AGREEMENT AND PLAN OF MERGER

                                      among

                          FAIRFIELD COMMUNITIES, INC.,

                               FC PALMAIRE, INC.,

                             THE BERKLEY GROUP, INC.

                                       and

                             PALM RESORT GROUP, INC.

                          Dated as of December 10, 1997












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                                        i

                                TABLE OF CONTENTS
                                                                        PAGE
ARTICLE I
         THE MERGER.......................................................1
         1.1  The Merger..................................................1
         1.2  Closing.....................................................1
         1.3  Effective Time..............................................2
         1.4  Effect of the Merger........................................2
         1.5  Articles of Incorporation...................................2
         1.6  Bylaws......................................................2
         1.7  Directors...................................................2
         1.8  Officers....................................................2

ARTICLE II
         EFFECTS OF THE MERGER ON THE CAPITAL STOCK OF THE
         CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES...............2
         2.1  Effect on Capital Stock.....................................2
         2.2  Surrender and Payment for Shares............................3
         2.3  Transfer of Shares After the Effective Time.................3

ARTICLE III
         REPRESENTATIONS AND WARRANTIES...................................3
         3.1  Representations and Warranties of Fairfield and Merger Sub..3
         3.2  Representations and Warranties of Shareholder 
               and Palm Resort............................................4
         3.3  Additional Representation of Shareholder....................10

ARTICLE IV
         COVENANTS RELATING TO CONDUCT OF BUSINESS........................10
         4.1  No Solicitation.............................................10
         4.2  Conduct of Business Prior to Effective Time.................11
         4.3  Access to Information.......................................12
         4.4  Investigation by Fairfield..................................13
         4.5  Inspection..................................................13
         4.6  Regulatory Compliance.......................................13
         4.7  Covenants of Fairfield......................................13

ARTICLE V
         ADDITIONAL AGREEMENTS............................................13
         5.1  Confidentiality.............................................13
         5.2  Indemnification of Shareholder..............................14
         5.3  Indemnification of Fairfield................................14
         5.4  Procedures for Indemnity....................................14
         5.5  Exclusivity Of Indemnification For Contractual Breaches.....15
         5.6  Reasonable Efforts..........................................16
<PAGE>

         5.7  Expenses and Fees...........................................16
         5.8  Consents....................................................16
         5.9  Repayment of PPM Loan; Release of Claims....................16
         5.10  Delivery of Information....................................16
         5.11  Tax Matters................................................16

ARTICLE VI
         CONDITIONS PRECEDENT; CLOSING....................................20
         6.1  Conditions to Each Party's Obligation to Effect the Merger..20
         6.2  Conditions to Obligations of Palm Resort and Shareholder....21
         6.3  Conditions to Obligations of Fairfield and Merger Sub.......21
         6.4  Frustration of Closing Conditions...........................22
         6.5  Closing Documents and Procedures............................22

ARTICLE VII
         TERMINATION, AMENDMENT AND WAIVER................................24
         7.1  Termination.................................................24
         7.2  Effect of Termination.......................................25
         7.3  Amendment...................................................25
         7.4  Extension; Waiver...........................................25

ARTICLE VIII
         GENERAL PROVISIONS...............................................25
         8.1  Survival of Representations and Warranties..................25
         8.2  Notices.....................................................25
         8.3  Definitions.................................................26
         8.4  Interpretation..............................................28
         8.5  Counterparts................................................28
         8.6  Entire Agreement; No Third-party Beneficiaries..............28
         8.7  Governing Law...............................................28
         8.8  Assignment..................................................29
         8.9  Enforcement.................................................29



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         AGREEMENT  AND PLAN OF  MERGER  dated as of  December  10,  1997  (this
"Agreement"),   among  FAIRFIELD  COMMUNITIES,   INC.,  a  Delaware  corporation
("Fairfield"),  FC  PALM-AIRE,  INC., a Florida  corporation  and a wholly owned
subsidiary  of Fairfield  ("Merger  Sub"),  THE BERKLEY  GROUP,  INC., a Florida
corporation  ("Shareholder")  and PALM RESORT GROUP, INC., a Florida corporation
("Palm Resort").

         WHEREAS,  the respective Boards of Directors of Fairfield,  Merger Sub,
Shareholder  and  Palm  Resort  each  have  determined  that  it is in the  best
interests of their respective stockholders for Merger Sub to merge with and into
Palm Resort (the  "Merger"),  upon the terms and subject to the  conditions  set
forth in this Agreement;

     WHEREAS,  Shareholder  holds all of the  outstanding  capital stock of Palm
Resort;

         WHEREAS,  the respective  Boards of Directors of Fairfield,  Merger Sub
and Palm Resort have each determined that the Merger and the other  transactions
contemplated  under this Agreement are consistent  with, and in furtherance  of,
their respective business strategies and goals; and

         WHEREAS,  Fairfield,  Merger Sub, Shareholder and Palm Resort desire to
make certain representations, warranties, covenants and agreements in connection
with the  transactions  contemplated  by this  Agreement  and also to  prescribe
various conditions to the Merger.

         NOW, THEREFORE,  in consideration of the  representations,  warranties,
covenants and agreements  contained in this Agreement,  the parties hereto agree
as follows:


                                    ARTICLE I
                                   THE MERGER

         I.1 The Merger.  Upon the terms and subject to the conditions set forth
in this Agreement,  and in accordance with the Florida Business  Corporation Act
(the  "FBCA"),  Merger  Sub  shall be merged  with and into  Palm  Resort at the
Effective  Time (as  hereinafter  defined).  Following the Merger,  the separate
corporate  existence  of Merger Sub will cease and Palm Resort will  continue as
the surviving corporation (the "Surviving  Corporation") and will succeed to and
assume all the rights and obligations of Merger Sub in accordance with the FBCA.

         I.2 Closing.  The closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the date that is two business days after the  expiration of the
Inspection  Period (the "Closing Date"),  at the offices of Jones, Day, Reavis &
Pogue, 2300 Trammell Crow Center, 2001 Ross Avenue,  Dallas, Texas 75201, unless
another  date,  time or place is  agreed  to in  writing  by all of the  parties
hereto.

        I.3 Effective  Time.  Subject to the provisions of this  Agreement,  as
soon as  practicable  on or after the  Closing  Date the parties  shall  deliver
Articles of Merger (the  "Articles of Merger")  executed in accordance  with the
relevant provisions of the FBCA to the Florida Department of State for filing as
required under the FBCA and shall make all other filings or recordings  required
under the FBCA. The Merger shall become  effective at such time (the  "Effective
Time") as the  Articles  of  Merger  are  accepted  for  filing  by the  Florida
Department  of State (or such later time as stated in the Articles of Merger and
permitted by the Florida Department of State), which will be the Closing Date or
as soon as practicable thereafter.
<PAGE>

          I.4 Effect of the Merger.  The Merger shall have the effects set forth
     in Section 607.1106 of the FBCA.

         I.5 Articles of Incorporation. Articles of incorporation of Palm Resort
shall be  amended to read in their  entirety  as set forth in Exhibit A attached
hereto and shall be the articles of incorporation  of the Surviving  Corporation
until thereafter changed or amended as provided therein or by applicable law.

         I.6 Bylaws. The bylaws of Palm Resort shall be amended to read in their
entirety  as set forth in  Exhibit B and  shall be the  bylaws of the  Surviving
Corporation following the Merger until thereafter changed or amended as provided
therein or by applicable law.

         I.7 Directors.  The directors of Merger Sub at the Effective Time shall
be the directors of the Surviving  Corporation  following the Merger,  until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

         I.8 Officers. The officers of Merger Sub at the Effective Time shall be
the  officers of the  Surviving  Corporation  following  the  Merger,  until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.


                                   ARTICLE II
                EFFECTS OF THE MERGER ON THE CAPITAL STOCK OF THE
               CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

         II.1 Effect on Capital  Stock.  As of the Effective  Time, by virtue of
the Merger and without any action on the part of the holder of any shares of the
capital stock of the constituent corporations:

                  (a) Merger  Consideration.  All of the shares of Common Stock,
         par value  $1.00 per share,  of Palm Resort  (the "Palm  Resort  Common
         Stock") issued and outstanding  immediately prior to the Effective Time
         (other than shares of Palm Resort Common Stock,  if any, to be canceled
         under Section  2.1(c)),  shall be converted into the right to receive a
         cash payment in an aggregate  amount equal to  $6,500,000  (the "Merger
         Consideration").

                  (b) Certificates. All shares of Palm Resort Common Stock to be
         converted into the right to receive the Merger  Consideration  pursuant
         to this  Section 2.1 shall cease to be  outstanding,  shall be canceled
         and retired and shall cease to exist,  and each holder of a certificate
         representing  any  such  shares  of  Palm  Resort  Common  Stock  shall
         thereafter cease to have any rights with respect to such shares of Palm
         Resort Common Stock, except the right to receive for each of the shares
         of Palm Resort Common Stock,  upon the surrender of such certificate in
         accordance  with  Section  2.2,  the  amount  of  Merger  Consideration
         specified in Section 2.2.
<PAGE>

                  (c) Treasury  Shares.  Shares of Palm Resort Common Stock,  if
         any,  held by Palm Resort as treasury  stock  immediately  prior to the
         Effective  Time shall cease to be  outstanding,  shall be canceled  and
         retired without payment of any consideration  therefor, and shall cease
         to exist.

                  (d) Stock of Merger Sub. Each share of common stock, par value
         $.01 per share, of Merger Sub issued and outstanding  immediately prior
         to the  Effective  Time shall be converted  into and  exchanged for one
         validly issued,  fully paid and nonassessable  share of common stock of
         the Surviving Corporation.

         II.2 Surrender and Payment for Shares. At the Closing,  the Shareholder
will deliver to Fairfield a certificate or certificates  representing all of the
shares  of  Palm  Resort  Common  Stock  outstanding  immediately  prior  to the
Effective Time.  Fairfield shall deliver to Shareholder the Merger Consideration
by wire transfer of immediately available funds to such account as is designated
by Shareholder at least two business days prior to the Closing.

         II.3  Transfer of Shares  After the  Effective  Time.  No  transfers of
shares of Palm Resort Common Stock shall be made on the stock  transfer books of
Palm  Resort  after  the close of  business  on the day prior to the date of the
Effective Time.
                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         III.1  Representations  and  Warranties  of  Fairfield  and Merger Sub.
Fairfield and Merger Sub represent and warrant to Palm Resort and Shareholder as
follows:

                  (a)  Organization.  Each  of  Fairfield  and  Merger  Sub is a
         corporation duly organized, validly existing and in good standing under
         the laws of its jurisdiction of incorporation.

                  (b) Binding  Agreement.  Each of Fairfield  and Merger Sub has
         full  corporate  power  and  authority  to  execute  and  deliver  this
         Agreement and to consummate the  transactions  contemplated  hereby and
         has taken all necessary corporate action to authorize the execution and
         delivery  of  this  Agreement  and  to  consummate   the   transactions
         contemplated   hereby.  This  Agreement  has  been  duly  executed  and
         delivered by  Fairfield  and Merger Sub and  constitutes  the valid and
         binding agreement of Fairfield and Merger Sub enforceable in accordance
         with its terms.
<PAGE>

                  (c) Governmental  Approvals. No consent,  approval,  order, or
         authorization  of, or declaration,  filing,  or registration  with, any
         Governmental  Entity is required to be obtained or made by Fairfield or
         Merger Sub in connection with the execution,  delivery,  or performance
         by Fairfield and Merger Sub of this  Agreement or the  consummation  by
         Fairfield and Merger Sub of the transactions contemplated hereby, other
         than such consents,  approvals,  orders, or authorizations that, if not
         obtained, and such declarations, filings, or registrations that, if not
         made,  would not,  individually  or in the  aggregate,  have a material
         adverse effect on Fairfield and its Subsidiaries considered as a whole.

                  (d)  Broker's  Fee.  Fairfield  has not made any  agreement or
         taken any other action which might cause anyone to become entitled to a
         broker's fee or commission as a result of the transactions contemplated
         under this  Agreement,  except for the  engagement  by Fairfield of any
         financial  advisor,  broker,  agent or finder for which  Fairfield will
         have  full  liability  for the  payment  of any  such  broker's  fee or
         commission.

                  (e) Merger Sub.  Merger Sub is a newly  formed  direct  wholly
         owned subsidiary of Fairfield formed solely for the purpose of engaging
         in this transaction. As of the Effective Time, Merger Sub will not have
         conducted  any business nor will it own any  significant  assets or owe
         any significant liabilities.

         III.2  Representations  and Warranties of Shareholder  and Palm Resort.
Shareholder  and Palm Resort hereby jointly and severally  represent and warrant
to Fairfield and Merger Sub as follows:

                  (a) Organization. Palm Resort is a corporation duly organized,
         validly  existing and in good  standing  under the laws of the State of
         Florida.  Palm Resort has full power to own its properties and to carry
         on the business  currently  being conducted by it, and does not conduct
         business in any state other than Florida.  Palm Resort does not now own
         and has never  owned any  capital  stock or any equity  interest in any
         corporation,  limited  liability  company,  partnership or other entity
         other than its  ownership of the Interest and has no  Subsidiary  other
         than the Partnership.

                  (b)  Binding   Agreement.   The   execution,   delivery,   and
         consummation  of this Agreement has been duly authorized by each of the
         Shareholder and Palm Resort and approved by all necessary action.  This
         Agreement  has been duly  executed  and  delivered  by Palm  Resort and
         Shareholder and constitutes the valid and binding  agreement of each of
         them enforceable in accordance with its terms.

                  (c) No Breach. Neither the execution of this Agreement nor the
         consummation of the transactions contemplated hereby will (i) result in
         the breach of any term or provision of, or constitute a default  under,
         or  be  in  violation  of  any  charter  provision,  bylaw,  agreement,
         instrument,  order, law or regulation to which Shareholder, Palm Resort
         and/or the  Partnership  is a party or which is  otherwise  applicable,
         (ii) result in the creation or  imposition  of any Lien upon any of the
         property or assets of the Shareholder,  Palm Resort or the Partnership,
         (iii) violate any  Applicable  Law binding upon the  Shareholder,  Palm
         Resort, or the Partnership,  or (iv) violate the terms of or constitute
         a default under, any note, bond, mortgage, indenture, or other contract
         between  third  parties  and  the  Shareholder,   Palm  Resort  or  the
         Partnership or by which the Shareholder, Palm Resort or the Partnership
         may be bound or result in the  termination,  acceleration  or amendment
         thereof,  except,  in the case of clauses (ii) and (iii) above, for any
         such conflicts,  violations or Liens that would not, individually or in
         the  aggregate,  have a material  adverse  effect on Palm Resort or the
         Partnership.
<PAGE>

                  (d) Governmental  Approvals. No consent,  approval,  order, or
         authorization  of, or declaration,  filing,  or registration  with, any
         Governmental  Entity is required to be obtained or made by Shareholder,
         Palm  Resort  or the  Partnership  in  connection  with the  execution,
         delivery,  or  performance  by  Shareholder  and  Palm  Resort  of this
         Agreement or the  consummation by it of the  transactions  contemplated
         hereby.

                  (e)   Partnership   Capitalization;   Title   to   Partnership
         Interests.  Except as otherwise set forth in the Partnership Agreement,
         Palm Resort owns and holds the Interest  beneficially and of record and
         free and clear of any Liens and of any right of  assignment  or options
         of any third party.  Palm Resort has paid in full and is not in default
         with  respect to any  capital  contribution  required  to be paid by it
         pursuant to the Partnership  Agreement.  There are no rights,  options,
         subscriptions,  or  other  agreements  of any  kind to  purchase  or to
         acquire,  receive or be issued any  interest in respect of the Interest
         existing in favor of any  person,  and there are no  agreements  of any
         kind to which  Palm  Resort  is a  party,  other  than the  Partnership
         Agreement  and  this  Agreement,   providing  for  or  restricting  the
         governance or control of the  Partnership  or the issuance or transfer,
         directly or indirectly,  of any interest in the Interest. Except as set
         forth in the  Partnership  Agreement,  Palm Resort has no agreements or
         commitments  of any kind in its  capacity  as a general  partner of the
         Partnership  to cause the  Partnership to  contribute,  make loans,  or
         guarantee the  contribution or loan of any Person,  whether directly or
         indirectly,  and after the  Closing  with  respect to the  Partnership,
         Fairfield  shall  not be  deemed  to have  assumed,  been  assigned  or
         otherwise  be  obligated  or  responsible  for any  such  agreement  or
         commitment to the  Partnership.  The  Partnership  Agreement is in full
         force and effect.
<PAGE>

                  (f)  Financial  Statements.  Shareholder  and Palm Resort have
         furnished to Fairfield  unaudited  balance  sheets of Palm Resort as of
         December 31, 1996 and the related  unaudited  statements  of operations
         for the fiscal year then ended and the unaudited  balance sheet of Palm
         Resort as of November 30, 1997 and the related unaudited  statements of
         operations for the interim period then ended (the "Unaudited  Financial
         Statements").  Those financial  statements fairly present the financial
         position  of Palm  Resort at, and the  results  of  operations  for the
         periods ending on, such dates,  in a consistent  manner  throughout the
         periods  indicated  and were  prepared  based on the books and  records
         maintained  for Palm  Resort's  business.  Except as  disclosed  in the
         Unaudited Financial Statements (which includes the notes thereto), Palm
         Resort has no liabilities  (contingent,  accrued,  actual or otherwise)
         that were not provided or reserved for in the November 30, 1997 balance
         sheet,  other than liabilities  incurred since the date of the November
         30, 1997  balance  sheet in the ordinary  course of  business;  and all
         reserves  established  by Palm Resort and reflected in the November 30,
         1997 balance  sheet were at the times they were  established,  adequate
         for the purposes indicated therein; subject, however, to the limitation
         that  Palm  Resort  has  not  accrued  reserves  for  tax  liabilities.
         Fairfield  acknowledges  such  limitation  of the  Unaudited  Financial
         Statements.  Except as disclosed in the Unaudited Financial Statements,
         since November 30, 1997, Palm Resort has not: (i) declared or set aside
         or paid any dividend or made any payment or  distribution in respect of
         shares of its  capital  stock;  (ii) made any loans or  advances to any
         person;  (iii) entered into any transaction  with any affiliate of Palm
         Resort  or  Shareholder;  (iv)  incurred  any  indebtedness  for  money
         borrowed; or (v) made or entered into any agreement or understanding to
         do any of the foregoing.

                  (g) Assets.  (i) Palm  Resort does not have,  and has not had,
         any  assets  or  properties,  whether  tangible  or  intangible,  real,
         personal or mixed, owned or leased other than the Interest. Palm Resort
         is not a party to any leases, subleases,  rental agreements,  contracts
         of sale,  tenancies  or  licenses  of any  assets  or  properties.  The
         Interest  constitutes  all the properties  and assets  reflected in the
         Unaudited  Financial  Statements  and all the assets  necessary for the
         conduct by Palm Resort of its business as now conducted.

                  (h)   Proceedings.   There  are  currently  no  pending,   and
         Shareholder and Palm Resort are not aware of any  threatened,  actions,
         suits,  proceedings or investigations  against or affecting Palm Resort
         or the Interest.  Palm Resort is not subject to any currently  existing
         order, writ,  injunction or decree. The Shareholder and Palm Resort are
         not aware of any actions, suits,  proceedings or investigations pending
         or threatened by or before any court or Governmental Entity (i) against
         or affecting the  Partnership or the Resort  Property or arising out of
         the development,  construction, operation, maintenance or management of
         the  Resort   Property  or  (ii)  that  would  prevent  or  hinder  the
         performance by Shareholder or Palm Resort of its obligations under this
         Agreement.

                  (i) Compliance  With Laws. Palm Resort and to the knowledge of
         Shareholder and Palm Resort, the Partnership, are and have at all times
         been, in compliance in all material  respects with all applicable laws,
         rules,  regulations  and  orders.  There  are  no  pending  or,  to the
         knowledge of Shareholder and Palm Resort, proposed laws or governmental
         rules that have been  submitted in writing to any  Governmental  Entity
         for due consideration  that, if enacted,  would have a material adverse
         effect on Palm Resort,  the Resort Property or the Partnership.  Except
         as set forth in Schedule 3.2(i),  none of Shareholder or Palm Resort is
         charged or, to each of their  knowledge,  threatened with, or, is under
         investigation  with respect to, any  violation of any  provision of any
         applicable law, rule, regulation or order.

                  (j) Claims. Except as set forth in the Partnership  Agreement,
         there are no claims of the Partnership  against, or any obligation owed
         to the  Partnership by, Palm Resort,  or  Shareholder.  No affiliate of
         Palm Resort or Shareholder  is owed any obligation by the  Partnership,
         or  holds a claim  against  the  Partnership,  except  as set  forth on
         Schedule 3.2(j).
<PAGE>

                  (k) PPM Loan.  Schedule 3.2(k) sets forth a true, complete and
         correct  list of all  documents  relating  to  indebtedness  for  money
         borrowed  from, or any other  obligations or liabilities of Palm Resort
         or the Partnership  to, PPM Brokerage  Service,  Inc.  ("PPM;" all such
         indebtedness,  obligations and liabilities, the "PPM Loan"), including,
         without  limitation,  promissory  notes  and all  mortgages  and  other
         collateral  security  instruments that secure the PPM Loan and encumber
         the Resort  Property,  including all amendments or supplements  thereto
         (collectively, the "PPM Loan Documents"). The PPM Loan Documents are in
         full force and effect and have not been  further  modified  or amended.
         PPM is the sole  obligee of the PPM Loan.  As of December  19, 1997 the
         outstanding  principal  balance of and accrued interest on the PPM Loan
         was $3,620,975 and $399,302,  respectively,  and no penalties,  fees or
         other  amounts are due or payable  with  respect to the PPM Loan except
         expenses of $30,000. For purposes of this Agreement,  "PPM Loan Amount"
         shall mean $4,050,277.

                  (l)  Partnership  Agreement and Marketing  Agreements.  To the
         best knowledge of Shareholder  and Palm Resort,  neither partner of the
         Partnership is in violation of either the Partnership  Agreement or any
         marketing agreements to which either entity is subject.

                  (m) Adverse Change.  Since the date of the Unaudited Financial
         Statements,  Palm  Resort  has not  made or  experienced  any  material
         adverse change in its working  capital,  financial  condition,  assets,
         liabilities, reserves, business, operations or prospects.

                  (n) Employees. Palm Resort does not have, and has not had, any
         employees and has no obligation to contribute  any amount to any Person
         in respect of the compensation,  accrued benefits, or vacation and sick
         leave of any  Person.  Palm  Resort  is not a party  to any  collective
         bargaining agreements.

                  (o)  Environmental  Matters.  Palm  Resort has not and, to the
         knowledge of  Shareholder  and Palm  Resort,  the  Partnership  and the
         Resort  Property  have not been  associated  with any spill,  disposal,
         discharge or release of any  hazardous  materials  (which  includes any
         hazardous or toxic  substance,  material or waste which is regulated by
         any Governmental Entity) into or upon or over any real property or into
         or upon ground or surface water including without  limitation in either
         case,  any real  property  that is or has been leased by Palm Resort or
         the Partnership.

                  (p) Broker's Fee. Neither Palm Resort nor Shareholder has made
         any  agreement  or taken any other  action  which might cause anyone to
         become  entitled  to a broker's  fee or  commission  as a result of the
         transactions contemplated under this Agreement.
<PAGE>

                  (q)  Capitalization.  The  authorized  capital  stock  of Palm
         Resort  consists of 7,500 shares of Palm Resort Common Stock,  of which
         100 shares are issued and outstanding.  All outstanding  shares of Palm
         Resort Common Stock have been duly authorized and validly  issued,  are
         fully paid and nonassessable, and are owned by Shareholder. No options,
         warrants,  subscriptions,  rights of conversion or exchange  exist that
         may obligate Palm Resort to issue any additional capital stock. Neither
         Palm Resort nor Shareholder is party to shareholder,  voting or similar
         agreement or arrangement of any kind affecting or restricting the sale,
         transfer,  disposition,  voting or other  rights of or  relating to the
         Palm Resort Common Stock,  other than the  Partnership  Agreement.  Set
         forth on  Schedule  3.2(q) are the number and  percentage  of shares of
         Palm Resort Common Stock held of record by Shareholder.

                  (r)  Benefit  Plans;  Labor  Relations.  Palm  Resort  has  no
         "employee  benefit  plan," as such term is defined  in Section  3(3) of
         ERISA or other plan, program, policy, contract or arrangement providing
         for bonuses,  pensions,  deferred pay,  stock or stock related  awards,
         severance   pay,    salary    continuation    or   similar    benefits,
         hospitalization, medical, dental or disability benefits, life insurance
         or other employee  benefits,  or  compensation to or for any current or
         former employees, agents, directors, or independent contractors of Palm
         Resort ("Palm Resort  Employees") or any beneficiaries or dependents of
         any Palm Resort employees.

                  (s)      Taxes.

                           (i) All Tax  Returns (as  defined in  paragraph  (iv)
                  below) required to be filed by Palm Resort or Shareholder have
                  been  duly  filed  on a  timely  basis  with  the  appropriate
                  federal, state, local and foreign tax authorities, or requests
                  for  extensions  to file such  returns  or  reports  have been
                  timely  filed and granted and have not  expired,  and all such
                  Tax  Returns  are   complete  and  accurate  in  all  material
                  respects.  Palm Resort and the  Shareholder  have paid or made
                  adequate provision in the Unaudited  Financial  Statements for
                  all Taxes (as defined in  paragraph  (iv) below)  shown as due
                  from each of them on such Tax Returns.  No claim has been made
                  by any authority in a jurisdiction  where Palm Resort does not
                  file Tax  Returns  that it is or may be subject to taxation by
                  that jurisdiction.  The Unaudited Financial Statements reflect
                  adequate reserves for all Taxes payable by Palm Resort for all
                  taxable periods and portions  thereof accrued through the date
                  of such  financial  statements,  and no  deficiencies  for any
                  Taxes have been  proposed,  asserted or assessed  against Palm
                  Resort  that  are not  adequately  reserved  for,  except  for
                  inadequately   reserved   Taxes  and   inadequately   reserved
                  deficiencies that would not, individually or in the aggregate,
                  have a material  adverse  effect on Palm Resort.  There are no
                  liens for Taxes (other than for current  Taxes not yet due and
                  payable) on the assets of Palm Resort. No requests for waivers
                  of the time to assess any Taxes  against Palm Resort have been
                  granted or are pending,  except for  requests  with respect to
                  such  Taxes  that have  been  adequately  reserved  for in the
                  Unaudited Financial Statements.  Palm Resort is not a party to
                  or bound by any  agreement  providing  for the  allocation  or
                  sharing  of Taxes;  except by reason of its  inclusion  in the
<PAGE>

                  consolidated  federal  tax  returns  of  Shareholder  as noted
                  below.  Palm  Resort  has not filed a consent  pursuant  to or
                  agreed to the  application of Section 341(f) of the Code. Palm
                  Resort has  disclosed  on its  federal  income tax returns all
                  positions  taken therein that could give rise to a substantial
                  understatement  of federal  income  tax within the  meaning of
                  Section  6662 of the Code.  All Taxes that are required by the
                  laws of the United States, any state or political  subdivision
                  thereof, or any foreign country to be withheld or collected by
                  Palm Resort have been duly  withheld or collected  and, to the
                  extent  required,  have been paid to the  proper  Governmental
                  Entities or properly deposited as required by applicable laws.
                  Except  as set  forth  in  Schedule  3.2(s),  the  statute  of
                  limitations for all Tax Returns of Palm Resort has expired for
                  all federal,  state,  local and foreign Tax purposes.  Neither
                  Palm  Resort  nor  Shareholder  has  received  any  notice  of
                  deficiency or  assessment  from any federal,  state,  local or
                  foreign taxing authority with respect to liabilities for Taxes
                  of Palm  Resort  which  has not  been  fully  paid or  finally
                  settled.  No power of  attorney  has been  executed  by, or on
                  behalf of,  Palm  Resort or  Shareholder  with  respect to any
                  matter  relating to Taxes  applicable  to Palm Resort which is
                  currently  in  force.  Palm  Resort  is  not a  party  to  any
                  agreement,  contract,  or other arrangement that would result,
                  separately or in the aggregate,  in the requirement to pay any
                  "excess parachute payments" within the meaning of Section 280G
                  of the Code.  Palm  Resort is not a party to a tax  sharing or
                  tax  indemnity  agreement or any other  agreement of a similar
                  nature that remains in effect.  Palm Resort (i) has not been a
                  member of an affiliated  group filing a  consolidated  federal
                  income  tax return  except  with  respect to the  consolidated
                  federal  income  tax  return  of  Shareholder  and (ii) has no
                  liability for the taxes of any person (other than Palm Resort)
                  under  Treasury  Regulation  Section  1.1502-6 (or any similar
                  provision of state, local, or foreign law), as a transferee or
                  successor, by contract or otherwise.

                           (ii)  Schedule  3.2(s) sets forth each state in which
                  Palm Resort has  collected  or remitted  any sales  and/or use
                  Taxes since September 1, 1992. To the knowledge of Palm Resort
                  and Shareholder,  Palm Resort has not conducted  activities in
                  any other state that would  require such Taxes to be collected
                  or  remitted.  No claim has ever been made since  September 1,
                  1992 by any authority in a jurisdiction where Palm Resort does
                  not pay sales and/or use Taxes that it is or may be subject to
                  a requirement to remit such Taxes in that jurisdiction.

                           (iii) Palm  Resort is not liable for the Taxes of any
                  person as a "transferee" within the meaning of Section 6901 of
                  the Code.

                           (iv) For purposes of this  Agreement,  "Taxes"  shall
                  mean all taxes,  charges,  fees,  levies,  penalties  or other
                  assessments imposed by any United States federal, state, local
                  or foreign taxing  authority,  including,  but not limited to,
                  income, gross receipts,  excise, property,  sales, use (or any
                  similar taxes),  transfer,  franchise,  payroll,  withholding,
                  social  security,   business  license  fees,  or  other  taxes
                  including any interest,  penalties or additions  thereto.  For
                  purposes  of this  Agreement,  "Tax  Return"  shall  mean  any
                  return, report, information return, schedule or other document
                  (including any related or supporting  information) required to
                  be supplied to a taxing authority with respect to Taxes.
<PAGE>

                  (t)  Voting   Requirements.   The  affirmative   vote  of  the
         Shareholder  (the "Palm Resort  Shareholder  Approval") to approve this
         Agreement  is the only vote of the  holders  of  capital  stock of Palm
         Resort  necessary  to  approve  this  Agreement  and  the  transactions
         contemplated by this Agreement.

                  (u)  No  Misleading  Statement.   To  the  best  knowledge  of
         Shareholder  and Palm  Resort,  neither  this  Agreement  nor any other
         document,   certificate,   financial   statement  or  other  instrument
         delivered  to  Fairfield  in  connection  herewith  contains any untrue
         statement  of a  material  fact  or  omits  to  state a  material  fact
         necessary in order to make the statements  contained herein or therein,
         in  light  of  the  circumstances  under  which  they  were  made,  not
         misleading.

         III.3 Additional Representation of Shareholder.  Shareholder represents
and  warrants  on  behalf  of  Shareholder  to  Fairfield  and  Merger  Sub that
Shareholder  has relied and will rely upon his own tax  advisors  for advice and
counseling in regard to the structure, accounting or tax treatment and all other
tax or  accounting  issues  relating  to the  transactions  contemplated  by the
parties  hereunder.  Shareholder has not relied,  nor will Shareholder  rely, on
Fairfield or its tax advisors, for any tax advice or counseling in regard to the
transactions contemplated hereunder.


                                   ARTICLE IV
                    COVENANTS RELATING TO CONDUCT OF BUSINESS

         IV.1 No  Solicitation.  Prior to the  Effective  Time,  Palm Resort and
Shareholder  will not (a) offer for sale the  Interest  or any  interest in Palm
Resort;  (b) solicit any offers to purchase or make any attempts by  preliminary
conversations  or negotiations to dispose of the Interest or any equity interest
in Palm Resort to any person,  firm or entity,  other than to  Fairfield,  or to
engage in any type of  business  combination  with any  person,  firm or entity,
other than  Fairfield;  or (c) provide  anyone with any written or oral offer to
sell,  invitation to purchase or any offering or sales  material with respect to
the Interest or any equity interest in Palm Resort.

         IV.2  Conduct  of  Business  Prior  to  Effective   Time.   Except  for
transactions specifically permitted by this Agreement or consented to in writing
by Fairfield, prior to the Effective Time Palm Resort shall (and the Shareholder
will cause Palm Resort to):

          (a) operate its business  only in the ordinary  course,  and employ no
     persons;

          (b)  neither  make,  nor incur any  obligation  to make,  any  capital
     expenditures;
<PAGE>

          (c) make no sale or other  disposition  of the  Interest or any equity
     interest in Palm Resort;

          (d)  not  enter  into,  amend,  rescind  or  terminate  any  contract,
     arrangement or commitment;

          (e) not declare, set aside or make any dividend, distribution, loan or
     other  advance to  Shareholder  or any other person  (except the payment to
     Shareholder  of the $369,000  marketing  fee shown on Schedule  3.2(j) (the
     "Marketing  Fee") and not more than $5,000 of operating cash distributed to
     Shareholder;

          (f) not amend its Articles of Incorporation  or Bylaws,  nor issue any
     additional  shares of capital  stock,  or any  options,  warrants  or other
     securities under which any additional  shares of its capital stock might be
     directly or indirectly authorized or issued;

          (g) not  fail  to  comply  in any  material  respect  with  the  laws,
     regulations,  ordinances or  governmental  actions or orders  applicable to
     Palm Resort;

          (h) not make any material tax  elections or settle or  compromise  any
     material tax liability;

          (i) not take any action  that would  materially  adversely  affect the
     ability of Palm Resort or Shareholder  to obtain the consents  required for
     Palm Resort and  Shareholder  to consummate the  transactions  contemplated
     hereby  or  materially  adversely  affect  the  ability  of Palm  Resort or
     Shareholder to perform their respective covenants and agreements under this
     Agreement;

          (j) not change its method of accounting  in effect  January 1, 1997 or
     during any other period included in the Unaudited Financial Statements;

          (k) not change  its method of  reporting  income  and  deductions  for
     federal or state income taxes in effect January 1, 1997 or during any other
     period included in the Unaudited Financial Statements;

          (l) not permit or authorize  any transfer,  sale,  assignment or other
     disposition  of any of the  assets  of the  Partnership  other  than in the
     ordinary course of business consistent with past practices;

          (m)  promptly  notify  Fairfield  in  writing  of  any  action,  suit,
     proceeding or investigation  commenced,  pending or threatened before or by
     any  Governmental  Entity  concerning  or  affecting  any of the  Interest,
     Partnership or Resort Property of which Palm Resort or Shareholder  becomes
     aware;

          (n) provide Fairfield copies of any notices of any event of which Palm
     Resort or Shareholder becomes aware that may have a material adverse effect
     on the Partnership,  specifically including, but not limited to, notices of
     intent to accelerate and notices of acceleration of any debt secured by the
     Resort Property;
<PAGE>

          (o) not permit or  otherwise  authorize  the  Partnership  to make any
     distributions  to, or redeem or purchase  the  interests of the partners of
     the  Partnership,   or  make  or  repay  any  loans,  advances  or  capital
     contributions made to the Partnership by Palm Resort, Shareholder or any of
     their affiliates;

          (p) not permit or otherwise authorize any sale or other disposition of
     the  Resort  Property,  or any part  thereof,  nor enter into or permit the
     Partnership  to enter into any agreement for such  purposes,  except in the
     ordinary course of business consistent with past practices;

          (q) not amend or modify or permit any amendment or modification of the
     Partnership Agreement; and

          (r) not,  without the prior  written  consent of  Fairfield  permit or
     otherwise  authorize  any  financing,  refinancing,  extension,  renewal or
     modification  of any debt of the  Partnership  other than  draws  under the
     existing  construction  financing  with Bank  Atlantic and the  receivables
     financing with Heller Financial, Inc.

         IV.3 Access to  Information.  Between the date hereof and the  Closing,
Shareholder   and  Palm  Resort  (i)  shall  give   Fairfield  and   Fairfield's
representatives  access during normal business hours and upon reasonable  notice
to all books and records  relating to the Interest,  the Resort Property and the
Partnership for purposes of an audit of such books and records and inspection of
the business of Palm Resort (the  "Inspection") and all of the personal property
owned by the  Partnership,  to the extent  such books and records are within the
control or in the possession of Shareholder or Palm Resort, and (ii) shall cause
Palm Resort's officers to furnish Fairfield and Fairfield's representatives with
any other information that is to be delivered pursuant to this Agreement.

         IV.4  Investigation  by  Fairfield.  During the period from the date of
this Agreement  through the earlier to occur of the Closing or December 31, 1997
(the  "Inspection  Period"),  Shareholder  and  Palm  Resort  shall  provide  to
Fairfield copies of documents  reasonably requested by Fairfield relating to the
Partnership,  the  Resort  Property  and the  Interest  and the  collectibility,
enforceability  and other  legal  matters  related to the  Interest,  the Resort
Property  and the  Partnership.  Such  documents  shall  be for the  purpose  of
enabling  Fairfield  to  evaluate,  prior to the end of the  Inspection  Period,
whether  Fairfield wishes to proceed with the transactions  contemplated by this
Agreement.

         IV.5  Inspection.  At or  prior  to the  expiration  of the  Inspection
Period, Fairfield shall have the right to terminate this Agreement without cause
and for whatever reason or no reason and without liability on the part of either
Fairfield,  Shareholder or Palm Resort by delivering to Palm Resort, at or prior
to the  expiration  of the  Inspection  Period,  written  notice of  Fairfield's
election to terminate this Agreement.

         IV.6  Regulatory  Compliance.  Shareholder and Palm Resort shall permit
Fairfield to register or amend existing registrations with Governmental Entities
of the Resort Property and/or the vacation  ownership  intervals relating to the
Resort  Property  from the date of this  Agreement  to reflect  the  anticipated
effects  or, if after the  Closing,  the  effects,  of the  consummation  of the
transactions  contemplated  by this  Agreement  as required in  accordance  with
applicable  law  or as  Fairfield  may  reasonably  deem  necessary,  and  shall
cooperate with Fairfield in effecting such registrations or amendments.
<PAGE>

         IV.7 Covenants of Fairfield.  Except for actions specifically permitted
by this Agreement or consented in writing by Palm Resort, prior to the Effective
Time, Fairfield shall not take any action that would materially adversely affect
the ability of  Fairfield  to obtain the  consents  required  for  Fairfield  to
consummate the transactions  contemplated hereby or materially  adversely affect
the ability of  Fairfield to perform its  covenants  and  agreements  under this
Agreement.


                                    ARTICLE V
                              ADDITIONAL AGREEMENTS

         V.1   Confidentiality.   The  terms  of  this   Agreement  and  related
agreements,   the  terms  of  all  transactions  contemplated  hereby,  and  all
confidential and proprietary information furnished to any party pursuant to this
Agreement,  or  in  connection  with  the  transactions   contemplated  by  this
Agreement,  shall be treated as confidential,  and none of the parties shall use
or disclose such information  except with the prior written consent of the other
parties hereto; provided,  however,  Fairfield may disclose such information (a)
to its  representatives,  advisors and agents for purposes of its  investigation
during  the  Inspection  Period  or (b) to comply  with any  legal  requirement;
provided,  further,  however,  Shareholder  and Palm  Resort may  disclose  such
information  to comply with any legal  requirement  if prompt  advance notice is
provided to Fairfield at least two business days prior to any such disclosure so
that Fairfield may seek a protective order or other appropriate remedy.

         V.2  Indemnification of Shareholder.  Fairfield agrees to indemnify and
hold  Shareholder  harmless  from  and  against  all  expenses,  losses,  costs,
deficiencies, liabilities and damages (including, without limitation, reasonable
attorneys'  fees and  expenses)  incurred  or suffered  by  Shareholder  from or
arising out of (a) any breach of a representation  or warranty made by Fairfield
in or pursuant to this Agreement,  (b) any breach of the covenants or agreements
made by Fairfield  in this  Agreement,  (c) any  inaccuracy  in any  certificate
delivered by Fairfield  pursuant to this Agreement,  or (d)  indebtedness of the
Partnership under the existing  construction  financing/with Bank Atlantic,  the
existing  receivables  financing  with  Heller  Financial,  Inc.,  the  existing
guaranty  of such  indebtedness  by  shareholder,  or any breach of the terms or
provisions of such indebtedness or guaranty thereof, to the extent arising after
the Closing or as a result of the consummation of the Merger.
<PAGE>

         V.3 Indemnification of Fairfield.  Shareholder shall indemnify and hold
Fairfield  and  its  affiliates  and  their  respective   directors,   officers,
employees,  agents and attorneys harmless from and against all expenses, losses,
costs,  deficiencies,  liabilities and damages  (including,  without limitation,
reasonable  attorneys'  fees and  expenses)  incurred or suffered by  Fairfield,
Merger Sub or any  Subsidiary  (including  without  limitation  Palm  Resort) of
Fairfield resulting from or arising out of (a) any breach of a representation or
warranty made by  Shareholder  or Palm Resort in or pursuant to this  Agreement,
(b) any breach of the covenants or agreements made by Shareholder or Palm Resort
in this  Agreement,  or (c)  any  inaccuracy  in any  certificate  delivered  by
Shareholder or Palm Resort pursuant to this Agreement.

         V.4  Procedures for Indemnity.

                  (a) Whenever any claim shall arise or any proceeding  shall be
         instituted  involving  any person in respect of which  indemnity may be
         sought  pursuant to Section 5.2 or 5.3,  such person (the  "Indemnified
         Party") shall promptly notify (in no event later than ten business days
         after  receipt of such notice) the person  against whom such  indemnity
         may be sought (the "Indemnifying Party") thereof in writing, including,
         when  known,  the  facts  constituting  the  basis  for  such  claim or
         proceeding  and  the  amount  or an  estimate  of  the  amount  of  the
         indemnified  liability arising therefrom (such  notification  being the
         "Claims  Notice").  To the extent that any Claims Notice relates to the
         assertion of a claim, the commencement of a suit,  action or proceeding
         or the  imposition  of a penalty or assessment by a third party that is
         not an Indemnified Party (a "Third-Party Claim"), the Indemnified Party
         shall  include with the Claims  Notice any written  demand,  complaint,
         petition,  summons or similar document relating thereto that is then in
         the Indemnified Party's possession. The failure by an Indemnified Party
         to  timely  furnish  to the  Indemnifying  Party  any  notice  document
         required to be furnished  under this  Section  5.4(a) shall not relieve
         the  Indemnifying  Party from any  liability or  obligation  hereunder,
         except  to the  extent  that such  failure  materially  prejudices  the
         ability of the Indemnifying Party to defend such matter.

                  (b) In connection with any Third-Party Claim, the Indemnifying
         Party at its sole cost and  expense  may,  upon  written  notice to the
         Indemnified  Party,  elect  to  assume  the  defense  thereof.  If  the
         Indemnifying  Party has so elected  to assume  the  defense of any such
         Third-Party Claim, such defense shall be conducted by counsel chosen by
         the  Indemnifying  Party,  provided  that such  counsel  is  reasonably
         satisfactory to the Indemnified  Party. The Indemnified  Party shall be
         entitled to  participate  in (but not  control) the defense of any such
         Third-Party  Claim,  with its  counsel and at its own  expense.  If the
         Indemnifying Party has elected to assume the defense of any Third-Party
         Claim as provided herein,  the Indemnified  Party shall not be entitled
         to  indemnification  as to fees and expenses of any counsel retained by
         the Indemnified  Party after the time at which the  Indemnifying  Party
         has so elected.  The  Indemnified  Party shall not settle or compromise
         any  Third-Party  Claim  without  the  prior  written  consent  of  the
         Indemnifying  Party, which shall not be unreasonably  withheld.  In the
         event that the  Indemnifying  Party  shall  assume  the  defense of any
         Third-Party  Claim, it shall not compromise or settle such  Third-Party
<PAGE>

         Claim unless (i) the Indemnified Party gives its prior written consent,
         which  shall  not be  unreasonably  withheld,  or (ii) the terms of the
         compromise  or settlement  of such  Third-Party  Claim provide that the
         Indemnified Party shall have no responsibility for the discharge of any
         settlement  amount  and  impose no other  obligations  or duties on the
         Indemnified  Party,  and the  compromise or settlement  discharges  all
         rights against the Indemnified  Party with respect to such  Third-Party
         Claim.  If a firm  offer is made to  settle  a  pending  or  threatened
         Third-Party  Claim for which the  Indemnified  Party may be entitled to
         indemnification  hereunder and the Indemnifying Party desires to accept
         and agree to such offer,  the  Indemnifying  Party  shall give  written
         notice to the  Indemnified  Party to that  effect.  If the  Indemnified
         Party  fails to  consent to such firm offer  within ten  calendar  days
         after its receipt of such notice,  the Indemnifying  Party may continue
         to contest or defend such  Third-Party  Claim and,  in such event,  the
         maximum  liability  of the  Indemnifying  Party as to such  Third-Party
         Claim  shall not  exceed  the  amount  of such  settlement  offer.  The
         Indemnified  Party  shall  cooperate  with  the  defense  of  any  such
         Third-Party  Claim and shall provide such personnel,  technical support
         and  access  to  information  as may  be  reasonably  requested  by the
         Indemnifying Party in connection with such defense.

                  (c) Any  claim  for  indemnification  hereunder  that is not a
         Third-Party  Claim  shall  be  asserted  by the  Indemnified  Party  by
         promptly  delivering  notice thereof to the Indemnifying  Party. If the
         Indemnifying Party does not respond to such notice within 45 days after
         receipt thereof, it shall have no further right to contest the validity
         of such claim.

         V.5 Exclusivity Of Indemnification For Contractual  Breaches.  No party
hereto is making  any  representation,  warranty  or  covenant  other than those
contained  herein.  Except with respect to the  covenants in Section 5.1 and the
covenants and indemnities in Section 5.11,  following the Closing, the rights of
the parties  under the  provisions of Sections 5.2 and 5.3 shall be the sole and
exclusive  remedy  available  to the parties  with  respect to claims or damages
arising  out  of  breaches  of  the  representations  and  warranties  or  other
contractual obligations of the parties set forth in this Agreement.

         V.6  Reasonable  Efforts.  Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties will use all reasonable efforts
to take, or cause to be taken, all actions,  and to do, or cause to be done, and
to assist  and  cooperate  with the other  parties  in doing,  all other  things
necessary,  proper or advisable to consummate  and make  effective,  in the most
expeditious   manner   practicable,   the  Merger  and  the  other  transactions
contemplated  by this  Agreement,  including  (i)  the  obtaining  of all  other
necessary   actions  or  nonactions,   waivers,   consents  and  approvals  from
Governmental Entities and the making of all necessary  registrations and filings
(including  filings with  Governmental  Entities,  if any) and the taking of all
other reasonable steps as may be necessary to obtain all necessary  approvals or
waivers form, or to avoid any action or proceeding by any  Governmental  Entity,
(ii) the  obtaining of all necessary  consents,  approvals or waivers from third
parties,  and (iii) the  execution  and delivery of any  additional  instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. In further connection with and without limiting
the foregoing,  Palm Resort and Shareholder  shall make  appropriate  personnel,
contractors and advisors of Palm Resort  available to Fairfield and provide such
information  as may be requested by Fairfield for the purposes of conducting the
Inspection.
<PAGE>

         V.7 Expenses and Fees. Except as otherwise  provided in this Agreement,
all costs and expenses  incurred in connection with the Merger Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
or expenses.

         V.8 Consents.  Palm Resort shall use its  reasonable  efforts to obtain
the Palm Resort Consents (as hereinafter defined) before Closing.

         V.9  Repayment  of PPM  Loan;  Release  of  Claims.  At or prior to the
Closing, the Partnership will pay the PPM Loan Amount to PPM and the Shareholder
and its  affiliates  (including  PPM) shall  release all claims  (contingent  or
liquidated and known or unknown)  against Palm Resort,  the  Partnership and its
partners  including,  without  limitation,  the PPM Loan and any other claims in
respect  of loans,  advances,  project  management  or  marketing  fees or other
obligations  ("Claims"),  pursuant  to a written  release in form and  substance
reasonably  satisfactory to Fairfield and substantially in the form set forth in
Exhibit C hereto (the "Release").

         V.10 Delivery of  Information.  Two business days before the end of the
Inspection Period, Shareholder shall deliver to Fairfield a certificate executed
by  Shareholder   certifying   that  Palm  Resort  has  delivered  all  relevant
information,  documents,  agreements, and other materials related to any written
request made by Fairfield during the Inspection Period.

         V.11  Tax Matters.

                  (a)  Subject  to the  following  provisions,  Fairfield  shall
         prepare  and file (or cause to be  prepared  and filed) all Tax Returns
         relating to Palm Resort  which are  required to be filed  (taking  into
         account all applicable extensions) after the Closing, and shall pay all
         Taxes shown to be due thereon.

                  (b)  With  respect  to any Tax  Return  of Palm  Resort  for a
         taxable  period  ending on or prior to the Closing and not yet filed as
         of the Closing:  (i) within 90 days of the end of the taxable period to
         which such return relates,  Palm Resort and Fairfield shall prepare and
         deliver (or cause to be prepared and delivered) to the  Shareholder the
         financial  statements of Palm Resort for such taxable period;  (ii) the
         Shareholder  will  direct the tax  return  preparer  of Palm  Resort to
         prepare, at the Shareholder's  expense,  such Tax Returns in accordance
         with the prior practice and policies of Palm Resort and with applicable
         law; (iii) at least thirty (30) days prior to the due date for such Tax
         Returns (taking into account all available extensions), the Shareholder
         will deliver to Palm Resort completed versions of such Tax Returns; and
         (iv) Palm Resort shall have the right to review such Tax Returns  prior
         to their  filing and, if Palm Resort  disputes or  otherwise  disagrees
         with any  amounts  shown due on such Tax  Returns,  Palm Resort and the
         Shareholder  shall consult in good faith to resolve any issues  arising
         as a result thereof; (v) after Palm Resort's review of such Tax Returns
         and the resolution of any disputes or disagreements described in clause
         (iv)  hereof,  Palm Resort  shall timely sign and file such Tax Returns
         and pay all amounts shown as due and owing thereon (reserving any right
         to  indemnification  by the  Shareholder if otherwise  provided by this
         Agreement);  and (vi)  Fairfield  and Palm  Resort  shall  provide  the
         Shareholder  and their  agents  (including  any return  preparer)  with
         reasonable  access during normal  business hours to the records of Palm
         Resort as needed  for the  preparation  of such  returns  and with such
         other assistance as may be reasonably requested by the Shareholder.
<PAGE>

                  (c) With respect to each Tax Return which relates, in whole or
         in part, to periods prior to Closing  (other than Tax Returns  prepared
         at the  direction  of  the  Shareholder  pursuant  to  Section  5.11(b)
         hereof),  at least  thirty  (30) days  prior to the due date for filing
         such return (including applicable extensions), Palm Resort will deliver
         to the Shareholder (i) a draft return, (ii) copies of any workpapers or
         schedules  used to prepare such return,  and (iii) a calculation of the
         excess  (if any) of (A) Taxes to be paid with or with  respect  to such
         Tax Return that relate to periods prior to Closing over (B) the amounts
         reserved or otherwise  provided  for. If the  Shareholder  do not agree
         with the amounts set forth on such draft Tax Return,  the parties shall
         work diligently to resolve the dispute.

                  (d) If the parties are unable to resolve any dispute described
         in Sections 5.11 (b) or 5.11(c) prior to the fifteenth day prior to the
         due date for such Tax Return,  the dispute will be submitted to Ernst &
         Young,  LLP,  or such other  nationally  recognized  firm of  certified
         public  accountants as the parties may agree upon (the "Firm") with the
         costs of the Firm's  determination to be shared equally by the parties,
         except that if the Firm agrees  completely with the calculations of one
         party,   the  other   party   shall   bear  all  costs  of  the  Firm's
         determination.

                  (e) Fairfield shall pay, or shall cause Palm Resort to pay, to
         the  Shareholder  the  excess,  if any,  of the  amount  accrued in the
         Unaudited Financial Statements for current Taxes payable by Palm Resort
         over the  aggregate  Taxes  actually  paid by Palm Resort in connection
         with the filing of any Tax Returns  described  in Sections  5.11(b) and
         5.11(c),  within 5  business  days of the  filing  of the last such Tax
         Returns.  The  Shareholder  shall pay to  Fairfield  (or Palm Resort if
         directed by Fairfield)  the amount of the  shortfall,  if any, by which
         the amount  accrued in the Unaudited  Financial  Statements for current
         Taxes payable by Palm Resort is less than the aggregate  Taxes actually
         paid by Palm  Resort in  connection  with the filing of any Tax Returns
         described in Section  5.11(c),  within 5 business days of the filing of
         the last such Tax Returns and receipt of written demand  therefore from
         Fairfield  together  with copies of such Tax  Returns.  Nothing in this
         Section   5.11(e)   shall   be  read   to   limit   the   Shareholder's
         indemnification of Fairfield pursuant to Section 5.3 hereof.
<PAGE>

                  (f)  The   Shareholder   shall  indemnify  and  hold  harmless
         Fairfield  from and  against (i) all Taxes for which Palm Resort may be
         liable  arising in periods ending prior to the Closing Date and for the
         ratable  portion of any period  that  begins  before and ends after the
         Closing Date;  (ii) all Taxes imposed on Palm Resort by reason of being
         a member of any affiliated group with which Palm Resort has filed a Tax
         Return on a consolidated  or combined basis for a taxable period ending
         on or before  the  Closing  Date;  and  (iii)  all  costs and  expenses
         (including reasonable attorneys' and accountants' fees) attributable to
         any contest or dispute  involving the  foregoing.  In the case of Taxes
         that are payable  with respect to a taxable  period that begins  before
         the Closing  Date and ends after the Closing  Date,  the portion of any
         such Tax that is allocable  to the portion of the period  ending on the
         Closing Date shall be:

                           (1) in the case of Taxes  that are  either  (x) based
                  upon or  related  to income or  receipts,  or (y)  imposed  in
                  connection  with any sale or other  transfer or  assignment of
                  property (real or personal,  tangible or  intangible),  deemed
                  equal to the amount which would be payable if the taxable year
                  ended with the Closing Date; and

                           (2)  in  the  case  of   Taxes   not   described   in
                  subparagraph  (i) that are  imposed  on a  periodic  basis and
                  measured by the level of any item,  deemed to be the amount of
                  such  Taxes for the  entire  period  (or,  in the case of such
                  Taxes determined on an arrears basis, the amount of such Taxes
                  for the immediately preceding period) multiplied by a fraction
                  the  numerator of which is the number of calendar  days in the
                  period ending on the Closing Date and the denominator of which
                  is the number of calendar days in the entire period.

         For purposes of this Section  5.11(f),  the Taxes  attributable to Palm
         Resort by reason of such  corporation's  distributive  share of income,
         gain,  or loss from,  or  otherwise in respect of, any  partnership  in
         which Palm Resort is a member on the Closing  Date shall be  determined
         as if such partnership's taxable year ended on the Closing Date.

                  (g) Fairfield shall pay, or shall cause Palm Resort to pay, to
         the  Shareholder  all  refunds or  credits of Taxes or similar  benefit
         (including  any interest or similar  benefit  received from or credited
         thereon by the applicable tax authority)  received by Fairfield or Palm
         Resort (or their  respective  successors and assigns) after the Closing
         to the  extent  attributable  to (i) Taxes paid prior to Closing by the
         Shareholder or Palm Resort, or (ii) Taxes for which the Shareholder has
         indemnified  Fairfield or Palm Resort under this  Agreement;  provided,
         however,  that the Shareholder shall not be entitled to any such refund
         or credit to the extent such refund or credit arises as a result of the
         application  of a net  operating  loss or similar  tax  benefit of Palm
         Resort which arises during a period after the Closing Date and which is
         carried back to a period prior to the Closing Date.

                  (h) If a Tax Return which relates in whole or in part to Taxes
         for which the Shareholder might be obligated to indemnify  Fairfield or
         Palm Resort under this Agreement  (including without limitation any Tax
         Return filed prior to Closing or at the  direction  of the  Shareholder
         pursuant to Section 5.11(b) hereof) is audited by the Internal  Revenue
         Service or other tax  authority,  (i)  Fairfield  and Palm Resort shall
         promptly notify the Shareholder of the  commencement of such audit, and
         any failure to give such notice will not  constitute a waiver of rights
         to indemnity  under this Agreement for damages  arising from such audit
<PAGE>

         and subsequent  proceedings,  except to the extent that the Shareholder
         are precluded by the failure to give prompt notice from  contesting the
         asserted Tax liability in both the  administrative and judicial forums;
         (ii) the  Shareholder  shall have the right but not the  obligation  to
         control the dealings with such tax authority and any ensuing litigation
         or  administrative  proceedings  (collectively,   the  "Tax  Dispute"),
         including  without  limitation choice of tax accountants or counsel and
         the right to settle  or  compromise  such  matters,  provided  that the
         Shareholder  shall consult in good faith with Palm Resort and Fairfield
         about  the Tax  Dispute  and will  give  due  regard  to such  parties'
         interests  and  provided,  further,  that with  respect to any  taxable
         period  that  begins  before  and ends  after  the  Closing  Date,  the
         Shareholder  shall not be entitled to settle or compromise any such Tax
         Dispute  without  the  consent  of the  Fairfield,  which  shall not be
         unreasonably withheld;  (iii) if the Shareholder has a right to control
         a Tax  Dispute  pursuant to clause (ii) but does not choose to exercise
         such control,  Fairfield shall be entitled, but shall not be obligated,
         to defend  such Tax  Dispute  (giving  due regard to the  Shareholder's
         interests),  shall  keep the  Shareholder  reasonably  informed  of the
         progress of such Tax Dispute and will not settle or compromise such Tax
         Dispute  without the prior written  consent of the  Shareholder,  which
         consent shall not be unreasonably  withheld; and (iv) all parties shall
         cooperate with each other in good faith with respect to any Tax Dispute
         and provide such  assistance  to the other  parties and their agents as
         may be necessary for the resolution thereof. The preparation and filing
         of any  amended  Tax  Return,  the audit of which  would  otherwise  be
         subject to this Section 5.11(h),  shall be subject to the principles of
         this Section 5.11(h).

                  (i)  Fairfield  and  Palm  Resort  shall  retain  all  records
         relevant to Taxes and Tax  Returns of Palm Resort for periods  prior to
         or including  Closing  ("Tax  Records")  for a period of at least seven
         years  after the  Closing.  In  addition,  at all  times  that such Tax
         Records  are  in  the  custody  of  Fairfield,  Palm  Resort  or  their
         successors and assigns,  such parties shall permit the  Shareholder and
         their  agents  (including  without  limitation  his tax  professionals)
         reasonable access to such Tax Records in accordance with the principles
         of this Section  5.11 to the extent the  Shareholder  reasonably  deems
         such access appropriate for Tax and financial matters.

                  (j) If there is a disposition of all or  substantially  all of
         the capital stock,  of Palm Resort assets,  or business of Palm Resort,
         Fairfield  agrees to use its reasonable best efforts to ensure that the
         successor  to Palm  Resort,  such assets or  business is  contractually
         obligated  to and in fact  does  comply  with  the  provisions  of this
         Section 5.11.

                  (k) Fairfield  shall be responsible  for the timely payment of
         all sales,  use,  transfer,  gains,  recording,  ad  valorem  and other
         similar  Taxes  and  fees  ("Transfer  Taxes"),  arising  out  of or in
         connection with or attributable to the transactions  effected  pursuant
         to this  Agreement,  and all Taxes  arising as a result of the  Merger.
         Fairfield shall prepare and timely file all necessary documentation and
         Tax  Returns  required  to be  filed  in  respect  of  Transfer  Taxes;
         provided,  that the Shareholder  shall be permitted to prepare any such
         Tax Returns  that are the  primary  responsibility  of the  Shareholder
         under  applicable  law.  Fairfield  shall provide  Fairfield with final
         copies  of  the  documentation  and  Tax  Returns  referred  to in  the
         immediately preceding sentence not later than fifteen days prior to the
         filing of such documentation and Tax Returns.
<PAGE>

         V.12  Shareholder  shall not be responsible for the payment of Taxes to
the  extent  arising  from its  pro-rata  allocation  of  income in excess of $9
million that results from a change by the  Partnership  in the tax  treatment it
elects for the period ending  December 31, 1997 as compared to the tax treatment
elected for the period ending December 31, 1996.

         V.13  Fairfield  shall not sell any  timeshare  contracts  or timeshare
receivables of the Partnership prior to January 1, 1998.

                                   ARTICLE VI
                          CONDITIONS PRECEDENT; CLOSING

         VI.1  Conditions to Each Party's  Obligation to Effect the Merger.  The
respective  obligation  of each  party to effect  the  Merger is  subject to the
satisfaction  or  waiver  on or  prior  to the  Closing  Date  of the  following
conditions:

                  (a)  Corporate  Approval.  The  approval  of the  transactions
         hereunder by Fairfield's  board of directors or  appropriate  committee
         thereof shall have been received.

                  (b)  Consent  of  Fairfield's  Lender.  Fairfield  shall  have
         obtained all applicable  consents  required under  Fairfield's  and its
         subsidiaries' credit agreements.

                  (c) Palm Resort Consents.  Palm Resort shall have obtained all
         applicable  consents  required from the parties  identified on Schedule
         6.1(c) (the "Palm Resort Consents").

                  (d) No Injunctions or Restraints.  No judgment, order, decree,
         statute, law, ordinance, rule, regulation, temporary restraining order,
         preliminary or permanent  injunction or other order  enacted,  entered,
         promulgated,  enforced or issued by any court of competent jurisdiction
         or other  Governmental  Entity or other legal  restraint or prohibition
         (collectively,  "Restraints") preventing the consummation of the Merger
         shall be in effect;  provided,  however, that each of the parties shall
         have  used  reasonable  efforts  to  prevent  the  entry  of  any  such
         Restraints  and to appeal as promptly as possible  any such  Restraints
         that may be entered.

                  (e) No Litigation. There shall not be pending any suit, action
         or proceeding,  in each case brought by any Governmental Entity against
         Palm  Resort,  Fairfield  or Merger  Sub with  respect to or that would
         adversely affect the Merger or the transactions contemplated under this
         Agreement.

                  (f) Before the Effective Time, the Partnership shall have paid
         the PPM Loan Amount to PPM and PPM shall have  released Palm Resort and
         the Partnership from any further  liabilities or obligations in respect
         of the PPM Loan pursuant to the Release.
<PAGE>

         VI.2  Conditions to  Obligations  of Palm Resort and  Shareholder.  The
obligations  of Palm  Resort and  Shareholder  to effect the Merger are  further
subject to the following conditions:

                  (a) Actions of Fairfield.  Fairfield and Merger Sub shall have
         performed  and  complied  with  all  the   covenants,   agreements  and
         obligations  and  satisfied  all of the  conditions  required  by  this
         Agreement to be  performed or complied  with or satisfied by them at or
         prior to the Effective Time.

                  (b)  Representations  and Warranties.  The representations and
         warranties of Fairfield and Merger Sub set forth in this Agreement that
         are  qualified as to  materiality  shall be true and  correct,  and the
         representations and warranties of Fairfield and Merger Sub set forth in
         this Agreement  that are not so qualified  shall be true and correct in
         all material  respects,  in each case as of the date of this  Agreement
         and (except to the extent such  representations and warranties speak as
         of an earlier date) as of the  Effective  Time as though made on and as
         of the  Effective  Time,  except  as  otherwise  contemplated  by  this
         Agreement.

         VI.3  Conditions  to  Obligations  of  Fairfield  and Merger  Sub.  The
obligations of Fairfield and Merger Sub to effect the Merger are further subject
to the following conditions:

                  (a) Actions of Shareholder  and Palm Resort.  Shareholder  and
         Palm Resort  shall have  performed  and  complied  with all  covenants,
         agreements and obligations and satisfied all the conditions required by
         this Agreement to be performed or complied with or satisfied by them at
         or prior to the Effective Time.
                  (b)  Representations  and Warranties.  The representations and
         warranties of Palm Resort and  Shareholder  set forth in this Agreement
         that are qualified as to materiality shall be true and correct, and the
         representations and warranties of Palm Resort and Shareholder set forth
         in this Agreement  that are not so qualified  shall be true and correct
         in all material respects, in each case as of the date of this Agreement
         and (except to the extent such  representations and warranties speak as
         of an earlier date) as of the  Effective  Time as though made on and as
         of the  Effective  Time,  except  as  otherwise  contemplated  by  this
         Agreement.

                  (c) No Material  Adverse  Change.  At any time on or after the
         date of this  Agreement  there  shall not have  occurred  any  material
         adverse change in Palm Resort.

                  (d) Audit and  Inspection.  The completion by Fairfield of the
         Inspection and Fairfield's satisfaction,  in its sole discretion,  with
         the results of the Inspection.

                  (e)  Release.  Fairfield  shall  have  received  the  Release,
         executed by the Shareholder and PPM.


<PAGE>

                  (f) Vacation Break Merger.  The Merger of FCVB Corp., a wholly
         owned  subsidiary  of Fairfield,  with and into Vacation  Break U.S.A.,
         Inc. (the "Vacation Break Merger") shall have been consummated.

                  (g)  Opinion  of Palm  Resort  Counsel.  Fairfield  shall have
         received a favorable opinion of counsel for Shareholder and Palm Resort
         with respect to the matters set forth on Schedule 6.3(g).

         VI.4 Frustration of Closing Conditions. None of Fairfield, Shareholder,
Merger Sub or Palm Resort may rely on the failure of any  condition set forth in
Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was
caused by such  party's  failure to use  reasonable  efforts to  consummate  the
Merger and the other transactions contemplated by this Agreement, as required by
and subject to Section 5.6.

         VI.5  Closing  Documents  and  Procedures.  In  addition  to the  other
obligations  and  procedures  to be performed  at the Closing,  the parties will
undertake the following actions:

          (a)  Deliveries  of  Shareholder.  At the Closing,  Shareholder  shall
     deliver to Fairfield:

                           (i)  a  certificate  or   certificates   representing
                  Shareholder's  shares of Palm Resort Common Stock  outstanding
                  immediately prior to the Effective Time.

                           (ii) a certificate executed by Shareholder certifying
                  that the  representations and warranties set forth in Sections
                  3.2 and 3.3 are true and  correct  on and as of the  Effective
                  Time,   with  the  same  force  and  effect  as  though   such
                  representations  and  warranties  had been  made on, as of and
                  with reference to the Effective Time and that  Shareholder has
                  performed and complied with all covenants and  agreements  and
                  satisfied  all  conditions  required by this  Agreement  to be
                  performed  or  complied  with or  satisfied  by  them  for the
                  benefit of Fairfield at or prior to the Effective Time; and

                           (iii) the Release,  executed by the  Shareholder  and
     its affiliates.

          (b)  Deliveries  of Palm  Resort.  At the  Closing,  Palm Resort shall
     deliver to Fairfield:

                           (i)  a  certificate  of an  officer  of  Palm  Resort
                  certifying that the  representations  and warranties set forth
                  in Section 3.2 are true and correct on and as of the Effective
                  Time,   with  the  same  force  and  effect  as  though   such
                  representations  and  warranties  had been  made on, as of and
                  with  reference to the Effective Time and that Palm Resort has
                  performed and complied with all covenants and  agreements  and
                  satisfied  all  conditions  required by this  Agreement  to be
                  performed or complied  with or satisfied by it for the benefit
                  of Fairfield at or prior to the Effective Time;
<PAGE>

                         (ii)   certificates  of  good  standing  and  corporate
                    existence for Palm Resort; and

                           (iii) the  opinion of  counsel to Palm  Resort as set
                    forth in Section 6.3(g).

                  (c) Fairfield's  Deliveries.  At the Closing,  Fairfield shall
deliver to the Shareholder:

          (i) Shareholder's Palm Resort Percentage of the Merger Consideration;

          (ii) evidence of payment of the PPM Loan Amount;

          (iii) evidence of payment of the Marketing Fee; and

          (iv) a  certificate  of an officer of  Fairfield  certifying  that the
     representations  and  warranties  set  forth  in  Section  3.1 are true and
     correct on and as of the Effective  Time, with the same force and effect as
     though such representations and warranties had been made on, as of and with
     reference  to the  Effective  Time and that  Fairfield  has  performed  and
     complied  with all covenants and  agreements  and satisfied all  conditions
     required by this Agreement to be performed or complied with or satisfied by
     it for the benefit of Palm Resort at or prior to the Effective Time.


                                   ARTICLE VII
                        TERMINATION, AMENDMENT AND WAIVER

         VII.1  Termination.  This Agreement may be  terminated,  and the Merger
contemplated hereby may be abandoned, at any time prior to the Effective Time:

                    (a) by mutual written  consent of Fairfield,  Merger Sub and
               Palm Resort;

                    (b) by either Fairfield or Palm Resort;

                           (i) if the Merger shall not have been  consummated on
                  or before December 31, 1997,  unless the failure to consummate
                  the Merger is the result of a breach of this  Agreement by the
                  party seeking to terminate this Agreement;

                           (ii)  if  any   Governmental   Entity  of   competent
                  jurisdiction  issues a  restraint  or takes any  other  action
                  permanently  enjoining,  restraining or otherwise  prohibiting
                  the Merger or any of the other actions  contemplated under the
                  Agreement and such restraint becomes final and nonappealable;
<PAGE>

                  (c) by  Fairfield  if there has been a material  violation  by
         Shareholder of any agreement,  representation or warranty  contained in
         this Agreement that has rendered the  satisfaction  of any condition to
         the  obligations  of Fairfield  impossible and such violation or breach
         has not been waived by Fairfield and is not due to Fairfield's default;

                  (d) by  Fairfield,  if the Vacation  Break Merger has not been
         consummated on or before December 31, 1997;

                  (e)  by  Fairfield,  at or  prior  to  the  expiration  of the
         Inspection  Period,  without cause and for whatever  reason and without
         liability on the part of any party hereto, by delivering to Palm Resort
         at or prior to the expiration of the Inspection Period,  written notice
         of Fairfield's election to terminate this Agreement;

                  (f) by either Fairfield or Palm Resort if the other shall fail
         to fulfill or satisfy any condition precedent to the performance of the
         first party's obligations in accordance with the terms hereof; and

                  (g) by Palm Resort, if there has been a material  violation by
         Fairfield of any  agreement,  representation  or warranty  contained in
         this Agreement which has rendered the  satisfaction of any condition to
         the  obligations  of  Shareholder  and Palm Resort  impossible and such
         violation or breach has not been waived by Shareholder  and Palm Resort
         and is not due to Shareholder's or Palm Resort's default.

         VII.2  Effect  of  Termination.  In the  event of  termination  of this
Agreement by Palm Resort or Fairfield as provided in Section 7.1, this Agreement
shall  terminate  and there  shall be no  liability  on the part of either  Palm
Resort or Fairfield,  except for (a)  liabilities  arising from a breach of this
Agreement  prior to such  termination  if the  termination is made under Section
7.1(b)(i),  and (b)  liabilities  arising  from a breach of a provision  of this
Agreement which is to be performed regardless of any such termination.

         VII.3  Amendment.  This  Agreement  may  not be  amended  except  by an
instrument in writing signed on behalf of each of the parties hereto.

         VII.4 Extension;  Waiver.  At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other  acts  of  the  other  parties,   (b)  waive  any   inaccuracies   in  the
representations  and warranties  contained  herein or in any document  delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein.  Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an  instrument  in writing  signed on
behalf of such party. No other action or course of dealing,  including,  without
limitation,  the  consummation  of the Merger  with notice or  knowledge  of any
inaccuracy in the representations or breach of the warranties of the other party
or any investigation  thereof, will operate as a waiver of any rights under this
Agreement.  The delay or failure of any party to this Agreement to assert any of
its rights under this  Agreement or otherwise  shall not  constitute a waiver of
such rights.
<PAGE>

                                  ARTICLE VIII
                               GENERAL PROVISIONS

         VIII.1  Survival of  Representations  and  Warranties.  The  respective
covenants, representations,  warranties, covenants and the indemnities set forth
in this  Agreement  shall survive after the Effective Time and shall continue in
full force and effect.

         VIII.2  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):

                  (a)      if to Palm Resort:

                           Palm Resort Group, Inc.
                           3015 North Ocean Boulevard, Suite 121
                           Fort Lauderdale, Florida  33308
                           Attention: President


                           with a copy to:

                           Greenspoon, Marder, Hirschfeld,
                           Rafkin, Ross & Berger
                           Trade Centre South, Suite 700
                           100 West Cypress Creek Road
                           Fort Lauderdale, Florida  33309
                           Attention: Gerald , Esq.

                  (b)      if to Shareholder:

                           The Berkley Group, Inc.
                           3015 North Ocean Boulevard, Suite 121
                           Fort Lauderdale, Florida  33308
                           Attention: President

                           with a copy to:

                           Greenspoon, Marder, Hirschfeld,
                           Rafkin, Ross & Berger
                           Trade Centre South, Suite 700
                           100 West Cypress Creek Road
                           Fort Lauderdale, Florida  33309
                           Attention: Gerald Greenspoon, Esq.

                  (c)      if to Fairfield or Merger Sub:
<PAGE>

                           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.

         VIII.3  Definitions.  For purposes of this Agreement:

                  (a) an  "affiliate"  of any person means  another  person that
         directly or indirectly,  through one or more intermediaries,  controls,
         is controlled by, or is under common control with, such first person;

                  (b)  "Code"  means  the  Internal  Revenue  Code of  1986,  as
         amended, and all regulations promulgated thereunder,  as in effect from
         time to time;

                  (c) an "environmental law" means any law, statute, regulation,
         rule, order, decree, judgment,  consent decree, settlement agreement or
         governmental  requirement,   which  relates  to  or  otherwise  imposes
         liability or standards of conduct  concerning  mining or reclamation of
         mined land, discharges,  emissions,  releases or threatened releases of
         noises,  odors or any  pollutants,  contaminants  or hazardous or toxic
         wastes,  substances  or  materials,  whether as matter or energy,  into
         ambient air, water, or land, or otherwise  relating to the manufacture,
         processing,   generation,   distribution,   use,  treatment,   storage,
         disposal,  cleanup, transport or handling of pollutants,  contaminants,
         or  hazardous  wastes,  substances  or  materials,  including  (but not
         limited to) the Comprehensive Environmental Response,  Compensation and
         Liability Act of 1980, the Superfund Amendments and Reauthorization Act
         of 1986,  as amended,  the  Resource  Conservation  and Recovery Act of
         1976, as amended, the Toxic Substances Control Act of 1976, as amended,
         the Federal Water  Pollution  Control Act Amendments of 1972, the Clean
         Water Act of 1977, as amended,  any so-called  "Superlien" law, and any
         other similar Federal, state or local statutes;

                  (d) "ERISA" means the Employee  Retirement Income Security Act
         of 1974, as amended, and all regulations promulgated thereunder,  as in
         effect from time to time;

                  (e)  "Governmental  Entity" means any government or any court,
         arbitral  tribunal,   administrative  agency  or  commission  or  other
         governmental or other regulatory authority or agency,  federal,  state,
         local or foreign;

                  (f) "Interest"  means the 45% general partner  interest in the
         Partnership held beneficially and of record by Palm Resort;
<PAGE>

                  (g)  "knowledge" of any person means actual  knowledge and, if
         such person is not an individual, actual knowledge of the directors and
         executive officers or partners of such person;

                  (h) "Liens" means liens, charges, pledges, options, mortgages,
         deeds of  trust,  security  interests,  conditional  sales  agreements,
         claims, restrictions (whether on voting, sale, transfer, disposition or
         otherwise),  and other  encumbrances,  adverse  claims and interests of
         every  type  and  description,   whether  imposed  by  law,  agreement,
         understanding or otherwise;

                  (i) "material  adverse  change" or "material  adverse  effect"
         means,  when used in  connection  with Palm  Resort or  Fairfield,  any
         change  or  effect  that  is   materially   adverse  to  the  business,
         properties,  assets,  financial  condition,  prospects,  or  results of
         operations of such party and its Subsidiaries taken as a whole;

                  (j)  "Partnership"  means Palm Vacation  Group, a Florida 
         general partnership;

                 (k)  "Partnership  Agreement" means that certain Palm Vacation
         Group Joint  Venture  Agreement,  dated as of March 30,  1995,  between
         Vacation Break Resorts at Palm-Aire, Inc., and Palm Resort Group, Inc.;

                  (l) "person"  means an individual,  corporation,  partnership,
         joint venture, association, trust, unincorporated organization or other
         entity;

                  (m)  "Personal  Property"  means  (a)  all  tangible  personal
         property owned by the Partnership and located on, attached to, and used
         in  connection  with the  operation  of the Resort  Property  including
         furniture,  fixtures and equipment,  (b) the Partnership's  interest in
         all personal property,  licenses,  permits,  plans, studies and utility
         arrangements with respect to the Resort Property, (c) the Partnership's
         interest in all service,  maintenance,  management  or other  contracts
         relating to the ownership or operation of the Resort Property,  and (d)
         the  Partnership's  interest in all warranties and guaranties,  if any,
         relating to the Resort Property;

                  (n) "Resort Property" means that certain resort property known
         as Palm-Aire  Resort and Spa owned by the  Partnership,  including  the
         land upon which the Resort  Property  is  situated,  together  with all
         rights   appurtenant   thereto,   the  building,   fixtures  and  other
         improvements  now or hereafter  situated  thereon and all leases and/or
         occupancy agreements for space in such improvements,  including any and
         all amendments and  modifications  thereto and any and all  acceptance,
         guaranty  or  other  agreements  related  thereto,   and  the  Personal
         Property; and

         VIII.4 Interpretation.  When a reference is made in this Agreement to a
Section,  Exhibit or Schedule,  such  reference  shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table of
contents and headings  contained in this  Agreement are for  reference  purposes
only and  shall not  affect in any way the  meaning  or  interpretation  of this
Agreement.  Whenever the words "include",  "includes" or "including" are used in
this  Agreement,  they  shall be deemed  to be  followed  by the words  "without
limitation".
<PAGE>

         VIII.5  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 signet by each of
the parties and delivered to the other parties.

         VIII.6 Entire Agreement; No Third-party  Beneficiaries.  This Agreement
(a) constitutes the entire  agreement,  and supersedes all prior  agreements and
understandings,  both  written and oral,  among the parties  with respect to the
subject  matter of this  Agreement  and (b) are not  intended to confer upon any
person other than the parties any rights or remedies.

         VIII.7  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.

         VIII.8  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,  except that  Merger Sub may assign,  in its sole
discretion,  any of or all its  rights,  interests  and  obligations  under this
Agreement to Fairfield or to any direct  wholly owned  corporate  subsidiary  of
Fairfield.  Subject to the preceding  sentence,  this  Agreement will be binding
upon,  inure to the  benefit  of, and be  enforceable  by, the parties and their
respective successors and assigns.

         VIII.9  Enforcement.  The parties agree that  irreparable  damage would
occur  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,  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 an
Florida state court.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


<PAGE>





         IN WITNESS WHEREOF,  Fairfield,  Merger Sub and Palm Resort have caused
this  Agreement  to be  signed  by  their  respective  officers  thereunto  duly
authorized and Shareholder  has signed this Agreement,  all as of the date first
written above.

                           FAIRFIELD COMMUNITIES, INC.


                         By:/s/ Robert W. Howeth
                            ---------------------------------
                                 Robert W. Howeth
                            Senior Vice President and 
                             Chief Financial Officer

                           FC PALM-AIRE, INC.


                          By:     /s/ Robert W. Howeth
                             ------------------------------- 
                                Robert W. Howeth
                                 Vice President


                             PALM RESORT GROUP, INC.


                           By:     /s/ Rebecca A. Foster
                              --------------------------------
                           Name:  Rebecca A. Foster
                           Title:  President


                             THE BERKLEY GROUP, INC.


                           By:     /s/ Rebecca A. Foster
                              --------------------------------
                         Name:  Rebecca A. Foster
                        Title:  President



<PAGE>





                                    EXHIBIT A

                              SURVIVING CORPORATION
                            ARTICLES OF INCORPORATION


                              AMENDED AND RESTATED
                            ARTICLES OF INCORPORATION
                                       OF
                            VACATION BREAK USA, INC.


         On December 19, 1997,  the Board of Directors and the  shareholders  of
PALM RESORT GROUP, INC. duly adopted the following Amended and Restated Articles
of Incorporation  pursuant to the provisions of 607.0704,  607.1003 and 607.1007
of the Florida Business Corporation Act:

                                    ARTICLE I
                                      NAME

         The name of the corporation is Palm Resort Group, Inc.

                                   ARTICLE II
                      PRINCIPAL OFFICE AND MAILING ADDRESS

         The  Corporation's  principal  office  and  mailing  address  is  11001
Executive Center Drive, Little Rock, Arkansas 72211.

                                   ARTICLE III
                                     SHARES

         The Corporation shall have authority to issue 10,000 common shares with
a par value of $.01 per share.

                                   ARTICLE IV
                           REGISTERED AGENT AND OFFICE

         The street address of its  registered  office is 1200 South Pine Island
Road,  Plantation,  Florida 33324,  and the name of its registered agent at that
address is CT Corporation System.




<PAGE>






                                    ARTICLE V
                                    DIRECTORS

         The Corporation  initially shall have three (3) directors,  whose names
and addresses are:

         Name                                             Address

  John W. McConnell                               11001 Executive Center Drive
                                                  Little Rock, Arkansas  72211

  Robert W. Howeth                                11001 Executive Center Drive
                                                  Little Rock, Arkansas  72211

  Marcel J. Dumeny                                11001 Executive Center Drive
                                                  Little Rock, Arkansas  72211
 
                                   ARTICLE VI
                        LIMITATION ON DIRECTOR LIABILITY

      A  director  shall  not be  personally  liable to the  Corporation  or the
holders of shares of capital stock for monetary  damages for breach of fiduciary
duty as a  director,  except  (i) for any  breach of the duty of loyalty of such
director to the  Corporation or such holders,  (ii) for acts or omissions not in
good faith or which involve  intentional  misconduct  or a knowing  violation of
law, (iii) under Section 607.0831 of the Florida  Business  Corporation Act (the
"FBCA"),  or (iv) for any  transaction  from  which  such  director  derives  an
improper  personal  benefit.  If the FBCA is hereafter  amended to authorize the
further or broader  elimination  or  limitation  of the  personal  liability  of
directors,  then  the  liability  of a  director  of the  Corporation  shall  be
eliminated  or  limited  to the  fullest  extent  permitted  by the FBCA,  as so
amended.  No repeal or modification  of this Article VII shall adversely  affect
any right of or protection  afforded to a director of the  Corporation  existing
immediately prior to such repeal or modification.

                                   ARTICLE VII
                                 INDEMNIFICATION

      The Corporation  shall indemnify and advance expenses to, and may purchase
and maintain  insurance on behalf of, its officers and  directors to the fullest
extent  permitted  by law as now or hereafter  in effect.  Without  limiting the
generality  of the  foregoing,  the Bylaws may provide for  indemnification  and
advancement  of expenses to officers,  directors,  employees  and agents on such
terms  and  conditions  as the  Board of  Directors  may from  time to time deem
appropriate or advisable.

      IN  WITNESS  WHEREOF,   the  undersigned,   being  the  President  of  the
Corporation,  has signed these  Amended and Restated  Articles of  Incorporation
this 19th day of December, 1997.


                                    John W. McConnell
                                    President


<PAGE>





                                    EXHIBIT B

                          SURVIVING CORPORATION BYLAWS


                           AMENDED AND RESTATED BYLAWS
                                       OF
                             PALM RESORT GROUP, INC.

                            Adopted December 19, 1997


                                    ARTICLE I
                                     Offices

     SECTION 1.  Principal  Office.  The principal  office of Palm Resort Group,
Inc. (the  "Corporation")  may be located  either within or without the State of
Florida as the board of directors  (the "Board of Directors" or the "Board") may
designate or as the business of the Corporation may require from time to time.

         SECTION 2. Registered Office. The registered office of the Corporation,
required by the Florida  Business  Corporation Act to be maintained in the State
of Florida,  may be, but need not be,  identical to the principal  office in the
State of Florida,  and the address of the registered  office may be changed from
time to time by the Board of Directors.


                                   ARTICLE II
                                  Shareholders

         SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on such date as the Board may determine in each year at such hour as may
be specified in a notice of meeting or in a duly executed waiver of notice,  for
the purpose of electing Directors and for the transaction of such other business
as may come before the meeting. If the day fixed for the annual meeting shall be
a legal  holiday in the State of Florida,  the meeting shall be held on the next
succeeding  business  day. If the  election of  Directors is not held on the day
designated in these bylaws for any annual meeting of the shareholders, or at any
adjournment  of the  annual  meeting,  the Board of  Directors  shall  cause the
election to be held at a special meeting of the  shareholders as soon thereafter
as may be convenient.

         SECTION 2. Special Meetings. Special meetings of the shareholders,  for
any  purpose,  may be called by the Board,  by the  holders of not less than ten
percent (10%) of all the votes entitled to be cast on any issue to be considered
at the meeting, or by the President of the Corporation.

         SECTION 3. Place of Meeting.  The Board may designate any place, either
within or without the State of Florida,  unless otherwise prescribed by statute,
as the place of meeting for any annual meeting of shareholders.  The Chairman of
the Board, if one is elected,  or the President may designate any place,  either
within or without the State of Florida,  unless otherwise prescribed by statute,
as the place of the meeting. If no designation is made, the place of the meeting
shall be the principal office of the Corporation in the State of Florida.
<PAGE>

         SECTION 4. Notice of Meeting.  Written notice  stating the time,  date,
and place of the meeting and, in the case of a special  meeting,  the purpose or
purposes for which the meeting is called, shall be delivered to each shareholder
of record  entitled to vote at such meeting not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally, by telegraph,
teletype,  or other form of electronic  communication,  or by mail, by or at the
direction of the President,  the Secretary, or the person or persons calling the
meeting.  If mailed,  such notice shall be deemed to be delivered when deposited
in the United  States mail  addressed  to the  shareholder  at his address as it
appears on the stock transfer books of the Corporation, postage prepaid.

         SECTION  5.  Fixing of Record  Date.  The Board may fix a date nor more
than  seventy (70) and not less than ten (10) days prior to the date set for any
meeting of the  shareholders  as the record date as of when the  shareholders of
record  entitled to notice of and to vote at such  meeting  and any  adjournment
thereof shall be determined.

         SECTION 6. Shareholders' List for Meeting. After fixing the record date
for a meeting, an alphabetical list of the names of all shareholders entitled to
notice of the  meeting,  arranged by voting  group,  with the address of and the
number,  class,  and series,  if any, of shares held by each, shall be prepared.
The list shall, upon written demand, be available during regular business hours,
for  inspection by any  shareholder  and at his expense for a period of ten (10)
days prior to the meeting  date,  or such shorter time as may exist  between the
record  date  and the  meeting,  and  continuing  through  the  meeting,  at the
Corporation's  principal  office,  at a place set forth in the meeting notice in
the city where the meeting will be held,  or at the office of the  Corporation's
transfer agent or registrar.  The Corporation shall also make the list available
at the meeting.

         SECTION  7.  Quorum.  A  majority  of  the  outstanding  shares  of the
Corporation  entitled  to  vote,  represented  in  person  or  by  proxy,  shall
constitute  a  quorum  at a  meeting  of the  shareholders.  When a  meeting  is
adjourned, it shall not be necessary to give any notice of the adjourned meeting
if the time,  date, and place to which the meeting is adjourned are announced at
the  meeting  at  which  the  adjournment  is  taken,  and any  business  may be
transacted  at the  adjourned  meeting  that might have been  transacted  at the
original date of the meeting. If, however, following the adjournment,  the Board
fixes a new record  date for the  adjourned  meeting,  notice of such  adjourned
meeting shall be given, in compliance with Section 4 of this Article II, to each
shareholder  of record on the new record date  entitled to vote at such meeting.
After a quorum has been established at a shareholders'  meeting,  the subsequent
withdrawal  of  shareholders,  so as to reduce the number of shares  entitled to
vote at the meeting below the numbered  required for a quorum,  shall not affect
the validity of any action taken at the meeting or any adjournment thereof.

         SECTION 8. Proxies.  Every shareholder entitled to vote at a meeting of
shareholders,  or to express consent or dissent  without a meeting,  or his duly
authorized attorney-in-fact,  may authorize another person or persons to act for
him by proxy.  The proxy must be executed in writing by the  shareholder  or his
duly authorized  attorney-in-fact.  Such proxy shall be filed with the Secretary
of the  Corporation  before  or at the  time of such  meeting  or at the time of
expressing  such consent or dissent  without a meeting.  No proxy shall be valid
after  eleven  (11)  months  from the date of its  execution,  unless  otherwise
provided in the proxy.
<PAGE>

         SECTION 9. Voting of Shares.  Each outstanding  share of stock entitled
to vote shall be entitled to one (1) vote upon each matter  submitted  to a vote
at a meeting of the shareholders.

         SECTION  10.  Voting  of  Shares by  Certain  Holders.  Shares of stock
standing in the name of another corporation may be voted by the officer,  agent,
or proxy as  prescribed by the bylaws of the  corporate  shareholder  or, in the
absence of any applicable bylaw, by such person as the Board of Directors of the
corporate  shareholder may designate.  Proof of such  designation may be made by
presentation  of a  certified  copy of the  bylaws  or other  instrument  of the
corporate  shareholder.  In the  absence  of  such  designation,  or in  case of
conflicting designation by the corporate shareholder, the Chairman of the Board,
the  President,  any Vice  President,  the  Secretary,  and the Treasurer of the
corporate shareholder shall be presumed to possess, in that order,  authority to
vote such shares.

         Shares of stock held by an administrator,  executor, guardian, personal
representative,  or  conservator  may be voted by him,  either  in  person or by
proxy, without a transfer of such shares into his name.

         Shares of stock  standing in the name of a trustee may be voted by him,
either in person or by proxy,  but no trustee  shall be  entitled to vote shares
held by him  without a transfer  of such shares into his name or the name of his
nominee.

         Shares  of stock  standing  in the name of a  receiver,  a  trustee  in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by him or her without the transfer thereof into his or her name.

         A  shareholder  whose shares of stock are pledged  shall be entitled to
vote such  shares  until the shares have been  transferred  into the name of the
pledgee, and thereafter the pledgee or his nominee shall be entitled to vote the
shares so transferred.

         Shares of stock  owned by another  corporation  the  majority  of whose
shares of stock  entitled to vote for  Directors is owned or  controlled  by the
Corporation shall not be voted, directly or indirectly, at any meeting.



                                   ARTICLE III
                               Board of Directors

     SECTION 1. General  Powers.  All corporate  powers shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors.
<PAGE>

         SECTION 2. Number,  Tenure, and Qualification.  The number of Directors
of the Corporation  initially shall be three (3). The number of Directors may be
increased or decreased from time to time by amendment of these bylaws,  provided
that the Corporation  shall always have at least one (1) director.  Any increase
in the number of Directors shall be effective  immediately.  Any decrease in the
number of Directors shall be effective at the time of the next succeeding annual
meeting of the  Shareholders  unless there shall be  vacancies on the Board,  in
which  case such  decrease  may become  effective  at any time prior to the next
succeeding annual meeting to the extent of the number of vacancies.

         Except as otherwise provided by statute, the Directors shall be elected
at the annual meeting of Shareholders  and, at each meeting of Shareholders  for
the election of Directors at which a quorum is present,  the persons receiving a
plurality of the votes cast at such election shall be elected as Directors.

         Each initial  director shall hold office until the first  shareholders'
meeting at which  Directors are elected.  Thereafter,  each director  shall hold
office until the next annual meeting of shareholders  and until his successor is
elected and qualified or until his earlier  resignation,  death, or removal from
office.

         SECTION  3.  Chairman  of the  Board.  The  Board of  Directors  of the
Corporation  may elect a  Chairman  who,  if so  elected,  shall  preside at all
meetings of the Board of  Directors.  The Chairman  shall have such other powers
and shall  perform all duties as from time to time may be granted or assigned to
him by the Board of Directors and as provided by law.

         SECTION 4. Annual and Regular Meetings. The annual meeting of the Board
of  Directors  shall be held without  other  notice than this bylaw  immediately
after and at the same place as the annual meeting of shareholders.  The Board of
Directors may provide, by resolution,  the time, date, and place for the holding
of regular meetings without other notice than such resolution.

     SECTION 5. Special Meetings. Special meetings of the Board of Directors may
be  called  by the  Chairman  of the  Board,  by the  President,  or by any  two
Directors.  The Chairman of the Board, if one is elected, or the President shall
fix the place for holding such special meeting.

         SECTION 6.  Notice.  Notice of any  special  meeting  shall be given at
least two (2) days before the meeting by written notice delivered personally, or
by  mail,   telecopy,   telegram,   cablegram,   or  other  form  of  electronic
communication  to each  director  at his  business  address,  unless  in case of
emergency,  the Chairman of the Board, if one is elected, or the President shall
prescribe a shorter  notice to be given  personally or by  telegraph,  telecopy,
cablegram,  or other electronic  communication to each director at his residence
or business  address.  If a notice of meeting is mailed,  such  notice  shall be
deemed to be  delivered  five (5) days after its  deposit  in the United  States
mail, if mailed, postpaid and correctly addressed. Any director may waive notice
of any meeting,  before or after the meeting.  The attendance of a director at a
meeting shall  constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place of the meeting, the time or date of the meeting,
or the manner in which it has been  called or  convened,  except when a director
states,  at the beginning of the meeting,  any objection to the  transaction  of
business because the meeting is not lawfully called or convened.
<PAGE>

         SECTION 7. Quorum. A majority of the number of Directors fixed pursuant
to Section 2 of this Article III shall  constitute a quorum for the  transaction
of  business  at any  meeting  of the  Board of  Directors.  A  majority  of the
Directors  present,  whether or not a quorum exists,  may adjourn any meeting of
the Board to another time and place.  Notice of any such adjourned meeting shall
be given to the  Directors  who were not present at the time of the  adjournment
and,  unless the time and place of the  adjourned  meeting are  announced at the
time of the adjournment, to the other Directors.

     SECTION  8.  Manner of Acting.  The act of the  majority  of the  Directors
present at a meeting at which a quorum is present  shall be the act of the Board
of Directors.

         SECTION 9. Vacancies. Any vacancy occurring on the Board, including any
vacancy  created by reason of an  increase  in the number of  Directors,  may be
filled by the affirmative  vote of a majority of the remaining  Directors though
less than a quorum of the  Board of  Directors.  A  director  elected  to fill a
vacancy shall hold office only until the next annual meeting of shareholders and
until his  successor  shall have been elected and qualified or until his earlier
resignation, removal from office, or death.

         SECTION 10. Compensation.  By resolution of the Board of Directors, the
Directors may be paid their expenses,  if any, for attendance at each meeting of
the  Board of  Directors,  and may be paid a fixed  sum for  attendance  at each
meeting of the Board or may be paid a stated salary as director. No such payment
shall  preclude any director from serving the  Corporation in any other capacity
and receiving compensation therefor.

         SECTION 11. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any  corporate
matter is taken shall be presumed to have assented to the action  taken,  unless
he  objects  at the  beginning  of the  meeting  to  holding  it or  transacting
specified  business  at the  meeting or he votes  against or  abstains  from the
action taken.

         SECTION 12.  Constructive  Presence at a Meeting. A member of the Board
of  Directors  may  participate  in a  meeting  of such  Board  by any  means of
communication   by  which  all   persons   participating   in  the  meeting  may
simultaneously  hear each other during the meeting.  Participating by such means
shall constitute presence in person at a meeting.

         SECTION 13. Action Without a Meeting.  Any action required or permitted
by law to be taken at any  meeting of the Board or a committee  thereof,  may be
taken without a meeting if the action is taken by all members of the Board or of
the  committee.  The action must be evidenced  by one or more  written  consents
describing the action taken and signed by each director or committee member. The
action so taken is effective  when the last director  signs the consent,  unless
the consent  specifies a difference  effective date. A consent so signed has the
effect of a meeting vote and may be described as such in any document.
<PAGE>


                                   ARTICLE IV
                                    Officers

         SECTION  1.  Number.  The  officers  of  the  Corporation  shall  be  a
President,  a Secretary,  and a Treasurer,  each of whom shall be elected by the
Board of  Directors.  One or more Vice  Presidents  and such other  officers and
assistant  officers  and  agents as may be deemed  necessary  may be  elected or
appointed by the Board of Directors.

         SECTION 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors  shall be elected  annually by the Board
of  Directors at the regular  meeting of the Board of Directors  held after each
annual  meeting of the  shareholders.  If the election of officers  shall not be
held at such meeting,  such election shall be held as soon  thereafter as may be
convenient.  Each officer shall hold office until his successor  shall have been
elected and qualified or until his earlier resignation,  removal from office, or
death.

         SECTION 3.  Removal.  Any officer or agent  elected or appointed by the
Board of  Directors  may be removed by the Board of Directors  whenever,  in its
judgment,  the best interests of the Corporation  would be served  thereby,  but
such removal shall be without  prejudice to the contract rights,  if any, of the
person so removed.  Election or  appointment of an officer or agent shall not of
itself create contract rights.

         SECTION 4. Vacancies. A vacancy, however occurring, in any office may 
be filled by the Board of Directors for the unexpired portion of the term.

         SECTION 5. President.  The President  shall be the principal  executive
officer  of the  Corporation  and,  subject  to the  control  of  the  Board  of
Directors, shall in general supervise and control all of the business affairs of
the  Corporation.  He  shall,  when  present,  preside  at all  meetings  of the
shareholders.  The President  shall also preside at the meetings of the Board of
Directors, unless the Board of Directors has elected a Chairman and the Chairman
is present at such meetings. The President may sign any deeds, mortgages, bonds,
contracts,  or other  instruments which the Board of Directors has authorized to
be executed,  except in cases where the signing and  execution  thereof shall be
expressly  delegated  by the Board of Directors or by these bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed.  The President  shall in general  perform all duties as from
time to time may be assigned to him by the Board of Directors.

         SECTION 6. Vice  President.  In the absence of the  President or in the
event of his death or his  inability or refusal to act, the Vice  President,  if
one is  elected,  shall  have the duties of the  President,  and when so acting,
shall have all the powers of, and be subject to all the  restrictions  upon, the
President.  The Vice  President,  if one is elected,  shall  perform  such other
duties as from time to time may be assigned to him by the President or the Board
of Directors. If more than one Vice President is elected, the Board of Directors
shall  designate  which Vice  President  shall  serve  until the  election  of a
successor President.
<PAGE>

         SECTION 7. Secretary.  The Secretary shall: (a) keep the minutes of all
the meetings of the shareholders and the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the  provisions  of these bylaws or as required by law; (c) be custodian of
the corporate  records and of the seal of the  Corporation and see that the seal
of the  Corporation is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized; (d) keep a register of the
post  office  address  of each  shareholder  which  shall  be  furnished  to the
Secretary by such  shareholder;  (e) have general  charge of the stock  transfer
books of the Corporation;  (f) authenticate all records of the Corporation;  and
(g) in general,  perform all duties incident to the office of Secretary and such
other duties as from time to time may be assigned to him by the  President or by
the Board of Directors.

         SECTION 8. Treasurer.  The Treasurer shall: (a) have charge and custody
of and be  responsible  for all funds and  securities  of the  Corporation;  (b)
receive and give receipts for monies due and payable to the Corporation from any
source whatsoever, and deposit all such monies in the name of the Corporation in
such  banks,  trust  companies,  or other  depositories  as shall be selected in
accordance  with the  provisions of Article VI of these bylaws;  (c) in general,
perform  all of the duties  incident to the office of  Treasurer  and such other
duties as from time to time may be  assigned to him by the  President  or by the
Board of Directors.  If required by the Board of Directors,  the Treasurer shall
give a bond for the  faithful  discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine.

         SECTION 9.  Compensation.  The  compensation  of the officers  shall be
fixed  from  time to time by the  Board of  Directors  and no  officer  shall be
prevented from receiving such compensation by reason of the fact that he is also
a director of the Corporation.


                                    ARTICLE V
                                  Resignations

         Any director of the Corporation may resign by delivering written notice
to the Board of Directors or its Chairman or to the Corporation.  Any officer of
the  Corporation  may  resign  at any  time  by  giving  written  notice  to the
Corporation.  Any such  resignation  shall take effect when delivered unless the
notice specifies a later effective date.



                                   ARTICLE VI
                     Contracts, Loans, Checks, and Deposits

         SECTION 1. Contracts.  The Board of Directors may authorize any officer
or  officers,  agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, unless otherwise
restricted  by law.  Such  authority  may be general  or  confined  to  specific
instances.

     SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
a  resolution  of the Board of  Directors.  Such  authority  may be  general  or
confined to specific instances.
<PAGE>

         SECTION 3. Checks, Drafts, Etc. All checks, drafts, or other orders for
the payment of money,  notes, or other  evidences of indebtedness  issued in the
name of the Corporation,  shall be signed by such officer or officers,  agent or
agents  of the  Corporation  in  such  manner  as  shall  from  time  to time be
determined by resolution of the Board of Directors.

         SECTION  4.  Deposits.  All  funds  of the  Corporation  not  otherwise
employed shall be deposited  from time to time to the credit of the  Corporation
in such banks, trust companies,  or other depositories as the Board of Directors
may select.


                                   ARTICLE VII
                   Certificates for Shares and Their Transfer

         SECTION 1. Certificates for Shares. Certificates representing shares of
the  Corporation  shall be in such form as shall be  determined  by the Board of
Directors.  Certificates  shall be  signed  by the  President  or by such  other
officers  as   authorized  by  law.  All   certificates   for  shares  shall  be
consecutively  numbered  or  otherwise  identified.  The name and address of the
person to whom the shares  represented  thereby are  issued,  with the number of
shares and date of issue,  shall be entered on the stock  transfer  books of the
Corporation.  All certificates surrendered to the Corporation for transfer shall
be canceled, and no new certificate shall be issued until the former certificate
for a like number of shares shall have been  surrendered  and  canceled,  except
that in case of a lost, destroyed,  or mutilated  certificate,  a new one may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.

         SECTION 2.  Transfer of Shares.  Transfer of shares of the  Corporation
shall be made on the  stock  transfer  books of the  Corporation  only  when the
holder of record thereof or his legal representative,  or his attorney thereunto
authorized  by power of attorney  duly  executed and filed with the Secretary of
the  Corporation,  shall furnish proper  evidence of authority to transfer,  and
when there is surrendered  for  cancellation  the  certificate  for such shares,
properly  endorsed.  The person in whose name  shares  stand on the books of the
Corporation  shall be deemed by the  Corporation to be the owner thereof for all
purposes.


                                  ARTICLE VIII
                                   Fiscal Year

         The fiscal year of the Corporation  shall begin on January 1 and end on
December 31 in each year, except its first fiscal year, which shall begin on the
date of incorporation.


                                   ARTICLE IX
                                    Dividends

         The  Board  of  Directors  may  from  time  to  time  declare,  and the
Corporation may pay,  dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
<PAGE>


                                    ARTICLE X
                           Indemnification of Officers
                         Directors, Employees and Agents

         SECTION 1.  Indemnification.  The Corporation  shall,  and does hereby,
indemnify  and hold  harmless to the fullest  extent  permitted or authorized by
current or future  legislation or current or future  judicial or  administrative
decisions (but, in the case of any such future legislation or decisions, only to
the extent that it permits the  Corporation to provide  broader  indemnification
rights than  permitted  prior to such  legislation  or  decisions),  each person
(including here and hereinafter, the heirs, executors, administrators,  personal
representatives  or  estate  of  such  person)  who  was  or is a  party,  or is
threatened  to be  made a  party,  or was or is a  witness,  to any  threatened,
pending or  completed  action,  suit or  proceeding,  whether  civil,  criminal,
administrative or investigative (a "Proceeding"),  from,  against and in respect
of any  liability  (which  for  purposes  of this  Article X shall  include  any
judgment,  settlement,  penalty or fine) or cost,  charge or expense  (including
attorneys' fees and expenses)  asserted against him or incurred by him by reason
of the fact that such indemnified  person (1) is or was a director or officer of
the  Corporation or (2) is or was an employee or agent of the  Corporation as to
whom the  Corporation has agreed in writing to grant such indemnity or (3) is or
was serving, at the request of the Corporation, as a director, officer, employee
or trustee of another corporation,  partnership,  joint venture,  trust or other
enterprise  (including serving as a fiduciary of an employee benefit plan) or is
or was  serving  as an  agent  of such  other  corporation,  partnership,  joint
venture, trust or other enterprise, in each case, as to whom the Corporation has
agreed in writing to grant such indemnity.  Each director,  officer, employee or
agent of the  Corporation  as to whom  indemnification  rights have been granted
under this Section 1 of this  Article X shall be referred to as an  "Indemnified
Person."

         Notwithstanding the foregoing, except as specified in Section 3 of this
Article X, the  Corporation  shall not be required to indemnify  an  Indemnified
Person in connection  with a Proceeding (or any part thereof)  initiated by such
Indemnified  Person unless the  authorization  for such  Proceeding (or any part
thereof)  was not denied by the Board of  Directors  of the  Corporation  within
sixty (60) days after  receipt of notice  thereof from such  Indemnified  Person
stating his intent to initiate such Proceeding and only then upon such terms and
conditions as the Board of Directors may deem appropriate.

         SECTION 2. Advance of Costs,  Charges and Expenses.  Costs, charges and
expenses  (including  attorneys'  fees and  expenses)  incurred by an officer or
director who is an Indemnified Person in defending a Proceeding shall be paid by
the  Corporation,  to the fullest  extent  permitted or authorized by current or
future  legislation or current or future  judicial or  administrative  decisions
(but,  in the case of any such  future  legislation  or  decisions,  only to the
extent  that it permits the  Corporation  to provide  broader  rights to advance
costs,  charges  and  expenses  than  permitted  prior  to such  legislation  or
decisions), in advance of the final disposition of such Proceeding, upon receipt
of an undertaking by or on behalf of the Indemnified Person to repay all amounts
so advanced in the event that it shall ultimately be determined that such person
is not entitled to be  indemnified  by the  Corporation  as  authorized  in this
Article  X. The  Corporation  may,  upon  approval  of the  Indemnified  Person,
authorize the Corporation's  counsel to represent such person in any Proceeding,
whether or not the Corporation is a party to such Proceeding. Such authorization
may be made by the Chairman of the Board of  Directors,  unless he is a party to
such  Proceeding,  or by the Board of  Directors  by  majority  vote,  including
directors who are parties to such Proceeding.
<PAGE>

         SECTION  3.  Procedure  for  Indemnification.  Any  indemnification  or
advance  under this  Article X shall be made  promptly  and in any event  within
forty-five  (45) days upon the written request of the  Indemnified  Person.  The
right to  indemnification  or  advances  as granted  by this  Article X shall be
enforceable by the Indemnified Person in any court of competent jurisdiction, if
the Corporation denies such request under this Article,  in whole or in part, or
if no disposition  thereof is made within forty-five (45) days. Such Indemnified
Person's   costs  and  expenses   incurred  in  connection   with   successfully
establishing his right to indemnification  or advances,  in whole or in part, in
any such action  shall also be  indemnified  by the  Corporation.  It shall be a
defense  to any  such  action  that the  claimant  has not met the  standard  of
conduct,  if any,  required  by current or future  legislation  or by current or
future judicial or  administrative  decisions for  indemnification  (but, in the
case of any such future  legislation  or  decisions,  only to the extent that it
does not impose a more  stringent  standard of conduct than  permitted  prior to
such  legislation or decision),  but the burden of proving such defense shall be
on the Corporation.  Neither the failure of the Corporation (including its Board
of Directors or any committee  thereof,  its independent legal counsel,  and its
shareholders)  to have made a  determination  prior to the  commencement of such
action  that  indemnification  of the  claimant  is proper in the  circumstances
because he has met the applicable standard of conduct, if any, nor the fact that
there has been an actual  determination by the Corporation  (including its Board
of Directors or any committee  thereof,  its independent  legal counsel,  or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a  presumption  that the claimant has
not met the applicable standard of conduct.

         SECTION  4.  Rights  Not  Exclusive;   Contract  Right;  Survival.  The
indemnification  provided by this Article X shall not be deemed exclusive of any
other rights to which those  indemnified  may be entitled  under any  agreement,
vote of shareholders or disinterested directors or otherwise, both as to actions
in such person's  official  capacity and as to actions in another capacity while
holding  such office,  and shall  continue as to an  Indemnified  Person who has
ceased to be a  director,  officer,  employee  or agent  and shall  inure to the
benefit of the heirs, executors,  administrators,  personal  representatives and
estate of such person.  All rights to  indemnification  and advances  under this
Article X shall be deemed to be a  contract  between  the  Corporation  and each
Indemnified  Person who serves or served in such capacity at any time while this
Article X is in effect and, as such, are  enforceable  against the  Corporation.
Any repeal or  modification  of this Article X or any repeal or  modification of
relevant  provisions of Florida's  corporation law or any other  applicable laws
shall not in any way diminish these rights to  indemnification of or advances to
such  Indemnified   Person,  or  the  obligations  of  the  Corporation  arising
hereunder,  for claims  relating to matters  occurring  prior to such repeals or
modification.

         SECTION  5.  Insurance.  The  Corporation  may  purchase  and  maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a  director,  officer,  employee,  trustee or agent of  another  corporation,
partnership,  joint venture,  trust or other enterprise  (including serving as a
fiduciary of an employee benefit plan),  with respect to any liability  asserted
against  him and  incurred  by him in any such  capacity  or arising  out of his
status as such, whether or not the Corporation would have the power to indemnify
him  against  such  liability  under  the  provisions  of this  Article X or the
applicable provisions of Florida law.
<PAGE>

         SECTION 6.  Savings  Clause.  If this  Article X or any portion  hereof
shall be invalidated on any ground by any court of competent jurisdiction,  then
the  Corporation  shall  nevertheless  indemnify  and  hold  harmless,  and make
advances  to,  each  Indemnified  Person  as  to  costs,  charges  and  expenses
(including attorneys' fees), liabilities,  judgments,  fines and amounts paid in
settlement  with respect to any  Proceeding,  including  any action by or in the
right of the Corporation, to the full extent permitted by any applicable portion
of this  Article  X that  shall  not  have  been  invalidated  and as  otherwise
permitted by applicable law.


                                   ARTICLE XI
                                      Seal

         The Board of Directors  shall  provide a corporate  seal which shall be
circular in form and shall have inscribed  thereon the name of the  Corporation,
the state of incorporation, and the words, "Corporate Seal."


                                   ARTICLE XII
                                Waiver of Notice

         Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the Corporation  under the provisions of
these bylaws or under the provisions of its Articles of Incorporation,  a waiver
thereof in writing,  signed by the person or persons  entitled  to such  notice,
whether before or after the time stated therein,  shall be deemed  equivalent to
the giving of such notice.

                                  ARTICLE XIII
                                 Rules of Order

         Roberts' Rules of Order,  Newly Revised,  shall  prescribe the rules of
conduct for all meetings of the Corporation so far as not inconsistent  with the
laws of Florida, with the Articles of Incorporation, or with these bylaws.


                                   ARTICLE XIV
                                   Amendments

         These bylaws may be altered, amended, or repealed and new bylaws may be
adopted by a vote of the Board of Directors.

<PAGE>

                                   ARTICLE XV
                                Corporate Records

         The Corporation  shall maintain in written form or in a form capable of
conversion into written form (a) permanent records of minutes of all meetings of
its shareholders and Board of Directors,  or any committee thereof;  or a record
of all action taken without a meeting of its shareholders or Board of Directors,
or any committee thereof;  (b) accurate accounting records;  (c) a record of its
shareholders in a form that permits preparation of a list of names and addresses
of all shareholders in alphabetical  order by class of shares showing the number
and series held by each. Additionally,  the Corporation shall keep a copy of (a)
its Articles of Incorporation  and all amendments  currently in effect;  (b) its
Bylaws,  or  restated  Bylaws,  and all  amendments  currently  in  effect;  (c)
resolutions  adopted by its Board of  Directors  creating one or more classes or
series  of  shares  and  affixing  their  relative  rights,   preferences,   and
limitations,  if shares issued pursuant thereto are outstanding;  (d) minutes of
all  shareholders'  meetings  and  records of all action  taken by  shareholders
without a meeting for the past three years;  (e) written  communications  to all
shareholders,  generally,  or all  shareholders  of a class or series within the
past three years,  including  the  financial  statements  furnished for the past
three years  pursuant to the Florida  Business  Corporation  Act;  (f) a list of
names and business street addresses of its current  Directors and officers;  and
(g) its most recent annual report  delivered to the Florida  Department of State
pursuant to the Florida Business Corporation Act.


                                   ARTICLE XVI
                                Emergency Bylaws

         In the event  that a quorum  of the  Corporation's  Board of  Directors
cannot  readily be assembled  because of a  catastrophic  event,  the  following
emergency bylaws are in effect until termination of the emergency:

         (a) Notice of a meeting of the Board of Directors need only be given to
those  Directors  whom  it is  practicable  to  reach  and may be  given  in any
practicable manner, including by publication and radio;

         (b) One or more officers of the  Corporation  present at the meeting of
the Board of Directors may be deemed to be Directors  for the meeting,  in order
of rank and within the same rank in order of seniority,  as necessary to achieve
a quorum; and

         (c)  The  Director  or  Directors  in  attendance  at a  meeting  shall
constitute a quorum.

         The  Corporation's  bylaws not  inconsistent  with the emergency bylaws
shall  remain in effect  during an  emergency.  During an emergency as set forth
herein, the Board of Directors may:

         (a) Modify lines of succession to  accommodate  the  incapacity  of any
director, officer, employee, or agent; and

         (b) Relocate the principal office or designate alternative principal or
regional offices or authorize the officers to do so.


<PAGE>





                                    EXHIBIT C

                           COMPLETE AND FINAL RELEASE

         WHEREAS,   Palm  Resort  Group,  Inc.,  a  Florida  corporation  ("Palm
Resort"),  and The Berkley Group, Inc., a Florida corporation,  ("Shareholder"),
have entered  into the  Agreement  and Plan of Merger,  dated as of December 10,
1997 (the "Merger  Agreement"),  among Fairfield  Communities,  Inc., a Delaware
corporation  ("Fairfield"),  FC  Palm-Aire,  Inc., a Florida  corporation  and a
wholly owned  subsidiary of Fairfield  ("Merger Sub"),  the Shareholder and Palm
Resort;

         WHEREAS, pursuant to the Merger Agreement the Shareholder has agreed to
deliver,  and in consideration of the payment of the PPM Loan Amount (as defined
in the Merger  Agreement)  PPM  Brokerage  Service,  Inc.  ("PPM") has agreed to
deliver,  a complete and final release of all claims  against Palm Resort,  Palm
Vacation  Group,  a Florida  general  partnership  (the  "Partnership")  and its
partners; and

         WHEREAS,  the Shareholder  acknowledges  that it has conferred with its
counsel concerning the effect of this Release.

         NOW,  THEREFORE,  the  Shareholder,  for  itself  and  its  affiliates,
successors and assigns,  and PPM, for itself and its affiliates,  successors and
assigns, does hereby fully and forever release, relinquish, acquit and discharge
(a) Palm Resort,  its  successors and assigns,  and its and their  shareholders,
directors,  officers, attorneys,  employees, agents, representatives and assets,
and all  persons or  entities  in privity  with them or any of them from (i) all
debts, obligations,  liabilities,  liens and duties under the PPM Loan, (ii) all
claims in respect of loans,  advances,  project  management or marketing fees or
other  obligations,  and (iii) any and all  actions,  causes of action,  claims,
suits,  debts, sums of money,  accounts,  bonds,  bills,  covenants,  contracts,
agreements,  promises, damages, judgments, claims and demands whatsoever, in law
or equity,  whether  known or unknown  and whether  now  existing  or  hereafter
arising including,  without limitation,  any matter described on Schedule 3.2(j)
to the Merger  Agreement,  except claims arising under Sections 5.1, 5.2 and 5.3
of the Merger Agreement,  and (b) the Partnership,  its successors,  assigns and
partners, and its and their directors,  officers, attorneys,  employees, agents,
representatives, and assets, and all persons or entities in privity with them or
any of them from (i) all debt, obligations,  liabilities, liens and duties under
the Partnership Agreement (as defined in the Merger Agreement),  (ii) all claims
in respect of loans,  advances,  project  management or marketing  fees or other
obligations, and (iii) all actions, causes of action, claims, suits, debts, sums
of money, accounts, bonds, bills, covenants,  contracts,  agreements,  promises,
damages,  judgments,  claims and demands whatsoever,  in law or equity,  whether
known or unknown and  whether  now  existing  or  hereafter  arising  including,
without  limitation,  any  matter  described  on  Schedule  3.2(j) to the Merger
Agreement,  except claims  arising under Sections 5.1, 5.2 and 5.3 of the Merger
Agreement.

         The  Shareholder and PPM hereby covenant and agree with Palm Resort and
the  Partnership  to sign,  seal,  execute and  deliver,  or cause to be signed,
sealed,  executed and delivered,  and to make or cause to be done or made,  upon
the  reasonable  request  of  Palm  Resort  or  the  Partnership,  any  and  all
agreements,   instruments,   papers,   deeds,  acts  or  things,   supplemental,
confirmatory  or otherwise,  as may reasonably be required by Palm Resort or the
Partnership  for the purpose of, or in  connection  with,  the releases  granted
hereunder.
<PAGE>

         IN WITNESS  WHEREOF,  this Complete and Final Release is executed as of
the 19th day of December, 1997.



                                   THE BERKLEY GROUP, INC.


                                  By:/s/Rebecca A. Foster
                                     -----------------------------  
                                  Name: Rebecca A. Foster
                                       ---------------------------
                                  Title: President


                                   PPM BROKERAGE SERVICE, INC.


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




<PAGE>




                                 Schedule 6.3(g)
                             OPINION OF COUNSEL FOR
                           SHAREHOLDER AND PALM RESORT


         1. Palm Resort is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida,  has full power to own its
properties and to the knowledge of counsel,  to carry on the business  currently
being  conducted  by it,  and to the  knowledge  of  counsel,  does not  conduct
business in any state other than  Florida.  To the  knowledge  of counsel,  Palm
Resort  does not now own and has never  owned any  capital  stock or any  equity
interest in any corporation,  limited  liability  company,  partnership or other
entity except the Interest.

         2. The execution,  delivery, and consummation of the Agreement has been
duly authorized by the Shareholder and Palm Resort and approved by all necessary
action.  The Agreement has been duly executed and delivered by  Shareholder  and
Palm  Resort and  constitutes  the valid and binding  agreement  of each of them
enforceable in accordance with its terms.

         3. To the knowledge of counsel,  neither the execution of the Agreement
nor the consummation of the transactions contemplated thereby will result in the
breach of any term or  provision  of, or  constitute a default  under,  or be in
violation of any charter provision, bylaw, agreement,  instrument, order, law or
regulation to which  Shareholder,  Palm Resort and/or the Partnership is a party
or which is otherwise applicable.

         4. To the  knowledge  of  counsel,  there  is not (i)  any  pending  or
threatened actions,  suits,  proceedings or investigations  against or affecting
Palm  Resort  or the  Interest  or (ii)  any  currently  existing  order,  writ,
injunction or decree to which Palm Resort is subject.

         5. To the knowledge of counsel, Palm Resort and the Partnership are and
have at all  times  been,  in  compliance  in all  material  respects  with  all
applicable laws, rules and regulations and orders.

         6. To the knowledge of counsel,  there is no fact or circumstance  that
would cause any representation or warranty,  in whole or in part, of Shareholder
and Palm Resort contained in the Agreement not to be true.


<PAGE>





                                 SCHEDULE 3.2(i)



                                      None


<PAGE>


                                 SCHEDULE 3.2(j)



                                      None


<PAGE>


                                 SCHEDULE 6.3(g)



                                      None