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SUNTERRA CORPORATION ENGAGES CHANIN CAPITAL PARTNERS TO SELL SUNTERRA EUROPE; FORMS
STRATEGIC ALTERNATIVES COMMITTEE; RESTRUCTURES INTERIM MANAGEMENT'S COMPENSATION
TO ALIGN WITH SHAREHOLDER INTERESTS; HIRES VETERAN ACCOUNTING AND RESTRUCTURING
SPECIALIST AS COO
LAS VEGAS, NV--(MARKET WIRE)--Sep 14, 2006 -- The Board of Directors of Sunterra Corporation (OTC:SNRR.PK) today announced that the company has put its European operations up for sale. The Board made its final decision to sell the business based on its and management's determination that the European operations were not strategic, and Chanin Capital Partners' conclusion that the best strategic alternative was a sale. As a result, the company has engaged Chanin to begin the European sale process immediately. To facilitate this process and the overall strategic alternatives review and implementation, the Board formed a Strategic Alternatives Committee and appointed John Ziegelman as its Chairman. The company also announced that it has restructured interim management's compensation and named Steven Varner, a Managing Director at Alvarez & Marsal LLC, as interim Chief Operating Officer, replacing Keith Maib
European Operations to be Sold as Going Concern
Earlier this year, Sunterra retained Chanin to assess, value and assist the Board of Directors in considering strategic alternatives with respect to the European operations. During this same time period, the European business has been streamlined and restructured. Unprofitable marketing and sales channels have been eliminated and ongoing general and administrative expenses have been greatly reduced.
As a result of the above and in connection with Chanin's recommendation to sell the business, the Board has officially put the subsidiary up for sale. The streamlined Sunterra Europe -- its member base, inventory, management contracts, property, plant and equipment, and re-focused sales and marketing organization -- will be marketed by Chanin beginning immediately. During the course of its advisory work, Chanin was approached by several potential strategic acquirers expressing their interest to pursue a transaction for Sunterra Europe. Chanin has commenced the formal sale process for Sunterra Europe, including further discussions with these potential acquirers, and will solicit additional interest.
Strategic Alternatives Committee Formed
To expedite the review and analysis of the company's strategic alternatives for maximizing shareholder value and the sale of Europe, the Board has formed a three-member Strategic Alternatives Committee. In addition to Mr. Ziegelman, James A. Weissenborn, interim President and Chief Executive Officer, and James H. Dickerson, Jr., Chairman of the Audit Committee, will make up the balance of the Committee. The Committee's mandate is to work with the company's advisors and make recommendations to the Board on all matters pertaining to the sale process for Sunterra Europe and to work with Merrill Lynch & Co. as it formulates the company's strategic alternatives for its non-European operations.
Interim Management
The Board has made changes to the company's interim management team, and the Compensation Committee has reduced the overall compensation packages for Mr. Weissenborn and Keith Maib, while further aligning management and shareholder interests. Mr. Weissenborn will continue to serve as interim President and Chief Executive Officer. The Board noted it had interviewed several other potential interim Chief Executive Officers, but concluded that Mr. Weissenborn's management consulting experience, combined with his substantial knowledge of Sunterra's operations and understanding of the timeshare business, makes him uniquely qualified to lead the company through this transitional period. However, the Board decided, and Mackinac Partners, LLC, agreed to substantially reduce the overall compensation package in respect of Mr. Weissenborn's services. Mackinac's incentive fee is tied to Sunterra's stock price and will be zero unless and until the price is at least $15 per share.
The Board is also pleased to announce the appointment of Steven Varner as interim Chief Operating Officer. Mr. Varner is a managing director of Alvarez & Marsal, the independent global professional services firm specializing in business performance improvement that Sunterra engaged to assist in the implementation of its strategic alternatives plan and various business initiatives that are intended to maximize the performance of the North American operations. Mr. Varner has over 16 years of experience advising boards of directors and investors, and has a significant record of assisting in successful financial and operational improvement programs, including substantial experience in the consumer-branded products and services industries. Prior to joining Alvarez & Marsal, Mr. Varner was a non-CPA partner with Deloitte & Touche LLP and Arthur Andersen LLP. He has significant experience with public accounting firms and companies that require re-auditing or restatements, which will be necessary to re-establish Sunterra as a reporting company. Like the new arrangement with Mackinac, Alvarez & Marsal's incentive compensation is tied to clearly defined metrics reflecting Sunterra's stock price at not less than $15 per share.
Keith Maib, Sunterra's former Executive Vice President and Chief Operating Officer, will remain with the company on a transitional basis. He will assume some of the responsibilities of former Chief Marketing Officer David Lucas, as well as other projects on an as- needed basis. Mr. Maib's total compensation package has also been reduced substantially.
The company will be filing a Form 8-K with the Securities and Exchange Commission relating to the management compensation agreements.
Additionally, Sunterra recently began a recruiting process designed to attract qualified timeshare and leisure professionals to join its senior management team on a permanent basis, including filling the chief executive officer and chief marketing officer positions.
About Sunterra
Sunterra is one of the world's largest vacation ownership companies with more than 318,000 owner families and nearly 100 branded or affiliated vacation ownership resorts throughout the continental United States and Hawaii, Canada, Europe, the Caribbean and Mexico. Sunterra news releases, as well as additional news and information on the company, can be found at www.sunterra.com.
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