FRP (FRPH) 8-K Entry into a Material Definitive Agreement

FRP Holdings, Inc. 8-K

EXHIBIT 10.2

EMPLOYEE MATTERS AGREEMENT

by and between

FRP HOLDINGS, INC.

and

PATRIOT TRANSPORTATION HOLDING, INC.

Dated as of January 30, 2015

TABLE OF CONTENTS

Page

ARTICLE 1 DEFINITIONS		1
Section 1.1	Definitions	1
ARTICLE 2 GENERAL ALLOCATION OF LIABILITIES		4
Section 2.1	Allocation of Liabilities Generally	4
Section 2.2	Method of Settlement	5
Section 2.3	Further Assurances	5
Section 2.4	Assignment of Certain Rights; Non-Solicitation	6
ARTICLE 3 EMPLOYEES; ASSUMPTION AND/OR ADOPTION OF PLANS; OPTION ADJUSTMENTS		6
Section 3.1	Employees	6
Section 3.2	Adoption of Plans	6
Section 3.3	Existing Equity-Based Plan Retention; Option Adjustments; Bonus Payments	7
ARTICLE 4 PROFIT SHARING PLAN		7
ARTICLE 5 HEALTH AND WELFARE PLANS		7
Section 5.1	Assumption of Health and Welfare Plan Liabilities; General Provisions	7
Section 5.2	Post-retirement Health Insurance Benefits	8
Section 5.3	Effect of Change in Rates	8
Section 5.4	COBRA and HIPPA	9
Section 5.5	Leave of Absence Programs and FMLA	9
Section 5.6	Patriot Workers’ Compensation Program	10
Section 5.7	Flexible Benefit Plans	10
Section 5.8	Application of Article 5 to the Real Estate Group	10
ARTICLE 6 INDEMNIFICATION		11
ARTICLE 7 GENERAL PROVISIONS		11
Section 7.1	Notices	11
Section 7.2	Amendments; No Waivers	11
Section 7.3	Successors and Assigns	12
Section 7.4	Governing Law	12
Section 7.5	Counterparts; Effectiveness	12
Section 7.6	Entire Agreement; No Change in Control or Severance Event	12
Section 7.7	Dispute Resolution	13
Section 7.8	No Third Party Beneficiaries	13
Section 7.9	Headings	13
Section 7.10	Severability	13
Section 7.11	Schedules	13
Section 7.12	Cooperation and Coordination	13
Section 7.13	Withholdings	13

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EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT (the “Agreement”) is made as of January 30, 2015, between FRP Holdings, Inc., a Florida corporation (“FRP”) and Patriot Transportation Holding, Inc., a Florida corporation (“Patriot”).

RECITALS

WHEREAS, FRP has decided to distribute the common stock of Patriot to the holders of FRP Common Stock, $.10 par value, (the “Distribution”); and

WHEREAS, in furtherance of the foregoing, FRP and Patriot have entered into the Separation Agreement (as defined below) and certain other agreements that will govern certain matters relating to the Distribution and the relationship of FRP and Patriot and their respective Subsidiaries following the Distribution; and

WHEREAS, pursuant to the Separation Agreement, FRP and Patriot have agreed to enter into this Agreement for the purpose of allocating between them assets, liabilities, and responsibilities with respect to certain employee compensation and benefit plans and programs;

WHEREAS, FRP and Patriot have agreed that, except as otherwise specifically provided herein, the general approach and philosophy underlying this Agreement is to allocate assets, liabilities and responsibilities between FRP and Patriot on the basis of the employment relationships in effect at the time of the Distribution;

NOW, THEREFORE, in consideration of the mutual promises contained herein and in the Separation Agreement, the parties agree as follows:

ARTICLE 1
DEFINITIONS

Section 1.1     Definitions.

(a) The following terms, as used herein, shall have the meanings set forth below,provided, however, that capitalized terms used and not definedherein shall have the meanings set forth in the Separation Agreement:

“Applicable Law” shall have the meaning set forth in the Separation Agreement.

“Close of the Distribution Date” means 11:59:59 P.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the Distribution Date.

“COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code § 4980B and ERISA §§ 601 through 608.

“Code” shall have the meaning set forth in the Separation Agreement.

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“Distribution Date” shall have the meaning set forth in the Separation Agreement.

“Distribution” has the meaning set forth in the recitals to this Agreement.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor federal labor or employment law. Reference to a specific ERISA provision also includes any proposed, temporary, or final regulation in force under that provision.

“Existing Equity-Based Plans” means the Patriot Transportation Holding, Inc. 2000 Stock Option Plan and the 2006 Stock Incentive Plan.

“FMLA” means the Family Leave and Medical Act of 1993, as amended.

“FRP Common Stock” shall have the meaning set forth in the Separation Agreement.

“FRP Employee” means each Person who, on the Distribution Date, is means each Person who, on the Distribution Date (a) is actively employed in the Real Estate Business who is listed on the payroll records of any member of the Real Estate Group, (b) is on short-term disability leave, authorized leave of absence, military service or lay-off with recall rights and who was last actively employed by any member of the Real Estate Group, or (c) is an inactive or former employee and who was last actively employed by any member of the Real Estate Group, including any former employee who has been on long-term disability leave or unauthorized leave of absence or who has terminated his or her employment, retired or died on or before the Distribution Date, and, in each case, their respective beneficiaries and dependents.

“Immediately after the Distribution Date” means 12:00 A.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the day after the Distribution Date.

“Liabilities” shall have the meaning set forth in the Separation Agreement.

“New FRP Plans” means new, duplicate or mirror plans, policies or programs, as applicable, adopted or to be adopted by FRP that correspond to the Patriot Plans, with such changes therein as are necessary or appropriate to effectuate the terms of this Agreement.

“Patriot Employee” means each Person who, on the Distribution Date (a) is actively employed in the Transportation Business who is listed on the payroll records of any member of the Transportation Group, (b) is on short-term disability leave, authorized leave of absence, military service or lay-off with recall rights and who was last actively employed in the Transportation Business by any member of the Transportation Group, (c) is an inactive or former employee and who was last actively employed in the Transportation Business by any member of the Transportation Group, including any former employee who has been on long-term disability leave or unauthorized leave of absence or who has terminated his or her employment, retired or died on or before the Distribution Date, and, in each case, their respective beneficiaries and dependents or (d) is an individual set forth on Schedule 1.1(a)-1. Patriot Employees shall not include the individuals set forth on Schedule 1.1(a)-2.

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 “Patriot MIC Plan” shall mean the Patriot Transportation Holding, Inc. Management Incentive Compensation Plan.

“Patriot Plans” means the plans described inSchedule 1.1(a)-3 attached hereto.

“Profit Sharing Plan” means the Patriot Transportation Holding, Inc. Profit Sharing and Deferred Earnings Plan.

“Real Estate Businesses” shall have the meaning set forth in the Separation Agreement.

“Real Estate Group” shall have the meaning set forth in the Separation Agreement.

“Separation Agreement” means the Separation and Distribution Agreement by and between FRP and Patriot, dated as of January 30, 2015.

“Specified FRP Rights” means any and all rights to enjoy, benefit from or enforce any and all restrictive covenants including, without limitation covenants relating to non-disclosure, non-solicitation, non-competition, confidentiality or trade secrets, applicable or related, in whole or in part, to the Real Estate Businesses that are provided for, contained or set forth in the FRP Equity-Based Plans or any stock option or other award agreement issued thereunder, or pursuant to any non-competition, consulting, employment, termination, separation or severance agreement or arrangement with any Patriot Employee or FRP Employee and to which any member of the Transportation Group or the Real Estate Group is a party.

“Specified Patriot Rights” means any and all rights to enjoy, benefit from or enforce any and all restrictive covenants including, without limitation covenants relating to non-disclosure, non-solicitation, non-competition, confidentiality or trade secrets, applicable or related, in whole or in part, to the Patriot Business that are provided for, contained or set forth in the FRP Equity-Based Plans or any stock option or other award agreement issued thereunder, or pursuant to any non-competition, consulting, employment, termination, separation or severance agreement or arrangement with any Patriot Employee or FRP Employee and to which any member of the Transportation Group or Real Estate Group is a party.

“Tax Matters Agreement” shall have the meaning set forth in the Separation Agreement.

“Transportation Business” shall have the meaning set forth in the Separation Agreement.

“Transportation Group” shall have the meaning set forth in the Separation Agreement.

(b) Each of the following terms is defined in the Article or Section set forth opposite such term:

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TERMS	ARTICLE/SECTION
Employee Withholding Documents	Section 7.13
FRP Bonus Liabilities	Section 3.3
FRP Profit Sharing Plan Liabilities	Article 4
FRP Health and Welfare Liabilities	Section 5.1
FRP WCP Liabilities	Section 5.6
New FRP Health and Welfare Plans	Section 5.1
Patriot HCSAP	Section 5.7
Patriot Health and Welfare Liabilities	Section 5.1
Patriot Health and Welfare Plans	Section 5.1
Patriot WCP Liabilities	Section 5.6
Retained Profit Sharing Plan Liabilities	Section 4.1
Standard Procedure	Section 7.13

ARTICLE 2
GENERAL ALLOCATION OF LIABILITIES

Section 2.1     Allocation of Liabilities Generally.

(a) Subject to the terms and conditions of thisAgreement, effective as of theClose of the Distribution Date,FRPhereby assumes and agrees to pay when due, honor and discharge, the following Liabilities, whether incurred before, on or after theDistributionDate:

(i) all Liabilities arising under any employment, separation, change-in-control or retirement agreement or arrangement to the extent applicable to any Real Estate Employee;

(ii) the New FRP Plans, FRP Bonus Liabilities, FRP WCP Liabilities, FRP Health and Welfare Liabilities, FRP Profit Sharing Plan Liabilities and all Liabilities arising under the Existing Equity-Based Plans;

(iii) all Liabilities arising under any other employee benefit plan or arrangement maintained at any time after the Distribution Date by any member of the Real Estate Group;

(iv) all Liabilities arising under any federal, state, local or foreign law, order or regulation (including, without limitation, ERISA and the Code) to the extent they relate to participation by any FRP Employee in any employee benefit plan sponsored or maintained by any member of the Real Estate Group, whether relating to events occurring on, prior to or after the Close of the Distribution Date or arising by reason of the transactions contemplated by this Agreement or otherwise;

(v) all statutory Liabilities to any FRP Employee, which arise, directly or indirectly, by reason of the transactions contemplated by this Agreement; and

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(vi) all other Liabilities attributable to actions specified to be taken by FRP under this Agreement.

(b) Subject to the terms and conditions of thisAgreement, effective as ofImmediately after the Distribution Date,Patriothereby assumes and agrees to pay when due, honor and discharge, the following Liabilities, whether incurred before, on or after the Distribution Date:

(i) all Liabilities arising under any employment, separation, change-in-control or retirement agreement or arrangement to the extent applicable to any Patriot Employee;

(ii) Patriot Bonus Liabilities, Retained Profit Sharing Liabilities, Patriot Health and Welfare Liabilities, Patriot WCP Liabilities, and any other Liabilities arising the Liabilities under the Patriot Plans;

(iii) all Liabilities arising under any other employee benefit plan or arrangement maintained at any time after the Distribution Date by any member of the Transportation Group;

(iv) all Liabilities arising under any federal, state, local or foreign law, order or regulation (including, without limitation, ERISA and the Code) to the extent they relate to participation by any Patriot Employee in any Patriot Plan, relating to events occurring on or after the time Immediately after the Distribution Date;

(v) all statutory Liabilities to any Patriot Employee which arise, directly or indirectly, by reason of the transactions contemplated by this Agreement; and

(vi) all other Liabilities attributable to actions specified to be taken by Patriot under this Agreement.

Section 2.2     Method of Settlement.

Notwithstanding anything herein to the contrary, to the extent possible, any transfer or assumption of Liabilities pursuant to this Article 2 shall be effected, prior to the Distribution Date or as soon thereafter as is reasonably practicable, through a corresponding adjustment in the relevant intercompany account balances of the parties hereto.

Section 2.3     Further Assurances.

On and after the date hereof, each of the parties will, at the reasonable request of the other party, execute, acknowledge and deliver all such endorsements, assurances, consents, assignments, transfers, conveyances, powers of attorney and other instruments and documents, and take such other actions necessary (i) to assign, transfer, convey and deliver to the other party, acting in its fiduciary capacity, all assets to be transferred to the other party pursuant to this Agreement and (ii) to assist the other party in obtaining the consent and approval of all Governmental Authorities and other Persons required to be obtained to effect the transfer thereof and the assumption of any Liabilities by the other party or otherwise appropriate to carry out the transactions contemplated hereby.

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Section 2.4     Assignment of Certain Rights; Non-Solicitation.

(a) To the extent permitted by applicable law,FRPhereby assigns, to the maximum extent possible, on behalf of itself and theReal Estate Group, theSpecified Patriot Rights, toPatriotandFRPshall take such actions to effect such assignment pursuant to Section 2.3asPatriotmay reasonably request.

(b) To the extent permitted by applicable law,Patriothereby assigns, to the maximum extent possible, on behalf of itself and each of the Transportation Group, theSpecified FRP Rights, toFRPandPatriotshall take such actions to effect such assignment pursuant to Section 2.3asFRPmay reasonably request.

(c)FRPandPatriotagree that neither party shall, without the prior written approval of the other, directly or indirectly for 12 months after theDistributionDate, solicit any employee of the other party to terminate his or her relationshipwith any member of the Transportation GrouporReal Estate Group, respectively, provided that the foregoing shall not apply (i) to the use of an independent employment agency (so long as the agency was not directed to solicit such person) or (ii) as a result of the use of a general solicitation (such as an advertisement) not specifically directed to employees of the other party.

ARTICLE 3
EMPLOYEES; ASSUMPTION AND/OR
ADOPTION OF PLANS; OPTION ADJUSTMENTS

Section 3.1     Employees.

No provision of this Agreement shall require FRP or Patriot or any of their respective Subsidiaries to continue the employment of any of their respective employees following the Distribution Date.

Section 3.2     Adoption of Plans.

(a) Effective as of not later thanImmediately after the Distribution Date,FRPshall adopt theNew FRP Plans, provided that nothing shall preventFRPfrom terminating or amending such plans except to the extent precluded by Applicable Law, as would result in the loss of grandfathered status under thePatient Protection and Affordable Care Actor as otherwise provided herein.

(b) TheNew FRP Plansshall be, with respect to allFRP Employees, in all respects the successors in interest to any correspondingPatriot Plans. With respect toFRP Employees, eachNew FRP Planand any other benefit plan, arrangement or policy applicable after the Distribution Date forFRP Employeesshall provide that all service, compensation, and other benefit-affecting determinations, as of theClose of the Distribution Date, that were otherwise recognized under the correspondingPatriot Plan(for periods ending on the Distribution Date) shall, as ofImmediately after the Distribution Date, receive full recognition and credit to the extent the recognition or credit can validly be taken into account under theNew FRP Planto the same extent as if those items occurred under thePatriot Plans, except to the extent that duplication of benefits would result.Patriotshall provide appropriate data toFRPabout such past service.

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Section 3.3     Existing Equity-Based Plan Retention; Option Adjustments; Bonus Payments.

(a) In connection with theDistribution,FRPshall adopt theExisting Equity-Based PlansandPatriotwill adopt an equity incentive plan that permits the issuance of stock options as contemplated below.FRPandPatriotshall cause such actions to be taken under suchPlans as are necessary or appropriateto reflect theDistributionas provided in this Section 3.3.

(b) In connection with theDistributionand effective as of theDistributionDate, all outstanding options to purchase shares ofFRP Common Stock, whether held by a current or a formerFRP Employee, a current or a formerPatriot Employeeor a current or former non-employee director ofFRPwill be adjusted pursuant to the terms of the applicable existingEquity-Based Planand Applicable Law by replacing such options withan option to purchase FRP Common Stockandan option to purchase PatriotCommon Stock which, in the aggregate, have the same intrinsic value of the original option grant and the same ratio of the exercise price to thefair market valueofFRPCommon Stock on the Distribution Date. The manner in which the terms of such replacement options shall be calculated are set forth inSchedule 3.3(b), attached hereto.

(c)FRPhereby assumesLiabilityfor all annual bonus payments to Real Estate Employees under thePatriot MIC Plan(all such Liabilities, the “FRP Bonus Liabilities”).

ARTICLE 4
PROFIT SHARING PLAN

FRP and Patriot shall take all such actions as are necessary or appropriate for FRP to adopt the Profit Sharing Plan so that it shall thereafter be treated as a “multiple employer plan” for the benefit of FRP Employees and Patriot Employees. FRP shall assume all Liabilities and obligations in respect of benefits accrued by each FRP Employee under the Profit Sharing Plan (the“FRP Profit Sharing Plan Liabilities”).Any Profit Sharing Plan fund relating to FRP Common Stock shall be administered so as to permit transfers out of, but not additions to, such fund. After the Distribution Date, Patriot shall retain all Liabilities and obligations under the Profit Sharing Plan in respect of benefits accrued by each Patriot Employee under the Profit Sharing Plan.

ARTICLE 5
HEALTH AND WELFARE PLANS

Section 5.1     Assumption of Health and Welfare Plan Liabilities; General Provisions.

(a) Effective as ofImmediately after the Distribution Dateand except to the extent provided in this Article5, all Liabilities relating to claims incurred prior to, on or after theDistributionDate by eachFRP Employeeunder the “Patriot Health and Welfare Plans” (designated as such on Schedule3hereto) shall cease to be Liabilities of the Patriot Health and Welfare Plans and shall be transferred to and assumed byFRPas ofImmediately after the Distribution Date(“FRP Health and Welfare Liabilities”) under the NewFRPPlans that correspond to thePatriot Health and Welfare Plans(the “New FRP Health and Welfare Plans”).Patriotshall retain all other Liabilities under thePatriot Health and Welfare Plans(“Patriot Health and Welfare Liabilities”).

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(b)FRPshall cause theNew FRP Health and Welfare Plansto recognize and maintain all coverage and contribution elections made byFRP Employeesunder thePatriot Healthand Welfare Plans as of the Distribution Date and apply such elections under theNew FRP Health and Welfare Plansfor the remainder of the period or periods for which such elections are by their terms applicable. The transfer or other movement of employment fromPatriottoFRPat any time before theClose of the Distribution Dateshall neither constitute nor be treated as a “status change” under theNew FRP Health and Welfare Plansor the Patriot Health and Welfare Plans.

(c)FRPshall cause theNew FRP Health and Welfare Plansto recognize and give credit for all amounts applied to deductibles, out-of-pocket maximums, and other applicable benefit coverage limits with respect to which such expenses have been incurred byFRP Employeesunder thePatriot Health and Welfare Plansfor the remainder of the year in which theDistribution Dateoccurs to the extent recognized under the comparablePatriot Health and Welfare Plans.

(d)FRPshall provide coverage toFRP Employeesunder theNew FRP Health and Welfare Planswithout the need to undergo a physical examination or otherwise provide evidence of insurability to the extent provided under the comparablePatriot Health and Welfare Plans.

(e)FRPshall cause theNew FRP Health and Welfare Plansto recognize and credit all service of eachFRP Employeerecognized by the correspondingPatriot Health and Welfare Plansbefore theClose of the Distribution Datefor all purposes, including, but not limited to, severance, disability, vacation and paid time off purposes. On or as soon as reasonably practicable after theDistribution Date,Patriotshall deliver toFRPa schedule setting forth the accrued and unused vacation and paid time off for eachFRP Employeeas of theDistribution Date, andFRPshall assume and be responsible for allLiabilitiestherefor which, for the avoidance of doubt, shall be included inFRP Health and Welfare Liabilities.

Section 5.2     Post-retirement Health Insurance Benefits.

Patriot shall be responsible for providing to Patriot Employees who are eligible to receive post-retirement medical insurance coverage under the Patriot Health and Welfare Plans and retire prior to the Close of the Distribution Date, in each case pursuant to the terms of the applicable Patriot Health and Welfare Plans.

Section 5.3     Effect of Change in Rates.

Patriot and FRP shall use their reasonable efforts to cause each of the insurance companies, HMOs, point-of-service vendors and third-party administrators providing services and benefits under the New FRP Health and Welfare Plans and the Patriot Health and Welfare Plans to maintain the premium and/or administrative rates based on the aggregate number of participants in both the New FRP Health and Welfare Plans and the Patriot Health and Welfare Plans through the expiration of the financial fee or rate guarantees in effect as of the Close of the Distribution Date under the respective contracts, policies, and agreements separately rated or adjusted for the demographics, experience or other relevant factors related to the covered participants of Patriot and FRP, respectively. To the extent they are not successful in such efforts, Patriot and FRP shall each bear the revised premium or administrative rates attributable to the individuals covered by their respective health and welfare plans.

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Section 5.4     COBRAand HIPPA.

(a)Patriot shall be responsible for administering compliancewith thehealth care continuation coveragerequirements ofCOBRAand thePatriot Health and Welfare Plans(i) with respect toPatriot Employeesand, (ii) with respect toFRP Employeesand their dependents who incur aCOBRAqualifying event other than under anFRP Assumed Planprior to the Distribution Date.

(b) Effective as ofImmediately after the Distribution Date,FRP shall solely be responsible for administering compliancewith thehealth care continuation coveragerequirements ofCOBRAand theNew FRP HealthandWelfareplans with respect toFRP Employeesand their dependents who incur aCOBRAqualifying event (i) under anFRPAssumed Plan prior to the Distribution Date, and (ii) in all cases on or after the Distribution Date.

(c) For periods before theDistributionDate,Patriot shall be responsible for administering compliancewith the portability requirements under theHealth Insurance Portability and Accountability Act of 1996with respect toFRP Employeesand beginning not later thanImmediately after the Distribution Date FRP shall be responsible for filingall necessary employee change notices with respect toFRP Employeesin accordance with applicableFRPpolicies and procedures. EffectiveImmediately after the Distribution Date,FRP shall be solely responsible for administering compliancewith suchhealth care continuation coverageand portability requirements with respect toFRP Employees, andPatriot shall be solely responsible for administering compliancewith such requirements with respect toPatriot Employees.

Section 5.5     Leave of Absence ProgramsandFMLA.

(a)Patriot shall be responsible for administering compliancewith thePatriot leave of absence programsandFMLAwith respect toPatriot Employees.

(b) Effective as ofImmediately after the Distribution Date: (i) FRPshall adopt, and shall causeeach member of the Real Estate Groupto adopt,leave of absence programs; (ii) FRPshall honor, and shall causeeach member of the Real Estate Groupto honor, all terms and conditions of leaves of absence which have been granted to anyFRP Employeeunder anFRPleave of absence program orFMLAbefore the Distribution Date, including such leaves that are to commence after the Distribution Date; (iii) Patriotandeach member of the Transportation Groupshallbe solely responsible for administeringleaves of absence and compliance withFMLAwith respect to their employees; and (iv) FRPandeach member of the Real Estate Groupshall recognize all periods of service of eachFRP Employeewith theReal Estate Groupto the extent such service is recognized byPatriotfor the purpose of eligibility for leave entitlement under thePatriot leave of absence programsandFMLA.

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(c) As soon as administratively possible and not later than theClose of the Distribution Date,Patriotshall provide toFRPcopies of all records pertaining to thePatriot leave of absence programsandFMLAwith respect to allFRP Employeesto the extent such records have not been provided previously toFRPora member of the Real Estate Group.

Section 5.6     PatriotWorkers’ Compensation Program.

(a) EffectiveImmediately after the Distribution Date,

(ii) Patriot shall assume, retain and be responsible for all workers’ compensation Liabilities relating to Patriot Employees (the “Patriot WCP Liabilities”).

(iii) FRP shall assume, retain and be responsible for all workers compensation Liabilities relating to FRP Employees (“FRP WCP Liabilities”).

(b) For the avoidance of doubt, workers’ compensation Liabilities in respect of any current or former employee shall be the responsibility of such employee’s employer on the Distribution Date or, in the case of former employees, any such former employee’s last employer prior to the Distribution Date.

(c)FRPandPatriotshall cooperate with respect to the issuance of new, or transfer of, existing workers’ compensation policies and licenses.

Section 5.7     Flexible Benefit Plans.

To the extent any FRP Employee contributed to an account under the Patriot Health Care Spending Account Plan (“Patriot HCSAP”) during the calendar year that includes the Distribution Date, effective as of Immediately after the Distribution Date, Patriot shall transfer to the corresponding New FRP Health and Welfare Plan the account balances of such FRP Employees for such calendar year under the Patriot HCSAP, regardless of whether the account balance is positive or negative.

Section 5.8     Application of Article5to theReal Estate Group.

Any reference in this Article 5 to “FRP” shall include a reference to the Real Estate Group when and to the extent FRP has caused a member of the Real Estate Group to (a) become a party to a vendor contract, group insurance contract, or HMO letter agreement associated with a New FRP Health and Welfare Plan, (b) become a self-insured entity for the purposes of one or more New FRP Health and Welfare Plans, (c) assume all or a portion of the liabilities or administrative responsibilities for benefits which arose before the Distribution Date under a Patriot Health and Welfare Plan and which were expressly assumed by FRP pursuant to the terms of this Agreement, or (d) take any other action, extend any coverage, assume any other liability or fulfill any other responsibility that FRP would otherwise be required to take under the terms of this Article 5, unless it is clear from the context that the particular reference is not intended to include a member of the Real Estate Group. In all such instances in which a reference in this Article 5 to “FRP” includes a reference to a member of the Real Estate Group, FRP shall be responsible to Patriot for ensuring that the member of the Real Estate Group complies with the applicable terms of this Agreement.

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ARTICLE 6
INDEMNIFICATION

With respect to indemnification, the parties hereto agree as set forth in the Separation Agreement.

ARTICLE 7
GENERAL PROVISIONS

Section 7.1     Notices.

Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, or mail, to the following addresses:

If to FRP, to:	FRP Holdings, Inc.
	200 W. Forsyth Street
	7th Floor
	Jacksonville, Florida 32202
	Attn: President
	Facsimile: 904.353.2207
With a copy to:	Nelson Mullins Riley & Scarborough LLP
	50 N. Laura Street, Suite 2850
	Jacksonville, Florida 32202
	Attn: Daniel B. Nunn, Jr.
	Facsimile: 904-665-3621
If to Patriot, to:	Patriot Transportation Holding, Inc.
	200 W. Forsyth Street, 7th Floor
	Jacksonville, Florida 32202
	Attn: President
	Facsimile: 904.353.2207

or to such other addresses or telecopy numbers as may be specified by like notice to the other party. All such notices, requests and other communications shall be deemed given, (a) when delivered in person or by courier or a courier services, (b) if sent by facsimile transmission (receipt confirmed) on a business day prior to 5 p.m. in the place of receipt, on the date of transmission (or, if sent after 5 p.m. or on a day other than a business day, on the following business day) or (c) if mailed by certified mail (return receipt requested), on the date specified on the return receipt.

Section 7.2     Amendments; No Waivers.

(a) Any provision of thisAgreementmay be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, byFRPandPatriot, or in the case of a waiver, by the party against whom the waiver is to be effective.

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(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 7.3     Successors and Assigns.

The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns;provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto.

Section 7.4     Governing Law.

This Agreement shall be construed in accordance with and governed by the law of the State of Florida, without regard to the conflicts of laws rules thereof.

Section 7.5     Counterparts; Effectiveness.

This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

Section 7.6     Entire Agreement; No Change in Control or SeveranceEvent.

(a) ThisAgreementconstitutes the entire understanding of the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by any party hereto or any member of their Group with respect to the transactions contemplated by thisAgreement. To the extent that the provisions of thisAgreementare inconsistent with the provisions of the Tax Matters Agreement, the provisions of the Tax Matters Agreement shall prevail.

(b) Neither theDistributionnor the consummation of the transactions contemplated herein or under theSeparation Agreementshall constitute a change in control for purposes of, or trigger or otherwise give rise to any severance obligations or entitlements under, anyFRPorPatriotplan, program,agreementor arrangement.

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Section 7.7     Dispute Resolution.

Any dispute hereunder or with respect to the rights, duties and Liabilities of the parties hereto shall be resolved pursuant to the applicable provisions, including Article 8, of the Separation Agreement.

Section 7.8     No Third Party Beneficiaries.

Nothing contained in this Agreement is intended to constitute an amendment to any plan or arrangement governed by ERISA, or to confer upon any person or entity other than the parties hereto and their respective successors and permitted assigns, any benefit, right or remedies under or by reason of this Agreement.

Section 7.9     Headings.

The section and other headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

Section 7.10     Severability.

If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a declaration, the parties shall modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

Section 7.11     Schedules.

FRP and Patriot shall cooperate and mutually agree on each of the schedules to this Agreement. FRP and Patriot shall have the right to amend or supplement the information set forth in any schedule hereto from time to time until two business days prior to the Distribution Date.

Section 7.12     Cooperation and Coordination.

The parties agree to share, and furnish each other with, such information concerning employees and employee benefit plans, and to take all such other action, as is necessary and appropriate to effect the transactions contemplated hereby, and to coordinate, in advance, the time, form and content of communications to current and former employees of the parties relating to such transactions.

Section 7.13     Withholdings.

(a) To the extent consistent with the terms of the Tax Matters Agreement, the party that is responsible for making a payment hereunder shall be responsible for making the appropriate withholdings, if any, attributable to such payments.

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(b) To the extent applicable,FRPandPatriotagree to comply with theStandard Proceduredescribed in Section 4 of Revenue Procedure 2004-53, 2004-2 C.B. 320 (the ”Standard Procedure”). With respect to eachPatriot Employee,FRPshall, in accordance withRevenue Procedure2004-53, assume all responsibility for preparing and filing Form W-2,Wage and Tax Statements; Form W-3,Transmittal of Income and Tax Statements; Form 941,Employer’sQuarterly Federal Tax Returns; Form W-4,Employee’s Withholding Allowance Certificates; and Form W-5,Earned Income Credit Advance Payment Certificates(collectively, the “Employee Withholding Documents”) with regard to wages paid during the period through theClose of the Distribution Date.Patriotshall assume all responsibility for preparing and filing theEmployee Withholding Documentswith regard to wages paid to eachPatriot Employeeafter theClose of the Distribution Date.PatriotandFRPshall cooperate in good faith to the extent necessary to permit each of them to comply with theStandard Procedure.

[Signature Page Follows]

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

FRP HOLDINGS, INC.,
a Florida corporation

By:____________________________________________

Name:__________________________________________

Title:___________________________________________

PATRIOT TRANSPORTATION HOLDING, INC,
a Florida corporation

By:____________________________________________

Name:__________________________________________

Title:___________________________________________

[Signature Page to Employee Matters Agreement]

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SCHEDULE 1.1(a)-1

Patriot Employees

• Thompson S. Baker II

• John D. Milton, Jr.

• John D. Klopfenstein

• Robert E. Sandlin

Schedule 1.1(a)-1 

SCHEDULE 1.1(a)-2

Non-Patriot Employees

• David H. deVilliers, Jr.

Schedule 1.1(a)-2 

SCHEDULE 1.1(a)-3

Patriot Plans

1. Patriot Health and Welfare Plans:

• Patriot Basic Life Insurance Plan

• Patriot Supplemental Life Insurance Plan

• Patriot Accidental Death and Dismemberment Plan

• Patriot Travel Accident Plan

• Patriot Short-Term Disability Plan

• Patriot Long Term Disability Plan

• Patriot Medical Plan

• Patriot Dental Plan

• Patriot Vision Plan

• Patriot Express Scripts Prescription Drug Plan

• Patriot Employee Assistance Program

• Patriot TASC Plan (flex spending accounts)

2. Patriot Management Incentive Compensation Plan (“MIC Plan”)

3. Management and Security Plan

4. Profit Sharing Plan

5. 2000 Stock Option Plan

6. 2006 Stock Incentive Plan

Schedule 1.1(a)-3 

SCHEDULE 3.3(b)

Option Adjustment Methodology

• Each existing FRP stock option will be replaced with an option to purchase FRP common stock and a separate option to purchase Patriot common stock with a combined intrinsic (in-the-money) value equal to the intrinsic value of the existing option.

• Each option will retain its existing vesting schedule and expiration date.

• Each replacement option will preserve the same ratio of the option exercise price to fair market value.

• The intrinsic value of the replacement options will be allocated between FRP and Patriot based on the relative total market capitalization of FRP and Patriot.

• The intrinsic value of the existing options will be determined based on the closing price of Patriot stock on the date of the spin-off (the spin-off occurs after market close). If FRP stock is being traded “ex-dividend” and Patriot stock is being traded “when issued,” the combined values will be used.

• The relative values of FRP and Patriot stock will be determined based on the market capitalization of each company, using “ex-dividend” and “when issued” prices on the date of the spin-off, if so traded, or based on the relative closing prices on the next trading day, if there is no “when issued” and “ex-dividend” trading.

• If the stock trades “when issued” and “ex-dividend,” the intrinsic value of the replacement options will be determined using the closing prices on the date of the spin-off.

• If there is no “when issued” and “ex-dividend” trading, the intrinsic value of the replacement options will be determined using the closing prices on the day after the spin-off.

Note: The outstanding FRP stock options held by David H. deVilliers, Jr. will be replaced with options to purchase FRP common stock with the same intrinsic value as the existing FRP stock options, and the outstanding FRP stock options held by Robert E. Sandlin will be replaced with options to purchase Patriot common stock with the same intrinsic value as the existing Patriot stock options.

Schedule 3.3(b)