Document:

ex10-1.htm

     

    Exhibit
10.1

    

    

    

    

    

    

    CHANGE
IN CONTROL

    SEVERANCE
AGREEMENT

    

     

     

    
 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

    

    

    
      
        	
                1.           
      Purpose

              	
                1

              
	
                2.          
       Your Agreement

              	
                1

              
	
                3.           
      Events That Trigger Severance Benefits

              	
                1

              
	
                a.           Termination
      After a Change in Control

              	
                1

              
	
                b.           Termination
      After a Potential Change in Control

              	
                1

              
	
                c.           Successor
      Fails to Assume This Agreement

              	
                1

              
	
                4.           
      Events That Do Not Trigger Severance Benefits

              	
                2

              
	
                5.           
      Termination Procedures

              	
                2

              
	
                6.           
      Severance Benefits

              	
                2

              
	
                a.           In
      General

              	
                2

              
	
                b.           Lump-Sum
      Payment in Lieu of Future Compensation

              	
                2

              
	
                c.           Incentive
      Compensation and Options

              	
                2

              
	
                d.           Group
      Insurance Benefit Continuation

              	
                3

              
	
                e.           Group
      Benefit Continuation

              	
                3

              
	
                f.           Officer
      Benefits

              	
                3

              
	
                g.           Medical
      Benefits

              	
                3

              
	
                7.           
      Time for Payment

              	
                3

              
	
                8.           
      Payment Explanation

              	
                4

              
	
                9.           
      Potential Limitations

              	
                4

              
	
                a.Golden Parachute
      Limitation

              	
                4

              
	
                b.           Section
      162(m) Limitation

              	
                4

              
	
                10.          Disability

              	
                4

              
	
                11.          Effect
      of Reemployment

              	
                5

              
	
                12.          Successors

              	
                5

              
	
                a.           Assumption
      Required

              	
                5

              
	
                b.Heirs and
    Assigns

              	
                5

              
	
                13.          Amendments

              	
                5

              
	
                14.          Governing
      Law

              	
                5

              
	
                15.          Claims

              	
                5

              
	
                a.           When
      Required; Attorneys' Fees

              	
                5

              
	
                b.           Initial
      Claim

              	
                5

              
	
                c.           Claim
      Decision

              	
                6

              
	
                d.           Appeal
      of Denied Claims

              	
                6

              
	
                e.           Appeal
      Decision

              	
                6

              
	
                f.           Procedures

              	
                6

              
	
                g.           Arbitration

              	
                7

              
	
                17.          Validity

              	
                7

              
	
                18.          Counterparts

              	
                7

              
	
                19.          Giving
      Notice

              	
                7

              
	
                a.           To
      the Company

              	
                7

              
	
                b.           To
      You

              	
                7

              
	
                20.          Definitions

              	
                8

              
	
                a.           Agreement

              	
                8

              

      

       

      
        
          -i-

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                b.           Beneficial
      Owner

              	
                8

              
	
                c.           Board

              	
                8

              
	
                d.           Cause

              	
                8

              
	
                e.           Change
      in Control

              	
                8

              
	
                (1)           Acquisition
      of Controlling Interest

              	
                8

              
	
                (2)           Change
      in Board Control

              	
                8

              
	
                (3)           Merger
      Approved

              	
                9

              
	
                (4)           Sale
      of Assets

              	
                9

              
	
                (5)           Liquidation
      or Dissolution

              	
                9

              
	
                (6)           Private
      Transaction

              	
                9

              
	
                f.           Code

              	
                9

              
	
                g.           Company

              	
                9

              
	
                h.           Disability

              	
                9

              
	
                i.           Exchange
      Act

              	
                9

              
	
                j.           Good
      Reason

              	
                10

              
	
                (1)           Demotion

              	
                10

              
	
                (2)           Pay
      Cut

              	
                10

              
	
                (3)           Relocation

              	
                10

              
	
                (4)           Breach
      of Contract

              	
                10

              
	
                (5)           Improper
      Termination

              	
                10

              
	
                k.           Incentive
      Compensation

              	
                10

              
	
                l.           Management
      Action

              	
                11

              
	
                m.           Person

              	
                11

              
	
                n.           Potential
      Change in Control

              	
                11

              
	
                (1)           Agreement
      Signed

              	
                11

              
	
                (2)           Notice
      of Intent to Seek Change in Control

              	
                11

              
	
                (3)           Board
      Declaration

              	
                11

              
	
                o.           Separation
      from Service

              	
                11

              
	
                p.           Severance
      Benefits

              	
                11

              
	
                q.           Term
      of this Agreement

              	
                11

              
	
                (2)           Change
      in Control

              	
                11

              
	
                21.          Section
      409A

              	
                12

              

      

      

        
          
            -ii- 

          

          
             

            
              

            

          

          
             

          

        

    

    

    CHANGE
IN CONTROL

    SEVERANCE
AGREEMENT

     

    This
Agreement between _________________ ("you") and VERSAR, INC.("Company") has been
entered into as of ________________. This Agreement promises you severance
benefits if, following a Change of Control, you are terminated without Cause or
resign for Good Reason during the Term of this Agreement. Capitalized terms are
defined in the last section of this Agreement.

     

    
      	
              1.

            	
              Purpose

            

    

    The
Company considers a sound and vital management team to be essential. Management
personnel who become concerned about the possibility that the Company may
undergo a Change in Control may terminate employment or become distracted.
Accordingly, the Board has determined that appropriate steps should be taken to
minimize the distraction certain executives may suffer from the possibility of a
Change in Control. One step is to enter into this Agreement with you while you
hold the position as________________. Once you no longer hold this position,
except following or in connection with the triggering of severance benefits as
set forth in Section 3 below, this Severance Agreement shall immediately
terminate and be null and void as set forth in Section 20q hereof.

     

    
      	
              2.

            	
              Your
      Agreement

            

    

    If one or
more Potential Changes in Control occur during the Term of this Agreement, you
agree not to resign for at least six full calendar months after a Potential
Change in Control occurs, except as follows: (a) you may resign after a Change
in Control occurs; (b) you may resign if you are given Good Reason to do so; and
(c) you may terminate employment on account of retirement on or after age 65 or
because you become unable to work due to serious illness or injury.

     

    
      	
              3.

            	
              Events
      That Trigger Severance Benefits

            

    

     

    
      	
               
      

            	
              a.

            	
              Termination After a
      Change in
      Control

            

    

    You will
receive Severance Benefits under this Agreement if, during the Term of this
Agreement and after a Change in Control has occurred, your employment is
terminated by the Company without Cause (other than on account of your
Disability or death) or you resign for Good Reason.

     

    
      	
               
      

            	
              b.

            	
              Termination After a
      Potential Change in
      Control

            

    

    You also
will receive Severance Benefits under this Agreement if, during the Term of this
Agreement and after a Potential Change in Control has occurred but before a
Change in Control actually occurs, your employment is terminated by the Company
without Cause or you resign for Good Reason, but only if either: (i) you are
terminated at the direction of a Person who has entered into an agreement with
the Company that will result in a Change in Control; or (ii) the event
constituting Good Reason occurs at the direction of such Person.

     

    
      	
               
      

            	
              c.

            	
              Successor
      Fails to Assume This Agreement

            

    

    You also
will receive Severance Benefits under this Agreement if, during the Term of this
Agreement, a successor to the Company fails to assume this Agreement, as
provided in Section 12(a).

     

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    
      	
              4.

            	
              Events
      That Do Not Trigger Severance
Benefits

            

    

     

    You will
not be entitled to Severance Benefits if your employment ends because you are
terminated for Cause or on account of Disability or because you resign without
Good Reason, retire, or die. Except as provided in Section 3(c), you will not be
entitled to Severance Benefits while you remain protected by this Agreement and
remain employed by the Company, its affiliates, or their
successors.

     

    
      	
              5.

            	
              Termination
      Procedures

            

    

    If you
are terminated by the Company after a Change in Control and during the Term of
this Agreement, the Company shall provide you with 30 days' advance written
notice of your termination, unless you are being terminated for Cause. The
notice will indicate why you are being terminated and will set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
your termination. If you are being terminated for Cause, your notice of
termination will include a copy of a resolution duly adopted by the affirmative
vote of not less than 51 % of the entire membership of the Board (at a meeting
of the Board called and held for the purpose of considering your termination
(after reasonable notice to you and an opportunity for you and your counsel to
be heard before the Board)) finding that, in the good faith opinion of the
Board, Cause for your termination exists and specifying the basis for that
opinion in detail. If you are purportedly terminated without the notice required
by this Section, your termination shall not be effective.

     

    
      	
              6.

            	
              Severance
      Benefits

            

    

     

    
      	
               
      

            	
              a.

            	
              In
      General

            

    

    If you
become entitled to Severance Benefits under this Agreement, you will receive all
of the Severance Benefits described in this Section.

     

    
      	
               
      

            	
              b.

            	
              Lump-Sum Payment in Lieu
      of Future
      Compensation

            

    

    In lieu
of any further cash compensation for periods after your employment ends, other
than cash compensation paid pursuant to any agreement governing the terms of a
Change in Control payable to all similarly situated persons, you will be paid a
cash lump sum equal to 2 times your annual base salary in effect when your
employment ends or, if higher, in effect immediately before the Change in
Control, Potential Change in Control, or Good Reason event for which you
terminate employment. In addition, and without duplication, you will be paid a
cash lump sum equal to 2 times the higher of the amounts paid to you (if any)
under any existing bonus or incentive plans in the calendar year preceding the
calendar year in which your employment ends or in the calendar year preceding
the calendar year in which the Change in Control occurred (or in which the
Potential Change in Control occurred, if benefits are payable under Section
3(b)hereof).

     

    
      	
               
      

            	
              c.

            	
              Incentive
      Compensation and Options

            

    

    The
Company will pay you a cash lump sum equal to any unpaid incentive compensation
(that is not otherwise paid to you) that you have been allocated or awarded
under any existing bonus or incentive plans for measuring periods completed
before you became entitled to Severance Benefits under this Agreement. All
unvested options to purchase Company common stock will

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    immediately
vest and remain exercisable for the longest period of time permitted under the
applicable stock option plan.  All unvested restricted stock awards
awarded to you will immediately vest.

     

    
      	
               
      

            	
              d.

            	
              Group
      Insurance Benefit Continuation

            

    

    During
the period that begins when you become entitled to Severance Benefits under this
Agreement and ends on the last day of the 18th calendar month beginning
thereafter, the Company shall provide, at no cost to you or your spouse or
dependents, health and dental insurance benefits (or substantially similar
benefits) it was providing to you and your spouse and dependents immediately
before you became entitled to Severance Benefits under this Agreement. The
Company subsidized health and dental insurance coverage shall be treated as
satisfying the Company's COBRA obligations. After this subsidized coverage ends,
you, your spouse and dependents may continue any remaining COBRA coverage at
your sole cost and expense.

     

    
      	
               
      

            	
              e.

            	
              Group
      Benefit Continuation

            

    

    During
the period that begins when you become entitled to Severance Benefits under this
Agreement and ends on the last day of the 24th
calendar month beginning thereafter, the Company shall provide, at no cost to
you or your spouse or dependents, the life, disability and accident benefits (or
substantially similar benefits) it was providing to you and your spouse and
dependents before you became entitled to Severance Benefits under this Agreement
(or immediately before a benefit reduction that constitutes Good Reason, if you
terminate employment for that Good Reason).

     

    
      	
               
      

            	
              f.

            	
              Officer
      Benefits

            

    

    In lieu
of the medical and tax accounting benefits available to the Company’s officers,
you will be entitled to a lump sum payment of $16,000.00.

     

    
      	
               
      

            	
              g.

            	
              Medical
      Benefits

            

    

    The Company provides certain medical
benefits to retired CEO’s and Vice Presidents.  If you become entitled
to Severance Benefits under this Agreement, then you are deemed to have retired
for purposes of this benefit and the Company shall provide, at no cost to you,
continued medical benefits it was providing you and your spouse and dependents
immediately before you became entitled to Severance Benefits under this
Agreement.

    

     

    
      	
              7.

            	
              Time
      for Payment

            

    

    Subject
to the provisions of Section 21 hereof, you will be paid your cash Severance
Benefits within five days after you become entitled to Severance Benefits under
this Agreement (e.g., within five days following your termination of
employment). If the amount you are due cannot be finally determined within that
period, you will receive the minimum amount to which you are clearly entitled,
as estimated in good faith by the Company. The Company will pay the balance you
are due (together with interest at the rate provided in Internal Revenue Code
Section 1274(b)(2)(B)) as soon as the amount can be determined, but in no event
later than 30 days after you terminate employment. If your estimated payment
exceeds the amount you are due, the excess will be a loan to you,

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    which you
must repay to the Company within five business days after demand by the Company
(together with interest at the rate provided in Code Section
1274(b)(2)(B)).  In no event will any cash Severance Benefits be paid
to you later than March 15 of the calendar year following the calendar year in
which you become entitled to such Severance Benefits.

     

    
      	
              8.

            	
              Payment
      Explanation

            

    

    When
payments are made to you, the Company will provide you with a written statement
explaining how your payments were calculated and the basis for the calculations.
This statement will include any opinions or other advice the Company has
received from auditors or consultants as to the calculation of your benefits. If
your benefit is affected by the golden parachute limitation in Section 9, the
Company will provide you with calculations relating to that limitation and any
supporting materials you reasonably need to permit you to evaluate those
calculations.

     

    
      	
              9.

            	
              Potential
      Limitations

            

    

     

    
      	
               
      

            	
              a.

            	
              Golden
      Parachute Limitation

            

    

    Your
aggregate payments and benefits under this Agreement and all other contracts,
arrangements, or programs shall not exceed the maximum amount that may be paid
without triggering golden parachute penalties under Section 280G and related
provisions of the Internal Revenue Code, as determined in good faith by the
Company's independent auditors. The preceding sentence shall not apply to the
extent the shareholder approval requirements of Code Section 280G(b)(5) are
satisfied. If your benefits must be reduced to avoid triggering such penalties,
the Company shall reduce your benefits that are not considered deferred
compensation subject to Code Section 409A before it reduces any benefits that
are considered deferred compensation subject to Code Section 409A. If an amount
in excess of the limit set forth in this Section is paid to you, you must repay
the excess amount to the Company on demand, with interest at the rate provided
in Code Section 1274(b)(2)(B). You and the Company agree to cooperate with each
other reasonably in connection with any administrative or judicial proceedings
concerning the existence or amount of golden parachute penalties on payments or
benefits you receive.

     

    
      	
               
      

            	
              b.

            	
              Section
      162(m) Limitation

            

    

    To the
extent payments or benefits under this Agreement would not be deductible under
Code Section 162(m) if made or provided when otherwise due under this Agreement,
they shall be made or provided later, immediately after Section 162(m) ceases to
preclude their deduction, with interest thereon at the rate provided in Code
Section 1274(b)(2)(B).

     

    
      	
              10.

            	
              Disability

            

    

    Following
a Change in Control, while you are absent from work as a result of physical or
mental illness, the Company will continue to pay you your full salary and
provide you all other compensation and benefits payable to you under the
Company's compensation or benefit plans, programs, or arrangements. These
payments will stop if and when your employment is terminated by the Company for
Disability as described in Section 20(h) hereof or at the end of the Term of
this Agreement, whichever is earlier. Severance

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    Benefits
under this Agreement are not payable if you are terminated on account of your
Disability.

     

    
      	
              11.

            	
              Effect of
      Reemployment

            

    

    Your
Severance Benefits will not be reduced by any other compensation you earn or
could have earned from another source.

     

    
      	
              12.

            	
              Successors

            

    

     

    
      	
               
      

            	
              a.

            	
              Assumption
      Required

            

    

    In
addition to obligations imposed by law on a successor to the Company, during the
Term of this Agreement the Company will require any successor to all or
substantially all of the business or assets of the Company expressly to assume
and to agree to perform this Agreement in the same manner and to the same extent
that the Company was required to perform. If the Company fails to obtain such an
assumption and agreement before the effective date of a succession, you will be
entitled to Severance Benefits as if you were terminated by the Company without
Cause on the effective date of that succession.

     

    
      	
               
      

            	
              b.

            	
              Heirs
      and Assigns

            

    

    This
Agreement will inure to the benefit of, and be enforceable by, your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If you die while any amount is still
payable to you under this Agreement, that amount will be paid to the executor,
personal representative, or administrator of your estate.

     

    
      	
              13.

            	
              Amendments

            

    

    This
Agreement may be modified only by a written agreement executed by you and an
authorized officer of the Company.

     

    
      	
              14.

            	
              Governing
      Law

            

    

    This
Agreement creates a "top hat" employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, and it shall be interpreted,
administered, and enforced in accordance with that law; the Company is the "plan
administrator." To the extent that state law is applicable, the statutes and
common law of the State of Virginia(excluding its choice of laws statutes or
common law) shall apply.

     

    
      	
              15.

            	
              Claims

            

    

     

    
      	
               
      

            	
              a.

            	
              When
      Required; Attorneys' Fees

            

    

    You do
not need to present a formal claim to receive benefits payable under this
Agreement. However, if you believe that your rights under this Agreement are
being violated, you must file a formal claim with the Company in accordance with
the procedures set forth in this Section. The Company will pay your reasonable
attorneys' fees and related costs in enforcing your rights under this
Agreement.

     

    
      	
               
      

            	
              b.

            	
              Initial
      Claim

            

    

    Your
claim must be presented to the Company in writing. Within 30 days after
receiving the claim, a claims official appointed by the Company will consider
your claim and issue his or her determination thereon in writing. With your
consent, the initial claim determination period can be extended further. If you
can

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    establish
that the claims official failed to respond to your claim in a timely manner, you
may treat the claim as having been denied by the claims official.

     

    
      	
               
      

            	
              c.

            	
              Claim
      Decision

            

    

    If your
claim is granted, the benefits or relief you are seeking will be provided. If
your claim is wholly or partially denied, the claims official shall, within
three days, provide you with written notice of the denial, setting forth, in a
manner calculated to be understood by you: (i) the specific reason or reasons
for the denial; (ii) specific references to the provisions on which the denial
is based; (iii) a description of any additional material or information
necessary for you to perfect your claim, together with an explanation of why the
material or information is necessary; and (iv) an explanation of the procedures
for appealing denied claims. If you establish that the claims official has
failed to respond to your claim in a timely manner, you may treat the claim as
having been denied by the claims official.

     

    
      	
               
      

            	
              d.

            	
              Appeal
      of Denied Claims

            

    

    You may
appeal the claims official's denial of your claim in writing to an appeals
official designated by the Company (which may be a person, committee, or other
entity) for a full and fair appeal. You must appeal a denied claim within five
days after your receipt of written notice denying your claim, or within 60 days
after such written notice was due, if the written notice was not sent. In
connection with the appeals proceeding, you (or your duly authorized
representative) may review pertinent documents and may submit issues and
comments in writing. You may only present evidence and theories during the
appeal that you presented during the initial claims stage, except for
information the claims official requested you to provide to perfect the claim.
You will irrevocably waive any theories you do not in good faith pursue through
the appeal stage, such as by failing to file a timely appeal
request.

     

    
      	
               
      

            	
              e.

            	
              Appeal
      Decision

            

    

    The
decision by the appeals official will be made within 60 days after your appeal
request, unless special circumstances require an extension of time, in which
case the decision will be rendered as soon as possible, but not later than ten
days after your appeal request, unless you agree to a greater extension of that
deadline. The appeal decision will be in writing, set forth in a manner
calculated to be understood by you; it will include specific reasons for the
decision, as well as specific references to the pertinent provisions of this
Agreement on which the decision is based.

     

    
      	
               
      

            	
              f.

            	
              Procedures

            

    

    The
Company will adopt procedures by which initial claims and appeals will be
considered and resolved; different procedures may be established for different
claims. All procedures will be designed to afford you full and fair
consideration of your claim.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              g.

            	
              Arbitration

            

    

    In the
event that any dispute arises, following satisfaction of the claim procedures
outlined in this Section 15, related to the validity, interpretation,
enforcement or performance of this Agreement, the dispute shall be submitted to
binding arbitration in accordance with the Employment Rules of the American
Arbitration Association.  The aggrieved party must give written notice
of any claim to the other party no later than the expiration of the statute of
limitations (deadline for filing) that the law prescribes for the
claim.  Otherwise, the claim shall be void and deemed
waived.  The arbitrator may award any remedy that would otherwise be
available to a court of competent jurisdiction.  The decision of the
arbitrator shall be final and binding and shall be fully enforceable in any
court having jurisdiction and venue over the parties.  The arbitrator
shall have no power to alter, modify, ignore, or otherwise deviate from the
express terms of this Agreement, and the arbitrator shall be bound by
controlling law.  The arbitrator’s decision shall be provided to the
parties in writing and shall succinctly set forth the arbitrator’s findings of
fact, conclusions of law, and remedy, if any.  The cost of such
arbitration shall be paid by the Company, except you shall pay an administrative
fee equivalent to the filing fee to initiate a similar claim in the local court
of general jurisdiction if you are the party initiating the
claim.  The parties hereto agree that any action to compel arbitration
pursuant to this Agreement may be brought in the appropriate Virginia state
court, and in connection with such action to compel, the laws of Virginia shall
control.  Application may also be made to such court for confirmation
of any decision or award of the arbitrator, for an order of enforcement and for
any other remedies which may be necessary to effectuate such decision or
award.  The parties hereto hereby consent to the jurisdiction of the
arbitrator and of such court and waive any objection to the jurisdiction of such
arbitrator and court.

     

    
      	
              16.

            	
              Limitation
      on Employee Rights

            

    

    This
Agreement does not give you the right to be retained in the service of the
Company.

     

    
      	
              17.

            	
              Validity

            

    

    The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.

     

    
      	
              18.

            	
              Counterparts

            

    

    This
Agreement may be executed in several counterparts, each of which will be deemed
an original, but all of which will constitute one and the same
instrument.

     

    
      	
              19.

            	
              Giving
      Notice

            

    

     

    
      	
               
      

            	
              a.

            	
              To
      the Company

            

    

    All
communications from you to the Company relating to this Agreement must be sent
to the Company to its principal business office in Springfield, Virginia, in
writing, by registered or certified mail, or delivered personally.

     

    
      	
               
      

            	
              b.

            	
              To
      You

            

    

    
      All
communications from the Company to you relating to this Agreement must be sent
to you in writing, by registered or certified mail, or delivered personally,
addressed as indicated at the end of this Agreement.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

     

    
      	
              20.

            	
              Definitions

            

    

     

    
      	
               
      

            	
              a.

            	
              Agreement

            

    

    "Agreement"
means this contract, as amended.

     

    
      	
               
      

            	
              b.

            	
              Beneficial
      Owner

            

    

    "Beneficial
Owner" has the meaning set "forth in Rule 13d-3 under the Exchange
Act.

     

    
      	
               
      

            	
              c.

            	
              Board

            

    

    "Board"
means the Board of Directors of the Company.

     

    
      	
               
      

            	
              d.

            	
              Cause

            

    

    
      	 	"Cause" means any of
      the following:

    

     

    
      	
               
      

            	
              (1)

            	
              you
      fail to carry out assigned duties after being given prior warning and an
      opportunity to remedy the failure,

            

    

     

    
      	
               
      

            	
              (2)

            	
              you
      breach any material term of any employment agreement with the
      Company,

            

    

     

    
      	
               
      

            	
              (3)

            	
              you
      engage in fraud, dishonesty, willful misconduct, gross negligence, or
      breach of fiduciary duty (including without limitation any failure to
      disclose a conflict of interest)in the performance of your duties for the
      Company, or

            

    

     

    
      	
               
      

            	
              (4)

            	
              you
      are convicted of a felony or crime involving moral
    turpitude.

            

    

     

    
      	
               
      

            	
              e.

            	
              Change
      in Control

            

    

    
      	 	"Change in Control"
      means the first of the following to occur after the date of this
      Agreement:

    

     

    
      	
               
      

            	
              (1)

            	
              Acquisition of Controlling
      Interest

            
	 	 	Any
      Person becomes the Beneficial Owner, directly or indirectly, of securities
      of the Company representing 25% or more of the combined voting power of
      the Company's then outstanding securities. In applying the preceding
      sentence, securities acquired directly from the Company or its affiliates
      with the company's approval by or for the Person shall not be taken into
      account. 

    

     

     

    
      	
               
      

            	
              (2)

            	
              Change
      in Board Control

            
	 	 	During
      the term of this Agreement, individuals who constituted the Board as of
      the date of this Agreement (or their approved replacements, as defined in
      the next sentence) cease for any reason to constitute a majority of the
      Board. A new director shall be considered an "approved replacement"
      director if his or her election (or nomination for election) was approved
      by a vote of at least two-thirds of the directors then still in office who
      either were directors at the beginning of the period or were themselves
      approved replacement directors; provided that any individual whose initial
      assumption of office occurs as a result of an actual or threatened
      election contest (as the term is used in Rule 14a-11 of Regulation 14A
      issued under the Exchange Act) or other actual or threatened solicitation
      of proxies or consents by or on behalf of a Person other than the Board
      shall not be considered an “approved
  replacement”. 

    

     

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (3)

            	
              Merger
      Approved

            
	 	 	The
      shareholders of the Company approve a merger or consolidation of the
      Company with any other corporation unless: (a) the voting securities of
      the Company outstanding immediately before the merger or consolidation
      would continue to represent (either by remaining outstanding or by being
      converted into voting securities of the surviving entity) at least 75% of
      the combined voting power of the voting securities of the Company or such
      surviving entity outstanding immediately after such merger or
      consolidation; and (b) no Person acquires more than 25% of the combined
      voting power of the Company's then outstanding
  securities. 

    

     

    
      	
               
      

            	
              (4)

            	
              Sale
      of Assets

            
	 	 	The
      shareholders of the Company approve an agreement for the sale or
      disposition by the Company of all or substantially all of the Company's
      assets. 

    

     

    
      	
               
      

            	
              (5)

            	
              Liquidation
      or Dissolution

            
	 	 	A
      complete liquidation or dissolution of the
  Company. 

    

     

    
      	
               
      

            	
              (6)

            	
              Private
      Transaction

            
	 	 	Any
      transaction or series of transactions not covered in paragraphs (1)
      through (5) above the result of which is the suspension of the Company’s
      duty to file reports under the Exchange Act as a result of the remaining
      number of holders of the Company’s common stock following such transaction
      or series of transactions. 

    

     

    
      	
               
      

            	
              f.

            	
              Code

            

    

    "Code"
means the Internal Revenue Code of 1986, as amended.

     

    
      	
               
      

            	
              g.

            	
              Company

            

    

    "Company"
means Versar, Inc. and any successor to its business or assets that (by
operation of law, or otherwise) assumes and agrees to perform this Agreement.
However, for purposes of determining whether a Change in Control has occurred in
connection with such a succession, the successor shall not be considered to be
the Company.

     

    
      	
               
      

            	
              h.

            	
              Disability

            

    

    "Disability"
means that, due to physical or mental illness which is determined to be total
and permanent by a physician selected by the Company or its insurer and
acceptable to you or your legal representative: (i) you have been absent on a
full-time basis from your duties with the Company for 180 consecutive business
days; (ii) the Company has notified you more than 30 days prior to your intended
termination date that it intends to terminate you on account of Disability; and
(iii) you do not resume the full-time performance of your duties within 30 days
after receiving notice of your intended termination on account of
Disability.  Following the expiration of the 30 day period specified
above, unless you have resumed full- time performance of your duties, your
employment with the Company shall terminate immediately.

     

    
      	
            	
              i.

            	
              Exchange
      Act

            

    

    
"Exchange
Act" means the Securities Exchange Act of 1934, as amended.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              j.

            	
              Good
      Reason

            
	 	 	"Good
      Reason" means the occurrence of any of the following events arising
      without your consent: 

    

     

    
      	
               
      

            	
              (1)

            	
              Demotion

            
	 	 	Your
      duties and responsibilities are materially and adversely altered from
      those in effect immediately before the Change in Control (or, with respect
      to Section 3(b), the Potential Change in Control), or there is a material
      and adverse change in your reporting responsibilities or in the size of
      the budget you administer in effect immediately before the Change in
      Control (or, with respect to Section 3(b), the Potential Change in
      Control), provided that no demotion will be deemed to occur solely as a
      result of the Company ceasing to be a public company, a change in your
      title, or your transfer to an
affiliate. 

    

     

    
      	
               
      

            	
              (2)

            	
              Pay
      Cut

            
	 	 	Your
      annual base salary is materially
reduced. 

    

     

    
      	
               
      

            	
              (3)

            	
              Relocation

            
	 	 	Your
      principal office is materially relocated, which increases your one-way
      commute to work by more than 50 miles, based on your residence when the
      transfer was announced. 

    

     

    
      	
               
      

            	
              (4)

            	
              Breach
      of Contract

            
	 	 	The
      Company materially breaches this Agreement, your employment agreement or
      any other agreement between you and the Company pursuant to which you
      perform services for the Company or compensation and benefits are provided
      to you. 

    

     

    
      	
               
      

            	
              (5)

            	
              Improper
      Termination

            
	 	 	The
      Company terminates your employment, other than pursuant to a notice of
      termination satisfying the requirements of Section 5
    hereof. 

    

     

    However,
an event that is or would constitute Good Reason shall cease to be Good Reason
if: (a) you fail to provide written notice to the Company within 90 days
following the initial existence of the event described in paragraphs (1) through
(4) above; (b) the Company reverses or otherwise cures the event within 30 days
of receiving such notice; (c) you do not terminate employment within 180 days
after the event occurs; or (d) you were a primary
instigator of the Good Reason event and the circumstances make it inappropriate
for you to receive benefits under this Agreement (e.g., you agree temporarily to
relinquish your position on the occurrence of a merger transaction you
negotiate). If you have Good Reason to terminate employment, you may do so even
if you are on a leave of absence due to physical or mental illness or any other
reason.

     

    
      	
               
      

            	
              k.

            	
              Incentive
      Compensation

            

    

    “Incentive
Compensation” means the amount of cash and/or securities paid to you under all
bonus, incentive or other programs for performance adopted by the Company for
its executive officers and other key employees.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              l.

            	
              

                Management
      Action

              

            

    

    
      	 	”Management Action”
      means any event, circumstance, or transaction occurring during the
      six-month period following a Potential Change in Control that results from
      the action of a Management Group.

    

     

    
      	
               
      

            	
              m.

            	
              Person

            

    

    
      	
            	"Person" has the
      meaning given in Section 3(a)(9) of the Exchange Act, as modified and used
      in Section 13(d) of that Act, and shall include a "group," as defined in
      Rule 13d-5 promulgated thereunder. However, a Person shall not include:
      (i) the Company or any of its subsidiaries; (ii) a trustee or other
      fiduciary holding securities under an employee benefit plan of the Company
      or any of its subsidiaries; (iii) an underwriter temporarily holding
      securities pursuant to an offering of such securities; or (iv) a
      corporation owned, directly or indirectly, by the stockholders of the
      Company in substantially the same proportions as their ownership of stock
      of the Company.

    

     

    
      	

            	
              n.

            	
              

                Potential
      Change in Control

              

            

    

    
      	 	"Potential Change in
      Control" means that any of the following has occurred during the term of
      this Agreement, excluding any event that is Management
    Action: 

    

     

    
      	
               
      

            	
              (1)

            	
              Agreement
      Signed

            
	 	 	The
      Company enters into an agreement that will result in a Change in
      Control. 

    

     

    
      	
               
      

            	
              (2)

            	
              Notice of Intent to Seek Change in
      Control

            
	 	 	The
      Company or any Person publicly announces an intention to take or to
      consider taking actions that will result in a Change in
      Control. 

    

     

    
      	
               
      

            	
              (3)

            	
              Board
      Declaration

            
	 	 	With respect to this Agreement, the Board adopts a resolution
      declaring that a Potential Change in Control has
      occurred. 

    

     

    
      	
               
      

            	
              o.

            	
              Separation
      from Service

            

    

    “Separation
from Service” shall have the meaning set forth in Treas. Reg. §
1.409A-1(h).

     

    
      	
               
      

            	
              p.

            	
              Severance
      Benefits

            

    

    "Severance
Benefits" means your benefits under Section 6 of this Agreement.

     

    
      	
               
      

            	
              q.

            	
              Term of this
      Agreement

            

    

    "Term of
this Agreement" means the period that commences on the date of this Agreement
and ends on the

     

    (1) earlier of:

     

    
      	
               
      

            	
              a.

            	
              ______________,
      2010; or

            

    

    
      	
               
      

            	
              b.

            	
              Your
      ceasing to serve in the position of _______________ prior to the
      occurrence of a Potential Change in Control or Change in Control;
      or

            

    

     

    
      
        (2)
Change in Control

      

    

    The last
day of the 24th calendar month beginning after the calendar month in which a
Change in Control occurred during the Term of this Agreement. After

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    a Change
in Control occurs, the end of the Term of this Agreement shall solely be
determined under this Section 20 (q)(2).

     

    
      	
              21.

            	
              Section
      409A

            

    

     

    
      	
               
      

            	
              a.

            	
              Notwithstanding
      anything in this Agreement to the contrary, if any amounts that become due
      under this Agreement on account of your termination of employment
      constitute “nonqualified deferred compensation” within the meaning of Code
      Section 409A, payment of such amounts shall not commence until you incur a
      Separation from Service.

            

    

    

    
      	
               
      

            	
              b.

            	
              Notwithstanding
      any provision to the contrary in this Agreement (other than Section 21(c)
      below) no payments to which you become entitled under this Agreement shall
      be made or paid to you prior to the earlier of (1) the expiration of the
      six-month period measured from the date of your Separation from Service
      with the Company or (2) the date of your death, if you are deemed at the
      time of the Separation from Service a “specified employee” within the
      meaning of Code Section 409A, and such delayed commencement is otherwise
      required in order to avoid a prohibited distribution under Code Section
      409A(a)(2).  Upon expiration of the applicable deferral period,
      all payments deferred pursuant to this Section 21(b) shall be paid to you
      in a lump sum, and any remaining payments due under this Agreement shall
      be paid in accordance with the remaining payment dates specified
      herein.

            

    

    

    
      	
               
      

            	
              c.

            	
              The
      six-month holdback set forth in Section 21(b) above shall not be
      applicable to any cash Severance Benefits under Section 6 that are paid to
      you by March 15 of the calendar year following the calendar year in which
      you become entitled to Severance
Benefits.

            

    

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
parties have executed this Agreement as if the date set forth
above.

     

    
      
        	Date   
      	 
      	 	By:
      Versar, Inc.	 
      
	 	 	 	 	 
	 	 
      	 	 
      	 
      
	 	 
      	 	President
      and CEO  	 
      
	 	 
      	 	 
      	 
      

      

    

     

     

     

    
      	Date   
      	 
      	 	 	 
      

    

     

     

    
 

    Company
notices to you shall be addressed as follows (or in any other manner you notify
the Company to use):

     

     

    
      	 
	 
	 

    

     

    

     

    

    -13-ex10_1.htm

    
      

    

    Ex.
10.1

    

    THIRD AMENDMENT
TO

    RECEIVABLES LOAN AND
SECURITY AGREEMENT

    

     

    THIS
THIRD AMENDMENT TO RECEIVABLES LOAN AND SECURITY AGREEMENT (this “Amendment”)
is dated as of April 1, 2008 (the “Closing
Date”), by and between CAPITALSOURCE FINANCE LLC, a
Delaware limited liability company, as secured party (herein referred to as the
“Lender”) and SILVERLEAF RESORTS, INC., a
Texas corporation, as debtor (herein referred to as the “Borrower”).

     

     

    RECITALS

     

    A.      
Borrower and Lender have entered into that certain Receivables Loan and Security
Agreement, dated as of April 29, 2005 (as amended and modified from time to
time, the “Loan
Agreement”).

     

    B.       
The Borrower and Lender desire to amend the Loan Agreement on the terms and
conditions as hereinafter set forth.

     

    NOW,
THEREFORE, in consideration of the premises herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as
follows:

     

     

    AGREEMENT

     

     

    ARTICLE
I

    Definitions

     

    1.01   Capitalized
terms used in this Amendment are defined in the Loan Agreement, as amended
hereby, unless otherwise stated.

     

     

    ARTICLE
II

    Amendments to Loan
Agreement

     

    Effective
as of the date hereof, the Loan Agreement is hereby amended as
follows:

     

    2.01   
Amendment
to Section 1.57. Section 1.57 of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    “1.57    Loan.  The
maximum $20,000,000 credit facility as described in this Agreement and evidenced
and secured by the Loan Documents.”

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    2.02   
Amendment
to Section 1.63. Section 1.63 of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    “1.63  
 Maturity
Date.  June 30, 2008.”

     

    2.03   
Amendment
to Section 1.64.  Section 1.64 of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    “1.64   
Maximum Loan
Amount.  The maximum principal balance of the Loan which can be
outstanding at any time is Twenty Million Dollars ($20,000,000).”

     

    2.04   
Amendment
to Section 1.89.  The definition of “Sovereign Facility” in
Section 1.89 of
the Loan Agreement is hereby deleted in its entirety.

     

    2.05  
 Amendment
to Section 1.  Section 1 of the Loan
Agreement is hereby amended to add the definition of “Material Adverse Change”
in correct alphabetical order as set forth below.

     

    “Material Adverse
Change.  Any development, event, condition, obligation,
liability or circumstance or set of events, conditions, obligations, liabilities
or circumstances or any change(s) which:  (i) has had, or reasonably
could be expected to have (as determined by Lender), a material adverse effect
upon or change in (a) the legality, validity or enforceability of any Loan
Document, or (b) the validity, perfection or priority of any Lien granted to
Lender under this Agreement or any other Loan Document; (ii) has been, or
reasonably could be expected to be (as determined by Lender), material and
adverse to the value of any of the Collateral or to the business, operations,
prospects, properties, assets, liabilities or condition (financial or otherwise)
of the Borrower (including, without limitation, the termination of any
applicable timeshare, condominium or similar regime whether by consent of the
Timeshare Interest owners or otherwise, any modification or amendment to any
Declaration that shall, in the reasonable opinion of Lender, adversely affect
the Collateral, Timeshare Interest, any Receivables Loan Approved Resort or the
operations or prospects of any Receivables Loan Approved Resort, or the
substantial destruction of any Receivables Loan Approved Resort, if not fully
insured); or (iii) has materially impaired, or reasonably could be expected to
materially impair (as determined by Lender), the ability of the Borrower to
perform any of the Obligations, or to consummate the transactions, under the
Loan Documents.”

     

    2.06   
Amendment
to Section 4.1(h).  Section 4.1(h) of the
Loan Agreement is hereby deleted and replaced with “Intentionally
Omitted”.

     

    2.07   
Amendment
to Section 4.2(c)(iv).  Section 4.2(c)(iv) of
the Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

     

    “(iv)    
With respect to any Advance in connection with Pledged Notes Receivable
generated at Oak N’ Spruce Resort, delivered to Lender an Assignment of
Certificate of Beneficial Interest securing such Pledged Note Receivable
acceptable to Lender in its sole discretion and evidence satisfactory to Lender
that Borrower has filed a UCC-1 financing statement in the state where the
Purchaser is located naming Borrower as the secured party and Lender as
Borrower’s assignee (and within sixty (60) calendar days from the date of such
Advance, a recorded copy of such UCC-1 financing statement and
assignment).”

     

    2.08   
Amendment
to Section 5.12.  Section 5.12 of the
Loan Agreement is hereby amended to delete therefrom the phrase “(other than the
agreements executed in connection with the Sovereign Facility).”

     

    2.09   
Amendment
to Section 6.1(s).  Section 6.1(s) of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    “(s)     
Textron
Facility.  Borrower will comply with each of the terms and
conditions of any subordinated indebtedness, the Textron Facility and will
promptly deliver to Lender, upon receipt by Borrower, copies of any notices
received by Borrower in connection with the Textron Facility or any other credit
facility from time to time subject to the Interecreditor
Agreement.”

     

    2.10   
Amendment
to Section 6.1.  Section 6.1 of the
Loan Agreement is hereby amended to add the following clause (ee) to the
end thereto as follows:

     

    “(ee)   
Title
Insurance.  Borrower shall deliver or cause to be delivered to
Lender a mortgagee’s title insurance commitment within sixty (60) days after the
date of each Advance covering Timeshare Interest Mortgages which are included as
part of such Advance (other than Timeshare Interest Mortgages covering Timeshare
Interests in Oak N’ Spruce Resort), underwritten by a company acceptable to
Lender in all respects, to insure the lien of each Timeshare Interest pledged to
Lender in an amount not less than the applicable Pledged Notes Receivable
balance and containing such affirmative coverage as Lender deems reasonably
necessary.  A mortgagee title insurance policy consistent with the
subject title insurance commitment and naming Borrower, its successors and
assigns as insured mortgagee shall be delivered with respect to the Timeshare
Interest Mortgages which make up each Advance (other than Timeshare Interest
Mortgages covering Timeshare Interests in Oak N’ Spruce Resort) within sixty
(60) days from the issuance of the related title commitment in respect to a
Receivables Loan Approved Resort located within the State of Texas and within
ninety (90) days from the issuance of the related title commitment in respect to
a Receivables Loan Approved Resort located in a state other than the State of
Texas and must insure that the applicable Timeshare Interest Mortgage creates a
first priority lien in and to the financed Timeshare Interest in favor or
Lender, as assignee of Borrower, with such exceptions and conditions to title as
Lender shall approve in writing.  Notwithstanding the foregoing, Agent
reserves the right in its sole discretion to require at any time as a condition
to any Advance that Borrower deliver or cause to be delivered to Lender a
mortgagee’s title insurance commitment at the time of such Advance covering
Timeshare Interest Mortgages which are included as part of such Advance (other
than Timeshare Interest Mortgages covering Timeshare Interests in Oak N’ Spruce
Resort), underwritten by a company acceptable to Lender in all respects, to
insure the lien of each Timeshare Interest pledged to Lender in an amount not
less than the applicable Pledged Notes Receivable balance and containing such
affirmative coverage as Lender deems reasonably necessary.  If Agent
requires such delivery as a condition to an Advance, a mortgagee title insurance
policy consistent with the subject title insurance commitment and naming
Borrower, its successors and assigns as insured mortgagee shall be delivered
with respect to the Timeshare Interest Mortgages which make up each Advance
(other than Timeshare Interest Mortgages covering Timeshare Interests in Oak N’
Spruce Resort) within sixty (60) days of the date of the Advance on such Pledged
Notes Receivable and must insure that the applicable Timeshare Interest Mortgage
creates a first priority lien in and to the financed Timeshare Interest in favor
or Lender, as assignee of Borrower, with such exceptions and conditions to title
as Lender shall approve in writing ”

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    2.11   
Amendment
to Section 6.2(m).  Section 6.2(m) of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    “(m)     Maximum Sales
Costs.  As of the last day of each calendar quarter, commencing
with the calendar quarter ending June 30, 2005, Borrower will not permit the
four quarter cumulative ratio of Marketing and Sales Costs to the Borrower’s net
proceeds from the sale of Timeshare Interests as recorded on the Borrower’s
financial statements for the immediately preceding four (4) consecutive fiscal
quarters of the Borrower to equal or exceed a ratio of .600 to
1.  Notwithstanding the foregoing, in the event that Borrower delivers
written evidence satisfactory to Lender that the above-referenced ratio is no
longer required to be tested under the Textron Facility, such ratio shall not be
tested under this Agreement.”

     

    2.12   
Amendment
to Section 7.13.  Section 7.13 of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    “7.13    Material Adverse
Change.  If
there occurs any Material Adverse Change.”

     

    2.13   
Amendment
to Section 7.14.  Section 7.14 of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    “7.14    Default by Borrower in Other
Agreements

     

    .  Any
default by Borrower (a) in the payment of any indebtedness to Lender; (b) in the
payment or performance of other indebtedness for borrowed money or obligations
in excess of $100,000 secured by all or any portion of the Collateral; or (c) in
the payment or performance of any other material indebtedness or obligations
(including any indebtedness owed pursuant to the Textron Facility, the Bond
Holder-Exchange Transaction or any other indebtedness from time to time subject
to the Intercreditor Agreement).”

     

    2.14   
Amendment
to Section 11.  Section 11 of the
Loan Agreement is hereby amended to add the following Section 11.26 thereto
in its entirety as follows:

     

    “11.26  Appointment of
Servicer.

     

    (a)           Lender
may from time to time, at no cost or expense to Borrower, enter into a servicing
agreement (a “Loan
Servicing Agreement”) with CapitalSource or an Affiliate of Lender or
CapitalSource (a “Loan
Servicer”) to service and enforce the Loan Documents and collect the
Obligations on Lender’s behalf.  Pursuant to the Loan Servicing
Agreement, Lender may authorize the Loan Servicer to take certain actions,
perform certain duties and exercise certain powers on Lender’s behalf under the
provisions of the Loan Documents and any other instruments and agreements
referred to in this Agreement, all of to which Borrower hereby
consent.

     

    (b)           The
Loan Servicer shall have no duties or responsibilities to Borrower, but only to
Lender and then only as expressly set forth in the Loan Servicing
Agreement.  Without limiting the generality of the foregoing, the Loan
Servicer shall have no obligation to make any loans or advances to
Borrower.  Neither the Loan Servicer nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by them under this Agreement or in connection herewith, unless caused by its or
their willful misconduct.  The Loan Servicer’s duties shall be
mechanical and administrative in nature; nothing in this Agreement, express or
implied, is intended to or shall be so construed as to impose upon the Loan
Servicer any rights or obligations with respect to the Loan Documents except as
expressly set forth herein.  Neither Borrower nor any Guarantor shall
in any way be construed to be a third party beneficiary of any relationship
between the Loan Servicer and Lender.

     

    (c)           The
Loan Servicer shall be entitled to rely, and shall be fully protected in
relying, upon any communication whether written or oral believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person,
and, with respect to all legal matters pertaining to this Agreement and its
duties hereunder, upon advice of counsel selected by it.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (d)           Borrower
shall be entitled to rely upon any communication whether written or oral sent or
made by the Loan Servicer for and on behalf of Lender with respect to all
matters pertaining to the Loan Documents and Borrower’ duties and obligations
hereunder, unless and until Borrower receive written notice from Lender that the
Loan Servicer is no longer servicing the Loan.

     

    (e)           The
Loan Servicing Agreement may be terminated at any time without prior notice to
or consent of Borrower, and Lender will notify Borrower within a reasonable
period of time thereafter of such termination.  Upon termination of
the Loan Servicing Agreement and failure to replace the Loan Servicing Agreement
with a new servicing agreement, all references herein to the Loan Servicer shall
thereafter mean and refer to Lender.”

    

    ARTICLE
III

    Conditions
Precedent

    

     

    3.01  
 Conditions
to Effectiveness.  The effectiveness
of this Amendment is subject to the satisfaction of the following conditions
precedent in a manner satisfactory to Lender, unless specifically waived in
writing by Lender:

     

    (a)           Lender
shall have received this Amendment, duly executed by the Borrower and
Lender.

     

    (b)           Lender
and Borrower shall have entered into an amendment and restatement of the
Inventory Loan Agreement in form and substance satisfactory to
Lender.

     

    (c)           Lender
shall have received a commitment and extension fee equal to
$10,000.00.

     

    (d)           Lender
shall have received a copy of the resolutions in form and substance reasonably
satisfactory to Lender, of the board of directors of Borrower authorizing the
execution, delivery and performance of this Amendment, certified by the
secretary of the Borrower as of the Closing Date, and such certificate shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of such certificate.

     

    (e)           The
representations and warranties contained herein and in the Loan Agreement, as
amended hereby, and the Loan Documents, shall be true and correct as of the date
hereof, as if made on the date hereof.

     

    (f)            No
Default or Event of Default shall have occurred and be continuing, unless such
Default or Event of Default has been otherwise specifically waived in writing by
Lender.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (g)           All
corporate and other proceedings, and all documents, instruments and other legal
matters in connection with the execution of this Amendment shall be satisfactory
in form and substance to Lender and its counsel.

     

     

    ARTICLE
IV

    No
Waiver

     

    4.01   
No
Waiver.  Borrower is
hereby notified that irrespective of (i) any waivers or consents previously
granted by Lender regarding the Loan Agreement and the Loan Documents, (ii) any
previous failures or delays of Lender in exercising any right, power or
privilege under the Loan Agreement or the Loan Documents, or (iii) any previous
failures or delays of Lender in the monitoring or in the requiring of compliance
by Borrower with the duties, obligations, and agreements of Borrower in the Loan
Agreement and the Loan Documents, Borrower will be expected to comply strictly
with its duties, obligations and agreements under the Loan Agreement and the
Loan Documents.

     

    Except as
expressly provided in this Amendment, nothing contained in this Amendment or any
other communication between Lender and the Borrower shall be a waiver of any
past, present or future violation, Default or Event of Default of Borrower under
the Loan Agreement or any Loan Document.  Similarly, Lender hereby
expressly reserves any rights, privileges and remedies under the Loan Agreement
and each Loan Document that Lender may have with respect to each violation,
Default or Event of Default, and any failure by Lender to exercise any right,
privilege or remedy as a result of the violations set forth above shall not
directly or indirectly in any way whatsoever either (i) impair, prejudice or
otherwise adversely affect the rights of Lender, except as set forth herein, at
any time to exercise any right, privilege or remedy in connection with the Loan
Agreement or any Loan Document, (ii) amend or alter any provision of the Loan
Agreement or any Loan Document or any other contract or instrument, or (iii)
constitute any course of dealing or other  basis for altering any
obligation of Borrower or any rights, privilege or remedy of Lender under the
Loan Agreement or any Loan Document or any other contract or
instrument.  Nothing in this Amendment shall be construed to be a
consent by Lender to any prior, existing or future violations of the Loan
Agreement or any Loan Document.

     

     

    ARTICLE
V

    Ratifications,
Representations and Warranties

     

    5.01   
Ratifications.  The terms and
provisions set forth in this Amendment shall modify and supersede all
inconsistent terms and provisions set forth in the Loan Agreement and the Loan
Document, and, except as expressly modified and superseded by this Amendment,
the terms and provisions of the Loan Agreement and the Loan Document are
ratified and confirmed and shall continue in full force and
effect.  The Borrower and Lender agree that the Loan Agreement and the
Loan Document, as amended hereby, shall continue to be legal, valid, binding and
enforceable in accordance with their respective terms.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    5.02  
 Representations
and Warranties.  The Borrower
hereby represents and warrants to Lender that (a) the execution, delivery and
performance of this Amendment and any and all Loan Document executed and/or
delivered in connection herewith have been authorized by all requisite corporate
action on the part of the Borrower and will not violate the organizational
documents or governing documents of Borrower; (b) the representations and
warranties contained in the Loan Agreement, as amended hereby, and any Loan
Document are true and correct on and as of the date hereof and on and as of the
date of execution hereof as though made on and as of each such date; (c) no
Default or Event of Default under the Loan Agreement, as amended hereby, has
occurred and is continuing, unless such Default or Event of Default has been
specifically waived in writing by Lender; and (d) the Borrower is in full
compliance with all covenants and agreements contained in the Loan Agreement and
the Loan Document, as amended hereby; (e) Borrower has not amended its
organizational documents or its governing documents since the date of the Loan
Agreement.

     

     

    ARTICLE
VI

    Miscellaneous
Provisions

     

    6.01   
Survival
of Representations and Warranties.  All
representations and warranties made in the Loan Agreement or any Loan Document,
including, without limitation, any  document furnished in connection
with this Amendment, shall survive the execution and delivery of this Amendment
and the Loan Document, and no investigation by Lender or any closing shall
affect the representations and warranties or the right of Lender to rely upon
them.

     

    6.02   
Reference
to Loan Agreement.  Each of the Loan
Agreement and the Loan Document, and any and all documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Loan Agreement, as amended hereby, are hereby amended so that any
reference in the Loan Agreement and such Loan Document to the Loan Agreement
shall mean a reference to the Loan Agreement, as amended hereby.

     

    6.03  
 Expenses
of Lender.  As provided in
the Loan Agreement, the Borrower agrees to pay on demand all costs and expenses
incurred by Lender in connection with the preparation, negotiation, and
execution of this Amendment and the Loan Documents executed pursuant hereto,
including, without limitation, the costs and fees of Lender’s legal counsel, and
all costs and expenses incurred by Lender in connection with the enforcement or
preservation of any rights under the Loan Agreement, as amended hereby, or any
Loan Document, including, without, limitation, the costs and reasonable fees of
Lender’s legal counsel in connection with any such enforcement or preservation
efforts.

     

    6.04   
Severability.  Any provision of
this Amendment held by a court of competent jurisdiction to be invalid or
unenforceable shall not impair or invalidate the remainder of this Amendment and
the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    6.05   
Successors
and Assigns.  This Amendment is
binding upon and shall inure to the benefit of Lender and the Borrower and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of their rights or obligations hereunder without the prior written
consent of Lender.

     

    6.06   
Counterparts.  This Amendment
may be executed in one or more counterparts, each of which when so executed
shall be deemed to be an original, but all of which when taken together shall
constitute one and the same instrument.

     

    6.07   
Effect of
Waiver.  No consent or
waiver, express or implied, by Lender to or for any breach of or deviation from
any covenant or condition by the Borrower shall be deemed a consent to or waiver
of any other breach of the same or any other covenant, condition or
duty.

     

    6.08   
Headings.  The headings,
captions, and arrangements used in this Amendment are for convenience only and
shall not affect the interpretation of this Amendment.

     

    6.09   
Applicable
Law.  THIS AMENDMENT
AND ALL LOAN DOCUMENT EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE
AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MARYLAND.

     

    6.10   
Final
Agreement.  THE LOAN
AGREEMENT AND THE LOAN DOCUMENT, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE
THIS AMENDMENT IS EXECUTED.  THE LOAN AGREEMENT AND THE LOAN
DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.  NO
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY THE BORROWER
AND LENDER.

     

    6.11   
Release.  THE BORROWER
HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET,
CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE
“OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE
FROM LENDER.  THE BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES
AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, LENDER, EMPLOYEES, SUCCESSORS
AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION,
DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR
CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE
THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER
HAVE AGAINST LENDER, ITS PREDECESSORS, LENDER, EMPLOYEES, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR LOAN DOCUMENT, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.

     

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Remainder of this Page Intentionally Left Blank]

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, this
Amendment has been duly executed on the date first written above.

     

     

    
      	 
      	
              LENDER:

            
	 
      	 
      
	 	 
	
              Dates
      of Execution:

            	
              CAPITALSOURCE
      FINANCE LLC,

            
	 
      	
              a
      Delaware limited liability company

            
	 
      	 
      
	 	 
	
              April
      1, 2008

            	
              By:

            	
              /S/ HEATHER E. MURPHY

            
	 
      	
              Name:

            	
              Heather E. Murphy

            
	 
      	
              Title:

            	
              Senior
Counsel

            

    

    

    

    
      	 
      	
              BORROWER:

            
	 
      	 
      
	 	 
	 
      	
              SILVERLEAF
      RESORTS, INC.,

            
	 
      	
              a
      Texas corporation

            
	 	 
	 	 
	
              April
      1, 2008

            	
              By:

            	
              /S/ BOB M. SINNOTT

            
	 
      	
              Name:

            	
              Bob M. Sinnott

            
	 
      	
              Title:

            	
              Chief Financial
  Officer

            

    

     

     

    10

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