Document:

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                                                                        Ex. 10.1

                                                               EXECUTION VERSION

                          HYPOTHECATION LOAN AGREEMENT

                                     BETWEEN

                               RESORT FUNDING LLC

                                       AND

                            SILVERLEAF RESORTS, INC.

                                  MAY 20, 2005

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                                TABLE OF CONTENTS
<TABLE>
<S>                                                                     <C>
SECTION 1 -  RECITALS...............................................    1

SECTION 2 -  DEFINITIONS............................................    1

   2.0         Advance..............................................    1
   2.1         Affiliate............................................    1
   2.2         Apple Mountain Resort................................    1
   2.3         Applicable Law.......................................    2
   2.4         Assignment of Notes Receivable and Mortgages.........    2
   2.5         Borrowing Base.......................................    2
   2.6         Club.................................................    2
   2.7         Club Documents.......................................    2
   2.8         Collateral...........................................    2
   2.9         Compliance Documents.................................    2
   2.10        Custodian............................................    2
   2.11        Custodial Agreement..................................    3
   2.12        Declaration..........................................    3
   2.13        Default Rate.........................................    3
   2.14        EBITDA...............................................    3
   2.15        Effective Date.......................................    3
   2.16        Eligible Deferred Note Receivable....................    3
   2.17        Eligible Note Receivable.............................    3
   2.18        Environmental Indemnity Agreement....................    6
   2.19        Environmental Laws...................................    6
   2.20        FICO Credit Bureau Score.............................    6
   2.21        Event of Default.....................................    7
   2.22        Financed Note Receivable.............................    7
   2.23        Financing Statement..................................    7
   2.24        Fox River Resort.....................................    7
   2.25        GAAP.................................................    7
   2.26        Governmental Authority...............................    7
   2.27        Hazardous Materials..................................    7
   2.28        Hill Country Resort..................................    7
   2.29        Holiday Hills Resort.................................    7
   2.30        Holly Lake Resort....................................    7
   2.31        Improvements.........................................    8
   2.32        Indebtedness.........................................    8
   2.33        Initial Advance......................................    8
   2.34        Intercreditor Agreement..............................    8
   2.35        Interest Rate........................................    8
   2.36        Interval.............................................    8
   2.37        Lake O' The Woods Resort.............................    8
   2.38        Loan.................................................    8
   2.39        Loan Documents.......................................    8
</TABLE>

                                        i
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<TABLE>
<S>                                                                     <C>
   2.40        Lockbox Agent.........................................    9
   2.41        Lockbox Agreement.....................................    9
   2.42        Mandatory Prepayment..................................    9
   2.43        Maturity Date.........................................    9
   2.44        Maximum Exposure......................................    9
   2.45        Mortgage..............................................    9
   2.46        Negative Pledge Agreement.............................    9
   2.47        Note..................................................    9
   2.48        Note Receivable.......................................    9
   2.49        Oak N' Spruce Resort..................................    9
   2.50        Orlando Breeze Resort.................................    9
   2.51        Ozark Mountain Resort.................................   10
   2.52        Permitted Exceptions..................................   10
   2.53        Person................................................   10
   2.54        Piney Shores Resort...................................   10
   2.55        Property..............................................   10
   2.56        Purchase Documents....................................   10
   2.57        Purchaser.............................................   10
   2.58        Recreation and Use Agreements.........................   10
   2.59        Replacement Note Receivable...........................   10
   2.60        Resorts...............................................   10
   2.61        Resort Association....................................   11
   2.62        Resort Documents......................................   11
   2.63        Revolving Period......................................   11
   2.64        Servicing Agreement...................................   11
   2.65        Silverleaf's Seaside Resort...........................   11
   2.66        The Villages..........................................   11
   2.67        Tangible Net Worth....................................   11
   2.68        Timber Creek Resort...................................   11
   2.69        Timeshare Acts........................................   11
   2.70        UCC...................................................   12
   2.71        Unit..................................................   12

SECTION 3 -  THE LOAN................................................   12

   3.0         Advances..............................................   12
   3.1         Amount Financed.......................................   12
   3.2         Availability..........................................   12
   3.3         Term..................................................   12
   3.4         Note..................................................   13
   3.5         Interest Rate.........................................   13
   3.6         Payments..............................................   13
   3.7         Prepayment............................................   14
   3.8         Commitment Fee........................................   15

SECTION 4 -  COLLATERAL..............................................   15

   4.0         Grant of Security Interest............................   15
</TABLE>

                                       ii
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<TABLE>
<S>                                                                              <C>
   4.1         Security Interests in All Pledged Notes Receivable............    16
   4.2         Security Agreement............................................    16
   4.3         Protection of Collateral......................................    16

SECTION 5 -  CONDITIONS PRECEDENT TO ADVANCES................................    17

   5.0         Closing Deliveries............................................    17
   5.1         Deliveries Prior to Each Advance..............................    17
   5.2         Security Interests............................................    18
   5.3         Representations and Warranties................................    18
   5.4         No Default....................................................    18
   5.5         Performance of Agreements.....................................    19
   5.6         Governmental Approvals........................................    19
   5.7         Purchase Documents and Resort Documents.......................    19
   5.8         Opinion of Counsel............................................    19
   5.9         Waiver of Borrowing Restrictions..............................    19
   5.10        Other Documents and Instruments...............................    19
   5.11        No Change of Management.......................................    19

SECTION 6 -  REPRESENTATIONS AND WARRANTIES OF BORROWER......................    19

   6.0         Existence; Good Standing......................................    19
   6.1         Authorization and Enforceability..............................    20
   6.2         Litigation and Proceedings....................................    20
   6.3         Taxes.........................................................    20
   6.4         Financial Statements and Business Condition...................    20
   6.5         Compliance with Applicable Laws...............................    21
   6.6         Licenses and Permits..........................................    21
   6.7         Employee Benefit Plans........................................    21
   6.8         Title to Collateral...........................................    21
   6.9         Representations as to Each Property and the Improvements......    21
   6.10        Full Disclosure...............................................    22
   6.11        Consent Parties...............................................    23
   6.12        The Club......................................................    23
   6.13        Resort Associations...........................................    23
   6.14        Other Lenders.................................................    23

SECTION 7 -  AFFIRMATIVE COVENANTS...........................................    23

   7.0         Payment and Performance.......................................    23
   7.1         Insurance.....................................................    23
   7.2         Condemnation..................................................    25
   7.3         Inspections and Audits........................................    25
   7.4         Reporting Requirements........................................    26
   7.5         Records.......................................................    27
   7.6         Management....................................................    27
   7.7         Financial Covenants...........................................    27
   7.8         Maintenance...................................................    27
   7.9         Proceeds......................................................    27
</TABLE>

                                       iii
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<TABLE>
<S>                                                                                    <C>
   7.10        Release and Bonding of Liens.........................................   27
   7.11        Claims...............................................................   28
   7.12        Other Documents......................................................   28
   7.13        Loan Servicing.......................................................   28
   7.14        Compliance with Applicable Laws, Etc.................................   28
   7.15        Costs and Expenses...................................................   28
   7.16        Covenants as to each Property, Resort, the Intervals, and the Club...   29
   7.17        Exchange Companies...................................................   30
   7.18        Representations as to the Collateral.................................   30
   7.19        Patriot Act..........................................................   31
   7.20        Other Indebtedness...................................................   32

SECTION 8 -  NEGATIVE COVENANTS.....................................................   32

   8.0         Consolidation and Merger.............................................   32
   8.1         Restrictions on Transfers............................................   32
   8.2         Operation of Business................................................   32
   8.3         Timeshare Regimes; Purchase Documents................................   32
   8.4         Collateral...........................................................   32
   8.5         Sales................................................................   33
   8.6         Management Contracts.................................................   33
   8.7         Subordinated Debt....................................................   33
   8.8         Use of Lender's Name.................................................   33

SECTION 9 -  EVENTS OF DEFAULT......................................................   33

   9.0         Payments.............................................................   33
   9.1         Representations......................................................   33
   9.2         Enforceability of Liens..............................................   33
   9.3         Financial Condition..................................................   33
   9.4         Judgments; Liens.....................................................   34
   9.5         Bankruptcy...........................................................   34
   9.6         Maximum Financed Notes Receivable Delinquencies......................   34
   9.7         Failure to Permit Inspections........................................   34
   9.8         Operation of Business................................................   34
   9.9         Use of Resorts.......................................................   34
   9.10        Exchange Program.....................................................   34
   9.11        Default by Borrower With Respect to Other Indebtedness...............   34
   9.12        Default Under Other Loan Documents...................................   35
   9.13        Covenant Defaults....................................................   35
   9.14        Maintenance and Operation of Resorts.................................   35

SECTION 10 -  CERTAIN RIGHTS AND REMEDIES UPON DEFAULT..............................   35

   10.0        Rights and Remedies..................................................   35
   10.1        Application of Collateral; Termination of Agreements.................   36
   10.2        Waiver...............................................................   36
   10.3        Cumulative Rights....................................................   36
   10.4        Survival on Termination..............................................   37
</TABLE>

                                       iv
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<TABLE>
<S>                                                                    <C>
SECTION 11 -  CERTAIN RIGHTS OF LENDER..............................   37

   11.0        Protection of Collateral.............................   37
   11.1        Performance by Lender................................   37
   11.2        Assignment of Lender's Interest......................   37
   11.3        Notice to Purchaser..................................   37
   11.4        Collection of Notes..................................   38
   11.5        Power of Attorney....................................   38
   11.6        Indemnification of Lender............................   38
   11.7        Relief from Automatic Stay, Etc......................   39

SECTION 12 -  MISCELLANEOUS.........................................   39

   12.0        Notice...............................................   39
   12.1        Broker's Fees........................................   40
   12.2        Lender Not a Fiduciary...............................   40
   12.3        No Purchase..........................................   40
   12.4        Consent to Advertising and Publicity.................   40
   12.5        Entire Agreement.....................................   40
   12.6        Modification.........................................   40
   12.7        Severability.........................................   40
   12.8        Binding Effect.......................................   40
   12.9        Counterparts.........................................   40
   12.10       Headings.............................................   40
   12.11       Survival.............................................   40
   12.12       Choice of Law, Jurisdiction, and Venue...............   40
   12.13       Jury Trial Waiver....................................   41
</TABLE>

                                    EXHIBITS

EXHIBIT A-1       Property Description of Apple Mountain Resort

EXHIBIT A-2       Property Description of Fox River Resort

EXHIBIT A-3       Property Description of Hill Country Resort

EXHIBIT A-4       Property Description of Holiday Hills Resort

EXHIBIT A-5       Property Description of Holly Lake Resort

EXHIBIT A-6       Property Description of Lake O' The Woods Resort

EXHIBIT A-7       Property Description of Oak N' Spruce Resort

EXHIBIT A-8       Property Description of Orlando Breeze Resort

EXHIBIT A-9       Property Description of Ozark Mountain Resort

EXHIBIT A-10      Property Description of Piney Shores Resort

                                        v
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EXHIBIT A-11    Property Description of Silverleaf's Seaside Resort

EXHIBIT A-12    Property Description of The Villages

EXHIBIT A-13    Property Description of Timber Creek Resort

EXHIBIT B       Permitted Exceptions

EXHIBIT C       Form of Reassignment of Notes Receivable and Mortgages

EXHIBIT D       Closing Checklist for Initial Advance

EXHIBIT E       Deliveries Prior to Each Advance

EXHIBIT F       Form of Request for Advance

EXHIBIT G       Litigation and Proceedings

EXHIBIT H       List of Club Documents

EXHIBIT I       Form of Allonge

EXHIBIT J-1     Form of Collateral Assignment of Notes Receivable and Mortgages

EXHIBIT J-2     Form of Collateral Assignment of Notes Receivable and
                Certificates of Beneficial Interest

EXHIBIT K       List of Declarations

EXHIBIT L       Material Amounts Owed to Lenders and Other Persons

EXHIBIT M       List of Recreation and Use Agreements

EXHIBIT N       Subordinated Debt

                                       vi

<PAGE>

                          HYPOTHECATION LOAN AGREEMENT

      THIS HYPOTHECATION LOAN AGREEMENT ("Agreement") is made this 20th day of
May, 2005, by and between RESORT FUNDING LLC, a Delaware limited liability
company, with offices located at 360 S. Warren Street, Sixth Floor, Syracuse,
New York 13202 ("Lender"), and SILVERLEAF RESORTS, INC., a Texas corporation,
with offices located at 1221 River Bend Drive, Suite 120, Dallas, Texas 75247
("Borrower").

      A. Borrower desires Lender to extend a secured credit facility to Borrower
in the amount of Twenty-Five Million and No/100 Dollars ($25,000,000.00), in
accordance with this Agreement and the other Loan Documents (defined below).

      B. Borrower's obligations under this Agreement and the other Loan
Documents will be secured by, among other things, a security interest in certain
Notes Receivable (defined below).

      In consideration of the foregoing premises and the agreements, provisions,
and covenants contained in this Agreement, the parties agree as follows:

                              SECTION 1 - RECITALS

      The above recitals are true and correct and are incorporated in this
Agreement by reference.

                             SECTION 2 - DEFINITIONS

      In addition to the words and terms elsewhere defined in this Agreement,
the following words and terms as used in this Agreement have the following
meanings:

            2.0 Advance means proceeds of the Loan advanced from time to time by
Lender to Borrower in accordance with the terms and conditions of this
Agreement.

            2.1 Affiliate means any individual, trust, estate, partnership,
limited liability company, corporation, or any other incorporated or
unincorporated organization (each, a "Person") that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with another Person; or any relative of any of the foregoing. For
purposes of this definition, "Control" means possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract, or
otherwise. For purposes hereof, Silverleaf Berkshires, Inc. shall be deemed an
Affiliate of Borrower.

            2.2 Apple Mountain Resort means that certain timeshare vacation
resort located in Habersham County, Georgia, on the Property more particularly
described in Exhibit "A-1", including but not limited to all related Units,
common areas, limited common areas, parking areas, facilities, and amenities, as
established by the Declaration for such Resort.

<PAGE>

            2.3 Applicable Law means any and all applicable federal, state, and
local statutes, ordinances, rules, regulations, court orders, consent decrees,
other requirements of any applicable Governmental Authority, any other legal
requirements of any and every conceivable type to which Borrower, the Resorts,
or any portion thereof, the Club, the Resort Documents, the Purchase Documents,
the Club Documents, the Units, the Intervals, the Compliance Documents, or all
or any portion of the Collateral, as applicable, is or becomes subject from time
to time, including but not limited to the Timeshare Acts.

            2.4 Assignment of Notes Receivable and Mortgages means with respect
to all Resorts except for Oak N' Spruce Resort, a recordable Assignment of Notes
Receivable and Mortgages in substantially the form of Exhibit "J-1" hereto
executed by Borrower in favor of Lender, pursuant to which the Notes Receivables
and Mortgages identified therein are collaterally assigned to Lender to secure
Borrower's repayment of the Indebtedness and the fulfillment of all of
Borrower's other obligations under the Loan Documents. With respect to Oak N'
Spruce Resort only, "Assignment of Notes Receivable and Mortgages" shall mean
(i) an Assignment of Notes Receivable and Certificates of Beneficial Interest in
substantially the form of Exhibit "J-2" hereto executed by Borrower in favor of
Lender, pursuant to which the Notes Receivable and corresponding Certificates of
Beneficial Interest, as defined in the Resort Documents for such Resort,
identified therein are collaterally assigned to Lender to secure Borrower's
repayment of the Indebtedness and the fulfillment of all of Borrower's other
obligations under the Loan Documents; and (ii) a UCC assignment prepared in
accordance with the provisions of the Massachusetts UCC, pursuant to which the
Borrower's first priority security interest in a particular Interval consisting
of a Certificate of Beneficial Interest is collaterally assigned to Lender.

            2.5 Borrowing Base has the meaning set forth in Section 3.2 hereof.

            2.6 Club means Silverleaf Club, a Texas non-profit corporation.

            2.7 Club Documents means, collectively, all those documents and
instruments listed on Exhibit "H" hereto, as amended and/or restated from time
to time.

            2.8 Collateral has the meaning set forth in Section 4 hereof.

            2.9 Compliance Documents means, with respect to sales of Intervals
in any jurisdiction: (a) unless expressly waived by Lender in writing, an
opinion letter in form and substance satisfactory to Lender from an attorney
licensed in such jurisdiction addressing the compliance of Borrower's offering
materials, the applicable Resort Documents, the applicable Purchase Documents,
the Club Documents, and Borrower's marketing and sales practices in such
jurisdiction with all Applicable Laws; (b) evidence satisfactory to Lender that
the Governmental Authority having jurisdiction over the marketing and sale of
Intervals in such jurisdiction has issued all required approvals of Borrower's
offering materials, marketing, and sales practices; and (c) copies of Borrower's
offering materials, applicable Resort Documents, applicable Purchase Documents,
Club Documents, and financing documents as approved by the applicable
Governmental Authority of such jurisdiction.

            2.10 Custodian means U.S. Bank Trust National Association, its
successors and assigns, or any other Person designated as Custodian by Lender
from time to time.

                                       2

<PAGE>

            2.11 Custodial Agreement means the Custodial Agreement (if any) by
and among Lender, Borrower, and Custodian, as amended and/or restated from time
to time.

            2.12 Declaration means, collectively, those Resort Documents listed
on Exhibit "K" hereto, as amended and/or restated from time to time.

            2.13 Default Rate means the Interest Rate plus five percent (5%) per
annum.

            2.14 EBITDA means, with respect to any Person for any period of
time, (a) the sum of (i) net income (but excluding any extraordinary gains or
losses or any gains or losses from the sale or other disposition of assets other
than in the ordinary course of business; (ii) interest expense; (iii)
depreciation, amortization, and other non-cash items properly deducted in
determining net income; and (iv) federal, state, and local income taxes, in each
case for such Person for such period, computed and calculated in accordance with
GAAP, minus (b) non-cash items properly added in determining net income, in each
case for the corresponding period.

            2.15 Effective Date means the date of this Agreement as first set
forth above.

            2.16 Eligible Deferred Note Receivable means an Eligible Note
Receivable satisfying all of the following criteria:

                  (a) the Purchaser has not had more than one (1) deferred
series of payments of principal and interest within any twelve (12) month
period;

                  (b) the Purchaser has not had more than a total of two (2)
deferred series of payments of principal and interest within the entire term of
the Note Receivable; and

                  (c) any such deferment of principal and interest is limited to
no more than six (6) regularly scheduled monthly payments.

            Notwithstanding the foregoing, prior to Lender's Advance of Loan
proceeds in respect to any particular Eligible Deferred Note Receivable, the
Purchaser shall have made two (2) consecutive timely payments of principal and
interest immediately prior to such Advance.

            2.17 Eligible Note Receivable means a Note Receivable satisfying all
of the following criteria:

                  (a) amounts due under the Note Receivable shall be
self-amortizing and payable in equal monthly installments, and the maximum term
of such Note Receivable does not exceed one hundred twenty (120) months.
Notwithstanding the foregoing, the weighted average remaining term of all
Financed Notes Receivable at any time shall in no event be greater than
ninety-six (96) months, and no more than twenty-five percent (25%) of all
Financed Notes Receivable at any time may have a maximum term in excess of one
hundred fourteen (114) months.

                  (b) the interest rate payable by the Purchaser is not less
than twelve percent (12.0%) per annum;

                                       3

<PAGE>

                  (c) the first payment due date is not more than forty-five
(45) days following the date upon which such Note Receivable becomes a Financed
Note Receivable;

                  (d) the Note Receivable arises as a result of a bona fide sale
of an Interval by Borrower in the ordinary course of its business, and the
applicable Purchaser has purchased no more than four (4) Intervals which are the
subject of Advances;

                  (e) the Purchaser has a minimum FICO Credit Bureau Score of
600 (subject to the last paragraph of this Section 2.17) and otherwise meets
credit standards acceptable to Lender, in its sole discretion;

                  (f) the Note Receivable is in form and substance reasonably
satisfactory to Lender, is valid and legally enforceable in accordance with its
terms, and shall become due and payable in full upon the occurrence of an event
of default thereunder by the applicable Purchaser;

                  (g) the applicable Purchaser has made a cash down payment of
at least ten percent (10%) of the actual gross purchase price of the applicable
Interval, and no part of such payment has been made or loaned to such Purchaser
by Borrower or an Affiliate of Borrower, nor has such Purchaser received any
cash or other rebate of any kind;

                  (h) no monthly installment due in connection with such Note
Receivable is more than thirty (30) days' past due on a contractual basis at the
time of its assignment to Lender, nor becomes more than sixty (60) days' past
due on a contractual basis thereafter;

                  (i) the Unit with respect to the Interval purchased has been
completed, developed, and furnished in accordance with the applicable Purchase
Documents and is in compliance with all Applicable Laws;

                  (j) all facilities and amenities of the applicable Resort have
been completed, are available for use by all Purchasers in the manner
represented to them by or on behalf of Borrower, and are in compliance with all
Applicable Laws;

                  (k) Borrower is the sole payee under the Note Receivable;

                  (l) the Purchaser is not an Affiliate of, related to, or
employed by Borrower;

                  (m) the sale of the Interval from which the Note Receivable
arises has not been canceled by the Purchaser, any statutory or other applicable
cancellation or rescission period has expired, and the sale of the Interval
otherwise complies fully with the terms, provisions, and conditions of this
Agreement, the other Loan Documents, the applicable Purchase Documents, the
applicable Resort Documents, the Club Documents, and all Applicable Laws; and
the Note Receivable is free and clear of any adverse claims, liens, security
interests, and encumbrances and is not currently, nor shall it potentially be in
the future, subject to claims of rescission, invalidity, unenforceability,
illegality, defense, offset, or counterclaim, nor is Borrower aware of any
threatened claims of rescission, invalidity, unenforceability, illegality,
offset, or counterclaim with respect to such Note Receivable;

                                       4

<PAGE>

                  (n) the Note Receivable is secured by a first priority
Mortgage or, in the case of Notes Receivable arising from the sale of Intervals
in Oak N' Spruce Resort only, a first priority perfected security interest,
pursuant to Article 9 of the UCC in effect in Massachusetts from time to time,
which shall be assigned by Borrower to Lender, pursuant to a document or
instrument acceptable to Lender, in its sole discretion, in both form and
content;

                  (o) payments are to be made in legal tender of the United
States;

                  (p) the form and contents of the applicable Purchase Documents
have been approved by Lender, in its sole discretion, such Purchase Documents
are valid, genuine, and enforceable against the obligor thereunder, the
applicable Purchaser does not have any right of set-off, abatement, or
counterclaim, all applicable rescission periods have expired, and such Purchaser
has not assigned his or her interest thereunder;

                  (q) the applicable Purchaser is a U.S. citizen and resident
(provided, however, that up to ten percent (10.0%) of the outstanding principal
balance of all Financed Notes Receivable at any time may be comprised of
Financed Notes Receivable executed by Canadian citizens as obligors);

                  (r) payments have been and shall be made by the obligor
thereunder and not by Borrower or any Affiliate of Borrower on the obligor's
behalf;

                  (s) neither the Note Receivable nor any related Purchase
Documents obligates the Purchaser to pay any prepayment penalty to either
Borrower or Lender;

                  (t) the Purchaser of the relevant Interval has access to a
Unit within the applicable Resort during any use period properly reserved by or
assigned to such Purchaser, all in accordance with the applicable Resort
Documents and the Club Documents;

                  (u) the original of the Note Receivable has been endorsed by
Borrower to Lender in the manner prescribed by Lender and delivered to Lender or
Custodian, along with all other Purchase Documents and other items required by
this Agreement or the Custodial Agreement (if any) to be delivered to Lender or
Custodian;

                  (v) the applicable Unit (or the building in which such Unit is
located) has been fully completed and furnished and, if applicable, a
certificate of occupancy or its legal equivalent has been issued by the
applicable Governmental Authority, and such Unit (or building) is not subject to
any lien or claim (other than the lien created by the Mortgage securing the Note
Receivable and the Permitted Exceptions) that has not previously been approved
in writing by Lender;

                  (w) the maximum outstanding principal balance of such Note
Receivable does not exceed $35,000.00, and the maximum aggregate outstanding
principal balance of all Notes Receivable made by any one (1) Purchaser or other
obligor does not exceed $50,000;

                  (x) in the case of a Note Receivable arising from the sale of
an Interval in Oak N' Spruce Resort: (1) Borrower has recorded in the
appropriate public records of Berkshire County, Massachusetts, a notice of
timeshare license, pursuant to the requirements of Sec

                                       5
<PAGE>

tion 18 of the Massachusetts Timeshare Act; and (2) such Note Receivable and/or
the related purchase agreement includes the language required by the Federal
Trade Commission's Holder in Due Course Rule, 16 C.F.R. Section 433; and

                  (y) Sales of Intervals at the Resort to which such Note
Receivable relates are continuing and have not been suspended as a result of any
stay, order, cease and desist order, temporary restraining order, injunction, or
other judicial or non-judicial sanction or other action.

            Notwithstanding the foregoing, up to ten percent (10%) of Eligible
Notes Receivables pledged to Lender at any given time may consist of Eligible
Deferred Notes Receivable. Additionally, each Advance may contain twenty-five
percent (25%) of Eligible Notes Receivables with respect to which the applicable
Purchaser has a current FICO Credit Bureau Score of 600 or less; provided,
however, that the weighted average of all FICO Credit Bureau Scores related to
the Eligible Notes Receivable and Eligible Deferred Notes Receivable subject to
any particular Advance shall not be less than 650. Furthermore, as of the end of
any calendar quarter, no more than twenty-five percent (25%) of Notes Receivable
with respect to which the applicable Purchaser had a FICO Credit Business Score
of 600 or less as of the date of Lender's Advance hereunder in respect of such
Note Receivable shall constitute Financed Notes Receivable.

            2.18 Environmental Indemnity Agreement means the Environmental
Indemnity Agreement dated of even date herewith executed and delivered by
Borrower to Lender, as the same may be amended and/or restated from time to
time.

            2.19 Environmental Laws means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Resource
Conservation and Recovery Act of 1976 ("RCRA"), the Superfund Amendments and
Reauthorization Act of 1986, the federal Clean Air Act, the federal Clean Water
Act, the federal Safe Drinking Water Act, the federal Toxic Substances Control
Act, the federal Hazardous Materials Transportation Act, the federal Emergency
Planning and Community Right to Know Act of 1986, the federal Endangered Species
Act, the federal Occupational Safety and Health Act of 1970, the federal Water
Pollution Control Act, and any and all comparable statutes and ordinances
enacted in the jurisdiction in which any Resort is located, as all of the
foregoing laws may be amended from time to time, and any rules or regulations
promulgated pursuant to the foregoing; together with any similar local, state,
or federal statutes, ordinances, rules, or regulations, either in existence as
of the date hereof or enacted or promulgated after the date of this Agreement,
that govern or affect the management, control, storage, discharge, treatment,
containment, removal, and/or transport of Hazardous Materials or other
substances that are or may become a threat to public health or the environment;
together with any common law theory involving Hazardous Materials or substances
that are (or alleged to be) hazardous to human health or the environment, based
on nuisance, trespass, negligence, strict liability, or other tortious conduct,
or any other federal, state, or local statute, ordinance, regulation, rule,
policy, or determination pertaining to health, hygiene, the environment, or
environmental conditions.

            2.20 FICO Credit Bureau Score means a credit risk score determined
by the Fair Isaac Company for a consumer borrower through the analysis of
individual credit files in order to predict the likelihood of such consumer's
repayment of a loan.

                                       6
<PAGE>

            2.21 Event of Default has the meaning set forth in Section 9 hereof.

            2.22 Financed Note Receivable means any Eligible Note Receivable or
Eligible Deferred Note Receivable as to which an Advance has been made and which
has been assigned and delivered to Lender as partial security for the Loan.

            2.23 Financing Statement means a UCC-1 Financing Statement or
amendment thereto in form and substance satisfactory to Lender, in its sole
discretion.

            2.24 Fox River Resort means that certain timeshare vacation resort
located in LaSalle County, Illinois, on the Property more particularly described
in Exhibit "A-2", including but not limited to all related Units, common areas,
limited common areas, parking areas, facilities, and amenities, as established
by the Declaration for such Resort.

            2.25 GAAP means generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants or in statements of
the Financial Accounting Standards Board which are applicable in the
circumstances as of the date in question. The requirement that such principles
be applied on a consistent basis means that the accounting principles in a
current period are comparable in all material respects to those applied in any
preceding period, with any exceptions thereto noted.

            2.26 Governmental Authority means the United States of America and
any state, county, or municipality in which a Resort is located, and all other
governmental authorities having jurisdiction over Borrower, a Resort, or the
marketing, sale, use, or occupancy of Intervals and Units thereat.

            2.27 Hazardous Materials means "hazardous substances," "hazardous
waste," "hazardous constituents," "toxic substances," or "solid waste," as
defined in the Environmental Laws, and any other contaminant or any material,
waste, or substance that is petroleum or petroleum based, asbestos,
polychlorinated biphenyls, flammable explosives, or radioactive materials.

            2.28 Hill Country Resort means that certain timeshare vacation
resort located in Comal County, Texas, on the Property more particularly
described in Exhibit "A-3", including but not limited to all related Units,
common areas, limited common areas, parking areas, facilities, and amenities, as
established by the Declaration for such Resort.

            2.29 Holiday Hills Resort means that certain timeshare vacation
resort located in Taney County, Missouri, on the Property more particularly
described in Exhibit "A-4", including but not limited to all related Units,
common areas, limited common areas, parking areas, facilities, and amenities, as
established by the Declaration for such Resort.

            2.30 Holly Lake Resort means that certain timeshare vacation resort
located in Wood County, Texas, on the Property more particularly described in
Exhibit "A-5", including but not limited to all related Units, common areas,
limited common areas, parking areas, facilities, and amenities, as established
by the Declaration for such Resort.

                                       7
<PAGE>

            2.31 Improvements means all Units, buildings, facilities, amenities,
and other improvements to any Property.

            2.32 Indebtedness means all financial obligations of Borrower to
Lender under this Agreement or any of the other Loan Documents.

            2.33 Initial Advance means the first Advance by Lender hereunder.

            2.34 Intercreditor Agreement means that certain Amended and Restated
Intercreditor Agreement by and among Borrower, Lender, Sovereign Bank,
CapitalSource Finance LLC, and Textron Financial Corporation.

            2.35 Interest Rate means a floating rate per annum equal to the
prime rate as announced or published in The Wall Street Journal, Eastern Edition
(the "WSJ") (the "Prime Rate") plus one and one-half percent (1.50%) per annum,
as such rate may change from time to time. Notwithstanding the foregoing, in no
event shall the Interest Rate ever be less than six and one-half percent (6.50%)
per annum. The Interest Rate for each calendar month shall be fixed for such
calendar month by reference to the Prime Rate published and in effect on the
first (1st) business day of such calendar month. Interest shall accrue daily on
the basis of a three hundred sixty (360) day year and the number of actual days
elapsed and shall accrue from the date of an Advance until the final payment
thereof, pursuant to this Agreement and the other Loan Documents. In the event
that the prime rate announced or published in the WSJ is no longer available for
any reason, then the Prime Rate shall be the highest prime rate announced or
published by a major money center bank selected by Lender, in its sole
discretion.

            2.36 Interval means (a) with respect to all Resorts except Oak N'
Spruce Resort, a "Vacation Ownership Interest," as defined in the relevant
Declaration, consisting of an undivided interest in a particular Unit at such
Resort, together with all other Purchasers of Intervals in such Unit; and (b)
with respect to Oak N' Spruce Resort only, a "Certificate of Beneficial
Interest," as defined in the Resort Documents for such Resort, together with a
right to use such Unit, or a Unit of the same type, for one week annually, and
all appurtenant rights and interests, as more particularly described in the
applicable Resort Documents.

            2.37 Lake O' The Woods Resort means that certain timeshare vacation
resort located in Smith County, Texas, on the Property more particularly
described in Exhibit "A-6", including but not limited to all related Units,
common areas, limited common areas, parking areas, facilities, and amenities, as
established by the Declaration for such Resort.

            2.38 Loan means the revolving credit facility evidenced and secured
by this Agreement and the other Loan Documents in the maximum principal amount
of Twenty-Five Million and No/100 Dollars ($25,000,000.00) as described herein.

            2.39 Loan Documents means this Agreement, the Note, the
Environmental Indemnity Agreement, the Servicing Agreement, the Custodial
Agreement (if any), the Lockbox Agreement, the Intercreditor Agreement, the
Negative Pledge Agreements, the Financing Statements, and any and all other
agreements, documents, instruments, and certificates as Lender may require in
order to evidence and/or secure the Indebtedness, to evidence and/or perfect the
rights, liens, and security interests of Lender contemplated by the Loan
Documents, and otherwise to

                                       8
<PAGE>

effectuate the transactions contemplated hereby, as the same may be amended,
renewed, extended, restated, and/or supplemented from time to time.

            2.40 Lockbox Agent means JPMorgan Chase Bank, its successors and
assigns.

            2.41 Lockbox Agreement means that certain Lockbox Agreement of even
date herewith by and among Lender, Borrower, and Lockbox Agent, as amended
and/or restated from time to time.

            2.42 Mandatory Prepayment means any prepayment of the Loan required
by Section 3.7(b) hereof.

            2.43 Maturity Date means the date on which the Loan shall be due and
payable in full, which is sixty (60) months after the Effective Date, or any
earlier date on which the Loan is required to be paid in full, whether by
acceleration or otherwise.

            2.44 Maximum Exposure means seventy-five percent (75.0%) of the
Borrowing Base.

            2.45 Mortgage means any deed of trust or mortgage executed and
delivered by a Purchaser, encumbering all of the related right, title, and
interest of such Purchaser in and to its purchased Interval as security for such
Purchaser's obligations under the related Note Receivable. For purposes hereof
and the other Loan Documents, "Mortgage" shall sometimes also mean the
Assignment of Beneficial Interest and the related Financing Statement executed
and delivered to Borrower in connection with the Purchaser of an Interval in Oak
N' Spruce Resort.

            2.46 Negative Pledge Agreement means each Negative Pledge Agreement
of even date herewith executed by Borrower in favor of Lender, to be recorded in
the appropriate public records of each jurisdiction in which any Property is
located, pursuant to which Borrower has agreed not to convey, assign, transfer,
or encumber any of the real property described therein.

            2.47 Note means that certain Hypothecation Promissory Note of even
date herewith made by Borrower to the order of Lender evidencing the Loan, as
the same may be amended and/or restated from time to time

            2.48 Note Receivable means a promissory note made by a Purchaser to
the order of Borrower in connection with such Purchaser's acquisition of an
Interval.

            2.49 Oak N' Spruce Resort means that certain timeshare vacation
resort located in Berkshire County, Massachusetts, on the Property more
particularly described in Exhibit "A-7", including but not limited to all
related Units, common areas, limited common areas, parking areas, facilities,
and amenities, as established by the Declaration for such Resort.

            2.50 Orlando Breeze Resort means that certain timeshare resort
located in Polk County, Florida, on the Property more particularly described in
Exhibit "A-8", including but not limited to all related Units, common areas,
limited common areas, parking areas, facilities and amenities, as established by
the Declaration for such Resort.

                                       9
<PAGE>

            2.51 Ozark Mountain Resort means that certain timeshare vacation
resort located in Stone County, Missouri, on the Property more particularly
described in Exhibit "A-9", including but not limited to all related Units,
common areas, limited common areas, parking areas, facilities, and amenities, as
established by the Declaration for such Resort.

            2.52 Permitted Exceptions means the exceptions to title listed on
Exhibit "B" hereto.

            2.53 Person means any natural person, corporation, limited
partnership, limited liability company, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust, or other organization, and any government or agency or
political subdivision thereof.

            2.54 Piney Shores Resort means that certain timeshare vacation
resort located in Montgomery County, Texas, on the Property more particularly
described in Exhibit "A-10", including but not limited to all related Units,
common areas, limited common areas, parking areas, facilities, and amenities, as
established by the Declaration for such Resort.

            2.55 Property means any land described in Exhibits "A-1" through
"A-13," attached hereto, upon which the Resorts are situated.

            2.56 Purchase Documents means the Notes Receivable, Mortgages,
Warranty Deeds, Owner Confirmation Interviews, Arbitration Addenda, Notices of
Your Financial Privacy Rights, Automatic Debit or Credit Card Authorizations,
Property Description Addenda, receipt acknowledgments, Certificates of
Beneficial Interest, Assignments of Beneficial Interest, and any purchase
agreements, contracts for sale, related sale and escrow documents executed and
delivered by Purchasers, public offering statements, public reports, and other
disclosure documents, loan applications, financial statements, Truth-in-Lending
Disclosure Statements, Real Estate Settlement Procedures Act Servicing
Disclosure Statements, HUD-1s, Good Faith Estimates of Settlement Costs, credit
card authorization forms, and all guarantees and other documents or instruments
evidencing or securing the obligations of a Purchaser or any other Person
primarily or secondarily liable to pay all or any portion of the purchase price
of an Interval.

            2.57 Purchaser means any Person who has purchased one or more
Intervals from Borrower.

            2.58 Recreation and Use Agreements. Those certain Recreation and Use
Agreements and Recreation and Use Easements listed on Exhibit "M" hereto.

            2.59 Replacement Note Receivable means an Eligible Note Receivable
which is assigned to Lender in replacement of or as a supplement to a Financed
Note Receivable. All Replacement Notes Receivable shall be considered Financed
Notes Receivable and be subject to the security interest granted to Lender
pursuant to Section 4 herein.

            2.60 Resorts means Apple Mountain Resort, Fox River Resort, Hill
Country Resort, Holiday Hills Resort, Holly Lake Resort, Lake O' The Woods
Resort, Oak N' Spruce Resort, Orlando Breeze Resort, Ozark Mountain Resort,
Piney Shores Resort, Silverleaf's Sea-

                                       10
<PAGE>

side Resort, The Villages, or Timber Creek Resort. "Resort" means any one of
them, as the context requires.

            2.61 Resort Association means any not-for-profit corporation or
unincorporated association that is responsible for operating and maintaining a
particular Resort, pursuant to the applicable Resort Documents.

            2.62 Resort Documents means any and all documents and instruments
that establish a particular Resort and govern the maintenance, management, and
operation thereof, including but not limited to a Declaration, the Resort
Association's bylaws and articles of incorporation (if applicable), rules and
regulations, any affiliation agreement with an internal or external exchange
program, a Recreation and Use Agreement, and a management agreement, as each of
the same may be amended and/or restated from time to time.

            2.63 Revolving Period means the period beginning on the Effective
Date and ending on the date which is twenty-four (24) months following the
Effective Date.

            2.64 Servicing Agreement means that certain Servicing Agreement of
even date herewith by and between Borrower, in its capacity as servicer, and
Lender, as amended and/or restated from time to time.

            2.65 Silverleaf's Seaside Resort means that certain timeshare
vacation resort located in Galveston County, Texas, on the Property more
particularly described in Exhibit "A-10", including but not limited to all
related Units, common areas, limited common areas, parking areas, facilities,
and amenities, as established by the Declaration for such Resort.

            2.66 The Villages means that certain timeshare vacation resort
located in Smith County, Texas, on the Property more particularly described in
Exhibit "A-12", including but not limited to all related Units, common areas,
limited common areas, parking areas, facilities, and amenities, as established
by the Declaration for such Resort.

            2.67 Tangible Net Worth means, with respect to any Person, the
amount calculated in accordance with GAAP as (a) the net worth of such Person
and its consolidated subsidiaries; plus (b) to the extent not otherwise included
in such consolidated net worth, unsecured subordinated indebtedness of such
Person and its consolidated subsidiaries, the terms and conditions of which are
reasonably satisfactory to Lender; minus (c) the consolidated intangibles of
such Person and its consolidated subsidiaries, including, without limitation,
goodwill, trademarks, tradenames, copyrights, patents, patent applications,
licenses, and rights in any of the foregoing and other items treated as
intangibles in accordance with GAAP.

            2.68 Timber Creek Resort means that certain timeshare vacation
resort located in Jefferson County, Missouri, on the Property more particularly
described in Exhibit "A-13", including but not limited to all related Units,
common areas, limited common areas, parking areas, facilities, and amenities, as
established by the Declaration for such Resort.

            2.69 Timeshare Acts means any and all laws enacted and in force from
time to time in any jurisdiction in which any Resort is located or in which
Intervals or Club memberships are offered for sale by Borrower governing the
creation, marketing, and sale of timeshare

                                       11
<PAGE>

interests, including but not limited to the Intervals and Club memberships
and/or the management and operation of timeshare resorts, including but not
limited to the Resorts, as enacted and in effect from time to time.

            2.70 UCC means the Uniform Commercial Code as enacted and in effect
from time to time in a particular jurisdiction.

            2.71 Unit means an individual residential dwelling unit within a
Resort, together with all furniture, fixtures, equipment, and furnishings
therein, and any and all interest in any common areas or common elements
appurtenant thereto, as provided in the applicable Declaration.

                              SECTION 3 - THE LOAN

            3.0 Advances. The Advances are part of a revolving credit facility.
Except in connection with a prepayment mandated under Section 3.7 hereof, and to
the extent repaid, the Advances may be borrowed again during the term of the
Revolving Period, subject to the restrictions set forth in this Agreement and
the other Loan Documents. Advances shall occur no more frequently than weekly.

            3.1 Amount Financed. During the Revolving Period, and provided that
no Event of Default has occurred hereunder, Lender shall advance up to a maximum
amount of Twenty-Five Million and No/100 Dollars ($25,000,000.00) on a revolving
basis beginning on the Effective Date. At no time shall the total outstanding
principal balance of the Loan exceed the lesser of (i) Twenty-Five Million and
No/100 Dollars ($25,000,000.00); or (ii) the amount determined in accordance
with Section 3.2 hereof.

            3.2 Availability. Lender shall, from time to time during the
Revolving Period, make Advances to Borrower in amounts of up to seventy-five
percent (75.0%) of the unpaid principal balance owed by a Purchaser under an
Eligible Note Receivable or Eligible Deferred Note Receivable assigned by
Borrower to Lender pursuant to this Agreement and the other Loan Documents,
provided that the aggregate amount of all such advances shall at no time exceed
seventy-five percent (75.0%) of the aggregate unpaid principal balance of all
Eligible Notes Receivable and Eligible Deferred Notes Receivable assigned by
Borrower to Lender pursuant to this Agreement and the other Loan Documents (the
"Borrowing Base"). Lender shall have no obligation to make any Advances unless
the Borrowing Base equals at least one hundred thirty-three percent (133%) of
the outstanding principal balance of the Loan. Notwithstanding the foregoing,
Lender may immediately terminate this Agreement and its obligation to make
further Advances hereunder if: (i) an Event of Default occurs; or (ii) Borrower
fails for any reason to satisfy the conditions precedent to the Initial Advance
set forth in Section 5 hereof on or before sixty (60) days following the
Effective Date.

            3.3 Term. The Loan shall be for a term of sixty (60) months after
the Effective Date or any earlier date on which the Indebtedness is required to
be paid in full, whether by acceleration or otherwise.

                                       12
<PAGE>

            3.4 Note. The obligation of Borrower to repay all Advances together
with all other Indebtedness, shall be evidenced by the Note.

            3.5 Interest Rate. The outstanding principal balance of the Loan,
together with all other Indebtedness, shall bear interest at the Interest Rate;
provided, however, that upon occurrence of an Event of Default, the outstanding
principal balance of the Loan and all other Indebtedness shall bear interest at
the Default Rate.

            3.6 Payments.

                  (a) Monthly Payments.

                        (i) Not later than the Effective Date for the Initial
Advance and prior to each subsequent Advance, Borrower shall direct and cause
all Purchasers and makers of all Financed Notes Receivable to pay all monies due
thereunder to Lender, Lockbox Agent, or such other Person as Lender may direct.
If applicable, Lockbox Agent shall remit all such funds received by it to Lender
in accordance with the terms and provisions of the Lockbox Agreement. All costs
and fees incurred by Lockbox Agent shall be paid by Borrower, as more
particularly described in the Lockbox Agreement.

                        (ii) If the funds received by Lender with respect to any
month are insufficient to pay all interest due Lender in full, then Borrower
shall pay the difference to Lender within five (5) calendar days following
written notice from Lender. Payments received by Borrower directly from any
Purchaser shall be delivered to Lender within two (2) business days following
Borrower's receipt thereof. In the event that Borrower receives any payments in
respect of any Financed Notes Receivable directly from or on behalf of the
applicable Purchaser or other obligor, Borrower shall be deemed to be holding
the entire amount so received in trust for the sole and exclusive benefit of
Lender. Borrower shall immediately deliver to Lockbox Agent all such amounts (in
the form so received by Borrower), unless Lender shall have notified Borrower to
deliver any such amounts directly to Lender. Borrower shall endorse any checks
received by it in favor of Lockbox Agent or Lender, as appropriate.

                  (b) Final Payment. The Indebtedness shall be due and payable
in full on the Maturity Date.

                  (c) Application of Payments. Except as otherwise provided in
the Note, payments received hereunder will be applied as follows:

                        (i) First, to any outstanding costs or fees, including
but not limited to servicing fees, lockbox fees, custodial fees, wire fees, and
collection and other costs which Borrower is obligated to pay under the Loan
Documents.

                        (ii) Second, to all outstanding Late Fees (as such term
is defined in the Note);

                        (iii) Third, to all accrued but unpaid interest due
Lender; and

                        (iv) Fourth, to the outstanding principal balance of the
Loan.

                                       13
<PAGE>

            3.7 Prepayment.

                  (a) Optional Prepayment. The Loan is subject to mandatory
prepayments as provided in Section 3.7(b) below. Other than such mandatory
prepayments, Borrower is prohibited from prepaying the Loan, in whole or in
part, in the first year following the Initial Advance. Thereafter, the Loan may
be prepaid, in whole or in part, upon not less than thirty (30) days' prior
written notice to Lender. Such prepayment shall be accompanied by all interest
accrued through and including the date of Lender's receipt of the prepayment,
all fees and expenses payable by Lender pursuant to the Loan Documents, and a
premium ("Prepayment Premium") calculated based on the amount of time that has
elapsed since the date of the Initial Advance, in accordance with the schedule
below:

<TABLE>
<CAPTION>
Period After Date of Initial Advance                         Premium Percentage
------------------------------------           ----------------------------------------------
<S>                                            <C>
       13 months to 24 months                  3% of the Loan's outstanding principal balance
       25 months to 36 months                  2% of the Loan's outstanding principal balance
       37 months to 48 months                  1% of the Loan's outstanding principal balance
</TABLE>

      Notwithstanding the foregoing provisions of this Section 3.7(a) to the
contrary, Borrower may prepay the Loan, in whole or in part, upon any whole loan
sale, off balance sheet conduit sale, or securitization upon thirty (30) days'
prior written notice to Lender, so long as neither the Loan nor this Agreement
is terminated as a result of such prepayment.

      Notwithstanding any provision of this Section 3.7(a) or any other
provision hereof to the contrary, Borrower shall pay Lender an unused line fee
("Unused Line Fee"), calculated as of the last day of each calendar month during
the term hereof, equal to one quarter of one percent (0.25%) per annum of the
difference between (i) $25,000,000; and (ii) the average outstanding principal
balance of the Loan during such month, commencing on the first day of the
seventh month following the Effective Date, payable monthly in arrears by the
first business day of the following month; provided, however, that the Unused
Line Fee shall be waived in the event that the average outstanding principal
balance of the Loan exceeds $15,000,000 during such month.

                  (b) Mandatory Prepayments.

                        (i) Excess Outstanding. If at any time the outstanding
principal balance of the Loan exceeds the Maximum Exposure, Borrower shall,
within thirty (30) days after Lender's notice thereof, partially prepay the Loan
in an amount necessary to reduce the outstanding principal balance of the Loan
to no more than the Maximum Exposure.

                        (ii) Ineligible Financed Notes Receivable. If at any
time a Financed Note Receivable ceases to be an Eligible Note Receivable,
Borrower shall, within five (5) days after Lender's notice thereof, either (A)
prepay the Loan in an amount equal to the outstanding principal balance due
under such Financed Note Receivable; or (B) deliver to Lender one (1) or more
Eligible Notes Receivable having an outstanding aggregate principal balance
equal to or in excess of the outstanding principal balance of such ineligible
Financed Note Receivable. Thereafter, at Borrower's request, Lender shall return
such ineligible Note Receivable

                                       14
<PAGE>

to Borrower, along with a completed reassignment relating to such Note
Receivable and the Mortgage securing the same, in substantially the form
attached hereto as Exhibit "C."

                        (iii) No Prepayment Premium. Except as set forth in
Section 3.7(c) below, no prepayment premium shall be due in connection with any
mandatory prepayment made in accordance with Sections 3.7(b)(i) or (ii) hereof.

                  (c) Prepayment of Financed Notes Receivable. Borrower
anticipates that Purchasers may make prepayments in accordance with the terms of
their respective Financed Notes Receivable during the term of this Agreement. No
prepayment premium shall be charged in connection with any such prepayments by
Purchasers.

            3.8 Commitment Fee. A commitment fee, which Borrower hereby
acknowledges has been fully earned by Lender as of the date hereof, of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00), i.e., one percent
(1.0%) of the maximum Loan amount, shall be paid by Borrower to Lender and
deducted from the initial Advance by Lender hereunder.

                             SECTION 4 - COLLATERAL

            4.0 Grant of Security Interest. To secure the full and complete
payment of the Indebtedness and Borrower's fulfillment of all other obligations
under the Loan Documents, Borrower hereby unconditionally and irrevocably
assigns, pledges, and grants to Lender a first priority continuing security
interest and lien in and to all rights, title, and interest of Borrower in and
to the following property of Borrower, whether now owned or existing or
hereafter acquired, regardless of where located (collectively, the
"Collateral"):

                  (a) the Purchase Documents and all of Borrower's rights,
title, and interest thereunder and thereto, including but not limited to all
Financed Notes Receivable and the related Mortgages;

                  (b) all rights of Borrower, its Affiliates, successors, and
permitted assigns related to each Interval which is the subject of a Financed
Note Receivable;

                  (c) all deposits, accounts, accounts receivable, general
intangibles, and other receivables arising under or in connection with all or
any portion of the Collateral, together with all payments, privileges, and
benefits arising out of the enforcement thereof, and all funds held in any
escrow or deposit account related to any of the Financed Notes Receivable;

                  (d) all books, records, reports, computer tapes, computer
disks, and software relating to all or any portion of the Collateral;

                  (e) all books, records, ledger cards, files, correspondence,
computer tapes, disks, and software relating to the Purchase Documents or any
other Collateral; and

                  (f) all proceeds, including insurance and condemnation
proceeds, extensions, amendments, additions, improvements, betterments,
renewals, substitutions, and replacements of the foregoing.

                                       15
<PAGE>

            All of the foregoing shall be delivered to Lender in accordance with
Section 5 hereof and Exhibit "D" hereto.

            4.1 Security Interests in All Pledged Notes Receivable.
Notwithstanding that Lender is required, pursuant to the terms and conditions
hereof, to make Advances in respect of Eligible Notes Receivable and Eligible
Deferred Notes Receivable only, Lender shall have a continuing first priority
security interest in all Notes Receivable which have been pledged and assigned
to Lender, including those Notes Receivable that at one time constituted
Eligible Notes Receivable or Eligible Deferred Notes Receivable but which
subsequently became ineligible for any reason ("Ineligible Notes Receivable").

            4.2 Security Agreement. This Agreement shall be deemed a security
agreement as defined in the UCC, and the remedies for any violation of the
covenants, terms, and conditions of the agreements in this Agreement shall be
cumulative and be as prescribed (a) in this Agreement; (b) by Applicable Law; or
(c) as to such part of the Collateral which is described in any Financing
Statement, by the specific provisions of the UCC now or hereafter enacted in the
applicable jurisdiction, all at Lender's sole election. Lender is hereby
authorized by Borrower to sign and file or record any Financing Statements,
together with amendments and renewals thereof, with respect to any of the
Collateral.

            4.3 Protection of Collateral.

                  (a) All original Financed Notes Receivable and other documents
and items referenced in Section 5.1(b) hereof shall, except as otherwise
expressly provided herein to the contrary, be delivered, at Borrower's expense,
to Lender at its address set forth in Section 12 hereof and held by Lender until
all of the Indebtedness has been fully paid and all other obligations, both
financial and otherwise, of Borrower hereunder and pursuant to the other Loan
Documents have been fully satisfied.

            Alternatively, Lender, in its sole discretion, may elect for
Custodian to accept delivery and maintain possession, custody, and control of
all such documents and other items, on behalf of, and for the sole benefit of,
Lender. Except to the extent expressly included in Custodian's fee as set forth
in the Custodial Agreement, all insurance and other expenses of protecting the
Collateral, including but not limited to the costs of storing, warehousing,
insuring, handling, maintaining, and shipping the Collateral, and any and all
excise, property, intangible, sales, and use taxes imposed by any Governmental
Authority on any of the Collateral or in respect of the sale thereof, shall be
paid by Borrower.

                  (b) Any and all amounts for which Borrower may become liable
hereunder and all costs and expenses (including reasonable attorneys' fees and
court costs) that Lender incurs in enforcing or protecting its lien and security
interest in and to all or any portion of the Collateral or any of its rights or
remedies under this Agreement or any other Loan Document or in respect to any of
the transactions to be consummated hereunder or thereunder, until paid by
Borrower to Lender with interest at the Default Rate, shall be added to the
Indebtedness and, as such, be secured by all of the Collateral.

                                       16
<PAGE>

                  (c) Provided that Lender or Custodian retains all original
Financed Notes Receivable and original or copies of the related Purchase
Documents delivered to it in secure, fire-resistant filing cabinets, Lender
shall not be liable or responsible in any way for the safekeeping of the
Collateral, or for any loss or damage thereto, for any diminution in the value
thereof, or for any act or omission by any warehouseman, carrier, forwarding
agency, Lockbox Agent, Custodian, or any other Person whatsoever, excluding
damages or losses that occur as a direct result of Lender's gross negligence or
willful misconduct.

                  SECTION 5 - CONDITIONS PRECEDENT TO ADVANCES

      The obligation of Lender to make Advances is subject to satisfaction of
all of the following conditions and in accordance with the other terms and
conditions of this Agreement and the other Loan Documents:

            5.0 Closing Deliveries. Prior to the Initial Advance, Lender shall
have received, in form and substance satisfactory to Lender, all documents,
instruments, and information identified on the closing checklist attached hereto
as Exhibit "D".

            5.1 Deliveries Prior to Each Advance.

                  (a) To Lender. Prior to each Advance, including the Initial
Advance, Lender shall have received all documents, instruments, and information
identified on Exhibit "E" hereto. Requests for Advances shall be made in writing
at least five (5) business days prior to the requested date of disbursement and
shall be in the form of Exhibit "F" hereto. Borrower shall ensure that all
actions to be taken after each Advance as set forth in the Request for Advance
or elsewhere in this Agreement are taken in compliance with this Agreement.

                  (b) To Lender or Custodian. Prior to each Advance, including
the Initial Advance, the following documents and other items shall have been
delivered to Lender or, if so requested by Lender, to Custodian, in connection
with each Note Receivable in respect to which such Advance is requested by
Borrower:

                        (i) The original of such Note Receivable, payable to the
order of Borrower and endorsed to Lender as follows: "Pay to order of Resort
Funding LLC with Recourse;"

                        (ii) The original or a true copy time-stamped by the
applicable recording office of the recorded Mortgage (including the attached
Property Description Addendum) securing the Note Receivable. Notwithstanding the
foregoing, in the case of a Note Receivable related to the purchase of an
Interval in Oak N' Spruce Resort, Borrower shall deliver to Lender or, if
applicable, to Custodian (A) an original Assignment of Beneficial Interest
(including the attached Property Description Addendum) which secures such Note
Receivable; and (B) evidence satisfactory to Lender of the perfection of
Borrower's security in the applicable Oak N' Spruce Interval, including but not
limited to evidence satisfactory to Lender of the filing of a Financing
Statement against the maker and any other obligor of such Note Receivable in the
appropriate filing or recording office in the applicable jurisdiction;

                                       17
<PAGE>

                        (iii) An original or a true copy (time-stamped by the
applicable recording office for all Resorts other than Oak N' Spruce Resort) of
the recorded (if applicable) Collateral Assignment of Notes Receivable and
Mortgages in the form of Exhibit "J-1" or Exhibit "J-2" (with respect to Oak N'
Spruce Resort only) hereto; provided, however, that in the case of a Note
Receivable secured by a Assignment of Beneficial Interest related to the sale of
an Interval in Oak N' Spruce Resort, Borrower shall also deliver to Lender or,
if applicable, to Custodian, a UCC assignment or other evidence satisfactory to
Lender of the perfection of Lender's security interest in the applicable
Certificate of Beneficial Interest;

                        (iv) A true copy of the related credit application,
credit report, purchase agreement (including the attached Property Description
Addendum), Truth-in-Lending Disclosure Statement, and all other related Purchase
Documents;

                        (v) A true copy time-stamped by the applicable recording
office of the related Warranty Deed (including the attached Property Description
Addendum), (with respect to Intervals in all Resorts except Oak N' Spruce
Resort) or, with respect to Intervals in Oak N' Spruce Resort, an original
Certificate of Beneficial Interest (including the attached Property Description
Addendum);

                        (vi) With respect to Intervals in all Resorts except for
Oak N' Spruce Resort, a title insurance commitment in form and substance
acceptable to Lender, in its sole discretion, which commits the applicable title
insurance company to issue a title insurance policy insuring in favor of Lender,
together with its successors and assigns, the first priority of the lien of the
applicable Mortgage upon the Interval which it encumbers, subject only to such
exceptions and conditions to title as Lender shall have approved in writing and
including such coverage (including endorsements) as Lender deems reasonably
necessary. The original title insurance policy issued pursuant to such
commitment shall be delivered to Lender or, if applicable, to Custodian no later
than sixty (60) days following the date of Lender's Advance in respect of the
applicable Note Receivable;

                        (vii) If applicable, a true copy of the public offering
statement receipt or comparable document as required by Applicable Law; and

                        (viii) Such other documents and other items as Lender,
in its sole discretion, may require from time to time.

            5.2 Security Interests. Lender shall have received satisfactory
evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on all of the Collateral.

            5.3 Representations and Warranties. The representations and
warranties in this Agreement and in the other Loan Documents shall be true,
correct, and complete in all material respects on and as of the date of funding
of the Advance, except for any representation or warranty limited by its terms
to a specific date.

            5.4 No Default. No Event of Default shall have occurred.

                                       18
<PAGE>

            5.5 Performance of Agreements. Borrower shall have performed in all
material respects all agreements, paid all fees, costs, and expenses, and
satisfied all conditions which any Loan Document provides shall be paid or
performed by it as of the date of the Advance.

            5.6 Governmental Approvals. Borrower shall have obtained all
approvals, licenses, permits, and consents for the construction, operation, use,
and occupancy of each applicable Resort, Unit, and Interval that is the subject
of the requested Advance.

            5.7 Purchase Documents and Resort Documents. Prior to the Initial
Advance, Lender shall have received, in form and substance satisfactory to
Lender: (a) the Purchase Documents to be used by Borrower in connection with the
sale of the Intervals at each Resort; and (b) all Resort Documents and
amendments thereto evidencing the establishment of each Resort and the Units and
Intervals thereat.

            5.8 Opinion of Counsel. Prior to the Initial Advance, Borrower shall
deliver to Lender one or more opinions of Borrower's counsel, each of which
shall be in form and substance acceptable to Lender, as to such matters as
Lender may reasonably require.

            5.9 Waiver of Borrowing Restrictions. Prior to the Initial Advance,
Borrower shall deliver to Lender Sovereign Bank's original signed consent, in
form and substance satisfactory to Lender, to the Loan, which consent shall
expressly waive Borrower's compliance with any relevant negative covenants
included in any applicable loan document to which Sovereign Bank and Borrower
are parties.

            5.10 Other Documents and Instruments. Prior to the Initial Advance,
Borrower shall execute and/or deliver to Lender such other documents and
instruments as Lender may reasonably request.

            5.11 No Change of Management. No Change of Management shall have
occurred. For purposes hereof, "Change of Management" means a change of more
than fifty percent (50%) in the aggregate of the following members of the
executive management team of Borrower as of the Effective Date: Robert Mead,
Sharon Brayfield, David O'Connor, Harry White, Edward Lahart, and Joe Conner.

             SECTION 6 - REPRESENTATIONS AND WARRANTIES OF BORROWER

      Borrower represents and warrants and shall be deemed to represent and
warrant continuously to Lender the following:

            6.0 Existence; Good Standing. Borrower is a validly existing
corporation formed under the laws of the State of Texas. Borrower is duly
authorized to do business and is in good standing under the laws of the State of
Texas and such other jurisdictions as may be required in order for Borrower
legally to conduct the business in which it is engaged, and has all licenses and
permits necessary to conduct the business in which it is engaged. Borrower's tax
identification number is 75-2259890.

                                       19
<PAGE>

            6.1 Authorization and Enforceability.

                  (a) Loan Documents. The Loan Documents have been duly
authorized, executed, and delivered to Lender and constitute the duly
authorized, valid, and legally binding obligations of Borrower, enforceable
against Borrower and the other parties signatory thereto (other than Lender) in
accordance with their respective terms. Borrower's execution and performance of
the Loan Documents does not require the consent or approval of any Governmental
Authority or other Person and will not result in a breach of, or constitute a
default by Borrower or any Affiliate thereof under, any loan or credit
agreement, indenture, or any other contract, agreement, document, instrument, or
certificate to which Borrower or any Affiliate thereof is a party or to which it
or any of its assets is subject.

                  (b) Other Agreements. Borrower's execution, delivery, and
compliance with the Loan Documents will not (i) violate any Applicable Law; or
(ii) conflict or be inconsistent with, or result in any default under, any
contract, agreement, or commitment to which Borrower or its assets is subject.

            6.2 Litigation and Proceedings. Except as disclosed in Exhibit "G"
hereto there are no actions, suits, proceedings, orders, or injunctions pending
or, to the best of Borrower's knowledge, threatened against or affecting
Borrower, the Resorts, the Club, the Units, the Intervals, the Purchase
Documents, any Property, any Resort Association, or any Affiliate of Borrower,
at law or in equity, or before or by any Governmental Authority. Borrower has
not received any notice from any court or Governmental Authority alleging that
Borrower or any Affiliate thereof has or may have violated any Applicable Law.

            6.3 Taxes. Borrower has filed all tax returns, income or otherwise,
which are required to be filed by it and has paid, or will pay prior to
delinquency, all taxes (including all interest and penalties, if any) due
pursuant to such returns or pursuant to any assessment received by it, and there
is no unassessed tax or tax deficiency proposed or threatened against Borrower.
All ad valorem taxes and other taxes and assessments against all Property, the
Resorts, the Intervals, and the Collateral have been paid or are current and
will be paid when due, and Borrower knows of no basis for any additional taxes
or assessments against the Resorts, the Intervals, or the Collateral. Borrower
shall collect and pay all applicable sales and rental tax respecting the sale or
rental of the Intervals.

            6.4 Financial Statements and Business Condition. Borrower's
financial statements fairly present the respective financial conditions and (if
applicable) results of operations of Borrower as of the date or dates of the
financial statements and for the periods covered by the financial statements.
All such financial statements, other than those prepared on behalf of a natural
person, if any, were prepared in accordance with GAAP. There has been no
material adverse change in the financial condition of Borrower from the
financial condition shown in its financial statements furnished to Lender.
Borrower is able to pay all of its debts as they become due, and Borrower shall
maintain such solvent financial condition, giving effect to all obligations,
absolute and contingent, of Borrower. Borrower's obligations under the Loan
Documents will not render Borrower unable to pay its debts as they become due.
The present fair market value of Borrower's assets is greater than the amount
required to pay its total liabilities.

                                       20
<PAGE>

            6.5 Compliance with Applicable Laws. Borrower has complied and has
caused the Club to comply, in all respects, with all Applicable Laws, including,
without limitation: (i) the Interstate Land Sales Full Disclosure Act; (ii) the
Timeshare Acts and any other applicable state condominium and timeshare
statutes, rules, and regulations, including but not limited to those governing
the administration and operation of owners' associations and those requiring
registration of any of the Intervals, Club memberships, or internal or external
exchange programs; (iii) Regulation Z of the Federal Reserve Board; (iv) the
Equal Credit Opportunity Act; (v) Regulation B of the Federal Reserve Board;
(vi) Section 5 of the Federal Trade Commission Act; (vii) all applicable state
and federal securities laws; (viii) all applicable usury laws; (ix) all
applicable trade practices, home and telephone solicitation, advertising,
anti-spam, sweepstakes, lottery, and other consumer credit and protection laws;
(x) all applicable real estate sales licensing, disclosure, reporting, and
escrow laws; (xi) the Americans with Disabilities Act; (xii) the Fair Housing
Act; (xiii) the Real Estate Settlement Procedures Act; and (xiv) all rules and
regulations promulgated under the foregoing, as each of the same may be enacted
and in force from time to time. In particular, the "pooling" of Resort
assessments and Club dues and Borrower's practical ability to control the Club
and each Resort Association indefinitely does not violate any Timeshare Act or
other Applicable Law. In addition, notices of timeshare licenses related to the
sale of Intervals in Oak N' Spruce Resort have been and will continue to be
recorded in the appropriate public records of Berkshire County, Massachusetts,
in accordance with the requirements of Section 18 of the Massachusetts Timeshare
Act.

            6.6 Licenses and Permits. Borrower has all required franchises,
certificates of convenience and necessity, operating rights, licenses, permits,
consents, authorizations, approvals, exemptions, and orders as are necessary to
carry on its business as now being conducted (collectively, "Licenses"). Such
Licenses are in full force and effect, no violations are or have been recorded
in respect to any License, and no proceeding is pending or threatened to revoke
any License.

            6.7 Employee Benefit Plans. Borrower is in compliance in all
respects with all applicable provisions of the Employee Retirement Income
Security Act, the Internal Revenue Code, and all other applicable laws and the
regulations and interpretations thereof with respect to all employee benefit
plans adopted by Borrower for the benefit of its employees. No material
liability has been incurred by Borrower which remains unsatisfied for any
funding obligation, taxes, or penalties with respect to any such employee
benefit plan.

            6.8 Title to Collateral. Borrower has, or will have, good and
marketable title to all of the Collateral, free and clear of any lien, security
interest, charge, or encumbrance except for the security interests created by
this Agreement or any other Loan Document or otherwise created in favor of
Lender. No financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any filing or recording office,
except such as may have been filed in favor of Lender.

            6.9 Representations as to Each Property and the Improvements.

                  (a) Title; Prior Liens. Borrower has good and marketable title
to each Property, Resort, and all related Improvements, including but not
limited to each Resort's recreational facilities and amenities, except for
certain real property at Oak N' Spruce Resort, legal title

                                       21
<PAGE>

to which is vested in Oak N' Spruce Resort Trust, pursuant to the applicable
Resort Documents, as well as Intervals which have already been sold and conveyed
to Purchasers. Borrower is not in default under any of the documents evidencing
or securing any indebtedness which is secured, wholly or in part, by any
Property or Improvements, and no event has occurred which with the giving of
notice, the passage of time, or both, would constitute a default under any of
the documents evidencing or securing any such indebtedness. There are no liens
or encumbrances against any Property or Improvements, including but not limited
to each Resort's recreational facilities and amenities, other than the Permitted
Exceptions.

                  (b) Access. Each Property has access, either directly or
indirectly over recorded easements, to a publicly dedicated road, and all
roadways, if any, inside each Property are or will be common elements or common
areas under the applicable Resort Documents. Each Purchaser has and will
continue to have the right to use and enjoy all Units, facilities, amenities,
and other Improvements at the Resorts in the same manner (and subject to the
same conditions) as represented to such Purchaser by or on behalf of Borrower.
Each Property, Resort, and Improvement is free and clear of all liens and
encumbrances, except for the Permitted Exceptions.

                  (c) Utilities. Electric, gas, water, and sanitary facilities,
and other necessary utilities are lawfully available in sufficient capacity to
service each Resort and any easements necessary to the furnishing of such
utility service have been obtained and duly recorded.

                  (d) Environmental Matters. No Property contains any Hazardous
Materials, and no Hazardous Materials are used or stored at or transported to or
from any Property, except for commercially reasonable amounts thereof commonly
found at residential or resort properties in the immediate vicinity of a
particular Property. Borrower has received no notice from any governmental
agency or other Person with regard to Hazardous Materials on, under, or
affecting all or any portion of the Collateral; and neither Borrower, any
Property, nor the Collateral are in violation of any Environmental Laws with
regard to Hazardous Materials.

                  (e) Resort Documents; Club Documents. Borrower has furnished
Lender with true and complete copies of each of the Resort Documents and Club
Documents. Borrower has obtained formal written approval from the Applicable
Governmental Authority (to the extent required by any Applicable Law) to market
and sell Intervals and, to the extent that Borrower is deemed to be marketing
and selling Club memberships, Club memberships in each jurisdiction in which it
has previously or is presently offering Intervals or Club memberships (if
applicable) for sale.

            6.10 Full Disclosure. No part of any of the Loan Documents or any
certificate or statement furnished by Borrower to Lender contains or will
contain any misleading or untrue statement of a material fact and, to the best
of Borrower's knowledge, there is no fact, other than facts relating to general
economic conditions, which materially adversely affects the business,
operations, affairs, conditions, properties, or assets of Borrower which has not
been set forth in the Loan Documents or any certificate or statement furnished
by Borrower to Lender. Borrower knows of no legal or contractual restriction
that will prevent it from offering or selling Intervals to Purchasers in any
jurisdiction in which it is offering Intervals for sale.

                                       22

<PAGE>

            6.11 Consent Parties. Lender is a "Consent Party," as such term is
defined in that certain Sixth Amended and Restated Declaration of Trust of Oak
N' Spruce Resort Trust dated as of September 20, 2004, executed by Borrower and
Silverleaf Berkshires, Inc. as further amended and/or restated from time to time
(the "Trust Agreement"). In such capacity, Lender is entitled to all easements,
remedies, liens, security interests, and other rights granted to any other such
Consent Party, including but not limited to those granted pursuant to Section
5.2 of the Trust Agreement.

            6.12 The Club. The Club (a) is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas; (b) has all
requisite corporate authority to conduct its business as now conducted and as
presently contemplated; and (c) is in good standing as a foreign corporation in
each jurisdiction in which such qualification is reasonably necessary. Borrower,
as manager of the Club, has the right under all Applicable Laws to manage each
Resort. The books and records of the Club delivered to Lender are true and
complete, and all funds collected from Purchasers have been properly accounted
for in all respects and expended for such purposes as are authorized under all
applicable Resort Documents, Club Documents, and Applicable Laws.

            6.13 Resort Associations. Each Resort Association is a corporation
or an unincorporated association duly organized, validly existing, and in good
standing in the jurisdiction in which the Resort to which such Resort
Association relates is located. Each Resort Association has the power and
authority to conduct its business as it is now or proposed to be conducted.

            6.14 Other Lenders. Borrower and each applicable Affiliate thereof
is in full compliance with all of the terms and conditions of all documents and
instruments which evidence and/or secure Borrower's and its Affiliates'
financial and other obligations to Textron Financial Corporation, Sovereign
Bank, DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as agent for Autobahn
Funding Company, LLC, and any other Person. All principal, interest, and other
amounts owed to each such lender and any other Person (to the extent that the
aggregate amount owed to any such lender or other Person exceeds $100,000) as of
the Effective Date are set forth in Exhibit "L" hereto.

                       SECTION 7 - AFFIRMATIVE COVENANTS

      Borrower hereby covenants with Lender as follows:

            7.0 Payment and Performance. Borrower shall pay and promptly perform
on a timely basis all of its financial and other obligations under the Loan
Documents. In addition, Borrower will do all things necessary that are not
prohibited by any Applicable Law to prevent the occurrence of an Event of
Default hereunder.

            7.1 Insurance. Borrower or the Club shall maintain the following
insurance policies ("Insurance Policies") in connection with each Property and
Resort:

                  (a) All-risk builder's risk insurance during any renovation of
Improvements in an amount equal to one hundred percent (100%) of the replacement
cost of the Property or Resort, providing all-risk coverage on the Property and
Resort and the materials

                                       23

<PAGE>

stored on the Property, the Resort, and elsewhere, including the perils of
collapse and water damage;

                  (b) All-risk insurance on the Property and Resort until the
Loan is paid in full, as determined by Lender, in an amount equal to one hundred
percent (100%) of the replacement cost of the Property and Resort or in such
additional amounts as Lender may require, providing all-risk coverage on the
Property and Resort;

                  (c) Such other insurance as Lender may reasonable require,
which may cover protection from business interruption, flood, sinkhole,
earthquake, hurricane, and other risks.

            All Insurance Policies shall be issued on forms and by companies of
at least a Best rating of A-, XII, which are licensed to do business in the
state in which the applicable Resort is located, and shall be satisfactory to
Lender in all material respects. Borrower shall deliver copies of all Insurance
Policies to Lender prior to the Effective Date and shall deliver to Lender
evidence of such coverage forty-five (45) days prior to the anniversary date of
each Insurance Policy. All Insurance Policies shall have loss made payable to
Lender, as mortgagee or secured party, together with the standard mortgagee
clause, if such is required in the state in which a particular Resort is
located. No Insurance Policy may be terminated, reduced, or materially changed
without Lender's prior written consent, and all Insurance Policies shall contain
a provision giving Lender thirty (30) days prior notice of termination,
reduction, or other material change of the applicable coverage.

                  (d) Proofs of Claim. In case of loss or damage or other
casualty, Borrower shall give prompt written notice thereof to the insurance
carrier(s) and to Lender. Subject to the prior rights of the applicable Resort
Association under the applicable Resort Documents, Lender is authorized and
empowered, and Borrower hereby irrevocably appoints Lender as its
attorney-in-fact (such appointment is coupled with an interest), at Lender's
option, to make or file proofs of loss or damage and to settle and adjust all
claims under insurance policies which insure against such risks, to direct
Borrower, in writing, to agree with the insurance carrier(s) on the amount to be
paid in regard to such loss, and to endorse all checks for insurance proceeds
payable to Borrower so that the proceeds are payable to Lender.

                  (e) Loss or Casualty. Provided that no Event of Default
hereunder then exists and Borrower certifies as to same, the net insurance
proceeds shall be made available for the restoration or repair of the applicable
Property and Resort if (i) in Lender's reasonable judgment: (A) restoration or
repair and the continued operation of such Resort is economically feasible; (B)
the value of Lender's security is not reduced; and (C) the casualty loss does
not exceed the net insurance proceeds available for restoration, or Borrower or
the applicable Resort Association provides a deposit in the amount of any such
excess or other evidence satisfactory to Lender that funds are otherwise
available to pay any excess costs of restoration; and (ii) the loss does not
occur in the six (6) month period preceding the Maturity Date, and Lender's
independent consultant certifies that the restoration of the applicable Resort
can be completed at least ninety (90) days prior to the Maturity Date. Borrower
or the Club shall pay, or cause to be paid, all amounts, in addition to the net
insurance proceeds, necessary to pay in full the cost of the restoration or
repair. In addition, prior to any disbursement of insurance proceeds subject to
this

                                       24

<PAGE>

Agreement for renovation or repair to the applicable Resort, Lender shall have
approved in writing (i) all plans and specifications for any proposed repair or
restoration; (ii) the construction schedule; and (iii) the architect's and
general contractor's contracts for restoration exceeding $100,000.00. Lender may
establish other conditions it deems reasonably necessary to assure the work is
fully completed in a good and workmanlike manner free of all liens or claims by
reason thereof, and in compliance with all Applicable Laws. At Lender's option,
the net insurance proceeds shall be disbursed pursuant to a construction escrow
acceptable to Lender.

            If an Event of Default hereunder then exists, or any of the
conditions set forth in this subsection have not been fully satisfied, or the
applicable Property and Resort are not to be restored or repaired, the net
insurance proceeds shall be applied to the Indebtedness in such order and manner
as Lender may elect, whether or not due and payable, with any excess paid to
Borrower.

            Notwithstanding anything in this Agreement to the contrary, for so
long as any Interval to which a Financed Note Receivable relates is subject to a
Declaration, insurance proceeds shall first be applied in accordance with such
Declaration. All Resort Documents and Mortgages shall contain provisions that
require disbursement of insurance proceeds to Lender to the extent available
under the Declaration for disbursement to Purchasers of Intervals to which
Financed Notes Receivable relate, which provisions shall not be modified in any
way or deleted without the prior written consent of Lender. In no event shall
any Resort Documents or Mortgage permit disbursement of the insurance proceeds
for any Interval financed through a Financed Note Receivable directly to such
Purchaser to the extent that any unpaid balance is due on such Mortgage.

            7.2 Condemnation. The proceeds of all awards, payments, and claims
for damages, direct or consequential, in connection with any condemnation or
other taking of any Unit or Interval which is the subject of a Financed Note
Receivable or part thereof, or for conveyances in lieu of condemnation
(collectively, "Proceeds"), are hereby assigned to and shall be paid to Lender.
Lender is authorized (but is under no obligation) to collect any such proceeds.
Lender may, in its sole discretion, elect to apply the net proceeds of any such
condemnation award (after deduction of Lender's reasonable costs and expenses,
if any, in collecting the same) in reduction of the Indebtedness in such order
and manner as Lender may elect, whether due or not.

            Notwithstanding anything in this Agreement to the contrary, for so
long as any Interval to which a Financed Note Receivable relates is subject to a
Declaration, Proceeds shall first be applied in accordance with such
Declaration. All Resort Documents and Mortgages shall contain provisions that
require disbursement of Proceeds to Lender to the extent available under such
Declaration for disbursement to Purchasers of Intervals to which Financed Notes
Receivable relate, which provisions shall not be modified in any way or deleted
without the prior written consent of Lender. In no event shall any Resort
Documents or Mortgage permit disbursement of the condemnation proceeds for any
Interval financed through a Financed Note Receivable directly to such Purchaser
to the extent that any unpaid balance is due on such Mortgage.

            7.3 Inspections and Audits. Borrower shall, at such reasonable times
during normal business hours and as often as may be reasonably requested, permit
Lender's agents or

                                       25

<PAGE>

representatives to inspect the Resorts and Borrower's assets (including
financial and accounting books and records), to examine and make copies of any
abstracts from the records and books of accounts of Borrower or any Resort
Associations (as permitted by Applicable Laws) and to discuss its affairs,
finances, and accounts with any of its officers, employees, or independent
public accountants. Borrower acknowledges that Lender intends to conduct such
audits on at least an annual basis and inspections on a biannual basis. Borrower
shall make available all credit information in Borrower's possession or under
Borrower's control with respect to Purchasers as Lender may request. All
property inspections, audits, copies, and credit investigations shall be at
Borrower's expense.

            7.4 Reporting Requirements. So long as any portion of the
Indebtedness remains unpaid, Borrower shall furnish the following to Lender:

                  (a) Sales and Inventory Reports. Within twenty (20) days after
the end of each calendar month, a report showing all sales and cancellations of
sales of Intervals at each Resort for that month, in form and content
satisfactory to Lender; and within thirty (30) days after the end of each fiscal
year of Borrower, an annual sales and inventory report for each Resort detailing
the sales of all Intervals during such fiscal year and the available inventory
of Units and Intervals, certified by Borrower to be true, correct, and complete
and otherwise in a form approved by Lender;

                  (b) Quarterly Financial Reports. Within forty-five (45) days
after the end of each calendar quarter, unaudited financial statements of
Borrower, Orlando Breeze Resort Club, and the Club, for that quarter, certified
by the respective chief financial officer of each such Person;

                  (c) Year-End Financial Reports. Borrower shall cause to be
delivered the financial statements listed in clause (i) below, prepared, in
accordance with GAAP;

            As soon as available and in any event within one hundred twenty
(120) days after the end of each calendar year, with respect to Borrower,
Orlando Breeze Resort Club and the Club: a balance sheet as of the end of such
year and the related statements of operations, capital accounts, and changes
therein and the related statements of cash flow for such fiscal year; together
with the appropriate notes to such financial statements and supporting
schedules, all of which shall be audited and certified by an independent firm of
independent certified public accountants, shall be unqualified as to going
concern and scope of audit and shall state that such financial statements
present fairly the financial position of Borrower, each Resort Association, and
the Club, as applicable, as of the dates indicated and the results of operations
and cash flow for the periods indicated in conformity with GAAP;

                  (d) Audit Reports. Promptly on receipt thereof, one (1) copy
of each other report submitted to Borrower, Orlando Breeze Resort Club, and the
Club by independent public accountants in connection with all annual, interim,
or special audits made by them of the respective books of Borrower, each Resort
Association, and the Club;

                                       26

<PAGE>

                  (e) Other Reports. Such other reports, statements, notices,
and written communications relating to Borrower, Orlando Breeze Resort Club, the
Club, or the Resorts as Lender may require, in its reasonable discretion; and

                  (f) SEC Reports. If applicable, promptly on their becoming
available, one (1) copy of each financial statement, report, notice, and proxy
statement sent by Borrower to security holders generally, and of each regular or
periodic report and each registration statement, prospectus, and written
communication (other than transmittal letters) in respect thereof filed by
Borrower with, or received by Borrower in connection therewith from, any
securities exchange or the Securities and Exchange Commission or any successor
agency.

            7.5 Records. Borrower shall keep adequate records and books of
account reflecting all financial transactions of Borrower, including sales of
Intervals, in which complete entries shall be made in accordance with GAAP.

            7.6 Management. The management contracts for each Resort (if any)
and the Club shall at all times be reasonably satisfactory to Lender. For so
long as Borrower controls any Resort Association or the Club, Borrower shall not
amend, modify, or waive any provision of or terminate the management contract
for any Resort or the Club without the prior written consent of Lender, which
consent shall not be unreasonably withheld.

            7.7 Financial Covenants. At all times that any portion of the
Indebtedness is outstanding or Lender is obligated to make Advances:

                  (a) Borrower shall not, for more than sixty (60) continuous
days, fail to maintain a minimum Tangible Net Worth of at least One Hundred
Million Dollars ($100,000,000) plus, on a cumulative basis, fifty percent (50%)
of the consolidated net income of Borrower and its Affiliates for the
immediately preceding fiscal year, as determined in accordance with GAAP; and

                  (b) Borrower shall ensure that the Interest Coverage Ratio is
at least 1.25:1. For purposes hereof, "Interest Coverage Ratio" shall mean, with
respect to Borrower for any period, the ratio of (i) EBITDA for such period less
capital expenditures, as determined in accordance with GAAP, to (ii) Borrower's
interest expense minus all non-cash items constituting interest expense for such
period.

            7.8 Maintenance. Borrower, in its capacity as manager, shall fully
perform all of its obligations under its management agreement with the Club,
including but not limited to its obligation to maintain all Resorts in good
repair, working order, and condition and to make or cause to be made all
necessary replacements to any Resort.

            7.9 Proceeds. Immediately on Borrower's receipt of proceeds from the
sale of any of the Collateral, Borrower shall deliver such proceeds to Lender in
their original form and, pending delivery to Lender, Borrower shall hold such
proceeds as agent for Lender and in trust therefor.

            7.10 Release and Bonding of Liens. If any lien attaches to all or
any portion of the Collateral, Borrower shall, within forty-five (45) days after
such attachment, either (a) cause

                                       27

<PAGE>

such lien to be released of record; or (b) provide Lender with a bond in
accordance with Applicable Laws, issued by a corporate surety acceptable to
Lender, in an amount acceptable to Lender and in form acceptable to Lender, in
its sole discretion; or (c) provide Lender with such other security as Lender
may reasonably require.

            7.11 Claims. Borrower shall (a) promptly notify Lender of (i) any
material claim, action or proceeding affecting any Resort or the Collateral, or
any part thereof, or any of the security interests granted under this Agreement;
(ii) any material action, suit, proceeding, order, or injunction of which
Borrower becomes aware after the Effective Date pending or threatened against or
affecting Borrower or any Affiliate of Borrower; and (iii) the occurrence of any
Event of Default; (b) at the request of Lender, appear in and defend, at
Borrower's expense, any such claim, action, or proceeding; and (c) comply in all
respects, and shall cause all Affiliates of Borrower to comply in all respects,
with the terms of any orders imposed on such Person by any Governmental
Authority. For purposes of this Section 7.11, a claim, action, proceeding, suit,
order, or injunction shall not be deemed material unless it relates to an amount
claimed or in dispute of $100,000 or more.

            7.12 Other Documents. Borrower shall maintain accurate and complete
files relating to the Notes Receivable and all other Collateral to the
satisfaction of Lender, and such files will contain copies of each Note
Receivable, together with the corresponding purchase agreements,
truth-in-lending statements, all relevant credit memoranda, and all collection
information and correspondence relating to such Notes Receivable.

            7.13 Loan Servicing. Borrower shall be the initial servicer of the
Financed Notes Receivable, pursuant to the Servicing Agreement. However, upon
the occurrence of (a) an Event of Default; (b) fraud, misrepresentation, willful
misconduct, negligence or any other breach by Servicing Agent in the performance
of its duties and obligations under the Servicing Agreement, Lender shall
provide written notice to Borrower that all such servicing responsibilities
shall immediately be transferred to Lender. Any and all costs related to such
transfer as well as all reasonable fees charged and costs incurred by Lender in
servicing the Financed Notes Receivable shall be paid by Borrower.

            7.14 Compliance with Applicable Laws, Etc. Borrower shall at all
times comply fully with, conform to, and obey, and shall cause the Club to
comply fully with, conform to, and obey, each and every Applicable Law and
judgment, indenture, instrument, agreement, and document to which it is a party
or by which it or any of its assets is subject. Prior to offering Intervals for
sale in any jurisdiction in which such offers are not occurring as of the
Effective Date, Borrower shall notify Lender and provide Lender with evidence
satisfactory to Lender, in Lender's sole discretion, including but not limited
to a legal opinion issued by an attorney licensed in such jurisdiction and
acceptable to Lender, that Borrower has fully complied with the Timeshare Act
and all other Applicable Laws governing the marketing and sale of Intervals in
such jurisdiction.

            7.15 Costs and Expenses. Borrower shall pay when due all costs and
expenses required by this Agreement, including but not limited to the following:
(a) all taxes and assessments applicable to the Collateral; (b) all fees,
charges, and taxes in connection with filing or recording the Loan Documents;
(c) all fees and commissions lawfully due to brokers, salespersons,

                                       28

<PAGE>

and agents in connection with the Loan and the Collateral; (d) all fees and
expenses of outside counsel to Lender, including but not limited to all fees and
expenses had or incurred in connection with: (i) the preparation and negotiation
of Loan Documents, including, without limitation, all due diligence review
which, in such counsel's sole discretion, is reasonably necessary or appropriate
in connection with the Loan; (ii) the interpretation or enforcement of any of
the provisions of, or the creation, preservation, or exercise of rights and
remedies under, any of the Loan Documents; (iii) the preparation for,
negotiations regarding, consultations concerning, or the defense or prosecution
of legal proceedings involving any claim or claims made or threatened against
Lender in connection with the Loan or the preservation or protection of the
Collateral, expressly including, without limitation, the defense by Lender of
any legal proceedings instituted or threatened, including those for pre-trial,
trial, appellate, bankruptcy, and probate matters, and all costs associated
therewith, including, without limitation, receivers' fees, appraisers' fees,
engineers' fees, accountants' fees, independent consultants' fees, including,
without limitation, environmental consultants, outlays for documentary and
expert evidence, and stenographers' charges, publication costs, and costs, which
may be estimates as to items to be expended after entry of an order or judgment,
for procuring all such abstracts of title, title, and UCC searches, and
examination, title policy, and similar data and assurances with respect to title
as Lender may deem reasonably necessary either to prosecute any action; (e) all
title insurance policies and title examination charges, including, without
limitation, premiums for such title insurance policies; (f) all survey costs and
expenses, including, without limitation, the cost of any survey requested by
Lender; (g) all premiums for the insurance policies required by Lender; (h) all
travel and out-of-pocket expenses of Lender or its agents to conduct inspections
or audits; (i) all servicing fees, lockbox fees, custodial fees, wire fees, and
collection costs in connection with the Loan; (j) all other costs and expenses
payable to third parties incurred by Borrower in connection with the
consummation of the transactions contemplated by this Agreement; and (k) all
other reasonable expenditures and expenses which may be paid or incurred by or
on behalf of Lender, including, without limitation, repair costs and payments to
remove or protect against liens. All costs and expenses to be paid by Borrower
to Lender shall be due as a condition precedent to each Advance, or at Lender's
election, within ten (10) days following Lender's delivery to Borrower of
written notification of such costs and expenses from Lender, and all such costs
and expenses shall be secured by all of the Collateral.

            7.16 Covenants as to each Property, Resort, the Intervals, and the
Club.

                  (a) Title; Prior Liens. Borrower has and will retain good and
marketable title to all Collateral and to each Resort's recreational facilities
and amenities. Borrower shall not engage in or permit any act or omission which
would, with notice, the passage of time, or both, constitute a default under any
of the documents evidencing or securing any indebtedness which is secured,
wholly or in part, by any assets of Borrower. There are no liens or encumbrances
against any Resort's recreational facilities and amenities, other than the
Permitted Exceptions. All necessary approvals for the continued offering for
sale of Intervals will continue to be obtained.

                  (b) Amenities. Each Purchaser will have access to and the use
of all of the amenities and public utilities of each Resort as and to the extent
provided in the applicable Resort Documents.

                                       29

<PAGE>

                  (c) Operation. Each Property, Resort, Unit, and the other
Improvements will be operated in compliance with all applicable zoning
requirements, building codes, subdivision ordinances, licensing requirements,
covenants, conditions, and restrictions of record, and all other Applicable
Laws.

                  (d) Resort Documents and Club Documents. The Resort Documents
and the Club Documents shall comply with all Applicable Laws, including, without
limitation, the Timeshare Acts and all of the rules and regulations promulgated
thereunder. The Resorts have been established and dedicated as, and will remain,
timeshare projects.

                  (e) Assessments. The Club will have the authority to levy
annual and other assessments to cover the costs of maintaining and operating the
Resorts and the Club. The Club will remain solvent, and all levied assessments
upon Purchasers will be adequate to cover the costs of maintaining and operating
the Resorts and the Club. There are no events which currently exist or could
reasonably be foreseen by Borrower which could give rise to a material increase
in such costs. Borrower shall obtain, at its sole cost, an annual reserve
analysis with respect to the Improvements at each Resort, copies of which shall
be furnished to Lender promptly following Borrower's receipt thereof.

            7.17 Exchange Companies. Borrower has entered into written
agreements with Resort Condominiums International, LLC and Interval
International, Inc., pursuant to which the Club and the Resorts are affiliated
with one (1) or both such external exchange programs. Borrower has provided
Lender with a copy of such affiliation and related agreements, and Borrower
shall promptly pay all fees and other amounts as and when due and owing under
such agreements and shall remain in good standing under such agreements.

            7.18 Representations as to the Collateral.

                  (a) Title. Borrower has, on the date of the Initial Advance,
and will retain thereafter good and marketable title to the Collateral, free and
clear of all liens, security interests, charges, and encumbrances except for (i)
the security interests created by this Agreement or otherwise created in favor
of Lender; and (ii) the Permitted Exceptions. No Financing Statement or other
instrument similar in effect covering all or any part of the Collateral is or
will be on file in any recording or filing office, except such as may have been
filed or recorded in favor of Lender.

                  (b) Binding Obligations. On the date of its pledge and
assignment to Lender, each Financed Note Receivable and Replacement Note
Receivable will constitute an Eligible Note Receivable.

                  (c) Community Property. The Purchase Documents will be
executed by Purchasers in connection with the purchase of Intervals and, as to
individuals, bind the marital community of married individual partners, to the
extent community property statutes are applicable.

                  (d) Compliance with Applicable Laws. The Purchase Documents
will continue to comply with all Applicable Laws. The marketing, sale, offering
for sale, rental, and solicitation of Purchasers or, if applicable, lessees, and
the financing of Intervals (i) do not and

                                       30

<PAGE>

will not constitute the sale, or the offering for sale, of securities subject to
the registration or other requirements of the Securities Act of 1933, as
amended, or any state securities law; (ii) do not and will not violate the
Interstate Land Sales Full Disclosure Act, the Timeshare Acts, or any other
Applicable Laws; and (iii) do not and will not violate any consumer credit or
usury statute of the state or county in which any Resort is located or any
jurisdiction in which sales or solicitation activities regarding the Intervals
occur. To the extent required by Applicable Laws, all Interval marketing and
sales activities will be performed by employees or independent contractors of
Borrower, who will be and shall remain, to the extent required by Applicable
Laws, properly licensed real estate brokers or salespersons.

                  (e) Enforceability. The Purchase Documents will be original,
genuine, and in all respects what they purport to be, and will be enforceable
according to their terms. All statements contained in the Purchase Documents
shall be true, and all unpaid balances shown therein shall be correct. Borrower
has and will have full right to enter into the Purchase Documents, and all
parties to the Purchase Documents will have full capacity to contract.

                  (f) Mortgages. Each Mortgage will create and evidence a first
priority security interest in the purchased Interval.

            7.19 Patriot Act.

                  At all times during the term of the Loan, Borrower and all of
its Affiliates shall (i) not be Prohibited Persons; and (ii) be in full
compliance with the Executive Order and the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Pub L. No. 107-56 Stat. 272 (2001) and all amendments thereto. For
purposes hereof, "Executive Order" means Executive Order No. 13224 - Blocking
Property and Prohibiting Transactions with Persons Who Commit, Threaten to
Commit, or Support Terrorism, effective September 24, 2001, and all applicable
orders, rules, regulations, and recommendations promulgated under or in
connection therewith, and all amendments of the foregoing.

                  In addition, "Prohibited Person" means any Person:

                  (a) listed in the Annex to, or otherwise subject to the
provisions of, the Executive Order;

                  (b) that is owned or controlled by, or acting for or on behalf
of, any Person that is listed in the Annex to, or is otherwise subject to the
provisions of, the Executive Order;

                  (c) with whom Borrower or Lender is prohibited from dealing or
otherwise engaging in any transaction by any terrorism or money laundering law,
including the Executive Order;

                  (d) who commits, threatens, or conspires to commit or supports
"terrorism" as defined in the Executive Order;

                                       31

<PAGE>

                  (e) that is named as a "specially designated national and
blocked person" on the most current list published by the U.S. Treasury
Department Office of Foreign Assets Control at its official website,
http:\www.treas.gov.ofac\t11sdn.pdf or at any replacement website or other
replacement official publication of such list; or

                  (f) who is an Affiliate of a Person listed above.

            7.20 Other Indebtedness. Borrower shall comply fully with all
financial and other obligations which it owes to Textron Financial Corporation,
Sovereign Bank, DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as agent for
Autobahn Funding Company, LLC, and any other Person and will promptly deliver to
Lender, upon receipt by Borrower, copies of any notices received by Borrower in
connection with any of the foregoing credit facilities.

                         SECTION 8 - NEGATIVE COVENANTS

      Borrower covenants and agrees with Lender as follows:

            8.0 Consolidation and Merger. Borrower shall not consolidate with or
merge into any other Person or permit any other Person to consolidate with or
merge into it, unless Borrower is the surviving entity and the requirements of
Section 8.1(b) below remain satisfied. Borrower will not sell or lease all or
substantially all of its assets, including real and personal property, out of
the ordinary course of its business.

            8.1 Restrictions on Transfers. Except as set forth in this
Agreement, Borrower shall not, without obtaining the prior written consent of
Lender, which may be granted or withheld in Lender's sole discretion, transfer,
sell, convey, lease, or encumber (A) all or any portion of the Collateral; or
(B) any real or personal property of any kind covered by a Negative Pledge
Agreement (or cause or permit Silverleaf Club to do so), nor shall Borrower or
Silverleaf Club contract to do any of the foregoing, including entering into
options to purchase and installment sales contracts.

            8.2 Operation of Business. Borrower shall not materially change the
type or character or the standard operation of Borrower out of the ordinary
course of its current business.

            8.3 Timeshare Regimes; Purchase Documents. Without Lender's prior
written consent, Borrower shall not (a) materially amend, modify, or terminate
any of the Resort Documents or the Club Documents, unless such amendment or
modification is required either (i) to cause additional Units and/or Intervals
to be annexed into the existing timeshare regime of a Resort; or (ii) by
Applicable Law, in which event Borrower shall implement the same and give prompt
written notice thereof, along with copies of the revised documents, to Lender;
or (b) materially revise the forms of any of the Purchase Documents.

            8.4 Collateral. Borrower shall not take any action (nor permit or
consent to the taking of any action) that might reasonably be anticipated to
materially impair the value of all or any portion of the Collateral or any of
the rights of Lender in and to the Collateral. Without Lender's prior written
consent, Borrower shall not, except as expressly permitted by Section 2.17
hereof: (a) modify or amend any of the Financed Notes Receivable or any related
Purchase

                                       32

<PAGE>

Documents; (b) grant extensions of time for the payment of, compromise for less
than the full face value, release in whole or in part any Purchaser liable for
the payment of, or allow any credit whatsoever except for the amount of cash to
be paid on, any Collateral or any instrument or document representing the
Collateral; or (c) materially alter Borrower's credit underwriting criteria.

            8.5 Sales. Borrower shall not market or cause to be marketed,
attempt to sell or cause to attempt to sell, or sell or cause the sale of any
Intervals unless, prior to taking any such actions, Borrower delivers to Lender
the applicable Compliance Documents and provides Lender with evidence
satisfactory to Lender that Borrower has complied and is in compliance with all
Applicable Laws regarding same.

            8.6 Management Contracts. Without Lender's prior written consent,
Borrower shall not materially amend, modify, assign, or encumber any management
contract in connection with any Resort or the Club.

            8.7 Subordinated Debt. Borrower shall not, directly or indirectly,
without Lender's prior written consent, permit the amendment, rescission, or
other modification of any of Borrower's Subordinated Debt, as described on
Exhibit "N" hereto, in such a manner as to affect adversely the first lien
priority of Lender in and to all of the Collateral.

            8.8 Use of Lender's Name. Borrower shall not, and will not permit
any Affiliate of Borrower, without the prior written consent of Lender, to use
the name of Lender or the name of any affiliates of Lender in connection with
any of their respective businesses or activities, except in connection with
internal business matters, administration of the Loan, and as required in
dealings with Governmental Authorities.

                         SECTION 9 - EVENTS OF DEFAULT

      The occurrence of any of the following constitutes an Event of Default:

            9.0 Payments. Borrower fails to make any payment of the Indebtedness
when due and such failure continues for more than three (3) calendar days
following Lender's giving of written or oral notice of such failure.

            9.1 Representations. Any representation or other statement made by
or on behalf of Borrower in the Loan Documents or in any certificate or
instrument furnished in compliance with or in reference to the Loan Documents is
false, misleading, or incorrect in any material respect as of the date made or
reaffirmed.

            9.2 Enforceability of Liens. Any lien or security interest granted
by Borrower in favor of Lender becomes invalid or unenforceable, in whole or in
part, or is not, or ceases to be, a perfected first priority lien or security
interest in favor of Lender, encumbering the asset which it is intended to
encumber, and Borrower fails to cause such lien or security interest to become,
in its sole discretion, a valid, enforceable, and perfected first priority lien
or security interest in a manner satisfactory to Lender within ten (10) calendar
days after Lender delivers written notice thereof to Borrower.

                                       33

<PAGE>

            9.3 Financial Condition. The financial condition of Borrower, any
Resort Association, or the Club has materially and adversely changed since the
date of the last financial statement provided to Lender, pursuant to Section 7
hereof. For purposes hereof, Borrower's financial condition shall be deemed to
have materially and adversely changed if Borrower fails to have positive income,
as determined in accordance with GAAP, for any two (2) consecutive calendar
quarters.

            9.4 Judgments; Liens. The issuance, filing, or levy against
Borrower, any Property, any Resort, any Unit, or the Club of one (1) or more
attachments, injunctions, executions, tax liens, or judgments for the payment of
money cumulatively in excess of $100,000.00, which is not discharged in full or
stayed within forty-five (45) days after issuance or filing.

            9.5 Bankruptcy. The institution of any proceeding by or against
Borrower or any Affiliate thereof under any bankruptcy or insolvency laws, an
assignment of Borrower's or its Affiliates' assets for the benefit of its
creditors, or Borrower's or its Affiliates' admission in writing of its
inability to pay its debts as they mature or become due.

            9.6 Maximum Financed Notes Receivable Delinquencies. If at any time
more than ten percent (10%) of all Financial Notes Receivable are thirty (30) or
more days contractually past due.

            9.7 Failure to Permit Inspections. Borrower's failure strictly to
comply with the provisions of Section 7.3 hereof.

            9.8 Operation of Business. The termination or suspension of the
operation of Borrower out of the ordinary course of its business.

            9.9 Use of Resorts. Any act of or failure to act by Borrower which
materially and adversely limits the rights of Purchasers to use the common areas
and recreational facilities of any of the Resorts, including but not limited to
a default by Borrower or any Affiliate thereof under any loan documents to which
Borrower or its Affiliate is a party.

            9.10 Exchange Program. The termination of any affiliation or
licensing agreement with an internal or external exchange program without such
affiliation or licensing agreement being replaced with a substantially similar
contract or licensing agreement acceptable to Lender.

            9.11 Default by Borrower With Respect to Other Indebtedness. Any
default by Borrower or any Affiliate thereof in the repayment of indebtedness
for borrowed money from Textron Financial Corporation, Sovereign Bank, DZ Bank
AG Deutsche Zentral-Genossen-schaftsbank, as agent for Autobahn Funding Company,
LLC, or any other Person after the expiration of any applicable grace or cure
period, any other default under such indebtedness which accelerates or permits
the acceleration (after the giving of notice, the passage of time, or both) of
the maturity of such indebtedness, or any default which permits the holder of
such indebtedness to elect a majority of the board of directors of Borrower, any
Affiliate thereof, or otherwise control Borrower or any Affiliate thereof.

                                       34

<PAGE>

            9.12 Default Under Other Loan Documents. An "Event of Default" or
"Default" occurs under any of the other Loan Documents.

            9.13 Covenant Defaults. Borrower's failure to perform or observe any
covenant, negative covenant, agreement, or obligation contained in this
Agreement or any of the other Loan Documents (other than as set forth above in
this Section), if such failure continues for thirty (30) calendar days after
Lender's delivery of written notice thereof to Borrower.

            9.14 Maintenance and Operation of Resorts. Borrower, the Club, or
any Resort Association fails to fund and otherwise provide for the proper
maintenance, repair, renovation, refurbishment, and efficient operation of the
Club and all of the Resorts, as determined by Lender, in its reasonable
discretion.

             SECTION 10 - CERTAIN RIGHTS AND REMEDIES UPON DEFAULT

            10.0 Rights and Remedies. Upon the occurrence of an Event of
Default, Lender may take any one (1) or more of the following actions, all
without demand or notice to Borrower:

                  (a) Acceleration. Declare the unpaid balance of the
Indebtedness, or any part thereof, to be immediately due and payable, at which
point the same shall immediately be due and payable.

                  (b) Termination of Obligation to Advance. Terminate any
commitment of Lender to make Advances under this Agreement in its entirety, or
any portion of any such commitment, to the extent Lender shall deem appropriate.

                  (c) Judgment. Reduce Lender's claim to judgment, foreclose, or
otherwise enforce Lender's security interest in all or any part of the
Collateral by any available judicial or non-judicial procedure.

                  (d) Sale of Collateral. Exercise all the rights and remedies
of a secured party under the UCC (whether or not the UCC applies to the affected
Collateral), including but not limited to: (i) requiring Borrower to, and
Borrower agrees that it will, at its expense and on request of Lender, assemble
all or part of the Collateral as directed by Lender and make it available to
Lender at a place to be designated by Lender which is reasonably convenient to
both parties; (ii) enter on any premises of Borrower and take possession of any
of the Collateral; and (iii) sell the Collateral or any part thereof in one (1)
or more parcels at public or private sale, at any of the Lender's offices or
elsewhere, at such time or times, for cash, on credit, or for future delivery,
and at such price or prices and on such other terms as Lender may deem
commercially reasonable. Borrower agrees that, to the extent notice of sale
shall be required by the Law, ten (10) days notice of the time and place of any
sale shall constitute reasonable notification. At any sale of the Collateral, if
permitted by Applicable Law, Lender may bid (which bid may be, in whole or in
part, in the form of cancellation of indebtedness) for the purchase of the
Collateral or any portion thereof for the account of Lender. Borrower shall
remain liable for any deficiency. Lender shall not be required to proceed
against any Collateral but may proceed against Borrower directly. To the extent
permitted by Applicable Law, Borrower hereby specifically waives all

                                       35

<PAGE>

rights of redemption, stay, or appraisal which it has or may have under any
Applicable Law as now existing or hereafter enacted.

                  (e) Receiver. Apply by appropriate judicial proceedings for
the appointment of a receiver for the Collateral, or any part thereof, which
receiver shall be entitled to exercise all of the rights of Lender as set forth
in Section 10.(d) above, and Borrower consents to any such appointment.

                  (f) Replacement of Servicer. Without demand or notice of any
kind, upon an Event of Default, Lender may terminate the Servicing Agreement and
replace Borrower, as Servicer, with such Person as Lender may select, in its
sole discretion, including but not limited to Lender.

                  (g) Exercise of Other Rights. Exercise any and all other
rights and remedies afforded by Applicable Law or by the Loan Documents as
Lender shall deem appropriate, at law, in equity, or otherwise, including,
without limitation, the right to bring suit or other proceedings, either for
specific performance of any covenant or condition contained in the Loan
Documents or in aid of the exercise of any right or remedy granted to Lender in
the Loan Documents.

            10.1 Application of Collateral; Termination of Agreements. On the
occurrence of an Event of Default, Lender may apply against the Indebtedness any
and all Collateral in its possession, any and all balances, credits, deposits,
accounts, reserves, indebtedness, or other monies due or owing to Borrower held
by Lender under this Agreement or under any other financing agreement or
otherwise, whether accrued or not.

            10.2 Waiver. No delay or failure for any reason of Lender to
exercise any right or remedy arising from the occurrence of any Event of Default
shall exhaust or impair any such right or power or prevent its exercise during
the continuance of such Event of Default or following a subsequent Event of
Default. No waiver by Lender of any such Event of Default, whether such waiver
be full or partial, shall extend to or be taken to affect any subsequent Event
of Default, or to impair the rights resulting therefrom except as may be
otherwise provided therein. Borrower hereby waives notice of the occurrence of
any Event of Default, presentment, and demand for payment, protest, and notice
of protest, notice of intention to accelerate, acceleration, and nonpayment, and
agrees that its liability hereunder shall not be affected by any renewal or
extension in the time of payment of the Indebtedness, or by any release or
change in any security for the payment or performance of the Indebtedness,
regardless of the number of such renewals, extensions, releases, or changes.
Borrower also waives the right to assert any statute of limitations as a bar to
the enforcement of the lien created by any of the Loan Documents or to any
action brought to enforce the Note or any other obligation evidenced or secured
by any of the Loan Documents.

            10.3 Cumulative Rights. All rights and remedies available to Lender
under this Agreement and the other Loan Documents shall be cumulative and in
addition to all other rights and remedies granted to Lender at law or in equity,
whether or not the Indebtedness is due and payable and whether or not Lender
shall have instituted any suit for collection or other action in connection with
the Loan. The giving, taking, or enforcement of any other or additional
security,

                                       36

<PAGE>

collateral, or guaranty shall not be considered the waiver of any rights,
powers, or remedies of Lender, nor shall Lender be required to look first to
enforce or exhaust such other or additional security, collateral, or guarantees.

            10.4 Survival on Termination. Any termination of this Agreement,
either through the occurrence of an Event of Default or by lapse of time, the
giving of notice, or otherwise, shall not absolve, release, or otherwise affect
the liability of Borrower with respect to transactions prior to such
termination, or affect any of the liens, security interests, rights, powers, or
remedies of Lender, but they shall, in all events, continue until the
Indebtedness has been repaid in full and all other obligations of Borrower
arising under any of the Loan Documents have been fully satisfied.

                     SECTION 11 - CERTAIN RIGHTS OF LENDER

            11.0 Protection of Collateral. Lender may at any time and from time
to time take such actions as Lender deems reasonably necessary or appropriate to
protect Lender's liens and security interests in and to preserve the Collateral.
Borrower agrees to cooperate fully with all of Lender's efforts to preserve the
Collateral and Lender's liens and security interests therein. Any and all costs
and expenses incurred by Lender or its agents in connection with the
preservation of the Collateral and Lender's liens and security interests with
respect thereto shall be borne entirely by Borrower and added to the
Indebtedness.

            11.1 Performance by Lender. If Borrower fails to perform any
covenant in this Agreement or any of the other Loan Documents, Lender may, but
shall not be obligated to, cause the performance of such covenant, and any
expenses of Lender incurred in connection therewith shall promptly be payable by
Borrower as additional Indebtedness, bearing interest at the Default Rate until
paid.

            11.2 Assignment of Lender's Interest. Lender may, at any time and
without the consent of Borrower, grant participations in or sell, transfer,
assign, or convey all or any portion of its rights, title, and interest in and
to the Loan, the Note, this Agreement, and the other Loan Documents, any
guaranties given in connection with the Loan, and the Collateral. If Lender
sells, transfers, conveys, or assigns all of Lender's right, title, and interest
in the Loan or the Note, Lender shall give notice thereof to Borrower, whereupon
Lender shall be fully released from all liability and obligations of Lender
under the Note and under all other transferred Loan Documents from and after the
date of such transfer, provided that such transferee agrees to be bound by the
obligations of Lender thereunder. Notice to Borrower shall not be required for
any partial sale, transfer, assignment, or conveyance of the Loan or the Note.

            11.3 Notice to Purchaser. Borrower authorizes both Lender and its
agents to communicate at any time and from time to time, whether prior to or
after the sale of an Interval, with any Purchaser or any other Person primarily
or secondarily liable under a Financed Note Receivable with regard to the lien
of Lender thereon and any other matter related thereto. Lender may perform, at
Borrower's expense, any and all credit investigations as Lender may deem
necessary to determine whether any such Purchaser meets the requirements to
qualify the Note Receivable as an Eligible Note Receivable.

                                       37

<PAGE>

            11.4 Collection of Notes. As provided in Section 3.6(a) hereof,
Borrower shall direct and authorize each Purchaser and other Person liable for
the payment of any Financed Notes Receivable to pay each installment due thereon
to Lender or Lockbox Agent, unless and until otherwise directed by Lender.
Borrower hereby irrevocably authorizes, directs, and empowers Lender to collect
and receive all checks and drafts evidencing such payments and to endorse such
checks or drafts in the name of Borrower and on such endorsements, to collect
and receive the money therefor. Upon the payment and satisfaction in full of all
Indebtedness, Lender will, at Borrower's request and sole expense, give written
notice as necessary to redirect payments of the Financed Notes Receivable as
requested by Borrower.

            11.5 Power of Attorney. Borrower hereby irrevocably constitutes and
appoints Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of substitution, for Borrower and in Borrower's name, place, and
stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in
the name of Borrower and in favor of Lender; (b) to demand and receive from time
to time any and all property, rights, titles, interests, and liens hereby
assigned and transferred, or intended so to be, and to give receipts for same;
and (c) on the occurrence and during the continuance of any Event of Default,
(i) to institute and prosecute in the name of Borrower or otherwise, but for the
benefit of Lender, any and all proceedings at law, in equity, or otherwise, that
Lender may deem proper in order to collect, assert, or enforce any claim, right,
or title, of any kind, in and to the property, rights, titles, interests, and
liens hereby assigned or transferred, or intended so to be, and to defend and
compromise any and all actions, suits, or proceedings in respect of any of the
property, rights, titles, interests, and liens; and (ii) generally to do all and
any such acts and things in relation to the Collateral as Lender deems
advisable. Borrower hereby declares that the appointment made and the powers
granted pursuant to this Section are coupled with an interest and are and shall
be irrevocable by Borrower in any manner, or for any reason, unless and until
all Indebtedness has been repaid in full and all other obligations of Borrower
under the Loan Documents have been fully satisfied.

            11.6 Indemnification of Lender. Borrower hereby indemnifies Lender
and holds Lender harmless from and against any and all liabilities,
indebtedness, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever, including
but not limited to reasonable attorneys' fees and court costs, which may be
imposed on, incurred by, or asserted against Lender (collectively, "Liability"),
in any way relating to or arising out of (a) the Loan Documents; (b) any of the
transactions contemplated therein or thereby; (c) the willful or negligent acts
or omissions of Borrower; or (d) in connection with any Hazardous Materials or
the failure by Borrower, any Affiliate of Borrower, any Resort, any Property,
the Club, or any Resort Association to comply fully with any Environmental Law,
provided that Borrower shall have no obligation to indemnify Lender from any
Liability resulting solely from Lender's gross negligence or willful misconduct.
Upon written notice, Borrower will reimburse Lender for all legal and other
expenses reasonably incurred by or on behalf of Lender, including, without
limitation, such costs incurred in all bankruptcy and probate proceedings, in
connection with investigating or defending each Liability. This indemnity shall
be in addition to any liability which Borrower may have to Lender in equity, at
common law, or otherwise. This Section shall survive the payment in full of the
Indebtedness and the expiration or termination of this Agreement.

                                       38

<PAGE>

            11.7 Relief from Automatic Stay, Etc. To the fullest extent
permitted by law, in the event that Borrower shall make application for or seek
relief or protection under the U.S. Bankruptcy Code (the "Bankruptcy Code") or
any other debtor relief laws, or in the event that any involuntary petition is
filed against Borrower thereunder, and not dismissed with prejudice within
forty-five (45) days, then the automatic stay provisions of Section 362 of the
Bankruptcy Code are hereby modified as to Lender to the extent reasonably
necessary to implement the provisions hereof permitting set-off and the filing
of financing statements or other documents or instruments; and Lender shall
automatically and without demand or notice (each of which is hereby waived by
Borrower) be entitled to immediate relief from any automatic stay imposed by
Section 362 of the Bankruptcy Code or otherwise, on or against the exercise of
any rights or remedies otherwise available to Lender, pursuant to any of the
Loan Documents or Applicable Law.

                           SECTION 12 - MISCELLANEOUS

            12.0 Notice. All notices and other communications required or
permitted to be given hereunder shall be in writing addressed to the respective
party as set forth below and may be personally served or sent by reputable
overnight courier or U.S. Mail and shall be deemed given: (a) if delivered in
person, when so delivered; (b) if sent by reputable overnight courier, on the
first business day after delivery to such courier; or (c) if sent by U.S. Mail,
certified or registered mail, return receipt requested, on the third (3rd) day
after deposit in the mail postage prepaid.

            Lender:         Resort Funding LLC
                            360 S. Warren Street
                            Sixth Floor
                            Syracuse, New York 13202
                            Attention: Lisa M. Henson, President &
                                       Chief Operating Officer

            with copy to:   Holland & Knight LLP
                            2099 Pennsylvania Avenue
                            Washington, D.C.  20006
                            Attention: Mel S. Weinberger, Esq.

            Borrower:       Silverleaf Resorts, Inc.
                            1221 River Bend Drive, Suite 120
                            Dallas, Texas 75247
                            Attention: Robert E. Mead

            with copy to:   Meadows, Owens, Collier, Reed, Cousins & Blau, LLP
                            901 Main Street, Suite 3700
                            Dallas, Texas 75202
                            Attention: George R. Bedell, Esq.

                                       39

<PAGE>

            12.1 Broker's Fees. There are no broker's, finder's, or other
similar fees due with respect to the transactions described in the Agreement.

            12.2 Lender Not a Fiduciary. The relationship between Borrower and
Lender is solely that of debtor and creditor, Lender has no fiduciary or other
special relationship with Borrower, and no term or provision of any of the Loan
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.

            12.3 No Purchase. Borrower and Lender hereby acknowledge and agree
that the assignment of Collateral to Lender in accordance with this Agreement
and the other Loan Documents does not constitute a purchase or sale of
Collateral. Such assignment is meant and intended to constitute a hypothecation
of Collateral and shall be treated as such.

            12.4 Consent to Advertising and Publicity. Borrower hereby agrees
that Lender may issue and disseminate to the public information describing the
Loan.

            12.5 Entire Agreement. The Loan Documents embody the entire
agreement between the parties, supersede all prior agreements and understandings
between the parties, whether written or oral, relating to the subject matter of
this Agreement, and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties.

            12.6 Modification. This Agreement may be modified or changed only in
a writing executed by both Lender and Borrower.

            12.7 Severability. If any provision of this Agreement or any other
Loan Document is declared invalid, such provision shall be inapplicable and
deemed omitted, but the remaining provisions shall be given full force and
effect.

            12.8 Binding Effect. The Loan Documents shall be binding on and
inure to the benefit of the parties and their respective successors and
permitted assigns.

            12.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed an original and when
taken together, shall constitute one and the same Agreement. This Agreement
shall become effective on Lender's receipt of one or more counterparts of this
Agreement signed by Borrower.

            12.10 Headings. The headings contained herein are for convenience of
reference only and shall not be used in the interpretation of this Agreement.

            12.11 Survival. All representations, warranties, covenants, and
agreements made by Borrower herein in any of the other Loan Documents and in any
other agreement, document, instrument, or certificate delivered by or on behalf
of Borrower under or pursuant to the Loan Documents shall be considered to have
been relied on by Lender and shall survive the delivery to Lender and the
extension of the Indebtedness (and each part thereof), regardless of any
investigation made by or on behalf of Lender.

            12.12 Choice of Law, Jurisdiction, and Venue. The Loan Documents
shall be deemed to have been negotiated, made, and executed in the County of
Onondaga, State of New

                                       40

<PAGE>

York. The Loan Documents shall be interpreted, construed, and enforced in
accordance with the laws of the State of New York, without regard to the
principles of conflict of laws.

            BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY,
INDIRECTLY, OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THE
LOAN DOCUMENTS SHALL BE LITIGATED, AT LENDER'S SOLE DISCRETION AND ELECTION,
ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY OF ONONDAGA, STATE OF NEW YORK.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR
FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE. BORROWER HEREBY WAIVES ANY
RIGHT THAT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY LENDER IN CONNECTION, DIRECTLY OR INDIRECTLY, WITH THE LOAN.

            12.13 Jury Trial Waiver. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED ON OR
ARISING OUT OF THE LOAN OR THE LOAN DOCUMENTS. BORROWER AND LENDER HEREBY
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A LENDING
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THE LOAN
DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. BORROWER AND LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE
OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

                      [Signature Pages Begin on Next Page]

                                       41

<PAGE>

      IN WITNESS WHEREOF, the parties set their hands the date above first
written.

                                      LENDER:
_______________________________
Witness                               RESORT FUNDING LLC, a Delaware limited
_______________________________       liability company
Print Name
                                      By: /S/ THOMAS J. HAMEL
                                          -------------------------
                                      Print Name: Thomas J. Hamel
_______________________________       Title:      CEO
Witness
_______________________________
Print Name

                                      BORROWER:
/S/ PATRICIA K. DOREY
-------------------------------
Witness                               SILVERLEAF RESORTS, INC., a Texas corp-
Patricia K. Dorey                     oration
-------------------------------
Print Name

/S/ KIM W. MURDOCK                    By: /S/ HARRY J. WHITE, JR.
------------------------                  ----------------------------------
Witness                                   Name:  Harry J. White, Jr.
Kim W. Murdock                            Title: CFO
-------------------------------
Print Name

Exhibits to Agreement not filed herewith:

EXHIBIT A-1     Property Description of Apple Mountain Resort
EXHIBIT A-2     Property Description of Fox River Resort
EXHIBIT A-3     Property Description of Hill Country Resort
EXHIBIT A-4     Property Description of Holiday Hills Resort
EXHIBIT A-5     Property Description of Holly Lake Resort
EXHIBIT A-6     Property Description of Lake O' The Woods Resort
EXHIBIT A-7     Property Description of Oak N' Spruce Resort
EXHIBIT A-8     Property Description of Orlando Breeze Resort
EXHIBIT A-9     Property Description of Ozark Mountain Resort
EXHIBIT A-10    Property Description of Piney Shores Resort
EXHIBIT A-11    Property Description of Silverleaf's Seaside Resort
EXHIBIT A-12    Property Description of The Villages
EXHIBIT A-13    Property Description of Timber Creek Resort
EXHIBIT B       Permitted Exceptions
EXHIBIT C       Form of Reassignment of Notes Receivable and Mortgages
EXHIBIT D       Closing Checklist for Initial Advance
EXHIBIT E       Deliveries Prior to Each Advance
EXHIBIT F       Form of Request for Advance

                                     42

<PAGE>

EXHIBIT G       Litigation and Proceedings
EXHIBIT H       List of Club Documents
EXHIBIT I       Form of Allonge
EXHIBIT J-1     Form of Collateral Assignment of Notes Receivable and Mortgages
EXHIBIT J-2     Form of Collateral Assignment of Notes Receivable and
                Certificates of Beneficial Interest
EXHIBIT K       List of Declarations
EXHIBIT L       Material Amounts Owed to Lenders and Other Persons
EXHIBIT M       List of Recreation and Use Agreements
EXHIBIT N       Subordinated Debt

                                       43exv10w1

 

EXHIBIT 10.1

AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment (the “Amendment”) to the Employment Agreement by and between Solectron
Corporation (the “Company”) and Michael Cannon (“Executive”) dated January 6, 2003 (the “Employment
Agreement”) is made effective as of April 6, 2005, by and between the Company and Executive. Unless
otherwise defined herein, capitalized terms used in this Amendment shall have the same meaning as
in the Employment Agreement.

     WHEREAS, Executive and the Company entered into the Employment Agreement; and

     WHEREAS, Executive and the Company hereby desire to amend the Employment Agreement to provide
for the acceleration of certain types of equity awards in the event of certain terminations of
Executive’s employment following a Change of Control not currently addressed in the Employment
Agreement and to address the payment of cash severance in light of recent additions to the Internal
Revenue Code of 1986, as amended (the “Code”).

     NOW, THEREFORE, in consideration of the foregoing recitals and the respective covenants and
agreements of the parties contained in this Amendment, the Company and Executive agree to amend
the Employment Agreement as follows:

     1. Change of Control Severance. Section 10(a) shall be amended to read in its entirety
as follows:

     “Termination Without Cause; Resignation for Good Reason. If within twelve (12) months
following a Change of Control the Company terminates Executive’s employment for reasons other than
“Cause” (as defined in Section 14) or Executive resigns for “Good Reason” (as defined in Section
14), then in addition to the benefits Executive may otherwise be entitled pursuant to Section 8,
Executive will receive: (i) a lump sum payment equal to two (2) times his annual Base Salary and
Target Bonus, both at the level in effect immediately prior to his termination date or (if greater)
at the level in effect immediately prior to the Change of Control, (ii) Company-paid coverage for
Executive and Executive’s eligible dependents under the Company’s “Benefit Plans” (as defined in
Section 14) for thirty-six (36) months following such termination, (iii) immediate vesting of 100%
of the shares subject to all outstanding options to purchase the Company’s Common Stock, (iv) two
years following such termination or resignation in which to exercise any outstanding options to
purchase the Company’s Common Stock, and (v) all outstanding shares of restricted stock, (excluding
the Restricted Stock described in Section 4(e), which shall be treated in accordance with Section
8), with an issue price per share equal to the par value of the Company’s Common Stock will vest
and be released from any Company repurchase or reacquisition right. In the event the Executive’s
employment terminates by reason of death or “Disability” (as defined in Section 14) within twelve
(12) months following a Change of Control, then he will only be entitled to receive the benefits
described in clauses (ii) through (v) above.”

     2. Section 409A. Notwithstanding Sections 9 and 10 of the Employment Agreement, but
subject to Section 11 of the Employment Agreement, Executive’s cash severance payment (other
than Company-paid coverage under the Company’s Benefit Plans) will become payable in a lump sum
payment on the date six (6) months and one (1) day following the date of Executive’s
termination;

 

 

provided, however, that such cash severance payment will be paid earlier, subject to Sections 9, 10
and 11 of the Employment Agreement, if Internal Revenue Service guidance provides that the
imposition of additional tax under Section 409 A of the Code will not apply if the payment is made
earlier, as reasonably determined by the Company.

     3. Employment Agreement. To the extent not expressly amended hereby, the Employment
Agreement shall remain in full force and effect.

     4. Entire Agreement. This Amendment, taken together with the Employment Agreement,
represents the entire agreement of the parties and will supersede any and all previous
contracts, arrangements or understandings between the parties with respect to subject matter herein. This
Amendment may be amended at any time only by mutual written agreement of the parties hereto.

     5. Counterparts. This Amendment may be executed in counterparts, and each counterpart
will have the same force and effect as an original and will constitute an effective, binding
agreement on the part of each of the undersigned. Execution and delivery of this Amendment by exchange of
facsimile copies bearing the facsimile signature of a party will constitute a valid and binding
execution and delivery of the Amendment by such party. Such facsimile copies will constitute enforceable
original documents.

     6. Headings. All captions and section headings used in this Amendment are for
convenient reference only and do not form a part of this Amendment.

     7. Governing Law. This Amendment will be governed by the laws of the State
of California (with the exception of its conflict of laws provisions).

     IN WITNESS WHEREOF, this amendment has been entered into as of the date first set forth above.

	 	 	 	 	 
	 

	 	SOLECTRON CORPORATION	 	 
	 
	 	 	 	 
	 

	 	/s/ Kevin O’ Connor	 	 
	 
	 	 	 	 
	 

	 	Kevin O’ Connor	 	 
	 
	 	 	 	 
	 

	 	Title: Executive Vice President Human Resources
	 
	 	 	 	 
	 

	 	EXECUTIVE	 	 
	 
	 	 	 	 
	 

	 	/s/ Michael Cannon	 	 
	 

	 	Michael Cannon	 	 

-2-

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