<PAGE>

                             CONSULTING AGREEMENT
                                      and
                                      ---
                     MODIFICATION OF STOCK OPTION AGREEMENT
                     --------------------------------------


This agreement made this 14th day of August 1999 by and between SUNTERRA
CORPORATION, a Maryland corporation (the "Company") and JAMES E. NOYES (the
"Executive").

WHEREAS, the Company and the Executive have previously entered into an
Employment Agreement (the "Employment Agreement") dated June 13, 1996 and a
Stock Option Agreement (the "Option Agreement") dated June 13, 1996; and

WHEREAS, the parties desire that the Employment Agreement shall be converted
into a consulting arrangement with the following terms and conditions:

1.   Term.
     -----

     The parties agree that commencing September 1, 1999, Executive's employment
     pursuant to the Employment Agreement is terminated and converted into a
     Consulting Agreement as detailed herein.  Except as expressly provided in
     this Consulting Agreement, all provisions of the Employment Agreement are
     deleted and superceded and replaced by the provisions of this Consulting
     Agreement.   The term of this Consulting Arrangement shall continue until
     August 31, 2001 (the "Termination Date") or such sooner time as provided in
     Section 4, herein.  Upon execution of this agreement, Executive has
     contemporaneously executed all documents necessary to effectuate his
     resignation as an officer and director of Sunterra Corporation, its
     subsidiaries and affiliates.  Notwithstanding any language to the contrary
     contained within the Employment Agreement, Executive's total compensation
     for the period between August 1/st/, and August 31st, 1999 including all
     base salary and bonuses shall be $28,333.  Except for the payments set
     forth below, and the $28,333 for August referenced above, Company has no
     other monetary obligations to Executive, including payments for vacation,
     sick days, discretionary time off , or otherwise, it being agreed that all
     such obligations have been fully satisfied by the Company.

2.   Duties and Responsibilities.
     ----------------------------

     During the Consulting Period, the Executive agrees to consult with and
     advise the Company on any and all matters consistent with his prior duties
     that the Company might request including, but not limited to, the areas
     covered by the Executive's responsibilities pursuant to Section 3 of the
     Employment Agreement, for not less than ten (10) hours per week nor more
     than 50 hours per month.  Monthly hours are not cumulative.  When requested
     by the Company, the Executive will make himself

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     available to the Company during the Consulting Period at the Company's
     corporate offices located in Orlando, Florida. Executive will also make
     himself available, on reasonable notice, at any sites or locations as may
     be requested by the Company provided the Company shall reimburse the
     Executive for reasonable and customary travel related expenses to all
     locations in the same manner as other senior officers. However, after the
     first trip each calendar month, each additional trip outside of Chicago,
     within that month shall be on mutually convenient dates.

3.   Compensation and Related Matters.
     ---------------------------------

         (a)   During the Consulting Period, the Company shall pay the Executive
               48 consecutive payments payable twice monthly in the amount of
               $19,166.66. However, these amounts may be reduced as provided in
               this agreement.  All consulting fees shall be paid by the Company
               in a manner consistent with the standard payroll practices of the
               Company (e.g., timing of payments and required deductions or
                        ----
               other withholdings).  The Executive shall be considered an
               independent consultant for purposes of determining appropriate
               withholding, unemployment insurance and any other related
               matters.

               So long as the Executive is not in breach of this agreement, the
               Executive is free to pursue other opportunities outside of this
               Agreement subject to the confidentiality, non-solicitation and
               non-compete provisions contained in this Agreement.

               Commencing December 15th, 1999 and every three months thereafter,
               the Executive will be required to furnish to the Company a
               detailed income statement, in a format acceptable to the Company,
               that demonstrates the earned gross income including all
               compensation, salary, bonus, stock, stock options, cash, cash
               equivalent or any other remuneration earned of any type, for
               services rendered by or generated from the Executive's various
               employment and consulting activities (hereinafter "income").
               Income shall not include out of pocket reimbursements, dividends,
               and interest from investments, and payments for those activities
               permitted pursuant to Section 3(c) of the Employment Agreement.
               The income statement shall reflect income for the following
               periods: the quarterly statement due on December 15, 1999,
               February 15, 2000, June15, 2000 and September 15, 2000, shall
               report all required income from the date of the execution of this
               agreement until the end of the most recent quarter. Quarterly
               statements due thereafter shall report all income required for
               the preceding 12 months. This income statement should be
               delivered to the Company no later than 15/th/ of the month
               following the end of each quarter. In the event the remuneration
               earned is not easily determined and agreed upon, the parties
               agree to mutually select an expert for purposes of that
               determination.

               In the event any income statement indicates income which exceeds
               $250,000 for the preceding 12 month period or, for those
               reporting periods prior to

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              October 1, 2000, income for the period from September 1, 1999
              until the date of the statement, the company shall be entitled to
              an offset and credit equal to the full amount of all income shown
              for that period. In the event the amount of income for any
              reporting period exceeds 250,000 but is less than the full amount
              payable to the executive for the remainder of the period of this
              Consulting Agreement, the amount of the remaining credit shall be
              used to offset future payments required to be made to the
              Executive until the credit has been exhausted. In the event the
              amount of offset and credits exceed amounts payable by company to
              executive for the remainder of this Consulting Agreement, then
              this Consulting Agreement shall be deemed to constitute a
              promissory note from the executive to the company in an amount
              equal to the difference of the amount owed by the Company and the
              income shown on the statement without any further notice to the
              Executive. The Executive shall be deemed to be the maker/debtor of
              such promissory note and Sunterra Corporation, its successors and
              assigns, the payee of the note. Further, in such case, the Company
              shall not be responsible for any further payments to the
              Executive. The note shall bear interest at the rate of 10%, APR
              and shall be paid in equal monthly installments in amounts
              sufficient to satisfy the note in full within 3 months of the date
              of the statement. The provisions of this Section 3(a) are intended
              to supercede the provisions contained in Section 6(f) of the
              Employment Agreement.

         (b)  Business Expenses.
              ------------------

              The Company shall reimburse the Executive for reasonable and
              customary expenses incurred by the Executive in connection with
              the performance and services pursuant to this Consulting Agreement
              upon presentation of sufficient evidence of such expenditures
              consistent with the Company's policies as may be in place from
              time to time.

         (c)  Other Benefits.
              ---------------

              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.

         (d)  Stock Options.
              --------------

              Notwithstanding anything to the contrary contained within this
              Consulting Agreement, the Employment Agreement or the Option
              Agreement described on Exhibit "A" to the Employment Agreement,
              (hereinafter "Option Agreement"), the Company and the Executive
              hereby agree that Section 3.1(a)(ii) and Section 3.3(b) and (c) of
              the Option Agreement are hereby clarified and shall be interpreted
              to state that those options that have been granted and which are
              exercisable as of August 31, 1999 (namely 459,375) shall continue
              to be exercisable during the term of this Consulting Agreement and
              shall expire at termination of this Consulting Agreement. Any
              options

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<PAGE>

          that have been granted but are not exercisable as of August 31, 1999
          shall terminate as of the first day of this Consulting Agreement.
          However, should an event resulting in Change of Control (as defined in
          the Employment Agreement), be publicly announced or a letter of intent
          for such event be executed prior to January 31, 2000 and such event
          closed by July 31, 2000, such additional shares as would have vested
          under the Employment Agreement during the period prior to July 31st,
          2000 shall be deemed to have vested according to the schedule set
          forth in that Employment Agreement so that the aggregate number of
          shares of Common Stock vested should these contingencies occur shall
          be 562,500. Nothing contained herein, however, shall require that such
          provision be included in any subsequent option agreement that may be
          entered into between the Company and the Executive. This Section 3(d)
          intended to supercede the provisions of Section 3.3.(c) of the Option
          Agreement.

          To the extent required, the parties agree to submit this agreement for
          ratification by the Compensation Committee (as defined in the Option
          Agreement) and if not ratified, this Agreement shall be null and void.

          Company agrees to process Executive's exercise of options in the
          same fashion and as expeditiously as it normally processes similar
          actions for other persons. To the extent that registered shares
          are available for issuance upon exercise of the option, Company
          will issue registered shares to Executive.

4.   Termination.
     ------------

     This Consulting Agreement shall be, or may be, as the case may be,
     terminated under the following circumstances.

     (a)  Death.  This Consulting Agreement shall terminate upon the death of
          ------
          the Executive except that in the event this agreement is converted to
          a promissory note pursuant to Section 3(a), the obligations of
          Executive shall thereafter become an obligation of his estate.

     (b)  Disability.  This Consulting Agreement shall terminate upon the
          -----------
          physical or mental disability of the Executive which, in the opinion
          of a competent physician selected by the Board of Directors of the
          Company, renders the Executive unable to perform his duties under this
          Consulting Agreement for more than 120 days in any 180-day period.

     (c)  Cause.  The Company may terminate this Consulting Agreement for
          ------
          "cause".  Cause shall be defined in Section 5(c) of the Employment
          Agreement.

     (d)  Executive's Termination.  The Executive may voluntarily terminate this
          ------------------------
          Consulting Agreement at any time by delivery of a written notice to
          the Company (the "Notice of Termination").  The Notice of Termination
          shall

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<PAGE>

          set forth the dates that termination shall become effective (the
          "Date of Termination"), which date shall, in any event, be at least
          ten (10) days and no more than thirty (30) days from the date the
          Notice of Termination 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.

     (e)  Notice.  Any termination of this Agreement by the Company shall be
          -------
          communicated by a 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 termination provision in this
          Consulting Agreement relied upon and shall set forth in reasonable
          detail the facts and circumstances claimed to provide a basis for
          termination of the Consulting Agreement under the provision so
          indicated.

     (f)  Date of Consulting Termination.  "Date of Consulting Termination"
          ---------------------------------
          shall mean (i) if the Consulting Agreement is terminated by death, the
          date of death, (ii) if the Consulting Agreement is terminated by
          reason of disability, the date of the opinion of the physician
          referred to in Section 4(b) above, (iii) if the Consulting Agreement
          is terminated by the Company for cause pursuant to Section 4(c) above,
          the date specified in the Notice of Termination, and (iv) if the
          Executive should terminate this Agreement pursuant to Section 4(d)
          above, the Date of Termination.

     (g)  Termination Obligations.  The termination obligations contained in
          ------------------------
          Section 5(h) and 5(i) of the Employment Agreement shall also apply to
          a termination of the Consulting Agreement, it being understood that
          the phrase "Employment Period" as contained in Section 5(h) of the
          Employment Agreement shall be amended to read "Consulting Period."

          Compensation upon Termination.
          ------------------------------

     (a)  Death.  If this Consulting Agreement should be terminated pursuant to
          ------
          Section 4(a), the Company shall, subject to application of the credits
          as set forth in Section 3(a), pay the Executive's Personal
          Representative pursuant to Section 3(a) the amounts entitled to be
          received, by the Executive and according to the same schedule of
          payments, (the "Post Consulting Payment"), until August 31, 2001. At
          the Executive's own expense, the Executive's dependent shall be
          entitled to any continuation of health insurance coverage rights under
          any applicable law.

     (b)  Disability.  If this Consulting Agreement should be terminated by
          -----------
          reason of disability pursuant to Section 4(b), the Executive shall,
          subject to application of the credits as set forth in Section 3(a),
          receive the Post-Consulting Payment, until the earlier of (i) the
          duration of such disability, or (ii) August

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<PAGE>

          31, 2001, provided that the payment so made to the Executive during
          the disability should 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 dependents shall also be entitled to
          any continuation of health insurance rights under any applicable law.

     (c)  Cause.  If the Company terminates this Consulting Agreement for Cause
          ------
          pursuant to Section 4(c) hereof, the Company shall, subject to
          application of the credits as set forth in Section 3(a), pay the
          Executive any accrued consulting fee through the Termination Date.  At
          the Executive's own expense, the Executive and its dependents shall
          also be entitled to any continuation of health insurance coverage
          rights under any applicable law.


     (d)  Executive's Termination. If the Executive terminates this Consulting
          ------------------------
          Agreement for any reason other than "Good Cause" as defined herein,
          the Company shall only be required to pay to the Executive, subject to
          application of the credits as set forth in Section 3(a), the amounts
          of consulting fees described in Sections 3(a) and 3(b) hereof through
          the Date of Termination. However, in this event, this agreement is
          converted to a promissory note pursuant to Section 3(a) hereof, the
          obligations of Executive shall survive until repayment of the note.
          In the event the Executive terminates its Consulting Agreement for
          "Good Cause," the Company shall pay the Executive the consulting
          payment until the expiration date of the Consulting Agreement.  If the
          Executive terminates this agreement without "Good Cause," the Company
          shall have no obligation to compensate the Executive following such
          termination.  In the 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 Consulting Agreement, "Good Cause" shall mean a
     material breach by the Company of any material provision of this Consulting
     Agreement and "Cause" shall mean a material breach by Executive of any
     material provision of this Consulting Agreement.

     (e)  The provisions of Section 6(i) of the Employment Agreement, shall
          apply to this Consulting Agreement, by substituting for the term
          "Severance Payment" the term "Post-Consulting Payment" and by reading
          such provisions to apply to the termination of the Consulting
          Agreement hereunder.

6.   Personal Computer, Laptop, Weeks.
     --------------------------------

     Executive shall be permitted to retain the Company's personal computer,
     laptop and printer provided that all files, data and information contained
     therein shall be downloaded to disk, the disks delivered to the Company and
     the files resident on the

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<PAGE>

     personal computer and laptops deleted and purged therefrom. Executive shall
     be permitted to purchase up to 4 weeks of inventory from Company's
     inventory, subject to availability, at a price equal to 40% of retail list.

     Confidentiality, Non-Solicitation, Non-Compete and Injunctive Relief.  The
     ---------------------------------------------------------------------
     parties acknowledge that the provisions of Sections 7, 8 and 9 of the
     Employment Agreement shall equally apply to the provisions of this
     Consulting Agreement; provided that the "employment period" shall include
     the "consulting period" and that all time periods for obligation of those
     Sections 7,8 and 9 shall continue for a period of two years following the
     termination of the Consulting Agreement. For two years following execution
     of this Agreement, Executive agrees not to talk about, write about or
     otherwise publicize any derogatory information or documentation concerning
     the business of the Company, the financial affairs of the Company, the
     operation of any of the resorts owned or managed by the Company, his
     employment with the Company, the termination of his employment, other
     Company employees, or the terms or existence of this Agreement unless
     required by law or for accounting or tax purposes.

8.   Miscellaneous Provisions.  The parties acknowledge that the provisions of
     -------------------------
     Sections 10 (except that the Company's address for notice is hereby changed
     to: Sunterra Corporation, 1781 Park Center Drive, Orlando FL 32835, Attn:
     Thomas Bell), 11, 12, 13,14, 15, 16, 17, 18, 19 and 20 of the Employment
     Agreement shall continue to apply during the term of this Consulting
     Agreement. Except as modified herein, all terms and conditions of the
     Option Agreement shall remain in full force & effect.

9.   Indemnification.   As a former officer and director of the Company,
     ----------------
     Executive shall be entitled to indemnification by the Company to the full
     extent permitted by Maryland law and the Company's articles of
     incorporation and by-laws and to coverage under any insurance policies that
     may be maintained by the Company from time to time.



ACKNOWLEDGED:

COMPANY:

SUNTERRA CORPORATION,
A Maryland corporation

By:   L. W. Miller, CEO
   ---------------------------------

EXECUTIVE:

     /s/  James E. Noyles
-------------------------------------
         James E. Noyes

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