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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of July
27, 1998 (the "Agreement"), between Sunterra Corporation (f.k.a. Signature
Resorts, Inc.), a Maryland corporation (the "Company"), and Xxxxxxx X. Xxxxxxx
(the "Executive"), amends and restates that Employment Agreement, dated
September 27, 1996 (the "1996 Agreement"), between the Company and the
Executive.
RECITALS
WHEREAS, the initial two (2) year term of the Agreement expires on
November 18, 1998, and unless terminated by the Executive or the Company prior
to September 1, 1998, the Agreement automatically renews on the terms set forth
therein for a second two-year period commencing November 18, 1998; and
WHEREAS, the Company wishes to retain the services of the Executive as
Chief Financial Officer, extend the term of the 1996 Agreement and amend and
restate the 1996 Agreement as set forth herein; and
WHEREAS, the Executive wishes to continue his employment with the
Company, extend the term of the 1996 Agreement and amend and restate the 1996
Agreement as set forth herein; and
WHEREAS, this Agreement amends and restates the 1996 Agreement in its
entirety and, upon the execution hereof by the Company and the Executive, the
1996 Agreement shall be, as of the date of this Agreement, immediately
terminated, of no further force or effect and replaced in its entirety by this
Agreement.
THE PARTIES HEREBY AGREE AS FOLLOWS,
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The employment of the Executive by the Company commenced on
November 18, 1996 and will continue until 12:01 a.m. on November 18, 2000 (the
"Expiration Date") unless automatically extended or sooner terminated as
hereinafter provided (such period, the "Employment Period"). Unless terminated
by the Executive or the Company pursuant to the terms of the Agreement prior to
September 1, 2000, this Agreement shall automatically renew on the terms set
forth herein for an additional two-year period. If so renewed, no later than
September 1, 2002, the Company shall notify the Executive with written notice as
to whether the Company intends to further renew or extend the Agreement
(including proposals for such further renewal which the Executive may accept,
reject or negotiate, at his discretion).
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3. Position, Duties and Responsibilities.
(a) Position. The Executive hereby agrees to serve as Executive
Vice President and Chief Financial Officer of the Company, reporting directly to
the President of the Company, or such other senior executive officer of the
Company as determined by the Company Board of Directors (the "Board"). The
Executive shall devote his best efforts and substantially full business time and
attention to the performance of services to the Company in his capacity as an
officer thereof and as may reasonably be requested by the Board of Directors of
the Company. The Company shall retain full direction and control of the means
and methods by which the Executive performs his services thereto. Both the
Executive and the Company agree that the nature and scope of the Executive's
responsibility and authority will be consistent with being the Executive Vice
President and Chief Financial Officer of a public company, as described in more
detail herein. In no order of priority, the following are the Executive's
primary responsibilities and duties:
1. To work closely with the Company's executive level senior-most
officers to structure strategic initiatives, including
acquisitions, and to analyze the financial impact of such
initiatives; and to participate actively in the negotiations
thereof and oversee the completion of such initiatives.
2. To maintain a current understanding of the Company's progress
in achieving stated financial goals and objectives (i.e.,
internal and Wall Street estimates) relative to applicable
Company projections and budgets prepared by others.
3. To serve as the primary point of contact for investor
relations and investment banking, research and analyst
communications; to participate in investor and analyst meetings
and conferences; to coordinate press releases, quarterly and
annual filings; and to coordinate the design and preparation of
the Company's annual shareholders' report; and to be involved in
such other similar matters with the assistance of Company
counsel.
4. To analyze and structure the Company's capital base,
including, without limitation, coordinating and implementing
equity and debt initiatives such as follow-on offerings, lines of
credit and securitization programs; and, generally, to manage the
Company's commercial banking relationships and lines of credit.
5. To develop and oversee cash management policies.
6. To oversee the Company's policies and procedures respecting
employee purchases and sales of the Company's stock and the
exercise of its stock options.
7. To oversee the Company's treasury function, with the
assistance of appropriate personnel.
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8. To oversee the Company's insurance and risk management
program, with the assistance of appropriate personnel.
9. To cooperate with and assist the Company in the search for and
training of a to-be-hired member of the Company's management team
who will report to the Executive and will have primary
responsibility of overseeing the Company's internal accounting,
administration, and financial reporting and control functions,
including systems, SEC financial reporting, internal audits,
corporate budgeting, tax planning, and risk management functions
(the "Administration Executive") . Commencing on the date that
the Administration Executive commences employment at the Company
(the "Administration Executive Employment Date"), the Executive
shall cooperate with the Company's management to introduce such
newly hired individual to each of the Company's Wall Street
analysts, the Company's auditors, major shareholders and other
important individuals or entities determined by the Company, by
means of either mini road show(s), one on one meetings and/or
conference calls.
10. To carry out such other customary duties and responsibilities
of an executive vice president and chief financial officer of a
public company.
The Company recognizes that to accomplish these responsibilities, the Executive
will require full cooperation and extensive interaction with Company's executive
level senior-most officers, the Company's controller and accounting department,
as well as the use of reasonably necessary staff resources dedicated exclusively
to assisting the Executive in discharging his duties.
(b) Place of Employment. During the term of this Agreement, the
Executive shall perform the services required by this Agreement at the Company's
place of business in the San Francisco Bay area; provided, however, that the
Company will require the Executive to travel extensively to other locations on
the Company's business.
(c) Other Activities. Except with the prior written approval of
the Board (which the Board may grant or withhold in its sole and absolute
discretion), the Executive, during the Employment Period, will not (i) accept
any other employment, (ii) serve on the board of directors or similar body of
any other business entity (except as otherwise set forth below), or (iii)
engage, directly or indirectly, in any other business activity (whether or not
pursued for pecuniary advantage) that is or may be competitive with, or that
might place him in a competing position to, that of the Company or any of its
affiliates, (iv) formally search for or formally explore post-Company employment
opportunities, or (v) entertain inquiries or offers for post-Company employment
opportunities; however, by way of example, the Executive may answer and return
phone calls or participate in contacts generated in the ordinary course of
business during which unsolicited employment opportunities may be presented to
him or discussed; provided that the Executive shall not indicate his
availability, then-current willingness or interest in exploring or accepting any
post-Company employment. Notwithstanding the foregoing, the Company agrees that
the Executive (or affiliates of the Executive) shall be permitted to make any
other passive personal investment that is not in a business activity that is
directly or indirectly competitive with the Company.
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(d) Board of Directors. The Executive shall serve on the Board of
Directors of the Company without additional compensation through the earlier to
occur of ten (10) days after receiving a written notice from the Company to
resign from the Board (which the Executive agrees to do immediately), or the
expiration of the Executive's current term as a Director of the Company.
4. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
the Executive a salary of not less than $280,000 per year. All salary is to be
paid consistent with the standard payroll practices of the Company (e.g., timing
of payments and standard employee deductions, such as income tax withholdings,
social security, etc.). The Executive's performance and salary shall be subject
to review at the end of each fiscal year and increase consistent with the
standard practices of the Company.
(b) Business Expenses. The Company shall reimburse the Executive
in connection with the conduct of the Company's business upon presentation of
sufficient evidence of such expenditures consistent with the Company's policies
as in place from time to time. Such benefits are all subject to change in the
Company's sole and absolute discretion. Currently, those benefits include a
Company paid participation for the Executive only in (i) an HMO (with the right
to upgrade to a PPO health provider at the Executive's expense in accordance
with the terms of our agreement with our current carrier, Blue Shield) and (ii)
an HMO dental provider (with the right to upgrade to a PPO dental provider at
the Executive's expense in accordance with the terms of the Company's agreement
with its current medical benefits provider). In addition, the Executive will be
able to participate at the Executive's own expense in any life and disability
policies available for purchase, in accordance with the terms of the Company's
plan with its carrier, and in the Company 401K retirement plan. The cost of any
medical or dental or other insurance benefits selected by the Executive in
excess of the benefits provided by the Company for either the Executive or the
Executive's dependents will be paid by the Executive personally from payroll
deductions.
(c) Other Benefits. The Executive shall be entitled to
participate in or receive health, welfare, life insurance, long-term disability
insurance, bonus plan and similar benefits as the Company provides generally
from time to time to its executives. The Executive shall have the right to
participate at the Company's expense in industry related trade groups,
conventions, etc. in furtherance of enhancing the Executive's visibility in and
knowledge of the timeshare and resort industry. Except as otherwise set forth in
this Section 4 and except with respect to the Company's obligations under its
Option Agreements with the Executive, nothing herein is intended, or shall be
construed to require the Company to institute or continue any, or any
particular, plan or benefits for the benefit of the Executive.
(d) Bonus Compensation.
(i) The Executive will be eligible to receive annual bonus
compensation of up to 100% of his annual base salary paid during each fiscal
year. The Compensation Committee of the Board shall determine the Executive's
annual bonus
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compensation, based primarily on two criteria. The first will be the nature of
the Executive's performance in excess of the high level of reasonably achievable
performance which the Company requires of all of its employees, including the
quality and level of the Executive's performance; the value which the Executive
has contributed to or created for the Company; and the Executive's compliance
with the terms of the Agreement. The second will be based on the overall
profitability and level of increased profitability (e.g., reduced cost of funds,
off-balance sheet financing, and other similar issues) in each of the Company's
activities in which the Executive has either bottom-line responsibility or in
which the Executive has been materially involved, as well as the overall
financial performance of the Company and its publicly-traded stock.
(ii) Notwithstanding Section 4(d)(i) hereof, provided that
the Executive complies with the terms and conditions of Section 5(e) of the
Agreement and of the terms and conditions of the Agreement entitling him to
receive the payments set forth in Section 6(j) hereof, the Company (i) shall pay
the Executive $280,000 as calendar year 1998 bonus compensation, and (ii) shall
pay the Executive as calendar year 1999 bonus compensation an amount equal to
(A) $280,000 multiplied by the number of full months in 1999 that the Executive
is employed by the Company divided by twelve (12), plus, (B) with respect to any
remaining partial month in 1999 that the Executive is employed by the Company,
$5,400 times the number of full or partial weeks in such remaining partial month
in 1999 that the Executive is employed by the Company. Should the Executive be
entitled to receive, and the Company satisfies its obligation to pay, the
amounts set forth in Section 6(j) hereof, the Company shall have no obligation
to consider the Executive for, or to pay, any additional bonus compensation to
the Executive for the 1998 and 1999 calendar years under Section 4(d)(i) hereof
or otherwise. Provided that the Executive complies with the provisions of this
Agreement, the Company will have the obligation to pay the Executive any
required bonus payments on or before the earlier to occur of (a) March 15 of the
fiscal year following the year in which the Executive earned such bonus or (b)
ten days after the Executive's last day of employment at the Company.
(e) Fringe Benefits. The Executive will be entitled to fringe
benefits as may be determined or granted from time-to-time by the Board.
(f) Vacation. The Executive shall be entitled to four vacation
weeks (20 days) in each calendar year on pro-rated basis. The Executive will be
entitled to all Company holidays. On the Executive's last day of employment with
the Company, the Company will pay the Executive $1,217 per day for all accrued
and, up to that point, unused vacation time with the Company. The Executive may
use accrued vacation days through his last day of employment with the Company,
provided that such does not unreasonably interfere with the Executive's duties
and responsibilities.
(g) Performance Reviews. At the end of each fiscal year, the
Company (through the Compensation Committee of the Board) will review the
Executive's job performance and implement any Company determined revisions to
the Executive's base salary, the Executive's merit bonus, the Executive's
incentive compensation package (including the Executive's option grants), the
Executive's title and/or the Executive's responsibility at the
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Company; provided, however, that neither of Executive's title, base salary,
merit bonus potential, position or responsibilities at the Company shall be
reduced.
5. Termination. The Executive's employment hereunder shall be, or may
be, as the case may be, terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. The Executive's employment hereunder shall
terminate on the Executive's physical or mental disability or infirmity which,
in the opinion of a competent physician selected by the Board, renders the
Executive unable to perform his duties under this Agreement for more than 120
days during any 180-day period.
(c) Cause. The Company may terminate the Executive's employment
hereunder for "Cause." Cause shall mean (i) Employee's material breach of any of
the terms of this Agreement, (ii) his conviction of a crime involving moral
turpitude or constituting a felony under the laws of any state, the District of
Columbia or of the United States, or (iii) his gross negligence, willful
misconduct or fraud in the performance of his duties hereunder.
(d) Notice by the Company. At any time following December 1,
1998, the Company may (i) give the Executive thirty (30) days written notice of
its intention to terminate the Executive's employment ("Notice of Termination")
with the Company, for any reason, with or without cause, without liability
except with respect to the payments provided for by Section 6 and otherwise in
the Agreement, and (ii) thereafter retain the Executive as a consultant for five
(5) years pursuant to Section 5(j) of the Agreement. Except as set forth in this
Section 5(d) of the Agreement, notwithstanding the term of this Agreement having
a duration through November 18, 2000 and Section 2 and Section 4 referring to
extensions of this Agreement and the annual salary to be paid to the Executive
during his employment with the Company, nothing in this Agreement should be
construed as to confer any right of the Executive to be employed by the Company
for a fixed or definite term.
(e) Voluntary Resignation. Provided that the Executive has
complied with the terms of the Agreement, at any time following the later of (i)
December 1, 1998 and (ii) the Administration Executive Employment Date (which
shall be not later than March 1, 1999), the Executive may voluntarily resign his
position, terminate his employment with the Company and become a consultant to
the Company for five (5) years pursuant to Section 5(j) of the Agreement by
delivery of a written notice of resignation to the Company (the "Notice of
Resignation"). The Notice of Resignation shall set forth the date such
resignation shall become effective (the "Date of Resignation"), which date
shall, in any event, be at least thirty (30) days from the date the Notice of
Resignation is delivered to the Company. At its option, the Company may reduce
such notice period to any length, upon thirty (30) days written notice to the
Executive.
(f) Notice. Any termination of the Executive's employment by the
Company shall be communicated by written Notice of Termination to the Executive.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
that shall indicate the specific
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termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(g) "Date of Termination" shall mean (i) if the Executive's
employment is terminated by his death, the date of his death, (ii) if the
Executive's employment is terminated by reason of his disability, the date of
the opinion of the physician referred to in Section 5(b), above, (iii) if the
Executive's employment is terminated by the Company for Cause pursuant to
subsection 5(c) above, or without Cause by the Company pursuant to subsection
5(d) above, the date specified in the Notice of Termination and (iv) if the
Executive voluntarily resigns pursuant to subsection 5(e) above, the date of the
Notice of Resignation.
(h) Termination Obligations.
(i) The Executive hereby acknowledges and agrees that all
personal property and equipment furnished to or prepared by the
Executive in the course of or incident to his employment, belongs to
the Company and shall be promptly returned to the Company upon
termination of the Employment Period; provided that the Executive may
retain as his personal property the Company computer and related
equipment currently located at the Executive's home as well as the
Star Tac mobile telephone provided to the Executive by the Company
(the Executive's account will be switched over to a non-Company
account at the end of the Employment Period). "Personal property"
includes, without limitation, all books, manuals, records, reports,
notes, contracts, lists, blueprints, and other documents, or
materials, or copies thereof (including computer files), and all other
proprietary information relating to the business of the Company.
Following termination, the Executive will not retain any written or
other tangible material containing any proprietary information of the
Company.
(ii) Upon termination of the Employment Period, the Executive
shall be deemed to have resigned from all offices and directorships
then held with any of the Company's affiliates.
(iii) The representations and warranties contained herein and the
Executive's obligations under Sections 5(h), 7, 8, 9 and 15 through 18
shall survive termination of the Employment Period and the expiration
of this Agreement.
(i) Release. In exchange for the Company entering into the
Agreement, the Executive agrees that, at the time of his resignation or
termination from the Company, he will execute a release acceptable to the
Company of all liability of the Company and its officers, shareholders,
employees and directors to the Executive in connection with or arising out of
his employment with the Company, except with respect to any then-vested rights
under the Company's Option Plan and except with respect to any Severance
Payments or consulting or other benefit payments which may be payable to him
under the terms of the Agreement. Nothing herein shall modify Employee's
mediation and other rights under this Agreement.
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(j) Executive Consultancy. Following any termination of the
Executive's employment with the Company pursuant to Section 5(d) or (e) hereof
or following any termination by the Executive for "Good Cause" pursuant to
Section 6(e) hereof (which termination date shall be referred to as the
"Consulting Commencement Date"):
(i) the Executive irrevocably agrees to act as a consultant
to the Company for a period of sixty (60) months thereafter (the "Consulting
Period"), and the Company irrevocably agrees to retain the Executive as a
consultant on the terms and conditions set forth herein; and
(ii) in the event the Executive continues to serve on the
Board of Directors of the Company following any such termination of employment,
the Executive shall be entitled to receive non-employee directors fees and
expense reimbursements, to the extent provided to other non-employee directors;
provided the Executive shall not be entitled to receive any additional stock
option grants as a result of being a non-employee director.
6. Compensation Upon Termination.
(a) Death. If the Executive's employment shall be terminated
pursuant to Section 5(a), the Company shall pay the Executive monthly his base
salary payable pursuant to Section 4(a) and one-twelfth of any bonus payable
pursuant to Section 4(d) at the most recent annual amount received, or entitled
to be received, by the Executive (the "Severance Payment") for a period of two
years following the Date of Termination. At the Executive's own expense, the
Executive's dependents shall also be entitled to any continuation of health
insurance coverage rights under any applicable law.
(b) Disability. If the Executive's employment shall be terminated
by reason of disability pursuant to Section 5(b), the Executive shall receive
the Severance Payment for the lesser of two years or the duration of such
disability; provided that payments so made to the Executive during the
disability shall be reduced by the sum of the amounts, if any, payable to the
Executive at or prior to the time of any such payment under any disability
benefit plan of the Company. At the Executive's own expense, the Executive and
his dependents shall also be entitled to any continuation of health insurance
coverage rights under any applicable law.
(c) Cause. If the Executive's employment shall be terminated for
Cause pursuant to Section 5(c) hereof, the Company shall pay the Executive his
salary, but no bonus, through the Date of Termination, and the Company shall
have no obligation to make any of the other payments set forth in Sections 4, 5
or 6 of the Agreement. At the Executive's own expense, the Executive and his
dependents shall also be entitled to any continuation of health insurance
coverage rights under any applicable law.
(d) Other Terminations by the Company. If the Company shall
terminate the Executive's employment without cause pursuant to Section 5(d)
hereof, the Company shall pay the Executive (i) his salary and any bonus then
payable through the Date of Termination pursuant to Section 4(d)(ii) of the
Agreement, and (ii) the consulting payments set forth in Section 6(j) of
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the Agreement. The Executive and his dependents shall also be entitled to any
continuation of health insurance coverage rights under any applicable law.
(e) Voluntary Resignation. If the Executive terminates his
employment with the Company for "Good Cause", the Company shall pay the
Executive (i) his salary and any bonus then payable through the Date of
Termination pursuant to Section 4(d)(ii) of the Agreement, and (ii) the
consulting payments set forth in Section 6(j) of the Agreement. If the Executive
terminates his employment with the Company without "Good Cause" at a time which
is not permitted under Section 5(e) hereof, the Company shall pay the Executive
his salary, but no bonus, through the Date of Termination, and the Company shall
have no obligation to make any of the other payments set forth in Sections 4, 5
or 6 of the Agreement. In any event, at the Executive's own expense, the
Executive and his dependents shall be entitled to any continuation of health
insurance coverage rights under any applicable law.
For purposes of this Agreement, "Good Cause" shall mean, without
the express written consent of the Executive, the occurrence of any of the
following events unless such events are substantially corrected within 30 days
following written notification by the Executive to the Company that he intends
to terminate his employment hereunder for one of the reasons set forth below:
(i) Any material alteration, reduction or diminution in the
duties, responsibilities or compensation of the Executive or
required relocation of the Executive from the Company's San
Francisco Bay area office;
(ii) a material breach by the Company of any provision of this
Agreement; and
(iii) the occurrence of a "Change in Control."
As used in this Agreement, "Change of Control" means the
occurrence of any of the following: (i) the adoption of a plan relating to the
liquidation or dissolution of the Company, (ii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any person or group, other than any of Xxxxx Xxxxxx,
Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxxxxx or their affiliates (the "Principals"),
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of
more than 50% of the total voting power of the total outstanding voting stock of
the Company on a fully diluted basis or (iii) the consummation of the first
transaction (including, without limitation, any merger or consolidation) the
result of which is that any person or group, other than the Principals, becomes
the beneficial owner (as defined above), directly or indirectly, of more than
50% of the total voting power of the total outstanding voting stock of the
Company.
The Executive understands that any voluntary resignation by him
as a result of any personal or family reasons not otherwise set forth in this
Section 6(e) shall not constitute "Good Cause."
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(f) The Company will be entitled to offset and reduce each month
the amount of the monthly Severance Payment otherwise payable to the Executive
hereunder by seventy-five percent (75%) of the amount of the Executive's prior
month's earnings (if any) from post-Company employment (including both salary,
bonus and other cash or cash equivalent compensation) at a subsequent employer
or in connection with any consulting practice or other self-employment or
venture founded by the Executive.
(g) The Executive's rights, if any, to retain and/or exercise any
and all options to purchase capital stock of the Company granted to the
Executive under the Option Agreements, dated as of September 10, 1996 and
September 27, 1996, each as amended as of July 27, 1998 (the "Option
Agreements"), upon or following termination of this Agreement are as set forth
in the amended Option Agreements.
(h) Any Severance Payment made pursuant to Section 6(a) or
Section 6(b) shall be payable in equal monthly installments over the required
duration set forth in Section 6(a) or 6(b).
(i) The continuing obligation of the Company to make any
Severance Payment or other payment to the Executive is expressly conditioned
upon the Executive complying and continuing to comply with his obligations and
covenants under Sections 7 and 8 of this Agreement following termination of
employment with the Company.
(j) Executive Consultancy. Provided that (i) the Executive has
complied with the terms of the Agreement, and (ii) the early termination of the
Agreement occurred as a result of one of the circumstances expressly described
in Section 5(j) hereof, the Company shall make the following payments to the
Executive. Such payments shall be in lieu of and shall satisfy any and all
obligations of the Company to pay the Executive any other Severance Payments
under Section 6 of this Agreement:
(i) Initial Consulting Period. On the first day of each of
the first five (5) months of the Consulting Period (the "Initial Consulting
Period"), the Company will pay the Executive a monthly consulting fee of
$25,000. Provided that the Executive has not yet commenced post-Company full
time employment during such five (5) month period, the Executive will make
himself available for up to ten (10) hours each month of consultation with the
Company for no additional consideration. In the event the Executive has
commenced post-Company full time employment during such five month period, the
Executive will make himself available for up to five (5) hours each month of
consultation with the Company for no additional consideration. In the event the
Company requires additional consulting time from the Executive during the
Initial Consulting Period, the Executive will make himself available for an
additional reasonable amount of time, given his other professional and personal
commitments, for an additional charge to the Company of $250 per hour.
(ii) Extended Consulting Period. As compensation for further
consulting services to be provided by the Executive during the last fifty five
(55) months of the Consulting Period (the "Extended Consulting Period"), the
Company will pay the Executive a prepaid, lump sum consulting fee equal to
$108,000 (the "Lump Sum Consulting Fee"). The
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Company agrees to pay the Lump Sum Consulting Fee on or before ten (10) days
following the end of the Initial Consulting Period. During the Extended
Consulting Period, the Executive agrees to make himself available for
consultation with the Company for up to five (5) hours per month at an hourly
rate of $500 for each hour spent on the Company's activities.
(iii) Subject to the Executive's substantial compliance with
the terms of this Agreement, the Company shall pay to the Executive the
consulting fees set forth above, without reduction or offset, regardless of
other post-Company employment income the Executive earns as an employee,
consultant or principal.
(iv) During the Consulting Period, the Company will allow
the Executive to reasonably juggle his personal matters and/or his other work or
employment with Company-requested consulting work.
(v) During the Consulting Period, the Company will reimburse
the Executive for all reasonable expenses incurred by him in connection with his
consulting for the Company.
(vi) During the Initial Consulting Period, the Company will
make available to the Executive under COBRA the medical benefits currently
received by him as a result of being an employee of the Company. The Company
shall reimburse to the Executive the cost to him of such COBRA benefits up to
the amount per month that the Executive would have received in medical benefits
allowance had he been an employee of the Company. The Executive will be
responsible for any excess COBRA costs.
7. Confidentiality and Non-Solicitation Covenants.
(a) Confidentiality. In addition to the agreements set forth in
Section 5(h)(i), the Executive hereby agrees that the Executive will not, during
the Employment Period or at any time thereafter directly or indirectly disclose
or make available to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever, any Confidential Information (as defined
below). The Executive agrees that, upon termination of his employment with the
Company, all Confidential Information in his possession that is in written or
other tangible form (together with all copies or duplicates thereof, including
computer files) shall be returned to the Company and shall not be retained by
the Executive or furnished to any third party, in any form except as provided
herein; provided, however, that the Executive shall not be obligated to treat as
confidential, or return to the Company copies of any Confidential Information
that (i) was publicly known at the time of disclosure to the Executive, (ii)
becomes publicly known or available thereafter other than by any means in
violation of this Agreement or any other duty owed to the Company by any person
or entity or (iii) is lawfully disclosed to the Executive by a third party. As
used in this Agreement the term "Confidential Information" means: information
disclosed to the Executive or known by the Executive as a consequence of or
through his relationship with the Company, about the owners, customers,
employees, business methods, public relations methods, organization, procedures
or finances, including, without limitation, information of or relating to owner
or customer lists of the Company and its affiliates.
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(b) Non-Solicitation. The Executive hereby agrees that during the
Employment Period and at all times thereafter, regardless of the reason or
circumstances of termination of employment with the Company, the Executive will
not, either on his own account or jointly with or as a manager, agent, officer,
employee, consultant, partner, joint venturer, owner or shareholder or otherwise
on behalf of any other person, firm or corporation, (i) carry on or be engaged
or interested directly or indirectly in, or solicit, the manufacture or sale of
goods or provision of services to any person, firm or corporation which, at any
time during the Employment Period has been or is a customer of or in the habit
of dealing with the Company in its business, (ii) endeavor directly or
indirectly to canvas or solicit in competition with Company or to interfere with
the supply of orders for goods or services from or by any person, firm or
corporation which during the Employment Period has been or is a supplier of
goods or services to Company or (iii) directly or indirectly solicit or attempt
to solicit away from Company any of its officers or employees or offer
employment to any person (except for Xxxxx X. Xxxxxxxx, to whom the prohibitions
set forth in this subsection (iii) do not apply) who, on or during the 6 months
immediately preceding the date of such solicitation or offer, is or was an
officer or employee of Company.
8. Covenant Not to Compete.
(a) The Executive agrees that during the Employment Period he
will devote substantially full-time to the business of the Company, will not
engage in any competitive businesses and will not serve as an officer of any
other public company, except with the prior written approval of the Board (which
the Board may grant or withhold in its sole and absolute discretion). Subject to
such full-time requirement and the restrictions set forth below in this Section
8 and Section 3(c) above, the Executive agrees that he shall not (i) invest in,
manage, consult or participate in any way in any other timeshare business (in
either an active or passive manner), (ii) participate in or advise any business
wherein timeshare is a relevant business segment or (iii) act for or on behalf
of any business that intends to enter or participate in the timeshare business,
in each case unless the independent members of the Company's Board determine
that such action is in the best interest of the Company. Notwithstanding the
foregoing, the Executive may purchase stock as a stockholder in any publicly
traded company, including any company which is involved in the timeshare
business; provided that the Executive does not own (together or separately or
through his affiliates) more than 5% of any company (other than the Company) in
the timeshare business. In addition, the Executive shall not invest (directly or
indirectly) in any timeshare property in the hospitality business (including any
condominium project) or any property where the business plan therefor includes
an intention to convert the property to timeshare, unless the independent
members of the Company's Board of Directors determine that such an investment is
in the best interest of the Company. In the event that there is no Consulting
Period due to a breach of the Agreement by the Executive, the provisions of this
Section 8(a) shall survive until the later of two years following the Date of
Termination, regardless of whether the termination is for "Good Cause" or
otherwise. In the event that there is a Consulting Period, the provisions of
this Section 8(a) shall terminate as of the Date of Termination.
(b) The Executive agrees that during any Consulting Period he
will not (i) manage, consult, invest in or participate in any way in any other
public timeshare or vacation
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ownership business (in either an active or passive manner), (ii) participate in,
advise or invest in any public company wherein timeshare or vacation ownership
is a relevant business segment, (iii) act for or on behalf of or invest in any
business that intends to enter or participate in the timeshare business as a
public company, provided that the Executive may purchase stock as a stockholder
in any publicly traded company, including any company which is involved in the
timeshare business so long as the Executive does not own (together or separately
or through his affiliates) more than 5% of any company (other than the Company)
in the timeshare business. The provisions of this Section 8(b) shall survive
until the expiration of any Consulting Period, regardless of whether the
Executive's termination is for "Good Cause" or otherwise.
9. Injunctive Relief and Enforcement. In the event of breach by the
Executive of the terms of Sections 5(h)(i), 7 or 8, and only following mediation
or attempted mediation as set forth in Section 16 below (unless the Company is
suffering irreparable injury, in which case Section 16 will not prevent the
Company from seeking injunctive relief against the Executive in any court or
forum), the Company shall be entitled to institute legal proceedings to enforce
the specific performance of this Agreement by the Executive and to enjoin the
Executive from any further violation of Sections 5(h)(i), 7 or 8 and to exercise
such remedies cumulatively or in conjunction with all other rights and remedies
provided by law and not otherwise limited by this Agreement. The Executive
acknowledges, however, that the remedies at law for any breach by him of the
provisions of Sections 5(h)(i), 7 or 8 may be inadequate. In addition, in the
event the agreements set forth in Sections 5(h)(i), 7 or 8 shall be determined
by any court of competent jurisdiction to be unenforceable by reason of
extending for too great a period of time or over too great a geographical area
or by reason of being too extensive in any other respect, each such agreement
shall be interpreted to extend over the maximum period of time for which it may
be enforceable and to the maximum extent in all other respects as to which it
may be enforceable, and enforced as so interpreted, all as determined by such
court in such action.
10. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered when
transmitted by telecopy with receipt confirmed, or one day after delivery to an
overnight air courier guaranteeing next day delivery, addressed as follows:
If to the Executive: Xxxxxxx X. Xxxxxxx
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000
If to the Company: Signature Resorts, Inc.
0000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
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With a copy to: Signature Resorts, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
11. Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect; provided, however, that if any one or more of the terms contained in
Sections 5(h), 7 or 8 hereto shall for any reason be held to be excessively
broad with regard to time, duration, geographic scope or activity, that term
shall not be deleted but shall be reformed and constructed in a manner to enable
it to be enforced to the extent compatible with applicable law.
12. Assignment. This Agreement may not be assigned by the Executive,
but may be assigned by the Company to any successor to its business and will
inure to the benefit and be binding upon any such successor.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Headings. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
15. Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
Maryland (without reference to the choice of law provisions of Maryland), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
16. Mediation. Subject to any irreparable injury being suffered by the
Company giving rise to the right of the Company to seek injunctive relief
against the Executive pursuant to Section 9 hereof, in the event that there
shall be a dispute among the parties arising out of or relating to this
Agreement, or the breach thereof, the parties agree that such dispute shall be
resolved by final and binding mediation in Los Angeles, California, before a
mediator and on terms and conditions mutually acceptable to the parties;
provided, however, that if the parties cannot agree on the terms and conditions
of such mediation, such terms and conditions shall be established by the
mediator. Any award issued as a result of such mediation shall be final and
binding between the parties thereto, and shall be enforceable by any court
having jurisdiction over the party against whom enforcement is sought. The fees
and expenses relating to such mediation (with the exception of the Executive's
attorneys' fees, if any) or any action to enforce a mediation award shall be
paid by the Company.
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17. LIMITATION ON LIABILITIES. IF EITHER THE EXECUTIVE OR THE COMPANY
IS AWARDED ANY DAMAGES AS COMPENSATION FOR ANY BREACH OR ACTION RELATED TO THIS
AGREEMENT, A BREACH OF ANY COVENANT CONTAINED IN THIS AGREEMENT (WHETHER EXPRESS
OR IMPLIED BY EITHER LAW OR FACT), OR ANY OTHER CAUSE OF ACTION BASED IN WHOLE
OR IN PART ON ANY BREACH OF ANY PROVISION OF THIS AGREEMENT, SUCH DAMAGES SHALL
BE LIMITED TO CONTRACTUAL DAMAGES AND SHALL EXCLUDE (I) PUNITIVE DAMAGES, AND
(II) CONSEQUENTIAL AND/OR INCIDENTAL DAMAGES (E.G., LOST PROFITS AND OTHER
INDIRECT OR SPECULATIVE DAMAGES). THE MAXIMUM AMOUNT OF DAMAGES THAT THE
EXECUTIVE MAY RECOVER FOR ANY REASON SHALL BE THE AMOUNT EQUAL TO ALL AMOUNTS
OWED (BUT NOT YET PAID) TO THE EXECUTIVE PURSUANT TO THIS AGREEMENT THROUGH ITS
NATURAL TERM OR THROUGH ANY SEVERANCE PERIOD, PLUS INTEREST ON ANY DELAYED
PAYMENT AT THE MAXIMUM RATE PER ANNUM ALLOWABLE BY APPLICABLE LAW FROM AND AFTER
THE DATE(S) THAT SUCH PAYMENTS WERE DUE.
18. WAIVER OF JURY TRIAL. TO THE EXTENT APPLICABLE, EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
19. Entire Agreement. This Agreement contains the entire agreement and
understanding between the Company and the Executive with respect to the
employment of the Executive by the Company as contemplated hereby, and no
representations, promises, agreements or understandings, written or oral, not
herein contained shall be of any force or effect. This Agreement shall not be
changed unless in writing and signed by both the Executive and the Board of
Directors of the Company.
20. The Executive's Acknowledgment. The Executive acknowledges (a)
that he has had the opportunity to consult with independent counsel of his own
choice concerning this Agreement, and (b) that he has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on his own judgment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
this 27th day of July 1998.
SUNTERRA CORPORATION
By /s/ XXXXXX X. XXXXXXXXX
------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President
EXECUTIVE
/s/ XXXXXXX X. XXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxx
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