SILVERLEAF RESORTS INC, S-1/A, 1997-06-02

SILVERLEAF RESORTS INC
S-1/A, 1997-06-02
LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1997

REGISTRATION NO. 333-24273
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 2 TO FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

SILVERLEAF RESORTS, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
TEXAS 6552 75-2259890
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
ROBERT E. MEAD
CHIEF EXECUTIVE OFFICER
SILVERLEAF RESORTS, INC.
1221 RIVERBEND DRIVE, SUITE 120 1221 RIVERBEND DRIVE, SUITE 120
DALLAS, TEXAS 75247 DALLAS, TEXAS 75247
(214) 631-1166 (214) 631-1166
(Address, including zip code, and telephone (Address, including zip code, and telephone
number, including area code, number, including area code,
of registrant's principal executive offices) of agent for service)
</TABLE>

Copies to:

<TABLE>
<C> <C>
DAVID N. REED, ESQ.
MEADOWS, OWENS, COLLIER, REED, THOMAS W. DOBSON, ESQ.
COUSINS & BLAU, LLP LATHAM & WATKINS
901 MAIN STREET, SUITE 3700 633 W. FIFTH STREET, SUITE 4000
DALLAS, TEXAS 75202-3792 LOS ANGELES, CALIFORNIA 90071
(214) 744-3700 (213) 485-1234
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434
of the Securities Act of 1933, please check the following box. [ ]
---------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
===========================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED AMOUNT PROPOSED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per
share................................ 4,025,000 shares $16.00 $64,400,000 $21,467
===========================================================================================================================
</TABLE>

(1) Includes 525,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.

(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2

SILVERLEAF RESORTS, INC.

CROSS-REFERENCE SHEET

PURSUANT TO RULE 404(a) AND ITEM 501(b) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM NUMBER AND
HEADING IN FORM S-1
REGISTRATION STATEMENT PROSPECTUS CAPTION
---------------------- ------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Cross-Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Summary; Risk Factors; Selected
Consolidated Historical Financial,
Operating and Pro Forma Financial
Information
4. Use of Proceeds............................ Summary; Use of Proceeds; Capitalization;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
5. Determination of Offering Price............ Outside Front Cover Page; Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution....................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................. Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel..... Legal Matters; Experts
11. Information with Respect to the
Registrant................................. Outside and Inside Front Cover Pages of
Prospectus; Summary; Risk Factors; Use of
Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Historical Financial,
Operating and Pro Forma Financial
Information; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Relationships and
Related Transactions; Principal
Shareholders; Description of Capital
Stock; Certain Provisions of the
Company's Charter and Bylaws; Shares
Eligible for Future Sale; Consolidated
Financial Statements of Silverleaf
Resorts, Inc.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Management
</TABLE>
<PAGE> 3

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.

SUBJECT TO COMPLETION, DATED JUNE 2, 1997

3,500,000 Shares

[SILVERLEAF RESORTS, INC. LOGO]

SILVERLEAF RESORTS, INC.
Common Stock
($0.01) par value

------------------

All of the shares of Common Stock, $0.01 par value ("Common Stock"), of
Silverleaf Resorts, Inc., a Texas corporation (the "Company"), offered hereby
(the "Offering"), are being sold by the Company. Prior to the Offering, there
has been no public market for the Common Stock. It is anticipated that the
initial public offering price will be between $13.00 and $16.00 per share of
Common Stock. For information relating to the factors considered in determining
the initial public offering price, see "Underwriting". The Common Stock has been
approved for listing on The New York Stock Exchange ("NYSE"), subject to
official notice of issuance, under the symbol "SVR".

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING ON PAGE 16.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total(2)............................................. $ $ $
</TABLE>

(1) Before deduction of expenses payable by the Company estimated at $2,147,500.
(2) The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase a maximum of 525,000
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ and Proceeds to
Company will be $ .

The Common Stock is offered by the several Underwriters when, as and if
issued by the Company, delivered to and accepted by the Underwriters and subject
to their right to reject orders in whole or in part. It is expected that the
Common Stock will be ready for delivery on or about , 1997, against
payment in immediately available funds.

The Company will use approximately $9.9 million of the Offering proceeds to
pay indebtedness owed to the chief executive officer of the Company and certain
of his affiliates, and approximately $4.5 million of the Offering proceeds (or
$5.2 million if the Underwriters' over-allotment option is exercised in full) to
pay indebtedness owed to an affiliate of the lead managing Underwriter.

Insiders of the Company will retain control of the Company after the
consummation of the Offering. After taking into account Common Stock currently
owned by insiders of the Company and assuming the immediate exercise of stock
options to be granted to such persons, insiders of the Company will own
approximately 69.9% of the Common Stock of the Company after the Offering.

CREDIT SUISSE FIRST BOSTON
EVEREN SECURITIES, INC.
MCDONALD & COMPANY
SECURITIES, INC.

Prospectus Dated , 1997
<PAGE> 4

CAPTION: "SILVERLEAF RESORTS, INC. LODGE GETAWAY(TM)"

MAP OF CENTRAL U.S. DEPICTING LOCATIONS OF EXISTING RESORTS,
PROPOSED EXPANSION MARKETS, AND THEIR RESPECTIVE PROXIMITIES
TO EACH OTHER AND TO MAJOR METROPOLITAN AREAS.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING".

2
<PAGE> 5

1. First Picture -- color drawing of planned clubhouse at Hill Country Resort.
Caption: "Rendering of Planned Expansion for Clubhouse/Activity Center at
Hill Country Resort (San Antonio-Austin market)."

2. Second Picture -- photo of exterior timeshare units at Piney Shores Resort.
Caption: "Typical Timeshare Units at Piney Shores Resort -- Lake Conroe,
Texas (Houston market)".

3. Third Picture -- photo of interior of new "lodge-style" unit at Piney Shores
Resort. Caption: "Lodge-Style Interior -- Piney Shores Resort."

CAPTION: "SILVERLEAF RESORTS GROWTH STRATEGY

- -- Focus on "Drive-to" Economy Segment.

- -- Increase New Sales and Upgrade Sales at Existing Resorts.

- -- Add New "Drive-to" and Destination Resorts.

- -- Continue Margin Expansion Through Vertical Integration."

3
<PAGE> 6

CAPTION: "SILVERLEAF RESORTS, INC."

1. First Picture -- photo of people playing golf at golf course at Holiday
Hills Resort. Caption: "Holiday Hills Resort 18-hole Golf Course --
Branson, Missouri."

2. Second Picture -- photo of spa facility at Ozark Mountain Resort.
Caption: "Wellness Center amenities, Ozark Mountain Resort -- Branson,
Missouri."

3. Third Picture -- photo of man and child with tennis racquet at Holly
Lake resort. Caption: "Learning Tennis at Holly Lake Ranch."

4. Fourth Picture -- photo of woman jet skiing on lake. Caption: "Jet
Skiing at The Villages."

<TABLE>
<CAPTION>
GRAPH: INDUSTRY REVENUES GRAPH: SILVERLEAF REVENUES
- ------------------------ ---------------------------
$ BILLIONS $ MILLIONS
<C> <C> <C> <C>
1985 1.6 1993 23.5
1990 3.2 1994 27.2
1995 4.8 1995 36.7
1996E 5.7 1996 48.0
</TABLE>

4
<PAGE> 7

SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data included
elsewhere in this Prospectus, including the Consolidated Financial Statements
and the notes thereto. Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option, and
all share information has been adjusted to give effect to a May 15, 1997 common
stock dividend to existing shareholders which resulted in a 719.97204 for one
increase in outstanding shares (the "Stock Split"). Unless otherwise indicated,
all timeshare industry data contained herein is derived from information
prepared by the American Resort Development Association ("ARDA"). This
Prospectus contains certain statements of a forward-looking nature relating to
future events or the future financial performance of the Company. In evaluating
such statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under the
caption "Risk Factors", which could cause actual results to differ materially
from those indicated in such forward-looking statements. Unless the context
otherwise indicates, the "Company" or "Silverleaf" means Silverleaf Resorts,
Inc., doing business as "Silverleaf Vacation Club, Inc.", and its subsidiaries.

THE COMPANY

The Company is a leading developer, marketer, and operator of timeshare
resorts in the economy segment of the timeshare industry. The Company currently
owns and operates five "drive-to" resorts in Texas (the "Drive-to Resorts") and
two "destination" resorts in Missouri (the "Destination Resorts"). The Drive-to
Resorts are designed to appeal to value conscious vacationers seeking
comfortable and affordable accommodations in locations convenient to their
residences. The Drive-to Resorts are located proximate to major metropolitan
areas (currently Dallas-Ft. Worth, Houston, San Antonio and Austin),
facilitating more frequent "short stay" getaways, which the Company believes is
a growing vacation trend. The Destination Resorts, which are located in the
popular resort area of Branson, Missouri, offer Silverleaf customers the
opportunity to upgrade into a higher quality destination resort area as their
lifestyles and travel budgets permit. Both the Drive-to Resorts and the
Destination Resorts (collectively, the "Existing Resorts") are in rustic areas
and provide a quiet, relaxing vacation environment. The Company believes its
combination of Drive-to and Destination Resorts offers its customers within the
"economy segment" an economical alternative to commercial vacation lodging. The
average price for an annual one-week vacation interval (a "Vacation Interval")
for a two-bedroom unit at the Existing Resorts was $6,799 in 1996 and $6,028 in
1995, which compares favorably to an industry average price of $12,014 for a
two-bedroom unit in 1995.

The Company offers benefits to owners of Silverleaf Vacation Intervals
("Silverleaf Owners") which are uncommon in the timeshare industry. These
benefits include (i) use of vacant lodging facilities at the Existing Resorts at
no extra cost through Silverleaf's "Endless Escape" program; (ii) year-round
access to the Existing Resorts' non-lodging amenities such as fishing, boating,
horseback riding, tennis or golf for little or no additional charge; and (iii)
the right of Silverleaf Owners to exchange their Vacation Interval for a
different time period or different Existing Resort through Silverleaf's internal
exchange program. The above benefits are subject to availability. Silverleaf
Owners also have the option of enrolling in the world's largest Vacation
Interval exchange network operated by Resort Condominiums International ("RCI").

Operations

Silverleaf's operations include (i) developing timeshare resorts; (ii)
marketing and selling Vacation Intervals to prospective first-time owners; (iii)
marketing and selling upgraded Vacation Intervals to existing Silverleaf Owners;
(iv) providing financing for the purchase of Vacation Intervals; and (v)
operating timeshare resorts. The Company has substantial in-house capabilities
which enable it to coordinate all aspects of expansion of the Existing Resorts
and the development of any new resorts, including site selection, design, and
construction pursuant to standardized plans and specifications. The Company also
performs substantially all marketing and sales functions internally and has made
a significant investment in operating technology, including sophisticated
telemarketing and computer systems and proprietary software applications. The
Company identifies potential purchasers through internally developed marketing
techniques, and sells Vacation Intervals through on-site sales offices located
at certain Drive-to Resorts. This practice allows the Company to avoid the more
expensive
5
<PAGE> 8

marketing costs of subsidized airfare and lodging which are typically associated
with the timeshare industry. The Company believes its marketing program and
operating systems enable it to market and sell Vacation Intervals at a lower
cost than its competitors in the timeshare industry.

During 1996, the Company sold 6,054 Vacation Intervals at the Existing
Resorts to new customers, compared to 4,831 and 3,705 during 1995 and 1994,
respectively. Total revenues for the same periods increased to $48.0 million in
1996 from $36.7 million and $27.2 million in 1995 and 1994, respectively. In the
first quarter of 1997, the Company sold 1,539 Vacation Intervals at the Existing
Resorts to new customers, compared to 1,544 in the first quarter of 1996. Total
revenues for the first quarter of 1997 were $15.3 million compared to $12.0
million for the first quarter of 1996. At March 31, 1997, the Company had an
existing inventory of 6,024 Vacation Intervals and a master plan to construct up
to 70,740 additional Vacation Intervals at the Existing Resorts, subject to
demand and contingencies applicable to real estate development. See "Risk
Factors -- Development, Construction and Property Acquisition Activities".

As part of the Vacation Interval sales process, the Company offers
potential purchasers financing of up to 90% of the purchase price over a seven
year period. The Company has historically financed its operations by borrowing
from third-party lending institutions at an advance rate of up to 70% of
customer receivables. At December 31, 1996, the Company had a portfolio of
approximately 15,796 customer promissory notes totalling approximately $66.8
million with an average yield of 14.7% per annum, which compares favorably to
the Company's weighted average cost of borrowings of 10.8% per annum. At
December 31, 1996, approximately $3.6 million in principal, or 5.9% of the
Company's loans to Silverleaf Owners, were 60 to 120 days past due, and
approximately $4.3 million in principal, or 7.2% of the Company's loans to
Silverleaf Owners, were more than 120 days past due. The Company provides for
uncollectible notes by reserving an amount which management believes is
sufficient to cover anticipated losses from customer defaults. In 1996 and 1995,
the Company's provision for uncollectible notes exceeded actual loan chargeoffs
by $2.0 million and $467,000, respectively. See "Risk Factors -- Borrower
Defaults" and "Risk Factors -- Financing Customer Borrowings".

Each Existing Resort has a timeshare owners' association (a "Club") which
has contracted with a centralized organization (referred to as the "Master
Club") to manage the Existing Resorts on a collective basis. The Master Club has
contracted with the Company to perform the supervisory, management and
maintenance functions at the Existing Resorts on a collective basis. All costs
of operating the Existing Resorts, including management fees to the Company, are
covered by monthly dues paid by Silverleaf Owners to their respective Clubs,
together with income generated by the operation of certain amenities at the
Existing Resorts. See "Business -- Clubs/Master Club".

Timeshare Industry

The timeshare industry has experienced substantial growth since 1980.
Annual worldwide timeshare sales have increased from approximately $490 million
in 1980 to approximately $5 billion in 1995. The Company believes that the
growth in the worldwide timeshare industry is due to (i) increased consumer
confidence resulting from consumer protection regulation of the timeshare
industry and the entrance of brand name national lodging companies into the
industry; (ii) increased flexibility of timeshare ownership due to the growth of
exchange organizations such as RCI; (iii) improvement in the quality and
management of timeshare resorts and related amenities; (iv) increased consumer
awareness of the value and benefits of timeshare ownership, including the cost
savings relative to other lodging alternatives; and (v) improved availability of
financing for purchasers of Vacation Intervals.

Growth Strategy

The Company believes it is the largest operator and developer in the
economy segment of the timeshare industry, and further believes this segment has
particularly attractive demographic and competitive characteristics. The Company
targets households with earnings between $25,000 and $50,000, which represented
30.2% of the U.S. population in 1995 based on a 1990 projection by the U.S.
Census Bureau; however, only 1% of these households owned a Vacation Interval.
The Company believes it is the only significant timeshare developer
6
<PAGE> 9

focused solely on this segment. See "Business -- Growth Strategy". The Company
intends to grow through the following strategies:

- Increasing Development and Sales of Vacation Intervals at Existing
Resorts. The Company intends to capitalize on its significant expansion
capacity at the Existing Resorts by increasing marketing, sales and
development activities. At March 31, 1997, the Company owned
approximately 3,900 acres of land at the Existing Resorts, including
approximately 3,046 acres which are unsuitable for further development
due to deed restrictions and allowances for lakes or waterways. After
deducting such unsuitable acreage and acreage developed by the Company
through March 31, 1997, approximately 579 acres remained available for
further development of timeshare units and amenities under the Company's
master plan. The Company has broadened its marketing efforts, increased
its sales force, completed (in certain instances) the construction of new
sales offices, and other amenities, and commenced the development of
newer lodging facilities. Furthermore, the Company has continued to
emphasize its Endless Escape program designed to accommodate shorter,
"getaway" vacations and has broadened its product offerings to include
biennial (alternate year) intervals and short-term leasing packages
("Samplers") which are designed to accommodate more cost-conscious
customers.

- Increasing Sales of Upgraded Intervals at Existing Resorts. The Company
has designed specific marketing and sales programs to sell upgraded
Vacation Intervals to Silverleaf Owners. Upgrades may include (i) an
interval in a newly designed and constructed standard unit; (ii) an
interval in a larger or higher quality unit; (iii) an interval during a
more desirable time period (week); (iv) an interval at a different
Drive-to Resort; (v) an interval at a Destination Resort; and (vi) the
purchase of an interval for an additional week by an existing Silverleaf
Owner. The Company generally develops higher quality, larger units for
sale as upgraded intervals. For example, at Ozark Mountain Resort in
Branson, Missouri, luxury "President's View" units are offered for sale
at prices ranging from $8,000 to $17,500 per Vacation Interval. The
Company is expanding the President's View units to other Existing
Resorts. See "Business -- Description of Existing Resorts". In 1996,
sales of upgraded intervals amounted to $7.9 million, or 16.4% of the
Company's total revenues. The Company must incur additional sales
commissions upon the resale of Vacation Intervals reconveyed to the
Company by purchasers of upgraded intervals, and such sales absorb their
proportionate share of marketing costs to the extent they displace the
sale of another interval, although they do not directly result in
incremental marketing costs. Sales commissions on sales of reconveyed
intervals amount to approximately 9% to 15% of the sales price.

- Development of New Resorts and Acquisitions. The Company believes there
is significant opportunity for development of new timeshare resorts with
characteristics similar to those of the Existing Resorts. The Company
plans to develop new Drive-to Resorts close to major metropolitan areas
and has recently entered into an agreement to acquire three parcels of
land, two of which are proximate to Chicago, Illinois, and St. Louis,
Missouri, which the Company plans to develop as new drive-to timeshare
resorts. See "Business -- Growth Strategy". The Company also presently
owns a five acre tract of land in Mississippi which it plans to develop
as a new destination resort. See "Business -- Growth Strategy". In
developing a new resort, the Company will use its design, marketing, and
sales capabilities to complete and market such resorts in accordance with
the Company's standard criteria. In addition, the Company selectively
considers acquiring other resorts and timeshare companies where it
believes such acquisitions would be advantageous to its business. See
"Risk Factors -- Development, Construction and Property Acquisition
Activities".

- Improvement of Operating Margins. The Company believes it can increase
sales without significantly increasing general and administrative costs
by capitalizing on recent investments in its marketing and administrative
systems and personnel. See "Business -- Growth Strategy -- Improvement of
Operating Margins". The Company also believes it can improve margins by
selling upgraded Vacation Intervals to existing Silverleaf Owners since
sales of upgraded intervals have significantly lower sales and marketing
costs. In addition, as a public company, Silverleaf may be able to
achieve lower borrowing costs and a lower cost of capital, although there
can be no assurance that as a public company Silverleaf will be able to
achieve such lower borrowing costs and costs of capital.
7
<PAGE> 10

Competitive Advantages

The Company believes the following characteristics provide Silverleaf with
competitive advantages in operating within the economy segment of the timeshare
industry:

- Lower Marketing and Sales Costs. With convenient drive-to locations and
on-site sales offices at certain Drive-to Resorts, the Company can invite
potential customers to tour the Drive-to Resorts without offering
subsidized airline tickets and lodging, a significant marketing expense
typically incurred by competitors in the industry. The Company has also
reduced marketing, operating, and administrative costs through
centralization and automation of many functions at its Dallas, Texas
headquarters.

- Convenient Drive-to Locations. The Company's Drive-to Resorts are located
within a two-hour drive of the target customers' residences, which
accommodates the growing demand for shorter, more frequent, close to home
vacations. This proximity facilitates use of the Company's Endless Escape
program, which offers Silverleaf Owners up to six consecutive nights per
visit on an unlimited basis for no additional charge, subject to
availability and certain limitations. The Company believes it is the only
operator in the industry which offers its customers these benefits.
Silverleaf Owners can also conveniently enjoy non-lodging resort
amenities year-round.

- Substantial Internal Growth Capacity. At March 31, 1997, the Company had
an inventory of 6,024 Vacation Intervals and a master plan to construct
new units at the Existing Resorts over a seven-year period which will
result in up to 70,740 additional Vacation Intervals. The Company is
therefore less reliant on acquisitions and new development for growth.
The Company's seven-year master plan for construction of new units is
based upon projections of future sales at the Existing Resorts. Changes
in the actual volume of future sales at the Existing Resorts may result
in modifications to such seven-year construction period. See
"Business -- Competitive Advantages".

- In-House Operations. The Company has in-house marketing, sales,
financing, development, and property management capabilities. While the
Company utilizes outside contractors to supplement internal resources,
when appropriate, the breadth of the Company's internal capabilities
allows greater control over all phases of its operations and helps
maintain operating standards and reduce overall costs.

- Standard Design, Lower Construction and Operating Costs. The Company has
developed standard architectural designs and operating procedures which
the Company believes significantly reduce construction and operating
expenses at the Existing Resorts and should likewise reduce such expenses
at new resorts. Standardization and integration also allow the Company to
rapidly develop new inventory in response to demand. New units can
normally be constructed on an "as needed" basis in under 150 days.

- Centralized Property Management. The Company operates all of the Existing
Resorts on a centralized and collective basis, with operating and
maintenance costs paid from Silverleaf Owners' monthly dues. The Company
believes that consolidation of resort operations benefits Silverleaf
Owners by providing them with a uniform level of service, accommodations
and amenities on a standardized, cost-effective basis. Integration also
facilitates the Company's internal exchange program, the Endless Escape
program, and the Existing Resorts' qualification in the RCI exchange
program.
8
<PAGE> 11

THE EXISTING RESORTS

The following table sets forth certain information regarding each of the
Existing Resorts at March 31, 1997, unless otherwise indicated.
<TABLE>
<CAPTION>
VACATION INTERVALS AT VACATION
UNITS AT RESORTS RESORTS INTERVALS SOLD(A)
------------------------ --------------------- -----------------
INVENTORY INVENTORY DATE IN
PRIMARY AT PLANNED AT PLANNED SALES THROUGH 1996
RESORT/LOCATION MARKET SERVED 3/31/97 EXPANSION(B) 3/31/97 EXPANSION COMMENCED 3/31/97 ONLY
--------------- -------------- --------- ------------ --------- --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DRIVE-TO RESORTS
Holly Lake Dallas- 130 104 595 5,200(d) 1982 6,110 1,376
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 204 388 560 20,176(e) 1980 9,929 1,970
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 64 16 114 800(d) 1987 3,199 821
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 96 304 1,184 15,808(e) 1988 3,809 1,139
Conroe, TX
Hill Country Austin-San 113 292(f) 790 14,600(d) 1984 4,990 644
Canyon Lake, TX Antonio, TX
DESTINATION RESORTS
Ozark Mountain Branson, MO 124 78 2,432 4,056(e) 1982 3,864 95
Kimberling City, MO
Holiday Hills Branson, MO 24 202 349 10,100(d) 1984 823 9
Branson, MO
--- ----- ----- ------ ------ -----
TOTAL 755 1,384 6,024 70,740 32,724 6,054
=== ===== ===== ====== ====== =====

AVERAGE
SALES
PRICE AMENITIES/
RESORT/LOCATION IN 1996(A) ACTIVITIES(C)
--------------- ---------- --------------
<S> <C> <C>
DRIVE-TO RESORTS
Holly Lake $ 6,097 B,F,G,H,
Hawkins, TX M,S,T
The Villages 6,336 B,F,H,
Flint, TX M,S,T
Lake O' The Woods 6,272 F,M,S,T
Flint, TX
Piney Shores 7,349 B,F,H,
Conroe, TX M,S,T
Hill Country 6,853 B,M,S,T(g)
Canyon Lake, TX
DESTINATION RESORTS
Ozark Mountain 13,887 B,F,H,
Kimberling City, MO M,S,T
Holiday Hills 11,999 B,F,G,H,
Branson, MO M,S,T(g)
-------
TOTAL $ 6,645
=======
</TABLE>

- ---------------

(a) These totals do not reflect sales of upgraded Vacation Intervals to
Silverleaf Owners. For 1996, upgrade sales at the Existing Resorts were as
follows:

<TABLE>
<CAPTION>
AVERAGE SALES
UPGRADED VACATION PRICE IN 1996 -- NET OF
RESORT INTERVALS SOLD EXCHANGED INTERVAL
------ ----------------- -----------------------
<S> <C> <C>
Holly Lake............................ 279 $4,195
The Villages.......................... 399 4,316
Lake O' The Woods..................... 125 4,303
Piney Shores.......................... 571 4,028
Hill Country.......................... 296 4,209
Ozark Mountain........................ 184 3,639
Holiday Hills......................... 60 3,760
------
1,914 $4,113
====== =======
</TABLE>

9
<PAGE> 12

(b) Represents units included in the Company's master plan. This plan is subject
to change based upon various factors, including consumer demand, the
availability of financing, grant of governmental permits, and future
land-planning and site layout considerations. The following chart reflects
the status of certain planned units:

<TABLE>
<CAPTION>
GOVT.
GOVT. APPROVAL GOVT. APPROVAL APPROVAL
SHELL CURRENTLY IN PROCESS PROCESS PROCESS
COMPLETE CONSTRUCTION COMPLETE PENDING NOT STARTED TOTAL
-------- ------------ -------------- -------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Holly Lake................ 4 -- 50 -- 50 104
The Villages.............. -- 12 114 152 110 388
Lake O' The Woods......... -- -- 16 -- -- 16
Piney Shores.............. -- 12 64 120 108 304
Hill Country.............. 3 12 82 42 153(f) 292
Ozark Mountain............ 12 -- 30 -- 36 78
Holiday Hills............. 14 -- 118 -- 70 202
-- -- --- --- --- -----
33 36 474 314 527 1,384
== == === === === =====
</TABLE>

The 33 "Shell Complete" units are currently devoted to such uses as a
general store, registration office, sales office, activity center,
construction office, or pro shop. The Company anticipates that these units
will continue to be used for such purposes during 1997, except for three
units at Hill Country Resort which will be finished-out for sale as
Vacation Intervals.

"Governmental Approval Process Complete" means either that (i) the Company
believes that it has obtained all necessary authorizations under current
law from the applicable local governmental authority with jurisdiction,
including the approval and filing of any required preliminary or final plat
and the issuance of building permit(s), in each case to the extent
applicable, or (ii) upon payment of any required filing or other fees, the
Company believes that it will under current law obtain such necessary
authorizations without further process. See "Risk Factors -- Development,
Construction and Property Acquisition Activities".

"Governmental Approval Process Pending" means that the Company has
commenced the process which the Company believes is required under current
law in order to obtain the necessary authorizations from the applicable
local governmental authority with jurisdiction, including submitting for
approval any architectural drawings, preliminary plats or other attendant
items as may be required.

(c) Principal amenities available to Silverleaf Owners at each resort are
indicated by the following symbols: B -- boating; F -- fishing; G -- golf
course; H -- horseback riding; M -- miniature golf; S -- swimming pool; and
T -- tennis.

(d) These figures are based on 50 one-week intervals per unit. In some
instances, the Company may be able to market 52 one-week intervals per unit.

(e) These figures are based on 52 one-week intervals per unit.

(f) This figure includes 132 planned units on land which the Company has the
right to acquire in June 1997 pursuant to a written agreement.

(g) Boating is available near the resort.
10
<PAGE> 13

CORPORATE BACKGROUND

The Company was incorporated in Texas in 1989 and has been owned by and
operated primarily under the direction of Robert E. Mead. Mr. Mead has more than
17 years of experience in timeshare resort acquisition, development, and
operations, and since 1995 has served as a director of ARDA, the primary trade
association for the timeshare industry. See "Management -- Directors and
Executive Officers".

Through the Company, Mr. Mead consolidated in one entity all of the
timeshare assets and operations he previously owned through various partnerships
and corporations affiliated with Mr. Mead. In May 1989, a partnership, of which
the Company was the general partner, acquired the Existing Resorts from a now
dissolved corporation which was also owned and controlled by Mr. Mead. In
December 1995 (i) through a merger of the partnership into the Company, the
Existing Resorts were transferred to the Company, (ii) the Company acquired
additional assets of the now dissolved corporation subject to certain
indebtedness owing by such corporation to Mr. Mead and his affiliates; and (iii)
the Company acquired Condominium Builders, Inc. ("CBI") and certain assets from
Mr. Mead (all of the acquisition and merger transactions in (i), (ii) and (iii)
are collectively referred to herein as the "Consolidation Transactions"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Relationships and Related Transactions". The affiliated
corporations and partnership whose assets were acquired by the Company through
the Consolidation Transactions are sometimes collectively referred to herein as
the "Affiliated Companies" or individually as an "Affiliated Company".

The Company does business under the name "Silverleaf Vacation Club, Inc."
The Company's principal executive offices are located at 1221 Riverbend Drive,
Suite 120, Dallas, Texas 75247. The Company's telephone number is (214)
631-1166.

THE OFFERING

<TABLE>
<S> <C>
Issuer.................................... Silverleaf Resorts, Inc.
Offering.................................. 3,500,000 shares(1)
Shares outstanding after the Offering..... 11,211,517 shares(1)(2)(3)
Use of proceeds........................... Substantially all of the net proceeds of the
Offering will be used to repay outstanding
indebtedness of the Company. Approximately $9.9
million of the proceeds will be used to repay
indebtedness owed to Mr. Mead and his affiliates.
Additionally, approximately $4.5 million of the
proceeds (or $5.2 million if the Underwriters'
over-allotment option is exercised in full) will be
used to repay indebtedness owed to an affiliate of
the lead managing Underwriter. See "Risk
Factors -- Repayment of Indebtedness Owed to
Officer and Affiliates", and "-- Repayment of
Indebtedness Owed to Affiliate of Underwriter" and
"Use of Proceeds".
Risks of Offering......................... See generally "Risk Factors" beginning on page 16.
Dividend policy........................... The Company does not expect to pay any dividends in
the foreseeable future. See "Dividend Policy".
Proposed NYSE symbol...................... "SVR"
</TABLE>

- ---------------

(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting".

(2) Does not include 1,100,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1997 Stock Option Plan (as defined). See
"Management -- 1997 Stock Option Plan".

(3) Mr. Mead and another officer of the Company will collectively own 7,711,517
shares of Common Stock after the Offering, which represents approximately 69% of
all issued and outstanding shares. See "Risk Factors -- Voting Control by
Existing Shareholder".

11
<PAGE> 14

SUMMARY CONSOLIDATED HISTORICAL FINANCIAL, OPERATING AND
PRO FORMA FINANCIAL INFORMATION

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The summary consolidated historical financial information set forth below
has been derived from the consolidated financial statements of the Company which
have been restated giving effect to the Consolidation Transactions utilizing the
historical cost basis of the combined entities so as to present the consolidated
financial condition and operations since these entities were under common
ownership and control. The consolidated financial statements of the Company for
1995 and 1996 included herein were audited by Deloitte & Touche LLP. The
consolidated financial statements for 1994 included herein were audited by James
Smith & Company, P.C. The consolidated financial statements for 1992 and 1993
are unaudited. In the opinion of management of the Company, the data presented
for the three months ended March 31, 1996 and 1997, which are derived from the
Company's unaudited consolidated financial statements included herein, reflects
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operation for such
periods. Results for the three months ended March 31, 1997 are not necessarily
indicative of results for the entire fiscal year.

The unaudited pro forma income statement data for the three months ended
March 31, 1996 and 1997 and for the year ended December 31, 1996 gives effect to
the Offering and the application of the proceeds therefrom to the payment of all
amounts due to affiliates and payment of $35.1 million of notes payable to third
parties at the beginning of the periods presented, subject to the assumptions
stated in the related notes. The unaudited as adjusted balance sheet data at
March 31, 1997 gives effect to the Offering and the application of the proceeds
therefrom to the payment of debt as of the last day of the period presented,
subject to the assumptions stated in the notes. The unaudited pro forma income
statement and balance sheet data is not necessarily indicative of what the
actual results of operations or financial position of the Company would have
been, nor do they purport to represent the Company's results of operations or
financial position for future periods.

The Summary Consolidated Historical Financial, Operating and Pro Forma
Financial Information should be read in conjunction with the Consolidated
Financial Statements and notes thereto included herein, "Selected Consolidated
Historical Financial, Operating and Pro Forma Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
12
<PAGE> 15

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Vacation Interval sales.......... $ 13,987 $ 19,607 $ 25,843 $ 35,885 $ 48,103 $ 12,590 $ 15,771
Less provision for uncollectible
notes.......................... (2,693) (3,249) (6,014) (9,144) (12,075) (3,243) (3,849)
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net Vacation Interval sales:....... 11,294 16,358 19,829 26,741 36,028 9,347 11,922
Interest income.................. 542 1,029 1,633 3,968 6,297 1,312 1,933
Interest income from
affiliates..................... -- 70 252 393 377 128 107
Management fee income............ 2,265 3,613 2,394 2,478 2,187 552 499
Lease income..................... 428 512 1,137 1,310 1,717 456 485
Other income..................... 1,813 1,964 1,932 1,832 1,440 245 399
---------- ---------- ---------- ---------- ---------- ----------- -----------
Total revenues............. 16,342 23,546 27,177 36,722 48,046 12,040 15,345
Costs and Operating Expenses:
Cost of Vacation Interval
sales.......................... 3,876 2,094 2,648 3,280 2,805 224 1,221
Sales and marketing.............. 7,690 10,219 12,929 17,850 21,839 5,040 5,949
Operating, general and
administrative................. 2,475 6,109 5,336 8,062 8,970 2,343 1,945
Depreciation and amortization.... 288 477 590 863 1,264 277 331
Interest expense to affiliates... 383 664 885 1,403 880 228 225
Interest expense to unaffiliated
entities....................... 1,318 762 757 2,206 3,879 828 1,461
---------- ---------- ---------- ---------- ---------- ----------- -----------
Total costs and operating
expenses................. 16,030 20,325 23,145 33,664 39,637 8,940 11,132
---------- ---------- ---------- ---------- ---------- ----------- -----------
Income from continuing operations
before income taxes.............. 312 3,221 4,032 3,058 8,409 3,100 4,213
Income tax expense................. 266 1,376 1,677 1,512 3,140 1,156 1,559
---------- ---------- ---------- ---------- ---------- ----------- -----------
Income from continuing
operations....................... 46 1,845 2,355 1,546 5,269 $ 1,944 2,654
Income (loss) on discontinued
operations....................... -- (286) 568 (1,484) (295) (95) --
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net income......................... $ 46 $ 1,559 $ 2,923 $ 62 $ 4,974 $ 1,849 $ 2,654
========== ========== ========== ========== ========== =========== ===========
Income per common share from:(a)...
Continuing operations............ $ 0.00 $ 0.24 $ 0.31 $ 0.20 $ 0.68 $ 0.25 $ 0.34
Discontinued operations.......... -- (0.03) 0.08 (0.19) (0.04) (0.01) --
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net income per common share........ $ 0.00 $ 0.21 $ 0.39 $ 0.01 $ 0.64 $ 0.24 $ 0.34
========== ========== ========== ========== ========== =========== ===========
Weighted average number of shares
outstanding(b)................... 7,588,952 7,588,952 7,588,952 7,590,295 7,711,517 7,711,517 7,711,517
========== ========== ========== ========== ========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT AVERAGE PRICE OF VACATION INTERVALS SOLD)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOW DATA:
EBITDA(c)...................................... $ 2,301 $ 5,124 $ 6,264 $ 7,530 $ 14,432 $ 4,433 $ 6,230
Cash flows provided by (used in):
Operating activities......................... $ 1,672 $ 5,711 $ 2,496 $ 3,713 $ 6,375 $ 3,443 $ 2,747
Investing activities......................... (4,266) (6,121) (12,189) (19,604) (23,997) (6,199) (7,028)
Financing activities......................... 422 378 10,424 18,674 14,882 819 4,430
OPERATING DATA:
Number of Existing Resorts at period end....... 7 7 7 7 7 7 7
Number of Vacation Intervals sold (excluding
upgrades).................................... 1,983 2,582 3,705 4,831 6,054 1,544 1,539
Number of upgraded Vacation Intervals sold..... 884 1,378 1,290 1,921 1,914 482 860
Number of Vacation Intervals in inventory...... 7,218 5,615 5,943 6,584 6,746 6,172 6,024
Average price of Vacation Intervals sold
(excluding upgrades)(d)...................... $ 5,293 $ 5,554 $ 5,727 $ 5,881 $ 6,645 $ 6,794 $ 7,832
Average price of upgraded Vacation Intervals
sold (net of exchanged interval)............. $ 3,949 $ 3,822 $ 3,585 $ 3,885 $ 4,113 $ 4,358 $ 4,331
Average price of all Vacation Intervals sold
(including upgrades)......................... $ 7,054 $ 7,594 $ 6,975 $ 7,428 $ 7,946 $ 8,154 $ 10,254
</TABLE>

13
<PAGE> 16

SUMMARY PROFORMA FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PROFORMA(E)
------------------------------------------
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------
1996 1996 1997
------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Vacation Interval sales............... $ 48,103 $ 12,590 $ 15,771
Less provision for uncollectible
notes............................... (12,075) (3,243) (3,849)
----------- ----------- -----------
Net Vacation Interval sales........... 36,028 9,347 11,922
Interest income....................... 6,297 1,312 1,933
Interest income from affiliates....... -- -- --
Management fee income................. 2,187 552 499
Lease income.......................... 1,717 456 485
Other income.......................... 1,440 245 399
----------- ----------- -----------
Total revenues................. 47,669 11,912 15,238
Costs and Operating Expenses:
Cost of Vacation Interval sales....... 2,805 224 1,221
Sales and marketing................... 21,839 5,040 5,949
Operating, general and
administrative...................... 9,720 2,531 2,133
Depreciation and amortization......... 1,264 277 331
Interest expense to affiliates........ -- -- --
Interest expense to unaffiliated
entities............................ 201 22 236
----------- ----------- -----------
Total costs and operating
expenses..................... 35,829 8,094 9,870
----------- ----------- -----------
Income from continuing operations before
income taxes.......................... 11,840 3,818 5,368
Income tax expense...................... 4,416 1,424 1,986
----------- ----------- -----------
Income from continuing operations....... $ 7,424 $ 2,394 $ 3,382
=========== =========== ===========
Income per common share from continuing
operations:(f)........................ $ 0.71 $ 0.24 $ 0.30
=========== =========== ===========
Weighted average number of shares
outstanding(f)........................ 10,483,168 10,161,933 11,211,517
=========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------
HISTORICAL AS ADJUSTED(G)
---------- --------------
<S> <C> <C>
BALANCE SHEET DATA (at end of period):
Cash and cash equivalents........................ $ 1,121 $ 1,121
Amounts due from affiliates...................... 6,494 1,667
Total assets..................................... 99,714 94,887
Amounts due to affiliates........................ 14,747 --
Notes payable and capital lease obligations...... 46,690 11,560
Total liabilities................................ 76,397 26,520
Shareholders' equity............................. 23,317 68,367
</TABLE>

- ---------------

(a) Earnings per share amounts are based on the weighted average number of
shares outstanding.

(b) Gives retroactive effect to the Stock Split.

(c) As shown below, EBITDA represents net income from continuing operations
before interest expense, income taxes and depreciation and amortization.
EBITDA is presented because it is a widely accepted indicator of a
company's financial performance. However, EBITDA should not be construed as
an alternative to net income as a measure of the Company's operating
results or to cash flows from operating activities (determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. Since revenues from Vacation Interval sales include promissory
notes received by the Company, EBITDA does not reflect cash flow available
to the Company. Additionally, due to varying methods of reporting EBITDA
within the timeshare industry, the computation of EBITDA for the Company
may not be comparable to other companies in the timeshare industry which
compute EBITDA in a different manner. The Company's management interprets
trends in EBITDA to be an indicator of the Company's financial performance,
in addition to net income and cash flows from operating activities
(determined in accordance with generally accepted accounting principles).
The following table reconciles EBITDA to net income from continuing
operations:

14
<PAGE> 17

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income from continuing operations... $ 46 $1,845 $2,355 $1,546 $ 5,269 $1,944 $2,654
Interest expense........................ 1,701 1,426 1,642 3,609 4,759 1,056 1,686
Income tax expense...................... 266 1,376 1,677 1,512 3,140 1,156 1,559
Depreciation and amortization........... 288 477 590 863 1,264 277 331
------ ------ ------ ------ ------- ------ ------
EBITDA from continuing operations....... $2,301 $5,124 $6,264 $7,530 $14,432 $4,433 $6,230
====== ====== ====== ====== ======= ====== ======
</TABLE>

(d) Includes one and two bedroom units.

(e) Assumes (i) the sale of 3,500,000 shares of Common Stock offered hereby at
an offering price of $14.50 per share, in the aggregate $50.7 million, less
the underwriting discounts and commissions and the payment by the Company of
the estimated offering expenses of $5.7 million; (ii) payment of all amounts
due to affiliates net of amounts due from affiliates and elimination of the
related interest; (iii) payment of $35.1 million of notes payable to third
parties and elimination of the related interest expense; (iv) estimated
annual additional costs to be incurred as a public company of $750,000; (v)
adjustment of the provision for income taxes for the effect of these pro
forma adjustments; and (vi) excludes discontinued operations.

(f) Gives retroactive pro forma effect to the Stock Split and increase in the
number of shares outstanding to 11,211,517 Common Shares. As required by
Staff Accounting Bulletin No. 55, the weighted average number of shares
outstanding utilized in the pro forma earnings per share computations
assumes (i) the historical shares as adjusted for the Stock Split were
outstanding for all periods presented, and (ii) an additional number of
shares were outstanding only in an amount sufficient to retire the
outstanding debt balances during the periods presented.

(g) As adjusted to give effect to the Offering and the application of the
proceeds therefrom as described in Note (e) as if the Offering and
application of the proceeds therefrom occurred at period end.

15
<PAGE> 18

RISK FACTORS

Prospective investors should carefully consider the following information
in conjunction with the other information contained in this Prospectus before
purchasing any of the shares of Common Stock offered hereby.

SENSITIVITY OF CUSTOMERS TO GENERAL ECONOMIC CONDITIONS

The Company focuses exclusively on the economy segment of the timeshare
industry and markets primarily to households with annual incomes between $25,000
and $50,000. The Company's targeted customers are generally more vulnerable to
deteriorating economic conditions than consumers in the luxury or upscale
markets. Any economic downturn could depress spending for Vacation Intervals,
limit the availability or increase the cost of financing for the Company and its
customers, and adversely affect the collectibility of the Company's loans to
Vacation Interval buyers. During past economic slowdowns and recessions,
Affiliated Companies experienced increased delinquencies in the payment of
Vacation Interval promissory notes and monthly Club dues and consequent
increased foreclosures and loan losses. During any future economic slowdown or
recession, the Company projects that increased delinquencies, foreclosures, and
loan losses are likely to occur. Similar adverse consequences could result from
significant increases in transportation costs. Any or all of the foregoing could
have a material adverse effect on the Company's results of operations, liquidity
and financial position.

LEVERAGE

The Company's future lending and development activities will likely be
financed with indebtedness obtained under the Company's existing credit
facilities or under credit facilities to be obtained by the Company in the
future. Such credit facilities are and would likely be collateralized by Company
assets and contain restrictive covenants. Among other consequences, terms of the
Company's debt instruments could impair the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, significant business opportunities that may arise, general
corporate purposes or other purposes. In addition, if the Company were to incur
additional indebtedness, this could increase its vulnerability to adverse
general economic and timeshare industry conditions and to increased competitive
pressures. Finally, creditors' claims against the Company will be paid in full
before the claims of shareholders in the event of a liquidation, bankruptcy or
winding up of the Company. Historically and at March 31, 1997, after taking into
account the amount of ineligible collateral and the 70% borrowing base, the
Company's borrowings have approached the maximum amount available under its
existing credit facilities. However, to the extent the Company continues to
generate additional customer notes receivable through its sales efforts, such
notes may be pledged to lenders under existing credit facilities for additional
borrowings, subject to the 70% advance rate. See "-- Financing Customer
Borrowings -- Borrowing Base" and "Business -- Existing Credit Facilities".

BORROWER DEFAULTS

The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts. These buyers make a down payment of at least 10% of the
purchase price and deliver a promissory note to the Company for the balance; the
promissory notes generally bear interest at a fixed rate, are payable over a
seven year period, and are secured by a first mortgage on the Vacation Interval.
The Company bears the risk of defaults on these promissory notes, and this risk
is heightened inasmuch as the Company generally does not verify the credit
history of its customers and will provide financing if the customer is presently
employed and meets certain household income criteria.

16
<PAGE> 19

proceeding to determine the fair market value of the property foreclosed upon.
In such event, the Company may not recover a personal judgment against the
customer for the full amount of the deficiency, but may recover only to the
extent that the indebtedness owed to the Company exceeds the fair market value
of the property. Accordingly, the Company has generally not pursued this remedy.

Prior to 1996, the Company sold customer promissory notes and mortgages to
third parties, generally with recourse, as a means of financing its operations.
As a result, the Company may be required to repurchase customer promissory notes
previously sold which become delinquent. The Company takes these contingent
obligations into account in establishing its allowance for uncollectible notes.
At December 31, 1996, the Company had notes receivable (including notes
unrelated to Vacation Intervals) in the approximate principal amount of $67.7
million, was contingently liable with respect to approximately $11.0 million
principal amount of customer notes sold with recourse and had an allowance for
doubtful notes of approximately $11.9 million. There can be no assurance that
such reserves are adequate. See Note 4 of Notes to Consolidated Financial
Statements.

FINANCING CUSTOMER BORROWINGS

While the Company intends to use the proceeds of the Offering to pay off
approximately $45.0 million of existing indebtedness, it will be required to
continue to borrow to sustain operations.

Borrowing Base. The Company has entered into agreements with lenders to
borrow up to approximately $96 million collateralized by customer promissory
notes and mortgages. The Company's lenders typically lend the Company 70% of the
principal amount of performing notes, and Silverleaf Owners make payments on
their promissory notes directly to the lender's collection center, where
receipts are applied against the Company's loan balance. At December 31, 1996,
the Company had a portfolio of approximately 15,796 customer promissory notes in
the approximate principal amount of $66.8 million, of which approximately $7.9
million in principal amount of customer receivables were 60 days or more past
due and therefore ineligible as collateral. At such date, the Company had
borrowings from lenders in the approximate principal amount of $34.7 million
secured by the customer loans. Historically and currently, after taking into
account the amount of ineligible collateral and the 70% borrowing base, the
Company's borrowings have approached the maximum amount available under its
existing credit facilities. To the extent the Company generates additional
customer notes receivable through its sales efforts, such notes may be pledged
to lenders for additional borrowings, subject to the 70% advance rate.

Negative Cash Flow. The Company ordinarily receives only 10% of the
purchase price on the sale of a Vacation Interval but must pay in full the costs
of development, marketing, and sale of the interval. Maximum borrowings
available under the Company's current credit agreements may not be sufficient to
cover these costs, thereby straining capital resources, liquidity, and capacity
to grow.

Interest Rate Mismatch. At December 31, 1996, the Company's portfolio of
customer loans had a weighted average fixed interest rate of 14.7%. At such
date, the Company's borrowings (which bear interest at variable rates) against
the portfolio had a weighted average cost of funds of 10.8%. The Company has
historically derived net interest income from its financing activities because
the interest rates it charges its customers who finance the purchase of their
Vacation Intervals exceed the interest rates the Company pays to its lenders.
Because the Company's indebtedness bears interest at variable rates and the
Company's customer receivables bear interest at fixed rates, increases in
interest rates will erode the spread in interest rates that the Company has
historically enjoyed and could cause the interest expense on the Company's
borrowings to exceed its interest income on its portfolio of customer loans. The
Company does not currently engage in interest rate hedging transactions.
Therefore, any increase in interest rates, particularly if sustained, could have
a material adverse effect on the Company's results of operations, liquidity and
financial position.

To the extent interest rates decrease generally on loans available to the
Company's customers, the Company faces an increased risk that customers will
pre-pay their loans and reduce the Company's income from financing activities.
See "Business -- Customer Financing".

Maturity Mismatch. The Company typically provides financing to customers
over a seven year period which customer notes have an average maturity of 5.6
years. The Company's related revolving credit borrowings, however, mature
between October 1998 and August 2003, with most of such borrowings maturing in
1999. Accordingly, there is a mismatch between the Company's anticipated cash
receipts and cash disbursements.

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<PAGE> 20

Although the Company has historically been able to secure financing sufficient
to fund its operations, it does not presently have agreements with its lenders
to extend the term of its existing funding commitments or to replace such
commitments upon their expiration. Failure to obtain such refinancing facilities
could require the Company to sell its portfolio of customer loans, probably at a
substantial discount, or to seek other alternatives to enable it to continue in
business. While the Company has been successful in obtaining financing to date,
there is no assurance it will be able to do so in the future. See
"-- Acceleration of Deferred Taxes" and "-- Alternative Minimum Taxes".

Impact on Sales. Limitations on the availability of financing would inhibit
sales of Vacation Intervals due to (i) the lack of funds to finance the initial
negative cash flow that results from sales that are financed by the Company, and
(ii) reduced demand if the Company is unable to provide financing to purchasers
of Vacation Intervals.

REPAYMENT OF INDEBTEDNESS OWED TO OFFICER AND AFFILIATES

Mr. Mead will realize benefits from the Offering that will not be received
by other persons participating in the Offering. Such benefits include the
repayment by the Company of indebtedness owed to Mr. Mead and his affiliates.
Thus, Mr. Mead has interests that conflict with the interests of persons
acquiring Common Stock in the Offering. Mr. Mead and his affiliates will receive
approximately $9.9 million of the net proceeds of the Offering for the repayment
of debt owed by the Company to him and his affiliates. See "Certain
Relationships and Related Transactions -- Repayment of Affiliated Debt",
"Principal Shareholders", and "Management -- Employment and Noncompetition
Agreements".

REGULATION OF MARKETING AND SALES OF VACATION INTERVALS AND RELATED LAWS

The Company's marketing and sales of Vacation Intervals and other
operations are subject to extensive regulation by the federal government and the
states and jurisdictions in which the Existing Resorts are located and in which
Vacation Intervals are marketed and sold. On a federal level, the Federal Trade
Commission has taken the most active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-in-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Settlement Procedures Act, the Consumer Credit
Protection Act, the Telephone Consumer Protection Act, the Telemarketing and
Consumer Fraud and Abuse Prevention Act, the Fair Housing Act and the Civil
Rights Acts of 1964 and 1968.

In response to the fraudulent marketing practices which plagued the
timeshare industry in the 1980's, in the late 1980's and early 1990's, various
states enacted legislation aimed at curbing such abuses. Texas and Missouri, the
only states in which the Company currently owns resorts, have adopted specific
laws and regulations regarding the sale of Vacation Interval ownership programs.
The laws of most states, including Texas, require the Company to file with a
designated state authority for its approval a detailed offering statement
describing the Company and all material aspects of the project and the sale of
Vacation Intervals prior to selling to residents of that state. The laws of
these states require the Company to file numerous documents and supporting
information with the state agency responsible for the regulation of Vacation
Intervals. When the agency determines that a project may be sold, it will issue
a public report for the project. The Company is required to deliver an offering
statement or public report to all prospective purchasers of a Vacation Interval
who are Texas residents, together with certain additional information concerning
the terms of the purchase, regardless of whether the resort is located in Texas.
In Missouri, the Company is required to make certain disclosures in its sales
documents. Laws in each state where the Company currently sells Vacation
Intervals generally grant the purchaser of a Vacation Interval the right to
cancel a contract of purchase at any time within approximately five calendar
days following the date the contract was signed by the purchaser. Most states
have other laws which regulate the Company's activities and protect purchasers,
such as real estate licensure laws; travel sales licensure laws; anti-fraud
laws; consumer protection laws; telemarketing laws; prize, gift and sweepstakes
laws; and other related laws.

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<PAGE> 21

The Company believes it is in material compliance with federal, Texas, and
Missouri laws and regulations to which it is currently subject relating to the
sale and marketing of timeshare resorts. However, the Company is normally and
currently the subject of a number of consumer complaints generally relating to
marketing or sales practices filed with relevant authorities, and there can be
no assurance that all of these complaints can be resolved without adverse
regulatory actions or other consequences. The Company expects some level of
consumer complaints in the ordinary course of its business as the Company
targets audiences which generally are less financially sophisticated and more
susceptible to intensive sales practices than more affluent customers. There can
be no assurance that the costs of resolving consumer complaints or of qualifying
under Vacation Interval ownership regulations in all jurisdictions in which the
Company desires to conduct sales will not be significant, that the Company is in
material compliance with applicable federal, Texas, Missouri, or other laws and
regulations, or that violations of law will not have adverse implications for
the Company, including negative public relations, potential litigation, and
regulatory sanctions. The expense, negative publicity, and potential sanctions
associated with the failure to comply with applicable laws or regulations could
have a material adverse effect on the Company's results of operations,
liquidity, or financial position. See "Business -- Governmental Regulation".

During the 1980's and continuing through the present, the timeshare
industry has been and continues to be afflicted with negative publicity and
prosecutorial attention due, among other things, to marketing practices which
were widely viewed as deceptive or fraudulent. Among the many timeshare
companies which have been the subject of federal, state and local enforcement
actions and investigations in the past were certain of the Affiliated Companies
and their affiliates. Some of the settlements, injunctions and decrees resulting
from litigation and enforcement actions (the "Orders") to which certain of the
Affiliated Companies consented purport to bind all successors and assigns, and
accordingly bind the Company. In addition, at that time the Company was directly
a party to one such Order issued in Missouri. No past or present officers,
directors or employees of the Company or any Affiliated Company were named as
subjects or respondents in any of these Orders; however, each Order purports to
bind generically unnamed "officers, directors and employees" of certain
Affiliated Companies. Therefore, certain of these Orders may be interpreted to
be enforceable against the present officers, directors and employees of the
Company even though they were not individually named as subjects of the
enforcement actions which resulted in these Orders. These Orders require, among
other things, that all parties bound by the Orders, including the Company,
refrain from engaging in deceptive sales practices in connection with the offer
and sale of Vacation Intervals. In one case in 1988, an Affiliated Company pled
guilty to deceptive uses of the mails in connection with promotional sales
literature mailed to prospective timeshare purchasers and agreed to pay a
judicially imposed fine of $1.5 million and restitution of $100,000. The
requirements of the Orders are substantially what applicable state and federal
laws and regulation mandate, but the consequence of violating the Order may be
that sanctions (including possible financial penalties and suspension or loss of
licensure) may be imposed more summarily and may be harsher than would be the
case if the Orders did not bind the Company. In addition, the existence of the
Orders may be viewed negatively by prospective regulators in jurisdictions where
the Company does not now do business, with attendant risks of increased costs
and reduced opportunities.

Recently, the Company has been the subject of some consumer complaints
which have triggered governmental investigations into the Company's affairs. In
March 1997, the Company entered into an Assurance of Voluntary Compliance with
the Texas Attorney General, in which the Company agreed to make additional
disclosure to purchasers of Vacation Intervals regarding the limited
availability of its Endless Escape program during certain periods. The Company
paid $15,200 for investigatory costs and attorneys' fees of the Attorney General
in connection with this matter. Also, in March 1997, the Company entered into an
agreed order (the "Agreed Order") with the Texas Real Estate Commission
requiring the Company to comply with certain aspects of the Texas Timeshare Act,
Texas Real Estate License Act and Rules of the Texas Real Estate Commission,
with which it had allegedly been in non-compliance until mid-1995. The
allegations included (i) the Company's admitted failure to register the Missouri
Destination Resorts in Texas (due to its misunderstanding of the reach of the
Texas Timeshare Act); (ii) payment of referral fees for Vacation Interval sales,
the receipt of which was improper on the part of the recipients; and (iii)
miscellaneous other actions alleged to violate the Texas Timeshare Act, which
the Company denied. While the Agreed Order acknowledges that Silverleaf
independently resolved ten consumer complaints referenced in the Agreed Order,
discontinued the practices complained of, and had registered the Destination
Resorts during 1995 and 1996, the Texas Real Estate Commission ordered
Silverleaf to

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<PAGE> 22

cease its discontinued practices and enhance its disclosure to purchasers of
Vacation Intervals. In the Agreed Order, Silverleaf agreed to make a voluntary
donation of $30,000 to the State of Texas. The Agreed Order also directs
Silverleaf to revise its training manual for timeshare salespersons and
verification officers. While the Agreed Order resolved all of the alleged
violations contained in complaints received by the Texas Real Estate Commission
through December 31, 1996, the Company expects to encounter some level of
consumer complaints in the ordinary course of its business. See
"Business -- Governmental Regulation".

CONCENTRATION IN TIMESHARE INDUSTRY

Because the Company's operations are conducted solely within the timeshare
industry, any adverse changes affecting the timeshare industry such as an
oversupply of timeshare units, a reduction in demand for timeshare units,
changes in travel and vacation patterns, changes in governmental regulations or
taxation of the timeshare industry, as well as negative publicity about the
timeshare industry, could have a material adverse effect on the Company's
results of operations, liquidity or financial position. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

COMPETITION

The timeshare industry is highly fragmented and includes a large number of
local and regional resort developers and operators. However, some of the world's
most recognized lodging, hospitality and entertainment companies, such as,
Marriott Ownership Resorts ("Marriott"), The Walt Disney Company ("Disney"),
Hilton Hotels Corporation ("Hilton") and Hyatt Corporation ("Hyatt"), have
recently entered the industry. Other companies in the timeshare industry,
including Signature Resorts, Inc. ("Signature"), Fairfield Communities, Inc.
("Fairfield"), Vacation Break USA, Inc. ("Vacation Break"), Vistana, Inc.
("Vistana") and Ramada Vacation Suites ("Ramada"), a subsidiary of Mego
Financial Corporation, are public companies with enhanced access to capital and
other resources.

Fairfield and Signature own timeshare resorts in or near Branson, Missouri,
which compete with the Company's Holiday Hills and Ozark Mountain Resorts, and
Signature owns a resort which is located near and competes with the Company's
Piney Shores Resort. Based on published industry data and reports, except for
Fairfield and Signature, the Company does not believe that any of the
competitors named above own timeshare resorts in Texas or Missouri and believes
that such competitors generally target consumers with higher annual incomes than
the Company. Nonetheless, competitors may possess significantly greater
financial, marketing, personnel and other resources than the Company, and there
can be no assurance that such competitors will not significantly reduce the
price of their Vacation Intervals or offer greater convenience, services or
amenities than the Company.

While the Company's principal competitors are developers of timeshare
resorts, the Company is also subject to competition from other entities engaged
in the commercial lodging business, including condominiums, hotels and motels;
others engaged in the leisure business; and, to a lesser extent, from
campgrounds, recreational vehicles, tour packages and second home sales. A
reduction in the product costs associated with any of these competitors, or an
increase in the Company's costs relative to such competitors' costs, could have
a material adverse effect on the Company's results of operations, liquidity and
financial position.

Numerous businesses, individuals and other entities will compete with the
Company in seeking properties for development and acquisition of resorts. Some
of these competitors will be larger and have greater financial resources than
the Company. Such competition may result in a higher cost for properties the
Company wishes to acquire or may cause the Company to be unable to acquire
suitable properties for the development of new resorts.

DEVELOPMENT, CONSTRUCTION AND PROPERTY ACQUISITION ACTIVITIES

The Company intends to selectively develop and acquire new resorts and
continue the expansion of the Existing Resorts. Acquiring and developing new
resorts will place substantial demands on the Company's liquidity and capital
resources, as well as on its personnel and administrative capabilities. Risks
associated with the Company's development and construction activities include
the following: construction costs or delays at a property may exceed original
estimates, possibly making the expansion or development uneconomical or
unprofitable; sales of Vacation Intervals at a newly completed property may not
be sufficient to make the property

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<PAGE> 23

profitable; and financing may be unavailable or may not be available on
favorable terms for development of, or the continued sales of Vacation Intervals
at, a property. The Company projects that its planned expansion at the Existing
Resorts alone will cost in excess of $100 million. Additionally, the Company
currently projects that it will cost in excess of $47.6 million to acquire and
fully develop its planned new drive-to resorts in Missouri and Illinois. The
Company also has plans to develop a tract of land it currently owns in
Mississippi as a new destination resort at an estimated cost of $4.5 million.
There can be no assurance the Company will develop and acquire new resorts or
expand the Existing Resorts. The Company does not and upon the consummation of
the Offering will not have the financing available to complete all of its
planned expansion as set forth in "Business -- The Existing Resorts" and
"Business -- Growth Strategy".

In addition, the Company's development and construction activities, as well
as its ownership and management of real estate, are subject to comprehensive
federal, state and local laws regulating such matters as environmental and
health concerns, protection of endangered species, water supplies, zoning, land
development, land use, building design and construction, marketing and sales,
and other matters. Such laws and difficulties in obtaining, or failing to
obtain, the requisite licenses, permits, allocations, authorizations and other
entitlements pursuant to such laws could impact the development, completion, and
sale of the Company's projects. See "-- Regulation of Marketing and Sales or
Vacation Intervals and Related Laws". The enactment of "slow growth" or
"no-growth" initiatives or changes in labor or other laws in any area where the
Company's projects are located could also delay, affect the cost or feasibility
of, or preclude entirely the expansion planned at each of the Existing Resorts
or the development of other resorts.

The Company's resorts are located in rural areas, often requiring the
Company to provide public utility water and sanitation services in order to
proceed with development. Such activities are subject to permission and
regulation by governmental agencies, the denial or conditioning of which could
limit or preclude development. Operation of the utilities also subjects the
Company to risk of liability in connection with both the quality of fresh water
provided and the treatment and discharge of waste-water. See
"Business -- Governmental Regulation".

While the Company's construction activities typically are performed by
third-party contractors whose performance cannot be assured by the Company,
construction claims may be asserted against the Company for construction defects
and such claims may give rise to liabilities. Certain state and local laws may
impose liability on property developers with respect to construction defects
discovered or repairs made by future owners of such property.

See "Business -- Growth Strategy", "Business -- Development and Acquisition
Process" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a large extent upon the experience and
abilities of Mr. Mead, Sharon K. Brayfield, and David T. O'Connor, the Company's
Chief Executive Officer, President, and Executive Vice President -- Sales,
respectively. The loss of the services of any one of these key individuals could
have a material adverse effect on the Company's results of operations, liquidity
or financial position. See "Management -- Employment and Noncompetition
Agreements". The Company's success is also dependent upon its ability to attract
and maintain qualified acquisition, development, marketing, management,
administrative and sales personnel. The ability to attract such personnel will
become particularly important as the Company grows and develops additional
resorts, and there can be no assurance that the Company will be successful in
attracting and/or retaining such personnel.

COSTS OF COMPLIANCE WITH LAWS GOVERNING ACCESSIBILITY OF FACILITIES TO DISABLED
PERSONS

A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act (the "ADA"), impose requirements related to
access and use by disabled persons of a variety of public accommodations and
facilities. The ADA requirements did not become effective until after January 1,
1991. Although the Company believes the Existing Resorts are substantially in
compliance with laws governing the accessibility of its facilities to disabled
persons, the Company will incur additional costs of complying with such laws.
Additional federal, state and local legislation may impose further burdens or
restrictions on the Company,

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<PAGE> 24

the Clubs, or the Master Club at the Existing Resorts with respect to access by
disabled persons. The ultimate cost of compliance with such legislation is not
currently ascertainable, and, while such costs are not expected to have a
material effect on the Company's results of operations, liquidity or capital
resources, such costs could be substantial.

GEOGRAPHIC CONCENTRATION WITHIN TEXAS AND MISSOURI

At March 31, 1997, all of the Company's resorts and substantially all of
the Company's customers and borrowers were located in Texas and Missouri. The
Company's performance and the value of its properties is affected by regional
factors, including local economic conditions (which may be adversely impacted by
business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and the local regulatory climate. The Company's current
concentration in the Texas and Missouri markets could make the Company more
susceptible to adverse events or conditions which affect these areas in
particular.

POSSIBLE ENVIRONMENTAL LIABILITIES

Under various federal, state and local laws, ordinances and regulations, as
well as common law, the owner or operator of real property generally is liable
for the costs of removal or remediation of certain hazardous or toxic substances
located on, in, or emanating from, such property, as well as related costs of
investigation and property damage. Such laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of the
hazardous or toxic substances. The presence of such substances, or the failure
to properly remediate such substances, may adversely affect the owner's ability
to sell or lease a property or to borrow money using such real property as
collateral. Other federal and state laws require the removal or encapsulation of
asbestos-containing material when such material is in poor condition or in the
event of construction, demolition, remodeling or renovation. Other statutes may
require the removal of underground storage tanks. Noncompliance with these and
other environmental, health or safety requirements may result in the need to
cease or alter operations at a property. Further, the owner or operator of a
site may be subject to common law claims by third parties based on damages and
costs resulting from violations of environmental regulations or from
contamination associated with the site. Phase I environmental reports (which
typically involve inspection without soil sampling or ground water analysis)
were prepared in 1994 by independent environmental consultants for each Existing
Resort and did not reveal, nor is the Company aware of, any environmental
liability that would have, a material adverse effect on the Company's results of
operations, liquidity or financial position. No assurance, however, can be given
that these reports reveal all environmental liabilities or that no prior owner
created any material environmental condition not known to the Company.

Certain environmental laws impose liability on a previous owner of property
to the extent hazardous or toxic substances were present during the prior
ownership period. A transfer of the property may not relieve an owner of such
liability. Thus, the Company may have liability with respect to properties
previously sold by it or by its predecessors.

The Company owns its own water supply facilities and waste-water treatment
plant at several of its resorts. The Texas Natural Resources Conservation
Commission ("TNRCC") is the primary state umbrella agency regulating the
utilities at the Drive-to Resorts in Texas, and the Department of Natural
Resources and the Public Service Commission of Missouri are the primary state
umbrella agencies regulating such utilities at the Destination Resorts in
Missouri. As a result of an enforcement proceeding brought against the Company
by TNRCC in connection with a waste-water facility at the Holly Lake Resort, the
Company is in the process of expanding the existing waste-water facility. See
"Business -- Governmental Regulation".

The Company believes that it is in compliance in all material respects with
all federal, state and local ordinances and regulations regarding hazardous or
toxic substances. Other than in connection with the waste-water proceedings
mentioned above, the Company has not been notified by any governmental authority
or third party of any non-compliance, liability or other claim in connection
with any of its present or former properties. See "Business -- Governmental
Regulation -- Environmental Matters".

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<PAGE> 25

DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORKS; POSSIBLE INABILITY TO QUALIFY
RESORTS

The attractiveness of Vacation Interval ownership is enhanced by the
availability of exchange networks that allow Silverleaf Owners to exchange in a
particular year the occupancy right in their Vacation Interval for an occupancy
right in another participating network resort. According to ARDA, the ability to
exchange Vacation Intervals was cited by many buyers as an important reason for
purchasing a Vacation Interval. Several companies, including RCI, provide
broad-based Vacation Interval exchange services, and all of the Company's
Existing Resorts are currently qualified for participation in the RCI exchange
network. However, no assurance can be given that the Company will continue to be
able to qualify the Existing Resorts or future resorts for participation in the
RCI network or any other exchange network. If such exchange networks cease to
function effectively, or if the Company's resorts are not accepted as exchanges
for other desirable resorts, the Company's sales of Vacation Intervals could be
materially adversely affected. See "Business -- Participation in Vacation
Interval Exchange Networks".

RESALE MARKET FOR VACATION INTERVALS

Based on its experience at the Existing Resorts, the Company believes the
market for resale of Vacation Intervals by the owners of such intervals is very
limited and that resale prices are substantially below their original purchase
price. This may make ownership of Vacation Intervals less attractive to
prospective buyers. Also, attempts by buyers to resell their Vacation Intervals
compete with sales of Vacation Intervals by the Company. While Vacation Interval
resale clearing houses or brokers do not currently have a material impact, if
the secondary market for Vacation Intervals were to become more organized and
liquid, the availability of resale intervals at lower prices could materially
adversely affect the prices and number of sales of new Vacation Intervals by the
Company.

SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS

Sales of Vacation Intervals have generally been lower in the months of
November and December. Cash flow and earnings may be impacted by the timing of
development, the completion of future resorts, and the potential impact of
weather or other conditions in the regions where the Company operates. The above
may cause significant variations in quarterly operating results. See "-- Natural
Disasters; Uninsured Loss" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

NATURAL DISASTERS; UNINSURED LOSS

There are certain types of losses (such as losses arising from floods and
acts of war) that are not generally insured because they are either uninsurable
or not economically insurable and for which neither the Company nor the Clubs,
nor the Master Club have insurance coverage. Should an uninsured loss or a loss
in excess of insured limits occur, the Company could lose its capital invested
in a resort, as well as the anticipated future revenues from such resort and
would continue to be obligated on any mortgage indebtedness or other obligations
related to the property. Any such loss could have a material adverse effect on
the Company's results of operations, liquidity or financial position. See
"Business -- Insurance; Legal Proceedings".

ACCELERATION OF DEFERRED TAXES

While the Company reports sales of Vacation Intervals as income currently
for financial reporting purposes (see Note 2 of Notes to Consolidated Financial
Statements), for regular federal income tax purposes the Company reports
substantially all Vacation Interval sales on the installment method. Under the
installment method, the Company recognizes income for tax on the sale of the
Vacation Interval when cash is received in the form of a down payment and as
payments on customer loans are received. The Company's December 31, 1996 balance
sheet reflected a liability for deferred taxes (i.e., taxes owed to taxing
authorities in the future in consequence of income previously reported in the
financial statements) of $4.8 million, primarily attributable to this method of
reporting Vacation Interval sales. This amount does not include accrued interest
on such deferred taxes which also will be payable when the taxes are due, the
amount of which is not now reasonably ascertainable. If the Company should sell
the installment notes or be required to factor them or if the notes were
foreclosed on by a lender of the Company or otherwise disposed of, the deferred
gain would be reportable for tax and the deferred taxes,

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<PAGE> 26

including interest on the taxes for the period the taxes were deferred, as
computed under Section 453 of the Internal Revenue Code of 1986, as amended (the
"Code"), would become due. There can be no assurance that the Company would have
sufficient cash resources to pay those taxes and interest. Furthermore, if the
Company's sales of Vacation Intervals should decrease in the future, the
Company's diminished operations may not generate either sufficient tax losses to
offset taxable income or funds to pay the deferred tax liability from prior
periods. See "-- Limitations on Use of Net Operating Loss From Ownership
Change".

ALTERNATIVE MINIMUM TAXES

The Company has also used the installment method for the calculation of
adjusted current earnings for federal alternative minimum tax purposes, although
the accrual method is required under the Code. This has resulted in current
income taxes payable of approximately $3.3 million which is included in the
Company's December 31, 1996 balance sheet within Income Taxes Payable. The
Company has submitted a request to the Internal Revenue Service for permission
to change to the accrual method for this computation. If granted, these current
estimated taxes of approximately $3.3 million will become payable during 1997
through 2000. Although the Company believes the Internal Revenue Service will
give its permission, there is no assurance that it will, and if not granted, the
Company will currently owe those taxes plus interest and potential penalties.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

LIMITATIONS ON USE OF NET OPERATING LOSS FROM OWNERSHIP CHANGE

The Company estimates that it had net operating loss carryforwards of
approximately $14 million at December 31, 1996, for regular federal income tax
purposes related primarily to losses associated with the deferral of installment
sale gains. In addition to the general limitations on the carryback and
carryforward of net operating losses under Section 172 of the Code, Section 382
of the Code imposes additional limitations on the utilization of a net operating
loss by a corporation following various types of ownership changes which result
in more than a 50 percentage point change in ownership of a corporation within a
three year period. Mr. Mead owned 100% of the stock of the Company until
December 29, 1995, at which time his ownership decreased to approximately 99%.
As a result of the Offering, Mr. Mead's ownership of the Company will decrease
such that he will own approximately 65% to 68% of the Company after the
Offering. Thereafter, Mr. Mead could transfer his shares and/or the Company
could issue additional shares or grant stock options, which could result in more
than a 50 percentage point change in his ownership of the Company. If such a
subsequent change occurs within a three year period, the limitations of Section
382 would apply and may limit or deny the future utilization of the net
operating loss by the Company, resulting in the Company paying substantial
additional federal and state taxes and interest for any periods following such
change in ownership. See "-- Acceleration of Deferred Taxes" and "Shares
Eligible for Future Sale".

TAX RE-CLASSIFICATION OF INDEPENDENT CONTRACTORS AND RESULTING TAX LIABILITY

Although all on-site sales personnel are treated as employees of the
Company for payroll tax purposes, the Company does have independent contractor
agreements with certain sales, marketing, and architectural persons or entities.
The Company has not treated these independent contractors as employees;
accordingly, the Company does not withhold payroll taxes from the amounts paid
to such persons or entities. In the event the Internal Revenue Service or any
state or local taxing authority were to successfully classify such persons or
entities as employees of the Company, rather than as independent contractors,
and hold the Company liable for back payroll taxes, such action may have a
material adverse effect on the Company's results of operations, liquidity or
financial position.

VOTING CONTROL BY EXISTING SHAREHOLDER

Upon consummation of the Offering, Mr. Mead will hold a majority of the
Common Stock (approximately 65% to 68%), which will allow him to elect all of
the Company's directors and control the management and affairs of the Company.
To the extent Mr. Mead holds more than two-thirds of the Common Stock, he will
have sufficient voting power to determine the outcome of various matters
submitted to the shareholders for approval,

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<PAGE> 27

including mergers, consolidations, and the sale of substantially all of the
Company's assets. See "Principal Shareholders" and "Description of Capital
Stock". Such control may result in decisions which are not in the best interest
of the Company.

REPAYMENT OF INDEBTEDNESS OWED TO AFFILIATE OF UNDERWRITER

Credit Suisse First Boston Mortgage Capital, L.L.C., an affiliate of Credit
Suisse First Boston Corporation, the lead managing underwriter for the Offering,
will receive approximately $4.5 million of the net proceeds of the Offering (or
$5.2 million if the Underwriters' over-allotment option is exercised in full) as
repayment of indebtedness and related interest expected to be outstanding upon
consummation of the Offering. See "Underwriting".

ANTI-TAKEOVER EFFECT OF THE COMPANY'S CHARTER AND BYLAWS

Certain provisions of the Company's articles of incorporation (the
"Charter") and bylaws (the "Bylaws"), may be deemed to have anti-takeover
effects and may delay, defer or prevent a takeover attempt that a shareholder
might consider to be in the shareholder's best interest. For example, such
provisions may (i) deter tender offers for Common Stock, which offers may be
beneficial to shareholders, or (ii) deter purchases of large blocks of Common
Stock, thereby limiting the opportunity for shareholders to receive a premium
for their Common Stock over then-prevailing market prices. These provisions
include the following:

Preferred Shares. The Charter authorizes the Board of Directors to
issue Preferred Stock in one or more series and to establish the
preferences and rights (including the right to vote and the right to
convert into Common Stock) of any series of Preferred Stock issued. No
Preferred Stock will be issued or outstanding as of the consummation of the
Offering. See "Description of Capital Stock -- Preferred Stock".

Classified Board. The Board of Directors of the Company will have
three classes of directors, and directors will be elected for three year
terms, with approximately one-third of the directors elected each year. The
terms of the first, second and third classes will expire in 1998, 1999 and
2000, respectively. The affirmative vote of two-thirds of the outstanding
Common Stock is required to remove a director.

IMMEDIATE AND SUBSTANTIAL BOOK VALUE DILUTION; NO ANTICIPATED DIVIDENDS

Purchasers of Common Stock in the Offering will experience immediate
dilution in net tangible book value per share of Common Stock of $8.40 from the
initial public offering price per share. See "Dilution". The Company does not
anticipate that it will pay any dividends on its Common Stock in the foreseeable
future. See "Dividend Policy".

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering, all the 3,500,000 shares of Common Stock
offered hereby will be eligible for public sale under the Securities Act of
1933, as amended (the "Securities Act"), without restriction, except for shares
acquired in the Offering by "affiliates" of the Company, as that term is defined
in Rule 144 promulgated under the Securities Act. In addition, all shares held
by affiliates will be eligible for public sale under Rule 144, subject to the
Rule's volume, manner of sale and other restrictions. In addition, the Company
has the authority to issue additional shares of Common Stock and shares of one
or more series of Preferred Stock. Pursuant to a Registration Rights Agreement
between the Company and Mr. Mead, upon Mr. Mead's request, the Company shall
register one-half of his Common Stock 180 days following the consummation of the
Offering and any of his remaining unregistered Common Stock one year after the
Offering. See "Shares Eligible for Future Sale". The Company intends to register
1,100,000 shares of Common Stock reserved for issuance pursuant to the Company's
1997 Stock Option Plan as soon as practicable following the consummation of the
Offering. The issuance of such shares could result in the dilution of voting
power of the shares of Common Stock purchased in the Offering and could have a
dilutive effect on earnings per shares. The Company currently has no plans to
designate and/or issue any shares of Preferred Stock. Future sales of
substantial amounts of Common Stock, or the potential for such sales, could
adversely affect prevailing market prices. See "-- Limitations on Use of Net
Operating Loss From Ownership Change".

25
<PAGE> 28

The Company and its officers, directors and current shareholders each have
agreed that they will not, without the prior written consent of Credit Suisse
First Boston Corporation, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for such Common Stock or in any
other manner transfer all or a portion of the economic consequences associated
with the ownership of such Common Stock for a period of 180 days from the date
of this Prospectus.

ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

There has been no prior public market for the Company's Common Stock.
Although the Common Stock has been approved for listing on The New York Stock
Exchange, subject to official notice thereof, there can be no assurance that a
viable public market for the Common Stock will develop or be sustained after the
Offering or that purchasers of the Common Stock will be able to resell their
Common Stock at prices equal to or greater than the initial public offering
price. The initial public offering price will be determined by negotiations
between the Company and the representative of the Underwriters and may not be
indicative of the prices that may prevail in the public market after the
Offering is completed. See "Underwriting". Numerous factors, including
announcements of fluctuations in the Company's or its competitors' operating
results and market conditions for hospitality and timeshare industry stocks in
general, could have a significant impact on the future price of the Common
Stock. In addition, the stock market in recent years has experienced significant
price and volume fluctuations that often have been unrelated or disproportionate
to the operating performance of companies. These broad fluctuations may
adversely affect the market price of the Common Stock.

26
<PAGE> 29

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock offered by the Company hereby are estimated to be $45,050,000
million ($52,062,500 million if the Underwriters' over-allotment option is
exercised in full), based on the initial public offering price of $14.50 per
share, after deducting underwriting discounts and commissions and estimated
expenses of the Offering. The Company intends to use substantially all of the
approximately $45,050,000 in net proceeds of the Offering to repay outstanding
indebtedness and accrued interest, including $9.9 million to Mr. Mead and his
affiliates and $4.5 million (or $5.2 million if the Underwriters' over-allotment
option is exercised in full) to Credit Suisse First Boston Mortgage Capital,
L.L.C., an affiliate of Credit Suisse First Boston Corporation, the lead
managing underwriter for the Offering. See "Certain Relationships and Related
Transactions -- Repayment of Affiliated Debt" and "Underwriting". Indebtedness
to be repaid from the proceeds of the Offering to Mr. Mead and his affiliates
bears interest at fixed rates currently ranging from 8% to 12% per annum, except
for one note which bears interest at a floating rate of interest equal to prime
rate plus 3.5%. All such affiliated debt matures on December 31, 1997.
Indebtedness to be repaid out of the net proceeds from the Offering to lenders
unaffiliated with Mr. Mead bears interest at variable rates currently ranging
from 6% to 11% per annum and matures between October 1998 and August 2003.
Pending negotiation of terms of repayment of certain of the Company's existing
credit facilities, the Company may invest a portion of the proceeds in
commercial paper, bankers' acceptances, other short-term investment-grade
securities and money-market accounts.

DIVIDEND POLICY

The Company does not intend to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain future earnings
to finance its operations and fund the growth of its business. Any payment of
future dividends will be at the discretion of the Board of Directors of the
Company and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
and other restrictions in respect of the payment of dividends, and other factors
that the Company's Board of Directors deems relevant. See "Business -- Existing
Credit Facilities".

27
<PAGE> 30

CAPITALIZATION

The following table sets forth at March 31, 1997, the consolidated
capitalization of the Company on an actual basis and as adjusted to give effect
to the Offering and the payment of all amounts due to affiliates and payment of
$35.1 million of notes payable to third parties with the proceeds thereof. This
table should be read in conjunction with "Use of Proceeds", the Consolidated
Financial Statements and the notes thereto, "Selected Consolidated Historical
Financial, Operating and Pro Forma Financial Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED(A)
------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
Amounts due to affiliates (net of $4,827 due from
affiliates)............................................ $ 9,920 $ --
Notes payable and capital lease obligations............... 46,690 11,560
------- -------
Total indebtedness........................................ 56,610 11,560
Shareholders' equity:
Common Stock, $0.01 par value; 7,711,517 shares issued and
outstanding, and 11,211,517 shares as adjusted for the
Offering(b)............................................ 77 112
Additional paid-in capital................................ 13,470 58,485
Retained earnings......................................... 9,770 9,770
------- -------
Total shareholders' equity................................ 23,317 68,367
------- -------
Total capitalization.............................. $79,927 $79,927
======= =======
</TABLE>

- ---------------

(a) Adjusted to give effect to the sale of 3,500,000 shares of Common Stock
offered hereby at an offering price of $14.50 per share, in the aggregate
$50.7 million, less the underwriting discounts and commissions and the
payment by the Company of the estimated offering expenses of $5.7 million,
and the payment of all amounts due to affiliates and payment of $35.1
million of notes payable to third parties. See "Selected Consolidated
Historical Financial, Operating and Pro Forma Financial Information".

(b) Does not include an aggregate 1,100,000 shares of Common Stock reserved for
issuance pursuant to the Company's 1997 Stock Option Plan and 525,000
shares of Common Stock which the Underwriters may purchase pursuant to
their over-allotment option. See "Management -- 1997 Stock Option Plan" and
"Underwriting".

28
<PAGE> 31

DILUTION

The net tangible book value of the Company at March 31, 1997, was
approximately $23.3 million, or $3.02 per share of Common Stock. Net tangible
book value per share represents the Company's total tangible assets less its
total liabilities, divided by the total number of outstanding shares of Common
Stock. After giving effect to the sale of 3,500,000 shares of Common Stock
offered by the Company hereby and the application of the net proceeds therefrom,
the pro forma net tangible book value of the Company at March 31, 1997, would
have been approximately $68.4 million or $6.10 per share of Common Stock. This
represents an immediate increase in such net tangible book value of $3.08 per
share to the existing shareholders of the Company and an immediate dilution in
net tangible book value of $8.40 per share to purchasers of Common Stock in the
Offering. The following table illustrates this dilution on a per share basis:

<TABLE>
<S> <C> <C>
Public offering price per share............................. $14.50
Net tangible book value per share before the Offering..... $ 3.02
Increase per share attributable to new investors.......... 3.08
------
Pro forma net tangible book value per share after the
Offering.................................................. 6.10
------
Dilution per share to new investors......................... $ 8.40
======
</TABLE>

The following table sets forth, as of March 31, 1997, after giving effect
to the Offering, the number of shares of Common Stock purchased, the total
consideration paid therefor and the average price paid per share by the existing
shareholders of the Company and the purchasers of Common Stock in the Offering,
respectively. The following table does not give effect to an aggregate of
1,100,000 shares of Common Stock reserved for issuance pursuant to the Company's
1997 Stock Option Plan, and does not include 525,000 shares of Common Stock
which the Underwriters may purchase pursuant to their over-allotment option. See
"Management -- Executive Compensation" and "Underwriting".

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............ 7,711,517 68.8% $13,547,219 21.1% $ 1.76
---------- ----- ----------- ----- --------
New investors.................... 3,500,000 31.2 50,750,000 78.9% $ 14.50
---------- ----- ----------- ----- --------
Total.................. 11,211,517 100.0% $64,297,219 100.0%
========== ===== =========== =====
</TABLE>

29
<PAGE> 32

SELECTED CONSOLIDATED HISTORICAL FINANCIAL, OPERATING AND
PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated historical financial information set forth below
has been derived from the consolidated financial statements of the Company which
have been restated giving effect to the Consolidation Transactions utilizing the
historical cost basis of the combined entities so as to present the consolidated
financial condition and operations since these entities were under common
ownership and control. The consolidated financial statements of the Company for
1995 and 1996 included herein were audited by Deloitte & Touche LLP. The
consolidated financial statements for 1994 included herein were audited by James
Smith & Company, P.C. The consolidated financial statements for 1992 and 1993
are unaudited. In the opinion of management of the Company, the data presented
for the three months ended March 31, 1996 and 1997, which are derived from the
Company's unaudited consolidated financial statements included herein, reflect
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations for such
periods. Results for the three months ended March 31, 1997 are not necessarily
indicative of results for the entire fiscal year.

The unaudited pro forma income statement data for the three months ended
March 31, 1996 and 1997 and for the year ended December 31, 1996 gives effect to
the Offering and the application of the proceeds therefrom to the payment of all
amounts due to affiliates and payment of $35.1 million of notes payable to third
parties at the beginning of the periods presented, subject to the assumptions
stated in the related notes. The unaudited as adjusted balance sheet at March
31, 1997 gives effect to the Offering and the application of the proceeds
therefrom to the payment of debt as of the last day of the period presented
subject to the assumptions stated in the related notes. The unaudited pro forma
income statement and balance sheet data is not necessarily indicative of what
the actual results of operations or financial position of the Company would have
been, nor do they purport to represent the Company's results of operations or
financial position for future periods.

The Selected Consolidated Historical Financial, Operating and Pro Forma
Financial Information should be read in conjunction with the Consolidated
Financial Statements and notes thereto included herein and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

30
<PAGE> 33

<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Vacation Interval sales............. $ 13,987 $ 19,607 $ 25,843 $ 35,885 $ 48,103 $ 12,590 $ 15,771
Less provision for uncollectible
notes............................. (2,693) (3,249) (6,014) (9,144) (12,075) (3,243) (3,849)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Vacation Interval sales:.......... 11,294 16,358 19,829 26,741 36,028 9,347 11,922
Interest income..................... 542 1,029 1,633 3,968 6,297 1,312 1,933
Interest income from affiliates..... -- 70 252 393 377 128 107
Management fee income............... 2,265 3,613 2,394 2,478 2,187 552 499
Lease income........................ 428 512 1,137 1,310 1,717 456 485
Other income........................ 1,813 1,964 1,932 1,832 1,440 245 399
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues................ 16,342 23,546 27,177 36,722 48,046 12,040 15,345
Costs and Operating Expenses:
Cost of Vacation Interval sales..... 3,876 2,094 2,648 3,280 2,805 224 1,221
Sales and marketing................. 7,690 10,219 12,929 17,850 21,839 5,040 5,949
Operating, general and
administrative.................... 2,475 6,109 5,336 8,062 8,970 2,343 1,945
Depreciation and amortization....... 288 477 590 863 1,264 277 331
Interest expense to affiliates...... 383 664 885 1,403 880 228 225
Interest expense to unaffiliated
entities.......................... 1,318 762 757 2,206 3,879 828 1,461
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total costs and operating
expenses.................... 16,030 20,325 23,145 33,664 39,637 8,940 11,132
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations
before income taxes................. 312 3,221 4,032 3,058 8,409 3,100 4,213
Income tax expense.................... 266 1,376 1,677 1,512 3,140 1,156 1,559
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations..... 46 1,845 2,355 1,546 5,269 1,944 2,654
Income (loss) on discontinued
operations.......................... -- (286) 568 (1,484) (295) (95) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............................ $ 46 $ 1,559 $ 2,923 $ 62 $ 4,974 $ 1,849 $ 2,654
========== ========== ========== ========== ========== ========== ==========
Income per common share from:(a)
Continuing operations............... $ 0.00 $ 0.24 $ 0.31 $ 0.20 $ 0.68 $ 0.25 $ 0.34
Discontinued operations............. -- (0.03) 0.08 (0.19) (0.04) (0.01) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income per common share........... $ 0.00 $ 0.21 $ 0.39 $ 0.01 $ 0.64 $ 0.24 $ 0.34
========== ========== ========== ========== ========== ========== ==========
Weighted average number of shares
outstanding(b)...................... 7,588,952 7,588,952 7,588,952 7,590,295 7,711,517 7,711,517 7,711,517
========== ========== ========== ========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE PRICE
OF VACATION INTERVALS SOLD)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(c).......................................... $ 2,301 $ 5,124 $ 6,264 $ 7,530 $ 14,432 $ 4,433 $ 6,230
Cash flows provided by (used in)
Operating activities............................. $ 1,672 $ 5,711 $ 2,496 $ 3,713 $ 6,375 $ 3,443 $ 2,747
Investing activities............................. (4,266) (6,121) (12,189) (19,604) (23,997) (6,199) (7,028)
Financing activities............................. 422 378 10,424 18,674 14,882 819 4,430
Number of Existing Resorts at period end........... 7 7 7 7 7 7 7
Number of Vacation Intervals sold (excluding
upgrades)........................................ 1,983 2,582 3,705 4,831 6,054 1,544 1,539
Number of upgraded Vacation Intervals sold......... 884 1,378 1,290 1,921 1,914 482 860
Number of Vacation Intervals in inventory.......... 7,218 5,615 5,943 6,584 6,746 6,172 6,024
Average price of Vacation Intervals sold (excluding
upgrades)(d)..................................... $ 5,293 $ 5,554 $ 5,727 $ 5,881 $ 6,645 $ 6,794 $ 7,832
Average price of upgraded Vacation Intervals sold
(net of exchanged interval)...................... $ 3,949 $ 3,822 $ 3,585 $ 3,885 $ 4,113 $ 4,358 $ 4,331
Average price of all Vacation Intervals sold
(including upgrades)............................. $ 7,054 $ 7,594 $ 6,975 $ 7,428 $ 7,946 $ 8,154 $ 10,524
</TABLE>

31
<PAGE> 34

<TABLE>
<CAPTION>
PRO FORMA(E)
----------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------ -------------------------
1996 1996 1997
------------ ----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Vacation Interval sales................................... $ 48,103 $ 12,590 $ 15,771
Less provision for uncollectible notes.................... (12,075) (3,243) (3,849)
----------- ----------- -----------
Net Vacation Interval sales:................................ 36,028 9,347 11,922
Interest income........................................... 6,297 1,312 1,933
Interest income from affiliates........................... -- -- --
Management fee income..................................... 2,187 552 499
Lease income.............................................. 1,717 456 485
Other income.............................................. 1,440 245 399
----------- ----------- -----------
Total Revenues..................................... 47,669 11,912 15,238
Costs and Operating Expenses:
Cost of Vacation Interval sales........................... 2,805 224 1,221
Sales and marketing....................................... 21,839 5,040 5,949
Operating, general and administrative..................... 9,720 2,531 2,133
Depreciation and amortization............................. 1,264 277 331
Interest expense to affiliates............................ -- -- --
Interest expense to unaffiliated entities................. 201 22 236
----------- ----------- -----------
Total costs and operating expenses................. 35,829 8,094 9,870
----------- ----------- -----------
Income from continuing operations before income taxes....... 11,840 3,818 5,368
Income tax expense.......................................... 4,416 1,424 1,986
----------- ----------- -----------
Income from continuing operations........................... $ 7,424 $ 2,394 $ 3,382
=========== =========== ===========
Income per common share from continuing operations:(f)...... $ 0.71 $ 0.24 $ 0.30
=========== =========== ===========
Weighted average number of shares outstanding(f)............ 10,483,168 10,161,933 11,211,517
=========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED
------------------------------------------------------------------- -----------
DECEMBER 31, MARCH 31,
----------------------------------------------- ----------------- MARCH 31,
1992 1993 1994 1995 1996 1996 1997 1997(G)
------- ------- ------- ------- ------- ------- ------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 228 $ 197 $ 929 $ 3,712 $ 973 $ 1,774 $ 1,121 $ 1,121
Amounts due from affiliates............... 1,485 2,391 4,559 4,342 6,237 4,491 6,494 1,667
Total assets.............................. 16,695 23,834 37,326 62,687 90,852 68,942 99,714 94,887
Amounts due to affiliates................. 5,690 8,704 14,613 14,263 14,765 14,323 14,747 --
Notes payable and capital lease
obligations............................. 2,054 533 11,887 23,363 41,986 25,360 46,690 11,560
Total liabilities......................... 11,788 18,062 29,340 46,999 70,190 51,404 76,397 26,520
Equity.................................... 4,907 7,292 10,123 15,689 20,662 17,538 23,317 68,367
</TABLE>

- ---------------

(a) Earnings per share amounts are based on the weighted average number of
shares outstanding.

(b) Gives retroactive effect to the Stock Split.

(c) EBITDA represents net income from continuing operations before interest
expense, income taxes and depreciation and amortization. EBITDA is presented
because it is a widely accepted indicator of a company's financial
performance. However, EBITDA should not be construed as an alternative to
net income as a measure of the Company's operating results or to cash flows
from operating activities (determined in accordance with generally accepted
accounting principles) as a measure of liquidity. Since revenues from
Vacation Interval sales include promissory notes received by the Company,
EBITDA does not reflect cash flow available to the Company. Additionally,
due to varying methods of reporting EBITDA within the timeshare industry,
the computation of EBITDA for the Company may not be comparable to other
companies in the timeshare industry which compute EBITDA in a different
manner. The Company's management interprets trends in EBITDA to be an
indicator of the Company's financial performance, in addition to net income
and cash flows from operating activities (determined in accordance with
generally accepted accounting principles). The following table reconciles
EBITDA to net income from continuing operations:

32
<PAGE> 35

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income, from continuing
operations................ $ 46 $1,845 $2,355 $1,546 $ 5,269 $1,944 $2,654
Interest expense............ 1,701 1,426 1,642 3,609 4,759 1,056 1,686
Income tax expense.......... 266 1,376 1,677 1,512 3,140 1,156 1,559
Depreciation and
amortization.............. 288 477 590 863 1,264 277 331
------ ------ ------ ------ ------- ------ ------
EBITDA, from continuing
operations................ $2,301 $5,124 $6,264 $7,530 $14,432 $4,433 $6,230
====== ====== ====== ====== ======= ====== ======
</TABLE>

(d) Includes one and two bedroom units.

(e) Assumes (i) the sale of 3,500,000 shares of Common Stock offered hereby at
an offering price of $14.50 per share, in the aggregate $50.7 million, less
the underwriting discounts and commissions and the payment by the Company
of the estimated offering expenses of $5.7 million; (ii) payment of all
amounts due to affiliates net of amounts due from affiliates and
elimination of the related interest; (iii) payment of $35.1 million of
notes payable to third parties and elimination of the related interest
expense; (iv) estimate of additional costs to be incurred as a public
company of $750,000; (v) adjustment of the provision for income taxes for
the effect of the pro forma adjustments; and (vi) excludes discontinued
operations.

33
<PAGE> 36

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the "Selected
Consolidated Historical Financial, Operating and Pro Forma Financial
Information" and the Consolidated Financial Statements and notes thereto
included elsewhere in this Prospectus.

OVERVIEW

Silverleaf Resorts, Inc. was formed in 1989 to acquire the Existing
Resorts. Certain additional assets and liabilities were subsequently acquired
from the Affiliated Companies in 1995 pursuant to the Consolidation
Transactions. See "Summary -- Corporate Background", "Certain Relationships and
Related Transactions", and Notes 1 and 10 of Notes to Consolidated Financial
Statements. The Consolidated Financial Statements of the Company include the
accounts of Silverleaf Resorts, Inc. and its subsidiaries, all of which are
wholly-owned. One such subsidiary, CBI, is treated as a discontinued operation.
See Note 12 of Notes to Consolidated Financial Statements. The historical
consolidated financial statements have been restated utilizing the historical
cost basis of the Affiliated Companies since these entities were under common
ownership and control.

The Company generates revenues primarily from the sale and financing of
Vacation Intervals at the Existing Resorts. Additional revenues are generated
from management fees from the Master Club, lease income from Sampler sales, and
resort and utility operations. The Company recognizes management fee income as
the lesser of 15% of revenue or 100% of net income of the Master Club. See
"Business -- Clubs/Master Club".

The Company recognizes Vacation Interval sales revenues on the accrual
basis. A sale is recognized after a binding sales contract has been executed,
the buyer has made a down payment of at least 10%, and the statutory rescission
period has expired. If a customer fails to make the first installment payment,
the Company reverses the sale and normally retains any payments received.
Approximately 6% of the Company's customers fail to make the first installment
payment. For further information concerning accounting for Vacation Interval
sales and accounting policies generally, see Note 2 of Notes to Consolidated
Financial Statements.

The Company accounts for uncollectible notes by recording a provision to
its Allowance for Doubtful Notes at the time revenue is recognized. Since 1993,
this provision has averaged approximately 22% of Vacation Interval sales. The
Company sets this provision at an amount sufficient to maintain the Allowance at
a level which management considers adequate to provide for anticipated losses
from customers' failure to fulfill their obligations under the notes. When
inventory is returned to the Company, any unpaid notes receivable balances are
charged against the previously established bad debt reserves net of the amount
at which the Vacation Interval is being restored to inventory.

Costs associated with the acquisition and development of the Existing
Resorts and the marketing and sale of Vacation Intervals (including land,
construction costs, furniture, interest, and taxes) are capitalized and included
in inventory. Vacation Interval inventory is segregated into three ratings based
on customer demand (see "Business -- Participation in Vacation Interval Exchange
Networks"), with greater costs apportioned to higher value ratings. As Vacation
Intervals are sold, these costs are deducted from inventory on a specific
identification basis.

Vacation Intervals may be reacquired as a result of (i) foreclosure (or
deed in lieu of foreclosure); (ii) trade-in, associated with the purchase of an
upgraded Vacation Interval; or (iii) the Company's program to reacquire Vacation
Intervals owned but not actively used by Silverleaf Owners. Vacation Intervals
reacquired are recorded in inventory at the lower of their original cost or
market value. Vacation Intervals which have been reacquired are relieved from
inventory on a specific identification basis when resold. Inventory obtained
through the Consolidation Transactions has a significantly lower average cost
basis than recently constructed inventory, contributing significantly to
historical operating margins. New inventory added through the Company's
construction and acquisition programs has a higher average cost than the
Company's existing inventory. Accordingly, cost of goods sold will increase as
sales of new inventory increases.

The Company recognizes interest income as earned. To the extent interest
payments become delinquent the Company ceases recognition of the interest income
until collection is assured.

34
<PAGE> 37

RESULTS OF OPERATIONS

The following table sets forth certain operating information for the
Company.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- ------------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
As a percentage of Total Revenues:
Vacation Interval sales.................. 95.1% 97.7% 100.1% 104.5% 102.7%
Less provision for uncollectible notes... (22.1%) (24.9%) (25.1%) (26.9%) (25.1%)
------ ------ ------ ------ ------
Net Vacation Interval sales.............. 73.0% 72.8% 75.0% 77.6% 77.6%
Interest income.......................... 6.9% 11.9% 13.9% 12.0% 13.3%
Management fee income.................... 8.8% 6.7% 4.6% 4.6% 3.3%
Lease income............................. 4.2% 3.6% 3.6% 3.8% 3.2%
Other income............................. 7.1% 5.0% 2.9% 2.0% 2.6%
------ ------ ------ ------ ------
Total Revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0%
As a percentage of gross Vacation Interval
sales:
Provision for uncollectible notes........ 23.3% 25.5% 25.1% 25.8% 24.4%
Cost of Vacation Interval sales.......... 10.2% 9.1% 5.8% 1.8% 7.8%
Sales and marketing...................... 50.0% 49.7% 45.4% 40.0% 37.7%
As a percentage of Interest Income:
Interest expense......................... 87.1% 82.8% 71.3% 73.3% 82.6%
As a percentage of Total Revenues:
Operating, general and administrative.... 19.6% 22.0% 18.7% 19.5% 12.7%
Depreciation and amortization............ 2.2% 2.4% 2.6% 2.3% 2.2%
Total costs and operating expenses....... 85.2% 91.7% 82.5% 74.2% 72.5%
</TABLE>

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 TO THE THREE MONTHS
ENDED MARCH 31, 1996. Revenues in the first quarter 1997 were $15.3 million,
representing a $3.3 million or 27.5% increase over revenues of $12.0 million in
the first quarter 1996. The increase was primarily due to a $2.6 million
increase in net sales of Vacation Intervals and a $600,000 increase in interest
income. The vigorous increase in Vacation Interval revenues resulted from the
Company's modernized electronic telemarketing programs, increased sales force
and enhanced lead generation methods.

In 1997, the number of Vacation Intervals sold, exclusive of sales of
upgraded Vacation Intervals, decreased .3% to 1,539 from 1,544 in 1996, and the
average price per interval increased 15.3% to $7,832 from $6,794. Total interval
sales in 1997 included 352 biennial intervals (accounted for as 176 Vacation
Intervals), compared to none in 1996. The increase in average price per interval
resulted from the Company's increased sales of higher value rated intervals and
biennial intervals (whose sales price is more than one-half of an annual
interval). In addition, the Company has increased revenues generated from sales
of upgraded intervals at the Existing Resorts through the continued
implementation of marketing and sales programs focused on selling upgraded
intervals to Silverleaf Owners. See "Business -- Growth Strategy".

The provision for uncollectible notes as a percentage of Vacation Interval
sales decreased to 24.4% in 1997 from 25.8% in 1996 reflecting an increased
focus on collection efforts for notes receivable.

Interest income increased 41.7% to $2.0 million in 1997 from $1.4 million
in 1996. This increase resulted from a $20.9 million increase in notes
receivable, net of allowance for uncollectible notes, due to increased sales.

Management fee income decreased 9.5% to $499,000 in 1997 from $551,000 in
1996. This decrease was primarily the result of the Master Club's net income
being reduced by significant non-capital maintenance and refurbishment costs
incurred as a part of the Company's continuing facility improvement program and
increased operating costs.

Lease income, relating to the Company's Sampler program, remained
relatively unchanged in 1997 from 1996.

Other income increased 62.5% to $399,000 in 1997 from $245,000 in 1996.
This increase was due primarily to increased loan document preparation and
filing fee income and increased revenues from sales of undeveloped land.

35
<PAGE> 38

Cost of sales as a percentage of gross Vacation Interval sales increased to
7.8% in 1997 from 1.8% in 1996. The increase is due to a decline in the volume
of sales of Vacation Intervals with a low cost basis. Cost of sales in 1996 was
lower primarily due to the sale of a significant amount of low cost inventory
acquired by the Company in 1996 through its program to reacquire Vacation
Intervals owned but not actively used by Silverleaf Owners. The Company
anticipates that the number of intervals acquired from Silverleaf Owners in 1997
will be significantly lower than the number in 1996. Additionally, the Company
continues to deplete its inventory of other low-cost intervals. As a result of
these factors and the Company's extensive construction program to build new
inventory, the cost of sales average is expected to increase.

Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 37.8% in 1997 from 40.0% in 1996. This decline is due primarily to
the efficiencies resulting from the Company's telemarketing and sales force
areas and economies of scale.

Operating, general and administrative expenses as a percentage of gross
Vacation Interval sales declined to 12.3% in 1997 from 18.6% in 1996. The
decrease was due to a reduction of uncapitalized legal fees and bonus expense.

Interest expense as a percentage of interest income increased to 82.6% in
1997 from 73.3% in 1996. This increase was due to higher borrowing costs during
the period, mostly attributable to an increase in outstanding indebtedness
during the first quarter of 1997 compared to the first quarter of 1996.

Depreciation and amortization expense as a percentage of total revenue
remained relatively unchanged at 2.2% in 1997 versus 2.3% in 1996.

Income from continuing operations before income taxes increased 35.9% to
$4.2 million in 1997 from $3.1 million in 1996 as a result of the above
mentioned operating activities.

Income tax expense as a percentage of income from continuing operations
before income taxes remained relatively unchanged at 37.0% in 1997 versus 37.3%
in 1996.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996, TO THE YEAR ENDED DECEMBER
31, 1995. Revenues in 1996 were $48.0 million, representing a $11.3 million or
30.8% increase over revenues of $36.7 million in 1995. The increase was
primarily due to a $9.3 million increase in net sales of Vacation Intervals and
a $2.3 million increase in interest income.

In 1996, the number of Vacation Intervals sold, exclusive of sales of
upgraded Vacation Intervals, increased 25.3% to 6,054 from 4,831 in 1995 and the
average price per unit increased 13.0% to $6,645 from $5,881. The increase in
Vacation Interval sales resulted from the Company's modernized electronic
telemarketing programs, increased sales force and enhanced lead generation
methods. The increase in average price per interval resulted from the Company's
increased sales of higher value rated intervals. In addition to increases in
sales of Vacation Intervals, the Company has increased revenues generated from
sales of upgraded intervals at its Existing Resorts through the continued
implementation of marketing and sales programs focused on selling such intervals
to Silverleaf Owners. See "Business -- Growth Strategy".

The provision for uncollectible notes as a percentage of Vacation Interval
sales remained relatively unchanged at 25.1% in 1996 versus 25.5% in 1995.

Interest income increased 53.0% to $6.7 million in 1996 from $4.4 million
in 1995. This increase resulted from a $20.2 million increase in notes
receivable, net of allowance for uncollectible notes, due to increased sales.

Management fee income decreased 11.8% to $2.2 million in 1996 from $2.5
million in 1995. This decrease was primarily the result of the Master Clubs' net
income being reduced by significant non-capital maintenance and refurbishment
costs incurred as a part of the Company's continuing facility improvement
program and increased operating costs.

In 1996, lease income increased 31.1% to $1.7 million in 1996 from $1.3
million in 1995 due to increased sales under the Company's Sampler program. To
date, the Company has generally been successful in converting such customers to
purchasers of Vacation Intervals.

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<PAGE> 39

Other income decreased 21.4% to $1.4 million in 1996 from $1.8 million in
1995. This decrease was primarily due to a significant reduction in servicing
fee income due to discontinuation of factoring notes receivables, and, to a
lesser extent, the temporary closing of the Holiday Hills golf course for
remodeling.

Cost of sales as a percentage of gross Vacation Interval sales declined to
5.8% in 1996 from 9.1% in 1995. This decrease was due to a greater volume of
sales of Vacation Intervals with a low cost basis, and to a lesser extent, price
increases of Vacation Intervals sold. The Company obtained a significant amount
of low cost inventory in 1996 (approximately 1,500 intervals) through its
program to reacquire Vacation Intervals owned but not actively used by
Silverleaf Owners. These Vacation Intervals were acquired at a nominal cost to
the Company (typically $200 per interval). The 1,500 intervals acquired in 1996
represent approximately 5% of all intervals owned by Silverleaf Owners at
December 31, 1996. The Company believes the number of intervals acquired in 1996
was unusually high and that a more normalized level would approximate 500
intervals per year in future years. As the Company has begun an extensive
construction program to build new inventory, the cost of sales average is
expected to increase.

Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 45.4% in 1996 from 49.7% in 1995. This decline is due primarily to
the efficiencies resulting from the Company's telemarketing and sales force
areas and economies of scale.

Operating, general and administrative expenses as a percentage of gross
Vacation Interval sales declined to 18.6% in 1996 from 22.5% in 1995 due to
realization of economies of scale and elimination of non-recurring expenses
incurred in 1995.

Interest expense as a percentage of interest income declined to 71.3% in
1996 from 82.8% in 1995. This decrease was due to lower borrowing cost during
the period.

Depreciation and amortization expense as a percentage of total revenue
increased to 2.6% in 1996 from 2.4% in 1995 primarily due to an increase in
property, plant and equipment made in 1996.

Income from continuing operations before income taxes increased 175.0% to
$8.4 million in 1996 from $3.1 million in 1995 as a result of the above
mentioned operating activities.

Income tax expense as a percentage of income from continuing operations
before income taxes declined to 37.3% in 1996 from 49.4% in 1995 due to
recognition in 1995, for tax purposes, of certain income which was not
recognized under generally accepted accounting principles. CBI operated as a
Subchapter S Corporation wholly-owned by the principal shareholder; accordingly,
the cumulative losses of CBI incurred prior to the transfer of the stock of CBI
to the Company were not available for utilization by the Company as an offset to
taxable income. Effective January 1, 1996, the Company converted CBI to a C
corporation and CBI will be included in the consolidated income tax return of
the Company.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995, TO THE YEAR ENDED DECEMBER
31, 1994. Revenues in 1995 were $36.7 million, representing a $9.5 million or
35.1% increase over revenues of $27.2 million in 1994. The increase was
primarily due to a $6.9 million increase in net sales of Vacation Intervals and
a $2.5 million increase in interest income.

In 1995, the number of Vacation Interval weeks sold, exclusive of sales of
upgraded Vacation Intervals, increased 30.4% to 4,831 from 3,705 in 1994 and the
average price per unit increased 2.7% to $5,881 from $5,727. The increase in
Vacation Interval sales resulted from the Company's bringing many lead
generation, telemarketing and sales programs in-house.

The provision for uncollectible notes as a percentage of Vacation Interval
sales increased to 25.5% in 1995 versus 23.3% in 1994 due to the impact of the
Company's aggressive inventory recovery policy.

Interest income increased 131.4% to $4.4 million in 1995 from $1.9 million
in 1994. This increase was the result of a $15.9 million increase in notes
receivable and the Company's decision to change its method of financing
operations. Prior to 1994, the Company had factored its customer notes
receivable to third parties. In 1994 the Company ceased factoring and began
retaining and borrowing against its notes. This change in the Company's method
of financing enabled it to retain the interest income on the notes.

37
<PAGE> 40

Management fee income increased 3.5% to $2.5 million in 1995 from $2.4
million in 1994 due primarily to an increase in the number of dues paying
Silverleaf Owners resulting from increased sales during the period.

Lease income increased 15.2% to $1.3 million in 1995 from $1.1 million in
1994 due to emphasis of sales under the Company's Sampler program.

Other income decreased 5.1% to $1.8 million in 1995 from $1.9 million in
1994. This decrease was primarily due to servicing income of the Company's
factored notes as the Company ceased factoring of notes receivable.

Cost of sales as a percentage of gross Vacation Interval sales declined to
9.1% in 1995 from 10.2% in 1994. This decrease was due to a greater volume of
sales of Vacation Intervals with a low cost basis, and to a lesser extent, price
increases of Vacation Intervals sold. The Company obtained a significant amount
of low cost inventory in 1995 by commencing a program to reacquire Vacation
Intervals owned but not actively used by Silverleaf Owners.

Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 49.7% in 1995 from 50.0% in 1994. The Company's lead generation and
telemarketing programs were taken in house in mid-1994. Prior to that time,
outside marketers, who were paid on a production basis, had been used.

Operating, general and administrative expenses as a percentage of gross
Vacation Interval sales increased to 22.5% in 1995 from 20.6% in 1994. This
increase included nonrecurring expenses comprised of $1.0 million incurred in
connection with promoting the Company's Holiday Hills development; commissions
of $212,000 paid in connection with the inventory recovery program; salary and
bonus increases of $277,000; $80,000 related to the implementation of a customer
relations function, and other various increases primarily related to increased
volume.

Interest expense as a percentage of interest income declined to 82.8% in
1995 from 87.1% in 1994. This decrease was due to lower borrowing costs and an
increase in notes receivable.

Depreciation and amortization expense as a percentage of total revenue
increased to 2.4% in 1995 from 2.2% in 1994 primarily due to the impact of added
capital investments during 1995.

Income from continuing operations before income taxes declined 24.1% to
$3.1 million in 1995 from $4.0 million in 1994 as a result of the above
mentioned operating activities.

Income tax expense as a percentage of income from continuing operations
before income taxes increased to 49.4% in 1995 from 41.6% in 1994 due to
recognition in 1995, for tax purposes, of certain income which was not
recognized under generally accepted accounting principles.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash. The Company generates cash primarily from the sale of
Vacation Intervals, the financing of promissory notes from Silverleaf Owners,
management fees, Sampler sales, and resort and utility operations. During the
years ended December 31, 1994, 1995, and 1996 and the three months ended March
31, 1996 and 1997, cash provided by operations was $2.5 million, $3.7 million,
$6.4 million, $3.4 million and $2.7 million, respectively. The Company generates
cash from financing sales not only by borrowing against customer loans
receivable but also from the spread between interest paid on borrowings and
interest received on the related customer notes receivables. Because the Company
uses significant amounts of cash in the development and marketing of Vacation
Intervals, but collects the cash on the customer notes receivable over a long
period of time, borrowing against receivables is a necessary part of normal
operations. See "Risk Factors -- Financing Customer Borrowings" and "Risk
Factors -- Borrower Defaults".

For regular Federal income tax purposes, the Company reports substantially
all of the Vacation Interval sales it finances under the installment method.
Under the installment method, the Company does not recognize income on sales of
Vacation Intervals until cash is received in the form of a down payment and as
installment payments on customer receivables are received by the Company. The
deferral of income tax liability conserves cash resources on a current basis.
Interest will be imposed, however, on the amount of tax attributable to the

38
<PAGE> 41

installment payments for the period beginning on the date of sale and ending on
the date the related tax is paid. If the Company is otherwise not subject to tax
in a particular year, no interest is imposed since the interest is based on the
amount of tax paid in that year. The consolidated financial statements do not
contain an accrual for any interest expense which would be paid on the deferred
taxes related to the installment method as the interest expense is not estimable
as of December 31, 1996. In addition, the Company is subject to current
alternative minimum tax ("AMT") as a result of the deferred income which results
from the installment sales treatment. Payment of AMT reduces future regular tax
liability in respect of installment sales, and creates a deferred tax asset. As
of December 31, 1996, the Company estimates its total liability for AMT to be
approximately $3.3 million which is included in Income Taxes Payable. See "Risk
Factors -- Acceleration of Deferred Taxes", "Risk Factors -- Alternative Minimum
Taxes" and Note 6 of Notes to Consolidated Financial Statements. The Company's
net operating losses, which also may be used to offset installment sale income,
expire beginning in 2007 through 2011. Realization of the deferred tax assets
arising from net operating losses is dependent on generating sufficient taxable
income prior to the expiration of the loss carryforwards and other factors. See
"Risk Factors -- Limitations on Use of Net Operating Loss from Ownership Change"
and Note 6 of Notes to Consolidated Financial Statements.

Financing activities have historically provided cash as a result of the
Company's financing of customer notes receivable. Net cash provided from
financing activities for the years ended December 31, 1994, 1995, and 1996 and
for the three months ended March 31, 1996 and 1997 was $10.4 million, $18.7
million, $14.9 million, $819,000 and $4.4 million, respectively. During the
three month period ended March 31, 1997, compared to the three month period
ended March 31, 1996, the $3.6 million increase in cash flow provided by
financing activities was due to the $4.6 increase in proceeds from borrowings
from unaffiliated entities offset in part by increased payments on borrowings to
unaffiliated entities. The Company has five revolving credit facilities with
four lenders providing for loans of up to $96 million. Approximately $34.7
million of principal and interest related to advances under these credit
facilities was outstanding at December 31, 1996. At March 31, 1997,
approximately $39.7 million of principal and interest related to advances under
existing credit facilities was outstanding. Under these credit facilities,
approximately $392,000, $7.3 million, $21.0 million, $5.6 million, and $5.4
million of the $39.7 million outstanding at March 31, 1997 is due in 1998, 1999,
2001, 2002, and 2003, respectively. During 1996, the weighted average cost of
funds for these borrowings was 10.8%.

Uses of Cash. Investing activities typically reflect a net use of cash
because of capital additions and loans to customers in connection with the
Company's Vacation Interval sales. Net cash used in investing activities for the
years ended December 31, 1994, 1995, and 1996 and for the three months ended
March 31, 1996 and 1997 was $12.2 million, $19.6 million, $24.0 million, $6.2
million and $7.0 million, respectively. Cash used in investing activities
increased significantly in the year ended December 31, 1996, over 1995 and in
the year ended December 31, 1995, over 1994 due to significant increases in
customer notes receivable and a major capital improvements program begun in 1995
to remodel the corporate headquarters and build new field sales offices.

The Company requires funds to finance the acquisitions of property for
future resort development and to further develop the Existing Resorts, as well
as to make capital improvements and support current operations. The Company has
budgeted capital expenditures of $6.8 million in 1997 for the development of
additional roads and utilities, amenities, and condominium units at the Existing
Resorts. The Company is also actively seeking sites for new resorts. The Company
has recently entered into an agreement to acquire three tracts of land in
Missouri, Illinois, and Tennessee for an aggregate purchase price of $3.2
million. Neither the $6.8 million of proposed capital expenditures nor the $3.2
million of proposed acquisition costs will be paid for from the proceeds of the
Offering. Such capital expenditures and acquisition costs will be financed
through a combination of cash flow from operations and proceeds from anticipated
borrowings under existing or future lines of credit (with available capacity
thereunder enhanced due to the application of the Offering proceeds to existing
indebtedness). See "Business -- Growth Strategy", "Business -- Existing Credit
Facilities" and "Use of Proceeds".

Customer defaults have significant impact on cash available to the Company
from financing customer notes receivable in that notes more than 60 days past
due are not eligible as collateral. As a result, the Company in effect must
repay borrowings against such notes. See "Risk Factors -- Borrower Defaults",
"Risk Factors -- Financing Customer Borrowings" and "Risk
Factors -- Development, Construction and Property Acquisition Activities".

39
<PAGE> 42

CBI, which has historically required funding from the Company, was engaged
in the development and sale of full ownership condominiums, the investment in,
holding and sale of both real and personal properties, principally in Missouri,
and holding land in Mississippi. Subsequent to the acquisition of CBI, the
Company determined that CBI's condominium development and sale line of business
was not fully compatible with the Company's timeshare operations. Consequently,
CBI has ceased all development operations and adopted a plan of dissolution
effective December 31, 1996, whereby all remaining full ownership condominiums
will be sold by December 31, 1997. Accordingly, the condominium development and
sales operation of CBI is being treated as a discontinued operation for
financial reporting purposes. The income (loss), net of income taxes, from the
discontinued operations was $568,000, $(1.5) million, and $(295,000) for the
years ended December 31, 1994, 1995, and 1996, respectively. Anticipated future
costs of carrying and selling the remaining inventory of CBI have been accrued
as of December 31, 1996, in the amount of $201,000.

Credit Facilities. At March 31, 1997, the Company had available certain
revolving credit facilities for financing customer notes receivable and for
construction and development activities. See "Business -- Existing Credit
Facilities" and Note 7 of Notes to Consolidated Financial Statements. Some of
the debt outstanding under these facilities will be paid with the proceeds of
the Offering. See "Capitalization" and "Use of Proceeds". The Company intends to
maintain each of the facilities and to utilize such facilities to finance its
operations.

In accordance with its growth strategy, the Company intends to accelerate
the development of the Existing Resorts and to acquire new properties for
development. The Company intends to finance such development in part with
existing credit facilities. Additional financing will be required. Any failure
to renew existing credit facilities or obtain adequate financing under new
facilities could have a material adverse effect on the Company's financial
position, results of operations or liquidity, and could significantly reduce the
Company's plans to acquire new properties and expand the Existing Resorts.

In the future, the Company may negotiate additional credit facilities,
issue corporate debt, issue equity securities, or any combination of the above.
Any debt incurred or issued by the Company may be secured or unsecured, may bear
interest at fixed or variable rates of interest, and may be subject to such
terms as management deems prudent. There is no assurance that the Company will
be able to secure additional corporate debt or equity at or beyond current
levels. See "Risk Factors -- Leverage".

Giving effect to the Offering and application of the proceeds therefrom,
the Company believes available borrowing capacity, together with cash generated
from operations, will be sufficient to meet the Company's liquidity, operating
and capital requirements for at least the next 12 months.

INFLATION

Inflation and changing prices have not had a material impact on the
Company's revenues, operating income and net income during any of the Company's
three most recent fiscal years. However, to the extent inflationary trends
affect short-term interest rates, a portion of the Company's debt service costs
may be affected as well as the rates the Company charges on its customer
mortgages.

40
<PAGE> 43

BUSINESS

OVERVIEW

The Company is a leading developer, marketer, and operator of timeshare
resorts in the economy segment of the timeshare industry. The Company currently
owns and operates five Drive-to Resorts in Texas and two Destination Resorts in
Missouri. The Drive-to Resorts are designed to appeal to value conscious
vacationers seeking comfortable and affordable accommodations in locations
convenient to their residences. The Drive-to Resorts are located proximate to
major metropolitan areas (currently Dallas-Fort Worth, Houston, San Antonio, and
Austin), facilitating more frequent "short stay" getaways, which the Company
believes is a growing vacation trend. The Destination Resorts, which are located
in the popular resort area of Branson, Missouri, offer Silverleaf Owners the
opportunity to upgrade into a higher quality destination resort area as their
lifestyles and travel budgets permit. The Existing Resorts are in rustic areas
and provide a quiet, relaxing vacation environment. The Company believes its
combination of Drive-to and Destination Resorts offers its customers within the
"economy segment" an economical alternative to commercial vacation lodging. The
average price for an annual one-week Vacation Interval for a two-bedroom unit at
the Existing Resorts was $6,799 in 1996 and $6,028 in 1995, which compares
favorably to an industry average price of $12,014 for a two-bedroom unit in
1995.

The Company offers benefits to Silverleaf Owners which are uncommon in the
timeshare industry. The benefits include (i) use of vacant lodging facilities at
the Existing Resorts at no extra cost through Silverleaf's "Endless Escape"
program; (ii) year-round access to the Existing Resorts' non-lodging amenities
such as fishing, boating, horseback riding, tennis or golf for little or no
additional charge; and (iii) the right of Silverleaf Owners to exchange their
Vacation Interval for a different time period or different Existing Resort
through Silverleaf's internal exchange program. The above benefits are subject
to availability. Silverleaf Owners also have the option to enroll in the world's
largest Vacation Interval exchange network operated by RCI.

OPERATIONS

Silverleaf's operations include (i) developing timeshare resorts; (ii)
marketing and selling Vacation Intervals to prospective first-time owners; (iii)
marketing and selling upgraded Vacation Intervals to existing Silverleaf Owners;
(iv) providing financing for the purchase of Vacation Intervals; and (v)
operating timeshare resorts. The Company has substantial in-house capabilities
which enable it to coordinate all aspects of expansion of the Existing Resorts
and the development of any new resorts, including site selection, design, and
construction pursuant to standardized plans and specifications. The Company also
performs substantially all marketing and sales functions internally, and has
made a significant investment in operating technology, including sophisticated
telemarketing and computer systems and proprietary software applications. The
Company identifies potential purchasers through internally developed marketing
techniques, and sells Vacation Intervals through on-site sales offices at
certain Drive-to Resorts. This practice allows the Company to avoid the more
expensive marketing costs of subsidized airfare and lodging which are typically
associated with the timeshare industry. The Company believes its marketing
program and operating systems enable it to market and sell Vacation Intervals at
a lower cost than its competitors in the timeshare industry.

During 1996, the Company sold 6,054 Vacation Intervals at the Existing
Resorts to new customers, compared to 4,831 and 3,705 during 1995 and 1994,
respectively. Total revenues for the same periods increased to $48.0 million in
1996 from $36.7 million and $27.2 million in 1995 and 1994, respectively. In the
first quarter of 1997, the Company sold 1,539 Vacation Intervals at the Existing
Resorts to new customers, compared to 1,544 in the first quarter of 1996. Total
revenues for the first quarter of 1997 were $15.3 million compared to $12.0
million for the first quarter of 1996. At March 31, 1997, the Company had an
existing inventory of 6,024 Vacation Intervals, and a master plan to construct
up to 70,740 additional Vacation Intervals at the Existing Resorts, subject to
demand and contingencies applicable to real estate development. See "Risk
Factors -- Development, Construction and Property Acquisition Activities".

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<PAGE> 44

December 31, 1996, the Company had a portfolio of approximately 15,796 customer
promissory notes totalling approximately $66.8 million with an average yield of
14.7% per annum, which compares favorably to the Company's weighted average cost
of borrowings of 10.8% per annum. At December 31, 1996, approximately $3.6
million in principal, or 5.9% of the Company's loans to Silverleaf Owners, were
60 to 120 days past due, and approximately $4.3 million in principal, or 7.2% of
the Company's loans to Silverleaf Owners, were more than 120 days past due. The
Company provides for uncollectible notes by reserving an amount which management
believes is sufficient to cover anticipated losses from customer defaults. In
1996 and 1995, the Company's provision for uncollectible notes exceeded actual
loan chargeoffs by $2.0 million and $467,000, respectively. See "Risk
Factors -- Borrower Defaults" and "Risk Factors -- Financing Customer
Borrowings".

Each Existing Resort has a Club which has contracted with the Master Club
to manage the Existing Resorts. The Master Club has contracted with the Company
to perform the supervisory, management and maintenance functions at the Existing
Resorts on a collective basis. Costs of operating the Existing Resorts,
including management fees to the Company, are covered by monthly dues paid by
Silverleaf Owners to their respective Clubs, together with income generated by
the operation of certain amenities at the Existing Resorts. See
"Business -- Clubs/Master Club".

THE TIMESHARE INDUSTRY

The Market. The resort component of the leisure industry is serviced
primarily by two alternatives for overnight accommodations: commercial lodging
establishments and timeshare resorts. Commercial lodging consists of (i) hotels
and motels in which a room is rented on a nightly, weekly or monthly basis for
the duration of the visit, and (ii) rentals of privately-owned condominium units
or homes. For many vacationers, particularly those with families, a lengthy stay
at a quality commercial lodging establishment is not economical. In addition,
room rates and availability at such establishments are subject to change
periodically. Timeshare ownership presents an economical alternative to
commercial lodging for vacationers.

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<PAGE> 45

Worldwide Market. In 1995 (the most recent year for which statistics are
available), the worldwide timeshare industry experienced 206,000 first-time
buyers, sales of 600,000 Vacation Intervals, and sales volume of $5 billion.
First introduced in Europe in the mid-1960s, ownership of Vacation Intervals has
been one of the fastest growing segments of the hospitality industry over the
past two decades. As shown in the following charts, the worldwide timeshare
industry has expanded significantly since 1980 both in Vacation Interval sales
volume and number of Vacation Interval owners.

DOLLAR VOLUME OF VACATION INTERVAL SALES
(IN BILLIONS)

NUMBER OF VACATION INTERVAL OWNERS
(IN MILLIONS)

43
<PAGE> 46

United States Market. The number of interval owners of U.S. timeshare
properties has also grown significantly as set forth in the following table:

NUMBER OF VACATION INTERVAL OWNERS
OF U.S. PROPERTIES
(IN MILLIONS)
[TRACOR BAR GRAPH]

Reasons for Growth. The Company believes that, based on published industry
data, the following factors have contributed to the increased acceptance of the
timeshare concept among the general public and the substantial growth of the
timeshare industry over the past 15 years:

- increased consumer confidence resulting from consumer protection
regulation of the timeshare industry and the entrance of brand name
national lodging companies to the industry;

- increased flexibility of timeshare ownership due to the growth of
exchange organizations such as RCI;

- improved quality and management of timeshare resorts and related
amenities;

- increased consumer awareness of the value and benefits of timeshare
ownership, including the cost savings relative to other lodging
alternatives; and

- improved availability of financing for purchasers of Vacation Intervals.

Despite the growth in the timeshare industry, Vacation Interval ownership
had only achieved an approximate 1.72% market penetration of all U.S. households
at December 31, 1994. This is comprised of a .39% penetration of households with
an annual income under $35,000, a 1.73% penetration of households earning
$35,000 to $49,999 per year, and a 3.70% penetration of households with yearly
earnings of $50,000 to $99,999. In 1995, 69.6% of all existing one-week
intervals were purchased for under $10,000.

The timeshare industry is highly fragmented, engaged in by a large number
of local and regional resort developers and operators. The Company believes that
one of the most significant factors contributing to the current awareness of the
timeshare industry is the entry into the market of some of the world's major
lodging, hospitality and entertainment companies, including Marriott, Disney,
Hilton, Hyatt, and Ramada. Certain other companies, such as Signature, Vistana,
and Vacation Break, have recently become public companies, which has also added
to the growth of the industry.

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<PAGE> 47

The Consumer. The median age of a Vacation Interval owner in the United
States in 1995 was 50 years. The median annual household income of a U.S.
Vacation Interval owner in 1995 was approximately $63,400. In 1995,
approximately 16.3% of all U.S. Vacation Interval owners had an annual household
income of less than $40,000, approximately 30.4% of such owners had an annual
household income of less than $50,000, approximately 34.7% of such owners had a
household income of $50,000 to $74,999, and approximately 34.8% of such owners
had household incomes that exceeded $75,000. In a 1990 report, the U.S. Census
Bureau estimated that 30.2% of all U.S. households in 1995 would have a
household income between $25,000 and $50,000, which represents the Company's
targeted market. The U.S. Census Bureau figures represent household incomes
throughout the United States, whereas the Company's customers currently live
primarily only in Texas and Missouri; accordingly, the estimates prepared by the
U.S. Census Bureau may not accurately reflect the annual incomes of the
Company's target customers. Based upon a sampling of approximately 13% of the
Company's customers who purchased a Vacation Interval in 1995 and 1996,
approximately 52% of such customers had an income of $25,000 to $50,000 and
approximately 16% of such customers had an annual income less than $25,000.

The Company believes that its growth strategy is well designed to take
advantage of the strong growth conditions in the timeshare market generally and
the sheer size of the economy segment of the industry particularly.

GROWTH STRATEGY

The Company believes it is the largest operator and developer in the
economy segment of the industry, and further believes this segment has
particularly attractive demographic and competitive characteristics. The Company
targets households with earnings between $25,000 and $50,000, which represented
30.2% of the U.S. population in 1995 based on a 1990 projection by the U.S.
Census Bureau; however, only 1% of these households owned a Vacation Interval.
The Company believes it is the only significant timeshare developer focused
solely on this segment. The Company intends to grow through the following
strategies:

- Increasing Development and Sales of Vacation Intervals at Existing
Resorts. The Company intends to capitalize on its significant expansion
capacity at the Existing Resorts by increasing marketing, sales and
development activities. At March 31, 1997, the Company owned
approximately 3,900 acres of land at the Existing Resorts, including
approximately 3,046 acres which are unsuitable for further development
due to deed restrictions and allowances for lakes or waterways. After
deducting such unsuitable acreage and acreage developed by the Company
through March 31, 1997, approximately 579 acres remain available for
further development of timeshare units and amenities under the Company's
master plan. The Company has broadened its marketing efforts, increased
its sales force, completed (in certain instances) the construction of new
sales offices, club houses, and other amenities, and commenced the
development of newer lodging facilities. Furthermore, the Company has
continued to emphasize its Endless Escape program designed to accommodate
shorter, "getaway" vacations and has broadened its product offerings to
include biennial (alternate year) intervals and Samplers which are
designed to accommodate more cost-conscious customers.

- Increasing Sales of Upgraded Intervals at Existing Resorts. The Company
has designed specific marketing and sales programs to sell upgraded
Vacation Intervals to Silverleaf Owners. Upgrades may include (i) an
interval in a newly designed and constructed standard unit, (ii) an
interval in a larger luxury or enhanced amenity unit, (iii) an interval
during a more desirable time period (week), (iv) an interval at a
different Drive-to Resort, (v) an interval at a Destination Resort, and
(vi) the purchase of an interval for an additional week by an existing
Silverleaf Owner. The Company generally develops higher quality, larger
standard and luxury units for sale as upgraded intervals. For example, at
Ozark Mountain Resort in Branson, Missouri, luxury "President's View"
units are offered for sale at prices ranging from $8,000 to $17,500 per
Vacation Interval. The Company is expanding the President's View units to
other Existing Resorts. To facilitate sales, an existing Silverleaf Owner
may apply the equity in his existing Vacation Interval against the price
of an upgraded Vacation Interval. Such purchase price is typically
financed in the same manner as sales of standard Vacation Intervals. In
1996, upgrade sales amounted to $7.9 million, or approximately 16.4% of
the Company's total revenues. The Company must incur additional sales
commissions upon the resale of Vacation Intervals reconveyed to the
Company by purchasers of upgraded

45
<PAGE> 48

intervals, and such sales absorb their proportionate share of marketing costs to
the extent they displace the sale of another interval, although they do not
directly result in incremental marketing costs. Sales commissions on sales of
reconveyed intervals amount to approximately 9% to 15% of the sales price.

- Development of New Resorts and Acquisitions. The Company believes there
is ample opportunity for development of new timeshare resorts with
characteristics similar to those of the Existing Resorts. The Company
plans to develop new Drive-to Resorts close to major metropolitan areas
and is considering various potential sites. In this regard, the Company
has recently entered into an agreement with an unrelated third party to
purchase three parcels of land in Illinois, Missouri, and Tennessee for
approximately $3.2 million. These tracts are being operated by the
current owner as membership campgrounds. The agreement allows the Company
approximately four months to inspect the properties and complete its due
diligence and is contingent upon the Company's satisfaction with the
results. Among other things, the agreement will require the Company (i)
to continue to operate and maintain existing campsites and recreational
facilities for the use of existing campground members, and (ii) to honor
the current owner's obligations to provide camping privileges to
campground members who have prepaid for such privileges for time periods
ranging from five to ten years. To secure these obligations to the
current owner, the agreement requires the Company to provide the current
owner letters of credit in the aggregate amount of $500,000. If the
Company elects to close this acquisition, the Company intends to develop
two of these properties located in Illinois and Missouri as new drive-to
resorts by constructing up to approximately 500 timeshare units on the
two properties over the next seven years. The two parcels of land in
Illinois and Missouri are located in proximity to Chicago and St. Louis.
Construction of units could begin as early as the fourth quarter of 1997.
The Company estimates that it will cost approximately $47.6 million to
acquire and develop these two properties as new drive-to resorts.
However, engineering, architectural and construction estimates have not
been completed by the Company, and there can be no assurance that the
Company will either close the acquisition of these properties or, if
closed, develop these properties at the timetable, cost, and unit numbers
currently projected. If this three property acquisition is closed, the
Company intends to operate the Tennessee property it currently has under
contract as a membership campground until the Company can fully assess
the feasibility of developing this property as a possible timeshare
resort. Additionally, the Company owns a five acre parcel of land in Pass
Christian, Mississippi, which it plans to develop as a new destination
resort. The Company estimates that it will cost approximately $4.5
million to develop this property; however, engineering, architectural and
construction estimates have not been completed by the Company, and there
can be no assurance that the Company will develop this site, or if
developed, that the currently projected timetable, costs, or unit numbers
will not be modified. See "Risk Factors -- Development, Construction and
Property Acquisition Activities". In developing a new resort, the Company
will use its internal design, marketing, and sales capabilities to
complete and market such resorts in accordance with the Company's
standard criteria and incorporate them into its system. The Company will
consider acquiring other resorts and timeshare companies where it
believes such acquisitions would be advantageous to its business. There
can be no assurance that the Company will develop new resorts, locate
suitable acquisition candidates or successfully consummate any such
acquisitions. See "Risk Factors -- Development, Construction and Property
Acquisition Activities".

- Improvement of Operating Margins. The Company believes it can increase
sales without significantly increasing general and administrative costs
by capitalizing on recent investments in its marketing and administrative
systems and personnel, including approximately $2.5 million for
telemarketing equipment and computer hardware and software at the
Company's headquarters in Dallas, Texas. The Company also believes it can
improve margins by selling upgraded Vacation Intervals to existing
Silverleaf Owners since sales of upgraded intervals have significantly
lower sales and marketing costs. In addition, as a public company,
Silverleaf may be able to achieve lower borrowing costs and a lower cost
of capital, although there can be no assurance that as a public company
Silverleaf will be able to achieve such lower borrowing costs and costs
of capital.

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<PAGE> 49

COMPETITIVE ADVANTAGES

The Company believes the following characteristics provide Silverleaf with
competitive advantages in operating within the economy segment of the timeshare
industry:

- Lower Marketing and Sales Costs. With convenient locations and on-site
sales offices at certain Drive-to Resorts, the Company can invite
potential customers to tour the Drive-to Resorts without offering
subsidized airline tickets and lodging, a significant marketing expense
typically incurred by competitors in the industry. The Company has also
reduced marketing, operating, and administrative costs through
centralization and automation of many functions at its Dallas, Texas
headquarters.

- Convenient Drive-to Locations. The Company's Drive-to Resorts are located
within a two-hour drive of the target customers' residences, which
accommodates the demand for shorter, more frequent, close to home
vacations. This proximity facilitates use of the Company's Endless Escape
program which offers Silverleaf Owners up to six consecutive nights per
visit on an unlimited basis for no additional charge, subject to
availability and certain limitations. The Company believes it is the only
operator in the industry which offers its customers these benefits.
Silverleaf Owners can also conveniently enjoy non-lodging resort
amenities year-round.

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<PAGE> 50

THE EXISTING RESORTS

The following table sets forth certain information regarding each of the
Existing Resorts at March 31, 1997, unless otherwise indicated.
<TABLE>
<CAPTION>
VACATION INTERVALS AT VACATION
UNITS AT RESORTS RESORTS INTERVALS SOLD(A)
------------------------ --------------------- -----------------
INVENTORY INVENTORY IN
PRIMARY AT PLANNED AT PLANNED DATE SALES THROUGH 1996
RESORT/LOCATION MARKET SERVED 3/31/97 EXPANSION(B) 3/31/97 EXPANSION COMMENCED 3/31/97 ONLY
--------------- -------------- --------- ------------ --------- --------- ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DRIVE-TO RESORTS
Holly Lake Dallas- 130 104 595 5,200(d) 1982 6,110 1,376
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 204 388 560 20,176(e) 1980 9,929 1,970
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 64 16 114 800(d) 1987 3,199 821
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 96 304 1,184 15,808(e) 1988 3,809 1,139
Conroe, TX
Hill Country Austin-San 113 292(f) 790 14,600(d) 1984 4,990 644
Canyon Lake, TX Antonio, TX
DESTINATION RESORTS
Ozark Mountain Branson, MO 124 78 2,432 4,056(e) 1982 3,864 95
Kimberling City, MO
Holiday Hills Branson, MO 24 202 349 10,100(d) 1984 823 9
Branson, MO
--- ----- ----- ------ ------ -----
TOTAL 755 1,384 6,024 70,740 32,724 6,054
=== ===== ===== ====== ====== =====

TOTAL $ 6,645
=======
</TABLE>

- ---------------

(a) These totals do not reflect sales of upgraded Vacation Intervals to
Silverleaf Owners. For 1996, upgrade sales at the Existing Resorts were as
follows:

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<PAGE> 51

<TABLE>
<CAPTION>
GOVT. GOVT. GOVT.
APPROVAL APPROVAL APPROVAL
SHELL CURRENTLY IN PROCESS PROCESS PROCESS
COMPLETE CONSTRUCTION COMPLETE PENDING NOT STARTED TOTAL
-------- ------------ -------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Holly Lake.............................. 4 -- 50 -- 50 104
The Villages............................ -- 12 114 152 110 388
Lake O' The Woods....................... -- -- 16 -- -- 16
Piney Shores............................ -- 12 64 120 108 304
Hill Country............................ 3 12 82 42 153(f) 292
Ozark Mountain.......................... 12 -- 30 -- 36 78
Holiday Hills........................... 14 -- 118 -- 70 202
-- -- --- --- --- -----
33 36 474 314 527 1,384
== == === === === =====
</TABLE>

(d) These figures are based on 50 one-week intervals per unit. In some
instances, the Company may be able to market 52 one-week intervals per unit.

(e) These figures are based on 52 one-week intervals per unit.

(f) This figure includes 132 planned units on land which the Company has the
right to acquire in June 1997 pursuant to a written agreement.

(g) Boating is available near the resort.

FEATURES COMMON TO ALL RESORTS

The Existing Resorts are located in rustic areas offering Silverleaf Owners
a quiet, relaxing vacation environment. Furthermore, the resorts offer different
vacation activities, including golf, fishing, boating, swimming, horseback
riding, tennis and archery. Features common to all resorts include the
following:

- Endless Escape Program. The Company's Endless Escape program offers
Silverleaf Owners a substantial benefit not typically enjoyed by many
other timeshare owners. In addition to the right to use his unit one week
per year, the Endless Escape program allows a Silverleaf Owner to also
use any of the Existing Resorts for up to six consecutive nights per
visit on an unlimited basis for no additional charge. The Endless Escape
program is limited based on the availability of units which include
unused intervals and unsold inventory. The Company believes this program
is important as many vacationers prefer shorter two to three day
vacations. Silverleaf Owners who have utilized the resort less frequently
are given priority to

49
<PAGE> 52

use the program and may only use an interval with an equal or lower
rating than his Vacation Interval. See "-- Participation in Vacation
Interval Exchange Networks".

- Year-Round Use of Amenities. Silverleaf Owners have unlimited year-round
use of the amenities located at the Existing Resorts, such as boating,
fishing, miniature golf, tennis, swimming, or hiking, for little or no
additional cost. Certain amenities, however, such as golf, horseback
riding or watercraft rentals, may require a usage fee.

- Exchange Privileges. Each Silverleaf Owner has certain exchange
privileges which entitle him on an annual basis to (i) exchange his
interval for a different interval (week) at the same resort so long as
the different interval is of an equal or lower rating; and (ii) exchange
his interval for the same interval (week) at any other of the Existing
Resorts. These intra-company exchange rights require an exchange fee,
which is currently $50, and are conditioned upon availability of the
desired interval or resort. In addition, for an additional annual fee of
approximately $74, a Silverleaf Owner may join the exchange program
administered by RCI. See "-- Participation in Vacation Interval Exchange
Networks".

- Deeded Ownership. The Company typically sells a Vacation Interval which
entitles the owner to use a specific unit for a designated one-week
interval each year. The Vacation Interval purchaser receives a recorded
deed which grants the purchaser a percentage interest in a specific unit
for a designated week. The Company also sells a biennial (alternate year)
Vacation Interval which allows the owner to use a unit for a one-week
interval every other year with reduced dues.

- Clubs/Master Club. Each of the Existing Resorts has a Club which has an
agreement with the Master Club to manage the Existing Resorts on a
centralized and collective basis. The Master Club has contracted with the
Company to perform the supervisory, management and maintenance functions
granted by the Clubs to the Master Club. Costs of these operations are
covered by monthly dues paid by Silverleaf Owners to their respective
Clubs together with income generated by the operation of certain
amenities at the Existing Resorts.

- On-Site Security. The Existing Resorts are patrolled by security
personnel who are either employees of the Master Club or personnel of
independent security service companies which have contracted with the
Clubs.

DESCRIPTION OF EXISTING RESORTS

Holly Lake Resort. Holly Lake is a family-oriented golf resort located in
the Piney Woods of East Texas, approximately 105 miles east of Dallas. The
timeshare portion of Holly Lake is part of a 4,300 acre mixed use development of
single-family lots and timeshare units with other third-party developers. The
Company owns approximately 2,740 acres within Holly Lake, of which approximately
2,667 may not be developed due to deed restrictions. At March 31, 1997,
approximately 27 acres were developed such that approximately 45 remaining acres
are currently planned by the Company to be used for future development.

The Holly Lake resort timeshare development has been planned for a total of
234 units, with 130 units completed as of March 31, 1997. Three different types
of units are offered at the resort: (i) two bedroom, two bath, wood siding and
stucco fourplexes; (ii) one bedroom, one bath, one sleeping loft, log
construction duplexes; and (iii) two bedroom, two bath, log construction
fourplexes. Each unit has a living room with sleeper sofa and full kitchen.
Other amenities within each unit include whirlpool tub, color television, and
vaulted ceilings. Certain units include interior ceiling fans, imported ceramic
tile, over-sized sliding glass doors, and rattan and pine furnishings.

Amenities at the resort include an 18-hole golf course with pro shop;
19th-hole private club and restaurant; Holly Lake Restaurant; Country Store;
indoor rodeo arena and stables; six tennis courts (four lighted); four different
lakes (one with sandy swimming beach and swimming dock, one with boat launch for
water skiing); two swimming pools with bathhouses; children's pool and pavilion;
recently completed hiking/nature trail; children's playground area; miniature
golf course; three picnic areas; activity center with big screen television;
gameroom with arcade games and pool tables; horseback trails; activity areas for
basketball, horseshoes, volleyball, shuffleboard, and archery; and camp sites
with electrical and water hookups. Silverleaf Owners can also rent

50
<PAGE> 53

canoes, bicycles, and water trikes. Homeowners in neighboring subdivisions are
entitled to use the amenities at Holly Lake pursuant to easements or use
agreements.

At March 31, 1997, the resort contained 6,500 Vacation Intervals, of which
595 intervals remained available for sale. The Company plans to build an
additional 104 units, which would yield an additional 5,200 Vacation Intervals
available for sale. Vacation Intervals are currently priced from $6,000 to
$12,500 for one-week stays, 1,376 of which were sold in 1996. See "-- The
Existing Resorts" and "Risk Factors -- Development, Construction and Property
Acquisition Activities".

The Villages and Lake O' The Woods Resorts. The Villages and Lake O' The
Woods are sister resorts located on the shores of Lake Palestine, approximately
100 miles east of Dallas, Texas. The Villages, located approximately five miles
northwest of Lake O' The Woods, is an active sport resort popular for
water-skiing and boating. Lake O' The Woods is a quiet wooded resort where
Silverleaf Owners can enjoy the seclusion of dense pine forests less than two
hours from the Dallas-Fort Worth metroplex. The Villages is a mixed use
development of single-family lots and timeshare units, while Lake O' The Woods
has been developed solely as a timeshare resort. The two resorts contain
approximately 615 acres, of which approximately 379 may not be developed due to
deed restrictions. At March 31, 1997, approximately 47 acres were developed such
that approximately 189 remaining acres are currently planned by the Company to
be used for future development.

The timeshare development at these resorts has been planned for 672 units,
including 592 at The Villages and 80 at the Lake O' The Woods. At March 31,
1997, 204 units were completed at The Villages and 64 units were completed at
Lake O' The Woods. An additional 12 units at The Villages are scheduled for
completion by July 1997. There are four different types of units at these
resorts: (i) three bedroom, two and one-half bath, wood siding exterior duplexes
and fourplexes (two units); (ii) two bedroom, two bath, brick and siding
exterior fourplexes; (iii) two bedroom, two bath, siding exterior fourplexes;
and (iv) one bedroom, one bath with two-bed loft sleeping area, log construction
duplexes. Amenities within each unit include full kitchen, whirlpool tub, and
color television. Certain units include interior ceiling fans, ceramic tile,
and/or a fireplace.

Both resorts are situated on Lake Palestine, a 27,000 acre public lake.
Recreational facilities and improvements at The Villages include a full service
marina with convenience store, boat launch, water-craft rentals, and covered and
locked rental boat stalls; two swimming pools; lighted tennis court; miniature
golf course; nature trails; camp sites; riding stables; soccer/softball field;
children's playground; RV sites; an activity center with reading room,
wide-screen television and pool table; and competitive sports facilities which
include horseshoe pits, archery range, and shuffleboard, volleyball, and
basketball courts. Silverleaf Owners at The Villages can also rent or use
bicycles, jet skis, motor boats, paddle boats, pontoon boats, and water trikes.
Neighboring homeowners are also entitled to use these amenities pursuant to a
use agreement.

Recreational facilities at Lake O' The Woods include swimming pool,
bathhouse, lighted tennis court, a recreational beach area with picnic areas, a
fishing pier on Lake Palestine, nature trails, soccer/softball field, children's
playground, RV sites, an activity center with wide-screen television and pool
table, horseshoe pits, archery range, putting green, miniature golf course, and
shuffleboard, volleyball, and basketball courts. Guests can also ride horses or
rent bicycles.

At March 31, 1997, the Villages contained 10,200 total Vacation Intervals,
of which 560 remained available for sale. In addition to the 12 units under
construction, the Company plans to build 376 additional units at the Villages,
which collectively would yield an additional 20,176 Vacation Intervals available
for sale. At March 31, 1997, Lake O' The Woods contained 3,200 total Vacation
Intervals, of which 114 remained available for sale. The Company plans to build
16 additional units at Lake O' The Woods, which would yield 800 additional
Vacation Intervals available for sale. Vacation Intervals at The Villages and
Lake O' The Woods are currently priced from $5,500 to $14,500 for one-week stays
(and start at $3,500 for biennial intervals). During 1996, 1,970 Vacation
Intervals were sold at The Villages and 821 Vacation Intervals were sold at Lake
O' The Woods. See "-- The Existing Resorts" and "Risk Factors -- Development,
Construction and Property Acquisition Activities".

Piney Shores Resort. Piney Shores is a quiet, wooded resort ideally located
for day-trips from metropolitan areas in the southeastern Gulf Coast area of
Texas. Piney Shores is located on the shores of Lake Conroe,

51
<PAGE> 54

approximately 40 miles north of Houston, Texas. The resort contains
approximately 116 acres, of which approximately 73 acres are planned by the
Company for future development.

At March 31, 1997, 96 units were completed, and an additional 12 units are
scheduled to be completed by July 1997. All units consist of two bedroom, two
bath units, configured in log cabin fourplexes which will comfortably
accommodate up to six people. Amenities include a living room with sleeper sofa
and full kitchen, whirlpool tub, color television, and interior ceiling fans.
The Company recently completed 24 new "lodge-style" units which feature stone
fireplaces, white-washed pine wall coverings, "age-worn" paint finishes, and
antique furnishings.

The primary recreational amenity at the resort is Lake Conroe, a 21,000
acre public lake. Other recreational facilities and improvements available at
the resort include a swimming pool with spa, a new bathhouse complete with
showers and restrooms, lighted tennis court, miniature golf course, stables,
horseback riding trails, children's playground, picnic areas, boat launch, beach
area for swimming, 1,500-square foot activity center with big-screen television,
covered wagon rides, and facilities for horseshoes, archery, shuffleboard, and
basketball. The resort also has a vintage moored paddle-wheeled riverboat which
is available for parties and receptions.

At March 31, 1997, the resort contained 4,800 Vacation Intervals, of which
approximately 1,184 remained available for sale. In addition to the 12 units
under construction, the Company intends to build 292 additional units, which
collectively would yield an additional 15,808 Vacation Intervals available for
sale. Vacation Intervals at Piney Shores are currently priced from $6,000 to
$14,500 for one-week stays (and start at $3,500 for biennial intervals). In
1996, 1,139 Vacation Intervals were sold. See "-- The Existing Resorts" and
"Risk Factors -- Development, Construction and Property Acquisition Activities".

Hill Country Resort. Hill Country Resort is located near Canyon Lake in the
hill country of central Texas between Austin and San Antonio. Hill Country
Resort contains approximately 37 acres, of which approximately 13 acres are
currently planned by the Company to be used for future development. The Company
has recently entered into several contracts to purchase 23 additional acres on
which the Company plans to build 132 units.

At March 31, 1997, 113 units were completed, and an additional 292 units
are planned for development. Twenty units are single story, while all other
units are two-story structures in which the bedrooms and baths are located on
the second story. Each unit contains two bedrooms, two bathrooms, living room
with sleeper sofa, and full kitchen. Other amenities within each unit include
whirlpool tub, color television, and interior design details such as vaulted
ceilings. Certain units include interior ceiling fans, imported ceramic tile,
over-sized sliding glass doors, rattan and pine furnishings, and/or a fireplace.
The Company has recently completed 22 new units which feature the new "lodge
style".

Amenities at the resort include a registration center; an 1,150-square foot
activity center with electronic games, pool table, and wide-screen television;
miniature golf course; a children's playground area; barbecue and picnic areas;
enclosed swimming pool and heated spa; children's wading pool; newly-constructed
tennis court; archery range; and activity areas for shuffleboard, basketball,
horseshoes, and volleyball. The Company plans to expand the existing clubhouse
at the resort with construction projected to begin in November 1997. The Company
estimates that the addition will cost approximately $680,000 and will take six
months to complete. Area sights and activities include water-tubing on the
nearby Guadalupe River, and visiting the River Walk or the Alamo in San Antonio.

At March 31, 1997, the resort contained 5,650 total Vacation Intervals, of
which 790 remained for sale. In addition to the 12 units under construction, the
Company plans to build 280 additional units, which collectively would yield
14,600 additional Vacation Intervals available for sale. Vacation Intervals at
the resort are currently priced from $6,000 to $14,500 for one-week stays (and
start at $3,500 for biennial alternate year intervals), 644 of which were sold
in 1996. See "-- The Existing Resorts" and "Risk Factors -- Development,
Construction and Property Acquisition Activities".

Ozark Mountain Resort. Ozark Mountain Resort is a family-oriented resort
located on the shores of Table Rock Lake which features bass fishing. The resort
is located approximately 15 miles from Branson, Missouri, a country music
entertainment center, 233 miles from Kansas City, and 276 miles from St. Louis.
Ozark Mountain Resort is a mixed-use development of timeshare and condominium
units. The resort contains approximately

52
<PAGE> 55

116 acres, of which approximately 82 acres are currently planned by the Company
to be used for future development.

At March 31, 1997, 124 units were completed, and the Company plans to build
78 additional units. There are two types of units: (i) two bedroom, two bath,
one-story fourplexes; and (ii) two bedroom, two bath, three-story sixplexes.
Each standard unit includes two large bedrooms, two bathrooms, living room with
sleeper sofa, and full kitchen. Other amenities within each unit include
whirlpool tub, color television, and vaulted ceilings. Certain units contain
interior ceiling fans, imported ceramic tile, over-sized sliding glass doors,
rattan or pine furnishings, or fireplace. "President's View" units feature a
panoramic view of Table Rock Lake, a larger, more spacious floor plan (1,210
square feet), front and back screened verandas, washer and dryer, and a more
elegant decor.

The primary recreational amenity available at the resort is Table Rock
Lake, a 43,100 acre public lake. Other recreational facilities and improvements
at the resort include a swimming beach with dock, an activities center with pool
table, covered boat dock and launch ramp, olympic-sized swimming pool,
concession area with dressing facilities, lighted tennis court, nature trails,
horseback riding trails, two picnic areas, two playgrounds, miniature golf
course, and a competitive sports area accommodating volleyball, basketball,
tetherball, horseshoes, shuffleboard, and archery. Guests can also rent or use
canoes, paddle boats, or rowboats. Owners of neighboring condominium units
developed by the Company in the past are also entitled to use these amenities
pursuant to use agreements with the Company. Similarly, owners of Vacation
Intervals are entitled to use certain amenities of these condominium
developments, including a wellness center featuring a jacuzzi and exercise
equipment.

At March 31, 1997, the resort contained 6,224 Vacation Intervals, of which
approximately 2,432 remained available for sale. The Company plans to build 78
additional units which would yield an additional 4,056 Vacation Intervals
available for sale. Standard Vacation Intervals at the resort are currently
priced from $8,000 to $14,500 for one-week stays, while one-week "President's
View" intervals are priced at $8,000 to $17,500 depending on the value rating of
the interval. See "-- The Existing Resorts" and "Risk Factors -- Development,
Construction and Property Acquisition Activities".

Holiday Hills Resort. Holiday Hills is a resort community located in Taney
County, Missouri, two miles east of Branson, Missouri. The resort is 224 miles
from Kansas City and 267 miles from St. Louis. The resort is heavily wooded by
cedar, pine, and hardwood trees, and is favored by Silverleaf Owners seeking
quality golf and nightly entertainment in nearby Branson. Holiday Hills is a
mixed-use development of single-family lots, condominiums and timeshare units.
The resort contains approximately 338 acres, of which approximately 177 acres
are currently planned by the Company to be used for future development.

The Company plans to build 202 new units, and 24 units were complete at
March 31, 1997. There are two types of timeshare units: (i) two bedroom, two
bath, one-story fourplexes; and (ii) one bedroom, one bath, with upstairs loft,
log construction duplexes. Each unit includes a living room with sleeper sofa,
full kitchen, whirlpool tub, color television, vaulted ceilings, and interior
ceiling fans.

Taneycomo Lake, a popular lake for trout fishing, is three miles away, and
Table Rock Lake is approximately ten miles away. The resort has an 18-hole golf
course which is undergoing an approximate $2.5 million renovation and is
scheduled for completion in mid-1997. Other amenities owned by the Company
include a pro shop, a swimming pool, miniature golf course, tennis court, picnic
area, camp sites, archery range, basketball court, and an activity area which
includes shuffleboard and horseshoes. Lot and condominium unit owners are also
entitled to use these amenities pursuant to use agreements between the Company
and certain homeowner associations.

At March 31, 1997, the resort contained 1,200 Vacation Intervals, of which
349 remained available for sale. The Company plans to build 202 additional
units, which would yield an additional 10,100 Vacation Intervals available for
sale. Intervals at the resort are currently priced from $8,000 to $14,500 for
one-week stays. See "-- The Existing Resorts" and "Risk Factors -- Development,
Construction and Property Acquisition Activities".

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MARKETING AND SALES

Marketing is the process by which the Company attracts potential customers
to visit and tour an Existing Resort or attend a sales presentation. Sales is
the process by which the Company seeks to sell a Vacation Interval to a
potential customer once he arrives for a tour at an Existing Resort or attends a
sales presentation. The Company believes it has the marketing and sales systems
necessary to sell Vacation Intervals in the economy segment on a low-cost basis.
The Company also believes it is strategically positioned to enter new markets
and develop marketing programs for additional resorts it may develop in the
future at a lower cost than its competitors in the economy segment.

Marketing. The Company's in-house marketing staff develops prospects
through a variety of marketing programs specifically designed to attract the
Company's target customers. Databases of new prospects are principally developed
through cooperative arrangements between Database Research, Inc., a subsidiary
of the Company, and other local businesses and special event sponsors. Under
these cooperative marketing programs, basic demographic information of potential
customers is solicited on a voluntary basis from individuals who patronize these
businesses or events. After entering this demographic information into its
permanent database, the Company utilizes its systems to identify prospects who
meet the Company's marketing criteria. Using the Company's automated dialing and
bulk mailing equipment, in-house marketing specialists conduct coordinated
telemarketing and direct mail procedures which invite prospects to tour one of
the Company's resorts and receive an incentive, such as a free gift.

Sales. The Company actively sells its Vacation Intervals primarily through
on-site salespersons at certain Existing Resorts. Upon arrival at an Existing
Resort for a scheduled tour, the prospect is met by a member of the Company's
on-site salesforce who conducts the prospect on a one to two hour tour of the
resort and its related amenities. At the conclusion of the tour, the sales
representative explains the benefits and costs of becoming a Silverleaf Owner.
The presentation also includes a description of the financing alternatives
offered by the Company. Prior to the closing of any sale, a verification officer
(a salaried employee of the Company) interviews each prospect to ensure
compliance with Company sales policies and regulatory agency requirements. No
sale becomes final until a statutory waiting period (which varies from state to
state) of up to five days has passed.

Sales representatives receive commissions ranging from 5-14% of the sales
price depending on established guidelines. Sales managers also receive
commissions from 4-6%, and are subject to commission chargebacks in the event
the purchaser fails to make his first required payment. Sales directors also
receive commissions of 2%, which are also subject to chargebacks.

Prospects who are interested in a lower priced product are offered biennial
(alternate year) intervals or Samplers, which entitle the prospect to sample a
resort for a specified number of nights. The prospect may apply the cost of a
Sampler against the down-payment on a Vacation Interval if purchased at a later
date. In addition, the Company actively markets upgraded Vacation Intervals to
existing Silverleaf Owners. See "-- Growth Strategy". Although most upgrades are
sold by the Company's in-house sales staff, the Company has contracted with a
third party to assist in offsite marketing of upgrades at the Destination
Resorts. These upgrade programs have been well received by Silverleaf Owners and
accounted for approximately 21% and 16%, respectively, of the Company's gross
revenues from Vacation Interval sales for 1995 and 1996. By offering Samplers
and upgraded Vacation Intervals, the Company believes it offers an affordable
product for all prospects in its target market. Also, by offering products with
a range of prices, the Company attempts to attract younger purchasers with its
lower-priced products and gradually upgrade such purchasers over time as their
earnings increase.

Because the Company's sales representatives are a critical component of the
sales and marketing effort, the Company continually strives to attract, train
and retain a dedicated salesforce. The Company provides intensive sales
instruction and training which, coupled with the representative's valuable local
knowledge, assist the sales representatives in acquainting prospects with the
resort's benefits. Each sales representative is an employee of the Company and
receives some employment benefits. At December 31, 1996, the Company employed
more than 200 sales representatives at its Existing Resorts.

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CUSTOMER FINANCING

The Company's credit experience is such that in 1997 it plans to allocate
22% of the purchase price of each Vacation Interval to a bad debt reserve. If a
buyer of a Vacation Interval defaults, the Company generally must foreclose on
the Vacation Interval and attempt to resell it; the associated marketing,
selling, and administrative costs from the original sale are not recovered; and
such costs (approximately 40% of sales price) must be incurred again to resell
the Vacation Interval. Although the Company, in many cases, may have recourse
against a Vacation Interval buyer for the unpaid price, the State of Texas and
certain other states have laws which limit the Company's ability to recover
personal judgments against customers who have defaulted on their loans. For
example, under Texas law, if the Company were to pursue a post-foreclosure
deficiency claim against a customer, the customer may file a court proceeding to
determine the fair market value of the property foreclosed upon. In such event,
the Company may not recover a personal judgment against the customer for the
full amount of the deficiency, but may recover only to the extent that the
indebtedness owed to the Company exceeds the fair market value of the property.
Accordingly, the Company has generally not pursued this remedy.

The Company recognizes interest income as earned. If interest payments on
customer notes become delinquent, the Company ceases recognition of the interest
income until collection is assured. When inventory is returned to the Company,
any unpaid note receivable balances are charged against the allowance for
uncollectible notes net of the amount at which the Vacation Interval is being
restored to inventory.

While the Company intends to use the proceeds of the Offering to pay off
approximately $45.0 million of its existing indebtedness, it will be required to
continue to borrow to sustain operations. The Company has entered into
agreements with lenders to borrow up to approximately $96 million collateralized
by customer promissory notes and mortgages. The Company's lenders typically lend
70% of the principal amount of performing notes, and Silverleaf Owners make
payments on their promissory notes directly to the lender's collection center,
where receipts are applied against the Company's loan balance. At December 31,
1996, the Company had a portfolio of approximately 15,796 customer promissory
notes in the approximate principal amount of $66.8 million, of which
approximately $7.9 million in principal amount of customer receivables were 60
days or more past due and therefore ineligible as collateral. At such date, the
Company had borrowings from lenders in the approximate principal amount of $34.7
million secured by the customer loans. Historically and currently, after taking
into account the amount of ineligible collateral and the 70% borrowing base, the
Company's borrowings have approached the maximum amount available under its
existing credit facilities. To the extent the Company generates additional
customer notes receivable through its sales efforts, such notes may be pledged
to lenders for additional borrowings, subject to the 70% advance rate.

At December 31, 1996, the Company's portfolio of customer loans had an
average yield of 14.7%. At such date, the Company's borrowings, which bear
interest at variable rates, had a weighted average cost of 10.8%. The Company
has historically derived net interest income from its financing activities
because the interest rates it charges its customers who finance the purchase of
their Vacation Intervals exceed the interest rates the Company

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pays to its lenders. Because the Company's indebtedness bears interest at
variable rates and the Company's customer receivables bear interest at fixed
rates, increases in interest rates will erode the spread in interest rates that
the Company has historically enjoyed and could cause the interest expense on the
Company's borrowings to exceed its interest income on its portfolio of customer
loans. The Company does not currently engage in interest rate hedging
transactions. Therefore, any increase in interest rates, particularly if
sustained, could have a material adverse effect on the Company's results of
operations, liquidity and financial position.

Limitations on availability of financing would inhibit sales of Vacation
Intervals due to (i) the lack of funds to finance the initial negative cash flow
that results from sales that are financed by the Company, and (ii) reduced
demand if the Company is unable to provide financing to purchasers of Vacation
Intervals. The Company ordinarily receives only 10% of the purchase price on the
sale of a Vacation Interval but must pay in full the costs of development,
marketing, and sale of the Interval. Maximum borrowings available under the
Company's current credit agreements may not be sufficient to cover these costs,
thereby straining capital resources, liquidity, and capacity to grow. In
addition, to the extent interest rates decrease generally on loans available to
the Company's customers, the Company faces an increased risk that customers will
pre-pay their loans and reduce the Company's income from financing activities.

The Company typically provides financing to customers over a seven year
period which customer notes have an average maturity of 5.6 years. The Company's
related revolving credit borrowings, however, mature between October 1998 and
August 2003, with most of such borrowings maturing in 1999. Accordingly, there
is a mismatch between the Company's cash receipts and the Company's cash
disbursement obligations. Although the Company has historically been able to
secure financing sufficient to fund its operations, it does not presently have
agreements with its lenders to extend the term of its existing funding
commitments or to replace such commitments upon their expiration. Failure to
obtain such refinancing facilities could require the Company to sell its
portfolio of customer loans, probably at a substantial discount, or to seek
other alternatives to enable it to continue in business. While the Company has
been successful in obtaining financing to date, there is no assurance it will be
able to do so in the future. See "Risk Factors -- Acceleration of Deferred
Taxes" and "Risk Factors -- Alternative Minimum Taxes".

EXISTING CREDIT FACILITIES

The Company has five revolving credit facilities with four lenders
providing for loans up to $96 million, approximately $39.7 million of which was
outstanding at March 31, 1997, maturing between October 1998 and August 2003.
These credit facilities are collateralized by customer notes receivables, and
one of these credit facilities is also collateralized by unsold Vacation
Intervals. The Company also has one term loan which is collateralized by
condominium units, certain acreage, and customer notes receivable. Collectively,
the credit agreements contain numerous covenants, including covenants requiring
the Company to (i) preserve and maintain the collateral securing the loans; (ii)
pay all taxes and other obligations relating to the collateral; and (iii)
refrain from selling or transferring the collateral or permitting any
encumbrances on the collateral. Such credit facilities also contain operating
covenants requiring the Company to (i) maintain an aggregate minimum tangible
net worth ranging from $6.0 million to $17.5 million; (ii) maintain its legal
existence and be in good standing in any jurisdiction where it conducts
business; (iii) remain in the active management of the Existing Resorts; (iv)
ensure that sales and marketing expenses incurred in connection with marketing
the Vacation Intervals do not exceed 50% of the net sales revenue realized from
the sale of the Vacation Intervals, and (v) refrain from modifying or
terminating certain timeshare documents. See Note 7 of Notes to Consolidated
Financial Statements.

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DEVELOPMENT AND ACQUISITION PROCESS

The Company believes there is substantial opportunity to develop and
acquire resorts, although such acquisitions have not contributed to the
Company's growth in recent years. As part of its current growth strategy, the
Company intends to develop and selectively acquire new resorts with
characteristics similar to the Existing Resorts. The Company has recently
entered into an agreement to acquire three tracts of land, two of which, if
acquired, are planned for development as new drive-to timeshare resorts. See
" -- Growth Strategy -- Development of New Resorts and Acquisitions". The
Company estimates it will cost $47.6 million to develop these two tracts in
Illinois and Missouri as timeshare projects. The Company also has plans to
develop a tract of land it owns in Mississippi as a new destination resort at an
estimated cost of $4.5 million for 50 units. See "Risk Factors -- Development,
Construction, and Property Acquisition Activities".

In evaluating a potential site for a Drive-to Resort, the Company generally
seeks locations within 100 miles of a large metropolitan area. For both Drive-to
Resorts and Destination Resorts, the Company seeks rustic settings with
amenities such as golf courses or water frontage. The Company also seeks
locations offering an absence of competing properties within the economy
timeshare segment, ease of development with respect to zoning and land-use
issues, and ease of compliance with governmental regulations concerning
timeshare sales and operations.

Before committing capital to a site, the Company tests the market using
certain marketing techniques developed by the Company. The Company also explores
the zoning and land-use laws applicable to the potential site and the regulatory
issues pertaining to licenses and permits for timeshare sales and operations.
The Company will also contact various governmental entities and review
applications for necessary governmental permits and approvals. If the Company is
satisfied with its market and regulatory review, it will prepare a conceptual
layout of the resort, including building site plans and resort amenities. After
the Company applies its standard lodging unit design and amenity package, the
Company prepares a budget which estimates the cost of developing the resort,
including costs of lodging facilities, infrastructure and amenities, as well as
projected sales, marketing, and general and administrative costs. Once a budget
has been prepared, the Company will enter into a contract for the site. Such
contract may provide for additional due diligence by the Company, including
obtaining an environmental report by an environmental consulting firm, a survey
of the property, and a title commitment. If recommended by an environmental
consulting firm, the Company may either conduct additional testing or abandon
the proposed site. The Company employs legal counsel to review such documents
and to also review pertinent legal issues. If the Company continues to be
satisfied with the site after the environmental and legal review, the Company
will complete the purchase of the property.

The Company has a contract with an outside architectural firm which
supervises construction of new units. All construction activities are contracted
out to third parties, subject to completion guarantees. The Company seeks
initial completion of the development of a new resort's basic infrastructure and
models within one year, with additional units to be added within 150 days based
on demand. See "Risk Factors -- Development, Construction and Property
Acquisition Activities". An integral part of the development process is the
establishment of a functional sales office at the new resort.

CLUBS/MASTER CLUB

Upon purchasing a Vacation Interval at an Existing Resort, the purchaser
automatically becomes a member of the Club for that particular resort. The
Company has the right to appoint the directors of the Clubs. The Silverleaf
Owners are obligated to pay monthly dues to their respective Clubs, which
obligation is secured by a lien on their Vacation Interval in favor of the Club.
If a Silverleaf Owner fails to pay his monthly dues, the Club may foreclose on
the delinquent Silverleaf Owner's Vacation Interval. During 1995 and 1996,
approximately 649 and 396 foreclosures, respectively, resulted from Silverleaf
Owners' failure to pay monthly dues.

Each of the Clubs has entered into a Master Club Agreement with the Master
Club. The Master Club, a non-profit corporation, has no shareholders or members,
and its directors are elected by a majority vote of the directors of the Clubs.
The Master Club Agreement authorizes the Master Club to manage the Existing
Resorts on a centralized and collective basis. As the Company develops new
resorts, their clubs are expected to be added to the Master Club Agreement. The
consolidation of resort operations through the Master Club permits: (i) a
centralized reservation system for the Existing Resorts; (ii) substantial cost
savings by purchasing goods and

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services for the Existing Resorts on a group basis, which generally results in a
lower cost of goods and services than if such goods and services were purchased
by each resort on an individual basis; (iii) centralized management for the
entire resort system; (iv) centralized legal, accounting and administrative
services for the entire resort system; and (v) uniform implementation of various
rules and regulations governing the Existing Resorts. All furniture,
furnishings, recreational equipment and other personal property used in
connection with the operation of the Existing Resorts are owned by the Master
Club, rather than the Company.

One officer of the Company is also an officer of the Master Club. Prior to
1997, a large portion of her salary was paid by the Master Club. At December 31,
1996, the Master Club had 340 full-time employees and is solely responsible for
their salaries. The Master Club is also responsible for the direct expenses of
operating the Existing Resorts, while the Company is responsible for the direct
expenses of new development and all marketing and sales activities. To the
extent the Master Club provides payroll, administrative and other services that
directly benefit the Company, the Company reimburses the Master Club for such
services. See "Certain Relationships and Related Transactions -- Transactions
with the Master Club" and Note 10 of Notes to Consolidated Financial Statements.

The Master Club collects dues, currently $49.98 per month ($24.99 for
biennial (alternate year) Vacation Intervals), from Silverleaf Owners, plus
certain other amounts assessed against the Silverleaf Owners from time to time,
together with all income generated by the operation of certain amenities at the
Existing Resorts. Such amounts are placed in a common account and are used by
the Master Club to pay the costs of operating the Existing Resorts and the
management fees owing to the Company pursuant to a Management Agreement between
the Company and the Master Club. This Management Agreement authorizes the
Company to manage and operate the resorts and provides for a management fee
equal to 15% of Master Club gross revenues, but the Company's right to receive
such fee on an annual basis is limited to the amount of the Master Club's net
income. Due to anticipated refurbishment of units at the Existing Resorts,
together with the operational and maintenance expenses associated with the
Company's current expansion and development plans, the Company believes its 1997
management fee will be subject to the net income limitation. For financial
reporting purposes, management fees from the Master Club are recognized based on
the lower of (i) 15% of Master Club's gross revenues, or (ii) Master Club net
income. See Note 10 of Notes to Consolidated Financial Statements. The
Management Agreement was entered into in March 1990, has a ten year term, and
will continue year-to-year thereafter unless cancelled by either party.

OTHER OPERATIONS

Operation of Amenities. The Company owns, operates, and receives the
revenues from the marina at The Villages and the golf course and pro shop at
Holiday Hills. Although the Company owns the golf course at Holly Lake, a
homeowners association in the development operates the golf course. In general,
the Master Club receives revenues from the various amenities which require a
usage fee, such as watercraft rentals, horseback rides, and restaurants.

Unit Leasing. The Company also realizes revenues from sales of Samplers
which allow prospective Vacation Interval purchasers to sample a resort for a
specified number of nights. A five night Sampler package currently sells for
$795. For the years ended December 31, 1995 and 1996, the Company realized $1.31
million and $1.72 million, respectively, in revenues from Sampler sales. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation".

Utility Services. The Company owns its own water supply facilities at Piney
Shores Resort, The Villages, Hill Country Resort, Holly Lake, Ozark Mountain
Resort, and Holiday Hills Resort. The Company also currently owns its own
waste-water treatment facilities at Piney Shores Resort and Ozark Mountain
Resort, and has entered into an agreement with the local public utility company
to transfer ownership of the waste-water treatment facilities at Holiday Hills.
TNRCC is the primary state umbrella agency regulating the utilities at the
Drive-to Resorts in Texas, and the Department of Natural Resources and Public
Service Commission of Missouri are the primary state umbrella agencies
regulating such utilities at the Destination Resorts in Missouri. The Company
has rate case permits to supply and charge third parties for the water supply
facilities at The Villages and Holly Lake and the waste-water facility at
Holiday Hills Resort, and has applied for rate case permits which would allow it
to

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charge third-parties for water supply at Piney Shores Resort and Hill Country
Resort and the waste-water facility at Holly Lake. The Company plans to build a
waste-water facility at The Villages in 1997, which facility should be completed
by mid-1998. As a result of an enforcement proceeding brought by TNRCC, the
Company is in the process of expanding its waste-water facility at Holly Lake,
which the Company believes will be completed within the time schedule mandated
by TNRCC.

Other Property. The Company owns an undeveloped five-acre tract of land on
the Gulf Coast in Mississippi. See "-- Development and Acquisition Process". As
of December 31, 1996, it also owned 28 lots at Holiday Hills Resort and 282 lots
at The Villages. At December 31, 1996, the Company also owned 22 condominium
units which are in the process of being sold. See Note 12 of Notes to
Consolidated Financial Statements. Additionally, the Company owns approximately
45 acres in Mississippi, and the Company is entitled to 85% of any profits from
this land. An affiliate of a proposed director owns a 10% net profits interest
in this land. See "Certain Relationships and Related
Transactions -- Transactions with Related Individuals".

Other Operations. The Company provides management services for certain
condominium homeowners' associations at the Existing Resorts.

PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORKS

Internal Exchanges. Each purchaser of a Vacation Interval from the Company
has certain exchange privileges which entitle such purchaser to: (i) exchange
his interval for a different interval (week) at the same resort so long as the
different interval is of an equal or lower rating; and (ii) exchange his
interval for the same interval at any other of the Existing Resorts. These
intra-company exchange rights require an exchange fee, which is currently $50,
and are conditioned upon availability of the desired interval or resort.

RCI Exchanges. The Company believes that its Vacation Intervals are made
more attractive by the Company's participation in Vacation Interval exchange
networks operated by RCI. Approximately one-third of Silverleaf Owners
participate in RCI's exchange network. Membership in RCI allows participating
Silverleaf Owners to exchange their occupancy right in a unit in a particular
year for an occupancy right at the same time or a different time of the same or
lower color rating in another participating resort, based upon availability and
the payment of a variable exchange fee. A member may exchange his Vacation
Interval for an occupancy right in another participating resort by listing his
Vacation Interval as available with the exchange organization and by requesting
occupancy at another participating resort, indicating the particular resort or
geographic area to which the member desires to travel, the size of the unit
desired and the period during which occupancy is desired.

RCI has assigned a rating of either "red", "white", or "blue" to each
Vacation Interval for each Existing Resort, based upon a number of factors,
including the location and size of the unit, the quality of the resort and the
period during which the Vacation Interval is available, and attempts to satisfy
exchange requests by providing an occupancy right in another Vacation Interval
with a similar rating. Owners of a red Vacation Interval may exchange their
interval for a red, white, or blue interval. Owners of a white Vacation Interval
may exchange only for a white or blue interval, and owners of a blue interval
may exchange only for a blue interval. If RCI is unable to meet the member's
initial request, it suggests alternative resorts based on availability. RCI has
assigned either red or white ratings to all Vacation Intervals at the Company's
Ozark Mountain and Holiday Hills resorts.

RCI has more than 2,900 participating resort facilities and over 2.0
million members worldwide. During 1995 RCI processed over 1.5 million Vacation
Interval exchanges. The cost of the annual membership fee in RCI, which is at
the option and expense of the owner of the Vacation Interval, is currently $74
per year. Exchange rights require an additional fee of approximately $103 for
domestic exchanges and $133 for foreign exchanges.

COMPETITION

The timeshare industry is highly fragmented and includes a large number of
local and regional resort developers and operators. However, some of the world's
most recognized lodging, hospitality and entertainment companies, such as,
Marriott, Disney, Hilton and Hyatt have recently entered the industry. Other
companies in the timeshare industry, including Signature, Fairfield, Vacation
Break, Vistana, and Ramada are public companies, with the enhanced access to
capital and other resources that public ownership implies.

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While the Company's principal competitors are developers of timeshare
resorts, the Company is also subject to competition from other entities engaged
in the commercial lodging business, including condominiums, hotels and motels;
others engaged in the leisure business; and, to a lesser extent, from
campgrounds, recreational vehicles, tour packages and second home sales. A
reduction in the product costs associated with any of these competitors, or an
increase in the Company's (or its customers') costs relative to such
competitors' (or their customers') costs, could have a material adverse effect
on the Company's results of operations, liquidity and financial position.

Numerous businesses, individuals and other entities will compete with the
Company in seeking properties for acquisition and development and new resorts.
Some of these competitors will be larger and have greater financial resources
than the Company. Such competition may result in a higher cost for properties
the Company wishes to acquire or may cause the Company to be unable to acquire
suitable properties for the development of new resorts.

GOVERNMENTAL REGULATION

General. The Company's marketing and sales of Vacation Intervals and other
operations are subject to extensive regulation by the federal government and the
states and jurisdictions in which the Existing Resorts are located and in which
Vacation Intervals are marketed and sold. On a federal level, the Federal Trade
Commission has taken the most active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-in-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Settlement Procedures Act, the Consumer Credit
Protection Act, the Telephone Consumer Protection Act, the Telemarketing and
Consumer Fraud and Abuse Prevention Act, the Fair Housing Act and the Civil
Rights Acts of 1964 and 1968.

In response to the fraudulent marketing practices which plagued the
timeshare industry in the 1980's, in the late 1980's and early 1990's, various
states enacted legislation aimed at curbing such abuses. Texas and Missouri, the
only states in which the Company currently owns resorts, have adopted specific
laws and regulations regarding the sale of Vacation Interval ownership programs.
The laws of most states, including Texas, require the Company to file with a
designated state authority for its approval a detailed offering statement
describing the Company and all material aspects of the project and the sale of
Vacation Intervals prior to selling to residents of that state. The laws of
these states require the Company to file numerous documents and supporting
information with the state agency responsible for the regulation of Vacation
Intervals. When the agency determines that a project may be sold, it will issue
a public report for the project. The Company is required to deliver an offering
statement or public report to all prospective purchasers of a Vacation Interval
who are Texas residents, together with certain additional information concerning
the terms of the purchase, regardless of whether the resort is located in Texas.
In Missouri the Company is required to make certain disclosures in its sales
documents. Laws in each state where the Company currently sells Vacation
Intervals generally grant the purchaser of a Vacation Interval the right to
cancel a contract of purchase at any time within approximately five calendar
days following the date the contract was signed by the purchaser. Most states
have other laws which regulate the Company's activities and protect purchasers,
such as real estate licensure laws; travel sales licensure laws; anti-fraud
laws; consumer protection laws; telemarketing laws; prize, gift and sweepstakes
laws; and other related laws.

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The Company believes it is in material compliance with federal, Texas, and
Missouri laws and regulations to which it is currently subject relating to the
sale and marketing of timeshare resorts. However, the Company is normally and
currently the subject of a number of consumer complaints generally relating to
marketing or sales practices filed with cognizant authorities, and there can be
no assurance that all of these complaints can be resolved without adverse
regulatory actions or other consequences. The Company expects some level of
consumer complaints in the ordinary course of its business as the Company
targets audiences which generally are less financially sophisticated and more
susceptible to intensive sales practices than more affluent customers. There can
be no assurance that the costs of resolving consumer complaints or of qualifying
under Vacation Interval ownership regulations in all jurisdictions in which the
Company desires to conduct sales will not be significant, that the Company is in
material compliance with applicable federal, Texas, Missouri, or other laws and
regulations, or that violations of law will not have adverse implications for
the Company, including negative public relations, potential litigation, and
regulatory sanctions. The expense, negative publicity, and potential sanctions
associated with the failure to comply with applicable laws or regulations could
have a material adverse effect on the Company's results of operations,
liquidity, or financial position.

During the 1980's and continuing through the present, the timeshare
industry has been and continues to be afflicted with negative publicity and
prosecutorial attention due, among other things, to marketing practices which
were widely viewed as deceptive or fraudulent. Among the many timeshare
companies which have been the subject of federal, state and local enforcement
actions and investigations in the past were certain of the Affiliated Companies
and their affiliates. Some of the settlements, injunctions and decrees resulting
from litigation and enforcement actions (the "Orders") to which certain of the
Affiliated Companies consented purport to bind all successors and assigns, and
accordingly bind the Company. In addition, at that time the Company was directly
a party to one such Order issued in Missouri. No past or present officers,
directors or employees of the Company or any Affiliated Company were named as
subjects or respondents in any of these Orders; however, each Order purports to
bind generically unnamed "officers, directors and employees" of certain
Affiliated Companies. Therefore, certain of these Orders may be interpreted to
be enforceable against the present officers, directors and employees of the
Company even though they were not individually named as subjects of the
enforcement actions which resulted in these Orders. These Orders require, among
other things, that all parties bound by the Orders, including the Company,
refrain from engaging in deceptive sales practices in connection with the offer
and sale of Vacation Intervals. In one case in 1988 an Affiliated Company pled
guilty to deceptive uses of the mails in connection with promotional sales
literature mailed to prospective timeshare purchasers and agreed to pay a
judicially imposed fine of $1.5 million and restitution of $100,000. The
requirements of the Orders are substantially what applicable state and federal
laws and regulation mandate, but the consequence of violating the Order may be
that sanctions (including possible financial penalties and suspension or loss of
licensure) may be imposed more summarily and may be harsher than would be the
case if the Orders did not bind the Company. In addition, the existence of the
Orders may be viewed negatively by prospective regulators in jurisdictions where
the Company does not now do business, with attendant risks of increased costs
and reduced opportunities.

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<PAGE> 64

Order, Silverleaf agreed to make a voluntary donation of $30,000 to the State of
Texas. The Agreed Order also directs Silverleaf to revise its training manual
for timeshare salespersons and verification officers. While the Agreed Order
resolved all of the alleged violations contained in complaints received by the
Texas Real Estate Commission through December 31, 1996, the Company expects to
encounter some level of consumer complaints in the ordinary course of its
business.

The Company employs the following methods in training sales and marketing
personnel as to legal requirements. With regard to direct mailings, a designated
compliance employee of the Company reviews all mailings to determine if they
comply with applicable state legal requirements. With regard to telemarketing,
the Company's Vice President -- Marketing prepares a script for telemarketers
based upon applicable state legal requirements. All telemarketers receive
training which includes, among other things, directions to adhere strictly to
the Company approved script. Telemarketers are also monitored by their
supervisors to ensure that they do not deviate from the Company approved script.
With regard to sales functions, the Company distributes sales manuals which
summarize applicable state legal requirements. Additionally, such sales
personnel receive training as to such applicable legal requirements. The Company
has a salaried employee at each sales office who reviews the sales documents
prior to closing a sale to review compliance with legal requirements.
Additionally, a member of the corporate office staff calls each purchaser within
48 hours after the sale to verify information. Periodically, the Company is
notified by regulatory agencies to revise its disclosures to consumers and to
remedy other alleged inadequacies regarding the sales and marketing process. In
such cases, the Company revises its direct mailings, telemarketing scripts, or
sales disclosure documents, as appropriate, in an attempt to comply with such
requests.

Environmental Matters. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up hazardous or toxic
substances or petroleum product releases at such property, and may be held
liable to a governmental entity or to third parties for property damage and tort
liability and for investigation and clean-up costs incurred by such parties in
connection with the contamination. Such laws typically impose clean-up
responsibility and liability without regard to whether the owner or operator
knew of or caused the presence of the contaminants, and the liability under such
laws has been interpreted to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of responsibility. The cost of
investigation, remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly remediate the
contamination on such property, may adversely affect the owner's ability to sell
such property or to borrow using such property as collateral. Persons who
arrange for the disposal or treatment of hazardous or toxic substances at a
disposal or treatment facility also may be liable for the costs of removal or
remediation of a release of hazardous or toxic substances at such disposal or
treatment facility, whether or not such facility is owned or operated by such
person. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner or operator of a site may be subject
to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site or from environmental
regulatory violations. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such claims.

Certain Federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws may
impose liability for release of ACMs and may provide for third parties to seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such costs. In 1994, the
Company conducted a limited asbestos survey at each of the Existing Resorts,
which surveys did not reveal material potential losses associated with ACM's at
the Existing Resorts.

In addition, recent studies have linked radon, a naturally-occurring
substance, to increased risks of lung cancer. While there are currently no state
or federal requirements regarding the monitoring for, presence of, or exposure
to, radon in indoor air, the EPA and the Surgeon General recommend testing
residences for the presence of radon in indoor air, and the EPA further
recommends that concentrations of radon in indoor air be limited to less than 4
picocuries per liter of air (Pci/L) (the "Recommended Action Level"). The
presence of radon in

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concentrations equal to or greater than the Recommended Action Level in one or
more of the Company's properties may adversely affect the Company's ability to
sell Vacation Intervals at such properties and the market value of such
property. Recently-enacted federal legislation will eventually require the
Company to disclose to potential purchasers of Vacation Intervals at the
Company's resorts that were constructed prior to 1978 any known lead-paint
hazards and will impose treble damages for failure to so notify.

Electric transmission lines are located in the vicinity of the Company's
properties. Electric transmission lines are one of many sources of
electromagnetic fields ("EMFs") to which people may be exposed. Research into
potential health impacts associated with exposure to EMFs has produced
inconclusive results. Notwithstanding the lack of conclusive scientific
evidence, some states now regulate the strength of electric and magnetic fields
emanating from electric transmission lines, while others have required
transmission facilities to measure for levels of EMFs. In addition, the Company
understands that lawsuits have, on occasion, been filed (primarily against
electric utilities) alleging personal injuries resulting from exposure as well
as fear of adverse health effects. In addition, fear of adverse health effects
from transmission lines has been a factor considered in determining property
value in obtaining financing and in condemnation and eminent domain proceedings
brought by power companies seeking to construct transmission lines. Therefore,
there is a potential for the value of a property to be adversely affected as a
result of its proximity to a transmission line and for the Company to be exposed
to damage claims by persons exposed to EMFs.

In 1994, the Company conducted Phase I environmental assessments at each of
its Existing Resorts in order to identify potential environmental concerns.
These Phase I assessments have been carried out in accordance with accepted
industry practices and consisted of non-invasive investigations of environmental
conditions at the properties, including a preliminary investigation of the sites
and identification of publicly known conditions concerning properties in the
vicinity of the sites, physical site inspections, review of aerial photographs
and relevant governmental records where readily available, interviews with
knowledgeable parties, investigation for the presence of above ground and
underground storage tanks presently or formerly at the sites, a limited asbestos
survey, and the preparation and issuance of written reports. The Company's
assessments of its properties have not revealed any environmental liability that
the Company believes would have a material adverse effect on the Company's
business, assets or results of operations, nor is the Company aware of any such
material environmental liability. Nevertheless, it is possible that the
Company's assessments do not reveal all environmental liabilities or that there
are material environmental liabilities of which the Company is unaware. The
Company's Phase I assessments of the properties have not revealed any
environmental liability that the Company believes would have a material adverse
effect on the Company's business, assets or results of operations taken as a
whole; nor is the Company aware of any such material environmental liability.
Nevertheless, it is possible that the Company's Phase I assessments do not
reveal all environmental liabilities or that there are material environmental
liabilities of which the Company is unaware. Moreover, there can be no assurance
that (i) future laws, ordinances or regulations will not impose any material
environmental liability or (ii) the current environmental condition of the
properties will not be affected by the condition of land or operations in the
vicinity of the properties (such as the presence of underground storage tanks)
or by third parties unrelated to the Company. The Company does not believe that
compliance with applicable environmental laws or regulations will have a
material adverse effect on the Company or its financial condition, results of
operations, or liquidity.

The Company believes that its properties are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances. The Company has not been notified by
any governmental authority or any third party, and is not otherwise aware, of
any material noncompliance, liability or claim relating to hazardous or toxic
substances or petroleum products in connection with any of its present
properties.

Utility Regulation. The Company owns its own water supply and waste-water
treatment facilities at several of the Existing Resorts, which are regulated by
various governmental agencies. See "-- Other Operations". TNRCC is the primary
state umbrella agency regulating utilities at the Drive-to Resorts in Texas, and
the Missouri Department of Natural Resources and Public Service Commission of
Missouri are the primary state umbrella agencies regulating utilities at the
Destination Resorts in Missouri. These agencies regulate the rates and charges
for the services (allowing a reasonable rate of return in relation to invested
capital and other factors), the size and quality of the plants, the quality of
water supplied, the efficacy of waste-water treatment, and many other

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<PAGE> 66

aspects of the utilities' operations. The agencies have approval rights
regarding the entity owning the utilities (including its financial strength) and
the right to approve a transfer of the applicable permits upon any change in
control of the entity holding the permits. Other federal, state, regional and
local environmental, health and other agencies also regulate various aspects of
the provision of water and waste-water treatment services.

Other Regulations. Under various state and federal laws governing housing
and places of public accommodation, the Company is required to meet certain
requirements related to access and use by disabled persons. Many of these
requirements did not take effect until after January 1, 1991. Although
management of the Company believes that its facilities are substantially in
compliance with present requirements of such laws, the Company will incur
additional costs of compliance. Additional legislation may impose further
burdens or restrictions on owners with respect to access by disabled persons.
The ultimate amount of the cost of compliance with such legislation is not
currently ascertainable, and, while such costs are not expected to have a
material effect on the Company, such costs could be substantial. Limitations or
restrictions on the completion of certain renovations may limit application of
the Company's growth strategy in certain instances or reduce profit margins on
the Company's operations. See "Risk Factors -- Cost of Compliance with Laws
Governing Accessibility of Facilities to Disabled Persons".

EMPLOYEES

At December 31, 1996, the Company employed approximately 595 full-time
employees. The Company believes that employee relations are good. None of the
these employees is represented by a labor union.

INSURANCE; LEGAL PROCEEDINGS

The Company carries comprehensive liability, fire, hurricane and storm
insurance with respect to the Company's resorts, with policy specifications,
insured limits and deductibles customarily carried for similar properties which
the Company believes are adequate. There are, however, certain types of losses
(such as losses arising from floods and acts of war) that are not generally
insured because they are either uninsurable or not economically insurable.
Should an uninsured loss or a loss in excess of insured limits occur, the
Company could lose its capital invested in a resort, as well as the anticipated
future revenues from such resort and would continue to be obligated on any
mortgage indebtedness or other obligations related to the property. Any such
loss could have a material adverse effect on the Company. The Company
self-insures for property damage to certain vehicles and heavy equipment. See
"Risk Factors -- Natural Disasters; Uninsured Loss".

The Company is currently subject to litigation and claims respecting tort,
contract, and consumer disputes, among others. In the judgment of management,
none of such pending lawsuits or claims against the Company, either individually
or in the aggregate, is likely to have a material adverse effect on the Company
or its business. See "Risk Factors -- Regulation of Marketing and Sales of
Vacation Intervals and Related Laws".

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each person
who is a director or executive officer of the Company or upon the consummation
of the Offering will become a director of the Company. Concurrently with or
shortly following the Offering, the Company will add an additional director who
will be a Non-Employee Director within the meaning of Rule 16b-3 of the Exchange
Act (an "Independent Director").

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert E. Mead.................... 50 Chairman of the Board and Chief Executive Officer
Sharon K. Brayfield............... 36 Director and President
David T. O'Connor................. 55 Executive Vice President -- Sales
Joe W. Conner..................... 40 Chief Financial Officer, Treasurer
Larry H. Fritz.................... 45 Vice President -- Marketing
Ioannis N. Gioldasis.............. 47 Vice President -- Promotions
Robert G. Levy.................... 49 Vice President -- Resort Operations
Sandra G. Cearley................. 35 Secretary
James B. Francis, Jr.............. 48 Proposed Director
Michael A. Jenkins................ 55 Proposed Director
</TABLE>

ROBERT E. MEAD founded the Company, has served as its Chairman of the Board
since its inception, and has served as its Chief Executive Officer since May
1990. Mr. Mead began his career in hotel and motel management and also operated
his own construction company. Mr. Mead currently serves as a trustee on the
Board of Directors of ARDA and has over 17 years of experience in the timeshare
industry, with special expertise in the areas of consumer finance, hospitality
management and real estate development.

SHARON K. BRAYFIELD has served as the President of the Company since 1992
and manages all of the Company's day to day activities. Ms. Brayfield began her
career with an Affiliated Company in 1982 as the Public Relations Director of
Ozark Mountain Resort. In 1989, she was promoted to Executive Vice President of
Resort Operations for an Affiliated Company and in 1991 was named Chief
Operations Officer of the Company. During 1996, Ms. Brayfield also oversaw
operations of the Master Club.

DAVID T. O'CONNOR has over 20 years of experience in real estate and
timeshare sales and has worked periodically with Mr. Mead over the past 14
years. Since 1991, Mr. O'Connor has served as the Company's Executive Vice
President -- Sales, directing all field sales, including the design and
preparation of all training materials, incentive programs, and follow-up sales
procedures. For the past five years until May 12, 1997, Mr. O'Connor has been an
employee of Recreational Consultants, Inc., which was an independent contractor
of the Company. See "Certain Relationships and Related Transactions".

JOE W. CONNER joined the Company in February 1997 as Chief Financial
Officer and has responsibility for all accounting, financial reporting and
taxation issues. From 1995 to 1997, Mr. Conner served as Vice President of
Finance and Chief Financial Officer of the Jacobsen Division of Textron, Inc.
From 1993 to 1995, Mr. Conner was Executive Vice President and Chief Financial
Officer for Furr's/Bishop's, Inc. Mr. Conner worked for Club Corporation of
America from 1985 to 1993, and last served as Sr. Vice President, Chief
Financial Officer and Director. Mr. Conner is a certified public accountant.

LARRY H. FRITZ has been employed by the Company (or an Affiliated Company)
periodically over the past nine years and has served in various marketing
management positions. Since 1991, Mr. Fritz has served as the Company's chief
marketing officer, with responsibility for daily marketing operations, and
currently serves as the Company's Vice President-Marketing.

IOANNIS N. GIOLDASIS has been with the Company since May of 1993 and
currently serves as Vice President -- Promotions. Mr. Gioldasis is responsible
for the design and implementation of marketing strategies and promotional
concepts for lead generation in Texas and other markets. Prior to joining the
Company, Mr. Gioldasis was a national field director for Resort Property
Consultants, Inc.

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<PAGE> 68

ROBERT G. LEVY was appointed Vice President-Operations in February 1997 and
administers the Company's Management Agreement with the Master Club. Since 1990,
Mr. Levy has held a variety of managerial positions with the Master Club
including Project Manager, General Manager, Texas Regional Manager, and Director
of Operations. Prior to joining the Company, Mr. Levy spent 18 years in hotel,
motel, and resort management, and was associated with the Sheraton, Ramada Inn,
and Holiday Inn hotel chains.

SANDRA G. CEARLEY has served as Secretary of the Company since its
inception. Ms. Cearley maintains corporate minute books, oversees regulatory
filings, and coordinates legal matters with the Company's attorneys.

JAMES B. FRANCIS, JR. has consented to become a Director of the Company
upon the consummation of the Offering. During 1996, Mr. Francis' company,
Francis Enterprises, Inc., served as a consultant to the Company in connection
with governmental and public affairs. From 1980 to 1996, Mr. Francis was a
partner in the firm of Bright & Co., which managed various business investments,
including the Dallas Cowboys Football Club.

MICHAEL A. JENKINS has consented to become a Director of the Company upon
the consummation of the Offering. In 1971, Mr. Jenkins founded and became the
President of Leisure and Recreation Concepts, Inc., which has planned and
designed over 850 theme parks, resorts, retail areas, and major attractions
worldwide. Mr. Jenkins has more than 35 years in the leisure industry and serves
on the Board of Directors of Leisure and Recreational Concepts, Inc.

COMMITTEES OF THE BOARD OF DIRECTORS

Executive Committee. Concurrently with the consummation of the Offering,
the Board of Directors will establish an executive committee (the "Executive
Committee"), which will be granted such authority as may be determined from time
to time by a majority of the Board of Directors. The Company expects that the
Executive Committee will include at least one Independent Director. All actions
by the Executive Committee will require a majority vote of its members.

Audit Committee. Concurrently with the consummation of the Offering, the
Board of Directors will establish an audit committee (the "Audit Committee"),
which will consist of two or more directors who meet the independent
requirements imposed by The New York Stock Exchange's Audit Committee Policy.
The Audit Committee will be established to make recommendations concerning the
engagement of independent public accountants, review the plans and results of
the audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants and the adequacy of the Company's internal accounting controls, and
consider the range of audit and non-audit fees.

Compensation Committee. Concurrently with the consummation of the Offering,
the Board of Directors will establish a compensation committee (the
"Compensation Committee"), which will consist of two or more Independent
Directors to determine compensation for the Company's senior executive officers
and to administer the Company's 1997 Stock Option Plan.

The Board of Directors of the Company initially will not have a nominating
committee or any other committee. The membership of the committees of the Board
of Directors will be established after the consummation of the Offering.

CLASSIFIED BOARD OF DIRECTORS

The Company's Board of Directors is divided into three classes serving
staggered terms. Upon the consummation of the Offering, the Board of Directors
will be comprised of one Class I director (presently not identified), two Class
II directors (Ms. Brayfield and Mr. Jenkins) and two Class III directors (Mr.
Mead and Mr. Francis). At each annual meeting of shareholders, a class of
directors will be elected for a three-year term to succeed the directors of the
same class whose terms are then expiring. The terms of the initial Class I
directors, Class II directors and Class III directors will expire upon the
election and qualification of successor directors at the annual meeting of
shareholders held in calendar years 1998, 1999 and 2000, respectively. The
classification of directors makes it more difficult for a significant
shareholder to change the composition of the Board of Directors in a relatively
short period of time.

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<PAGE> 69

DIRECTOR COMPENSATION

Upon the consummation of the Offering, the Company will grant to each
Independent Director, as directors' fees, options to purchase 40,000 shares of
Common Stock at the initial public offering price. Such options shall vest in
three equal portions over a term of three years, with the first vesting period
occurring in May 1998. The options shall expire in June 2007. In addition to
such option grants, the Independent Directors will be reimbursed for expenses of
attending each meeting of the Board of Directors. Officers of the Company who
are directors will not be paid any director fees but will be reimbursed for
expenses of attending meetings of the Board of Directors.

INDEMNIFICATION

The Charter provides for the indemnification of the Company's officers and
directors against certain liabilities to the fullest extent permitted under
applicable law. The Charter also provides that the directors and officers of the
Company be exculpated from monetary damages to the fullest extent permitted
under applicable law. Additionally, the Company has entered into written
Indemnification Agreements with its directors and officers. It is the position
of the Securities and Exchange Commission (the "Commission") that
indemnification of directors and officers for liabilities arising under the
Securities Act is against public policy and unenforceable under the Securities
Act.

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the annual base
salary and other annual compensation that the Company paid in 1996 to the
Company's Chief Executive Officer and each of the other executive officers whose
cash compensation (salary and bonus) on an annualized basis exceeded $100,000
(the "Named Executive Officers"). During the past three fiscal years, none of
such persons received compensation in the form of restricted stock awards, stock
options, stock appreciation rights, or long-term incentive plans.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND ----------------------
PRINCIPAL POSITION YEAR SALARY BONUS(1)
------------------ ---- -------- --------
<S> <C> <C> <C>
Robert E. Mead,...................................... 1996 $400,015 $ 37,731
Chief Executive Officer
Sharon K. Brayfield,................................. 1996 16,074(2) 366,499(3)
President
David T. O'Connor,................................... 1996 538,768(4)
Executive Vice President -- Sales
Larry H. Fritz,...................................... 1996 70,000 67,913
Vice President -- Marketing
</TABLE>

- ---------------

(1) See "-- Employment and Noncompetition Agreements" for a discussion of
certain bonuses.

(2) During 1996, Ms. Brayfield also received $100,000 in salary paid by the
Master Club. Beginning in 1997, Ms. Brayfield will no longer receive a
salary from the Master Club, and the Company will pay her a salary of
$133,101. See "-- Employment and Noncompetition Agreements".

(3) Approximately $77,000 of such amount is for forgiveness of a loan by the
Company to Ms. Brayfield.

(4) These amounts were paid as sales commissions to Recreational Consultants,
Inc., a corporation of which Mr. O'Connor is the principal. See "Certain
Relationships and Related Transactions -- Transactions with Related
Individuals".

1997 STOCK OPTION PLAN

The Company has established a stock option plan (the "1997 Stock Option
Plan" or "Plan") to attract and retain directors, officers, and key employees of
the Company and to provide them incentives to maximize the Company's
performance. The 1997 Stock Option Plan provides for the award to directors,
officers, and key employees of nonqualified stock options and provides for the
grant to salaried key employees of options intended to qualify as "incentive
stock options" under Section 422 of the Code.

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<PAGE> 70

The 1997 Stock Option Plan will be administered by the Compensation
Committee which will select the individuals to whom options are to be granted
and to determine the number of shares to be subject thereto and the terms and
conditions thereof. The Compensation Committee is also authorized to adopt,
amend and rescind rules relating to the administration of the 1997 Stock Option
Plan.

Promptly after the consummation of the Offering, the Company estimates that
it will issue to officers and Independent Directors options to purchase 422,000
shares of Common Stock pursuant to the 1997 Stock Option Plan, including options
on 200,000 shares to Mr. O'Connor. A maximum of 1,100,000 shares are reserved
for issuance under the 1997 Stock Option Plan. The Company will file a
Registration Statement to register such shares. See "Shares Eligible for Future
Sale".

Nonqualified stock options will provide for the right to purchase Common
Stock at a specified price which may be less than fair market value on the date
of grant (but not less than par value). Nonqualified stock options may be
granted for any term and upon such conditions determined by the Compensation
Committee.

Incentive stock options will be designed to comply with the provisions of
the Code and will be subject to restrictions contained therein, including
exercise prices equal to at least 100% of fair market value of Common Stock on
the grant date and a ten year restriction on their term; however, incentive
stock options granted to any person owning more than 10% of the voting power of
the stock of the Company shall have exercise prices equal to at least 110% of
the fair market value of the Common Stock on the grant date and shall not be
exercisable after five years from the date the option is granted.

Under the 1997 Stock Option Plan, the Board of Directors of the Company
reserves the right to exercise the powers and functions of the Compensation
Committee. Also, the Board of Directors reserves the right to amend the Plan at
any time; however, the Board of Directors may not without the approval of the
shareholders of the Company (i) increase the total number of shares reserved for
options under the Plan (other than for certain changes in the capital structure
of the Company), (ii) reduce the required exercise price of any incentive stock
options, or (iii) modify the provisions of the Plan regarding eligibility.

DISCRETIONARY PERFORMANCE AWARDS

Performance awards, including bonuses, may be granted by the Compensation
Committee on an individual or group basis. Generally, these awards will be based
upon specific agreements or performance criteria and will be paid in cash.

EMPLOYMENT AND NONCOMPETITION AGREEMENTS

Effective January 1, 1997, Mr. Mead entered into a three year employment
agreement with the Company which provides for an annual base salary of $500,000,
a company vehicle, and other fringe benefits such as employee health insurance,
vacation, and sick leave as determined by the Board of Directors of the Company
from time to time. Either party may terminate the agreement upon 30 days notice
to the other.

Effective January 1, 1997, Ms. Brayfield entered into a three year
employment agreement which provides for an annual base salary of $133,101, a
company vehicle, and other fringe benefits such as employee health insurance,
vacation, and sick leave as determined by the Board of Directors of the Company
from time to time. Ms. Brayfield's agreement with the Company also provides for
an incentive bonus equal to .35% of the Company's net sales from Vacation
Intervals. Either party may terminate the agreement upon 30 days notice to the
other. Ms. Brayfield and the Company have an agreement that she may not transfer
her stock in the Company without first offering it for sale to the Company; this
agreement will terminate upon the consummation of the Offering.

Effective May 12, 1997, the Company entered into an employment agreement
with David T. O'Connor with a term through December 31, 1999. Pursuant to the
agreement, Mr. O'Connor will receive commissions equal to 1.35% of the Company's
net sales from Vacation Intervals, plus additional commissions based on weekly
sales volume and revenue per guest. The Company will also provide Mr. O'Connor
with a company vehicle and health insurance. Either party may terminate the
agreement upon 30 days notice to the other. See "Certain Relationships and
Related Transactions".

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<PAGE> 71

Each of the three agreements discussed above provides that such person will
not directly or indirectly compete with the Company in any county in which it
conducts its business or markets its products for a period of two years
following the termination of the agreement. The agreements also provide that
such persons will not (i) influence any employee or independent contractor to
terminate its relationship with the Company, or (ii) disclose any confidential
information of the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

REPAYMENT OF AFFILIATED DEBT

Approximately $9.9 million of the net proceeds from the Offering will be
used to repay outstanding debt to Mr. Mead and affiliated persons or entities.
Following the Offering, the Company will repay the affiliated debt of the
Company set forth below and Mr. Mead, Chairman of the Board and Chief Executive
Officer of the Company, and certain entities affiliated with Mr. Mead, will
simultaneously repay their debt to the Company. Affiliated debt is explained
below:

<TABLE>
<CAPTION>
COMPONENTS OF AMOUNT AT
AFFILIATED DEBT OF THE COMPANY MARCH 31, 1997
------------------------------ -----------------
(IN THOUSANDS)
<S> <C>
Debt of CBI to Mr. Mead (a)................................. $ 6,012
Debt of Silverleaf to Mr. Mead and affiliates (b)........... 8,194
Debt of Silverleaf to Pace, STG and Ralph Brotherton (c),
(d), (e).................................................. 541
-------
Total............................................. 14,747
Less:
Receivable from Mr. Mead (a)........................... (4,591)
Receivable from STG and Pace (f)....................... (236)
-------
Net Affiliated Party Debt of Silverleaf........... $ 9,920
=======
</TABLE>

- ---------------

(a) Prior to the Consolidation Transactions, Mr. Mead owned 100% of the stock
of CBI. During this period, Silverleaf made loans to Mr. Mead who
simultaneously made loans of similar amounts to CBI to finance its
operations. The Silverleaf loans to Mr. Mead bear interest at 8% per annum,
and the loans by Mr. Mead to CBI bear interest at 9% per annum. As a result
of the Consolidation Transactions, the debt of Mr. Mead to CBI and of CBI
to Mr. Mead has been consolidated on the Company's financial statements.
The above table reflects, on a consolidated basis, the remaining debt due
to Mr. Mead from the Company and the remaining receivable from Mr. Mead at
March 31, 1997.

(b) Mr. Mead owned 100% of the stock of Freedom Financial Corporation ("FFC")
prior to the Consolidation Transactions. As a part of the Consolidation
Transactions, the Company acquired certain assets held by FFC and the
Company assumed certain liabilities associated with these assets. See Note
9 of Notes to Consolidated Financial Statements. Liabilities assumed were
approximately $8.9 million consisting primarily of notes payable to Mr.
Mead and his affiliates of $7.6 million. The affiliates of Mr. Mead include
certain family partnerships and trusts. The notes payable to Mr. Mead and
his affiliates originated from loans of $1.1 million and asset sales of
$1.6 million made by Mr. Mead and his affiliates to FFC during 1987 and
1988. The $8.2 million debt at March 31, 1997 consists of principal of $2.7
million and accrued interest of $5.5 million, computed at a weighted
average rate of 11.9% through March 31, 1997.

(c) Includes approximately $399,000 owed to Pace Finance Company ("Pace"), a
Texas corporation wholly owned by Mr. Mead. Pace loaned the Company
approximately $648,000, $541,000 and $655,000, in 1994, 1995, and 1996,
respectively. The Company secured such loans by pledging notes secured by
Vacation Intervals with an aggregate principal balance of approximately
$1.1 million, $901,000, and $1.1 million, in 1994, 1995, and 1996,
respectively. The Company made payments to Pace of approximately $395,0000,
$636,000, and $863,000, in 1994, 1995, and 1996, respectively, and
approximately $242,000 in the first quarter of 1997.

(d) Includes approximately $84,000 owed to STG Investments ("STG"), a Texas
general partnership owned by trusts beneficially owned by Mr. Mead's
children.

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<PAGE> 72

(e) Includes approximately $58,000 owing to Ralph Brotherton, who serves as a
trustee of trusts for the children of Mr. Mead. This debt arose from the
1995 redemption of Mr. Brotherton's equity interest in Equal Investment
Company ("EIC") in exchange for a $100,000 note from EIC. Subsequently, EIC
was merged into the Company and the Company became liable for the note to
Mr. Brotherton. The note to Mr. Brotherton does not bear interest.

(f) At March 31, 1997, STG and Pace owed Silverleaf approximately $169,000 and
$37,000, respectively, relating to cash payments on notes receivable of
Silverleaf collected and held by STG and Pace on behalf of Silverleaf.

TRANSACTIONS WITH RELATED ENTITIES

FFC loaned the Company approximately $3.2 million and $555,000 in 1994 and
1995. To secure such loans, the Company pledged to FFC in 1994 and 1995 notes
secured by Vacation Intervals with an aggregate principal balance of
approximately $4.3 million and $740,000, respectively. The Company made
principal and interest payments to FFC of approximately $1.3 million and
$871,000, in 1994 and 1995.

During 1994, the Company transferred to FFC notes with an aggregate
principal balance of $216,094 secured by Vacation Intervals as a partial payment
of interest on a note from the Company to FFC (the "FFC Note"). The Company also
set off the amount of $121,032 in 1994 against the FFC Note, for servicing fees
to administer certain notes owned by FFC. FFC paid the Company $144,000 during
1994 in fees for providing administrative personnel, equipment, supplies and
other overhead items to FFC.

Prior to the Consolidation Transactions in December, 1995, Silverleaf
engaged in various transactions with entities affiliated with Mr. Mead. As a
result of the Consolidation Transactions, all transactions between Silverleaf
and the entities which were parties to the Consolidation Transactions were
eliminated through consolidation and restatement of the Company's financial
statements, and are therefore not specifically discussed herein. See Note 1 of
Notes to Consolidated Financial Statements.

Prior to the Consolidation Transactions, Pace purchased delinquent notes
secured by Vacation Intervals from an Affiliated Company. From time to time,
Pace sold these delinquent notes to the Company, generally at a price of $200
per note. The Company then reacquired through foreclosure the underlying
Vacation Intervals for resale. Pace's note sales to the Company equaled $47,400
in 1994 and $24,200 in 1996. In February 1997, Pace sold its remaining inventory
of notes to the Company for a consideration of $16,400.

STG loaned the Company approximately $558,000 and $272,000 in 1994 and
1995, respectively. As security, the Company pledged to STG notes secured by
Vacation Intervals with an aggregate principal balance of approximately $870,000
and $454,000 in 1994 and 1995, respectively. The Company made principal and
interest payments to STG of approximately $380,000, $533,000 and $247,000, in
1994, 1995, and 1996, respectively. These loans were repaid in full by the
Company in 1996.

TRANSACTIONS WITH RELATED INDIVIDUALS

In March 1997, Mr. Mead entered into a lease agreement with the Company
which grants Mr. Mead the exclusive right to use approximately 500 acres
adjoining an Existing Resort for hunting purposes. This land is subject to deed
restrictions which prohibit the construction of new units, and most of this land
is located in a flood plain. The land will remain available to Silverleaf Owners
for hiking and nature trails. In exchange for these lease rights, Mr. Mead has
agreed to pay the annual property taxes for this land which are estimated at
approximately $5,000. This lease agreement has a ten-year term and may be
renewed by Mr. Mead for four additional ten-year terms.

Upon the consummation of the Offering, Mr. Mead has agreed to purchase a
condominium in Mexico and a residential property in Texas from the Company. The
Company's acquisition cost of these properties in 1995 was approximately
$420,000. Mr. Mead has proposed to pay the Company the higher of its acquisition
cost plus an additional 15% per annum (approximately $464,000), or the appraised
fair market value of these properties.

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<PAGE> 73

Prior to the consummation of the Offering, the Company will enter into a
Registration Rights Agreement with Mr. Mead with respect to all of his shares
(7,625,000) of Common Stock. See "Shares Eligible for Future Sale".

With regard to each of the above-referenced transactions with Mr. Mead, the
remaining disinterested member of the Board of Directors has reviewed the terms
of such transactions and has determined that they are fair to the Company.

During 1995, the Company loaned $15,000 to Ms. Brayfield at 8.5% interest
per annum. Due to a previous loan balance and the accrual of interest, her
aggregate debt to the Company was $71,000 at December 31, 1995. Her largest
outstanding loan balances in 1995 and 1996 were approximately $71,000 and
$77,000, respectively. The Company forgave this loan effective December 31,
1996. See "Management -- Executive Compensation".

During 1996, the Company was a party to a consulting agreement with Francis
Enterprises, Inc. ("FEI"), a Texas corporation which is wholly owned by a
proposed director of the Company. FEI received approximately $201,000 (and the
Company expensed approximately $208,000) in 1996 under this agreement. FEI
provided advice to the Company in connection with governmental and public
affairs. This consulting agreement was terminated in February 1997. An affiliate
of this proposed director owns a 10% net profits interest in a 45 acre tract of
land in Mississippi owned by the Company. See "Management -- Directors and
Executive Officers" and "Business -- Other Operations".

The Company paid Recreational Consultants, Inc., an entity of which Mr.
O'Connor is the principal, approximately $321,000, $430,000, and $552,000 in
sales commissions in 1994, 1995, and 1996, respectively. The Company paid
Recreational Consultants, Inc. approximately $148,000 in the first quarter of
1997. See "Management -- Executive Compensation".

Mr. O'Connor was indebted to the Company during 1994 and 1995 for advances
by the Company on his behalf, which debt bears interest at approximately 8% per
annum. The largest outstanding balance during 1994 and 1995 was approximately
$145,000 and $156,000, respectively. This debt was satisfied at the end of 1995.

TRANSACTIONS WITH THE MASTER CLUB

Prior to May 1997, Ms. Brayfield, an officer and director of the Company,
was the principal executive officer of the Master Club. In May 1997, Robert G.
Levy, an officer of the Company, was elected as President of the Master Club.
The Company manages the Existing Resorts under a management agreement with the
Master Club. The Company is entitled to a management fee equal to 15% of the
Master Club's gross revenues, but the Company's right to receive such fee on an
annual basis is limited to the amount of the Master Club's net income. If the
management fee is limited due to the Master Club's net income in a given year,
such deficiency may be recovered from the Master Club in subsequent years,
subject to the net income limitation. Accordingly, receivables for unpaid
management fee deficiencies from the Master Club due to the net income
limitation are not accrued on the books of the Company. In 1994, 1995, and 1996,
the Company reported management fees from the Master Club of approximately $2.4
million, $2.5 million and $2.2 million, respectively. The management fees
amounted to approximately $499,000 during the first quarter of 1997. The Master
Club bears and pays all expenses of operating the Existing Resorts, while the
Company bears the expense of new development and all marketing and sales
activities. To the extent the Master Club pays for payroll or other general and
administrative expenses that relate to the Company's development, marketing, or
sales activities, the Master Club allocates and charges such expenses to the
Company. During 1994, 1995 and 1996, the Master Club charged the Company
approximately $1.5 million, $1.9 million, and $2.1 million, respectively, for
expenses attributable to the Company. During the first quarter of 1997, such
expenses amounted to approximately $755,000. Also, during 1996, the Company
advanced on behalf of the Master Club approximately $940,000 for expenditures
related to refurbishment of the Existing Resorts. After netting management fees
earned, expenses charged back, and the advance for refurbishment expenditures,
the Company owed the Master Club approximately $429,000 at the end of 1995, and
the Master Club owed the Company approximately $1.1 million and $1.5 million at
the end of 1996 and March 1997, respectively. See "Business -- Clubs/Master
Club".

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<PAGE> 74

PRINCIPAL SHAREHOLDERS

The information in the following table sets forth information regarding the
beneficial ownership of the Common Stock of the Company, as adjusted to reflect
the sale of shares offered hereby, with respect to (i) each person known by the
Company to beneficially own 5% or more of the outstanding shares of Common
Stock, (ii) each person who is a director, proposed director or Named Executive
Officer of the Company and (iii) all directors, proposed directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
NAME AND ADDRESS OF ------------------------- -------------------------
BENEFICIAL OWNER(A) SHARES PERCENTAGE SHARES PERCENTAGE
------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Robert E. Mead(b)........................ 7,625,000(c) 99% 7,625,000 68.0%
Sharon K. Brayfield(b)................... 86,517(c) 1% 86,517 .8%
Joe W. Conner(b)......................... -- -- -- --
Larry H. Fritz(b)........................ -- -- -- --
Ioannis N. Gioldasis(b).................. -- -- -- --
Robert G. Levy(b)........................ -- -- -- --
Sandra G. Cearley(b)..................... -- -- -- --
James B. Francis, Jr.(d)................. -- -- -- --
Michael A. Jenkins(e).................... -- -- -- --
--------- --- --------- ----
All directors, proposed directors and
executive officers as a group (9
persons)............................... 7,711,517(c) 100% 7,711,517 68.8%
</TABLE>

- ---------------

(a) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Common Stock owned by
such beneficial owner.

(b) The address of such person is 1221 Riverbend Drive, Suite 120, Dallas,
Texas 75247.

(c) In May 1997, the Company declared a 719.97204 for one stock dividend.
Immediately prior to such stock dividend, Mr. Mead and Ms. Brayfield owned
10,576 shares and 120 shares, respectively, for a total of 10,696 issued
and outstanding shares.

(d) The address of such person is 8300 Douglas Avenue, Suite 800, Dallas, Texas
75225.

(e) The address of such person is 2151 Fort Worth Avenue, Dallas, Texas
75211-1812.

DESCRIPTION OF CAPITAL STOCK

Upon the consummation of the Offering the authorized capital stock of the
Company will consist of (i) 100,000,000 shares of Common Stock, par value $0.01
per share, 11,211,517 shares of which will be outstanding after the Offering
(without the over-allotment option), and (ii) 10,000,000 shares of Preferred
Stock, par value $0.01 per share, none of which will be outstanding after the
Offering. The following summary description of the capital stock of the Company
is qualified in its entirety by reference to the Charter and Bylaws of the
Company, copies of which are filed as exhibits to the Registration Statement of
which this Prospectus is a part. See "Additional Information".

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters voted on by shareholders, including elections of directors, and, except
as otherwise required by law or provided in any series of Preferred Stock, the
holders of shares of Common Stock exclusively possess all voting power. The
Charter prohibits cumulative voting in the election of directors. Subject to any
preferential rights of any outstanding series of Preferred Stock, the holders of
Common Stock are entitled to such distributions as may be declared from time to
time by the Board of Directors from funds available therefor, and upon
liquidation are entitled to receive pro rata all assets of the Company available
for distribution to such holders. All shares of Common Stock issued in the
Offering will be fully paid and nonassessable and the holders thereof will not
have preemptive rights.

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<PAGE> 75

PREFERRED STOCK

Preferred Stock may be issued from time to time, in one or more series, as
authorized by the Board of Directors. Prior to issuance of shares of each class,
the Board of Directors is required by the Texas Business Corporation Act
("TBCA") and the Company's Charter to fix for each such series, the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption, as are permitted by Texas law. The Board of Directors
could authorize the issuance of Preferred Stock with terms and conditions which
could have the effect of discouraging a takeover or other transaction which
holders of some, or a majority, of the Company's outstanding shares might
believe to be in their best interests or in which holders of some, or a
majority, of shares might receive a premium for their shares over the market
price of such shares. No Preferred Stock will be outstanding following the
consummation of the Offering.

TRANSFER AGENT AND REGISTRAR

The Company has appointed ChaseMellon Shareholder Services, L.L.C. as its
transfer agent and registrar.

CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS

The following paragraphs summarize certain provisions of the Company's
Charter and Bylaws that may be deemed to have anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a shareholder
may consider to be in the best interests of the Company or its shareholders,
including those attempts that may result in a premium over the then current
market price for the Common Stock. The following summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Charter and Bylaws, copies of which are exhibits to the Registration
Statement of which this Prospectus is a part, as described in "Additional
Information".

CLASSIFICATION OF THE BOARD OF DIRECTORS

The Company's Charter provides that the number of directors of the Company
shall be established by the Bylaws but shall not be less than the minimum number
required by the TBCA, which is one. The Bylaws provide that upon the
consummation of the Offering the Board of Directors will consist of not fewer
than five nor more than 13 members. Any vacancy on the Board of Directors will
be filled, at any regular meeting or at any special meeting called for that
purpose, by a majority of the remaining directors, except that a vacancy
resulting from an increase in the number of directors will be filled by a
majority of the entire board of directors. The Charter provides for a staggered
Board of Directors consisting of three classes as nearly equal in size as
practicable. One class will hold office initially for a term expiring at the
annual meeting of shareholders to be held in 1998, another class will hold
office initially for a term expiring at the annual meeting of shareholders to be
held in 1999 and another class will hold office initially for a term expiring at
the annual meeting of shareholders to be held in 2000. As the term of each class
expires, directors in that class will be elected for a term of three years and
until their successors are duly elected and qualify. The Company believes that
classification of the Board of Directors will help to assure the continuity and
stability of the Company's business strategies and policies as determined by the
Board of Directors.

The classified director provision could have the effect of making the
removal of incumbent directors more time-consuming and difficult, which could
discourage a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to the Company and its shareholders. At least two annual meetings of
shareholders, instead of one, will generally be required to effect a change in a
majority of the Board of Directors. Thus, the classified board provision could
increase the likelihood that incumbent directors will retain their positions.
Holders of shares of Common Stock will have no right to cumulative voting for
the elections of directors. Consequently, at each annual meeting of
shareholders, the holders of a majority of outstanding shares of Common Stock
present at such meeting (so long as a quorum exists) will be able to elect all
of the successors of the class of directors whose term expires at that meeting.

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<PAGE> 76

REMOVAL OF DIRECTORS

The Charter provides that a director may be removed with or without cause
by the affirmative vote of at least two-thirds of the votes entitled to be cast
in the election of directors. This provision precludes shareholders from
removing incumbent directors except upon a substantial affirmative vote, and the
Bylaws preclude the shareholders from filling the vacancies created by such
removal with their own nominees.

AMENDMENT TO THE COMPANY'S CHARTER AND BYLAWS

The Company's Charter, including its provisions on classification of the
Board of Directors and removal of directors, may be amended only by the
affirmative vote of the holders of at least 66 2/3% of the capital stock
entitled to vote. The Company's Bylaws may be amended by the affirmative vote of
holders of a majority of the capital stock entitled to vote on the matter.
Subject to the right of shareholders as set forth in the preceding sentence, the
Board of Directors is authorized to adopt, alter or repeal the Bylaws.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws of the Company provide that (i) with respect to an annual
meeting of shareholders, nominations of persons for election to the Board of
Directors and the proposal of business to be considered by shareholders may be
made only (a) pursuant to the Company's notice of the meeting, (b) by the Board
of Directors, or (c) by a shareholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws, and
(ii) with respect to special meetings of shareholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of shareholders, or provided that the Board of Directors has determined that
directors shall be elected at such meeting, nominations of persons for election
to the Board of Directors may be made by a shareholder who is entitled to vote
at the meeting and has complied with the advance notice provisions set forth in
the Bylaws.

SHAREHOLDER MEETINGS AND ACTION BY WRITTEN CONSENT

In order for shareholders to call special meetings, the Bylaws require the
written request of holders of shares entitled to cast not less than 25% of all
votes entitled to be cast at such meeting. Such provisions do not, however,
affect the ability of shareholders to submit a proposal to the vote of all
shareholders of the Company in accordance with the Bylaws, which provide for the
additional notice requirements for shareholder nominations and proposals at the
annual meetings of shareholders as described above.

The Bylaws provide that any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting by unanimous written
consent, if such consent sets forth such action and is signed by each
shareholder entitled to vote on the matter and a written waiver of any right to
dissent is signed by each shareholders entitled to notice of the meeting but not
entitled to vote at it.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Charter limits the liability of the Company's directors and
officers to the Company and its shareholders to the fullest extent permitted
from by law. The TBCA presently permits the liability of directors and officers
to a corporation or its shareholders for money damages to be limited, except (i)
if the director or officer is found liable on the basis that he improperly
received a personal benefit, or (ii) if the officer or director is found liable
to the Company by a court of competent jurisdiction after exhaustion of all
appeals therefrom. This provision does not limit the ability of the Company or
its shareholders to obtain other relief, such as an injunction or rescission.

The Company's Charter and Bylaws require the Company to indemnify its
directors, officers and certain other parties to the fullest extent permitted
from time to time by law. The TBCA presently permits a corporation to indemnify
its directors, officers and certain other parties against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party, only if (i)
the indemnified party conducted himself in good faith, (ii) if a director, his
conduct was in the corporation's best interest, or, if not a director, his
conduct was not opposed to the corporation's best interests, and (iii) in the
case of any criminal proceeding, the indemnified party had no reasonable cause
to believe his

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<PAGE> 77

conduct was unlawful. Indemnification may be made against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by the director or
officer in connection with the proceeding; provided, however, if the director or
officer has been adjudged to be liable to the corporation or is found liable on
the basis that personal benefit was improperly received, indemnification (1) is
limited to reasonable expenses actually incurred by such person in the
proceeding, and (2) shall not be made in respect of any proceeding in which the
person shall have been found liable for willful or intentional misconduct in the
performance of his duty to the corporation. The termination of any proceeding by
judgment, order, settlement, or conviction, or upon a plea of nolo contendere or
its equivalent, is not itself determinative that the director or officer did not
meet the requisite standard of conduct required for indemnification to be
permitted. The Company has applied for directors and officers insurance which
will become effective upon the effectiveness of the Registration Statement.

MERGER, SHARE EXCHANGE, CONSOLIDATION, DISSOLUTION OR ASSET SALES

A merger, share exchange, consolidation, dissolution, or sale of all or
substantially all of the assets of the Company must be approved by the
affirmative vote of holders of not less than two-thirds of the votes entitled to
be cast on the matter.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering the Company will have outstanding
11,211,517 shares of Common Stock. Of these shares, the 3,500,000 shares sold in
the Offering plus any additional shares sold upon exercise of the Underwriters'
over-allotment option will be freely tradable in the public market without
restriction or further registration under the Securities Act.

The remaining 7,711,517 outstanding shares of Common Stock are "restricted
securities" as that term is defined under Rule 144 and may be sold only pursuant
to registration under the Securities Act or pursuant to an exemption therefrom,
such as that provided by Rule 144. In general, under Rule 144 as recently
amended, if one year has elapsed since the later of (i) the date of acquisition
of shares of Common Stock from the Company (as is the case with respect to all
shares of Common Stock owned immediately prior to the consummation of the
Offering), or (ii) the date of acquisition of shares of Common Stock from any
"affiliate" of the Company (as that term is defined under the Securities Act),
the acquiror or subsequent holder is entitled to sell within any three-month
period a number of shares of Common Stock that does not exceed the greater of 1%
of the then-outstanding shares of Common Stock or the average weekly trading
volume of shares of Common Stock on all national securities exchanges or
reported through the consolidated transactions reporting system during the four
calendar weeks preceding the date on which notice of the sale is filed with the
Commission. Sales under Rule 144 are also subject to certain restrictions on the
manner of sales, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the date of
acquisition of shares of Common Stock from the Company or from any "affiliate"
of the Company, and the acquiror or subsequent holder thereof is deemed not to
have been an affiliate of the company at any time during the 90 days preceding a
sale, such person would be entitled to sell such shares of Common Stock in the
public market under Rule 144(k) without regard to the volume limitations, manner
of sale provisions, public information requirements or notice requirements.

The Company will enter into a Registration Rights Agreement (the
"Registration Rights Agreement") with Mr. Mead pursuant to which the Company
will be obligated to register his 7,625,000 shares under the Securities Act at
specified times and in specified amounts. Specifically, the Company, subject to
certain exceptions and limitations, will, upon request, be required (i) at any
time after 180 days following consummation of the Offering, to register up to
50% of the Common Stock owned by Mr. Mead, and (ii) at any time after the first
anniversary of the Offering, to register all of the Common Stock owned by Mr.
Mead which has not been previously registered.

After the first anniversary of the consummation of the Offering, under the
Registration Rights Agreement, subject to certain exception and limitations, if
the Company proposes to register any of its securities under the Securities Act
for its own account or the account of another person pursuant to an
underwriting, Mr. Mead may require the Company to include in such registration
all or part of the shares of Common Stock held by him after completion of the
Offering.

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<PAGE> 78

The Company is required to pay all expenses incident to the performance of
its obligations under the Registration Rights Agreement, other than any
underwriting discounts and commissions, or transfer taxes relating to shares of
Common Stock registered pursuant thereto.

Mr. Mead has agreed, if requested by an underwriter in an underwritten
offering of the Company's securities (whether for the account of the Company or
otherwise), not to effect any public sale or distribution of any shares of
Common Stock or other Company equity securities, including a sale pursuant to
Rule 144, during the ten day period prior to, and during the 90-day period
beginning on, the closing date of such underwritten offering.

After the completion of the Offering, the Company intends to file a
Registration Statement on Form S-8 under the Securities Act to register all of
the shares of Common Stock reserved for issuance under the Plan. After the date
of such filing, such shares when issued will be immediately eligible for sale in
the public market, provided that shares owned by "affiliates" of the Company (as
defined in Rule 144 under the Securities Act), will be subject to the volume
limitations, manner of sale provisions, and public information and notice
requirements of Rule 144.

Prior to the Offering, there has been no public market for the Common Stock
and the effect, if any, that future market sales of Common Stock or the
availability of such Common Stock for sale will have on the market price of the
Common Stock prevailing from time to time cannot be predicted. Nevertheless,
sales of substantial amounts of Common Stock in the public market (or the
perception that such sales could occur) might adversely affect market prices for
the Common Stock.

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated June , 1997 (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Credit Suisse First Boston
Corporation, EVEREN Securities, Inc., and McDonald & Company Securities, Inc.
are acting as representatives (the "Representatives"), have severally but not
jointly agreed to purchase from the Company the following respective numbers of
shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
EVEREN Securities, Inc......................................
McDonald & Company Securities, Inc. ........................
---------
Total............................................. 3,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides that,
in the event of a default by an Underwriter, in certain circumstances, the
purchase commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.

The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of this Prospectus, to purchase
up to 525,000 additional shares at the initial public offering price less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of the shares of Common Stock. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a concession
of $ per share, and the

76
<PAGE> 79

Underwriters and such dealers may allow a discount of $ per share on sales
to certain other dealers. After the initial public offering, the public offering
price and concession and discount to dealers may be changed by the
Representatives.

The Representatives have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5% of the number of shares
being offered hereby.

The Company and its shareholders, officers and directors have agreed that
they will not offer, sell, contract to sell, announce their intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act relating to, any additional shares of Common Stock or securities convertible
or exchangeable into or exercisable for any shares of Common Stock without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this Prospectus.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or contribute
to payments which the Underwriters may be required to make in respect thereof.

The shares of Common Stock have been approved for listing on The New York
Stock Exchange, subject to notice of issuance.

Prior to the Offering, there has been no public market for the Common
Stock. The initial price to the public for the shares of Common Stock has been
negotiated among the Company and the Representatives. Such initial price is
based on, among other things in addition to prevailing market conditions, the
Company's financial and operating history and condition, its prospects and the
prospects for its industry in general, the management of the Company and the
market prices for securities of companies in businesses similar to that of the
Company.

The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Representatives to reclaim a selling concession from a
syndicate member when the Common Stock originally sold by such syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Common Stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The New York Stock Exchange or otherwise and, if commenced, may be
discontinued at any time.

Credit Suisse First Boston Mortgage Capital, L.L.C. ("CSFBMC"), an
affiliate of Credit Suisse First Boston Corporation, currently has a lending
relationship with the Company and its affiliate, CBI. In October of 1996, CSFBMC
entered into two loan agreements which provide for borrowings up to $45.4
million: a revolving loan commitment for up to $40.0 million of borrowings
secured by notes receivable from Silverleaf Owners and a $5.4 million term loan
secured by condominium units, certain undeveloped acreage at the Ozark Mountain
and Holiday Hills Resorts, and the golf course at Holiday Hills Resort. At March
31, 1997, the Company was indebted to CSFBMC in the amount of $5.3 million.
Interest continues to accrue on this debt at the rate of 10.25% per annum. The
debt to CSFBMC will be paid from the proceeds of the Offering. See "Use of
Proceeds".

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Common Stock are effected. Accordingly, any resale of the Common
Stock in

77
<PAGE> 80

Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the Common Stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Common Stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".

RIGHT OF ACTION AND ENFORCEMENT

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
Company or such persons. All or a substantial portion of the assets of the
Company and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the Company or such persons in
Canada or to enforce a judgment obtained in Canadian courts against the Company
or such persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of Common Stock should consult their own legal and tax
advisers with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the shares for investment by the purchaser under relevant Canadian legislation.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P. ("Meadows
Owens"), Dallas, Texas. Certain matters of Missouri real estate and timeshare
law will be passed upon for the Company by Armstrong, Teasdale, Schlafy & Davis,
Kansas City, Missouri. Certain matters will be passed upon for the Underwriters
by Latham & Watkins, Los Angeles, California, in reliance, as to matters of
Texas law, on the opinion of Meadows Owens.

78
<PAGE> 81

EXPERTS

The combined financial statements of Silverleaf Resorts, Inc. at December
31, 1994 and for the year then ended included in this Prospectus have been
audited by James Smith & Company, P.C., Dallas, Texas, independent auditors, as
stated in its report appearing herein, and are included in reliance upon the
report of such firm given upon its authority as experts in accounting and
auditing.

The consolidated financial statements of the Company at December 31, 1995
and 1996 and for the years then ended included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. Upon the effectiveness of the Registration Statement, the
Company will become subject to the reporting requirements of the Exchange Act.
This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Common Stock offered hereby, reference is hereby made to such Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and in each instance, reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference. Copies of the
Registration Statement may be obtained from the Commission's principal office at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Seven World Trade Center, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained from the public reference section of the Commission at
its Washington address upon payment of the fees prescribed by the Commission or
may be examined without charge at the offices of the Commission. The Commission
maintains a web site that contains reports, proxy statements and other
information filed with the Commission; the address of this site is
http://www.sec.gov. Copies of such material may also be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549.

The Company intends to furnish its shareholders with annual reports
containing consolidated financial statements audited by an independent public
accounting firm. The shares of Common Stock offered for sale herein have been
approved for listing on The New York Stock Exchange, subject to official notice
of issuance.

79
<PAGE> 82

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports............................... F-2
Financial Statements (amounts at March 31, 1997 and for the
three months ended March 31, 1996 and 1997 are unaudited)
Consolidated Balance Sheets at December 31, 1995 and 1996,
and March 31, 1997..................................... F-4
Consolidated Statements of Income for the years ended
December 31, 1994, 1995 and 1996, and the three months
ended March 31, 1996 and 1997.......................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1994, 1995 and 1996, and the
three months ended March 31, 1997...................... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996, and the three months
ended March 31, 1996 and 1997.......................... F-7
Notes to Consolidated Financial Statements................ F-8
</TABLE>

F-1
<PAGE> 83

INDEPENDENT AUDITORS' REPORT

To the Shareholders of
Silverleaf Resorts, Inc.

We have audited the accompanying consolidated balance sheets of Silverleaf
Resorts, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1996
and the related consolidated statements of income, shareholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Silverleaf Resorts, Inc. and
subsidiaries as of December 31, 1995 and 1996 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 10, 1997 (May 15, 1997
as to the first paragraph of Note 9)

F-2
<PAGE> 84

INDEPENDENT AUDITORS' REPORT

To the Shareholders of
Silverleaf Resorts, Inc.

We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows for the year ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Silverleaf
Resorts, Inc. and subsidiaries for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.

JAMES SMITH AND COMPANY, P.C.

Dallas, Texas
December 1, 1995 (May 15, 1997 as
to the first paragraph of Note 9)

F-3
<PAGE> 85

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents........................... $ 3,711,571 $ 972,510 $ 1,120,790
Notes receivable, net of allowance for uncollectible
notes of approximately $9,861,000 and $11,894,000
at December 31, 1995 and 1996, respectively, and
$12,808,000 at March 31, 1997..................... 35,567,224 55,793,996 62,483,113
Amounts due from affiliates......................... 4,341,888 6,237,023 6,493,909
Inventory........................................... 4,453,914 10,300,475 11,390,250
Land, equipment and utilities, net.................. 8,947,848 12,633,119 12,641,882
Land held for sale.................................. 1,016,132 466,133 466,133
Prepaid and other assets............................ 1,599,801 2,859,956 3,990,200
Net assets of discontinued operations............... 3,048,795 1,589,212 1,127,453
----------- ----------- -----------
TOTAL ASSETS.............................. $62,687,173 $90,852,424 $99,713,730
=========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Accounts payable and accrued expenses............. $ 2,761,731 $ 3,155,335 $ 3,334,838
Amounts due to affiliates......................... 14,262,627 14,765,135 14,746,814
Unearned revenues................................. 1,089,334 1,790,269 1,572,828
Income taxes payable.............................. 2,654,000 3,650,000 3,996,000
Deferred income taxes, net........................ 2,868,000 4,843,000 6,056,000
Notes payable and capital lease obligations....... 23,362,867 41,986,269 46,690,413
----------- ----------- -----------
Total Liabilities......................... 46,998,559 70,190,008 76,396,893
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, par value $0.01 per share,
100,000,000 shares authorized 7,711,517 shares
issued and outstanding......................... 77,115 77,115 77,115
Additional paid-in capital........................ 13,470,104 13,470,104 13,470,104
Retained earnings................................. 2,141,395 7,115,197 9,769,618
----------- ----------- -----------
Total Shareholders' Equity................ 15,688,614 20,662,416 23,316,837
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.................................. $62,687,173 $90,852,424 $99,713,730
=========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 86

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Vacation Interval sales............ $25,842,774 $35,885,181 $ 48,103,161 $12,590,776 $15,770,509
Provision for uncollectible
notes............................ (6,013,783) (9,144,251) (12,075,097) (3,243,324) (3,848,514)
----------- ----------- ------------ ----------- -----------
Net Vacation Interval sales........ 19,828,991 26,740,930 36,028,064 9,347,452 11,921,995
Interest income.................... 1,632,649 3,968,332 6,296,578 1,312,099 1,932,735
Interest income from affiliates.... 252,083 392,713 377,090 127,830 107,614
Management fee income.............. 2,394,475 2,478,181 2,186,903 551,484 498,925
Lease income....................... 1,136,853 1,309,670 1,717,207 456,289 485,462
Other income....................... 1,931,668 1,832,374 1,440,798 245,395 398,667
----------- ----------- ------------ ----------- -----------
Total revenues.............. 27,176,719 36,722,200 48,046,640 12,040,549 15,345,398
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales.... 2,648,170 3,279,533 2,805,063 224,346 1,221,110
Sales and marketing................ 12,929,231 17,850,161 21,838,577 5,039,930 5,948,944
Operating, general and
administrative................... 5,335,960 8,061,534 8,970,233 2,342,574 1,945,025
Depreciation and amortization...... 589,847 863,149 1,263,816 277,365 330,596
Interest expense to affiliates..... 884,668 1,403,309 880,488 228,009 225,580
Interest expense to unaffiliated
entities......................... 757,060 2,206,091 3,879,253 827,874 1,460,722
----------- ----------- ------------ ----------- -----------
Total costs and operating
expenses.................. 23,144,936 33,663,777 39,637,430 8,940,098 11,131,977
----------- ----------- ------------ ----------- -----------
Income from continuing operations
before income taxes................ 4,031,783 3,058,423 8,409,210 3,100,451 4,213,421
Income tax expense................... 1,677,000 1,512,000 3,140,000 1,156,000 1,559,000
----------- ----------- ------------ ----------- -----------
INCOME FROM CONTINUING OPERATIONS.... 2,354,783 1,546,423 5,269,210 1,944,451 2,654,421
DISCONTINUED OPERATIONS:
Income (loss) from operations (less
applicable income taxes of $0 in
1994 and 1995 and a benefit of
$99,000 in 1996)................. 568,592 (1,484,414) (168,408) (94,774) --
Loss on disposal including
provision for operating losses
during the phase out period (less
applicable income taxes of $0 in
1994 and 1995 and a benefit of
$74,000 in 1996)................. -- -- (127,000) -- --
----------- ----------- ------------ ----------- -----------
Total income (loss) from discontinued
operations......................... 568,592 (1,484,414) (295,408) (94,774) --
----------- ----------- ------------ ----------- -----------
NET INCOME........................... $ 2,923,375 $ 62,009 $ 4,973,802 $ 1,849,677 $ 2,654,421
=========== =========== ============ =========== ===========
INCOME (LOSS) PER COMMON SHARE FROM:
Continuing Operations.............. $ 0.31 $ 0.20 $ 0.68 $ 0.25 $ 0.34
Discontinued Operations............ 0.08 (0.19) (0.04) (0.01) --
----------- ----------- ------------ ----------- -----------
NET INCOME PER COMMON SHARE.......... $ 0.39 $ 0.01 $ 0.64 $ 0.24 $ 0.34
=========== =========== ============ =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING........................ 7,588,952 7,590,295 7,711,517 7,711,517 7,711,517
=========== =========== ============ =========== ===========
PRO FORMA INCOME FROM CONTINUING
OPERATIONS (UNAUDITED)............. $ 7,424,000 $ 2,394,000 $ 3,382,000
============ =========== ===========
PRO FORMA INCOME PER COMMON SHARE
FROM CONTINUING OPERATIONS
(UNAUDITED)........................ $ 0.71 $ 0.24 $ 0.30
============ =========== ===========
PRO FORMA WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (UNAUDITED)..... 10,483,168 10,161,933 11,211,517
============ =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 87

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------- NET
NUMBER OF $0.01 UNREALIZED ADDITIONAL
SHARES PAR GAINS PAID-IN RETAINED
ISSUED VALUE (LOSSES) CAPITAL EARNINGS TOTAL
--------- ------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1994.............. 7,588,952 $75,889 $ -- $ 8,006,331 $ (843,989) $ 7,238,231
Unrealized loss on
investments available
for sale................ -- -- (44,675) -- -- (44,675)
Net income................. -- -- -- -- 2,923,375 2,923,375
--------- ------- ------- ----------- ---------- -----------
DECEMBER 31, 1994............ 7,588,952 75,889 (44,675) 8,006,331 2,079,386 10,116,931
Contributions.............. 209,082 2,091 -- 5,562,908 -- 5,564,999
Repurchase and retirement
of common stock......... (86,517) (865) -- (99,135) -- (100,000)
Realized loss on
investments available
for sale................ -- -- 44,675 -- -- 44,675
Net income................. -- -- -- -- 62,009 62,009
--------- ------- ------- ----------- ---------- -----------
DECEMBER 31, 1995............ 7,711,517 77,115 -- 13,470,104 2,141,395 15,688,614
Net income................. -- -- -- -- 4,973,802 4,973,802
--------- ------- ------- ----------- ---------- -----------
DECEMBER 31, 1996............ 7,711,517 77,115 $ -- 13,470,104 7,115,197 20,662,416
Net income (unaudited)..... -- -- -- -- 2,654,421 2,654,421
--------- ------- ------- ----------- ---------- -----------
MARCH 31, 1997 (unaudited)... 7,711,517 $77,115 $ -- $13,470,104 $9,769,618 $23,316,837
========= ======= ======= =========== ========== ===========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 88

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................... $ 2,923,375 $ 62,009 $ 4,973,802 $ 1,849,675 $ 2,654,421
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.......... 589,847 863,149 1,263,816 277,365 330,596
Discontinued operations................ (3,530,342) 1,476,057 3,794,138 99,002 523,939
Loss on investment in joint venture.... -- 151,035 -- -- --
(Gain) Loss on disposal of land,
equipment and utilities.............. (4,580) 116,373 64,721 -- --
Loss on sale of marketable
securities........................... -- 8,578 -- -- --
Deferred tax provision................. 861,000 871,000 1,975,000 760,000 1,213,000
Increase (decrease) in cash from
changes in assets and liabilities
(exclusive of amounts contributed):
Amounts due from affiliates.......... (383,366) 452,181 (1,733,402) (148,949) (256,886)
Inventory............................ 205,389 (379,868) (5,846,561) (1,416,891) (1,089,775)
Prepaid and other assets............. (650,692) 42,084 (1,558,753) (60,795) (1,130,244)
Accounts payable and accrued
expenses.......................... 473,188 160,866 393,604 931,032 179,503
Amounts due to affiliates............ 836,029 (711,597) 114,013 495,437 194,050
Interest payable to affiliates....... 410,376 (41,392) 1,238,035 -- --
Unearned revenues.................... (49,731) 23,259 700,935 260,841 (217,441)
Income taxes payable................. 816,000 619,000 996,000 396,000 346,000
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities...................... 2,496,493 3,712,734 6,375,348 3,442,717 2,747,163
INVESTING ACTIVITIES:
Proceeds from sale of marketable
securities............................. -- 58,907 -- -- --
Issuance of notes receivable from
affiliates............................. (1,783,871) (237,453) (207,668) -- --
Proceeds from sales of land, equipment
and utilities.......................... 593,164 -- -- -- --
Proceeds from sales of land held for
sale................................... -- 733,279 599,999 -- --
Purchase of land held for sale........... (744,203) -- -- -- --
Purchases of land, equipment and
utilities.............................. (1,701,402) (4,497,328) (4,162,069) (159,877) (339,359)
Notes receivable, net.................... (8,552,693) (15,661,786) (20,226,772) (6,039,335) (6,689,117)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities...................... (12,189,005) (19,604,381) (23,996,510) (6,199,212) (7,028,476)
FINANCING ACTIVITIES:
Proceeds from borrowings from
unaffiliated entities.................. 4,454,544 22,667,898 26,647,776 3,600,476 8,231,605
Payments on borrowings to unaffiliated
entities............................... (1,134,053) (4,004,385) (8,938,788) (1,602,985) (3,527,461)
Proceeds from borrowings from
affiliates............................. 6,417,057 2,467,791 619,564 100,042 --
Payments on borrowings to affiliates..... (1,800,925) (1,116,954) (1,111,896) (535,346) (212,371)
Discontinued operations.................. 2,487,685 (1,340,053) (2,334,555) (743,392) (62,180)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities...................... 10,424,308 18,674,297 14,882,101 818,795 4,429,593
NET INCREASE (DECREASE) IN CASH............ 731,796 2,782,650 (2,739,061) (1,937,700) 148,280
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD...................... 197,125 928,921 3,711,571 3,711,571 972,510
----------- ----------- ----------- ----------- -----------
END OF PERIOD............................ $ 928,921 $ 3,711,571 $ 972,510 $ 1,773,871 $ 1,120,790
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid............................ $ 1,545,916 $ 2,462,179 $ 3,713,796 $ 792,156 $ 1,184,156
Income taxes paid........................ -- 17,000 -- -- --
Assets contributed....................... -- 14,489,000 -- -- --
Liabilities assumed with contributed
assets................................. -- 8,924,000 -- -- --
Equipment acquired under capital
leases................................. 726,847 408,655 814,414 -- 29,985
Repurchase of common stock through
issuance of debt....................... -- 100,000 -- -- --
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 89

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
UNAUDITED INTERIM INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

1. NATURE OF BUSINESS

Silverleaf Resorts, Inc., a Texas Corporation (the "Company" or
"Silverleaf"), formerly known as Ascension Capital Corporation ("ACC"), operates
as Silverleaf Vacation Club, Inc. Silverleaf's principal activities consist of
(i) developing and operating timeshare resorts; (ii) marketing and selling
one-week vacation intervals ("Vacation Intervals") to new prospective owners;
(iii) marketing and selling upgraded Vacation Intervals to existing Silverleaf
Owners; and (iv) providing financing for the purchase of Vacation Intervals. The
Company has in-house sales, marketing, financing, and property management
capabilities and coordinates all aspects of expansion of its seven existing
resorts (the "Existing Resorts") and the development of any new timeshare
resort, including site selection, design, and construction. The Company operates
its Existing Resorts under a management agreement with a non-profit corporation,
Master Club ("Master Club"), which bears the costs of operating, maintaining,
and refurbishing the resorts from monthly dues paid by the Vacation Interval
owners. The Company receives a management fee from Master Club to compensate it
for the services it provides. In addition to Vacation Interval sales revenues,
interest income derived from its financing activities and the management fee
received from Master Club, the Company generates additional revenue from leasing
of unsold intervals, utility operations related to the resorts and other
sources. All of the operations are directly related to the resort real estate
development industry. Sales of Vacation Intervals are marketed to individuals
primarily through direct mail and telephone solicitation.

The consolidated financial statements of the Company as of and for the year
ended December 31, 1996, reflect the operations of the Company and its wholly
owned subsidiaries, Condominium Builders, Inc. ("CBI"), Villages Land, Inc.
("VLI"), Silverleaf Travel, Inc., and Database Research, Inc.

The Company was formed as a result of the combination of ACC, Equal
Investment Corporation ("EIC"), CBI, and Holly Ranch Water Company, Inc.
("HRWCI") on December 29, 1995 (HRWCI was liquidated in 1995). ACC and EIC were
the 99% general partner and 1% limited partner, respectively, of Ascension
Resorts, Ltd. ("ARL"). The historical consolidated financial statements have
been restated utilizing the historical cost basis of the combined entities so as
to present the consolidated financial condition, operations, equity and cash
flows since these entities were under common ownership and control.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in the
consolidated financial statements.

Interim Financial Statements (Unaudited) -- The accompanying financial
statements for the interim periods ended March 31, 1996 and 1997 and related
disclosures are unaudited. These unaudited condensed interim financial
statements do not include all of the disclosures provided in the annual
consolidated financial statements and have been prepared in accordance with
Article 10 of Regulation S-X. The interim financial statements should be read in
conjunction with the accompanying annual audited financial statements and
footnotes thereto. In the opinion of the Company, all adjustments necessary to
fairly present the financial position, results of operations, and cash flows
have been reflected in the financial statements for the periods ended March 31,
1996 and 1997. Results for the interim period 1997 are not necessarily
indicative of the results to be expected for the year ending December 31, 1997.

Revenue and Expense Recognition -- A substantial portion of Vacation
Interval sales are made in exchange for mortgage notes receivable, which are
secured by a deed of trust on the Vacation Interval sold. The Company recognizes
the sale of a Vacation Interval under the accrual method. Revenues are
recognized after a binding sales contract has been executed, a 10% minimum down
payment has been received, construction is substantially

F-8
<PAGE> 90

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

complete and the statutory rescission period has expired. If all criteria are
met except that construction is not substantially complete, revenues are
recognized on the percentage-of-completion basis. If a customer fails to make
the first installment payment when due, the Company reverses the sale and the
recovered property is placed back into inventory at its original historical cost
basis and any payments made by the customer during the period which are not
refunded are recorded as other revenues. In addition to sales of Vacation
Intervals to new prospective owners the Company sells upgraded Vacation
Intervals to existing Silverleaf owners. Revenues are recognized on these
upgrade Vacation Interval sales when the criteria described above are satisfied.
The revenue recognized is the net of the incremental increase in the upgrade
sales recognized price and cost of sales is the incremental increase in the cost
of the Vacation Interval purchased.

The Company recognizes interest income as earned. To the extent interest
payments become delinquent the Company ceases recognition of the interest income
until collection is assured. When inventory is returned to the Company any
unpaid note receivable balances are charged against the previously established
bad debt reserve net of the amount at which the Vacation Interval is being
restored to inventory.

Revenues related to one-time Sampler contracts, which entitles the
prospective owner to sample a resort for various periods, are recorded as lease
income and deferred until earned.

The Company receives fees for management services provided to Master Club.
These revenues are recognized on an accrual basis in the period the services are
provided.

Utilities, services and other income is recognized on an accrual basis in
the period service is provided.

Sales and marketing costs are expensed as incurred.

Cash and Cash Equivalents -- Cash and cash equivalents consist of all
highly liquid investments with a remaining maturity at the date of purchase of
three months or less. Cash and cash equivalents consist of cash, certificates of
deposit and money market funds.

Provision for Uncollectible Notes -- The Company records a provision for
uncollectible notes at the time revenue is recognized. Such provision is
recorded in an amount sufficient to maintain the allowance at a level considered
adequate to provide for anticipated losses resulting from customers' failure to
fulfill their obligations under the terms of their notes. The allowance for
doubtful notes takes into consideration both notes held by the Company and those
sold with recourse. Such allowance for doubtful notes is adjusted based upon
periodic analysis of the portfolio, historical credit loss experience and
current economic factors. The allowance for uncollectible notes is reduced by
actual cancellations and losses experienced, including losses related to
previously sold notes receivable which were reacquired pursuant to the recourse
obligations discussed herein. Recourse to the Company on sales of notes
receivable is governed by the agreements between the purchasers and the Company.

Inventory -- Inventory is stated at the lower of cost or market. Cost
includes amounts for land construction materials, direct labor and overhead,
taxes and capitalized interest incurred in the construction or through the
acquisition by purchase of resort dwellings held for timeshare sale. These costs
are capitalized as inventory and are allocated to Vacation Intervals based upon
their relative sales values. Upon sale of a Vacation Interval these costs are
charged to cost of sales on a specific identification basis. Vacation Intervals
reacquired through repossession, recaptured through mutual release of deed or
received as part of the upgrade program are placed back into inventory at the
lower of its original historical cost basis or market value. Company management
routinely reviews the carrying value of its inventory on an individual project
basis to determine that the carrying value does not exceed market.

Land Held for Sale -- Land held for sale represents undeveloped land and is
recorded at the lower of cost or fair value less costs to sell.

F-9
<PAGE> 91

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Impairment -- In March, 1995, the FASB issued Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of ("SFAS No. 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted SFAS No. 121 on January 1, 1996, with no material impact to the
Company's operations or financial position.

Land, Equipment and Utilities -- Land, equipment (including equipment under
capital lease), and utilities are stated at cost, which includes amounts for
construction materials, direct labor and overhead and capitalized interest. When
assets are disposed of, the cost and related accumulated depreciation are
removed, and any resulting gain or loss is reflected in income for the period.
Maintenance and repairs are charged to operations as incurred; significant
betterments and renewals are capitalized. Depreciation is calculated using the
straight-line method over the estimated useful life of the asset, ranging from 3
to 10 years.

Discontinued Operations -- The Company has adopted a plan to discontinue
its development and sale of condominiums by CBI. Accordingly, these operations
have been reported as a separate component of operations and the assets and
liabilities have been combined and included in net assets of discontinued
operations on the balance sheet.

Income Taxes -- Deferred income taxes are recorded for temporary
differences between the bases of assets and liabilities as recognized by tax
laws and their carrying value as reported in the financial statements. Provision
is made or benefit recognized for deferred taxes relating to temporary
differences in the recognition of expense and income for financial reporting
purposes. To the extent a deferred tax asset does not meet the criteria of "more
likely than not" for realization, a valuation allowance is recorded.

Earnings per Share -- Earnings per share amounts are based on the weighted
average number of shares outstanding. The weighted average shares outstanding
for all periods presented give retroactive effect to the 1995 and 1997 stock
dividends (see Note 9). Fully diluted earnings per share amounts are not
presented as there are no common stock equivalents.

Pro Forma Earnings per Share (unaudited) -- Unaudited pro forma earnings
per share amounts are based on the weighted average number of shares outstanding
assuming; (i) the historical shares as adjusted for the stock dividend were
outstanding for all periods presented; and (ii) an additional number of shares
were outstanding at any time only in an amount sufficient to retire the
outstanding debt as of that date.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from such
estimates.

Environmental Remediation Costs -- The Company accrues for losses
associated with environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. Recoveries of
environmental remediation costs from other parties are recorded as assets when
their receipt is deemed probable. Company management is not aware of any
environmental remediation obligations which would materially affect the
operations, financial position or cash flow of the Company.

New Accounting Standards -- Statement of Financial Standards ("SFAS") No.
128, "Earnings Per Share" specifies new computation, presentation and disclosure
requirements. The statement will be effective for both interim and annual
periods ending after December 15, 1997. Management believes that the adoption of
this statement will not have a material impact on the earnings per share
presented.

F-10
<PAGE> 92

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS No. 125 -- "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," requires an entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred
and to derecognize financial assets when control has been surrendered. The
Company will apply the new rules of SFAS No. 125 prospectively to transactions
beginning in 1997. Based on current activities, the Company believes the
adoption of SFAS No. 125 will not have a material impact on the Company's
results of operations or financial position.

SFAS No. 123 -- "Accounting for Stock-Based Compensation," which was
effective for fiscal years beginning after December 15, 1995, requires that an
employer's financial statements include certain disclosures about stock-based
employee compensation arrangements regardless of the method used to account for
them. Management expects to measure compensation costs using APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and will therefore include
disclosures in the notes to the financial statements of pro forma net income and
pro forma earnings per share as if the fair value based accounting method in
SFAS No. 123 had been used to account for stock-based compensation cost in
future financial statement presentations. No awards or grants existed as of
December 31, 1996.

3. CONCENTRATIONS OF RISK

Credit Risk -- The Company is exposed to on-balance sheet credit risk
related to its notes receivable. The Company is exposed to off-balance sheet
credit risk related to loans sold under recourse provisions.

The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts. These buyers make a down payment of at least 10% of the
purchase price and deliver a promissory note to the Company for the balance; the
promissory notes generally bear interest at a fixed rate are payable over a
seven year period and are secured by a first mortgage on the Vacation Interval.
The Company bears the risk of defaults on these promissory notes, and this risk
is heightened inasmuch as the Company generally does not verify the credit
history of its customers and will provide financing if the customer is presently
employed and meets certain household income criteria.

If a buyer of a Vacation Interval defaults, the Company generally must
foreclose on the Vacation Interval and attempt to resell it; the associated
marketing, selling, and administrative costs from the original sale are not
recovered; and such costs must be incurred again to resell the Vacation
Interval. Although the Company in many cases may have recourse against a
Vacation Interval buyer for the unpaid price, Texas and certain other states
have laws which limit the Company's ability to recover personal judgments
against customers who have defaulted on their loans. Accordingly, the Company
has generally not pursued this remedy. (See Note 4)

Interest Rate Risk -- The Company has historically derived net interest
income from its financing activities because the interest rates it charges its
customers who finance the purchase of their Vacation Intervals exceed the
interest rates the Company pays to its lenders. Because the Company's
indebtedness bears interest at variable rates and the Company's customer
receivables bear interest at fixed rates, increases in interest rates will erode
the spread in interest rates that the Company has historically obtained and
could cause the rate on the Company's borrowings to exceed the rate at which the
Company provides financing to its customers. The Company does not engage in
interest rate hedging transactions. Therefore, any increase in interest rates,
particularly if sustained, could have a material adverse effect on the Company's
results of operations, cash flows and financial position.

Availability of Funding Sources -- The Company funds substantially all of
the notes receivable, timeshare inventory and land inventory which it originates
or purchases with borrowings through its financing facilities and internally
generated funds. These borrowings are in turn repaid with the proceeds received
by the Company from repayments of such notes receivable. To the extent that the
Company is not successful in maintaining or replacing existing financings, it
would have to curtail its operations or sell assets, thereby having a material
adverse effect on the Company's results of operations, cash flows and financial
condition.

F-11
<PAGE> 93

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Geographic Concentration -- The Company's notes receivable are primarily
originated in Texas and Missouri. The risk inherent in such concentrations is
dependent upon regional and general economic stability which affects property
values and the financial stability of the borrowers. The Company's Vacation
Interval inventories are concentrated in Texas and Missouri. The risk inherent
in such concentrations is in the continued popularity of the resort
destinations, which affects the marketability of the Company's products and the
collection of notes receivable.

4. NOTES RECEIVABLE

The Company provides financing to the purchasers of Vacation Intervals
which are collateralized by their interest in such Vacation Intervals. The notes
receivable generally have initial terms of up to seven years. The average yield
on outstanding notes receivable at December 31, 1996 was approximately 14.7%.

In connection with the its Sampler program the Company routinely enters
into notes receivable with terms of 10 months. These notes receivable total
$1,089,334 at December 31, 1995, and $1,568,051 at December 31, 1996, and are
typically non-interest bearing. These notes receivable have not been discounted
as management has determined the effects would not be material to the
consolidated financial statements of the Company.

Notes receivable are scheduled to mature as follows at December 31, 1996:

<TABLE>
<S> <C>
1997........................................................ $ 8,130,195
1998........................................................ 9,054,037
1999........................................................ 9,430,225
2000........................................................ 10,254,382
2001........................................................ 10,691,275
Thereafter.................................................. 20,128,168
------------
67,688,282
Less allowance for uncollectible notes...................... (11,894,286)
------------
Notes receivable, net....................................... $ 55,793,996
============
</TABLE>

The following schedule summarizes the original principal amount of notes
receivable sold with recourse to third parties and affiliates during the years
ended December 31, 1994, 1995, and 1996:

<TABLE>
<CAPTION>
1994 1995 1996
---------- -------- --------
<S> <C> <C> <C>
Unaffiliated third parties........................ $5,406,102 $564,664 $ --
Affiliates........................................ -- -- --
---------- -------- --------
Total notes receivable sold............. $5,406,102 $564,664 $ --
========== ======== ========
</TABLE>

The following schedule summarizes outstanding principal maturities of notes
receivable sold with recourse as of December 31, 1995 and 1996:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Unaffiliated third parties................................ $11,735,864 $ 9,693,317
Affiliates................................................ 2,033,386 1,355,387
----------- -----------
Total outstanding notes receivable sold with
recourse...................................... $13,769,250 $11,048,704
=========== ===========
</TABLE>

F-12
<PAGE> 94

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Management considers both pledged and sold-with-recourse notes receivable
in the Company's allowance for uncollectible notes. The activity in the
allowance for uncollectible notes is as follows for years ended December 31,
1994, 1995, and 1996:

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Balance, beginning of year.................. $ 7,953,164 $ 9,394,490 $ 9,861,458
Provision................................... 6,013,783 9,144,251 12,075,097
Receivables charged off..................... (4,572,457) (8,677,283) (10,042,269)
----------- ----------- ------------
Balance, end of year........................ $ 9,394,490 $ 9,861,458 $ 11,894,286
=========== =========== ============
</TABLE>

Receivables charged off is inclusive of current year and previous year
sales which were charged against the provision during the respective year.

5. LAND, EQUIPMENT AND UTILITIES

The Company's land, equipment and utilities consist of the following at
December 31, 1995 and 1996:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Land.................................... $ 875,472 $ 1,345,774
Vehicles and equipment.................. 1,872,087 2,066,470
Utility plant and facilities............ 2,345,494 3,397,689
Office furniture and equipment.......... 2,977,905 4,012,727
Improvements............................ 3,559,376 5,551,074
----------- -----------
11,630,334 16,373,734
Less accumulated depreciation........... (2,682,486) (3,740,615)
----------- -----------
Net land, equipment and utilities....... $ 8,947,848 $12,633,119
=========== ===========
</TABLE>

Depreciation and amortization expense for the years ended December 31,
1994, 1995 and 1996, was $589,847, $863,149 and $1,263,816 respectively.

6. INCOME TAXES

Prior to December 29, 1995, CBI operated as a Subchapter S Corporation
wholly-owned by the principal shareholder of the Company. The cumulative losses
of CBI incurred prior to the transfer of the stock of CBI to the Company have
been reported on the individual income tax return of its then sole shareholder.
Upon transfer the Company recorded deferred taxes for the difference between the
tax and book basis of the assets, which was not material. Effective January 1,
1996, the Company converted CBI to a C corporation and, accordingly, CBI will be
included in the consolidated income tax return of the Company (See Note 12).

Income tax expense (benefit) consists of the following components for the
years ended December 31, 1994, 1995 and 1996:

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal............................... $ 751,000 $ 618,000 $ 992,000
State................................. 65,000 17,000 --
---------- ---------- ----------
Total current tax expense..... 816,000 635,000 992,000
Deferred tax expense.................... 861,000 877,000 1,975,000
---------- ---------- ----------
Total income tax expense...... $1,677,000 $1,512,000 $2,967,000
========== ========== ==========
</TABLE>

F-13
<PAGE> 95

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of income taxes on reported pretax income at statutory
rates to actual income tax expense for the years ended December 31, 1994, 1995,
and 1996, is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
----------------- ----------------- -----------------
DOLLARS RATE DOLLARS RATE DOLLARS RATE
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Income tax at statutory rates........... $1,371,000 34% $1,040,000 34% $2,700,000 34%
State income taxes, net of Federal Tax
benefit............................... 121,000 3% 92,000 3% 238,000 3%
Other................................... 185,000 5% 380,000 12% 29,000 1%
---------- -- ---------- -- ---------- --
Total income tax expense...... $1,677,000 42% $1,512,000 49% $2,967,000 38%
========== ========== ==========
Income tax expense attributable to:
Continuing operations................. $1,677,000 $1,512,000 $3,140,000
Discontinued operations............... -- -- (173,000)
---------- ---------- ----------
Total income tax expense...... $1,677,000 $1,512,000 $2,967,000
========== ========== ==========
</TABLE>

Amounts for deferred tax assets and liabilities as of December 31, 1995 and
1996, are as follows:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Installment sales income................................ $10,143,000 $16,056,000
Other................................................... 54,000 34,000
----------- -----------
Total deferred tax liabilities.................. 10,197,000 16,090,000
----------- -----------
Deferred tax assets:
Accrued interest payable to related party............... 1,963,000 2,287,000
Alternative minimum tax credit.......................... 2,654,000 3,650,000
Net operating loss carryforward......................... 2,712,000 5,310,000
----------- -----------
Total deferred tax assets....................... 7,329,000 11,247,000
----------- -----------
Net deferred tax liability................................ $ 2,868,000 $ 4,843,000
=========== ===========
</TABLE>

The Company reports substantially all Vacation Interval sales which it
finances on the installment method for Federal income tax purposes. Under the
installment method, the Company does not recognize income on sales of Vacation
Intervals until the installment payments on customer receivables are received by
the Company. Interest will be imposed, however, on the amount of tax
attributable to the installment payments for the period beginning on the date of
sale and ending on the date the related tax is paid. If the Company is otherwise
not subject to tax in a particular year, no interest is imposed since the
interest is based on the amount of tax paid in that year. The consolidated
financial statements do not contain an accrual for any interest expense which
would be paid on the deferred taxes related to the installment method. The
amount of interest expense is not estimatable as of December 31, 1996.

The Company is subject to Alternative Minimum Tax ("AMT") as a result of
the deferred income which results from the installment sales treatment of
Vacation Interval sales for regular tax purpose. The AMT liability creates a
deferred tax asset which can be used to offset any future tax liability from
regular Federal income tax. This deferred tax asset has an unlimited carryover
period.

The net operating losses expire beginning in 2007 through 2011. Realization
of the deferred tax assets arising from net operating losses is dependent on
generating sufficient taxable income prior to the expiration of

F-14
<PAGE> 96

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the loss carryforwards. The amount of the deferred tax asset considered
realizable could be decreased if estimates of future taxable income during the
carryforward period are reduced.

The following are the expiration dates and the approximate net operating
loss carryforwards at December 31, 1996:

<TABLE>
<CAPTION>
EXPIRATION DATES
- ----------------
<S> <C> <C>
2007............................................................. $ 261,000
2008............................................................. --
2009............................................................. 1,493,000
2010............................................................. 5,454,000
2011............................................................. 7,142,000
-----------
$14,350,000
===========
</TABLE>

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable and capital lease obligations related to continuing
operations at December 31, 1995 and 1996, consist of the following:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
$25 million revolving loan agreement ($15 million at
December 31, 1995), which contains certain financial
covenants, due January 2, 2001, principal and interest
payable from the proceeds obtained from timeshare notes
receivable which are pledged as collateral for the note,
at an interest rate as defined in the agreement (10.28%
at December 31, 1996).................................... $ 9,026,337 $20,139,365
$12 million revolving loan agreement which contains certain
financial covenants, due May 8, 2003, principal and
interest payable from the proceeds obtained from
timeshare notes receivable which are pledged as
collateral for the note, at an interest rate of Base plus
2.75% (11.00% at December 31, 1996)...................... 7,324,323 6,004,061
$7.5 million revolving line of credit, which contains
certain financial covenants, due December 31, 1999,
secured by certain assets of the Company, with monthly
interest payments at Base plus 2.75% (10.75% at December
31, 1996)................................................ 4,000,000 4,000,000
$40 million revolving loan agreement, which contains
certain financial covenants, due October 9, 1998,
principal and interest payable from the proceeds obtained
on timeshare notes receivable pledged as collateral for
the note, at an interest rate of LIBOR plus 4% (9.53% at
December 31, 1996)....................................... -- 277,694
$15 million ($5 million at December 31, 1995) revolving
loan agreement which contains certain financial
covenants, due November 30, 2002, principal and interest
payable from the proceeds obtained from timeshare notes
receivable which are pledged as collateral for the note,
at an interest rate of Prime plus 2%..................... 661,778 4,278,484
</TABLE>

F-15
<PAGE> 97

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
$5.4 million note payable, which contain certain financial
covenants, due October 9, 1999, secured by certain assets
of the Company, interest only payments due through April
1, 1998, with payments of principal and interest due
monthly thereafter until maturity on October 9, 1999, at
interest rate of Prime plus 2%........................... -- 5,200,920
Various notes, due from November, 1997, through October,
2002, collateralized by various assets with interest
rates ranging from 6% to 11%............................. 1,635,479 1,022,203
----------- -----------
Total notes payable.............................. 22,647,917 40,922,727
Capital lease obligations.................................. 714,950 1,063,542
----------- -----------
Total notes payable and capital lease
obligations.................................... $23,362,867 $41,986,269
=========== ===========
</TABLE>

Prime rate at December 31, 1996, was 8.25%.

As of December 31, 1995, the Company had additional notes payable to
unaffiliated entities totaling $2,334,555 which are included in net liabilities
of discontinued operations on the balance sheet. These notes payable to
unaffiliated parties were collateralized by various assets and had interest
rates which were generally based on prime plus 2% to 3%. During 1996, all of
these notes were repaid. (See note 12)

Certain of the above debt agreements include restrictions on the Company's
ability to pay dividends based on minimum levels of net income and cash flow.
The debt agreements contain additional covenants including requirements that the
Company (i) preserve and maintain the collateral securing the loans; (ii) pay
all taxes and other obligations relating to the collateral; and (iii) refrain
from selling or transferring the collateral or permitting any encumbrances on
the collateral. Such credit facilities also contain operating covenants
requiring the Company to (i) maintain an aggregate minimum tangible net worth
ranging from $6 million to $17.5 million; (ii) maintain its legal existence and
be in good standing in any jurisdiction where it conducts business; (iii) remain
in the active management of the Resorts; (iv) ensure that sales and marketing
expenses incurred in connection with marketing the Vacation Intervals do not
exceed 50% of the net sales revenue realized from the sale of the Vacation
Intervals, and (v) refrain from modifying or terminating certain timeshare
documents.

Principal maturities of notes payable and capital lease obligations are as
follows at December 31, 1996:

<TABLE>
<CAPTION>
YEAR ENDING CONTINUING AFFILIATES
DECEMBER 31: OPERATIONS (SEE NOTE 10) TOTAL
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
1997...................................... $10,225,282 $8,201,445 $18,426,727
1998...................................... 11,702,713 33,333 11,736,046
1999...................................... 12,868,669 -- 12,868,669
2000...................................... 2,971,033 -- 2,971,033
2001...................................... 3,304,037 -- 3,304,037
Thereafter................................ 914,535 -- 914,535
----------- ---------- -----------
Total..................................... $41,986,269 $8,234,778 $50,221,047
=========== ========== ===========
</TABLE>

Total interest expense for 1994, 1995 and 1996 was $1,641,728, $3,609,400
and $4,759,741, respectively. Interest of $0, $515,751 and $711,070 was
capitalized during 1994, 1995 and 1996, respectively.

Substantially all assets of the Company are pledged as collateral.

F-16
<PAGE> 98

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business the Company has been named a defendant
in certain lawsuits. It is the opinion of the Company's management that the
outcome of the suits now pending will not have a material, adverse effect on the
operations, cash flows or the consolidated financial position of the Company.

Prior to 1996, the Company sold certain of its notes receivable with
recourse to third parities and affiliated parties. The Company has contingent
liability for the notes receivable sold with recourse. The total amount of
contingent liability is equal to the uncollected balance of the notes as of
December 31, 1996. The Company's management considers both pledged and sold with
recourse notes receivable in the Company's allowance for doubtful notes. (see
Note 4)

The Company has entered into noncancelable operating leases covering office
and storage facilities and small equipment which will expire at various dates
through 2001. The total rental expense incurred during the years ended December
31, 1994, 1995 and 1996, was $674,501, $309,894 and $480,801, respectively. The
Company has also acquired equipment by entering into capital leases. The future
minimum annual commitments for the noncancelable lease agreements are as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31 LEASES LEASES
- ----------------------- ---------- ---------
<S> <C> <C> <C>
1997...................................................... $ 551,182 $ 185,937
1998...................................................... 448,708 161,376
1999...................................................... 190,932 116,704
2000...................................................... 3,549 68,725
2001...................................................... -- 22,037
Thereafter................................................ -- --
---------- ---------
Total minimum future lease payments....................... 1,194,371 $ 554,779
=========
Less amounts representing interest........................ (130,829)
----------
Present value of future minimum lease payments............ $1,063,542
==========
</TABLE>

Equipment acquired under capital leases consists of the following as of
December 31, 1995 and 1996:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Amount of equipment under capital leases.................... $1,190,224 $2,240,366
Less accumulated depreciation............................... (218,727) (599,224)
---------- ----------
$ 971,497 $1,641,142
========== ==========
</TABLE>

9. EQUITY

On March 27, 1997 the Board of Directors of the Company increased the
number of common shares authorized to 100,000,000 shares and in May 1997 the
Board of Directors declared a common stock dividend to existing shareholders
which resulted in an increase in the number of shares of common stock
outstanding. The weighted average shares outstanding for all periods presented
give retroactive effect to the split of common shares.

On December 27, 1995, the principal shareholder contributed certain assets
and the Company assumed certain liabilities associated with these assets which
had been held in a dormant entity. These assets and liabilities were recorded by
the Company at their historical cost basis at the date of the transaction. The
historical cost basis of the assets contributed was approximately $14,489,000
which included a note receivable from the Company of $10,869,000. Upon receipt
of this asset, the Company retired the corresponding obligation which had been
recorded in the Company's financial statements. Liabilities assumed had a
historical cost basis of approximately

F-17
<PAGE> 99

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$8,924,000 consisting primarily of notes payable to affiliates of $7,631,000.
These amounts are included within the financial statements of the Company. The
net excess of assets contributed over liabilities assumed is reflected as an
equity contribution to the Company.

During December 1995, the Company re-acquired a former officers equity
interest in EIC in exchange for a $100,000 promissory. As of December 31, 1996
the amount owed under this agreement was $66,667 and is included in amounts due
to affiliates.

10. RELATED PARTY TRANSACTIONS

The Company has entered into certain financing and operating transactions
with affiliate entities of the Company or its shareholders and officers. Pace
Finance Company ("Pace") and Capital Ventures I are entities owned or controlled
by the Company's principal shareholder; STG Investments is a partnership, the
partners of which include certain trusts which benefit the family of the
Company's principal shareholder.

Each timeshare owners association has entered into an agreement with Master
Club, formerly Master Endless Escape Club, a Texas nonprofit corporation which
authorizes Master Club to manage the resorts on a centralized and collective
basis. Master Club, in turn, has entered into a management agreement with the
Company. Under this agreement, the Company manages the operations of the
resorts. Pursuant to the management agreement, the Company receives a management
fee equal to the lesser of 15% of Master Club's gross revenues, or the net
income of Master Club; however, if the Company does not receive 15% of Master
Club's gross revenues, such deficiency is deferred for payment in succeeding
year(s), subject again to the net income limitation. The management agreement
expires in March, 2000, but will continue year-to-year thereafter unless
canceled by either party. During the years ending December 31, 1994, 1995 and
1996 and for the three months ended March 31, 1996 and 1997, the Company
recorded management fees from Master Club of $2,394,475, $2,478,181, $2,186,903,
$551,484 and $498,925, respectively, in management fee income.

The direct expenses of operating the resorts are paid by Master Club. To
the extent Master Club provides payroll, administrative and other services that
directly benefit the Company, a separate allocation charge is generated and paid
by the Company to Master Club. During the years ended December 31, 1994, 1995
and 1996 and for the three months ended March 31, 1996 and 1997, the Company
incurred $1,483,510, $1,911,285, $2,107,347, $526,837 and $754,816,
respectively, of expenses under this agreement.

At December 31, 1995 the net amount payable to Master Club totaled $429,449
and at December 31, 1996 and March 31, 1997 the net receivable from Master Club
totalled $1,133,178 and $1,479,261, respectively. The amounts are included in
amounts due to/from affiliates.

The Company incurred and made payments to Recreational Consultants, Inc.,
an entity of which an officer of the Company is the principal. Amounts paid
under this agreement totaled $320,581, $429,747 and $538,768, during the years
ended December 31, 1994, 1995, and 1996, respectively, and $103,538 and $147,836
for the three months ended March 31, 1996 and 1997.

Prior to 1995, Pace purchased from an affiliate of the Company certain
delinquent notes receivable executed by purchasers of Vacation Intervals. During
1996, the Company purchased notes from Pace for $24,200. During 1997 the Company
and subsidiaries purchased the remainder of Pace's inventory of notes receivable
at a cash price of $16,400.

F-18
<PAGE> 100

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following schedule represents amounts due from affiliates at December
31, 1995 and 1996 and March 31, 1997:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes receivable from the principal
shareholder, due December 31, 1997, bearing
interest at rates ranging from 8.0%-9.0%..... $4,025,038 $4,128,343 $4,108,343
Notes receivable from the other shareholder,
which bore interest at 8%, such Note being
forgiven and included in compensation expense
during 1996.................................. 64,537
Receivable from other affiliated parties....... 168,900 235,628
Interest on shareholders notes receivables..... 89,698 370,764 482,660
---------- ---------- ----------
4,179,273 4,668,007 4,826,631
Timeshare owners associations and other, net... 162,615 435,838 188,017
Amount due from Master Club.................... 1,133,178 1,479,261
---------- ---------- ----------
Total amounts due from affiliates.... $4,341,888 $6,237,023 $6,493,909
========== ========== ==========
</TABLE>

The following schedule represents outstanding amounts due to affiliates at
December 31, 1995 and 1996 and March 31, 1997:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- -----------
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to Capital Venture I, due
December 31, 1997, bearing interest at
12.0%..................................... $ 1,570,118 $ 1,570,118 $ 1,570,118
Note payable to principal shareholder, due
December 31, 1997, bearing interest at
9.0%...................................... 809,640 809,640 809,640
Note payable to Pace Finance Company due
December 31, 1997, bearing interest at
prime plus 3.5% (11.75% at December 31,
1996)..................................... 539,168 361,515 156,551
Notes payable to principal shareholder, due
December 31, 1997, bearing interest at
8.0%...................................... 5,152,642 5,152,642 5,152,642
Other affiliated entities (see below),
bearing interest at 9.0%.................. 451,969 340,863 333,456
Accrued interest payable to Capital Venture
I......................................... 2,529,493 2,671,190 2,706,034
Accrued interest payable to principal
shareholder............................... 2,488,806 3,178,849 3,352,718
Accrued interest payable to other affiliated
entities (see below)...................... 291,342 394,064 406,522
Accounts payable to other affiliated
entities.................................. 286,254 259,133
Amount due to Master Club................... 429,449
----------- ----------- -----------
Total notes payable to
affiliates...................... $14,262,627 $14,765,135 $14,746,814
=========== =========== ===========
</TABLE>

Notes payable and interest payable to other affiliated entities represent
amounts payable to entities owned or controlled by the Company's principal
shareholder.

The Company has a consulting agreement with a proposed director of the
Company. During 1996, $208,000 was expensed by the Company under this agreement.
This agreement was canceled during 1997.

F-19
<PAGE> 101

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has agreed to sell to the principal shareholder the Company's
interest in a condominium, two vehicles and a residential dwelling at a price in
excess of the Company's carrying value. As of December 31, 1996, the carrying
value of these assets totaled approximately $450,000.

The Company has entered into a ten year lease agreement with the principal
shareholder for personal use of flood plain land adjacent to one of the
Company's resorts in exchange for an annual payment equal to the property taxes
attributable to the land.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

The carrying value of cash and cash equivalents, other receivables, amounts
due from or to affiliates, and accounts payable and accrued expenses
approximates fair value due to the relatively short term nature of the financial
instruments. The carrying value of the notes receivable approximates fair value
because the weighted average interest rate on the portfolio of notes receivable
approximates current interest rates to be received on similar current notes
receivable. The carrying amount reported on the balance sheet of notes
receivable and payable to affiliates and notes payable and capital lease
obligation approximates their fair value because the interest rates on these
instruments are adjustable or approximate current interest rates charged on
similar current borrowings.

12. DISCONTINUED OPERATIONS

The Company adopted a plan on December 31, 1996, to discontinue its
development and sale of condominiums by CBI. Based on the formal plan adopted by
the Company, all assets will be sold and liabilities repaid by December 31,
1997. All anticipated future costs of carrying and selling the remaining
inventory of CBI has been accrued as of December 31, 1996. The net assets of the
subsidiary as of December 31, 1995 and 1996 were as follows:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Inventory of unsold condominiums............................ $4,740,892 $1,939,194
Other Assets................................................ 1,137,330 49,856
Accounts payable and accrued expenses....................... (494,872) (198,486)
Notes payable............................................... (2,334,555) --
Reserve for losses on discontinued operations............... -- (201,352)
---------- ----------
Net assets of discontinued operations............. $3,048,795 $1,589,212
========== ==========
</TABLE>

Gross revenues applicable to the discontinued operations were $14,569,597,
$8,556,278, and $7,459,141 for the years ended December 31, 1994, 1995 and 1996,
respectively. The income from discontinued operations was $568,592 for the year
ended December 31, 1994, and the loss from discontinued operations was
$1,484,414 and $295,408 for the years ended December 31, 1995 and 1996, net of
income tax benefit of $173,000 in 1996. There was no tax affect applicable to
the years ended December 31, 1994 and 1995, since the discontinued operations
were contained in an S-Corporation, and taxable income and losses were passed
directly through to its shareholder.

F-20
<PAGE> 102

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. SUBSEQUENT EVENTS

The Company has proposed an initial public offering for the sale of common
stock. In preparation for this offering the Company entered into the following
contracts and agreements.

The Company has established a stock option plan (the "1997 Stock Option
Plan" or "Plan"). The 1997 Stock Option Plan provides for the award to
directors, officers, and key employees of nonqualified stock options and
provides for the grant to salaried key employees of incentive stock options.
Nonqualified stock options will provide for the right to purchase Common Stock
at a specified price which may be less than fair market value on the date of
grant (but not less than par value). Nonqualified stock options may be granted
for any term and upon such conditions determined by the board of directors of
the Company. The Company has reserved 1,100,000 shares of common stock for
issuance pursuant to the Company's 1997 Stock Option Plan.

Effective January 1, 1997, the Company entered into three year employment
agreements with two executive employees which provides for minimum annual base
salaries, bonuses based on the operating results of the Company and other fringe
benefits as determined by the Board of Directors of the Company from time to
time. Either party may terminate the agreement upon 30 days notice to the other.

The Company entered into an employment agreement with an executive officer
of the Company with a term through December 31, 1999. Pursuant to the agreement,
such officer will receive commissions equal to 1.35% of the Company's net sales
from Vacation Intervals, plus additional commissions based on weekly sales
volume and revenue per guest. Either party may terminate the agreement upon 30
days notice to the other.

Each of the employment agreements provide that such person will not
directly or indirectly compete with the Company in any county in which it
conducts its business or markets its products for a period of two years
following the termination of the agreement. The agreements also provide that
such persons will not influence any employee or independent contractor to
terminate its relationship with the Company, or disclose any confidential
information of the Company.

F-21
<PAGE> 103

CAPTION: "OPERATING TECHNOLOGIES"

1. First Picture -- Photo of the exterior of Silverleaf's corporate
headquarters in Dallas, Texas. Caption: "Silverleaf Resorts, Inc. Corporate
Headquarters -- Dallas, Texas."

2. Second Picture -- Photo of the telemarketing department at
Silverleaf's corporate headquarters depicting employees at work and
telemarketing equipment. Caption: "Sophisticated Telemarketing Technology
at Corporate Headquarters -- Dallas, Texas."

CAPTION: "RESORT ACTIVITIES."

3. Third Picture -- Photo of people in mule-drawn covered wagon at
Piney Shores. Caption: "Covered Wagon Rides -- Piney Shores, Texas."

4. Fourth Picture -- Photo of two people floating down Guadalupe River
near Hill Country Resort. Caption: "Tubing the Guadalupe River near Hill
Country Resort."
<PAGE> 104

- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 5
Risk Factors.......................... 16
Use of Proceeds....................... 27
Dividend Policy....................... 27
Capitalization........................ 28
Dilution.............................. 29
Selected Consolidated Historical
Financial, Operating and Pro Forma
Financial Information............... 30
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 34
Business.............................. 41
Management............................ 65
Certain Relationships and Related
Transactions........................ 69
Principal Shareholders................ 72
Description of Capital Stock.......... 72
Certain Provisions of the Company's
Charter and Bylaws.................. 73
Shares Eligible for Future Sale....... 75
Underwriting.......................... 76
Notice to Canadian Residents.......... 77
Legal Matters......................... 78
Experts............................... 79
Additional Information................ 79
Index to Combined Financial
Statements.......................... F-1
</TABLE>

---------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- ------------------------------------------------------

[SILVERLEAF RESORTS, INC. LOGO]

SILVERLEAF RESORTS, INC.
3,500,000 Shares
Common Stock

($0.01 par value)

PROSPECTUS
CREDIT SUISSE FIRST BOSTON
EVEREN SECURITIES, INC.
MCDONALD & COMPANY SECURITIES, INC.
- ------------------------------------------------------
<PAGE> 105

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated costs and expenses, other than
underwriting discounts and commissions, in connection with the sale and
distribution of the shares of Common Stock being registered hereby.

<TABLE>
<S> <C>
Commission Registration Fee................................. $ 21,467
NASD filing fee............................................. 8,000
Accounting fees and expenses................................ 670,000
Blue Sky fees and expenses.................................. 20,000
Legal fees and expenses..................................... 975,000
Printing and engraving expenses............................. 275,000
Transfer Agent fees......................................... 5,000
Miscellaneous expenses...................................... 173,033
----------
TOTAL............................................. $2,147,500
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company is a Texas corporation. Article 2.02-1 of the Texas Business
Corporation Act empowers the Company to indemnify, subject to the standards set
forth therein, any person who is a party in any action in connection with any
action, suit or proceeding brought or threatened by reason of the fact that the
person was a director, officer, employee or agent of such company, or is or was
serving as such with respect to another entity at the request of such company.
The Texas Business Corporation Act also provides that the Company may purchase
insurance on behalf of any such director, officer, employee or agent and the
Company will maintain liability insurance for the benefit of its directors and
officers.

The Company's Charter and Bylaws provide in effect for the indemnification
by the Company of each director and officer of the Company to the fullest extent
permitted by applicable law.

Upon the consummation of the Offering, the Company will enter into
agreements to indemnify its directors and officers, in addition to the
indemnification provided for in the Company's Articles of Incorporation and By-
Laws. These agreements provide, among other things, that the Company will
indemnify its directors and officers for all direct and indirect expenses and
costs (including, without limitation, all reasonable attorneys' fees and related
disbursements, other out-of-pocket costs and reasonable compensation for time
spent by such persons for which they are not otherwise compensated by the
Company or any third person) and liabilities of any type whatsoever (including,
but not limited to, judgments, fines and settlement fees) actually and
reasonably incurred by such person in connection with either the investigation,
defense, settlement or appeal of any threatened, pending, or completed action,
suit or other proceeding, including the corporation, arising out of such
person's services as a director, employee or other agent of the Company, any
subsidiary of the Company or any other company or enterprise to which the person
provides services at the request of the Company. The Company believes that these
provisions and agreements are necessary to attract and retain talented and
experienced directors and officers. Upon the consummation of the Offering, the
Company expects to have in place certain insurance which insures the directors
and officers against certain acts and omissions in the course of their duties.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

None.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

II-1
<PAGE> 106

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1.1 -- Form of Underwriting Agreement between Silverleaf
Resorts, Inc. and Credit Suisse First Boston Corporation.
*2.1 -- Acquisition Agreement between Ascension Capital
Corporation and Robert E. Mead, executed December 27,
1995, effective December 29, 1995.
*2.2 -- Articles of Merger (Holly Ranch Water Co., Inc. into
Ascension Capital Corporation).
*2.3 -- Plan and Agreement of Reorganization between Ascension
Capital Corporation and Freedom Financial Corporation,
dated December 27, 1995.
*2.4 -- Plan and Agreement of Reorganization by Merger of Equal
Investment Company and Ascension Resorts, Ltd. with and
into Ascension Capital Corporation, which is renamed
"Silverleaf Vacation Club, Inc.", dated December 29,
1995.
*3.1 -- Charter of Silverleaf Resorts, Inc.
*3.2 -- Bylaws of Silverleaf Resorts, Inc.
*4.1 -- Form of Stock Certificate of Silverleaf Resorts, Inc.
*5.1 -- Form of Opinion of Meadows, Owens, Collier, Reed, Cousins
& Blau, L.L.P. regarding the validity of the Common Stock
being registered (including consent).
*10.1 -- Form of Registration Rights Agreement between Silverleaf
Resorts, Inc. and Robert E. Mead.
*10.2.1 -- Employment Agreement between Silverleaf Resorts, Inc. and
Robert E. Mead.
*10.2.2 -- Employment Agreement between Silverleaf Resorts, Inc. and
David T. O'Connor.
*10.2.3 -- Employment Agreement between Silverleaf Resorts, Inc. and
Sharon K. Brayfield.
*10.3 -- 1997 Stock Option Plan of Silverleaf Resorts, Inc.
*10.4 -- Master Club Agreement between the Master Club and the
resort clubs named therein.
*10.5 -- Management Agreement between Silverleaf Resorts, Inc. and
the Master Club.
*10.6 -- Revolving Loan and Security Agreement, dated October
1996, by CS First Boston Mortgage Capital Corp.
("CSFBMCC") and Silverleaf Vacation Club, Inc.
*10.7 -- Amendment No. 1 to Revolving Loan and Security Agreement,
dated November 8, 1996, between CSFBMCC and Silverleaf
Vacation Club, Inc.
*10.8 -- Inventory and Development Loan and Security Agreement,
dated October 9, 1996, among Condominium Builders, Inc.,
CSFBMCC, and Silverleaf Vacation Club, Inc.
*10.9 -- Loan and Security Agreement among Textron Financial
Corporation ("Textron"), Ascension Resorts, Ltd. and
Ascension Capital Corporation, dated August 15, 1995.
*10.10 -- First Amendment to Loan and Security Agreement, dated
December 28, 1995, between Textron and Silverleaf
Vacation Club, Inc.
*10.11 -- Second Amendment to Loan and Security Agreement, dated
October 31, 1996, executed by Textron and Silverleaf
Vacation Club, Inc.
*10.12 -- Restated and Amended Loan and Security Agreement, dated
December 27, 1995, between Heller Financial, Inc.
("Heller") and Ascension Resorts, Ltd.
*10.13 -- Loan and Security Agreement, dated December 27, 1995,
executed by Ascension Resorts, Ltd. and Heller.
*10.14 -- Amendment to Restated and Amended Loan and Security
Agreement, dated August 15, 1996, between Heller and
Silverleaf Vacation Club, Inc.
*10.15 -- Loan and Security Agreement, between Greyhound Financial
Corporation and Ascension Resorts, Ltd., dated August 12,
1994.
</TABLE>

II-2
<PAGE> 107

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.16 -- Amendment No. 1 to Loan and Security Agreement between
FINOVA Capital Corporation and Ascension Resorts, Ltd.,
dated July 24, 1995.
*10.17 -- Amendment No. 2 to Loan and Security Agreement among
Ascension Resorts, Ltd., Ascension Capital Corporation,
and Finova Capital Corporation, dated December 13, 1995.
*10.18 -- Form of Indemnification Agreement (between Silverleaf
Resorts, Inc. and all officers, directors, and proposed
directors).
*10.19 -- Resort Affiliation and Owners Association Agreement
between Resort Condominiums International, Inc.,
Ascension Resorts, Ltd., and Hill Country Resort
Condoshare Club, dated July 29, 1995. (similar agreements
for all other Existing Resorts).
*10.20 -- Agreement for Professional Services between Silverleaf
Vacation Club, Inc. and Hudson and Company, Inc., dated
November 12, 1996.
*10.21 -- Shareholder's Agreement between Silverleaf Vacation Club,
Inc. and Sharon K. Brayfield, dated December 29, 1995.
*10.22 -- First Amendment to Master Club Agreement, dated March 28,
1990, among Master Club, Ozark Mountain Resort Club,
Holiday Hills Resort Club, the Holly Lake Club, The
Villages Condoshare Association, The Villages Club, Piney
Shores Club, and Hill Country Resort Condoshare Club.
*10.23 -- First Amendment to Management Agreement, dated January 1,
1993, between Master Endless Escape Club and Ascension
Resorts, Ltd.
*10.24 -- Contract of Sale, dated May 2, 1997, between Silverleaf
Resorts, Inc. and third-party.
*10.25 -- Amendment to Loan Documents, dated December 27, 1996,
among Silverleaf Vacation Club, Inc., Ascension Resorts,
Ltd., and Heller Financial, Inc.
*21.1 -- Subsidiaries of Silverleaf Resorts, Inc.
*23.1 -- Consent of Meadows, Owens, Collier, Reed, Cousins & Blau,
L.L.P. (included as part of Exhibit 5.1)
+23.2 -- Consent of James Smith & Company.
+23.3 -- Consent of Deloitte & Touche LLP.
+23.4 -- Consent of Director Nominee James B. Francis, Jr.
+23.5 -- Consent of Director Nominee Michael A. Jenkins.
*24.1 -- Power of Attorney (included as part of page II-3 of this
Registration Statement).
*27.1 -- Financial Data Schedule
*99 -- Supplement to Filed Exhibits
</TABLE>

- ---------------

* Previously filed

+ Filed herewith

(b) Financial Statement Schedules

None. Schedules are omitted because of the absence of the conditions under
which they are required or because the information required by such omitted
schedules is set forth in the financial statements or the notes thereto.

II-3
<PAGE> 108

ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by registrant is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(b) The registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(c) The registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

II-4
<PAGE> 109

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Silverleaf Resorts, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas, on June 2, 1997.

SILVERLEAF RESORTS, INC.

By: /s/ ROBERT E. MEAD
----------------------------------
Name: Robert E. Mead
Title: Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Robert
E. Mead and Joe W. Conner, and each of them, with full power to act without the
other, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign this Registration Statement, and any
and all amendments thereto (including pre- and post-effective amendments) or any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with exhibits and schedules thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ ROBERT E. MEAD Chairman of the Board and Chief June 2, 1997
- ----------------------------------------------------- Executive Officer (Principal
Robert E. Mead Executive Officer)

/s/ SHARON K. BRAYFIELD Director and President June 2, 1997
- -----------------------------------------------------
Sharon K. Brayfield

/s/ JOE W. CONNER Chief Financial Officer and June 2, 1997
- ----------------------------------------------------- Treasurer (Principal Financial
Joe W. Conner and Accounting Officer)
</TABLE>

II-5
<PAGE> 110

INDEX TO EXHIBITS

<PAGE> 111

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.15 -- Loan and Security Agreement, between Greyhound Financial
Corporation and Ascension Resorts, Ltd., dated August 12,
1994.
*10.16 -- Amendment No. 1 to Loan and Security Agreement between
FINOVA Capital Corporation and Ascension Resorts, Ltd.,
dated July 24, 1995.
*10.17 -- Amendment No. 2 to Loan and Security Agreement among
Ascension Resorts, Ltd., Ascension Capital Corporation,
and Finova Capital Corporation, dated December 13, 1995.
*10.18 -- Form of Indemnification Agreement (between Silverleaf
Resorts, Inc. and all officers, directors, and proposed
directors).
*10.19 -- Resort Affiliation and Owners Association Agreement
between Resort Condominiums International, Inc.,
Ascension Resorts, Ltd., and Hill Country Resort
Condoshare Club, dated July 29, 1995. (similar agreements
for all other Existing Resorts).
*10.20 -- Agreement for Professional Services between Silverleaf
Vacation Club, Inc. and Hudson and Company, Inc., dated
November 12, 1996.
*10.21 -- Shareholder's Agreement between Silverleaf Vacation Club,
Inc. and Sharon K. Brayfield, dated December 29, 1995.
*10.22 -- First Amendment to Master Club Agreement, dated March 28,
1990, among Master Club, Ozark Mountain Resort Club,
Holiday Hills Resort Club, the Holly Lake Club, The
Villages Condoshare Association, The Villages Club, Piney
Shores Club, and Hill Country Resort Condoshare Club.
*10.23 -- First Amendment to Management Agreement, dated January 1,
1993, between Master Endless Escape Club and Ascension
Resorts, Ltd.
*10.24 -- Contract of Sale, dated May 2, 1997, between Silverleaf
Resorts, Inc. and third-party.
*10.25 -- Amendment to Loan Documents, dated December 27, 1996,
among Silverleaf Vacation Club, Inc., Ascension Resorts,
Ltd., and Heller Financial, Inc.
*21.1 -- Subsidiaries of Silverleaf Resorts, Inc.
*23.1 -- Consent of Meadows, Owens, Collier, Reed, Cousins & Blau,
L.L.P. (included as part of Exhibit 5.1)
+23.2 -- Consent of James Smith & Company.
+23.3 -- Consent of Deloitte & Touche LLP.
+23.4 -- Consent of Director Nominee James B. Francis, Jr.
+23.5 -- Consent of Director Nominee Michael A. Jenkins.
*24.1 -- Power of Attorney (included as part of page II-3 of this
Registration Statement).
*27.1 -- Financial Data Schedule
*99 -- Supplement to Filed Exhibits
</TABLE>

- ---------------

* Previously filed

+ Filed herewith

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement of Silverleaf Resorts,
Inc. on Amendment No. 2 to Form S-1 (Registration No. 333-24273) of our report
dated December 1, 1995 (May 15, 1997 as to the first paragraph of Note 9),
appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the headings "Summary
Consolidated Historical Financial, Operating and Pro Forma Financial
Information," "Selected Consolidated Historical Financial, Operating and Pro
Forma Financial Information" and "Experts" in such Prospectus.

/s/ JAMES SMITH & COMPANY, P.C.

James Smith & Company, P.C.

Dallas, Texas

June 2, 1997

<PAGE> 1

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement of Silverleaf Resorts,
Inc. on Amendment No. 2 to Form S-1 (Registration No. 333-24273) of our report
dated March 10, 1997 (May 15, 1997 as to the first paragraph of Note 9),
appearing in the Prospectus, which is part of this Registration Statement.

/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP

Dallas, Texas

June 2, 1997

<PAGE> 1
EXHIBIT 23.4

CONSENT OF DIRECTOR NOMINEE

The undersigned hereby consents to the reference of the undersigned as
a director nominee of Silverleaf Resorts, Inc. (the "Company") in the Company's
Registration Statement on Form S-1 (File No. 333-24273).

/s/ JAMES B. FRANCIS, JR.
-------------------------------
James B. Francis, Jr.

June 2, 1997
Dallas, Texas

<PAGE> 1
EXHIBIT 23.5

CONSENT OF DIRECTOR NOMINEE

/s/ MICHAEL A. JENKINS
-------------------------------
Michael A. Jenkins

June 2, 1997
Dallas, Texas