PRINCIPAL STOCKHOLDERS AGREEMENT


         This PRINCIPAL STOCKHOLDERS  AGREEMENT (this "Agreement"),  is made and
entered into as of August 8, 1997, by and among Fairfield  Communities,  Inc., a
Delaware corporation ("Fairfield"), FCVB Corp., a Florida corporation and wholly
owned  subsidiary of Fairfield  ("Merger  Sub"),  Ralph P. Muller ("RM"),  R & A
Partnership,  Ltd., a Texas limited partnership ("R&A"), and Kevin Sheehan ("KS"
and together with RM and R&A, the  "Stockholders").  Capitalized  terms used and
not  otherwise  defined in this  Agreement  have the meanings  ascribed to those
terms in the Merger Agreement referred to below.

                                    RECITALS


A. As of the date of this Agreement,  RM beneficially owns (such term being used
herein  within  the  meaning  of Rule  13d-3  promulgated  under the  Securities
Exchange Act of 1934, as amended)  5,172,026  shares of Common Stock,  par value
$.01 per share ("Vacation  Break Common Stock"),  of Vacation Break USA, Inc., a
Florida  corporation  ("Vacation  Break"),  of which 5,150,526  shares are owned
beneficially  and of record by R&A (of which  350,000  shares (the "RM/JN Option
Shares")  are  subject to an option  granted to Joyce  North  ("JN")) and 21,500
shares  are owned  beneficially  and of  record  by RM and RM's  spouse as joint
tenants (such 5,172,026  shares of Vacation Break Common Stock together with any
other  voting  or  equity  securities  of  Vacation  Break of which RM  acquires
beneficial  ownership  after  the  date  of  this  Agreement  but  prior  to the
consummation  of the Merger  being  referred to herein  collectively  as the "RM
Shares").  As of the date of this  Agreement,  KS  beneficially  owns  1,428,572
shares of Vacation Break Common Stock, of which 175,000 shares are issuable upon
the exercise of currently  exercisable  options and 1,253,572 shares are held of
record by KS (of which 50,000 shares (the "KS/JN Option  Shares") are subject to
an option granted to JN) (such  1,428,572  shares of Vacation Break Common Stock
together with any other voting or equity  securities of Vacation  Break of which
KS acquires  beneficial  ownership after the date of this Agreement but prior to
the consummation of the Merger being referred to herein  collectively as the "KS
Shares").  The shares of Vacation Break Common Stock  described in the preceding
two sentences  together  with any other voting or equity  securities of Vacation
Break of which the Stockholders  acquire beneficial  ownership after the date of
this  Agreement  but prior to the  consummation  of the Merger are  referred  to
herein  collectively as the "Shares".  Each  Stockholder is entitled to vote the
Shares  beneficially  owned by the  Stockholder,  and no Stockholder has entered
into any voting  arrangement  with  respect to the Shares  except as provided in
this Agreement or granted any proxy in respect of any of the Shares.

         B. Concurrently with the execution of this Agreement, Fairfield, Merger
Sub and Vacation Break are entering into an Agreement and Plan of Merger (as the
same may be amended or  modified  from time to time,  the  "Merger  Agreement"),
pursuant  to which and upon the terms and  subject to the  conditions  of which,
Merger Sub will be merged  with and into  Vacation  Break and shares of Vacation
Break Common Stock  outstanding  immediately  prior to the Effective Time of the
Merger will be converted  into and represent  the right to receive,  among other
things,  a number of  shares of Common  Stock,  par  value  $.01 per  share,  of
Fairfield ("Fairfield Common Stock").
<PAGE>

         C. As a condition to the  willingness  of  Fairfield  and Merger Sub to
enter into the Merger  Agreement,  Fairfield  and Merger Sub have  required that
each of the Stockholders  agree, and in order to induce Fairfield and Merger Sub
to enter  into the  Merger  Agreement,  each of the  Stockholders  is willing to
agree, to (i) vote the Shares owned by such  Stockholder for the adoption of the
Merger  Agreement  and the  approval  of the Merger  and the other  transactions
contemplated by the Merger Agreement subject to the conditions set forth herein,
and (ii) the other matters  provided for in this  Agreement,  upon the terms and
subject to the conditions set forth herein.

         D. The  Stockholders  acknowledge  receipt  and review of a copy of the
Merger Agreement.

         NOW  THEREFORE,  in  consideration  of the  foregoing  and  the  mutual
covenants and  agreements  contained  herein,  and intending to be legally bound
hereby, the parties hereto hereby agree as follows:


        1. Voting Agreement.

         (a)  Vacation  Break  Stockholders  Meeting.  Subject to  Section  1(c)
hereof,  at the  Vacation  Break  Stockholders  Meeting  or any  meeting  of the
stockholders of Vacation Break,  however called, and in any action by consent of
the stockholders of Vacation Break,  each of the  Stockholders  will vote all of
the Shares  beneficially  owned by such Stockholder and entitled to vote (i) for
approval of the Merger Agreement and the other transactions  contemplated by the
Merger  Agreement,  (ii) against any action or agreement  that would result in a
breach of any representation,  warranty, covenant, agreement or other obligation
of  Vacation  Break  under  the  Merger  Agreement  or may  result in any of the
conditions to Vacation Break's  obligations under the Merger Agreement not being
fulfilled  and (iii) in favor of any other matter  necessary to  consummate  the
transactions  contemplated by the Merger Agreement and considered and voted upon
by the stockholders of Vacation Break.

         (b) Other  Actions.  Subject to Section 1(c) hereof,  the  Stockholders
will not solicit,  encourage or  recommend  to other  holders of Vacation  Break
Common Stock that those  holders (i) vote their shares of Vacation  Break Common
Stock or any other  securities  of  Vacation  Break in any  manner  that  would,
directly or indirectly,  impede or adversely effect stockholder  approval of the
Merger  Agreement  and  the  other  transactions   contemplated  by  the  Merger
Agreement, (ii) at the Vacation Break Stockholders Meeting, abstain from voting,
or otherwise fail to vote,  their shares of Vacation  Break Common Stock,  (iii)
sell,  transfer,  tender or otherwise  dispose of their shares of Vacation Break
Common Stock or (iv) exercise any dissenters' appraisal or other similar rights.

         (c) Limitation on  Obligations.  The  obligations  of each  Stockholder
under  Sections 1(a) and 1(b) who is a director or officer of Vacation Break are
subject to his obligation to faithfully discharge his duties as a director or an
officer  of  Vacation  Break;  provided,  however,  if  Vacation  Break  has not
terminated  the  Merger  Agreement  pursuant  to  Section  7.1(e) of the  Merger
Agreement,  each such  Stockholder  will  vote his  Shares  in  accordance  with
Sections 1(a) and 1(b).
<PAGE>

         2. Transfer of Shares. Until the close of business on the date on which
results  covering  at least 30 days of  combined  operations  of  Fairfield  and
Vacation  Break have been  published  by  Fairfield,  in the form of a quarterly
earnings  report,  an  effective  registration  statement  filed with the SEC, a
report filed with the SEC on Form 10-K,  10-Q or 8-K, or any other public filing
or announcement which includes those combined results of operations (a "Combined
Operations Filing"), none of the Stockholders will, directly or indirectly,  (a)
sell,  assign,  transfer,  pledge,  encumber or otherwise  dispose of any of the
Shares or the  shares of  Fairfield  Common  Stock  into  which the  Shares  are
converted or exchanged  pursuant to the Merger Agreement (the "Merger  Shares"),
(b) deposit any of the Merger  Shares into a voting trust or enter into a voting
agreement or  arrangement  with respect to any of the Merger Shares or grant any
proxy or power of attorney with respect  thereto or (c) enter into any contract,
option  or other  arrangement  or  undertaking  with  respect  to the  direct or
indirect sale, assignment, transfer or other disposition of any Shares or Merger
Shares.  Notwithstanding  the foregoing  restrictions of this Section 2, R&A (or
RM) may  transfer the RM/JN  Option  Shares to JN following  the exercise of the
options  covering the RM/JN Option  Shares and maintain the existing  pledges of
3,000,000  RM Shares to Morgan  Stanley  and not more than  550,000 RM Shares to
Bear Sterns  (collectively,  the "RM Pledged  Shares"),  and KS may transfer the
KS/JN  Option  Shares to JN following  the exercise of the options  covering the
KS/JN Option  Shares and  maintain the existing  pledges of 200,000 KS Shares to
Sun Trust Bank,  233,000 KS Shares to Josephthal  Lyon & Ross  Incorporated  and
133,000  KS  Shares  to  PPM,  Inc.  (collectively,  the "KS  Pledged  Shares").
Fairfield  will cause a Combined  Operations  Filing to be filed or announced as
promptly as practicable  consistent with past practice in making such filings or
announcements.

         3. Registration  Rights. At the Effective Time,  Fairfield,  R&A and KS
will enter into a Registration  Rights  Agreement in  substantially  the form of
Exhibit A in respect of the Merger  Shares to be acquired by each of RM, R&A and
KS in the Merger.  Notwithstanding  any  provisions of the  Registration  Rights
Agreement,  each of RM, R&A and KS acknowledges that neither any rights provided
under the Registration Rights Agreement nor any registration effected thereunder
will relieve R&A or KS of their respective obligations under this Agreement.

         4.       Restrictive Covenants.

                  (a) Non-competition. Each of RM and KS shall not, for a period
of one year following the Effective Time, or if employed by or otherwise engaged
to provide  services to Fairfield or any of its  Subsidiaries  or elected to the
Board of Directors of Fairfield,  during such employment,  engagement, or tenure
on the Board of Directors and for a period of one year after the  termination of
that employment,  engagement,  or tenure on the Board of Directors,  directly or
indirectly,  engage  in  or  have  any  interest  in  any  sole  proprietorship,
partnership,  corporation,  limited  liability  company,  firm,  association  or
business  or any other  person  or  entity  (whether  as an  employee,  officer,
director,  partner,  member,  agent,  security holder,  creditor,  consultant or
otherwise) that, directly or indirectly,  engages in sales of leads for vacation
<PAGE>

ownership  marketing,  marketing  or  sales  of  vacation  ownership  interests,
timeshares, travel certificates,  vacation packages, or other travel or vacation
related  services  or  products  and any other  business  or  activity  in which
Vacation Break and its  Subsidiaries is engaged (the "Business") in the State of
Florida with respect to  marketing or sales of vacation  ownership  interests or
timeshares,  and  in any  geographic  area  in  which  Vacation  Break  and  its
Subsidiaries  presently  conduct any part of the  Business  with  respect to all
other  aspects  of the  Business  that are  conducted  in that  area;  provided,
however,  that  each of RM and KS may (i)  devote  his time and  efforts  to the
business and affairs of  companies  which are part of  Fairfield's  consolidated
group or (ii) continue to hold securities of Fairfield and/or acquire, solely as
an investment, shares of capital stock or other equity securities of any company
which are traded on any national  securities exchange or are regularly quoted in
the  over-the-counter  market,  so  long  as he  does  not  control,  acquire  a
controlling  interest in or become a member of a group which exercises direct or
indirect control of, more than one percent of any class of capital stock of such
corporation;  and provided  further,  however,  that RM's  involvement  with the
respective  businesses  as  presently  conducted,  and  ownership of the capital
stock, of Coconut Bay Resort Properties,  Inc. and Intracoastal  Resorts,  Inc.,
which have completed the development of the properties  owned or managed by such
corporations,  and Serenity Homes,  Sea America and Serenity shall not be deemed
to be a violation of this Section 4(a).

                  (b) Nondisclosure. Each of RM and KS, as applicable, shall not
divulge,  communicate,  use to the  detriment of  Fairfield or its  Subsidiaries
(including, without limitation,  Vacation Break and its Subsidiaries) or for the
benefit of any other person or persons,  or misuse in any way, any  Confidential
Information (as hereinafter defined) pertaining to the business of Fairfield and
its  Subsidiaries  (including,  without  limitation,   Vacation  Break  and  its
Subsidiaries). Any Confidential Information or data now or hereafter acquired by
Fairfield  with  respect  to the  business  of  Fairfield  or  its  Subsidiaries
(including,  without  limitation,  Vacation Break and its  Subsidiaries),  which
shall include,  but not be limited to,  information  concerning  their financial
condition,  prospects,  technology,  customers,  methods of doing business,  and
marketing  and  promotion  of their  services  and  products,  shall be deemed a
valuable,  special and unique asset of Fairfield  and its  Subsidiaries  that is
received by RM or KS, as applicable, in confidence and as a fiduciary, and RM or
KS, as  applicable,  shall remain a fiduciary to Fairfield and its  Subsidiaries
(including,  without  limitation,  Vacation  Break  and its  Subsidiaries)  with
respect to all of such Confidential Information. For purposes of this Agreement,
"Confidential   Information"  means  information  disclosed  to  RM  or  KS,  as
applicable,  or known by RM or KS, as applicable, as a consequence of or through
his  employment  by  Vacation  Break or  Fairfield  or any of  their  respective
Subsidiaries  or service as a director of Vacation  Break or Fairfield or any of
their respective  Subsidiaries or as a consequence of the Merger and all related
transactions  (including  information  conceived,   originated,   discovered  or
developed by RM or KS, as applicable) prior to or after the date hereof, and not
known to the general  public,  about  Fairfield and its  Subsidiaries,  Vacation
Break  and its  Subsidiaries,  and  their  respective  businesses.  Confidential
Information shall not include information that on the date of this Agreement is,
or, other than a result of the public disclosure by or at the direction of RM or
KS or  disclosure  by a Person who RM or KS should  have known was subject to an
obligation to maintain the  confidentiality  of such information,  subsequent to
the date of this  Agreement  becomes,  (i) publicly  available,  (ii)  generally
available in the timeshare industry,  (iii) non-proprietary to Fairfield and its
<PAGE>

Subsidiaries  (including  Vacation Break and its Subsidiaries),  such as general
information  related to  marketing  programs  widely  utilized in the  timeshare
industry.  If RM or KS, as  applicable,  is  legally  compelled,  pursuant  to a
subpoena,  civil  investigative  demand or  similar  process,  to  disclose  any
Confidential  Information,  RM or KS, as applicable,  shall promptly, and in all
cases prior to disclosing the same, notify Fairfield to permit Fairfield to seek
a protective order or take other  appropriate  action.  RM or KS, as applicable,
shall also  cooperate in  Fairfield's  efforts to obtain a  protective  order or
other  reasonable  assurance that  confidential  treatment will be accorded such
Confidential Information. If, in the absence of a protective order, RM or KS, as
applicable,  is, in the written opinion of their respective counsel addressed to
Fairfield,   compelled  as  a  matter  of  law  to  disclose  such  Confidential
Information,  RM or KS, as  applicable  shall  disclose to the party  compelling
disclosure only that part of such Confidential Information as is required by law
to be  disclosed  (in  which  case,  prior  to  such  disclosure,  RM or KS,  as
applicable,  shall advise and consult with  Fairfield and its counsel as to such
disclosure  and the nature and  wording  of such  disclosure),  and RM or KS, as
applicable,  shall use his best efforts to obtain confidential treatment for any
Confidential Information so disclosed.

                  (c) Nonsolicitation of Employees. Each of RM and KS shall not,
for a period of two years  following  the  Effective  Time, or if employed by or
otherwise engaged to provide services to Fairfield or any of its Subsidiaries or
elected  to the  Board  of  Directors  of  Fairfield,  during  such  employment,
engagement  or tenure on the  Board of  Directors  and for a period of two years
after the termination of that employment,  engagement, or tenure on the Board of
Directors,  directly or indirectly,  for himself or for any sole proprietorship,
partnership,  corporation,  limited  liability  company,  firm,  association  or
business or any other  person or entity,  employ or attempt to employ,  or enter
into any  contractual  arrangement  with any  employee  or sales agent or former
employee  or  former  sales  agent  of  Fairfield  or  Vacation  Break  or their
respective  Subsidiaries  (except with respect to the  employment of Mr. William
Schmidt by RM), unless such person has not been employed or otherwise engaged by
Fairfield or Vacation  Break or their  respective  Subsidiaries  for a period in
excess of six months.

                  (d)  Books and  Records.  All  books,  records,  accounts  and
similar repositories of Confidential  Information of Fairfield or Vacation Break
or their  respective  Subsidiaries,  whether  prepared by RM or KS or  otherwise
coming into his  possession,  shall be the  exclusive  property of Fairfield and
shall be returned immediately to Fairfield on Fairfield's request at any time.

         5.       Indemnification.

                  (a)      Indemnification of Fairfield.

     (i)  Subject  to  Sections  5(a)(ii)  and  5(d),  RM and R&A,  jointly  and
severally as a group,  and KS,  severally  and not jointly,  indemnify  and hold
Fairfield and its Subsidiaries  (including,  without limitation,  Vacation Break
and its Subsidiaries)  (each an "Indemnified  Person") harmless from and against
the sum of (1) 75% of any and all losses, deficiencies,  liabilities and damages
incurred or suffered by an Indemnified  Person  resulting from or arising out of
the matters  that are the  subject of the  proceedings  described  on Schedule 1
(each, an  "Indemnified  Matter"),  plus (2) 25% of all Litigation  Expenses (as
hereinafter defined) incurred by any Indemnified Person in connection with or as
a result of any  Indemnified  Matter in excess of the lesser of (A)  $500,000 or
(B) any reserve for the Indemnified Matter that is reflected in Vacation Break's
consolidated  financial  statements at June 30, 1997 (the sum of (1) and (2) are
referred to as an  "Indemnifiable  Loss").  Litigation  Expenses  shall mean all
reasonable legal,  investigatory,  expert and similar fees and expenses, witness
fees,  transcript  costs,  court costs,  appeal bonds,  appeal bond premiums and
printing costs related to the defense of an Indemnified Matter.
<PAGE>

     (ii) Subject to Section 5(g), the maximum  liability that the  Stockholders
may incur under this Section 5(a) with respect to any Indemnified  Matter is the
amount (the "Maximum  Amount")  specified on Schedule 1 opposite the  respective
Indemnified  Matter and the maximum  liability of RM and R&A, as a group, and KS
under this Section 5(a) with  respect to an  Indemnified  Matter is 80% and 20%,
respectively,   of  the  Maximum  Amount  for  that  Indemnified   Matter.   The
Stockholders  will  satisfy any  indemnity  obligation  under this  Section 5 by
payment of Holdback Shares (as hereinafter  defined) from the Escrow Account (as
hereinafter  defined) valued at the Share Value (as hereinafter  defined) unless
some or all of the Holdback  Shares have been sold or  otherwise  disposed of in
accordance  with this  Agreement,  in which case the payment  will be made first
from the cash held in the Escrow  Account and then from the  Holdback  Shares in
accordance  with the Escrow  Agreement.  For  purposes of this  Section 5, Share
Value will mean the closing  price of a share of  Fairfield  Common Stock on the
New York Stock  Exchange (or, if not quoted on the New York Stock  Exchange,  on
the principal national securities exchange upon which the Fairfield Common Stock
is then traded) on the business day  immediately  preceding the Closing Date, as
such price may be equitably adjusted after that date to give effect to any stock
split,  dividend,  or combination  or  reclassification  of Fairfield's  capital
stock.

                  (b)      Security for Indemnification of Fairfield.

     (i) As security for the agreement by the Stockholders to indemnify and hold
the Indemnified  Persons  harmless under Section 5(a), at the Effective Time the
Stockholders  shall  place in an  escrow  (the  "Escrow  Account")  with a title
company or financial institution reasonably acceptable to Fairfield (the "Escrow
Agent"), pursuant to an escrow agreement in substantially the form of Exhibit B,
certificates  representing  Merger  Shares equal to $7.0 million  divided by the
Share Value (the "Holdback  Shares").  The Holdback Shares so deposited shall be
free and clear of any Liens.  Further,  there shall also be  deposited  with the
Escrow Agent all cash  dividends  paid on the Holdback  Shares and all shares of
Fairfield  Common  Stock  or  other  securities  issued  or  distributed  to the
Stockholders with respect to the Holdback Shares as a result of any stock split,
stock  dividend,  or  combination  or  reclassification  of  or  in  respect  of
Fairfield's  capital stock,  together with any associated share purchase rights.
RM and R&A will deposit 80% and KS will  deposit 20% of the  Holdback  Shares in
the Escrow  Account.  In no event will the number of Holdback  Shares (valued at
the  Share  Value)  plus any  proceeds  from any  such  shares  that are sold or
otherwise  disposed of  pursuant to the terms of this  Section 5, plus any other
securities or other cash amounts  required to be deposited in the Escrow Account
that are received in respect of such shares or other cash  amounts,  that may be
applied to the  Stockholders'  obligations under Section 5(a) with respect to an
Indemnified Matter exceed the Maximum Amount.
<PAGE>

     (ii) All Holdback  Shares shall be deemed to be  beneficially  owned by the
Stockholders, and the Stockholders shall be entitled to vote the Holdback Shares
and, subject to the terms of the Escrow  Agreement,  to receive promptly as paid
by Fairfield all cash dividends or distributions paid thereon in respect thereof
until any such shares are  actually  delivered  to  Fairfield as provided in the
Escrow  Agreement.  To the extent that  Fairfield  applies the  Holdback  Shares
against  Indemnifiable  Losses,  such application  shall be effected against the
Stockholders'  Holdback Shares in the manner set forth in the Escrow  Agreement.
The  Stockholders  may require that all or any portion of the Holdback Shares be
sold in market transactions at any time in accordance with the provisions of the
Escrow  Agreement,  provided  that such sales shall be made in  compliance  with
state and federal securities laws and not in violation of the provisions of this
Agreement.  The net sales proceeds of any such sales of Holdback Shares shall be
retained in the Escrow Account pending disbursement to Fairfield or distribution
to the  Stockholders  in  accordance  with the Escrow  Agreement  (the  Holdback
Shares, any other securities required to be deposited in the Escrow Account, and
any cash proceeds,  interest thereon,  dividends paid on the Holdback Shares and
any other amounts required to be deposited in the Escrow Account are referred to
as the "Escrow  Funds").  All cash proceeds held in the Escrow  Account shall be
invested  in  obligations  issued or  unconditionally  guaranteed  by the United
States government, or issued by any agency or instrumentality thereof and backed
by the full faith and credit of the United States government,  which obligations
mature within one year from the date of  investment or as otherwise  provided in
the Escrow  Agreement,  and any interest  received in respect of any  investment
shall be disbursed in accordance with the Escrow Agreement.

     (iii) If an Indemnified Matter is finally and fully resolved pursuant to an
approved  settlement or a final,  nonappealable  judgment or order of a court of
competent   jurisdiction,   any  Escrow  Funds   allocated  to  the  payment  of
Indemnifiable  Losses  arising  from  such  Indemnified  Matter in excess of the
Escrow Funds paid to Fairfield to satisfy the  Stockholders'  obligations  under
this  Section 5 will be  released to the  Stockholders  in  accordance  with the
Escrow  Agreement.  Before  the  fourth  anniversary  of the  Closing  Date (the
"Release  Date"),  Fairfield and the  Stockholders  will meet and confer in good
faith to agree  upon and  establish  prior  to the  Release  Date the  realistic
Exposure  (as defined  below) to the  Indemnified  Persons  with respect to each
Indemnified  Matter  which has not  previously  been  adjudicated,  dismissed or
settled with respect to each such remaining  Indemnified Matter. As used herein,
"Exposure"  shall mean the  reasonably  projected cost of defense or prosecution
through a final judgment of such matter  (including  attorneys'  fees, costs and
any direct expenses of the Indemnified  Persons in connection  therewith) plus a
realistic  assessment  expressed as a dollar amount of the likelihood and amount
of either an adverse or favorable  judgment on all claims and  counterclaims  in
connection with each of such matters. The portion of the Exposure determined for
each of such  Indemnified  Matters  remaining  as of the  Release  Date plus the
cumulative amount of unreimbursed  Litigation  Expenses through the Release Date
for which the Stockholders would be responsible under this Section 5 if such sum
was  an  actual  Indemnifiable  Loss  shall  be  the  "Cumulative  Exposure"  in
connection with an Indemnified  Matter pending on the Release Date. Escrow Funds
held in the Escrow  Account on the  Release  Date in excess of the Escrow  Funds
<PAGE>

required to satisfy any Cumulative Exposure in respect of the Indemnified Matter
for which those  Escrow  Funds were  allocated  under  Section  5(b)(i)  will be
released to Stockholders  in accordance with the terms of the Escrow  Agreement;
provided,  however,  if an Indemnified Person has suffered an Indemnifiable Loss
pursuant  to an order or judgment  in respect of an  Indemnified  Matter and the
Indemnified  Person  has  appealed  or stayed  the  execution  of such  order or
judgment, none of the Escrow Funds allocated for the payment of an Indemnifiable
Loss in respect of that  Indemnified  Matter  shall be released  from the Escrow
Account to the  Stockholders and shall remain subject to the terms of the Escrow
Agreement and this Section 5 until 30 days after a final, nonappealable order or
judgment has been entered  (unless earlier settled or compromised) in respect of
that Indemnified Matter and all related Litigation Expenses have been paid.

     (iv) The Stockholders  acknowledge that,  subject to the provisions of this
Section 5 and acting in good faith,  Fairfield  will pursue  settlements  of the
Indemnified Matters in a manner or on terms that it reasonably determines are in
the best interests of its stockholders.

                  (c)   Waiver.   The   Stockholders   waive   any   claim   for
indemnification  or  contribution  against  any  Indemnified  Person  (including
Vacation Break and its Subsidiaries)  with respect to any  Indemnifiable  Matter
for which they have any obligation under this Section 5.

                  (d) Payment of Litigation Expenses.  Upon Fairfield's delivery
to the  Stockholders  no more  frequently  than once each  calendar  quarter  of
reasonable documentation  evidencing any Litigation Expenses,  Fairfield will be
entitled to obtain  reimbursement  for the portion of  Litigation  Expenses  the
Stockholders  are obligated to pay under this Section 5 from the Holdback Shares
or cash held in the Escrow  Account.  Fairfield  will also deliver to the Escrow
Agent copies of the  documentation  evidencing  the  Litigation  Expenses as set
forth in the Escrow Agreement.

                  (e)  Counsel;   Cooperation.   Fairfield   shall  defend  each
Indemnified  Matter and shall  prosecute any  reasonable  counterclaim  or third
party  claim  in  respect  of any  Indemnified  Matter  in a  reasonable  manner
consistent with its management of other litigation. Fairfield shall retain legal
counsel to assist it in the defense of the Indemnified  Matters  ("Counsel") who
shall  be  reasonably   satisfactory  to  the  Stockholders.   The  Stockholders
acknowledged  that the existing counsel for each Indemnified  Matter, as well as
Jones,  Day,  Reavis & Pogue,  Carlton Fields and Akerman,  Senterfitt & Eidson,
P.A. are  satisfactory.  Fairfield shall have sole authority to instruct Counsel
with respect to the  Indemnified  Matters and Counsel  shall be entitled to rely
upon such  instructions  without  verification  or  confirmation  from any other
Person.  Each of the Stockholders  shall cooperate with and assist Fairfield and
Counsel in Fairfield's defense of the Indemnified Matters and prosecution of any
claims.  Stockholders and counsel to Vacation Break have identified to Fairfield
defenses  that they  reasonably  believe  to be good and valid  defenses  to the
Indemnified  Matters.  In connection  therewith,  the  Stockholders (i) shall be
available to  Fairfield  and Counsel at mutually  agreeable  times and will make
available their records and other documents that are relevant to the Indemnified
Matters,  (ii) shall assist  Fairfield  and Counsel in locating and  maintaining
those records and other documents that would be necessary or useful in preparing
to defend and/or in defending the Indemnified  Matters,  and (iii) shall execute
such  affidavits,  certificates,  pleadings,  discovery  responses  and  similar
documents  ("Litigation  Papers") as are necessary in the conduct of the defense
of the Indemnified  Matters,  in each case,  however,  after review and approval
(which  approval  shall  not  be  unreasonably  withheld  or  delayed)  of  such
Litigation Papers.
<PAGE>

                  (f) Status.  On a regular  basis,  Fairfield and Counsel shall
advise the Stockholders of all material  aspects of such  Indemnified  Matter to
the extent that such discussions between Fairfield (and its officers, agents and
affiliates),  Counsel  and  Stockholders  would not impair the  attorney  client
privilege.   Counsel  will  provide   copies  of  all  material   pleadings  and
correspondence regarding each Indemnified Matter to Stockholders.

                  (g)   Settlement.   Fairfield   and  Counsel   will  keep  the
Stockholders  fully  advised  in a timely  manner of all  settlement  proposals,
discussions and negotiations  concerning an Indemnified  Matter.  Fairfield will
not effect any settlement of the first Indemnified Matter identified on Schedule
1 (the "MRG Matter") without the  Stockholders'  consent (which consent will not
be unreasonably withheld);  provided,  however, if the Stockholders'  obligation
under  Section  5(a) with  respect  to that  settlement  would be less than $2.0
million  (excluding  Litigation  Expenses),  Fairfield may settle the MRG Matter
without Stockholders'  consent. If Fairfield receives a settlement proposal with
respect to the MRG Matter pursuant to which the  Stockholders'  obligation under
Section 5(a) (excluding Litigation Expenses) exceeds $2.0 million that Fairfield
desires to accept,  Fairfield  will  notify the  Stockholders  in writing of its
desire  and  submit  to the  Stockholders  that  settlement  proposal  for their
approval. If the Stockholders approve that proposed settlement within 5 business
days (or fail to respond to such  request  within such 5 business  day period of
their  receipt  of  that  notice),  Fairfield  may  settle  the  MRG  Matter  on
substantially  the terms described in that notice and the Stockholders  will pay
Fairfield  from the Escrow  Fund,  subject to the limits set forth  herein,  the
Indemnifiable Loss in respect thereof. If the Stockholders do not approve of the
settlement,  they shall (i) notify Fairfield in writing that they do not approve
the  proposed  settlement  within  such 5 business  day period and (ii)  provide
Fairfield a written  undertaking that they (A) will be responsible,  jointly and
severally,  for  any  Indemnifiable  Loss  up to  the  amount  of  the  proposed
settlement and shall,  jointly and severally,  indemnify the Indemnified Persons
for  100%  of any  Indemnifiable  Loss  in  excess  of the  proposed  settlement
(including 100% of Litigation  Expenses incurred after that date) and (B) assume
the defense of that Indemnified  Matter, and shall have sole authority to retain
and direct Counsel with respect to such Indemnified Matter, on the same terms as
set  forth in  Sections  5(e) and 5(f).  The  Stockholders  shall  not  effect a
settlement  of the MRG  Matter  unless  Fairfield  reasonably  consents  to that
settlement  or  the  settlement  includes  an  unconditional   release  of  each
Indemnified Person.

                  (h)  Application of Awards.  Any monetary  damages awarded to,
and received by Fairfield or its Subsidiaries, or insurance proceeds received by
Fairfield or its  Subsidiaries,  in respect of an Indemnified  Matter,  shall be
applied after termination of such Indemnified  Matter on a pro rata basis, first
to  reimburse  the parties for any  Litigation  Expenses  and then to reduce the
Indemnifiable  Losses arising from such Indemnified  Matter and to reimburse the
parties for  payments  made in respect of the  Indemnified  Matter.  All amounts
exceeding the Indemnifiable Losses arising from such Indemnified Matter shall be
retained by Fairfield or its Subsidiaries.
<PAGE>

                  (i)  Continuing  Obligations.  Any  failure  of  Fairfield  to
perform any of its  obligations  under Sections 5(e), 5(f) or the first sentence
of 5(g) will not  relieve  the  Stockholders  of their  obligations  under  this
Agreement. If the Stockholders know or have reason to believe that Fairfield has
failed to perform its  obligations  under Section 5(f) or the first  sentence of
Section 5(g),  the  Stockholders  must notify  Fairfield in writing  thereof and
permit Fairfield 15 business days to cure any such failure before Fairfield will
be deemed to be in breach of such obligations.  If the Stockholders believe that
Fairfield is not performing its obligations  under the first sentence of Section
5(e), they shall notify Fairfield in writing of their belief. Within 10 business
days after Fairfield's receipt of that notice, an executive officer of Fairfield
and the  Stockholders  will meet at a mutually  agreed time and place to discuss
the  Indemnified  Matters  and  Fairfield  will  consult  in good faith with the
Stockholders  regarding the defense of any Indemnified  Matter or prosecution of
any claim.

         6. Effectiveness;  Termination.  Sections 4 and 5 will not be effective
until the Effective Time has occurred.  This Agreement  shall terminate upon the
earlier of (a) any  termination of the Merger  Agreement in accordance  with the
terms thereof and (b) the mutual written consent of the parties hereto.

         7. Share Ownership. RM and R&A represent and warrant to Fairfield that,
as of the date of this Agreement,  the RM Shares constitute all of the shares of
Vacation Break Common Stock beneficially owned by RM and R&A and the description
of the beneficial and record ownership of the RM Shares and of the voting rights
related thereto in Recital A of this Agreement is in all respects true, complete
and correct and such shares,  other than the RM Pledged  Shares,  are owned free
and clear of any Liens.  KS represents and warrants to Fairfield that, as of the
date of this Agreement,  the KS Shares  constitute all of the shares of Vacation
Break  Common  Stock  beneficially  owned  by KS  and  the  description  of  the
beneficial  and  record  ownership  of the KS Shares  and of the  voting  rights
related thereto in Recital A of this Agreement is in all respects true, complete
and correct and such shares,  other than the KS Pledged  Shares,  are owned free
and clear of any Liens.

         8.  Severance  Waiver.  Each of RM and KS waives any severance or other
compensation  which he would otherwise be entitled to receive under his existing
employment  agreement (or any other agreement) with Vacation Break or any of its
Subsidiaries  as a  consequence  of the  termination  of his  employment  by, or
service on the board of directors of, Vacation Break or any of its  Subsidiaries
except,  with  respect to KS, any amount  payable to him under the  Amendment to
Amended and Restated Employment Agreement dated of even date herewith.

         9. Release of Guarantees. Fairfield and the Surviving Corporation shall
use their  reasonable  efforts  (but will not be required to expend any funds or
incur any additional  liability) to obtain the release by the applicable  lender
of RM from any obligation  under any outstanding  guarantee of indebtedness  for
borrowed  money of the  Surviving  Corporation  and its  Subsidiaries  and shall
indemnify  and hold RM harmless  from any losses or  liabilities  incurred by RM
after the Effective Time under any such guarantee.
<PAGE>

         10.      Miscellaneous.

         (a)  Notices.  All  notices,   requests,   claims,  demands  and  other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
to the parties at the following  addresses (or at such other address for a party
as shall be specified by like notice):

                  (i)      if to Fairfield or Merger Sub:

                           Fairfield Communities, Inc.
                           11001 Executive Center Drive
                           Little Rock, Arkansas  72211

                           Attention:  Mr. John W. McConnell

                           with a copy to:

                           Jones, Day, Reavis & Pogue
                           2001 Ross Avenue, Suite 2300
                           Dallas, Texas  75201

                           Attention:  Mark V. Minton, Esq.

                  (ii)     if to RM:

                           Mr. Ralph P. Muller
                           Vacation Break USA, Inc.
                           6400 N. Andrews Avenue
                           Park Plaza, Suite 200
                           Ft. Lauderdale, Florida  33309

                           with a copy to:

                           Greenberg, Traurig, Hoffman,
                             Lipoff, Rosen & Quentel, P.A.
                           1221 Brickell Avenue
                           Miami, Florida  33131

                           Attention:  Gary M. Epstein, Esq.

                  (iii) if to R&A:

                           R & A Partnership, Ltd.
                           2435 S. Ocean Boulevard
                           Highland Beach, Florida  33487

                           Attention:  Mr. Ralph P. Muller
<PAGE>

                           with a copy to:

                           Baker & McKenzie
                           Barnett Tower
                           701 Brickell Avenue
                           Suite 1600
                           Miami, Florida  33131-2827

                           Attention:  Nicholas DeNovio, Esq.

                  (iv)     if to KS:

                           Mr. Kevin Sheehan
                           Vacation Break USA, Inc.
                           6400 N. Andrews Avenue
                           Park Plaza, Suite 200
                           Ft. Lauderdale, Florida  33309

                           with a copy to:

                           Greenberg, Traurig, Hoffman,
                             Lipoff, Rosen & Quentel, P.A.
                           1221 Brickell Avenue
                           Miami, Florida  33131

                           Attention:  Gary M. Epstein, Esq.


         (b)  Severability.  If any term or provision of this Agreement is found
to be invalid,  illegal or unenforceable by a final  determination of a court of
competent  jurisdiction  (i) the remaining terms and provisions  hereof shall be
unimpaired and shall  nevertheless  remain in full force and effect and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.  In the event that,
notwithstanding  the  preceding  sentence,  any of the  provisions  of Section 4
hereof  relating to the geographic or temporal scope of the covenants  contained
therein or the nature of the business  restricted thereby shall be declared by a
court of competent jurisdiction to exceed the maximum restrictiveness such court
deems  enforceable,  such provision shall be deemed to be replaced herein by the
maximum restriction deemed enforceable by such court.

         (c)  Counterparts.  This  Agreement  may be  executed  in  one or  more
counterparts,  all of which shall be considered  one and the same  agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

         (d) Entire  Agreement;  No  Third-party  Beneficiaries.  This Agreement
constitutes  the  entire  agreement,  and  supersede  all prior  agreements  and
understandings,  both  written and oral,  among the parties  with respect to the
subject matter of this Agreement and except for the provisions of Section 5, are
not  intended  to confer  upon any person  other than the  parties any rights or
remedies.
<PAGE>

         (e) Governing Law. This  Agreement  shall be governed by, and construed
in  accordance  with,  the laws of the State of Florida,  regardless of the laws
that might  otherwise  govern under  applicable  principles of conflicts of laws
thereof.

         (f) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned, in whole or in part, by operation of
law or otherwise by any of the parties  without the prior written consent of the
other parties. This Agreement will be binding upon, inure to the benefit of, and
be   enforceable   by,  the   parties   and  their   respective   heirs,   legal
representatives, successors and assigns.

         (g) Enforcement.  The parties agree that irreparable injury would occur
for  which  there is no  adequate  remedy  at law in the  event  that any of the
provisions  of this  Agreement  were not  performed  in  accordance  with  their
specific terms or were  otherwise  breached.  It is accordingly  agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this  Agreement  and to enforce  specifically  the terms and  provisions of this
Agreement in any court of the United  States  located in the State of Florida or
in Florida  state court,  without  posting  bond,  this being in addition to any
other remedy to which they are entitled at law or in equity.  In addition,  each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any federal  court located in the State of Florida or any Florida state court
in the  event any  dispute  arises  out of this  Agreement  or the  transactions
contemplated by this  Agreement,  (b) agrees that it will not attempt to deny or
defeat such personal  jurisdiction by motion or other request for leave from any
such court and (c) agrees  that it will not bring any  action  relating  to this
Agreement or the transactions  contemplated by this Agreement in any court other
than a federal court sitting in the State of Florida or a Florida state court.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


<PAGE>


         IN WITNESS WHEREOF,  the parties have signed this Agreement  personally
or by their respective  officers  thereunto duly authorized,  all as of the date
first written above.

                           FAIRFIELD COMMUNITIES, INC.


                           By:/s/ J. W. McConnell
                              -------------------------------
                            Name:  J. W. McConnell
                            Title:  President and Chief Executive Officer


                           FCVB CORP.


                            By: /s/ J. W. McConnell
                               --------------------------------
                             Name:  J. W. McConnell
                             Title:  President


                             R & A PARTNERSHIP, LTD.

                            By:      RPM Investments, Inc.,
                                      Its General Partner


                            By:/s/ Linda M. Fenner
                               -----------------------------------
                            Name:  Linda M. Fenner
                            Title:  President


                             /s/ Ralph P. Muller
                             ------------------------------------
                             Ralph P. Muller



                             /s/ Kevin Sheehan
                             ------------------------------------
                             Kevin Sheehan


<PAGE>


         IN WITNESS WHEREOF,  the parties have signed this Agreement  personally
or by their respective  officers  thereunto duly authorized,  all as of the date
first written above.

                           FAIRFIELD COMMUNITIES, INC.


                            By:/s/ J. W. McConnell
                              --------------------------------
                          Name: J. W. McConnell
                          Title:  President and Chief Executive Officer


                            FCVB CORP.


                           By:/s/ J. W. McConnell
                              ---------------------------------
                          Name: J. W. McConnell
                          Title:  President


                             R & A PARTNERSHIP, LTD.

                           By:      RPM Investments, Inc.,
                                     Its General Partner



                           By:/s/ Linda M. Fenner
                              -------------------------------- 
                         Name:  Linda M. Fenner
                         Title:  President



                            /s/ Ralph P. Muller
                            --------------------------------- 
                            Ralph P. Muller


                            /s/Kevin Sheehan
                            --------------------------------   
                               Kevin Sheehan


<PAGE>


                                   Schedule 1

Indemnified Matters                                   Maximum Amount

1.       Market Response Group and Laser                $6,000,000
         Company, Inc. v. Vacation Break USA, Inc.

2.       Global Marketing & Travel, Inc. v.                500,000
         Vacation Break USA, Inc.

3.       David Johnson, et al. v.                          500,000
         Vacation Break USA, Inc.