Document:

Letter Agreement

 Exhibit 10.1 
  
 [Sunterra Letterhead] 
  
 October 13, 2005 
  
 Mr. Nicholas J. Benson 
 President and CEO 
 Sunterra Corporation 
 3865 W Cheyenne Avenue 
 N Las Vegas, NV 89032 
  
 Re: Extension of
Employment Agreement 
  
 Dear Mr. Benson: 
  
 I have been instructed by the Compensation Committee (the “Committee”) of the
Board of Directors of Sunterra Corporation to offer a one - year extension of your employment agreement, until November 19, 2006. The compensation and terms of employment would be the same as described in Sunterra’s most recent proxy
statement, which is reflective of the attached Amendment No. 1 to Amended and Restated Employment Agreement (“Amendment No. 1”). While Amendment No. 1 was never signed, it is hereby ratified and adopted. 
  
 If the foregoing is acceptable to you, please sign below and return to me. 
  
 Sincerely yours, 
  

			
	SUNTERRA CORPORATION,
	            A Maryland corporation
		
	By	 	 /s/ Frederick C Bauman

	 	 	Frederick C. Bauman
	 	 	Secretary
	
	ACCEPTED AND AGREED
	
	 /s/ Nicholas J. Benson

	Nicholas J. Benson

  
 Date: October 13, 2005

 AMENDMENT NO. 1 
 TO 
 AMENDED AND RESTATED EMPLOYMENT AGREEMENT 
  
 This AMENDMENT NO. 1, dated this
             day of September, 2004 (the “Amendment”), to Amended and Restated Employment Agreement dated as of November 19, 2001 (“the Agreement”), between
Sunterra Corporation, a Maryland corporation (the “Company”), and Nicholas Benson (the “Executive”). 
  
 R E C I T A L S : 
  
 WHEREAS, The Executive and the Company are party to the Agreement; and 
  
 WHEREAS, Section 14 of the Agreement provides that any amendment to the Agreement shall be valid only if made in
writing and signed by the parties thereto and may be made only if consented to on the Company’s behalf by the General Counsel; and 
  
 WHEREAS, the parties hereto desire to amend the Agreement, in the form of this Amendment; 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 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 in the Agreement, as amended by this Amendment. 
  
 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: 
  

	 	1.	Location of Employment. Section 1 of the Agreement is amended by striking “Orlando, Florida” from the 14th line and replacing with “N. Las Vegas, Nevada”. 

  

	 	2.	Employment Term The first sentence of Section 2 of the Agreement is deleted in its entirety, and the following substituted: “Unless terminated pursuant to Section 6
hereof, the Executive’s employment hereunder shall commence on the Commencement Date and shall continue during the period ending on November 19, 2005 (the “Initial Term”).” 

  

	 	3.	Salary. The first sentence of Section 3(a) of the Agreement is deleted in its entirety, and the following substituted: “As compensation for the performance of
Executive’s services hereunder, the Company shall pay to the Executive a salary (the “Salary”) of Seven Hundred Fifty Thousand Dollars ($750,000) per annum.” This change is effective retroactively as of January 1, 2004.

	 	4.	Cash Bonus. Section 3(b) of the Agreement is deleted in its entirety, and the following substituted: 

  
 “(b) Annual Performance Bonus. The Executive
shall be eligible to receive, in respect of each fiscal year in the Employment Term beginning in fiscal 2004 and thereafter, an annual cash performance bonus (the “Annual Performance Bonus”) in an amount up to Seven Hundred Eighty Thousand
Dollars ($780,000), based upon 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 fiscal year
(the “Performance Plan”); provided that (1) the performance goals for fiscal year 2004 shall be as set forth on Schedule 1 hereto and, (2) for fiscal year 2004, the bonus eligibility shall be 75% of that otherwise applicable. The
Annual Performance Bonus shall be determined based on the level of achievement of the performance goals (from 90% to 110% attainment of budget, including Epic budget), with a payment range of $520,000 to $780,000. By way of example, if 100% of
budget is achieved, the payment would be at the midpoint, or $650,000. The Annual Performance Bonus shall be paid to the Executive on the same basis as the payment of bonuses to other senior executive officers of the Company.” 
  

	 	5.	Equity Compensation. Section 3.c of the Agreement is deleted in its entirety, and the following substituted: 

  
 “(c) Equity Compensation. The Executive shall be eligible to
receive annual equity compensation (the “Annual Equity Award”) as shall be agreed between the Executive and the Compensation Committee of the Board. 
  

	 	6.	Housing Allowance and Free Flights for Family Eliminated. Clauses (i) and (iii) of Section 3(f) of the Agreement are deleted. 

  

	 	7.	Section Headings. The headings of the sections and subsections of this Amendment 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. 

  

	 	8.	Counterparts. This Amendment 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. 

  

	 	9.	Existing Agreement. Except for the changes effected by this Amendment, the Agreement shall remain in effect as presently written. 

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

  

			
	SUNTERRA CORPORATION
		
	By:	 	  

	 	 	Frederick C. Bauman
	 	 	Vice President, General Counsel and Secretary
	
	  

	Nicholas Benson

 SCHEDULE 1 
  
 NICHOLAS BENSON 
  
 PERFORMANCE GOAL BONUS – Fiscal 2004 
  

				
	 % of EBITDA Target

	  	 Bonus
 (@75% of Regular Eligibility)

	 At least 90% but less than 95%
	  	$	390,000
	 At least 95% but less than 100%
	  	$	438,750
	 At least 100% but less than 105%
	  	$	487,500
	 At least 105% but less than 110%
	  	$	536,250
	 110% or greater
	  	$	585,000Sunterra Corporation Specifications for Annual Incentive Awards Plan

 Exhibit 10.2 
  
 Sunterra Corporation 
  
 2005 Incentive Plan 
  
 Plan Specifications for Annual Incentive Awards 
  
 October 1, 2005 

 Section 1: Introduction. 
  
 The Sunterra Corporation 2005 Incentive Plan (“Plan”) was approved by the shareholders of Sunterra Corporation
(“Sunterra” or “Company”) at the annual shareholders meeting in February 2005, and the Compensation Committee of the Board of Directors administers the Plan (“Committee”). A variety of awards may be
granted under the Plan, including stock awards, cash awards and performance-based awards within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code”). The Plan authorizes the Committee to
establish more detailed specifications, and other terms and conditions applicable to awards under the Plan, subject to any limitations or restrictions set forth in the Plan. This document sets forth such specifications, terms and conditions
applicable to annual incentive awards to be granted to Senior Executives, as well as select other employees. All awards described herein are granted under the Plan and shall be subject to all requirements and limitations set forth in the Plan.

  
 Section 2: Definitions and Terms. Unless the context
requires otherwise, each capitalized term used without being defined herein shall have the same meaning ascribed to such term in the Plan. 
  

	 	2.1	Accounting Terms. Except as the context otherwise requires, financial and accounting terms shall have the meaning ascribed to such terms for purposes of and shall be
determined in accordance with generally accepted accounting principles, as from time to time in effect, as applied and included in the consolidated financial statements of the Company, prepared in the ordinary course of business.

  

	 	2.2	Specific Terms. The following words and phrases as used herein shall have the following meanings unless a different meaning is plainly required by the context:

  
 “Adjusted EBITDA” means
EBITDA, subject to and/or after giving effect to any adjustments applicable pursuant to Section 4.6 at the time Business Criteria and Performance Target(s) are established. 
  
 “Adjusted Net Income” means Net Income, subject to and/or after giving effect to any adjustments applicable
pursuant to Section 4.6 at the time Business Criteria and Performance Target(s) are established. 
  
 “Adjusted Return on Assets” shall mean Return on Assets, subject to and/or after giving effect to any adjustments applicable pursuant to
Section 4.6 at the time Business Criteria and Performance Target(s) are established. 
  
 “Adjusted Return on Equity” shall mean Return on Equity, subject to and/or after giving effect to any adjustments applicable pursuant to Section 4.6 at the time Business Criteria and Performance
Target(s) are established. 
  

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 “Base Salary” in respect of any Performance Period means the aggregate base annualized
salary of a participant from the Company and all affiliates of the Company at the time the participant is selected to participate for that Performance Period, exclusive of any commissions or other actual or imputed income from any Company-provided
benefits or perquisites, but prior to any reductions for salary deferred pursuant to any deferred compensation plan or for contributions to a plan qualifying under Section 401(k) of the Code or contributions to a cafeteria plan under
Section 125 of the Code. 
  
 “Business
Criteria” means any one or any combination of the business criteria described in Section 12 of the Plan, including, but not limited to, EBITDA, Adjusted EBITDA, Net Income, Adjusted Net Income, Return on Equity, Adjusted Return on
Equity, Return on Assets or Adjusted Return on Assets. In the case of any participant who is not a Senior Executive, the term “Business Criteria” shall also include performance targets based on Company-wide, divisional or individual
performance as the Committee may determine in its discretion. 
  
 “EBITDA” for any Year means earnings before interest, taxes, depreciation and amortization, including amortization of fresh start premiums, amortization of capitalized loan origination costs, adjustment for foreign
exchange, elimination of gains and losses from asset dispositions outside the ordinary course of business, and elimination of goodwill impairments. 
  
 “Senior Executive” means an executive officer of the Company or other key employee of the Company or any of its majority-owned
subsidiaries who is a “covered employee” within the meaning of Section 162(m)(3) of the Code at the time of an Award, and such other officers or employees as designated by the Committee as to any Award. 
  
 “Net Income” for any Year means the consolidated net income
of the Company, as reported in the consolidated financial statements of the Company for the Year; provided, however, that in the event of a change in accounting principles affecting the Company or Net Income during a Performance Period, Net Income
shall be determined without regard to such change unless otherwise specified by the Committee at the time the Business Criteria and Performance Targets for any Awards relative to such Performance Period are established. 
  
 “Performance Period” means the Year (or portions thereof)
with respect to which the Performance Targets are set by the Committee. 
  
 “Performance Target(s)” means the specific objective goal or goals that are timely set in writing by the Committee pursuant to Section 4.2 for each participant for the applicable Performance Period in respect of any
one or more of the Business Criteria. 
  

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 “Return on Assets” means Net Income divided by the average of the total assets of the
Company at the end of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements; provided, however, that in the event of a change in accounting principles affecting the Company or Return on Assets
during a Performance Period, Return on Assets shall be determined without regard to such change unless otherwise specified by the Committee at the time the Business Criteria and Performance Targets for any Awards relative to such Performance Period
are established. 
  
 “Return on Equity” means the
Net Income divided by the average of the common shareholders equity of the Company at the end of each of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements; provided, however, that in the event
of a change in accounting principles affecting the Company or Return on Equity during a Performance Period, Return on Equity shall be determined without regard to such change unless otherwise specified by the Committee at the time the Business
Criteria and Performance Targets for any Awards relative to such Performance Period are established. 
  
 “Section 162(m)” means Section 162(m) of the Code, and the regulations promulgated thereunder, all as amended from time to time.

  
 “Shares” means shares of common stock of the
Company or any securities or property, including rights, into which the same may be converted by operation of law or otherwise. 
  
 “Year” means a fiscal year of the Company commencing on or after October 1, 2005 that constitutes all or part of the applicable
Performance Period. 
  
 Section 3: Administration of the Plan.

  

	 	3.1	The Committee. The Committee administers the Plan and awards granted subject to the specifications, terms and conditions set forth herein. A majority (but not fewer than two)
of the members of the Committee shall constitute a quorum. The vote of a majority of those present at a meeting at which a quorum is present or the unanimous written consent of the Committee shall constitute action by the Committee.

  

	 	3.2	Authority to Change Terms and Conditions of Awards. Without limiting the Committee’s authority under the Plan, but subject to any limitations of the Plan and
compliance with Section 162(m) to the extent applicable, the Committee shall have the authority to waive restrictive conditions for an award (including any forfeiture conditions, but not Performance Target(s)), in such circumstances as the
Committee deems appropriate. In particular, the Committee has 

  

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 authority to provide under the terms of an Award that payment shall be accelerated upon the death or
disability of a participant, a change in control of the Company, or upon termination of the participant’s employment without cause or as a constructive termination. 
  
 Section 4: Annual Incentive Awards. 
  

	 	4.1	Selection of Participants. The Committee shall determine, at the time the Business Criteria and the Performance Target(s) are set for any Performance Period, the employees of
the Company or any of its subsidiaries who will be granted a conditional opportunity to earn an annual incentive award with respect to such Performance Period. 

  

	 	4.2	Awards. Unless otherwise provided by the Committee, the Committee shall specify, as to each annual incentive award granted hereunder, the Performance Period, the Business
Criteria, the Performance Targets, the amount (expressed as a fixed amount in dollars or other currency, or as a percentage of Base Salary) that could be earned relative to the satisfaction of the Performance Targets, the maximum amount, if any, of
compensation that could be earned and, if applicable, the allocable portion of the award dependent on any particular Performance Target. The applicable Performance Target(s) shall be determined by the Committee consistent with the terms of the Plan
and may be based on Company-wide, division or individual performance. Notwithstanding the fact that the Performance Target(s) have been attained, the Company may pay an award of less than the amount determined by the formula or standard established
pursuant to Section 4.2 or may pay no amount at all, unless the Committee otherwise expressly provides by written contract or other written commitment. 

  

	 	4.3	Limitations Applicable to Senior Executives. Annual incentive awards hereunder to Senior Executives shall be Performance-Based Awards under the Plan. The specific Performance
Target(s) with respect to the Business Criteria must be established for Senior Executives by the Committee in advance of the deadlines applicable under Section 162(m) and while the performance relating to the Performance Target(s) remains
substantially uncertain within the meaning of Section 162(m). The Performance Target(s) with respect to any Performance Period may be established on a cumulative basis or in the alternative, and may be established on a stand-alone basis with
respect to the Company or on an a relative basis with respect to any peer companies or index selected by the Committee. At the time the Performance Target(s) are selected, the Committee shall provide, in terms of an objective formula or standard for
each participant who is a Senior Executive at such time, the method of computing the specific amount that will represent the maximum amount of Cash Award 

  

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 payable to such participant if the Performance Target(s) are attained, subject to Sections 4.1, 4.3, 4.7,
6.1 and 6.8. The Performance Target(s) shall be based on an objective formula or standard, shall comply with the requirements of Section 162(m) applicable to performance-based compensation and shall preclude the use of discretion to increase
the amount of any Cash Award earned pursuant to the terms of the Award. Notwithstanding the fact that the Performance Target(s) have been attained, the Company may pay a Cash Award of less than the amount determined by the formula or standard
established pursuant to Section 4.2 or may pay no Cash Award at all, unless the Committee otherwise expressly provides by written contract or other written commitment. 
  

	 	4.4	Effect of Mid-Year Commencement of Service; Termination of Employment. To the extent compatible with Sections 4.3 and 5.7, if any individual commences employment after the
adoption of the Plan and the Performance Target(s) are established for a Performance Period, the Committee may grant an annual incentive award that is proportionately adjusted based on the period of actual service during the Year; the amount of any
annual incentive award paid to such person shall not exceed that proportionate amount of the applicable maximum individual bonus. In the event of the termination of employment of a participant prior to the payment of an annual incentive award, the
participant shall not be entitled to any payment in respect of such award, unless otherwise expressly provided by the terms of the award or other written contract with the Company. 

  

	 	4.5	Adjustments. To preserve the intended incentives and benefits of an award based on selected Business Criteria and Performance Targets, the Committee shall apply the
objective formula or standard with respect to the applicable Performance Target in a manner that shall eliminate, in whole or in part, in such manner as is specified by the Committee, the effects of the following : (i) the gain, loss, income or
expense resulting from changes in accounting principles that become effective during the Performance Period; (ii) the gain, loss, income or expense reported by the Company in its public filings with respect to the Performance Period that are
extraordinary or unusual in nature or infrequent in occurrence, excluding gains or losses on the early extinguishment of debt, as determined in accordance with Opinion No. 30 of the Accounting Principles Board, and (iii) the gains or
losses resulting from, and the direct expenses incurred in connection with, the disposition of a business, in whole or in part. The Committee may, however, provide at the time the Performance Targets are established that one or more of the foregoing
adjustments will not be made as to a specific award. In addition, the Committee may determine at the time the Performance Targets are established that other adjustments shall apply to the objective formula or standard with respect to the

  

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 applicable Performance Target to take into account, in whole or in part, in any manner specified by the
Committee, any one or more of the following with respect to the Performance Period: (a) gain or loss from all or certain claims and/or litigation and all or certain insurance recoveries relating to claims or litigation, (b) the impact of
impairment of tangible or intangible assets, (c) the impact of restructuring activities, including but not limited to reductions in force, that are reported in the Company’s public filings covering the Performance Period and (d) the
impact of investments or acquisitions made during the year or, to the extent provided by the Committee, any prior year. Each of the adjustments described in this Section 4.6 may relate to the Company as a whole or any part of the Company’s
business or operations, as determined by the Committee at the time the Performance Targets are established. The adjustments are to be determined in accordance with generally accepted accounting principles and standards, unless another objective
method of measurement is designated by the Committee. In addition to the foregoing, the Committee shall adjust any Business Criteria, Performance Targets or other features of an Award that relate to or are wholly or partially based on the number of,
or the value of, any Shares, to reflect a change in the Company’s capitalization, such as a stock split or dividend, or a corporate transaction, such as a merger, consolidation, separation (including a spin-off or other distribution of stock or
property), or a reorganization of the Company. 
  

	 	4.6	Committee Discretion to Determine Cash Awards. The Committee has the sole discretion to determine the standard or formula pursuant to which each participant’s
award shall be calculated (in accordance with Section 4), whether all or any portion of the amount so calculated will be paid, and the specific amount (if any) to be paid to each participant, subject in all cases to the terms, conditions and
limits of the Plan and of any other written commitment authorized by the Committee. To this same extent, the Committee may at any time establish (and, once established, rescind, waive or amend) additional conditions and terms of payment of Cash
Awards (including but not limited to the achievement of other financial, strategic or individual goals, which may be objective or subjective) as it may deem desirable in carrying out the purposes of the Plan and may take into account such other
factors as it deems appropriate in administering any aspect of the Plan. The Committee may not grant an award under the Plan if the applicable Performance Target(s) have not been satisfied. 

  

	 	4.7	Committee Certification. No Senior Executive shall receive any payment under the Plan unless the Committee has certified, by resolution or other appropriate action in
writing, that the amount thereof has been accurately determined in accordance with the terms, conditions and limits of the Plan and that the Performance Target(s) and any other material terms previously established by the Committee or set forth in
the Plan were in fact satisfied. 

  

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	 	4.8	Time of Payment; Deferred Amounts. Any awards granted by the Committee under the Plan shall be paid as soon as practicable following the Committee’s
determinations under this Section 4 and the certification of the Committee’s findings under Section 4.7. Any such payment shall be in cash or cash equivalent or in such other form of equal value on such payment date (including Shares
or share equivalents as contemplated by Section 4.9) as the Committee may approve or require, subject to applicable withholding requirements and, if applicable, Section 4.9. Notwithstanding the foregoing, the Committee, in its sole
discretion (but subject to compliance with Section 162(m) to the extent applicable and to any prior written commitments and to any conditions consistent with Sections 3.4, 4.9 and 5.7 that it deems appropriate), defer the payout or vesting of
any Cash Award and/or provide to participants the opportunity to elect to defer the payment of any Cash Award under a nonqualified deferred compensation plan and as contemplated by Section 4.9. In the case of any deferred payment of a Cash
Award after the attainment of the applicable Performance Target(s), any amount in excess of the amount otherwise payable shall be based on either Moody’s Average Corporate Bond Yield (or such other rate of interest that is deemed to constitute
a “reasonable rate of interest” for purposes of Section 162(m)) over the deferral period or the return over the deferral period of one or more predetermined actual investments (including Shares) such that the amount payable at the
later date will be based upon actual returns, including any decrease or increase in the value of the investment(s), unless the alternative deferred payment is otherwise exempt from the limitations under Section 162(m). 

 

	 	4.9	Share Payouts of Cash Award. Any Shares payable under an award shall be pursuant to a combined Award under the Plan. The number of Shares or stock units (or similar
deferred award representing a right to receive Shares) awarded in lieu of all or any portion of an Award shall be equal to the largest whole number of Shares which have an aggregate fair market value (as defined in the Plan) no greater than the
amount of cash otherwise payable as of the date the cash payment of the award would have been made. Any such Shares, stock units (or similar rights) shall thereafter be subject to adjustments for changes in corporate capitalization as provided in
the Stock Plan. Dividend equivalent rights thereafter earned may be accrued and payable in additional stock units, cash or Shares or any combination thereof, in the Committee’s discretion. 

  

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 Section 5: General Provisions. 
  

	 	5.1	No Right to Awards or Continued Employment. Neither the establishment of the Plan nor the provision for or payment of any amounts hereunder nor any action of the
Company (including, for purposes of this Section 5.1, any predecessor or subsidiary), the Board of Directors of the Company or the Committee in respect of the Plan shall be held or construed to confer upon any person any legal right to receive,
or any interest in, an Award or any other benefit under the Plan, or any legal right to be continued in the employ of the Company. The Company expressly reserves any and all rights to discharge an Executive in its sole discretion, without liability
of any person, entity or governing body under the Plan or otherwise. Nothing in this Section 5.1, however, is intended to adversely affect any express independent right of any person under a separate employment agreement. Notwithstanding any
other provision hereof and notwithstanding the fact that the Performance Target(s) have been attained and/or the individual maximum amounts hereunder have been calculated, the Company shall have no obligation to pay any award hereunder nor to pay
the maximum amount so calculated or any prorated amount based on service during the period, unless the Committee otherwise expressly provides by written contract or other written commitment. 

  

	 	5.2	Discretion of Company, Board of Directors and Committee. Any decision made or action taken by the Company or by the Board of Directors of the Company or by the
Committee arising out of or in connection with the creation, amendment, construction, administration, interpretation and effect of the Plan shall be within the absolute discretion of such entity and shall be conclusive and binding upon all persons.
No member of the Committee shall have any liability for actions taken or omitted under the Plan by the member or any other person. 

  

	 	5.3	Non-Exclusivity. The specifications, terms and conditions set forth herein do not limit the authority of the Board or the Committee to grant awards to the full extent
permitted under the Plan, regardless of whether such awards comply with such specifications, terms and conditions. 

  

	 	5.4	Section 162(m) Conditions. Awards made hereunder to Senior Executives are intended to satisfy and shall be interpreted in a manner that satisfies any applicable
requirements as performance-based compensation. Any provision, application or interpretation of the Plan inconsistent with such intent shall be disregarded. 

  

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 Section 6: Amendments, Suspension or Termination of Plan. 
  
 The Board of Directors or the Committee may from time to time amend, suspend or terminate in
whole or in part, and if suspended or terminated, may reinstate, any or all of the provisions of the Plan. Notwithstanding the foregoing, no amendment shall be effective without Board of Directors and/or shareholder approval if such approval is
necessary to comply with the applicable provisions of Section 162(m). 
  

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