Exhibit 10.13

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is dated as of this 24 day of
January 2003, and is made between Sunterra Corporation, a Maryland corporation
(the “Company”), and Frederick C. Bauman (the “Executive”).

 

R E C I T A L S:

 

WHEREAS, the Company recognizes that the future growth, profitability and
success of the Company’s business will be substantially and materially enhanced
by the employment of the Executive by the Company; and

 

WHEREAS, the Company desires to employ the Executive and the Executive has
indicated his willingness 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 employ the Executive and the
Executive hereby accepts 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 the Company’s Vice President,
General Counsel and Secretary of the Company and, in such capacity, shall report
directly to the Chief Executive Officer of the Company (the “CEO”). The
Executive shall have such duties as are typically performed by an employee of a
corporation of similar size and type as the Company in such capacity, together
with such additional duties, commensurate with the Executive’s position, as may
be assigned to the Executive from time to time by the CEO. The principal
location of the Executive’s employment shall be at the Company’s principal
office located in Las Vegas, Nevada. The Executive understands and agrees that
he will be required to travel from time to time for business reasons.

 

Section 2. Commencement Date; Employment Term. The Executive’s employment
hereunder shall commence on February 3, 2003 (the “Commencement Date”) and the
term of the Executive’s employment (the “Employment Term”) shall continue until
terminated pursuant to Section 6.

 

Section 3. Compensation and Benefits. During the Employment Term, the Executive
shall be entitled to the following compensation and benefits:

 

(a) Salary. As compensation for the performance of the Executive’s services
hereunder, the Company shall pay to the Executive a salary (the “Salary”) of
$175,000 per annum with increases, if any, as may be approved in writing from
time to time by the Company. The Salary shall be payable in accordance with the
regular payroll practices of the Company. Executive’s Salary shall be reviewed
on or about the first anniversary of the Commencement Date. Thereafter, the
Executive’s Salary shall be reviewed periodically, at least once every twelve
months on or about each anniversary of the Commencement Date.

 

(b) Annual Bonus. The Executive shall be eligible to receive a bonus (the
“Bonus”) in an amount up to 25% of salary for each calendar year during the
Employment Term,

 

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

which bonus shall be awarded in the discretion of the Company. Any Bonus awarded
will be payable consistent with the timing of bonus payments by the Company to
other employees eligible to receive bonus payments. Unless otherwise agreed by
the Company and the Executive, the Executive shall not be eligible to receive
the Bonus unless the Executive is employed by the Company on the date the Bonus
is paid by the Company.

 

(c) Options. The Board of Directors of the Company (the “Board”) shall grant to
the Executive, as of the Commencement Date, an option to purchase 70,000 shares
of the Common Stock of the Company (the option to purchase any one share of
Company Common Stock hereafter referred to as an “Option”). The Options shall be
granted pursuant to the 2002 Sunterra Corporation Stock Option Plan (the
“Plan”). Each Option shall have an exercise price equal to $15.25 per share. The
Option shall be subject to such other terms and conditions as are set forth in
the Plan and the stock option agreement for the Option.

 

(d) Benefits. In addition to the Salary and Annual Bonus, the Executive shall be
entitled to participate in health, insurance and other benefits provided to
other similarly situated employees of the Company on terms no less favorable
than those available to such other employees. The Executive shall be entitled to
all other benefits as are generally allowed to other similarly situated
employees of the Company, in accordance with the Company’s policies in effect
from time to time.

 

(e) Relocation Expenses. In connection with the performance of the Executive’s
services hereunder:

 

(i) The Company shall reimburse the Executive for the reasonable housing costs
incurred by the Executive during the three-month period following the
Commencement Date in connection with the relocation of the Executive and his
family to the greater Las Vegas, Nevada metropolitan area, provided that such
reimbursement shall not exceed $1,300 per month.

 

(ii) Unless otherwise mutually agreed by the parties hereto, within (3) months
following the Commencement Date, the Executive will be required to permanently
relocate to a location near the Company’s principal office in Las Vegas, Nevada.
The Company shall reimburse the Executive for the reasonable costs incurred by
the Executive in connection with his relocation from provided that such
reimbursement shall not exceed $10,000.

 

(iii) Notwithstanding the foregoing, in the event the Executive terminates his
employment with the Company pursuant to Section 6(e) herein prior to the first
anniversary of the Commencement Date, the Executive agrees to pay to the Company
in a single lump sum within 15 days of written demand by the Company, the amount
paid to the Executive pursuant to this Section 3(e)(i) and (ii), multiplied by
the ratio of (A) the number of days during the period beginning on the
Termination Date (as defined in Section 6(h) and ending on the one year
anniversary of the Commencement Date, and (B) 365.

 

Section 4. Exclusivity. During the Employment Term, the Executive shall devote
his full time to the business of the Company, shall faithfully serve the
Company, shall in all

 

2

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

respects conform to and comply with the lawful and reasonable directions and
instructions given to him by the CEO, or such other person as may be designated
by the CEO, in accordance with the terms of this Agreement, shall use his best
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 (i) participate in the
activities of professional trade organizations, including arbitration
activities, and (ii) engage in personal investing activities, provided that
activities set forth in these clauses (i) and (ii), either singly or in the
aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.

 

Section 5. Reimbursement for Expenses. Except as otherwise provided in Section
3(e) herein, the Executive is authorized to incur reasonable expenses in the
discharge of the services to be performed hereunder, including expenses for
travel, lodging, entertainment, maintaining professional licenses and
certifications and attendance at association meetings and conferences 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 expense
reimbursement policy of the Company, as in effect from time to time.

 

Section 6. Termination and Default.

 

(a) Death. The Executive’s employment shall automatically terminate 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 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 ninety (90) days (whether or not consecutive) during any
twelve (12) month period during the term of this Agreement (a “Disability”), in
which event the Executive’s employment shall terminate upon written notice to
the Executive.

 

(c) Cause. The Company may terminate the Executive’s employment at any time for
Cause. In the event of termination pursuant to this Section 6(c) for Cause, the
Company shall deliver to the Executive written notice setting forth the basis
for such termination, which notice shall specifically set forth the nature of
the Cause which is the reason for such termination. Termination of the
Executive’s employment hereunder shall be effective upon delivery of such notice
of termination. For purposes of this Agreement, “Cause” shall mean; (i) the
Executive’s failure (except where due to a Disability), neglect or refusal to
perform his duties hereunder which failure, neglect or refusal shall not have
been corrected by the Executive within thirty (30) days of receipt by the
Executive of written notice from the Company of such failure, neglect or
refusal, which notice shall specifically set forth the nature of said failure,
neglect or refusal; (ii) any breach of this Agreement by the Executive (or
willful or intentional act of the Executive) that injures the reputation or
business of the Company or its affiliates in any material respect; (iii) any
continued or repeated absence from the Company other than in connection with
activities performed by the

 

3

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

Executive that are consistent with the terms and conditions of the Agreement,
unless such absence is (A) approved or excused by the CEO, or (B) is the result
of the Executive’s illness, Disability (in which event the provisions of Section
6(b) hereof shall control) or incapacity; (iv) the Executive’s conviction of a
felony or pleading of no contest to a felony; or (v) the commission by the
Executive of an act of fraud or embezzlement against the Company.

 

(d) Without Cause. The Company may terminate the Executive’s 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 “Without Cause” termination). 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 the case of
termination of employment for Good Reason, the Executive shall have the right to
terminate his employment at any time by giving six (6) months 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 notice period.

 

(f) Good Reason. The Executive shall have the right to terminate his Employment
for Good Reason under 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, or (ii) if during the
one year period 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 (e); and 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
or 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 Commencement Date:

 

(i) the consummation of any sale, transfer or other disposition of all or
substantially all of the assets of the Company through one transaction or a
series of related transactions to one or more persons or entities; or

 

(ii) 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,
provided such Person is not a beneficial owner of any such securities of the
Company at the date of this Agreement; or

 

4

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

(iii) 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

 

(iv) 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 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 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.

 

(i) Termination Without Cause or for Good Reason. In the event that during the
Employment Term the Executive’s employment is terminated by the Company Without
Cause or by the Executive for Good Reason, the Company shall pay to the
Executive the sum of the following amounts: (A) all amounts fully earned and
payable pursuant to the terms of this Agreement, but unpaid hereunder through
the date on which the Executive’s employment with the Company is terminated (the
“Termination Date”), if any, in respect of Salary, Bonus and unreimbursed
expensed (the “Accrued Obligations”), and (B) continuation of the Executive’s
Salary (less any applicable withholding or similar taxes) at the rate in effect
hereunder on the Termination Date, in accordance with the Company’s regular
payroll practices, for a period of six (6) months (the “Severance Benefit”).
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, the parties hereto understand and agree that if the Company pays the
Executive the Severance Benefit, 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. The payment of the Severance
Benefit is subject to the execution by the Executive of a release substantially
in the form attached hereto as Exhibit A.

 

(ii) Termination due to Death or Disability. In the event that 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 without Good Reason. 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.

 

5

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

(i) Survival of Operative Sections. Upon any termination of the Executive’s
employment, the provisions of Sections 6(h) and 7 through 18 of this Agreement
shall survive to the extent necessary to give effect to the provisions hereof.

 

Section 7. Secrecy and Non-Competition.

 

(a) No Competing Employment. The Executive acknowledges that the agreements and
covenants contained in this Section 7 are essential to protect the value of the
Company’s business and assets and by his employment with the Company, the
Executive will obtain 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 on the first anniversary of 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 competitive 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.

 

(b) Nondisclosure of Confidential Information. The Executive, except 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 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
materials, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company. 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 benefits)
provided and to be provided to the Executive as set forth hereunder, the
Executive covenants and

 

6

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

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 (1) 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 could directly adversely
affect the business of the Company, or (ii) solicit, hire, induce, endeavor to
entice away from the Company or its subsidiaries, 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
materials, 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 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
materials, to obtain copyright thereof. Any invention relating to the business
of the Company and disclosed by the Executive within one (1) 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 not withstanding any other provision
of this Agreement to the contrary, “Company” shall be defined to mean Sunterra
Corporation, and each of its subsidiaries and affiliates, including Polpu Resort
Partners, L.P., a Hawaii limited partnership, and West Maul 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.

 

7

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

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. Nevada Bar Admission. As soon as reasonably practicable after the
Commencement Date, the Executive shall apply for admission to the Nevada Bar and
shall use his best efforts to pass all and any examinations required to obtain
such admission. The Company shall pay the costs of the application fee and the
cost of a bar review course which the Executive will undertake before his
application for admission.

 

Section 11. Representations and Warranties of the Executive. The Executive
represents and warrants to the Company as follows:

 

(a) This Agreement, upon execution and delivery by the Executive, will be the
valid and binding obligation of the Executive enforceable against the Executive
in accordance with its terms.

 

(b) 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. Without limiting the
generality of the foregoing, the Executive is not a party to any
non-competition, non-solicitation, confidentiality, no hire or similar agreement
that restricts in any way the Executive’s ability to engage in any business or
to solicit or hire the employees of any person.

 

(c) The representations and warranties of the Executive contained in this
Section 10 shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

 

Section 12. 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, and the personal
representatives of the Executive’s estate. 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. In the event of any sale, transfer or other disposition of all or
substantially all of the Company’s assets or business, whether by merger,
consolidation or otherwise, the Company may assign this Agreement and its rights
hereunder. In the event of assignment, the assignee shall expressly assume all
obligations of the Company hereunder. 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.

 

8

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

Section 13. 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 CEO. 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 14. Severability; Governing Law; Jurisdiction; No 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 NEVADA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO
ITS CONFLICT OF LAWS RULES.

 

The parties hereby (i) submit to the exclusive jurisdiction of the courts of the
State of Nevada (and the U.S. federal courts in the District of Nevada), (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 15 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 15. 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.

 

If to the Executive at 8125 E Buena Terra Way, Scottsdale, AZ 85250, or at such
other address as the Executive may have furnished the Company in writing.

 

If to the Company, at 3865 W. Cheyenne Avenue, North Las Vegas, Nevada 89032
marked for the attention of the CEO, or at such other address as it may have
furnished in writing to the Executive, with a copy to the Vice President of
Human Resources.

 

(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

 

9

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

date of such mailing; and if mailed by registered or certified mail, on the
third business day after the date of such mailing.

 

Section 16. 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 17. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement.

 

Section 18. 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 affect the remaining
provisions of this Agreement, which shall remain in full force and effect.

 

Section 19. 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.

 

[Signature Page to Follow]

 

10

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

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

SUNTERRA CORPORATION By:   /s/    NICHOLAS BENSON            

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

Name:

  Nicholas Benson

Title:

  Chief Executive Officer

 

EXECUTIVE By:   /s/    FREDERICK C. BAUMAN            

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

    Frederick C. Bauman

 

11

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

Exhibit A

 

Form of Release

 

Section 1. Release. As a material inducement to Sunterra Corporation (the
“Company”) to providing the Severance Benefit as provided for and defined in the
Employment Agreement (the “Agreement”) dated January, 24, 2003 between the
Company and Frederick C, Bauman (the “Executive”), and in consideration of its
agreements and obligations under the Agreement and for other good and valuable
consideration, the receipt of which is hereby acknowledged by the Executive, the
Executive hereby irrevocably, unconditionally and generally releases the Company
and its respective parents, affiliates, shareholders, officers, directors,
employees and attorneys, and the heirs, executors, administrators, receivers,
successors and assigns of all of the foregoing (collectively, “Releases”), from,
and hereby waives and/or (settles, any and all actions, causes of action, suits,
debts, sums of money, agreements, promises, damages or any liability, claims or
demands, know or unknown and of any nature whatsoever and that the Executive
ever had, now has or hereafter can, shall or may have, for, upon, or by reason
of any matter, cause or thing whatsoever from the beginning of the world to the
date of this release (collectively, the “Executive Claims”) arising directly or
indirectly under, out of or pursuant to his employment with the Company, the
performance of services for the Company or any Releasee or the termination of
such employment or services and, specifically, without limitation, any rights
and/or Executive Claims (a) arising under or pursuant to any contract, express
or implied, written or oral, relating to the Executive’s employment or
termination thereof or the employment relationship, including, without
limitation, the Agreement; (b) for wrongful dismissal or termination of
employment; (c) arising under any federal, state, local or other statutes,
orders, laws, ordinances, regulations or the like that relate to the employment
relationship and/or that specifically prohibit discrimination based upon age,
race, religion, sex, national origin, disability, sexual orientation or any
other unlawful bases, including, without limitation, the Age Discrimination in
Employment Act of 1967, as amended (the “ADEA”), the Civil Rights Act of 1991,
as amended, the Civil Rights Acts of 1866 and 1871, as amended, and applicable
rules and regulations promulgated pursuant to or concerning any of the foregoing
Statutes; and (d) for damages, including, without limitation, punitive or
compensatory damages or for attorneys’ expenses, costs, wages, injunctive or
equitable relief. This paragraph shall not apply to any rights or claims that
the Executive may have: (w) to enforce the provisions of the Agreement (x) for
tax-qualified retirement benefits, including any applicable 401(k) plan and
options granted pursuant to the Company’s 2002 Stock Option Plan; (y) for
disability, life insurance, health and other employee benefits in accordance
with the terms of the applicable employee benefit plans; and (z) that the
release and waiver of claims under ADEA was not knowing or voluntary.

 

Section 2. Representation by Counsel/Revocation.

 

(a) By executing this Release, the Executive acknowledges that: (i) he has been
advised by the Company to consult with an attorney before executing this Release
and has consulted and been represented by counsel in connection therewith; (ii)
he has been provided with at least a twenty one (21) day period to review and
consider whether to sign this Release and that by executing and delivering this
Release to the Company, he is waiving any remaining

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

portion of such twenty one (21) day period; and (iii) he has been advised that
he has seven (7) days following execution of the Release to revoke this Release
(“Revocation Period”).

 

(b) This Release will not be effective or enforceable until the Revocation
Period has expired. Such revocation shall only be effective if an originally
executed written notice thereof is delivered to the Company on or before 5:00
p.m. on the last day of the Revocation Period. If so revoked, it shall be deemed
to be void ab initio and have no further force and effect.

 

(c) Defined terms not otherwise defined herein shall have the same meanings
ascribed to them in the Agreement.

 

Dated:                         

 

 

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

Frederick C. Bauman

 

- 2 -