EXECUTION COPY
EXHIBIT 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
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This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"),
dated as of this 19 day of November, 2001, between Sunterra Corporation, a
Maryland corporation (the "Company"), and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Executive"). As
described further in Section 11 herein, this Agreement shall only become
effective (the "Commencement Date") upon approval by the U.S. Bankruptcy Court
for the District of Maryland (Baltimore Division) (the "Bankruptcy Court") and
shall be null and void in the event the Bankruptcy Court does not approve the
Agreement.
R E C I T A L S:
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WHEREAS, the Executive, LSI Group Holdings PLC and Signature Resorts,
Inc. (predecessor to the Company) entered into an employment agreement dated
August 1, 1997 (the "Existing Employment Agreement"); and
WHEREAS, Section 21.1 of the Existing Employment Agreement provides
that such agreement shall not be amended without the written approval of the
parties thereto; and
WHEREAS, the parties hereto desire to amend and restate the Existing
Employment Agreement, in the form of this Agreement; and
WHEREAS, the Company recognizes that the future growth, profitability
and success of the Company's business will be substantially and materially
enhanced by the continued employment of the Executive by the Company; and
WHEREAS, the Company desires to continue to employ the Executive and
the Executive has indicated his willingness to continue to provide his services,
on the terms and conditions set forth herein.
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to continue to
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employ the Executive and the Executive hereby accepts such continued employment
with the Company, on the terms and subject to the conditions hereinafter set
forth. Subject to the terms and conditions contained herein, the Executive
shall serve as President and Chief Executive Officer of the Company and shall
have such duties as are typically performed by a chief executive officer of a
corporation of similar size and type as the Company. The Company shall nominate
the Executive to serve, and shall use reasonable efforts to secure Executive's
election, as a member of the Board of Directors of the Company (the "Board") and
shall use reasonable efforts to keep the Executive on the Board for so long as
the Executive serves as President and Chief Executive Officer of the Company.
The Executive shall render his services at the direction of, and shall report
solely to, the Board of Directors of the Company. The Executive agrees to use
reasonable efforts to promote and further the business, reputation and good name
of the Company. All other officers of the Company shall report directly or
indirectly to the Executive.
The Executive's primary place of employment shall be in the Orlando, Florida
area, or such other location as the Executive and the Company may reasonably
agree.
Section 2. Commencement Date; Term. Unless terminated pursuant to
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Section 6 hereof, the Executive's employment hereunder shall commence on the
Commencement Date and shall continue during the period ending on the third
anniversary of the Commencement Date(the "Initial Term"). Thereafter, the
Employment Term shall extend for consecutive periods of one year, provided the
parties hereto agree in writing to such extension not less than ninety (90) days
prior to the Initial Term or relevant anniversary date of this Agreement, as
applicable. The Initial Term, together with any extension pursuant to this
Section 2, is referred to herein as the "Employment Term." The Employment Term
shall terminate upon any termination of the Executive's employment pursuant to
Section 6.
Section 3. Compensation and Benefits. During the Employment Term,
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the Executive shall be entitled to the following compensation and benefits:
(a) Salary. As compensation for the performance of the Executive's
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services hereunder, the Company shall pay to the Executive a salary (the
"Salary") of Four Hundred Fifty Thousand Dollars $450,000 per annum. The Salary
shall be payable in accordance with the payroll practices of the Company as the
same shall exist from time to time.
(b) Annual Performance Bonus. The Executive shall be eligible to
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receive, in respect of each calendar year in the Employment Term beginning in
2002 and thereafter, an annual cash performance bonus (the "Annual Performance
Bonus") in an amount up to Five Hundred Fifty Thousand Dollars ($550,000), based
upon (other than as noted below) the attainment of quantitative performance
goals set forth in a performance plan to be mutually agreed to by the
Compensation Committee of the Board and the Executive within 90 days of the
beginning of each calendar year (the "Performance Plan"); provided that the
performance goals for calendar year 2002 shall be as set forth on Schedule 1
hereto. Notwithstanding the foregoing, the Annual Performance Bonus shall not
be less than One Hundred Fifty Thousand Dollars ($150,000) (the "Guaranteed
Bonus"). The portion of the Annual Performance Bonus that does not constitute
the Guaranteed Bonus (the "Performance Goal Bonus") shall be determined based on
the level of achievement of the performance goals (from 75% to 120% attainment
of plan targets) set forth in the Performance Plan. The Performance Goal Bonus
shall be paid to the Executive on the same basis as the payment of bonuses to
other senior executive officers of the Company. The Guaranteed Bonus shall be
paid in equal monthly installments in arrears commencing with the on-month
anniversary of the Commencement Date.
(c) Equity Compensation. Subject to the confirmation of the
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Company's Chapter 11 plan of reorganization (the "Plan"), the "Reorganized
Company" (defined as the Company as it may be constituted upon and immediately
following the consummation of the Plan) will implement a stock option plan (the
"New Management Incentive Plan"), which will not be inconsistent with the terms
set forth in this Section 3(c), under which the Reorganized Company will grant
to the Executive, as of the "Effective Date" (defined as the date on which the
Plan is consummated), options to purchase 2.5% of the fully diluted Common Stock
of the Reorganized Company, after exercise of the options (the option to
purchase any one share of Reorganized Company Common Stock hereafter referred to
as an "Option"). Each Option shall have an exercise price equal to the price
per share of the Common Stock of the Reorganized
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Company on the Effective Date, as set forth in the section of the Disclosure
Statement for the Plan describing the New Management Incentive Plan, as filed
with the Bankruptcy Court; provided, however, that if the Disclosure Statement
does not provide a specific exercise price for the Options, then the exercise
price for the Options shall equal the per share price (or the midpoint value of
such per share price) of the Reorganized Company Common Stock as set forth in
the section of the Disclosure Statement describing the reorganization value of
the Reorganized Company. The Options shall be subject to four year vesting under
which the Executive may exercise 25% of the Options after the first anniversary
of the Commencement Date, subject to the Executive's continued employment with
the Company (other than as stated herein). The remainder of the Options shall
vest and become exercisable ratably on each monthly anniversary during the 36
month period following the first anniversary of the Commencement Date, subject
to the Executive's continued employment with the Company (other than as stated
herein). The Options shall not expire until the date that is nine years from the
Effective Date; provided that such Options (whether or not vested) shall expire
immediately upon termination of the Executive's employment for Cause. If the
Executive is terminated by the Company without "Cause," in accordance with
Section 6(c) herein, or if the Executive terminates his employment for "Good
Reason," in accordance with Section 6(f) herein, any unvested Options will
expire as of the date of such termination, and any unexercised vested Options
shall expire on the earlier of the expiration date of the Option or the date
that is twelve months after the date of such termination. If the Executive's
employment is terminated due to death or disability (in accordance with Section
6(b) herein), any unvested Options will expire as of the date of such
termination, and any unexercised vested Options shall expire on the earlier of
the expiration date of the Option or the date that is twelve months after the
date of such termination. If the Executive terminates his employment other than
for Good Reason in accordance with Section 6(f) herein, any unvested Options and
one-half of the unexercised vested Options will expire as of the date of such
termination, and the remaining one-half of the Executive's Options that were
vested and unexercised as of the date of such termination shall expire on the
earlier of the expiration date of the Option or the date that is three months
after the date of such termination. Notwithstanding the foregoing, the Options
shall become fully vested upon the occurrence of a Change in Control (as defined
below). The Options shall have such other terms and conditions as are set forth
in the New Management Incentive Plan and stock option agreement, including, but
not limited to, a formal "cashless exercise" program maintained with an outside
broker. The Executive's option agreement shall contain a provision that
authorizes the Executive to require the Company to withhold shares of Common
Stock from the shares of Common Stock that would otherwise be issuable to the
Executive as a result of the exercise of the Common Stock under the Option in
order to satisfy the Company's required tax withholding obligation.
(d) Benefits. In addition to the Salary and the Annual Performance
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Bonus, the Executive shall be eligible to participate in the Company's health,
insurance, retirement, and other benefit plans and programs; provided, however,
that the value of such benefits in the aggregate shall not be less than the
value of the benefits currently provided to the Executive under the Existing
Employment Agreement (including, but not limited to, pension contributions made
on behalf of the Executive pursuant to the Existing Employment Agreement, such
pension contributions to be made in an amount equal to 7% of the Executive's
Salary and Guaranteed Bonus). In addition, the Company shall reimburse the
Executive for the reasonable cost of tax return preparation in all jurisdictions
in which the Executive is subject to tax filing, payment or other reporting
requirements up to $5,000 for each year during the Employment Term, subject to
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presentation by the Executive of receipts and documentation of such expenditures
in accordance with the Company's expense reimbursement policy, as in effect from
time to time. The Executive shall also be entitled to four (4) weeks of
vacation for each calendar year during the Employment Term, and all Company
holidays. The Executive shall be entitled to all other benefits as are
generally allowed to other senior executives of the Company, in accordance with
the Company's policies in effect from time to time.
(e) Directors and Officers Liability Insurance. The Company will at
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its expense provide the Executive with Directors' and Officers Liability
Insurance, subject to the provisions governing such insurance and on such terms
as the Board may from time to time decide. The Company will indemnify Executive
and hold Executive harmless, to the maximum extent permitted by applicable law,
as applicable, against all costs, charges and expenses incurred or sustained by
him in connection with any action, suit or proceeding to which he may be made a
party by reason of his being an officer, director or employee of the Company or
of any subsidiary or affiliate of the Company at any time.
(f) Living Expenses. Subject to the limitations described below, the
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Company shall reimburse the Executive for (i) reasonable expenses (including,
without limitation, housekeeping expenses) up to Four Thousand Dollars ($4,000)
per month incurred by the Executive for temporary housing in the Orlando,
Florida area (or other location of Company's executive offices) for the
Executive and his family, (ii) reasonable costs for travel between the
Executive's primary residence in England and the location of the Company's
executive offices as reasonably necessary in connection with the performance of
his services hereunder, and (iii) the cost of round trip economy-class travel
for the Executive's family (i.e., the Executive's two children and his domestic
partner) between England and the United States twice per calendar year.
Reimbursement of such expenses is subject to submission of properly documented
housing and travel receipts. If all or any portion of the amounts payable to or
on behalf of the Executive under this Section 3(f) (other than the travel costs
described in clause (iii) above) (the "Reimbursed Amounts") is subject to income
tax payable by the Executive (after taking into account whether any such amounts
are legally permissible income tax deductions to the Executive), the Company
shall pay to the Executive an additional amount to the extent necessary to place
the Executive in the same after-tax position as he would have been in had the
Reimbursed Amounts not been subject to income tax (the "Gross-up Amount"). The
determination of the Gross-up Amount shall be made by the Company's independent
auditors, and such determination shall be final.
(g) Automobile. During the Employment Term, the Company will continue
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to provide the Executive with an automobile in the United Kingdom comparable to
that provided to him in the United Kingdom on the date hereof in accordance with
Company policy. During the Employment Term with respect to the United States,
the Company will provide Executive with an automobile in the United States, as
may be reasonably necessary in connection with the performance of the
Executive's duties hereunder. Such automobiles shall be used by Executive in
the performance of the Executive's duties for the Company and its subsidiaries
and affiliates. The Executive will also be entitled to the use of the
automobiles for his private purposes, subject to such restrictions and upon such
conditions as the Company may from time to time reasonably impose. Upon
submission of properly documented receipts, the Company shall reimburse the
Executive for all reasonable expenses (including gasoline, maintenance, repairs,
insurance, parking and registration, as applicable) incurred in connection with
the use of such automobiles.
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(h) Pre-Approval Bonus. In the event of a Change in Control prior to
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approval of the Plan by the Bankruptcy Court and, as a result, the Options have
not been issued to the Executive pursuant to Section 3(c) hereof, the Executive
shall be paid a bonus (the "Special Bonus") upon the consummation of the Change
in Control in an amount equal to 1.5% of the excess, if any, of (i) the
aggregate value of the Company determined with reference to the price paid
(including assumption of debt and value of equity, if any) in connection with
such Change in Control over (ii) $650 million. Notwithstanding the foregoing,
in no event shall the Special Bonus be less than $500,000. The Special Bonus
shall be paid irrespective of a termination of the Executive's employment if (A)
such termination is pursuant to Section 6(d) or 6(f) and (B) a Change in Control
occurs no later than six months following such termination.
(i) No Other Compensation. Except as otherwise expressly provided
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herein, or in any other written document executed by the Company and the
Executive, no other compensation or other consideration shall become due or
payable to the Executive on account of the services rendered hereunder.
Section 4. Exclusivity. During the Employment Term, the Executive
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shall devote his full time to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Board. The
Executive shall use reasonable efforts to promote and serve the interests of the
Company and shall not engage in any other business activity, whether or not such
activity shall be engaged in for pecuniary profit, except that the Executive may
participate in the activities of professional trade organizations and, engage in
personal investing activities, provided that such activities do not interfere in
any material respect with the services to be provided by the Executive
hereunder.
Section 5. Reimbursement for Expenses. In addition to, but without
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duplication of, the expenses described in Section 3(d), the Executive is
authorized to incur reasonable expenses in the discharge of the services to be
performed hereunder, including, without limitation, expenses for travel,
entertainment, maintaining professional licenses and certifications, trade
association fees, attendance at association meetings and conferences, lodging
and similar items in accordance with the Company's expense reimbursement policy,
as the same may be modified by the Company from time to time. The Company shall
reimburse the Executive for all such proper expenses upon presentation by the
Executive of itemized accounts of such expenditures in accordance with the
financial policy of the Company, as in effect from time to time.
Section 6. Termination and Default.
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(a) Death. The Executive's employment shall automatically terminate
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upon his death and upon such event, the Executive's estate shall be entitled to
receive the amounts specified in Section 6(h) below.
(b) Disability. If the Executive is unable to perform the duties
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required of him under this Agreement because of illness, incapacity, or physical
or mental disability, the Employment Term shall continue and the Company shall
pay all compensation required to be paid to the Executive hereunder, unless the
Executive is unable to perform the duties required of him under this Agreement
for an aggregate of 120 days (whether or not consecutive) during any
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12-month period during the term of this Agreement (a "Disability"), in which
event the Executive's employment shall terminate.
(c) Cause. The Company may terminate the Executive's employment at
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any time, with or without Cause. For purposes of this Agreement, "Cause" shall
mean the occurrence of any of the following: (i) the Executive's failure
(except where due to a disability contemplated by subsection (b) hereof),
neglect or refusal to perform his duties hereunder; (ii) any breach of this
Agreement by the Executive (or any willful or intentional act of the Executive)
that injures the reputation or business of the Company or its affiliates in any
material respect; (iii) material breach by the Executive of his obligations
under this Agreement; (iv) the Executive's indictment of, conviction of, or
pleading of no contest to, a felony or misdemeanor involving fraud, or (v) the
commission by the Executive of an act of fraud or embezzlement, or any other act
involving the misappropriation of funds or assets. For purposes of this Section
6(c), no act or failure to act by Executive shall be considered "willful" unless
done or omitted to be done by Executive in bad faith and without reasonable
belief that Executive's action or omission was in the best interests of the
Company or its affiliates. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by Executive in good faith and in the best interests of the
Company. Cause shall not exist pursuant to clause (i), (ii) or (iii) of this
Section 6(c) unless the Executive has failed to correct the activity alleged to
constitute "Cause" within thirty (30) days following written notice from the
Company of such activity, which notice shall specifically set forth the nature
of such activity and the corrective action reasonably sought by the Company.
Notwithstanding the foregoing, the termination of the Executive's employment for
Cause shall be pursuant to the action of the Board, taken in conformity with the
By-laws of the Company.
(d) Without Cause. The Company may terminate the Executive's
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employment during the Employment Term without Cause at any time by giving
written notice to the Executive. A termination of the Executive's employment
without Cause shall mean a termination initiated by the Company for any reason
other than Cause or on account of death or Disability. A termination without
Cause shall be effective immediately upon notice given by the Company to the
Executive, or such later date as may be mutually agreed between the Executive
and the Company.
(e) Resignation. Unless otherwise provided in Section 6(f) below in
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the case of termination of employment for Good Reason, the Executive shall have
the right to terminate his employment at any time by giving 60 days written
notice of his resignation to the Company. Except as provided in Section 6(g)
below, a termination by the Executive other than for Good Reason shall be
effective upon the expiration of the 60 day notice period.
(f) Good Reason. The Executive shall have the right to terminate his
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employment for Good Reason under any of the following circumstances: (i) the
failure by the Company to pay to the Executive the compensation and benefits, or
expense reimbursement in accordance with Sections 3 and 5 herein; (ii) a
material diminution in the Executive's responsibilities or authority, or
diminution of the Executive's title; (iii) any material breach of this Agreement
by the Company or (iv) following a Change in Control (as defined below) the
Executive is not retained by the Company in a similar capacity; provided,
however, that Good Reason shall not exist upon a termination of employment
described in Section 6(b), (c) or (d)
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herein; provided, further, that the Executive must provide written notice of
termination of employment for Good Reason within thirty (30) days following the
Executive's knowledge of an event constituting Good Reason or such event shall
not constitute Good Reason hereunder. Notwithstanding the foregoing, Good Reason
shall not be deemed to exist unless the Company fails to cure the event giving
rise to Good Reason within thirty (30) days after receipt of written notice
thereof given by the Executive. For purposes of this Agreement, Change in
Control shall mean the following events or circumstances that occur after the
effective date of the Plan (but excluding the consummation of the Plan and the
transactions contemplated thereby as a Change in Control event):
(i) individuals who, on the date the Plan is consummated,
constitute the Board of Directors (the "Board") of the Company (the "Incumbent
Directors") cease for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to such date, whose
election or nomination for election was approved by a vote of at least two-
thirds of the Incumbent Directors then on the Board (either by a specific vote
or by approval of the proxy statement of the Company or Reorganized Company in
which such person is named as a nominee for director, without written objection
to such nomination) shall be an Incumbent Director; provided, however, that no
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individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director; or
(ii) the consummation of any sale, transfer or other
disposition of all or substantially all of the assets of the business of the
reorganized Company through one transaction or a series of related transactions
to one or more persons or entities; or
(iii) any "Person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding securities eligible to
vote for the election of the Board; or
(iv) the consummation of a merger, consolidation,
reorganization, statutory share exchange or similar form of corporate
transaction involving the Company or any of its subsidiaries that requires the
approval of the Company's stockholders, whether for such transaction or the
issuance of securities in the transaction; or
(v) a sale of all or substantially all of the Company's
assets; or
(vi) the stockholders of the Company approve a plan of complete
liquidation or dissolution.
(g) Payment in Lieu. The Company may, in its sole discretion, at any
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time after notice of termination without Good Reason has been given to the
Company by the Executive, terminate this Agreement, provided that, in addition
to any amount payable to the Executive under Section 6(h) herein, the Company
shall pay to the Executive (without
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duplication) his then current Salary and continue benefits provided pursuant to
Section 3(d) herein, for the duration of the unexpired notice period.
(h) Termination Payments.
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(i) Termination without Cause or By Executive for Good Reason.
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In the event that during the Employment Term the Executive's employment is
terminated by the Company without Cause or the Executive terminates his
employment for Good Reason, the Company shall pay to the Executive the sum of
the following amounts: (A) all amounts fully earned pursuant to the terms of
this Agreement, but unpaid hereunder through the date of termination, if any, in
respect of Salary, Annual Performance Bonus and unreimbursed expenses (the
"Accrued Obligations"), and (B) continuation of Executive's Salary (less any
applicable withholding or similar taxes) at the rate in effect hereunder on the
date of termination, in accordance with the Company's prevailing payroll
practices, for a period of eighteen (18) months following the date of
termination (the "Severance Term") (C) eighteen (18) payments each in the amount
of Twelve Thousand Five Hundred Thousand Dollars ($12,500) (less any applicable
withholding or similar taxes), such payments to be made at the same time as the
continuation of Executive's Salary under Clause (B) above, and (D) continuation,
for the lesser of twelve (12) months and the remaining balance of the Employment
Term (without giving effect to the termination pursuant to Section 6 hereof), of
coverage under the Company's group health insurance plan for the Executive
and/or his covered dependents, provided that such continuation coverage shall
cease in any event on the date that the Executive first becomes eligible to
participate in the group health plan of a new employer. Notwithstanding any
other provision in this Agreement or the terms of any severance plan or policy
maintained by the Company or its affiliates to the contrary, if the Company pays
the Executive the severance benefit as provided in this Section 6(g)(i) the
Executive shall not be entitled to receive any other payments or benefits under
any other severance or similar plan maintained by the Company or its affiliates,
except to the extent such payments or benefits are more favorable than those
specifically provided for in this Section 6(h).
(ii) Termination due to Death or Disability. In the event that
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during the Employment Term the Executive's employment is terminated by the
Company due to the Executive's death or Disability, the Company shall pay to the
Executive, or the Executive's estate, the Accrued Obligations.
(iii) Termination for Cause or By Executive without Good Reason.
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In the event that during the Employment Term the Executive's employment is
terminated by the Company for Cause or by the Executive by resignation without
Good Reason, the Company shall pay to the Executive the Accrued Obligations.
(iv) Expiration of Agreement. If either the Company or the
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Executive elects not to renew this Agreement and it expires, the Executive shall
not receive any termination payments other than the (i) Accrued Obligations,
(ii) a payment in respect of the Performance Goal Bonus for the year this
Agreement expires equal to the product of (aa) the Performance Goal Bonus that
would have been payable to the Executive based upon the satisfaction of the
performance goals set forth in the Performance Plan for the year in which this
Agreement expires, and (bb) a fraction, the numerator of which is the number of
days elapsed in the calendar
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year through the expiration date, and the denominator of which is 365, and,
(iii) if applicable, the payments described in clause (i) of the last sentence
of Section 7(a).
(i) No Mitigation or Offset. In the event of any termination of
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Executive's employment hereunder, Executive shall be under no obligation to seek
other employment or otherwise mitigate the obligations of the Company under this
Agreement, and there shall be no offset against amounts due Executive under this
Agreement on account of amounts purportedly owing by Executive to the Company or
amounts earned by Executive from any source. Any amounts due to Executive under
this Agreement upon termination of employment are considered to be reasonable by
the Company and are not in the nature of a penalty.
(j) Survival of Operative Sections. Upon any termination of the
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Executive's employment, the provisions of Sections 6(h) and 7 through 22 of this
Agreement shall survive to the extent necessary to give effect to the provisions
thereof.
Section 7. Secrecy and Non-Competition.
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(a) No Competing Employment. The Executive acknowledges that the
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agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and by his current employment
with the Company, the Executive has obtained and will obtain such knowledge,
contacts, know-how, training and experience and there is a substantial
probability that such knowledge, know-how, contacts, training and experience
could be used to the substantial advantage of a competitor of the Company and to
the Company's substantial detriment. Therefore, the Executive agrees that for
the period commencing on the Commencement Date and ending Eighteen (18) months
following the termination of the Executive's employment hereunder (such period
is hereinafter referred to as the "Restricted Period"), the Executive shall not
participate or engage, directly or indirectly, for himself or on behalf of or in
conjunction with any person, partnership, corporation or other entity, whether
as an employee, agent, officer, director, shareholder, partner, joint venturer,
investor, lender, advisor, consultant or otherwise, in any business activity if
such activity consists of any activity undertaken or expressly contemplated to
be undertaken by the Company at any time during the Employment Term.
Notwithstanding the foregoing, (i) the Executive shall have no obligation under
this Section 7(a) in the event of a termination of employment due to the
delivery of a notice of non-extension of the Employment Term by the Company as
contemplated by Section 2 hereof unless the Company shall continue to pay
Executive his Salary and Guaranteed Bonus during the Restricted Period pursuant
to a written notice of its intent to do so and (ii) and except as limited by the
Company's policies and procedures, the Executive may invest in securities of any
competitive enterprise, solely for investment purposes and without participating
in the business thereof, if (A) such securities are traded on any national
securities exchange or the National Association of Securities Dealers, Inc.
Automated Quotation System, (B) the Executive is not a controlling person of, or
a member of a group that controls, such entity and (C) the Executive does not,
directly or indirectly, own five percent or more of the voting securities of
such entity.
(b) Nondisclosure of Confidential Information. The Executive, except
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in connection with his employment hereunder, shall not disclose to any person or
entity or use, either during the Employment Term or at any time thereafter, any
information not in the public domain or generally known in the industry, in any
form, acquired by the Executive while
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employed by the Company or any predecessor to the Company's business or, if
acquired following the Employment Term, such information which, to the
Executive's knowledge, has been acquired, directly or indirectly, from any
person or entity owing a duty of confidentiality to the Company, relating to the
Company, including but not limited to information regarding customers, vendors,
suppliers, trade secrets, training programs, manuals or materials, technical
information, contracts, systems, procedures, mailing lists, know-how, trade
names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Company's products or
services), business plans, code books, invoices and other financial statements,
computer programs, software systems, databases, discs and printouts, plans
(business, technical or otherwise), customer and industry lists, correspondence,
internal reports, personnel files, sales and advertising material, telephone
numbers, names, addresses or any other compilation of information, written or
unwritten, which is or was used in the business of the Company, provided that
Executive may retain a copy of his Rolodex or any other personal telephone
database established and maintained by the Executive. The Executive agrees and
acknowledges that all of such information, in any form, and copies and extracts
thereof, are and shall remain the sole and exclusive property of the Company,
and upon termination of his employment with the Company, the Executive shall
return to the Company the originals and all copies of any such information
provided to or acquired by the Executive in connection with the performance of
his duties for the Company, and shall return to the Company all files,
correspondence and/or other communications received, maintained and/or
originated by the Executive during the course of his employment.
(c) No Interference. In consideration of the compensation (and other
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benefits) provided and to be provided to the Executive as set forth hereunder,
the Executive covenants and agrees that during the Restricted Period, the
Executive will not, directly or indirectly: (i) solicit, induce, or otherwise
have business contact with, any person or entity who has, within the most recent
one-year period, been a service provider of or to the Company, and with whom the
Executive had any business relationship or about whom the Executive acquired any
significant knowledge during the Employment Term, if such contact is for the
purpose of soliciting such person or entity to cease doing business with the
Company, or (ii) solicit, hire, induce, endeavor to entice away from the
Company, or otherwise directly interfere with the relationship of the Company
with any person who, to the knowledge of the Executive, is or was within the
then most recent twelve (12) month period, employed by or otherwise engaged to
perform services for the Company.
(d) Inventions, etc. The Executive hereby sells, transfers and
---------------
assigns to the Company or to any person or entity designated by the Company all
of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive, solely or
jointly, during his employment by the Company which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company, or which otherwise relate to or
pertain to the business, functions or operations of the Company or which arise
from the efforts of the Executive during the course of his employment for the
Company. The Executive shall communicate promptly and disclose to the Company,
in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and
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documents as may be necessary or required of the Executive to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof. Any invention relating to the business of the Company and disclosed by
the Executive within one year following the termination of his employment with
the Company shall be deemed to fall within the provisions of this paragraph
unless proved to have been first conceived and made following such termination.
(e) Definition of Company for Purposes of Covenants. For purposes of
-----------------------------------------------
the covenants provided in this Section 7, and notwithstanding any other
provision of this Agreement to the contrary, "Company" shall be defined to mean
Sunterra Corporation, and each of its subsidiaries and affiliates (i.e. entities
controlling, controlled by or under common control with the Company), including,
without limitation, Sunterra Europe, Poipu Resort Partners, L.P., a Hawaii
limited partnership, and West Maui Resort Partners, L.P., a Delaware limited
partnership.
Section 8. Injunctive Relief. Without intending to limit the
-----------------
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving irreparable harm or injury as a result of such breach or threatened
breach of Section 7 hereof, restraining the Executive from engaging in
activities prohibited by Section 7 hereof or such other relief as may be
required specifically to enforce any of the covenants in Section 7 hereof.
Section 9. Extension of Restricted Period. In addition to the
------------------------------
remedies the Company may seek and obtain pursuant to Section 8 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 7 hereof.
Section 10. Representations and Warranties. The Executive and the
------------------------------
Company each represent and warrant to the other as follows:
(a) This Agreement, upon execution and delivery by the Executive and
the Company will be the valid and binding obligation of the Executive and the
Company enforceable against the Executive and the Company in accordance with its
terms.
(b) As to the Executive only, except as expressly contemplated in
Section 11 hereof, neither the execution and delivery of this Agreement nor the
performance of this Agreement in accordance with its terms and conditions by the
Executive (i) requires the approval or consent of any governmental body or of
any other person or (ii) conflicts with or results in any breach or violation
of, or constitutes (or with notice or lapse of time or both would constitute) a
default under, any agreement, instrument, judgment, decree, order, statute,
rule, permit or governmental regulation applicable to the Executive.
(c) The representations and warranties of the Executive and the
Company contained in this Section 10 shall survive the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
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Section 11. Approval by the Bankruptcy Court. Approval by the
--------------------------------
Bankruptcy Court, after notice and hearing, is a condition precedent to either
party's obligations under this Agreement, and to the effectiveness of this
Agreement. The Company agrees to promptly file and serve a motion authorizing
the Company to enter into this Agreement with the Executive following the
execution of this Agreement by the parties hereto and the Company shall take all
other measures reasonably necessary to secure approval of this Agreement by the
Bankruptcy Court as soon as possible after execution of the Agreement. The
Executive shall have the right to reasonably approve the form of the Bankruptcy
Court order approving this Agreement.
Section 12. Certain Additional Payments.
---------------------------
(a) If it is determined (as hereafter provided) that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code (or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such excise tax (such
tax or taxes, together with any such interest and penalties, are hereafter
collectively referred to as the "Excise Tax"), then Executive will be entitled
to receive an additional payment or payments (a "Gross-Up Payment") in an amount
such that, after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 12(f) hereof, all
determinations required to be made under this Section 12, including whether an
Excise Tax is payable by Executive and the amount of such Excise Tax and whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be
made by a nationally recognized firm of certified public accountants (the
"Accounting Firm") selected by Executive and subject to the approval of the
Company, such approval not to be unreasonably withheld. Executive will direct
the Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and Executive within 15 calendar days after the
date of the Change in Control or the date of Executive's termination of
employment, if applicable, and any other such time or times as may be requested
by the Company or Executive. If the Accounting Firm determines that any Excise
Tax is payable by Executive, the Company will pay the required Gross-Up Payment
to Executive within five business days after receipt of such determination and
calculations. If the Accounting Firm determines that no Excise Tax is payable
by Executive, it will, at the same time as it makes such determination, furnish
Executive with an opinion that he has substantial authority not to report any
Excise Tax on his federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment
will be binding upon the Company and Executive. As a result of the uncertainty
in the application of Section 4999 of the Code (or any successor provision
thereto) and the possibility of similar uncertainty regarding applicable state
or local tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts or fails to
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pursue its remedies pursuant to Section 12(f) hereof and Executive thereafter is
required to make a payment of any Excise Tax, Executive will direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and Executive as promptly as possible. Any such Underpayment will be
promptly paid by the Company to, or for the benefit of, Executive within five
business days after receipt of such determination and calculations.
(c) The Company and Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or Executive, as the case may be, reasonably requested by the
Accounting Firm and reasonably necessary to calculate the Gross-Up Payment, and
otherwise cooperate with the Accounting Firm in connection with the preparation
and issuance of the determination contemplated by Section 12(b) hereof.
(d) The federal, state and local income or other tax returns filed by
Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
Executive. Executive will make proper payment of the amount of any Excise Tax,
and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of Executive's federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, Executive will within five
business days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Sections
12(b) and 12(d) hereof will be borne by the Company. If such fees and expenses
are initially advanced by Executive, the Company will reimburse Executive the
full amount of such fees and expenses within five business days after receipt
from Executive of a statement therefor and reasonable evidence of his payment
thereof.
(f) Executive will notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification will be given as promptly as
practicable but no later than 10 business days after Executive actually receives
notice of such claim and Executive will further apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid
(in each case, to the extent known by Executive). Executive will not pay such
claim prior to the earlier of (i) the expiration of the 30-calendar-day period
following the date on which he gives such notice to the Company and (ii) the
date that any payment of amount with respect to such claim is due. If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive will: (i) provide the Company
with any written records or documents in his possession relating to such claim
reasonably requested by the Company; (ii) take such action in connection with
contesting such claim as the Company will reasonably request in writing from
time to time, including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the subject matter
and reasonably selected by the Company; (iii) cooperate with the Company in good
faith
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in order effectively to contest such claim; and (iv) permit the Company to
participate in any proceedings relating to such claim; provided, however, that
-------- -------
the Company will bear and pay directly all costs and expenses (including
interest and penalties) incurred in connection with such contest and will
indemnify and hold harmless Executive, on an after-tax basis, for and against
any Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this Section 12(f), the
Company will control all proceedings taken in connection with the contest of any
claim contemplated by this Section 12(f) and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided that Executive may
participate therein at his own cost and expense) and may, at its option, either
direct Executive to pay the tax claimed and ▇▇▇ for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company will determine;
provided, however, that if the Company directs Executive to pay the tax claimed
and ▇▇▇ for a refund, the Company will advance the amount of such payment to
Executive on an interest-free basis and will indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such
advance; and provided further, however, that any extension of the statute of
-------- ------- -------
limitations relating to payment of taxes for the taxable year of Executive with
respect to which the contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of any such contested
claim will be limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and Executive will be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(g) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 12(f) hereof, Executive receives any refund with
respect to such claim, Executive will (subject to the Company's complying with
the requirements of Section 12(f) hereof) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon after any
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 12(f) hereof, a determination is
made that Executive will not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial or refund prior to the expiration of 30 calendar days after
such determination, then such advance will be forgiven and will not be required
to be repaid and the amount of such advance will offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid pursuant to this Section 12.
Section 13. Assignment; No Third-Party Beneficiaries. This Agreement
----------------------------------------
shall inure to the benefit of, and be binding on, the successors and assigns of
each of the parties, including, but not limited to, the Executive's heirs, the
Executive's guardian in the event of the Executive's disability, the personal
representatives of the Executive's estate and any successor to all or
substantially all of the business and/or assets of the Company. This Agreement,
and the Executive's rights and obligations hereunder, may not be assigned by the
Executive; any purported assignment by the Executive in violation hereof shall
be null and void. The Company may assign this Agreement and its rights
hereunder, but in the event of assignment, the assignee shall expressly assume
all obligations of the Company hereunder and the Company shall remain
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fully liable for the performance of all of such obligations in the manner
prescribed in this Agreement. Except as otherwise provided herein, nothing in
this Agreement shall confer upon any person or entity not a party to this
Agreement, or the legal representatives of such person or entity, any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
Section 14. Waiver and Amendments. Any waiver, alteration, amendment
---------------------
or modification of any of the terms of this Agreement shall be valid only if
made in writing and signed by the parties hereto; provided, however, that any
-------- -------
such waiver, alteration, amendment or modification is consented to on the
Company's behalf by the General Counsel. No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 15. Severability, Governing Law, Service and Jury Trial. The
---------------------------------------------------
Executive acknowledges and agrees that the covenants set forth in Section 7
hereof are reasonable and valid in geographical and temporal scope and in all
other respects. If any of such covenants or such other provisions of this
Agreement are found to be invalid or unenforceable by a final determination of a
court of competent jurisdiction (a) the remaining terms and provisions hereof
shall be unimpaired and (b) the invalid or unenforceable term or provision shall
be deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO ITS CONFLICT OF LAWS
RULES TO THE EXTENT SUCH LAWS ARE NOT PREEMPTED BY FEDERAL BANKRUPTCY LAW.
The parties hereby (i) submit to the exclusive jurisdiction of the courts
of the State of Florida and the U.S. federal courts (sitting in Orlando,
Florida, and the U.S. federal courts in the Northern District of Florida),
provided that until the consummation of the Plan, the Bankruptcy Court shall
have exclusive jurisdiction for any action or proceeding relating to this
Agreement, (ii) consent that any such action or proceeding may be brought in any
such venue, (iii) waive any objection that any such action or proceeding, if
brought in any such venue, was brought in any inconvenient forum and agree not
to claim the same, (iv) agree that any judgment in any such action or proceeding
may be enforced in other jurisdictions, (v) consent to service of process at the
address set forth in Section 16 herein, and (vi) to the extent applicable, waive
their respective rights to a jury trial of any claim or cause of action based on
or arising out of this agreement or any dealings between them relating to the
subject matter of this agreement.
Section 16. Notices.
-------
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered or
certified mail, postage prepaid
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If to the Executive, at Thwaite Moss, Tatham, Lancashire LA2 8PR,
England, or at such other address as the Executive may furnish the
Company in writing; with a copy to: ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company, at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇,
marked for the attention of the General Counsel, or at such other
address as Company may furnish in writing to the Executive.
(b) Any notice so addressed shall be deemed to be given: if delivered
by hand, on the date of such delivery; if mailed by overnight courier, on the
first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.
Section 17. Section Headings. The headings of the sections and
----------------
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 18. Entire Agreement. This Agreement constitutes the entire
----------------
understanding and agreement of the parties hereto regarding the employment of
the Executive. Except as specifically set forth in Section 21 below, this
Agreement supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties relating to
the subject matter of this Agreement.
Section 19. Severability. In the event that any part or parts of
------------
this Agreement shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such determination shall not
effect the remaining provisions of this Agreement which shall remain in full
force and effect.
Section 20. Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
Section 21. Existing Agreement. Upon the approval of this Agreement
------------------
by the Bankruptcy Court, the Existing Employment Agreement shall be deemed null
and void, with the exception of (i) any bonuses pertaining to the Company's
Chapter 11 proceeding currently pending in the Bankruptcy Court, and (ii) the
bonus the Executive would be entitled to receive under Section 6.2 of the
Existing Employment Agreement for 2001.
Section 22. Legal Fees. The Company shall directly pay the fees and
----------
expenses of legal counsel retained by the Executive in negotiating this
Agreement, provided that such payment shall not exceed $25,000.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUNTERRA CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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SCHEDULE 1
▇▇▇▇ ▇▇▇▇▇▇
PERFORMANCE GOAL BONUS - 2002
----------------------------------------------------------
% of EBITDA Target Bonus
----------------------------------------------------------
At least 75% but less than 90% $225,000
----------------------------------------------------------
At least 90% but less than 100% $300,000
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At least 100% but less than 110% $350,000
----------------------------------------------------------
At least 110% $400,000
----------------------------------------------------------
Notes: EBITDA targets will be set on a quarterly or monthly basis.
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