<PAGE>

                                                                        EX-10.26

                             CONSULTING AGREEMENT
                             --------------------


This Consulting Agreement is entered into this _____ day of January, 2000,
effective as of the 20th day of January, 2000 by and between SUNTERRA
CORPORATION, a Maryland corporation (the "Company") and L. STEVEN MILLER (the
"Executive").

WHEREAS, the Company and the Executive have previously entered into an
Employment Agreement (the "Employment Agreement") dated as of September 11,
1998; and

WHEREAS, the parties desire that the Employment Agreement shall be converted
into a consulting arrangement pursuant to the terms and conditions set forth
herein, and, consequently, that from the date of this Agreement forward, the
Employment Agreement shall be referred to as the "Consulting Agreement"; and

WHEREAS, the Company and Executive have entered into a Severance Payment
Agreement on even date herewith (the "Severance Payment Agreement"), providing
for the payment of certain specified sums to Executive, which sums are in
addition to the amounts due and payable under this Consulting Agreement; and

NOW THEREFORE, in furtherance of the foregoing objectives and in consideration
of and for the payment and receipt of good, valuable and sufficient
consideration, which is hereby acknowledged as having been received by each of
the parties hereto, they agree to the terms of this Consulting Agreement, which
are set forth as follows:

1.   Term.
     -----

     The parties agree that commencing January 20, 2000, Executive's employment
     pursuant to the Employment Agreement is converted into a consulting
     arrangement as detailed herein.  Except as expressly provided in this
     Consulting Agreement, all provisions of the Employment Agreement are
     deleted and, as appropriate, are superceded or replaced by the provisions
     of this Consulting Agreement. The term of this Consulting Agreement (also
     referred to herein as the "Consulting Period") shall continue until January
     19, 2004 (the "Termination Date") or such sooner time as provided in
     Section 4, herein. Notwithstanding any language to the contrary contained
     within the Employment Agreement, Executive's total compensation for the
     period between January 1 and January 31, 2000 including all base salary and
     bonuses shall be $29,167.  Except for the payments set forth below, and the
     $29,167 for January referenced above, and the payments due under the
     Severance Payment Agreement, Company has no other compensation 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.  Notwithstanding the foregoing, the Company
     shall also reimburse Executive for his reasonable out of pocket moving

                                       1
<PAGE>

     expenses incurred in connection with relocating his household and personal
     effects to Indianapolis, Indiana.

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 more than ten (10) hours per month.  Monthly
     hours are not cumulative.

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

     (a)  During the Consulting Period, the Company shall pay the Executive 48
          consecutive monthly payments on the last day of each month commencing
          on February 29, 2000, in the amount of $3,000 each, which shall not be
          subject to set off or reduction except as otherwise provided in this
          Consulting 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.  The Executive
          is free to pursue and engage in other business activities, subject to
          the confidentiality and non-solicitation provisions contained in this
          Consulting 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"), or the Stock Option Agreement, dated as of
          January

                                       2
<PAGE>

          21, 1999 (hereinafter the "Additional Option Agreement") the Company
          and the Executive hereby agree (a) that Section 3.1(a) and Sections
          3.3(b) and (c) of the Option Agreement are hereby clarified and, to
          the extent necessary, modified, to state that those options that have
          been granted and which are exercisable as of January 19, 2000 (namely
          276,750 shares) shall continue to be exercisable until 90 days after
          the termination of this Consulting Agreement, but that no additional
          options will become exercisable at any time, (b) that Section 3.1(a)
          and Sections 3.3(b) and (c) of the Additional Option Agreement are
          hereby clarified and, to the extent necessary, modified to state that
          those options that have been granted and which are exercisable as of
          January 19, 2000 (namely 19,110 shares) shall continue to be
          exercisable until 90 days after the termination of this Consulting
          Agreement, but that no additional options will become exercisable at
          any time, and (c) that notwithstanding any provisions of the Option
          Agreement or the Additional Option Agreement, options that have been
          granted but are not exercisable as of January 19, 2000 under Section
          3.1(a) of both the Option Agreement or the Additional Option Agreement
          shall terminate as of the first day of this Consulting Agreement.
          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) is
          intended to supercede the provisions of Section 3.3(a) of the Option
          Agreement and the Additional Option Agreement, respectively.

          Company agrees (a) that the relationship established by this Agreement
          constitutes the "simultaneous establishment of a consulting
          relationship" between the Company and the Executive as described in
          the Option Agreement and the Additional Option Agreement, and (b) 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.  Executive further agrees that to the extent he
          anticipates entering into the market to sell any of the shares
          received upon exercise, that he will consult with and cooperate with
          reasonable requests of the Company or the Company's designated
          investment banker with respect to the timing and amount of such sales
          in order to avoid any adverse market affect from such dispositions.

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.

                                       3
<PAGE>

     (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 as Section 5(c) of the Employment
          Agreement, except that reference is made to the duties under this
          Consulting Agreement, and that Executive satisfies his duties pursuant
          to Section 2 by making himself available for the time required
          therein.

     (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 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" and
          the reference in such Section to Section "8" shall have no further
          effect.

                                       4
<PAGE>

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

    (a)   Death. If this Consulting Agreement should be terminated pursuant to
          ------
          Section 4(a), the Company shall 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 the Termination Date.
          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.

     (b)  Disability. If this Consulting Agreement should be terminated by
          -----------
          reason of disability pursuant to Section 4(b), the Executive shall,
          receive the Post-Consulting Payment, until the earlier of (i) the
          determination of such disability in accordance with Section 4(b), or
          (ii) the Termination Date, provided that any payments 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 his 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 pay the Executive
          any accrued consulting fee through the Termination Date.  At the
          Executive's own expense, the Executive and his dependents shall also
          be entitled to any continuation of health insurance coverage rights
          under any applicable law.

     (d)  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 the amounts
          of consulting fees described in Sections 3(a) and 3(b) hereof through
          the Date of Termination. In the event the Executive terminates his
          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 this 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.

                                       5
<PAGE>

     (e)  The provisions of Sections 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; furthermore the reference such Section to Section
          "8" shall have no further effect.

6.   Personal Computer, Laptop, etc.
     -------------------------------

     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 disks, the disks delivered to the Company
     and the files resident on the personal computer and laptops deleted and
     purged therefrom Executive shall also be entitled to retain the following
     items of personal property: palm pilot and cell phone.

7.   Confidentiality, Non-Solicitation, Non-Compete and Injunctive Relief.
     ---------------------------------------------------------------------

     The parties acknowledge that the provisions of Sections 7 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 the obligations set
     forth in those Sections 7 and 9 shall continue for a period of two years
     following the termination of this Consulting Agreement. Until two years
     following termination of this Consulting 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.  The
     provisions of paragraph 8 containing Employee's agreement not to compete
     with the Company are hereby deleted in their entirety.  Executive and
     Company agree to reasonably cooperate in defending any litigation against
     the Company and/or Executive for events or actions that occurred during the
     Executive's employment including, but not limited to, providing truthful
     information and testimony in connection with any such legal proceedings.
     The Company agrees that in any letter or reference, referral or
     recommendation that it will not make any derogatory statements concerning
     Executive, his employment with the Company, the termination of his
     employment, or publicly disseminate any information concerning 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 A. Bell), 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

                                       6
<PAGE>

     modified herein, all terms and conditions of the Option Agreement and the
     Additional Option Agreement shall remain in full force & effect.

9.   Indemnification.
     -----------------

     Nothing contained in this Agreement, the Severance Payment Agreement or the
     Release shall affect the right of the Executive to the indemnification
     provided by the Company pursuant to Article IX of the Bylaws of the Company
     as in effect on the date hereof, as well as all rights to indemnification
     by the Company to which he is entitled under the articles of incorporation
     of the Company and the Maryland General Corporation Law, and shall be
     entitled to the benefit of any directors and officers liability insurance
     coverage maintained by the Company.

10.  Severability.
     -------------

     The invalidity or unenforceability of any provision or provisions of this
     Consulting Agreement shall not affect the validity or enforceability of any
     other provision of this Consulting Agreement, which shall remain in full
     force and effect.

11.  Effect of Revocation of General Release.
     ----------------------------------------

     The parties acknowledge that Executive has executed a General Release and
     Waiver in favor of Company dated January 29, 2000 (the "Release").  In the
     event that Executive should exercise his right to revoke the Release as
     described therein, the parties agree that such revocation will
     automatically revoke this Consulting Agreement as of its effective date as
     if it had never been executed by the parties.

     In witness whereof, the undersigned have hereunto set their hands and seal,
either personally or through an authorized corporate representative, as of the
day and year first written above.

COMPANY:                               EXECUTIVE:

SUNTERRA CORPORATION,
a Maryland corporation                 /s/ L. Steven Miller
                                       -------------------------
                                       L. Steven Miller

By: /s/ [ILLEGIBLE]
    -----------------------
As its: Co-Chairman

                                       7