction can be made
as to the effect, if any, that future sales of shares, or the availability of
shares for future sale, will have on the market price of the Common Stock. Sales
of substantial amounts of shares of Common Stock in the public market or the
perception that such sales might occur could adversely affect the market price
of the shares of Common Stock. In the event of any future issuance of equity
securities, the interests of holders of Common Stock, including the shares of
Common Stock offered hereby, could be diluted. In addition, the Trust, the
Company, and certain of the Company's officers, directors and other stockholders
have agreed, except in certain limited circumstances, not to offer, sell,
contract to sell, or otherwise dispose of any Common Stock or securities
exercisable for, convertible into or exchangeable for Common Stock, for a period
of 180 days after the closing of the Offerings, without the prior written
consent of Morgan Stanley & Co. Incorporated. See "Underwriters."

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DIVIDENDS

The Company paid aggregate annual cash dividends of $.20 per share to
holders of the Common Stock in 1995 and 1996 and, upon payment of an additional
$.05 to stockholders on December 30, 1997, will have paid aggregate cash
dividends of $.20 to holders in 1997. In addition, the Company distributed net
proceeds of $10.00 per share to all holders of record on March 21, 1997 arising
from the sale of the Company's linerboard and container facilities and its
communications business, and announced its intention to distribute an additional
$1.02 per share to stockholders of record on December 19, 1997, payable on
December 30, 1997. Although the Company has historically paid quarterly cash
dividends of $.05 per share, there can be no assurance that such practice will
continue in the future.

MARKET FOR COMMON STOCK

The Company had 899 common stockholders of record as of November 24, 1997.
The Company's common stock is quoted on the New York Stock Exchange ("NYSE")
Composite Transactions Tape under the symbol "SJP".

The range of high and low sales prices for the Common Stock as reported on
the NYSE Composite Transactions Tape for the periods indicated is set forth
below.

COMMON STOCK PRICE
-------------------
HIGH LOW
-------- -------

1995
First Quarter............................................... $ 68 $53 1/4
Second Quarter.............................................. 66 1/4 60
Third Quarter............................................... 64 1/2 60
Fourth Quarter.............................................. 64 3/4 52 1/2
1996
First Quarter............................................... 62 1/4 53 7/8
Second Quarter.............................................. 65 7/8 57 7/8
Third Quarter............................................... 65 3/4 59 7/8
Fourth Quarter.............................................. 69 1/2 63 1/2
1997
First Quarter............................................... 93 63 1/8
Second Quarter.............................................. 84 3/4 69 7/8
Third Quarter............................................... 100 7/8 81
Fourth Quarter(1)........................................... 115 91 1/2

- ---------------

(1) Through December 15, 1997.

A recently reported sale price of the Company's common stock on the NYSE is
set forth on the cover page of this Prospectus.

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24

ALFRED I. DUPONT TESTAMENTARY TRUST

The Trust was established under the Last Will and Testament of Alfred I.
duPont (the "Will") to provide testamentary dispositions to persons named in the
Will and otherwise to benefit the Nemours Foundation, a charitable foundation
provided for under the Will for the care and treatment of crippled, but not
incurable, children and certain elderly. The Trust has been the controlling
stockholder of the Company since 1940.

The Trust and the Nemours Foundation together currently own 21,291,900
shares or 68.9% of the outstanding Common Stock (after giving effect to
management options exercisable within the next 60 days) and upon consummation of
the Offerings will own 16,691,900 shares or 54.0% of the outstanding Common
Stock (assuming exercise of the U.S. Underwriters' over-allotment option), and
thus will continue to control the Company. The trustees of the Trust as of
November 30, 1997 were W. L. Thornton, Chairman, J. C. Belin, H. H. Peyton, J.
F. Porter, W. T. Thompson, III and Wachovia Bank, N.A. One trustee position is
currently vacant due to the recent death of Alfred duPont Dent, who had been a
trustee for 32 years.

REASONS FOR THE OFFERINGS

The Trust has concluded that it is desirable to sell a portion of its
holdings of the Company's Common Stock to diversify its assets and to enable the
Trust to invest the proceeds of the Offerings in assets that produce higher
current income. Florida law requires the Trust to distribute annually at least
3% of the fair market value of its assets, regardless of its earnings in a given
year. Under the terms of the Will, the Trust is separately required to
distribute annually all of its income. Historically, the Trust has allocated its
investments between debt securities, held to generate current income, and equity
securities, principally the Company's Common Stock, held for long-term capital
appreciation. Because the Company pays relatively low dividends on its Common
Stock, the Trust's other assets must generate income sufficient to permit the
Trust to meet its obligation to distribute annually an amount equal to 3% of the
fair market value of the Trust's total assets. As the equity securities held by
the Trust, principally the Company's Common Stock, have appreciated over time,
the fair market value of the Trust's assets has reached a level at which its
income-producing assets may not generate income equal to 3% of the fair market
value of its assets.

In the future, the Trust may sell additional shares of Common Stock, but
has agreed with the Underwriters that it will not effect any sales of Common
Stock for a period of 180 days after the commencement of the Offerings without
the consent of Morgan Stanley & Co. Incorporated. See "-- Registration Rights
Agreement" and "Underwriters."

CERTAIN RELATIONSHIPS

Apart from its ownership interest in the Company's Common Stock, the Trust
owns 46,859 units, or 93.7%, of the outstanding limited partnership units of
Al-Zar, Ltd. ("Al-Zar"), a limited partnership organized by the Company for the
purpose of holding approximately 300 acres of real property in Wilmington,
Delaware. A subsidiary of the Company serves as general partner of Al-Zar and
owns 500 units, or 1%, of Al-Zar's outstanding partnership units.

In addition to their positions with the Trust, Messrs. Thornton, Belin,
Peyton, Porter, Thompson and H. M. Durden, the representative of the corporate
trustee, Wachovia Bank, N.A., also serve as directors of the Nemours Foundation.
The Nemours Foundation owns 450,224 shares, or approximately 5%, of FECI's
outstanding common stock. Mr. Belin and Mr. Thornton also serve as directors of
the Company and FECI.

CERTAIN TRANSACTIONS

The Nemours Foundation rents office space from GCC at rates approximating
market rentals. In addition, Mr. Belin and Mr. Thornton have entered into
consulting agreements with the Company. See "Certain Transactions."

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EXPENSES OF THE OFFERINGS

The Company will bear all expenses of the Offerings, other than
underwriting commissions and discounts, the fees and expenses of legal counsel
and financial advisors to the Trust and certain other expenses.

REGISTRATION RIGHTS AGREEMENT

Pursuant to a Registration Rights Agreement between the Trust and the
Company, the Trust may require the Company on up to five occasions to file a
registration statement under the Securities Act so long as such registration
covers not less than 10% of the Registrable Securities (as defined in the
Registration Rights Agreement) held by the Trust and the Nemours Foundation
collectively (unless the registration demand is the last demand available under
the Registration Rights Agreement, in which case it may cover less than 10% of
the Registrable Securities). The Trust may not exercise a demand registration
within six months following the effectiveness of a registration statement for an
earlier demand registration, and the Company may defer filing such a
registration statement or proceeding with an offering for up to 60 days under
certain conditions. The Offerings will constitute the first demand under the
Registration Rights Agreement. In addition, the Trust and the Nemours Foundation
have unlimited "piggy-back" registration rights under the terms of the
Registration Rights Agreement. The Registration Rights Agreement provides that
if the Trust has made a demand for registration and decides not to proceed with
the related offering, in certain circumstances such demand shall be deemed to
have been effected, unless the Trust agrees to pay all expenses of registration.

Pursuant to the Registration Rights Agreement, the Company will bear all of
the expenses of demand registrations, except that the Trust will pay with
respect to its Registrable Securities only its own underwriting discounts and
commissions, the fees and expenses of the Trust's legal counsel and financial
advisors and certain other expenses.

In the Registration Rights Agreement, the Trust has agreed, if required by
the managing underwriter of a public offering of Common Stock by the Company or
the Trust, not to effect any public sale or distribution or otherwise dispose of
any securities of the Company during the seven days prior to, and the 90 days
after, the effectiveness of the registration statement for any such offering. In
connection with the Offerings, the Company and the Trust have agreed not to
effect any such sale or disposition for a period of 180 days after the date of
this Prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated. See "Underwriters."

In the Registration Rights Agreement, the Company has agreed that, so long
as the Trust and the Nemours Foundation collectively beneficially own at least
51% of the Company's issued and outstanding Common Stock calculated on a fully
diluted basis (as defined in the Registration Rights Agreement), the Company
will not for a period of one year after the closing of the Offerings, without
the prior written consent of the Trust, issue any common stock, convertible
preferred stock, stock subject to options, warrants or other rights, convertible
or exchangeable debt or equity securities or other securities which would cause
the collective beneficial ownership interests of the Trust and the Nemours
Foundation in the Company's Common Stock to fall below 51% on a fully diluted
basis. In addition, for so long as the Trust and the Nemours Foundation
collectively beneficially own at least 20% of the issued and outstanding shares
of the Company's Common Stock, the Trust will be entitled to nominate, and the
Company and the Board of Directors of the Company will support the election by
the Company's stockholders of, two individuals designated by the Trust to be
members of the Company's Board of Directors. For so long as the Trust and the
Nemours Foundation collectively own at least 5% and less than 20% of the issued
and outstanding shares of the Company's Common Stock, the Trust will be entitled
to nominate, and the Company and the Board of Directors of the Company will
support the election by the Company's stockholders of, one individual designated
by the Trust to be a member of the Company's Board of Directors. If the size of
the Company's Board of Directors is increased, the number of individuals
designated by the Trust shall be appropriately and proportionately increased.
These provisions of the Registration Rights Agreement are not intended to limit
the ability of the Trust or the Nemours Foundation to vote their shares as they
see fit with respect to the election of directors or otherwise.

Under the Registration Rights Agreement, the Trust and the Company have
also agreed to indemnify each other against certain civil liabilities, including
certain liabilities under the Securities Act.

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below are qualified in
their entirety by and should be read in conjunction with the consolidated
financial statements and the notes related thereto included elsewhere in this
Prospectus. The statement of operations data with respect to the years ended
December 31, 1994, 1995 and 1996 and the balance sheet data as of December 31,
1995 and 1996 have been derived from the financial statements of the Company
included herein, which have been audited by KPMG Peat Marwick LLP. The statement
of operations data with respect to the years ended December 31, 1992 and 1993
and the balance sheet data as of December 31, 1992, 1993 and 1994 has been
derived from the financial statements of the Company previously filed with the
SEC although not incorporated by reference or included elsewhere herein, which
have also been audited by KPMG Peat Marwick LLP. The following selected
financial data for the nine months ended on September 30, 1996 and September 30,
1997 have been derived from the Company's unaudited consolidated financial
statements which, in the opinion of management, contain all adjustments
(consisting of only normal and recurring adjustments) necessary to present
fairly the Company's financial position and results of operations at such dates
and for such periods. Historical results are not necessarily indicative of the
results to be expected in the future and results for interim periods are not
necessarily indicative of results for the entire year.

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS
DATA:
Net sales(1).............. $ 130,085 $ 135,417 $ 155,122 $ 150,564 $ 245,704 $ 173,401 $ 79,566
Operating revenues(2)..... 169,439 177,040 175,784 184,360 185,485 162,307 172,328
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues... 299,524 312,457 330,906 334,924 431,189 335,708 251,894
Cost of sales............. 95,005 105,644 111,014 116,014 112,163 64,765 63,282
Operating expenses........ 138,317 129,704 133,091 139,875 139,640 120,524 118,493
Selling, general and
administrative
expenses................ 23,269 22,145 26,836 31,718 31,215 24,373 28,103
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit........ 42,933 54,964 59,965 47,317 148,171 126,046 42,016
Other income.............. 17,860 12,330 25,164 18,770 40,857 32,005 32,650
Income from continuing
operations before income
taxes and minority
interest................ 60,793 67,294 85,129 66,087 189,028 158,051 74,666
Provision for income
taxes................... 21,837 30,328 31,446 24,535 83,117 71,211 32,981
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations before
minority interest....... 38,956 36,966 53,683 41,552 105,911 86,840 41,685
Minority interest......... 11,074 10,241 15,827 12,194 14,002 9,922 13,404
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations.............. 27,882 26,725 37,856 29,358 91,909 76,918 28,281
Cumulative effect of
change in accounting
principle(3)............ -- 20,518 -- -- -- -- --
Income (loss) from
discontinued
operations(4)........... (12,292) (14,600) 4,253 44,461 (4,528) (4,528) --
Gain on sale of
discontinued
operations(4)........... -- -- -- -- 88,641 95,644 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income....... $ 15,590 $ 32,643 $ 42,109 $ 73,819 $ 176,022 $ 168,034 $ 28,281
========== ========== ========== ========== ========== ========== ==========

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PER SHARE DATA:
Income from continuing
operations.............. $ 0.91 $ 0.87 $ 1.24 $ 0.96 $ 3.01 $ 2.52 $ 0.93
Earnings (loss) from
discontinued
operations(4)........... (0.40) (0.48) 0.14 1.46 (0.15) (0.15) --
Gain on the sale of
discontinued
operations(4)........... -- -- -- -- 2.91 3.14 --
Cumulative effect of
change in accounting
principle(3)............ -- 0.68 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................ $ 0.51 $ 1.07 $ 1.38 $ 2.42 $ 5.77 $ 5.51 $ 0.93
========== ========== ========== ========== ========== ========== ==========
Dividends paid(5)......... $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.15 $ 0.15
Special distribution(6)... -- -- -- -- -- -- 10.00
OTHER OPERATING DATA:
EBDDT(7).................. $ 50,140 $ 68,469 $ 58,327 $ 73,992 $ 72,682 $ 55,701 $ 60,938
Capital expenditures...... 71,574 68,615 65,450 78,816 64,271 41,135 53,256
Cash flows provided by
(used in)
Operating activities.... 68,960 81,605 102,718 154,082 117,345 136,818 75,237
Investing
activities(6)......... (85,498) (68,108) (82,750) (137,115) 322,877 344,437 (11,773)
Financing
activities(6)......... (7,210) (6,153) (11,143) (46,554) (8,011) (6,065) (311,491)

AS OF DECEMBER 31, AS OF SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

BALANCE SHEET DATA:
Cash and cash
equivalents(8).......... $ 201,112 $ 256,292 $ 275,417 $ 303,590 $ 819,851 $ 848,636 $ 576,712
Total property, plant and
equipment, net.......... 684,043 722,043 756,954 804,974 834,167 825,816 853,217
Total assets.............. 1,289,384 1,395,833 1,449,390 1,530,994 1,806,238 1,817,606 1,584,860
Total stockholders'
equity(9)............... 833,682 901,710 936,982 1,016,067 1,196,941 1,185,164 934,606

- ---------------

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(6) Approximately $359.3 million of proceeds from the sales of the
communications segment, linerboard mill and container plants were held in
special accounts during 1996. A special distribution of a portion of the net
proceeds of the sales of $10.00 per share was paid on March 25, 1997, for
stockholders of record on March 21, 1997. The Company has announced its
intention to distribute the remaining net proceeds of approximately $1.02
per share in a special distribution to stockholders of record on December
19, 1997, payable on December 30, 1997.
(7) The Company uses a supplemental performance measure along with net income to
report its operating results. This measure, Earnings Before Depreciation and
Deferred Taxes (EBDDT), is not a measure of operating results or cash flows
from operating activities as defined by generally accepted accounting
principles. Additionally, EBDDT is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative
to cash flows as a measure of liquidity. However, the Company believes that
EBDDT provides relevant information about its operations and is necessary,
along with net income, for an understanding of its operating results.
Depreciation, amortization and deferred income taxes are excluded from EBDDT
as they represent non-cash charges. Earnings and gains on sales of
discontinued operations and gains on the sale of non-strategic land and
other assets represent non-operating, unusual and/or nonrecurring items and
are therefore excluded from EBDDT. The cumulative effect in 1993 of a change
in accounting principle has also been excluded from EBDDT.
(8) Includes cash, cash equivalents, marketable securities and short-term
investments.
(9) The Company adopted the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" at December 31, 1993. This
adoption increased stockholders' equity by $41.5 million.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Management's discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and "Business and Properties" included
elsewhere in this Prospectus. The following discussion contains forward-looking
statements. The Company's actual results may differ significantly from those
projected in the forward-looking statements. Factors that might cause future
actual results to differ materially from the Company's recent results or those
projected in the forward-looking statements include, but are not limited to,
those discussed in "Risk Factors" and below.

The text below includes a discussion of the Company's results of operations
for the nine month period ended September 30, 1996 compared to the nine month
period ended September 30, 1997. For a discussion of the results of operations
for the years ended December 31, 1994, 1995 and 1996, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Result of Operations," in the
Company's 1996 Form 10-K, incorporated by reference herein.

OVERVIEW

St. Joe Corporation is a diversified company engaged in the real estate,
forestry, transportation and sugar industries. Until the second quarter of 1996,
the Company was also engaged in communications and the manufacture and
distribution of forest products.

The Company's assets and operations are concentrated in the state of
Florida. Consequently the Company's performance, and particularly that of its
real estate operations, is significantly affected by the general health of the
Florida economy. The Company's businesses, particularly forestry and
transportation, are influenced by the general health of the national economy.
The Company's real estate operations are also cyclical but are primarily
affected by local demographic and general economic trends, and the supply and
rate of absorption of new construction. Although the Company has a large
portfolio of income producing properties that provide stable operating results,
the Company's earnings from period to period may be significantly affected by
the nature and timing of sales of development property and non-strategic assets.

The Company is currently undergoing a number of important changes in the
mix of its businesses and its overall business strategy. In the first quarter of
1997, the Company hired a new chairman and chief executive officer as well as
several other senior members of management with strong backgrounds in
large-scale real estate planning and development. Under the direction of this
new management team, the Company is focusing more closely on the development of
its large land portfolio. Management believes that the Company's increased focus
on real estate operations will result in a larger portion of the Company's
overall revenues being attributable to real estate operations. However, many of
the Company's proposed projects will require a lengthy process to complete the
development cycle before they are sold or otherwise generate revenue.
Nevertheless, management believes the Company's existing raw land portfolio will
allow the Company to maintain relatively low development costs and that its
existing large portfolio of income-producing properties, together with its other
businesses, will continue to generate cash to fund a significant portion of its
longer-term projects.

The Company is also undergoing certain strategic changes in its forestry
operations. The major customer for the Company's timber has been and continues
to be the Company's former linerboard mill which was sold in May, 1996. The wood
fiber supply agreement between the Company and the mill was recently
renegotiated to provide for a level of tonnage that is significantly less than
historical levels. Partly as a result of the reduced tonnage under the
agreement, the Company has decided to allow its forests to grow for longer
periods in order to age the timber and shift its focus toward higher margin
products. However, during this transition period, management believes that
revenues in the forestry segment may continue to decline.

RECENT EVENTS

On December 10, 1997, the Company entered into a letter of intent with
Codina Group, Inc. and Weeks Corporation under which the Company and Weeks each
agreed to purchase a one-third interest in Codina, a

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30

commercial/industrial developer, active principally in southern Florida. After
the consummation of the transaction, Codina will continue to develop commercial,
industrial and office property in southern Florida. The purchase price of this
transaction is not material to the Company's financial position.

On December 6, 1997, the Company announced that it had reached an agreement
in principle to sell its sugar lands to certain federal and state government
agencies for $133.5 million in cash. Under the preliminary agreement, the
Company would retain the right to farm the sugar lands through the 2002-2003
crop year. The proposed transaction is subject to both government and board
approval.

On December 3, 1997, the Company and Orlando-based CNL Group, Inc. formed a
real estate joint venture to invest in and develop office and industrial
properties in the central Florida region. The Company, through two subsidiaries,
received a 50% ownership interest in the joint venture. The Company committed to
supply $25 million in funding for new projects the venture determines to develop
and/or manage.

On November 21, 1997, the Company announced the withdrawal of its
outstanding offer to purchase all outstanding FECI common stock not owned by the
Company at $102 per share.

On November 12, 1997, the Company, through two subsidiaries, purchased
certain assets, including the personnel, trademark and proprietary information
systems, of Arvida Company through a newly formed limited partnership with JMB
Southeast Development, L.L.C. and JMB Southeast Development, L.P. for the
purpose of developing and/or managing residential communities on certain lands
owned by the Company, as well as the purchase of other lands for development and
management. The Company owns 74% of the new limited partnership, St. Joe/Arvida
Company, L.P. The purchase price for the 74% partnership interest in the new
entity is not material to the Company's financial position.

RESULTS OF OPERATIONS

COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997

Net sales decreased 54.1% from $173.4 million in the first nine months of
1996 to $79.6 million in the first nine months of 1997. Sales in 1996 were
unusually high due to two related condemnation sales of land to the State of
Florida in exchange for $97.8 million in cash plus certain limited development
rights. Sales of real estate totaled $30.5 million in 1997. Operating revenues
increased 6.2% from $162.3 million in 1996 to $172.3 million in 1997, primarily
due to an increase in transportation revenues of $6.8 million as well as
increases in real estate rental revenues.

Cost of sales decreased 2.3% from $64.8 million in the first nine months of
1996 to $63.3 million in the first nine months of 1997, as a result of decreases
in cost of timber and other sales of $21.9 million offset by increases in cost
of real estate sales of $20.3 million. Operating expenses decreased 1.7% from
$120.5 million in the first nine months of 1996 to $118.5 million in the first
nine months of 1997 resulting from decreases in transportation costs of $3.9
million offset in part by an increase in real estate operating costs of $1.9
million.

Selling, general and administrative expenses increased 15.3% from $24.4
million in the first nine months of 1996 to $28.1 million in the first nine
months of 1997, primarily due to a one-time write-off of approximately $2.9
million for expenses incurred in the transportation segment in connection with
the possible disposition of certain of its assets.

Other income (expense) increased 2.0% from $32.0 million in 1996 to $32.7
million in 1997. The year to date increase for the first nine months of 1997 was
due to higher average investment balances compared to the first nine months of
1996.

Income tax expense on continuing operations for the nine months ended in
September 30, 1997 totaled $33.0 million, representing an effective rate of 44%
compared to $71.2 million for a similar effective tax rate in the 1996
comparable period. These rates exceed statutory rates primarily because of the
50% excise tax on prepaid pension cost totaling $4.2 million in 1997 and $11.0
million in 1996. It is anticipated that as long as the Company continues to
record prepaid pension cost, an excise tax of 50% will be accrued.

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31

Net income for the nine months ended September 30, 1997 was $28.3 million
or $0.93 per share compared to $168.0 million or $5.51 per share in 1996.
Results for 1996 included income from discontinued operations of $91.1 million,
net of tax.

Real Estate

NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1997 % CHANGE
------ ----- --------
($ IN MILLIONS)

Net Sales and Operating Revenue............................. $124.2 $59.2 (52.3)
Cost of Sales and Operating Expense......................... 18.4 41.2 123.9
Selling, General and Administrative Expenses................ 3.1 3.4 9.7
Operating Profit............................................ 102.7 14.6 (85.8)

The Company's real estate operations currently consist of commercial and
industrial development and management through GCC, a subsidiary of FECI, and
community residential development through the Southwood Properties Division of
the Company ("Southwood").

Real estate net sales and operating revenue decreased $65.0 million, or
52.3%, from $124.2 million in the first nine months of 1996 to $59.2 million in
the first nine months of 1997. Costs of sales and operating expenses increased
123.9% from $18.4 million in the first nine months of 1996 to $41.2 million in
the first nine months of 1997. The decrease in sales was largely due to two
related condemnation sales of land to the State of Florida in 1996 for $97.8
million in cash plus certain limited development rights. Costs associated with
these sales were $.1 million. The increase in costs of sales and operating
expense was due to a higher cost basis on 1997 land and building sales. Year to
date selling, general and administrative expenses increased 9.7% during 1997 due
primarily to additional salaries and related benefits.

In the commercial/industrial segment, conducted through GCC, rental
revenues increased $3.6 million, or 14.3%, from $25.1 million in the first nine
months of 1996 to $28.7 million in the first nine months of 1997. Operating
expenses in the commercial/industrial segment were $17.6 million for a 38.7%
gross margin in the 1997 period compared to $15.7 million in 1996 for a gross
margin of 37.5%. During the first nine months of 1997 eight buildings were
placed in service adding approximately 973,000 leasable square feet. In the
first nine months of 1997, land and building sales totaled $26.5 million and
included three buildings, totaling $20.1 million, one of which was developed and
constructed specifically for the purpose of resale. The total cost of these
sales was $22.4 million.

In the community/residential segment, land sales increased $2.7 million, or
200.7%, from $1.3 million in the first nine months of 1996 to $4.0 million in
the first nine months of 1997 (not including the condemnation sales). Costs of
these sales increased 200.0% from $.4 million in the first nine months of 1996
to $1.2 million in the first nine months of 1997.

As a result of these factors, operating profit decreased 85.8% from $102.7
million for the nine months ended September 30, 1996 to $14.6 million for the
comparable period in 1997.

Forestry

NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1997 % CHANGE
----- ----- --------
($ IN MILLIONS)

Net Sales................................................... $44.6 $23.1 (48.2)
Cost of Sales............................................... 42.3 20.3 (52.0)
Selling, General and Administrative Expenses................ 1.4 1.7 21.4
Operating Profit (Loss)..................................... .9 1.1 22.2

Total net sales decreased $21.5 million, or 48.2%, from $44.6 million in
the first nine months of 1996 to $23.1 million the first nine months of 1997,
all of which is attributable to the Florida Coast linerboard mill

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32

shutdown which lasted from April 1997 through September 1997. Costs of sales
decreased 52% from $42.3 million in 1996 to $20.3 million in 1997 due to
declining sales, although cost of sales as a percentage of sales continued to
improve as the Company sold more of its grown timber with higher margins than
procured wood. Selling, general and administrative costs increased $.3 million
from $1.4 million in 1996 to $1.7 million in 1997 primarily due to severance
payments of approximately $1.2 million paid to 62 terminated employees, offset
by reductions in ongoing staffing levels. Operating profit increased 22.2% from
$.9 million in 1996 to $1.1 million in 1997.

On August 25, 1997, the Company renegotiated certain terms of its wood
fiber supply agreement with Florida Coast Paper Company. Under the new
agreement, the Company will supply 615,400 tons of pulpwood and wood chips
between August 25, 1997 and May 30, 1998; thereafter the Company will supply
700,000 tons per year through December, 2011 with two five year renewal periods.
Under the previous agreement, up to 1.6 million tons per year were to be
provided to Florida Coast. As a result of the decrease in tonnage required to be
provided to Florida Coast, management expects that the Company's revenues will
be temporarily depressed, but the change should result in higher quality
older-growth timber in the future. The pricing mechanism for the wood remains
the same as in the original agreement.

Transportation

NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1997 % CHANGE
------ ------ --------
($ IN MILLIONS)

Operating Revenues.......................................... $137.2 $144.0 5.0
Operating Expenses.......................................... 104.8 100.9 (3.7)
Selling, General and Administrative Expenses................ 14.5 17.7 22.1
Operating Profit............................................ 17.9 25.4 41.9

Operating revenues in the transportation segment were $144.0 million in
1997, an increase of 5% over the comparable period in 1996. Total FEC
transportation operating revenues increased $9.0 million, or 7.1% from $127.5
million in the first nine months of 1996 to $136.5 million in the first nine
months of 1997. This increase is attributable to a combination of an 8.2%
increase in the number of shipments handled in the first nine months of 1997
versus 1996 and various rate increases achieved since the beginning of the year.
ANRR's operating revenues were $7.5 million in 1997, $2.2 million lower than in
1996 due to the shutdown of the Florida Coast Paper linerboard mill shutdown,
its largest customer. Operating expenses for this segment were $100.9 million,
$3.9 million lower than last year as a result of decreases in casualty reserves
totaling $2.5 million and overall reductions in operating expenses. The 1996
comparable figures for casualty and insurance costs included an accrual for an
adverse legal judgment against the Company, which was subsequently reversed on
appeal, of approximately $2.2 million. Selling, general and administrative
expenses increased 22.1% over the previous year from $14.5 million in 1996 to
$17.7 million in 1997. Operating profit for the transportation segment overall
has increased from 13.0% in 1996 to 17.6% in 1997 as a result.

Sugar

NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1997 % CHANGE
----- ----- --------
($ IN MILLIONS)

Net Sales................................................... $29.7 $25.5 (14.1)
Cost of Sales............................................... 19.9 19.3 (3.0)
Selling, General and Administrative Expenses................ 3.5 3.5 0
Operating Profit (Loss)..................................... 6.3 2.7 (57.1)

Net sales decreased $4.2 million, or 14.1%, from $29.7 million in the first
nine months of 1996 to $25.5 million in the first nine months of 1997, due
primarily to a 12.4% volume decrease (8,400 tons) resulting from the timing of
shipments and fewer acres being harvested, and a sales price decrease of $7
dollars per ton. Cost

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33

of sales as a percentage of sales increased from 67.0% to 75.7% due to lower
selling price, higher direct costs including cultivation expenses, as well as
higher indirect costs compared to 1996. Selling, general and administrative
expense levels were consistent with 1996. Included in selling, general and
administrative expense is the Everglades Agricultural Privileges Tax of $905,000
and $976,000 for 1997 and 1996, respectively.

CORPORATE AND OTHER

On February 25, 1997 the Board of Directors approved an interim severance
program. The program was available to all employees (including early and regular
retirees) who elected to leave employment with the Company prior to May 2, 1997.
In total 80 employees elected to participate, and the Company incurred total
severance costs of approximately $2.5 million during 1997, of which $1.3 million
is included in corporate general and administrative expense and $1.2 million is
included in the forestry segment.

FINANCIAL POSITION AND CAPITAL RESOURCES

Total cash and cash equivalents decreased 55.2% from $449.0 million at
December 31, 1996 to $201.0 million at September 30, 1997 primarily as a result
of the special distribution of $10.00 per share paid during the first quarter
totaling approximately $305 million. The Company has announced its intention to
distribute the remaining net proceeds of the sales of operations which occurred
in 1996 of approximately $1.02 per share in a special distribution to
stockholders of record on December 19, 1997, payable on December 30, 1997. The
Company has also declared a dividend of $.05 per share to stockholders of record
on December 24, 1997, payable on December 30, 1997. Total cash, cash
equivalents, short-term investments and marketable securities were $576 million
at September 30, 1997.

Capital expenditures for the year to date totaled $53.3 million, of which
$40.8 million related to real estate construction and land purchases. It is
anticipated that expenditures in the foreseeable future will be funded through
available cash and cash equivalents and funds from operations.

Stockholders' equity at September 30, 1997 was $30.58 per share, a decrease
of $8.67 from December 31, 1996, due to total distributions of $310.2 million,
including the special distribution and the regular $.05 per share dividend paid
each quarter.

The Company has historically not incurred debt in the development of its
various real estate projects or for other expenditures, funding instead from
internally generated cash flows. However, as the Company moves forward, debt may
be incurred in those situations where the use of financing leverage is deemed
appropriate. See "Business and Properties -- Investments."

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34

BUSINESS AND PROPERTIES

GENERAL

- Real Estate -- the development, ownership and management of commercial,
industrial and residential properties as well as the prospective
development of resort and entertainment properties;

- Forestry -- the management and harvesting of extensive timberland
holdings;

- Transportation -- the operation of two railroads within Florida; and

- Sugar -- the cultivation, harvesting and processing of sugar cane.

COMPANY BACKGROUND AND HISTORY

The Company was organized as a Florida corporation in 1936 by the executors
of the Estate of Alfred I. duPont to implement Mr. duPont's plans to establish a
paper company in northwestern Florida. The Company's Port St. Joe paper mill
began operations in 1938. The Company subsequently expanded into other lines of
business primarily by acquiring companies in financial difficulty whose assets
the Company perceived to be undervalued. For example, the Company acquired
control of FEC when it emerged from reorganization in 1961 and subsequently made
large capital investments in FEC to rehabilitate its operations.

Since 1940, the Company has continued to purchase additional parcels of
real property located throughout Florida and over time has acquired a sizable
portfolio of land. Included in these holdings are approximately 45,000 acres in
northwestern Florida that the Company has identified as potentially suitable for
development over the near to long term. For a more complete description of the
Company's land holdings, see "-- Real Estate Operations."

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35

The current ownership structure of the Company's principal lines of
business is as follows:

[GRAPH]

OPERATIONS

Real Estate. The Company currently conducts its real estate operations in
two principal segments: commercial/industrial development and management and
community/residential development.

The Company owns and manages commercial and industrial properties through
Gran Central Corporation ("GCC"), a wholly-owned subsidiary of Florida East
Coast Industries, Inc. ("FECI"), in which the Company has a 54% equity interest.
At October 31, 1997, GCC owned and operated 59 buildings with approximately 5.6
million square feet of rentable commercial/industrial space. On the same date,
GCC's buildings in service for one year or more were 91% leased (82% for its
portfolio as a whole, including newly constructed buildings). GCC's buildings
are primarily Class "A" office space and high quality commercial/industrial
facilities constructed after 1987 and are well-located in business parks near
major transportation hubs, primarily in the Jacksonville and Miami, Florida
areas. At December 1, 1997, GCC had an additional 479,000 square feet under
construction and had entitlements to develop an additional approximately 14.3
million square feet of buildings, primarily in its Miami, Jacksonville and
Orlando parks. GCC also owns over 15,300 acres of unentitled land that
management believes are suitable for future commercial, industrial and
residential development, primarily situated adjacent to the Florida East Coast
Railway right-of-ways in attractive markets that the Company believes will
provide significant growth opportunities.

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36

Transportation. FECI's subsidiary, Florida East Coast Railway ("FEC"),
provides rail and freight service over 351 miles of main line track between
Jacksonville and Miami, Florida and 71 miles of branch line track between Fort
Pierce and Lake Harbor, Florida. FEC has the only coastal right-of-way between
Jacksonville and West Palm Beach, Florida and is the exclusive rail-service
provider to the Port of Palm Beach, Port Everglades and the Port of Miami.
Principal commodities carried by FEC, by weight, include trailers-on-flatcars,
containers-on-flatcars, crushed stone, foodstuffs, vehicles and cement. FEC is
pursuing a number of opportunities to enhance returns, including through leasing
its right-of-ways for the laying of fiber-optic conduit and the construction of
communications towers. The Company also owns the Apalachicola Northern Railroad
("ANRR"), a short-line railroad that operates on 96 miles of track between Port
St. Joe and Chattahoochee, Florida.

KEY BUSINESS STRATEGIES

The Company's principal objective is to optimize the value of its
substantial asset base. The Company's management team is focused on the
following key strategies:

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37

believes the Company's large raw land portfolio will allow the Company to
maintain low development costs relative to its competitors and that its
existing large portfolio of income-producing properties, together with its
other businesses, will generate cash to fund a significant portion of its
long-term projects.

Pursue Resort and Location-Based Entertainment Development
Opportunities. The Company plans to actively pursue the development of
resorts (including hotels, golf courses and other recreational facilities)
and location-based entertainment facilities as a new line of business.
These development projects may be in the form of stand alone projects or,
in the case of resort facilities, in conjunction with the Company's
large-scale community development projects. The Company's management has
extensive expertise in these development areas and the Company believes it
has the land inventory (including attractive beach and other waterfront
properties) necessary to enter these new markets effectively. As part of
this strategy, in December 1997, the Company acquired the Riverside Golf
Management Company, which manages three daily fee public golf courses in
Jacksonville, Florida, Atlanta, Georgia and Clemson, South Carolina, and a
50% interest in the Champions Club Golf Course at Alaqua Lakes in Orlando,
Florida.

Enhance Operating Performance. The Company believes it can improve
its operating performance through the following means:

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THE FLORIDA ECONOMY

The Company's businesses are centered in Florida and the state's economic
health and growth rate will be important factors in creating demand for the
Company's products and services. According to the Bureau of Economic Analysis of
the WEFA Group, from 1992 to 1996 Florida's gross domestic product grew at an
average rate of approximately 6.1% per year compared to 5.3% per year for the
United States as a whole, and from 1997 to 2001 is expected to grow at an
average annual rate of approximately 5.8% compared to 5.3% for the nation as a
whole. According to U.S. Census Bureau statistics, Florida's annual population
growth over the last ten years has been 2.0%, while the average U.S. rate of
population growth has been approximately 1.0%. According to the Bureau of
Economic and Business Research at the University of Florida (the "Bureau"),
Florida's population will increase 26% between 1995 and 2010 compared to a U.S.
Census Bureau projection of 13.5% for the United States as a whole. Population
growth rates on the eastern coast of Florida, where many of GCC's properties are
located, are projected by the Bureau to be significantly higher than the
statewide rate. With the exception of Walton County (where population growth
rates have exceeded those of the State of Florida), population growth rates in
northwestern Florida, where most of the Company's properties are located, have
not been as high as those of the State as a whole, but have still exceeded the
national average. The Bureau estimates that employment in Florida grew at an
average annual rate of 3.5% from 1980 to 1995 and will continue to increase at
an average annual rate of 2.2% from 1996 to 2010. According to the Bureau,
personal incomes in Florida grew at 4.1% from 1980 to 1995 and are expected to
continue to grow at approximately 3% per year from 1996 to 2010. Florida's
population, job and income growth have created substantial demand for new
residential and commercial construction. According to a study conducted by the
Bureau, in 1995 Florida ranked first in the nation with respect to the number of
housing units permitted for construction and second in the nation on a value per
unit basis. Housing starts in the state of Florida are expected to reach an
aggregate level of 113,200 for 1996 and 1997 combined and to increase to 116,000
for 1998 alone. Management expects Florida's economic and population growth to
continue and believes that St. Joe is well positioned to benefit from increasing
demand for housing as well as office and industrial space in the Florida real
estate market.

REAL ESTATE

The Company conducts its real estate operations through two principal
segments: commercial/industrial development and management, and
community/residential development. In addition, the Company plans to pursue
resort and entertainment-based development in the future. The general locations
of the Company's real estate holdings are indicated on the map on the inside
front cover of this Prospectus.

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39

COMMERCIAL AND INDUSTRIAL DEVELOPMENT

The Company owns and manages commercial and industrial properties through
FECI's wholly-owned subsidiary, Gran Central Corporation. The primary focus of
GCC's development activities has been the Miami, Jacksonville and Orlando areas,
all of which are highly active with local, regional and national development
companies competing for land and tenants. The Company plans to continue
operating in these markets, and to evaluate Florida and southeastern markets to
increase the geographic diversity of its current portfolio. GCC is aggressively
pursuing commercial/industrial development opportunities on its entitled land
and actively seeks attractive land acquisition opportunities. A summary of GCC's
properties is set forth below:

GCC PROPERTY SUMMARY

Rentable Square Feet(1)..................................... 5,591,994
Percent Leased(1)(2)........................................ 82.4%
Rental Revenue(3)........................................... $24,116,385
Average Age of Buildings(1)................................. 5.5 yrs.
Square Feet under Construction(4)........................... 479,000
Entitled Square Feet(4)(5).................................. 14,324,000
Entitled Land (acres)(4).................................... 1,888
Unentitled Land (acres)(4).................................. 15,338
Developed Land (acres)(4)................................... 452
-----------
Total Land (acres)(4)....................................... 17,678
===========

- ---------------

(1) At October 31, 1997.
(2) Buildings in service for one year or more were approximately 91% leased.
(3) Through October 31, 1997.
(4) At December 1, 1997.
(5) Several of the Development of Regional Impact ("DRI") applications under
which GCC has vested rights to develop property contain conversion formulas.
These formulas vary the number of square feet GCC may construct in a given
project depending on the type of buildings constructed. Accordingly, actual
square footage constructed may vary significantly from currently entitled
square footage.

Because GCC was formed to conduct the real estate activities of the Florida
East Coast Railway, its undeveloped properties are generally located near
transportation corridors along the eastern coast of Florida. GCC's developable
holdings include sizable parcels adjacent to FEC tracks which are suitable for
development into office and industrial parks, offering both rail and
non-rail-served parcels. Certain of GCC's other holdings are in urban or
suburban locations offering opportunities for development of office building
structures or business parks containing both office building sites and sites for
flexible space structures such as office/showroom/warehouse buildings.

On December 3, 1997, the Company formed a 50/50 joint venture ("St.
Joe/CNL") with Orlando-based CNL Group, Inc. to develop and acquire commercial
real estate in the Central Florida area. CNL is a large privately held real
estate, finance, and development company with substantial market knowledge and
relationships in the Orlando and central Florida commercial and industrial
markets. At October 31, 1997, CNL and its affiliates owned assets totaling more
than $2 billion, representing more than 1,500 properties in 47 states. St.
Joe/CNL's strategy is to accumulate a portfolio of profitable, stabilized real
estate assets through a combination of development and acquisition and hold
those assets in anticipation of ultimate sale. St. Joe/CNL will initially focus
on single and multi-tenant office buildings and industrial and flex space,
primarily in 17 central Florida counties and along the U.S. Interstate Highway 4
corridor, including Tampa, Orlando and Daytona Beach. St. Joe/CNL has
significant investments planned for the greater Orlando market, including a
14-story 345,000 square foot downtown Orlando office building, together with an
1,800 space parking garage, which will serve as CNL's new corporate
headquarters.

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Income Producing Projects

At October 31, 1997, GCC's commercial and industrial income-producing
portfolio included ten projects with 59 buildings aggregating 5,591,994 square
feet. At October 31, 1997, these buildings were 82.4% leased. GCC's
income-producing projects are detailed below:

GCC INCOME-PRODUCING PROJECTS

(AT OCTOBER 31, 1997)

AVERAGE
NUMBER RENTABLE LEASED BASE RENT/
OF SQUARE SQUARE PERCENT MONTHLY SQUARE YEAR
LOCATION BUILDINGS TYPE FEET FEET LEASED BASE RENT FOOT BUILT
- -------- --------- ---------- --------- --------- ------- ---------- ----------- -------

duPont Center............... 2 Office 162,669 157,040 96.5% $ 178,951 $13.67 1987-88
Jacksonville, FL
Gran Park at Deerwood(1).... 3 Office 385,213 302,091 78.4 406,163 16.13 1995-97
Jacksonville, FL
Gran Park at Interstate
South..................... 6 Industrial 260,064 223,247 85.8 123,598 6.64 1987-89
Jacksonville, FL
Gran Park at
Jacksonville(2)........... 3 Industrial 354,153 108,060 30.5 71,819 7.98 1997
Jacksonville, FL
Gran Park at the
Avenues(3)................ 8 Mixed use 713,877 594,741 83.3 492,723 9.94 1992-97
Jacksonville, FL
Gran Park at Riviera
Beach..................... 5 Industrial 311,392 279,935 89.9 98,810 4.24 1982-91
Riviera Beach, FL
Gran Park at McCahill(4).... 5 Industrial 878,439 566,420 64.5 249,063 5.28 1992-97
Miami, FL
Gran Park at Miami(5)....... 24 Industrial 2,422,101 2,297,185 94.8 1,060,331 5.54 1988-97
Miami, FL
Hialeah, FL................. 2 Industrial 50,150 24,075 48.0 11,975 5.97 1975/87
Pompano Beach, FL........... 1 Industrial 53,936 53,936 100.0 23,040 5.13 1987
-- --------- --------- ----- ---------- ------
Total............... 59 5,591,994 4,606,730 82.4%(6) $2,716,473 $ 7.09
== ========= ========= ===== ========== ======

- ---------------

(1) A third office building totaling 126,228 square feet was constructed and
placed in service during 1997 and has not yet been fully leased.
(2) All buildings in Gran Park at Jacksonville were constructed and placed in
service in 1997.
(3) A third office/showroom/warehouse building totaling 70,400 square feet was
constructed and placed in service during 1997 and has not yet been fully
leased.
(4) Two 159,520 square feet warehouse buildings were constructed and placed in
service in 1997 at Gran Park at McCahill and have not yet been fully leased.
(5) A sixth office/warehouse building totaling 103,200 square feet was
constructed and placed in service during 1997.
(6) GCC's buildings in service for one year or more were approximately 91%
leased.

A description of the most significant existing projects in GCC's portfolio
is set forth below:

duPont Center. The duPont Center is comprised of two office buildings
totaling 162,669 rentable square feet located in downtown Jacksonville,
Florida. Its current occupancy rate is 96.5%. GCC owns an additional 17
acres at this location of which approximately five acres, capable of
supporting an additional 160,000 square feet, have been entitled. The
remaining 12 acres which lie to the south of Interstate 95 have not been
entitled; however, GCC believes that it can construct additional office or
industrial space on this site once entitlements are secured.

Gran Park at Deerwood. Built between 1995 and 1997, Gran Park at
Deerwood ("Deerwood Park") is a 385,213 square foot Class A suburban office
complex situated on 41 acres in the Deerwood area of Jacksonville, Florida.
Deerwood Park is located in one of the fastest growing markets in
Jacksonville. When it purchased Deerwood Park in 1994, GCC obtained vested
development rights to build 540,000 square feet of office space. The three
buildings constructed at Deerwood Park to date have

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an occupancy rate of approximately 78.4%. A fourth building is under
construction and is expected to be completed by mid-1998. This building
will provide an additional 134,200 square feet, approximately 85,000 of
which has been pre-leased to Chase Manhattan Bank, N.A. Deerwood Park will
be fully built upon completion of the fourth building.

Gran Park at Interstate South. Gran Park at Interstate South
("Interstate South") is located near the intersection of U.S. Highway 1 and
Interstate 95 in Jacksonville, Florida. Interstate South consists of six
office/showroom/warehouses totaling 260,064 rentable square feet, located
on approximately 25 acres. Its current occupancy rate is 85.8%.

Gran Park at Jacksonville. Gran Park at Jacksonville ("Jacksonville
Park") is situated upon approximately 935 acres between U.S. Highway 1 and
Interstate 95 in Jacksonville, Florida. This park is served by a rail spur
connecting to FEC's main track. During 1997, GCC constructed three
buildings at Jacksonville Park totaling 354,153 rentable square feet. By
early December 1997, the project was 32.7% leased. GCC believes that it
will enter into leases for an additional 15% of the space at the project
before year end, and that the majority of the balance of the currently
vacant space will be leased by the middle of 1998. GCC has secured
entitlements to construct an additional 5.6 million square feet of
industrial space, 500,000 square feet of office space and 80,000 square
feet of retail space at Jacksonville Park, and has the flexibility to
convert industrial space to office or retail space based upon market
conditions. During 1997, GCC also completed construction of a 350,000
square foot build-to-suit rail served warehouse at Jacksonville Park for
General Motors.

Gran Park at the Avenues. Gran Park at the Avenues ("Avenues Park")
is located at the intersection of U.S. Highway 1 and Southside Boulevard in
Jacksonville, Florida. Avenues Park consists of eight buildings totaling
713,877 rentable square feet. Its current occupancy rate is 83.3%.
Approximately 30% of Avenues Park's capacity is utilized as office space
while the remaining 70% is industrial. GCC completed construction of a
70,400 square foot office/showroom/warehouse at Avenues Park in 1997. GCC
has completed additional infrastructure development at the site and has
entitlements to construct approximately 80,000 additional square feet.

Gran Park at Riviera Beach. Gran Park at Riviera Beach is a 311,392
square foot park consisting of five industrial buildings which are 89.9%
leased. The remainder of this property's 82 acres are platted and zoned for
industrial development and GCC intends to sell individual parcels to
others.

Gran Park at McCahill. Gran Park at McCahill ("McCahill Park"), a
878,439 square foot office/industrial park, is located in Dade County,
west of the Miami International Airport at the intersection of State Road
826, a multi-lane limited access road, and U.S. Highway 27. By early
December 1997, the project was 75.3% leased and GCC believes it will enter
into leases for the majority of the currently vacant space by the middle of
1998. Management believes McCahill Park is well-situated to capitalize on
saturated market conditions immediately adjacent to the airport.
Development of McCahill Park is complete.

Gran Park at Miami. The Gran Park at Miami development ("Miami Park")
consists of 24 buildings on 928 acres between U.S. Highway 27 and the
Florida Turnpike. Miami Park features over 2.4 million square feet of
rentable office, showroom and warehouse space, with a current occupancy
rate of 94.8%. This Park is served by a rail spur. GCC has secured
entitlements to develop an additional 7.0 million square feet at Miami
Park. Due to the scarcity of available land adjacent to the airport, GCC
believes that Miami Park is well-positioned to benefit as prospective
tenants begin seeking accessible bulk distribution space outside of the
congested airport vicinity.

New Construction

Through December 1, 1997, GCC's holdings grew significantly through the
construction and placing in rental status of eight buildings offering
approximately 973,000 square feet of leasable space. New construction in 1997
included one office building at Gran Park at Deerwood; one
office/showroom/warehouse, one front load warehouse and one rail building at
Gran Park at Jacksonville; one office/showroom/warehouse at Gran

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Park at the Avenues; two office/warehouses at Gran Park at McCahill; and one
office/warehouse at Gran Park at Miami.

At October 31, 1997, buildings under construction included a 134,200 square
foot office building at Gran Park at Deerwood, of which 85,000 square feet has
been pre-leased, a 62,800 square foot office/showroom/warehouse at Gran Park at
Jacksonville, a 150,000 square foot office building and a 132,000 square foot
office/ showroom/warehouse at Gran Park at Southpark, a new park being
established by the Company in Orlando, Florida. Following completion, expected
in the first half of 1998, these buildings will add approximately 479,000 square
feet to GCC's total leasable space. Set forth below are details of GCC's new
construction:

GCC NEW CONSTRUCTION

COMPLETION LEASED
NUMBER OR ESTIMATED RENTABLE SQUARE ESTIMATED
OF COMPLETION SQUARE FEET BASE RENT/
LOCATION BUILDINGS TYPE DATE FEET (10/31/97) SQUARE FEET
- -------- --------- ---- ------------ -------- ---------- -------------

COMPLETED IN 1997:
Gran Park at Deerwood...... 1 Office July 1997 126,228 72,540 $17.50-$18.00
Jacksonville, FL
Gran Park at
Jacksonville............. 1 Office/Showroom/Warehouse July 1997 147,553 85,852 $9.10
Jacksonville, FL......... 1 Front Load Warehouse July 1997 98,800 -- $4.25
1 Rail Building May 1997 107,800 -- $4.50
Gran Park at the Avenues... 1 Office/Showroom/Warehouse June 1997 70,400 -- $6.75
Jacksonville, FL
Gran Park at McCahill...... 1 Office/Warehouse January 1997 159,520 159,520 $6.00-$6.50
Miami, FL................ 1 Office/Warehouse April 1997 159,520 -- $6.00-$6.50
Gran Park at Miami......... 1 Office/Warehouse July 1997 103,200 76,240 $6.00
- -------
Miami, FL
Total.............. 8 973,021
=======
UNDER CONSTRUCTION AT
OCTOBER 31, 1997:
Gran Park at Deerwood...... 1 Office May 1998 134,200 85,000 $17.50-$18.00
Jacksonville, FL
Gran Park at
Jacksonville............. 1 Office/Showroom/Warehouse January 1998 62,800 51,500 $9.50
Jacksonville, FL
Gran Park at Southpark..... 1 Office June 1998 150,000 -- $18.50
Orlando, FL.............. 1 Office/Showroom/Warehouse June 1998 132,000 -- $10.00
- -------
Total.............. 4 479,000
=======

GCC has received expressions of interest from prospective tenants relating
to leasing portions of its recently completed buildings and current sites under
construction, including: (i) 35,340 square feet in the completed Gran Park at
Deerwood office building, (ii) 31,566 square feet in the completed
office/showroom/ warehouse and 26,400 square feet in the front load warehouse at
Gran Park at Jacksonville, (iii) 17,749 square feet in the completed
office/showroom/warehouse at Gran Park at the Avenues, (iv) 135,000 square feet
in an office/warehouse at Gran Park at McCahill, (v) 23,680 square feet in the
completed office/warehouse at Gran Park at Miami and (vi) 46,000 square feet at
the office/showroom/warehouse under construction at Gran Park at Southpark.

In addition to those buildings presently under construction, GCC expects to
commence construction in 1998 on a 134,200 square foot office building at
Deerwood North, a 62,800 square foot office/showroom/warehouse at Gran Park at
Jacksonville and a 134,200 square foot office building at Gran Park at
Southpark. A description of new commercial/industrial parks upon which the
Company has commenced or expects to commence construction in 1998 is set forth
below:

Gran Park at Deerwood North. Gran Park at Deerwood North ("Deerwood
North") is located near Deerwood Park in Jacksonville, Florida on
approximately 35 acres purchased in 1997. As part of the purchase, GCC
obtained vested development rights to build 513,000 square feet of office
space. In addition, GCC was granted a right of first refusal to purchase
certain adjacent property. The infrastructure for this project is in the
design stage and GCC anticipates that infrastructure construction and
construction of a 134,200 square foot office building will commence during
1998.

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Gran Park at Southpark. Gran Park at Southpark ("Southpark") is
situated upon approximately 85 acres near the Florida turnpike in Orlando,
Florida. GCC has commenced construction of infrastructure and a 150,000
square foot office building and a 132,000 square foot
office/showroom/warehouse building. It expects to construct an additional
134,200 square foot office building in 1998. The site is zoned for
approximately 450,000 square feet of office space and 465,000 square feet
of industrial space.

Leasing

At October 31, 1997, approximately 4,606,730 square feet or 82.4% of GCC's
rentable square feet was leased. On the same date, in GCC's buildings in service
for one year or more, approximately 4,220,370 square feet, or 91% of rentable
square feet, was leased.

GCC's portfolio has limited tenant concentration, with the largest tenants
being Seaboard Marine, Ltd., occupying 166,400 square feet or 3.6% of leased
space, and Perfumania, occupying 138,600 square feet or 3.0% of leased space, in
each case at October 31, 1997. The following table summarizes the lease
expirations in GCC's portfolio for 1998 and thereafter:

LEASE EXPIRATION SCHEDULE

1998 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- -------

Square Feet................. 871,288 862,127 546,543 482,358 606,359 457,413
Percent (annual)............ 19.0% 18.8% 11.9% 10.5% 13.2% 10.0%
Percent (cumulative)........ 19.0 37.8 49.7 60.2 73.4 83.4

Entitlements

In addition to properties under construction or upon which construction is
expected to commence in the near term, at October 31, 1997, GCC had secured
entitlements to construct up to 14,324,000 square feet of additional buildings.
The Company's entitled land is located as indicated in the table set forth
below:

GCC ENTITLED LAND SUMMARY

(AT OCTOBER 31, 1997)

PROJECT ENTITLEMENTS
- ------- -------------
(SQUARE FEET)

duPont Center............................................... 160,000
Jacksonville, FL
Gran Park Deerwood North.................................... 519,000
Jacksonville, FL
Gran Park at the Avenues.................................... 80,000
Jacksonville, FL
Gran Park at Jacksonville................................... 5,800,000
Jacksonville, FL
Gran Park at Southpark...................................... 765,000
Orlando, FL
Gran Park at Miami.......................................... 7,000,000
Miami, FL
----------
Total............................................. 14,324,000(1)
==========

- ---------------

(1) Several of the DRIs under which GCC has vested rights to develop property
contain conversion formulas. These formulas vary the number of square feet
GCC may construct in a given project depending on the type of buildings
constructed. Accordingly, actual square footage constructed may vary
significantly from currently entitled square footage.

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In addition to the foregoing, GCC owns an 8.88 acre tract adjacent to the
Dade County government center in Miami. This property is subject to the
"Downtown Miami DRI", which allows construction of high rise office buildings in
the Central Business District of Miami by GCC and other property owners. GCC
previously explored the possibility of constructing one or more high rise office
buildings on this site. At that time, it was determined that the DRI would allow
the construction of two buildings totaling over one million square feet. GCC
believes that there is currently capacity under the DRI to construct at least
that amount of space. There can be no assurance, however, that this capacity
will be available at the time building permits are issued. Because this DRI
covers the entire Central Business District, other developers owning property
subject to the DRI could exhaust all the capacity prior to GCC securing permits.

Land Holdings

GCC owns approximately 17,680 acres of land within fourteen counties,
including several high-growth areas along Florida's east coast, such as West
Palm Beach, Melbourne-Titusville, Daytona Beach, Jacksonville, Miami-Hialeah and
the Fort Pierce area. GCC's land holdings were as follows at December 1, 1997:

GCC LAND HOLDINGS (ACRES)

(AT DECEMBER 1, 1997)

COUNTY VACANT DEVELOPED ENTITLED TOTAL
- ------ ------ --------- -------- ------

Brevard............................................. 2,396 -- -- 2,396
Broward............................................. 46 6 -- 52
Dade................................................ 605 260 757 1,622
Duval............................................... 324 155 1,046 1,525
Flagler............................................. 3,462 -- -- 3,462
Indian River........................................ 5 -- -- 5
Martin.............................................. 661 -- -- 661
Manatee............................................. 897 -- -- 897
Palm Beach.......................................... 147 31 -- 178
Orange.............................................. -- -- 85 85
St. Johns........................................... 3,321 -- -- 3,321
St. Lucie........................................... 567 -- -- 567
Seminole............................................ 1 -- -- 1
Volusia............................................. 2,908 -- -- 2,908
------ --- ----- ------
Total:.................................... 15,340 452 1,888 17,680
====== === ===== ======

COMMUNITY AND RESIDENTIAL DEVELOPMENT

In the community/residential development sector, the Company's strategy is
to develop large-scale mixed-use communities on Company-owned land. Development
of master-planned communities is a long-term endeavor, with build-out typically
occurring over a five- to fifteen-year period. The Company also intends to
develop smaller scale residential projects that offer good uses of existing
Company and acquired land.

On November 12, 1997 the Company purchased a 74% general partnership
interest in a limited partnership, St. Joe/Arvida Company, L.P., through a joint
venture with JMB Southeast Development, L.L.C. and JMB Southeast Development,
L.P. The principal assets acquired through the Arvida Venture were the "Arvida"
name, proprietary information systems and the Arvida management team. Through
the Arvida Venture, the Company intends to develop certain of its existing lands
as well as to acquire additional land for development. Although the Company has
not in the past built homes, the Company intends to initiate home-building
through the Arvida Venture. Between 1958 and 1996, Arvida completed more than 50
master-planned communities (including Weston, near Ft. Lauderdale, Florida;
Sawgrass at Ponte Vedra Beach, Florida; Longboat Key Club in Sarasota, Florida;
Boca West and Broken Sound in Boca Raton, Florida; and Eagle Watch in Atlanta,
Georgia) which comprised more than 35,000 new homes. Although the Company's

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residential development activities have historically been conducted primarily
through its Southwood Properties division, the Company expects to direct most of
its future community and residential development efforts through the Arvida
Venture and to conduct the majority of its residential development activity
under the Arvida trademark.

Company Land Holdings Identified for Residential Development

The Company owns approximately 45,000 acres in northwestern Florida and
approximately 6,435 acres in St. John's County on the northeastern coast of
Florida near Jacksonville, including substantial gulf, lake and riverfront
acreage, that it believes to be potentially suited to community/residential and
resort development. The Company continually evaluates its holdings and local
market conditions to determine the market's readiness for additional development
and, as a result, may identify additional significant developable tracts among
its over 1.1 million acres in the future.

The Company's most significant land holdings potentially suitable for
community and residential development are set forth below:

LAND HOLDINGS FOR COMMUNITY AND RESIDENTIAL DEVELOPMENT

(AT OCTOBER 31, 1997)

COUNTY ACRES
- ------ ------

Bay......................................................... 25,933
Franklin.................................................... 7,003
Leon........................................................ 9,556
St. John's.................................................. 6,435
Walton...................................................... 1,583
Wakulla..................................................... 1,143

Approximately 244 acres listed above are currently entitled for
development.

In evaluating whether to develop a mixed-use residential community, the
Company analyzes current demographic and economic data, such as (i) population
growth, including net migration and natural increase trends, (ii) increases in
household formation, (iii) job growth and job/household imbalance, (iv) income
levels, (v) transportation, and (vi) new home occupancy levels. Once a site is
identified, the Company designs the project to meet the needs of the target
market, based on specific demographic information and the characteristics of the
site itself. Items such as project design and unit mix, construction materials
and finishes and common area amenities are reviewed in relation to the
preferences of the target market. The Company believes that market segmentation
during the planning process maximizes the overall returns of development.

Although the Company has completed a number of real estate developments and
has begun to develop certain other parcels, in the aggregate these projects
amount to a small fraction of the Company's land holdings that it believes to be
suitable for development. The Company believes there is generally a two-year lag
between the submission of a master plan to the appropriate regulatory body and
the commencement of first phase construction. Accordingly, the Company expects
that it will take many years for the Company to complete the development of
significant portions of its developable land portfolio.

New Communities and Residential Development Projects

The Company is currently master-planning two tracts of land near the Town
of Seaside and one large tract in suburban Tallahassee, as part of its
development program. The master-planning of these tracts is expected to be
completed in early 1998, and the Company anticipates submission of such plans to
the relevant entitlement authorities soon thereafter. Described below are the
Company's plans for development of these tracts:

Walton County, Seagrove and Camp Creek. The Company owns a 500 acre
tract located between the Town of Seaside to the east and the Grayton Beach
State Recreation Area to the west (the "Seagrove

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Tract"). The Seagrove Tract has an approximately 1,400 foot frontage on the
Gulf of Mexico as well as significant frontage on a large interior fresh
water lake, Western Lake. The Company also owns a 300 acre tract four miles
to the east of the Seagrove Tract with one mile of frontage on the Gulf of
Mexico (the "Camp Creek Tract"). These tracts constitute the largest
privately-owned undeveloped beach frontage remaining in South Walton County
and feature high dunes and white sand beaches. In addition, these tracts
are adjacent to or near the Town of Seaside, an eighty acre planned-resort
community of 350 homes that has received wide acclaim as a model resort
community and has an average home value of $460,000. Seaside is located
midway between Panama City and Pensacola on the northwestern cost of
Florida. The Company intends to develop the Seagrove and Camp Creek Tracts
as second home/resort communities, each with an image and identity separate
from the Town of Seaside, but capitalizing on the positive image Seaside
has created over the past decade. The Company's preliminary plans for the
Seagrove and Camp Creek Tracts include gulf front inns or hotels and beach
clubs to provide beach access and facilities for neighborhood property
owners and guests. Management believes the Seagrove and Camp Creek Tracts'
gulf frontage presents an opportunity for the Company to enhance the value
of several thousand acres it owns nearby that are off the beach and to the
north, by providing "windows" of beach access for such properties. The
Company anticipates that the first phase of construction of these tracts
will begin approximately two years after submission of master-plans to the
Walton County entitlement authority. The following map shows a detail of
the Seagrove and Camp Creek Tracts' locations.

[MAP]

Leon County, Tallahassee. The Company is currently master-planning a
3,000 acre tract located in Tallahassee for development as a residential
and mixed-use planned community (the "Tallahassee Tract"). The Tallahassee
Tract is characterized by rolling terrain, large lakes and heavily treed
areas of live oaks and other hard woods. It is located only six miles from
downtown Tallahassee and the State Capital building. The Tallahassee Tract
is immediately adjacent to the Capital Circle complex, a 750,000 square
foot state office complex located on land previously donated to the State
by the Company. The Capital Circle complex has been entitled to expand to 2
million square feet and, when fully constructed, will provide employment
for up to 8,000 persons. The Company anticipates that the favorable
location of

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the Tallahassee Tract will create demand for new residential construction.
The Company intends to commence the first phase of construction on the
Tallahassee Tract approximately two years after submission of master-plans
to the Leon County entitlement authority, expected early in 1998. The
Company expects to engage in on-going master-planning of the Tallahassee
Tract and, on a longer-term basis, of an additional 7,000 acres that it
owns adjacent to the Tallahassee Tract in order to create a full-scale new
town adjacent to the existing Tallahassee city limits. The following map
shows a detail of the Tallahassee Tract's location.

[MAP]

The Company believes that its raw land inventory will provide a long-term
supply of well-situated land and waterfront properties that may be suitable for
similar developments in the future. In particular, the Company owns two
developable parcels in St. John's County, on the northeastern coast of Florida.
The Company's Riverton property, located near Jacksonville, is a 4,300 acre
parcel with 4.5 miles of riverfront on the St. John's River, which at that
location is approximately 3 miles wide. The Riverton property offers
unobstructed western views across the waterfront as well as fishing and boating
opportunities. Management believes that transportation improvements planned by
the County and State should give the Riverton property strong transportation
connections and access to employment centers in Jacksonville. The Company
anticipates that master-planning of a residential community to be built on this
tract will begin in the next year. In addition, GCC owns a 2,150 acre parcel in
St. John's County located on the Intracoastal Waterway with a view across to the
undeveloped beach front at the Guana River State Park. Management believes this
property is suitable for development into a mixed-use community and the Company
expects to begin master-planning in late 1998. As is typical of large scale
development projects, development of these tracts could require significant
infrastructure development costs and may raise environmental issues that require
mitigation.

In addition, the Company has certain smaller developments underway or
entitled in Bay and Walton counties. The Retreat, a 97-lot vacation home project
in Walton County with 2,600 feet of gulf frontage, is fully entitled and
construction is expected to begin shortly. The Company expects home values at
the Retreat will range from $375,000 to over $1,000,000. In addition, first
phase infrastructure is complete and sales are underway for Summerwood, a
200-lot subdivision in Panama City Beach intended for first and retirement home
buyers. Home values at Summerwood are expected to range from $90,000 to
$125,000. Woodrun, a

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52-lot subdivision in Panama City, is currently under construction and sales are
expected to begin in January 1998. Woodrun is intended to serve as primary
housing for trade-up buyers, and the Company expects home prices will range from
$150,000 to $250,000. In conjunction with the Arvida Venture, the Company
intends to construct homes at these development sites and then sell them to end
purchasers.

Several of the projects described above, including the Seagrove Tract, the
Camp Creek Tract and the Tallahassee Tract, are still in the master-planning
stage and have not yet been submitted to the state and local authorities for
their review. No assurances can be given that the necessary entitlements for
development will be secured, that any of the Company's projects can be
successfully developed, if at all, or that they can be developed in a timely
manner. It is not feasible to estimate project development costs until
entitlements have been obtained.

Longer-Term Development Priorities

The Company owns several other developable properties in the northwestern
portion of Florida. A large portion of this property is situated along major
U.S. and state highways and has significant gulf, lake or river frontage. The
most significant tracts include parcels situated near Panama City Beach, Mexico
Beach, St. Joe Beach and the town of Apalachicola. The Company believes that
these properties offer significant development opportunities that it expects to
develop over the long-term.

Panama City Beach, Bay County. The Company's 5,000 acre holdings to
the north and abutting the city limits of Panama City Beach are the only
avenues for Panama City Beach to expand its limits. The City estimates that
it captures four million overnight visitors annually and promotes itself as
the home of the "World's Most Beautiful Beaches". The Company is currently
conducting land use analyses and environmental studies to determine the
suitability of this land for development. In addition, the Company has
contracted to purchase a 1.4 acre beach-front "window" on Panama City Beach
to provide beach access for its thousands of off-beach acres adjacent to
the corporate limits of Panama City Beach. Management believes these tracts
present an opportunity for mixed-use recreation and second home development
with an entertainment/retail component.

Apalachicola, Franklin County. The Company owns 7,003 acres
surrounding the town of Apalachicola, a coastal fishing town on
Apalachicola Bay and the Gulf of Mexico that is emerging as a tourist
destination. The Company's holdings include approximately twelve miles of
frontage on the Apalachicola Bay and the Gulf of Mexico to the west of the
town. Management believes this tract presents an opportunity for the
development of vacation and second homes with a golf and water orientation.

St. Joe Beach/Mexico Beach, Gulf and Bay Counties. Company holdings
at St. Joe and Mexico Beach contain slightly over four miles of gulf
frontage. At St. Joe Beach, the white sand beaches of the Florida panhandle
begin. The Company owns several thousand acres of off-beach property behind
its beach exposure. These parcels are traversed by U.S. Highway 98, which
runs along the coast providing access east and west. Management believes
these tracts present an opportunity for the development of vacation and
second homes with a golf and water orientation.

Other

Through the Arvida Venture, the Company has acquired a six-month option to
purchase certain real estate management contracts and a limited ownership stake
in certain existing Arvida developments. The Arvida Venture will also provide
management services for a number of non-Company large scale residential housing
projects on a cost reimbursement basis, and accordingly it is expected that the
Arvida Venture management team will dedicate significant time and resources to
non-Company projects in the near to medium term.

RESORT AND LOCATION-BASED ENTERTAINMENT DEVELOPMENT

The Company plans actively to pursue development of resorts and
recreational facilities as a new business line. The development of resorts,
including hotels, recreation facilities and golf courses, may be in the form of
stand-alone projects or in conjunction with the Company's large scale community
developments. Resort

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developments may be the best use for some of the Company's prime waterfront
lands. The Company's inventory of raw land, management's knowledge of the
permitting process and extensive experience in resort development should allow
the Company to begin to develop these lands in the near future. Resort projects
typically require large tracts of undeveloped land, and regulatory agencies may
require that a developer of such a property dedicate land for public use in
order to secure the requisite permits. The Company may be able to utilize its
large land holdings to facilitate the permitting process with local communities
in appropriate circumstances.

As part of its strategy to pursue resort and recreational facility
development, on December 3, 1997, the Company purchased 100% of the capital
stock of Riverside Golf Management Company ("Riverside") and a 50% interest in
the Champions Club Golf Course at Alaqua Lakes in North Orlando, Florida from
Steven Melnyk. Riverside is currently the manager of three daily fee public
courses in Jacksonville, Florida, Atlanta, Georgia and Clemson, South Carolina.
The Company acquired Riverside, its information systems, current management
contracts and the right to use the name "Champions Club" on any course it
develops or manages. Management intends to utilize Riverside in conjunction with
the Arvida Venture to create attractive residential communities with a golf
course component. Riverside will also develop golf courses unrelated to Company
residential developments.

The Company is also evaluating potential development opportunities in the
location-based entertainment business. This industry has experienced substantial
growth in the past five years. Location-based entertainment takes the form of
standalone facilities, often part of regional or national chains, that provide
multiple forms of entertainment experiences in a single setting. Such facilities
may offer only entertainment or may offer a combination of entertainment, food
and beverage and retail experiences. The Company's management has extensive
experience in the entertainment segment of the real estate development industry
and is seeking avenues to take advantage of that experience.

REGULATION

Development of real property in Florida entails an extensive approval
process involving overlapping regulatory jurisdictions. Real estate projects
must generally comply with the provisions of the Local Government Comprehensive
Planning and Land Development Regulation Act (the "Growth Management Act"). In
addition, development projects that exceed certain specified regulatory
thresholds require approval of a comprehensive DRI application. Compliance with
the Growth Management Act and the DRI process is usually lengthy and costly and
can be expected to materially affect the Company's real estate development
activities.

The Growth Management Act requires counties and cities to adopt
comprehensive plans guiding and controlling future real property development in
their respective jurisdictions. After a local government adopts its
comprehensive plan, all development orders and development permits that it
issues must be consistent with the plan. Each such plan must address such topics
as future land use, capital improvements, traffic circulation, sanitation,
sewerage, potable water, drainage and solid wastes. The local governments'
comprehensive plans must also establish "levels of service" with respect to
certain specified public facilities and services to residents. Local governments
are prohibited from issuing development orders or permits if facilities and
services are not operating at established levels of service, or if the projects
for which permits are requested will reduce the level of service for public
facilities below the level of service established in the local government's
comprehensive plan. If the proposed development would reduce the established
level of services below the level set by the plan, the development order will
require that, at the outset of the project, the developer either sufficiently
improve the services to meet the required level or provide financial assurances
that the additional services will be provided as the project progresses.

The Growth Management Act is in some instances significantly affecting the
ability of developers to obtain local government approval in Florida. In many
areas, infrastructure funding has not kept pace with growth. As a result,
substandard facilities and services are delaying or preventing the issuance of
permits. The Growth Management Act could adversely affect the ability of Florida
developers, including the Company and GCC, to develop real estate projects.

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The DRI review process includes an evaluation of the project's impact on
the environment, infrastructure and government services, and requires the
involvement of numerous federal, state and local environmental, zoning and
community development agencies and authorities. Local government approval of any
DRI is subject to appeal to the Governor and Cabinet by the Florida Department
of Community Affairs, and adverse decisions by the Governor or Cabinet are
subject to judicial appeal. The DRI approval process is usually lengthy and
costly, and there are no assurances as to what specific factors will be
considered in the approval process, or what conditions, standards or
requirements may be imposed on a developer with respect to a particular project.
The DRI approval process is expected to have a material impact on the Company's
real estate development activities in the future.

In addition, a substantial portion of the developable property in Florida,
including much of the Company's property, is raw land located in areas where its
development may affect the natural habitats of various endangered or protected
wildlife species or in sensitive environmental areas such as wetlands and
coastal areas, which are subject to extensive and evolving federal, state and
local regulation. Accordingly, federal, state and local wildlife protection,
zoning and land use restrictions, as well as community development requirements,
may become increasingly restrictive and, as a result, significant limitations
may be imposed on the Company's ability to develop its real estate holdings in
accordance with their most profitable uses.

The Company's ownership and development of real estate are subject to
extensive and changing federal, state and local environmental laws, the
provisions and enforcement of which are expected to become more stringent in the
future. Pursuant to those laws, the owner or operator of real estate may be
required to perform remediation regardless of whether it caused the
contamination. The sale or development of properties may also be restricted due
to environmental concerns, the protection of endangered species, or the
protection of wetlands. In addition, violations of various statutory and
regulatory programs can result in civil penalties, remediation expenses, natural
resource damages, potential injunctions, cease and desist orders and criminal
penalties.

The Company is not presently aware of any material contaminations at or any
material adverse environmental development issues relating to its real estate
operations. However, there can be no assurance that environmental issues will
not arise in the future relating to the real estate operations. See "Risk
Factors -- Environmental Matters."

FORESTRY

The Company's forestry operations, conducted through its wholly-owned
subsidiary, St. Joe Timberland Company, are in the business of growing,
harvesting and selling timber and wood fiber. The Company is the largest private
holder of timberlands in Florida, with over 700,000 acres of planted pine
forests, primarily in northwestern Florida, and an additional 300,000 acres of
mixed timberland, wetlands, lake and canal properties. Over 639,000 acres of the
Company's timberlands have been planted as managed pine plantations to
facilitate harvesting and reforestation and to maximize timber yields. Although
no detailed inventory has been conducted, the Company estimates that
approximately 150,000 acres of hardwood are located on its remaining
timberlands. Six forestry units and a wood procurement unit manage the
timberlands. The timberlands are harvested by local independent contractors
pursuant to agreements which are generally renewed annually. The Company also
owns a wood chipping facility located at Lowry, Florida. The principal product
of the Company's forestry operations is softwood pulpwood, but the Company also
produces and sells softwood and hardwood sawtimber.

On May 30, 1996, the Company sold its former linerboard mill and container
plants as part of its strategy of focusing its forestry operations on the
business of growing and harvesting timber. By divesting itself of these assets,
the Company can now focus on achieving the highest margin usage for its
products, consistent with sustainable harvest practices, without the competing
imperative of supplying fiber to manufacturing operations that typically only
operate efficiently at full capacity. As a result, the Company can now seek to
operate its forestry operations as a stable and sustainable business, shielded
from the highly cyclical nature of the conversion business.

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51

THE TIMBERLANDS

The Company's timberlands are located in northwestern Florida and southern
Georgia, near key transportation links including roads, waterways and railroads,
allowing the Company to deliver fiber to its customers on a cost efficient
basis. The Company's principal productive timberlands are near the facilities of
Florida Coast in Port St. Joe, the Company's major customer. Numerous other
major conversion facilities located near the Company's timber assets could serve
to further expand the markets for the Company's timber products. The map inside
the front cover of this Prospectus sets forth the locations of the Company's
timberlands.

The Company's strategy in its forestry segment is to increase the average
age of its timber by extending growing periods before final harvesting in order
to capitalize on the higher margins of older-growth timber. The Company intends
to extend growing periods for its softwood forests from a historical average of
approximately 18-22 years to approximately 28-30 years. This change is expected
to shift the Company's product mix from approximately 85% pulpwood and 15%
higher margin products in 1997 to approximately 60% pulpwood and 40% higher
margin products by 2005. Although revenues in the forestry segment will likely
be flat or decline slightly in the near term, this strategy should ultimately
increase the revenues and returns of the Company's timber operations when a
sustainable harvest of older growth timber is achieved, although there can be no
assurances in this regard. The Company will also seek to maximize sustainable
harvest volumes through the continued use and development of genetically
improved seedlings, soil mapping, extensive fertilization, vegetation control,
thinning and selective harvesting practices. In addition, the Company is
considering potential transactions to increase the nearer term value of the
Company's timberlands, such as asset swaps, sales, joint ventures or lease
arrangements.

At October 31, 1997, the distribution of the Company's pine timberland, by
age class, was as follows:

SOFTWOOD FORESTS -- FIVE YEAR AGE CLASSES

AGE ACRES
- --- -------

0- 5....................................................... 161,334
6-10....................................................... 179,936
11-15....................................................... 153,426
16-20....................................................... 107,164
21-25....................................................... 62,652
26-30....................................................... 20,436
31-35....................................................... 1,937
36 +........................................................ 2,115
-------
Total............................................. 689,000
=======

The Company views its timberlands as a renewable resource and manages its
timberlands to achieve sustainable harvests. During the 1996-1997 planting
season, the Company planted approximately 13 million seedlings on 17,900 acres.
St. Joe maintains a research facility in Capps, Florida, which conducts research
to produce faster-growing, more disease-resistant species of pine trees.

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52

Harvest Levels

In 1996, the Company harvested 697,398 tons of softwood pulpwood and
sawtimber. The Company estimates that it can increase its long-term sustainable
yearly harvest over the next decade to 1.6 million tons of softwood pulpwood and
.9 million tons of softwood sawtimber. The Company estimates that its
timberlands will yield a sustainable harvest of approximately 2.5 million tons a
year of softwood and .3 million tons of hardwood, commencing in 2008. The
following tables set forth the Company's historical and projected annual
softwood and hardwood harvest volumes for the years 1992 to 2008:

SOFTWOOD AND HARDWOOD HARVEST PLAN
(TONS)

SOFTWOOD HARDWOOD
SAWTIMBER TOTAL ANNUAL SAWTIMBER TOTAL ANNUAL
SOFTWOOD AND OTHER SOFTWOOD HARDWOOD AND OTHER HARDWOOD TOTAL ANNUAL
YEAR PULPWOOD PRODUCTS HARVEST PULPWOOD PRODUCTS HARVEST HARVEST
- ---- --------- --------- ------------ -------- --------- ------------ ------------

ACTUAL:
1992............... 773,051 195,691 968,742 * * * 968,742
1993............... 823,625 177,109 1,000,734 * * * 1,000,734
1994............... 1,096,682 151,420 1,248,102 * * * 1,248,102
1995............... 943,413 84,492 1,027,905 * * * 1,027,905
1996............... 620,110 77,288 697,398 * * * 697,398
PROJECTED:
1997............... 665,000 135,000 800,000 * * * 800,000
1998............... 829,000 123,300 952,300 100,000 150,000 250,000 1,202,300
1999............... 910,000 190,000 1,100,000 100,000 150,000 250,000 1,350,000
2000............... 925,000 275,000 1,200,000 125,000 175,000 300,000 1,500,000
2001............... 925,000 275,000 1,200,000 125,000 175,000 300,000 1,500,000
2002............... 950,000 350,000 1,300,000 125,000 175,000 300,000 1,600,000
2003............... 950,000 350,000 1,300,000 125,000 175,000 300,000 1,600,000
2004............... 1,000,000 500,000 1,500,000 125,000 175,000 300,000 1,800,000
2005............... 1,150,000 600,000 1,750,000 125,000 175,000 300,000 2,050,000
2006............... 1,300,000 700,000 2,000,000 125,000 175,000 300,000 2,300,000
2007............... 1,450,000 800,000 2,250,000 125,000 175,000 300,000 2,550,000
2008............... 1,600,000 900,000 2,500,000 125,000 175,000 300,000 2,800,000

- ---------------

(*) Historically, the Company has harvested minimal amounts of hardwood.

Inventory Levels

The Company estimates that its standing inventory on January 1, 1998 will
total 10.6 million tons of softwood timber and 5.9 million tons of hardwood
timber. The following table sets forth the Company's projected standing
inventory levels by product, at January 1, 2008:

PROJECTED STANDING INVENTORY AT JANUARY 1, 2008
(TONS)

SOFTWOOD HARDWOOD SOFTWOOD HARDWOOD
PULPWOOD PULPWOOD SAWTIMBER SAWTIMBER TOTAL
- ---------- --------- --------- --------- ----------

15,938,372 2,456,869 6,904,607 6,274,983 31,574,832

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PRICING

While the supply of timber in the United States has been subject to
constraint, demand has remained relatively strong, driven by economic expansion
and population increases, which in turn drive growth in housing starts, repair
and remodeling activities and industrial wood use. The Company expects demand
for timber to remain strong as economies in the United States and abroad
continue to expand. This stable demand in the face of a constrained supply has
resulted in real price appreciation for timber. As the following charts
illustrate, between 1988 and 1996 stumpage prices for two of the Company's
largest timber products, southern pine pulpwood and sawtimber, increased at real
compound annual growth rates of 4% and 5%, respectively.

[CHART]

The Company anticipates that increasing demand and continuing constraints
on timber supply will continue to support higher real timber prices.

SALES AND MARKETING

The major customer for the timber harvested from the Company's timberlands
has been and continues to be the Company's former linerboard mill at Port St.
Joe, Florida, which was sold on May 30, 1996 and which now operates as the
Florida Coast Paper Company, L.L.C. Pursuant to a supply contract entered into
with Florida Coast upon the sale of the mill, the Company was obligated to sell
Florida Coast between 900,000 and 1.6 million tons of pulpwood a year on a
long-term basis. However, from April to September 1997, Florida Coast shut down
due to soft market conditions in the paper industry and breached its obligations
to buy specified amounts of pulpwood from the Company. In August 1997, the
Company negotiated an amendment to the supply agreement with Florida Coast,
which will reduce the Company's supply obligations to 700,000 tons a year
beginning in June 1998 and which also contains certain protections for the
Company, including liquidated damages in the event of future shutdowns. The
Company views the reduction of its supply obligations to Florida Coast as a key
to its future business strategy because the reduction will allow the Company to
sell a greater portion of its timber in the form of higher margin products over
the long term. The Company's amended supply contract with Florida Coast expires
in 2011, subject to two five year extensions at the option of Florida Coast.
Under the supply contract, prices for the Company's pulpwood are set at a base
level and readjusted quarterly based on a four-quarter rolling average of market
prices. Although quarterly

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54

price variation is capped at 5%, the base price level is reset every two years.
The Company mitigated the short-term financial impact of Florida Coast's
shutdown through sales to various mills and other producers in Florida, Georgia
and Mississippi in the spot market, although the shutdown adversely affected the
forestry segment's results of operations for 1997.

Although the Company has historically provided pulpwood softwood primarily
to the Florida Coast mill, management believes that wood harvested from the
Company's lands has the potential to provide products to several regional
manufacturing facilities. Several companies have consulted with the Company
regarding potential long term timber supply contracts and the possible location
of substantial new conversion facilities near the Company's lands. In 1996, the
Company sold 697,398 tons of timber, of which approximately 610,418 tons were
sold to Florida Coast, and the balance to other customers.

OTHER BUSINESSES

As part of its strategy to maximize the cash flows from its timberlands,
the Company engages in several business activities complementary to its land
holdings. The Company leases approximately 881,000 acres of its timberlands to
private clubs and state agencies for hunting, 280 acres in north Gadsden County
for the mining of Fullers earth, and 600 acres to Martin Marietta for the mining
of limerock. Revenues from these businesses totaled $369,309 in 1996 and are
estimated to be $1,260,000 for 1997. The Company has not conducted an exhaustive
survey of its timberlands for potential mineral reserves.

REGULATION

The Company's forestry operations are subject to extensive and changing
federal, state and local environmental laws and regulations, the provisions and
enforcement of which are expected to become more stringent in the future.
Forestry operations generate air emissions through controlled burning and
discharge industrial wastewater and stormwater. The forestry operations are
subject to regulation under the ESA, the federal Clean Water Act, the federal
Clean Air Act, the Federal Insecticide, Fungicide and Rodenticide Act and the
Toxic Substances Control Act as well as similar state laws and regulations.
Violations of various statutory and regulatory programs can result in civil
penalties, remediation expenses, natural resource damages, potential
injunctions, cease and desist orders and criminal penalties. Some environmental
statues impose strict liability, rendering a person liable for environmental
damage without regard to negligence or fault on the part of such person.

The ESA and counterpart state legislation protect species threatened with
possible extinction. A number of species indigenous to the Company's timberlands
have been, and in the future may be, protected under these laws, including the
red cockaded woodpecker, the bald eagle and various other species. Protection of
endangered and threatened species may include restrictions on timber harvesting,
road building and other silvicultural activities on the Company's land
containing the affected species. There can be no assurance that such laws or
future legislation or administrative or judicial action with respect to
protection of the environment will not adversely affect the Company's forestry
operations.

In conducting its harvesting activities, the Company voluntarily complies
with the "Best Management Practices" recommended by the Florida Division of
Forestry. From time to time, proposals have been made in state legislatures
regarding the regulation of timber harvesting methods. There can be no assurance
that such proposals, if adopted, will not adversely affect the Company or its
ability to harvest and sell logs or timber in the manner currently contemplated.

The Company is not presently aware of any facts that indicate that the
Company will be required to incur material costs relating to environmental
matters in relation to its forestry operations. However, there can be no
assurances that environmental regulation or regulation relating to endangered
species or wetlands will not have a material adverse effect on the forestry
operations in the future. See "Risk Factors -- Environmental Matters."

TRANSPORTATION

The Company owns 54% of Florida East Coast Industries, Inc., which in turn
owns 100% of Florida East Coast Railway Company. The Company also owns and
operates the Apalachicola Northern Railroad Company.

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55

FLORIDA EAST COAST RAILWAY

FEC operates a railroad along 351 miles of main line track between
Jacksonville and Miami, Florida and along 91 miles of branch track between Fort
Pierce and Lake Harbor, Florida. FEC also maintains approximately 157 miles of
switching track and 184 miles of other track. FEC has the only coastal right-of-
way between Jacksonville and West Palm Beach, Florida and is the exclusive
rail-service provider to the Port of Palm Beach, Port Everglades and the Port of
Miami. To complement and facilitate its railroad operations, FEC also provides
drayage and interstate trucking services. FEC owns 82 diesel electric
locomotives, approximately 2,633 freight cars, approximately 7 tractors, 1,352
trailer units for highway service, numerous pieces of work equipment and
automotive vehicles. FEC also owns three four-story buildings in downtown St.
Augustine, which it uses for its corporate headquarters, and approximately
12,000 acres of land along the east coast of Florida devoted to its railroad
operation. All property and equipment owned is in good physical condition.

OPERATING STATISTICS

YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ----------- -----------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Operating revenues........................................ $ 148,067 $ 144,700 $ 143,802
Operating income.......................................... 25,646 22,210 22,854
Operating margin.......................................... 17.3% 15.3% 15.9%
Tonnage................................................... 10,369,888 9,123,972 8,691,980
Revenue ton miles......................................... 4,388 4,122 4,098

Railroad Traffic. FEC carries automotive vehicles, consumer goods and
various intermodal traffic southbound and aggregates and intermodal traffic
northbound. FEC's principal customers include the Ford Motor Company, Chrysler
Corporation, Tarmac-Florida, Inc., Rinker Materials Corporation, and the United
Parcel Service. In general, the volume of the railroad's traffic is heaviest
from October to May. The mix of commodities shipped by FEC and each component's
contribution to FEC's revenues have remained relatively constant over the past
five years. Set forth below is the mix of goods transported by FEC in 1996 and
the respective contribution each category made to revenues:

TRAFFIC

YEAR ENDED DECEMBER 31, 1996
---------------------------------------
COMMODITY UNITS % REVENUE %
- --------- ------- ----- ------------ -----
(IN THOUSANDS, EXCEPT PERCENTAGE DATE)

TOFC/COFC........................................... 236.8 63% $ 51,117.1 38%
Crushed stone....................................... 88.7 24 34,509.2 26
Vehicles............................................ 18.3 5 20,116.0 15
Foodstuffs.......................................... 10.4 3 7,683.1 6
Cement.............................................. 5.0 1 3,049.1 2
Other............................................... 17.2 4 16,692.6 13
----- --- ---------- ---
Total..................................... 376.4 100% $133,167.1 100%
===== === ========== ===

At Jacksonville, FEC connects with Norfolk Southern Corporation and with
CSX Transportation, Inc. ("CSXT"). FEC relies upon both of these carriers for
Florida-bound rail freight traffic which originates elsewhere in the United
States. In 1996, approximately 48% of FEC's revenues were attributable to
traffic that originated on other railroads, approximately 6% were attributable
to traffic that originated on FEC but was bound for other destinations and 46%
were attributable to traffic that both originated and terminated on FEC's
system. FEC is a terminating railroad and, consequently, does not receive
traffic from one railroad to be passed over its track to another railroad.
Because all of FEC's traffic either originates in or is bound for Florida, FEC's
revenues fluctuate seasonally and with economic conditions in southern Florida,
rising as the economy of southern Florida expands and declining as it contracts.

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56

Capital Expenditures. FEC believes that its railway system is in excellent
condition and intends to continue to reinvest a portion of the cash generated by
its operations to maintain it and to make selected additional improvements. In
1995 and 1996, FEC invested approximately $26.6 million and $14.6 million,
respectively, to upgrade and maintain its property, track, structures and
equipment. FEC has installed concrete crossties over substantially all of its
main line track and main line sidings. While installing concrete crossties is
more expensive initially, their significantly longer useful life makes them less
expensive over the long-term. FEC has also installed sophisticated detection
equipment to monitor the condition of its rolling stock to detect flat wheels,
hot wheels and axles, cracked wheels, shifted loads and similar problems. Set
forth below is certain information relating to FEC's expenditures for road and
equipment for the past three years:

CAPITAL EXPENDITURES

YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1994 1995 1996
------------------- ------------------- -------------------
ROAD EQUIPMENT ROAD EQUIPMENT ROAD EQUIPMENT
------- --------- ------- --------- ------- ---------
(IN THOUSANDS)

Capital expenditures.......... $ 3,940 $ 7,319 $10,585 $15,987 $ 9,678 $ 4,919
Maintenance expense........... 22,630 33,347 24,359 30,645 24,271 27,801
------- ------- ------- ------- ------- -------
Total............... $26,570 $40,666 $34,944 $46,632 $33,949 $32,720
======= ======= ======= ======= ======= =======

Competition. FEC's railroad operations are subject to intense competition
from common motor carriers and, with respect to the section of FEC's main line
track from West Palm Beach south to Miami, from CSXT. FEC also competes to some
extent with air carriers as well as barges and other vessels plying the
coastwise trade between Jacksonville and Miami. FEC's competitiveness depends
upon its ability to provide its customers with efficient, dependable service at
an attractive price. Management at FEC stresses maintaining a high level of
customer service and satisfaction.

Miscellaneous Operations. In addition to its rail and other related
services, FEC leases the use of its right-of-ways to various tenants, including
several telecommunications companies' fiber optics systems, pursuant to
long-term leases. Under such leases, FEC currently receives approximately $2.5
million per year in revenue, nearly all of which represents profit.

APALACHICOLA NORTHERN RAILROAD

ANRR is a short-line railroad operating between Port St. Joe and
Chattahoochee, Florida, where it connects with an unaffiliated carrier. Its
transportation facilities include 96 miles of main track, 13 miles of yard
switching track and 3 miles of other track. ANRR owns 14 diesel locomotives, 274
freight cars, numerous pieces of work equipment and automotive vehicles. ANRR
also owns a three-story building in Port St. Joe which it uses partially for its
corporate offices. All property and equipment owned is in good physical
condition.

Although it is a common carrier, most of ANRR's business consists of
carrying coal from Port St. Joe to Chattahoochee pursuant to a contract with
Seminole Electric Cooperative, Incorporated ("Seminole") and carrying wood
chips, pulpwood and linerboard used or produced at the paper mill in Port St.
Joe, Florida. The other items carried by ANRR are tall oil, chemicals, stone and
clay products and recyclable items. The mix of commodities carried by ANRR
during 1996, which is representative of the traffic carried by ANRR over the
last several years, was as follows:

TRAFFIC

YEAR ENDED DECEMBER 31, 1996
---------------------------------------
COMMODITY CARLOADS % REVENUE %
- --------- -------- ----- ----------- -----

Coal............................................. 30,601 70.1% $ 5,963,558 53.2%
Wood products.................................... 10,157 23.2 3,635,765 32.4
Other............................................ 2,916 6.7 1,613,478 14.4
------ ----- ----------- -----
Total.................................. 43,674 100.0% $11,212,801 100.0%
====== ===== =========== =====

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Between April and September, 1997, the linerboard mill at Port St. Joe,
Florida shut down. Shipment of wood and wood products produces a significant
portion of ANRR's revenues. ANRR entered into a coal contract with Seminole in
order to mitigate the financial impact of the shutdown and limit its dependence
on a single customer. Nevertheless, if the linerboard mill shuts down in the
future or if Seminole does not renew its contract which expires in 2004, ANRR's
revenue, operating profit and net income would be significantly impacted.

Historically, the Company has upgraded, modernized and maintained ANRR's
road and equipment through the reinvestment of internally-generated cash without
incurring any long-term indebtedness. As with FEC's track, all of ANRR's main
track is laid with concrete crossties. Certain operating statistics are shown
below:

OPERATING STATISTICS

YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
---------- ---------- ----------
(IN THOUSANDS EXCEPT PERCENTAGE DATA)

Operating revenues.................................... $12,886 $13,345 $12,589
Operating income...................................... $ 1,398 $ 2,326 $ 1,646
Operating margin...................................... 10.8% 17.4% 13.1%
Tonnage............................................... 4,227 4,413 4,074
Revenue ton miles..................................... 397 411 383

ANRR faces competition from motor carriers and barge lines.

INTERNATIONAL TRANSIT, INC.

International Transit, Inc. ("ITI") operates a common motor carrier with
service throughout the Southeastern United States. FECI acquired an 80% interest
in ITI on April 1, 1995, and the remaining 20% on June 25, 1997, as a strategic
purchase designed to enable FEC to reach intermodal traffic not being solicited
by FEC's connections due to the short-haul nature of the traffic.

REGULATION

Both FEC and ANRR are subject to regulation by the Surface Transportation
Board of the U.S. Department of Transportation and, in some areas, the State of
Florida. These governmental agencies must approve, prior to implementation,
changes in areas served and certain other changes in operations of FEC and ANRR.

The Company's transportation operations are subject to extensive local,
state and federal environmental laws and regulations, including the federal
Clean Air Act, CERCLA and various other state and local environmental laws and
regulations. Violations of various statutory and regulatory programs can result
in civil penalties, remediation expenses, natural resource damages, potential
injunctions, cease and desist orders and criminal penalties. Some environmental
statutes impose strict liability, rendering a person liable for environmental
damage without regard to negligence or fault on the part of such person. In
addition, the Company's present and historic ownership and operation of real
property, including yards, in connection with its transportation operations
involve the storage, use or disposal of hazardous substances that have
contaminated and may in the future contaminate the environment. The Company may
also be liable for the costs of cleaning up a site at which it has disposed
(intentionally or unintentionally by virtue of, for example, an accident,
derailment or leak) or to which it has transported hazardous substances. The
Company is currently involved in various remediations of properties relating to
its transportation operations. In addition, FEC, along with many other
companies, has been named a potentially responsible party in proceedings under
Federal statutes for the clean up of designated Superfund sites at Hialeah,
Florida; Jacksonville, Florida; and Portsmouth, Virginia. See "-- Environmental
Proceedings." Based on presently available information, the Company does not
believe that the costs of addressing any known environmental issues relating to
its transportation operations will be material. However, the future cost of
complying with environmental laws and

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58

containing or remediating contamination cannot be predicted with any certainty,
and there can be no assurances that such liabilities or costs would not have a
material adverse effect on the Company in the future. See "Risk
Factors -- Environmental Matters."

SUGAR

The Company owns Talisman Sugar Corporation, a grower of sugarcane located
in the Belle Glade area in south central Florida. Talisman owns approximately
48,600 acres of agricultural land and leases approximately 6,400 acres. The
Company also operates a sugar mill at which sugar cane is converted into raw
sugar.

On December 6, 1997, the Company signed an agreement in principle with the
United States of America and the State of Florida (the "Governments"), under
which the Governments agreed to purchase the Company's sugar lands, including
45,731 acres of Company-owned land and 5,121 acres of leased land, for $133.5
million in cash. Under the agreement, the Company will retain the right to farm
the transferred lands through the 2002-2003 crop year. Thereafter, the Company
will be required to deliver the lands in compliance with all federal and state
environmental laws and will be responsible for and bear the expenses of
environmental cleanup of such lands and the sugar mill. At that time, the
Company has agreed to close its sugar mill and remove it and all associated
structures designated by the Governments. The Company will retain any salvage
value from the disposition of its mill. The Company and the Governments have
agreed to enter into an appropriate purchase agreement reflecting these terms by
June 6, 1998. The proposed transaction is subject to board and government
approval, and there can be no assurances that an agreement will be concluded or
that the sale of the Company's sugar lands will be consummated.

Talisman sells its entire production to Everglades Sugar Refinery, Inc., a
wholly-owned subsidiary of Savannah Foods & Industries, Inc., pursuant to an
annually renewed contract. The amount Talisman is paid for its sugar under the
current contract is a function of market prices.

MILL OPERATIONS

The Company's sugar mill has a grinding capacity of approximately 11,500
tons of sugarcane per day. The Company ground approximately 1,202,000 tons of
sugarcane in 1996, approximately 1,386,000 tons in 1995 and approximately
1,184,000 tons of sugarcane in 1994 from Company operated lands. Total raw sugar
production for the Company was approximately 117,000 tons in 1996, 138,000 tons
in 1995, and 114,000 tons in 1994. The sugar mill is virtually energy
self-sufficient, with almost all of its energy requirements supplied through the
use of bagasse, a by-product of the mill's cane grinding operations.

HARVESTING OPERATIONS

Sugarcane plantings generally yield two harvests before replanting is
necessary. The Company harvests its sugarcane crop in one-year cycles, as do
other Florida producers. The Company generally plants sugarcane in the fall of
each year. Harvesting of a crop generally commences in October of each year and
continues into the following March. During the 1996-1997 crop year, Talisman
grew sugarcane on approximately 43,000 acres of land.

The majority of the Florida sugarcane producers, including Talisman,
harvest sugarcane using mechanical cane harvesters which reduce significantly
the labor requirements, resulting in substantial cost savings and more efficient
and timely grinding of the sugarcane. Mechanized harvesting, however, is less
precise than manual harvesting, results in greater amounts of chaff and trash
being mixed in with the harvested sugarcane, causes small amounts of sucrose to
be lost through leaching into the trash and chaff, damages cane fields more than
manual harvesting, and results in slightly lower cane yields in subsequent
crops. Yields of sucrose from such harvested sugarcane and its crop yields per
acre are generally slightly lower than those cut by hand. These negative
effects, however, are far outweighed by cost savings and other efficiencies
which result from mechanized harvesting.

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59

REGULATION

The Company's sugar operations are subject to and may be severely
restricted by various federal, state and local environmental laws, including,
but not limited to, the federal Clean Water Act, the federal Clean Air Act and
CERCLA. Violations of these laws can result in civil penalties, remediation
expenses, natural resource damages, potential injunctions, cease and desist
orders and criminal penalties. The Company's sugar operations are located in the
Florida Everglades, which are the subject of extensive environmental review by a
variety of government entities. In 1994, the State of Florida enacted the
Everglades Forever Act which significantly affects agriculture in the Everglades
Agricultural Area ("EAA"). The Act calls for the creation of six Stormwater
Treatment Areas ("STA") as buffers between the Everglades Protection Area and
the EAA. The Act imposes substantial taxes on Talisman (approximately $1.3
million was paid in each of 1995 and 1996) and other agricultural interests to
pay for construction of the STAs. As part of its environmental compliance
efforts, Talisman has installed equipment to monitor the quality and quantity of
water being pumped out of its pumping stations as required by the local Water
Management District.

Except as described above, the Company is not presently aware of any
material environmental issues relating to its sugar operations. However, there
can be no assurance that environmental issues that could have a material adverse
effect on the Company will not arise in the future relating to its sugar
operations. See "Risk Factors -- Environmental Matters."

INVESTMENTS

The Company, in addition to its operations, has cash, cash equivalents, and
investments in U.S. and municipal government securities, common and preferred
stocks and corporate debt securities. At December 4, 1997, the market value of
the Company's cash, cash equivalents, and marketable securities was
approximately $560,000,000, valued as follows: cash and money market deposits,
$89,000,000; government securities with less than a one year term, $99,000,000;
government securities with a greater than one year term, $152,000,000; corporate
debt securities with less than a one year term, $70,000,000; and corporate debt
securities with a greater than one year term and corporate equity securities,
$151,000,000.

EMPLOYEES

The Company (excluding its subsidiaries) had approximately 44 employees at
October 31, 1997. The Company effected a substantial reduction in its workforce
during 1996 primarily due to the sale of its former linerboard mill and
container operations. None of the Company's employees are covered by collective
bargaining agreements. The Company considers its relations with its employees to
be good.

The Company's forestry operations, through St. Joe Timberland Company, had
28 employees at October 31, 1997. The Company effected a 72% reduction in its
forestry workforce during 1997 in order to improve the cost structure of
forestry operations. The reduction in employment was primarily due to the
outsourcing of replanting land preparation operations to independent
contractors. The Company estimates that this outsourcing will achieve cost
savings of approximately $1 million per year on an ongoing basis.

At September 30, 1997, FECI had 9 employees, FEC had 854 employees, ANRR
had 83 employees and Talisman had 714 employees. Most FEC and ANRR employees are
covered by collective bargaining agreements which set wage levels and establish
work rules and working conditions. Most of FEC's non-salaried employees are
represented by the United Transportation Union or the International Brotherhood
of Electrical Workers. The Company and FEC consider their working relationship
with the various unions that represent railroad employees to be satisfactory.
Approximately 160 Talisman employees are covered by collective bargaining
agreements. They are represented by the International Association of Machinists
and Aerospace Workers. Talisman believes its relations with its employees to be
satisfactory.

ENVIRONMENTAL PROCEEDINGS

The Company is named as a Potentially Responsible Party ("PRP") for the
remediation of a designated Superfund site near Tampa, Florida. The United
States Environmental Protection Agency ("USEPA") has

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alleged that the Company caused certain materials to be disposed at the site
over a period of years in the late 1970s or 1980s. The Company has provided
USEPA with certain evidence indicating the Company did not dispose of any
materials at the site. The Company has declined an invitation to join a PRP
group as a de minimis party. While the Company believes that its liability would
be de minimis, it nonetheless continues to deny liability and vigorously opposes
any attempt to impose any liability upon the Company for the remediation of the
site.

FEC has been named as a PRP for the remediation of two designated Superfund
sites near Jacksonville, Florida. On the first site, the USEPA has alleged that
FEC caused certain materials to be disposed at the site over a period of years.
The USEPA has offered all named PRPs an opportunity to participate in the pilot
allocation program. This program is similar to binding arbitration. If FEC
participates in this program, its share of the liability for the remediation
will be fixed. The USEPA has also offered to negotiate a separate settlement
with certain parties, including FEC. FEC believes that, whichever alternative is
chosen, its liability for the remediation of the site will not be material. On
the second site, FEC was contacted by the USEPA during 1996, at which time FEC
was asked to provide certain information about the manner in which FEC disposes
of steel drums. The USEPA is attempting to determine whether or not FEC should
be a PRP at the steel drum site in Jacksonville, Florida. There is some evidence
that FEC may have sent a small number of steel drums to the site for disposal.
FEC believes its responsibility, if any, for the remediation of the site will
not be material.

FEC has been named as a PRP for the remediation of a designated Superfund
site in Portsmouth, Virginia. The USEPA has alleged that FEC caused certain
materials to be sent to the site over a period of years. These materials were
utilized by the owner of the site in the course of its business which, FEC
believes, caused the site to become contaminated. The owner of the site has
filed suit in the United States District Court for the Eastern District of
Virginia, Norfolk Division seeking to impose liability upon the defendants,
including FEC, for remediation of the site. A settlement between the owner of
the site and FEC was achieved late in 1996. The settlement as to FEC, of
approximately $.2 million, was approved by the Court and the USEPA. Unless
additional contamination is discovered at the site or it becomes necessary to
remediate areas beyond the original clean-up, FEC will have no further liability
at the site.

FEC was contacted by the USEPA during 1996, seeking reimbursement of costs
associated with the remediation of a Superfund site in Hialeah, Florida, part of
which includes a FEC right-of-way. An individual operated a business on this
site for a number of years. The owner of the business slightly encroached upon
FEC's right-of-way. Upon discovering this, FEC entered into a lease agreement
with the business owner rather than require the building be removed. The
individual has ceased doing business. The USEPA is seeking reimbursement of the
approximate $2 million spent in remediation from FEC on the grounds that FEC was
an "owner" of the site. Settlement negotiations are ongoing at this time and the
ultimate cost is not expected to be material.

The Company received notice of potential involvement in a Superfund Site in
Sharonville, Ohio, during the third quarter of 1996. The site was formerly owned
and operated by the Company as a container plant. It was sold in the late
1970's. At this time the extent of the contamination and magnitude of the
cleanup is unknown. The Company does not believe, based on its preliminary
investigation of the Company's use of the property, that it is responsible for
the contamination, and if found partially responsible, the Company does not
believe its liability would be material.

The Company, through its subsidiaries, is a party to various proceedings
before state regulatory agencies relating to environmental issues. The Company
is not aware of any monetary sanctions to be proposed, which, in the aggregate,
are likely to exceed $100,000, nor does it believe that corrections, if any,
will necessitate significant capital outlays or cause material changes in the
business.

LEGAL PROCEEDINGS

Kahn

During April 1996, a shareholder of FECI instituted a class action in
Florida state court against FECI, St. Joe Industries Inc., the Company and
members of the FECI Board of Directors (Messrs. Thornton, Belin,

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Nedley, Zellers, Fairbanks, Foster, Harper, Mercer and Parrish). Certain of the
individuals named in the action also are officers or directors of the Company.
The action, which has been brought on behalf of all shareholders of FECI, other
than the defendants and their affiliates, is styled Kahn v. St. Joe Industries,
Inc., St. Joe Paper Co., Thornton, Belin, Nedley, Zellers, Fairbanks, Foster,
Harper, Mercer, Parrish and Florida East Coast Industries, Inc., Case No.
96-01874 CA (Circuit Court, Fourth Judicial Circuit, Duval County, Florida,
Division CV-G).

The complaint alleges that the defendants breached their fiduciary duties
to the minority shareholders of FECI in connection with the February 26, 1996
announcement by FECI that it was considering the sale of its real estate
subsidiary, GCC, to the Company and the sale of its railroad subsidiary, FEC to
a third party. According to the complaint, such transactions allegedly would
constitute unfair dealing and benefit the Company, as FECI's majority and
controlling shareholder, at the expense of FECI's minority shareholders. The
action seeks, among other things, to certify the litigation as a class action,
enjoin the sale of GCC to the Company and to require the defendant directors of
FECI to sell GCC by conducting an auction or accepting competitive bids from
third parties.

On May 29, 1996, the parties to the action entered into a stipulation
whereby (i) defendants agreed to appear in the litigation and waive any
challenge to sufficiency and service of process and (ii) plaintiff agreed that
defendants' time to respond to the complaint would be extended such that
defendants are not required to answer or respond to the complaint until
plaintiff's counsel provides written notice to defendants' counsel that a
response is required (a response is then required to be filed within 20 days).
On February 6, 1997, the Court entered an order approving the stipulation.

Kokol

During May 1997, another FECI shareholder instituted a class action in
Florida state court against FECI, the Company and members of the FECI Board of
Directors (Messrs. Thornton, Zellers, Belin, Foster, Harper, Mercer and
Parrish). Again, certain of the individuals named in the action are also
officers or directors of the Company. The action, which has been brought on
behalf of all shareholders of FECI, other than the defendants and their
affiliates, is styled Kokol v. Thornton, Zellers, Belin, Foster, Harper, Mercer,
Fairbanks, Parrish, St. Joe Corp. and Florida East Coast Industries, Inc., Case
No 97-650-CIV-J-21(B) (District Court, Middle District of Florida, Jacksonville
Division).

The complaint alleges that the defendants breached their fiduciary duties
to the minority shareholders of FECI in connection with the May 5, 1997 offer by
the Company to buy out the minority shareholders for $102 per share. According
to the complaint, the proposed buyout would constitute unfair dealing and
benefit the Company, as FECI's majority and controlling shareholder, at the
expense and to the detriment of FECI's shareholders. The action seeks, among
other things, to certify the litigation as a class action, to enjoin the
proposed buyout transaction or, in the event the transaction is consummated, to
rescind the transaction and/or award rescissory damages to the plaintiffs.

On November 21, 1997, the Company announced the withdrawal of its
outstanding offer to purchase all outstanding FECI common stock not owned by the
Company at $102 per share. On December 10, 1997, the parties entered into a
joint stipulation dismissing the case, subject to court approval.

The Company, through its subsidiaries, is a party in various other pending
proceedings which are ordinary, routine litigation incidental to its business.

EXECUTIVE OFFICES

The Company's principal executive offices are located at 1650 Prudential
Drive, Jacksonville, Florida 32207 and its telephone number is (904)396-6600.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers, their ages and their
respective positions with the Company are as follows:

NAME AGE POSITIONS
- ---- --- ---------

Peter S. Rummell................................ 52 Chairman of the Board and Chief
Executive Officer
Charles A. Ledsinger, Jr........................ 47 Senior Vice President and Chief
Financial Officer
Robert M. Rhodes................................ 55 Senior Vice President and General
Counsel
David D. Fitch.................................. 43 Senior Vice President and General
Manager -- Commercial and Industrial
Development
J. Malcolm Jones, Jr............................ 44 Senior Vice President -- Forestry
Operations
Michael F. Bayer................................ 39 Vice President -- Human Resources and
Administration
Jacob C. Belin.................................. 83 Director
Russell B. Newton, Jr........................... 73 Director
John J. Quindlen................................ 65 Director
Walter L. Revell................................ 62 Director
Frank S. Shaw, Jr............................... 66 Director
Winfred L. Thornton............................. 69 Director
John D. Uible................................... 61 Director
Carl F. Zellers, Jr............................. 65 Director

Executive officers serve at the discretion of the Board of Directors. Each
director holds office until his successor is duly elected and qualified or until
his resignation or removal. There are no family relationships among any of the
directors or executive officers of the Company.

PETER S. RUMMELL was appointed Chairman and CEO of the Company in January
1997. From 1985 until 1996, Mr. Rummell was employed by The Walt Disney Company,
most recently as Chairman of Walt Disney Imagineering, the division responsible
for Disney's worldwide creative design, real estate and research and development
activities. Mr. Rummell also served as President of Disney Development Company,
the community development arm of Walt Disney, from 1992 to 1994 and as President
of the Arvida Resort Communities Division during 1985. From 1983 until 1985, Mr.
Rummell was Vice Chairman of the Rockefeller Center Management Corporation in
New York City. Mr. Rummell was general manager and then President of Sawgrass,
near Jacksonville, Florida, from 1977 until 1983. Mr. Rummel also held
management positions for the Sea Pines Company in Hilton Head, South Carolina,
and the Amelia Island Plantation and spent two years as an employee of the Ocean
Reef Club in Key Largo, Florida.

CHARLES A. LEDSINGER, JR. was named Senior Vice President and Chief
Financial Officer in May 1997. From 1990 to 1997, Mr. Ledsinger served as Senior
Vice President and Chief Financial Officer of Harrah's Entertainment/The Promus
Companies, where from 1988 to 1990 he served as Treasurer, from 1986 to 1988 as
Vice President, Project Finance, and from 1983 to 1986 in the Embassy Suites
Division. Mr. Ledsinger was employed by Holiday Inns from 1978 to 1983, where he
held a variety of financial management positions. Prior to his employment at
Holiday Inns, Mr. Ledsinger held various management positions in the restaurant
business and was a commercial property manager for a regional property developer
in Atlanta. Mr. Ledsinger is a Director of TBL Corporation, Perkins Management
Company, Inc., Friendly Ice Cream Corporation and Felcor Suite Hotels, Inc.

ROBERT M. RHODES was named Senior Vice President and General Counsel in
February 1997. Prior to joining the Company, Mr. Rhodes was a partner in the law
firm of Steel, Hector and Davis L.L.P., specializing

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in land development. From 1985 to 1988 Mr. Rhodes served as Senior Vice
President and General Counsel of Arvida/Disney Corporation and Disney
Development Company. Mr. Rhodes also served in Florida state government as
counsel to the Speaker of the Florida House of Representatives and chaired the
State's Environmental Land Management Study Committee.

DAVID D. FITCH was named Senior Vice President and General
Manager -- Commercial and Industrial Development in September 1997. Prior to
joining the Company, Mr. Fitch served as Senior Vice President at Insignia
Financial Corporation responsible for commercial acquisitions. Mr. Fitch served
as Senior Vice President at the Paragon Group, Inc. from 1991 until Insignia's
purchase of Paragon in 1996. From 1987-91, Mr. Fitch served as Executive Vice
President at Mason Hirst Companies, a Virginia commercial developer. From
1978-1987, Mr. Fitch was a Vice President with the Cadillac Fairview
Corporation, responsible for a number of large scale commercial development
projects.

J. MALCOLM JONES, JR. was named the Company's Senior Vice
President -- Forestry Operations in April 1997. From 1995 to 1997 Mr. Jones
served as the Company's Vice President and Chief Financial Officer. Mr. Jones
served as President of AmSouth Bank of Jacksonville in 1994 and 1995 and as
President and CEO of FloridaBank from 1990 to 1994.

MICHAEL F. BAYER was named Vice President -- Human Resources and
Administration in February, 1997. From 1987 until 1995, Mr. Bayer was employed
by The Walt Disney Company in a variety of executive positions in Human
Resources. Most recently he was Vice President of Human Resources of Walt Disney
Imagineering. Previously, Mr. Bayer served as Director -- Human Resources for
the Sarasota division of the Arvida Corporation.

JACOB C. BELIN was President of the Company from 1968 to 1984, and Chairman
of the Board and Chief Executive Officer from 1982 to June 1991. He is a
director of the Company and has served as such since 1953. Mr. Belin also serves
as a member of the Board of Directors of the Nemours Foundation, and as a
Trustee of the Trust and as a director of FECI.

RUSSELL B. NEWTON, JR. has been a director of the Company since 1994. Mr.
Newton is Chairman of Timucuan Asset Management Company, which is involved in
investment portfolio management. Mr. Newton is also a director of East Coast Oil
Company and Alliance Mortgage Company, as well as other smaller, closely held
companies. Since 1981, Mr. Newton has been an investor in oil, marketing,
shipping, public utilities, construction, direct mail solicitation and cable
television. From 1975 to 1981, Mr. Newton was principal owner and Chairman of
Kern County Refineries, Inc. From 1968 to 1975, Mr. Newton was President of
Charter Oil Company. Mr. Newton spent his early employment years with Booz,
Allen & Hamilton, Management Consultants and as President of Southern Stores,
Inc.

JOHN J. QUINDLEN has been a director of the Company since 1995. Mr.
Quindlen retired as Senior Vice President and Chief Financial Officer of E. I.
duPont de Nemours & Company in 1993 ("duPont"). Mr. Quindlen worked for duPont
from 1954 until his retirement, except for three years as a naval Supply
Officer. Mr. Quindlen is a trustee of the Rodney Square Funds and the Kalmar
Pool Investment Trust. Mr. Quindlen is a member of the Finance Council of the
Archdiocese of Philadelphia and the President of its Board of Education.

WALTER L. REVELL has been a director of the Company since 1994. Mr. Revell
is presently Chairman of the Board and CEO of H. J. Ross Associates, Inc., a
consulting engineering, architectural and planning firm in Coral Gables,
Florida, and Chairman of the Board and CEO of Revell Investments International,
Inc. and Infinity Technologies, Inc. Mr. Revell was President, CEO and Director
of Post, Buckley, Schuh and Jernigan, Inc. until 1983 after serving as Secretary
of Transportation for the State of Florida from 1972 to 1975. Mr. Revell is also
a director of Dycom Industries, Inc., RISCORP, Inc., Hotelcopy, Inc. and other
closely-held companies, and is chairman of the Greater Miami Foreign Trade Zone,
Inc.

FRANK S. SHAW, JR. has been a director of the Company since 1995. Mr. Shaw
is President of Shaw Securities, Inc., a financial services company, and of
Cherry Bluff, Inc., a North Florida development firm based in Tallahassee,
Florida. Mr. Shaw also serves on the Board of Directors of First South Bank,
Regional

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Financial Company, The Southern Scholarship Foundation, Maclay School
Foundation, Leon County Library Foundation and the James Madison Institute.

WINFRED L. THORNTON has been a director of the Company since 1968. Mr.
Thornton was Chairman of the Board and CEO from June 1991 to January 1997, and
was President and Chief Operating Officer of the Company from 1984 to June 1991.
Mr. Thornton also serves as a member of the Board of Directors of the Nemours
Foundation, a Trustee of the Trust and a director of FECI.

JOHN D. UIBLE has been a director of the Company since 1994. Since 1990,
Mr. Uible has been an investor and Director of First Union Corporation. Mr.
Uible was Chairman of the Board and CEO of Florida National Bank from 1982 to
1990, when it was acquired by First Union Corporation. From 1976 to 1982, Mr.
Uible was Chairman of the Board and CEO of Jacksonville National Bank. Mr. Uible
was employed by the Charter Company from 1958 to 1976.

CARL F. ZELLERS, JR. has been a director of the Company since 1995. Mr.
Zellers is Chairman, President and Chief Executive Officer of FECI, and
President and a director of FEC and GCC. Mr. Zellers served as President and
Chief Operating Officer of FECI during 1996 and 1997 and as a Vice President of
FECI from 1984 to 1996.

EMPLOYMENT ARRANGEMENTS OF NEW MANAGEMENT

Peter S. Rummell. On January 7, 1997, the Company entered into an
Employment Agreement (the "Rummell Agreement") with Peter S. Rummell, its
Chairman of the Board and Chief Executive Officer. The Rummell Agreement has a
five-year term but may be terminated earlier under certain circumstances. The
Rummell Agreement provides for a salary of not less than $600,000 per year and a
performance-based incentive bonus ranging from 0% to 100% of salary, except that
the potential bonus for the year 1997 is $250,000 and is contingent upon the
timely submission to, and acceptance by, the Board of Directors, of a business
plan for the Company. The Rummell Agreement also provides for the reimbursement
of relocation costs and related income taxes.

Pursuant to the Rummell Agreement, the Company has granted Mr. Rummell an
option to purchase 1,347,840 shares of the Company's Common Stock under the St.
Joe Corporation 1997 Stock Incentive Plan (the "Incentive Plan"). The exercise
price of the options is $57.43 per share, which was equal to the closing price
of the Company's Common Stock on the day preceding the execution of the Rummell
Agreement. The exercise price shall be adjusted equitably in the event that the
Company makes a partial liquidation distribution to its shareholders. The option
becomes exercisable in equal installments on the first five anniversaries of the
date of grant, but the entire option becomes exercisable in the event that the
Company terminates Mr. Rummell's employment without cause, in the event of Mr.
Rummell's death or in the event that the Company is subject to a "change in
control" (as defined below). In the event that the Company terminates Mr.
Rummell's employment because of his disability, the option shall become
exercisable to the extent that it would have become exercisable during the 12
months immediately following such termination had Mr. Rummell's employment
continued. The option expires 10 years after the date of grant (or two years
after Mr. Rummell's death, if earlier).

Under the Rummell Agreement, the Company has also granted Mr. Rummell
67,287 restricted shares of its Common Stock under the Incentive Plan. The
restricted shares are intended to compensate Mr. Rummell for the value of the
stock options he forfeited upon resigning his position with his former employer,
based on the closing prices of the two companies' Common Stock on the day
preceding the execution of the Rummell Agreement. The restricted shares vest in
equal installments on the first five anniversaries of the date of grant but the
entire award vests in the event that the Company terminates Mr. Rummell's
employment without cause, in the event of Mr. Rummell's death or disability (as
defined in the Rummell Agreement), or in the event that the Company is subject
to a "change in control." If Mr. Rummell's employment terminates for any other
reason, he forfeits any restricted shares that have not vested.

The Company may terminate Mr. Rummell's employment at any time for "cause"
(as described in the Rummell Agreement), in which event no further compensation
will be due. The Company may also terminate

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Mr. Rummell's employment if he has been "disabled" for more than six months, in
which event no further cash compensation is due but benefit coverage continues
for the remaining term of the Rummell Agreement and the option and restricted
shares vest to the extent described above. Following a change in control, Mr.
Rummell may resign for "good reason" (as defined in the Rummell Agreement) and
receive his salary for the balance of the term of the Rummell Agreement, subject
to certain restrictions. For one year following a resignation for good reason,
the Rummell Agreement precludes Mr. Rummell from competing with the Company in
certain respects.

"Change in control" is defined in the Rummell Agreement to mean (i) 30% or
more of the outstanding voting stock of the Company is acquired by any person or
group other than the Trust and the Nemours Foundation if such person or group
owns more voting stock of the Company than the Trust and the Nemours Foundation,
(ii) stockholders of the Company other than the Trust and the Nemours Foundation
vote in a contested election for directors resulting in the replacement of 50%
or more of the Company's directors and (iii) as a result of a merger or similar
transaction the Company's stockholders own 50% or less of the surviving entity's
voting securities. The Rummell Agreement provides that notwithstanding items
(i), (ii) and (iii) above, no "change in control" shall occur as long as the
Trust and the Nemours Foundation own more than 50% of the voting stock of the
Company.

Charles A. Ledsinger, Jr.; Robert M. Rhodes; David D. Fitch; Michael F.
Bayer; and J. Malcom Jones, Jr. The Company has entered into employment
agreements (the "Executive Agreements") with Messrs. Ledsinger (Senior Vice
President and Chief Financial Officer), Rhodes (Senior Vice President and
General Counsel), Fitch (Senior Vice President and General Manager -- Commercial
and Industrial Development), Bayer (Vice President -- Human Resources and
Administration) and Jones (Senior Vice President -- Forestry Operations) (each,
individually, an "Executive," and collectively, the "Executives"), that are
based on substantially the same form of agreement. The specific terms of each of
the Executive Agreements are tailored to each of Messrs. Ledsinger, Rhodes,
Fitch, Bayer and Jones, while the general terms of each of the Executive
Agreements are substantially similar. The Executive Agreements of Messrs.
Ledsinger, Rhodes, Fitch, Bayer and Jones, are dated April, 1997, November 3,
1997, September 15, 1997, February 1, 1997 and February 21, 1997, respectively.

The Executive Agreements provide that each of the Executives is an "at
will" employee. The Executive Agreements further provide that each Executive
shall receive (i) a base salary and (ii) a performance based incentive bonus in
an amount equal to between 0% and 60% of the Executive's base salary. The
Executive Agreements provide that the amount of each Executive's base salary and
the range of his bonus may be increased but not decreased during his period of
employment with the Company. The base salaries provided in the Executive
Agreements for Messrs. Ledsinger, Rhodes, Fitch, Bayer and Jones are $350,000,
$275,000, $225,000, $167,500, and $170,000, respectively. In addition, the
Executive Agreements of Messrs. Ledsinger, Rhodes, Fitch and Bayer provide for
the reimbursement of relocation costs and related income taxes.

The Executive Agreements also provide that each of the Executives shall
receive an option to purchase shares of the Company's Common Stock under the
Incentive Plan. In most cases, the exercise price of each option is equal to the
closing price of the Company's Common Stock on the day preceding the date the
Executive was granted such option. The exercise price of any unexercised option
shall be adjusted equitably in the event that the Company makes a partial
liquidation distribution to its shareholders. Each of the options becomes
exercisable in equal installments on the first five anniversaries following the
date of grant; provided, however, that the an Executive's option shall become
exercisable in its entirety in the event that the Company terminates the
Executive's employment without "cause" (as defined in the respective Executive
Agreements) or the Company is subject to a "change in control" ("change in
control" is defined in the respective Executive Agreements as in the Rummell
Agreement). Each of the options expires on the tenth anniversary following the
date of grant. The per share exercise prices for the options of Messrs.
Ledsinger. Rhodes, Fitch, Bayer and Jones are $71.125, $69.00, $94.125, $66.33
and $66.33, respectively.

The Executive Agreements further provide that, in the event the Company
terminates the employment of any of the respective Executives for any reason
other than for cause or disability, such Executive will receive a severance
payment ("Severance Payment") in a lump sum amount equal to a specified
percentage of the

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Executive's base salary, plus a specified percentage of the amount of any bonus
awarded to the Executive in the year prior to the termination. Each of Mr.
Ledsinger's, Mr. Rhodes' and Mr. Fitch's Agreements provides that any Severance
Payment shall be in the amount of 150% of base salary, plus 50% of the prior
year's bonus, while each of Mr. Bayer's and Mr. Jones' Agreements provides that
any Severance Payment shall be in the amount of 100% of base salary, plus 50% of
the prior year's bonus. Mr. Ledsinger's, Mr. Bayer's and Mr. Jones' Agreements
also provide for an augmented Severance Payment in the event that the
Executive's employment is terminated within 12 months following a change in
control of the Company, although such provisions are superseded by their
Severance Agreements to the extent that any such Severance Agreement provides
for greater payments than the applicable Executive Agreement. See
"Management -- Severance Agreements."

STOCK INCENTIVE PLAN

Effective January 7, 1997, the Company adopted the Incentive Plan which was
approved by the Company's stockholders on May 13, 1997. The principal purposes
of the Incentive Plan is to promote the long-term success of the Company and the
creation of stockholder value by (a) encouraging employees and non-employee
directors to focus on critical long-range objectives, (b) encouraging the
attraction and retention of employees and non-employee directors with
exceptional qualifications and (c) linking employees and non-employees directly
to stockholder interests through increased stock ownership. The Incentive Plan
seeks to achieve this purpose through the granting of options exercisable with
respect to, or restricted shares of, the Company's Common Stock. Under the
Incentive Plan, the maximum number of options or restricted shares that may be
awarded may not exceed 2,010,160. Furthermore, under the Incentive Plan, the
maximum number of shares of Common Stock which may be subject to options or
which may be granted as restricted shares to any individual in any fiscal year
cannot exceed 1,000,000, except that an option granted to an employee during
such employee's first year of service may be exercisable with respect to up to
1,500,000 shares of Common Stock.

The Incentive Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"). Subject to certain limitations contained
in the Incentive Plan, the Committee selects the individuals who receive awards,
determines the size of any such award and establishes the vesting and other
conditions with respect thereto. The Committee consists of at least two members
of the Board of Directors, each of whom satisfies the applicable requirements of
Rule 16b-3 under the Exchange Act and Section 162(m) of the Internal Revenue
Code of 1986, as amended. The Committee is authorized, in accordance with the
provisions of the Incentive Plan, to amend the terms of outstanding restricted
shares, to modify or extend outstanding options or to exchange new options for
outstanding options, including outstanding options with a higher exercise price
than the new options.

The Incentive Plan provides for awards in the form of restricted shares or
options.

Restricted Shares. Restricted shares are shares of Common Stock that are
subject to forfeiture in the event that the applicable vesting conditions are
not satisfied. Restricted shares, unlike options, have the same voting and
dividend rights as other shares of Common Stock.

Options. An option may be either (i) an incentive stock option ("ISO")
intended to qualify for special tax treatment under the Code, or (ii) a
nonqualified stock option ("NSO"). The Incentive Plan provides that the term of
an option cannot exceed 10 years following the date of grant, and the exercise
price must be equal to or greater than the fair market value of the Common Stock
on the most recent trading day before the date of grant. In addition, the
Incentive Plan provides that, in the case of an ISO granted to an individual who
owns more that 10% of the total combined voting power of all classes of
outstanding stock of the Company, certain additional requirements set forth in
the Code must be satisfied.

Restricted shares and NSOs may be granted to any individual who is an
employee or a non-employee director of the Company (or a parent, subsidiary or
affiliated company) and who is selected by the Committee for participation in
the Incentive Plan. In contrast, ISOs may be granted to an individual only if
such individual is an employee of the Company (or a parent or subsidiary
corporation) and who is selected by the Committee for participation in the
Incentive Plan.

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The exercise price of an option may be paid in any lawful form permitted by
the Committee, including (without limitation) a full-recourse promissory note or
the surrender of shares of Common Stock or restricted shares already owned by
the optionee. In addition, the Committee may permit an optionee to satisfy his
or her withholding tax obligation upon exercise of an NSO by surrendering a
portion of his or her option shares to the Company. The Committee may at any
time offer to buy out an outstanding option for cash or give an optionee the
right to surrender his or her option for cash.

The Incentive Plan provides that the terms of options granted, or
restricted shares awarded, under the Incentive Plan are to be set forth in a
written agreement. Such written agreements describe when an option becomes
exercisable, or when any restrictions with respect to restricted shares lapse,
based upon the length of the recipient's service, his or her individual
performance, the Company's performance or other appropriate criteria. Such
written agreements may provide that vesting shall be accelerated in the event of
the recipient's death, disability or retirement or in the event of a "change in
control" of the Company.

"Change in control" is defined in the Incentive Plan to mean (i) as a
result of a merger or consolidation, 50% of the surviving entity's voting stock
is owned by stockholders who were not stockholders of the Company prior to the
merger or consolidation, (ii) the sale, transfer, exchange or other disposition
of all or substantially all of the Company's assets, (iii) a change in two
thirds of the composition of the board of the Company under certain
circumstances, (iv) the liquidation or dissolution of the Company or (v) any
transaction resulting in a person (other than the Company, an affiliate, an
employee, the Trust or the Nemours Foundation) being the beneficial owner of 25%
of the Company's voting stock.

The Incentive Plan will remain in effect until it is terminated, except
that no ISO may be granted after January 6, 2007. The Board of Directors may
amend or terminate the Incentive Plan at any time and for any reason. Amendments
require the approval of the Company's shareholders only to the extent required
by applicable laws, regulations or rules.

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The following table discloses options granted during 1997 to the Company's
executive officers:

OPTION GRANTS IN 1997(1)

INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
-------------------------------------------------------------- ASSUMED ANNUAL RATES OF
PERCENT OF TOTAL NUMBER OF STOCK PRICE APPRECIATION
OPTIONS GRANTED SECURITIES EXERCISE OR FOR OPTION TERM
TO EMPLOYEES IN UNDERLYING BASE PRICE EXPIRATION ------------------------------
NAME FISCAL YEAR OPTIONS GRANTED ($/SH) DATE 5% ($) 10% ($)
- ---- ---------------- --------------- ------------ ---------- ------------- --------------

Peter S. Rummell....... 73.4% 1,347,840 $57.430 1/8/07 $48,683,981 $123,367,795
Chairman of the Board
and Chief Executive
Officer
Charles A. Ledsinger,
Jr................... 4.4 80,000 71.125 5/5/07 3,578,800 9,068,400
Senior V.P. and Chief
Financial Officer
Robert M. Rhodes....... 3.1 56,160 69.000 3/3/07 2,436,782 6,175,915
Senior V.P. and
General Counsel
David D. Fitch......... 2.2 40,000 94.125 9/22/07 2,367,800 6,000,600
Senior V.P. and
General
Manager -- Commercial
and Industrial
Development
J. Malcolm Jones,
Jr................... 1.5 28,080 66.330 2/25/07 1,171,217 2,968,337
Senior V.P.
Forestry Operations
Michael F. Bayer....... 1.5 28,080 66.330 2/25/07 1,171,217 2,968,337
V.P. -- Human
Resources and
Administration

- ---------------

(1) The Company has announced its intention to distribute the remaining net
proceeds of the sale of its paper mill and linerboard facilities in a
special distribution of $1.02 per share to stockholders of record on
December 19, 1997, payable on December 30, 1997. The exercise price of
management options will be recalculated after payment of the special
distribution pursuant to the terms of the Rummell Agreement and the
Executive Agreements.

SEVERANCE AGREEMENTS

The Company has entered into severance agreements containing substantially
identical terms and conditions (collectively, the "Severance Agreements") with
Messrs. Rummell, Ledsinger, Rhodes, Fitch, Jones and Bayer (the "Named Executive
Officers"), pursuant to which each such executive shall be entitled to severance
benefits in the event of a "change in control" of the Company ("change of
control" is defined in the Severance Agreements as in the Incentive Plan) during
the term of his employment.

Under the terms of the Severance Agreements, if an executive who has
entered into a Severance Agreement (i) resigns for any reason during the last
six months of the first year following the date of a change in control, (ii)
resigns for "good reason" (as defined in the Severance Agreements) within the
first 36 months following a change in control, or (iii) is terminated by the
Company within 36 months following the date of a change in control, then the
Company is obligated to provide the executive with certain payments and
benefits. Such payments and benefits that the Company is obligated to provide to
the executive include (A) payment of a lump sum amount equal to the sum of three
times the executive's annual base salary plus three times the

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executive's bonus (as described in the Severance Agreement), (B) payment of a
lump sum supplemental pension benefit amount, (C) payment of a pro-rated bonus
for the year during which such executive's employment is terminated, (D)
continued participation in the Company's group insurance plans, at the Company's
expense, until the expiration of three years following the change in control (or
the date of the executive's death, if earlier), (E) senior executive level
outplacement services, and (F) "gross-up" payments, if applicable, in the amount
necessary to satisfy any excise tax incurred by the executive, if any, under
Section 4999 of the Code; provided, however, that if payment of such excise tax
could be avoided by reducing total payments under the Change in Control
Agreement by $50,000 or less, the total amount of such payments shall be reduced
to the level necessary to ensure that no excise tax shall be paid. In addition,
under the terms of the Severance Agreements, all stock options previously
granted to the executive shall become fully exercisable upon a change in
control, and shall remain exercisable until the earlier of the first anniversary
following such change in control or the date such options would have otherwise
expired by their terms, and any right of the Company to repurchase shares
subject to the executive's options shall lapse in full.

The Severance Agreements entered into by the executives do not supersede
the respective employment agreements entered into by such executives, except to
the extent that severance pay and benefits provided under the Severance
Agreements are greater than under the applicable employment agreement. Likewise,
the Severance Agreements do not supersede any respective stock option agreements
entered into by such executives, except to the extent that the applicable
Severance Agreement provides for earlier exercisability or a longer
post-termination exercise period than under such stock option agreement.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to persons known by
the Company to be the beneficial owners of more than five percent (5%) of its
outstanding Common Stock as well as information concerning the beneficial
ownership of Common Stock by each director, Named Executive Officer and
directors and officers as a group. The information is presented as of December
15, 1997, and as adjusted to reflect the sale of 4,600,000 shares of Common
Stock by the Trust (assuming exercise of the U.S. Underwriters' over-allotment
option). Under the rules of the Securities and Exchange Commission, beneficial
ownership is deemed to include shares for which the individual, directly or
indirectly, has or shares voting and/or dispositive power.

PERCENT OF
OUTSTANDING
SHARES OWNED(1)
--------------------
BEFORE AFTER
NAME AND ADDRESS BENEFICIAL OWNERSHIP OFFERING OFFERING
- ---------------- --------------------- -------- --------

Alfred I. duPont Testamentary Trust(2)(3).............. 21,291,900 68.9% 54.0%
P.O. Box 1380
Jacksonville, FL 32201
State Farm Mutual Automobile Insurance Company(4)...... 1,720,600 5.6 5.6
One State Farm Plaza
Bloomington, Illinois 61710
Franklin Resources Inc.(5)............................. 1,573,675 5.1 5.1
Charles B. Johnson
Rupert H. Johnson
777 Mariners Island Blvd.
San Mateo, CA 94404
Peter S. Rummell....................................... 336,855(6) 1.1 1.1
Charles A. Ledsinger................................... -- -- --
Robert M. Rhodes....................................... -- -- --
David D. Fitch......................................... -- -- --
J. Malcolm Jones, Jr. ................................. 240(7) * *
Michael F. Bayer....................................... -- -- --
Jacob C. Belin......................................... 21,301,155(8) 68.9 54.0
Russel B. Newton, Jr. ................................. 2,000 * *
John J. Quindlen....................................... 200 * *
Walter L. Revell....................................... 100 * *
Frank S. Shaw, Jr. .................................... -- -- --
Winfred L. Thornton.................................... 21,293,911(8) 68.9 54.0
John D. Uible.......................................... 1,000 * *
Carl F. Zellers, Jr. .................................. -- -- --
Directors and officers as a group (14 persons)......... 21,654,689(9) 70.1 55.2

- ---------------

(1) All percentages are rounded to the nearest tenth of one percent. An
asterisk(*) indicates that the percentage is less than one percent.
(2) The Trust owns 20,547,764 shares or 67.4% in its name and the Nemours
Foundation owns 744,136 shares or 1.5% in its name. The Trustees constitute
the entire Board of Directors of the Nemours Foundation and, therefore, have
sole voting and sole dispositive power over these shares.
(3) Under the provisions of the Will creating the Trust, the Trustees of the
Trust having the power to vote the shares of stock specified above are J. C.
Belin, H. H. Peyton, J. F. Porter, W. T. Thompson, III, W. L. Thornton and
Wachovia Bank, N.A., a subsidiary of Wachovia Corporation. A majority of the
Trustees have the right to vote all the stock of the Company owned by the
Trust.
(4) According to a Schedule 13G filed with the Securities and Exchange
Commission, as of December 31, 1996, State Farm Mutual Automobile Insurance
Company owns 761,300 shares and State Farm

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Employee Retirement Trust owns 959,300 shares of the Company's Common Stock.
The Board of Directors of State Farm Automobile Insurance Company and the
Trustees of State Farm Employees Retirement Trust have sole voting and sole
dispositive power over the shares of Common Stock each owns.
(5) According to a Schedule 13G filed with the Securities and Exchange
Commission, as of December 31, 1996, the above shares are beneficially owned
by one or more open or closed end investment companies or other managed
accounts which are advised by direct and indirect advisory subsidiaries (the
"Advisory Subsidiaries") of Franklin Resources, Inc. ("FRI"). Charles B.
Johnson and Rupert H. Johnson, Jr. (the "Principal Shareholders") each own
in excess of 10% of the outstanding common stock of FRI and are the
principal shareholders of FRI. FRI and the Principal Shareholders may be
deemed to be, for purposes of Rule 13d-3 under the 1934 Act, the beneficial
owner of securities held by persons and entities advised by FRI and it
subsidiaries. FRI, the Principal Shareholders and each of the Advisory
Subsidiaries has disclaimed any economic interest or beneficial ownership in
any of the above shares. According to the Schedule 13G, Templeton Global
Advisors Limited has the sole power to vote or to direct the vote and the
sole power to dispose or direct the disposition of 1,145,500 shares and
Franklin Mutual Advisors, Inc. has the sole power to vote or to direct the
vote and the sole power to dispose or direct the disposition of 428,175
shares of the Company's Common Stock.
(6) Mr. Rummel was granted 67,287 restricted shares of Common Stock under the
Company's Incentive Plan. In addition, 269,568 of his 1,347,840 options
under the Incentive Plan will vest on January 8, 1998 making him the
beneficial owner of the Common Stock subject to such options for purposes of
Rule 13d-3(d)(1) of the Exchange Act.
(7) Includes 240 shares held in the Company's 401(k) plan.
(8) Includes 20,547,764 shares of the Company's Common Stock owned by the Trust,
on which the named individuals serve as trustees, and 744,136 shares owned
by The Nemours Foundation, of which the named individuals are directors. Mr.
Belin owned 9,255 shares as to which he had sole dispositive voting power,
and Mr. Thornton owned 2,011 (including those held in the Company's 401(k)
plan).
(9) Includes 11,128 shares held in the Company's 401(k) plan for which the
Trustee of the plan has sole voting power and the participants have sole
dispositive power. The trustee of this plan is Merrill Lynch.

CERTAIN TRANSACTIONS

Jacob C. Belin and Winfred L. Thornton are trustees of the Trust and also
serve as directors of the Company and FECI. In addition, Carl F. Zellers, Jr.
serves as a director of the Company and of FECI.

On May 1, 1997, the Company entered into consulting agreements with Mr.
Belin and Mr. Thornton (the "Consulting Agreements"). Pursuant to the Consulting
Agreements, Messrs. Belin and Thornton will advise and counsel the Company on
various corporate matters at the request of the Chairman and Chief Executive
Officer. The Consulting Agreements provide that Messrs. Belin and Thornton will
receive annual compensation of $100,000 and $112,000, respectively, and will be
reimbursed for expenses actually incurred up to $10,000 per year.

In addition, the Nemours Foundation and the Company rent office space from
GCC at rates approximating market rentals.

DESCRIPTION OF COMMON STOCK

As of December 9, 1997 the authorized capital stock of the Company
consisted of 60,000,000 shares of common stock, no par value, of which
32,402,384 shares were issued and outstanding (including 1,836,447 shares
subject to outstanding options). However, the Company will effect a 3-for-1
stock split prior to the commencement of the Offerings so that 180,000,000
shares of Common Stock, no par value will, be authorized and 97,207,152 shares
of such Common Stock will be issued and outstanding. In order to effect the
stock split, the Company's Certificate of Incorporation will be amended to
increase the authorized number of shares of capital stock.

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The Company's Common Stock consists of one class of common voting stock
with each share being entitled to one vote. A majority of the holders of the
Common Stock represented at any meeting of stockholders constitutes a quorum and
a majority of such quorum is entitled to vote on any matter coming before the
meeting. Directors are elected at the annual meeting of stockholders by a
plurality of the votes cast at such election. The Company's Board of Directors
is not staggered.

Stockholders are entitled to receive such dividends as may be declared by
the Board of Directors out of funds legally available therefor and share
proportionately in any such liquidating distribution.

There are no redemption, conversion or sinking fund provisions with respect
to the Common Stock. The Common Stock is not entitled to preemptive rights or
cumulative voting rights.

Transfer Agent and Registrar. The transfer agent and registrar for the
Common Stock is First Union National Bank Corporate Trust, 1525 West W.T. Harris
Blvd., 3C3, NC1153, Charlotte, North Carolina 28288-1153.

TAX CONSEQUENCES TO NON-U.S. HOLDERS

In the opinion of Latham & Watkins, counsel to the Company, the material
federal income tax consequences to Non-U.S. Holders expected to result from the
purchase, ownership and sale or other taxable disposition of the Common Stock,
under currently applicable law, are summarized below. A "Non-U.S. Holder" is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign estate or trust or a foreign
partnership as such terms are defined in the Internal Revenue Code of 1986, as
amended (the "Code").

This summary is based upon the current provisions of the Code, applicable
Treasury Regulations and judicial and administrative decisions and rulings.
There can be no assurance that the Internal Revenue Service (the "IRS") will not
take a contrary view, and no ruling from the IRS has been or will be sought.
Future legislative, judicial or administrative changes or interpretations could
alter or modify the statements set forth herein, and any such changes or
interpretations could be retroactive and could affect the tax consequences to
Non-U.S. Holders of Common Stock.

The following summary is for general information only and does not purport
to deal with all aspects of federal income taxation that may affect particular
Non-U.S. Holders in light of their individual circumstances and is not intended
for (a) stockholders other than Non-U.S. Holders, (b) Non-U.S. Holders who would
not hold the Common Stock as capital assets or (c) Non-U.S. Holders who are
otherwise subject to special treatment under the Code (including insurance
companies, tax-exempt entities, financial institutions, broker-dealers and
persons who would hold the Common Stock as part of a straddle, hedge or
conversion transaction). In addition, the summary does not consider the effect
of any applicable state, local or foreign tax laws on Non-U.S. Holders. EACH
PROSPECTIVE NON-U.S. HOLDER OF COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL AND FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.

DIVIDENDS ON COMMON STOCK

Dividends paid to a Non-U.S. Holder of Common Stock that are not
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the United States will generally be subject to withholding of
United States federal income tax at a rate of 30% of the gross amount of the
dividends unless the rate is reduced by an applicable income tax treaty. Except
to the extent that an applicable tax treaty otherwise provides, a Non-U.S.
Holder will be taxed in the same manner as United States citizens, resident
aliens and domestic corporations on dividends paid (or deemed paid) that are
effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Holder. If such Non-U.S. Holder is a foreign corporation,
it may also be subject to a United States branch profits tax on such effectively
connected income at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. However, a

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Non-U.S. Holder may claim exemption from withholding under the effectively
connected income exception by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of Business in the United
States) or a successor form with the Company or its paying agent.

Under the currently applicable Treasury regulations, dividends paid to an
address in a country other than the United States are presumed to be paid to a
resident of such country for purposes of the withholding discussed above (unless
the payor has knowledge to the contrary) and, under the current interpretation
of Treasury regulations, for purposes of determining the applicability of a
reduced rate of withholding under an income tax treaty. However, under certain
recently finalized Treasury Regulations (the "New Withholding Regulations") a
Non-U.S. Holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate would be required to satisfy certain certification and other
requirements. In addition, under the New Withholding Regulations, in the case of
Common Stock held by a foreign partnership, the certification requirement would
generally be applied to the partners of the partnership and the partnership may
be required to provide certain information, including a United States taxpayer
identification number. The New Withholding Regulations also provide look-through
rules for tiered partnerships. The New Withholding Regulations are generally
effective for payments made after December 31, 1998, subject to certain
transition rules. Non-U.S. Holders are encouraged to consult with their own tax
advisors with respect to the application of the New Withholding Regulations.

Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient and the amount, if any, of the tax
withheld. A similar report is sent to the holder. Pursuant to income tax
treaties or certain other agreements, the IRS may make its reports available to
tax authorities in the recipient's country of residence.

If paid to an address outside the United States, dividends on Common Stock
held by a Non-U.S. Holder will generally not be subject to backup withholding,
provided that the payor does not have actual knowledge that the holder is a
United States person. However, under the New Withholding Regulations (which are
effective for dividends paid after December 31, 1998), dividend payments may be
subject to backup withholding imposed at a rate of 31% unless applicable
certification requirements are satisfied. See the discussion above with respect
to rules applicable to foreign partnerships under the New Withholding
Regulations.

GAIN ON DISPOSITION OF COMMON STOCK

Subject to the discussion below under "FIRPTA Treatment of Non-U.S.
Holders," a Non-U.S. Holder generally will not be subject to United States
federal income tax or withholding on gain recognized upon the sale or other
disposition of Common Stock unless (i) the gain is effectively connected with
the conduct of a trade or business within the United States by the Non-U.S.
Holder, or (ii) in the case of a Non-U.S. Holder who is a non-resident alien
individual and holds the Common Stock as a capital asset, such holder is present
in the United States for 183 or more days in the taxable year and certain other
conditions are met, or (iii) the Non-U.S. Holder is subject to tax pursuant to
the provisions of United States federal income tax law applicable to certain
United States expatriates. If a Non-U.S. Holder falls under clause (i) above,
the holder will be taxed on the net gain derived from the sale at regular
graduated United States federal income tax rates (the branch profits tax also
may apply if the Non-U.S. Holder is a corporation). If an individual Non-U.S.
Holder falls under clause (ii) above, the holder generally will be subject to a
30% tax on the gain derived from the sale, which gain may be offset by U.S.
capital losses recognized within the same taxable year of such sale.

FIRPTA TREATMENT OF NON-U.S. HOLDERS

Under the Foreign Investment in Real Property Tax Act of 1980, as amended
("FIRPTA"), and subject to the exception discussed below for 5% or less
shareholders, Non-U.S. Holders generally are subject to United States federal
income tax on capital gain realized on the disposition of Common Stock which
constitutes a United States real property interest by reason of that Company's
status as a United States real property holding corporation ("USRPHC"), as well
as United States withholding in respect to such tax equal to 10% of the amount
realized on such disposition. Under FIRPTA, a corporation is a USRPHC if the
fair

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market value of the United States real property interests held by the
corporation equals 50% or more of the aggregate fair market value of the
Company's real property interests and any other assets of the Company used or
held for use in a trade or business. In the event that a sale or disposition of
Common Stock constitutes a sale or disposition of a United States real property
interest, a greater than 5% Non-U.S. Holder will generally be subject to United
States tax on such sale or disposition.

The Company currently believes that, in light of the nature and extent of
its real estate interests in the United States, it is a USRPHC. Even if a
corporation meets the test for a USRPHC, a Non-U.S. Holder would generally not
be subject to U.S. federal income tax on gain from a sale or other disposition
of Common Stock solely by reason of such USRPHC status if the Common Stock is
regularly traded on an established securities market during the calendar year in
which such sale or disposition occurs and such holder does not own, actually or
constructively, Common Stock with a fair market value in excess of 5% of the
fair market value of all Common Stock outstanding at any time during the shorter
of the five-year period preceding such disposition or the holder's holding
period. In addition, a Non-U.S. Holder will not be subject to withholding in
respect to such tax if the Company's Common Stock is so regularly traded during
the calendar year of such disposition. The Company believes that the Common
Stock will be treated as regularly traded on an established securities market.
Accordingly, a Non-U.S. Holder that owns more than 5% of the fair market value
of the Common Stock during the period described above may be subject to U.S.
federal income tax on a sale or disposition.

FEDERAL ESTATE TAXES

An individual Non-U.S. Holder who owns, or is treated as owning, Common
Stock at the time of his or her death or has made certain lifetime transfers of
an interest in Common Stock will be required to include the value of such Common
Stock in his gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of Common Stock effected
outside the United States by a foreign office of a "broker" (as defined in
applicable Treasury Regulations), unless such broker is (i) a United States
person, (ii) a foreign person that derives 50% or more of its gross foreign
income for certain periods from activities that are effectively connected with
the conduct of a trade or business in the United States, (iii) a controlled
foreign corporation for United States federal income tax purposes or (iv)
effective December 31, 1998, certain brokers that are foreign partnerships with
partners who are Non-U.S. Holders or that are engaged in a United States trade
or business. Payment of the proceeds of any such sale effected outside the
United States by a foreign office of any broker that is described in (i), (ii),
(iii) or (iv) of the preceding sentence will not be subject to backup
withholding tax, but will be subject to information reporting requirements
unless such broker has documentary evidence in its records that the beneficial
owner is a Non-U.S. Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption. Payment of the proceeds of
any such sale to or through the United States office of a broker is subject to
information reporting and backup withholding requirements, unless the beneficial
owner of the Common Stock either (a) provides a Form W-8 (or a suitable
substitute form) signed under penalties of perjury that includes its name and
address and certifies as to its Non-U.S. Holder status in compliance with
applicable law and regulations, or (b) otherwise establishes an exemption.
Effective for payments after December 31, 1998 (and subject to certain
transition rules), the New Withholding Regulations unify certain certification
procedures and forms and the reliance standards relating to information
reporting and backup withholding.

THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE
NON-U.S. HOLDER OF COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT
TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON
STOCK.

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UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below for whom Morgan Stanley & Co. Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Raymond James & Associates, Inc. are acting as U.S.
Representatives, and the International Underwriters named below for whom Morgan
Stanley & Co. International Limited, Donaldson, Lufkin & Jenrette International,
Merrill Lynch International and Raymond James & Associates, Inc. are acting as
International Representatives, have severally agreed to purchase, and the Trust
has agreed to sell to them, severally, the respective number of shares of Common
Stock set forth opposite the names of such Underwriters below:

NUMBER OF
NAME SHARES
- ---- ---------

U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Donaldson, Lufkin & Jenrette Securities Corporation.......
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Raymond James & Associates, Inc...........................
---------
Subtotal..........................................
International Underwriters:
Morgan Stanley & Co. International Limited................
Donaldson, Lufkin & Jenrette International................
Merrill Lynch International...............................
Raymond James & Associates, Inc...........................
---------
Subtotal..........................................
---------
Total.............................................
=========

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Shares offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold and will not offer
or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S. Underwriter and
an International Underwriter, the foregoing representations and agreements (i)
made by it in its capacity as a U.S. Underwriter apply only to in its capacity
as a U.S. Underwriter and (ii) made by it in its capacity as an International
Underwriter apply only to it in its capacity as an International Underwriter.
The foregoing limitations do no apply to stabilization transactions or to
certain other transaction specified in the Agreement between U.S. and
International Underwriters. As used herein, "United States or Canadian Person"
means any national or resident of the United States or Canada or of any
corporation, pension, profit-

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sharing or other trust or other entity organized under the laws of the United
States and Canada or of any political subdivision thereof (other than branch
located outside the United States of any United States or Canadian person), and
includes any United States or Canadian branch of a person who is otherwise not a
United States or Canadian Person. All shares of Common Stock to be purchased by
the Underwriters under the Underwriting Agreement are referred to herein as the
"Shares."

Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer to sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of any resident of any province or
territory of Canada in contravention of the Securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada will be made only pursuant to an exemption from
the requirement to file a prospectus in the province or territory of Canada in
which such offer or sale is made. Each International Underwriter has further
agreed to send to any dealer who purchases from it any of the Shares a notice
stating in substance that, by purchasing such Shares, such dealer represents and
agrees that it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such Shares in any province or territory of Canada or to, or
for the benefit of, any resident or any province or territory of Canada in
contravention of the securities laws thereof and that any offer or sale of
Shares in Canada will be made only pursuant to an exemption from the requirement
to file a prospectus in the province to territory of Canada in which such offer
is made, and that such dealer will deliver to any other dealer to whom it sells
any of such Shares a notice contained substantially the same statement as is
contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
Shares to the International Underwriters, will not offer or sell, any Shares to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offerings of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.

Pursuant to the Agreement between the U.S. and International Underwriters,
each International Underwriter has further represented that it has not offered
or sold and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other

69
77

dealer to whom it sells any of such Shares a notice containing substantially the
same statement as is contained in this sentence.

The Underwriters initially propose to offer part of the Shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
$ a share under the public offering price. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ a share
to other Underwriters or to certain dealers. After the initial offering of the
Shares, the offering price and other selling terms may from time to time be
varied by the Representatives.

Pursuant to the Underwriting Agreement, the Trust has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 600,000 additional shares of
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering overallotments, if
any, made in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as the number set
forth next to such U.S. Underwriter's name in the preceding table bears to the
total number of share of Common Stock set forth next to the names of all U.S.
Underwriters in the preceding table.

The Common Stock is listed on the New York Stock Exchange under the symbol
"SJP".

Each of the Company, the Selling Stockholder and certain other stockholders
and officers and directors of the Company has agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period ending 180 days from the date of
this Prospectus, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or lend, file a
registration statement or exercise a registration right in respect of or
otherwise transfer or dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of shares of Common Stock or such other securities, in cash or
otherwise, other than (w) the Shares, (x) the issuance by the Company of shares
of Common Stock upon the exercise of an option or a warrant or the conversion of
a security outstanding on the date of this Prospectus of which the Underwriters
have been advised in writing, (y) the issuance of shares of Common Stock as
consideration for acquisitions or (z) the grant of options under the Company's
stock option plans; provided such options do not vest prior to the termination
of the 180-day period referenced herein, and provided further that, in the case
of subclauses (x) and (y), the recipient of any such issued shares agrees to be
bound by the transfer restrictions set forth herein.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offerings, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the Offerings, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The Company, the Trust and the Underwriters have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.

70
78

LEGAL MATTERS

The validity of the Common Stock offered hereby and certain other legal
matters will be passed upon for the Company by Robert M. Rhodes, Senior Vice
President and General Counsel of the Company, and by Latham & Watkins, Chicago,
Illinois. Certain legal matters will be passed upon for the Trust by McGuire,
Woods, Battle & Boothe L.L.P., Richmond, Virginia. Certain legal matters will be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.

EXPERTS

The consolidated financial statements of St. Joe Corporation as of December
31, 1996 and 1995, and for each of the years in the three-year period ended
December 31, 1996, have been included herein and in the registration statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

71
79

ST. JOE CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Changes in Stockholders'
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7

F-1
80

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
St. Joe Corporation:

We have audited the accompanying consolidated balance sheets of St. Joe
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of St. Joe
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Jacksonville, Florida
March 7, 1997

F-2
81

ST. JOE CORPORATION

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
----------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

ASSETS
Current Assets:
Cash and cash equivalents............................... $ 16,802 $ 449,013 $ 200,986
Short-term investments.................................. 96,923 88,011 38,200
Accounts receivable..................................... 44,390 57,517 39,343
Income taxes refundable................................. 4,314 -- --
Inventories............................................. 20,592 18,677 12,692
Other assets............................................ 18,162 17,455 35,665
Net assets of discontinued operations................... 296,001 -- --
---------- ---------- ----------
Total current assets............................ 497,184 630,673 326,886
Investments and Other Assets:
Marketable securities................................... 189,865 282,827 337,526
Note receivable......................................... -- 10,000 --
Other assets............................................ 38,971 48,571 67,231
---------- ---------- ----------
Total investments and other assets.............. 228,836 341,398 404,757
Property, plant and equipment, net........................ 804,974 834,167 853,217
---------- ---------- ----------
Total assets.................................... $1,530,994 $1,806,238 $1,584,860
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................ $ 26,024 $ 28,480 $ 26,903
Accrued liabilities..................................... 18,445 21,615 25,920
Income taxes payable.................................... -- 6,864 3,876
---------- ---------- ----------
Total current liabilities....................... 44,469 56,959 56,699
Accrued casualty reserves and other liabilities........... 11,681 18,361 19,950
Deferred income taxes..................................... 192,036 254,873 279,690
Minority interest in consolidated subsidiaries............ 266,741 279,104 293,915
Stockholders' Equity:
Common stock, no par value; 60,000,000 shares
authorized; 30,498,650 shares issued and outstanding
at December 31, 1995 and 1996 and 30,565,937 at
September 30, 1997................................... 8,714 8,714 13,054
Retained earnings....................................... 955,239 1,125,161 843,198
Net unrealized gains on marketable securities available
for sale............................................. 52,114 63,066 82,043
Restricted stock deferred compensation.................. -- -- (3,689)
---------- ---------- ----------
Total stockholders' equity...................... 1,016,067 1,196,941 934,606
---------- ---------- ----------
Total liabilities and stockholders' equity...... $1,530,994 $1,806,238 $1,584,860
========== ========== ==========

See notes to consolidated financial statements.

F-3
82

ST. JOE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Net sales................................... $155,122 $150,564 $245,704 $173,401 $ 79,566
Operating revenues.......................... 175,784 184,360 185,485 162,307 172,328
-------- -------- -------- -------- --------
Total revenues.................... 330,906 334,924 431,189 335,708 251,894
Cost of sales............................... 111,014 116,014 112,163 64,765 63,282
Operating expenses.......................... 133,091 139,875 139,640 120,524 118,493
Selling, general and administrative
expenses.................................. 26,836 31,718 31,215 24,373 28,103
-------- -------- -------- -------- --------
Operating profit.................. 59,965 47,317 148,171 126,046 42,016
Other income (expense):
Dividends................................. 2,187 2,595 2,968 2,196 2,583
Interest income........................... 9,678 12,666 29,914 20,887 21,955
Interest expense.......................... (1,982) (2,235) (600) (426) (331)
Gain on sales and other dispositions of
property, plant and equipment, net..... 13,895 2,674 3,423 5,745 3,305
Other, net................................ 1,386 3,070 5,152 3,603 5,138
-------- -------- -------- -------- --------
Total other income (expense)...... 25,164 18,770 40,857 32,005 32,650
-------- -------- -------- -------- --------
Income from continuing operations before
income taxes and minority interest........ 85,129 66,087 189,028 158,051 74,666
Provision for income taxes
Current................................... 24,692 5,778 30,288 12,399 22,372
Deferred.................................. 6,754 18,757 52,829 58,812 10,609
-------- -------- -------- -------- --------
Total provision for income
taxes........................... 31,446 24,535 83,117 71,211 32,981
-------- -------- -------- -------- --------
Income from continuing operations before
minority interest......................... 53,683 41,552 105,911 86,840 41,685
Minority interest........................... 15,827 12,194 14,002 9,922 13,404
-------- -------- -------- -------- --------
Income from continuing operations........... 37,856 29,358 91,909 76,918 28,281
Income from discontinued operations:
Earnings (loss) from discontinued
operations, net of income taxes of
$2,491, $26,116, $(2,785) and $(2,785),
respectively........................... 4,253 44,461 (4,528) (4,528) --
Gain on the sale of discontinued
operations, net of income taxes of
$48,705 and $64,950, respectively...... -- -- 88,641 95,644 --
-------- -------- -------- -------- --------
Income from discontinued operations....... 4,253 44,461 84,113 91,116 --
-------- -------- -------- -------- --------
Net income.................................. $ 42,109 $ 73,819 $176,022 $168,034 $ 28,281
======== ======== ======== ======== ========
PER SHARE DATA:
Income from continuing operations........... $ 1.24 $ 0.96 $ 3.01 $ 2.52 $ 0.93
Earnings (loss) from discontinued
operations................................ 0.14 1.46 (.15) (.15) --
Gain on the sale of discontinued
operations................................ -- -- 2.91 3.14 --
-------- -------- -------- -------- --------
Net income........................ $ 1.38 $ 2.42 $ 5.77 $ 5.51 $ 0.93
======== ======== ======== ======== ========

See notes to consolidated financial statements.

F-4
83

ST. JOE CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------------- SEPTEMBER 30,
1994 1995 1996 1997
-------- -------- ---------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Common Stock:
Balance, at end of year (1994, 1995 and 1996 --
30,498,650 shares, September 30,
1997 -- 30,565,937)............................. $ 8,714 $ 8,714 $ 8,714 $ 13,054
======== ======== ========== ==========
Retained Earnings:
Balance, at beginning of year..................... $851,511 $887,520 $ 955,239 $1,125,161
Net income........................................ 42,109 73,819 176,022 28,281
Dividends:
Cash ($0.20 per share -- 1994, 1995 and 1996,
$.15 per share in 1997)...................... (6,100) (6,100) (6,100) (4,585)
Special distribution ($10.00 per share in 1997)... -- -- -- (305,659)
-------- -------- ---------- ----------
Balance, at end of year........................... $887,520 $955,239 $1,125,161 $ 843,198
======== ======== ========== ==========
Net Unrealized Gain on Marketable Securities
Available for Sale:
Balance, at beginning of year..................... $ 41,485 $ 40,747 $ 52,114 $ 63,066
Increase (decrease) in net unrealized gain, net of
tax effect...................................... (738) 11,367 10,952 18,977
-------- -------- ---------- ----------
Balance, at end of year........................... $ 40,747 $ 52,114 $ 63,066 $ 82,043
======== ======== ========== ==========
Restricted stock deferred compensation:
Balance, at beginning of year..................... -- -- -- --
(Increase) decrease in restricted stock deferred
compensation.................................... -- -- -- $ (3,689)
----------
Balance, at end of year........................... -- -- -- $ (3,689)
======== ======== ========== ==========

See notes to consolidated financial statements.

F-5
84

ST. JOE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- -------- -------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

Cash flows from operating activities:
Net Income.................................. $ 42,109 $ 73,819 $176,022 $168,034 $ 28,281
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and depletion................ 27,612 28,551 28,758 21,232 23,635
Minority interest in income............... 15,827 12,194 14,002 9,922 13,404
Gain on sale of property.................. (13,895) (2,674) (3,423) (5,745) (3,682)
Gain on sale of discontinued operations... -- -- (88,641) (95,644) --
Deferred income tax provision............. 6,754 18,757 52,829 60,687 12,327
Changes in operating assets and
liabilities:
Accounts receivable.................... (1,375) (3,139) (13,127) (377) 18,174
Inventories............................ 6,545 (828) 1,915 3,459 5,985
Other assets........................... (406) (4,790) (8,893) (14,151) (26,870)
Accounts payable, accrued liabilities
and casualty reserves................ 3,176 (4,279) 5,435 27,121 6,971
Income taxes payable................... 4,275 (7,012) 11,178 25,537 (2,988)
Discontinued operations -- noncash
charges and working capital
changes.............................. 12,096 43,483 (58,710) (63,257) --
--------- --------- -------- -------- ---------
Cash provided by operating activities......... 102,718 154,082 117,345 136,818 75,237
--------- --------- -------- -------- ---------
Cash flows from investing activities:
Purchases of property, plant and
equipment................................. (65,450) (78,816) (64,271) (41,135) (53,256)
Investing activities of discontinued
operations................................ (19,513) (28,102) (4,327) (4,327) --
Proceeds from sales of property............. 18,135 5,119 9,743 4,806 14,904
Proceeds from sale of discontinued
operations................................ -- -- 445,055 454,949 --
Purchases of investments:
Available for sale........................ (18,851) (31,247) (21,928) (18,698) (49,615)
Held-to-maturity.......................... (105,091) (168,607) (180,797) (216,570) (100,336)
Maturity and redemption of investments:
Available for sale........................ 12,779 29,058 18,291 12,218 62,434
Held-to-maturity.......................... 95,241 135,480 121,111 153,194 114,096
--------- --------- -------- -------- ---------
Cash provided by (used in) investing
activities.................................. (82,750) (137,115) 322,877 344,437 (11,773)
--------- --------- -------- -------- ---------
Cash flows from financing activities:
Net change in short-term borrowings......... (5,437) (11,989) -- -- --
Financing activities of discontinued
operations................................ 2,092 (9,917) (245) (245)
Dividends paid to stockholders.............. (6,100) (6,100) (6,100) (4,575) (310,244)
Repayment of long-term debt................. (19) (16,893) -- -- --
Dividends paid to minority interest......... (1,679) (1,655) (1,666) (1,245) (1,247)
--------- --------- -------- -------- ---------
Cash used in financing activities............. (11,143) (46,554) (8,011) (6,065) (311,491)
--------- --------- -------- -------- ---------
Net increase (decrease) in cash and cash
equivalents................................. 8,825 (29,587) 432,211 475,190 (248,027)
Cash and cash equivalents at beginning of
period...................................... 37,564 46,389 16,802 16,802 449,013
--------- --------- -------- -------- ---------
Cash and cash equivalents at end of period.... $ 46,389 $ 16,802 $449,013 $491,992 $ 200,986
========= ========= ======== ======== =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for certain expense
items:
Interest.................................... $ 3,973 $ 4,541 $ 1,009 $ 835 $ 331
Income taxes................................ $ 20,494 $ 45,283 $120,789 $ 93,172 $ 25,776

See notes to consolidated financial statements.

F-6
85

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

1. NATURE OF OPERATIONS

St. Joe Corporation (the Company) is a diversified corporation engaged in
transportation, real estate, forestry and sugar operations. Forestry has
operations in both Florida and Georgia while the remaining businesses operate
principally within the state of Florida.

Transportation

Transportation operations accounted for 43% of the Company's net sales and
operating revenues in 1996, and consist of both railway and trucking operations.
The two railroads, one serving the northwest Florida area from Port St. Joe to
Chattahoochee and the other serving the eastern seaboard of Florida from
Jacksonville to Miami, provide transportation services for the common carriage
of goods by rail between their terminating points. Since the rail operations are
within the state of Florida, more than one-half of its transportation revenue is
generated by shipments which originate and terminate within Florida.
Additionally, a significant portion of the traffic handled is received from or
transferred to other rail carriers. The principal commodities carried by rail
include crushed stone, cement, automobile vehicles and parts,
trailer-on-flatcar, container-on-flatcar, basic consumer goods such as
foodstuffs and building material, coal, pulpboard, pulpwood, woodchips, tall oil
chemicals, stone and clay products and recyclables. The trucking portion of the
Company's operation is an interstate, irregular route, common carrier with
terminals located throughout the eastern half of the United States.

Real Estate

Real estate accounted for 31% of the Company's net sales and operating
revenues in 1996, and consists of the development, construction and management
of real estate projects within the state of Florida, both for long-term
appreciation and for sale to third parties and the sale of both developed and
undeveloped land. Along Florida's east coast, the Company concentrates in
commercial property which it can manage, maintain and develop. In west Florida,
the Company has concentrated on developing parcels for residential use. The Real
Estate segment's competition is with other developers and brokers throughout its
operating area.

Forestry

Forestry accounted for 13% of the Company's net sales and operating
revenues in 1996, and consists of the growing and harvesting of timber on
approximately one million acres of timberlands in Florida and Georgia. The
majority of the wood harvested by the Company is sold under a long term wood
fiber supply agreement to one linerboard mill located in Port St. Joe, Florida.
The Company plans in the future to shift its remaining fiber production from the
Company's lands to higher margin timber products.

Wood is supplied to the mill pursuant to a negotiated wood fiber supply
agreement entered into at the time of the sale of the mill. See Note 3.
Discontinued Operations. Under that agreement, wood fiber will be supplied to
the linerboard mill for a period of fifteen years, with two five year renewal
periods. Tonnage to be provided, reduces from 1.6 million tons in year one to
1.4, 1.2, .9 million tons in years two, three and four respectively. Years four
and thereafter remain at .9 million tons. The amount of tonnage required from
Company's land is .9 million tons per year starting in the third year. At
anytime, the mill can elect to reduce in increments on a permanent basis the
amount of tonnage to not less than 600,000 tons per year. Prices for the wood
fiber were negotiated at the time of the negotiation of the agreement and were
negotiated based on fixed prices from geographic zones for pulp wood and prices
tied to designated chipping facilities for wood chips. Under the wood fiber
supply agreement, prices are to be renegotiated every two years and are to be
indexed on a quarterly basis to certain published prices resulting in quarterly
adjustments that are not greater than five percent.

F-7
86

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

On March 6, 1997 officials of the linerboard mill at Port St. Joe announced
that the mill would be shutdown beginning in April, 1997 for an indefinite
period of time due to soft market conditions in the paper industry.

In September 1997, the linerboard mill reopened. On August 25, 1997, the
Company renegotiated certain terms of its wood fiber supply agreement with
Florida Coast Paper Company. Under the revised agreement, the Company will
supply 615,400 tons of pulpwood and wood chips between August 25, 1997 and May
30, 1998; thereafter the Company will supply 700,000 tons per year through
December, 2011 with two five year renewal periods at the option of Florida
Coast. The financial impact to transportation (ANRR) and forestry segments
operations had a significant adverse impact on the segments' revenues, operating
profit, net income and cash flow during the shutdown period.

Sugar

Sugar accounted for 13% of the Company's net sales and operating revenues
in 1996, and consists of a sugarcane plantation and a sugar mill which processes
the sugarcane into raw sugar. The raw sugar from the mill is sold to one
customer. The sugarcane crop is subject to varying weather conditions which can
significantly reduce the harvest and crop yields.

2. MAJORITY STOCKHOLDERS

The Alfred I. duPont Testamentary Trust (the "Trust") and Nemours
Foundation (the "Foundation"), beneficiary of the Trust, collectively own
approximately 69.8% of the common stock of the Company. The Company and its
subsidiaries had no significant transactions with the Trust or the Foundation
during the period.

3. DISCONTINUED OPERATIONS

Communications

On April 11, 1996, St. Joe Industries, Inc., a wholly owned subsidiary of
the Company, sold the stock of St. Joe Communications, Inc. (SJCI) to TPG
Communications, Inc. for $96,098. TPG Communications, Inc. assumed $17,963 of
SJCI interest bearing debt. SJCI sold its interest in three remaining cellular
partnerships for an aggregate of $25,113. The Company recorded a $39,154 gain on
the sale net of tax. SJCI's revenues through the April 11, 1996 sale date were
$9,335. Revenues in 1995 and 1994 were $32,826 and $30,638, respectively. During
1995, the Company had previously sold a cellular partnership interest for
$2,104. Earnings for SJCI were $1,120, $6,767 and $4,993 for 1996, 1995 and
1994, respectively

Forest Products

On May 30, 1996, the Company sold its linerboard mill and container plants.
Proceeds from the sale include $323,844 cash and a $10,000 senior subordinated
note, (the Promissory Note). The Promissory Note bears interest at a rate of
13.25% and interest is payable quarterly in arrears commencing September 1,
1996, provided that any interest payable on its due date may, at the borrowers'
option, be added to the principal amount outstanding. To date, interest payments
have been added to the principal amount. All unpaid principal and interest is
due June 1, 2007. The Promissory Note may be prepaid without penalty at any
time. The gain on the sale was $49,487, net of tax. Revenues for the linerboard
mill and container plants through May 30, 1996 were $156,305. Revenues in 1995
and 1994 were $438,399 and $378,088, respectively. Earnings (loss) for the
linerboard mill and container plants were $(5,648), $37,694 and $(740) for 1996,
1995 and 1994, respectively.

F-8
87

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Included in cash and cash equivalents at December 31, 1996 is approximately
$359,267 of proceeds from these sales which have been held in special accounts
during 1996. A formal plan of liquidation was adopted on February 25, 1997, and
a distribution of net proceeds of the sales in partial liquidation of $10 per
share was paid on March 31, 1997, for stockholders of record on March 21, 1997.
It is currently anticipated that remaining net proceeds of $1.02 per share will
also be distributed later this year after further costs and expenses of the
sales have been accounted for. Also included in cash and cash equivalents at
December 31, 1996 is approximately $9,783 in earnings on the proceeds of sales.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and all of its majority owned subsidiaries. All significant intercompany
transactions and balances have been eliminated except for sales of continuing
operations of $18,988, $59,535 and $58,925 derived from discontinued operations
in the years ended December 31, 1996, 1995 and 1994, respectively. The
unrealized profit in ending inventories relating to these sales has been
eliminated.

Unaudited Interim Financial Information

The accompanying unaudited consolidated interim balance sheet as of
September 30, 1997 and the results of operations and cash flows for the nine
months ended September 30, 1996 and 1997 have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
and reflect only normal and recurring adjustments, which are, in the opinion of
the Company considered necessary for a fair presentation, as permitted by these
regulations. Certain information and footnotes required by generally accepted
accounting principles for complete financial statements have been condensed or
omitted pursuant to such regulations, although the Company believes that the
disclosures made are adequate to make the information presented not misleading.

Revenue Recognition

Transportation revenues are substantially recognized upon completion of
transportation services at destination. Revenues from sales of forestry products
and sugar are recognized generally on delivery of the product to the customer.
Revenue from realty land sales is recognized upon closing of sales contracts for
sale of land or upon settlement of condemnation proceedings. Rental revenues are
recognized upon completion of rental and lease contracts, using the
straight-line basis for recording the revenues over the life of the contract.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, cash and cash
equivalents include cash on hand, bank demand accounts, money market accounts,
and repurchase agreements having original maturities at acquisition date of
three months or less.

F-9
88

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Inventories

Inventories are stated at the lower of cost or market. Costs for
substantially all inventories are determined under the first in, first out
(FIFO) or the average cost method.

Property, Plant and Equipment

Depreciation is computed using both straight-line and accelerated methods
over the useful lives of various assets.

Depletion of timber is determined by the units of production method. An
adjustment to depletion is recorded, if necessary, based on the continuous
forest inventory (CFI) analysis prepared every five years.

Railroad properties are depreciated and amortized using the straight-line
method at rates established by regulatory agencies. Gains and losses on normal
retirements of these items are credited or charged to accumulated depreciation.

Deferred Cane Crop Costs

Sugar cane plantings generally yield two annual harvests, depending on
weather conditions and soil quality, before replanting is necessary. New
planting costs are amortized on a straight-line basis over two years.

Earnings Per Common Share

Earnings per common share are based on the weighted average number of
common shares outstanding during the year.

Income Taxes

The Company follows the asset and liability method of accounting for income
taxes in accordance with Statement of Financial Accounting Standards (SFAS) No.
109 "Accounting for Income Taxes." Under SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. SFAS 109 also requires the recognition of a
deferred tax liability on the undistributed earnings of subsidiaries applied on
a prospective basis.

Investments

Investments consist principally of corporate debt securities, government
sponsored agency securities, mortgage backed securities, municipal bonds, common
stocks, preferred stocks, and U.S. Government obligations. Investments maturing
in three months to one year are classified as short term. Those having
maturities in excess of one year are classified as marketable securities.

The Company follows the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under SFAS 115, the Company
classifies its debt and marketable equity securities in one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are bought
and held principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities for which the Company has the
ability and intent to hold the security until maturity. All other securities not
included in trading or held-to-maturity are classified as available-for-sale.

F-10
89

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses on trading securities are included in earnings. Unrealized holding gains
and losses, net of the related income tax effect and minority interest in
consolidated subsidiaries, on available-for-sale securities are excluded from
earnings and are reported as a separate component of stockholders' equity until
realized.

A decline in the market of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary is charged to earnings
resulting in the establishment of a new cost basis for the security.

Realized gains and losses for securities classified as available-for-sale
and held-to-maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the asset's
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company has historically reserved for
losses related to the impairment of long-term assets. The adoption of SFAS No.
121 in 1996 had no material effect on the Company's financial statements.

Stock-Based Compensation

Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, permits entities to recognize as expense over the
vesting period the fair value of all stock based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to apply the provisions of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants as if the fair-value-based method
defined in SFAS No. 123 has been applied. Under APB No. 25, compensation expense
would be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. The Company has elected to apply
the provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123. The disclosures are not required for interim
reporting.

Reclassifications

Certain prior year amounts have been reclassified to conform with the
current year's presentation.

5. INVENTORIES

Inventories consist of:

DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)

Materials and supplies................................. $12,875 $13,530 $12,399
Sugar.................................................. 7,717 5,147 293
------- ------- -------
$20,592 $18,677 $12,692
======= ======= =======

F-11
90

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

6. INVESTMENTS

Investments as of December 31, 1995, consist of:

UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
(IN THOUSANDS)

Short term investments (maturing
within one year)
Held to maturity
U.S. Government securities..... $ 50,077 $ 50,818 $ 51,203 $ 385 $ --
Tax exempt municipals.......... 39,135 39,179 39,150 -- 29
Mortgage backed securities..... 5,641 5,911 5,909 -- 2
Certificates of deposit........ 1,000 1,015 1,015 -- --
-------- -------- -------- ------- ----
$ 95,853 $ 96,923 $ 97,277 $ 385 $ 31
======== ======== ======== ======= ====
Marketable securities
Available for sale
U.S. Government securities
Maturing in one to five
years..................... $ 872 $ 887 $ 887 $ 15 $ --
Tax exempt municipals
Maturing in one to five
years..................... 6,968 7,181 7,181 213 --
Maturing in five to ten
years..................... 20,093 20,953 20,953 860 --
Maturing in more than ten
years..................... 5,610 5,820 5,820 210 --
Equity securities.............. 11,633 94,027 94,027 82,394 --
Mortgage backed securities
Maturing in five to ten
years..................... 3,801 3,877 3,877 76 --
Other corporate debt securities
Maturing in five to ten
years..................... 1,842 1,897 1,897 55 --
-------- -------- -------- ------- ----
50,819 134,642 134,642 83,823 --
Held to maturity
U.S. Government securities
Maturing in one to five
years..................... 45,569 45,902 46,432 530 --
Tax exempt municipals
Maturing in one to five
years..................... 1,283 113 113 -- --
Maturing in more than ten
years..................... 1,000 1,003 1,003 -- --
Mortgage backed securities
Maturing in five to ten
years..................... 6,132 6,143 6,699 556 --
Other corporate debt securities
Maturing in five to ten
years..................... 794 2,062 2,454 451 59
-------- -------- -------- ------- ----
54,778 55,223 56,701 1,537 59
-------- -------- -------- ------- ----
$105,597 $189,865 $191,343 $85,360 $ 59
======== ======== ======== ======= ====

F-12
91

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Investments as of December 31, 1996, consist of:

UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
(IN THOUSANDS)

Short term investments (maturing
within one year)
Held to maturity
U.S. Government securities..... $ 87,007 $ 87,007 $ 87,226 $ 296 $ 77
Tax exempt municipals.......... 1,004 1,004 1,005 1 --
-------- -------- -------- -------- ------
$ 88,011 $ 88,011 $ 88,231 $ 297 $ 77
======== ======== ======== ======== ======
Marketable securities
Available for sale
U.S. Government securities
Maturing in one to five
years..................... $ 1,226 $ 1,226 $ 1,226 $ 3 $ 3
Maturing in five to ten
years..................... 152 151 151 -- 1
Tax exempt municipals
Maturing in one to five
years..................... 10,624 10,945 10,945 321 --
Maturing in five to ten
years..................... 19,726 20,336 20,336 610 --
Maturing in more than ten
years..................... 4,281 4,265 4,265 -- 16
Equity securities.............. 13,534 117,128 117,128 103,594 --
Mortgage backed securities
Maturing in one to five
years..................... 71 71 71 -- --
Maturing in five to ten
years..................... 342 343 343 1 --
Maturing in more than ten
years..................... 3,210 3,255 3,255 45 --
Other corporate debt securities
Maturing in one to five
years..................... 920 931 931 11 --
Maturing in five to ten
years..................... 463 468 468 5 --
Maturing in more than ten
years..................... 95 105 105 10 --
-------- -------- -------- -------- ------
56,644 159,224 159,224 104,600 20
Held to maturity
U.S. Government securities
Maturing within one year..... $114,371 $114,371 $113,454 $ 333 $1,250
Tax exempt municipals
Maturing in one to five
years..................... $ 7,079 $ 7,079 $ 7,121 $ 42 $ --
Maturing in more than ten
years..................... 56 56 725 669 --
Mortgage backed securities
Maturing in one to five
years..................... -- -- 400 400 --
Maturing in more than ten
years..................... 41 41 44 3 --
Other corporate debt securities
Maturing in one to five
years..................... 2,056 2,056 2,475 502 83
-------- -------- -------- -------- ------
123,603 123,603 124,219 1,949 1,333
-------- -------- -------- -------- ------
$178,247 $282,827 $283,443 $106,549 $1,353
======== ======== ======== ======== ======

Marketable securities, including certain investments which mature within
one year, are held as a developmental fund created to accumulate capital
expected to be required for future improvement of the Company's real estate
properties.

F-13
92

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Investments as of September 30, 1997 (unaudited), consist of:

UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
(IN THOUSANDS)

Short term investments (maturing
within one year)
Available for Sale
U.S. Government securities..... $ 8,496 $ 8,495 $ 8,495 $ -- $ (1)
Other corporate debt
securities................... 29,751 29,705 29,705 -- (46)
-------- -------- -------- -------- -----
$ 38,247 $ 38,200 $ 38,200 $ -- $ (47)
======== ======== ======== ======== =====
Marketable Securities
Available for Sale
U.S. Government securities
Maturing in one to five
years..................... $135,420 $135,796 $135,796 $ 376 $ --
Maturing in five to ten
years..................... 547 558 558 11 --
Tax exempt municipals
Maturing in one to five
years..................... 19,875 19,248 19,248 -- (627)
Maturing in five to ten
years..................... 18,223 19,011 19,011 788 --
Maturing in more than ten
years..................... 3,465 3,984 3,984 519 --
Equity securities.............. 15,753 149,969 149,969 134,216 --
Mortgage backed securities
Maturing in one to five
years..................... 99 99 99 -- --
Maturing in five to ten
years..................... 396 400 400 4 --
Maturing in more than ten
years..................... 4,049 4,363 4,363 314 --
Corporate debt securities
Maturing in one to five
years..................... 3,323 3,795 3,795 472 --
Maturing in five to ten
years..................... 189 196 196 7 --
Maturing more than ten
years..................... 95 107 107 12 --
-------- -------- -------- -------- -----
$201,434 $337,526 $337,526 $136,719 $(627)
======== ======== ======== ======== =====

During 1997, consistent with the Company's expected capital expenditure
needs, approximately $137,000 of securities classified as held to maturity were
transferred to available for sale. Net unrealized gains were not material.

7. ACCRUED LIABILITIES

Accrued liabilities consist of:

DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)

Payroll and benefits.................................. $ 1,433 $ 5,716 $ 5,139
Payroll taxes......................................... 246 403 --
Property and other taxes.............................. 3,418 4,248 13,806
Accrued casualty reserves............................. 16,635 18,984 13,938
Other accrued liabilities............................. 8,394 10,625 12,988
------- ------- -------
30,126 39,976 45,871
Less: noncurrent accrued casualty reserves and other
liabilities......................................... 11,681 18,361 19,951
------- ------- -------
$18,445 $21,615 $25,920
======= ======= =======

F-14
93

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, consist of:

DECEMBER 31,
----------------------- SEPTEMBER 30, ESTIMATED
1995 1996 1997 USEFUL LIFE
---------- ---------- ------------- -----------
(UNAUDITED)

Land and timber........................ $ 132,393 $ 134,811 $ 134,808 --
Land improvements...................... 19,149 19,770 21,107 20
Buildings.............................. 3,686 3,702 3,702 45
Machinery and equipment................ 623,183 630,847 616,447 12-30
Office equipment....................... 799 1,150 1,557 10
Autos and trucks....................... 2,375 2,829 3,044 3-6
Construction in progress............... 5,689 3,844 33,326 --
Investment property.................... 318,181 359,689 366,272 various
---------- ---------- ----------
1,105,455 1,156,642 1,180,263
Accumulated depreciation............... 300,481 322,475 327,046
---------- ---------- ----------
$ 804,974 $ 834,167 $ 853,217
========== ========== ==========

Real estate properties having net book value of $196,700 million at
December 31, 1996 are leased under non-cancelable operating leases with expected
aggregate rentals of $106,200 of which $32,100, $26,500, $20,900, $15,800 and
$10,900 million is due in the years 1997 through 2001, respectively.

9. INCOME TAXES

Total income tax expense for the years ended December 31 was allocated as
follows:

1994 1995 1996
------- ------- --------

Income from continuing operations........................ $31,446 $24,535 $ 83,117
Earnings (loss) from discontinued operations............. 2,491 26,116 (2,785)
Gain on the sale of discontinued operations.............. -- -- 48,705
Shareholders' equity, for recognition of unrealized gain
(loss) on debt and marketable equity securities........ (2,377) 8,778 9,428
------- ------- --------
$31,560 $59,429 $138,465
======= ======= ========

Income tax expense attributable to income from continuing operations
differed from the amount computed by applying the statutory federal income tax
rate to pre-tax income as a result of the following:

1994 1995 1996
------- ------- -------

Tax at the statutory federal rate......................... $29,795 $23,131 $66,159
Dividends received deduction and tax free interest........ (1,075) (1,277) (4,311)
Excise tax on reversion of prepaid pension asset.......... -- -- 13,228
State income taxes (net of federal benefit)............... 2,497 1,916 5,839
Undistributed earnings of FECI............................ 1,245 916 1,262
Other, net................................................ (1,016) (151) 940
------- ------- -------
$31,446 $24,535 $83,117
======= ======= =======

F-15
94

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are presented
below:

DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)

Deferred tax assets:
Accrued casualty and other reserves............... $ 7,451 $ 11,915 $ 10,944
Other............................................. 1,912 1,287 1,287
-------- -------- --------
Total deferred tax assets................. 9,363 13,202 12,231
-------- -------- --------
Deferred tax liabilities:
Tax in excess of financial depreciation........... 114,047 112,023 113,263
Deferred gain on land sales....................... 6,893 7,224 7,224
Deferred gain on subsidiary's defeased bonds...... 2,139 1,929 1,929
Unrealized gain on debt and marketable equity
securities..................................... 30,902 40,330 51,675
Deferred gain on involuntary conversion of land... 29,160 66,682 66,682
Prepaid pension asset recognized for financial
reporting...................................... 8,085 26,712 34,186
Other............................................. 5,620 8,042 8,966
-------- -------- --------
Total gross deferred tax liabilities...... 196,846 262,942 283,925
-------- -------- --------
Net deferred tax liability................ $187,483 $249,740 $271,694
======== ======== ========

Based on the timing of reversal of future taxable amounts and the Company's
history of reporting taxable income, the Company believes that the deferred tax
assets will be realized and a valuation allowance is not considered necessary.
The current deferred tax asset of $5,133, $4,553 and $7,996 is recorded in other
current assets as of December 31, 1996 and 1995, and September 30, 1997,
respectively.

The Company has not recognized a deferred tax liability of approximately
$17,842 for the undistributed earnings of FECI that arose in 1992 and prior
years because the Company does not currently expect those unremitted earnings to
reverse and become taxable to the Company in the foreseeable future. A deferred
tax liability will be recognized when the Company expects that it will recover
those undistributed earnings in a taxable manner, such as through receipt of
dividends or sale of the investment. As of December 31, 1996, the undistributed
earnings of the subsidiary for which no deferred tax liability was provided were
approximately $48,454.

F-16
95

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

10. PENSION AND RETIREMENT PLANS

The Company sponsors defined benefit pension plans which covered
approximately 10% of its employees in 1996 and 70% of its employees in 1995. The
reduction in employees covered resulted from the previously discussed sales of
the communications segment and the linerboard mill and container plants. The
benefits are based on the employees' years of service or years of service and
compensation during the last five or ten years of employment. The Company's
funding policy is to contribute annually the maximum contribution required by
ERISA.

A summary of the net periodic pension credit follows:

1995 1996
-------- --------

Service cost................................................ $ 3,450 $ 1,659
Interest cost............................................... 7,986 7,923
Actual return on assets..................................... (40,436) (26,606)
Net amortization and deferral............................... 28,221 11,555
-------- --------
Total pension income...................................... $ (779) $ (5,469)
======== ========

A summary of the plan's funded status as of December 31 was:

1995 1996
-------- --------

Accumulated benefit obligation, including vested benefits of
$105,627 and $92,354 in 1996 and 1995, respectively....... $100,104 $106,368
======== ========
Projected benefit obligation for service rendered to date... 125,136 108,726
Plan assets at fair value, primarily listed stocks and U.S.
bonds..................................................... 177,276 193,937
-------- --------
Plan assets in excess of projected benefit obligation....... 52,140 85,211
Unrecognized net (gain) loss................................ (27,734) (42,011)
Unrecognized prior service cost............................. 12,956 768
Unrecognized transition asset............................... (15,395) (12,829)
Additional cost for special termination benefits............ -- (982)
-------- --------
Prepaid pension cost........................................ $ 21,967 $ 30,157
======== ========

The weighted-average discount rates for the plans were 7% in 1996 and 1995.
The rate of increase in future compensation levels used in determining the
actuarial present value of the projected benefit obligation for salaried
employees was 6% in 1996 and 1995. The expected long-term rates of return on
assets was 8% in 1996 and 1995.

As discussed in note 3, several of the Company's operations were sold
during 1996, which significantly reduced the number of employees covered under
the defined benefit plans. The defined benefit plans' assets were not a part of
the sales. In accordance with SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits", the Company recognized a curtailment gain of
approximately $3,700 ($500 net of tax). The Company's pension plans are in an
overfunded position and with the reduction in employees resulting from the sales
of several of the Company's operations, it is unlikely that the overfunding will
be realized other than by a plan termination and reversion of excess assets.
Accordingly, a 50% excise tax has been included in the tax effects of the
prepaid asset as well as the curtailment gain. The Company has no immediate
plans to terminate the pension plans and is in the process of evaluating other
alternatives.

The Company had an Employee Stock Ownership Plan (the ESOP) for the purpose
of purchasing stock of the Company for the benefit of qualified employees. On
November 21, 1996 the Pension committee of the

F-17
96

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Board of Directors of the Company voted to terminate the ESOP effective December
31, 1996. Contributions to the ESOP were limited to .5% of compensation of
employees covered under the ESOP. The Company also has other defined
contribution plans which, in conjunction with the ESOP, cover substantially all
its salaried employees. Contributions are at the employees' discretion and are
matched by the Company up to certain limits. Expense for these defined
contribution plans was $1,081, $1,322, and $1,213 in 1996, 1995 and 1994,
respectively.

On January 7, 1997, the Company adopted the 1997 Stock Incentive Plan ("the
Incentive Plan"), whereby awards may be granted to certain employees and
non-employee directors of the Company in the form of restricted shares of
Company stock or options to purchase Company stock. Awards are discretionary and
are determined by the Compensation Committee of the Board of Directors. The
total amount of restricted shares and options available for grant under the
Incentive Plan is 2.01 million shares. As of September 30, 1997 awards were
granted to certain officers of the Company totaling 1.8 million shares. The
options were granted at the Company's current market price on the date of grant
and range from $57.43 to $94.13 after adjustment for the effects of the special
distribution paid on March 31, 1997. The options are exercisable in equal
installments on the first five anniversaries of the date of grant and expire
generally 10 years after date of grant.

Effective January 6, 1997, the Company also granted Mr. Rummell, Chairman
and CEO of the Company, 67,287 restricted shares of the Company's common stock.
The restricted shares vest in equal installments on the first five anniversaries
of the date of grant. The Company has recorded deferred compensation of $3,700
for the unamortized portion of this grant as of September 30, 1997. Compensation
expense related to this grant totaled approximately $600 in 1997.

F-18
97

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

QUARTERS ENDED
---------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------- -------- ---------

1995
Net sales and operating revenues................... $89,764 $82,877 $85,905 $ 76,378
Operating profit................................... 11,888 11,745 12,857 10,827
Net income from continuing operations.............. 8,006 6,360 8,340 6,652
Income from discontinued operations................ 6,804 4,799 17,996 14,862
Net income......................................... 14,810 11,159 26,336 21,514
Net income per share............................... 0.49 0.37 0.86 0.71
1996
Net sales and operating revenues................... 95,481 84,556 80,190 170,962
Operating profit................................... 22,125 9,595 23,053 93,398
Net income from continuing operations.............. 14,991 11,449 5,790 59,679
Income (loss) from discontinued operations......... (7,003)* -- 82,227 8,889
Net income......................................... 7,988 11,449 88,017 68,568
Net income per share............................... 0.25 0.38 2.89 2.25
1997
Net sales and operating revenues................... -- 69,413 94,102 88,379
Operating profit................................... -- 15,887 15,874 10,255
Net income from continuing operations.............. -- 9,056 11,214 8,010
Income (loss) from discontinued operations......... -- -- -- --
Net income......................................... -- 9,056 11,214 8,010
Net income per share............................... $ -- $ 0.30 $ 0.37 $ 0.26

- ---------------

* The total gain on discontinued operations declined by approximately $7,000
during the fourth quarter as a result of finalizing the postclosing working
capital adjustments, closing expenses and the pension curtailment gain,
previously estimated.

12. SEGMENT INFORMATION

Total net sales and operating revenues represent sales to unaffiliated
customers, as reported in the Company's consolidated income statements and
intercompany sales which occurred principally between the Forestry and
Transportation segments and discontinued operations. Operating profit is net
sales and operating revenues less directly traceable costs and expenses. In
computing operating profit, the following items have not been considered: other
income (expense) and provision for income taxes.

Identifiable assets by lines of business are those assets that are used in
the Company's operations in each segment. Other assets are composed of cash,
marketable securities and miscellaneous nonsegment assets.

F-19
98

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Information by lines of business segment follows:

SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 1997
---------- ---------- ---------- ------------- -------------
(UNAUDITED)
(IN THOUSANDS)

Net sales and operating
revenues:
Transportation........... $ 173,707 $ 184,450 $ 185,484 $ 137,207 $ 143,970
Real Estate.............. 42,141 32,870 134,530 124,155 59,234
Forestry................. 60,158 60,057 56,679 44,667 23,141
Sugar.................... 54,900 57,547 54,496 29,679 25,549
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 330,906 $ 334,924 $ 431,189 $ 335,708 $ 251,894
========== ========== ========== ========== ==========
Operating profit:
Transportation........... $ 27,313 $ 25,763 $ 26,711 $ 17,847 $ 25,407
Real Estate.............. 22,251 11,621 109,450 102,692 14,568
Forestry................. 6,293 (555) 2,337 921 1,049
Sugar.................... 6,329 13,310 8,281 6,231 2,711
Other.................... (2,221) (2,822) 1,392 (1,645) (1,719)
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 59,965 $ 47,317 $ 148,171 $ 126,046 $ 42,016
========== ========== ========== ========== ==========
Assets:
Transportation........... $ 424,241 $ 407,969 $ 413,100 $ 435,990 $ 436,397
Real Estate.............. 229,449 290,013 373,799 342,427 549,232
Forestry................. 91,319 111,848 114,710 117,624 122,239
Sugar.................... 93,685 72,647 77,824 75,836 73,604
Discontinued
operations............ 299,347 296,001 -- -- --
Other.................... 311,349 352,516 826,805 845,729 403,388
---------- ---------- ---------- ---------- ----------
Consolidated..... $1,449,390 $1,530,994 $1,806,238 $1,817,606 $1,584,860
========== ========== ========== ========== ==========
Capital expenditures:
Transportation........... $ 25,060 $ 28,204 $ 15,800 $ 7,077 $ 7,842
Real Estate.............. 28,354 45,029 43,708 31,013 40,822
Forestry................. 8,655 5,413 4,672 3,042 2,136
Sugar.................... 3,381 170 91 3 277
Other.................... -- -- -- -- 2,179
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 65,450 $ 78,816 $ 64,271 $ 41,135 $ 53,256
========== ========== ========== ========== ==========
Depreciation and depletion:
Transportation........... $ 18,706 $ 18,840 $ 18,067 $ 13,454 $ 13,663
Real Estate.............. 5,117 5,733 7,808 5,720 6,795
Forestry................. 2,184 2,307 1,148 760 1,177
Sugar.................... 1,605 1,671 1,735 1,297 1,217
Other.................... -- -- -- -- 783
---------- ---------- ---------- ---------- ----------
Consolidated..... $ 27,612 $ 28,551 $ 28,758 $ 21,232 $ 23,635
========== ========== ========== ========== ==========

13. CONTINGENCIES

The Company and its subsidiaries are involved in litigation on a number of
matters and are subject to certain claims which arise in the normal course of
business, none of which, in the opinion of management, is

F-20
99

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.

The Company has retained certain self-insurance risks with respect to
losses for third party liability, property damage and group health insurance
provided to employees.

The Company is subject to costs arising out of environmental laws and
regulations, which include obligations to remove or limit the effects on the
environment of the disposal or release of certain wastes or substances at
various sites including sites which have been previously sold. It is the
Company's policy to accrue and charge against earnings environmental cleanup
costs when it is probable that a liability has been incurred and an amount is
reasonably estimable. As assessments and cleanups proceed, these accruals are
reviewed and adjusted, if necessary, as additional information becomes
available.

On May 30, 1996 the Company sold its linerboard mill and container plants.
As part of the sale, the Company remains contingently liable for up to $10,000
relating to On-Site Environmental Liabilities, as defined in the sales
agreement, as long as they are discovered within three years of the closing date
of the sale and the Company has, except in limited circumstances, received
invoices for them within five years of the closing date. The Company has no
obligation for costs incurred by the buyer to comply with Title V of the Clean
Air Act or the Cluster Rules. On-Site Environmental Liabilities arising from
environmental conditions caused from activities both before and after the
closing date are to be allocated among the parties based on relative
contribution. The agreement provided the exclusive remedy for On-Site
Environmental Liabilities which relate to matters within the property lines of
real property conveyed under the agreement. The Company's obligation to pay
$10,000 for On-Site Environmental Liabilities existing on the closing date is
subject to cost-sharing with the buyer according to the following schedule: the
first $2,500 by buyer, the next $2,500 by the Company; the next $2,500 by the
buyer; the next $2,500 by the company; the next $2,500 by the buyer and the next
$5,000 by the Company. The Company also agreed to reimburse up to $1,000 for
certain remediation activities at the linerboard mill, if such activities were
required under environmental laws under the following schedule: the first $200
by the Company, the next $300 by the buyer, the next $300 by the Company, the
next $300 by the buyer, the next $500 by the Company, the next $500 by the buyer
with any remaining amounts treated as On-Site Environmental Liabilities. No
known matters exist which, pursuant to this contingent liability, would require
funding or accrual in the Company's financial statements.

The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of several Superfund sites. The Company has accrued an
allocated share of the total estimated cleanup costs for these sites. Based upon
management's evaluation of the other potentially responsible parties, the
Company does not expect to incur additional amounts even though the Company has
joint and several liability. Other proceedings involving environmental matters
such as alleged discharge of oil or waste material into water or soil are
pending against the Company.

It is not possible to quantify future environmental costs because many
issues relate to actions by third parties or changes in environmental
regulation. However, based on information presently available, management
believes that the ultimate disposition of currently known matters will not have
a material effect on the financial position, results of operations or liquidity
of the Company. Environmental liabilities are paid over an extended period and
the timing of such payments cannot be predicted with any certainty. Aggregate
environmental-related accruals were $5,500 and $6,200 as of December 31, 1996
and 1995, respectively. Aggregate environmental-related accruals totaled
approximately $7,000 at September 30, 1997.

14. SUBSEQUENT EVENTS (UNAUDITED)

On January 10, 1997, the Company purchased for $5,500 a 38% limited
partnership interest in Deerfield Park, LLC, a limited partnership established
to acquire and develop 554 acres of land in Fulton County, Georgia. Costs
incurred to date have been capitalized.

F-21
100

ST. JOE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

On November 12, 1997, the Company, through two subsidiaries, purchased
certain assets, including management and proprietary information systems, of
Arvida Company through a newly formed limited partnership with JMB Southeast
Development, L.L.C. and JMB Southeast Development, L.P. for the purpose of
developing and/or managing residential communities on certain lands owned by the
Company, as well as the purchase of other lands for development and management.
The Company owns 74% of the new limited partnership, St. Joe/Arvida Company,
L.P. The purchase price for the 74% partnership interest in the new entity is
not considered material to the Company's financial position.

On November 21, 1997, the Company announced the withdrawal of its
outstanding offer to purchase all outstanding FECI common stock owned by others
than the Company at $102 per share.

On November 25, 1997, the Company sold the Promissory Note to an unrelated
third party for approximately $10,400 which will result in a pre-tax gain of
approximately $400 in the fourth quarter of 1997.

As part of its efforts to focus more intently on the Company's core assets,
on December 6, 1997 the Company agreed in principle to sell its sugar lands to
certain federal and state governmental agencies on or before June 6, 1998 for
$133,500 in cash. In the event the proposed sale is consummated, Talisman would
retain the right to farm the sugar lands through the 2002-2003 crop season. The
Company intends to develop a formal plan of disposition and execute a definitive
agreement. The proposed transaction is subject to both government and board
approvals.

On December 3, 1997, the Company and Orlando-based CNL Group, Inc. formed a
joint venture to invest in and develop office and industrial properties in the
central Florida region. The Company, through two subsidiaries, received a 50%
ownership interest in the joint venture by contributing $5,000 in cash to the
partnership and committing to fund an additional $25,000 for new projects the
venture determines to develop and/or manage.

On December 10, 1997, the Company entered into a letter of intent with
Codina Group, Inc. ("Codina") and Weeks Corporation ("Weeks") under which the
Company and Weeks each agreed to purchase a one-third interest in Codina. The
purchase price is not material to the Company's financial position.

F-22
101

[LOGO]

St. Joe Corporation
102

PROSPECTUS (Subject To Completion)

Issued December , 1997

4,000,000 Shares

St. Joe Corporation
COMMON STOCK
------------------------

OF THE 4,000,000 SHARES OF COMMON STOCK OFFERED HEREBY, 600,000 ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS (THE "INTERNATIONAL OFFERING") AND 3,400,000 ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS (THE "U.S.
OFFERING," AND TOGETHER WITH THE INTERNATIONAL OFFERING, THE "OFFERINGS"). SEE
"UNDERWRITERS." ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD
BY THE ALFRED I. DUPONT TESTAMENTARY TRUST (THE "SELLING STOCKHOLDER" OR THE
"TRUST"). SEE "ALFRED I. DUPONT TESTAMENTARY TRUST." ST. JOE CORPORATION (THE
"COMPANY" OR "ST. JOE") WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF THE
SHARES BEING OFFERED HEREBY. THE COMPANY'S COMMON STOCK IS LISTED ON THE NEW
YORK STOCK EXCHANGE UNDER THE SYMBOL "SJP." ON DECEMBER 15, 1997, THE LAST
REPORTED SALE PRICE OF THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS
$94.75 PER SHARE.
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
------------------------

PRICE $ A SHARE
------------------------

UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDER
-------- -------------- -----------

Per Share................................................. $ $ $
Total(2).................................................. $ $ $

- ------------

------------------------

MORGAN STANLEY DEAN WITTER

DONALDSON, LUFKIN & JENRETTE INTERNATIONAL

MERRILL LYNCH INTERNATIONAL

RAYMOND JAMES & ASSOCIATES, INC.

, 1998
103

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an estimate of expenses to be incurred by
the Company in connection with the issuance and distribution of the securities
offered hereby.

Securities and Exchange Commission registration fee......... $128,067
Blue Sky fees and expenses.................................. 3,000
Legal fees and disbursements (estimated).................... 500,000
Printing and engraving expenses (estimated)................. 100,000
Accounting fees and expenses (estimated).................... 200,000
Transfer agent's fees....................................... 2,000
Miscellaneous............................................... 16,933
--------
Total............................................. $950,000
========

- ---------------

* To be supplied by amendment.

The Trust will bear the underwriting commissions and discounts associated
with the Offerings, the fees and expenses of its legal counsel and financial
advisors and certain other expenses.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Reference is hereby made to Section 607.0850 of the Florida General
Corporation Act as to indemnification by the Company of officers and directors.

Article III, Section 9 of the Company's Amended By-Laws provides as follows
with respect to the indemnification of the Company's officers and directors:

"The Corporation shall indemnify each officer and director, whether or
not then in office, (and his or her executor, administrator and heirs),
against all reasonable expenses actually and necessarily incurred,
including but not limited to, judgments, costs and counsel fees in
connection with the defense of any litigation, civil or administrative
action, suit or proceeding, to which he or she may have been made a party
because he or she is or was a director or officer of the Corporation. He or
she shall have no right to reimbursement, however, in relation to matters
as to which he or she had been adjudged liable to the Corporation for
negligence or misconduct in the performance of his or her duties or was
derelict in the performance of his or her duty as director or officer by
reason of willful misconduct, bad faith, gross negligence or reckless
disregard of the duties of his or her office or employment. The right to
indemnify for expenses shall also apply to expenses in connection with
suits that are compromised or settled if (1) the Court having jurisdiction
of the action shall approve such settlement, or (2) a majority of the Board
of Directors, excluding interested directors, votes to approve such
settlement. As used in this paragraph an "interested director or officer"
is one against whom the proceeding in question or another proceeding on the
same or similar grounds is then pending.

The foregoing right of indemnification shall be in addition to, and
not exclusive of, all other rights to which the director or officer may be
entitled."

Each Underwriter on whose behalf the agreement filed as Exhibit 1 to this
registration statement is executed will agree therein to indemnify the Company's
officers, directors and controlling persons against certain liabilities which
might arise under the Securities Act of 1933, as amended (the "Act") from

II-1
104

information furnished to the Company by or on behalf of any such Underwriter for
use in this registration statement.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

1.01 -- Form of Underwriting Agreement**
2.01 -- Limited Partnership Agreement of St. Joe/Arvida Company,
L.P.*
2.02 -- Agreement of Limited Partnership of St. Joe/CNL Development,
Ltd.*
2.03 -- Stock Purchase Agreement dated as of September 1, 1995
between St. Joe Industries, Inc. and TPG Communications,
Inc. (incorporated herein by reference and Exhibits filed
with the Registrant's Quarterly Report on Form 10-Q for the
third quarter ended September 30, 1995)
2.04 -- Asset Purchase Agreement dated as of November 1, 1995 by and
among St. Joe Forest Products Company, St. Joe Container
Company and St. Joe Paper Company, on the one hand and Four
M Corporation and St. Joe Paper Company on the other hand
(the "Asset Purchase Agreement") (incorporated herein by
reference and Exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the third quarter ended September
30, 1995)
2.05 -- Amendments dated December 14, 1995; December 20, 1995;
January 10, 1996 and January 12, 1996 to the Asset Purchase
Agreement (incorporated herein by reference to the
Registrant's Proxy Statement for the Special Meeting of
Stockholders on April 24, 1996)
3.01 -- Articles of Incorporation, as amended**
3.02 -- Articles of Amendment, dated , 1998**
3.03 -- Amended By-Laws dated March 18, 1997 (incorporated herein by
reference to Exhibit 3(b) filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1996)
4.01 -- Registration Rights Agreement between the Registrant and the
Alfred I. duPont Testamentary Trust, dated December 16,
1997**
5.01 -- Opinion of Robert M. Rhodes*
8.01 -- Opinion of Latham & Watkins**
10.01 -- Employment Agreement of Peter Rummell, dated January 7,
1997*
10.02 -- Employment Agreement of Charles A. Ledsinger, Jr., dated
April 24, 1997*
10.03 -- Employment Agreement of Robert M. Rhodes, dated November 5,
1997*
10.04 -- Employment Agreement of David D. Fitch, dated September 19,
1997*
10.05 -- Employment Agreement of J. Malcolm Jones, dated February 26,
1997*
10.06 -- Employment Agreement of Michael F. Bayer, dated February 1,
1997*
10.07 -- Form of Severance Agreement*
23.01 -- Consent of Independent Accountants*
24.01 -- Powers of Attorney (on page II-4 of the Registration
Statement)

- ---------------

* Filed herewith
** To be filed by amendment

II-2
105

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-3
106

SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Jacksonville, Florida on the 16th day of December
1997.

St. Joe Corporation

By: /s/ CHARLES A. LEDSINGER, JR.
------------------------------------
Charles A. Ledsinger, Jr.
Title

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
following persons in the capacities and on the dates indicated. St. Joe
Corporation, a Florida corporation, and each person whose signature appears
below, constitutes and appoints Charles A. Ledsinger, Jr. with full power to act
without the other, such person's true and lawful attorneys-in-fact, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign this Registration Statement, and any
and all amendments thereto (including post-effective amendments), and to file
the same, with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
each and every act and thing necessary or desirable to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, thereby ratifying and confirming all that said attorneys-in-fact, or any
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ PETER S. RUMMELL Chairman of the Board and Chief December 5, 1997
- ------------------------------------------------ Executive Officer (Principal
Peter S. Rummell Executive Officer)

/s/ CHARLES A. LEDSINGER, JR. Chief Financial Officer December 10, 1997
- ------------------------------------------------ (Principal
Charles A. Ledsinger, Jr. Financial and Accounting
Officer)

/s/ JACOB C. BELIN Director December 15, 1997
- ------------------------------------------------
Jacob C. Belin

/s/ RUSSELL B. NEWTON, JR. Director December 4, 1997
- ------------------------------------------------
Russell B. Newton, Jr.

/s/ JOHN J. QUINDLEN Director December 5, 1997
- ------------------------------------------------
John J. Quindlen

/s/ WALTER L. REVELL Director December 5, 1997
- ------------------------------------------------
Walter L. Revell

/s/ FRANK S. SHAW Director December 5, 1997
- ------------------------------------------------
Frank S. Shaw

II-4
107

SIGNATURE TITLE DATE
--------- ----- ----

/s/ WINFRED L. THORNTON Director December 15, 1997
- ------------------------------------------------
Winfred L. Thornton

/s/ JOHN D. UIBLE Director December 8, 1997
- ------------------------------------------------
John D. Uible

/s/ CARL F. ZELLERS Director December 5, 1997
- ------------------------------------------------
Carl F. Zellers

II-5
108

EXHIBIT INDEX

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
- ------- ----------------------- ----------------------------------------

1.01 -- Form of Underwriting Agreement**..............
2.01 -- Limited Partnership Agreement of St.
Joe/Arvida Company, L.P.*.....................
2.02 -- Agreement of Limited Partnership of St.
Joe/CNL Development, Ltd.*....................
2.03 -- Stock Purchase Agreement dated as of September
1, 1995 between St. Joe Industries, Inc. and
TPG Communications, Inc. (incorporated herein
by reference and Exhibits filed with the
Registrant's Quarterly Report on Form 10-Q for
the third quarter ended September 30, 1995)...
2.04 -- Asset Purchase Agreement dated as of November
1, 1995 by and among St. Joe Forest Products
Company, St. Joe Container Company and St. Joe
Paper Company, on the one hand and Four M
Corporation and St. Joe Paper Company on the
other hand (the "Asset Purchase Agreement")
(incorporated herein by reference and Exhibits
filed with the Registrant's Quarterly Report
on Form 10-Q for the third quarter ended
September 30, 1995)...........................
2.05 -- Amendments dated December 14, 1995; December
20, 1995; January 10, 1996 and January 12,
1996 to the Asset Purchase Agreement
(incorporated herein by reference to the
Registrant's Proxy Statement for the Special
Meeting of Stockholders on April 24, 1996)....
3.01 -- Articles of Incorporation, as amended**.......
3.02 -- Articles of Amendment, dated ,
1998**........................................
3.03 -- Amended By-Laws dated March 18, 1997
(incorporated herein by reference to Exhibit
3(b) filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1996)............................
4.01 -- Registration Rights Agreement between the
Registrant and the Alfred I. duPont
Testamentary Trust, dated December 16,
1997**........................................
5.01 -- Opinion of Robert M. Rhodes*..................
8.01 -- Opinion of Latham & Watkins**.................
10.01 -- Employment Agreement of Peter Rummell, dated
January 7, 1997*..............................
10.02 -- Employment Agreement of Charles A. Ledsinger,
Jr., dated April 24, 1997*....................

109

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
- ------- ----------------------- ----------------------------------------

10.03 -- Employment Agreement of Robert M. Rhodes,
dated November 5, 1997*.......................
10.04 -- Employment Agreement of David D. Fitch, dated
September 19, 1997*...........................
10.05 -- Employment Agreement of J. Malcolm Jones,
dated February 26, 1997*......................
10.06 -- Employment Agreement of Michael F. Bayer,
dated February 1, 1997*.......................
10.07 -- Form of Severance Agreement*..................
23.01 -- Consent of Independent Accountants............
24.01 -- Powers of Attorney............................ Page II-4 of the Registration Statement

- ---------------

* Filed herewith
** To be filed by amendment

   1
                                                                    EXHIBIT 2.01


                          LIMITED PARTNERSHIP AGREEMENT

                                       OF

                          ST. JOE/ARVIDA COMPANY, L.P.

                                      AMONG

                          ST. JOE/ARVIDA COMPANY, INC.

                            (THE "MANAGING PARTNER")

                                       AND

                       JMB SOUTHEAST DEVELOPMENT, L.L.C.

                          (THE "NON-MANAGING PARTNER")

                                      AND

                           ST. JOE DEVELOPMENT, INC.

                                      AND

                        JMB SOUTHEAST DEVELOPMENT, L.P.






                         Dated as of November 12, 1997

   2

                               TABLE OF CONTENTS


                                                                            PAGE
                                                                       
                            ARTICLE I - DEFINITIONS
                                        
                                        
                             ARTICLE II - FORMATION

2.1    Formation ............................................................  8
2.2    Name .................................................................  8
2.3    Term .................................................................  9
2.4    Office and Agent .....................................................  9
2.5    Purposes of the Partnership ..........................................  9


        ARTICLE III - PURCHASE OF UNITS;CAPITAL CONTRIBUTIONS AND LOANS

3.1    Purchase of Units .................................................... 10
3.2    Initial Capital Contribution ......................................... 10
3.3    Capital Calls; Defaults; Dilution; Partner Loans ..................... 10
3.4    Capital Accounts ..................................................... 12
3.5    No Interest .......................................................... 12


                             ARTICLE IV - PARTNERS

4.1    Limited Liability of Partners for Partnership Debts .................. 13
4.2    Withdrawal of Partners ............................................... 13
4.3    Transactions With The Partnership; Competing Activities .............. 13
4.4    Remuneration To Partners ............................................. 14
4.5    Non-Managing Partner and Limited Partner Are Not Agents .............. 14
4.6    Meetings of General Partners ......................................... 14


             ARTICLE V - MANAGEMENT AND CONTROL OF THE PARTNERSHIP

5.1    Exclusive Management of the Partnership by the Managing Partner ...... 15
5.2    Determination of Partner to Act as Managing Partner .................. 16
5.3    Powers of Managing Partner ........................................... 17


   3

                                                                       
5.4    Non-Managing Partner Has No Managerial Authority Except With 
            Respect to Major Decisions ...................................... 18
5.5    Performance of Duties; Liability of Managing Partner and 
            Non-Managing Partner............................................. 20
5.6    Devotion of Time ..................................................... 21
5.7    Transactions between the Partnership and the Managing Partner ........ 21
5.8    Liability of Partners to Partnership or Each Other Limited to Assets . 21
5.9    Limited Partners Have No Managerial Authority ........................ 22
5.10   Officers ............................................................. 22
5.11   Managing Partner and Its Successors To Be Single Purpose Entity ...... 22
5.12   New Development or Management Opportunities .......................... 22
5.13   Certain Employment Matters ........................................... 27
5.14   Business Plan ........................................................ 28


        ARTICLE VI - ALLOCATIONS OF PROFITS AND LOSSES AND DISTRIBUTIONS

6.1    Sharing of Income, Gain, Loss, Deduction and Credit .................. 29
6.2    Allocations and Distributions Attributable to Transferred Interest ... 30
6.3    Distributions ........................................................ 30
6.4    Tax Status and Reports ............................................... 30
6.5    Capital Accounts of the Partners ..................................... 30
6.6    Minimum Gain Chargeback; Qualified Income Offset ..................... 31


          ARTICLE VII - TRANSFER AND ASSIGNMENT OF ECONOMIC INTERESTS

7.1    Transfer and Assignment of Interest .................................. 31
7.2    Substitution of Partners ............................................. 32
7.3    Effective Date of Transfers and Admission to Partnership ............. 32
7.4    Rights of Legal Representatives ...................................... 33
7.5    No Effect to Transfers in Violation of Agreement ..................... 33
7.6    Right of Partnership and Remaining Partners to Purchase Partnership 
            Interest Prior to Transfer ...................................... 33
7.7    Piggy-Back Right ..................................................... 34
7.8    Right of Managing Partner to Call Partnership Interest of 
            Non-Managing Partner and JMB LP ................................. 34
7.9    Restrictions on Transfer ............................................. 35
7.10   Indemnity ............................................................ 35
7.11   Arbitration of Call Price ............................................ 36



   4

                                                                      
       ARTICLE VIII - ACCOUNTING, RECORDS, REPORTING BY MANAGING PARTNER

 8.1    Books and Records .................................................. 37
 8.2    Delivery to Partners and Inspection ................................ 38
 8.3    Financial Statements and Reports ................................... 38
 8.4    Filings ............................................................ 39
 8.5    Bank Accounts ...................................................... 39
 8.6    Accounting Decisions and Reliance on Others ........................ 39
 8.7    Tax Matters for the Partnership Handled by Managing Partner and 
            Tax Matters Partner............................................. 39
 8.8    Section 754 Election ............................................... 40


                    ARTICLE IX - DISSOLUTION AND WINDING UP

 9.1    Dissolution ........................................................ 40
 9.2    Winding Up ......................................................... 40
 9.3    Distributions in Kind .............................................. 40
 9.4    Liquidation Distributions .......................................... 41
 9.5    No Deficit Restoration Requirements ................................ 41
 9.6    Limitations on Payments Made in Dissolution ........................ 41
 9.7    Certificate of Cancellation ........................................ 41
 9.8    No Action for Dissolution .......................................... 41

                                        
                          ARTICLE X - INDEMNIFICATION
                                        
                                        
                                        
                            ARTICLE XI - ARBITRATION

11.1    Arbitration of Claims .............................................. 42
11.2    Selection of Arbitrators ........................................... 42
11.3    Arbitration Fees and Expenses ...................................... 43


                          ARTICLE XII - MISCELLANEOUS

12.1    Complete Agreement ................................................. 43
12.2    Binding Effect ..................................................... 44
12.3    Parties in Interest ................................................ 44
12.4    Pronouns; Statutory References ..................................... 44
12.5    Headings ........................................................... 44

 



   5

                                                                       
12.6   Interpretation ...................................................... 44
12.7   References to this Agreement ........................................ 44
12.8   Exhibits and Schedules .............................................. 44
12.9   Severability ........................................................ 44
12.10  Additional Documents and Acts ....................................... 44
12.11  Notices ............................................................. 45
12.12  Amendments .......................................................... 46
12.13  Reliance on Authority of Person Signing Agreement ................... 46
12.14  No Interest in Partnership Property, Waiver of Action for Partition . 46
12.15  Multiple Counterparts ............................................... 47
12.16  Time is of the Essence .............................................. 47
12.17  Remedies Cumulative ................................................. 47



Exhibit A       Initial Capital Contributions of the Partners


   6

                         LIMITED PARTNERSHIP AGREEMENT
                                       OF
                          ST. JOE/ARVIDA COMPANY, L.P.


         This Limited Partnership Agreement (this "Agreement"), is made as of
the ____ day of November, 1997, by and among ST. JOE/ARVIDA COMPANY, INC., a
Florida corporation, Suite 400, DuPont Center, 1650 Prudential Drive,
Jacksonville, Florida 32207 (the "Managing Partner"), JMB SOUTHEAST DEVELOPMENT,
LLC, a Delaware limited liability company, Suite 1900, 900 North Michigan
Avenue, Chicago, Illinois 60611 (the "Non-Managing Partner") as General
Partners, and ST. JOE DEVELOPMENT, INC., a Florida corporation, Suite 400,
DuPont Center, 1650 Prudential Drive, Jacksonville, Florida 32207 ("St. Joe
Development"), and JMB SOUTHEAST DEVELOPMENT, L.P., a Delaware limited
partnership, Suite 1900, 900 North Michigan Avenue, Chicago, Illinois 60611
("JMB LP"), as Limited Partners.


                               W I T N E S S E T H


         WHEREAS, pursuant to the filing of a Certificate of Limited Partnership
of St. Joe/Arvida Company, L.P. (the "Partnership") with the Secretary of State
of Delaware on November 6, 1997, the Partnership was formed in accordance with
the Delaware Revised Uniform Limited Partnership Act (the "Act"); and

         WHEREAS, the Managing Partner desires to purchase 1 Unit in the
Partnership from the Non-Managing Partner and St. Joe Development desires to
purchase 73 Units in the Partnership from JMB LP; and

         WHEREAS, the Non-Managing Partner and the JMB LP now desire to admit
the Managing Partner as a new General Partner of the Partnership and to enter
into this Agreement, with respect to the conduct of the affairs of the
Partnership and the Partners' rights and obligations with regard to their
Interests in the Partnership; and

         WHEREAS, the parties hereto therefore desire to adopt and approve their
agreement for the Partnership.

         NOW, THEREFORE, the parties hereto by this Agreement set forth the
Limited Partnership Agreement of the Partnership under the laws of the State of
Delaware, upon the terms and subject to the conditions of this Agreement.


   7



                                   ARTICLE I

                                   DEFINITIONS

         When used in this Agreement, the following terms shall have the
meanings set forth below (all capitalized terms used in this Agreement that are
not defined in this Article I shall have the meanings set forth elsewhere in
this Agreement):

         "Act" shall mean the Delaware Revised Uniform Limited Partnership Act
(6 Del. C. Section 17-101, et. seq.), as the same may be amended from time to
time.

         "Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:

                  A.       Adding to such Capital Account the following items: 
                           (i) the amount, if any, that such Partner is
                           obligated to contribute to the Company upon
                           liquidation of such partner's Partnership Interest;
                           and (ii) the amount that such Partner is obligated to
                           restore or is deemed to be obligated to restore
                           pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)
                           or the penultimate sentence of each of Regulations
                           Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

                  B.       Subtracting from such Capital Account such Partner's
                           share of the items described in Regulations Sections
                           1.704-1(b)(2)(ii)(d)(4), (5) and (6).

         The foregoing definition of Adjusted Capital Account Deficit is 
intended to comply with the provisions of Regulations Section 
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

         "Affiliate" shall mean with respect to any Partner, any Person directly
or indirectly, through one or more intermediaries, controlling, controlled by,
or under common control with such Partner. The term "control", as used in the
immediately preceding sentence, means, with respect to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled entity. With respect
to the Managing Partner, solely for the purposes of Section 5.12, "Affiliate"
shall additionally mean any Person controlled by St. Joe that has the ability,
as a member, general partner, shareholder, agent, contractor, or otherwise, to
exercise significant control or influence over the purchase, development,
management, ownership, sale or financing of a Future Development.

         "Agreement" shall mean this Limited Partnership Agreement, as
originally executed and as amended from time to time.


                                       -2-
   8



         "Arbitration Notice of Call Price" shall have the meaning ascribed
thereto in Section 7.11A.

         "Arvida Company" shall mean Arvida Company, an Illinois corporation.

         "Arvida I" shall mean Arvida/JMB Partners, L.P., a Delaware limited
partnership.

         "Arvida-named project" shall have the meaning ascribed to it in Section
5.12A.

         "Asset Contribution Agreement" shall mean that certain Asset
Contribution Agreement of even date herewith by and among the Partnership, JMB
LP and the Non-Managing Partner.

         "Assumed Obligations" shall have the meaning attributed thereto in the
Asset Contribution Agreement.

         "Bankrupt Partner" shall mean a Partner who:

         (i)      Has become the subject of an order for relief under the United
States Bankruptcy Code; or,

         (ii)     Has initiated, either in an original proceeding or by way of
answer in any state insolvency or receivership proceeding, an action for
liquidation, arrangement, composition, readjustment, dissolution or similar
relief.

         "Business Day" shall mean any day that national banks doing business in
the City of Jacksonville, Florida, are generally open for business in
Jacksonville, Florida.

         "Business Plan" shall have the meaning ascribed to it in Section 5.14.

         "Call Assessment Period" shall have the meaning ascribed to in Section
7.8.

         "Call Counteroffer" shall have the meaning ascribed to in Section 7.8.

         "Call Negotiation Period" shall have the meaning ascribed to in Section
7.8.

         "Call Notice" shall have the meaning ascribed to it in Section 7.8.

         "Call Offer" shall have the meaning ascribed to in Section 7.8.

         "Call Price" shall have the meaning ascribed to it in Section 7.8.

         "Call Response" shall have the meaning ascribed to in Section 7.8.


                                      -3-

   9

         "Call Transfer Date" shall have the meaning ascribed to in Section 7.8.

         "Called Interest" shall have the meaning ascribed to it in Section 7.8.

         "Capital Account" shall mean with respect to any Partner the capital
account that the Partnership establishes and maintains for such Partner pursuant
to Section 3.4.

         "Capital Call" shall have the meaning ascribed in Section 3.3.A.

         "Capital Contributions" shall mean the cash and property (including
promissory notes or other obligations) contributed to the Partnership by
Partners. The Capital Contributions of a Partner shall be valued at the amount
of cash and the Fair Market Value (as of the date of contribution) of property
other than cash constituting such Capital Contributions. Such Fair Market Value
shall be determined by the Partnership and such Partner prior to the acceptance
of such Capital Contribution by the Partnership.

         "Cause" shall mean any of the following with respect to a Partnership
Officer:

                  (i)      the Partnership Officer's gross negligence or
                           fraudulent, dishonest or willful misconduct relative
                           to the Partnership Officer's employment with the
                           Partnership;

                  (ii)     the Partnership Officer's failure to perform his or
                           her duties in all material respects, including any
                           set forth in any employment contract with the
                           Partnership (including any assumed by the Partnership
                           pursuant to the Asset Contribution Agreement); or

                  (iii)    the Partnership Officer's conviction following final
                           disposition of any available appeal of a felony, or
                           pleading guilty or no contest to a felony.

         "Certificate" means the Certificate of Limited Partnership of the 
Partnership, filed with the Delaware Secretary of State on November 6, 1997, as 
amended from time to time.

         "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, the provisions of succeeding law, and to the extent applicable,
the Regulations.

         "Contributed Assets" shall have the meaning attributed thereto in the
Asset Contribution Agreement.

         "Defaulting Partner" shall have the meaning ascribed to it in Section
3.3.B.

         "Development Costs" shall have the meaning ascribed to it in Section
5.12.C.
                                      -4-

   10

         "Development Notice" shall have the meaning ascribed to it in Section
5.12A.4.

         "Development Notice Period" shall have the meaning ascribed to it in
Section 5.12A.4.

         "Development Participation Notice" shall have the meaning ascribed to
it in Section 5.12A.4.

         "Dissolution Event" shall have the meaning ascribed to it in Section
9.1.

         "Distributable Cash" shall mean the amount of cash which the Managing
Partner deems available for distribution to the Partners, after taking into
account all debts, liabilities, and obligations of the Partnership then due
(including indebtedness of the Partnership owed to any Partner) and amounts
which the Managing Partner deems necessary to place into reserves for customary
and usual, or actual claims with respect to the Partnership's business.

         "Education Partners" shall mean Education Partners, L.P., a Delaware
limited partnership.

         "Fair Market Value" with respect to a parcel of real property or other
specific asset (and the improvements thereon) shall mean the price at which such
real property or asset would be sold for cash by a willing seller to a willing
unaffiliated buyer, subject to such financing and liens which then encumber such
real property or asset, in its then-current condition or state of development,
assuming a purchase and sale agreement with customary terms and provisions.
"Fair Market Value" with respect to the Partnership, shall mean the price at
which the Partnership, taken as a whole, would be sold for cash by a willing
seller to a willing unaffiliated buyer, assuming a purchase and sale agreement
with customary terms and provisions.

         "Fiscal Year" shall mean the Partnership's fiscal year that shall be
the calendar year or any other fiscal year as determined by the Managing
Partner.

         "Future Development" shall have the meaning ascribed to it in Section
5.12.

         "Future Development Entity" shall have the meaning ascribed to it in
Section 5.12A.4.

         "Future Management Contracts" shall have the meaning ascribed to it in
Section 2.5.

         "GAAP" means those generally accepted accounting principles and
practices in the United States which are recognized as such by the Financial
Accounting Standards Board (or any generally recognized successor).

         "General Partners" shall mean the Managing Partner and the Non-Managing
Partner, and their respective permitted successors appointed as set forth
herein.

                                      -5-
   11

         "Inventory Items" shall have the meaning ascribed to in Section 751(d)
of the Code.

         "JMB LP" shall have the meaning attributed thereto in the preamble to
this Agreement.

         "JMB Partner" shall have the meaning ascribed to it in Section 5.12A.

         "Limited Partners" shall mean St. Joe Development and JMB LP, and their
permitted successors appointed as set forth herein.

         "Liquidators" shall have the meaning ascribed to it in Section 9.2.

         "Major Decisions" shall mean those decisions that require the consent
of the Non-Managing Partner as set forth in Section 5.4.

         "Managing Partner" shall mean St. Joe/Arvida Company, Inc., a Florida
corporation, and its permitted successors appointed as set forth herein.

         "Non-Defaulting Partners" shall have the meaning ascribed to it in
Section 3.3.B.

         "Non-Managing Partner" shall mean JMB Southeast Development, LLC, a
Delaware limited liability company, and its permitted successors appointed as
set forth herein.

         "Non-Transferring Partners" shall have the meaning ascribed to it in
Section 7.1.

         "Old Arvida Bonus Plans" shall have the meaning ascribed to it in
Section 5.13.

         "Partner" shall mean each Person who (a) is an initial signatory to
this Agreement as either a General Partner or a Limited Partner, has been
admitted to the Partnership as a Partner in accordance with this Agreement or is
an assignee who has become a Partner in accordance with Article VII and (b) has
not ceased to be a Partner pursuant to the terms of this Agreement.

         "Partnership" shall mean St. Joe/Arvida Company, L.P., a Delaware
limited partnership.

         "Partnership Accountants" means, as of any specified time, the firm of
certified public accountants then engaged as the Partnership's outside
accountants. The initial Partnership Accountants shall be KPMG Peat Marwick,
LLP, certified public accountants, but the Partnership Accountants may be
changed at any time and from time to time by the Managing Partner with the
consent of the Non-Managing Partner, provided that such consent shall not be
required if the newly-selected Partnership Accountants are a nationally
recognized accounting firm.

                                      -6-
   12

         "Partnership Interest" shall mean a Partner's entire interest in the
Partnership including, without limitation, the Partner's share of the
Partnership's Profits, Losses, and distributions of the Partnership's assets
pursuant to this Agreement and the Act, the right to vote on or participate in
the management, and the right to receive information concerning the business and
affairs, of the Partnership.

         "Paying Agreement" shall have the meaning ascribed to it in Section
5.13.

         "Percentage Interest" shall mean for any Partner the percentage
obtained by dividing the number of Units held by such Partner by the total
number of Units of the Partnership then issued and outstanding, subject to
adjustment pursuant to Section 3.3.

         "Person" shall mean an individual, general partnership, limited
partnership, limited liability company, corporation, trust, estate, real estate
investment trust, association or any other entity (except that with respect to
St. Joe, "Person" shall not include the Alfred I. duPont Testamentary Trust).

         "Profits" and "Losses" shall mean the income, gain, loss, deductions,
and credits of the Partnership in the aggregate or separately stated, as
appropriate, under the method of accounting at the close of each Fiscal Year on
the Partnership's information tax return filed for federal income tax purposes.

         "Regulations" shall, unless the context clearly indicates otherwise,
mean the regulations currently in force as final or temporary that have been
issued by the U.S. Department of Treasury pursuant to its authority under the
Code.

         "St. Joe" shall mean St. Joe Corporation, a Florida corporation.

         "St. Joe Advances" shall have the meaning ascribed to it in Section
5.12C.

         "St. Joe Partner" shall have the meaning ascribed to it in Section
5.12A.

         "Subsidiary" shall have the meaning ascribed to it in Section 2.5.

         "Tax Matters Partner" shall be the Managing Partner, or its successor
as designated pursuant to Section 8.7.

         "Term" shall have the meaning ascribed to it in Section 2.3.

         "Transfer" shall have the meaning ascribed to it in Section 7.1.

         "Transfer Notice" shall have the meaning ascribed to it in Section 7.6.

                                      -7-
   13

         "Transfer Acceptance Notice" shall have the meaning ascribed to it in
Section 7.6.

         "Transfer Notice Period" shall have the meaning ascribed to it in
Section 7.6.

         "Transferred Employees" shall have the meaning ascribed to it in
Section 5.13.

         "Transferee" shall have the meaning ascribed to it in Section 7.1.

         "Transferor" shall have the meaning ascribed to it in Section 7.1.

         "Units" shall mean partnership interests in the Partnership evidencing
the ownership interests of the Partners in the Partnership. Partners may own
fractional Units, and such Units may be held as general partnership interests or
limited partnership interests; provided, however, that at no time shall less
than 1% of the Units be held, in the aggregate, by the General Partners as
general partnership interests.

         "Unrealized Receivables" shall have the meaning ascribed to in Section
751(c) of the Code.

         "Value Negotiation Date" shall have the meaning ascribed to it in
Section 5.12A.5.


                                   ARTICLE II

                                   FORMATION

         2.1 Formation. Pursuant to the Act, the Non-Managing Partner and JMB LP
have formed a limited partnership under the laws of the State of Delaware by
filing the Certificate with the Delaware Secretary of State and otherwise
complying with the requirements of the Act for the formation of limited
partnerships. The rights and liabilities of the Partners shall be determined
pursuant to the Act and this Agreement. To the extent that the rights or
obligations of any Partner are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent not prohibited by the Act, control.

         2.2 Name. The name of the Partnership shall be St. Joe/Arvida Company,
L.P. The business of the Partnership may be conducted under that name or any
other name that the Managing Partner deems appropriate or advisable. The
Managing Partner shall file any fictitious name certificates and similar filings
that the Managing Partner considers appropriate or necessary.

                                      -8-
   14

         2.3 Term. The term of the Partnership and this Agreement (the "Term")
shall be from the date of filing of the Certificate with the Delaware Secretary
of State as aforesaid until December 31, 2047, unless sooner terminated as
hereinafter provided.

         2.4 Office and Agent. The Partnership shall continuously maintain a
registered office and registered agent in the State of Delaware as required by
the Act. The registered office of the Partnership in Delaware is 1209 Orange
Street in the City of Wilmington, County of New Castle. The name of the
Partnership's registered agent is The Corporation Trust Company and its address
is the same as that of the registered office of the Partnership as set forth
above. In addition, the Partnership shall maintain its principal business office
at 1650 Prudential Drive, Suite 400, Jacksonville, Florida, or at such other
place as the Managing Partner may determine. The Partnership also may have such
other offices anywhere in the United States as the Managing Partner from time to
time may determine. The registered office and registered agent of the
Partnership may be changed at any time and from time to time by the Managing
Partner in accordance with the Act.

         2.5 Purposes of the Partnership. The purposes of the Partnership are
(i) either directly or through one or more wholly-owned (directly and/or through
intermediaries) subsidiary entities (each a "Subsidiary") to provide services
relative to the acquisition, predevelopment, development, construction,
management, supervision, marketing and sale of Future Developments, (ii) to act,
either directly or through one or more Subsidiaries, as the exclusive agent and
with respect to Future Developments, to enter into exclusive pre-development,
development, management, residential property brokerage, advisory, construction,
project consulting and/or project supervisory agreements (the "Future Management
Contracts"), and to engage in such activities in a manner that will capitalize
on the value and goodwill associated with the "Arvida" name, (iii) to continue
existing license agreements and enter into new license agreements for, and
otherwise utilize and engage in business under, the name "Arvida" and its
derivatives, (iv) to continue existing educational consulting contracts of JMB
LP or its Affiliates and to enter into new educational consulting contracts; (v)
if otherwise permitted by this Agreement, to own interests, directly or
indirectly in Future Developments; (vi) to employ certain persons formerly
employed by Arvida Company and its Affiliates, (vii) to enter into and perform
certain sub-management agreements pursuant to the Asset Contribution Agreement,
and (viii) to engage in any and all activities related or incidental thereto. In
addition, the Partnership may, pursuant to the Asset Contribution Agreement,
acquire certain rights and obligations with respect to certain management
agreements and certain partnerships, limited liability companies and
corporations engaged in the business of development and management of
residential real properties consistent with the purposes of the Partnership. The
Partnership may engage in any other lawful activity for which a limited
partnership may be organized under the Act, only if the same is approved by all
of the Partners in writing, and is otherwise conducted in accordance with the
terms of this Agreement.


                                      -9-
   15

                                  ARTICLE III

               PURCHASE OF UNITS; CAPITAL CONTRIBUTIONS AND LOANS

         3.1 Purchase of Units. As of the date hereof and immediately after the
contribution of the Contributed Assets to the Partnership, the Managing Partner
hereby purchases 1 Unit from  the Non-Managing  Partner and St. Joe  Development
hereby  purchases 73 Units from JMB LP for  the aggregate cash  purchase price 
of            .

         3.2 Initial Capital Contribution. The capitalization of the Partnership
is comprised of 100 Units in the aggregate with the amount of each Partner's
initial Capital Contribution (after taking into account the purchase of Units
set forth in Section 3.1) set forth opposite its name in Exhibit "A" hereto.

         3.3 Capital Calls; Defaults; Dilution; Partner Loans.

             A.  Capital Calls. The Partners (including any Transferor
         admitted pursuant to Section 7.1 hereof) shall be obligated to make
         additional Capital Contributions to the Partnership for expenses
         incurred or to be incurred in the ordinary course of the Partnership's
         business at such times and in such amounts as the Managing Partner and
         the Non-Managing Partner shall determine upon not less than 10 Business
         Days prior written notice (which shall be sent by telecopy or by
         overnight courier service). Pursuant to a call (a "Capital Call") from
         the Managing Partner for an additional Capital Contribution, each
         Partner will be obligated to contribute to the Partnership an amount
         equal to the product of such Partner's then Percentage Interest
         multiplied by the total additional Capital Contribution to be made by
         all Partners pursuant to the Capital Call.

             B.  Defaults. In the event that any Partner (a "Defaulting
         Partner") shall fail to contribute all or any portion of its additional
         Capital Contribution within 5 Business Days of the due date specified
         in the notice for the Capital Call (or such later date as the Managing
         Partner, in its sole discretion, may determine), the Managing Partner
         may (but will not be required to) permit the Partners (including the
         Managing Partner) who contributed their respective additional Capital
         Contribution pursuant to a Capital Call (the "Non-Defaulting Partners")
         to contribute all or any portion of the additional Capital Contribution
         that such Defaulting Partner failed to contribute. In such event the
         Managing Partner shall request that each Non-Defaulting Partner
         contribute a pro rata share of the Defaulting Partner's additional
         Capital Contribution based upon the ratio that such Non-Defaulting
         Partner's Percentage Interest immediately prior to such Capital Call
         bears to the aggregate Percentage Interests of all Non-Defaulting
         Partners immediately prior to such Capital Call. If any Non-Defaulting
         Partner shall, within the time period designated by the Managing
         Partner, in its sole discretion, decline or fail to contribute its




                                      -10-
   16

         entire pro rata share of the Defaulting Partner's additional Capital
         Contribution, the Managing Partner may (but will not be required to)
         permit such share, or any portion thereof, to be contributed in such
         amounts and/or such proportions as the Managing Partner, in its sole
         discretion, may determine by any Non-Defaulting Partner or Partners who
         contribute its or their entire pro rata share or shares of the
         Defaulting Partner's additional Capital Contribution.

                  C. Dilution. In the event of a default described in this
         Section 3.3, the Percentage Interests of the Partners shall be adjusted
         in accordance with the following from and after the effective date of
         such adjustment as determined by the Managing Partner, in its sole
         discretion: (i) the Percentage Interest of a Defaulting Partner shall
         be determined as the ratio, expressed as a percentage, that the total
         Capital Contribution then made to date by the Defaulting Partner bears
         to the total Capital Contributions then made to date by all Partners
         plus 100% of the amount of the Defaulting Partner's additional Capital
         Contribution that has been contributed by a Non-Defaulting Partner or
         Partners; and (ii) the Percentage Interest of a Non-Defaulting Partner
         shall be determined as the ratio, expressed as a percentage, that the
         total Capital Contribution then made to date by such Non-Defaulting
         Partner (including any amount of a Defaulting Partner's additional
         Capital Contribution contributed by such Non-Defaulting Partner),
         increased by 100% of the amount (if any) of a Defaulting Partner's
         additional Capital Contribution that such Non-Defaulting Partner has
         contributed, bears to the total Capital Contributions then made to date
         by all Partners plus 100% of the amount of the Defaulting Partner's
         additional Capital Contribution that has been contributed by a
         Non-Defaulting Partner or Partners. A Non-Defaulting Partner shall be
         deemed to have acquired that portion of the Defaulting Partner's
         Percentage Interest that corresponds to such adjustment in the
         Non-Defaulting Partner's Percentage Interest attributable to the
         default and to that extent the Non-Defaulting Partner, from and after
         the effective date of such adjustment, shall be entitled to the
         allocations of Profits, Losses and distributions of Distributable Cash
         and other rights and obligations (including the obligation to make any
         future additional Capital Contribution pursuant to a Capital Call) with
         respect to the portion of the Defaulting Partner's Percentage Interest
         so acquired; provided, however, that (x) a Non-Defaulting Partner shall
         not acquire any interest in the Capital Account of a Defaulting Partner
         as a result of such adjustments, and there shall be no adjustment to
         the Capital Accounts of the Partners as a result of such adjustments to
         the Percentage Interests of the Partners (other than adjustments caused
         by future allocations of Profits and Losses and distributions of
         Distributable Cash or other assets), and (y) in no event shall any
         Limited Partner acquire any management rights, management obligations
         or general liability as a general partner as a result of any adjustment
         in the Percentage Interest of a General Partner. Each of the Partners
         authorizes the Managing Partner to amend this Agreement (including
         Exhibit A hereto) and the Partnership's Certificate of Limited
         Partnership to reflect any adjustment provided in this Section 3.3,
         including without limitation any adjustment in the allocations of
         Profits and Losses and distributions. Notwithstanding anything herein
         to the contrary, the Managing Partner, in its sole discretion and
         without 



                                      -11-
   17

         the consent of any other Partner, may at any time (notwithstanding that
         a Capital Call for an additional Capital Contribution has been made and
         is outstanding or any Partner is in default with respect thereto)
         cancel (in whole or in part) any Capital Call for an additional Capital
         Contribution and/or may seek a loan or loans from the Partners in lieu
         of all or any portion of an additional Capital Contribution as provided
         in Section 3.3D hereof.

                  D. Partner Loans. No loan to the Partnership shall be made
         without the prior consent of the Managing Partner. Subject to the other
         terms of this Agreement, the Managing Partner may obtain on behalf of
         the Partnership a loan or loans from all of the Partners (other than
         any Defaulting Partner or Partners with respect to an outstanding
         Capital Call) in lieu of all or any portion of an additional Capital
         Contribution (whether or not a Capital Call for an additional Capital
         Contribution has been made and is outstanding and any Partner is in
         default with respect thereto or the maximum amount of additional
         Capital Contributions has been made pursuant to Section 3.3A hereof).
         In such event the Managing Partner shall request that each
         Non-Defaulting Partner lend a pro rata share of any such loan based
         upon the ratio that a Non-Defaulting Partner's then Percentage Interest
         bears to the then Percentage Interest of all Non-Defaulting Partners.
         If any Non-Defaulting Partner shall, within the time period designated
         by the Managing Partner, in its sole discretion, decline or fail to
         lend his entire pro rata share of such loan, the Managing Partner may
         (but will not be required to) permit such share, or any portion
         thereof, to be lent, in such amounts and/or such proportions as the
         Managing Partner in its sole discretion shall determine, by any other
         Non-Defaulting Partner or Partners. Any such loan(s) shall bear
         interest at two percent (2%) plus the prime rate as announced from time
         to time by First Union National Bank of Florida, and the same, together
         with interest as aforesaid shall be repaid before any distribution
         shall be made under Section 6.3 or Section 9.4 hereof; provided that
         any loan made as a result of a Defaulting Partner's failure to
         contribute its share of an additional Capital Contribution pursuant to
         a Capital Call shall bear interest at fifteen percent (15%) per annum
         and not at two percent (2%) plus prime. Unless otherwise agreed in
         writing by all the Partners, any such loan shall be without recourse to
         each of the Partners and their respective personal assets, and the
         amount of such loan, together with interest thereon, shall be repaid
         before any distribution shall be made to the Partners.

         3.4 Capital Accounts. The Partnership shall establish an individual
capital account for each Partner. The Partnership shall determine and maintain
each capital account in accordance with Section 6.5 hereof.

         3.5 No Interest. No Partner shall be entitled to receive any interest
from the Partnership on such Partner's Capital Contributions or Units.


                                      -12-
   18


                                   ARTICLE IV

                                    PARTNERS

         4.1 Limited Liability of Partners for Partnership Debts. Except as
required under the Act or as expressly set forth in this Agreement or as
expressly agreed by such Partner, under no circumstances will any Partner, or
any director, officer, shareholder, member, manager, partner, employee, agent or
Affiliate of any Partner, have any personal responsibility for any debt,
liability or obligation of the Partnership (whether on a theory of alter ego,
piercing the corporate veil, or otherwise), whether that liability or obligation
arises in contract, tort, or otherwise, beyond its Capital Contribution actually
made, and no third party shall have any right to enforce or rely upon any
obligation of such Partner (or any other Person) hereunder or otherwise.

         4.2 Withdrawal of Partners. Except as specifically set forth in this
Agreement, no Partner may resign, retire or otherwise withdraw from the
Partnership.

         4.3 Transactions With The Partnership; Competing Activities. Subject to
any limitations set forth in this Agreement, including, without limitation,
Sections 5.4, 5.7 and 5.12, and with the prior approval of the Managing Partner,
a Partner may enter into any agreement and transact any business with the
Partnership, and such Partner shall have the same rights and obligations with
respect thereto as it would have had if it were not a Partner. Any such
agreement or business conducted after the date hereof shall be entered into and
conducted on market terms. Except as set forth in this Agreement, and in
particular Section 5.12 hereof, the Partners, and their respective officers,
directors, shareholders, partners, members, managers, agents, employees and
Affiliates may engage or invest in, independently or with others, any business
activity of any type or description, including without limitation those that
might be the same as or similar to the Partnership's business and that might be
in direct or indirect competition with the Partnership. Neither the Partnership
nor any Partner shall have any right in or to such other ventures or activities
or to the income or proceeds derived therefrom. Except as set forth in this
Agreement, and in particular Section 5.12, no Partner shall be obligated to
present any investment opportunity or prospective economic advantage to the
Partnership, even if the opportunity or advantage is of the character that, if
presented to the Partnership, could be taken by the Partnership. Except as set
forth in this Agreement, and in particular Section 5.12, the Partners shall have
the right to hold any investment opportunity or prospective economic advantage
for their own account or to recommend such opportunity or advantage to Persons
other than the Partnership. Except as set forth in this Agreement, and in
particular Section 5.12, each Partner acknowledges that the other Partners and
their respective Affiliates own and/or manage other businesses, including
businesses that may compete with the Partnership and for the Partners' time.
Each Partner hereby waives any and all rights and claims which it may otherwise
have against each other Partner and such other Partner's officers, directors,
shareholders, partners, members, managers, agents, employees, and Affiliates as
a result of any of such 


                                      -13-
   19

activities; including specifically, but without limitation, any claim that a
General Partner has breached its fiduciary duty to the Partnership as a result
of such activities.

         4.4 Remuneration To Partners. Subject to the entitlement of Partners
winding up the affairs of the Partnership to reasonable compensation as
Liquidators pursuant to Section 9.2, no Partner nor any Affiliate of any Partner
shall be entitled to remuneration for services rendered or goods provided to the
Partnership in such Person's capacity as a Partner; provided, however, that
nothing herein shall prevent the Partnership from employing any Partner to
provide goods or services on behalf of the Partnership in furtherance of the
Partnership's business and to be compensated therefor, subject to any other
provision of this Agreement governing same. The Partnership shall also pay or
reimburse the Partners or their Affiliates for organizational expenses
(including, without limitation, reasonable legal and accounting fees and costs)
incurred to form the Partnership and prepare the Certificate of Formation and
this Agreement.

         4.5 Non-Managing Partner and Limited Partner Are Not Agents. Pursuant
to Section 5.1 and the Certificate (and subject to Sections 5.4 and 5.13), the
management of the Partnership is vested in the Managing Partner. Neither the
Non-Managing Partner nor the Limited Partners, acting solely in their respective
capacities as such, shall act as an agent of the Partnership nor shall either
the Non-Managing Partner or the Limited Partners, in any such capacity, bind or
execute any instrument on behalf of the Partnership, except to the extent
otherwise expressly provided herein.

         4.6 Meetings of General Partners.

             A. Date, Time and Place of Meetings of General Partners.
         Meetings of General Partners shall be held at least semi-annually, upon
         such date and at such time and place within or without the State of
         Illinois or the State of Florida as determined by the Managing Partner.
         No other annual or regular meetings of Partners are required.

             B. Power to Call Meetings. Meetings of the General Partners
         may be called at any time and at any place, but no less often than
         semi-annually, by the Managing Partner, for the purpose of discussing
         the business and prospects of the Partnership generally and addressing
         any matters on which the General Partners may vote or on which the
         Partnership must obtain the consent of the Non-Managing Partner.

             C. Notice of Meeting. Written notice of a meeting of General
         Partners shall be sent or otherwise given to each General Partner not
         less than seven (7) or more than sixty (60) days before the date of the
         meeting. The notice shall specify the place, date and hour of the
         meeting and the general nature of the business to be transacted. If the
         subject matter of such a meeting is to include items that also require
         the consent of the Limited Partners, or any of them, the Managing
         Partner shall also send such notice to the Limited Partners and afford
         them the opportunity to attend such meeting. Such meetings may be


                                      -14-
   20

         held at any time and place without notice, by unanimous written consent
         of the Partners, or by the presence (whether in person or by telephone)
         of all Partners at such meeting.

                  D. Action by Written Consent without a Meeting. Any action
         that may be taken at a meeting of General Partners may be taken without
         a meeting, if a consent in writing setting forth the action so taken,
         is signed and delivered to the Partnership by all of the Partners
         having a right to consent thereto. All such consents shall be filed
         with the Managing Partner and shall be maintained in the Partnership
         records. Any Partner giving a written consent, or the Partner's proxy
         holders, may revoke the consent by a writing received by the Managing
         Partner or secretary, if any, of the Partnership before written
         consents of all Partners required to authorize the proposed action have
         been filed.

                  E. Telephonic Participation by Partner at Meetings. Partners
         may participate in any General Partners' meeting through the use of any
         means of conference telephones or similar communications equipment as
         long as all Partners participating can hear and communicate with one
         another. A Partner so participating is deemed to be present in person
         at the meeting.

                  F. Proxies. Every Partner entitled to vote shall have the
         right to do so either in person or by one or more agents authorized by
         a written proxy signed by the person and filed with the Managing
         Partner or secretary, if any, of the Partnership. A proxy shall be
         deemed signed if the Partner's name is placed on the proxy (whether by
         manual signature, typewriting, telegraphic transmission, electronic
         transmission or otherwise) by the Partner or the Partner's
         attorney-in-fact. A proxy may be transmitted by a telephonic
         transmission if it is submitted with information from which it may be
         determined that the proxy was authorized by the Partner or the
         Partner's attorney-in-fact. A validly executed proxy which does not
         state that it is irrevocable shall continue in full force and effect
         unless (i) revoked by the person executing it, before the vote pursuant
         to that proxy, by a writing delivered to the Partnership stating that
         the proxy is revoked, or by a subsequent proxy executed by, or
         attendance at the meeting and voting in person by, the Partner
         executing the proxy; or (ii) written notice of the dissolution, death
         or incapacity of the Partner executing the proxy is received by the
         Partnership before the vote pursuant to that proxy is counted;
         provided, however, that no proxy shall be valid after the expiration of
         eleven (11) months from the date of the proxy, unless otherwise
         provided in the proxy.


                                   ARTICLE V

                   MANAGEMENT AND CONTROL OF THE PARTNERSHIP

         5.1 Exclusive Management of the Partnership by the Managing Partner.
Except to the extent otherwise expressly set forth in this Agreement, including,
without limitation Sections 5.4 and 5.13, the business, property and affairs of
the Partnership shall be managed exclusively by 



                                      -15-
   21

the Managing Partner. Except for situations in which the approval of the
Non-Managing Partner and/or the Limited Partners are expressly required by this
Agreement or pursuant to provisions of the Act, the Managing Partner shall have
full, complete and exclusive authority, power, and discretion to manage and
control the business, property and affairs of the Partnership, to make all
decisions regarding those matters and to perform any and all other acts or
activities customary or incident to the management of the Partnership's
business, property and affairs. Without limitation on the foregoing, the
Managing Partner shall designate either as authorized signatories or as officers
of the Partnership, from time to time the Persons having authority to sign and
endorse checks, execute contracts and otherwise bind the Partnership, and no
Person not so designated shall have any such authority. Any third party shall be
entitled to conclusively rely on any contract or instrument (including, but not
limited to, any guaranty) signed by the Managing Partner on behalf of the
Partnership, as the act and deed of the Partnership.

         5.2 Determination of Partner to Act as Managing Partner.

                  A. Number and Tenure. The Partnership shall at all times have
         one Managing Partner. Subject to the terms of this Agreement, the
         Partnership may have no more than one Non-Managing Partner and any
         number of Limited Partners. The initial Managing Partner and
         Non-Managing Partner are the Partners identified as such in the
         preamble to this Agreement.

                  B. Vacancies. The Managing Partner and the Non-Managing
         Partner shall each serve in such capacity until the earlier of (with
         respect to such Partner only) (i) except relative to an event described
         in Section 7.4, the sale, transfer or other disposition (whether
         voluntarily or by operation of law, including, without limitation, by
         merger, consolidation or liquidation) of such Partner's Partnership
         Interest in the Partnership in accordance with this Agreement, (ii)
         such Partner becoming a Bankrupt Partner, (iii) the determination by a
         court of competent jurisdiction that such Partner has committed fraud,
         gross negligence, a material breach of its fiduciary duties hereunder,
         or willfully or intentionally breached this Agreement in any material
         respect, (iv) the occurrence of an event described in Section 7.4 and
         (v) the agreement of the Managing Partner and the Non-Managing Partner
         that the Managing Partner shall become the Non-Managing Partner and
         vice-versa. The Managing Partner shall have no right to resign, nor may
         the Non-Managing Partner act to remove the Managing Partner, absent any
         of the events set forth in the first sentence of this Section 5.2B;
         provided, that the Non-Managing Partner may seek the determination of a
         court of competent jurisdiction that any such events have in fact
         occurred. The Non-Managing Partner shall have no right to resign as
         such, nor may the Managing Partner act to remove the Non-Managing
         Partner as such absent any of the events set forth in the first
         sentence of this Section 5.2B; provided, that the Managing Partner may
         seek a determination of a court of competent jurisdiction that any such
         events have in fact occurred. In the event of the sale, transfer or
         other disposition of the Partnership Interest of the Managing Partner
         or the Non-Managing Partner as described in clause (i) of the first
         sentence of this Section 5.2B, the successor to such Partner's



                                      -16-
   22

         Partnership Interest shall thereupon automatically succeed to the
         rights of such Partner as Managing Partner or Non-Managing Partner, as
         applicable. Upon the occurrence of any of the events set forth in
         clauses (ii), (iii) or (iv) of the first sentence of this Section 5.2B
         with respect to the Managing Partner only, the Non-Managing Partner
         shall automatically become the Managing Partner, and the Managing
         Partner shall become a Limited Partner. In the event of a change in the
         identity of the Managing Partner hereunder, the departing Managing
         Partner shall cooperate fully with the new Managing Partner to effect a
         smooth transition of the duties and responsibilities assigned to the
         Managing Partner hereunder, as well as the delivery of any and all
         relevant books and records, files and other information which the
         departing Managing Partner has in its possession or control relative to
         such duties and obligations and the business and affairs of the
         Partnership.

         5.3 Powers of Managing Partner. Without limiting the generality of
Section 5.1, but subject to the express limitations set forth elsewhere in this
Agreement, including, without limitation, Sections 5.4 and 5.13, the Managing
Partner shall have all necessary powers to manage and carry out the purposes,
business, property, and affairs of the Partnership, including, without
limitation, the power to do any or all of the following on behalf and in the
name of the Partnership:

             A.   The licensing of the name "Arvida" or any of its
         derivatives, provided that, such licensing shall not have a material
         adverse effect on the business or any of the properties owned (directly
         or through joint ventures or partnerships) or managed by Arvida/JMB
         Partners, L.P. as of the date hereof and set forth on Schedule 5.3A.

             B.   Acquire, purchase, and own any personal property that the
         Managing Partner determines is necessary or appropriate or in the
         interest of the business of the Partnership;

             C.   Sell, exchange, lease, or otherwise dispose of the property
         and assets owned by the Partnership, or any part thereof, or any
         interest therein;

             D.   Borrow money on behalf of the Partnership from any party
         including the Partners and their respective Affiliates, issue evidences
         of indebtedness in connection therewith, and secure such indebtedness
         by mortgage, deed of trust, pledge, security interest, or other lien on
         Partnership assets, in each case where the amount of any such
         indebtedness does not exceed $1,000,000.00 in the aggregate; provided,
         however, that the Managing Partner shall have the power and authority,
         subject to the terms of this Agreement, to borrow money on behalf of
         any Future Development Entities (or other entities controlled by them)
         in such amounts as it deems necessary or appropriate, so long as such
         indebtedness is non-recourse to the Partnership and the Partners
         (except for customary recourse "carve-outs" for which recourse is
         limited to the interests of the Partnership and/or the Partners in the
         applicable Future Development Entity but not to any Partner's
         Partnership Interest);



                                      -17-
   23

                  E. Subject to Sections 5.3D and 5.4B incur debts and
         liabilities in the normal course of the business of the Partnership.

                  F. Undertake all actions that the Managing Partner determines
         are necessary or appropriate or in the interest of the business of the
         Partnership in furtherance of the purposes of the Partnership set forth
         in Section 2.5; obtain such licenses and permits on behalf of the
         Partnership and its Subsidiaries as are necessary or appropriate to
         conduct their respective businesses; employ persons to manage and
         perform the business of the Partnership and to provide compensation and
         other financial and employment benefits thereto as the Managing
         Partners may determine;

                  G. Sue on, defend, or compromise any and all claims or
         liabilities in favor of or against the Partnership; submit any or all
         such claims or liabilities to arbitration; and confess a judgment
         against the Partnership in connection with any litigation in which the
         Partnership is involved;

                  H. Retain legal counsel, auditors, and other professionals in
         connection with the Partnership business and to pay therefor such
         remuneration as the Managing Partner may determine;

                  I. Purchase liability and other insurance to protect the
         Partnership's property and business; and

                  J. Invest any Partnership funds in time deposits, short-term
         governmental obligations, commercial paper or other money market
         investments as the Managing Partner may determine.

         5.4 Non-Managing Partner Has No Managerial Authority Except With
Respect to Major Decisions. The Non-Managing Partner shall have no power to
participate in the management of the Partnership except as expressly authorized
by this Agreement (including, without limitation, this Section 5.4) and except
as expressly required by the Act. Unless expressly and duly authorized in
writing to do so by the Managing Partner or as otherwise provided herein, the
Non-Managing Partner shall not have any power or authority to bind or act on
behalf of the Partnership in any way, to pledge its credit, or to render it
liable for any purpose. If the Partnership establishes a Subsidiary in
accordance with Section 2.5, the Non-Managing Partner shall have the same
approval rights for actions proposed to be taken by any such Subsidiary as are
specified in this Section 5.4 with respect to actions proposed to be taken by
the Partnership. The following matters in this Section 5.4 ("Major Decisions")
shall require the prior written approval of both the Managing Partner and the
Non-Managing Partner, such consent to be given or withheld at their sole and
absolute discretion, before action binding on the Partnership may be taken by
the Managing Partner with respect to such matter:


                                      -18-
   24


                  A. Any sale, transfer or disposition by the Partnership,
                  directly or indirectly, of all or substantially all of the
                  Contributed Assets, and the terms of and parties to the
                  documentation relating to the same.

                  B. Except as permitted by Section 5.3D, any financing,
                  refinancing or indebtedness, or any material modification of
                  the terms of any financing, refinancing or indebtedness,
                  obtained by the Partnership in its own name or in the name of
                  any of its Subsidiaries (or for which any of them are liable,
                  directly or indirectly, by guaranty or otherwise), and the
                  terms of and parties to the documentation relating to the
                  same.

                  C. Except as expressly permitted by Section 5.12, the
                  acquisition of one or more additional real property assets, or
                  any direct or indirect interest therein, by the Partnership,
                  costing in the aggregate, more than $1,000,000.

                  D. Except for the provisions of Section 3.3C, any transaction
                  which would otherwise be permitted under Section 5.7, such
                  consent by the Non-Managing Partner not to be unreasonably
                  withheld unless it falls within another category requiring the
                  consent of the Non-Managing Partner under this Section 5.4 or
                  elsewhere in this Agreement.

                  E. Any sale of the Partnership or any of its Subsidiaries, or
                  merger or consolidation thereof with another entity.

                  F. Any voluntary action of the Partnership to (a) make an
                  assignment for the benefit of creditors, (b) obligate any
                  Partner as a surety, guarantor or accommodation party to any
                  obligation, or (c) file a petition, or consent to the
                  appointment of a trustee or receiver or any judgment or order,
                  under the federal bankruptcy laws on behalf of the Partnership
                  or any of its Subsidiaries.

                  G. Except with respect to any action permitted by the
                  provisions of Section 3.3, any action that may, either
                  immediately or upon the exercise of future rights or options,
                  cause the dilution of the Non-Managing Partner's or any
                  Limited Partner's Percentage Interest in the Partnership.

                  H. The amendment, waiver or repeal of any of the provisions of
                  this Agreement.

                  I. The conversion of the form of the Partnership from a
                  limited partnership to any other type of entity.

                  J. Prior to the earlier of (i) the liquidation and termination
                  of Arvida/JMB Partners, LP or (ii) December 31, 2002, the
                  termination, replacement or 



                                      -19-
   25

                  reassignment of the Chief Executive Officer of the
                  Partnership, or any material reduction in such person's duties
                  or in his or her total compensation or benefits (as the duties
                  and compensation exist effective as of January 1, 1998).

                  K. The preparation and filing of the Partnership's federal
                  income tax return and the making (or revocation) of all tax
                  elections for federal income tax purposes for the fiscal year
                  ended December 31, 1997. The Managing Partner shall use its
                  best efforts to provide a copy of the Partnerships proposed 
                  federal income tax return for the fiscal year ended December 
                  31, 1997, to the Non-Managing Partner for its review no later 
                  than February 28, 1998.

                  L. The terms of any employment contract (or any modification
                  or amendment thereof) which purports to give a Partnership
                  employee any rights thereunder relative to the Old Arvida
                  Bonus Plans or any other benefits to be provided by the
                  Non-Managing Partner or its Affiliates (other than the
                  Partnership).

                  M. The termination by the Partnership of any license agreement
                  described on Schedule 5.4M, with respect to uses permitted as
                  of the date hereof; provided that in the event the Managing
                  Partner determines in the future that any other uses are in
                  violation of the quality standards set forth under any such
                  license agreements it shall provide the Non-Managing Partner
                  written notice of such violation and the licensee (or its
                  affiliate as the case may be) shall have forty-five (45) days
                  to cure such violation. If such violation is not cured within
                  such forty-five (45) day period, then the Managing Partner
                  shall have the right without the consent of the Non-Managing
                  Partner to terminate the license agreement.

                  N. The dissemination and the contents of any public notice,
                  release or announcement, or public distribution of any
                  document, relative to (a) transactions set forth in the Asset
                  Contribution Agreement, (b) the terms and provisions of this
                  Agreement, or (c) the private or public sale of debt or equity
                  securities of the Partnership or any Subsidiary (if such
                  notice, release, announcement or document refers to any other
                  Partner's investment in the Partnership or such Subsidiary),
                  except as such notice, release or announcement, or
                  distribution of such document, may be required by law or the
                  rules or regulations of any securities exchange, in which case
                  the Partner required to give such notice, issue such release,
                  make such announcement or distribute such document, or the
                  Partnership, as applicable, shall allow the other General
                  Partner a reasonable opportunity to comment upon the contents
                  of such notice, release, announcement or document in advance
                  of the public dissemination of same.

        Any change in any tax accounting practice or methods of the Partnership
shall be subject to the consent of the Non-Managing Partner, which consent may
not be unreasonably withheld.

         5.5 Performance of Duties; Liability of Managing Partner and
Non-Managing Partner. Neither the Managing Partner nor the Non-Managing Partner
shall be liable to the Partnership or to any Partner for any loss or damage
sustained by the Partnership or any Partner, unless the loss 



                                      -20-
   26

or damage shall have been the result of fraud, the material breach of fiduciary
duty hereunder, gross negligence or willful or intentional misconduct by the
Managing Partner or the Non-Managing Partner. In performing their duties, the
Managing Partner and the Non-Managing Partner shall be fully protected in
relying in good faith on the records of the Partnership and on information,
opinions, reports, or statements, including financial statements and other
financial data presented to the Partnership by:

             (i)  any of the other Partners, officers, employees or committees 
of the Partnership or its Subsidiaries; or

             (ii) any attorney, independent accountant, or other person as to
matters which the Managing Partner or the Non-Managing Partner reasonably
believes to be within such person's professional or expert competence and who
has been selected with reasonable care by or on behalf of the Partnership.

         5.6 Devotion of Time. The Managing Partner and the Non-Managing Partner
are not obligated to devote all of their time or business efforts to the affairs
of the Partnership. The Managing Partner and the Non-Managing Partner shall
devote whatever time, effort, and skill as they reasonably deem appropriate for
the operation of the Partnership.

         5.7 Transactions between the Partnership and the Managing Partner.
Notwithstanding that it may constitute a conflict of interest, the Managing
Partner may, and may cause its Affiliates to, engage in any transaction
(including, without limitation, the purchase, sale, lease, or exchange of any
property or the rendering of any service, or the establishment of any salary,
other compensation, or other terms of employment) with the Partnership so long
as such transaction is not expressly prohibited by this Agreement and so long as
the terms and conditions of such transaction, on an overall basis, are fair and
reasonable to the Partnership and are at least as favorable to the Partnership
as those that are generally available from Persons capable of similarly
performing them and in similar transactions between parties operating at arm's
length.

         5.8 Liability of Partners to Partnership or Each Other Limited to
Assets. Unless otherwise specifically agreed in writing by the Person
undertaking such liability, under no circumstances will any director, officer,
shareholder, member, manager, partner, employee, agent or Affiliate of any
Partner, have any personal responsibility, directly or indirectly, for any
liability or obligation of the Partner (whether on a theory of alter ego,
piercing the corporate veil, or otherwise), whether that liability or obligation
arises in contract, tort, or otherwise, and any recourse permitted under this
Agreement or otherwise of the Partners, any former Partner or the Partnership
against a Partner will be limited to the assets of the Partner (exclusive of any
rights by or on behalf of such Partner against any of its directors, officers,
shareholders, members, managers, partners, employees, agents or Affiliates) as
they may exist from time to time; provided, however, that nothing herein shall
protect any such Person from liability arising from the fraud, gross negligence
or willful or intentional misconduct by such Person, or the activities of such
Person taken outside the scope of such Person's duties and authority as a
director, officer, 



                                      -21-
   27

shareholder, member, manager, partner, employee or agent of the Partnership or
its Subsidiaries, as applicable.

         5.9  Limited Partners Have No Managerial Authority. No Limited Partner
shall have any power to participate in the management of the Partnership except
as expressly authorized by this Agreement, and except as expressly required by
the Act. Unless expressly and duly authorized in writing to do so by the
Managing Partner or as otherwise provided herein, no Limited Partner shall have
any power or authority to bind or act on behalf of the Partnership in any way,
to pledge its credit, or to render it liable for any purpose.

         5.10 Officers. The Managing Partner (subject to the rights of the
Non-Managing Partner under Sections 5.4 and 5.13) may elect officers at any time
and shall maintain the names and offices held of such officers in the records of
the Partnership. The initial officers of the Partnership are set forth in
Schedule 5.13 attached hereto. The officers of the Partnership may have such
titles as are determined by the Managing Partner. The officers shall serve at
the pleasure of the Managing Partner, subject to Sections 5.4, 5.13, and this
Section 5.10, and all rights, if any, of an officer under any contract of
employment that is or becomes an obligation of the Partnership. Any individual
may hold any number of offices. No officer need be a resident of any State or
citizen of the United States. If the Managing Partner is not an individual,
subject to Section 5.13, such Managing Partner's officers may serve as officers
of the Partnership if elected by the Managing Partner. The officers shall
exercise such powers and perform such duties as shall be determined from time to
time by the Managing Partner.

         5.11 Managing Partner and Its Successors To Be Single Purpose Entity.
The Managing Partner hereby covenants and agrees that its sole purpose while it
has any obligations under this Agreement, shall be to hold its Partnership
Interest in the Partnership and exercise its rights, duties and obligations in
connection herewith. Each successor in interest to the Managing Partner shall
also be a single-purpose entity in accordance with the foregoing. St. Joe also
joins in this Agreement for the purpose of acknowledging the foregoing and
covenanting that it will cause any of its Affiliates that is (or becomes) the
Managing Partner to comply with this Section 5.11 and that it will take no
action inconsistent therewith.

         5.12 New Development or Management Opportunities. The Partnership and
the Managing Partner each hereby covenant and agree that all opportunities for
the project supervision and management, predevelopment, development, purchase,
ownership, construction, marketing or sale of any Future Development (as defined
below) shall be governed by this Section 5.12. St. Joe shall join in this
Agreement for the purpose of, among other things, acknowledging and becoming
bound by the provisions of Section 5.12 hereof.

              A. Right of Non-Managing Partner and JMB LP to Participate as
         Owner in Future Developments. For the purposes of this Agreement,
         "Future Development" means: (i) future Arvida-named projects; and (ii)
         other residential projects or mixed use projects that are primarily
         residential, but may include other land uses, whether or not such



                                      -22-
   28

         projects include the name "Arvida". This term includes all land,
         infrastructure, improvements (whether residential improvements or
         non-residential improvements which support any such property
         development), rights, fixtures, easements and other real and personal
         property relative thereto. Future Developments, at St. Joe's sole
         discretion, may, in addition, include stand alone hotel and/or resort
         properties, but shall not include stand-alone golf courses; provided
         that, Future Developments in all cases shall include any Arvida-named
         projects regardless of any designations to the contrary by St. Joe. The
         Managing Partner and St. Joe Development, on behalf of themselves and
         their Affiliates (herein collectively referred to as the "St. Joe
         Partner"), hereby grant to the Non-Managing Partner and its Affiliates
         (and to JMB LP to the extent set forth herein), and their respective
         Affiliates (collectively referred to as the "JMB Partner") the right to
         participate in any Future Development on the same economic basis as the
         Managing Partner and its Affiliates, for up to 26% (such percentage to
         be determined by the JMB Partner) of the Future Development. The right
         of participation granted to the JMB Partner pursuant to this Section
         5.12A shall cover all acquisitions of economic interests of the St. Joe
         Partner, including all interests in the Future Developments obtained
         through purchase, option, the acquisition of development rights, loans,
         contribution or other transfers of assets, securities or rights. The
         decision as to whether a particular stand-alone hotel and/or resort
         project is a Future Development in which a JMB Partner shall have a
         right to participate in shall be the sole decision of the St. Joe
         Partner; provided that, Future Developments in all cases include any
         Arvida-named projects regardless of any designations to the contrary by
         St. Joe. An "Arvida-named project" means any project that includes
         "Arvida" in its name, whether or not with any other name, designation
         or reference.

                           1. Currently Owned Properties. Except for the
                  projects and properties listed on Schedule 5.12A(1), in the
                  event that the St. Joe Partner determines to develop a Future
                  Development on land that is owned by the St. Joe Partner as of
                  the date hereof, the St. Joe Partner shall afford the JMB
                  Partner the right to purchase up to 26% (such percentage to be
                  determined by the JMB Partner) of such Future Development for
                  a purchase price based upon the Fair Market Value thereof, as
                  determined under subsection 5 below.

                           2. Not Currently Owned Properties. Except for the
                  projects and properties listed on Schedule 5.12A(1), in the
                  event that the St. Joe Partner determines to develop a Future
                  Development on land that is not owned by the St. Joe Partner
                  as of the date hereof, the St. Joe Partner shall afford the
                  JMB Partner the right to participate for up to 26% (such
                  percentage to be determined by the JMB Partner) of the St. Joe
                  Partner's economic interest therein for a cost equal to the
                  cost to the St. Joe Partner (prorated on the basis of their
                  relative percentage interests) of acquiring such interest.



                                      -23-
   29

                           3. Character of JMB Partner's Interest. The JMB
                  Partner's interest in any Future Development Entity shall be
                  as a limited partner, non-managing member of a limited
                  liability company or other similar interest in which the JMB
                  Partner has no liability beyond its interest therein, unless
                  the JMB Partner requests in writing that it be a non-managing
                  general partner. Any participation of the JMB Partner in any
                  such Future Development shall be upon market terms and the
                  provisions and any documentation regarding such Future
                  Development Entity shall be on market terms, but shall in any
                  event permit the JMB Partner to freely transfer any such
                  interest to an Affiliate. In addition to the foregoing, to the
                  extent that the terms of the relevant organizational documents
                  (e.g. partnership agreement, limited liability company
                  agreement, etc.) or transactional documents relative to the
                  investment of the Future Development Entity in such Future
                  Development entitles the St. Joe Partner to receive
                  promotional or incentive fees based upon the returns achieved
                  by the Future Development Entity in such Future Development,
                  such promotional and incentive fees shall not be taxed against
                  the interest of the JMB Partner in such Future Development
                  Entity (other than those given to a third party unaffiliated
                  with the St. Joe Partner which shall be taxed proportionally
                  against the St. Joe Partner and the JMB Partner).

                           4. Notice of Opportunity and Election to Participate.
                  If the St. Joe Partner desires to undertake or participate in
                  the development of a Future Development, the St. Joe Partner
                  shall first deliver a notice (the "Development Notice") to the
                  Non-Managing Partner notifying it thereof and identifying all
                  of the material terms of and facts relating to the investment
                  theretofore made, or to be made, by the St. Joe Partner in
                  such Future Development, including, without limitation, the
                  identity and extent of participation of any third parties
                  therein. For a period of thirty (30) days after receipt of
                  such Development Notice (the "Development Notice Period") the
                  Non-Managing Partner (on behalf of itself and any other JMB
                  Partner) shall have the right to invest in such development,
                  upon the same terms and conditions as set forth in the
                  Development Notice, which shall otherwise be consistent with
                  this Section 5.12. Such Development Notice shall also include
                  the St. Joe Partner's good faith estimate of the Fair Market
                  Value of any property currently owned by the St. Joe Partner
                  which shall be a part of such Future Development, which Fair
                  Market Value shall be finally determined in accordance with
                  subsection 5 below. The JMB Partner may exercise its right to
                  invest hereunder by delivering a written notice (the
                  "Development Participation Notice") to the St. Joe Partner
                  prior to the end of the Development Notice Period, which
                  Development Participation Notice shall specify the percentage
                  participation (relative to the entire collective participation
                  of the St. Joe Partner and the JMB Partner, but not any
                  unaffiliated third parties), not greater than 26%, that the
                  JMB Partner desires in such Future Development. If the JMB
                  Partner delivers a timely Development Participation Notice
                  exercising its right to invest in the development of such
                  Future Development, the St. Joe Partner and the JMB Partner
                  shall (i) 



                                      -24-
   30

                  promptly initiate the appraisal process set forth in
                  subsection 5 below, if applicable, (ii) form and agree upon
                  the terms and provisions of the operating agreements for an
                  entity through which the ownership of the interests in such
                  Future Development shall be held (a "Future Development
                  Entity"); provided, however, that in the event that the JMB
                  Partner elects to invest for its entire 26% entitlement and
                  there are no third-party investors in such Future Development,
                  such ownership may, at the election of the Managing Partner,
                  be held directly by the Partnership, which shall then be
                  deemed to be the Future Development Entity for the purposes of
                  such Future Development, (iii) effect the transfer of any
                  currently owned property to such Future Development Entity,
                  and (iv) enter into development and management agreements with
                  the Partnership which comply with the terms of this Agreement.
                  The Partners hereby agree that, to the extent that the
                  Non-Managing Partner and JMB LP elect to invest for their
                  entire 26% entitlement and the Partnership is to be the Future
                  Development Entity, each of the Partners shall invest therein
                  for such portion in accordance with their respective
                  Percentage Interests. If the JMB Partner does not exercise the
                  right granted hereunder with respect to a particular Future
                  Development the St. Joe Partner will have the right to
                  undertake and participate in such Future Development. If the
                  St. Joe Partner ultimately determines to undertake or
                  participate in such Future Development and there is a material
                  change in the terms and conditions from those contained in the
                  original Development Notice (which would be beneficial to the
                  JMB Partner economically) or the development costs incurred
                  with respect to such Future Development during the one year
                  period after the date of the expiration of the original
                  Development Notice Period are less than $250,000, then the
                  right of the Managing Partner and its Affiliates to develop
                  such Future Development shall again become subject to this
                  Section 5.12, and a new Development Notice containing such
                  revised terms and conditions must be delivered.

                           5. Agreement Upon Fair Market Value; Appraisal
                  Process. In the event that the St. Joe Partner and the JMB
                  Partner are unable to agree on the Fair Market Value of any
                  interest in property to be purchased by such JMB Partner from
                  such St. Joe Partner under this Section 5.12, within thirty
                  (30) days after the delivery of the Development Participation
                  Notice (the "Value Negotiation Date"), the Fair Market Value
                  of such property shall be determined by an appraisal made by a
                  single appraiser or by a board of three appraisers, each of
                  whom must (i) be a member of the American Institute of Real
                  Estate Appraisers or a successor body hereinafter constituted
                  exercising a similar function, (ii) have at least five (5)
                  years experience in appraising large tracts of undeveloped
                  land, and (iii) have no direct or indirect financial or other
                  business interests in or with either the JMB Partner or the
                  St. Joe Partner. During the fifteen (15) days immediately
                  following the Value Negotiation Date, the St. Joe Partner and
                  the JMB Partner will endeavor to jointly select and appoint an
                  appraiser; however, if they fail to do so, each of 



                                      -25-
   31

                  them shall within thirty (30) days after the Value Negotiation
                  Date select and appoint an appraiser, and the two appraisers
                  so selected shall select and appoint a third appraiser. If the
                  appraisers selected by the St. Joe Partner and the JMB Partner
                  are unable to agree upon a third appraiser within forty-five
                  (45) days after the Value Negotiation Date, such third
                  appraiser shall be appointed pursuant to the rules of the
                  American Arbitration Association. If either the St. Joe
                  Partner or the JMB Partner fails to select and appoint an
                  appraiser within thirty (30) days after the Value Negotiation
                  Date (and they have not otherwise agreed on a single
                  appraiser) the appraiser selected and appointed by the party
                  that appointed an appraiser within such period shall be the
                  sole appraiser to determine the Fair Market Value hereunder.
                  The costs and expenses of each of the first two appraisers
                  shall be paid by the party appointing such appraiser, and the
                  costs and expenses of the third appraiser (or the single
                  appraiser, if applicable) shall be shared 50% by the St. Joe
                  Partner and 50% by the JMB Partner. Each appraiser appointed
                  shall proceed to appraise the Fair Market Value of the
                  property and notify the parties of same by written notice
                  (which shall include a copy of such appraiser's appraisal
                  report) not later than thirty (30) days after such
                  appointment. If there is a single appraiser, such appraiser's
                  determination shall constitute the Fair Market Value of such
                  property. If there are three appraisers, the middle appraisal
                  in terms of value shall constitute the Fair Market Value of
                  such property. Such determination of Fair Market Value shall
                  be binding and conclusive on the St. Joe Partner and the JMB
                  Partner.

                  B. Right of Partnership to Enter Into Future Management
         Contracts. Unless otherwise agreed in writing by the Partners, the
         Managing Partner and its Affiliates shall enter into Future Management
         Contracts solely with the Partnership (or its wholly-owned
         Subsidiaries) for all Future Developments, and shall refer all
         opportunities for Future Management Contracts with unaffiliated third
         parties for Future Developments to the Partnership, which shall include
         all property purchase, pre-development, development, management,
         residential property brokerage, advisory, construction, project
         consulting and/or project supervisory services to be provided relative
         to such Future Developments. The Managing Partner and its Affiliates
         may not perform any of such services themselves, but shall act solely
         through the Partnership and its Subsidiaries. The terms and provisions
         of each such Future Management Contract respecting any Future
         Development shall be market terms for such contracts available at the
         time with unaffiliated third parties, provided, however, that the
         Partnership shall, in addition to any other compensation to be received
         pursuant to any such Future Management Contract, receive reimbursement
         of or value for all out-of-pocket costs incurred by the Partnership and
         its Affiliates (or their officers, directors, managers, members,
         shareholders, partners, employees, contractors or agents) in connection
         with the provision of services pursuant to any such Future Management
         Contract.



                                      -26-
   32

                  C. Advancement of Development Costs. The St. Joe Partner
         covenants and agrees that it will advance 75% of the costs and expenses
         (the "Development Costs") associated with the evaluation of potential
         Future Developments (the "St. Joe Advances"). The St. Joe Advances
         shall be made to a Subsidiary of St. Joe. The Partnership shall be
         responsible for funding the remaining 25% of the Development Costs to
         be borne by the Partners in their respective Percentage Interests at
         the time of funding (i.e. 74% to be charged to the Capital Accounts of
         the Managing Partner and St. Joe Development (or 18.5% of the total
         Development Costs) and 26% to be charged to the Capital Accounts of the
         Non-Managing Partner and JMB LP (or 6.5% of the total Development
         Costs), subject to adjustment as provided in Section 3.3). The St. Joe
         Advances shall bear interest at the rate of 2% plus the prime rate
         announced from time to time by First Union National Bank of Florida and
         shall accrue interest from the date the first advance is made. In the
         event that either the St. Joe Partner or the JMB Partner ultimately
         decide to invest in a particular Future Development then the
         Development Costs shall be repaid by the Future Development Entity
         including repayment of any St. Joe Advances together with accrued
         interest. In the event that neither the St. Joe Partner or the JMB
         Partner invests in a particular Future Development, then only 25% of
         the Development Costs shall be charged against the Capital Accounts of
         each Partner pursuant to their respective Percentage Interests.

         5.13 Certain Employment Matters. Pursuant to the Asset Contribution
Agreement, the Assumed Obligations include, among other things, employment
agreements with certain executives of Arvida Company. As of January 1, 1998, the
Partnership will become the employer of all the officers listed on Schedule 5.13
(the "Partnership Officers"). The Managing Partner agrees that it will give the
Non-Managing Partner 45 days prior written notice of termination of any
Partnership Officer; provided, however, that the Managing Partner shall not be
required to provide any prior notice of termination to the Non-Managing Partner
for the termination of any Partnership Officer if such termination is for Cause.
Notwithstanding the foregoing, if the Partnership Officer that the Managing
Partner intends to terminate is the Chief Executive Officer (the "CEO") of the
Partnership (who initially shall be James D. Motta), then the Managing Partner
shall provide the Non-Managing Partner 60 days prior written notice. In
addition, the decisions to terminate and replace the CEO of the Partnership
shall be made jointly by the Managing Partner and the Non-Managing Partner. The
rights of the Non-Managing Partner to prior notices regarding Partnership
Officers and decisions regarding the CEO shall terminate upon the earlier of (i)
the liquidation and termination of Arvida/JMB Partners, L.P. or (ii) December
31, 2002. The Managing Partner hereby acknowledges and agrees that there are
currently in effect for the benefit of certain employees of Arvida I and Arvida
Company: (i) the Long Term Income Award Program, and (ii) the Bonus Program
(collectively, the "Old Arvida Bonus Plans"). Arvida Company also has adopted
and maintains the Amended and Restated 1997 Supplemental Bonus Plan (the
"Supplemental Plan"). The Partnership has entered into that certain Paying
Agreement (the "Paying Agreement") with Arvida Company, dated as of the date
hereof, whereby the Partnership will act as the paying agent of Arvida Company,
which will otherwise continue to administer the Supplemental Plan. Subject to
the provisions of this 



                                      -27-
   33

Section 5.13, the Partnership will administer the Old Arvida Bonus Plans from
and after January 1, 1998. The Non-Managing Partner represents that any amounts
awarded and unpaid under the Old Arvida Bonus Plans on the date hereof are
subject to reimbursement by Arvida I. With respect to any amounts to be awarded
under the Old Arvida Bonus Plans from and after January 1, 1998 (or any other
plans adopted from and after such date) for which reimbursement will be sought
from Arvida I ("Arvida I Reimbursable Bonus Costs"), all actions of the
Partnership and decisions with respect thereto shall be determined by the
Non-Managing Partner, in its sole and absolute discretion. In addition, the
Partners acknowledge and agree that the Partnership will obtain the consent of
Arvida I prior to the determination of any Arvida I Reimbursable Bonus Costs.
The rights of the Non-Managing Partner hereunder shall (subject to the
Non-Managing Partner obtaining the approval of Arvida I and solely with respect
to Arvida I Reimbursable Bonus Costs) include, without limitation: (i) the
determination of the size of any bonus pools funded by Arvida I, (ii) the
formulae and parameters for determining whether bonuses will be awarded, (iii)
the range of bonus eligibility for each employee; (iv) the exercise of any
discretion with respect to the determination of the bonus payable to any
employee; (v) the timing of payment, (vi) the rules for participation, vesting
and forfeiture of employees; and, (vii) the modification or termination of the
Old Arvida Bonus Plans. The Managing Partner shall have no responsibility or
liability with respect to duties and obligations of the Non-Managing Partner
relative to the Arvida I Reimbursable Bonus Costs. The Managing Partner will
have the right to make decisions and take action with respect to any bonus
program of the Partnership that is in effect from or after January 1, 1998, to
the extent it is a Partnership obligation and not an Arvida I Reimbursable Bonus
Cost.

         5.14 Business Plan. Prior to thirty (30) days before the beginning of
each calendar year the Managing Partner shall prepare (or cause the Partnership
to prepare) and submit to the Non-Managing Partner a business plan (the
"Business Plan") for such calendar year with respect to the operations of the
Partnership. Notwithstanding the foregoing, the Partners agree that the 1998
Business Plan shall not be submitted to the Non-Managing Partner until ninety
(90) days after the date of this Agreement. The Business Plan shall be presented
in sufficient detail that the recipient thereof shall have a comprehensive
report on the projected cash expenditures, capital expenditures, cash receipts,
reserves, material business developments and other significant matters expected
to be pursued or encountered by the Partnership during the calendar year in
question with respect to the portion of the operations of the Partnership
covered by such Business Plan. The Managing Partner and the Non-Managing
Partner, shall meet within fifteen (15) days following the submission of any
Business Plan in order that they may each discuss and provide comments thereon,
however, the Managing Partner shall have the sole and absolute authority to
adopt such Business Plan and cause the Partnership to implement same; provided
that the foregoing shall not modify any rights or obligations under a management
agreement or sub-management agreement by which the Partnership is bound. The
Business Plan may be amended at any time by the Managing Partner provided that
reasonable advance notice be given to the Non-Managing Partner, and a reasonable
opportunity for additional discussion and commentary has been provided. The
Managing Partner shall cause the Partnership to prepare and deliver a report to
the Partners within sixty (60) days after the end of each calendar quarter which



                                      -28-
   34

compares the actual results of the Partnership both for the quarter, and on a
year to date basis, along with comparable historical information, if available
from the previous Fiscal Year, with the projected results set forth in the
Business Plan. Such report shall also contain an update of the development and
management activities of the Partnership at each of the communities where it is
performing services or conducting its activities. The Managing Partner will
respond to reasonable questions presented by any Partner respecting the Business
Plan, such reports and the operating results of the Partnership.

                                   ARTICLE VI

              ALLOCATIONS OF PROFITS AND LOSSES AND DISTRIBUTIONS

         6.1 Sharing of Income, Gain, Loss, Deduction and Credit.

                  A. Profits and Losses. Except as otherwise expressly provided
         in this Agreement, all Profits and Losses (including, without
         limitation, all items of income, gain, loss, deduction and credit) and
         all cash flow, proceeds and other cash available for distribution, and
         any other economic item or attribute of the Partnership shall be shared
         by the Partners in accordance with this Article VI.

                  B. Allocation. Subject to Sections 6.1C and D and Sections 6.5
         and 6.6 for each Partnership taxable year (or portion thereof), all
         Profits and Losses (including, without limitation, all items of income,
         gain, loss, deduction and credit) shall be allocated among the Partners
         in proportion to their respective Percentage Interests; provided,
         however, that Losses shall not be allocated to a Partner to the extent
         that they would create or increase an Adjusted Capital Account Deficit
         for such Partner, and any such Losses that would, absent the
         application of the preceding sentence, otherwise be allocated to such
         Partner, shall be allocated to the other Partners; and provided
         further, that any such reallocation shall be subject to the application
         of this Section 6.1B to the other Partners.

                  C. Allocations in Accordance with Section 704(c) of Code. The
         parties hereto intend that the allocations of Profits and Losses set
         forth in this Section 6.1 be in compliance with Section 704(c) of the
         Code, to the extent that such Section applies to Partnership property.
         Accordingly, allocations shall be made so as to take account of the
         variation between the respective basis of the Partnership properties
         and their fair market values at the time of contribution, as determined
         pursuant to Section 5.12, if applicable, and otherwise as determined by
         all of the Partners. Subject to Section 5.4, the "traditional method"
         under Regulation Section 1.704-3(b) shall be used.

                  D. Unrealized Receivables and Inventory Items. For purposes of
         determining the character of any gain or profit (arising from the sale
         or other disposition of property by the Partnership or a partnership or
         limited liability company in which the Partnership is a partner, member
         or economic interest owner) allocated to any Partner under this Section



                                      -29-
   35

         6.1, the portion of such gain or profit allocated under this Section
         6.1 that represents ordinary income attributable to depreciation
         recapture, to other Unrealized Receivables or to Inventory Items, shall
         be allocated to the Partners who were allocated the depreciation
         deductions or other tax benefits giving rise to or attributable to such
         depreciation recapture, other Unrealized Receivables or Inventory
         Items, but only to the extent of such gain or profit already allocated
         to such Partners under this Section 6.1.

         6.2 Allocations and Distributions Attributable to Transferred Interest.
Except with respect to the transfer described in Section 3.1 hereof, with
respect to any Transfer of an interest in the Partnership in accordance with
this Agreement during any period for which an allocation or distribution is
made, Profits, Losses and cash distributions resulting from the operations of
the Partnership, or a partnership or limited liability company in which the
Partnership is a partner or owns an economic interest, shall be allocated or
distributed based upon the number of days in such period which occurred before
and after such Transfer regardless of the time at which any item was actually
received, paid or incurred, and Profits, Losses and cash distributions resulting
from sales of properties outside the ordinary course of business by the
Partnership, or a partnership or limited liability company in which the
Partnership is a partner or owns an economic interest, shall be allocated or
distributed, as the case may be, to the Partners of the Partnership as of the
day on which such allocations or distributions were based even if they have
ceased to be Partners on any date on which such allocations or distributions are
made. The determination of allocations of Profits and Losses and distributions
with respect to the transfer of Units described in Section 3.1 hereof as between
the transferor and the transferee of such Units shall be based upon the closing
of the books of the Partnership, on an accrual basis, as of the date of
transfer.

         6.3 Distributions. Subject to Section 6.2, each distribution to the
Partners of cash or other assets of the Partnership made prior to the
dissolution of the Partnership, including, but not limited to, each distribution
of Distributable Cash from the operations of the Partnership shall be made to
the Partners in accordance with their respective Percentage Interests, as of the
date of such distribution. Subject to Section 6.2, each distribution of cash or
other assets of the Partnership made after dissolution of the Partnership shall
be made in accordance with Article IX hereof. Distributions to the Partners will
be made in such amounts and at such times as shall be determined by the Managing
Partner, or in the event of the dissolution and liquidation of the Partnership,
by the Liquidators. Distributions of Distributable Cash shall be made no less
frequently than annually.

         6.4 Tax Status and Reports. Any provisions hereof to the contrary
notwithstanding, solely for Federal income tax purposes, each of the Partners
hereby recognizes that the Partnership will be subject to all provisions of
Subchapter K of Chapter 1 of Subtitle A of the Code; provided, however, that the
filing of partnership returns of income for such tax purposes shall not be
construed to extend the purposes of the Partnership.

         6.5 Capital Accounts of the Partners.



                                      -30-
   36

                  A. General. The Managing Partner shall establish and maintain
         for each Partner a separate Capital Account in accordance with Section
         704(b) of the Code and Regulation Section 1.704-1(b)(2)(iv). Unless
         otherwise required by the immediately preceding sentence, such Capital
         Account shall be increased by (a) the amount of all Capital
         Contributions made by such Partner to the Partnership pursuant to this
         Agreement and (b) all Profits or items of Partnership income and gain
         (including income and gain exempt from tax) computed in accordance with
         Section 6.5B. hereof and allocated to such Partner pursuant to Section
         6.1 hereof, and decreased by (i) all distributions of cash or property
         (determined based on the Fair Market Value thereof) made to such
         Partner pursuant to this Agreement, (ii) all Losses or items of
         Partnership loss or deduction computed in accordance with Section 6.5B.
         hereof and allocated to such Partner pursuant to Section 6.1, and (iii)
         any expenditures of the Partnership described, or treated under Section
         704(b) of the Code as described in Section 705(a)(2)(B) of the Code.
         The initial Capital Account balance of each Partner on the date hereof
         is as set forth in Exhibit B.

                  B. Income, Gains, Deductions and Losses. For purposes of
         computing the amount of any item of income, gain, loss or deduction to
         be reflected in the Partners' Capital Accounts, unless otherwise
         specified in this Agreement, the determination, recognition and
         classification of any such item shall be the same as its determination,
         recognition and classification for Federal income tax purposes
         determined in accordance with Section 703(a) of the Code (for this
         purpose all items of income, gain, loss or deduction required to be
         stated separately pursuant to Section 703(a)(1) of the Code shall be
         separately included in taxable income or loss).

                  C. Distributions and Partnership Interest Transfers. The
         Managing Partner shall make the adjustments to the Capital Accounts of
         the Partners to the extent permitted by Regulation Section
         1.704-1(b)(2)(iv)(f) & (g).

         6.6 Minimum Gain Chargeback; Qualified Income Offset. Notwithstanding
anything to the contrary in this Agreement, Profits and Losses shall be
allocated as though this Agreement contained (and there is hereby incorporated
by reference) a minimum gain chargeback provision which complies with the
requirements of Section 1.704-2 of the Treasury Regulations and qualified income
offset provision which complies with the regulations of Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations.


                                  ARTICLE VII

                 TRANSFER AND ASSIGNMENT OF ECONOMIC INTERESTS

         7.1 Transfer and Assignment of Interest. Any Partner (a "Transferor")
may transfer, assign, convey, sell, pledge, encumber, gift, bequeath (subject to
Section 7.4 hereof) or otherwise 



                                      -31-
   37

alienate (any such event being hereinafter referred to as a "Transfer") such
Partner's Partnership Interest hereunder only if such Transfer otherwise
complies with the provisions of this Agreement (including, without limitation,
Sections 7.2, 7.6 and 12.10 hereof). Subject to such requirements, such
Partnership Interest may be transferred in whole, but not in part, and any
attempt of a Partner to transfer only a portion of such Partner's Partnership
Interest shall be void, and without any force or effect; provided, however, that
a Partner may transfer a portion of such Partner's Partnership Interest to any
other Partner or to an Affiliate of the Transferor. In further limitation of the
foregoing, a Partner may not make any Transfer to a non-Affiliate, unless all
Affiliates of such Partner who also hold Partnership Interests, transfer such
Partnership Interests to such non-Affiliate (or an Affiliate thereof) on the
same terms and conditions as, and in conjunction with, such Transfer. In the
event of any Transfer to a Person who is not an Affiliate of such Partner, the
Partnership and the other Partners who are not Affiliates of the Transferor (the
"Non-Transferring Partners") shall have certain rights to purchase such
Partnership Interest or to sell such other Non-Transferring Partners'
Partnership Interests pursuant to Sections 7.6 and 7.7. Subject to Section 7.4,
in the event of a Transfer of an Partnership Interest hereunder which complies
with the provisions of this Agreement, the transferee of such Partnership
Interest (the "Transferee") shall be admitted as a substitute Partner of the
same category as the Transferor, entitled to all of the benefits, and
responsible for all of the obligations, in the Partnership represented by such
category of interest from and after the date of such admission as established in
Section 7.3. In addition to the other provisions in this Section 7.1, a Partner
may not Transfer or otherwise dispose of the economic interest represented by
its Partnership Interest, separately from such Partnership Interest, except as
expressly provided in this Article 7. In addition to the other restrictions
noted in this Agreement, each Partner agrees that it will not, directly or
indirectly, Transfer any interest, economic or otherwise, represented by its
Units except as permitted under the Securities Act of 1933 and other applicable
securities laws. A transfer or other disposition of all or a controlling
interest in the stock, partnership interests, membership interests or other
equity interests in a Partner, directly or indirectly, shall be deemed a
Transfer of such Partner's Partnership Interest for the purposes of this Article
VII.

         7.2 Substitution of Partners. A Transfer shall not be effective, and
Transferee shall not become a substitute Partner, unless the Transferee executes
an instrument satisfactory to the Non-Transferring Partners (other than the
Limited Partners) accepting and adopting the terms and provisions of this
Agreement, and the Transferee pays any reasonable expenses in connection with
such Transferee's admission as a new Partner. The admission of a substitute
Partner shall not result in the release of the Transferor from any liability
that the Transferor may have to the Partnership or any other Partner as of the
date of the Transfer. A Transferor who is a Partner shall cease to be a Partner
upon the effective date of Transfer under Section 7.3.

         7.3 Effective Date of Transfers and Admission to Partnership. Unless
otherwise agreed by the Partners in writing, any Transfer of a Partnership
Interest shall be effective as of the date following the later of (i) the date
upon which the Transferor provides the Non-Transferring Partners with written
notice of such Transfer (or, if the Transfer is proposed to be made to a Person
other than an Affiliate of such Transferor, the date of expiration of the



                                      -32-
   38

Transfer Notice Period under Section 7.6), (ii) the date as of which such
Transfer and any other Transfers required under Section 7.7 are consummated
between the Transferor and those Partners exercising their piggy-back rights
under Section 7.7 and the Transferee, and (iii) the date upon which the
Transferee executes an instrument satisfactory to the Non-Transferring Partners
(other than the Limited Partners and those other Partners exercising their
piggy-back rights under Section 7.7) accepting and adopting the terms and
provisions of this Agreement. Any Transferee of a Partnership Interest shall
take subject to the restrictions on Transfer imposed by this Agreement.

         7.4 Rights of Legal Representatives. Subject to Section 5.2, if a
Partner who is an individual dies or is adjudged by a court of competent
jurisdiction to be incompetent to manage the Partner's person or property, the
Partner's executor, administrator, guardian, conservator, or other legal
representative may exercise all of the Partner's rights for the purpose of
settling the Partner's estate or administering the Partner's property. Subject
to Section 5.2, if a Partner that is a corporation, trust or other entity is
dissolved or terminated, the Partner's rights may be exercised by such Partner's
legal representative or successor.

         7.5 No Effect to Transfers in Violation of Agreement. No transfer of a
Partnership Interest not permitted under or made in compliance with this
Agreement shall be valid or effective for any purpose.

         7.6 Right of Partnership and Remaining Partners to Purchase Partnership
Interest Prior to Transfer. If a Partner desires to make a Transfer pursuant to
Section 7.1, other than to an Affiliate of such Partner, the Partner shall first
deliver a notice (the "Transfer Notice") to the Partnership and the
Non-Transferring Partners notifying them thereof and all of the material terms
of such Transfer, including, without limitation, the identity of the proposed
Transferee (and any reasonable information with respect thereto requested by the
Non-Transferring Partner), the consideration for such Transfer and material
terms to be set forth in any agreement of transfer intended to be entered into
with respect to such Transfer. For a period of sixty (60) days after receipt of
such Transfer Notice (the "Transfer Notice Period") the Non-Transferring
Partners shall have a right of first refusal to purchase (or cause a designee
who is an Affiliate to purchase) the Partnership Interest which is the subject
of such proposed Transfer, upon the same terms and conditions as set forth in
the Transfer Notice. The Non-Transferring Partners may exercise their purchase
right hereunder by delivering a notice (the "Transfer Acceptance Notice") to the
Transferor prior to the end of the Transfer Notice Period. If any
Non-Transferring Partner delivers a timely Transfer Acceptance Notice exercising
its right to purchase the Transferor's Partnership Interest, the Transferor
shall transfer such Partnership Interest to the Non-Transferring Partner (or its
designee who is an Affiliate) on a date selected by the Non-Transferring Partner
on or before thirty (30) days after the end of the Transfer Notice Period. If
more than one Non-Transferring Partner exercises such rights, each such
Non-Transferring Partner shall purchase its pro rata share of such Partnership
Interest, based upon the relative Percentage Interests of such Non-Transferring
Partners. If the Non-Transferring Partners do not exercise either the right
granted hereunder, or the right granted under Section 7.7, 



                                      -33-
   39

the Transferor must consummate such proposed Transfer, on the terms set forth in
the Transfer Notice (including, without limitation, consummating such Transfer
to the Transferee proposed in the Transfer Notice, or an Affiliate thereof),
within sixty (60) days after the expiration of the Transfer Notice Period, or
the Transferor's right to Transfer shall again become subject to this Section
7.6 and Section 7.7 hereof, and a new Transfer Notice must be delivered. Any
such Transfer shall also be subject to all other provisions of this Agreement
respecting Transfers.

         7.7 Piggy-Back Right. In the event that a Partner delivers a Transfer
Notice as described in Section 7.6, the Non-Transferring Partners and each other
Partner shall also have the right to elect, such right also to be exercised in
the Transfer Acceptance Notice described in Section 7.6, to sell its Partnership
Interest to the Transferee specified in the Transfer Notice, on the same terms
and conditions (adjusted on a pro-rata basis to take into account the relative
Percentage Interests of the Partners) as specified in the Transfer Notice. If
the Non-Transferring Partner or any such other Partner delivers a timely
Transfer Acceptance Notice exercising its right to sell its Partnership
Interest, the Transferor shall cause the Transfer of the Partnership Interests
of both the Transferor and Partners so electing, to the proposed Transferee, on
or before thirty (30) days after the end of the Transfer Notice Period. The
Transferor shall in such event have no right to modify any of the terms of the
proposed Transfer without the prior written consent of each of the
Non-Transferring Partners, which consent may be withheld or delayed in the sole
discretion of the Non-Transferring Partners. In the event such Transfers are not
consummated on or before the end of such thirty (30) day period, the
Transferor's right to Transfer shall again become subject to Section 7.6 and
this Section 7.7 hereof, and a new Transfer Notice must be delivered.

         7.8 Right of Managing Partner to Call Partnership Interest of
Non-Managing Partner and JMB LP. The Managing Partner shall have the right,
which may be exercised at any time after the tenth anniversary of the date
hereof, upon one hundred twenty (120) days prior written notice (the "Call
Notice"), to purchase the entire aggregate Partnership Interests of the
Non-Managing Partner and JMB LP, and their respective successors and assigns, in
the Partnership (collectively, the "Called Interest"), upon the terms set forth
in this Section 7.8. The price to be paid by the Managing Partner (or an
Affiliate designated by the Managing Partner) for the Called Interest (the "Call
Price") shall be the amount obtained by multiplying the Fair Market Value of the
Partnership, determined on the date of delivery of the Call Notice, by the
aggregate Percentage Interests represented by the Called Interest. The Call
Notice shall include the Managing Partner's proposal for the Call Price (the
"Call Offer"), together with supporting information in sufficient detail so that
the Non-Managing Partner may assess the basis for and adequacy of the Call Price
so proposed, as well as the date for closing the purchase (the "Call Transfer
Date"), which shall be not more than one hundred fifty (150) days from the date
of the Call Notice. After receiving the Call Offer, the Non-Managing Partner
shall have ninety (90) days (the "Call Assessment Period") to perform such due
diligence on the Partnership, at the Non-Managing Partner's sole cost and
expense, as the Non-Managing Partner may reasonably deem necessary in order to
assess the appropriate Call Price, and the Managing Partner shall fully
cooperate with the Non-Managing Partner in facilitating such due diligence
review. Prior to the 



                                      -34-
   40

end of the Call Assessment Period, the Non-Managing Partner shall deliver a
notice to the Managing Partner (the "Call Response") which shall include the
Non-Managing Partner's proposal for the Call Price (the "Call Counteroffer"),
together with supporting information in sufficient detail so that the Managing
Partner may assess the basis for and adequacy of the Call Price so proposed. The
Call Response and Call Counteroffer shall be binding upon all Limited Partners.
For a period of thirty (30) days after the delivery of the Call Response (the
"Call Negotiation Period"), the Managing Partner and the Non-Managing Partner
shall negotiate in good faith to arrive at the Call Price to be paid hereunder.
In the event that the Managing Partner and the Non-Managing Partner are unable
to agree on the Call Price prior to the end of such thirty-day period, either
the Managing Partner or the Non-Managing Partner may request arbitration with
respect thereto by written notice to the other party. In such event, such
arbitration shall be conducted in accordance with Section 7.11. Once the
Arbitrators with respect to such arbitration determine the Call Price, the
Managing Partner shall promptly pay the Call Price to the Non-Managing Partner
and JMB LP, or their respective successors or assigns, (prorated based on their
respective Percentage Interests), together with interest thereon from the Call
Transfer Date to the date of such payment at the Applicable Rate, such payment
to be made in cash. The Partnership Interests of the Non-Managing Partner and
JMB LP, and their respective successors or assigns, shall be deemed transferred
hereunder as of the Call Transfer Date and the Non-Managing Partner and JMB LP
agree to deliver appropriate assignment documentation as determined by the
Managing Partner.

         7.9 Restrictions on Transfer. Anything contained in the provisions of
this Article VII to the contrary notwithstanding, no Transfer of Partnership
Interests (or any interests therein) shall be effective if the Non-Transferring
Partners determine, based on the advice of counsel from a nationally-recognized
law firm, that such Transfer (i) would result in the Partnership being
classified as an association taxable as a corporation for Federal and/or state
income tax purposes (and any such Transfer shall be effected in such manner as
may be necessary to maintain the classification of the Partnership as a
partnership for Federal and/or state income tax purposes), (ii) would result in
a termination of the Partnership under Section 708(b)(1)(B) of the Code, unless
the Non-Transferring Partners approve such a Transfer, (iii) would create a
material risk of adverse tax consequences to any Partner (other than the
transferor and transferee), including without limitation any material risk that
the Partnership will be treated as a "publicly traded partnership" under Section
7704 of the Code, or (iv) would create a material risk that the Partnership will
fail to qualify for at least one available safe harbor under Section 7704 of the
Code and the Treasury Regulations, unless the Non-Transferring Partners approve
such Transfer.

         7.10 Indemnity. To the fullest extent permitted under applicable law,
each Partner shall indemnify and hold harmless the Partnership and all other
Partners who were or are parties, or are threatened to be made parties, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation, misstatement of facts or omission to state
facts made (or omitted to be made), noncompliance with any agreement or failure
to perform any covenant by such Partner in connection with any Transfer of all
or any portion of its Units (or any economic 



                                      -35-
   41

interest therein), against losses, damages or expenses (including attorneys'
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred by it or them in connection with such action, suit or proceeding and
for which it or they have not otherwise been reimbursed.

         7.11 ARBITRATION OF CALL PRICE. IN THE EVENT THAT THE MANAGING PARTNER
AND THE NON-MANAGING PARTNER ARE UNABLE TO AGREE UPON THE CALL PRICE FOR THE
CALLED INTEREST AS PROVIDED UNDER SECTION 7.8, SUCH DISPUTE SHALL BE SETTLED BY
ARBITRATION IN WASHINGTON, D.C. IN ACCORDANCE WITH THE FOLLOWING.

                  A. AT ANY TIME AFTER THE CALL NEGOTIATION DATE, EITHER THE
         MANAGING PARTNER OR THE NON-MANAGING PARTNER, MAY REQUEST ARBITRATION
         BY WRITTEN NOTICE TO THE OTHER (THE "ARBITRATION NOTICE OF CALL
         PRICE"), WHICH NOTICE SHALL ALSO DESIGNATE AN ARBITRATOR. THE OTHER
         PARTY SHALL THEN, BY WRITTEN NOTICE TO THE FIRST PARTY, DESIGNATE A
         SECOND ARBITRATOR WITHIN FIFTEEN DAYS AFTER RECEIPT OF THE ARBITRATION
         NOTICE OF CALL PRICE, THE TWO ARBITRATORS SO SELECTED SHALL, WITHIN
         THIRTY (30) DAYS AFTER THE DELIVERY OF THE ARBITRATION NOTICE, SELECT A
         THIRD ARBITRATOR AND ALL THREE SHALL CONDUCT THE ARBITRATION. THE
         ARBITRATORS SHALL BE PERSONS WITH EXPERIENCE IN MANAGING, DEVELOPING
         AND MARKETING RESIDENTIAL REAL ESTATE PROJECTS OF THE KIND AND NATURE
         THAT THE PARTNERSHIP AND ITS PARTNERS HAVE BEEN ASSOCIATED WITH.

                  B. EACH OF THE MANAGING PARTNER AND THE NON-MANAGING PARTNER
         SHALL WITHIN TEN (10) DAYS AFTER THE DETERMINATION OF THE IDENTITY OF
         THE THIRD ARBITRATOR, DELIVER THE CALL OFFER AND THE CALL COUNTEROFFER
         TO EACH ARBITRATOR.

                  C. THE ARBITRATORS SHALL CONDUCT THE ARBITRATION IN ACCORDANCE
         WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, WITH SUCH
         MODIFICATIONS THEREOF AS THE ARBITRATORS MAY DEEM APPROPRIATE, AND THE
         PARTIES SHALL DILIGENTLY ENDEAVOR TO CONCLUDE THEIR PRESENTATIONS FOR
         SUCH ARBITRATION WITHIN SIXTY (60) DAYS WITH A DECISION NO LATER THAN
         THIRTY (30) DAYS THEREAFTER.

                  D. THE ARBITRATORS MAY RETAIN COUNSEL (UNRELATED TO EITHER
         PARTNER OR ITS RESPECTIVE AFFILIATES) TO ADVISE ALL OF THEM ON MATTERS
         OF LEGAL INTERPRETATION, THE COST OF WHICH SHALL BE A COST OF THE
         ARBITRATION. THE ARBITRATORS SHALL BE ENTITLED TO REASONABLE
         COMPENSATION AND REIMBURSEMENT OF 



                                      -36-
   42

         EXPENSES AS MUTUALLY AGREED BY THE PARTNERS, OR IF THEY ARE UNABLE TO
         AGREE, THEN AS REASONABLY DETERMINED BY THE ARBITRATORS. SUCH
         COMPENSATION AND OTHER EXPENSES SHALL BE BORNE SOLELY BY THE PARTY
         WHOSE OFFER OR COUNTEROFFER IS NOT SELECTED BY THE ARBITRATORS.

                  E. THE ONLY ISSUE TO BE DETERMINED BY THE ARBITRATORS PURSUANT
         TO THIS SECTION 7.11 SHALL BE WHETHER, BASED ON THE RELATIVE MERITS AND
         THE EXPRESS PROVISIONS OF THIS AGREEMENT, THE OFFER OF THE MANAGING
         PARTNER OR THE OFFER OF THE NON-MANAGING PARTNER SO SUBMITTED FOR
         ARBITRATION IS TO BE SELECTED, AND THE ARBITRATORS SHALL CHOOSE BETWEEN
         THE TWO OFFERS WITHOUT ALTERATION OR COMPROMISE OF THE CHOSEN OFFER.
         THE AWARD AND ALL OTHER DECISIONS OF A MAJORITY OF THE ARBITRATORS
         SHALL BE FINAL AND BINDING UPON THE PARTNERS, AND A JUDGMENT THEREON
         MAY BE RENDERED IN ANY COURT OF RECORD, EXCEPT THAT THE ENTITY
         RESPONSIBLE FOR THE PAYMENT OF THE COMPENSATION OF THE ARBITRATORS AND
         THE EXPENSES OF ARBITRATION MAY CONTEST AND OBTAIN JUDICIAL REVIEW OF
         THE REASONABLENESS OF THE DETERMINATION OF COMPENSATION UNDER
         SUBSECTION D. ABOVE.


                                  ARTICLE VIII

               ACCOUNTING, RECORDS, REPORTING BY MANAGING PARTNER

         8.1 Books and Records. The books and records of the Partnership shall
be kept, and the financial position and the results of its operations recorded,
in accordance with the accounting methods followed for federal income tax
purposes, or otherwise as determined by the Partnership Accountants in
accordance with generally accepted accounting practices. The books and records
of the Partnership shall reflect all the Partnership transactions and shall be
appropriate and adequate for the Partnership's business. The Partnership shall
maintain at its principal office, or at such other locations as determined by
the Managing Partner, all of the following: 

                  A. A current list of the full name and last known business or
         residence address of each Partner, together with the Capital
         Contributions, Capital Account, Units and Percentage Interest of each
         Partner;

                  B. A copy of the Certificate and any and all amendments
         thereto together with executed copies of any powers of attorney
         pursuant to which the Certificate or any amendments thereto have been
         executed;



                                      -37-
   43

                  C. A copy of this Agreement and any and all amendments thereto
         together with executed copies of any powers of attorney pursuant to
         which this Agreement or any amendments thereto have been executed;

                  D. The Partnership's books and records of account as they
         relate to the internal affairs of the Partnership for at least the
         current and past five Fiscal Years.

         8.2 Delivery to Partners and Inspection.

                  A. Upon the request of any Partner, the Managing Partner shall
         promptly deliver to the requesting Partner, at the expense of the
         Partnership, a copy of the information required to be maintained by
         Section 8.1.

                  B. Each Partner has the right, upon reasonable request, to:

                  1. inspect during normal business hours any of the Partnership
         records described in Section 8.1 and make copies or memoranda; and

                  2. obtain from the Managing Partner, promptly after their
         becoming available, a copy of the Partnership's federal, state, and
         local income tax or information returns for each Fiscal Year; and

                  3. visit and inspect the properties which are subject to a
         management agreement or submanagement agreement with the Partnership or
         Future Management Contracts, or are owned by the Partnership.

         8.3 Financial Statements and Reports.

                  A. In addition to the Business Plan to be prepared and adopted
         pursuant to Section 5.14, the Managing Partner shall provide to the
         Partners monthly operating reports, quarterly and annual financial
         statements, all prepared in accordance with GAAP. Annual financial
         statements shall be audited by the Partnership Accountants and be
         prepared and delivered to the Partners not later than sixty (60) days
         after the close of each Fiscal Year. The Managing Partner shall also
         cause an unaudited quarterly report to be prepared and delivered to the
         Partners not later than twenty-five (25) days after the close of each
         calendar quarter. Each such annual or quarterly report shall contain a
         balance sheet as of the end of the Fiscal Year (or calendar quarter for
         quarterly reports), an income statement for the Fiscal Year (or
         calendar quarter for quarterly reports), and a statement of changes in
         cash flow for the Fiscal Year (or calendar quarter for quarterly
         reports). Each such report shall also contain comparable projected
         information from the Business Plan for the comparable period, and, if
         available, comparable historical information from the comparable
         periods of the previous Fiscal Year. Copies of such reports shall be
         available to any Partner upon written request. The unaudited accounting



                                      -38-
   44

         statements of the Partnership with respect to each month, which
         accounting statements shall be prepared and presented in the manner
         customary for purposes of dissemination for management of the
         Partnership, shall be delivered to the Partners by the Partnership
         within twenty (20) days following the end of the month. The unaudited
         reports shall contain the certificate of the Managing Partner that the
         financial statements were prepared without audit from the books and
         records of the Partnership and that, to the best knowledge of the
         Managing Partner, such statements fairly present the financial position
         of the Partnership.

                  B. The Managing Partner shall cause to be prepared at least
         annually, at Partnership expense, information necessary for the
         preparation of the Partners' federal and state income tax returns. The
         Managing Partner shall send or cause to be sent to each Partner within
         seventy-five (75) days after the end of each taxable year such
         information as is necessary for such Partner to complete federal and
         state income tax or information returns respecting its investment in
         the Partnership.

         8.4 Filings. Subject to Section 5.4 the Managing Partner, at
Partnership expense, shall cause the income tax returns for the Partnership to
be prepared and timely filed with the appropriate authorities. The Managing
Partner, at Partnership expense, shall also cause to be prepared and timely
filed, with appropriate federal and state regulatory and administrative bodies,
amendments to, or restatements of, the Certificate and all reports required to
be filed by the Partnership with those entities under the Act or other then
current applicable laws, rules, and regulations.

         8.5 Bank Accounts. The Managing Partner shall maintain the funds of the
Partnership in one or more separate bank accounts in the name of the
Partnership. The Managing Partner and the appropriate officers of the
Partnership shall have signing authority on such accounts as reasonably
necessary for them to perform their duties and obligations hereunder.

         8.6 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Managing Partner. The Managing Partner may rely upon the advice of
the Partnership Accountants and/or the Partnership's legal counsel as to whether
such decisions are in accordance with accounting methods followed for GAAP or
federal income tax purposes.

         8.7 Tax Matters for the Partnership Handled by Managing Partner and Tax
Matters Partner. Subject to Section 5.4, the Tax Matters Partner (who shall have
the same duties and authority as a "Tax Matters Partner", as defined in Code
Section 6231, and the other duties and authority specified in this Agreement),
shall represent the Partnership (at the Partnership's expense) in connection
with all examinations of the Partnership's affairs by tax authorities, including
resulting judicial and administrative proceedings, and shall expend the
Partnership funds for professional services and costs associated therewith, and
the Tax Matters Partner shall oversee the Partnership's tax affairs in the
overall best interests of the Partnership.



                                      -39-
   45

         8.8 Section 754 Election. In connection with any transfer of or
distribution with respect to a Partnership Interest, the Managing Partner shall,
upon written request by any Partner, cause the Partnership to make an election
pursuant to Code Section 754 and Regulation Section 1.754-1(b) to adjust the
basis of Partnership property in the manner provided in Code Sections 734(b) and
743(b). Such Partner shall pay all costs incurred by the Partnership in
connection with such election.


                                   ARTICLE IX

                           DISSOLUTION AND WINDING UP

         9.1 Dissolution. The Partnership shall not be dissolved except as
provided in this Section 9.1. The Partnership shall be dissolved on the first to
occur of the following (each, a "Dissolution Event"):

                  A. The vote to dissolve by the Managing Partner and the
         Non-Managing Partner; or,

                  B. The expiration of the Term.

         9.2 Winding Up. Upon the occurrence of any event specified in Section
9.1, the Partnership shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Managing Partner shall be responsible for overseeing the
winding up and liquidation of Partnership, shall take full account of the
liabilities and assets of Partnership, shall either cause its assets to be sold
or distributed, and if sold as promptly as is consistent with obtaining the Fair
Market Value thereof, shall cause the proceeds therefrom, to the extent
sufficient therefor, to be applied and distributed as provided in Section 9.4.
The Persons winding up the affairs of the Partnership (herein called
"Liquidators") shall take such actions as may be required by law for the
liquidation and winding up of the affairs of the Partnership and otherwise
conduct such liquidation and winding up in the best interests of the
Partnership. The Liquidators shall be entitled to reasonable compensation for
such services.

         9.3 Distributions in Kind. Any non-cash asset distributed to one or
more Partners shall first be valued at its Fair Market Value to determine the
Profit or Loss that would have resulted for federal income tax purposes if such
asset were sold for such value, such Profit or Loss shall then be allocated
pursuant to Article VI, and the Partners' Capital Accounts shall be adjusted to
reflect such allocations. The amount distributed and charged to the Capital
Account of each Partner receiving an interest in such distributed asset shall be
the Fair Market Value of such interest (net of any liability secured by such
asset that such Partner assumes or takes subject to). The Fair Market Value of
such asset shall be determined by the Liquidators or if any Partner 



                                      -40-
   46

objects, by an independent appraiser (any such appraiser must be recognized as
an expert in valuing the type of asset involved) selected by the Liquidators and
approved by all the Partners.

         9.4 Liquidation Distributions. Upon liquidation of the Partnership,
distributions shall be made pursuant to Regulation Section
1.704-1(b)(2)(ii)(b)(2). Unless otherwise required by the immediately preceding
sentence, after determining that all the known debts and liabilities of the
Partnership, including, without limitation, debts and liabilities to Partners
who are creditors of the Partnership, have been paid or adequately provided for,
the remaining assets shall be distributed to the Partners in accordance with
Section 6.3.

         9.5 No Deficit Restoration Requirements. If, upon liquidation, any
Partner has a deficit balance in its Capital Account, after taking into account
all permitted Capital Account adjustments for the Partnership's taxable year
during which liquidation occurs, such Partner shall have no obligation to
contribute capital to the Partnership on account thereof and such deficit
balance shall not be considered a debt owed by such Partner to the Partnership
or to any other Person for any purpose whatsoever.

         9.6 Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement, each Partner shall look solely to the
assets of the Partnership for any payment with respect to its Partnership
Interest and shall have no recourse for its Capital Contribution and/or share of
distributions against the other Partners.

         9.7 Certificate of Cancellation. The Liquidators shall cause to be
filed in the office of, and on a form prescribed by, the Delaware Secretary of
State, a certificate of cancellation of the Partnership (or its equivalent) upon
the completion of the winding up of the affairs of the Partnership.

         9.8 No Action for Dissolution. The Partners acknowledge that
irreparable damage would be done to the goodwill and reputation of the
Partnership if any Partner should bring an action in court to dissolve the
Partnership under circumstances where dissolution is not required by Section
9.1. This Agreement has been drawn carefully to provide fair treatment of all
parties and equitable payment in liquidation of the Partnership Interests.
Accordingly, except where the Managing Partner has failed to liquidate the
Partnership as required by this Article IX, each Partner hereby waives and
renounces his or her right to initiate legal action to seek the appointment of a
receiver or trustee to liquidate the Partnership or to seek a decree of judicial
dissolution of the Partnership on any ground including, but not limited to, that
(a) it is not reasonably practicable to carry on the business of the Partnership
in conformity with this Agreement, or (b) dissolution is reasonably necessary
for the protection of the rights or interests of the complaining Partner.



                                      -41-
   47


                                   ARTICLE X

                                INDEMNIFICATION

         Indemnification of Agents. The Partnership shall and does hereby
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he or she is or was a Partner, officer, employee or other agent of
the Partnership or that, being or having been such a Partner, officer, employee
or agent, he or she is or was serving at the request of the Partnership as a
manager, director, officer, employee or other agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise (all
such persons being referred to hereinafter as an "agent"), to the fullest extent
permitted by applicable law in effect on the date hereof and to such greater
extent as applicable law may hereafter from time to time permit; provided,
however, that nothing herein shall protect any such Person from liability
arising from the fraud, gross negligence or willful or intentional misconduct by
such Person, or the activities of such Person taken outside the scope of such
Person's duties and authority as a director, officer, shareholder, member,
manager, partner, employee or agent of the Partnership or its Subsidiaries, as
applicable. The Managing Partner shall be authorized, on behalf of the
Partnership, to enter into indemnity agreements from time to time with any
Person entitled to be indemnified by the Partnership hereunder, upon such terms
and conditions as the Managing Partner deems appropriate in its business
judgment.

                                   ARTICLE XI

                                  ARBITRATION

         11.1 Arbitration of Claims. Except for the matters included in Sections
5.12A.5, 7.8 and 7.11, any other controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules and judgment on the award rendered by a majority of
the arbitrators appointed pursuant to Section 11.2 of this Agreement may be
entered in any court having jurisdiction thereof. Any such arbitration
proceeding shall be held in Washington, D.C. Any arbitrator selected pursuant to
this Article 11 shall have experience in managing, developing and marketing
residential real estate projects of the kind and nature that the Partnership and
its Partners have been associated with.

         11.2 Selection of Arbitrators. Either General Partner may demand
arbitration in writing within ten (10) days after a controversy arises, which
demand shall include the name of the arbitrator appointed by the party demanding
arbitration, together with a statement of the matter in controversy. Within ten
(10) days after such demand, the other General Partner shall name its
arbitrator, or in default of such naming, such second arbitrator shall be named
by the Arbitration Committee of the American Arbitration Association, and the
two arbitrators so selected shall name a third arbitrator within five (5) days
after the selection of the second arbitrator and the three arbitrators shall
conduct the arbitration, with the award being determined 



                                      -42-
   48

by the decision of a majority of the arbitrators. The General Partners agree to
diligently endeavor to bring such arbitration to conclusion within sixty (60)
days with the award of the arbitrators to be made no later than thirty (30) days
after the conclusion of presentations by the parties.

         11.3 Arbitration Fees and Expenses. All fees and expenses of the
arbitration shall be borne by the parties equally. However, each party shall
bear the expense of its own counsel, experts, witnesses, and preparation and
presentation of proofs.

NOTICE: BY INITIALING THE SPACE BELOW, EACH OF THE MANAGING PARTNER, THE
NON-MANAGING PARTNER AND THE LIMITED PARTNERS ARE AGREEING TO THE MATTERS
INCLUDED IN THIS ARTICLE XI AND IN SECTIONS 5.12A.5, 7.8 AND 7.11, ARE GIVING
UP ANY RIGHTS IT MAY POSSESS TO HAVE THE DISPUTES DESCRIBED HEREIN LITIGATED IN
A COURT, WITH OR WITHOUT A JURY TRIAL, AND ARE GIVING UP ANY RIGHTS TO DISCOVERY
AND APPEAL. EACH OF THE MANAGING PARTNER, THE NON-MANAGING PARTNER AND THE
LIMITED PARTNERS HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT ALL
DISPUTES TO ARBITRATION AS PROVIDED HEREIN.

/s/                                             /s/      
- ---------------------------                     --------------------------------
MANAGING PARTNER SENIOR V.P.                    NON-MANAGING PARTNER V.P.

/s/                                             /s/
- ---------------------------                     --------------------------------
ST. JOE DEVELOPMENT                             JMB LP
SENIOR V.P.
                                  ARTICLE XII

                                 MISCELLANEOUS

         12.1 Complete Agreement. This Agreement and the Certificate constitute
the complete and exclusive statement of agreement among the Partners with
respect to the subject matter herein and therein and replace and supersede all
prior written and oral agreements or statements by and among the Partners or any
of them. No representation, statement, condition or warranty not contained in
this Agreement or the Certificate will be binding on the Partners or have any
force or effect whatsoever. Notwithstanding the foregoing, the Partners
acknowledge the existence of the Asset Contribution Agreement and the various
documents and instruments executed and delivered in connection therewith, and
they hereby agree that nothing in this Agreement shall render void or
ineffective any provision of same; provided, however, that to the extent any of
the express provisions of this Agreement shall be in conflict with any of the
express provisions of the Asset Contribution Agreement, or any such other
document and instrument unless expressly agreed to by the parties thereto, the
provisions of this Agreement shall be controlling.



                                      -43-
   49

         12.2 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Partners and their respective successors and assigns.

         12.3 Parties in Interest. Except as expressly provided in this
Agreement, nothing in this Agreement shall confer any rights or remedies under
or by reason of this Agreement on any Persons other than the Partners and their
respective permitted successors and assigns, nor shall anything in this
Agreement relieve or discharge the obligation or liability of any third person
to any party to this Agreement, nor shall any provision give any third person
any right of subrogation or action over or against any party to this Agreement.

         12.4 Pronouns; Statutory References. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, singular
or plural, as the context in which they are used may require. Any reference to
the Code, the Regulations, the Act, or other statutes or laws will include all
amendments, modifications, or replacements of the specific sections and
provisions concerned.

         12.5 Headings. All headings herein are inserted only for convenience
and ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.

         12.6 Interpretation. This Agreement is the result of negotiations among
the parties. Therefore, in the event any claim is made by any Partner relating
to any conflict, omission or ambiguity in this Agreement, no rule of
construction, presumption or burden of proof or persuasion shall be implied by
virtue of the fact that this Agreement or any provision hereof was prepared by
or at the request of a particular Partner or its counsel.

         12.7 References to this Agreement. Numbered or lettered articles,
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.

         12.8 Exhibits and Schedules. All Exhibits and Schedules attached to
this Agreement, if any, are incorporated and shall be treated as if set forth
herein.

         12.9 Severability. If any provision of this Agreement or the
application of such provision to any Person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
Persons or circumstances other than those to which it is held invalid shall not
be affected thereby.

         12.10 Additional Documents and Acts. Each Partner agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby.



                                      -44-
   50

         12.11 Notices. Any notice or other communication required or permitted
to be made or given under this Agreement shall be in writing and shall be deemed
to have been received by the party to whom it is addressed: (i) on the date
indicated on the United States certified or registered mail return receipt; (ii)
on the date actually received if hand delivered or if transmitted by facsimile
(receipt of which is confirmed to sender); or (iii) on the Business Day after
such notice was delivered to an overnight delivery service, addressed, delivered
or transmitted in each case as follows:

To the Partnership:
St. Joe/Arvida Company, L.P.
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
Attention:   Charles A. Ledsinger
Telephone:   (904) 396-6600
Facsimile:   (904) 858-5265

With a copy to:
JMB Southeast Development, LLC
900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention:   Stephen A. Lovelette
Telephone:   (312) 915-2856
Facsimile:   (312) 915-2310

and to:

JMB Southeast Development, LLC
900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention:   Gary A. Nickele
Telephone:   (312) 915-1977
Facsimile:   (312) 915-1023


To Managing Partner and St. Joe Development:
c/o St. Joe/Arvida Company, Inc.
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
Attention:   Charles A. Ledsinger
Telephone:   (904) 396-6600
Facsimile:   (904) 858-5265



                                      -45-
   51

With a copy to:
St. Joe Corporation
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
Attention:   Robert M. Rhodes
Telephone:   (904) 396-6600
Facsimile:   (904) 858-5237

To Non-Managing Partner and JMB LP:
c/o JMB Southeast Development, LLC
900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention:   Stephen A. Lovelette
Telephone:   (312) 915-2856
Facsimile:   (312) 915-2310

With a copy to:
JMB Southeast Development, LLC
900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention:   Gary A. Nickele
Telephone:   (312) 915-1977
Facsimile:   (312) 915-1023

Any Partner may, at any time by giving five (5) days' prior written notice to
the other Partner, designate any other address in substitution of the foregoing
address to which such notice will be given.

         12.12 Amendments. This Agreement may not be amended in any way, except
by the unanimous vote or written consent of the Partners of the Partnership.

         12.13 Reliance on Authority of Person Signing Agreement. If a Partner
is not a natural person, neither the Partnership, any Partner nor any third
party will (a) be required to determine the authority of the individual signing
this Agreement to make any commitment or undertaking on behalf of such entity or
to determine any fact or circumstance bearing upon the existence of the
authority of such individual or (b) be responsible for the application or
distribution of proceeds paid or credited to individuals signing this Agreement
on behalf of such entity.

         12.14 No Interest in Partnership Property, Waiver of Action for
Partition. No Partner has any interest in specific property of the Partnership.
Without limiting the foregoing, each Partner irrevocably waives during the term
of the Partnership any right that it may have to maintain any action for
partition with respect to the property of the Partnership.



                                      -46-
   52

         12.15 Multiple Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.

         12.16 Time is of the Essence. All dates and times in this Agreement are
of the essence.

         12.17 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any Person may be
lawfully entitled.

        IN WITNESS WHEREOF, the Partners of St. Joe/Arvida Company, L.P., a
Delaware limited partnership, have executed this Agreement, effective as of the
date written above.

                                    MANAGING PARTNER:                        
                                                                             
                                    ST. JOE/ARVIDA COMPANY, INC.,            
                                    a Florida corporation                    
                                                                             
                                                                             
                                    By:  /s/ Robert M. Rhodes        
                                         ------------------------------------
                                    Its: Senior Vice President               
                                         ------------------------------------
                                                                             
                                                                             
                                                                             
                                    NON-MANAGING PARTNER:                    
                                                                             
                                    JMB SOUTHEAST DEVELOPMENT, LLC,          
                                    a Delaware limited liability company     
                                                                             
                                    By:  /s/ Stephen A. Lovelette            
                                         ------------------------------------
                                    Its: STEPHEN A. LOVELETTE                
                                         ------------------------------------
                                         Vice President                     


                                      -47-
   53


                                    LIMITED PARTNERS:                     
                                                                          
                                    JMB SOUTHEAST DEVELOPMENT, L.P.,      
                                    a Delaware limited partnership        
                                                                          
                                    By: EDUCATION PARTNERS, L.P.,         
                                        a Delaware limited partnership,   
                                        General Partner                   
                                                                          
                                        By: A/J ACQUISITIONS COMPANY,     
                                            a Delaware corporation,       
                                            General Partner               
                                                                          
                                            By:  /s/ Dennis M. Quinn
                                                 -----------------------------
                                            Its: Vice President
                                                 -----------------------------
                                                                          
                                                                          
                                    ST. JOE DEVELOPMENT, INC., a Florida 
                                    corporation      
                                                                          
                                                                          
                                    By:  /s/ Robert M. Rhodes
                                         -------------------------------------
                                    Its: Senior Vice President
                                         -------------------------------------
                                                                          
                                                                          
Joinder for the purposes set forth in this Agreement:

ST. JOE CORPORATION,
a Florida corporation


By:  /s/ Robert M. Rhodes
     -------------------------------------
Its: Senior Vice President
     -------------------------------------




                                      -48-
   54


                                   EXHIBIT A

                 Initial Capital Contributions of the Partners







                                                                AGREED FAIR MARKET
                                                CASH            VALUE OF PROPERTY
                                            -------------       ------------------
                                                                      
St. Joe/Arvida Company, Inc.

St. Joe Development, Inc.   

JMB Southeast Development, L.L.C.

JMB Southeast Development, L.P.  




   55
                         LIMITED PARTNERSHIP AGREEMENT
                                 SCHEDULE 5.3A

                                ARVIDA ENTITIES



       NAME                                             STATE OF ORG.              TYPE OF ENTITY
       ----                                             -------------              --------------

                                                                       
Arvida-BR Investors                                     Illinois             General Partnership
Arvida-BR Managers, Inc.                                Delaware             Corporation (for profit)
Arvida-Bridle Ridge Managers, L.P.                      Delaware             Limited Partnership
Arvida-Bridle Ridge Partners, L.P.                      Delaware             Limited Partnership
Arvida-CCG, L.L.C.                                      Delaware             Limited Liability Company
Arvida-Hickory Springs Manager, Inc.                    Delaware             Corporation (for profit) 
Arvida-Hickory Springs Partners Limited Partnership     Delaware             Limited Partnership     
Arvida-Hickory Springs Managers, Limited Partnership    Delaware             Limited Partnership      
Arvida-Sawmill Lakes Managers, Limited Partnership      Delaware             Limited Partnership      
Arvida-Sawmill Lakes Partners, Limited Partnership      Delaware             Limited Partnership     
Arvida-TC Investors                                     Illinois             General Partnership
Arvida-TC Managers, L.P.                                Delaware             Limited Partnership
Arvida-TC Sales, L.L.C.                                 Texas                Limited Liability Company
Arvida-Twin Creeks Partners L.P.                        Delaware             Limited Partnership
Arvida Builders, Inc.                                   Florida              Corporation (for profit)
Arvida Commercial Realty, Inc.                          Florida              Corporation (for profit)
Arvida Company                                          Illinois             Corporation (for profit)
Arvida Contractors-II, Inc.                             Delaware             Corporation (for profit)
Arvida Contractors-II, L.P.                             Delaware             Limited Partnership
Arvida Contractors Limited Partnership                  Delaware             Limited Partnership
Arvida Contractors, Inc.                                Florida              Corporation (for profit)
Arvida Corporate Park Associates                        Florida              General Partnership
Arvida Grand Bay Limited Partnership-I                  Delaware             Limited Partnership
Arvida Grand Bay Limited Partnership-II                 Delaware             Limited Partnership
Arvida Grand Bay Limited Partnership-III                Delaware             Limited Partnership
Arvida Grand Bay Limited Partnership-IV                 Delaware             Limited Partnership
Arvida Grand Bay Limited Partnership-V                  Delaware             Limited Partnership
Arvida Grand Bay Limited Partnership-VI                 Delaware             Limited Partnership
Arvida Grand Bay Managers, Inc.                         Delaware             Corporate (for profit)
Arvida Grand Bay Properties, Inc.                       Delaware             Corporate (for profit)
Arvida Home Builders, Inc.                              Delaware             Corporate (for profit)
Arvida Management Co. of Georgia, Inc.                  Delaware             Corporate (for profit)
Arvida Management Limited Partnership                   Delaware             Limited Partnership
Arvida Managers, Inc.                                   Florida              Corporation (for profit)
Arvida Oaks II, Ltd.                                    Florida              Limited Partnership
Arvida Pompano Associates Joint Venture                 Florida              General Partnership
Arvida Realty Company                                   Delaware             Corporation (for profit)
Arvida Realty Contracting, L.L.C.                       Delaware             Limited Liability Company
Arvida Realty Limited Partnership                       Delaware             Limited Partnership




   56


                                                      Residential - Continued
                                                      -----------------------

       NAME                                             STATE OF ORG.              TYPE OF ENTITY
       ----                                             -------------              --------------

                                                                       
Arvida Realty At Boca West, Inc.                        Florida              Corporation (for profit)
Arvida Realty Sales Limited Partnership                 Delaware             Limited Partnership
Arvida Realty Sales of Georgia, Inc.                    Georgia              Corporation (for profit)
Arvida Realty Sales, Inc.                               Florida              Corporation (for profit)
Arvida/Heathrow Cable, Inc.                             Delaware             Corporation (for profit)
Arvida/Heathrow Club, Inc.                              Delaware             Corporation (for profit)
Arvida/Heathrow Developers Limited Partnership          Delaware             Limited Partnership
Arvida/Heathrow Realty Sales, Inc.                      Delaware             Corporation (for profit)
Arvida/Jacksonville Contractors, Inc.                   Delaware             Corporation (for profit)
Arvida/Jacksonville Contractors, L.P.                   Delaware             Limited Partnership
Arvida/JMB Associates                                   Illinois             General Partnership
Arvida/JMB Associates Limited Partnership-II            Illinois             Limited Partnership
Arvida/JMB Limited Partnership                          Illinois             Limited Partnership
Arvida/JMB Managers-II, Inc.                            Delaware             Corporation (for profit)
Arvida/JMB Managers, Inc.                               Delaware             Corporation (for profit)
Arvida/JMB Partners                                     Florida              General Partnership
Arvida/JMB Partners, L.P.                               Delaware             Limited Partnership
Arvida/JMB Partners, L.P.-II                            Delaware             Limited Partnership
Arvida/Lakes Managers, Inc.                             Delaware             Corporation (for profit)
Arvida/Lakes Plaza, L.P.                                Delaware             Limited Partnership
Arvida/River Hills Contractors, Inc.                    Delaware             Corporation (for profit)
Arvida/River Hills Contractors, L.P.                    Delaware             Limited Partnership
Arvida/Weston Contractors-III, L.P.                     Delaware             Limited Partnership
Arvida/Weston Contractors-II, L.P.                      Delaware             Limited Partnership
Arvida/Weston Contractors-I, L.P.                       Delaware             Limited Partnership
Arvida/Weston Contractors, Inc.                         Delaware             Corporation (for profit)
Arvida/Weston Realty Sales Limited Partnership          Delaware             Limited Partnership
Education Partners, L.P. d/b/a Arvida/JMB               Delaware             Limited Partnership
Acquisitions, Ltd.
Arvida Company of Illinois (d/b/a on file in Arizona)


                                   PROPERTIES
                                            
                                  Residential
                                             

Palm Beach County, Florida               Jacksonville, Florida
     Broken Sound                            Sawgrass Country Club
                                             The Players Club
Weston, Florida                              Jacksonville Golf & Country Club
     Weston                                  Sawmill Lakes


                                       2

   57


                            Residential - Continued





Sarasota/Tampa, Florida                   Cobb County, Georgia
    River Hills Country Club                  Hickory Springs
    Grand Bay
                                          Gwinnett County, Georgia
Seminole County, Florida                     Country Club of Gwinnett
    Heathrow
                                          Forsythe County, Georgia
Cherokee County, Georgia                      Bridle Bridge
    Eagle Watch
                                          Dekalb County, Georgia
                                              Water's Edge
North Carolina                                Dockside
    Cullasaja





Commercial and Industrial


Arvida Parkway Center, Boca Raton
Arvida Executive Center, Boca Raton
Arvida Park Center, Sarasota
Arvida Pompano Park, Pompano Beach
Arvida Corporate Park, Tampa
Arvida Lakes Plaza, Weston
Metrodrama Joint Venture Property, Palm Beach County
HAE Joint Venture Property, Palm Beach County













                                       3

   58

                         LIMITED PARTNERSHIP AGREEMENT
                                 SCHEDULE 5.4M
                               LICENSE AGREEMENTS

1.       License Agreement by and between Arvida/JMB Partners, L.P., a Delaware
         limited partnership ("Arvida-I") and Arvida Company, an Illinois
         corporation ("Arvida"), set forth as Exhibit A to that certain
         Management, Advisory and Supervisory Agreement, dated as of September
         10, 1987, by and between Arvida-I and Arvida.

2.       License Agreement by and between Arvida/JMB Partners, L.P.-II, a
         Delaware limited partnership ("Arvida-II"), and Arvida, set forth as
         Exhibit A to that certain Management Agreement, dated as of October 16,
         1989, by and between Arvida-II and Arvida.

3.       License Agreement by and between Arvida-Bridle Ridge Partners, L.P., a
         Delaware limited partnership ("Arvida-Bridle"), and Arvida, set forth
         as Exhibit A to that certain Management Agreement, dated as of June 1,
         1994, by and among Arvida-Bridle, Arvida-Bridle Ridge Managers, L.P., a
         Delaware limited partnership, and Arvida.

4.       License Agreement by and between Arvida-Hickory Springs Partners
         Limited Partnership, a Delaware limited partnership ("Arvida-Hickory"),
         and Arvida, set forth as Exhibit A to that certain Management
         Agreement, dated as of December 9, 1996, by and among Arvida-Hickory,
         Arvida-Hickory Springs Managers, Limited Partnership, a Delaware
         limited partnership, and Arvida.

5.       License Agreement by and between Arvida-Sawmill Lakes Partners Limited
         Partnership, a Delaware limited partnership ("Arvida-Sawmill"), and
         Arvida, set forth as Exhibit A to that certain Management Agreement,
         dated as of July 1, 1996, by and among Arvida-Sawmill, Arvida-Sawmill
         Lakes Managers, Limited Partnership, a Delaware limited partnership,
         and Arvida.

6.       License Agreement by and between Heathrow Land Company Limited
         Partnership, a Florida limited partnership ("Heathrow"), and Arvida,
         set forth as Exhibit A to that certain Development Management
         Agreement, dated as of June 14, 1996, by and between Heathrow and
         Arvida.

7.       License Agreement, dated as of December 30, 1996, by and between
         Country Club of Gwinnett, L.L.C. and Arvida.

8.       License Agreement, dated as of October 17, 1997, by and between
         Stanford Lake Hotel, Inc. and Arvida.

9.       License Agreement dated November 12, 1997, by and between the
         Partnership and Arvida.




   59
                         LIMITED PARTNERSHIP AGREEMENT
                               SCHEDULE 5.12A(1)
                               EXCLUDED PROJECTS



1.   Arcadia Land Company projects

2.   Seaside (500 Acres in Florida panhandle)

3.   Boulevard Company (Infill residential properties)
   60
                         LIMITED PARTNERSHIP AGREEMENT
                                 SCHEDULE 5.13
                              PARTNERSHIP OFFICERS





NAME                     TITLE
- ----                     -----
                      
AMBACH, MARK             VP & PROJECT MANAGER

BROWN, MORGAN            PROJECT MANAGER

BARIC, JOHN              VP & GENERAL COUNSEL

GRAB, JOHN               VP & PROJECT GENERAL MANAGER

HILL, MILES E.           VP & PROJECT MANAGER

JENNESSE, MARGARET       PROJECT MANAGER

KUZMA, THOMAS            DIRECTOR, IS

LARSEN, RICHARD          VP SALES & MARKETING

LASSMAN, MARK            VP & CORPORATE CONTROLLER

MEARS, DONALD            VP, DEVELOPMENT

MOTTA, JAMES             PRESIDENT & CEO

PASKOW, ROY              VP & PROJECT GENERAL MANAGER

SIEGEL, THOMAS           VP

1
EXHIBIT 2.02

AGREEMENT OF LIMITED PARTNERSHIP OF

ST. JOE/CNL REALTY GROUP, LTD.,

A FLORIDA LIMITED PARTNERSHIP

DATED AS OF

DECEMBER 3, 1997

TABLE OF CONTENTS

Page
----

ARTICLE ONE - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 "Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 "Adjusted Capital Account Deficit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 "Adjusted Capital Contributions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 "Annual Partnership Business Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 "Assignee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7 "Authorized Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.8 "Bankrupt Partner" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.9 "Budget" or "Budgets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.10 "Capital Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.11 "Capital Contribution" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.12 "Capital Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.13 "Carrying Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.14 "Cash Flow" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.15 "CCP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.16 "CCP Management Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.17 "Central Florida Region" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.18 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.19 "Contributed Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.20 "Controllable Costs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.21 "Corporate Facilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.22 "Debenture" or "Debentures" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.23 "Event of Bankruptcy" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.24 "Fair Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.25 "Income Tax Regulations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.26 "IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.27 "Management Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.28 "Managing Partner" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.29 "Material" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.30 "Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.31 "Nonrecourse Deductions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.32 "Nonrecourse Liability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.33 "Partner" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.34 "Partner Nonrecourse Debt Minimum Gain" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.35 "Partner Nonrecourse Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.36 "Partner Nonrecourse Deductions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.37 "Partnership Budget" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.38 "Partnership Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

(i)
3

TABLE OF CONTENTS (cont'd)

Page
----

Section 1.39 "Partnership Minimum Gain" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.40 "Percentage Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.41 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.42 "Plan" or "Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.43 "Project Budget" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.44 "Project Financing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.45 "Project Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.46 "Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.47 "Subsidiary" or "Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.48 "Substitute Limited Partner" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE TWO - ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.2 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.3 Foreign Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.4 Effective Date; Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.5 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE THREE - NAME AND PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 Name and Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 Fictitious Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE FOUR - PURPOSES AND POWERS OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1 Purposes of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2 Powers of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.3 First Option as to Potential Property Acquisition, Development and Other Opportunities . . 12

ARTICLE FIVE - CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.1 Limited Partners' Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.2 General Partners' Capital Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.3 Liability of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.5 Additional Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.6 Repayment of Capital Contributions of Limited Partners; Distributions and Withdrawals . . . 14
Section 5.7 No Priorities among Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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Section 5.8 Agreement to Fund Capital Contributions to Subsidiaries . . . . . . . . . . . . . . . . . . 14
Section 5.9 Additional Required Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE SIX - ALLOCATION OF NET PROFIT AND LOSS; DISTRIBUTIONS; ACCOUNTING . . . . . . . . . . . . . . . . . . . . . 17
Section 6.1 Allocation of Net Profit and Loss and Capital Proceeds . . . . . . . . . . . . . . . . . . 17
Section 6.2 Distributions of Capital Proceeds and Cash Flow . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.3 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.4 Capital Accounts; Capital Account Adjustments; 704(c) Tax Allocations . . . . . . . . . . . 19
Section 6.5 Special Allocation Provisions 21
Section 6.6 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.7 Charges Carried Against Capital Accounts; Deficit Restoration Obligation . . . . . . . . . 22
Section 6.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.9 Interest of the General Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE SEVEN - MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.1 Management of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2 Day-to-Day Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.3 Duties of the Managing Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.4 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.5 Compensation of the Managing Partner; Affiliated Contracts . . . . . . . . . . . . . . . . 29
Section 7.6 Budgets and Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE EIGHT - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.1 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.2 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.4 Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE NINE - MEETINGS OF THE PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.1 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.2 Meetings of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.3 Amendment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

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ARTICLE TEN - RESTRICTIONS ON TRANSFERS OF INTEREST IN THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.1 Restrictions of Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.2 Transfer of Limited Partners' Partnership Interests . . . . . . . . . . . . . . . . . . . . 35
Section 10.3 Conditions and Effect of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.4 Liabilities of Transferring Limited Partners . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.5 Record Owner of Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.6 Admission of Additional Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.7 Death, Incompetency, or Dissolution of a Limited Partner . . . . . . . . . . . . . . . . . 37

ARTICLE ELEVEN - ADDITION OR WITHDRAWAL OF A GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.1 Additional General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.2 Withdrawal, Default or Insolvency of a General Partner; Purchase Option . . . . . . . . . . 38
Section 11.3 Mediation of Disputes; Reciprocal Purchase Rights . . . . . . . . . . . . . . . . . . . . . 41

ARTICLE TWELVE - DISSOLUTION OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.1 Dissolution; Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.2 Liquidation of Assets; Payment of Debts . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.3 Debts to Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.4 Distributions to Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.5 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 12.6 Final Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

ARTICLE THIRTEEN - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 13.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 13.2 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 13.3 Advancement of Legal Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 13.4 Liability of Exculpated Parties and Partners . . . . . . . . . . . . . . . . . . . . . . . 46

ARTICLE FOURTEEN - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 14.1 Reliance Upon General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 14.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 14.3 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

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Section 14.6 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14.7 Counterpart Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14.8 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14.9 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14.10 Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 14.11 Amendment, Waiver or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 14.12 Strict Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 14.13 Costs of Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 14.14 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 14.15 Entire Agreement; Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 50

EXHIBIT A - DEVELOPMENT OPPORTUNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

EXHIBIT B - FORM OF DEBENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

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AGREEMENT OF LIMITED PARTNERSHIP OF

ST. JOE/CNL REALTY GROUP, LTD.,

A FLORIDA LIMITED PARTNERSHIP

THIS AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") is made and
entered into effective this 3rd day of December, 1997, by and between ST. JOE
CENTRAL FLORIDA MANAGEMENT, INC., a Florida corporation ("St. Joe Management"),
and CNL CORPORATE VENTURE, INC., a Florida corporation ("CNL Venture"), as
General Partners, and ST. JOE CENTRAL FLORIDA DEVELOPMENT, INC. a Florida
corporation ("St. Joe Development") and CNL CORPORATE VENTURE I, INC., a
Florida corporation ("CNL Venture I"), as Limited Partners. The General
Partners and the Limited Partners are sometimes hereinafter referred to
individually as a "Partner" and collectively as the "Partners."

WHEREAS, the Partners have elected to form a limited partnership (the
"Partnership") under the Florida Revised Uniform Limited Partnership Act for
the purposes set forth in Section 4.1 hereinbelow; and

NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

ARTICLE ONE

DEFINITIONS

Section 1.1 "Act" means the Florida Revised Uniform Limited
Partnership Act (1986), as amended.

Section 1.2 "Adjusted Capital Account Deficit" means, with
respect to any Partner, the deficit balance, if any, in such Partner's Capital
Account as of the end of the relevant fiscal year after crediting such Capital
Account for any amounts the Partner is deemed obligated to restore pursuant to
the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Income Tax Regulations, this Agreement or otherwise, and debiting such Capital
Account for the items described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Income Tax
Regulations. The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Income Tax Regulations and shall be interpreted consistently therewith.

Section 1.3 "Adjusted Capital Contributions" means the excess of
(a) each Partner's total capital contributions to the Partnership over (b) the
prior total distributions to each Partner pursuant to Sections 6.2 and 12.4
hereof.
8

Section 1.4 "Affiliate" means, with respect to any Partner, (a)
any Person that directly or indirectly controls, is controlled by, or is under
common control with, such Partner; (b) any entity of which a Partner owns five
percent (5%) or more of the outstanding voting power; and (c) any entity of
which a Partner is an officer, director or general partner. As used in this
definition of "Affiliate," the term "control" means possessing, directly or
indirectly, the power for any reason whatsoever to direct or cause the
direction of the management and policies of an entity. Partners shall be
treated as affiliates for purposes of this Agreement. With respect to St. Joe
Management and St. Joe Development, "Affiliate" shall not include the Alfred I.
duPont Testamentary Trust.

Section 1.5 "Annual Partnership Business Plan" means the annual
business plan for the operation of the Partnership which is described in
Section 7.6(a) hereinbelow and approved by the Management Committee or General
Partners.

Section 1.6 "Assignee" means a Person who has acquired a
beneficial interest in the Partnership, but who is not a Substitute Limited
Partner.

Section 1.7 "Authorized Representative" means the Person
appointed by each General Partner to represent, manage the interests of, speak
for, and act on behalf of such General Partner as described in Section 7.1
hereinbelow.

Section 1.8 "Bankrupt Partner" means any Partner (a) that (i)
makes a general assignment for the benefit of creditors; (ii) files a voluntary
bankruptcy petition; (iii) becomes the subject of an order for relief or is
declared insolvent in any federal or state bankruptcy or insolvency
proceedings; (iv) files a petition or answer seeking for the Partner a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law; (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against the Partner in a proceeding of the type described in subclauses
(i) through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces
in the appointment of a trustee, receiver, or liquidator of the Partner or of
all or any substantial part of the Partner's properties; or (b) against which,
a proceeding seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any law has been commenced
and sixty (60) days have expired without dismissal thereof or with respect to
which, without the Partner's consent or acquiescence, a trustee, receiver, or
liquidator of the Partner or of all or any substantial part of the Partner's
properties has been appointed and sixty (60) days have expired without the
appointments having been vacated or stayed, or sixty (60) days have expired
after the date of expiration of a stay, if the appointment has not previously
been vacated.

Section 1.9 "Budget" or "Budgets" mean, individually or
collectively as the context may require, Partnership Budgets and Project
Budgets.

Section 1.10 "Capital Account" means, as to any Partner, the
account maintained for such Partner pursuant to Section 6.4 hereof, as adjusted
from time to time.

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Section 1.11 "Capital Contribution" means, with respect to any
Partner, the initial Fair Value of any Contributed Property with respect to the
Percentage Interest in the Partnership held by such Partner. The principal
amount of a promissory note which is not readily tradeable on an established
securities market and which, subject to the agreement of all of the General
Partners, is contributed to the Partnership by the maker of the note shall not
be included in the Capital Account of any Partner until the Partnership makes a
taxable disposition of the note or until (and to the extent) principal payments
are made on the note, all in accordance with Income Tax Regulations Section
1.704(b)(2)(iv)(d)(2). The initial Capital Contributions are set forth in
Article Five hereinbelow.

Section 1.12 "Capital Proceeds" means the proceeds received by the
Partnership derived from (a) dividends or distributions paid by a Subsidiary or
any other entity, (b) the sale, exchange or other disposition by the
Partnership or any Subsidiary of all or any portion of the assets of the
Partnership or such Subsidiary, other than in the ordinary course of the
business of the Partnership or such Subsidiary, (c) any mortgage financing or
refinancing of any mortgage loans on any Property by a Subsidiary, or (c) any
condemnation, casualty insurance or any other nonrecurring proceeds not used
for the restoration of any Property by a Subsidiary.

Section 1.13 "Carrying Value" means (a) with respect to
Contributed Property, the Fair Value of such property reduced (but not below
zero) by all amortization, depreciation and cost recovery deductions charged to
the Partners' Capital Accounts with respect to such property, as well as any
other charges for sales, retirements and other dispositions of assets included
in a Contributed Property, as of the time of determination, and (b) with
respect to any other property, the adjusted basis of such property for federal
income tax purposes as of the time of determination. The Carrying Value of any
property shall be adjusted in accordance with the principles set forth in
Article Six hereinbelow.

Section 1.14 "Cash Flow" means the net taxable income or loss of
the Partnership for federal income tax purposes, other than "Capital Proceeds,"
plus the amount of all depreciation and any other noncash charges deducted in
determining taxable income or loss, less (a) the amount of all expenditures
which are not deductible for federal income tax purposes, (b) a reasonable
reserve for such business needs of the Partnership as taxes, insurance,
maintenance, repairs and replacement of capital items and other amounts as
reasonably determined by the Managing Partner, offset by amounts currently
included in taxable income or loss which were previously reserved, (c) a
reserve for budgeted expenditures, and, in accordance with Section
1.704-1(b)(2)(iv)(d)(2) of the Income Tax Regulations, offset by amounts
currently included in taxable income or loss which were previously reserved,
(d) a predevelopment reserve for future projects which may be undertaken by
Subsidiaries in an amount reasonably determined by the Management Committee,
and (e) repayments on all indebtedness.

Section 1.15 "CCP" means CNL Corporate Properties, Inc., an
Affiliate of CNL Venture and CNL Venture I.

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Section 1.16 "CCP Management Agreement" means the management
agreement between the Partnership and CCP, pursuant to which CCP shall manage
the business and affairs of the Partnership as described in Section 7.5
hereinbelow.

Section 1.17 "Central Florida Region" means the following counties
in the state of Florida: Lake, Seminole, Orange, Osceola, Sumter, Hernando,
Pasco, Hillsborough, Pinellas, Polk, Hardee, De Soto, Highlands, Manatee,
Sarasota, Volusia and Brevard.

Section 1.18 "Code" means the Internal Revenue Code of 1986, as
amended or superseded from time to time.

Section 1.19 "Contributed Property" means each Partner's interest
in property or other consideration (excluding services) contributed to the
Partnership by such Partner.

Section 1.20 "Controllable Costs" means the costs or expenses
related to the development, construction, or operation of a project undertaken
by a Subsidiary the incurrence or magnitude of which is within the direct
control and discretion of the Managing Partner; provided, however, a cost or
expense which is reasonably required to be incurred in order to comply with
terms and parameters of a Project Plan approved by the Management Committee or
General Partners or any contract, agreement, lease or other obligation of the
Partnership or any Subsidiary which was generally or specifically approved by
the Management Committee, General Partners, or Authorized Representatives as
part of a Project Plan or Project Budget will not be deemed a "Controllable
Cost". "Controllable Costs" shall not include any cost or expense which is
reasonably incurred or reasonably required to be incurred, or which increases,
as a result of or in connection with conditions or occurrences which change,
arise or are discovered during the development, construction or operation of a
project that are not within the direct control by the Managing Partner,
including, but not limited to, general economic conditions, general increases
in the cost of utilities, insurance or taxes of any nature, the adoption by any
governmental entity or agency having jurisdiction over the project of any law,
regulation, ordinance, guideline or requirement, or any amendment to any of the
foregoing, related to the development, construction or operation of the
project, labor trouble or strikes, the occurrence of any uninsured loss,
damage, casualty, or personal injury, natural occurrences and calamities or
acts of God (whether or not covered by insurance), civil unrest, riots or acts
of war or a public enemy (whether or not covered by insurance), breaches or
violations of laws, regulations, ordinances, guidelines or requirements by any
Person other than the Managing Partner and CCP, environmental or other
conditions related to the Property which were not or had not been discovered at
the time the applicable Project Plan and Project Budget was approved by the
Management Committee or General Partners, or cost increases imposed by any
Person providing materials, labor or services in connection with a project
which cannot reasonably be mitigated within the scope and parameters of the
applicable Project Plan.

Section 1.21 "Corporate Facilities" means office buildings,
industrial space and flex space, but shall not include medical or medical
office buildings.

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Section 1.22 "Debenture" or "Debentures" mean, individually or
collectively as the context may require, the Partnership's 10% Subordinated
Debentures due 2004 issued to St. Joe Management and CNL Venture in the
aggregate face amounts of $25,000,000 and $5,000,000, respectively, as provided
in Section 5.9 hereinbelow.

Section 1.23 "Event of Bankruptcy" means any event that causes a
Partner to be deemed a Bankrupt Partner under Section 1.6.

Section 1.24 "Fair Value" means the value determined in accordance
with the terms of Section 11.2(d) hereinbelow.

Section 1.25 "Income Tax Regulations" means the Income Tax
Regulations promulgated under the Code as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).

Section 1.26 "IRS" means the Internal Revenue Service.

Section 1.27 "Management Committee" means the committee comprised
of three Persons appointed by CNL Venture and three Persons appointed by St.
Joe Management which is responsible for the overall management and control of
the business and affairs of the Partnership.

Section 1.28 "Managing Partner" means CNL Venture.

Section 1.29 "Material" means, with respect to a Partnership
Budget, an aggregate overage of costs, expenses or expenditures of the
Partnership exceeding ten percent (10%) of the total amount of costs, expenses
and expenditures provided for in such Partnership Budget, and, with respect to
a Project Budget, an aggregate overage of Controllable Costs related to the
project which is the subject of the Project Budget exceeding five percent (5%)
of the total amount of costs, expenses and expenditures provided for in such
Project Budget. The defined term "Material" shall have no application in any
context other than as relates to a Budget.

Section 1.30 "Material Adverse Effect" means any circumstances,
developments, occurrences, state of facts or matters which have, or would
reasonably be expected to have, a material adverse effect in respect of the
operations, properties, assets, condition (financial or otherwise), results,
plans, strategies or prospects of the business of the Partnership taken as a
whole.

Section 1.31 "Nonrecourse Deductions" shall have the meaning set
forth in Section 1.704-2(b)(1) of the Income Tax Regulations. The amount of
Nonrecourse Deductions for a Partnership fiscal year equals the excess, if any,
of the net increase, if any, in the amount of Partnership Minimum Gain during
that fiscal year over the aggregate amount of any distributions during that
fiscal year of proceeds of a Nonrecourse Liability that are allocable to

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an increase in Partnership Minimum Gain, determined according to the provisions
of Section 1.704-2(c) of the Income Tax Regulations.

Section 1.32 "Nonrecourse Liability" shall have the meaning set
forth in Sections 1.704-2(b)(3) and 1.752- 1(a)(2) of the Income Tax
Regulations.

Section 1.33 "Partner" means any Person executing this Agreement
as of the date of this Agreement as a member of the Partnership or hereafter
admitted to the Partnership as a Substitute Limited Partner as provided in this
Agreement, but does not include any Assignee or any Person who has ceased to be
a Partner of the Partnership.

Section 1.34 "Partner Nonrecourse Debt Minimum Gain" means an
amount, with respect to each Partner Nonrecourse Debt, determined in accordance
with Section 1.704-2(i) of the Income Tax Regulations.

Section 1.35 "Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Income Tax Regulations.

Section 1.36 "Partner Nonrecourse Deductions" shall have the
meaning set forth in Section 1.704-2(i)(1) of the Income Tax Regulations. The
amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse
Debt for a Partnership fiscal year equals the excess, if any, of the net
increase, if any, in the amount of Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt during that fiscal year over the
aggregate amount of any distributions during the fiscal year to the Partner
that bears the economic risk of loss for such Partner Nonrecourse Debt to the
extent such distributions are from the proceeds of such Partner Nonrecourse
Debt and are allocable to an increase in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Section 1.702-2(i)(2) of the Income Tax Regulations.

Section 1.37 "Partnership Budget" means the annual operational
budget for the Partnership as described in Section 7.6(a) hereinbelow which is
approved by the Management Committee or the General Partners.

Section 1.38 "Partnership Interest" means, with respect to any
Partner, any interest whatsoever of such Partner in the Partnership, including,
but not limited to, a Partner's Percentage Interest.

Section 1.39 "Partnership Minimum Gain" shall have the meaning set
forth in Section 1.704-2(b)(2) of the Income Tax Regulations and shall be
determined in accordance with Section 1.704-2(d) of the Income Tax Regulations.

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Section 1.40 "Percentage Interest" means, with respect to any
Partner, such Partner's percentage profits interest in the Partnership. Each
Partner's Percentage Interest is expressed as a percentage of one hundred
percent (100%).

Section 1.41 "Person" means any individual, partnership, firm,
limited liability company, corporation, trust, association or other legal
entity.

Section 1.42 "Plan" or "Plans" mean, individually or collectively
as the context may require, Annual Partnership Business Plans and Project
Plans.

Section 1.43 "Project Budget" means any development budget as
described in Section 7.6(b) hereinbelow which is approved by the Management
Committee or the General Partners for any project undertaken by a Subsidiary.

Section 1.44 "Project Financing" means financing, refinancing or
indebtedness obtained or incurred by or on behalf of any Subsidiary to fund
acquisition, development, construction, operational or other costs and expenses
related to any project undertaken by such Subsidiary as approved by the General
Partners or Management Committee.

Section 1.45 "Project Plan" means any business or development plan
as described in Section 7.6(b) hereinbelow which is approved by the Management
Committee or the General Partners for any project undertaken by a Subsidiary.

Section 1.46 "Property" means, collectively and individually, all
of the real property owned by the Subsidiaries, together with all tangible and
intangible personal property and rights relating thereto.

Section 1.47 "Subsidiary" or "Subsidiaries" means, individually
and collectively, the wholly or majority owned entities formed or acquired by
the Partnership for the purposes generally described in Section 4.1 below.

Section 1.48 "Substitute Limited Partner" means any Person not a
Person executing this Agreement as of the date of this Agreement to whom all or
any portion of a Partnership Interest of a Limited Partner has been transferred
and who has been admitted to the Partnership as a Substitute Limited Partner
pursuant to and in accordance with the provisions of Article Ten hereinbelow.

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ARTICLE TWO

ORGANIZATION

Section 2.1 Formation. The parties hereto do hereby confirm the
formation of the Partnership pursuant to the provisions of the Act by the
filing of an Affidavit and Certificate of Limited Partnership on the date
hereof, and agree that the Partnership shall be governed by the terms and
conditions of this Agreement. The parties agree that they shall promptly file
any additional or supplemental amended Affidavit and Certificate of Limited
Partnership as may be required by the appropriate office in the State of
Florida, and in such other offices as may be required, and that the parties
shall comply with the other provisions and requirements of the Act as in effect
in Florida, which Act shall govern the rights and liabilities of the Partners
except as herein or otherwise expressly stated.

Section 2.2 Filings. The General Partners shall file, record,
and publish such certificates and other documents as may be necessary and
appropriate to comply with the requirements for the organization and operation
of a limited partnership under the Act.

Section 2.3 Foreign Qualification. In the event that the
business of the Partnership shall be carried on or conducted in other states in
addition to the State of Florida, then the parties agree that this Partnership
shall exist or shall be qualified under the laws of each such additional state
in which business is actually conducted by the Partnership, and they severally
agree to execute and authorize the General Partners to execute on their behalf
or on behalf of the Partnership such other and further documents as may be
necessary or appropriate to permit the General Partners to qualify this
Partnership, or otherwise comply with requirements for the formation and
organization of a limited partnership in all such states.

Section 2.4 Effective Date; Term. The Partnership shall be
effective as of the date of this Agreement and shall continue in existence
until December 31, 2025, unless sooner terminated pursuant to the terms of this
Agreement or by law (the "Term").

Section 2.5 Scope. The purpose, authority and scope of the
Partnership shall extend no further than the purposes set forth in Article
Four. This Agreement shall not be deemed or construed to create a relationship
between the Partners with respect to any activities whatsoever except for those
activities required for the accomplishment of the Partnership's purposes as
specified in Article Four.

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ARTICLE THREE

NAME AND PRINCIPAL OFFICE

Section 3.1 Name and Office. The name of the Partnership is "St.
Joe/CNL Realty Group, Ltd." Its principal office shall be at 400 East South
Street, Suite 500, Orlando, Florida 32801, or at such other address as the
Managing Partner notifies each Partner in writing in accordance herewith. The
address of the registered office of the Partnership in the State of Florida is
400 East South Street, Suite 500, Orlando, Florida 32801, or at such other
address as the General Partners notify each Limited Partner in writing in
accordance herewith. The registered agent of the Partnership in Florida shall
be Robert A. Bourne. The General Partners also shall have the right, without
notice to the Limited Partners, to establish a registered office or offices in
such other states as the General Partners deem necessary in order to qualify
the Partnership under the laws of any additional state in which the Partnership
actually conducts business.

Section 3.2 Fictitious Names. The business of the Partnership
shall be conducted under the name listed above or under such other names as the
General Partners deem appropriate to comply with the laws of any state in which
the Partnership does business. The General Partners shall execute and file in
the proper offices such certificates as may be required by the Fictitious Name
Statute, Assumed Name Act, or similar law in effect in the counties and other
governmental jurisdictions in which the Partnership may elect to conduct
business.

ARTICLE FOUR

PURPOSES AND POWERS OF THE PARTNERSHIP

Section 4.1 Purposes of the Partnership. The Partners have
formed the Partnership to engage, solely through Subsidiaries, in the following
activities: acquiring, financing, developing, leasing, maintaining, owning,
operating, managing, enhancing, and/or disposing of (a) multi- and single
tenant Corporate Facilities in the Central Florida Region, (b) single tenant
Corporate Facilities throughout the United States, and (c) other projects in
the Central Florida Region in which a Subsidiary will act as a master
developer. The Partnership may also (y) engage in such other lawful activities
as the General Partners determine from time to time, and (z) do any and all
things necessary or incidental to any of the foregoing.

Section 4.2 Powers of the Partnership. The Partnership shall be
empowered to do or cause to be done, or not to do, any and all acts deemed by
the General Partners to be necessary or appropriate or in furtherance of the
purpose of the Partnership, including, without limitation, the power and
authority:

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(a) to cause the Subsidiaries to purchase, hold,
develop, construct, operate, refinance or resell real property, consistent with
the purposes of the Partnership and otherwise as determined by the General
Partners;

(b) to finance all or any of its or any
Subsidiary's activities authorized under the provisions of this Agreement by
secured or unsecured indebtedness from affiliated or unaffiliated lenders and,
in connection therewith, to issue evidences of indebtedness and to execute and
deliver guarantee instruments and security instruments of every nature and kind
as security therefor and to prepay, refinance, and recast any debt or other
lien, subject to the limitations contained in this Agreement;

(c) to make such elections under the Code as to
the treatment of items of Partnership income, gain, loss, deduction and credit,
as to all relevant matters as the General Partners believe necessary,
desirable, or beneficial to the Partners (the General Partners shall make a
Section 754 election at the request of any Partner);

(d) to purchase from others (except the General
Partners or their Affiliates unless approved by each General Partner) or to
elect not to purchase from others, at the expense of the Partnership, contracts
of liability, casualty, and other insurance which the General Partners deem, in
their sole discretion, to be advisable, appropriate, or convenient for the
protection of the assets or affairs of the Partnership or for any purpose
convenient or beneficial to the Partnership;

(e) to employ, at the expense of the Partnership,
Persons, including Affiliates, for the operation and management of the
Partnership and its Subsidiaries on such terms and for such compensation as the
General Partners deem, in their absolute discretion, to be in the best interest
of the Partnership;

(f) to designate the depository or depositories
in which all bank accounts of the Partnership shall be kept and the Person or
Persons upon whose signature withdrawals therefrom shall be made;

(g) to prosecute, defend, settle, compromise, or
submit to arbitration, at the Partnership's expense, any suits, actions, or
claims at law or in equity to which the Partnership is a party or by which it
is affected, as may be necessary, proper, or convenient, and to satisfy out of
Partnership funds any judgment, decree, or decision of any court, board,
agency, or authority having jurisdiction, or any settlement of any suit,
action, or claim prior to judgment or final decision thereon;

(h) to incur, at the expense of the Partnership,
bank charges with respect to bank accounts maintained, and expenses relating to
the purchase of supplies, materials, equipment, or similar items used in
connection with the operation of the Partnership, and to incur

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recording fees, insurance premiums, and similar expenses in connection with the
business of the Partnership;

(i) to employ Persons, at the expense of the
Partnership, to perform administrative, legal, and independent accounting
services in connection with the operation and management of the Partnership's
business, and to provide services in connection with the preparation and filing
of any tax return required of the Partnership;

(j) to distribute among the Partners, to the
extent deemed prudent or advisable in the sole discretion of the General
Partners, Cash Flow, including cash generated from the operations of the
Partnership, and Capital Proceeds or, in the discretion of the General
Partners, to utilize all or any portion thereof to satisfy Partnership
obligations, expenses, and reserves;

(k) to sell, lease, exchange, mortgage, transfer,
convey or otherwise dispose of all or any portion of the assets of the
Partnership, including, but not limited to, interests in any Subsidiary, and to
cause any Subsidiary to sell, lease, exchange, mortgage, transfer, convey or
otherwise dispose of all or any portion of any of its assets, including, but
not limited to, any Property, subject to the limitations contained elsewhere in
this Agreement or in other agreements to which the Partnership is bound, if
such transactions are deemed by the General Partners to be in the best interest
of the Partnership;

(l) to establish any reserves deemed necessary or
advisable by the General Partners, and invest such funds as temporarily are not
required for Partnership purposes in short-term, highly liquid investments,
including, without limitation, certificates of deposit, United States Treasury
bills or bonds, money market funds, and obligations of a financial institution;

(m) to engage in such other businesses,
activities, and transactions similar in nature and scope to those described in
this Article Four as the General Partners from time to time may determine to be
necessary or appropriate in furtherance of the purpose of the Partnership;

(n) to enter into such agreements, contracts,
documents, leases, mortgages, and instruments and to give such receipts,
releases, and discharges with respect to all of the foregoing and any matters
incident thereto, as the General Partners may deem advisable, appropriate or
convenient; and

(o) to execute, deliver, perform, and carry out
all contracts, agreements, and undertakings of every kind, pay all amounts
required by this Agreement or by applicable law, and engage in all activities
and transactions as may in the opinion of the General Partners be necessary,
incidental, or advisable to the accomplishment of the Partnership's purposes or
in

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connection with any of the foregoing, subject in each case to the limitations
contained in this Agreement.

Section 4.3 First Option as to Potential Property Acquisition,
Development and Other Opportunities.

(a) Each General Partner will present, and cause
its majority or wholly owned Affiliates (except, with respect to St. Joe
Management, Florida East Coast Industries, Inc.) to present, and use its best
efforts to cause each other of its Affiliates (including, with respect to St.
Joe Management, Florida East Coast Industries, Inc.) to present, to the
Partnership during the term of this Agreement on a right of first option basis
all opportunities identified, optioned, acquired or presently held by such
General Partner or its Affiliates with respect to acquiring, financing,
developing, leasing, maintaining, owning, operating, managing, enhancing,
and/or disposing of (i) multi- and single tenant Corporate Facilities in the
Central Florida Region, (ii) other projects in the Central Florida Region for
which a Subsidiary could potentially act as a master developer; provided these
projects are primarily comprised of Corporate Facilities, (iii) development
opportunities with respect to subsections (i) and (ii) hereinabove obtained
through referrals by existing or future clients of the retail, restaurant,
hospitality or healthcare groups of Affiliates of CNL Venture and cultivation
of the "Butler" relationship of such Affiliates.

(b) Nothing hereinabove shall preclude any
Partner or its Affiliates from entering into transactions or ventures with
other parties to acquire, finance, develop, lease, maintain, own, operate,
manage, enhance or dispose of Corporate Facilities outside of the Central
Florida Region, or engage in any other activities outside the Central Florida
Region, however, each Partner may, at its sole and absolute option, present to
the Partnership any such opportunity for consideration and a determination of
whether the Partnership shall, through a Subsidiary, pursue such opportunity.

(c) As of the date hereof, CNL has undertaken
certain projects which will be presented to the Partnership for consideration.
In connection therewith, upon the execution hereof, CNL will present to the
Partnership the potential projects described on Exhibit A attached hereto and
incorporated herein by reference.

(d) For any opportunity or project presented to
the Partnership for consideration under subsections (a), (b) or (c) above, the
non-presenting General Partner (or its Authorized Representative) shall have
the sole right to determine on behalf of the Partnership whether to pursue such
opportunity or project, provided that such determination shall be made within
ten (10) business days following the presentation of such opportunity or
project to the Partnership (the "Project Approval Period"). Notwithstanding
anything in this Agreement to the contrary, the Partnership shall undertake and
pursue any such opportunities or projects presented to it upon the approval of
the non- presenting General Partner (or its Authorized Representative). In the
event the non-presenting General Partner (or its Authorized Representative)
rejects or does not approve the pursuit of any opportunity or project presented
to Partnership within the Project

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Approval Period, the presenting General Partner or its Affiliates shall have
the sole and absolute right to pursue such opportunity or project for its own
account regardless of whether such opportunity or project will compete with the
Partnership or any Subsidiary or create a Material Adverse Effect. All
approvals or rejections of opportunities or projects presented to the
Partnership under this Section 4.3 (other than rejections due to the expiration
of the Project Approval Period) shall be effective upon notification in writing
to the presenting General Partner in accordance with Section 14.2 hereinbelow.

In no event shall any Partner engage or cause
its Affiliates (which, for this purpose, shall not include Florida East Coast
Industries, Inc.) to engage or participate, directly or indirectly, in any
activity, business, transaction or project within the Central Florida Region
which is similar in nature or scope to any activity, business, transaction or
project of the Partnership in the Central Florida Region as described in this
Article Four, or which will compete with any activity, business, transaction or
project of the Partnership or its Subsidiaries in the Central Florida Region,
without the express written consent of all of the General Partners. The
presentation of a potential project to the Partnership and the rejection or
failure by the non-presenting General Partner (or its Authorized
Representative) to approve the pursuit of any opportunity or project presented
to Partnership within the Project Approval Period shall be deemed to satisfy
the requirement of express written consent for purposes of this Section. It is
the intention of the Partners that, except as otherwise set forth herein, the
exclusive opportunity of the Partners and their Affiliates to engage or
participate in any activity, business, transaction or project which is similar
in nature or scope to those of the Partnership and its Subsidiaries in the
Central Florida Region as described in this Article Four is through the
Partnership and the Subsidiaries.

ARTICLE FIVE

CAPITALIZATION

Section 5.1 Limited Partners' Capital Contributions. Each of the
Limited Partners have contributed or shall, upon the request of the General
Partners, contribute to the Partnership the sum of $980,000 as its Capital
Contribution in consideration of which such Limited Partner shall receive a
Percentage Interest equal to 49%.

Section 5.2 General Partners' Capital Contributions. Each of the
General Partners have contributed to the Partnership the sum of $20,000 as its
Capital Contributions in consideration of which such General Partner shall
receive a Percentage Interest equal to 1%.

Section 5.3 Liability of Limited Partners. Except as otherwise
provided in Section 8.1, Limited Partners shall not be liable to the
Partnership beyond the amount of their Capital Contributions, nor shall they be
personally liable for any liabilities, contracts, or obligations of the
Partnership. It is the intent of the Partners that no distribution (or any
part of a distribution)

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made to any Limited Partner pursuant to Article Six of this Agreement shall be
deemed a return or withdrawal of capital, even if such distribution represents
(in full or in part) an allocation of depreciation or any other non-cash item
accounted for as a loss or deduction from or offset to the Partnership's
income, and that no Limited Partner shall be obligated to pay any such amount
to or for the account of the Partnership or any creditor of the Partnership.
Further, no Limited Partner may be assessed for amounts beyond their related
Capital Contributions without the consent of all of the General Partners and
all of the Limited Partners.

Section 5.4 Interest. Interest earned on Partnership funds shall
inure to the benefit of the Partnership, and the Partners shall not receive
interest on their Capital Accounts or Capital Contributions.

Section 5.5 Additional Capital Contributions. No Partner shall
be required to make any additional Capital Contributions beyond the amount of
such Partner's initial Capital Contribution, unless otherwise determined by the
General Partners, whereupon the Partners shall make additional Capital
Contributions to the Partnership pro rata in accordance with each Partner's
respective Percentage Interest in the manner determined by the General
Partners.

Section 5.6 Repayment of Capital Contributions of Limited
Partners; Distributions and Withdrawals. Except as expressly provided in this
Agreement, no specific time has been agreed upon for the repayment of the
Capital Contributions of the Limited Partners. No Limited Partner or any
successor in interest shall have a right to withdraw or reduce any capital
contributed to the Partnership. Distributions may be made in cash or in
property, or partly in each, but no Partner shall have the right to require
that a distribution be made other than in cash except as expressly provided
otherwise in this Agreement.

Section 5.7 No Priorities among Limited Partners. Except as
expressly provided in this Agreement, no Limited Partner shall have the right
to demand or receive property other than cash in return for the Limited
Partner's Capital Contribution, nor shall any Limited Partner have priority
over any other Limited Partner as to Capital Contributions or as to
compensation by way of income.

Section 5.8 Agreement to Fund Capital Contributions to
Subsidiaries. Each of the General Partners shall fund, or cause their
Affiliates to fund, capital contributions to the Subsidiaries when and as such
Subsidiaries are formed in such amounts as the General Partners determine, but
in no event less than an aggregate of $4,000,000 for each General Partner and
their respective Affiliates. On or about the date hereof, the General Partners
have agreed to form a Subsidiary to be named "CNL Plaza, Ltd." Each General
Partner shall fund, or cause its Affiliates to fund, aggregate capital
contributions to CNL Plaza, Ltd. in the amount of $3,000,000. In lieu of cash
contributions to CNL Plaza, Ltd., CNL Venture and its Affiliates shall
contribute their entire right, title and interest in and to the project to be
initially undertaken by CNL Plaza, Ltd. (as such project is briefly described
in Section (a) of Exhibit A attached

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hereto), which contributions, the General Partners agree, have an aggregate
Fair Value of $3,000,000.

Section 5.9 Additional Required Funds.

(a) Notwithstanding the provisions of Sections
5.3, 5.5 and 5.8, in order to finance the capital requirements of the
Partnership and its Subsidiaries and to facilitate the receipt by the
Partnership and its Subsidiaries of secured third-party financing, St. Joe
Management and CNL Venture (each, a "Holder") have agreed to make lendings
(individually, a "Lending" and collectively, "Lendings") to the Partnership
under the Debentures from time to time from a date which is ten (10) days after
the date of this Agreement until the Maturity Date (as defined hereinbelow) up
to the maximum aggregate principal amount outstanding at any time of
$30,000,000 (the "Maximum Commitment"); provided that in no event shall the
amount in principal outstanding at any time from Lendings to the Partnership
exceed $25,000,000 by St. Joe Management (the "St. Joe Funding Obligation") and
$5,000,000 by CNL Venture (the "CNL Funding Obligation") (the St. Joe Funding
Obligation and the CNL Funding Obligation are sometimes referred to hereinbelow
individually as a "Funding Obligation" and collectively as the "Funding
Obligations").

(b) The Debentures shall be revolving, unsecured,
fully subordinated obligations of the Partnership which shall bear interest at
the rate per annum of 10%, 8% of which shall be payable on a quarterly basis in
arrears and 2% of which shall accrue until the earlier of the maturity of the
Debentures or the date prior to the stated maturity thereof on which the
principal amounts of such Debentures are due and payable in full or otherwise
paid in full (the "Accrued Interest Allocation"). Interest shall be computed
on the basis of a year of 12 30-day months. The Accrued Interest Allocation
shall be compounded annually. The Debentures shall mature on December 3, 2004
(the "Maturity Date"). The Partnership shall be permitted to receive Lendings
under the Debentures upon fifteen (15) days' written notice to the Holders in
minimum aggregate amounts of $1,000,000 (or a lesser amount necessary to fully
fund a Debenture at the time of such Lending). Each Lending to be made
hereunder shall be made by St. Joe Management and CNL Venture in proportion to
their respective Funding Obligations. For example, for a minimum aggregate
Lending of $1,000,000, the St. Joe Funding Obligation would be $833,333 and the
CNL Funding Obligation would be $166,667.

In the event a Holder (the "Defaulting Holder") fails
to satisfy its Funding Obligation with respect to a Lending (a "Funding
Default"), the other Holder may, at its sole option, elect to pay the
Defaulting Holder's unpaid Funding Obligation (the "Deficiency Advance") within
twenty (20) business days following the date the Funding Obligation was to have
been satisfied. Such paying non-defaulting Holder shall automatically acquire
a lien upon the Defaulting Holder's Partnership Interest (the "Defaulted
Interest") and the Defaulting Holder's Debenture for the amount so paid, plus
interest thereon at a rate per annum of (i) the greater of the prime rate of
interest in effect on the date of the Deficiency Advance (as published in the
Wall Street Journal) plus 3%, or 15%, or (ii) the maximum rate permitted by
applicable law,

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whichever is less. The Deficiency Advance, and all accrued but unpaid interest
thereon, shall be due and payable by the Defaulting Holder upon demand by the
non-defaulting Holder. Notwithstanding anything to the contrary in this
Agreement, the Debenture Agreement or the Debentures, each Holder's obligation
to make a Lending hereunder is subject to the satisfaction by the other Holder
of its Funding Obligation with respect to such Lending. Further
notwithstanding anything to the contrary in this Agreement, neither a
Defaulting Holder nor any of such Defaulting Holder's Affiliates shall be
entitled to vote any interest which such Defaulting Holder and its Affiliates
have in the Partnership or any Subsidiary with respect to the affairs of the
Partnership or any Subsidiary, including, but not limited to, Major Decisions
or any decision to enforce the rights of the Partnership under the Debenture of
the Defaulting Holder, or otherwise to direct or control the activities of the
Partnership or any Subsidiary, whether directly or through the Management
Committee or its Authorized Representatives, until such time as the Defaulted
Interest is cured and becomes a Partnership Interest in good standing. Nothing
in this subsection 5.9(b) is intended to relieve any Holder from any obligation
to provide funds under the Debentures with respect to its Funding Obligation,
and nothing in this subsection 5.9(b) is intended to limit or restrict any
remedy or recourse the Partnership or the other Holder may have against a
Defaulting Holder, in law, equity or pursuant to other provisions of this
Agreement or the Debenture Agreement. The remedies set forth in this
subsection 5.9(b) are in addition to any other remedies allowed or available
under other provisions of this Agreement or the Debenture Agreement, by law or
in equity.

(c) Sums outstanding under the Debentures shall
be prepayable in whole or in part (in amounts of at least $1,000,000) at any
time without penalty. Sums prepaid may be reborrowed up to the Maximum
Commitment, subject to the terms and conditions set forth herein and in the
Debenture Agreement. All payments and prepayments of principal and interest
under the Debentures shall be paid to the Holders in proportion to their
respective Funding Obligations. Borrowings under the Debentures will be
unsecured obligations of the Partnership, fully subordinated to all existing
and future indebtedness of the Partnership, and non-recourse to the Partners.
The Debentures shall be issued in accordance with the specific terms and
condition of a Debenture Agreement to be executed by the Partnership and the
General Partners, the form of which is attached hereto as Exhibit B.

(d) Subject to the agreement of the General
Partners on a case by case basis, the General Partners may elect to provide to
the Partnership a guaranty or a letter of credit in response to a Lending
request of the Partnership in lieu of providing cash under the Debentures. In
the event that a General Partner is required to pay under a guaranty or a
General Partners' letter of credit is called upon, any sums paid under such
guaranty or letter of credit shall be deemed to be advances made by such
General Partner under its respective Debenture. In no event shall the
principal balance outstanding under a Debenture, together with all sums secured
by guaranties or letters of credit, exceed $25,000,000 with respect to St. Joe
Management and $5,000,000 with respect to CNL Venture.

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(e) Except as otherwise agreed to by the
Management Committee, any additional funding in excess of the Maximum
Commitment to be provided by the General Partners hereunder shall be provided
by the General Partners on an equal dollar for dollar basis and shall be
evidenced by additional debentures or evidences of indebtedness issued by the
Partnership in favor of St. Joe Management and CNL Venture as appropriate.

(f) In addition to the foregoing, the Managing
Partner may, upon the approval of the Management Committee whether in
conjunction with the approval of a Budget or a Plan or otherwise, cause the
Partnership to borrow amounts at market terms and conditions from Affiliates or
nonaffiliates to finance Partnership operations. Notwithstanding anything in
this Agreement to the contrary, the Partnership shall be entitled to replace or
refinance indebtedness at market terms and conditions upon maturity of such
indebtedness unless the General Partners determine otherwise. CNL Financial
Corporation, an Affiliate of CNL Venture, and its Affiliates, shall have a
right of first refusal to provide to the Subsidiaries any and all Project
Financing provided that the terms and conditions of such Project Financing
shall be fair, reasonable and no less favorable to the Partnership than
reasonably could be obtained from unaffiliated Persons and provided further
that this right shall be exercised within thirty (30) days of presentation of a
proposed Project Financing to CNL Financial Corporation.

ARTICLE SIX

ALLOCATION OF NET PROFIT AND LOSS;
DISTRIBUTIONS; ACCOUNTING

Section 6.1 Allocation of Net Profit and Loss and Capital
Proceeds. The Partnership shall allocate net profits and losses as follows:

(a) Except as otherwise provided in this
Agreement, the interest of each Partner in net profit and loss of the
Partnership and each item of income, gain, loss, deduction or credit (excluding
Capital Proceeds) shall be allocated among the Partners in proportion to their
Percentage Interests.

(b) Capital Proceeds, if any, shall be allocated
among the Partners, after adjusting the Partners' Capital Accounts for profits
(excluding gain to be allocated pursuant to this Section 6.1(b)) and losses
earned or incurred by the Partnership and for Cash Flow and Capital Proceeds,
except those proceeds relating to the current allocation, available for
distribution (as though such amounts had been distributed) through the date of
such sale, exchange or other disposition and for gain previously allocated
pursuant to this Section 6.1(b), as follows: (i) first, gain shall be allocated
among those Partners, if any, with Adjusted Capital Account Deficits pro rata
with, and to the extent of the aggregate of, any such Adjusted Capital Account
Deficits; (ii) thereafter, any remaining gain shall be allocated among the
Partners in proportion to their Percentage Interests.

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(c) Notwithstanding the foregoing, if and to the
extent one or more Partners may be allocated losses without being caused
thereby to have an Adjusted Capital Account Deficit balance, no loss shall be
allocated to a Partner to the extent it would cause or increase an Adjusted
Capital Account Deficit with respect to such Partner's Capital Account.

Section 6.2 Distributions of Capital Proceeds and Cash Flow.
Subject to the rights of creditors (including Partners who have loaned amounts
to the Partnership), except as the General Partners may otherwise determine
from time to time, all Capital Proceeds shall be distributed to the Partners in
proportion to their respective Percentage Interests at the time of such
distribution at such times and in such amounts as the General Partners may
unanimously determine. All Cash Flow shall be distributed to the Partners in
proportion to their respective Percentage Interests in the Partnership at the
time of such distribution at such times and in such amounts as the General
Partners may unanimously determine, provided, however, that it is the intent,
but not the obligation, of the General Partners to distribute such Cash Flow to
the Partners on a quarterly basis (within approximately sixty (60) days
following the end of each calendar quarter).

Section 6.3 Accounting.

(a) The books of the Partnership shall be kept on
the accrual basis and in accordance with generally accepted accounting
principles consistently applied.

(b) The fiscal year of the Partnership shall be a
year ending December 31.

(c) The terms "net profits" and "net losses," as
used herein, means profits and losses as determined for federal income tax
purposes and shall also include each Partner's share of income described in
Section 705(a)(1)(B) of the Code, any expenditures described in Section
705(a)(2)(B) of the Code, any expenditures described in Section 709(a) of the
Code that have not been deducted or amortized in accordance with Section 709(b)
of the Code, losses not deductible pursuant to Sections 267(a) and 707(b) of
the Code and adjustments made pursuant to this Article Six; in such event
losses shall first be allocated to any Partners with positive Capital Account
balances, and in proportion to such balances, to the extent necessary to reduce
their positive Capital Account balances to zero. Any excess shall be allocated
among the Partners in accordance with their Percentage Interests.

(d) All costs and expenses of keeping the books
of account and the fees for accounting services shall be deemed and treated as
expenses of the Partnership. The books of account shall be closed and balanced
as of the end of each fiscal year, and the net profit or loss of the
Partnership determined as herein provided. Copies of a report of such
determination prepared by the Partnership's accountants, accompanied by a
report of federal income tax information and a schedule of the Partners'
accounts as of the end of each fiscal year, shall be furnished to each Partner.
Each Partner (and any authorized representative of a Partner) shall have the
right to examine said books of account during reasonable business hours. The

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Management Committee will select a major national accounting firm to (i) review
or audit the Partnership's books, and (ii) prepare or sign annual tax returns
for the Partnership, such outside auditor expenses to be expenses of the
Partnership.

(e) The Managing Partner, at the expense of the
Partnership, shall provide all Partners with monthly operating reports and
quarterly and annual financial statements for the Partnership, all prepared in
accordance with generally accepted accounting principles, modified to the
extent that such reports and financial statements shall only include footnotes
describing Affiliate transactions. Monthly operating reports shall be provided
within fifteen (15) days following the end of each month; quarterly financial
statements shall be provided within twenty-five (25) days following the end of
each fiscal quarter; and annual audited financial statements shall be provided
within forty-five (45) days following the end of each fiscal year.

Section 6.4 Capital Accounts; Capital Account Adjustments; 704(c)
Tax Allocations.

(a) There shall be maintained a Capital Account
for each Partner in accordance with this Section 6.4 and the principles set
forth in this Article Six. The amount of any Capital Contribution made to the
Partnership by each Partner, net of liabilities assumed by the Partnership or
to which any property so contributed is subject, shall be credited to its
Capital Account, and from time to time the share of each Partner in profits,
losses and distributions shall be credited or charged to its Capital Account.
The determination of Partners' Capital Accounts, and any adjustments thereto,
shall be made consistent with tax accounting and other principles set forth in
Section 704(b) of the Code and applicable regulations thereunder.

(b) Immediately following the transfer of any
Partnership Interest, the Capital Account of the transferee Partner shall be
equal to the Capital Account of the transferor Partner attributable to the
transferred interest and such Capital Account shall, at the request of any
Partner, be adjusted to reflect any basis adjustment under Section 743 of the
Code.

(c) For purposes of computing the amount of any
item of income, gain, deduction or loss to be reflected in the Partners'
Capital Accounts, the determination, recognition and classification of any such
item shall be the same as its determination, recognition and classification for
federal income tax purposes, taking into account any adjustments required
pursuant to Section 704(b) of the Code and the applicable regulations
thereunder as more fully described hereinbelow.

(d) For purposes of computing the amount of any
item of income, gain, deduction or loss to be reflected in the Partners'
Capital Accounts, the determination, recognition and classification of any such
item shall be the same as its determination, recognition and classification for
federal income tax purposes; provided, however, that the computation of all
items of income, gain, loss and deduction shall be made by the Partnership and,
as to those items described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of
the Code, without regard to the fact

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that such items are not includable in gross income or are neither currently
deductible nor capitalizable for federal income tax purposes.

(e) Upon an issuance of additional Partnership
Interests for Contributed Property or upon adjustment of the Partners'
Percentage Interests resulting from Partner Contributions pursuant to this
Agreement, the Capital Accounts of all Partners (and the Carrying Values of all
Partnership properties) shall, immediately prior to such issuance, be adjusted
(consistent with the provisions hereof and Section 1.704-1(b)(2)(iv) of the
Income Tax Regulations) upward or downward to reflect any unrealized gain or
unrealized loss attributable to each Partnership property (as if such
unrealized gain or unrealized loss had been recognized upon an actual sale of
such property at the fair value thereof, immediately prior to such issuance or
adjustment, and had been allocated to the Partners, at such time, pursuant to
Article Six of the Agreement). In determining such unrealized gain or
unrealized loss attributable to the properties, the fair value of Partnership
properties shall be determined by the General Partners using such reasonable
methods of valuation as are appropriate under the circumstances.

(f) Immediately prior to the distribution of any
Partnership property in liquidation of the Partnership or an interest in the
Partnership, the Capital Accounts of all Partners (and the Carrying Values of
all Partnership properties) shall be adjusted (consistent with the provisions
hereof, Section 704 of the Code and Section 1.704-1(b)(2)(iv) of the Income Tax
Regulations) upward or downward to reflect any unrealized gain or unrealized
loss attributable to each Partnership property (as if such unrealized gain or
unrealized loss had been recognized upon an actual sale of each such property,
immediately prior to such distribution, and had been allocated to the Partners,
at such time, pursuant to Article Six of the Agreement). In determining such
unrealized gain or unrealized loss attributable to the properties, the fair
value of Partnership properties shall be determined by the Managing Partner
using such reasonable methods of valuation as are appropriate under the
circumstances.

(g) In accordance with Section 704(c) and the
regulations thereunder, income, gain, loss and deduction with respect to any
Contributed Property shall, solely for tax purposes, be allocated among the
Partners so as to take account of any variation between the adjusted basis of
such property to the Partnership for federal income tax purposes and its Fair
Value.

(h) In the event the Fair Value of any
Partnership asset is adjusted as described above, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income
tax purposes and its Fair Value in the same manner as under Section 704(c) of
the Code and the regulations thereunder.

(i) Any elections or other decisions relating to
such allocations shall be made by the General Partners in any manner that is
consistent with applicable law and regulations and reasonably reflects the
purpose and intention of this Agreement.

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Section 6.5 Special Allocation Provisions.

(a) For purposes of determining the amount of
gain or loss to be allocated pursuant to this Article Six, any basis
adjustments permitted pursuant to Section 743 of the Code shall be disregarded.

(b) Partnership income, loss, deductions and
credits shall be allocated to the Partners in accordance with the portion of
the year during which the Partners have held their respective interests. All
items of income, loss and deduction shall be considered to have been earned
ratably over the period of the fiscal year of the Partnership, except that
gains and losses arising from the disposition of assets shall be taken into
account as of the date thereof.

(c) Notwithstanding any other provision of the
Agreement, to the extent required by law, income, gain, loss and deduction
attributable to Contributed Property shall be shared among the Partners so as
to take into account any variation between the basis of the property and the
fair value of the Contributed Property at the time of contribution in
accordance with the requirements of Section 704(c) of the Code and the
applicable regulations thereunder as more fully described in Section 6.4
hereinabove.

(d) Notwithstanding any other provision of the
Agreement, in the event the Partnership is entitled to a deduction for interest
imputed under any provision of the Code on the Debentures or any other loan or
advance from a Partner (whether such interest is currently deducted,
capitalized or amortized), such deduction shall be allocated solely to such
Partner.

(e) Notwithstanding any provision of the
Agreement to the contrary, to the extent any payments in the nature of fees
made to a Partner are finally determined by the IRS to be distributions to a
Partner for federal income tax purposes, there will be a gross income
allocation to such Partner in the amount of such distribution.

(f) Notwithstanding any provision of the
Agreement to the contrary and subject to the exceptions set forth in Section
1.704-2(f)(2)-(5) of the Income Tax Regulations, if there is a net decrease in
Partnership Minimum Gain during any Partnership fiscal year, each Partner shall
be specially allocated items of Partnership income and gain for such year (and,
if necessary, subsequent years) in an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain determined in accordance with
Section 1.704-2(g)(2) of the Income Tax Regulations. The items to be so
allocated shall be determined in accordance with Section 1.704-2(f) of the
Income Tax Regulations. This section (f) is intended to comply with the
minimum gain chargeback requirement in such Section of the Regulations and
shall be interpreted consistently therewith. To the extent permitted by such
Section of the Regulations and for purposes of this subsection (f) only, each
Partner's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to this Article Six with respect to such fiscal year
and without regard to any net decrease in Partner Minimum Gain during such
fiscal year.

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(g) Notwithstanding any provision of the
Agreement to the contrary, except subsection (f) hereinabove, and subject to
the exceptions set forth in Section 1.704-2(i)(4) of the Income Tax
Regulations, if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain, determined in accordance with Section 1.704-2(i)(3) of the Income Tax
Regulations, during any Partnership fiscal year, each Partner who has a share
of the Partner Nonrecourse Debt Minimum Gain shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section
1.704-2(i)(5) of the Income Tax Regulations. The items to be so allocated
shall be determined in accordance with Section 1.704-2(i)(4) of the
Regulations. This subsection (g) is intended to comply with the minimum gain
chargeback requirement in such Section of the Regulations and shall be
interpreted consistently therewith. Solely for purposes of this subsection
(g), each Partner's Adjusted Capital Account Deficit shall be determined prior
to any other allocations pursuant to this Article Six with respect to such
fiscal year, other than allocations pursuant to subsection (f) hereof.

(h) Notwithstanding any provision of the
Agreement to the contrary, in the event any Partners unexpectedly receive any
adjustments, allocations or distributions described in Income Tax Regulation
Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specially allocated to such Partners in an amount and manner sufficient to
eliminate their Adjusted Capital Account Deficits created by such adjustments,
allocations or distributions as quickly as possible.

(i) Any special allocations of items pursuant to
this Section 6.5 shall be taken into account in computing subsequent
allocations so that the net amount of any items so allocated and the profits,
losses and all other items allocated to each such Partner pursuant to this
Article Six shall, to the extent possible, be equal to the net amount that
would have been allocated to each such Partner pursuant to the provisions of
this Article Six if such special allocations had not occurred.

(j) Notwithstanding any provision of the
Agreement to the contrary, any Partner Nonrecourse Deduction for any fiscal
year or other period shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with Section
1.704-2(i) of the Income Tax Regulations.

Section 6.6 Elections. The General Partners, at the request of
any Partner, shall elect pursuant to Section 754 of the Code to adjust the
basis of the Partnership's assets for any subsequent transfers of Partnership
Interest.

Section 6.7 Charges Carried Against Capital Accounts; Deficit
Restoration Obligation. If the Partnership shall suffer losses as a result of
which the Capital Account of any Partner shall be negative, such loss shall be
carried as a charge against its Capital Account and its subsequent

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share of net income and gain of the Partnership shall be applied to restore
such deficit in its Capital Account. Upon liquidation of the Partnership, any
Partner with a deficit Capital Account balance shall not be required to make
any further contribution to the capital of the Partnership to restore any such
deficit in its Capital Account.

Section 6.8 Tax Matters. The Managing Partner shall be the "Tax
Matters Partner," as defined in Section 6231(a)(7) of the Code and shall, at
the expense of the Partnership, prepare and file or cause to be prepared and
filed all tax returns and tax filings for the Partnership and shall make all
elections required or permitted by the Code with respect to the Partnership's
federal income tax returns.

Section 6.9 Interest of the General Partners. Notwithstanding
anything contained in this Agreement to the contrary, the aggregate interests
of the General Partners in each material item of Partnership income, gain,
loss, deduction, and credit will be equal to at least 1% of each such item at
all times during the existence of the Partnership.

ARTICLE SEVEN

MANAGEMENT

Section 7.1 Management of Partnership. The overall management
and control of the business and affairs of the Partnership shall be vested in
the Management Committee. Any appointee to the Management Committee may be
removed or replaced at any time by the General Partner which appointed such
Person. Notwithstanding any other provision hereof, no action shall be taken,
sum expended, decision made or obligation incurred with respect to a matter
within the scope of any of the major decisions enumerated below ("Major
Decisions"), unless such Major Decision has been approved by the unanimous
agreement of all members of the Management Committee or, alternatively, by the
unanimous agreement of the General Partners (the agreement of the members of
the Management Committee shall equate to the agreement of the General
Partners). The Major Decisions are:

(a) Approving the Partnership Budget and all
Project Budgets, amending in any Material respect the Partnership Budget or any
Project Budget as necessary to reflect changes in the operations of the
Partnership or the scope thereof, additional projects undertaken by any
Subsidiary or otherwise, or approving any Material deviation or Material
variation from the Partnership Budget or any Project Budget;

(b) Approving the Annual Partnership Business
Plan and all Project Plans, amending in any material respect the Annual
Partnership Business Plan or any Project Plan, or approving any material
deviation or variation from the Annual Partnership Business Plan or any Project
Plan;

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(d) Amending, waiving or repealing any of the
provisions of this Agreement, except as specifically provided for herein;

(e) Requiring the making by Partners of
additional Capital Contributions;

(f) Permitting an assignment of a Partnership
Interest and admitting an assignee of a Partnership Interest as a substituted
Partner in the Partnership, pursuant to terms and subject to the limitations
set forth in this Agreement;

(g) Obtaining any financing, incurring and
refinancing any indebtedness (except as provided in Section 5.9(c) with respect
to the replacement or refinancing of indebtedness upon the maturity thereof),
or modifying in any material respect the terms of any financing, refinancing or
indebtedness obtained or incurred by the Partnership in its own name or in the
name of any of its Subsidiaries (or for which any of them are liable, directly
or indirectly, by guaranty or otherwise), including financing or indebtedness
to be provided or incurred under the Debentures, and approving the terms of,
and parties to, any documentation relating to the same;

(h) Except as expressly approved pursuant to a
Budget or Plan, acquiring or leasing one or more additional real or personal
property assets, or any direct or indirect interest therein, by the Partnership
or any Subsidiary, costing in the aggregate, more than $1,000,000;

(i) Selling any interest in the Partnership or
any of its Subsidiaries, or merging or consolidating the Partnership or any
Subsidiary with another entity;

(j) Taking any voluntary action to cause the
Partnership to (i) make an assignment for the benefit of creditors, (ii)
obligate any Partner as a surety, guarantor or accommodation party to any
obligation, or (iii) file a petition, or consent to the appointment of a
trustee or receiver or any judgment or order, under the federal bankruptcy laws
on behalf of the Partnership or any of its Subsidiaries;

(k) Except with respect to any action otherwise
specifically permitted by the provisions of this Agreement, taking any action
that may, either immediately or upon the exercise of future rights or options,
cause the dilution of any Partners' Percentage Interest in the Partnership;

(l) Converting the form of the Partnership from a
limited partnership to any other type of entity; and

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(m) Preparing and filing the Partnership's
federal income tax return and making (or revoking) all tax elections for
federal income tax purposes.

Notwithstanding anything herein to the contrary, the General Partners
shall have all the rights and powers which may be possessed by a general
partner under the Act and such rights and powers as are otherwise conferred by
law or are necessary, advisable, or convenient to the discharge of its duties
under this Agreement or applicable law and to the management of the business
and affairs of the Partnership; provided, however, that except for rights,
powers and authority granted to the Managing Partner in this Agreement or
otherwise, any action taken by the General Partners upon the affirmative vote
of all of the General Partners, shall constitute the act of and serve to bind
the Partnership. The General Partners agree to manage and control the affairs
of the Partnership to the best of their ability and to conduct the operations
contemplated under this Agreement in a prudent manner in accordance with good
industry and business practice.

Each of the General Partners shall appoint and, during the term of
this Agreement, maintain, one Authorized Representative to represent, manage
the interests of, speak for, and act on behalf of such General Partner, and
consult with the Managing Partner in connection with any matters other than
Major Decisions, including, but not limited to, matters involving an amendment
to or deviation or variation from any Budget or Plan previously approved by the
Management Committee which such Authorized Representatives have unanimously
determined is not material (which, with respect to a Budget, shall have the
meaning ascribed to it in Section 1.29 hereinabove). The Limited Partners
consent to the appointment of and authority granted to the Authorized
Representatives and each of the Partners acknowledges that the Partnership and
the other Partners are relying, and will in the future rely, on the authority
granted to the Authorized Representatives herein. In the event a General
Partner removes an Authorized Representative, or an Authorized Representative
of a General Partner resigns, such General Partner shall promptly deliver to
the Partnership and the other Partners written notice of such removal or
resignation. Notwithstanding anything in this Agreement to the contrary, the
Partnership and the other Partners shall be entitled to rely upon the authority
of an Authorized Representative of a General Partner and deal with such
Authorized Representative on the basis described herein until such time as the
Partnership and other Partners receive written notice of the removal or
resignation of such Authorized Representative. Upon the removal or resignation
of an Authorized Representative, the General Partner which appointed such
Authorized Representative will immediately appoint a substitute Authorized
Representative and notify the Partnership and the other Partners of such
appointment.

In the event that the members of the Management Committee refuse or
are unable to agree on any Major Decision or in the event that the General
Partners are unable to agree on such matter or any other matter requiring their
consent and authorization hereunder, subject to the conditions set forth in
Section 11.3, the General Partners shall submit the matter to mediation in
accordance with Section 11.3 hereof. In the event that the General Partners
cannot resolve the

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matter by mediation or otherwise, any Partner may give notice to any other
Partner(s) of its intention to invoke the reciprocal purchase provisions set
forth in Section 11.3 hereof.

Section 7.2 Day-to-Day Management. The Partners hereby appoint
CNL Venture as the Managing Partner to manage and conduct of the day-to-day
business of the Partnership, to implement the decisions of the Management
Committee, the General Partners or the Authorized Representatives as provided
in Section 7.1 above and to take such other actions and exercise such further
powers as are set forth in this Agreement. Subject to the items, decisions and
parameters set forth in Budgets and Plans approved by the Management Committee
in accordance with Section 7.1 above, and other limitations specifically set
forth in this Agreement, including, but not limited to, Section 7.1 above, the
Managing Partner shall, in addition to those powers and authority granted to
the Managing Partner by law or elsewhere in this Agreement, have the right,
power and authority to take the following actions without the approval (or
further approval, as the case may be) of the Management Committee or any other
Partner:

(a) Expend the capital and revenues of the
Partnership in furtherance of the Partnership's business and pay, in accordance
with the provisions of this Agreement, all expenses, debts and obligations of
the Partnership to the extent that funds of the Partnership are available
therefor;

(b) Borrow money in the Partnership's name or use
the Partnership's property as collateral for a debt (except as set forth in
Section 5.9(c) with respect to the replacement or refinancing of indebtedness
upon the maturity thereof for which no Management Committee approval is
necessary);

(d) Purchase or lease any real property or any
personal property;

(e) Enter into, amend or terminate agreements and
contracts with third parties, institute and defend litigation arising
therefrom, and give receipts, releases and discharges with respect to all of
the foregoing and any matters incident thereto;

(f) Assign, transfer, pledge, compromise or
release any claim of or debt owing to the Partnership upon payment in full to
the Partnership of such claim or debt;

(g) Maintain, at the expense of the Partnership,
adequate records and accounts of all operations and expenditures and furnish
the Partners with the reports referred to in Section 6.3(e);

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(h) Purchase, at the expense of the Partnership,
liability, casualty, fire, fidelity and other insurance and bonds to protect
the Partnership's properties, business, Partners and employees;

(i) Sell, lease, trade, mortgage, pledge,
exchange or otherwise dispose of all or any portion of the property of the
Partnership in the ordinary course of the business of the Partnership;

(j) Employ or retain, at the expense of the
Partnership, and enter into agreements with such contractors, subcontractors,
engineers, managers, consultants, brokers, attorneys, escrow agents,
accountants and others the Managing Partner may select, on such terms and for
such reasonable compensation as the Managing Partner shall determine, and
notwithstanding the fact that the Managing Partner or any of its Affiliates may
have a financial interest in, or otherwise be affiliated with, any such
persons, firms or corporations, and terminate such employment, retention or
agreements;

(k) Execute and deliver any and all instruments
necessary or incidental to the conduct of the business of the Partnership;

(l) Prepare or cause to be prepared all required
governmental filings, including tax returns, and make any and all elections
under the tax laws of the United States, the several states and other relevant
jurisdictions as to the treatment of items of income, gain, loss, deduction and
credit of the Partnership, or any other method or procedure related to the
preparation of the Partnership's income tax returns, and any and all other
elections for tax purposes it deems appropriate to meet the overall needs of
the Partnership; and

(m) Prosecute, defend, adjust, compromise,
settle, refer to arbitration or otherwise deal with any claims in favor of or
against the Partnership; provided, however, the Managing Partner may not
without the consent of the Management Committee or each General Partner, settle
any legal claims against the Partnership by paying in excess of Ten Thousand
and no/100 Dollars ($10,000.00), unless such claim is covered by insurance.

By executing this Agreement, each Partner shall be deemed to have
consented to any exercise by the Managing Partner of any of the foregoing
powers. Notwithstanding the foregoing, if the Managing Partner delegates its
duties to CCP that the Managing Partner shall remain responsible for the duties
undertaken by it pursuant to the terms of this Agreement, including
specifically, but without limitation, Sections 7.2, 7.3 and 7.6 of this
Agreement.

Section 7.3 Duties of the Managing Partner.

(a) The Managing Partner shall manage or cause to
be managed the affairs of the Partnership in a prudent and businesslike manner
and shall devote such portion of its time to the Partnership's affairs as is
reasonably necessary for the conduct of such affairs;

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provided, however, that it is expressly understood and agreed that the Managing
Partner shall not be required to devote its entire time or attention to the
business of the Partnership and shall not be restricted in any manner from
participating in any other business activities, provided that, except as set
forth in Section 4.3(c) hereinabove or elsewhere in this Agreement, such
activities shall not have a Material Adverse Effect.

(b) In carrying out its obligations hereunder,
the Managing Partner shall, at the expense of the Partnership:

(i) prepare from time to time
proposed Budgets and Plans, and proposed amendments to the foregoing as may be
necessary, for presentation to and consideration and approval by the Management
Committee, which Budgets and Plans shall be in form and substance acceptable to
the General Partners and shall include without limitation the information
described in Section 7.6 below;

(ii) install and maintain appropriate
accounting systems;

(iii) upon the request of any Partner,
provide access during regular business hours to originals, and deliver
photocopies, of all contracts, agreements, leases, records and other
documentation affecting or otherwise relating to the Partnership or any of its
Subsidiaries;

(iv) obtain and maintain appropriate
public liability, casualty and other insurance as may be necessary or desirable
in the discretion of the Managing Partner;

(v) cause one or more interest
bearing accounts to be maintained in the Partnership's name at one or more
banks, each of which shall, unless otherwise agreed to by the Management
Committee, the General Partners or the Authorized Representatives, be a member
of the FDIC having not less than One Billion and no/100 Dollars
($1,000,000,000.00) of assets and being "well capitalized" under FDIC rules for
purposes of accepting brokered deposits. The Managing Partner shall cause all
expenditures incurred by or on behalf of the Partnership to be timely paid out
of such accounts and all income, cash receipts, and other monies received by
the Partnership as a result of operation of the Property to be promptly
deposited into such accounts. All funds not needed for the operations of the
Partnership may be invested in short-term investments, having maturities of no
more than ninety (90) days which are securities issued or fully guaranteed by
United States government agencies, certificates of deposit of banks having a
net worth of at least Fifty Million and no/100 Dollars ($50,000,000.00), bank
repurchase agreements covering the securities of the United States government,
commercial paper rated "A" or better by Moody's Investors Services, Inc., money
market funds having assets in excess of Ten Million and no/100 Dollars
($10,000,000.00), or interest-bearing time deposits in banks or thrift
institutions. All such amounts shall be and remain the property of the
Partnership, shall be held in the name of the Partnership, and shall be
received, held and disbursed by the Managing Partner solely for the purposes of
the Partnership.

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No other funds shall in any way be commingled with funds belonging to the
Partnership in such accounts. Withdrawals from such accounts shall be made on
such signatures as the Managing Partner shall determine from time to time. All
personnel handling Partnership funds or with access to Partnership bank
accounts shall be bonded or otherwise covered by insurance;

(vi) have prepared and distributed to
all Partners the reports and financial statements described in Section 6.3(e)
hereinabove within the time periods set forth therein; and

(vii) cause such certificates to be
filed, if any, and do such other acts as may be required by applicable law to
qualify and maintain the Partnership as a limited partnership in good standing
in the States where the Partnership does business, including, without
limitation, any state where property owned by the Partnership is located.

Section 7.4 Exculpation. Neither the General Partners, the
members of the Management Committee, the Authorized Representatives, the
Managing Partner, any of their respective Affiliates, nor any officer,
director, partner, employee or agent of the foregoing (each, an "Exculpated
Party"), shall be liable, in damages or otherwise, to the Partnership or to any
of the Partners for any act or omission by any such Exculpated Party pursuant
to the authority granted by this Agreement, unless such act or omission results
from fraud, gross negligence, or willful misconduct. The Partnership shall
indemnify, defend and hold harmless each Exculpated Party from and against any
and all claims or liabilities of any nature whatsoever, including reasonable
attorneys' fees, arising out of or in connection with any action taken or
omitted by an Exculpated Party pursuant to the authority granted by this
Agreement, except where attributable to the fraud, gross negligence, or willful
misconduct of such Exculpated Party. Each Exculpated Party shall be entitled
to rely on the advice of counsel, public accountants or other independent
experts experienced in the manner at issue, and any act or omission of such
Exculpated Party pursuant to such advice shall in no event subject such
Exculpated Party to liability to the Partnership or any Partner.

Section 7.5 Compensation of the Managing Partner; Affiliated
Contracts. Except as otherwise provided in this Section 7.5, the Managing
Partner shall receive no compensation for its services to the Partnership.
Pursuant to an approved Budget, the Managing Partner shall be entitled to
reimbursement by the Partnership for (a) reasonable out-of-pocket costs and
expenses incurred by the Managing Partner or its Affiliates on behalf of the
Partnership in connection with the conduct of its business and affairs,
including, but not limited to, costs and expenses related to overhead of the
Managing Partner and its Affiliates allocated to the Partnership and
compensation and other benefits, including incentive bonuses, for the staff and
professional personnel of the Managing Partner and its Affiliates which are
employed, engaged or retained in connection with the business of the
Partnership; provided that such costs and expenses were approved by the
Management Committee as part of a Budget or otherwise, and (b) expenses
(including reasonable attorneys' fees) incurred in prosecuting or defending any
action relating to the Partnership's affairs or this Agreement or any Partner,
except as to matters where the

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Managing Partner is adjudged to have been guilty of gross negligence, willful
misconduct or intentional breach of this Agreement. The Partners acknowledge
that the Managing Partner will cause the Partnership to enter into the CCP
Management Agreement with its Affiliate, CCP, pursuant to which the Partnership
will engage and retain CCP to operate and manage the business and affairs of
the Partnership. The form and substance of the CCP Management Agreement shall
be subject to the unanimous approval of the General Partners, the members of
the Management Committee or the Authorized Representatives.

The Partnership may do business and enter into contracts with any of
the Partners or any Affiliate of any Partner (each, an "Affiliated Contract")
for such consideration and upon such terms as are unanimously approved by the
General Partners, the members of the Management Committee or the Authorized
Representatives, such approval not to be unreasonably withheld. The General
Partners, the members of the Management Committee or the Authorized
Representatives shall approve the consideration to be paid under and the other
terms and conditions of an Affiliated Contract in the event such consideration,
terms and conditions are fair, reasonable and no less favorable to the
Partnership than reasonably could be obtained from unaffiliated Persons.

The Partnership may enter into agreements with its Subsidiaries
pursuant to which the Partnership will (a) provide services to the Subsidiaries
in connection with the acquisition, development, management, leasing, and
disposition of Properties as well as the management of the assets of such
Subsidiaries, and (b) receive commissions, fees and other compensation in
consideration of the services provided. Notwithstanding anything in this
Agreement to the contrary, unless otherwise agreed to by the Management
Committee or the General Partners, no Partner shall be entitled to receive
direct compensation resulting from any services provided by such Partner to the
Subsidiaries in connection with the foregoing.

Section 7.6 Budgets and Plans. In accordance with Section
7.3(b)(i) above, the Managing Partner shall prepare and submit to the
Management Committee for consideration and approval the Budgets and Plans as
follows:

(a) Except for the 1998 Partnership Business Plan
and Partnership Budget which shall be due within thirty (30) days of the date
of this Agreement, at least ninety (90) days prior to the end of a fiscal year,
the Managing Partner shall prepare and submit to the Management Committee a
proposed Annual Partnership Business Plan and Partnership Budget detailing with
respect to the following fiscal year all material aspects of the operation of
the Partnership, the management of the business of the Partnership, the
transactions and projects anticipated to be undertaken by the Partnership or
its Subsidiaries and such other information as may be reasonably requested by
the Management Committee, including, without limitation, the following:

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(i) a description of specific
proposed developments and real estate acquisitions together with proposed terms
of each transaction and parameters of yet unspecified projects;

(ii) the number and duties of
employees of the Managing Partner or its Affiliates engaged or to be engaged on
behalf of the Partnership;

(iii) projected revenues of the
Partnership from development, management, leasing, property
acquisition/disposition and asset management fees;

(iv) projected cash expenditures,
including salaries and benefits for employees of the Managing Partner and its
Affiliates engaged or to be engaged on behalf of the Partnership and other
identified expenses to be reimbursed by the Partnership;

(v) projected capital expenditures;
and

(vi) projected reserves.

(b) Additionally, within a reasonable period of
time after the Partnership has identified a potential project for
consideration, the Managing Partner shall prepare and submit to the Management
Committee a proposed Project Plan and a proposed Project Budget with respect to
such potential project. The proposed Project Plan shall include, without
limitation, the following information:

(i) the proposed name of the
project;

(ii) preliminary architectural plans
and specifications setting forth the scope and size of the project, the quality
and type of architectural finishes, and the standards and methods of
construction, including plans and elevations;

(iii) a development pro forma
statement of total project costs and anticipated revenues and expenses;

(iv) the proposed leasing policy,
tenant allowances, and rental rate structure for the project; and

(v) the proposed general
contractors, engineers, managers, consultants, brokers and architects for the
project.

The proposed Project Budget shall include all proposed costs
of developing and constructing the project computed in accordance with a form
to be adopted by the Management Committee including, without limitation, the
following:

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(i) the acquisition cost of the
project site plus any transfer taxes, title insurance premiums, escrow fees,
and other closing costs, as well as carrying costs attributable to the project
site;

(ii) the hard construction costs of
all labor, materials, utilities, equipment and similar items incorporated into
or consumed in the construction and development of the project and any related
site, utility, or landscaping work including all contract prices of contractors
or materialmen;

(iii) architectural, topographical and
boundary surveying, legal, consulting, accounting, and engineering fees and
costs paid to outside architects, surveyors, accountants, consultants,
attorneys, and engineers in connection with the planning, construction,
financing, and leasing of the project and any related site, utility, or
landscaping work, including borings, soil analysis, traffic studies required by
local authorities, and market studies;

(iv) costs of reproducing plans and
specifications for major tenants, lenders, inspecting architects and/or
engineers, and the general contractor;

(v) all leasing fees and
commissions, advertising and promotional costs, lease takeover costs, tenant
inducement payments, and tenant coordination costs incurred in connection with
leasing or pre-leasing of space in the project;

(vi) all project level costs,
including office rents, office supplies, utilities, and related expenses, and
the travel costs of all project employees, if any, including salaries, bonuses,
medical and hospital insurance premiums, costs of workmen's compensation
insurance and other fringe benefits and costs, and payroll taxes;

(vii) all costs and expenses with
respect to the installation of tenant finish work in the project, and the
amount of any tenant finish allowances or any other concessions actually paid
under all initial tenant leases for space in the project;

(viii) all costs of building and other
permits for the project and all direct or indirect costs incurred in connection
with obtaining any rezoning, zoning variances, or other approvals required from
any governmental entities having jurisdiction over the project;

(ix) all commitment fees, interest,
and other financing costs incurred during the development of the project,
including actual interest accruing on interim and/or permanent financing, plus
interest upon equity funds advanced or deemed advanced by the Partnership from
time to time in connection with the project;

(x) all ad valorem taxes and
assessments paid or payable with respect to the project;

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(xi) the actual costs of all off-site
improvements required to be constructed including but not limited to, any such
improvements required to be constructed or paid for in connection with the
issuance of any building or other permits;

(xii) all direct or indirect costs of
acquiring any easements, air rights, use permits, or other off-site rights in
connection with the development of the project;

(xiii) all insurance premiums paid or
payable with respect to a project, including, but not limited to, any builder's
risk, fire and extended coverage, rent loss, or general liability coverage; and

(xiv) any other costs appropriate to a
specific development.

(c) All Budgets and Plans approved by the
Partnership shall be reviewed, revised, updated and amended on a quarterly
basis as necessary.

ARTICLE EIGHT

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

Limited Partners shall have the following rights and obligations.

Section 8.1 Liabilities. Except as otherwise provided in this
Section 8.1 or under applicable law, no Limited Partner shall be personally
liable for any of the debts of the Partnership or any of the losses thereof
beyond the amount of the Limited Partner's Capital Contribution and the share
of undistributed profits of the Partnership attributable to such Limited
Partner.

Section 8.2 Management. No Limited Partner, as such, shall take
part in the management of the business or transact any business for the
Partnership. All management responsibility is vested in the General Partners
and the Managing Partner.

Section 8.3 Authority. No Limited Partner, as such, shall have
the power to sign for or to bind the Partnership. All authority to act on
behalf of the Partnership is vested in the General Partners and in the Managing
Partner.

Section 8.4 Rights. A Limited Partner shall have such rights as
are set forth in the Act and otherwise in this Agreement.

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ARTICLE NINE

MEETINGS OF THE PARTNERS

Section 9.1 Voting Rights. Except as otherwise expressly
provided in this Agreement or otherwise under the Act, a Limited Partner shall
have no right to vote upon any matter affecting the Partnership. Votes may be
cast on any matter submitted for consideration at a duly called meeting of the
Partnership, or without a meeting upon call of either of the General Partners.
The affirmative vote of all of the Limited Partners shall be required to
approve any matter presented to the Limited Partners for their vote.

Section 9.2 Meetings of the Partnership. Meetings of the
Partnership may be called by either of the General Partners. Within ten (10)
days after receipt of such request, the General Partners shall provide all
Limited Partners with written notice of a meeting to be held not less than ten
(10) nor more than sixty (60) days after receipt of such written request, which
notice (i) shall specify the time and place of such meeting, (ii) shall contain
a detailed statement of each matter to be acted on at such meeting, and (iii)
shall include proxies or written consents which specify a choice between
approval or disapproval of each matter to be acted upon at such meeting.
Meetings of the Partnership shall be held at such location as shall be
specified by the General Partners. Voting by proxy shall be permitted.
Limited Partners comprising 100% of the Limited Partners in interest entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of the Partnership.

Section 9.3 Amendment of Agreement.

(a) Amendments to this Agreement may be proposed
by either of the General Partners. The General Partners shall have the right,
without first proposing such amendment to the Limited Partners and without
notice to, or the vote or consent of, the Limited Partners, to amend the
Agreement to reflect a ministerial amendment, amendment required by state
securities authority, or amendment to add to the duties or responsibilities of
the General Partners to reflect the transfer of Partnership Interests pursuant
or to reflect the admission of additional Limited Partners pursuant to this
Agreement.

(b) Following any proposal of an amendment, other
than an amendment to be made as described in Section 9.3(a) above, the General
Partners, within ten (10) days after receipt, shall submit to all Limited
Partners a verbatim statement of the proposed amendment. Except as otherwise
provided in Sections 9.3(a) above, all proposed amendments shall be submitted
to Limited Partners for a vote, and the affirmative vote of all of the Limited
Partners shall be required to approve any such amendment.

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ARTICLE TEN

RESTRICTIONS ON TRANSFERS OF INTEREST IN THE PARTNERSHIP

Section 10.1 Restrictions of Transfers. No General Partner may
sell, assign, transfer or otherwise dispose of, or mortgage, hypothecate or
otherwise encumber its Partnership Interest or permit or suffer the encumbrance
thereof (each a "transfer") whether voluntarily, involuntarily or by operation
of law, and any attempt to do so shall be null and void ab initio. No Limited
Partner may transfer (as defined above) or permit a transfer of its Partnership
Interest whether voluntarily, involuntarily or by operation of law (except as
provided in this Article Ten), and any attempt to do so shall be null and void
ab initio. Further, any transfer of all or any portion of a Partnership
Interest of a Limited Partner shall not give the transferee the right to be
admitted as a Substitute Limited Partner. Notwithstanding the foregoing, a
Limited Partner may sell, assign or transfer its Partnership Interest to any of
its majority or wholly owned subsidiaries or Affiliates, and, upon such sale,
assignment or transfer, such subsidiary or Affiliate will be entitled to become
a Substitute Limited Partner with respect to such Partnership Interest, subject
to the provisions of this Article Ten.

Section 10.2 Transfer of Limited Partners' Partnership Interests.
Except as set forth above, if a Limited Partner is permitted to transfer its
Partnership Interest, its Assignees shall not become Substituted Limited
Partners unless the General Partners shall have affirmatively consented in
writing to such Persons becoming Substituted Limited Partners, which consent
may be withheld in the sole discretion of the General Partners. Additionally,
any such transfers also shall comply with the following conditions:

(a) No transfer will be permitted if the General
Partners determine that such transfer would increase the likelihood that the
Partnership would be treated as a corporation or as a "publicly traded
partnership" within the meaning of sections 7704, 469(k), or 512(c) of the
Code.

(b) In no event shall any Partnership Interest be
transferred to a minor or an incompetent except by will or intestate
succession.

(c) No transfer will be permitted that would
cause the assets of the Partnership to be characterized as "plan assets" under
the Employee Retirement Income Security Act of 1974, as amended; or subject to
the Investment Company Act of 1940, as amended.

Section 10.3 Conditions and Effect of Transfer.

(a) No transfer will be binding upon the
Partnership or the Partners until (i) the provisions of Section 10.2 have been
met; and (ii) the General Partners have received, at the expense of the
transferor or the transferee, an opinion of counsel satisfactory in form and
substance to the General Partners that neither the offer to transfer nor the
transfer of such

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Partnership Interest will violate any federal or state securities laws; (iii)
in the case of a transfer (but not an offer to transfer), there shall have been
filed with the Partnership a duly executed and acknowledged counterpart of the
instrument making such transfer, signed by both the transferor and the
transferee, with such instrument evidencing the written acceptance by the
transferee of all of the terms and provisions of this Agreement and containing
a representation by the transferor that such transfer was made in accordance
with all applicable laws and regulations; and (iv) the transferor and the
transferee have executed and provided such certificates and other documents and
have performed such acts as the General Partners deem necessary to preserve the
limited liability status of the Partnership under the laws of the jurisdictions
in which the Partnership is doing business, to preserve the federal tax status
of the Partnership as a partnership rather than as an association or publicly
traded partnership, to prevent the termination of the Partnership for federal
tax purposes, to prevent the assets of the Partnership from being characterized
as "plan assets" under the Employee Retirement Income Security Act of 1974, as
amended, to prevent the Partnership from becoming subject to the Investment
Company Act of 1940, as amended, to preserve the status of the original or
subsequent sale of such Partnership Interest under the private offering
exemption of the Securities Act of 1933, as amended, or any similar state
exemption, and to evidence the agreement of such transferee to be bound by the
terms and provisions of this Agreement. Any transfer of Partnership Interests
pursuant to this Article Ten shall be subject to, and the transferee shall
acquire the transferred Partnership Interests subject to, all of the terms and
provisions of this Agreement. Notwithstanding anything else herein contained,
the General Partners may waive any one or more of the foregoing conditions in
connection with a transfer, and the consent of the General Partners shall not
be required for the transfer of a Partnership Interest by succession or
testamentary disposition upon the death of a Limited Partner.

(b) All transfers of a Limited Partner's
Partnership Interest shall entitle the transferee only to receive the economic
interest to which the transferring Limited Partner otherwise would be entitled.
Such transferee shall become a Substituted Limited Partner only with the
written consent of the General Partners following compliance with the
conditions set forth in this Section 10.3 and in Section 10.2 hereof. The
Substituted Limited Partner also shall be required to (i) execute and
acknowledge such instruments as the General Partners deem necessary or
advisable to effect the admission of such Person as a Substituted Limited
Partner, and (ii) pay all reasonable expenses incurred by the Partnership in
connection with such Person's admission as a Substituted Limited Partner.

(c) All transfers made in compliance with
Sections 10.2 and 10.3 hereof shall be effective the first day of the month
immediately following the date the Partnership receives the instrument
described in clause (iii) of Section 10.3(a) above and any other documents
required by the General Partners in connection with the transfer. Each Partner
agrees to execute such certificates and other documents and perform such acts
as may be requested by the General Partners in connection with such transfer.
Any Substituted Limited Partner so admitted to the Partnership will succeed to
all the rights and be subject to all the obligations of the transferring
Limited Partner with respect to the Partnership Interest as to which such
Limited Partner was

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substituted. The Limited Partners hereby consent to the substitution as a
Limited Partner of any individual or entity approved by the General Partners.

Section 10.4 Liabilities of Transferring Limited Partners.
Limited Partners who shall transfer all of their Partnership Interests shall
cease to be Limited Partners of the Partnership, except that unless and until
Substituted Limited Partners are admitted in their stead, such transferring
Limited Partners shall retain the statutory rights of assignors of limited
partnership interests under the Act. No substitution of an Assignee as a
Limited Partner shall operate to relieve the assignor of the liabilities
imposed under the Act or of the assignor's duties and obligations hereunder,
unless the General Partners agree in writing to release such Limited Partner.

Section 10.5 Record Owner of Partnership Interest.
Notwithstanding anything contained in this Agreement to the contrary, both the
Partnership and the General Partners shall be entitled to prohibit the transfer
of a Limited Partner's economic interest in the Partnership in accordance with
Section 10.2 hereof and to treat the transferor of any Partnership Interest as
the absolute owner thereof in all respects, and shall incur no liability for
distributions of cash or other property made to such transferor until such time
as the conditions of this Article are satisfied above- referenced written
instrument of transfer has been received by, approved, and recorded on the
books of, the Partnership.

Section 10.6 Admission of Additional Limited Partners. The
General Partners are authorized, in their sole discretion and without the
approval of any of the Limited Partners, to admit from time to time on or
before expiration of the Term, as additional Limited Partners, such Persons as
apply to become Limited Partners. Each such Person may apply for admission by
completing, executing, and delivering to the General Partners (i) the Capital
Contribution required by the General Partners, and (ii) such documents as may
be required by the General Partners. Admission of an additional Limited
Partner will become effective upon an amendment to this Agreement reflecting
such admission. The recordation of such amendment with the State of Florida is
not required.

Section 10.7 Death, Incompetency, or Dissolution of a Limited
Partner. The death, legal incompetency, bankruptcy, or dissolution of a
Limited Partner shall not dissolve the Partnership. The rights and obligations
of such Limited Partner to share in the net income, net loss, net profit, Cash
Flow, profit and loss of the Partnership, to receive distributions of
Partnership funds, and to transfer the Limited Partner's Partnership Interest
pursuant to this Article Ten, upon the happening of such an event, shall
devolve upon such Limited Partner's legal representative or successor in
interest, as the case may be, subject to the terms and conditions of this
Agreement, and the Partnership shall continue as a limited partnership. Upon
the death of a Limited Partner, the Limited Partner's legal representative
shall have all the other rights of a Limited Partner solely for the purpose of
settling the Limited Partner's estate. In no event, however, may such estate,
legal representative, or other successor in interest become a Substituted
Limited Partner

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except in accordance with Sections 10.2 and 10.3 hereof. Each Limited
Partner's estate or other successor in interest shall be liable for all the
obligations and liabilities of such Limited Partner.

ARTICLE ELEVEN

ADDITION OR WITHDRAWAL OF A GENERAL PARTNER

Section 11.1 Additional General Partners. The General Partners
may at any time designate one or more additional general partners whose
Partnership Interests shall be such as shall be agreed upon by the General
Partners and such additional general partners, provided that the Partnership
Interests of the Limited Partners shall not be affected thereby.

Section 11.2 Withdrawal, Default or Insolvency of a General
Partner; Purchase Option.

(a) Except as otherwise specifically provided in
this Agreement, no General Partner shall have the right to withdraw from the
Partnership and all General Partners hereby agree not to withdraw from the
Partnership. If a General Partner becomes a Bankrupt Partner, the remaining
General Partner or Partners or an assignee designated thereby (the "Remaining
Partner(s)") shall have the right to purchase the entire interest in the
Partnership of the Bankrupt Partner and any Affiliate of the Bankrupt Partner
(collectively, the "Bankrupt Sellers") as follows: The Remaining Partners that
are not Affiliates of the Bankrupt Sellers shall become vested with the
exclusive right and option, to be exercised in writing to the Bankrupt Sellers
(with written notice provided to all other Partners), for a period of one
hundred eighty (180) days after the occurrence of a General Partner becoming a
Bankrupt Partner, to elect to purchase the entire interest of the Bankrupt
Sellers at a purchase price determined in accordance with subsection (d) of
this Section 11.2.

(b) A Bankrupt Seller (or its legal
representative) whose entire right, title and interest is to be purchased and
succeeded to by the Remaining Partner(s) pursuant to this Section 11.2 shall,
within ten (10) days after receipt of notice from the Remaining Partner(s) of
its or their intent to purchase the entire interest of the Bankrupt Sellers,
execute and deliver such deeds, bills of sale and other instruments as shall
reasonably be requested by such Remaining Partner(s) to effect the conveyance
and transfer of the entire right, title and interest of such Bankrupt Sellers
in the Partnership, and shall, to the extent requested by the Remaining
Partner(s), cooperate to effect a smooth and efficient continuation of the
Partnership affairs. If either of the Bankrupt Sellers disputes the right of
the Remaining Partner(s) to purchase and succeed to the Bankrupt Sellers'
entire right, title and interest in the Partnership, such Bankrupt Seller shall
nevertheless execute instruments and cooperate with the Remaining Partner(s)
pursuant to the immediately preceding sentence, without, however, being deemed
to have waived his or its rights to damages if the Remaining Partner(s) shall
have purchased and succeeded to the interest of the Bankrupt Seller under this
Section 11.2 without having the right to do so. The Bankrupt Seller shall
indemnify and hold the Remaining Partner(s) harmless from and against all

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loss, liability, cost or expense (including reasonable attorneys' fees)
suffered or incurred by the Remaining Partner(s) if the Bankrupt Seller shall
fail to properly execute instruments and cooperate with the Remaining
Partner(s) pursuant to, or shall otherwise fail to perform, the provisions of
this Section 11.2.

(c) Simultaneously upon compliance by the
Bankrupt Sellers with the provisions of the immediately preceding subsection
(b) of this Section 11.2, the Remaining Partner(s) succeeding to the entire
right, title and interest of the Bankrupt Sellers in the Partnership shall pay
to such Bankrupt Sellers the "Fair Value" thereof (such value to be determined
as of the date the Remaining Partner(s) serve notice on the Bankrupt Sellers of
its or their intent to purchase the Bankrupt Sellers' interest). The Fair
Value of the Partnership and of the interest of the Bankrupt Sellers therein
shall be determined in accordance with the proceeding set forth in Section
11.2(d) below.

(d) Whenever in this Agreement the term "Fair
Value" is used, it shall mean the fair market value (i.e., the value at which a
willing purchaser and a willing seller would, under normal circumstances,
purchase and sell, both cognizant of all relevant factors, and neither being
under a compulsion to buy or sell) of the Partnership, Partnership Interest or
property in question (the "Subject Property"), as of the date of the valuation,
the date of the service of notice exercising any right to purchase or sell
under this Agreement, the date of the contribution of property or such other
date specified in this Agreement, as appropriate and as the case may be,
determined in the following manner:

(i) In the event a determination of
"Fair Value" is required, such determination shall be made by agreement in
writing of the General Partners.

(ii) If the General Partners fail to
agree in writing upon the "Fair Value" of the Subject Property within thirty
(30) days of the appropriate date as described in Section 11.2(d) above (the
"Agreement Period"), then the "Fair Value" of such Subject Property shall be
determined as follows, which determination shall be final, binding, and
conclusive upon all Persons affected by such determination.

(iii) The General Partners shall agree
upon a mutually acceptable appraiser within ten (10) days following the end of
the Agreement Period, or, in the event the General Partners fail to so agree,
two (2) appraisers shall be appointed within fifteen (15) days following the
end of the Agreement Period, one by each General Partner. If either General
Partner fails to appoint an appraiser within the fifteen (15) day time period
specified herein, the sole appraiser appointed within such fifteen (15) day
time period shall be the sole appraiser of the "Fair Value" of the Subject
Property. Each General Partner shall promptly provide notice of the name of
the appraiser so appointed by such General Partners, respectively, to the
other. A third appraiser, if the initial two appraisers are appointed, shall
be appointed by the mutual agreement of the first two appraisers so appointed,
or, if such first two appraisers fail to agree upon a third appraiser within
twenty (20) days following the end of the Agreement

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Period, either General Partner may demand that appointment of an appraiser be
made by the then Director of the Regional Office of the American Arbitration
Association located nearest to Orlando, Florida, in which event the appraiser
appointed thereby shall be the third appraiser. Each of the three appraisers
shall submit to each General Partner within thirty (30) days after all
appraisers have been appointed (the "Appraisal Period"), a written appraisal of
the "Fair Value" of the Subject Property.

(iv) In connection with any appraisal
conducted pursuant to this Agreement, the parties hereto agree that any
appraiser appointed hereunder shall be given full access during normal business
hours to all books, records, and files of the Partnership and all Partners
relevant to a valuation of the Subject Property.

(v) If three appraisers are
appointed, the "Fair Value" of the Subject Property shall be equal to the
numerical average of the two closest appraised determinations, or, if one
appraisal is within seven percent (7%) of the average of the other two
appraisals, the numerical average of all three appraisals shall be
determinative.

(vi) Any appraiser, to be qualified
to conduct an appraisal hereunder, shall be an independent appraiser (i.e., not
affiliated with any Partner), M.A.I. certified, and have at least five (5)
years experience in appraising property similar to the Subject Property. If
any appraiser initially appointed under this Agreement shall, for any reason,
be unable to serve, a successor appraiser shall be promptly appointed in
accordance with the procedures pursuant to which the predecessor appraiser was
appointed.

(vii) Notwithstanding the foregoing,
if the determination of the "Fair Value" of the Subject Property by appraisal
is not completed and all appraisal reports delivered as provided for herein
within the Appraisal Period, then all closing, payment, and similar dates
subsequent thereto shall be automatically extended one (1) day for each day
delivery of the appraisal reports is delayed beyond the end of the Appraisal
Period.

(viii) The costs of the appraiser
appointed by each respective General Partner shall be borne by that General
Partner. The costs of the third appraiser, if any, or the sole appraiser, in
the event the General Partners mutually agree upon a single appraiser or either
General Partner fails to appoint its respective appraiser, shall be borne
equally by the General Partners.

(e) Any determination of Fair Value hereunder
shall take into account any encumbrances, debts or indebtedness to which the
Subject Property is subject and which is to be assumed by a party in connection
with the contribution, transfer, assignment or sale of the Subject Property.

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Section 11.3 Mediation of Disputes; Reciprocal Purchase Rights.

(a) In the event the Partners are unable to reach
agreement with respect to any matter which requires their consent and
authorization hereunder, or in the event any Partner wants to remove a General
Partner or the Managing Partner, terminate CCP as the manager of the
Partnership's business and affairs, or terminate the CCP Management Agreement
(except in connection with a dissolution of the Partnership), the Partners
shall submit the matter in dispute to an independent mediator for settlement
and use reasonable attempts to resolve such dispute prior to taking any other
action with respect thereto. The Partners shall mutually agree on a certified
mediator to mediate the dispute and shall make their respective representatives
available for mediation with full power to enter into a settlement within five
(5) days of any Partner identifying a dispute in writing to the other Partners
(or such other period of time as may be reasonably required in order to gather
documentation and prepare for such mediation). The representatives must be
available for mediation between the hours of 9:00 a.m. and 5:00 p.m. on the
date(s) agreed upon by the Partners as the date set for the mediation. The
Partners shall bear equally the mediator's fee and the costs associated with
the mediation. The Partners shall make reasonable good-faith efforts to
resolve any dispute before mediation and at mediation.

(b) In the event the Partners are unable to
resolve the matter in dispute by mediation under subsection 11.3(a) or
otherwise, any Partner (other than a Bankrupt Partner or any Partner in default
under this Agreement) may declare that an impasse exists (and that the Partner
intends to invoke the provisions of this Section 11.3) and if such impasse is
not resolved within five (5) days of receipt of written notice regarding the
impasse, any Partner may elect to invoke the provisions of this Section 11.3 by
giving written notice (the Partner giving such notice being sometimes
hereinafter referred to as "A") to the other Partner(s) (the Partner(s)
receiving such written notice being sometimes hereinafter referred to as "B")
stating that A wishes to apply the provisions of this Section 11.3 to purchase
the entire right, title and interest of B and its Affiliates in the Partnership
(whether such interest is in the nature of a General Partner interest or a
Limited Partner interest) and setting forth a dollar figure selected by A (such
figure being hereinafter referred to as the "Specified Value") to be the net
value (i.e., the value net of (i) all Partnership liabilities to Partners and
(ii) all Capital Account balances of the Partners, all of which amounts are to
be repaid before any purchase pursuant to this Section 11.3, as set forth in
Section 11.3(h) below) of the Partnership. A's offer to purchase B's interest
(including the interest of any of B's Affiliates) shall be at a price equal to
the Specified Value multiplied by the aggregate Percentage Interest of B and
B's Affiliates at such time. A's notice shall be accompanied by a letter or
other statement signed by a bank or trust company confirming that A has
deposited with such bank or trust company the sum of One Hundred Thousand and
no/100 Dollars ($100,000.00), and the funds so deposited by A shall be held in
an interest-bearing account and applied as hereinafter provided.

(c) Notwithstanding the foregoing or anything
else in this Agreement to the contrary, in the event the impasse pertains
solely to a Subsidiary and not the Partnership as a whole, including, but not
limited to, matters related to, involving or arising out of (i) the

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management and operation of the business of the Subsidiary, (ii) a current or
future project of the Subsidiary, or (iii) a Project Plan or Project Budget of
the Subsidiary, A's purchase rights under this Section 11.3 shall be limited to
the purchase of the entire right, title and interest of the selling party and
its Affiliates in the Subsidiary (whether such interest is in the nature of a
General Partner interest (or the selling party's interest in any entity which
holds a General Partner interest in the Subsidiary) or a Limited Partner
interest) and not in the Partnership as a whole. In the case of a Subsidiary,
for purposes of calculating the value of the interest of the selling party and
its Affiliates in the Subsidiary, the percentage interest of the selling party
and its Affiliates in the Subsidiary would be added to the product of (A) the
percentage interest of the Partnership in the Subsidiary and (B) the aggregate
Percentage Interest of the selling party and its Affiliates in the Partnership.
For example, if the selling party and its Affiliates hold (Y) limited partner
interest in the Subsidiary of 49.5%, and (Z) an aggregate Percentage Interest
in the Partnership of 50%, and the Partnership is the holder of a 1% general
partner interest in the Subsidiary, the aggregate interest of the selling party
and its Affiliates in the Subsidiary would equal 49.5% plus .5% (50% x 1%) or
50%.

(d) Within sixty (60) days after receipt of such
notice from A, B shall give written notice to A electing either to (i) purchase
A's entire right, title and interest in the Partnership or Subsidiary, as the
case may be (including the right, title and interest of all of A's Affiliates
in the Partnership or Subsidiary) at an amount equal to the Specified Value set
forth in the notice from A to B, multiplied by the aggregate Percentage
Interest of A and A's Affiliates at such time, or (ii) sell its entire interest
(including the interest of its Affiliates) to A at the price set forth in A's
offer, multiplied by the aggregate Percentage Interest of B and B's Affiliates
at such time. If B shall give notice electing to purchase the entire
Partnership (or Subsidiary) interest of A and A's Affiliates, then such notice,
to be effective, shall be accompanied by a letter or other statement signed by
a bank or trust company confirming that B has deposited with such bank or trust
company the sum of One Hundred Thousand and no/100 Dollars ($100,000.00), which
funds may be held in an interest-bearing account and applied as hereinafter
provided: thereupon, the deposit (together with interest thereon) made by A
pursuant to subsection (b) above, shall be returned to A by the bank or trust
company with which A shall have deposited said monies. If B shall not
effectively give either of the above notices within sixty (60) days of receipt
of notice from A, then B shall be deemed to have elected to sell its entire
right, title and interest in the Partnership or Subsidiary, as the case may be
(and the entire right, title and interest of B's Affiliates in the Partnership
or Subsidiary) to A as herein provided.

(e) The closing of the purchase of the interest
of a Partner and its Affiliates described in this Section 11.3 shall take place
on or before the expiration of a one hundred eighty (180) day period
immediately following the expiration of the sixty (60) day period set forth
above for giving notice of an election by B (the "Purchase Closing Date"), on
which date the selling Partner(s) shall convey, transfer and assign to the
purchasing Partner or its designee (by assignment and such other instruments of
transfer as shall be reasonably requested by the purchasing Partner) the
selling Partner's or Partners' entire right, title and interest in and to the
Partnership or Subsidiary, as the case may be, free and clear of any liens,
encumbrances

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49

or claims of any nature whatsoever, and shall, to the extent requested by the
purchasing Partner, cooperate to effect a smooth and efficient continuation of
the affairs of the Partnership or Subsidiary.

(f) On the Purchase Closing Date, the purchasing
Partner shall pay to the selling Partner(s), by certified or bank cashier's
check, a cash sum equal to one hundred percent (100%) of the total purchase
price for the selling parties' interest in the Partnership or Subsidiary, as
the case may be (net of any debts, loans or other obligations by the selling
parties' to the Partnership (or Subsidiary) or to any other Partner (or partner
of the Subsidiary), which shall be paid from amounts otherwise payable to the
selling parties). On the Purchase Closing Date, the purchasing parties' or
their designee(s) shall execute such instruments as shall be reasonably
requested by the selling parties to confirm the assumption by the purchasing
parties of all of the obligations (whether of the Partnership or the
Subsidiary) for which the selling parties shall have been liable, it being
understood and agreed that the selling parties may not be released from
liabilities and obligations to third parties and the purchasing parties shall
have no obligation to obtain any such releases to complete the purchase
contemplated by this Section 11.3. The closing shall occur at such place as
shall be designated by the purchasing parties by notice to the selling parties
at least ten (10) days prior to the Purchasing Closing Date. Upon the Purchase
Closing Date, the selling parties shall have no further right, title or
interest in or to the deposit made by the purchasing parties, and said deposit
may be returned to the purchasing parties by the bank or trust company with
which the purchasing parties shall have deposited said monies, or may be used
in payment of the purchase price to the selling parties; provided, however,
that until the Purchase Closing Date said deposit shall stand as security for
the performance of the obligations hereunder by the purchasing parties.

(g) If the purchasing parties shall fail to
complete the purchase within the time and in the manner required by this
Section 11.3 (a) through (f), the One Hundred Thousand and no/100 Dollar
($100,000.00) deposit made by such parties with the bank or trust company,
together with all accrued interest or other earnings thereon, shall be
forfeited by the purchasing parties and shall be paid over by such institution
to the selling parties, and the selling parties may then elect (i) to become
the purchasing parties and purchase the other parties entire right, title and
interest in the Partnership or the Subsidiary, as the case may be (including
the entire right, title and interest of the other parties Affiliates in the
Partnership or the Subsidiary) on the same terms as were offered by the parties
who failed to complete the purchase, said election to be made within forty-five
(45) days after the initial purchasing parties failure to timely and/or
properly close, with the closing then to take place within sixty (60) days
thereafter, or (ii) to cancel the notice invoking the provisions of this
Section 11.3 regardless of which party originally gave the notice, in which
event (absent written agreement of all parties to the contrary) the parties
failing to complete the purchase shall have no further right for a period of
three (3) years thereafter to invoke the provisions of this Section 11.3.

(h) If the provisions of this Section 11.3 are
invoked and a party's interest in the Partnership or Subsidiary is sold, all
loans made to or by the selling parties to the

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Partnership (or the Subsidiary, as the case may be), or to any other Partner
(or partner in the Subsidiary), and all Capital Account balances of the
Partners (or capital account balance of the partner in the Subsidiary),
together with any interest earned thereon, must be repaid within ninety (90)
days following the Purchase Closing Date under Section 11.3(d), (e), (f), (g)
and (h) hereof.

ARTICLE TWELVE

DISSOLUTION OF THE PARTNERSHIP

Section 12.1 Dissolution; Winding Up. Except pursuant to rights
provided in Sections 12.1 and 12.3 hereof, each of the Partners agrees not to
voluntarily withdraw from the Partnership or to default with respect to any
obligation or undertaking contained in this Agreement or the Act. Upon (i) the
expiration of the Term, (ii) a sale, transfer, conveyance, or other disposition
of all of the then-remaining non-cash assets of the Partnership, (iii) any
Partner becoming a Bankrupt Partner or dissolving (provided that for purposes
of this Section 12.1, the term "dissolving" shall not include the merger,
consolidation, or recapitalization of any corporate general partner) or
terminating, or (iv) the occurrence of any other event causing the dissolution
of the Partnership under the Act, the affairs of the Partnership shall be wound
up insofar as practicable, and the Partnership shall be liquidated and its
affairs applied and distributed, in accordance with this Article Twelve.

Section 12.2 Liquidation of Assets; Payment of Debts. Upon the
termination of the Partnership, subject to the provisions of Section 12.1(a)
hereof, its assets shall be liquidated insofar as it is determined practicable
by the Managing Partner, and the net proceeds shall first be applied to the
payment of the debts and liabilities of the Partnership and the expenses of
liquidation. A reasonable time shall be allowed for the orderly liquidation of
the assets of the Partnership and the discharge of liabilities to creditors so
as to enable the Partners to minimize the normal losses attendant upon such
liquidation.

Section 12.3 Debts to Partners. The remaining proceeds and assets
shall next be applied toward the repayment of any loans made by any Partners to
the Partnership on a pari passu basis.

Section 12.4 Distributions to Partners. The remaining proceeds
and assets of the Partnership shall then be applied and distributed among the
Partners proportionally in accordance with the positive balances in their
Capital Accounts, until all such Capital Accounts are reduced to zero. The
Managing Partner may, in its sole and absolute discretion, distribute cash or
assets or properties in kind, or any combination of cash and assets or
properties in kind, to each Partner (or its legal representative or successor
in interest) in connection with the winding-up and liquidation of the
Partnership, and no Partner (or its successor in interest) shall claim any
interest whatsoever in any such distribution to another Partner so long as the
cash and assets or properties so distributed are equivalent in value to the
value of such Partner's Capital Account at such time. The value of any assets
or properties distributed in kind to a Partner in liquidation shall be such

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value as is attributed to such asset in the final accounting prepared pursuant
to Section 12.6 below.

Section 12.5 Reserves. Upon the liquidation of the Partnership,
if any Partner's Capital Account has a deficit balance (after giving effect to
all contributions, distributions and allocations for all fiscal years through
and including the fiscal year of liquidation) such Partner shall not be
required to contribute to the capital of the Partnership the amount necessary
to restore such deficit balance to zero. Any liquidating distribution pursuant
to this Article Twelve shall be made no later than the earlier of (a) the end
of the taxable year during which such liquidation occurs and (b) ninety (90)
days after the date of such liquidation. Notwithstanding the preceding
sentence, with the approval of all Partners, a pro rata portion of the
distributions which would otherwise be made to the Partners pursuant to the
first sentence of Section 12.4 hereof may be:

(i) distributed to a trust
established for the benefit of the Partners for the purpose of liquidating
Partnership assets, collecting amounts owed to the Partnership, and paying any
known or existing or contingent or unforeseen liabilities or obligations of the
Partnership or the Partners arising out of or in connection with the
Partnership. The assets of any such trust shall be distributed to the Partners
from time to time, in the reasonable discretion of the Managing Partner or of
all the Partners or of the trustees, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the Partners pursuant to Section 12.4 hereof; or

(ii) withheld to provide a reasonable
reserve (taking into account the receivables of the Partnership, the unrealized
portion of any installment obligations owed to the Partnership and the
likelihood of collection of same) for Partnership liabilities (contingent or
otherwise); provided, however, that such withheld amounts shall be distributed
to the Partners as soon as practicable pursuant to Section 12.4 hereof.

Section 12.6 Final Accounting. Each of the Partners (or its
successor in interest) shall be furnished with a statement prepared by the
Managing Partner and reviewed by an independent public accountant that shall
set forth the assets and liabilities of the Partnership as at the date of
termination. Upon compliance with the foregoing distribution plan, the
Partnership shall cease to be such, and the General Partners shall, if
necessary, execute and cause to be filed, distributed or published any and all
notices and documents as may be necessary or appropriate with respect to the
termination of the Partnership.

ARTICLE THIRTEEN

INDEMNIFICATION

Section 13.1 General. In any pending or completed action, suit,
or proceeding to which a General Partner or an Affiliate (which for purposes of
this Article shall include in each case

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the officers, directors, shareholders, partners, principals, agents and
representatives of the foregoing) is or was a party by reason of the fact that
such General Partner or Affiliate (a) is or was a General Partner, or (b) is an
Affiliate of a General Partner, the Partnership shall hold harmless and
indemnify such General Partner or Affiliate harmless from and against any an
against any and all losses, harm, liabilities, damages, costs, and expenses
(including, but not limited to, attorneys' fees, judgments, and amounts paid in
settlement) incurred by such General Partner or Affiliate in connection with
such action, suit, or proceeding if such General Partner or Affiliate
determined in good faith, that the course of conduct which caused the loss or
liability was in the best interests of the Partnership, and provided that such
General Partner's or Affiliate's conduct does not constitute gross negligence,
willful misconduct, or breach of fiduciary duty to the Limited Partners or the
Partnership.

Section 13.2 Liability Insurance. The Partnership shall not incur
the cost of that portion of any liability insurance which insures a General
Partner or Affiliate against liabilities as to which such General Partner or
Affiliate may not be indemnified under this Article Thirteen.

Section 13.3 Advancement of Legal Costs and Expenses. The
Partnership shall advance Partnership funds to the General Partner or its
Affiliates for legal expenses and other costs incurred as a result of any legal
action if the following conditions are satisfied: (a) the legal action relates
to acts or omissions with respect to the performance of duties or services on
behalf of the Partnership; (b) the legal action is initiated by a third party
who is not a Limited Partner, or the legal action is initiated by a Limited
Partner and a court of competent jurisdiction specifically approves such
advancement; and (c) the General Partner or its Affiliates undertake to repay
the advanced funds, together with interest at the rate of prime plus one
percent (1%), to the Partnership in cases in which the General Partners or such
Affiliates are not entitled to indemnification under this Article Thirteen.

Section 13.4 Liability of Exculpated Parties and Partners.

(a) In carrying out their respective powers and
duties hereunder, each Exculpated Party (as defined in Section 7.4 hereinbelow)
shall exercise its best efforts and shall not be liable to the Partnership or
to any Partner for any actions taken or omitted to be taken in good faith and
reasonably believed to be in the best interest of the Partnership or for errors
of judgment made in good faith.

(b) A Partner who ceases to be a Partner shall
not be liable for or on account of obligations or liabilities of the
Partnership incurred subsequent to its ceasing to be a Partner.

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53

ARTICLE FOURTEEN

MISCELLANEOUS

Section 14.1 Reliance Upon General Partners. No Person dealing
with the General Partners shall be required to determine such General Partners'
authority to make any commitment or undertaking on behalf of the Partnership,
nor to determine any fact or circumstance bearing upon the existence of its
authority.

Section 14.2 Notices. Notices to Partners or to the Partnership
shall be deemed to have been given when personally delivered or delivered by
facsimile transmission, or when mailed by prepaid registered or certified mail
to the respective mailing addresses of each Partner and of the Partnership's
principal office, all as herein provided:

To the Partnership: c/o CNL Corporate Venture, Inc.,
Managing Partner
400 East South Street, Suite 500
Orlando, Florida 32801
Facsimile: (407) 648-8920
Attention: Lynn E. Rose, Chief Financial Officer

To St. Joe Management: St. Joe Central Florida Management, Inc.
1650 Prudential Drive
Suite 400
Jacksonville, Florida 32207
Facsimile: (904) 396-4042
Attention: Robert M. Rhodes
Senior Vice President and General Counsel

To St. Joe Development: St. Joe Central Florida Development, Inc.
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
Facsimile: (904) 396-4042
Attention: Robert M. Rhodes
Senior Vice President and General Counsel

To CNL Corporate
Venture, Inc.: 400 East South Street, Suite 500
Orlando, Florida 32801
Facsimile: (407) 648-8920
Attention: Lynn E. Rose, Chief Financial Officer

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54

To CNL Corporate
Venture I, Inc.: 400 East South Street, Suite 500
Orlando, Florida 32801
Facsimile: (407) 648-8920
Attention: Lynn E. Rose, Chief Financial Officer

Any Partner may change the address at which it shall receive notices
by notifying the Partnership and all other Partners of such change in writing
in accordance with this provision.

Section 14.3 Section Headings. All headings contained in this
Agreement are for convenience of reference only and are in no way intended to
describe, interpret, define, or limit the scope, extent, or intent of this
Agreement or any provisions hereof.

Section 14.4 Severability. The provisions of this Agreement shall
be deemed severable, and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the remainder of this
Agreement or any valid clause of any invalid provision. Any such invalid or
unenforceable provision shall be replaced with a valid and enforceable
provision which comes closest to the intent of the parties with respect to such
invalid or unenforceable provision.

Section 14.5 Governing Law. The laws of the State of Florida
shall govern the validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties.

Section 14.6 Jurisdiction. Each party hereto agrees to submit to
the personal jurisdiction and venue of the state and federal courts in the
state of Florida in the judicial circuit of Orange County, and does hereby
waive all questions of personal jurisdiction and venue, including, without
limitation, the claim or defense that such courts constitute an inconvenient
forum.

Section 14.7 Counterpart Execution. This Agreement may be
executed in any number of identical counterparts with the same effect as if all
parties hereto had signed the same document. All counterparts shall be
construed together and shall constitute one Agreement.

Section 14.8 Parties in Interest. Each and every covenant, term,
provision and agreement herein contained shall be binding upon, and inure to
the benefit of, the heirs, successors, assigns, and legal representatives of
the respective parties hereto.

Section 14.9 Gender and Number. As the context requires, all
words used herein in the singular number shall extend to and include the
plural; all words used in the plural number shall extend to and include the
singular; and all words used in any gender shall extend to and include all
genders or be neutral.

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Section 14.10 Partition. No Partner will, either directly or
indirectly, make any application for dissolution, take any action to require
partition or appraisement of the Partnership or of any of its assets or
properties or cause the sale of any Partnership property, and notwithstanding
any provisions of applicable law to the contrary, each Partner (and its
successors and assigns) hereby irrevocably waives any and all right to maintain
any action for partition or to compel any sale with respect to his interest in
the Partnership, or with respect to any of the properties and assets of the
Partnership.

Section 14.11 Amendment, Waiver or Termination. Except as
otherwise expressly provided in this Agreement, no amendment, waiver or
termination of this Agreement, or any part hereof, shall be effective unless
made in writing and signed by the party or parties sought to be bound thereby,
and no failure to pursue or elect any remedies shall constitute a waiver of any
default under or breach of any provisions of this Agreement, nor shall any
waiver of any default under or breach of any provision of this Agreement be
deemed to be a waiver of any other subsequent similar or different default
under or breach of such or any other provision or of any election of remedies
available in connection therewith.

Section 14.12 Strict Construction. This Agreement is the result of
the mutual efforts of the parties hereto. As such, in any dispute regarding
the interpretation of a provision hereto, no party shall advance a position
that a provision in dispute should be more strictly construed against another
party on the basis that such other party was the party responsible for the
preparation of any provision in controversy.

Section 14.13 Costs of Enforcement. In the event any party hereto
initiates action to enforce its rights hereunder or to interpret the terms
hereof, the substantially prevailing party shall recover from the substantially
non- prevailing party its reasonable expenses, court costs, including taxed and
untaxed costs, and reasonable attorneys' fees (including fees of paralegals and
legal assistants), whether suit be brought or not (collectively referred to as
"Expenses"). As used herein, Expenses include Expenses incurred in any
appellate or bankruptcy proceeding. All such Expenses shall bear interest at
the highest rate allowable under the laws of the State of Florida from the date
the substantially prevailing party pays such Expenses until the date the
substantially non-prevailing party repays such Expenses. Expenses incurred in
enforcing this Section shall be covered by this Section. For this purpose, the
court is requested by the parties to award actual costs and attorneys' fees
incurred by the substantially prevailing party, it being the intention of the
parties that the substantially prevailing party be completely reimbursed for
all such costs and fees. The parties request that inquiry by the court as to
the fees and costs shall be limited to a review of whether the fees charged and
hourly rates for such fees are consistent with the fees and hourly rates
routinely charged by the attorneys for the substantially prevailing party.

Section 14.14 Exhibits. Each exhibit, schedule or certificate
attached to this Agreement is incorporated into and made a part of this
Agreement for all purposes.

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56

Section 14.15 Entire Agreement; Sucessors and Assigns. This
Agreement contains the entire agreement by and among the parties and supersedes
any prior understandings and agreements among them respecting the subject hereof
and shall be binding upon the parties hereto, their successors, heirs, permitted
assigns, legal representatives, executors and administrators but shall not be
deemed for the benefit of creditors or any other Persons.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.

WITNESS: The "General Partners"

ST. JOE CENTRAL FLORIDA
MANAGEMENT, INC., a Florida
corporation

/s/ Valerie Lynn House By: /s/ Robert M. Rhodes
- -------------------------------- -------------------------------
Name: Valerie Lynn House Name: Robert M. Rhodes
------------------------- ----------------------------
Title: Senior Vice President
----------------------------

/s/ Alison D. Kennedy
- --------------------------------
Name: Alison D. Kennedy
-------------------------

CNL CORPORATE VENTURE, INC., a
Florida corporation

/s/ Robert A. Bourne By: /s/ James M. Seneff, Jr.
- -------------------------------- -------------------------------
Name: Robert A. Bourne Name: James M. Seneff, Jr.
-------------------------- ----------------------------
Title: Chief Executive Officer
----------------------------

/s/ Jeffrey Decker
- --------------------------------
Name: Jeffrey Decker
--------------------------

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57

The "Limited Partners"

ST. JOE CENTRAL FLORIDA
DEVELOPMENT, INC., a Florida
corporation

/s/ Valerie Lynn House By: /s/ Robert M. Rhodes
- ------------------------------ -------------------------------
Name: Valerie Lynn House Name: Robert M. Rhodes
----------------------- ----------------------------
Title: Senior Vice President
----------------------------

/s/ Alison D. Kennedy
- ------------------------------
Name: Alison D. Kennedy
-----------------------

CNL CORPORATE VENTURE I, INC., a
Florida corporation

/s/ Robert A. Bourne By: /s/ James M. Seneff, Jr.
- ------------------------------ -------------------------------
Name: Robert A. Bourne Name: James M. Seneff, Jr.
----------------------- ----------------------------
Title: Chief Executive Officer
----------------------------

/s/ Jeffrey Decker
- ------------------------------
Name: Jeffrey Decker
-----------------------

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EXHIBIT A

DEVELOPMENT OPPORTUNITIES

PROJECTS TO BE PRESENTED BY CNL VENTURE

(a) Development and ownership of the Downtown Orlando
Property currently under contract to First Union and
a proposed 352,000 square foot office tower on
parcels adjacent to the City of Orlando City Hall to
be known as CNL Plaza;

(b) Development and ownership of the Tampa Triangle
project in Tampa, Florida; and also

(c) The proposed development and partial ownership of a
multi-use project on the former naval training center
property and the proposed development of a hotel on
property held by Walt Disney World Company or its
Affiliates in the Reedy Creek Improvement District.

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59
EXHIBIT B

DEBENTURE AGREEMENT

THIS DEBENTURE AGREEMENT (this "Agreement") is made as of December 3,
1997, among ST. JOE/CNL REALTY GROUP, LTD., a Florida limited partnership (the
"Partnership"), ST. JOE CENTRAL FLORIDA MANAGEMENT, INC., a Florida corporation
("St. Joe"), and CNL CORPORATE VENTURE, INC., a Florida corporation ("CNL").
(St. Joe and CNL are sometimes hereinafter referred to collectively as
"Holders" and individually as "Holder").

RECITALS

A. Pursuant to the terms and conditions of that certain Agreement
of Limited Partnership (the "Partnership Agreement") among the Partnership, the
Holders as general partners, and ST. JOE CENTRAL FLORIDA DEVELOPMENT, INC., a
Florida corporation, and CNL CORPORATE VENTURE I, INC., a Florida corporation,
as limited partners, the Partnership was formed for the purposes described in
the Agreement.

B. As set forth in the Agreement, the Holders agreed to provide
from time to time as necessary certain funds to the Partnership in order to
finance its activities and the activities of its subsidiaries, which financing
would be evidenced by certain unsecured, subordinated debentures issued by the
Partnership in favor of the Holders (the "Debentures").

C. The parties have entered into this Agreement in order to set
forth the terms and conditions of the Debentures to be issued in connection
with the financing to be provided by the Holders.

NOW THEREFORE, in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. The Commitment; Issuance of Debentures. In accordance with
the terms and conditions of the Partnership Agreement and this Agreement, St.
Joe and CNL have agreed to make lendings (individually, a "Lending" and
collectively, "Lendings") to the Partnership from time to time from a date
which is ten (10) days after the date hereof until the Maturity Date (as
defined hereinbelow) up to the maximum aggregate principal amount outstanding
at any

- 1 -

time of $30,000,000 (the "Maximum Commitment"); provided that in no event shall
the amount in principal outstanding at any time from Lendings to the
Partnership exceed $25,000,000 by St. Joe (the "St. Joe Funding Obligation")
and $5,000,000 by CNL (the "CNL Funding Obligation") (the St. Joe Funding
Obligation and the CNL Funding Obligation are sometimes referred to hereinbelow
individually as a "Funding Obligation" and collectively as the "Funding
Obligations"). Each Lending to be made hereunder shall be made by St. Joe and
CNL in proportion to their respective Funding Obligations. In the event a
Holder (the "Defaulting Holder") fails to satisfy its Funding Obligation with
respect to a Lending (a "Funding Default"), the other Holder may, at its sole
option, elect to pay the Defaulting Holder's unpaid Funding Obligation (the
"Deficiency Advance") within 20 business days following the date the Funding
Obligation was to have been satisfied. Such paying non-defaulting Holder shall
automatically acquire a lien upon the Defaulting Holder's Debenture and
Defaulted Interest (as such term is defined in the Partnership Agreement) for
the amount so paid, plus interest thereon at a rate per annum of (a) the
greater of the prime rate of interest in effect on the date of the Deficiency
Advance (as published in the Wall Street Journal) plus 3%, or 15%, or (b) the
maximum rate permitted by applicable law, whichever is less. The Deficiency
Advance, and all accrued but unpaid interest thereon, shall be due and payable
by the Defaulting Holder upon demand by the non-defaulting Holder.
Notwithstanding anything in this Agreement, the Debentures or the Partnership
Agreement to the contrary, each Holder's obligation to make a Lending hereunder
is subject to the satisfaction by the other Holder of its Funding Obligation
with respect to such Lending. Simultaneously with the execution of this
Agreement, the Partnership has executed and issued to the Holders Debentures in
the form attached hereto as Exhibit A in order to evidence their respective
Funding Obligations.

Nothing in this Section 1 is intended to relieve any Holder from any
obligation to provide funds under the Debentures with respect to its Funding
Obligation, and nothing in this Section 1 is intended to limit or restrict any
remedy or recourse the Partnership or the other Holder may have against a
Defaulting Holder, in law, equity or pursuant to other provisions of this
Agreement. The remedies set forth in this Section 1 are in addition to any
other remedies allowed or available under other provisions of this Agreement or
the Partnership Agreement, by law or in equity. Notwithstanding anything in
this Agreement or in the Partnership Agreement to the contrary, in the event of
a Funding Default, whether or not a Deficiency Advance is made, the
non-defaulting Holder shall have the power and authority, without the consent
or approval of the Defaulting Holder or any of its Affiliates, including
Affiliates which are partners of the Partnership, to cause the Partnership to
take such actions as the non-defaulting Holder may deem necessary or desirable
to protect and enforce all of the rights

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61

and remedies which the Partnership may have under this Agreement and the
Debenture of the Defaulting Holder.

2. Terms of Debentures. The Debentures are designated as "10%
Subordinated Debentures Due 2004", and shall mature on December 3, 2004 (the
"Maturity Date"). The Partnership shall pay interest on the principal amount
outstanding under the Debentures from time to time at the rate of 8% per annum.
Additionally, interest on the principal amount outstanding under the Debentures
from time to time shall accrue at the rate of 2% per annum (the "Accrued
Interest Allocation") until the earlier of the Maturity Date or such date prior
to the Maturity Date on which the principal amounts of Debentures are due and
payable in full or otherwise paid in full (at which time all accrued, but
unpaid interest, including the Accrued Interest Allocation, shall be due and
payable in full). The Accrued Interest Allocation shall be compounded monthly.
Interest (except for the Accrued Interest Allocation) shall be payable
quarterly on January 1, April 1, July 1 and October 1, commencing on the first
of such dates following a Lending under the Debentures, until the principal
thereof, and all accrued but unpaid interest is paid in full. Interest on the
Debentures shall be computed on the basis of a year of 12 30-day months.
Principal on the Debentures shall be paid in full on the Maturity Date (or such
earlier date as may be provided herein).

Notwithstanding anything in this Agreement to the contrary, payments
of principal and interest, as scheduled hereinabove, will be paid to the
Holders in proportion to their respective Funding Obligations. All payments
due under the Debentures shall be payable by check mailed to the addresses of
the Holders as such addresses shall appear on records of the Partnership or, at
the request of a Holder, by wire transfer in accordance with the instructions
provided by such Holder.

3. Revolving Obligation. The Debentures shall evidence a
revolving obligation; accordingly, during the term of the Debentures, the
Partnership may borrow up to the Maximum Commitment, repay all or any portion
of such principal amount, and reborrow up to such Maximum Commitment subject to
the terms and conditions set forth herein. The Partnership shall give the
Holders written notice of any requested Lending hereunder. Such notice shall
specify the proposed date of the Lending and the amount thereof. Requests by
the Partnership for any Lending under the Debentures and this Agreement on any
date shall be in the minimum aggregate principal amount of $1,000,000 (or a
lesser amount necessary to fully fund a Debenture at the time of such Lending).
Each Holder shall make its respective portion of the Lending on the date
proposed by the Partnership therefor (which date shall not be earlier than 15
days after the receipt of said request for an Lending) by delivering
immediately available funds to the

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62

general deposit account of the Partnership, or in such other manner as the
Partnership may request in its notice.

4. Unsecured Obligations. The Debentures shall be unsecured,
general obligations of the Partnership. The Debentures shall be subordinate to
any and all other existing or future indebtedness or obligations owed by the
Partnership or any of its subsidiaries to any other person, whether secured or
unsecured (the "Senior Indebtedness"), except for indebtedness owed by the
Partnership to any of its partners which indebtedness shall be of equal
priority with the indebtedness evidenced by the Debentures. The Debentures
shall be non-recourse to the partners of the Partnership. The Holders agree to
execute any documents necessary to evidence the subordination of the Debentures
to any Senior Indebtedness.

5. Subordination of Debentures. The Partnership and the Holders
covenant and agree that all Debentures shall be issued subject to the
provisions of this Section; and each person holding any Debenture, whether upon
original issue or upon any permitted transfer or assignment thereof, accepts
and agrees to be bound by such provisions:

a. Maturity of Senior Indebtedness. Upon the maturity
of any Senior Indebtedness, by lapse of time, acceleration, or otherwise, no
amount shall be paid by the Partnership, nor shall the Holder of any Debenture
take or receive from the Partnership for the account of such Holder, any
payment in respect of the principal of or interest, if any, on such Debenture,
unless and until such matured Senior Indebtedness, and all interest thereon,
shall have been paid in full.

b. Payment Over of Proceeds. Upon any payment by the
Partnership, or distribution of assets of the Partnership of any kind or
character, whether in cash, property, or securities, to creditors upon any
dissolution, winding-up, liquidation, or reorganization of the Partnership,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership, or
other proceedings, all amounts then outstanding, whether or not then due, upon
all Senior Indebtedness shall first be paid in full, or payment thereof
provided for in money in accordance with its terms, before any payment is made
on account of the principal of or interest on the Debentures, and upon any such
dissolution, winding up, liquidation, or reorganization, any payment by the
Partnership, or distribution of assets of the Partnership of any kind or
character, whether in cash, property, or securities, to which the Holders would
be entitled, except for the provisions of this Section, shall be paid by the
Partnership or by any receiver, trustee in bankruptcy, liquidating trustee,
agent, or other person making such payment or distribution, or by the Holders
under this Agreement if received by them directly,

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63

to the holders of Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear to the extent necessary to pay all
outstanding Senior Indebtedness in full, in money or money's worth, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Indebtedness, before any payment or distribution is made to the
Holders.

In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Partnership of any kind or character, whether
in cash, property, or securities, prohibited by the foregoing, shall be
received by the Holders before all Senior Indebtedness is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness.

For purposes of this Section, the words "cash, property, or
securities" shall not be deemed to include partnership interests of the
Partnership as reorganized or readjusted, or securities of the Partnership or
any entity provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Section with respect to the Debentures to the payment of all Senior
Indebtedness which may at the time be outstanding; provided that (i) the Senior
Indebtedness is assumed by the new entity, if any, resulting from such
reorganization or readjustment; and (ii) the rights of the holders of the
Senior Indebtedness (other than leases) and of leases which are assumed are
not, without the consent of such holders, altered by such reorganization or
readjustment.

c. Debentures Declared Due. In the event that any of
the Debentures are declared due and payable before their stated maturity
because of the occurrence of an Event of Default (as defined in Section 7
hereof), the Holders shall be entitled to payment only after there shall first
have been paid in full (or such payment shall have been provided for) all
Senior Indebtedness outstanding at the time such Debentures are declared due
and payable and all interest thereon.

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64

d. Subrogation of Debentures. Subject to the payment in
full of all Senior Indebtedness, the rights of the Holders of the Debentures
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of cash, property, or securities of the
Partnership applicable to the Senior Indebtedness until the principal of and
interest on the Debentures shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property, or securities to which the Holders would be
entitled except for the provisions of this Section, and no payment over
pursuant to the provisions of this Section, to or for the benefit of the
holders of Senior Indebtedness by Holders shall, as between the Partnership,
its creditors other than holders of Senior Indebtedness, and the Holders, be
deemed to be a payment by the Partnership to or on account of the Senior
Indebtedness. It is understood that the provisions of this Section are and are
intended solely for the purpose of defining the relative rights of the Holders,
on the one hand, and the holders of the Senior Indebtedness, on the other hand.

Nothing contained in this Section or elsewhere in this
Agreement or in the Debentures is intended to or shall impair, as between the
Partnership, its creditors other than the holders of Senior Indebtedness, and
the Holders, the obligation of the Partnership, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the
Debentures as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Partnership other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent any Holder from
exercising all remedies otherwise permitted by applicable law upon default
under this Agreement, subject to the rights, if any, under this Section of the
holders of Senior Indebtedness in respect of cash, property, or securities of
the Partnership received upon the exercise of any such remedy.

Upon any payment or distribution of assets of the Partnership
referred to in this Section, the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation, or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent, or other person making such payment or distribution, delivered
to the Holders, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Partnership, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon, and all other facts
pertinent thereto or to this Section.

e. Payments on Debentures. Except as otherwise set
forth in this Section 5, the mere existence of the Senior Indebtedness shall
not interfere with

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65

or postpone the Partnership's obligation to make the payment of any amount of
principal or interest due on any of the Debentures.

6. Prepayment of Debentures. The Debentures may be prepaid at
the discretion of the Partnership, in whole or in part, in the principal amount
of $1,000,000 or multiples thereof, without premium or penalty, by paying the
principal amount thereof (or so much thereof as is being prepaid at such time),
together with all interest accrued but unpaid for the current period and all
prior periods to the date of prepayment (except for the Accrued Interest
Allocation which shall be due any payable only in the event of a total
prepayment of the Debentures). In the event of a prepayment under the
Debentures, such prepayments shall be allocated and distributed to the Holders
in proportion to their respective Funding Obligations.

Notice of prepayment shall be given by first-class mail, postage
prepaid, mailed not less than five nor more than 60 days prior to the specified
prepayment date, to each Holder of Debentures to be prepaid, at its address
appearing in the Debenture Register. All notices of prepayment shall state (a)
the prepayment date, (b) the total principal amount to be prepaid, and (c) if
less than all outstanding Debentures are to be prepaid, the identification
(and, in the case of a Debenture to be prepaid in part, the principal amount of
such Debenture) of the particular Debenture to be prepaid.

7. Events of Default. The following shall be deemed Events of
Default by the Partnership with respect to the Debentures and a breach of this
Agreement:

a. Failure to pay any installment of interest upon any
of the Debentures as and when the same shall become due and payable, and
continuance of such failure for a period of 30 days after written notice of
such failure from the Holder of such Debentures; or

b. Failure to pay the principal of any of the Debentures
as and when the same shall become due and payable, by declaration or otherwise,
and the continuance of such failure for a period of 30 days after written
notice of such failure from the Holder of such Debentures; or

c. Failure on the part of the Partnership duly to
observe or perform any other of the covenants or agreements on the part of the
Partnership in the Debentures or in this Agreement with respect to the
Debentures which has continued for a period of 60 days after the date on which
written notice of such failure, requiring the Partnership to remedy the same,
shall have been given to the Partnership by the Holder of such Debentures; or

- 7 -
66

d. Failure to (i) pay principal of or interest on any
other obligation for indebtedness owed by the Partnership, including, but not
limited to, any Senior Indebtedness, obligations with respect to guarantees of
the Partnership for indebtedness of another, or obligations secured by a
mortgage or security interest granted by the Partnership, or (ii) perform a
term or condition of an agreement, document or instrument evidencing, securing
or otherwise executed in connection with such indebtedness or obligation, if
the effect of nonpayment or nonperformance is to cause, or permit the holder(s)
of the indebtedness or obligation to cause the indebtedness or obligation to
become due and payable prior to its stated maturity; or

e. Commencement by the Partnership of a voluntary case
or other proceeding seeking liquidation, reorganization, or other relief with
respect to itself or its debts under any bankruptcy, insolvency, or other
similar laws now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it or
any substantial part of its property, or consent by the Partnership to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or the making of a
general assignment for the benefit of creditors, or a failure generally to pay
its debts as they become due; or

f. Commencement against the Partnership of an
involuntary case or other proceeding seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy, insolvency,
or other similar laws now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian, or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 90 consecutive
days; or

g. The Partnership sells, leases, assigns, transfers or
otherwise disposes of all or a substantial (being defined as 25% or more) part
of its assets or properties, tangible or intangible, to any person without the
prior written consent of both of the Holders; or

h. The Partnership consolidates with or merges into any
other entity, or permits any other entity to merge into it (unless, the
Partnership is the surviving entity), or dissolves or takes or omits to take
any action which would result in its dissolution, all without the prior written
consent of both of the Holders.

Upon the occurrence of any Event of Default, all of the
principal and accrued interest then outstanding on all of the Debentures shall
automatically

- 8 -
67

without any action by any Holder thereof, and without demand, notice or legal
process of any kind, be declared, and immediately shall become, due and payable
in full.

8. Payment of Principal and Interest. The Partnership covenants
and agrees that it will duly and punctually pay or cause to be paid the
principal of and interest accrued on the Debentures at the places, at the
respective times, and in the manner provided herein and in the Debentures.

9. Execution, Delivery, and Dating. The Debentures shall be
executed on behalf of the Partnership by both of its general partners. The
signatures of any of such general partners upon such certificates may be
facsimiles, engraved, stamped, or printed. Each Debenture shall be dated the
date of its issuance.

10. Exchange of Debenture Certificates. At the option of a
Holder, Debenture certificates may be exchanged for other certificates of any
authorized denomination or denominations, of a like aggregate principal amount,
upon surrender of the Debentures to be exchanged at the principal office of the
Partnership. All Debentures issued upon any exchange of Debentures shall be
the valid obligations of the Partnership, evidencing the same debt, and
entitled to the same benefits under this Agreement as the Debentures
surrendered upon such exchange.

Every Debenture certificate presented or surrendered for exchange
shall (if so required by the Partnership) be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Partnership
duly executed by the Holder thereof.

11. Mutilated, Destroyed, Lost or Stolen Certificates. If any
mutilated Debenture certificate is surrendered to the Partnership, or the
Partnership receives evidence to its satisfaction of the destruction, loss, or
theft of any Debenture certificate and there is delivered to the Partnership
such security or indemnity as may be required by the Partnership to save it
harmless, then the Partnership shall execute and deliver, in exchange for any
such mutilated certificate or in lieu of any such destroyed, lost, or stolen
certificate, a new certificate of like tenor and principal amount.

In case any such mutilated, destroyed, lost, or stolen Debenture has
become or is about to become due and payable, the Partnership, in its
discretion, may, instead of issuing a new Debenture, pay such Debenture.

- 9 -
68

Upon the issuance of any new certificate under this Section, the
Partnership may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses connected therewith.

Every new certificate issued pursuant to this Section in lieu of any
destroyed, lost, or stolen Debenture shall constitute a substituted contractual
obligation of the Partnership, whether or not the destroyed, lost, or stolen
certificate shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other certificates duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost, or stolen certificates.

12. Satisfaction and Discharge of Agreement. This Agreement shall
cease to be of further effect when the Debentures have (a) matured (or have
become due and payable in full prior to their stated maturity as a result of an
Event of Default or otherwise), or (b) been retired or cancelled, and the
Partnership has paid or caused to be paid all sums outstanding, due and payable
thereunder and hereunder.

13. Restrictions on Transfer. Without the express written consent
of the all of the general partners of the Partnership, no Holder shall,
directly or indirectly, offer, assign, transfer, grant or sell a participation
in, pledge or otherwise dispose of any of its interest in this Agreement or any
Debenture (each, a "transfer") to any person or entity whatsoever. Each
certificate evidencing the ownership of Debentures shall be imprinted with a
legend stating that they have not been registered under the Securities Act of
1933, as amended, and may set forth the restrictions on transfer contained in
or contemplated by this Agreement. All restrictions on transfer shall apply to
any permitted transferee.

14. Amendments. This Agreement may be amended or superseded in
whole or in part by a subsequent agreement, in writing, executed by the
Partnership and the Holders at the time of such amendment.

15. Provisions Binding on Partnership's Successors. All the
covenants, stipulations, promises and agreements in this Agreement by the
Partnership shall bind its successors and assigns whether so expressed or not.

- 10 -
69

16. Official Acts by Successor Entity. Any act or proceeding by
any provision of this Agreement authorized or required to be done or performed
by any board, committee or partner of the Partnership shall and may be done and
performed with like force and effect by the like board, committee, partner or
officer of any entity that shall at the time be the lawful sole successor of
the Partnership.

17. Addresses for Notices. Any notice or demand which by any
provision of this Agreement is required or permitted to be given or served may
be given or served by being personally delivered or delivered by facsimile
transmission, or by being mailed by prepaid registered or certified mail to the
respective mailing addresses of each Holder and of the Partnership's principal
office, all as herein provided:

To the Partnership: St. Joe/CNL Realty Group, Ltd.
c/o CNL Corporate Venture, Inc.,
Managing Partner
400 East South Street, Suite 500
Orlando, Florida 32801
Facsimile: (407) 648-8920
Attention: Lynn E. Rose, Chief Financial
Officer

To St. Joe: St. Joe Central Florida Development, Inc.
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
Facsimile: (904) 396-4042
Attention: Robert M. Rhodes
Senior Vice President and
General Counsel

To CNL: CNL Corporate Venture, Inc.
400 East South Street, Suite 500
Orlando, Florida 32801
Facsimile: (407) 648-8920
Attention: Lynn E. Rose, Chief Financial
Officer

Any party may change the address at which it shall receive notices by
notifying all other parties of such change in writing in accordance with this
provision.

- 11 -
70

18. Governing Law. This Agreement and each Debenture shall be
deemed to be a contract made under the laws of the State of Florida, and for
all purposes shall be construed in accordance with the laws of the State of
Florida, exclusive of conflict of law principles.

19. Legal Holidays. In any case where the date of maturity of
interest on or principal of the Debentures will be in the City of Orlando,
Florida, a legal holiday or a day on which banking institutions are authorized
by law or executive order to close ("Legal Holidays"), then payment of such
interest on or principal of the Debentures need not be made on such date but
may be made on the next succeeding day not a Legal Holiday with the same force
and effect as if made on the date of maturity and no interest shall accrue for
the period from and after such date.

20. Benefits of Agreement. Nothing in this Agreement or in the
Debentures, express or implied, shall give to any person, other than the
parties hereto and their permitted successors and assigns hereunder, any
benefit or any legal or equitable right, remedy or claim under this Agreement.

21. Headings. The titles and headings of the Sections of this
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.

22. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

[The remainder of this page intentionally left blank.]

- 12 -
71

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

Witnesses: The "Partnership"

ST. JOE/CNL REALTY GROUP,
LTD., a Florida limited partnership

By: ST. JOE CENTRAL FLORIDA
MANAGEMENT, INC., a
Florida corporation, as general
partner

By:
- ------------------------------ ------------------------------
Name: Name:
------------------------ --------------------------
Title:
--------------------------

- ------------------------------
Name:
------------------------

By: CNL CORPORATE VENTURE,
INC., a Florida corporation, as
general partner

By:
- ------------------------------ -----------------------------
Name: Name:
------------------------ --------------------------
Title:
--------------------------

- ------------------------------
Name:
------------------------

-13-
72

The "Holders"

ST. JOE CENTRAL FLORIDA
MANAGEMENT, INC., a Florida
corporation

By:
- ------------------------------ ----------------------------------
Name: Name:
----------------------- ------------------------------
Title:
------------------------------

- ------------------------------
Name:
-----------------------

CNL CORPORATE VENTURE, INC.,
a Florida corporation

By:
- ----------------------------- ----------------------------------
Name: Name:
---------------------- ------------------------------
Title:
------------------------------

- -----------------------------
Name:
----------------------

- 14 -

EXHIBIT A

No. __ $_________

ST. JOE/CNL REALTY GROUP, LTD.
10% Subordinated Debentures Due 2004

ST. JOE/CNL REALTY GROUP, LTD., a Florida limited partnership (the
"Partnership"), for value received, hereby promises to pay to
____________________, a Florida corporation (the "Holder"), or registered
assigns, the principal sum of _______________________________ Dollars
($________) on December 3, 2004 (the "Maturity Date"), and to pay interest,
other than the Accrued Interest Allocation (as defined below), on said
principal sum, or so much thereof as is outstanding from time to time, from the
date hereof quarterly on January 1, April 1, July 1 and October 1 (each, an
"Interest Payment Date") in each year commencing on the first of such dates
following an advance hereunder, at the rate of 8% per annum, until the
principal amount hereof, and all accrued but unpaid interest thereon, has been
paid in full. Additionally, notwithstanding anything herein to the contrary,
interest in the amount of 2% per annum, compounded monthly (the "Accrued
Interest Allocation"), shall be accrued and paid at the earlier of the Maturity
Date or such date prior to the Maturity Date on which the principal amounts of
this Debenture is due and payable in full or otherwise paid in full (at which
time all accrued, but unpaid interest, including the Accrued Interest
Allocation, shall be due and payable in full).

Payment of the principal of this Debenture shall on be made in full on
the Maturity Date unless otherwise required in accordance with the terms and
conditions of the Agreement. Payments of the principal of and interest on this
Debenture will be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts and will be paid by check mailed to the address of the Holder as such
address shall appear on records of the Partnership or, at the request of the
Holder, by wire transfer in accordance with the instructions provided by such
Holder.

The provisions of this Debenture relating to other matters are set
forth on the reverse hereof, and such provisions shall for all purposes have
the same effect as though fully set forth in this place. This Debenture is
issued in accordance with the Debenture Agreement dated as of December 3, 1997
(the "Agreement"), between the Partnership and the Holder, and is subject in
all respect to the terms and conditions set forth therein, which provisions are
hereby incorporated herein by reference to the same extent as though set forth
herein in full. In the event of any conflict or inconsistency between the
terms of this Debenture and the terms of the Debenture Agreement, the terms of
the Debenture Agreement shall supersede and control to the extent of such
conflict or inconsistency.

IN WITNESS WHEREOF, the Partnership has caused this Debenture to be
duly executed by its officers thereunto duly authorized.

Witnesses: The "Partnership"

ST. JOE/CNL REALTY GROUP, LTD., a Florida limited
partnership

By: ST. JOE CENTRAL FLORIDA MANAGEMENT,
INC., a Florida corporation, as general partner

By:
- ------------------------------------------------- --------------------------------------------
Name: Name:
------------------------------------------- -----------------------------------------
Title:
-----------------------------------------

- ------------------------------------------------
Name:
-----------------------------------------

By: CNL CORPORATE VENTURE, INC., a Florida
corporation, as general partner

- ------------------------------------------------
Name:
-----------------------------------------

THE DEBENTURES EVIDENCED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS
PURSUANT TO EXEMPTIONS FROM REGISTRATION, AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED (EACH A "TRANSFER") WITHOUT SUCH
REGISTRATIONS UNLESS ONE OR MORE VALID EXEMPTIONS FROM REGISTRATION ARE
AVAILABLE AND THE Partnership HAS RECEIVED AN OPINION OF, OR SATISFACTORY TO,
ITS LEGAL COUNSEL THAT SUCH TRANSFER WOULD NOT VIOLATE FEDERAL AND STATE
SECURITIES LAWS.
74

ST. JOE/CNL REALTY GROUP, LTD.

10% Subordinated Debentures Due 2004

This Debenture is one of a duly authorized issue of Debentures of the
Partnership, designated as its 10% Subordinated Debentures Due 2004 (herein
called the "Debentures"), limited to the aggregate principal amount of
$30,000,000, all issued or to be issued under and pursuant to the Agreement.

In case an Event of Default, as defined in the Agreement, shall have
occurred and be continuing, the principal of all Debentures may be declared,
and upon such declaration shall become due and payable, in the manner, with the
effect, and subject to the conditions provided in the Agreement.

The Partnership shall be entitled to receive advances under the
Debentures from time to time during the term of the Debentures up to the
aggregate principal amount of $30,000,000 (the "Maximum Amount") on the terms
and conditions set forth in the Agreement. The Debentures shall evidence a
revolving obligation; accordingly, during the term of the Debentures, the
Partnership may borrow up to the Maximum Amount, repay all or any portion of
such principal amount, and reborrow up to such Maximum Amount in accordance
with the terms and conditions in the Agreement.

The indebtedness evidenced by the Debentures is, to the extent and in
the manner provided in the Agreement, expressly subordinate and subject in
right of payment to the prior payment of certain obligations of the Partnership
as specified in the Agreement and this Debenture is issued subject to the
provisions of the Agreement with respect to such subordination. Each holder of
this Debenture, by accepting the same, agrees to and shall be bound by such
provisions.

Subject to the provisions of the Agreement, the Debentures may be
prepaid at the discretion of the Partnership, in whole or in part, in the
principal amount of $1,000,000 or multiples thereof, without premium or
penalty, by paying the principal amount thereof (or so much thereof as is being
prepaid at such time) together with accrued interest to the date of prepayment
(except with respect to the Accrued Interest Allocation which shall be payable
only in the event of a total prepayment of the Debentures). Notice of
prepayment shall be given and Debentures shall be prepaid as provided in the
Agreement.

Interest on the Debentures shall be computed on the basis of a year of
twelve 30-day months.

At the office of the Partnership in Orlando, Florida, and in the
manner and subject to the limitations provided in the Agreement, but without
payment of any service charge, Debentures may be exchanged for a like aggregate
principal amount of Debentures of other authorized denominations.

The Partnership and any paying agent may deem and treat the Holder
hereof as the absolute owner of this Debenture (whether or not this Debenture
shall be overdue and notwithstanding any notation of ownership or other writing
hereon made by anyone other than the Partnership), for the purpose of receiving
payment hereof, or on account hereof, and for all other purposes, and neither
the Partnership nor any paying agent shall be affected by any notice to the
contrary. All payments made to or upon the order of such the Holder shall, to
the extent of the sum or sums paid, satisfy and discharge liability for monies
payable on this Debenture.

All terms used in this Debenture which are defined in the Agreement
shall have the meanings assigned to them in the Agreement unless otherwise
specified herein.

EXHIBIT A

No. __ $_________

ST. JOE/CNL REALTY GROUP, LTD.
10% Subordinated Debentures Due 2004

IN WITNESS WHEREOF, the Partnership has caused this Debenture to be
duly executed by its officers thereunto duly authorized.

Witnesses: The "Partnership"

ST. JOE/CNL REALTY GROUP, LTD., a Florida limited
partnership

By: ST. JOE CENTRAL FLORIDA MANAGEMENT,
INC., a Florida corporation, as general partner

By:
- ---------------------------------------- --------------------------------------------
Name: Name:
---------------------------------- ------------------------------------------
Title:
------------------------------------------

- ----------------------------------------
Name:
----------------------------------

By: CNL CORPORATE VENTURE, INC., a Florida
corporation, as general partner

By:
- --------------------------------------- ---------------------------------------------
Name: Name:
--------------------------------- ------------------------------------------
Title:
------------------------------------------

- ---------------------------------------
Name:
---------------------------------

ST. JOE/CNL REALTY GROUP, LTD.

10% Subordinated Debentures Due 2004

Interest on the Debentures shall be computed on the basis of a year of
twelve 30-day months.

All terms used in this Debenture which are defined in the Agreement
shall have the meanings assigned to them in the Agreement unless otherwise
specified herein.

   1
                                                                    Exhibit 5.01
                                                                 
                                                                    SB 333-###)

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549


Re: St. Joe Corporation Registration Statement on Form S-3


Dear Sirs:

     I am General Counsel of St. Joe Corporation, a Florida corporation (the
"Company"). I refer you to the Registration Statement on Form S-3 (Reg. No. 
333-) (the "Registration Statement") filed by the Company on December 16, 1997 
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended, for the registration of the sale of 4,600,000 shares of the
Company's common stock, no par value (the "Common Stock") by the Alfred I.
duPont Testamentary Trust in an underwritten public offering.

     I have examined originals or copies, certified or otherwise identified to
my satisfaction, of such documents, corporate records and other instruments as I
have deemed necessary or appropriate in connection with this opinion.

     In this examination, I have assumed the genuineness of all signatures, the
authenticity of all documents submitted to me as original documents and the
conformity to original documents of all documents submitted to me a copies.
Based upon the foregoing, I am of the opinion that the shares of Common Stock to
be sold in the offering are duly authorized, validly issued, fully paid and
non-assessable.

     No opinion is expressed herein as to the laws of any jurisdiction other
than the laws of the United States of America and the State of Florida.

     I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.  




                                               Very truly yours, 


                                               /s/ ROBERT M. RHODES
                                               Robert M. Rhodes
                                               Senior Vice President
                                               and General counsel

   1
                                                                   EXHIBIT 10.01

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") is made this 7th day of
January, 1997, by and between ST. JOE CORPORATION, a Florida corporation (the
"Corporation"), and PETER RUMMELL (the "Employee").

         WHEREAS, the Corporation is a Florida corporation engaged in the
business of owning, developing, managing and selling real estate, silver
culture, transportation and farming; and

         WHEREAS, the Corporation desires to employ the Employee upon the terms
and conditions hereinafter set forth and the Employee desires to accept
employment on those terms and conditions;

         NOW, THEREFORE, in consideration of the mutual covenants stated below,
Corporation and Employee agree as follows:

         1.  EMPLOYMENT - Corporation hereby employs Employee as Chairman of
the Board and Chief Executive Officer of the Corporation, to perform such duties
as, from time to time, may be determined and/or assigned to him by the Board of
Directors of the Corporation.

         2.  TERM - The term of this Agreement shall commence on January 7, 1997
and shall continue for five (5) years, unless earlier terminated pursuant to
Section 9 or 10 hereof.

         3.  COMPENSATION - Corporation agrees to compensate Employee as
follows: 

         a)  Salary - For all services rendered by Employee during the term of
this Agreement, an annual salary of Six Hundred Thousand Dollars ($600,000.00),
payable in equal monthly installments.

         b)  Salary Adjustments - Employee's compensation shall be re-evaluated
not less than annually by the Board of Directors of the Corporation and may be
increased (but not decreased) at such time. 




                                       
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         c)  Benefits - The Corporation shall also make available to Employee
such other benefits and perquisites as are currently offered to executives of
the Corporation. Employee will be eligible to participate in the Corporation's
Salaried Employees Pension Plan, Salaried Employees Benefit Plan and Employee
Salary Deferral Plan in accordance with the current terms and conditions of
those plans.

         d)  Short Term Incentive - On or before December 31, 1997, Employee
will present to the Board of Directors of the Corporation a business plan for
the Corporation. If the business plan is accepted and approved by the Board of
Directors of the Corporation on or before December 31, 1997, then the
Corporation will pay Employee a bonus of Two Hundred Fifty Thousand Dollars
($250,000.00) on or before February 15, 1998. During the second through the
fifth years of this Agreement, the Board of Directors will design a short term
incentive plan for Employee. Such short term incentive plan will include goals
based on achievement by the Corporation of elements of the business plan
proposed by Employee and accepted by the Corporation and/or the meeting of
financial objectives as set by the Board of Directors of the Corporation.
Employee's short term incentive for each of the second through the fifth years
of this Agreement as determined by the Board of Directors will have a potential
award range equal up to 100% of Employee's annual salary for that year.

         e)  Long Term Incentive - As of the date of this Agreement, the
Corporation will grant to Employee a nonstatutory stock option award for One
Million Two Hundred thousand (1,200,000) shares in the Corporation's common
stock at the closing price on the day preceding the date of this Agreement (whch
is $64.50 per share). The nonstatutory stock options will vest in Employee at
20% per year effective on the anniversary dates of the date of this Agreement.
Once vested, Employee may exercise sald stock options within ten years from the
grant of the nonstatutory stock options (i,e., 



                                       2
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ten years from the date of this Agreement). In the event of a change in control
of the Corporation as defined in Section 3(g) below, or a termination of
Employee's employment without cause or upon Employee's death (subject to Section
9(c) herein), the vesting of the nonstatutory stock options will accelerate and
Employee will be the owner and holder of such stock options without
restrictions. In the event of the involuntary termination of Employee's
employment for cause as set forth in Section 9(a) herein or the Employee's
voluntary termination of his employment, all of the nonstatutory stock options
that had not vested in Employees at that time will lapse and Employee will have
no rights in same. All of the option shares will be registered under the
Securities Act of 1933 on or before the date when the first installment of the
option vests. In the event of the declaration of a partial liquidation
distribution due to the prior sale of certain assets of St. Joe Forest Products
Co. that are related to its paper mill business, the prior sale of certain
assets of St. Joe Container Co. that are related to its container business and
the prior sale of the stock of St. Joe Communications, Inc., the strike price of
said options will be reset equitably based upon (i) the average of the closing
prices on the last five (5) trading days on which the Corporation's stock trades
with the right to receive such partial liquidation distribution and (ii) the
average of the closing prices on the first five (5) trading days on which the
Corporation's stock trades without the right to receive such partial liquidation
distribution and (ii) the average of the closing prices on the first five (5)
trading days on which the Corporation's stock trades without the right to
receive such partial liquidation distribution. In the event of the declaration
of a partial liquidation distribution due to the subsequent sale of a
significant portion of the assets or the stock of a subsidiary of the
Corporation other than St. Joe Forest Products Co., St. Joe Container Co. and
St. Joe Communications, Inc., the strike price of said options will also be
reset equitably based upon (i) the average of the closing prices on the last
five (5) trading days on which the Corporation's stock trades with the right to
receive any such partial liquidation distribution and (ii) the average of the
closing prices on the first five (5) trading days on which the 


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Corporation's stock trades without the right to receive any such partial
liquidation distribution. To illustrate the foregoing, assume hypothetically (i)
that the exercise price of Employee's options is $64.50 per share, (ii) that the
average of the closing prices on the last five (5) trading days on which the
Corporation's stock trades with the right to receive the partial liquidation
distribution is $69.50 per share and (iii) that the average of the closing
prices on the first five (5) trading days on which the Corporation's stock
trades without the right to receive the partial liquidation distribution is
$57.00 per share. The exercise price would be adjusted by determining the
difference between the average of the closing prices on the first five (5)
trading days on which the Corporation's stock trades without the right to
receive the partial liquidation distribution ($57.00) and the average of the
closing prices on the last five (5) trading days on which the Corporation's
stock trades with the right to receive the partial liquidation distribution
($69.50) which in this hypothetical is $12.50, and then subtracting said sum
from the exercise price ($64.50 - $12.50 = $52.00). As a result, Employee would
hold options covering 1,200,000 shares with an exercise price of $52.00 per
share.

         1) The parties hereto acknowledge and agree that the Corporation does
not presently have in place a stock option plan, but the Corporation agrees to
promptly implement same in order to fulfill the terms of this Agreement subject
to shareholder approval. The nonstatutory stock options to be issued by the
Corporation to Employee hereunder shall be evidenced by agreements in such 
form as the Board of Directors of the Corporation shall approve, which 
agreements comply with and be subject to the terms and conditions of this
Agreement. Each of the parties hereto agree that they will cooperate and 
assist each other in the preparation and implementation of the stock option 
plan in accordance with all laws, rules and regulations and that same will be
accomplished as soon as reasonably practicable and within the necessary time
period.

                                       4
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          2)   In the event of a capital adjustment resulting from a stock 
dividend, stock split, reorganization, merger, consolidation, spinoff or a
combination or exchange of shares, the number shares of stock subject to the
nonstatutory stock options issued to Employee shall be adjusted consistent with
such capital adjustment.  The price of any share under options shall be adjusted
so that there will be no change in the aggregate purchase price payable under
exercise of any such option.  The granting of the nonstatutory stock options
shall not effect in any way the right or power of the Corporation to make
adjustments, reorganizations, reclassifications, or changes of its capital or
business structure, or to merge consolidate, dissolve, liquidate, or sell or
transfer all or any part of its business or assets.

     f)   Award of Restricted Stock - As of the date of this Agreement, the
Corporation will grant to Employee restricted common stock on the Corporation
equal in value (based on the closing prices on the day preceding the date of
this Agreement) to the difference between the value of 140,000 shares of Disney
common stock (which is $69.00 per share) and $5,320,000.00 (the "value of
Disney stock option").  For example, if Disney stock is valued at $69.00 per
share as of the day preceding the date of this Agreement, then the Corporation
will grant to Employee restricted common stock in the Corporation at a total
value of $4,340,000.00 (140,000 shares X $69.00 per share = $9,660,000.00;
$9,660,000.00 less $5,320,000.00 = $4,340,000.00).  The restricted stock will
be for the number of the Corporation's shares at the closing market value as of
the day preceding the date of this Agreement which will be equal to the value
of the Disney stock options as defined above ($4,340,000.00 + $64.50 = 67,287
shares of the Corporation's restricted common stock).  Unrestricted title to
the restricted stock will vest in Employee at 20% per year.  In the event of a
change in control of the Corporation as defined in Section 3(g) below or a
termination of Employee's employment without cause

                                       5
     
   6
or upon Employee's death, disability or adjudication of incompetency or
incapacity, the vesting of the restricted stock will accelerate and Employee
will be the owner and holder of such stock without restrictions.  In the
event of- the involuntary termination of Employee's employment for cause as set
forth in Section 9(a) herein or the Employee's voluntary termination of his
employment, all of the restricted stock which had not vested in Employee at
that time will be returned to the Corporation and Employee will have no rights
in same.  All of the restricted shares will be registered under the Securities
Act of 1933 on or before the date when the first installment of the shares
vests.

     1)   The parties hereto acknowledge and agree that the Corporation does
not presently have in place a restricted stock plan, but the Corporation agrees
to promptly Implement same In order to fulfill the terms of this Agreement
subject to shareholder approval.  The restricted stock to be issued by the
Corporation to Employee hereunder shall be evidenced by agreements in such form
as the Board of Directors of the Corporation shall approve, which agreements
shall comply with and be subject to the terms and conditions of this
Agreement.  Each of the parties hereto agree that they will cooperate and
assist each other in the preparation and implementation of the restricted stock
plan in accordance with all laws, rules and regulations and that the same will
be accomplished as soon as reasonably practicable and within the necessary time
period.

     g)   Definition of Change in Control - Control of the Corporation now
resides in the voting stock held by the combined ownership of the Alfred I.
duPont Testamentary Trust and the Nemours Foundation.  The term "change in
control" means that:

               (i)  30% or more of the outstanding voting stock of the
     Corporation is acquired by any person or group other than Alfred I. duPont
     Testamentary Trust and the Nemours Foundation, except that this paragraph
     (i) shall not apply as long as the Alfred I. duPont Testamentary Trust or
     the Nemours Foundation.

                                       6
   7
         of any combination of both, owns more voting stock than such person or
         group; or

         (ii) Stockholders of the Corporation other than the Alfred I. DuPont
         Testamentary Trust and the Nemours Foundation vote in a contested
         election for directors of the Corporation and through exercise of their
         votes result in the replacement of 50% or more of the Corporation's
         directors (the mere change of 50% or more of the members of the
         Corporation's Board of Directors will not trigger a change in control
         unless same occurs as a result of a contested election); or

         (iii) The Corporation is a party to a merger or similar transaction as
         a result of which the Corporation's stockholders own 50% or less of the
         surviving entity's voting securities after such merger or similar
         transaction.

It is agreed that no "change in control" occurs in any event as long as the
combined ownership of the Alfred I. DuPont Testamentary Trust and the Nemours
Foundation exceed 50% of the outstanding voting stock of the Corporation.

         4. EXPENSES OF EMPLOYEE - The Corporation shall pay, or shall
reimburse Employee for reasonable expenses in connection with the business of
the corporation subject to and in accordance with the Corporation's policies
and procedures established from time to time by the Corporation.

         5. WORKING FACILITIES - The Corporation shall provide Employee with an
office at its corporate headquarters at 1650 Prudential Drive, Jacksonville,
Florida, secretarial services, and such other facilities and other services as
are considered customary and consistent with Employee's position and adequate
for the proper performance of his duties.

         6. DUTIES OF EMPLOYEE - Employee agrees that he shall:



                                      7
   8
         a) Devote his full professional time and attention to the furtherance
of the Corporation's business, specifically including, but not limited to,
serving as chief executive officer and Chairman of the Board of Directors of the
Corporation.

         b) Comply with the policies, standards and regulations of the
Corporation as established from time to time by its Board of Directors and with
applicable standards of industry ethics.

         c) Promptly reveal to the Board of Directors of the Corporation such
matters coming to his attention as pertain to the material business or interests
of the Employee and the Corporation and are appropriate for consideration by the
Corporation's Board of Directors including but not limited to opportunities,
inventions, improvements, discoveries, processes, programs or systems, developed
or discovered by Employee during his employment with the Corporation and same
shall be the sole and absolute property of the Corporation.

         d) Seek the approval of the Board of Directors of the Corporation prior
to serving on the Board of Directors of other corporations and prior to Employee
engaging in any other trade or business (except for incidental personal
investments) during the term of this Agreement.

         e) Perform those duties assigned to Employee by the Board of Directors.

      7. VACATION AND SICK LEAVE - In addition to holidays recognized by the
Corporation, Employee shall be entitled each year to a paid vacation and sick
leave in accordance with the Corporation's policy. No unused vacation or sick
leave may be carried over from year to year.

      8. RELOCATION -
         
         a) It is the intention of the Corporation to make Employee whole by
reimbursing Employee for all reasonable costs associated with his relocation
from California to the 

                                       8
   9
Jacksonville, Florida area.  Such costs will include house hunting trips to the
Jacksonville area with Employee's spouse, visits to family in California prior
to the permanent relocation of Employee and his spouse, real-estate commissions
and closing costs related to the sale of Employee's California residence
(except that the Corporation will not be liable for any real estate commission
if Employee's California residence is purchased by the Corporation), the
physical movement of household goods from California to the Jacksonville,
Florida area, the removal and reinstallation of audio visual and electronic
equipment, storage of household goods for up to one (1) year, a temporary
living allowance of $5,000.00 per month for up to three (3) months, and closing
costs related to the purchase of a home in the Jacksonville, Florida area.  The
Corporation will pay invoices for the above described relocation expenses or
reimburse Employee for same.

     b)   In the event that Employee's California residence is placed on the
market at a reasonable price and the house is not sold within 90 days after
being placed on the market for sale, Employee may elect either (l) to sell the
house to the Corporation for an amount equal to the price at which the house
should sell within 180 days as determined by Independent appraisers or (ii) to
obtain an interest free bridge loan from the Corporation for up to one year for
an amount up to the price at which the house should sell within 180 days as
determined by independent appraisers.

     1)   In order to determine the price at which the house should sell within
180 days, each of Employee and the Corporation shall select an independent real
estate appraiser who will appraise Employee's California residence and give
their written professional opinion of the price at which the house should sell
within 180 days.  Each appraisal shall be obtained within thirty (30) days from
the date Employee gives the Corporation written notice of his intent to sell
the house to the Corporation or to obtain an interest free bridge loan from the
Corporation and the appraisals shall be shared with the other party.  If the

                                       9

   
   10
appraisals do not vary by more than 5%, then the average of the two appraisals
shall be utilized as the price at which the house should sell within 180 days.
If the two appraisals vary by more than 5%, the two appraisers shall then
promptly select a third real estate appraiser who shall appraise Employee's
California residence within twenty days thereafter.  The third appraiser will
then be averaged with the other appraisal which is closest to it and said
average of the two appraisals shall be utilized as the price at which the house
should sell within 180 days.

           2)   In the event Employee elects to obtain an Interest free bridge
loan from the Corporation for an amount up to the price at which the house
should sell within 180 days as determined by Independent appraisers, Employee
must repay said loan at the earlier of five days after the date of the closing
of the sale of Employee's California residence, or one year from the date the
Corporation made the interest free bridge loan to Employee.

           c)   As soon as reasonably practicable after each calendar year in 
which reimbursement of non-deductible relocation costs is made under this
Section 8, Employee shall be entitled to receive from the Corporation an
additional payment (the "Gross-Up Payment").  The amount of the Gross-Up
Payment shall be equal to all federal and state taxes Imposed on (i) such
reimbursement of non-deductible relocation costs and (ii) the Gross-Up Payment. 
The intent of this Section 8(c) is to hold Employee harmless, on an after-tax
basis, from the tax impact of all reimbursements of non-deductible relocation
costs.

     9.   INVOLUNTARY TERMINATION -

          a)   The employment of Employment with the Corporation may be
determined by the Board of Directors of the Corporation upon the occurrence of
any one or more of the following events;

                                       10
   11
     1)   At any time by the mutual consent of the parties as set forth in
writing signed by both parties; or

     2)   In the event Employee shall willfully and materially fail or refuse
to comply with the policies, standards and regulations of the Corporation from
time to time established by the Board of Directors, and applicable to all its
officers which conduct continues after thirty (30) days written notice of same
from the Corporation's Board of Directors; or,

     3)   In the event Employee shall willfully and materially fail or refuse
to faithfully or diligently perform the provisions of this Agreement or the
usual and customary duties of his employment which conduct continues after
thirty (30) days written notice of same from the Corporation's Board of
Directors; or

     4)   In the event Employee, in the reasonable judgment of the Board of
Directors, shall be guilty of fraud, dishonesty, embezzlement or other similar
acts of willful misconduct; or

     5)   In the event Employee engages in gross misconduct including but not
limited to moral turpitude, unethical or unlawful conduct, or any other act
abhorrent to the community which a reasonable person would consider materially
damaging to the Corporation.

Upon any involuntary termination pursuant to this Section 9(a) which shall be
considered as for cause, compensation of Employee and any other rights Employee
may have under this Agreement shall cease upon the termination date of his
employment, and no further payments or benefits shall be paid or payable to
Employee by the Corporation for any period thereafter, except to the extent
that Employee shall have accrued benefits under any retirement plan adopted by
the Corporation for the benefit of its employees.

     b)   The employment of Employee with the Corporation may also be
terminated by the Board of Directors of the Corporation in the event Employee
is adjudicated

                                       11
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incompetent or incapacitated, or becomes disabled.  For the purposes of this
Agreement, the term "disabled" is defined as being unable to render continuous,
full time service to the Corporation in the capacity described herein for a
period of more that six (6) months.  Upon any involuntary termination pursuant
to this Section 9(b), the parties hereto agree that (i) the Corporation will
not be liable to pay Employee his annual salary and the Corporation will not be
liable to pay Employee for any short term incentives that have not been earned
as of the date of Employee's adjudication of incompetency or incapacity or as
of the date of Employee's disability as defined herein; (ii) for the remaining
term of this Agreement, Employee will remain eligible for benefits as set forth
in Section 3(c) above including but not limited to disability benefits in
accordance with the Corporation's policy in effect from time to time; (iii) the
nonstatutory stock options which were awarded to Employee under Section 3(e)
above that have not vested within one (1) year from the date of any involuntary
termination pursuant to this Section 9(b) will lapse and Employee will have no
rights in same; (iv) the nonstatutory stock options which were awarded to
Employee under Section 3(e) above that are scheduled to vest within one (1)
year from the date of any involuntary termination pursuant to this Section 9(b)
will vest in full; and (v) the restricted stock which was awarded to Employee
under Section 3(f) above will remain the property of Employee and the vesting
of the restricted  stock will accelerate and Employee will be the owner and
holder of such stock without restrictions.

     c)   The employment of Employee with the Corporation will also be
terminated upon the death of Employee.  Upon any involuntary termination
pursuant to this Section 9(c), the parties hereto agree that (i) the
Corporation will not be liable to pay Employee his annual salary and the
Corporation will not be liable to pay Employee for any short term incentives
that have not been earned as of the date of Employee's death; (ii) the
eligibility of Employee and his dependents for benefits as set forth in
Section 3(c) above will also


                                       12
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terminate; (iii) the nonstatutory stock options which were awarded to Employee
under Section 3(e) above that have not vested as of Employee's death will vest
in full; provided, however, that the time for exercising the nonstatutory stock
options (both the options already vested prior to Employee's death and the
options which vest at Employee's death) will be reduced from ten (10) years
from the grant of the nonstatutory stock options to two (2) years from the
Employee's date of death; and (iv) the restricted stock which was awarded to
Employee under Section 3(f) above will remain the property of Employee's estate
and the vesting of the restricted stock will accelerate and Employee's estate
will be the owner and holder of such stock without restrictions.

     10.  RESIGNATION FOR GOOD REASONS AFTER CHANGE IN CONTROL - In the event
of a change in control as defined in Section 3(g) above, Employee may resign
for good reason.  If Employee resigns for good reason, such resignation will be
treated as if Employee's employment had been terminated by the Corporation
without cause and Employee will be entitled to receive his annual salary for
the balance of this Agreement subject to the restrictive covenants set forth in
Section 11 below.  "Good Reason" means that (a) Employee's title, position,
reporting relationship, or responsibilities have been diminished, or (b)
Employee's annual salary has been reduced below the rate in effect immediately
prior to the change in control or Employee's opportunity to earn short-term
incentive awards under Section 3(d) is reduced below 100% of Employee's annual
salary, or (c) Employee has been required to relocate from the Jacksonville,
Florida area.

     11.  RESTRICTIVE COVENANTS -

     a)   In the event Employee resigns for Good Reason as defined in Section
10 above, than for a period of one (1) year thereafter, Employee shall not,
directly or indirectly, within the business areas of interest of the
Corporation as such areas now exist or as they may exist at the time of this
Agreement terminates (the "Restricted Area"),

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   14
enter into, engage in, participate in, become financially interested in, be
employed by or consult with any business conducted in competition with the
business of the Corporation, as such business now exists or as it may exist in
the future, either as an individual on his own account or as an independent
contractor, consultant, partner or joint venturer, or as an employee or agent
of another person (including any corporation or other entity), or as an
officer, director, or shareholder of the corporation or other entity or
otherwise.

     b)   During the term of employment provided for in this Agreement and for
a period of one year thereafter in the event Employee resigns for Good Reason
as defined in Section 10 above, Employee shall not directly or indirectly, as
an individual on his own account or as an independent contractor, consultant,
partner or joint venturer, or as an employee or agent of another person
(including any corporation or other entity), or as an officer, director or
shareholder of the corporation or other entity, or otherwise, (i) solicit any of
the employees of the Corporation to terminate their employment; or (ii) contact
or otherwise solicit accounts from any customers of the Corporation with whom
the Corporation is doing or did business during the period of Employee's
employment hereunder, whether located within or without the Restricted
Territory; or (iii) divulge to any person, firm or corporation any information
received by him during the course of his employment with regard to personal
affairs, financial affairs, methods, processes, customer lists or other affairs
of the Corporation considered confidential or proprietary in nature except as
required by Law.

     c)   The period of time in which Employee is prohibited from engaging in
such business practices pursuant to the provisions of subparagraph (a) and (b),
respectively, shall be extended by the length of time during which Employee is
in breach of such covenants.

     d)   The restrictive covenants set forth in subparagraphs (a) and (b)
above are

                                       14
   15
essential elements of this Agreement, and, but for Employee's agreement to
comply with such covenants, the Corporation would not have entered into this
Agreement.  Such covenants by Employee shall be construed as agreements
independent of any other provision contained in this Agreement, and the
existence of any claim or cause of action of Employee against the Corporation,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Corporation of such covenants.  If any
portion of the covenants set forth in subparagraphs (a) and (b) above is held
to be unreasonable, arbitrary or against public policy, then such portion of
such subparagraphs shall be divisible both as to time and geographical area,
and each month of the specified period shall be considered to be a separate
period of time, and each state, county, city, town, municipality and the like,
shall be considered to be a separate geographical area, so that the lesser
period of time or geographical area shall remain effective as long as the same
is not unreasonable, arbitrary or against public policy and may be enforced
against Employee.

     e)   Damages at law shall be an insufficient remedy to the Corporation in
the event that Employee violates the terms of subparagraphs (a) and (b) above,
and the Corporation shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of said
subparagraphs, which injunctive relief shall be in addition to any other
rights and remedies available to the Corporation.

     12.  INVALID PROVISIONS.  The invalidity or unenforceability of a
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provisions were omitted.

     13.  MODIFICATION.  No change or modification of this Agreement shall be
valid unless in writing and signed by both Employee and the Corporation.

     14.  CONSTRUCTION.  This Agreement shall be construed and regulated under
and


                                       15
   16
in accordance with the laws of the State of Florida and, except as otherwise
provided herein, shall inure to the benefit of and be binding upon the parties
hereto, their heirs, personal representatives, successors and assigns.  All
disputes, controversies and causes of action of every kind and nature between
the parties hereto arising out of or in connection with or pertaining to this
Agreement must be brought, settled and litigated in the Courts located in
Jacksonville, Duval  County, Florida.  The term "Corporation" as used herein
shall also refer to any successor to the Corporation's business which has
agreed to assume the Corporation's obligations under this Agreement.  This
Agreement may be executed in counterparts, each of which shall be considered an
original.

     15.  CORPORATE RECORDS.  All Corporate opportunities, records, and
customer histories collected and used by Employee in connection with his
employment, and all books, manuals, lists, financial and other records and
written memoranda of the business of the Corporation are, and shall remain, the
sole and permanent property of the Corporation.

     16.  WAIVER OF BREACH.  The waiver by the Corporation or Employee of
enforcement of any term or provision of this Agreement with respect to the other
shall not operate or be construed as a waiver of any subsequent breach by
Employee or the Corporation.

     17.  ASSIGNMENT.  Except as provided herein, the rights, duties, privileges
and obligations of Employee hereunder shall not be assignable and shall not
inure to the benefit of his heirs, personal representatives or administrators.

     18.  ATTORNEYS' FEES.  In the event of a dispute arising out of this
Agreement, any party receiving any monetary or injunctive remedy, whether at
law or in equity, which is final and not subject to appeal shall be entitled
to recover its reasonable attorneys' fees and costs incurred with respect to
obtaining such remedy from the other party.


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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.


Signed, sealed and delivered
In the presence of:                     CORPORATION:

                                        ST. JOE CORPORATION

/s/ Mary B. Futch                       By: /s/ W.L. Thornton
- ------------------------------              ----------------------------
/s/ Loyce J. Padrick                        W.L. Thornton, its Chairman
- ------------------------------

                                        EMPLOYEE:

/s/                                     /s/ Peter Rummell
- ------------------------------          ---------------------------------
/s/                                     PETER RUMMELL     
- ------------------------------






                                       17

   1
                                                                   EXHIBIT 10.02


Page 1
 

                               ST JOE CORPORATION
                        1650 Prudential Drive, Suite 400
                        Jacksonville, Florida 32201-1380



                                   April, 1997



Mr. Charles A. Ledsinger, Jr.
210 West Cherry Circle
Memphis, TN 38117

Dear Chuck:

      St. Joe Corporation (the "Company") is pleased to offer you employment on 
the following terms.

1. Position. You will serve in a full-time capacity as Senior Vice President
   and Chief Financial Officer of St. Joe Corporation and its wholly owned
   subsidiaries. You will report directly to the Chief Executive Officer. Your
   primary duties will be overall management of Company's financial affairs
   including financial planning and forecasting, accounting, information
   services, investor relations, treasury, strategic planning, mergers,
   acquisitions and divestitures.

2. Salary. You will be paid a salary at the annual rate of $350,000.00 (the 
   "Base Salary"), payable in accordance with the Company's standard payroll
   practices for salaried employees. This salary will be subject to 
   reevaluation on each January 1, commencing January 1, 1998, It may be 
   increased but not reduced during your employment, pursuant to the Company's
   employee compensation policies in effect from time to time.


   2



Page 2

3. Bonus.  You will be eligible to participate in the Company's annual 
   discretionary bonus plan, which is based on overall Company performance and
   individual performance for the calendar year. Your initial participation will
   be in the plan for calendar year 1997, with an award range of 0% to 60% of
   your Base Salary with a target of 50% of your base salary. This award range
   will not be reduced during your employment with the Company. We will provide
   you with a one time front-end payment of $125,000.00 (gross) as compensation
   for the loss of value of unvested "in the money" options granted to you by
   Harrah's. This payment will not be included in the gross-up tax payment
   provided to you in Paragraph 7. Therefore, you will be responsible for any
   and all taxes on this front-end payment.

4. Stock Options. Subject to the approval of the Company's Board of Directors
   Compensation Committee, you will be granted a nonstatutory option to purchase
   80,000 shares of the Company's Common Stock. The exercise price per share 
   will be equal to the fair market value per share as of closing on April 28,
   1997.  You will vest 20% of the option after 12 months of service, and the 
   balance will vest in equal annual installments over the next 48 months of 
   service, as described in the applicable stock option agreement. In the event 
   of a Change in Control or termination of your employment for any reason 
   other than cause or disability as defined in Paragraphs 9, 11, and 12, or 
   your resignation, you will vest in the entire option. The option will have a
   10-year term. In all respects not described in this letter, the option will
   be subject to the terms and conditions of the Company's 1997 Stock Incentive 
   Plan (the "Plan") and the applicable stock option agreement.

5. Benefits. You and your family will be eligible for all benefit programs and
   perquisites that are offered from time to time to similarly situated officers
   of the Company, including pension, 401(K), life, health, and disability
   insurance programs. You will also receive a $1,000.00/month gross car 
   allowance in addiction to your base salary. We are in the process


   3



Page 3


     of creating a supplemental executive retirement plan (SERP) and an 
     executive financial counseling plan which you will be eligible to
     participate in.

  6. Expense Reimbursement. You will be eligible for reimbursement of necessary
     and reasonable business expenses subject to Company policy upon their
     completion and approval.

  7. Relocation Benefits. Your relocation package will include packing and
     shipment of your office and household goods from Memphis to Jacksonville 
     and storage for up to 150 days, reimbursement of all reasonable and 
     customary expenses associated with the sale of your primary residence in 
     Memphis and the purchase of a primary residence in Jacksonville, and 
     temporary housing (not including meals and incidentals) in a Company 
     apartment in Jacksonville through July 31, 1997 This date may be extended
     by the Company. You may sell your current residence in Memphis directly or
     participate in the Company's third-party purchase program. You will be
     reimbursed for airfare expenses for any commuting to Memphis from May 1,
     1997 to July 31, 1997. This may include up to 2 round trips for your family
     from Memphis to Jacksonville. You will be entitled to receive from the
     Company a gross-up payment equal to all federal and state taxes imposed on
     the reimbursement of nondeductible relocation costs and on the gross-up
     payment itself. The intent of the preceding sentence is to hold you
     harmless, in an after-tax basis, from the tax impact of all reimbursements
     of nondeductible relocation costs.

  8. Period of Employment. Your employment with the Company will be "at will,"
     meaning that either you or the Company will be entitled to terminate your
     employment at any time and for any reason, with or without cause, upon 30
     days' written notice. Any contrary representations which may have been made
     to you arc superseded by this offer. Except for other specific provisions
     of this Agreement relating to termination, this is the full and


   4



Page 4


     complete Agreement between you and the Company on this term. The "at will"
     nature of your employment may only be changed in an express written 
     agreement signed by you and a duly authorized officer of the Company.

9.   Severance Pay. Notwithstanding Paragraph 8, in the event that the Company
     terminates your employment without your consent for any reason other than
     cause or disability, you will receive severance pay in a lump sum in an
     amount equal to 150% of your Base Salary at the rate in effect at the time
     of your termination, plus 50% of the amount of any bonus awarded you the
     prior year. However, if the termination of your employment under the
     preceding sentence occurs within 12 months after a Change in Control as
     defined in Paragraph 12, the amount of your severance pay will be 200% of
     your Base Salary at the rate in effect at the time of your termination,
     plus 75% of the amount of any bonus awarded you the prior year.

        If termination of your employment is subject to this paragraph, the 
     Company will provide you and your family health insurance coverage,
     including, if applicable, COBRA reimbursement provided in Paragraph 5, and
     will provide you disability insurance coverage under the applicable Company
     plans for a period of 12 months following termination or until you start
     other full time employment, whichever is earlier.

        For purposes of this Agreement, "cause" means gross negligence, 
     misconduct, nonfeasance, a material breach of this Agreement, conviction
     following final disposition of any available appeal of a felony, or
     pleading guilty or no contest to a felony.

10.  Termination Upon Death. In the event of your death during your employment,
     this Agreement shall terminate and the Company shall only be obligated to
     pay your estate or legal representative the Base Salary provided for herein
     to the extent earned by you prior to such event.


   5



Page 5

         However, the Company may pay your estate or legal representative a 
     bonus which you may have earned prior to your death. Any rights in stock
     options for which you were eligible prior to your death shall vest
     according to Company policy.

11.  Disability. If you are unable to perform the services required of you as a
     result of any disability and such disability continues for a period of 120
     or more consecutive days or an aggregate of 180 or more days during any
     12-month period during your employment, the Company shall have the right,
     at its option, to terminate your employment. Unless and until so
     terminated, during any period of disability during which you are unable to
     perform the services required of you, your salary shall be payable to the
     extent of, and subject to, Company's policies and practices then in effect
     with regard to sick leave and disability benefits.

12.  Definition of "Change in Control." For purposes of this Agreement, the term
     "Change in Control" means that:

     a) 30% or more of the outstanding voting stock of the Company is acquired
        by any person or group other than the Alfred I. DuPont Testamentary
        Trust and the Nemours Foundation, except that this Paragraph (a) will
        not apply as long as the Alfred I. DuPont Testamentary Trust or the
        Nemours Foundation or any combination of both, owns more voting stock
        than such person or group; or

     b) Shareholders of the Company other than the Alfred I. DuPont Testamentary
        Trust and the Nemours Foundation vote in a contested election for
        directors of the Company and through exercise of their votes cause the
        replacement of 50% or more of the Company's directors with directors who
        were not nominated by a majority of the directors who were in office
        before such contested election; or


   6



Page 6



     c) The Company is a party to a merger or similar transaction as a result of
        which the Company's shareholders own 50% or less of the surviving 
        entity's voting securities after such merger or similar transaction.

        It is agreed that no Change in Control occurs as long as the combined
     ownership of the Alfred I. DuPont Testamentary Trust and the Nemours
     Foundation exceeds 50% of the outstanding voting stock of the Company. A
     transaction will not constitute a Change in Control if its sole purpose is
     to change the state of the Company's incorporation or to create a holding
     company that will be owned in substantially the same proportions by the
     persons who held the Company's securities immediately before such
     transaction.

 13. Special Termination Provision. In recognition of your commencement of
     employment before the Company's Stock Incentive Plan is in place and that
     existence of this Plan and your stock option award is a material factor in
     your decision to accept employment with the Company, if the Plan and your
     stock option award are not in effect and fully approved by all required
     Company and other entities and Company shareholders by June 15, 1997, you
     may, no later than July 15, 1997, at your sole discretion, terminate your
     employment with the Company. Upon such termination, the Company will pay
     you the prorated remainder of your full Base Salary for 1997 as provided in
     Paragraph 2. The Company also will pay necessary and reasonable expenses to
     move your office furniture and goods and will maintain health, dental,
     life, and disability insurance for you and those members of your family
     then covered by Company programs until January 1, 1998, or until you start
     other full-time employment, including self employment, whichever is
     earlier. You and the Company agree that this paragraph is your sole and
     exclusive remedy if the Company does not establish a Stock Incentive Plan
     and grant you the option described in Paragraph 4 before the date
     established in this paragraph.


   7



Page 7

14.  Insurance and Indemnification. The Company will indemnify you for your
     actions as a Company employee or officer pursuant to Company policy.

15.  Outside Activities. While employed by the Company, you will not engage in
     any other employment, or business activity for compensation without the
     written consent of the Company. While employed by the Company, you also
     will not compete with or assist any person or organization in competing
     with the Company, in preparing to compete with the Company, or in hiring
     any employees of the Company.

16.  Withholding Taxes. All forms of compensation referred to in this Agreement
     are subject to reduction to reflect applicable withhold and payroll taxes.

17.  Entire Agreement. This Agreement contains all of the terms of your
     employment with the Company and supersedes any prior understandings or
     agreements, whether oral or written, between you and the Company.

18.  Amendment and Governing Law. This Agreement may only be amended or
     modified by an express written agreement signed by you and a duly
     authorized officer of the Company. The terms of this Agreement and the
     resolution of any disputes will be governed by Florida law.

       We hope that you find the foregoing terms acceptable. You may indicate 
your agreement with these terms and accept this offer by signing and dating the
enclosed duplicate original of this letter and resuming it to me. As required by
law, your employment with the Company is also contingent upon your providing
legal proof of your identity and authorization to work in the United States.
This offer, if not accepted, will expire at the close of business on April 28
1997.


   8


Page 8





       We look forward to having you join us on or about May 5, 1997.
      
       If you have any questions' please call me at 904/858-5212.

                                 Very truly yours,


                                 ST. JOE CORPORATION




                                 By: /s/ Michael F. Bayer
                                    ------------------------------
                                    Michael F. Bayer

                                    Vice President 
                                    Human Resources and Administration



I have read and accept this employment offer:

/s/ Charles A. Ledsinger, Jr.
- -------------------------------------
Signature of Charles A. Ledsinger, Jr.

Dated: April 24, 1997

   1
                                                                   EXHIBIT 10.03

                               ST. JOE CORPORATION
                        1650 Prudential Drive, Suite 400
                         Jacksonville, Florida 32201-1380

                                November 3, 1997

Mr. Robert M. Rhodes                                    PERSONAL & CONFIDENTIAL
1203 Kenilworth Road
Tallahassee, FL 32312

Dear Bob:

    St. Joe Corporation (the "Company") is pleased to offer you employment on
the following terms.

1.  Position. You will serve in a full-time capacity as Senior Vice President
    and General Counsel for St. Joe and its wholly owned subsidiaries. You will
    report directly to the Chief Executive Officer. Your duties will be those as
    assigned by the Chief Executive Officer.

2.  Salary. You will be paid a salary at the annual rate of $275,000 (the "Base
    Salary"), payable in accordance with the Company's standard payroll
    practices for salaried employees. This salary will be subject to
    reevaluation on each January 1, commencing January 1, 1998. It may be
    increased but not reduced during your employment, pursuant to the Company's
    employee compensation policies in effect from time to time. You will also
    receive a car allowance of $1,000 per month (gross) in addition to your base
    salary. This allowance constitutes the full and complete reimbursement of
    all car expenses by the Company. This allowance will not be included as
    wages in the calculation of any benefits or compensation plans.




                                       
   2



Page 2

3.  Bonus. You will be eligible to participate in the Company's annual
    discretionary bonus plan, which is based on overall Company performance,
    Division performance and individual performance for the calendar year with
    an award range of 0% to 60% of your Base Salary. This award range will not
    be reduced during your employment with the Company. If you commence your
    employment with the company on or before March 15, 1997, your 1997 award
    will not be pro-rated to reflect a partial year of service and your 1997
    bonus will not be less than $100,000.

4.  Stock Options. Subject to the approval of the Company's Board of Directors
    Compensation Committee, you will be granted a nonstatutory option to
    purchase 50,000 shares of the Company's Common Stock. The exercise price per
    share will be equal to the closing price on the date previous to the date
    the Committee grants the option. You will vest 20% of the option after 12
    months of service, and the balance will vest in equal annual installments
    over the next 48 months of service, as described in the applicable stock
    option agreement. The option will have a 10-year term. In all respects not
    described in this letter, the option will be subject to the terms and
    conditions of the Company's 1997 Stock Incentive Plan (the "Plan") and the
    applicable stock option agreement.




   3



Page 3

5.  Benefits. You and your family will be eligible for all benefit programs and
    perquisites that are offered from time to time to similarly situated
    officers of the Company. 

        Regarding health insurance, it is the Company's intent as soon as
    practicable to expand coverage to at least $1 million per person over a
    lifetime and to include your wife, Robin, in the Company program, subject to
    the per-existing condition provisions of the program. The company will
    reimburse you for COBRA coverage for Robin until she is brought into the
    Company plan.

6.  Expense Reimbursement. You will be eligible for reimbursement of necessary
    and reasonable business expenses subject to Company policy. The Company will
    maintain your membership in the Governor's Club in Tallahassee.

7.  Relocation Benefits. Your relocation package will include packing and
    shipment of your office and household goods from Tallahassee to Jacksonville
    and storage for up to 180 days, reimbursement of all reasonable and
    customary expenses associated with the sale of your primary residence in
    Tallahassee and the purchase of a primary residence in Jacksonville, and
    temporary housing (not including meals and incidentals) in a Company
    apartment in Jacksonville through July 1, 1998. This date may be extended by
    the Company. You may sell your residence in Tallahassee directly or
    participate in the Company's third-party purchase program. You will be
    entitled to receive from the




   4



Page 4

    Company a gross-up payment equal to all federal and state taxes imposed on
    the reimbursement of nondeductible relocation costs and on the gross-up
    payment itself. The intent of the preceding sentence is to hold you
    harmless, in an after-tax basis, from the tax impact of all reimbursements
    of nondeductible relocation costs.

8.  Period of Employment. Your employment with the Company will be "at will,"
    meaning that either you or the Company will be entitled to terminate your
    employment at any time and for any reason, with or without cause, upon 30
    days' written notice. Any contrary representations which may have been made
    to you are superseded by this offer. Except for other specific provisions
    of this Agreement relating to termination, this is the full and complete
    Agreement between you and the Company on this term. The "at will" nature of
    your employment may only be changed in an express written agreement signed
    by you and a duly authorized officer of the Company.

9.  Severance Pay. Notwithstanding Paragraph 8, in the event that the Company
    terminates your employment without your consent for any reason other than
    cause or disability, you will receive severance pay in a lump sum in an
    amount equal to 150% of your Base Salary at the rate in effect at the time
    of your termination, plus 50% of the amount of any bonus awarded you the
    prior year; less any severance payments under the Company's standard
    severance program, provided; however, if you receive or are entitled to
    receive payment under a severance agreement with the Company that provides
    payments or




   5



Page 5

    benefits under a Change in Control then no payments shall be made to you
    under this Paragraph 9.

        If termination of your employment is subject to this paragraph, the
    Company will provide you and your family health insurance coverage,
    including, if applicable, COBRA reimbursement provided in Paragraph 5, and
    will provide you disability insurance coverage under the applicable Company
    plans for a period of 12 months following termination or until you start
    other full time employment, whichever is earlier.

        For purposes of this Agreement, "cause" means gross negligence,
    misconduct, non-feasance, a material breach of this Agreement, conviction
    following final disposition of any available appeal of a felony, or pleading
    guilty or no contest to a felony.

10. Termination Upon Death. In the event of your death during your employment,
    this Agreement shall terminate and the Company shall only be obligated to
    pay your estate or legal representative the Base Salary provided for herein
    to the extent earned by you prior to such event.

        However, the Company may pay your estate or legal representative a bonus
    which you may have earned prior to your death. Any rights in stock options
    for which you were eligible prior to your death shall vest according to
    Company policy.




   6



Page 6

11. Disability. If you are unable to perform the services required of you as a
    result of any disability and such disability continues for a period of 120
    or more consecutive days or an aggregate of 180 or more days during any
    12-month period during your employment, the Company shall have the right, at
    its option, to terminate your employment. Unless and until so terminated,
    during any period of disability during which you are unable to perform the
    services required of you, your salary shall be payable to the extent of, and
    subject to, Company's policies and practices then in effect with regard to
    sick leave and disability benefits.

12. Insurance and Indemnification. The Company will indemnify you for your
    actions as a Company employee or officer pursuant to Company policy and,
    prior to commencement of your service, will confirm it has in place adequate
    insurance coverage acceptable to you for your actions as a Company employee
    or officer.

13. Outside Activities. While employed by the Company, you will not engage in
    any other employment, or business activity for compensation without the
    written consent of the Company. While employed by the Company, you also will
    not compete with or assist any person or organization in competing with the
    Company, in preparing to compete with the Company, or in hiring any
    employees of the Company.




   7



Page 7

14. Withholding Taxes. All forms of compensation referred to in this Agreement
    are subject to reduction to reflect applicable withhold and payroll taxes.

15. Entire Agreement. This Agreement contains all of the terms of your
    employment with the Company and supersedes any prior understandings or
    agreements (including your prior Employment Agreement dated February 10,
    1997), whether oral or written, between you and the Company.

16. Amendment and Governing Law. This Agreement may only be amended or modified
    by an express written agreement signed by you and a duly authorized officer
    of the Company. The terms of this Agreement and the resolution of any
    disputes will be governed by Florida law.

    We hope that you find the foregoing terms acceptable. You may indicate your
agreement with these terms and accept this offer by signing and dating the
enclosed duplicate original of this letter and returning it to me. As required
by law, your employment with the Company is also contingent upon your providing
legal proof of your identity and authorization to work in the United States.
This offer, if not accepted, will expire at the close of business on Friday,
October 31, 1997.




   8


Page 8




         If you have any questions, please call me at 904/858-5212.


                                         Very truly yours,

                                         ST. JOE CORPORATION

                                         By: /s/ Michael F. Bayer
                                             ----------------------------------
                                             Michael F. Bayer
                                             Vice President
                                             Human Resources and Administration





I have read and accept this employment offer:

/s/ Robert M. Rhodes
- -----------------------------
Signature of Robert M. Rhodes

Dated:   11/5           , 1997
      ------------------

   1
                                                                   EXHIBIT 10.04


                               ST. JOE CORPORATION
                        1650 Prudential Drive, Suite 400
                        Jacksonville, Florida 32201-1380

                               September 15, 1997

Mr. David D. Fitch
8462 Brook Road
McLean, VA 22102 

Dear David:

    St. Joe Corporation (the "Company") is pleased to offer you employment on
the following terms.

1.  Position. You will serve in a full-time capacity as Senior Vice President
    and General Manager - Commercial and Industrial Development for St. Joe and
    its wholly owned subsidiaries. You will report directly to the Chief
    Executive Officer. Your duties will be those assigned by the Chief
    Executive Officer.

2.  Salary. You will be paid a salary at the annual rate of $225,000 (the "Base
    Salary"), payable ill accordance with the Company's standard payroll
    practices for salaried employees. This salary will be subject to
    reevaluation on each January 1, commencing January 1, 1998. It may be
    increased but not reduced during your employment, pursuant to the Company's
    employee compensation policies in effect from time to time. You will also
    receive a car allowance of $1000 per month (gross) in addition to your base
    salary. This allowance constitutes the full and complete reimbursement of
    all car expenses by the Company. This allowance will not be included as
    wages in the calculation of any benefits or compensation plans. You will
    also receive a one-time cash payment of




   2



Page 2

    $50,000 (gross) upon your date of hire. You will be responsible for all
    taxes on this payment.

3.  Bonus. You will be eligible to participate in the Company's annual
    discretionary bonus plan, which is based on overall Company
    performance, Division performance and individual performance for the
    calendar year with an award range of 0% to 60% of your Base Salary. This
    award range will not be reduced during your employment with the Company.
    Your initial participation will be in the plan for calendar year 1997 with
    a pro-rated range of 0% to 45% of your Base Salary.

4.  Stock Options. Subject to the approval of the Company's Board of Directors
    Compensation Committee, you will be granted a nonstatutory option to
    purchase 40,000 shares of the Company's Common Stock. The exercise price
    per share will be equal to the closing price on the date previous to the
    date the Committee grants the option. You will vest 20% of the option after
    12 months of service, and the balance will vest in equal annual
    installments over the next 48 months of service, as described in the
    applicable stock option agreement. The option will have a 10-year term. In
    all respects not described in this letter, the option will be subject to
    the terms and conditions of the Company's 1997 Stock Incentive Plan (the
    "Plan") and the applicable stock option agreement.




   3



Page 3

5.  Benefits. You and your family will be eligible for all benefit programs and
    perquisites that are offered from time to time to similarly situated
    officers of the Company.

6.  Expense Reimbursement. You will be eligible for reimbursement of necessary
    and reasonable business expenses subject to Company policy. 

7.  Relocation Benefits. Your relocation package will include packing and
    shipment of your office and household goods from McLean, VA to Jacksonville
    and storage for up to 90 days, reimbursement of all reasonable and customary
    expenses associated with the sale of your primary residence in Washington
    and the purchase of a primary residence in Jacksonville. This includes up to
    two mortgage points to "buy down" your mortgage and up to one point in
    origination fees. In the event that you purchase a home in Jacksonville
    prior to the sale of your home in McLean, VA, the Company will provide you
    with an interest free "bridge loan" equivalent to the down payment on the
    purchase of your new home. This loan is to be reimbursed upon the sale of
    your home in Washington. We will reimburse you for up to fifteen round trip
    airfares from Jacksonville to Washington until your family relocates. We
    will also reimburse you for up to 9 round trip coach airfares from McLean to
    Jacksonville for your family until they relocate. You will receive temporary
    housing (not including meals and incidentals) in a Company apartment in
    Jacksonville through January 31, 1998. This date may be extended by the
    Company.




   4



Page 4


    You will be entitled to receive from the Company a gross-up payment equal to
    all federal and state taxes imposed on the reimbursement of nondeductible
    relocation costs and on the gross-up payment itself. The intent of the
    preceding sentence is to hold you harmless, in an after-tax basis, from the
    tax impact of all reimbursements of nondeductible relocation costs.

8.  Period of Employment. Your employment with the Company will be "at will,"
    meaning that either you or the Company will be entitled to terminate your
    employment at any time and for any reason, with or without cause, upon 30
    days' written notice. Any contrary representations which may have been made
    to you are superseded by this offer. Except for other specific provisions of
    this Agreement relating to termination, this is the full and complete
    Agreement between you and the Company on this term. The "at will" nature of
    your employment may only be changed in an express written agreement signed
    by you and a duly authorized officer of the Company.

9.  Severance Pay. Notwithstanding Paragraph 8, in the event that the Company
    terminates your employment without your consent for any reason other than
    cause or disability, you will receive severance pay in a lump sum in an
    amount equal to 150% of your Base Salary at the rate in effect at the time
    of your termination, plus 50% of the amount of any bonus awarded you the
    prior year; less any severance payments under the Company's standard
    severance program, provided; however, if you receive or are entitled to
    receive




   5



Page 5

    payment under a severance agreement with the Company that provides payments
    or benefits under a Change in Control then no payments shall be made to you
    under this Paragraph 9.

        If termination of your employment is subject to this paragraph, the
    Company will provide you and your family health insurance coverage,
    including, if applicable, COBRA reimbursement provided in Paragraph 5, and
    will provide you disability insurance coverage under the applicable Company
    plans for a period of 12 months following termination or until you start
    other full time employment, whichever is earlier.

        For purposes of this Agreement, "cause" means gross negligence,
    misconduct, non-feasance, a material breach of this Agreement, conviction
    following final disposition of any available appeal of a felony, or pleading
    guilty or no contest to a felony.

10. Termination Upon Death. In the event of your death during your employment,
    this Agreement shall terminate and the Company shall only be obligated to
    pay your estate or legal representative the Base Salary provided for herein
    to the extent earned by you prior to such event.

        However, the Company may pay your estate or legal representative a bonus
    which you may have earned prior to your death. Any rights in stock options
    for which you were




   6



Page 6

    eligible prior to your death shall vest according to Company policy.

11. Disability. If you are unable to perform the services required of you as a
    result of any disability and such disability continues for a period of 120
    or more consecutive days or an aggregate of 180 or more days during any
    12-month period during your employment, the Company shall have the right, at
    its option, to terminate your employment. Unless and until so terminated,
    during any period of disability during which you are unable to perform the
    services required of you, your salary shall be payable to the extent of, and
    subject to, Company's policies and practices then in effect with regard to
    sick leave and disability benefits.

12. Insurance and Indemnification. The Company will indemnify you for your
    actions as a Company employee or officer pursuant to Company policy and,
    prior to commencement of your service, will confirm it has in place adequate
    insurance coverage acceptable to you for your actions as a Company employee
    or officer.

13. Outside Activities. While employed by the Company, you will not engage in
    any other employment, or business activity for compensation without the
    written consent of the Company. While employed by the Company, you also will
    not compete with or assist any person or organization in competing with the
    Company in preparing to compete with the Company, or in hiring any employees
    of the Company.




   7



Page 7

14. Withholding Taxes. All forms of compensation referred to in this Agreement
    arc subject to reduction to reflect applicable withhold and payroll taxes.

15. Entire Agreement. This Agreement contains all of the terms of your
    employment with the Company and supersedes any prior understandings or
    agreements, whether oral or written, between you and the Company.

16. Amendment and Governing Law. This Agreement may only be amended or modified
    by an express written agreement signed by you and a duly authorized officer
    of the Company. The terms of this Agreement and the resolution of any
    disputes will be governed by Florida law.

        We hope that you find the foregoing terms acceptable. You may indicate
    your agreement with these terms and accept this offer by signing and dating
    the enclosed duplicate original of this letter and returning it to me. As
    required by law, your employment with the Company is also contingent upon
    your providing legal proof of your identity and authorization to work in the
    United Slates. This offer, if not accepted, will expire at the close of
    business on Friday, September 19, 1997.




   8


Page 8



    We look forward to having you join us on or about September 22, 1997.

    If you have any questions, please call me at 904/858-5212.


                                   Very truly yours,

                                   ST. JOE CORPORATION

                                   By:/s/ Michael F. Bayer
                                       ------------------------------------ 
                                       Michael F. Bayer
                                       Vice President
                                       Human Resources and Administration




I have read and accept this employment offer:


/s/ David D. Fitch
- ---------------------------
Signature of David D. Fitch



Dated: September 19, 1997

   1
                                                                   EXHIBIT 10.05

                              ST. JOE CORPORATION
                        1650 Prudential Drive, Suite 400
                        Jacksonville, Florida 32201-1380
                                        
                                        
                                        
                                        
                               February 21, 1997







Mr. J. Malcolm Jones, Jr.
3065 Front Street
Jacksonville, FL 32257

Dear Malcolm:

St. Joe Corporation (the "Company") is pleased to offer you employment on the
following terms.

1.    Position.  You will serve in a full-time capacity as Senior Vice
President - Forestry Operations and its wholly owned subsidiaries.  You will
report directly to the Chief Executive Officer.  Your primary duties will be
general management of St. Joe Land & Development, Talisman Sugar Corporation
and The Apalachicola Northern Railroad.

2.    Salary.  You will be paid a salary at the annual rate of $170,000.00 (the
"Base Salary"), payable in accordance with the Company's standard payroll
practices for salaried employees.  This salary will be subject to reevaluation
on each January 1, commencing January 1, 1998.  It may be increased but not
reduced during your employment, pursuant to the Company's employee compensation
policies in effect from time to time.

3.    Bonus.  You will be eligible to participate in the Company's annual
discretionary bonus plan, which is based on overall Company performance and
individual performance for the calendar year.  Your initial participation will
be in the plan for calendar year 1997, with an award range of 0% to 60% of your
Base Salary.  This award range will not be reduced during your employment with
the Company.

4.    Stock Options.  Subject to the approval of the Company's Board of
Directors Compensation Committee, you will be granted a nonstatutory option to
purchase 25,000 shares of the Company's Common Stock.  The exercise price per
share will be equal to the fair market value per share on the date the
Committee grants the option or your first day of employment, whichever is
later.  You will vest 20% of the option after 12 months of service, and the
balance    




                                      
   2
Page 2



will vest in equal annual installments over the next 48 months of service, as
described in the applicable stock option agreement.  In the event of a Change
in Control or termination of your employment for any reason other than cause or
disability as defined in Paragraphs 9, 11, and 12, or your resignation, you will
vest in the entire option.  The option will have a 10-year term.  In all
respects not described in this letter, the option will be subject to the terms
and conditions of the Company's 1997 Stock Incentive Plan (the "Plan") and the
applicable stock option agreement.  The Plan is in the process of being
implemented and will be subject to the approval of the Company's shareholders.

5.    Benefits.  You and your family will be eligible for all benefit programs
and perquisites that are offered from time to time to similarly situated
officers of the Company, including pension, 401(k), life, health, and
disability insurance programs.  You will also receive a $1,000/month (gross)
car allowance in addition to your base salary.  This allowance constitutes the
full and complete reimbursement of all car expenses by the Company.

6.    Expense Reimbursement.  You will be eligible for reimbursement of
necessary and reasonable business expenses subject to Company policy.

7.    Period of Employment.  Your employment with the Company will be "at
will," meaning that either you or the Company will be entitled to terminate
your employment at any time and for any reason, with or without cause, upon 30
days' written notice.  Any contrary representations which may have been made to
you are superseded by this offer.  Except for other specific provisions of this
Agreement relating to termination, this is the full and complete Agreement
between you and the Company on this term.  The "at will" nature of your
employment may only be changed in an express written agreement signed by you
and a duly authorized officer of the Company.

8.    Severance Pay.  Notwithstanding Paragraph 8, in the event that the
Company terminates your employment without your consent for any reason other
than cause or disability, you will receive severance pay in a lump sum in an
amount equal to 100% of your Base Salary at the rate in effect at the time of
your termination, plus 50% of the amount of any bonus awarded you the prior
year.  However, if the termination of your employment under the preceding
sentence occurs within 12 months after a Change in Control as defined in
Paragraph 12, the amount of your severance pay will be 100% of your Base Salary
at the rate in effect at the time of your termination, plus 75% of the amount
of any bonus awarded you the prior year.
      If termination of your employment is subject to this paragraph, the
Company will provide you and your family health insurance coverage, including,
if applicable, COBRA reimbursement provided in Paragraph 5, and will provide
you disability insurance coverage under the applicable Company plans for a
period of 12 months following termination or until you start other full time
employment, whichever is earlier.



   3
Page 3



       For purposes of this Agreement, "cause" means gross negligence,
misconduct, non-feasance, a material breach of this Agreement, conviction
following final disposition of any available appeal of a felony, or pleading
guilty or no contest to a felony.

9.     Termination Upon Death.  In the event of your death during your 
employment, this Agreement shall terminate and the Company shall only be
obligated to pay your estate or legal representative the Base Salary provided
for herein to the extent earned by you prior to such event.

       However, the Company may pay your estate or legal representative a bonus
which you may have earned prior to your death.  Any rights in stock options for
which you were eligible prior to your death shall vest according to Company
policy.

10.    Disability.  If you are unable to perform the services required of you
as a result of any disability and such disability continues for a period of 120
or more consecutive days or an aggregate of 180 or more days during any 12-month
period during your employment, the Company shall have the right, at its option,
to terminate your employment.  Unless and until so terminated, during any period
of disability during which you are unable to perform the services required of
you, your salary shall be payable to the extent of, and subject to, Company's
policies and practices then in effect with regard to sick leave and disability
benefits.

11.    Definition of "Change in Control." For purposes of this Agreement, the
term "Change in Control" means that:

(a)    30% or more of the outstanding voting stock of the Company is acquired by
       any person or group other than the Alfred I. DuPont Testamentary Trust
       and the Nemours Foundation, except that this Paragraph (a) will not apply
       as long as the Alfred I. DuPont Testamentary Trust or the Nemours
       Foundation or any combination of both, owns more voting stock than such
       person or group; or
(b)    Shareholders of the Company other than the Alfred I. DuPont
       Testamentary Trust and the Nemours Foundation vote in a contested
       election for directors of the Company and through exercise of their votes
       cause the replacement of 50% or more of the Company's directors with
       directors who are not nominated by a majority of the directors who were
       in office before such contested election; or
(c)    The Company is a party to a merger or similar transaction as a result of
       which the Company's shareholders own 50% or less of the surviving
       entity's voting securities after such merger or similar transaction.

It is agreed that no Change in Control occurs as long as the combined ownership
of the Alfred I DuPont Testamentary Trust and the Nemours Foundation exceeds 50%
of the outstanding voting stock of the Company.  A transaction will not
constitute a Change in Control if its sole purpose is to change the state of the
Company's incorporation or to create a holding company that will be

   4
Page 4

owned in substantially the same proportions by the persons who held the
Company's securities immediately before such transaction.

12.    Special Termination Provision.  In recognition of your commencement of
employment before the Company's Stock Incentive Plan is in place and that
existence of this Plan and your stock option award is a material factor in your
decision to continue employment with the Company, if the Plan and your stock
option award are not in effect and fully approved by all required Company and
other entities and Company shareholders by June 15, 1997, you may, no later than
July 15, 1997, at your sole discretion, terminate your employment with the
Company.  Upon such termination, the Company will pay you the prorated remainder
of your Base Salary for 1997 as provided in Paragraph 2, plus the minimum bonus
for 1997, as provided in Paragraph 3.  The Company also will maintain health,
life and disability insurance for you and those members of your family then
covered by Company programs until January 1, 1998, or until you start other
full-time employment, including self employment, whichever is earlier.  You and
the Company agree that this paragraph is your sole and exclusive remedy if the
Company does not establish a Stock Incentive Plan and grant you the option
described in Paragraph 4 before the date established in this paragraph.

13.    Insurance and Indemnification.  The Company will indemnify you for your
actions as a Company employee or officer pursuant to Company policy and, prior
to commencement of your service, will confirm it has in place adequate insurance
coverage acceptable to you for your actions as a Company employee or officer.

14.    Outside Activities.  While employed by the Company, you will not engage
in any other employment, or business activity for compensation without the
written consent of the Company. While employed by the Company, you also will
not compete with or assist any person or organization in competing with the
Company, in preparing to compete with the Company, or in hiring any employees of
the Company.

15.    Withholding Taxes. All forms of compensation referred to in this
Agreement are subject to reduction to reflect applicable withhold and payroll
taxes.

16.    Entire Agreement. This Agreement contains all of the terms of your
employment with the Company and supersedes any prior understandings or
agreements, whether oral or written, between you and the Company.

17.    Amendment and Governing Law.  This Agreement may only be amended or
modified by an express written agreement signed by you and a duly authorized
officer of the Company.  The terms of this Agreement and the resolution of any
disputes will be governed by Florida law.

       We hope that you find the foregoing terms acceptable.  You may indicate
your agreement with these terms and accept this offer by signing and dating the
enclosed duplicate original of

   5
Page 5


this letter and returning it to me.  This offer, if not accepted, will expire at
the close of business on February 28, 1997.

     If you have any questions, please call me at (904) 858-5212.
                                        Very truly yours,

                                        ST. JOE CORPORATION 


                                        By: /s/ Michael F. Bayer
                                            ----------------------------------
                                            Michael F. Bayer
                                            Vice President
                                            Human Resources and Administration



I have read and accept this employment offer:



/s/ J. Malcolm Jones, Jr.
- ----------------------------------
Signature of J. Malcolm Jones, Jr.


Dated: February 26, 1997

   1
                                                                   EXHIBIT 10.06

                              ST. JOE CORPORATION
                        1650 Prudential Drive, Suite 400
                        Jacksonville, Florida 32201-1380


                                February 1, 1997


Michael F. Bayer
5442 Split Pine Court
Orlando, FL 32819

Dear Michael:

     St. Joe Corporation (the "Company") is pleased to offer you employment on
the following terms.

1.   Position.  You will serve in a full-time capacity as Vice President-Human
     Resources and Administration of the Company and its wholly owned
     subsidiaries. You will report directly to the Chief Executive Officer.
     Your primary duties will be management of the human resources and
     administrative affairs of the Company.

2.   Salary.  You will be paid a salary at the annual rate of $167,500.00 (the
     "Base Salary"), payable in accordance with the Company's standard payroll
     practices for salaries employees.  This salary will be subject to
     reevaluation on each January 1, commencing January 1, 1998.  It may be
     increased but not reduced during your employment, pursuant to the Company's
     employee compensation policies in effect from time to time.

3.   Bonus.  You will be eligible to participate in the Company's annual
     discretionary bonus plan, which is based on overall Company performance and
     individual performance for the calendar year.  Your initial participation
     will be in the plan for calendar year 1997, with an award range of 0% to
     60% of your Base Salary.  This award range will not be reduced during your
     employment with the Company.

4.   Stock Options.  Subject to the approval of the Company's Board of
     Directors Compensation Committee, you will be granted a nonstatutory option
     to purchase 25,000 shares of the Company's Common Stock.  The exercise
     price per share will be equal to the fair market value per share on the
     date the Committee grants the option on your first day of employment,
     whichever is later.  You will vest 20% of the option after 12 months of
     service, and the balance will vest in equal annual installments over the
     next 48 months of service, as described in the applicable stock option
     agreement.  In the event of a Change in Control or termination of your
     employment for any reason other than cause or disability as defined in
     Paragraphs 9, 11, and 12, or your resignation, you will vest in the entire
     option.  The option will have a 10-year term. In all respects not described
     in this letter, the option will be subject to the terms and conditions of
     the Company's 1997 Stock




                                       
   2
Page 2

     Incentive Plan (the "Plan") and the applicable stock option agrement.  The
     Plan is in the process of being implemented and will be subject to the
     approval of the Company's shareholders.

5.   Benefits.  You and your family will be eligible for all benefit programs
     and perquisites that are offered from time to time to similarly situated
     officers of the Company, including life, health, dental, and disability
     insurance programs.

6.   Expense Reimbursement.  You will be eligible for reimbursement of necessary
     and reasonable business expenses subject to Company policy.

7.   Relocation Benefits.  Your relocation package will include packing and
     shipment of your office and household goods from Orlando to Jacksonville
     and storage for up to 120 days, reimbursement of all reasonable and
     customary expenses associated with the sale of your primary residence in
     Orlando and the purchase of a primary residence in Jacksonville, and
     temporary housing (not including meals and incidentals) in a Company
     apartment in Jacksonville through August 1, 1997.  This date may be
     extended by the Company.  In the event that you purchase a home in
     Jacksonville prior to the sale of your home in Orlando, the Company will
     reimburse you for the actual cost of your monthly mortgage payment for your
     home in Orlando for a maximum of four months after purchase of your
     Jacksonville home.  You will be entitled to receive from the Company a
     gross-up payment equal to all federal and state taxes imposed on the
     reimbursement of nondeductible relocation costs and on the gross-up payment
     itself.  The intent of the preceding sentence is to hold you harmless, in
     an after-tax basis, from the tax impact of all reimbursements of
     nondeductible relocation costs.

8.   Period of Employment.  Your employment with the Company will be "at will,"
     meaning that either you or the Company will be entitled to terminate your
     employment at any time and for any reason, with or without cause, upon 30
     days' written notice.  Any contrary representations which may have been
     made to you are superseded by this offer.  Except for other specific
     provisions of this Agreement relating to termination, this is the full and
     complete Agreement between you and the Company on this term.  The "at will"
     nature of your employment may only be changed in an express written
     agreement signed by you and a duly authorized officer of the Company.

9.   Severance Pay.  Notwithstanding Paragraph 8, in the event that the Company
     terminates your employment without your consent for any reason other than
     cause or disability, you will receive severance pay in a lump sum in an
     amount equal to 100% of your Base Salary at the rate in effect at the time
     of your termination, plus 50% of the amount of any bonus awarded you the
     prior year. However, if the termination of your employment under the
     preceding sentence occurs within 12 months after a Change in Control as
     defined in Paragraph 12, the amount of your severance pay will be 100% of
     your Base Salary at the rate in effect at the time of your termination,
     plus 75% of the amount of any
   3
Page 3


      bonus awarded you the prior year.
            If termination of your employment is subject to this paragraph, the
      Company will provide you if applicable, COBRA reimbursement provided in
      Paragraph 5, and will provide you disability insurance coverage under the
      applicable Company plans for a period of 12 months following termination
      or until you start other full time employment, whichever is earlier.
            For purposes of this Agreement, "cause" means gross negligence,
      misconduct, non-feasance, a material breach of this Agreement, conviction
      following final disposition of any available appeal of a felony, or
      pleading guilty or no contest to a felony.

10.   Termination Upon Death.  If the event of your death during your
      employment, this Agreement shall terminate and the Company shall only be
      obligated to pay your estate or legal representative the Base Salary
      provided herein to the extent earned by your prior to such event.
            However, the Company may pay your estate or legal representative a
      bonus which you may have earned prior to your death.  Any rights in stock
      options for which you were eligible prior to your death shall vest
      according to Company policy.

11.   Disability.  If you are unable to perform the services required of you as
      a result of any disability and such disability continues for a period of
      120 or more consecutive days or an aggregate of 180 or more days during
      any 12-month period during your employment, the Company shall have the
      right, at its option, to terminate your employment.  Unless and until so
      terminated, during any period of disability during which you are unable
      to perform the services required of you, your salary shall be payable to
      the extent of, and subject to, Company's policies and practices then
      in effect with regard to sick leave and disability benefits.

12.   Definition of "Change in Control."  For purposes of this Agreement, the
      term "Change in Control" means that:
      (a)   30% or more of the outstanding voting stock of the Company is
            acquired by any person or group other than the Aflred I. DuPont
            Testamentary Trust and the Nemours Foundation, except that this
            Paragraph (a) will not apply as long as the Alfred I. DuPont
            Testamentary Trust or the Nemours Foundation or any combination of
            both, owns more voting stock than such person or group; or
      (b)   Shareholders of the Company other than the Alfred I. DuPont
            Testamentary Trust and the Nemours Foundation vote in a contested
            election for directors of the Company and through exercise of their
            votes cause the replacement of 50% or more of the Company's
            directors with directors who were not nominated by a majority of the
            directors who were in office before such contested election; or  
      (c)   The Company is a party to a merger or similar transaction as a
            result of which the Company's shareholders own 50% or less of the
            surviving entity's voting securities after such merger or similar
            transaction.
      
   4
Page 4



            It is agreed that no Change in Control occurs as long as the
      combined ownership of the Alfred I. DuPont Testamentary Trust and the
      Nemours Foundation exceeds 50% of the outstanding voting stock of the
      Company.  A transaction will not constitute a Change in Control if its
      sole purpose is to change the state of the Company's incorporation or to
      create a holding company that will be owned in substantially the same
      proportions by the persons who held the Company's securities immediately
      before such transaction.

13.   Special Termination Provision.  In recognition of your commencement of
      employment before the Company's Stock Incentive Plan is in place and that
      existence of this Plan and your stock option award is a material factor
      in your decision to accept employment with the Company, if the Plan and
      your stock option award are not in effect and fully approved by all
      required Company and other entities and Company shareholders by June 15,
      1997, you may, no later than July 15, 1997, at your sole discretion,
      terminate your employment with the Company.  Upon such termination, the
      Company will pay you the prorated remainder of your full Base Salary for
      1997 as provided in Paragraph 2, plus the minimum bonus for 1997, as
      provided in Paragraph 3.  The Company also will pay necessary and
      reasonable expenses to move your office furniture and goods and will
      maintain health, dental, life, and disability insurance for you and those
      members of your family then covered by Company programs until January 1,
      1998, or until you start other full-time employment, including self
      employment, whichever is earlier.  You and the Company agree that this
      paragraph is your sole and exclusive remedy if the Company does not
      establish a Stock Incentive Plan and grant you the option described in
      Paragraph 4 before the date established in this paragraph.

14.   Insurance and Indemnification.  The Company will indemnify you for your
      actions as a Company employee or officer pursuant to Company policy and,
      prior to commencement of your service, will confirm it has in place
      adequate insurance coverage acceptable to you for your actions as a
      Company employee or officer.

15.   Outside Activities.  While employed by the Company, you will not engage
      in any other employment, or business activity for compensation without
      the written consent of the Company.  While employed by the Company, you
      also will not compete with or assist any person or organization in
      competing with the Company, in preparing to compete with the Company, or
      in hiring any employees of the Company.

16.   Withholding Taxes.  All forms of compensation referred to in this
      Agreement are subject to reduction to reflect applicable withhold and
      payroll taxes.

17.   Entire Agreement.  This Agreement contains all of the terms of your
      employment with the Company and supersedes any prior understandings or
      agreements, whether oral or written, between you and the Company.   
   5
Page 5

18.  Amendment and Governing Law.  This Agreement may only be amended or
     modified by an express written agreement signed by you and a duly
     authorized officer of the Company.  The terms of this Agreement and the
     resolution of any disputes will be governed by Florida law.

     We hope that you find the foregoing terms acceptable.  You may indicate
your agreement with these terms and accept this offer by signing and dating the
enclosed duplicate original of this letter and returning it to me.  As required
by law, your employment with the Company is also contingent upon your providing
legal proof of your identity and authorization to work in the United States.
This offer, if not accepted, will expire at the close of business on February
14, 1997.

     We look forward to having you join us on or about February 3, 1997.

     If you have any questions, please call me at 904/358-5212.

                                             Very truly yours,

                                             ST. JOE CORPORATION


                                             By:/s/ Peter S. Rummell
                                                -----------------------------
                                                Peter S. Rummell
                                                Chief Executive Officer


I have read and accept this employment offer:

/s/ Michael F. Bayer
- ---------------------------------------------
Signature of Michael F. Bayer


Dated:  February 1, 1997

   1
                                                                   EXHIBIT 10.07


                             SEVERANCE AGREEMENT

    THIS AGREEMENT is entered into as of      1997, by and between (the 
"Employee") and ST. JOE CORPORATION, a Florida corporation (the "Company").

    1. TERM OF AGREEMENT.

    This Agreement shall remain in effect from the date hereof until:

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

    2. DEFINITION OF CHANGE IN CONTROL,

    For all purposes under this Agreement, "Change In Control" shall mean the
occurrence of any of the following events after the date of this Agreement:

         a)       The consummation of a merger or consolidation of the Company
                  with or into another entity or any other corporate
                  reorganization, if 50% or more of the combined voting power,
                  directly or indirectly, of the continuing or surviving
                  entity's securities outstanding immediately after such merger,
                  consolidation or other reorganization is owned by persons who
                  are not stockholders of the Company immediately prior to such
                  merger, consolidation or other reorganization;

         b)       The sale, transfer, exchange or other disposition of all or
                  substantially all of the Company's assets;

         c)       A change in the composition of the Board, as a result of which
                  fewer than two-thirds of the incumbent directors are directors
                  who either (i) had been directors of the Company on the date
                  24 months prior to the date of the event that may constitute a
                  Change in Control (the "original directors") or (ii) were
                  elected, or nominated for election, to the Board with the
                  affirmative votes of at least a majority of the aggregate of
                  the original directors who were still in office at the time of
                  the election or nomination and the directors whose election
                  or nomination was previously so approved;

         d)       The liquidation or dissolution of the Company; or

         e)       Any transaction as a result of which any person is the
                  "beneficial owner" (as defined in Rule 13d-3 under the
                  Securities Exchange Act of 1934, as amended), directly or
                  indirectly, of securities of the Company




   2




                                                                   CONFIDENTIAL


                  representing at 25% of the total voting power represented by
                  the Company's then outstanding voting securities. For purposes
                  of this Paragraph (e), the term "person" shall have the same
                  meaning as when used in sections 13(d) and 14(d) of such Act
                  but shall exclude (i) a trustee or other fiduciary holding
                  securities under an employee benefit plan of the Company or a
                  parent or subsidiary of the Company, (ii) a corporation owned
                  directly or indirectly by the stockholders of the Company in
                  substantially the same proportions as their ownership of the
                  common stock of the Company, (iii) the Alfred I. duPont
                  Testamentary Trust and (iv) the Nemours Foundation.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

    3. DEFINITION OF GOOD REASON.

    For all purposes under this Agreement, "Good Reason" shall mean that the
    Employee:

         a)       Has experienced a demotion in title with the Company from that
                  in effect immediately prior to the Change in Control which
                  demotion results in a substantial and material reduction in
                  responsibilities with the Company from those in effect
                  immediately prior to the Change in Control;

         b)       Has incurred a reduction in his total compensation as an
                  employee of the Company (consisting of base salary and maximum
                  bonus potential);

         c)       Has been notified that his principal place of work as an
                  employee of the Company will be relocated outside the
                  Jacksonville, Florida area; or

         d)       Is employed by a successor to the Company that has failed to
                  comply with Section 10(a).

    4. DEFINITION OF CONTINUATION PERIOD.

         For all purposes under this Agreement, "Continuation Period" shall mean
the period commencing on the date when the termination of the Employee's
employment under Section 5 is effective and ending on the earlier of:


                                        2




   3



                                                               CONFIDENTIAL

                  a)       The later of (i) the date 36 months after the date
                           when the employment termination was effective or (ii)
                           ________; or

                  b) The date of the Employee's death.

         5. ENTITLEMENT TO SEVERANCE PAY AND BENEFITS.

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

            a)    Within the period which is the last six months of the first
                  year after the occurrence of a Change in Control, the Employee
                  voluntarily resigns the Employee's employment for any reason;

            b)    Within the first 36 month period after the occurrence of a
                  Change in Control, the Employee voluntarily resigns the
                  Employee's employment for Good Reason; or

            c)    Within the first 36 month period after the occurrence of a
                  Change in Control, the Company terminates the Employee's
                  employment for any reason.

The determination of whether the Employee's employment has terminated shall be
made without regard to whether the Employee continues to provide services to the
Company as a member of its Board of Directors or otherwise in the capacity of an
independent contractor. A transfer of the Employee's employment from the Company
to a successor of the company shall not be considered a termination of
employment, if such successor complies with the requirements of Section 10(a).

         6. AMOUNT OF SEVERANCE PAY.

         Within five business days after the termination of the Employee's
employment under Section 5, the Company shall pay the Employee a lump sum equal
to the product of three times the sum of:

         a)       The Employee's base compensation at the greater of (i) the
                  annual rate in effect on the date when the termination of the
                  Employee's employment with the Company is effective or (ii)
                  the annual rate in effect on the date of the Change in
                  Control; plus

         b)       The greater of (i) the Employee's annual bonus for the most
                  recent year completed prior to the date when the termination
                  of the Employee's employment with the Company is effective or
                  (ii) the amount of the Employee's maximum bonus potential then
                  in effect, provided, however, that

                                        3




   4



                                                               CONFIDENTIAL

               if the employee has earned a bonus for any three completed years
               prior to the date when termination of the Employee's employment
               with the Company is effective, then this paragraph (B) shall be
               the average of the three most recent completed years for which a
               bonus was earned.

            7. SUPPLEMENTAL PENSION BENEFIT.

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

               b) CALCULATION OF BENEFIT. The Supplemental Benefit shall be the
                  actuarial equivalent of a monthly pension benefit equal to the
                  difference between:

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

                  (ii)     the amount of the actual monthly pension benefit
                           payable to the Employee as a single-life annuity
                           under the Pension Plans.

For purposes of this subsection (b), actuarial equivalence shall be determined
by applying the actuarial assumptions then set forth in the Company's principal
funded pension plan for salaried employees used to determine lump sum payments.

            8. STOCK, BONUS, GROUP INSURANCE AND OUTPLACEMENT SERVICES.

               a) STOCK OPTIONS AND STOCK SUBJECT TO REPURCHASE. In the event of
                  a Change in Control, (i) all stock options granted to the
                  Employee by the Company before or after the date of this
                  Agreement shall immediately become exercisable in full
                  (regardless of whether such stock options previously were
                  vested) and (ii) any right of the Company to repurchase shares
                  of its Common Stock from employee shall immediately lapse in
                  full. Following a termination of the Employee's


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                  employment under Section 5, the Employee shall remain entitled
                  to exercise each stock option granted to the Employee by the
                  Company before or after the date of this Agreement until the
                  earlier of (i) the first anniversary of the employment
                  termination date or (ii) the date when such option would have
                  expired by its terms if the Employee's employment had not
                  terminated. If the Company and the other party to the
                  transaction constituting a Change in Control agree that the
                  transaction is to be treated as a "pooling of interests" for
                  financial reporting purposes, and if the transaction in fact
                  is so treated, then the acceleration of exercisability and/or
                  the extended exercise period will not occur to the extent that
                  the surviving entity's independent public accountants
                  determine in good faith that the acceleration would preclude
                  the use of "pooling of interests" accounting.

         b)       BONUS. In the event of an employment termination described in
                  Section 5, the Company shall pay the Employee a bonus for the
                  year in which such termination occurs. Such bonus shall not be
                  less than the greater of (i) the Employee's annual bonus for
                  the most recent year completed prior to the date when the
                  termination of the Employee's employment with the Company is
                  effective or (ii) the amount of the Employee's maximum bonus
                  potential then in effect, in either case prorated to reflect
                  the portion of such year during which the Employee was
                  employed by the Company.

         c)       GROUP INSURANCE. During the Continuation Period, the Employee
                  (and, where applicable, the Employee's dependents) shall be
                  entitled to continue participation in the group insurance
                  plans maintained by the Company, including life, disability
                  and health insurance programs, at the Company's expense. Where
                  applicable, the Employee's salary for purposes of such plans
                  shall be determined at the greater of (i) the annual rate in
                  effect on the date when the termination of the Employee's
                  employment with the company is effective or (ii) the annual
                  rate in effect on the date of the Change in Control. To the
                  extent that the Company finds it impossible to cover the
                  Employee under its group insurance policies during the
                  Continuation Period, the Company shall provide the Employee
                  with individual policies which offer at least the same level
                  of coverage and which impose not more than the same costs on
                  the Employee. The foregoing notwithstanding, in the event that
                  the Employee becomes eligible for comparable group insurance
                  coverage in connection with new employment, the coverage
                  provided by the Company under this Subsection (c) shall
                  terminate immediately. Any group health continuation coverage
                  that the Company is required to offer under the Consolidate
                  Omnibus Budget Reconciliation Act of 1986 shall commence when
                  coverage under this Subsection (c) terminates.


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         d)       OUTPLACEMENT SERVICES. If one of the events described in
                  Section 5 has occurred, the Employee shall be entitled to
                  senior-executive level outplacement services at the Company's
                  expense. Such services shall be provided by a firm selected by
                  the Employee from a list compiled by the Company.

9. EXCISE TAXES.

         a)       GROSS-UP PAYMENT. If it is determined that any payment or
                  distribution of any type to or for the benefit of the Employee
                  by the Company, any of its affiliates, any person who acquires
                  ownership or effective control of the Company or ownership of
                  a substantial portion of the Company's assets (within the
                  meaning of section 280G of the Internal Revenue Code of 1986,
                  as amended (the "Code"), and the regulations thereunder) or
                  any affiliate of such person, whether paid or payable or
                  distributed or distributable pursuant to the terms of this
                  Agreement or otherwise (the "Total Payments"), would be
                  subject to the excise tax imposed by section 4999 of the Code
                  or any interest or penalties with respect to such excise tax
                  (such excise tax and any such interest or penalties are
                  collectively referred to as the "Excise Tax"), then the
                  Employee shall be entitled to receive an additional payment (a
                  "Gross-Up Payment") in an amount calculated to ensure that
                  after payment by the Employee of all taxes (and any interest
                  or penalties imposed with respect to such taxes), including
                  any Excise Tax, imposed upon the Gross-Up Payment, the
                  Employee retains an amount of the Gross-Up Payment equal to
                  the Excise Tax imposed upon the Total Payments. Payments under
                  this section are payable to the Employee, even if the Employee
                  is not eligible for employment termination benefits under this
                  Agreement.

         b)       DETERMINATION BY ACCOUNTANT. All determinations and
                  calculations required to be made under this Section 9 shall be
                  made by an independent accounting firm selected by the
                  Employee from among the largest six accounting firms in the
                  United States (the "Accounting Firm"), which shall provide its
                  determination (the "Determination"), together with detailed
                  supporting calculations regarding the amount of any Gross-Up
                  Payment and any other relevant matter, both to the company and
                  the Employee within five days of the termination of the
                  Employee's employment, if applicable, or such earlier time as
                  is requested by the Company or the Employee (if the Employee
                  reasonably believes that any of the Total Payments may be
                  subject to the Excise Tax). If the Accounting firm determines
                  that no Excise Tax is payable by the Employee, it shall
                  furnish the Employee with a written statement that such
                  Accounting Firm has concluded that no


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                  Excise Tax is payable (including the reasons therefor) and
                  that the Employee has substantial authority not to report any
                  Excise Tax on the Employee's federal income tax return. If a
                  gross-Up payment is determined to be payable, it shall be paid
                  to the Employee within five days after the Determination is
                  delivered to the Company or the Employee. Any determination by
                  the Accounting Firm shall be binding upon the Company and the
                  Employee, absent manifest error.

         c)       OVER- AND UNDERPAYMENTS. As a result of uncertainty in the
                  application of section 4999 of the Code at the time of the
                  initial determination by the Accounting Firm hereunder, it is
                  possible that Gross-Up Payments not made by the Company should
                  have been made ("Underpayment"), or that Gross-Up Payments
                  will have been made by the Company which should not have been
                  made ("Overpayments"). In either such event, the Accounting
                  Firm shall determine the amount of the Underpayment or
                  Overpayment that has occurred. In the case of an Underpayment,
                  the amount of such Underpayment shall be promptly paid by the
                  Company to or for the benefit of the Employee. In the case of
                  an Overpayment, the Employee shall, at the direction and
                  expense of the Company, take such steps as are reasonably
                  necessary (including the filing of returns and claims for
                  refund), follow reasonable instructions from, and procedures
                  established by, the Company, and otherwise reasonably
                  cooperate with the Company to correct such Overpayment,
                  provided, however, that (i) the Employee shall in no event be
                  obligated to return to the Company an amount greater than the
                  net after-tax portion of the Overpayment that the Employee has
                  retained or has recovered as a refund from the applicable
                  taxing authorities and (ii) this provision shall be
                  interpreted in a manner consistent with the intent of
                  Subsection (a) above, which is to make the Employee whole, on
                  an after-tax basis, from the application of the Excise Tax, it
                  being understood that the correction of an Overpayment may
                  result in the Employee's repaying to the Company an amount
                  which is less that the Overpayment.

         d)       LIMITATION ON PARACHUTE PAYMENTS. Any other provision of this
                  Section 9 notwithstanding, if the Excise Tax could be avoided
                  by reducing the Total Payments by $50,000 or less, then the
                  Total Payments shall be reduced to the extent necessary to
                  avoid the Excise Tax and no Gross-Up Payment shall be made. If
                  the Accounting Firm determines that the total Payments are to
                  be reduced under the preceding sentence, then the Company
                  shall promptly give the Employee notice to that effect and a
                  copy of the detailed calculation thereof. The Employee may
                  then elect, in the Employee's sole discretion, which and how
                  much of the total Payments are to be eliminated or reduced (as
                  long as after such election no Excise Tax


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                  will be payable) and shall advise the Company in writing of
                  the Employee's election within 10 days of receipt of notice.
                  If no such election is made by the Employee within such 10 day
                  period, then the Company may elect which and how much of the
                  total Payments are to be eliminated or reduced (as long as
                  after such election no Excise Tax will be payable) and shall
                  notify the Employee promptly of such election.
   
    10. SUCCESSORS.

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

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

    11. MISCELLANEOUS PROVISIONS.

         a)       NOTICE. Notices and all other communications contemplated by
                  this Agreement shall be in writing and shall be deemed to have
                  been duly given when personally delivered or when mailed by
                  U.S. registered or certified mail, return receipt requested
                  and postage prepaid. In the case of the Employee, mailed
                  notices shall be addressed to the Employee at the home address
                  which the Employee most recently communicated to the Company
                  in writing. In the case of the Company, mailed notices shall
                  be addressed to its corporate headquarters, and all notices
                  shall be directed to the attention of its Secretary.

         b)       WAIVER. No provision of this Agreement shall be modified,
                  waived or discharged unless the modification, waiver or
                  discharge is agreed to in writing and signed by the Employee
                  and by an authorized officer of the Company (other than the
                  Employee). No waiver by either party of any breach of, or of
                  compliance with, any condition or provision of this


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                  Agreement by the other party shall be considered a waiver of
                  any other condition or provision or of the same condition or
                  provision at another time.

         c)       OTHER AGREEMENTS; AMENDMENTS. This Agreement does not
                  supersede the Employment Agreement dated      , 1997, between
                  the Employee and the company, except to the extent that the
                  severance pay and benefits provided in Sections 6, 7 and 8 of
                  this Agreement (and the related definitions) are greater than
                  the severance pay and benefits provided by such Employment
                  Agreement. In no event shall the Employee be entitled to
                  severance pay both under this Agreement and under such
                  Employment Agreement following a termination of employment.
                  This Agreement does not supersede any stock option or
                  restricted stock agreement between the Employee and the
                  Company, except to the extent that Section 8(a) of this
                  Agreement provides for earlier exercisability or vesting or a
                  longer post-termination exercise period than such stock option
                  or restricted stock agreement. This Agreement may be amended
                  only in writing, by an instrument executed by both parties.

         d)       NO SETOFF; WITHHOLDING TAXES. There shall be no right of
                  setoff or counterclaim, with respect to any claim, debt or
                  obligation, against payments to the Employee under this
                  Agreement. Except as provided in Section 9, all payments made
                  under this Agreement shall be subject to reduction to reflect
                  taxes required to be withheld by law. The payments received
                  under this Agreement shall be in lieu of, and not in addition
                  to, any payments received in connection with any Employment
                  Agreement by and between the Employee and the Company under
                  any Company's general severance plan covering all its
                  employees and should any payment be made under such Employment
                  Agreement or severance plan, the amounts payable hereunder
                  shall be reduced by such payments.

         (e)      CHOICE OF LAW. The validity, interpretation, construction and
                  performance of this Agreement shall be governed by the laws of
                  the State of Florida, except their choice-of-law provisions.

         f)       SEVERABILITY. The invalidity or unenforceability of any
                  provision or provisions of this Agreement shall not affect the
                  validity or enforceability of any other provision hereof,
                  which shall remain in full force and effect.

         g)       ARBITRATION. Except as otherwise provided in Section 9, any
                  controversy or claim arising out of or relating to this
                  Agreement, or the breach thereof, shall be settled by
                  arbitration in Jacksonville, Florida,


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                  in accordance with the Commercial Arbitration Rules of the
                  American Arbitration Association. Arbitration shall be the
                  exclusive remedy for resolving disputes arising under this
                  Agreement. Discovery shall be permitted to the same extent as
                  in a proceeding under the Federal Rules of Civil Procedure.
                  Judgment on the award rendered by the arbitrator may be
                  entered in any court having jurisdiction thereof.  All fees
                  and expenses of the arbitrator and such Association shall be
                  paid as determined by the arbitrator

         h)       LEGAL FEES. In the event of any controversy or claim arising
                  out of or relating to this Agreement, or the breach thereof,
                  the company shall pay the reasonable fees and costs of the
                  Employee's attorneys attributable to such controversy or
                  claim, provided that the Employee prevails on at least one
                  material issue arising in such controversy or claim.

         i)       NO ASSIGNMENT. The rights of any person to payments or 
                  benefits under this Agreement shall not be made subject to
                  option or assignment, either by voluntary or involuntary
                  assignment or by operation of law, including (without
                  limitation) bankruptcy, garnishment, attachment or other
                  creditor's process, and any action in violation of this
                  Subsection (i) shall be void.

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

EMPLOYEE                                     ST. JOE CORPORATION

By                                           By
  -----------------------------                 -------------------------------
                                                Michael F. Bayer

Title                                        Title VP - HR and Administration
     --------------------------                    ----------------------------
         
Date                                         Date                        , 1997
    ---------------------------                  ------------------------------


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   1
 
                                                                   EXHIBIT 23.01
 
                       CONSENT OF INDEPENDENT ACCOUNTANTS
 
     We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.
 
                                                           KPMG Peat Marwick LLP
 
Jacksonville, Florida
December 16, 1997