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Exhibit 10.1

[MACKINAC PARTNERS LETTERHEAD]
 
CONFIDENTIAL
June 5, 2006

Mr. Nick Benson
President & Chief Executive Officer
Sunterra Corporation
3865 West Cheyenne Avenue
North Las Vegas, Nevada 89032

Dear Nick:

We are pleased to confirm that Sunterra Corporation (the “Company”) has retained
Mackinac Partners, LLC (“MP”) on the following basis:
 
1.   The Company engages MP as its agent for the purposes of: (a) providing
interim management services to Sunterra Europe. C. Alan Bentley (“Mr. Bentley”)
shall serve as the Interim Chief Operating Officer of Sunterra Europe or such
other title as the Company and MP may deem appropriate; (b) providing financial
analysis to the company; (c) assisting with the implementation of the
restructuring plan and related downsizing of Sunterra Europe; (d) assist with
the sale of Sunterra Europe if so directed by the Board of Directors; and (e)
such other services that the parties’ shall agree.
 
2.   Mr. Bentley will be under the direct supervision of the Company’s CEO and
will operate at his direction, subject to applicable law.
 
3.   The term of MP’s engagement will begin on May 16, 2006 and continue through
August 31, 2006. This agreement may be terminated at any time by either party
with 15 days prior written notice. The Company will remain liable for any and
all unpaid charges through the date of termination, and for its obligations
pursuant to paragraph 6 below notwithstanding the termination of this agreement.
 
4.   As compensation for the services to be rendered by MP, the Company shall
pay MP the sum of $85,000 per month plus reimbursement of reasonable
out-of-pocket expenses subject to the provisions of paragraph 5 below. In
connection with MP’s out-of-pocket expenses, MP shall provide the Company with a
summary description of categories of out-of-pocket expenses and related amounts
for the same. MP shall render monthly invoices at the first of each month for
fees for the applicable month plus out-of-pocket expenses incurred to date.
Payment shall be due by the last day of the month. The month of May 2006 is a
partial month pursuant to this agreement and shall be billed at 1/2 of the
monthly amount, or $42,500. Payment shall be due within 5 business days of
signature of this agreement.
 

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Sunterra Corporation
June 5, 2006
Page 2
 
5.   It is expected that the average monthly hours incurred during the course of
this agreement will approximate 215 hours. In the event that the total number of
hours of work performed by Mr. Bentley during the term of this Agreement is less
than 648, MP shall, within thirty (30) days of invoice, reimburse Company the
sum of three hundred ninety-five dollars ($395.00), multiplied by the difference
between 648 and the number of hours of work performed. In the event that the
total number of hours of work performed by Mr. Bentley during the term of this
Agreement is greater than 858, Company shall, within thirty (30) days of
invoice, pay to MP the sum of three hundred ninety-five dollars ($395.00),
multiplied by the difference between the total number of hours of work performed
and 858. For purposes of computation of hours of work performed, each hour of
travel time shall equal one-half (1/2) hour.
 
6.   In connection with engagements such as this, it is MP’s policy to receive
indemnification. The Company will provide MP with the indemnification and
contribution agreements described on the attached Exhibit A.
 
7.   The Company shall include Mr. Bentley as an officer of the Company and
shall direct the carrier of the Company’s Directors and Officers Liability
Insurance (the “D&O Insurance”) to include Mr. Bentley as an officer of the
Company effective May 16, 2006. The Company will not allow the D&O Insurance to
lapse or be reduced during the term of this agreement, and will continue the D&O
Insurance coverage for Mr. Bentley in full force and effect for at least one
year after the end of the term of this agreement.
 
8.   Notices under this agreement must be in writing and be mailed, sent by
recognized overnight courier, telecopied or hand delivered: (a) if to the
Company at the address listed at the beginning of this agreement; and (b) if to
MP, at its offices at 38710 Woodward Ave., Suite 240 Bloomfield Hills, MI 48304,
Attention: Mr. C. Alan Bentley.
 
9.   This agreement may be executed in counterpart.
 
10.         This agreement incorporates the entire understanding of the parties
and supersedes all previous agreements and/or discussions between MP and you
concerning its subject matter.
 
11.         This agreement may not be amended or modified except in writing
executed by the Company and MP. In the event of the death or resignation of Mr.
Bentley, or Mr. Bentley’s inability to perform, MP shall designate, subject to
Company’s approval, another MP employee for the engagement described herein.
Company shall incur no cost for any time devoted by MP and Mr. Bentley’s
replacement for review of work performed by Mr. Bentley, or in preparation for
replacing Mr. Bentley.
 

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Sunterra Corporation
June 5, 2006
Page 3
 
12.         This agreement will be governed by, and construed in accordance
with, the laws of the State of Michigan. The parties waive any right to trial by
jury in connection with any dispute related to this agreement, or any other
matter contemplated by this agreement.
 
13.          Section 4. Confidentiality.
 
MP agrees to keep confidential all information obtained from the Company. MP
agrees that neither it nor its directors, officers, employees, agents or
attorneys will disclose to any other person or entity, or use for any purpose
other than as specified herein, any information, including without limitation
any data, plans, reports, schedules, drawings, accounts, records, calculations,
specifications, flow sheets, computer programs, source or object codes, results,
models, or work product relating to the business of the Company, its
subsidiaries, distributors, affiliates, vendors, customers, employees,
contractors, or consultants (“Information”), which is non-public, confidential
or proprietary in nature that it obtains or is given access to during the
performance of the services provided hereunder.
 
14.         Except as required by law, any advice furnished by MP to the Company
will not be publicly disclosed or made available to third parties without MP’s
advance written consent.
 
Please confirm your agreement with the foregoing by dating, signing and
returning the enclosed copy of this letter agreement, whereupon it will become
immediately binding and enforceable in accordance with its terms.
 
We are delighted to accept this engagement and look forward to working together
with you on this assignment.
 

 
Sincerely,
     
Mackinac Partners, LLC
       
By:
/s/ C. Alan Bentley
       
Title:
Partner

Agreed to this on June 12, 2006:

Sunterra Corporation

By:
/s/ James Dickerson
   
James Dickerson
 
Director and Chairman of Audit Committee of
 
Sunterra Corporation

 

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EXHIBIT A

INDEMNIFICATION/CONTRIBUTION PROVISIONS TO LETTER
AGREEMENT DATED JUNE 5, 2006 BETWEEN
SUNTERRA CORPORATION AND
MACKINAC PARTNERS, LLC (“AGREEMENT”)

1.   Except as otherwise defined below, all capitalized terms used in these
provisions have the definitions given to them in the Agreement.
 
2.   (a)   The Company will indemnify and hold harmless Mackinac Partners LLC
and its partners, principals, affiliates, agents and employees, and any persons
retained by MP in connection with the performance of the services described in
the Agreement (“Indemnified Parties”), from and against all claims, losses,
damages, liabilities and expenses (including attorneys’ fees, interest,
penalties, and all amounts paid in investigation, defense or settlement of any
of the foregoing) (collectively, “Claims”) arising out of, based upon or related
to MP’s engagement under the Agreement, other than any Claims arising out of,
based upon or related to the willful misconduct, malfeasance or gross negligence
of any of the Indemnified Parties (collectively, “Damages”). The Company will be
liable pursuant to this paragraph 2 for Damages incurred by an Indemnified Party
unless a court having competent jurisdiction has determined by final judgment
(not subject to further appeal) that such Damages resulted from the willful
misconduct, malfeasance or gross negligence of such Indemnified Party. This
indemnification will apply regardless of whether MP is a party to a lawsuit,
claim or proceeding.
 
(b)   If the Company so elects, and the Company gives adequate assurances of its
ability to conduct such a defense and to pay any amounts which may ultimately be
owed under this Exhibit A, the Company may assume the defense of any Claim
against an Indemnified Party, including the employment of counsel reasonably
acceptable to such Indemnified Party, and the payment of fees, expenses, and
disbursements of such counsel. If the Company elects to assume such defense, the
Company shall not be liable to any Indemnified Party under these indemnification
provisions for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with such defense, other than reasonable costs
of investigation, and except as provided in the following sentence. In the event
that counsel for such Indemnified Party is of the opinion that having separate
counsel would be appropriate under the circumstances due to actual or potential
conflicts of interest, then the Indemnified Party may employ separate counsel
reasonably acceptable to the Company to represent and defend the Indemnified
Party in any Claim. The Company will be required to pay the fees and
disbursements of such counsel, but will only pay for one counsel for all
Indemnified Parties in any jurisdiction in any single action or proceeding. Any
separate counsel retained by an Indemnified Party shall, as a condition of the
indemnification and reimbursement commitments set forth herein, use its best
commercially reasonable efforts to cooperate with the Company and any counsel
designated by the Company. Subject to the provisions of paragraph 2(a) hereof,
the Company shall be liable for any settlement of any Claim against any
Indemnified Party entered into with the Company’s prior written consent. The
Company shall not be liable for any settlement of any Claim effected without the
Company’s written consent, which consent will not be unreasonably withheld or
delayed.

 
Mackinac Partners, LLC
       
By:
/s/ C. Alan Bentley
           
Title:
Partner

Sunterra Corporation

By:
/s/ James Dickerson
   
James Dickerson
 
Director and Chairman of Audit Committee of Sunterra Corporation

 

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