SILVERLEAF RESORTS INC, S-1/A, 1998-04-01

SILVERLEAF RESORTS INC
S-1/A, 1998-04-01
HOTELS & MOTELS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1998

REGISTRATION NO. 333-47423
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

AMENDMENT NO. 2

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>
<S> <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. [ ]

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

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

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 APRIL 1, 1998

2,500,000 Shares

[SILVERLEAF RESORTS, INC. LOGO]

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

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

Of the 2,500,000 shares of Common Stock, $0.01 par value ("Common Stock"), of
Silverleaf Resorts, Inc., a Texas corporation (the "Company"), offered hereby
(the "Equity Offering"), 2,000,000 shares are being sold by the Company and
500,000 shares are being sold by the majority shareholder of the Company (the
"Selling Shareholder"). The Company will not receive any proceeds from the sale
of shares by the Selling Shareholder. The Company will use approximately $13.0
million of the Equity Offering proceeds to pay indebtedness owed to an affiliate
of the lead managing Underwriter. After the Equity Offering, insiders of the
Company will own approximately 54.2% of the Common Stock of the Company and will
retain control of the Company. The Company's Common Stock is listed on The New
York Stock Exchange ("NYSE") under the symbol "SVR". On March 11, 1998, the last
reported sale price of the Company's Common Stock was $25.125 per share. See
"Common Stock Price Range".
The Company is also offering $75.0 million aggregate principal amount of %
Senior Subordinated Notes due 2008 (the "Notes"). The closing of the offering of
the Notes (the "Note Offering") is conditioned upon the closing of the Equity
Offering, but the Equity Offering is not conditioned upon the closing of the
Note Offering.

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 17.
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 PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDER
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total(2)...................... $ $ $ $
</TABLE>

(1) Before deduction of expenses payable by the Company estimated at $ .
(2) The Selling Shareholder has granted the Underwriters an option, exercisable
for 30 days from the date of this Prospectus, to purchase a maximum of
375,000 additional shares to cover over-allotments of shares. If the
Underwriters exercise this option in full, the total Price to Public will be
$ , Underwriting Discounts and Commissions will be $ , the
Proceeds to Company will be $ , and the Proceeds to the Selling
Shareholder will be $ .

The Common Stock is offered by the several Underwriters when, as and if
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 , 1998, against payment in immediately
available funds.

CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
EVEREN SECURITIES, INC.

Prospectus dated , 1998.
<PAGE> 3

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

PORTIONS OF A MAP OF U.S. DEPICTING LOCATIONS OF EXISTING RESORTS AND NEW
RESORTS,
AND THEIR RESPECTIVE PROXIMITIES
TO EACH OTHER AND TO AREA ATTRACTIONS AND MAJOR METROPOLITAN AREAS.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING".
2
<PAGE> 4

CAPTION: "SILVERLEAF RESORTS, INC. THE ONLY MAJOR VACATION OWNERSHIP OPERATOR
FOCUSED ON THE VALUE SEGMENT IN "DRIVE-TO" LOCATIONS."

1. First Picture -- photo of exterior of swimming pool at Oak N' Spruce Resort.
Caption: "Lodge Getaway(TM) -- Olympic-sized pool at Oak N' Spruce Resort and
the registration/activity center (inset) -- Lee Massachusetts".

2. Second Picture (inset) -- photo of exterior of registration/activity center
at Oak N' Spruce Resort.

3. Third Picture -- photo of exterior of timeshare units at Piney Shores Resort.
Caption: "Lodge Getaway(TM) Piney Shores Resort -- Houston Market".

4. Fourth Picture (inset) -- photo of interior of new "lodge-style" unit at
Piney Shores Resort.

5. Fifth Picture (inset) -- Photo of horseback riding available at Piney Shores
Resort.

CAPTION: "SILVERLEAF RESORTS GROWTH STRATEGY"

- -- Focus on Lodge Getaway(TM) Resorts in "Drive-to" Locations.

- -- Increase New Sales and Upgrade Sales.

- -- Add New Lodge Getaway(TM) and Club Destination(TM) Resorts.

3
<PAGE> 5

CAPTION: "SILVERLEAF RESORTS, INC."

1. First Picture -- photo of woman playing golf at golf course at Holiday
Hills Resort. Caption: "Club Destination(TM) Holiday Hills Resort --
Branson, Missouri 18-hole Golf Course."

2. Second Picture (inset) -- Man with two small children fishing off dock.

3. Third Picture -- photo of spa facility at Ozark Mountain Resort.
Caption: "Club Destination(TM) Ozark Mountain Resort -- Branson,
Missouri Wellness Center amenities."

4. Fourth Picture (inset) -- photo of man with tennis racquet.

5. Fifth Picture -- photo of woman jet skiing on lake. Caption: "Activities
and vacation life-style at various resorts."

6. Sixth Picture (inset) -- photo of a man, a woman and a child, all
smiling.

7. Seventh Picture -- photo of interior of timeshare unit. Caption: "Club
Destination (TM) President's View Interior, Ozark Mountain Resort,
Branson, Missouri."

<TABLE>
<CAPTION>
GRAPH: INDUSTRY REVENUES GRAPH: SILVERLEAF REVENUES
- ------------------------ ---------------------------
$ BILLIONS $ MILLIONS
<S> <C> <C> <C>
1985 1.6 1994 31.9
1990 3.2 1995 44.1
1995 5.0 1996 57.9
1996E 5.7 1997 85.1
</TABLE>

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4
<PAGE> 6

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.
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. and its subsidiaries.

THE COMPANY

Silverleaf is a leading developer, marketer, and operator of "drive-to"
timeshare resorts. Silverleaf currently owns and operates eight "drive-to"
resorts in Texas, Missouri, Illinois and Massachusetts (the "Drive-to Resorts").
Silverleaf also owns two "destination" resorts in Missouri (the "Destination
Resorts"), and has recently acquired sites in Las Vegas, Nevada and Galveston,
Texas, for development as two new destination resorts (the "New Resorts"). The
Drive-to Resorts are designed to appeal to value conscious vacationers seeking
comfortable and affordable accommodations in locations convenient to their
residences and are located proximate to major metropolitan areas (currently
Dallas-Ft. Worth, Houston, San Antonio-Austin, St. Louis, Chicago, Boston and
the greater New York City area). Silverleaf locates its Drive-to Resorts near
principal market areas to facilitate more frequent "short stay" getaways, which
it believes is a growing vacation trend. Silverleaf's Destination Resorts, which
are located in the popular resort area of Branson, Missouri, offer Silverleaf
customers the opportunity to upgrade into a higher quality 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 New Resorts are in
popular destination resort areas which are accessible to Silverleaf's customers
and complement Silverleaf's strategy of offering its existing customers
attractive upgrade opportunities. Silverleaf believes its resorts offer its
customers 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 $7,834 for 1997 and $6,922 for 1996, which compares
favorably to an industry average price of $10,790 for 1996.

Silverleaf's operations presently include (i) developing and acquiring
timeshare resorts; (ii) marketing and selling one-week annual and biennial
vacation intervals ("Vacation Intervals") to prospective first-time owners;
(iii) marketing and selling upgraded Vacation Intervals to existing owners of
Silverleaf Vacation Intervals ("Silverleaf Owners"); (iv) providing financing
for the purchase of Vacation Intervals; and (v) operating timeshare resorts. The
Company has substantial in-house capabilities, including marketing and sales,
which enable it to market and sell Vacation Intervals at a lower cost than its
competitors in the timeshare industry. Silverleaf has historically financed its
operations principally by borrowing from financial institutions at an advance
rate of up to 70% of eligible customer notes receivable. See "Risk
Factors -- Borrower Defaults" and "Risk Factors -- Financing Customer
Borrowings".

Silverleaf Owners enjoy benefits 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 to exchange a Vacation Interval for a different time
period or different Existing Resort through Silverleaf's internal exchange
program. These benefits are subject to availability and other limitations. See
"Business -- Features Common to Existing Resorts -- Endless Escape Program".
Most Silverleaf Owners may also enroll in the Vacation Interval exchange network
operated by Resort Condominiums International ("RCI").

Existing Resorts. The new resort in Galveston will have its own Club which will
contract with the Master Club; however, the New Resort in Las Vegas will be
operated independently of the Master Club. See "Business -- Clubs/Master Club".

RECENT DEVELOPMENTS

In June 1997, Silverleaf completed an initial public offering ("IPO") of
3,600,000 primary shares of its Common Stock. Since the IPO, Silverleaf has
taken actions which it believes will enhance its growth and competitive position
within the U.S. timeshare industry. These actions are summarized below and
discussed elsewhere in this Prospectus.

- DEVELOPMENT OF TIMBER CREEK PROPERTY. In August 1997, Silverleaf
purchased the Timber Creek Resort for $1.2 million for development as a
Drive-to Resort. Timber Creek is located 50 miles south of St. Louis,
Missouri. Silverleaf intends to develop approximately 600 units (31,200
Vacation Intervals) at the Timber Creek Resort and has begun construction
of 24 units to be completed in May 1998. Sales of Vacation Intervals at
Timber Creek began in October 1997.

- DEVELOPMENT OF FOX RIVER PROPERTY. In August 1997, Silverleaf purchased
the Fox River Resort for $1.7 million for development as a Drive-to
Resort. Fox River is located approximately 70 miles southwest of Chicago.
Silverleaf intends to develop approximately 492 (25,584 Vacation
Intervals) units on this property, and has begun construction of 36 units
to be completed in May 1998. Sales of Vacation Intervals at Fox River
began in November 1997.

- ACQUISITION OF OAK N' SPRUCE RESORT. In December 1997, Silverleaf
acquired the Oak N' Spruce Resort, an existing hotel/timeshare resort, in
the Berkshire Mountains of western Massachusetts for $5.1 million as a new
Drive-to Resort to serve Boston and the greater New York City market. The
Oak N'Spruce Resort presently has 132 existing units and 1,629 unsold
Vacation Intervals. Silverleaf intends to develop approximately 420 new
units (21,840 Vacation Intervals) at this resort. Silverleaf's sales of
Vacation Intervals at Oak N'Spruce began in January 1998.

- PURCHASE OF LAS VEGAS SITE. In November 1997, Silverleaf acquired a two
acre parcel near the "strip" in Las Vegas, Nevada, for $2.7 million.
Silverleaf intends to develop this property as a new Destination Resort
which will contain approximately 157 units (8,164 Vacation Intervals).

- PURCHASE OF GULF COAST SITE. In December 1997 and February 1998,
Silverleaf acquired two adjoining tracts of land in Galveston, Texas, for
approximately $1.7 million, to be developed as a new beach-front Gulf
Coast Destination Resort. Silverleaf intends to develop approximately 400
units (20,800 Vacation Intervals) at this resort.

- INCREASED SALES OF VACATION INTERVALS AT EXISTING RESORTS. In addition to
the acquisitions described above, Silverleaf has also worked since the IPO
to improve internal sales growth at the Existing Resorts. During 1997,
Silverleaf sold 6,592 Vacation Intervals (excluding upgrades), compared to
5,634 and 4,464 during 1996 and 1995, respectively. Total revenues
increased to $85.1 million in 1997 from $57.9 million and $44.1 million in
1996 and 1995, respectively.

- ENHANCED CREDIT FACILITIES. Silverleaf has improved its borrowing
capacity by increasing its revolving credit facilities from $80.0 million
to $115.0 million and by acquiring a construction line of credit in the
amount of $15.0 million. Additionally, Silverleaf has been able to
negotiate lower interest rates and extensions of maturity of certain loan
facilities.

- INVESTMENTS IN OPERATING AND TELEMARKETING SYSTEMS. Silverleaf has
invested approximately $2.1 million in a new automated dialer, telephone
system, and central marketing facility to improve Silverleaf's operating
and telemarketing systems.

- ADDITIONS TO MANAGEMENT TEAM. Silverleaf formed a new acquisition
subsidiary, Silverleaf Resort Acquisitions, Inc., and hired Thomas G.
Franks to lead the new subsidiary. Mr. Franks is a former President of
ARDA, the primary trade association for the timeshare industry, and has
more than 15 years of experience in the timeshare industry. Silverleaf has
also added marketing and operational personnel to its management team.
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<PAGE> 8

- PROPOSED ACQUISITION OF MANAGEMENT RIGHTS. In January 1998, Silverleaf
entered into an agreement with Crown Resort Co., LLC ("Crown") to acquire
management rights to eight timeshare resorts in Alabama, Mississippi,
North Carolina, Pennsylvania, South Carolina, Tennessee, and Texas for
$3.8 million. At December 31, 1997, these eight resorts had approximately
21,500 timeshare owners. As part of this agreement, Silverleaf will also
receive approximately 1,800 unsold Vacation Intervals and certain
equipment at the eight resorts. This proposed acquisition is subject to
completion of customary due diligence investigations and there is no
assurance that it will be consummated.

- PROPOSED PURCHASE OF ATLANTA AND KANSAS CITY SITES. In February 1998,
Silverleaf entered into two agreements, one to acquire a 220 acre
property, including a 160 acre golf course, 72 miles north of Atlanta,
Georgia for $3.5 million, and another to acquire 260 acres of undeveloped
land near Kansas City, Missouri for $1.6 million. If acquired, each
property will be developed as a Drive-to Resort. Each contract may be
cancelled by Silverleaf if it is not satisfied with each property after
conducting its due diligence investigation. Accordingly, there is no
assurance that either of these contracts will be closed.

GROWTH STRATEGY

Silverleaf intends to grow through the following strategies:

INCREASING DEVELOPMENT AND SALES OF VACATION INTERVALS. Silverleaf intends
to capitalize on its significant expansion capacity at the Existing Resorts and
the New Resorts by increasing marketing, sales and development activities. At
December 31, 1997, Silverleaf owned approximately 930 acres of land that were
available for further development of timeshare units and amenities under
Silverleaf's master plan. Such plan projects development of 3,347 additional
units (including 120 units presently under construction), which would result in
172,884 additional Vacation Intervals. Since the IPO, Silverleaf has enhanced
its marketing efforts, including increased telemarketing capacity arising from
investments in computer and automated dialing technology, increased its sales
force, enhanced its lead generation methods, completed the construction of new
sales offices and other amenities, and commenced the development of new lodging
facilities. Furthermore, Silverleaf continues 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. Silverleaf believes it can continue
to improve operating margins by increasing sales of upgraded Vacation Intervals
to existing Silverleaf Owners since these sales have significantly lower sales
and marketing costs. Upgrades by a Silverleaf Owner include the purchase of (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; (iv) an interval at a different Drive-to Resort; or (v) an interval
at a Destination Resort. Silverleaf has designed specific marketing and sales
programs to sell upgraded Vacation Intervals to Silverleaf Owners. Silverleaf
continues to construct higher quality, larger units for sale as upgraded
intervals, as well as developing sites at Las Vegas and Galveston as new upgrade
locations. 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. Intervals exchanged for upgraded intervals are
added back to inventory at historical cost, for resale at the current offering
price. Sales of upgrades increased to $16.9 million in 1997, from $7.9 million
in 1996 (upgrade sales represented 24.6% of Silverleaf's Vacation Interval sales
in 1997 as compared to 17.1% for 1996). Silverleaf incurs additional sales
commissions upon the resale of Vacation Intervals reconveyed to Silverleaf 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.

DEVELOPMENT OF ADDITIONAL RESORTS AND ACQUISITIONS. In 1997, Silverleaf
purchased four sites for development as Drive-to and Destination Resorts and
acquired an existing timeshare resort which it markets as a Drive-to Resort.
Additionally, in 1998, Silverleaf entered into agreements to acquire property
with a golf course near Atlanta, undeveloped land near Kansas City, and
management rights to eight Crown resorts. Silverleaf continues to seek new
properties for Drive-to Resorts in scenic wooded areas on lakes or waterways
that are near major metropolitan areas that have favorable demographic
characteristics. For Destination Resorts, Silverleaf seeks popular destination
resort areas that are easily accessible to Silverleaf Owners. Silverleaf is
currently

7
<PAGE> 9

exploring a number of other property acquisition opportunities, and intends to
continue acquiring and/or developing additional resorts.

COMPETITIVE ADVANTAGES

Silverleaf believes the following characteristics afford it certain
competitive advantages:

LOWER MARKETING, SALES, AND ADMINISTRATIVE COSTS. With resorts and on-site
sales offices within a two-hour drive of its targeted customers, Silverleaf 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. Silverleaf has also reduced
marketing, operating, and administrative costs through centralization and
automation of many functions. While marketing and sales costs as a percentage of
sales will increase for newly acquired resorts, the Company believes these costs
will, over time, return to historical levels.

CONVENIENT DRIVE-TO LOCATIONS. Silverleaf's Drive-to Resorts are located
within a two-hour drive of a majority of the target customers' residences, which
accommodates the growing demand for shorter, more frequent, close to home
vacations. This proximity facilitates use of Silverleaf's Endless Escape
program, which allows Silverleaf Owners to use vacant units for no additional
charge, subject to availability and certain limitations. Silverleaf believes it
is the only timeshare operator in the industry which offers its customers these
benefits. Silverleaf Owners can also conveniently enjoy non-lodging resort
amenities year-round on a "country-club" basis. See "Business -- Features Common
to Existing Resorts".

SUBSTANTIAL INTERNAL GROWTH CAPACITY. At December 31, 1997, Silverleaf had
an inventory of 10,931 Vacation Intervals, and a master plan to construct new
units which will result in up to 143,920 additional Vacation Intervals at the
Existing Resorts and 28,964 Vacation Intervals at the New Resorts. Silverleaf's
master plan for construction of new units is contingent upon future sales at the
Existing Resorts and New Resorts and the availability of financing, grant of
governmental permits, and future land-planning and site-layout considerations.
See "Risk Factors -- Development, Construction and Property Acquisition
Activities".

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

LOWER CONSTRUCTION AND OPERATING COSTS. Silverleaf has developed and
generally employs standard architectural designs and operating procedures which
it believes significantly reduce construction and operating expenses.
Standardization and integration also allow Silverleaf to rapidly develop new
inventory in response to demand. Weather permitting, new units at Existing
Resorts can normally be constructed on an "as needed" basis within 150 days.

CENTRALIZED PROPERTY MANAGEMENT. Silverleaf presently operates all of the
Existing Resorts on a centralized and collective basis, with operating and
maintenance costs paid from Silverleaf Owners' monthly dues. Silverleaf 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 Silverleaf's
internal exchange program, the Endless Escape program, and the resorts'
qualification in external Vacation Interval exchange programs. See
"Business -- Clubs/Master Club".

EXPERIENCED MANAGEMENT. Silverleaf's senior management has extensive
experience in the development and operation of timeshare resorts. Robert E.
Mead, Chairman of the Board and Chief Executive Officer, has more than 18 years
of experience in the timeshare industry and since 1995 has served as a director
of ARDA, the primary trade association for the timeshare industry. The Company's
senior officers have an average of ten years of experience in the timeshare
industry.

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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 U.S. market has also grown
considerably -- from $1.3 billion of timeshare sales in 1992 to $2.2 billion of
timeshare sales in 1996. The growth in the U.S. timeshare industry is due to (i)
higher quality accommodations and services; (ii) involvement of well-recognized
hotel companies in the upscale segment of the industry such as Marriott
Ownership Resorts ("Marriott"), The Walt Disney Company ("Disney"), and Hilton
Hotels Corporation ("Hilton"); (iii) improved availability of financing for
purchasers of Vacation Intervals; (iv) increased flexibility of timeshare use;
(v) increased governmental regulation; and (vi) improved overall image of the
industry. Since timeshare units typically include two bedrooms and kitchen
facilities, Vacation Interval ownership is often more economical for a family
than an extended vacation at a commercial lodging establishment.

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RESORTS SUMMARY

The following tables set forth certain information regarding each of the
Existing Resorts and New Resorts at December 31, 1997, unless otherwise
indicated.

EXISTING RESORTS

<TABLE>
<CAPTION>
VACATION
VACATION INTERVALS INTERVALS
UNITS AT RESORTS AT RESORTS SOLD(A)
------------------------ --------------------- --------- AVERAGE
PRIMARY INVENTORY INVENTORY DATE IN SALES
MARKET AT PLANNED AT PLANNED SALES THROUGH 1997 PRICE
RESORT/LOCATION SERVED 12/31/97 EXPANSION(B) 12/31/97 EXPANSION COMMENCED 12/31/97 ONLY IN 1997
--------------- ------------- --------- ------------ --------- --------- --------- --------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DRIVE-TO RESORTS
Holly Lake Dallas- 130 108 1,129 5,400(d) 1982 5,371 539 $7,062
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 240 352 2,440 18,304(e) 1980 10,040 1,679 7,640
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 64 16 412 800(d) 1987 2,788 332 6,743
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 132 268 2,516 13,936(e) 1988 4,348 1,359 8,518
Conroe, TX
Hill Country Austin-San 153(g) 254 1,887 12,700(d) 1984 5,763 1,391 8,552
Canyon Lake, TX Antonio, TX
Timber Creek St. Louis, -- 600(h) -- 31,200(e)(h) 1997 32 32 5,599
DeSoto, MO MO
Fox River Chicago, IL -- 492(h) -- 25,584(e)(h) 1997 49 49 5,465
Sheridan, IL
Oak N' Spruce Boston, MA 132 420 1,629 21,840(e)(h) 1998 -- -- --
South Lee, MA New York,
NY(i)
DESTINATION RESORTS
Ozark Mountain Branson, 124 78 783 4,056(e) 1982 5,441 994 7,282
Kimberling City, MO MO
Holiday Hills Branson, 24 202 135 10,100(d) 1984 1,065 217 8,046
Branson, MO MO
--- ----- ------ ------- ------ ----- ------
Total 999 2,790 10,931 143,920 34,897 6,592 $7,854
=== ===== ====== ======= ====== ===== ======

AMENITIES/
RESORT/LOCATION ACTIVITIES(C)
--------------- -------------
<S> <C>
DRIVE-TO RESORTS
Holly Lake B,F,G,H,
Hawkins, TX M,S,T
The Villages B,F,H,
Flint, TX M,S,T
Lake O' The Woods F,M,S,T(f)
Flint, TX
Piney Shores B,F,H,
Conroe, TX M,S,T
Hill Country B,M,S,T(f)
Canyon Lake, TX
Timber Creek B,F,G,M,S,T
DeSoto, MO
Fox River G,M,S,T
Sheridan, IL
Oak N' Spruce F,G,S,T
South Lee, MA
DESTINATION RESORTS
Ozark Mountain B,F,H,
Kimberling City, MO M,S,T
Holiday Hills G,M,S,T(f)
Branson, MO
Total
</TABLE>

NEW RESORTS

<TABLE>
<CAPTION>
PRIMARY EXISTING AND
MARKET DATE PLANNED PLANNED PLANNED
RESORT/LOCATION SERVED ACQUIRED UNITS(H) INTERVALS(H) AMENITIES/ACTIVITIES
--------------- ------------- -------- -------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Galveston, TX........................... Houston, TX 1997(j) 400(k) 20,800(e)(k) B,F,S,T
Las Vegas, NV........................... Las Vegas, NV 1997 157(l) 8,164(e)(l) S
----- ------
Total........................... 557 28,964
===== ======
</TABLE>

(See notes commencing on following page)

10
<PAGE> 12

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

(a) These totals do not reflect sales of upgraded Vacation Intervals to
Silverleaf Owners. For the year ended December 31, 1997, upgrade sales at
the Existing Resorts were as follows:

<TABLE>
<CAPTION>
AVERAGE SALES PRICE
FOR THE YEAR
ENDED 12/31/97
UPGRADED VACATION -- NET OF
RESORT INTERVALS SOLD EXCHANGED INTERVAL
------ ----------------- ----------------------
<S> <C> <C>
Holly Lake..................................... 187 $3,809
The Villages................................... 642 4,871
Lake O' The Woods.............................. 79 3,630
Piney Shores................................... 671 3,850
Hill Country................................... 648 3,928
Timber Creek................................... 2 945
Fox River...................................... 1 2,780
Ozark Mountain................................. 1,468 4,645
Holiday Hills.................................. 210 3,938
----- ------
3,908 $4,326
===== ======
</TABLE>

(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 at December 31, 1997:

<TABLE>
<CAPTION>
LAND- LAND- LAND-
USE USE USE
PROCESS PROCESS PROCESS CURRENTLY IN SHELL
NOT STARTED PENDING COMPLETE CONSTRUCTION COMPLETE TOTAL
----------- -------- -------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Holly Lake................ 54 -- 50 -- 4 108
The Villages.............. 110 152 78 12 -- 352
Lake O' The Woods......... -- -- 16 -- -- 16
Piney Shores.............. 108 120 16 24 -- 268
Hill Country.............. 153 47 54 -- -- 254
Timber Creek.............. 576 -- -- 24 -- 600
Fox River................. 456 -- -- 36 -- 492
Oak 'N Spruce............. 420 -- -- -- -- 420
Ozark Mountain............ 36 -- 30 -- 12 78
Holiday Hills............. 70 -- 94 24 14 202
----- --- --- --- -- -----
1,983 319 338 120 30 2,790
===== === === === == =====
</TABLE>

"Land-Use 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 land-use 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.

"Land-Use Process Complete" means either that (i) the Company believes
that it has obtained all necessary land-use 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".

Some of the 30 "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 1998.

(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.

11
<PAGE> 13

(d) These figures are based on 50 one-week intervals per unit.

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

(f) Boating is available near the resort.

(g) Includes three units which have not been finished-out for accommodations
and which are currently used for other purposes.

(h) Engineering, architectural and construction estimates have not been
completed by the Company, and there can be no assurance that the Company
will develop these properties at the unit numbers currently projected.

(i) The Company has commenced the timeshare permit process in New York, but has
not yet received a permit. (The Company has a timeshare permit in
Massachusetts.)

(j) One portion of this tract was acquired in February 1998.

(k) The Company has not commenced the timeshare permit process. The Company has
commenced the land use permit process. See "Risk Factors -- Development,
Construction and Property Acquisition Activities", "Business -- Description
of New Resorts -- Gulf Coast Resort".

(l) The Company has commenced the timeshare permit application process, but has
not yet received a permit. The Company has not commenced the land use
permit process. See "Risk Factors -- Regulation of Marketing and Sales of
Vacation Intervals and Related Laws".

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
18 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. In May 1989, a partnership, of which the Company was the
general partner, acquired seven of 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, such 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'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 NOTE OFFERING

The Company is also offering $75.0 million aggregate principal amount of
% Senior Subordinated Notes due 2008. The Note Offering is being made by
separate prospectus. The Notes will be general unsecured obligations of the
Company, ranking subordinate in right of payment to all Senior Debt (as defined)
of the Company, including indebtedness under the Company's revolving credit
facilities. The Notes will be unconditionally guaranteed on a senior
subordinated basis by all existing and future domestic subsidiaries of the
Company, subject to certain exceptions. See "Business -- Description of Certain
Indebtedness". The consummation of the Equity Offering is not conditioned upon
the consummation of the Note Offering; however, the consummation of the Note
Offering is conditioned upon the consummation of the Equity Offering.

12
<PAGE> 14

The net proceeds of the Equity Offering will be used to repay a substantial
portion of the Company's outstanding indebtedness. With the additional net
proceeds of the Note Offering, the Company will repay substantially all
indebtedness not repaid with the proceeds of the Equity Offering and will use
the balance of proceeds to (a) construct new units, amenities and infrastructure
at its Existing Resorts and New Resorts, and (b) fund acquisitions, working
capital and general corporate purposes. The Company intends to expend these
proceeds by year-end 1998. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".

THE EQUITY OFFERING

<TABLE>
<S> <C>
Issuer.................................... Silverleaf Resorts, Inc.
Common Stock Offered by the Company....... 2,000,000 shares
Common Stock Offered by the Selling
Shareholder............................. 500,000(a)
Shares outstanding after the Equity
Offering................................ 13,311,517 shares(b)(c)
Use of proceeds........................... The net proceeds of the Equity Offering will be
used to repay a substantial portion of the
Company's indebtedness. Approximately $13.0 million
of the proceeds will be used to repay indebtedness
owed to an affiliate of the lead managing
Underwriter. See "Risk Factors -- Repayment of
Indebtedness Owed to Affiliate of Underwriter" and
"Use of Proceeds".
Risks of Equity Offering.................. See generally "Risk Factors" beginning on page 17.
Dividend policy........................... The Company does not expect to pay any dividends in
the foreseeable future. See "Dividend Policy".
NYSE symbol............................... "SVR"
</TABLE>

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

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

(b) Does not include 1,100,000 shares of Common Stock presently reserved for
issuance pursuant to the Company's 1997 Stock Option Plan (as defined). In
February 1998, the Board of Directors approved an amendment to the plan
reserving an additional 500,000 shares of Common Stock for issuance under
the plan; however, this amendment will not become effective unless it is
approved by the shareholders. See "Management -- 1997 Stock Option Plan".

(c) Depending on whether or not the Underwriters exercise the over-allotment
option granted by Mr. Mead, he will own between 50.7% and 53.5% of all
issued and outstanding shares of Common Stock after the Equity Offering. See
"Risk Factors -- Voting Control by Existing Shareholder".

13
<PAGE> 15

SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND
OPERATING INFORMATION

The Summary Consolidated Historical Financial and Operating 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 since these
entities were under common ownership and control. The consolidated financial
statements of the Company for 1995, 1996 and 1997 included herein were audited
by Deloitte & Touche LLP. The data presented as of and for the year ended
December 31, 1994 has been derived from the Company's audited consolidated
financial statements which have not been included herein. Data presented as of
and for the year ended December 31, 1993 has been derived from the Company's
unaudited consolidated financial statements which in the opinion of management
of the Company reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial position at such
dates and results of operation for such periods.

During 1997, the Company began classifying the components of the previously
reported provision for uncollectible notes into three categories based on the
nature of the item -- credit losses, customer returns and customer releases. The
Company has reclassified these amounts within the previously reported financial
information to conform to the classification for the year ended December 31,
1997. This reclassification has no balance sheet effect and no effect on
previously reported net income. See Note 2 of Notes to Consolidated Financial
Statements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview".

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

14
<PAGE> 16

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND AVERAGE
PRICE OF VACATION INTERVALS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Vacation Interval sales................. $ 18,627 $ 24,551 $ 34,091 $ 45,907 $ 68,682
Interest income......................... 1,029 1,633 3,968 6,297 9,149
Interest income from affiliates......... 70 252 393 377 247
Management fee income................... 3,613 2,394 2,478 2,187 2,331
Lease income............................ 512 1,137 1,310 1,717 1,415
Other income............................ 1,964 1,932 1,832 1,440 3,234
---------- ---------- ---------- ---------- ----------
Total revenues..................... 25,815 31,899 44,072 57,925 85,058
---------- ---------- ---------- ---------- ----------
Costs and Operating Expenses:
Cost of Vacation Interval sales........... 2,094 2,648 3,280 2,805 6,600
Sales and marketing....................... 10,219 12,929 17,850 21,839 30,559
Provision for uncollectible notes......... 1,877 4,205 6,632 8,733 10,524
Operating, general and administrative..... 6,501 5,853 8,780 10,116 12,230
Depreciation and amortization............. 477 590 863 1,264 1,497
Interest expense.......................... 1,426 1,642 3,609 4,759 4,664
---------- ---------- ---------- ---------- ----------
Total costs and operating
expenses......................... 22,594 27,867 41,014 49,516 66,074
---------- ---------- ---------- ---------- ----------
Income from continuing operations before
income taxes.............................. $ 3,221 $ 4,032 $ 3,058 $ 8,409 $ 18,984
Income tax expense.......................... 1,376 1,677 1,512 3,140 7,024
---------- ---------- ---------- ---------- ----------
Income from continuing operations........... 1,845 2,355 1,546 5,269 11,960
Income (loss) on discontinued operations.... (286) 568 (1,484) (295) --
---------- ---------- ---------- ---------- ----------
Net income.................................. $ 1,559 $ 2,923 $ 62 $ 4,974 $ 11,960
========== ========== ========== ========== ==========
Income per share from continuing
operations -- Basic and Diluted(a)........ $ 0.24 $ 0.31 $ 0.20 $ 0.68 $ 1.22
========== ========== ========== ========== ==========
Net Income per share -- Basic and
Diluted(a)................................ $ 0.21 $ 0.39 $ 0.01 $ 0.64 $ 1.22
========== ========== ========== ========== ==========
Weighted average number of shares
outstanding -- Basic(b)................... 7,588,952 7,588,952 7,590,295 7,711,517 9,767,407
========== ========== ========== ========== ==========
Weighted average number of shares
outstanding -- Diluted(b)................. 7,588,952 7,588,952 7,590,295 7,711,517 9,816,819
========== ========== ========== ========== ==========
OTHER FINANCIAL DATA:
EBITDA(c)................................. $ 5,124 $ 6,264 $ 7,530 $ 14,432 $ 25,145
OTHER OPERATING DATA:
Number of Existing Resorts at period
end..................................... 7 7 7 7 10
Number of Vacation Intervals sold
(excluding upgrades)(d)................. 2,386 3,423 4,464 5,634 6,592
Number of upgraded Vacation Intervals
sold.................................... 1,378 1,290 1,921 1,914 3,908
Number of Vacation Intervals in
inventory............................... 5,615 5,943 6,580 6,746 10,931
Average price of Vacation Intervals sold
(excluding upgrades)(d)(e).............. $ 5,599 $ 5,821 $ 5,965 $ 6,751 $ 7,854
Average price of upgraded Vacation
Intervals sold (net of exchanged
interval)............................... $ 3,822 $ 3,585 $ 3,885 $ 4,113 $ 4,326
</TABLE>

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

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

(b) Gives retroactive effect to a 719.97205 for one increase in outstanding
shares (the "Stock Split") in May 1997.

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).

(d) The Vacation Intervals sold in 1997 include 1,517 biennial intervals
(counted as 759 annual Vacation Intervals). The Company did not begin
selling biennial intervals until January 1997.

(e) Includes annual and biennial Vacation Interval sales for one and two bedroom
units.

16
<PAGE> 18

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing any of the Common Stock offered hereby. The
Company cautions the reader that this list of material risk factors may not be
exhaustive.

The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Certain statements in this
Prospectus that are not historical fact constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Discussions containing such forward-looking statements may be found in the
material set forth under "Summary", "Use of Proceeds", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business",
as well as within this Prospectus generally. In addition, when used in this
Prospectus the words "believes", "anticipates", "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to a number of risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth below and the matters set forth in this Prospectus
generally. The forward-looking statements are made as of the date of this
Prospectus and the Company assumes no obligation to update the forward-looking
statements or to update the reasons why actual results could differ from the
projections in the forward-looking statements.

SENSITIVITY OF CUSTOMERS TO GENERAL ECONOMIC CONDITIONS

The Company targets value-conscious customers and approximately two-thirds
of the Company's customers have annual household incomes of less than $50,000.
These 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

If the Note Offering is consummated, the Company will have an increased
amount of indebtedness. As of December 31, 1997 after giving effect to the
Equity Offering and the Note Offering, and the application of the proceeds
therefrom, the aggregate outstanding principal amount of the Company's
indebtedness would have been $75.0 million, versus actual indebtedness at
December 31, 1997 of $48.9 million. Upon consummation of the Equity Offering and
the Note Offering, the Company also will have available to it up to $130.0
million in borrowing capacity under its revolving credit facilities. 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 be collateralized by the Company's assets and contain
restrictive covenants.

The Indenture pertaining to the Notes permits the Company to incur certain
additional indebtedness, including indebtedness in an amount up to 70% of
customer notes receivable of the Company. Accordingly, to the extent customer
notes receivable of the Company increase, the Company may be able to borrow
additional amounts under the credit facilities. The Indenture pertaining to the
Notes also permits the Company to borrow additional funds to finance development
of the Existing Resorts and New Resorts. Future construction loans will likely
result in liens against the respective properties.

The level of the Company's indebtedness could have important consequences
to holders of the Common Stock, including, but not limited to, (i) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on the Notes and other indebtedness; (ii) the
Company's ability to obtain additional debt financing in the future for working
capital, capital expenditures or acquisitions may be
17
<PAGE> 19

limited; (iii) the Company's level of indebtedness could limit its flexibility
in reacting to changes in the industry and economic conditions generally; (iv)
certain of the Company's borrowings are at variable rates of interest, and a
substantial increase in interest rates could adversely affect the Company's
ability to meet debt service obligations; and (v) increased interest expense
will reduce earnings, if any. See "Unaudited Pro Forma Condensed Consolidated
Financial Information". In addition, the Indenture and the existing credit
facilities presently contain, and future credit facilities could contain,
financial and other restrictive covenants that will limit the ability of the
Company to, among other things, borrow additional funds. Failure by the Company
to comply with such covenants could result in an event of default which, if not
cured or waived, could have a material adverse effect on the Company's results
of operations, liquidity, and financial position.

Finally, creditors' claims against the Company, including the claims of
holders of the Notes if the Note Offering is consummated, will be paid in full
before the claims of shareholders in the event of a liquidation, bankruptcy or
winding up of the Company. See "-- Financing Customer Borrowings -- Borrowing
Base" and "Business -- Description of Certain Indebtedness".

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 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.

The Company's credit experience is such that in 1997 it allocated 15.3% of
the purchase price of Vacation Intervals to its provision for uncollectible
notes. In addition, in 1997 the Company decreased sales by $2.8 million for
customer returns and increased operating, general and administrative expenses by
$1.2 million for customer releases. See Note 2 of Notes to Consolidated
Financial Statements. 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 generally 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, Illinois, and
certain other states have laws which limit or hinder 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.

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, 1997, the Company had Vacation Interval customer notes
receivable in the approximate principal amount of $104.4 million, was
contingently liable with respect to approximately $7.4 million principal amount
of customer notes sold with recourse and had an allowance for uncollectible
notes of approximately $12.6 million and an allowance for future customer
returns of approximately $2.8 million. There can be no assurance that such
allowances are adequate. See Note 4 of Notes to Consolidated Financial
Statements.

EQUITY OFFERING NOT CONDITIONED ON NOTE OFFERING

If the Equity Offering is not consummated, the Note Offering will not be
consummated. The Equity Offering, however, is not conditioned upon the Note
Offering. The closing of the Note Offering is expected to be subject to
customary conditions for a public offering of debt securities. Accordingly, the
Equity Offering may be completed without the Note Offering, and the total amount
of proceeds available to the Company may be substantially less than anticipated.
If the Note Offering is not consummated, the Company will not be able to pay
18
<PAGE> 20

substantially all of its existing indebtedness and will not have additional
proceeds for (a) construction of new units, amenities, and infrastructure at the
Existing Resorts and New Resorts, and (b) acquisitions, working capital, and
general corporate purposes. It will, accordingly, be required to borrow more
funds under its credit facilities sooner than it would have if the Note Offering
were consummated. Borrowing under existing credit facilities or otherwise
(including new facilities for acquisition and construction) may result in higher
interest expense or more onerous terms than would be applicable in respect of
the Notes, assuming such financing is available at all.

FINANCING CUSTOMER BORROWINGS

While the Company intends to use the proceeds of the Equity Offering and
Note Offering to pay indebtedness under its existing credit facilities, it may
borrow additional funds under existing or future credit arrangements and is
dependent on the ability to finance customer notes receivable through third
party lenders to conduct its business.

BORROWING BASE. To finance Vacation Interval customer notes receivable, the
Company has entered into agreements with lenders to borrow up to approximately
$115.0 million collateralized by customer promissory notes and mortgages. At
December 31, 1997, the Company had such borrowings from lenders in the
approximate principal amount of $40.4 million. The Company's lenders typically
lend the Company 70% of the principal amount of performing notes, and payments
from Silverleaf Owners on such notes are credited directly to the lender and
applied against the Company's loan balance. At December 31, 1997, the Company
had a portfolio of approximately 21,320 Vacation Interval customer notes
receivable in the approximate principal amount of $104.4 million, of which
approximately $14.4 million in principal amount were 61 days or more past due
and therefore ineligible as collateral.

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 credit facilities may not be sufficient to cover
these costs, thereby straining the Company's capital resources, liquidity, and
capacity to grow.

INTEREST RATE MISMATCH. At December 31, 1997, the Company's portfolio of
customer loans had a weighted average fixed interest rate of 14.5%. At such
date, the Company's borrowings (which bear interest at variable rates) against
the portfolio had a weighted average cost of funds of 10.1%. 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 existing indebtedness currently bears interest at variable
rates and the Company's customer notes receivable bear interest at fixed rates,
increases in interest rates would 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
notes receivable. The Company has not engaged 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. If the Note Offering is
consummated, the Notes will bear interest at a fixed rate for a ten year period,
which would lessen this risk initially.

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, and customer notes had an average maturity of 5.5
years at December 31, 1997. The Company's related revolving credit facilities
mature between December 1999 and October 2005 with up to $60.0 million of
borrowings under such credit facilities maturing in December 1999. Accordingly,
there could be a mismatch between the Company's anticipated cash receipts and
cash disbursements in December 1999 and subsequent periods. 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 notes receivable, probably at a
substantial discount, or to seek other alternatives to
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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". However, if the Equity Offering is consummated, a substantial portion of
the Company's indebtedness under the credit facilities will be repaid, which
would lessen this risk initially.

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.

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 and New 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 certain fraudulent marketing practices in the timeshare
industry in the 1980's, various states enacted legislation aimed at curbing such
abuses. Texas, Missouri, Illinois, Massachusetts, and Nevada, the states in
which the Company currently owns Existing Resorts or New Resorts, as well as
other states in which the Company markets its Vacation Intervals, have adopted
specific laws and regulations regarding the marketing and sale of Vacation
Intervals. The laws of most states, including Texas, Illinois, and Nevada,
require the Company to file a detailed offering statement and supporting
documents with a designated state authority, which describe the Company, the
project, and the promotion and sale of Vacation Intervals. The offering
statement must be approved by the appropriate state agency before the Company
may solicit residents of such state. The laws of Texas, Illinois, Massachusetts,
and Nevada, respectively, require the Company to deliver an offering statement
(or public report), together with certain additional information concerning the
terms of the purchase, to prospective purchasers of Vacation Intervals who are
residents of such state, even if the resort is not located in such state. The
laws of Missouri generally only require certain disclosures in sales documents
for prospective purchasers. There are also laws in each state where the Company
currently sells Vacation Intervals which grant the purchaser of a Vacation
Interval the right to cancel a contract of purchase at any time within three to
five calendar days following the date the contract was signed by the purchaser.

The Company qualifies each resort under the timeshare laws of the state
where it is located. The Company has recently filed a timeshare application in
Nevada with respect to the New Resort in Las Vegas. There can be no assurance
that the Company will obtain the requisite approval to sell Vacation Intervals
for this resort, and the Company has not commenced marketing or sales activities
for this resort.

The Company also markets and sells its Vacation Intervals to residents of
certain states which are near the states where the Company's resorts are
located. Many of these neighboring states also regulate the marketing and sale
of Vacation Intervals to their residents. The Company is currently in various
stages of obtaining permits to sell Vacation Intervals to residents of New York
and certain other states proximate to the Oak 'N Spruce Resort in Massachusetts.
There can be no assurance that the Company will obtain the requisite approvals
to sell Vacation Intervals to residents of such states. The Company does not
register all of its resorts in each of the states where it registers any
resorts.

Most states have additional 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> 22

The Company believes it is in material compliance with federal, Texas,
Missouri, Illinois and Massachusetts laws and regulations to which it is
currently subject relating to the sale and marketing of Vacation Intervals.
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 aggressively markets and sells
Vacation Intervals in the value segment of the timeshare industry, which may
include individuals who are less financially sophisticated 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, Illinois, Massachusetts, 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, and financial
position. Further, there can be no assurance that either the federal government
or states having jurisdiction over the Company's business will not adopt
additional regulations or take other actions which would adversely affect the
Company's results of operations, liquidity, and 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 regulations 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.

In early 1997, the Company was the subject of some consumer complaints
which 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
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<PAGE> 23

Company denied. While the Agreed Order acknowledged that Silverleaf
independently resolved ten consumer complaints referenced in the Agreed Order,
discontinued the practices complained of, and registered the Destination Resorts
during 1995 and 1996, the Texas Real Estate Commission ordered Silverleaf to
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 directed
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 has encountered and expects to encounter
some level of additional consumer complaints in the ordinary course of its
business. See "Business -- Governmental Regulation".

EXPANSION INTO NEW GEOGRAPHIC AREAS

Prior to August 1997, all of the Company's operating resorts and
substantially all of its customers and borrowers were located in Texas and
Missouri. Since August 1997, the Company has acquired the Fox River Resort in
Illinois, the Timber Creek Resort near St. Louis, Missouri, the Oak N' Spruce
Resort in Massachusetts, undeveloped beachfront property in Galveston, Texas,
and an undeveloped parcel in Las Vegas, Nevada. The recent expansion into new
geographic areas, particularly Illinois, Massachusetts, and Nevada, poses new
risks because the Company does not possess the same level of familiarity with
and experience in these markets as it possesses with respect to its historical
markets in Missouri and Texas, which could adversely affect the Company's
ability to develop and operate timeshare resorts and sell Vacation Intervals in
these new markets. Such expansion also requires the Company to comply with the
laws and regulations of additional jurisdictions, including Illinois,
Massachusetts, Nevada, New York, New Jersey, and Connecticut, where the Company
currently markets or will market its Vacation Intervals. Additionally, the
Company is subject to and will become subject to zoning and land use laws of
additional municipalities in Texas, Illinois, Massachusetts, and Nevada. There
is no assurance the Company can comply with all of these requirements
economically or at all. The New Resorts will also require new architectural
plans and construction techniques with which the Company is less familiar. For
example, Silverleaf will utilize five-story and nine-story, high density
buildings for the proposed resort in Las Vegas, Nevada, whereas the Company has
historically utilized low-rise, lower density building structures. The Oak N'
Spruce Resort in Massachusetts and the Fox River Resort in Illinois are subject
to a longer and harsher winter climate than the resorts in Missouri and Texas.
Accordingly, construction costs at these new resorts may be higher and the
construction cycle may be longer. Expansion of the Company's sales and marketing
activities to Illinois, Massachusetts, Nevada, New Jersey, New York, and
Connecticut is expected to result in higher marketing expenses to gain entrance
to these new markets. Cultural differences between customers in these new
markets and the Company's historical markets may result in additional marketing
costs or lower sales. All of the above risks associated with the Company's
entrance into the new geographic areas could have a material adverse effect on
the Company's results of operations, liquidity, and financial position.

RAPID GROWTH

The Company has experienced rapid growth which could place a strain on the
Company's management, employees and systems. Prior to August 1997, the Company
owned and operated seven resorts. Since then, the Company has acquired three
resorts and sites for two Destination Resorts and has entered into agreements to
acquire two sites for the development of Drive-to Resorts and management rights
with respect to eight timeshare resorts. As the Company's business develops and
expands, the Company will require additional management and employees and will
need to implement enhanced operational and financial systems. There can be no
assurance that the Company will successfully hire, retain, integrate and utilize
management and employees and implement and maintain such operational and
financial systems. Failure to hire, retain, and integrate management and
employees or implement such systems successfully could have a material adverse
effect on the Company's results of operations, liquidity, and financial
position.

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<PAGE> 24

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, a decrease in popularity of any of the
Company's resorts with consumers, 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, and 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, Disney, Hilton, Hyatt Corporation ("Hyatt"), and Four Seasons Resorts
("Four Seasons"), have 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"), Ramada Vacation Suites ("Ramada"), and TrendWest
Resorts, Inc. ("TrendWest"), are, or are subsidiaries of, 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 to
a lesser extent with the Company's newly-acquired Timber Creek Resort. Signature
also 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 Illinois, Missouri or Texas.
The Company believes that many of the companies named in the preceding paragraph
operate timeshare resorts in Las Vegas, Nevada. Additionally, the Company
believes there are a number of privately-owned and operated timeshare resorts in
most states in which the Company owns resorts which will compete with the
Company's Existing Resorts and New Resorts. Finally, the proposed resort in Las
Vegas will compete with a large number and variety of hotels and other lodging
facilities in Las Vegas.

The Company believes Marriott, Disney, Hilton, Hyatt, and Four Seasons
generally target consumers with higher annual incomes than the Company's target
market. The Company believes the other competitors named above target consumers
with similar, but slightly higher, income levels than the Company's target
market. The Company's 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 compete with the
Company in seeking properties for development and acquisition of resorts. Some
of these competitors are larger and have greater financial and other 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 develop and continue the expansion of the Existing
Resorts, to develop the New Resorts, and to selectively acquire and develop
other resorts. Acquiring and developing resorts places 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

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<PAGE> 25

development uneconomical or unprofitable; sales of Vacation Intervals at a newly
completed property may not be sufficient to make the property profitable; the
Company has expanded and will continue to expand into new geographic areas in
which it has no operating history and there is no assurance the Company will be
successful in such locations; 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. There can be no assurance the Company will
develop and expand the Existing Resorts, develop the New Resorts, or acquire and
develop other resorts. The Company does not and upon the consummation of the
Equity Offering and the Note Offering will not have the financing available to
complete all of its planned expansion as set forth in "Business -- Resorts
Summary" and "-- 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 of
Vacation Intervals and Related Laws". For instance, Silverleaf's land use plan
at its New Resort site in Galveston is currently being challenged in court. A
neighboring landowner has sued the city of Galveston and its zoning board to set
aside the Galveston planning commission's approval of Silverleaf's land use
plan. Silverleaf believes the suit is without merit and has filed a petition to
intervene in the litigation to protect its interests. The Company does not
believe that this suit will materially affect its timetable for development of
its New Resort at Galveston; however, there can be no assurance that
Silverleaf's land use plan will withstand this challenge. Furthermore, the
litigation may delay development of this property. 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 and New Resorts or the development of other resorts.

Most of the Company's resorts are located in rustic 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" and "-- 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 Robert E. 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 retain 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.

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<PAGE> 26

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 (other than the Oak N'
Spruce Resort which has not yet been reviewed for ADA compliance) 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, the Clubs, or the Master
Club at the Existing Resorts, the New Resorts, or other 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, and financial position, such costs could be substantial.

VULNERABILITY TO REGIONAL CONDITIONS

Prior to August 1997, all of the Company's operating resorts and
substantially all of the Company's customers and borrowers were located in Texas
and Missouri. Since August 1997, the Company has acquired resorts in Illinois
and Massachusetts as well as a site in Las Vegas, Nevada. 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. Even with the recent acquisitions,
the Company's current geographic concentration 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 several of
the Existing Resorts, and more recent Phase I environmental reports have been
obtained for each of the remaining resorts. The reports 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 Holly Lake Resort's water supply facilities do not comply with certain
state rules regarding minimum water capacity; accordingly, the Company plans to
build an additional water storage facility at Holly Lake, with construction to
begin in the third quarter of 1998. See "Business -- Governmental Regulation".

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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 Holly Lake water supply
storage compliance issue 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".

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 the Existing Resorts,
except Oak N' Spruce, are currently qualified for participation in the RCI
exchange network. The Oak N' Spruce is currently under contract with another
exchange network provider, Interval International. However, no assurance can be
given that the Company will continue to be able to qualify such resorts or any
other future resorts for participation in these networks 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, the Clubs, nor
the Master Club has insurance coverage. Should an uninsured loss or a loss in
excess of insured limits occur, the Company could be required to repair damage
at its expense or lose its capital invested in a resort, as well as the
anticipated future revenues from such resort; moreover, the Company 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, and financial position. See
"Business -- Insurance".

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

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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, 1997
liability for deferred taxes (i.e., taxes owed to taxing authorities in the
future in consequence of income previously reported in the financial statements)
was $30.2 million, primarily attributable to this method of reporting Vacation
Interval sales, before utilization of any available deferred tax benefits (up to
$16.2 million at December 31, 1997), including net operating loss carryforwards.
See Note 6 of Notes to Consolidated Financial Statements. 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,
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 Carryovers from Ownership Change".

ALTERNATIVE MINIMUM TAXES

Prior to 1997 the Company 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. During 1997, the Company
submitted a request to the Internal Revenue Service for permission to change to
the accrual method for this computation. In January 1998, the Company received a
proposed ruling from the Internal Revenue Service granting the request effective
January 1, 1997. The Company plans to file a request with the Internal Revenue
Service to modify the proposed ruling to correct the amount of the proposed
accounting adjustment and to make the ruling effective January 1, 1998. The
Company believes the Internal Revenue Service will approve the correction of the
amount of the proposed accounting adjustment, but may refuse to change the
effective date of the ruling. If the Internal Revenue Service refuses to change
the effective date, estimated taxes of $1.5 million, which are included as
current liabilities on the Company's December 31, 1997 balance sheet, plus
interest and any applicable penalties, will be payable in 1998, and the
Company's alternative minimum taxable income for 1998 through 2000 will be
increased each year by an estimated amount of approximately $9.6 million per
year for the pre-1997 adjustment, which will result in the Company paying
substantial additional federal and state taxes in those years. If the Internal
Revenue Service agrees to change the effective date, then the preceding effects
of the accounting method change will be delayed by one year. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

LIMITATIONS ON USE OF CARRYOVERS FROM OWNERSHIP CHANGE

The Company estimates that it had net operating loss carryforwards of
approximately $39.2 million at December 31, 1997, for regular federal income tax
purposes related primarily to 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% and Ms.
Brayfield acquired 1%. As a result of the IPO in June 1997, Mr. Mead's ownership
of the Company further decreased to approximately 67%. After the closing of the
Equity Offering and taking into account shares owned by his family, Mr. Mead
will own between 50.7% and 53.5% of the outstanding shares of Common Stock of
the Company, depending on the extent, if any, to which the Underwriters exercise
their over-allotment option. Concurrently with this offering or in the future,
Mr. Mead, his family, or Ms. Brayfield, could transfer their shares and/or the
Company could issue additional shares, including shares which it is required to
issue under its 1997 Stock Option Plan, which could result in more than a 50
percentage point change in ownership of the Company. If such a change occurs
within a three year period, the limitations of Section 382 would apply.
27
<PAGE> 29

Although the Company does not believe that those limitations would currently
adversely affect the Company, there can be no assurance that the limitations
will not 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". When such a change in ownership occurs,
Section 383 of the Code also limits or denies the future utilization of certain
carryover excess credits, including any unused minimum tax credit attributable
to payment of alternative minimum taxes. Although the Company does not believe
that these additional limitations would currently adversely affect the Company,
there can be no assurance that these additional limitations will not limit or
deny the future utilization of any excess tax credits of the Company, resulting
in the Company paying substantial additional federal and state taxes and
interest for any periods following such change in ownership. See "-- Alternative
Minimum Taxes".

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, and
financial position.

VOTING CONTROL BY EXISTING SHAREHOLDER

After the closing of the Equity Offering, Mr. Mead will own between 50.7%
and 53.5% of the outstanding shares of Common Stock of the Company, depending on
the extent, if any, to which the Underwriters exercise their over-allotment
option. By holding a majority of shares of Common Stock, Mr. Mead can elect all
of the Company's directors and control the management and affairs of the
Company. See "Principal and Selling Shareholders". Such control may result in
decisions which are not in the best interests 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 Equity
Offering and the Note Offering, will receive approximately $13.0 million of the
net proceeds of the Equity Offering as repayment of indebtedness and related
interest expected to be outstanding upon consummation of the Equity Offering.
See "Underwriting".

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF TEXAS LAW AND THE COMPANY'S
CHARTER AND BYLAWS

Certain provisions of the Company's articles of incorporation (the
"Charter") and bylaws (the "Bylaws"), as well as Texas corporate law, 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. 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. See
"Description of Capital Stock -- Preferred Stock" and "Certain Provisions of
Texas Law and the Company's Charter and Bylaws".

POSSIBLE VOLATILITY OF STOCK PRICE

Although the Common Stock is listed on the New York Stock Exchange, there
can be no assurance that a viable public market for the Common Stock will be
sustained after the Equity Offering or that purchasers of the Common Stock will
be able to resell their Common Stock at prices equal to or greater than the
offering price. 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

28
<PAGE> 30

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.

YEAR 2000 COMPLIANCE

Because of two-digit year formats, computer systems may not properly
categorize and process date information for the year 2000 and subsequent years.
Systems that do not properly classify dates could generate erroneous data or
cause a system to fail. The Company is in the process of implementing an upgrade
to its accounting systems that the Company believes will be year 2000 compliant.
The Company continues to update its other computer systems to prepare for the
year 2000. Management anticipates that it will incur $250,000 of expenses to be
year 2000 compliant. However, significant uncertainty exists concerning the
potential costs and effects associated with any year 2000 compliance. Any year
2000 compliance problem could materially adversely affect the Company's results
of operations, liquidity, and financial position.

29
<PAGE> 31

USE OF PROCEEDS

The net proceeds from the Equity Offering are estimated to be $46.1
million. The Company will apply the net proceeds of the Equity Offering to repay
a substantial portion of its indebtedness. The net proceeds from the Note
Offering are estimated to be $71.8 million. The following table sets forth the
estimated sources and uses of funds at December 31, 1997 if both the Equity
Offering and the Note Offering are consummated.

<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Sources of Funds:
Common Stock(a)........... $ 50.3
Senior Subordinated Notes
due 2008............... 75.0

------
Total Sources............... $125.3
======
</TABLE>

<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Uses of Funds:
Pay existing
indebtedness(b)(c)(d)... $ 48.9
Develop units, amenities,
and infrastructure at
Existing Resorts(e).... 28.5
Develop units, amenities,
and infrastructure at
New Resorts(e)......... 6.0
Acquisitions, working
capital and general
corporate
purposes(b)(e)......... 34.5
Offering expenses......... 7.4
------
Total Uses.................. $125.3
======
</TABLE>

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

(a) The Company is offering 2,000,000 primary shares of Common Stock in the
Equity Offering. The assumed offering price of $25.125 was the closing price
of Silverleaf's Common Stock on March 11, 1998. The Company will not receive
any of the proceeds from the sale of the shares of Common Stock offered by
the Selling Shareholder.

(b) Indebtedness is projected to increase from $48.9 million at December 31,
1997, to approximately $68.6 million immediately prior to the closing of the
Equity Offering and the Note Offering, substantially all of which will be
paid from the proceeds of the Equity Offering and the Note Offering. As a
result, estimated cash available for acquisitions, working capital, and
general corporate purposes will be reduced to approximately $14.8 million.
After repayment of existing indebtedness, the Company will have $130.0
million of borrowing capacity available under its credit facilities. See
"Business -- Description of Certain Indebtedness".

(c) This includes $5.6 million owing to Credit Suisse First Boston Mortgage
Capital, L.L.C., an affiliate of Credit Suisse First Boston Corporation, the
lead managing underwriter for the Equity Offering and the Note Offering.
This indebtedness is projected to increase to $13.0 million by the closing
of the Equity Offering and the Note Offering. See "Underwriting".

(d) Indebtedness to be repaid from the net proceeds of the Equity Offering and
Note Offering bears interest at variable rates ranging from 4.2% to 14.0%
per annum at December 31, 1997, and matures April 1998 through October 2005.
See "Business -- Description of Certain Indebtedness". Indebtedness is
projected to increase from $48.9 million at December 31, 1997, to
approximately $68.6 million immediately prior to the closing of the Equity
Offering and the Note Offering. Approximately $58.0 million of this
indebtedness will have been incurred within one year prior to the date of
this Prospectus. Of this indebtedness, $2.9 million was incurred to purchase
the Fox River and Timber Creek resorts near Chicago and St. Louis,
respectively, $2.7 million was incurred to purchase the New Resort site in
Las Vegas, $1.7 million was incurred to purchase the New Resort site in
Galveston, $5.1 million was incurred to purchase the Oak N' Spruce Resort in
the Berkshires, $2.9 million was incurred for capital leases of equipment,
and the balance was used for working capital and general corporate purposes.

(e) The Company currently anticipates investing these proceeds during 1998.
Pending the ultimate application of these proceeds, the Company will invest
them in commercial paper, bankers' acceptances, other short-term
investment-grade securities and money-market accounts, and may utilize them
to meet working capital requirements.

30
<PAGE> 32

COMMON STOCK PRICE RANGE

The Company's IPO was consummated in June 1997, at an initial public
offering price of $16.00 per share. The Company's Common Stock is listed on the
NYSE under the symbol "SVR". The following table sets forth, for the periods
indicated, the high and low sale prices for the Common Stock, as reported on the
NYSE consolidated transaction reporting system.

<TABLE>
<CAPTION>
COMMON STOCK
-------------------
1997 HIGH LOW
---- ----- ------
<S> <C> <C>
Second Quarter (commencing June 6, 1997) $19 $14 5/8
Third Quarter 24 3/1 15
Fourth Quarter 26 1/ 20 3/4
1998
First Quarter (through March 11, 1998) $29 1/8 $24 3/8
</TABLE>

A recent reported last sales price for the Company's Common Stock as quoted
on the NYSE is set forth on the cover of this Prospectus. On March 11, 1998,
there were approximately 11 holders of record, and an estimated 750 beneficial
owners, of the Company's Common Stock.

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. Additionally,
certain of the Company's credit facilities contain provisions which may prohibit
the payment of dividends depending on certain capital and liquidity maintenance
requirements. Also, the Indenture pertaining to the Note Offering limits the
payment of dividends unless, after giving effect thereto, certain interest
coverage and other tests are met. 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 -- Description of Certain Indebtedness".

31
<PAGE> 33

CAPITALIZATION

The following table sets forth the consolidated cash and equivalents and
consolidated capitalization of the Company at December 31, 1997, (i) on a
historical basis, (ii) as adjusted to give effect to the Equity Offering at an
assumed offering price of $25.125 per share, and (iii) as further adjusted for
the Note Offering, and in each case, the anticipated application of the
aggregate net proceeds therefrom. Consummation of the Note Offering is
conditioned upon the Equity Offering, but the Equity Offering is not conditioned
upon the Note Offering. This table should be read in conjunction with "Use of
Proceeds", the Consolidated Financial Statements and notes thereto, "Selected
Consolidated Historical Financial and Operating Information" and notes thereto,
"Unaudited Pro Forma Condensed Consolidated Financial Information" and notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------
AS ADJUSTED
FOR
AS ADJUSTED EQUITY OFFERING
FOR AND
ACTUAL EQUITY OFFERING NOTE OFFERING
-------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and equivalents(a)................................ $ 4,970 $ 4,970 $ 73,967
======== ======== ========
Debt:
Credit facilities and other notes payable(a)......... $ 46,239 $ 2,760 $ --
Capital lease obligations............................ 2,632 -- --
Senior Subordinated Notes due 2008................... -- -- 75,000
-------- -------- --------
Total indebtedness................................... 48,871 2,760 75,000
-------- -------- --------
Shareholders' equity:
Common Stock, $0.01 par value; 11,311,517 shares
issued and outstanding, 13,311,517 shares as
adjusted for the Equity Offering(b)............... 113 133 133
Additional paid-in capital........................... 64,577 110,668 110,668
Retained earnings.................................... 19,075 19,075 19,075
-------- -------- --------
Total shareholders' equity........................... 83,765 129,876 129,876
-------- -------- --------
Total capitalization......................... $132,636 $132,636 $204,876
======== ======== ========
</TABLE>

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

(a) Indebtedness is projected to increase from $48.9 million at December 31,
1997 to approximately $68.6 million immediately prior to the closing of the
Equity Offering and Note Offering, substantially all of which will be paid
from the proceeds of the Equity Offering and Note Offering. Accordingly, at
the closing of the Equity Offering and the Note Offering, cash and
equivalents would be $54.3 million and indebtedness would be $75.0 million.
If the Note Offering does not occur, upon the closing of the Equity
Offering, cash and equivalents would be $5.0 million and indebtedness would
be $22.5 million. After repayment of the indebtedness under the Company's
credit facilities, there will be $130.0 million of borrowing capacity
available under such facilities.

(b) Does not include an aggregate 1,100,000 shares of Common Stock currently
reserved for issuance pursuant to the Company's 1997 Stock Option Plan. In
February 1998, the Board of Directors approved an amendment to the plan
reserving an additional 500,000 shares of Common Stock for issuance under
the plan; however, this amendment will not become effective unless it is
approved by the shareholders. See "Management -- 1997 Stock Option Plan".

32
<PAGE> 34

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following Unaudited Pro Forma Condensed Consolidated Statement of
Income presents results of operations of the Company assuming the IPO, the
Equity Offering and the Note Offering occurred on January 1, 1997. The Unaudited
Pro Forma Condensed Consolidated Balance Sheet presents the financial position
of the Company assuming the Equity Offering and the Note Offering occurred on
December 31, 1997. Adjustments necessary to reflect these assumptions are
presented in the applicable Adjustments column and are further described in the
notes to Unaudited Pro Forma Condensed Consolidated Financial Statements. During
June 1997, the Company completed the IPO in which 3,600,000 primary shares of
Common Stock were sold at a price of $16 per share. The net proceeds, after the
deduction of the related issuance costs, amounted to approximately $51.1 million
and were used primarily to reduce indebtedness. The historical financial
information for the Company is derived from the consolidated financial
statements of the Company for the year ended December 31, 1997 which have been
audited by Deloitte & Touche LLP and are included elsewhere herein.

Consummation of the Note Offering is conditioned upon the consummation of
the Equity Offering, but the Equity Offering is not conditioned upon the
consummation of the Note Offering. See "Risk Factors -- Equity Offering Not
Conditioned on Note Offering".

The Pro Forma Financial Information does not purport to present the actual
financial position or results of operations of the Company had the IPO, the
Equity Offering, the Note Offering and events associated therewith occurred on
the dates specified, nor are they necessarily indicative of the Company's future
results of operations or financial position. The Pro Forma Financial Information
is based on certain assumptions and adjustments described in the notes and
should be read in conjunction therewith and with "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" and the audited
historical Consolidated Financial Statements and related notes. The adjustments
are based upon preliminary estimates and certain assumptions that management of
the Company believes are reasonable in the circumstances. Final amounts could
differ from those set forth below. In the opinion of management, all adjustments
have been made that are necessary to present fairly the pro forma financial
information.

33
<PAGE> 35

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
---------------------------------------------------------------------------------
PRO FORMA
FOR IPO,
ADJUSTMENTS PRO FORMA ADJUSTMENTS EQUITY OFFERING
FOR IPO AND FOR IPO AND FOR NOTE AND
HISTORICAL(A) EQUITY OFFERING EQUITY OFFERING OFFERING NOTE OFFERING
------------- --------------- --------------- ----------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Vacation Interval sales.............. $ 68,682 $ 68,682 $ $ 68,682
Interest income...................... 9,396 (172)(b) 9,224 --(g) 9,224
Other income......................... 6,980 6,980 6,980
---------- ---------- ----------- ---------- -----------
Total revenues............... 85,058 (172) 84,886 -- 84,886
---------- ---------- ----------- ---------- -----------
Costs and Operating Expenses:
Cost of Vacation Interval sales...... 6,600 (125)(c) 6,475 125(h) 6,600
Sales and marketing.................. 30,559 30,559 30,559
Provision for uncollectible notes.... 10,524 10,524 10,524
Operating, general and
administrative.................... 12,230 188(d) 12,418 12,418
Depreciation and amortization........ 1,497 1,497 1,497
Interest expense..................... 4,664 (4,385)(c) 279 6,441(h) 6,720
---------- ---------- ----------- ---------- -----------
Total costs and operating
expenses................... 66,074 (4,322) 61,752 6,566 68,318
---------- ---------- ----------- ---------- -----------
Income from continuing operations
before income taxes.................. 18,984 4,150 23,134 (6,566) 16,568
Income tax expense..................... 7,024 1,536(e) 8,560 (2,429)(e) 6,131
---------- ---------- ----------- ---------- -----------
Income from continuing operations...... $ 11,960 $ 2,614 $ 14,574 $ (4,137) $ 10,437
========== ========== =========== ========== ===========
Income per share from continuing
operations -- Basic.................. $ 1.22 $ 1.21 $ .86
========== =========== ===========
Income per share from continuing
operations -- Diluted................ $ 1.22 $ 1.20 $ .86
========== =========== ===========
Weighted average number of shares
Outstanding -- Basic(f).............. 9,767,407 12,073,134 12,073,134
========== =========== ===========
Weighted average number of shares
Outstanding -- Diluted(f)............ 9,816,819 12,122,546 12,122,546
========== =========== ===========
</TABLE>

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

34
<PAGE> 36

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------------------------------------------------------
PRO FORMA
FOR
EQUITY
PRO FORMA OFFERING
FOR AND
HISTORICAL(I) ADJUSTMENTS EQUITY OFFERING ADJUSTMENTS NOTE OFFERING
------------- ----------- --------------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and equivalents................... $ 4,970 $ $ 4,970 $68,997(k) $ 73,967
Restricted cash........................ 200 200 200
Notes receivable, net.................. 92,036 92,036 92,036
Amounts due from affiliates............ 1,389 1,389 1,389
Inventory.............................. 28,310 28,310 28,310
Land, equipment, building and
utilities, net....................... 21,629 21,629 21,629
Land held for sale..................... 466 466 466
Prepaid and other assets............... 7,401 7,401 3,243(k) 10,644
-------- -------- -------- ------- --------
Total Assets................. $156,401 $ -- $156,401 $72,240 $228,641
======== ======== ======== ======= ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses.......................... $ 5,106 $ 5,106 $ 5,106
Amounts due to affiliates............ -- -- --
Unearned revenues.................... 3,122 3,122 3,122
Income taxes payable................. 1,500 1,500 1,500
Deferred income taxes, net........... 14,037 14,037 14,037
Notes payable and capital lease
obligations....................... 48,871 (46,111)(j) 2,760 (2,760)(k) --
Senior Subordinated Notes due 2008... -- 75,000(k) 75,000
-------- -------- -------- ------- --------
Total Liabilities............ 72,636 (46,111) 26,525 72,240 98,765
Shareholders' Equity:
Common stock, par value $0.01 per
share,............................ 113 20(j) 133 133
Additional paid-in capital........... 64,577 46,091(j) 110,668 110,668
Retained earnings.................... 19,075 19,075 19,075
-------- -------- -------- ------- --------
Total Shareholders' Equity... 83,765 46,111 129,876 -- 129,876
-------- -------- -------- ------- --------
Total Liabilities and
Shareholders' Equity....... $156,401 $ -- $156,401 $72,240 $228,641
======== ======== ======== ======= ========
</TABLE>

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

35
<PAGE> 37

NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

Statement of Income Adjustments

(a) Represents the historical condensed consolidated statement of income of the
Company for 1997.

(b) Represents a reduction of interest income from affiliates (the Company used
IPO proceeds to repay indebtedness to affiliates and the affiliates used
such amounts to repay indebtedness to the Company). Does not include
interest income to the Company which would normally accrue to the Company
on cash balances resulting from the IPO and the Equity Offering.

(c) Represents the reduction of interest expense and capitalized interest
charged to cost of Vacation Interval sales as a result of the application
of the proceeds of the IPO and the Equity Offering to the repayment of
indebtedness.

(d) Represents additional costs incurred as a public company as a result of the
IPO.

(e) Represents the adjustment to income tax resulting from the above
adjustments.

(f) Gives retroactive pro forma effect to the Stock Split. 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. The difference
between pro forma weighted average number of shares -- basic and pro forma
weighted average number of shares -- diluted represents the increase in the
number of shares resulting from the assumed exercise of stock options
outstanding.

(g) Does not include interest income to the Company which would normally accrue
to the Company on cash balances resulting from the Note Offering.

(h) Represents pro forma interest expense from the Note Offering, assuming an
interest rate of 9.625%, including $324,000 associated with amortization of
Note Offering costs, less $823,000 of assumed capitalized interest, and
also represents capitalized interest charged to cost of Vacation Interval
sales.

Balance Sheet Adjustments

(i) Represents the historical condensed consolidated balance sheet of the
Company as of December 31, 1997.

(j) Represents the repayment of indebtedness from proceeds of the Equity
Offering and the related adjustments to equity.

(k) Represents the proceeds from the issuance of $75.0 million of Senior
Subordinated Notes, less capitalized offering expenses of $3.2 million, and
repayment of remaining indebtedness with the net proceeds thereof.

36
<PAGE> 38

SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND
OPERATING INFORMATION

The Selected Consolidated Historical Financial and Operating 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 since
these entities were under common ownership and control. The consolidated
financial statements of the Company for 1995, 1996 and 1997 included herein were
audited by Deloitte & Touche LLP. The data presented as of and for the year
ended December 31, 1994 has been derived from the Company's audited consolidated
financial statements which have not been included herein. Data presented as of
and for the year ended December 31, 1993 has been derived from the Company's
unaudited consolidated financial statements which in the opinion of management
of the Company reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial position at such
dates and results of operations for such periods.

During 1997, the Company began classifying the components of the previously
reported provision for uncollectible notes into three categories based on the
nature of the item -- credit losses, customer returns and customer releases. The
Company has reclassified these amounts within the previously reported financial
statements to conform to the classification for the year ended December 31,
1997. This reclassification has no balance sheet effect and has no effect on
previously reported net income. See Note 2 of Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview".

The Selected Consolidated Historical Financial and Operating 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".

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Vacation Interval sales............................ $ 18,627 $ 24,551 $ 34,091 $ 45,907 $ 68,682
Interest income.................................... 1,029 1,633 3,968 6,297 9,149
Interest income from affiliates.................... 70 252 393 377 247
Management fee income.............................. 3,613 2,394 2,478 2,187 2,331
Lease income....................................... 512 1,137 1,310 1,717 1,415
Other income....................................... 1,964 1,932 1,832 1,440 3,234
--------- --------- --------- --------- ---------
Total revenues................................... 25,815 31,899 44,072 57,925 85,058
--------- --------- --------- --------- ---------
Costs and Operating Expenses:
Cost of Vacation Interval sales.................... 2,094 2,648 3,280 2,805 6,600
Sales and marketing................................ 10,219 12,929 17,850 21,839 30,559
Provision for uncollectible notes.................. 1,877 4,205 6,632 8,733 10,524
Operating, general and administrative.............. 6,501 5,853 8,780 10,116 12,230
Depreciation and amortization...................... 477 590 863 1,264 1,497
Interest expense................................... 1,426 1,642 3,609 4,759 4,664
--------- --------- --------- --------- ---------
Total costs and operating expenses............... 22,594 27,867 41,014 49,516 66,074
--------- --------- --------- --------- ---------
Income from continuing operations before income
taxes.............................................. 3,221 4,032 3,058 8,409 18,984
Income tax expense................................... 1,376 1,677 1,512 3,140 7,024
--------- --------- --------- --------- ---------
Income from continuing operations.................... 1,845 2,355 1,546 5,269 11,960
Income (loss) on discontinued operations............. (286) 568 (1,484) (295) --
--------- --------- --------- --------- ---------
Net income........................................... $ 1,559 $ 2,923 $ 62 $ 4,974 $ 11,960
========= ========= ========= ========= =========
Income per share from continuing operations -- Basic
and Diluted(a)..................................... $ 0.24 $ 0.31 $ 0.20 $ 0.68 $ 1.22
========= ========= ========= ========= =========
Net income per share -- Basic and Diluted(a)......... $ 0.21 $ 0.39 $ 0.01 $ 0.64 $ 1.22
========= ========= ========= ========= =========
Weighted average number of shares
outstanding -- Basic(b)............................ 7,588,952 7,588,952 7,590,295 7,711,517 9,767,407
========= ========= ========= ========= =========
Weighted average number of shares outstanding --
Diluted(b)......................................... 7,588,952 7,588,952 7,590,295 7,711,517 9,816,819
========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
EBITDA(c).......................................... $ 5,124 $ 6,264 $ 7,530 $ 14,432 $ 25,145
</TABLE>

37
<PAGE> 39

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
Number of Existing Resorts at period end........... 7 7 7 7 10
Number of Vacation Intervals sold (excluding
upgrades)(d)..................................... 2,386 3,423 4,464 5,634 6,592
Number of upgraded Vacation Intervals sold......... 1,378 1,290 1,921 1,914 3,908
Number of Vacation Intervals in inventory.......... 5,615 5,943 6,580 6,746 10,931
Average price of Vacation Intervals sold (excluding
upgrades)(d)(e).................................. $ 5,599 $ 5,821 $ 5,965 $ 6,751 $ 7,854
Average price of upgraded Vacation Intervals sold
(net of exchanged interval)...................... $ 3,822 $ 3,585 $ 3,885 $ 4,113 $ 4,326
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents........................... $ 197 $ 929 $ 3,712 $ 973 $ 4,970
Amounts due from affiliates......................... 2,391 4,559 4,342 6,237 1,389
Total assets........................................ 25,301 39,463 62,687 90,852 156,401
Amounts due to affiliates........................... 8,704 14,613 14,263 14,765 --
Notes payable and capital lease obligations......... 2,741 6,061 23,363 41,986 48,871
Total liabilities................................... 18,063 29,347 46,999 70,190 72,636
Shareholders' equity................................ 7,238 10,116 15,688 20,662 83,765
</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 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:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Income from continuing operations........... $1,845 $2,355 $1,546 $ 5,269 $11,960
Interest expense............................ 1,426 1,642 3,609 4,759 4,664
Income tax expense.......................... 1,376 1,677 1,512 3,140 7,024
Depreciation and amortization............... 477 590 863 1,264 1,497
------ ------ ------ ------- -------
EBITDA from continuing operations........... $5,124 $6,264 $7,530 $14,432 $25,145
====== ====== ====== ======= =======
</TABLE>

(d) The Vacation Intervals sold during the year ended December 31, 1997 include
1,517 biennial intervals (counted as 759 annual Vacation Intervals). The
Company did not begin selling biennial intervals until January 1997.

(e) Includes annual and biennial Vacation Interval sales for one and two
bedroom units.

38
<PAGE> 40

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 and Operating Information", "Unaudited Pro
Forma Condensed Consolidated Financial Information", and notes thereto and the
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus.

OVERVIEW

Silverleaf Resorts, Inc. was formed in 1989 to acquire seven of 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, including upgraded intervals. Additional revenues are
generated from management fees from the Master Club, lease income from Sampler
sales, 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; however,
if the Company does not receive 15% of the Master Club's gross revenues, such
deficiency is deferred for payment in succeeding years, subject again to the net
income limitation. 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 all criteria are met except that construction is not
substantially complete, revenues are recognized on the percentage-of-completion
basis. Under this method, the portion of revenue applicable to costs incurred,
as compared to total estimated construction and direct selling costs, is
recognized in the period of sale. The remaining amount is deferred and
recognized as the remaining costs are incurred. If a customer fails to make the
first installment payment, the Company reverses the sale and normally retains
any payments received. During 1997, approximately 2% of the Company's customers
failed 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 uncollectible notes at the time revenue is recognized. During
1997 the Company began classifying the components of the previously reported
provision for uncollectible notes into the following three categories based on
the nature of the item -- credit losses, customer returns and customer releases
(customer releases represent voluntary cancellations of properly recorded sales
transactions which in the opinion of management are consistent with the
maintenance of overall customer goodwill). Provision pertaining to credit
losses, customer returns and customer releases are classified in provision for
uncollectible notes, Vacation Interval sales, and operating, general and
administrative, respectively. The Company has reclassified these amounts within
the previously reported financial statements to conform to the classification
for the year ended December 31, 1997. This reclassification has no balance sheet
effect and has no effect on previously reported net income. See Note 2 of Notes
to Consolidated Financial Statements. The Company sets the provision for
uncollectible notes 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 restored to inventory, which is the lower of the
historical cost basis or market value of the Vacation Interval.

39
<PAGE> 41

Costs associated with the acquisition and development of 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 ongoing 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 and acquired through the
Company's program to reacquire Vacation Intervals owned but not actively used by
Silverleaf Owners 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 inventory in prior years.
Accordingly, cost of goods sold has increased and will continue to increase as
sales of new inventory increase.

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 probable.

The Company estimates that it will incur expenses of approximately $250,000
in 1998 and 1999 to make its computer systems "year 2000" compliant. See "Risk
Factors -- Year 2000 Compliance".

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
As a percentage of Total Revenues:
Vacation Interval sales................................... 77.4% 79.3% 80.7%
Interest income........................................... 9.9 11.5 11.1
Management fee income..................................... 5.6 3.8 2.7
Lease income.............................................. 3.0 3.0 1.7
Other income.............................................. 4.1 2.4 3.8
----- ----- -----
Total Revenues.................................... 100.0% 100.0% 100.0%
As a percentage of gross Vacation Interval sales:
Provision for uncollectible notes......................... 19.5% 19.0% 15.3%
Cost of Vacation Interval sales........................... 9.6 6.1 9.6
Sales and marketing....................................... 52.4 47.6 44.5
As a percentage of Interest Income:
Interest expense.......................................... 82.8% 71.3% 49.6%
As a percentage of Total Revenues:
Operating, general and administrative..................... 19.9% 17.5% 14.4%
Depreciation and amortization............................. 2.0 2.2 1.8
Total costs and operating expenses........................ 93.1 85.5 77.7
</TABLE>

1997 VERSUS 1996. Revenues in 1997 were $85.1 million, representing a $27.1
million or 46.8% increase over revenues of $57.9 million for the year ended
December 31, 1996. The increase was primarily due to a $22.8 million increase in
sales of Vacation Intervals, a $2.7 million increase in interest income, and a
$1.8 million increase in other income. The strong increase in Vacation Interval
revenues resulted from sales of more Vacation Intervals at a higher average
price, driven by increased telemarketing capacity, increased sales force,
enhanced lead generation methods, and improved techniques of marketing upgraded
Vacation Intervals.

40
<PAGE> 42

In 1997, the number of Vacation Intervals sold, exclusive of upgraded
Vacation Intervals, increased 17% to 6,592 from 5,634 in 1996; the average price
per interval increased 16.3% to $7,854 from $6,751. Total interval sales for
1997 included 1,517 biennial intervals (counted as 759 Vacation Intervals)
compared to none in 1996. The increase in average price per interval resulted
from the Company's increased sales of higher priced, high-season intervals and
biennial intervals (whose sales price is more than 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.

Interest income increased 40.8% to $9.4 million for the year ended December
31, 1997 from $6.7 million for the same period of 1996. This increase resulted
from a $36.2 million increase in notes receivable, net of allowance for
uncollectible notes, due to increased sales.

Management fee income increased 6.6% to $2.3 million for 1997 from $2.2
million for 1996. The increase in management fee income was primarily the result
of greater Master Club net income due to higher dues income from an increased
membership base.

Lease income, which relates to the Company's Sampler program, decreased to
$1.4 million for 1997 compared to $1.7 million for 1996. The decrease resulted
from the Company's marketing of biennial intervals as an alternative to the
Sampler program.

Other income increased 124.6% to $3.2 million for the year ended December
31, 1997 from $1.4 million for the year ended December 31, 1996. This increase
was due primarily to usage fees from the Company's newly remodeled golf course
at Holiday Hills and higher water and sewer income due to the addition of two
new utility operations. Additionally, the Company recovered $219,000 from a
lawsuit.

Cost of sales as a percentage of gross Vacation Interval sales increased to
9.6% in 1997 from 6.1% in 1996. Cost of sales for 1996 was lower primarily as a
result of the sale of low cost inventory acquired by the Company in 1995 and
1996 through its program to reacquire Vacation Intervals owned but not actively
used by Silverleaf owners. The number of intervals acquired from Silverleaf
owners in 1997 was 559 as compared to approximately 1,700 in 1996. Additionally,
the Company continues to deplete its inventory of low cost intervals. As a
result of these factors and the Company's construction program to build new
inventory, the cost of sales percentage has increased and will continue to
increase.

Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 44.5% for the year ended December 31, 1997 from 47.6% for the same
period of 1996. This decline is due mainly to efficiencies in the telemarketing
and sales functions and economies of scale and increased sales of upgraded
intervals.

The provision for uncollectible notes as a percentage of Vacation Interval
sales decreased to 15.3% for 1997 from 19.0% for 1996, reflecting an increased
focus on collection efforts for notes receivable. The improvement can also be
attributed to an increase in receivables relating to upgrade sales which
typically represent better performing accounts, resulting in fewer
delinquencies.

Operating, general and administrative expenses as a percentage of total
revenues declined to 14.4% during 1997 from 17.5% in 1996. The decrease was due
to efficiencies realized from higher sales volume. Overall, operating, general
and administrative expenses increased $2.1 million in 1997 as compared to the
prior year, primarily due to an increase in corporate salaries and additional
costs incurred as a public company.

In 1997, depreciation and amortization expense as a percentage of total
revenue declined to 1.8% from 2.2% in 1996. Overall, depreciation and
amortization expense increased $233,000 from 1996, primarily due to investments
in a new automated dialer, telephone system, and central marketing facility.

Interest expense as a percentage of interest income decreased to 49.6% for
the year ended December 31, 1997 from 71.3% for the same period of 1996. This
decrease was due to lower borrowing costs during the second half of 1997, mostly
as a result of payment of indebtedness with proceeds of the IPO in June 1997.

41
<PAGE> 43

Income from continuing operations before income taxes increased 125.8% to
$19.0 million for the year ended December 31, 1997 from $8.4 million for the
year ended December 31, 1996 as a result of the above mentioned operating
results.

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.

1996 VERSUS 1995. Revenues in 1996 were $57.9 million, representing a $13.8
million or 31.4% increase over revenues of $44.1 million in 1995. The increase
was primarily due to a $11.8 million increase in 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 26.2% to 5,634 from 4,464 in 1995 and the
average price per unit increased 13.2% to $6,751 from $5,965. 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 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".

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 11.7% to $2.2 million in 1996 from $2.5
million in 1995. 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.

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. The
Company has generally been successful in converting such customers to purchasers
of Vacation Intervals.

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
6.1% in 1996 from 9.6% 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 1,700 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 1,700 intervals acquired in 1996
represented approximately 5.5% of all intervals owned by Silverleaf Owners at
December 31, 1996.

Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 47.6% in 1996 from 52.4% in 1995. This decline is due primarily to
the efficiencies resulting from the Company's telemarketing and sales force
areas and economies of scale.

The provision for uncollectible notes as a percentage of Vacation Interval
sales remained relatively unchanged at 19.0% in 1996 versus 19.5% in 1995.

Operating, general and administrative expenses as a percentage of total
revenues declined to 17.5% in 1996 from 19.9% in 1995 due to realization of
economies of scale and elimination of non-recurring expenses incurred in 1995.

Depreciation and amortization expense as a percentage of total revenue
increased to 2.2% in 1996 from 2.0% in 1995 primarily due to an increase in
property, plant and equipment in 1996.

42
<PAGE> 44

\ 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.

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 of certain losses of CBI for financial statement purposes which were
not deductible by the Company in 1995 for income tax purposes. 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 included it in the consolidated income tax return of the
Company.

LIQUIDITY AND CAPITAL RESOURCES

THE EQUITY OFFERING AND THE NOTE OFFERING. After consummation of the Equity
Offering and the Note Offering and the repayment of indebtedness with the
proceeds therefrom, the Company estimates that it will have approximately $54.3
million in cash and equivalents and $130.0 million of borrowing capacity
available under its revolving credit facilities. If the Note Offering is not
consummated, at the close of the Equity Offering the Company estimates its
indebtedness will be approximately $22.5 million, and it will have substantial
available borrowing capacity under its revolving credit facilities. See
"Business -- Description of Certain Indebtedness".

SOURCES OF CASH. The Company generates cash primarily from the sale of
Vacation Intervals, the financing of customer notes receivables from Silverleaf
Owners, management fees, Sampler sales, and resort and utility operations.
During the years ended December 31, 1995 and 1996, net cash provided by
operating activities was $3.7 million and $6.4 million, respectively. During the
year ended December 31, 1997, the Company's operating activities reflected a use
of cash of $3.4 million, reflecting a one-time cash use of approximately $6.2
million for the repayment of accrued but previously unpaid interest payable to
affiliates in connection with the IPO. The Company typically receives a 10% down
payment on sales of Vacation Intervals and finances the remainder by receipt of
a seven year customer promissory note. The Company generates cash from the
financing of customer notes receivable (i) by borrowing at an advance rate of
70% of eligible customer notes receivable and (ii) from the spread between
interest received on customer notes receivable and interest paid on related
borrowings. Because the Company uses significant amounts of cash in the
development and marketing of Vacation Intervals, but collects cash on customer
notes receivable over a seven year period, borrowing against receivables has
historically been a necessary part of normal operations. See "Risk
Factors -- Financing Customer Borrowings" and "Risk Factors -- Borrower
Defaults".

Net cash provided by financing activities for the years ended December 31,
1995, 1996 and 1997 was $18.7 million, $14.9 million and $46.9 million,
respectively. During 1997, compared to 1996, the $32.0 million increase in cash
flow provided by financing activities was due to net proceeds from the IPO of
$51.1 million and increased borrowings, substantially offset by repayment of
$45.7 million of debt from the IPO proceeds. The Company's revolving credit
facilities provide for loans of up to $130.0 million. At December 31, 1997,
approximately $44.4 million of principal and interest related to advances under
the credit facilities was outstanding. Of this amount, $0, $1.5 million, $4.1
million, $0, $12.6 million, and $26.2 million, matures in 1998, 1999, 2000,
2001, 2002, and subsequent years, respectively. For the year ended December 31,
1997, the weighted average cost of funds for these borrowings was 10.1%.
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". The Company intends to pay
substantially all of its indebtedness under its credit facilities with the
proceeds of the Equity Offering and the Note Offering. However, the Company
intends to maintain the facilities and expects to utilize them to finance its
operations after the Equity Offering and the Note Offering. See
"Business -- Description of Certain Indebtedness", Note 7 of Notes to
Consolidated Financial Statements, "Capitalization", and "Use of Proceeds".

43
<PAGE> 45

For regular federal income tax purposes, the Company reports substantially
all of the Vacation Interval sales it finances under the installment method.
Under this method, income on sales of Vacation Intervals is not recognized until
cash is received, either in the form of a down payment, or as installment
payments on customer notes receivable. 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 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. 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 the future regular tax liability attributable to Vacation Interval
sales, and creates a deferred tax asset. In February 1998, the Internal Revenue
Service proposed an AMT accounting adjustment effective as of January 1, 1997.
The Company plans to file a request with the Internal Revenue Service to make
the proposed ruling effective January 1, 1998, but the Internal Revenue Service
may refuse to change the effective date of the ruling. If the Internal Revenue
Service refuses to change the effective date, estimated taxes of $1.5 million,
which are included as current liabilities on the Company's December 31, 1997
balance sheet, plus interest and any applicable penalties, will be payable in
1998, and the Company's alternative minimum taxable income for 1998 through 2000
will be increased each year by an estimated amount of approximately $9.6 million
per year for the pre-1997 adjustment, which will result in the Company paying
substantial additional federal and state taxes in those years. If the Internal
Revenue Service agrees to change the effective date, then the preceding effects
of the accounting method change will be delayed by one year. 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 loss carryforwards, which also may be used to offset installment
sales income, expire beginning in 2007 through 2012. Realization of the deferred
tax asset 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.

USES OF CASH. Investing activities typically reflect a net use of cash
because of loans to customers in connection with the Company's Vacation Interval
sales, capital additions, and property acquisitions. Net cash used in investing
activities for the years ended December 31, 1995, 1996 and 1997 was $19.6
million, $24.0 million and $39.5 million, respectively. Cash used in investing
activities increased significantly in each period primarily due to significant
increases in customer notes receivable and the acquisition of the Fox River,
Timber Creek, and Oak N' Spruce resorts and the Las Vegas and Galveston sites.
The Company acquired the Fox River and Timber Creek resorts in August 1997 for
$2.9 million, the site in Las Vegas, Nevada in November 1997 for $2.7 million,
one tract of the Galveston property in December 1997 for $485,000, and the Oak
N' Spruce Resort in Massachusetts in December 1997 for $5.1 million. Operating
and investing activities also use cash because the Company requires funds to
construct infrastructure, amenities, and additional units at the Existing
Resorts and New Resorts, to acquire property for future resort development, and
to support current operations.

The Company has budgeted $13.1 million and $3.1 million for 1998 and 1999,
respectively, for the development of additional roads, utilities and amenities
at the Existing Resorts and New Resorts. To construct new units at the Existing
Resorts and the New Resorts, $39.6 million and $36.3 million is budgeted for
1998 and 1999, respectively. Additionally, the Company may purchase management
rights to eight resorts for $3.8 million, a golf course and land for $3.5
million, and other land for $1.6 million. See "Business -- Recent Developments".
Furthermore, the Company is actively seeking sites for additional new resorts or
acquisitions.

The foregoing capital expenditures, development costs, and acquisitions
will be financed through a combination of the proceeds of the Equity Offering
and the Note Offering, cash flow from operations, and proceeds from anticipated
borrowings under existing or future credit facilities. See "Business -- Growth
Strategy" and "-- Description of Certain Indebtedness", and "Use of Proceeds".

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
44
<PAGE> 46

Company's timeshare operations. Consequently, CBI ceased all development
operations and adopted a plan of dissolution effective December 31, 1996, to
sell its remaining full ownership condominiums by December 31, 1997.
Accordingly, the condominium development and sales operation of CBI is treated
as a discontinued operation for financial reporting purposes. The income (loss),
net of income taxes, from the discontinued operations was ($1.5) million,
($295,000), and $0 for the years ended December 31, 1995, 1996, and 1997,
respectively. Anticipated future costs of carrying and selling the remaining
inventory of CBI were accrued as of December 31, 1996, in the amount of
$201,000. Based on the formal plan adopted by the Company, substantially all
assets were sold and liabilities repaid by December 31, 1997 and no additional
accrual for the loss was reserved.

Giving effect to the Equity Offering and the application of the proceeds
therefrom, the Company believes the available borrowing capacity under its
credit facilities, together with cash generated by operations, will be
sufficient to fund operations in the ordinary course of business for at least
the next 12 months. With the additional net proceeds from the Note Offering, the
Company believes it will have sufficient cash to fund operations in the ordinary
course of business through December 1998, without drawing upon its existing
credit facilities. If the Equity Offering and the Note Offering are consummated,
the Company will have $130.0 million of borrowing capacity under such credit
facilities, which will offer the Company the additional flexibility to acquire
new timeshare resorts which are currently in operation, land upon which new
timeshare resorts may be constructed, or other companies which operate
resort-type properties. The Company does not have sufficient capital to fully
implement its master plan for the total development of the Existing Resorts and
New Resorts. See "Risk Factors -- Development, Construction and Property
Acquisition Activities". To completely finance such master plan development and
fund additional acquisitions, the Company will likely be required to raise
additional capital through additional credit facilities, debt offerings,
additional public offerings of its Common Stock, 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. Any failure to renew existing credit
facilities, obtain adequate financing under new facilities, or raise capital
through other debt or equity offerings, 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, develop the
New Resorts, and expand the Existing Resorts. See "Risk Factors -- Leverage".

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 notes
receivable.

45
<PAGE> 47

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.

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)

46
<PAGE> 48

NUMBER OF VACATION INTERVAL OWNERS
(IN MILLIONS)

UNITED STATES MARKET

In 1996, 218,000 intervals in U.S. properties were sold at an average price
of $10,000 per interval, resulting in total sales volume of $2.2 billion. By
comparison, total sales volume in 1992 was $1.3 billion. A total of 1,767,000
households owned intervals in U.S. timeshare properties at January 1, 1997.

REASONS FOR GROWTH

The following factors have contributed to increased acceptance of the
timeshare concept among the general public and the substantial growth of the
timeshare industry over the past 15 years:

- higher quality accommodations and services;

- involvement of well-recognized hotel companies in the industry;

- improved availability of financing for purchasers of Vacation Intervals;

- increased flexibility of timeshare use;

- increased regulation of the timeshare industry; and

- improved overall image of the timeshare industry.

Despite the growth in the timeshare industry, Vacation Interval ownership
had achieved only an approximate 1.77% market penetration of all U.S. households
at January 1, 1997 (based on a U.S. Census Bureau estimate of U.S. households in
1995).

The timeshare industry is highly fragmented, engaged in by a large number
of local and regional resort developers and operators. However, there is a trend
towards consolidation of timeshare properties among fewer owners. 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.

47
<PAGE> 49

THE CONSUMER

The median age of a Vacation Interval owner in the United States who
purchased an interval in 1995 or 1996 was 48 years. The following table shows
the estimated household incomes of (i) all timeshare owners in the United
States, (ii) U.S. timeshare owners who purchased an interval during the period
from October 1996 through February 1997, and (iii) all timeshare owners in the
Central Region of the United States (which consists of 20 states including
Illinois, Missouri, and Texas):

<TABLE>
<CAPTION>
UNITED '96/'97 CENTRAL
STATES BUYERS REGION
------- ------- -------
<S> <C> <C> <C>
HOUSEHOLD INCOME BEFORE TAXES
Under $30,000......................................... 3.7% 2.3% 4.6%
$30,000 to $39,999.................................... 6.9% 6.3% 7.5%
$40,000 to $49,999.................................... 12.2% 13.3% 12.5%
$50,000 to $59,999.................................... 14.3% 16.3% 15.1%
$60,000 to $74,999.................................... 18.0% 15.7% 18.6%
$75,000 to $99,999.................................... 21.2% 22.7% 25.3%
$100,000 to $124,999.................................. 12.1% 13.1% 6.2%
$125,000 to $149,999.................................. 4.2% 2.0% 4.6%
$150,000 or more...................................... 7.4% 8.4% 5.5%
Approximate Median.................................... $71,000 $71,000 $68,000
</TABLE>

The U.S. Census Bureau has estimated that 29.9% of all U.S. households in
1996 had a household income between $25,000 and $50,000, which represents
approximately one-half of the Company's customer base. The U.S. Census Bureau
figures represent household incomes throughout the United States, whereas the
Company's target customers currently live primarily in Texas, Missouri,
Illinois, Massachusetts, New York, and Connecticut; 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 7% of
the Company's customers who purchased a Vacation Interval in 1997, approximately
18% of such customers had an annual income less than $25,000, approximately 49%
of such customers had an income of $25,000 to $50,000, and approximately 33% of
such customers had an annual income greater than $50,000.

48
<PAGE> 50

BUSINESS

OVERVIEW

Silverleaf is a leading developer, marketer, and operator of "drive-to"
timeshare resorts. Silverleaf currently owns and operates eight Drive-to Resorts
in Texas, Missouri, Illinois and Massachusetts. Silverleaf also owns two
Destination Resorts in Missouri, and has recently acquired sites in Las Vegas,
Nevada and Galveston, Texas, for development as two new destination resorts (the
"New Resorts"). The Drive-to Resorts are designed to appeal to value conscious
vacationers seeking comfortable and affordable accommodations in locations
convenient to their residences and are located proximate to major metropolitan
areas (currently Dallas-Ft. Worth, Houston, San Antonio-Austin, St. Louis,
Chicago, Boston and the greater New York City area). Silverleaf locates its
Drive-to Resorts near principal market areas to facilitate more frequent "short
stay" getaways, which the it believes is a growing vacation trend. Silverleaf's
Destination Resorts, which are located in the popular resort area of Branson,
Missouri, offer Silverleaf customers the opportunity to upgrade into a higher
quality 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 New Resorts are in popular destination resort areas which are
accessible to Silverleaf's customers and complement Silverleaf's strategy of
offering its existing customers attractive upgrade opportunities. Silverleaf
believes its resorts offer its customers an economical alternative to commercial
vacation lodging. The average price for a Vacation Interval for a two-bedroom
unit at the Existing Resorts was $7,834 for 1997 and $6,922 for 1996, which
compares favorably to an industry average price of $10,790 for 1996.

OPERATIONS

Silverleaf's operations presently include (i) acquiring and 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
development and expansion of the Existing Resorts and New 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
continues to make significant investments 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 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.

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
eligible customer receivables. At December 31, 1997, the Company had a portfolio
of approximately 21,320 customer promissory notes totalling approximately $104.4
million with an average yield of 14.5% per annum, which compares favorably to
the Company's weighted average cost of borrowings of 10.1% per annum. At
December 31, 1997, approximately $4.0 million in principal, or 3.9% of the
Company's loans to Silverleaf Owners, were 61 to 120 days past due,
49
<PAGE> 51

and approximately $10.4 million in principal, or 9.9% 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 1997 and 1996,
the Company's provision for uncollectible notes exceeded actual loan chargeoffs
by $2.9 and $1.6 million, 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, in
turn, 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. The new Galveston resort will have its own Club which will
contract with the Master Club's centralized organization structure; however, the
New Resort in Las Vegas will be operated independently of the Master Club. See
"-- Clubs/Master Club".

RECENT DEVELOPMENTS

In June 1997, Silverleaf completed the IPO of 3,600,000 primary shares of
its Common Stock. Since the IPO, Silverleaf has taken actions which it believes
will enhance its growth and competitive position within the U.S. timeshare
industry. These actions are summarized below and discussed elsewhere in this
Prospectus.

- DEVELOPMENT OF FOX RIVER PROPERTY. In August 1997, Silverleaf purchased
the Fox River Resort for $1.7 million for development as a Drive-to
Resort. Fox River is located approximately 70 miles southwest of Chicago.
Silverleaf intends to develop approximately 492 units (25,584 Vacation
Intervals) on this property, and has begun construction of 36 units to be
completed in May 1998. Sales of Vacation Intervals at Fox River began in
November 1997.

- ACQUISITION OF OAK N' SPRUCE RESORT. In December 1997, Silverleaf
acquired the Oak N' Spruce Resort, an existing hotel/timeshare resort, in
the Berkshire Mountains of western Massachusetts for $5.1 million as a
new Drive-to Resort to serve Boston and the greater New York City market.
The Oak N' Spruce Resort presently has 132 existing units and 1,629
unsold Vacation Intervals. Silverleaf intends to develop approximately
420 new units (21,840 Vacation Intervals) at this resort. Silverleaf's
sales of Vacation Intervals at Oak N' Spruce began in January 1998.

- INCREASED SALES OF VACATION INTERVALS AT EXISTING RESORTS. In addition to
the acquisitions described above, Silverleaf has also worked since the
IPO to improve internal sales growth at the Existing Resorts. During
1997, Silverleaf sold 6,592 Vacation Intervals (excluding upgrades),
compared to 5,634 and 4,464 during 1996 and 1995, respectively. Total
revenues increased to $85.1 million in 1997 from $57.9 million and $44.1
million in 1996 and 1995, respectively.

50
<PAGE> 52

- ADDITIONS TO MANAGEMENT TEAM. Silverleaf formed a new acquisition
subsidiary, Silverleaf Resort Acquisitions, Inc., and hired Thomas G.
Franks to lead the new subsidiary. Mr. Franks is a former President of
ARDA, the primary trade association for the timeshare industry, and has
more than 15 years of experience in the timeshare industry. Silverleaf
has also added marketing and operational personnel to its management
team.

- PROPOSED ACQUISITION OF MANAGEMENT RIGHTS. In January 1998, the Company
entered into an agreement with Crown to acquire management rights to
eight timeshare resorts in Alabama, Mississippi, North Carolina,
Pennsylvania, South Carolina, Tennessee, and Texas for $3.8 million. At
December 31, 1997, the eight resorts had approximately 21,500 timeshare
owners. As part of this agreement, Silverleaf will also receive
approximately 1,800 unsold Vacation Intervals and certain equipment at
the eight resorts. This proposed acquisition is subject to completion of
customary due diligence investigations and there is no assurance that it
will be consummated. See "-- Possible Acquisition of Management Rights to
Crown Resorts".

- PROPOSED PURCHASE OF ATLANTA AND KANSAS CITY SITES. In February 1998,
Silverleaf entered into two agreements, one to acquire a 220 acre
property, including a 160-acre golf course, 72 miles north of Atlanta,
Georgia for $3.5 million, and another to acquire 260 acres of undeveloped
land near Kansas City, Missouri for $1.6 million. If acquired, each
property will be developed as a Drive-to Resort. Each contract may be
cancelled by Silverleaf if it is not satisfied with each property after
conducting its due diligence investigation. Accordingly, there is no
assurance that either of these contracts will be closed.

GROWTH STRATEGY

Silverleaf intends to grow through the following strategies:

51
<PAGE> 53

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.
Intervals exchanged for upgraded intervals are added back to inventory at
historical cost, for resale at the current offering price. Sales of upgrades
increased to $16.9 million in 1997, from $7.9 million in 1996 (upgrade sales
represented 24.6% of Silverleaf's Vacation Interval sales in 1997 as compared to
17.1% for 1996). Silverleaf incurs additional sales commissions upon the resale
of Vacation Intervals reconveyed to Silverleaf 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.

DEVELOPMENT OF ADDITIONAL RESORTS AND ACQUISITIONS. In 1997, Silverleaf
purchased four sites for development as Drive-to and Destination Resorts and
acquired an existing timeshare resort which it markets as a Drive-to Resort.
Additionally, in 1998, Silverleaf entered into agreements to acquire property
with a golf course in Atlanta, undeveloped land near Kansas City, and management
rights to eight Crown resorts. Silverleaf continues to seek new properties for
Drive-to Resorts in scenic wooded areas on lakes or waterways that are near
major metropolitan areas that have favorable demographic characteristics. For
Destination Resorts, Silverleaf seeks popular destination resort areas that are
easily accessible to Silverleaf Owners. Silverleaf is currently exploring a
number of other property acquisition opportunities, and intends to continue
acquiring and/or developing additional resorts.

COMPETITIVE ADVANTAGES

Silverleaf believes the following characteristics afford it certain
competitive advantages:

LOWER MARKETING, SALES, AND ADMINISTRATIVE COSTS. With resorts and on-site
sales offices within a two-hour drive of its targeted customers, Silverleaf 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. Silverleaf has also reduced
marketing, operating, and administrative costs through centralization and
automation of many functions. While marketing and sales costs as a percentage of
sales will increase for recently acquired new resorts, the Company believes that
these costs will, over time, return to historical levels.

52
<PAGE> 54

EXPERIENCED MANAGEMENT. The Company's senior management has extensive
experience in the acquisition, development, and operation of timeshare resorts.
Robert E. Mead, Chairman of the Board and Chief Executive Officer, has more than
18 years of experience in the timeshare industry and since 1995 has served as a
director of ARDA, the primary trade association for the timeshare industry. The
Company's senior officers have an average of ten years of experience in the
timeshare industry.

RESORTS SUMMARY

The following tables set forth certain information regarding each of the
Existing Resorts and New Resorts at December 31, 1997, unless otherwise
indicated.

EXISTING RESORTS

<TABLE>
<CAPTION>
VACATION
VACATION INTERVALS INTERVALS
UNITS AT RESORTS AT RESORTS SOLD(A)
------------------------ ------------------------ ---------
PRIMARY INVENTORY INVENTORY DATE IN
MARKET AT PLANNED AT PLANNED SALES THROUGH 1997
RESORT/LOCATION SERVED 12/31/97 EXPANSION(B) 12/31/97 EXPANSION COMMENCED 12/31/97 ONLY
--------------- ------------- --------- ------------ --------- ------------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DRIVE-TO RESORTS
Holly Lake Dallas- 130 108 1,129 5,400(d) 1982 5,371 539
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 240 352 2,440 18,304(e) 1980 10,040 1,679
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 64 16 412 800(d) 1987 2,788 332
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 132 268 2,516 13,936(e) 1988 4,348 1,359
Conroe, TX
Hill Country Austin-San 153(g) 254 1,887 12,700(d) 1984 5,763 1,391
Canyon Lake, TX Antonio, TX
Timber Creek St. Louis, -- 600(h) -- 31,200(e)(h) 1997 32 32
DeSoto, MO MO
Fox River Chicago, IL -- 492(h) -- 25,584(e)(h) 1997 49 49
Sheridan, IL
Oak N' Spruce Boston, MA 132 420 1,629 21,840(e)(h) 1998 -- --
South Lee, MA New York,
NY(i)
DESTINATION RESORTS
Ozark Mountain Branson, 124 78 783 4,056(e) 1982 5,441 994
Kimberling City, MO MO
Holiday Hills Branson, 24 202 135 10,100(d) 1984 1,065 217
Branson, MO MO
--- ----- ------ ------- ------ -----
Total 999 2,790 10,931 143,920 34,897 6,592
=== ===== ====== ======= ====== =====

AVERAGE
SALES
PRICE AMENITIES/
RESORT/LOCATION IN 1997 ACTIVITIES(C)
--------------- ------- -------------
<S> <C> <C>
DRIVE-TO RESORTS
Holly Lake $7,062 B,F,G,H,
Hawkins, TX M,S,T
The Villages 7,640 B,F,H,
Flint, TX M,S,T
Lake O' The Woods 6,743 F,M,S,T(f)
Flint, TX
Piney Shores 8,518 B,F,H,
Conroe, TX M,S,T
Hill Country 8,552 B,M,S,T(f)
Canyon Lake, TX
Timber Creek 5,599 B,F,G,M,S,T
DeSoto, MO
Fox River 5,465 G,M,S,T
Sheridan, IL
Oak N' Spruce -- F,G,S,T
South Lee, MA

DESTINATION RESORTS
Ozark Mountain 7,282 B,F,H,
Kimberling City, MO M,S,T
Holiday Hills 8,046 G,M,S,T(f)
Branson, MO
------
Total $7,854
======
</TABLE>

NEW RESORTS

<TABLE>
<CAPTION>
EXISTING AND
PRIMARY DATE PLANNED PLANNED PLANNED
RESORT/LOCATION MARKET SERVED ACQUIRED UNITS(H) INTERVALS(H) AMENITIES/ACTIVITIES
--------------- ------------- -------- -------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Galveston, TX......................... Houston, TX 1997(j) 400(k) 20,800(e)(k) B,F,S,T
Las Vegas, NV......................... Las Vegas, NV 1997 157(l) 8,164(e)(l) S
----- ------
Total......................... 557 28,964
===== ======
</TABLE>

(See
notes commencing on following page)
53
<PAGE> 55

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

(a) These totals do not reflect sales of upgraded Vacation Intervals to
Silverleaf Owners. For the year ended December 31, 1997, upgrade sales at
the Existing Resorts were as follows:

(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 land-use permits, and
future land-planning and site layout considerations. The following chart
reflects the status of certain planned units at December 31, 1997:

<TABLE>
<CAPTION>
LAND-USE LAND-USE LAND-USE
PROCESS PROCESS PROCESS CURRENTLY IN SHELL
NOT STARTED PENDING COMPLETE CONSTRUCTION COMPLETE TOTAL
----------- -------- -------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Holly Lake................ 54 -- 50 -- 4 108
The Villages.............. 110 152 78 12 -- 352
Lake O' The Woods......... -- -- 16 -- -- 16
Piney Shores.............. 108 120 16 24 -- 268
Hill Country.............. 153 47 54 -- -- 254
Timber Creek.............. 576 -- -- 24 -- 600
Fox River................. 456 -- -- 36 -- 492
Oak N' Spruce............. 420 -- -- -- -- 420
Ozark Mountain............ 36 -- 30 -- 12 78
Holiday Hills............. 70 -- 94 24 14 202
----- --- --- --- --- -----
1,983 319 338 120 30 2,790
===== === === === === =====
</TABLE>

(d) These figures are based on 50 one-week intervals per unit.

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

54
<PAGE> 56

(f) Boating is available near the resort.

(g) Includes three units which have not been finished-out for accommodations
and which are currently used for other purposes.

(i) The Company has commenced the timeshare permit process in New York, but has
not yet received a permit. (The Company has a timeshare permit in
Massachusetts.)

(j) One portion of this tract was acquired in February 1998.

(l) The Company has commenced the timeshare permit application process, but has
not received a permit. The Company has not commenced the land use permit
process. See "Risk Factors -- Regulation of Marketing and Sales of Vacation
Intervals and Related Laws".

FEATURES COMMON TO EXISTING 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 the Existing 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 vacant units at
any of the Existing Resorts, except Oak N' Spruce, 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 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".

Silverleaf Owners who purchase a Vacation Interval at the existing units at
Oak N' Spruce are not entitled to use Silverleaf's Endless Escape program for
other resorts. Furthermore, only those Silverleaf Owners who purchase a Vacation
Interval at the existing units at Oak N' Spruce may use the Endless Escape
program at such Oak N' Spruce units.

The Company is planning to change the Endless Escape program for customers
who purchase a Vacation Interval after approximately June 1998. Customers who
purchase a Vacation Interval at a Drive-to Resort after such date will not be
able to use the Endless Escape program at the Company's Destination Resorts,
including the New Resorts in Galveston and Las Vegas. However, customers who are
or become Silverleaf Owners before such date will be able to use the Endless
Escape program at all Destination Resorts, except the Galveston and Las Vegas
resorts. Silverleaf Owners who purchase a Vacation Interval at any Destination
Resort after such date will be able to use the Endless Escape program at any of
Silverleaf's resorts, including the New Resorts at Galveston and Las Vegas.

YEAR-ROUND USE OF AMENITIES. Even when not using the lodging facilities,
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. The Company
executed approximately 884 intra-company exchanges in 1997. In addition, for an
additional annual fee of approximately $74, most Silverleaf

55
<PAGE> 57

Owners 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.

MASTER CLUB. Each of the Existing Resorts has a Club for the benefit of the
Silverleaf Owners. The Clubs have 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. See "-- Clubs/Master Club".

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.

The new Galveston resort is expected to have the features set forth above.
Due to Nevada timeshare laws, the proposed resort in Las Vegas will not be
managed by the Master Club. See "-- Clubs/Master Club".

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 December 31, 1997,
approximately 27 acres were developed and approximately 45 remaining acres are
currently planned by the Company to be used for future development.

At December 31, 1997, 130 units were completed, and an additional 108 units
are planned for development. 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; two
miniature golf courses; 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 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 December 31, 1997, the resort contained 6,500 Vacation Intervals, of
which 1,129 intervals remained available for sale. The Company plans to build an
additional 108 units, which would yield an additional 5,400 Vacation Intervals
available for sale. Vacation Intervals at the resort are currently priced from
$6,000 to $12,500 for one-week stays. During 1997, 539 Vacation Intervals were
sold. See "-- Resorts Summary" 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

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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 December 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.

At December 31, 1997, 240 units were completed at The Villages and 64 units
were completed at Lake O' The Woods. An additional 352 units and 16 units are
planned for development at The Villages and Lake O' The Woods, respectively.
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 December 31, 1997, the Villages contained 12,480 total Vacation
Intervals, of which 2,440 remained available for sale. The Company plans to
build 352 additional units at the Villages, which would yield an additional
18,304 Vacation Intervals available for sale. At December 31, 1997, Lake O' The
Woods contained 3,200 total Vacation Intervals, of which 412 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 1997, 1,679 Vacation Intervals were sold at The Villages and 332 Vacation
Intervals were sold at Lake O' The Woods. See "-- Resorts Summary" 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, approximately 40
miles north of Houston, Texas. At December 31, 1997, the resort contained
approximately 116 acres, of which approximately 73 acres are planned by the
Company for future development.

At December 31, 1997, 132 units were completed, and an additional 268 units
are planned for development. All units are two bedroom, two bath units and will
comfortably accommodate up to six people. Amenities include a living room with
sleeper, full kitchen, whirlpool tub, color television, and interior ceiling
fans. The Company has 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.

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At December 31, 1997, the resort contained 6,864 Vacation Intervals, of
which 2,516 remained available for sale. The Company intends to build 268
additional units, which would yield an additional 13,936 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
intervals). During 1997, 1,359 Vacation Intervals were sold. See "-- Resorts
Summary" 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. At December 31,
1997, Hill Country Resort contained approximately 60 acres, of which
approximately 13 acres are currently planned by the Company to be used for
future development. In February 1998, the Company entered into an agreement to
acquire an additional 46 acres for $218,000. Silverleaf may cancel this
agreement if it is not satisfied with the property after its due diligence
investigation, and there is no assurance that this contract will be consummated.

At December 31, 1997, 153 units were completed, and an additional 254 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.
Twelve units feature the Company's 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 1998. 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 December 31, 1997, the resort contained 7,650 Vacation Intervals, of
which 1,887 remained available for sale. The Company plans to build 254
additional units, which collectively would yield 12,700 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). During 1997, 1,391 Vacation Intervals were
sold. See "-- Resorts Summary" 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. At December 31, 1997, the resort contained approximately 116 acres, of
which approximately 82 acres are currently planned by the Company to be used for
future development.

At December 31, 1997, 124 units were completed, and an additional 78
additional units are planned for development. 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,

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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 December 31, 1997, the resort contained 6,224 Vacation Intervals, of
which 783 remained available for sale. The Company plans to build 78 additional
units which would yield an additional 4,056 Vacation Intervals available for
sale. 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.
During 1997, 994 Vacation Intervals were sold. See "-- Resorts Summary" 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.
At December 31, 1997, the resort contained approximately 338 acres, of which
approximately 177 acres are currently planned by the Company to be used for
future development.

At December 31, 1997, 24 units were completed, and an additional 202 units
are planned for future development. 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. Amenities at the resort include
a newly renovated 18-hole golf course, pro shop, 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 December 31, 1997, the resort contained 1,200 Vacation Intervals, of
which 135 remained available for sale. The Company plans to build 202 additional
units, which would yield an additional 10,100 Vacation Intervals available for
sale. Vacation Intervals at the resort are currently priced from $8,000 to
$14,500 for one-week stays. During 1997, 217 Vacation Intervals were sold. See
"-- Resorts Summary" and "Risk Factors -- Development, Construction and Property
Acquisition Activities".

TIMBER CREEK RESORT. In August 1997, the Company acquired the Timber Creek
Resort in Desoto, Missouri. The resort is located approximately 50 miles south
of St. Louis. Prior to its acquisition by the Company, the Timber Creek Resort
was operated as a campground by a nationwide campground operator. At December
31, 1997, the resort contained approximately 308 acres, of which approximately
142 acres are currently planned by the Company to be used for future
development.

The Company plans to build 600 new units. The planned units will be two
bedroom, two bath units. Amenities within each new unit will include a living
room with sleeper sofa, full kitchen, whirlpool tub, and color television.
Certain units will include a fireplace, ceiling fans, imported ceramic tile,
oversized sliding glass doors, and rattan or pine furniture.

The primary recreational amenity available at the resort is a 40-acre
fishing lake. Other amenities include a clubhouse; outdoor pavilion; swimming
pool; two tennis courts; miniature golf course; shuffleboard/multi-use sports
court; and hook-ups for recreational vehicles. The Company plans to construct a
new par three executive golf course; clubhouse; stable and corral; lake
pavilion; and welcome station. Other planned improvements by the Company include
conversion of the existing sales and registration buildings and renovation of
the clubhouse and clubhouse pool. The Company is obligated to maintain and
provide campground facilities for members of the previous owner's campground
system.

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At December 31, 1997, construction had begun on 24 units which are expected
to be completed by May 1998. The Company plans to build 576 additional units
which collectively would yield 31,200 Vacation Intervals available for sale.
Vacation Intervals at the resort are currently priced from $6,000 to $12,500 for
one-week stays. Sales efforts commenced in October 1997, and 32 Vacation
Intervals were sold in the last quarter of 1997. See "-- Resorts Summary" and
"Risk Factors -- Development, Construction and Property Acquisition Activities".

FOX RIVER RESORT. In August 1997, the Company acquired the Fox River Resort
in Sheridan, Illinois. The resort is located approximately 70 miles southwest of
Chicago. Prior to its acquisition by the Company, the Fox River Resort was
operated as a campground by a nationwide campground operator . At December 31,
1997, the resort contained approximately 180 acres, of which approximately 87
acres are currently planned by the Company to be used for future development.

The Company plans to build 492 new units. All units will be two bedroom,
two bath units. Amenities within each unit will include a living room with
sleeper sofa, full kitchen, whirlpool tub, and color television. Certain units
will include a fireplace, ceiling fans, imported ceramic tile, oversized sliding
glass doors, and rattan or pine furniture.

Amenities available at the resort include a tennis court; sports court;
shuffleboard courts; outdoor pavilion; swimming pool; miniature golf course; and
hook-ups for recreational vehicles. The Company plans to construct a new par
three executive golf course; sales and registration buildings; clubhouse;
covered pool; playground; children's movie theater; stable and corral; and
welcome station. The Company also plans to offer winter recreational activities
at this resort, including ice-skating, snowmobiling, and cross-country skiing.
The Company is obligated to maintain and provide campground facilities for
members of the previous owner's campground system.

At December 31, 1997, construction had begun on 36 units which are expected
to be completed by May 1998. The Company plans to build 456 additional units
which collectively would yield 25,584 Vacation Intervals available for sale.
Vacation Intervals at the resort are currently priced from $6,000 to $12,500 for
one-week stays. Sales efforts commenced in November 1997, and 49 Vacation
Intervals were sold in the last quarter of 1997. See "-- Resorts Summary" and
"Risk Factors -- Development, Construction and Property Acquisition Activities".

OAK N' SPRUCE RESORT. In December 1997, the Company acquired the Oak N'
Spruce Resort in the Berkshire mountains of western Massachusetts. The resort is
located approximately 134 miles west of Boston and 114 miles north of New York
City. Oak N' Spruce is a mixed-use development which includes a hotel and
timeshare units. At December 31, 1997, the resort contained approximately 240
acres, of which approximately 120 acres are currently planned by the Company to
be used for future development.

At December 31, 1997, the resort had 132 units, and an additional 420 units
are planned for development. There are seven types of existing units: (i) studio
flat; (ii) one-bedroom flat; (iii) one-bedroom townhouse; (iv) two-bedroom flat;
(v) two-bedroom townhouse; (vi) two-bedroom, flex-time; and (vii) two-bedroom,
lockout. There is also a 55-room hotel at the resort which may be converted to
timeshare use. The hotel will initially be used primarily to provide
accommodations for potential timeshare customers who tour the resort. Amenities
within each new unit will include a living room with sleeper sofa, full kitchen,
whirlpool tub, and color television. Certain units will include a fireplace,
ceiling fans, imported ceramic tile, oversized sliding glass doors, and rattan
or pine furniture.

Amenities at the resort include a restaurant and lounge with banquet
facility; two indoor heated swimming pools with hot tubs; one outdoor
olympic-sized, spring fed pool with bar and snack bar; sauna; health club; nine-
hole golf course; ski rentals; shuffleboard, basketball and tennis courts;
horseshoe pits; hiking and ski trails; and activity areas for sledding and
badminton. The resort is also near Beartown State Forest.

At December 31, 1997, the resort contained 6,864 Vacation Intervals, of
which 1,629 remained available for sale. The Company plans to build 420
additional "lodge-style" units, which would yield an additional 21,840 Vacation
Intervals available for sale. Construction of units is slated to begin in the
second quarter of 1998, and sales efforts began in January 1998. Vacation
Intervals at the resort are currently priced from $6,000 to $12,500 for one-week
stays. Since the Oak N' Spruce Resort was acquired on December 31, 1997, the
Company

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did not sell any Vacation Intervals at this resort during 1997. See "-- Resorts
Summary" and "Risk Factors -- Development, Construction and Property Acquisition
Activities".

DESCRIPTION OF NEW RESORTS

LAS VEGAS RESORT. In November 1997, the Company acquired a two acre parcel
of land two blocks off the "strip" in Las Vegas, Nevada, for development as a
new Destination Resort.

The Company plans to build a five-story tower and a nine-story tower which
will include approximately 157 units, including 83 one-bedroom and 74
two-bedroom units. Construction of the units is slated to begin in June 1998.
This resort will feature the Company's larger President's View units which offer
1,210 square feet of floor space, front and back balconies, washer and dryer,
whirlpool tubs, living room with sleeper sofa, full kitchen, and color
television.

Amenities at the resort will include a restaurant and lounge on the top
floor. Other planned amenities include a swimming pool, health spa with sauna,
exercise facilities, children's theatre, and video arcade. The resort will also
feature a waterfall cascading down the front of one tower.

The Company plans to build 157 units which would yield 8,164 Vacation
Intervals for sale. The Company anticipates that sales efforts will begin in the
third quarter of 1998. Vacation Intervals at the resort will be priced from
$9,500 to $13,500 for one-week stays. See "-- Resorts Summary" and "Risk
Factors -- Development, Construction and Property Acquisition Activities".

GULF COAST RESORT. In December 1997 and February 1998, the Company acquired
over 83 acres of land, including beachfront, in Galveston, Texas. These tracts
are located approximately 50 miles south of Houston, Texas, and were acquired
for development as a new Destination Resort. Prior to its acquisition by the
Company, one tract was operated by a nationwide campground operator.

The Company plans to build 400 new units situated in three-story 12-plex
buildings, with construction of 12 units slated to begin in June 1998. All units
will be two bedroom, two bath units. Amenities within each unit will include two
large bedrooms, two bathrooms (one with a whirlpool tub), living room with
sleeper sofa, full kitchen, color television, and vaulted ceilings. This resort
will also include the Company's upscale President's View units which will
overlook the Gulf of Mexico and offer 1,210 square feet of floor space, front
and back screened verandas, washer and dryer, and a more elegant decor.

The primary amenity at the resort is the Gulf of Mexico. This site has 635
feet of beachfront. Other currently existing amenities include a lodge with
kitchen, sports court, and swimming pool. The Company is obligated to maintain
and provide campground facilities for members of the previous owner's campground
system.

The Company plans to build 400 units which would yield 20,800 Vacation
Intervals for sale. The Company anticipates that sales efforts will begin in the
third quarter of 1998. Vacation Intervals at the resort will be priced from
$8,000 to $14,500 for one-week stays. Silverleaf's land use plan at Galveston is
currently being challenged in court. A neighboring landowner has sued the city
of Galveston and its zoning board to set aside the Galveston planning
commission's approval of Silverleaf's land use plan. Silverleaf believes the
suit is without merit and has filed a petition to intervene in the litigation to
protect its interests. The Company does not believe that this suit will
materially affect its timetable for development of its New Resort at Galveston;
however, there can be no assurance that Silverleaf's land use plan will
withstand this challenge. Furthermore, this litigation may delay the development
of this property. See "-- Resorts Summary" and "Risk Factors -- Development,
Construction and Property Acquisition Activities".

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 on a low-cost basis.

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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.

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 of 4% 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 17.1% and 24.6%, respectively, of the Company's
gross revenues from Vacation Interval sales for 1996 and 1997. 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, 1997, the Company employed
more than 300 sales representatives at its Existing Resorts.

CUSTOMER FINANCING

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.
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The Company's credit experience is such that in 1997 it allocated 15.3% of
the purchase price of Vacation Intervals to its provision for uncollectible
notes. In addition, in 1997 the Company decreased sales by $2.8 million for
customer returns and increased operating, general and administrative expenses by
$1.2 million for customer releases. See Note 2 of Notes to Consolidated
Financial Statements. 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 generally 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, Illinois, Texas, and certain other states have laws which limit or hinder
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.

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, 1997, the Company had notes receivable (including notes
unrelated to Vacation Intervals) in the approximate principal amount of $107.5
million, was contingently liable with respect to approximately $7.4 million
principal amount of customer notes sold with recourse and had an allowance for
uncollectible notes of approximately $12.6 million and an allowance for future
customer returns of approximately $2.8 million. See Note 4 of Notes to
Consolidated Financial Statements.

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 Equity Offering and
the Note Offering to pay indebtedness under its existing revolving credit
facilities, it may borrow additional funds under such facilities in the future
to finance its operations. Under its existing revolving credit facilities, the
Company may borrow up to $115.0 million collateralized by customer promissory
notes and mortgages. At December 31, 1997, the Company had borrowings under such
revolving credit facilities in the approximate principal amount of $40.4
million. These facilities permit borrowings up to 70% of the principal amount of
performing notes, and payments from Silverleaf Owners on such notes are credited
directly to the lender and applied against the Company's loan balance. At
December 31, 1997, the Company had a portfolio of approximately 21,320 Vacation
Interval customer promissory notes in the approximate principal amount of $104.4
million, of which approximately $14.4 million in principal amount were 61 days
or more past due and therefore ineligible as collateral.

At December 31, 1997, the Company's portfolio of customer notes receivable
had an average yield of 14.5%. At such date, the Company's borrowings, which
bear interest at variable rates, had a weighted average cost of 10.1%. 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 existing indebtedness currently bears
interest at variable rates and the Company's customer notes receivable bear
interest at fixed rates, increases in interest rates would 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 has not engaged 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. If the Note Offering is
consummated, the Notes will bear interest at a fixed rate of interest for a ten
year period, which would lessen this risk initially.

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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, and customer notes had an average maturity of 5.5 years at December 31,
1997. The Company's revolving credit facilities mature between December 1999 and
October 2005, with up to $60.0 million of borrowings under such facilities
maturing in December 1999. Accordingly, there could be a mismatch between the
Company's cash receipts and the Company's cash disbursement obligations in
December 1999 and subsequent periods. 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 notes receivable, 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". However, if the Equity Offering is consummated, a substantial
portion of the Company's indebtedness under the credit facilities will be
repaid, which would lessen this risk initially.

DEVELOPMENT AND ACQUISITION PROCESS

The Company believes there is substantial opportunity to develop and
acquire resorts. As part of its current growth strategy, the Company intends to
develop and selectively acquire new resorts with characteristics similar to the
Existing Resorts and New Resorts. 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 large metropolitan areas that have favorable
demographic characteristics. For both Drive-to Resorts and Destination Resorts,
the Company generally seeks wooded rustic settings with amenities such as golf
courses or water frontage. For Destination Resorts, the Company seeks popular
destination resort areas that are easily accessible to Silverleaf Owners. The
Las Vegas, Nevada site was recently acquired in response to a survey in which
Silverleaf Owners expressed a strong interest in a "destination" resort in Las
Vegas. The Company also seeks locations offering an absence of competing
properties near the target location, 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. Purchase
contracts typically 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. 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.

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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, weather permitting. See "Risk Factors -- Development, Construction
and Property Acquisition Activities". A normal 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 a resort, the purchaser
automatically becomes a member of a homeowner's association ("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 1996 and 1997, approximately 396 and 228 foreclosures,
respectively, resulted from Silverleaf Owners' failure to pay monthly dues.

Each Existing Resort has a Club which 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. The
consolidation of resort operations through the Master Club permits: (i) a
centralized reservation system for all resorts; (ii) substantial cost savings by
purchasing goods and services for all 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 all 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.

At December 31, 1997, the Master Club had 398 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; however, if the Company does not receive 15% of the Master Club's gross
revenues, such deficiency is deferred for payment to succeeding year(s), subject
again to the net income limitation. 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 1998 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. At December 31, 1997, there were approximately 34,700
Silverleaf Owners who pay dues to the Master Club.

As the Company develops new resorts, their respective clubs are expected to
be added to the Master Club Agreement. However, the timeshare laws of some
states, including Nevada, prohibit the collective dues/expense

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arrangement used by the Master Club. Accordingly, the Club for the New Resort in
Las Vegas will not be managed by the Master Club and will be managed directly by
Silverleaf. Oak N' Spruce has two Clubs -- one for Silverleaf Owners who
purchase an interval in the new units to be constructed by Silverleaf, and
another Club for timeshare owners who purchase an interval in an existing Oak N'
Spruce unit. The latter Club, which had approximately 5,300 members at December
31, 1997, has no management agreement with the Master Club.

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
$595. For the years ended December 31, 1996 and 1997, the Company realized $1.7
million and $1.4 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, The Villages, Hill Country, Holly Lake, Ozark Mountain, Holiday Hills,
Timber Creek, and Fox River resorts. The Company also currently owns its own
waste-water treatment facilities at Piney Shores, Ozark Mountain, Holly Lake,
Timber Creek, and Fox River resorts. The Company recently transferred the
waste-water treatment facilities at the Holiday Hills Resort to a local public
utility district. The Company is in the process of applying for permits to build
expanded water supply and waste-water facilities at the Timber Creek and Fox
River resorts. The Company has permits to supply and charge third parties for
the water supply facilities at The Villages, Holly Lake, Holiday Hills, Ozark
Mountain, Hill Country, and Piney Shores resorts, and the waste-water facilities
at the Ozark Mountain, Holly Lake, Piney Shores, Hill Country, and Villages
resorts. The Company has applied for permits which would allow it to charge
third-parties for water supply and waste-water service at the Timber Creek
resort. The Company is currently building a waste-water facility at The Villages
which should be completed by mid-1998. TNRCC notified the Company that Holly
Lake's water supply facilities do not meet TNRCC rules regarding minimum water
storage capacity. To comply, the Company intends to build a new water supply
facility at Holly Lake, with construction slated to begin in the third quarter
of 1998. The Company also anticipates developing or augmenting utility service
capacity at the Timber Creek and Fox River resorts and the new resort in
Galveston.

OTHER PROPERTY. The Company owns an undeveloped five-acre tract of land in
Pass Christian, Mississippi, which has been listed with a broker for sale. The
Company had planned to develop this property as a Destination Resort. However,
in a recent survey, the Silverleaf Owners expressed a strong interest in a Texas
resort on the Gulf of Mexico. In response, the Company acquired the parcels in
Galveston, Texas, which will supplant development of the Pass Christian
property. At December 31, 1997, the Company also owned 18 lots at Holiday Hills
Resort and 404 lots at The Villages. At December 31, 1997, the Company also
owned eight 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 director of the Company 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. The Company will
receive fees from campground members at the Timber Creek, Fox River, and
Galveston resorts. The Company also receives revenues from room charges at the
hotel at the Oak N' Spruce Resort.

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POSSIBLE ACQUISITION OF MANAGEMENT RIGHTS TO CROWN RESORTS

In January 1998, the Company entered into an agreement with Crown to
acquire management rights to eight timeshare resorts in Alabama, Mississippi,
North Carolina, Pennsylvania, South Carolina, Tennessee, and Texas for $3.8
million. Under the agreement, the Company will receive all existing equipment
and furniture and fixtures in place for the management and operation of these
eight resorts which is not owned by the resort homeowners' associations. The
Company will also receive approximately 1,800 unsold Vacation Intervals. At
December 31, 1997, the eight resorts had approximately 21,500 Vacation Interval
owners. These resorts, if acquired, will not be operated under Silverleaf's name
and will not be managed by the Master Club, and their interval owners will not
participate in the Endless Escape program. Silverleaf would receive management
fees from the homeowners' associations of these eight resorts in exchange for
maintenance and cleaning of the units, management of the resorts' reservation
systems, and operation of a proposed Crown Resorts exchange program. This
acquisition would also provide an opportunity to market and sell Vacation
Intervals at the Existing Resorts and the New Resorts as upgrades to interval
owners of Crown Resorts. This acquisition is currently in the due diligence
stage, and there is no assurance that it will be consummated.

The eight Crown Resorts are described as follows:

- The Alpine Bay Resort is located in Talledega County, Alabama, near Lake
Logan Martin and is approximately 50 miles east of Birmingham. The resort
contains 54 units and includes a golf course, pro shop lounge, outdoor
pool and tennis courts. There are no remaining unsold Vacation Intervals
at this resort.

- The Hickory Hill Resort is located in Jackson County, Mississippi, near
the Pascagoula River and is approximately 20 miles east of Biloxi. The
resort contains 80 units and has a golf course, restaurant/lounge,
outdoor pool, clubhouse, fitness center, miniature golf course, tennis
courts, and playground. There are approximately 155 unsold Vacation
Intervals at this resort.

- The Lake Royale Resort is located in Franklin County, North Carolina, and
is approximately 50 miles east of Raleigh/Durham. The resort contains ten
units and has a golf course, pro shop lounge, outdoor pool, clubhouse,
miniature golf course, tennis courts, and playground. There are
approximately 14 unsold Vacation Intervals at this resort.

- The Beech Mountain Lake Resort is located in Butler Township, Luzerne
County, Pennsylvania, and is approximately 30 miles south of Wilkes
Barre-Scranton. The resort contains 54 units and has a restaurant/lounge,
indoor pool/sauna, clubhouse, fitness center, tennis courts, and pontoon
boat. There are approximately 116 unsold Vacation Intervals at this
resort.

- The Treasure Lake Resort is located in Sandy Township, Clearfield County,
Pennsylvania, and is approximately 160 miles northeast of Pittsburgh. The
resort contains 145 units and has two golf courses, a restaurant/lounge,
indoor pool/sauna, outdoor pool, clubhouse, tennis courts, and pontoon
boat. There are approximately 468 unsold Vacation Intervals at this
resort.

- The Foxwood Hills Resort is located in Oconee County, South Carolina,
near Lake Hartwell and is approximately 100 miles northeast of Atlanta.
The resort contains 113 units and has a golf course, restaurant/lounge,
indoor pool/sauna, outdoor pool, clubhouse, miniature golf course, tennis
courts, pontoon boat, and playground. There are approximately 483 unsold
Vacation Intervals at this resort.

- The Lake Tansi Village Resort is located in Cumberland County, Tennessee,
and is approximately 75 miles west of Knoxville. The resort contains 124
units and has a golf course, restaurant/lounge, indoor pool/sauna,
outdoor pool, clubhouse, fitness center, miniature golf course, tennis
courts, and playground. There are approximately 275 unsold Vacation
Intervals at this resort.

- The Westwind Manor Resort is located in Wise County, Texas, on Lake
Bridgeport and is approximately 65 miles northwest of the Dallas-Ft.
Worth metroplex. The resort contains 37 units and has a golf course,
restaurant/lounge, outdoor pool, clubhouse, miniature golf course, tennis
courts, and playground. There are approximately 333 unsold Vacation
Intervals at this resort.

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The Company will not own, operate, or receive revenues from the
above-described recreational amenities, which are generally owned and operated
by various homeowner's associations or unrelated third parties. Neither will the
Company acquire any land or development rights for the construction of
additional timeshare units at these eight resorts, although it may consider such
acquisitions in the future.

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 of equal or lower rating at any other Existing
Resort. These intra-company exchange rights require an exchange fee, which is
currently $50, and are conditioned upon availability of the desired interval or
resort. Owners of Vacation Intervals at the Drive-to resorts will not have
exchange rights to the New Resorts in Galveston and Las Vegas.

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. The Existing Resorts, except Oak N' Spruce, are
registered with RCI, and approximately one-third of Silverleaf Owners
participate in RCI's exchange network. The Oak N' Spruce Resort is currently
under contract with a different network exchange company, Interval
International. 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 assigns a rating of "red", "white", or "blue" to each Vacation Interval
for participating resorts 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.
An owner of a red Vacation Interval may exchange his interval for a red, white,
or blue interval. An owner of a white Vacation Interval may exchange only for a
white or blue interval, and an owner 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 3,200 participating resort facilities and over 2.3
million members worldwide. During 1997 RCI processed over 1.8 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, Hyatt, and Four Seasons have recently entered the
industry. Other companies in the timeshare industry, including Signature,
Fairfield, Vacation Break, Vistana, Ramada, and TrendWest, are, or are
subsidiaries of, public companies, with the enhanced access to capital and other
resources that public ownership implies.

Fairfield and Signature own timeshare resorts in or near Branson, Missouri,
which compete with the Company's Holiday Hills and Ozark Mountain Resorts, and
to a lesser extent with the Company's newly-acquired Timber Creek Resort.
Signature also 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 Illinois, Missouri, or Texas.
The Company believes that many of the companies named in the preceding paragraph
operate timeshare resorts in Las Vegas, Nevada. Additionally, the Company
believes there are a number of privately-owned and operated timeshare resorts in
most states in which the Company owns resorts which will compete with
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the Company's Existing Resorts and New Resorts. Finally, the proposed resort in
Las Vegas will compete with a large number and variety of hotels and other
lodging facilities in Las Vegas.

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 compete with the
Company in seeking properties for acquisition and development and new resorts.
Some of these competitors are larger and have greater financial and other
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 and New 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 certain fraudulent marketing practices in the timeshare
industry in the 1980's, various states enacted legislation aimed at curbing such
abuses. Texas, Missouri, Illinois, Massachusetts and Nevada, the states in which
the Company owns Existing Resorts or New Resorts, as well as other states in
which the Company markets its Vacation Intervals, have adopted specific laws and
regulations regarding the marketing and sale of Vacation Intervals. The laws of
most states, including Texas, Illinois, Massachusetts and Nevada, require the
Company to file a detailed offering statement and supporting documents with a
designated state authority, which describe the Company, the project, and the
promotion and sale of Vacation Intervals. The offering statement must be
approved by the appropriate state agency before the Company may solicit
residents of such state. The laws of Texas, Illinois, Massachusetts and Nevada,
respectively, require the Company to deliver an offering statement (or public
report), together with certain additional information concerning the terms of
the purchase, to prospective purchasers of Vacation Intervals who are residents
of such state, even if the resort is not located in such state. The laws of
Missouri generally only require certain disclosures in sales documents for
prospective purchasers. There are also laws in each state where the Company
currently sells Vacation Intervals which grant the purchaser of a Vacation
Interval the right to cancel a contract of purchase at any time within three to
five calendar days following the date the contract was signed by the purchaser.

The Company qualifies each resort under the laws of the state where it is
located. The Company has recently filed a timeshare application in Nevada with
respect to the New Resort in Las Vegas. There can be no assurance that the
Company will obtain the requisite approval to sell Vacation Intervals for this
resort, and the Company has not commenced marketing or sales activities for this
report.

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The Company also markets and sells its Vacation Intervals to residents of
certain states which are near the states where the Company's resorts are
located. Many of these neighboring states also regulate the marketing and sale
of Vacation Intervals to their residents. The Company is currently in various
stages of obtaining permits to sell Vacation Intervals to residents of New York
and certain other states proximate to the Oak N' Spruce Resort in Massachusetts.
There can be no assurance that the Company will obtain the requisite approvals
to sell Vacation Intervals to residents of such states. The Company does not
register all of its resorts in each of the states where it registers any
resorts.

The Company believes it is in material compliance with federal, Texas,
Missouri, Illinois, and Massachusetts laws and regulations to which it is
currently subject relating to the sale and marketing of Vacation Intervals.
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 aggressively markets and sells
Vacation Intervals in the value segment of the timeshare industry, which may
include individuals who are less financially sophisticated 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, Illinois, Massachusetts, 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.
Further, there can be no assurance that either the federal government or states
having jurisdiction over the Company's business will not adopt additional
regulations or take other actions which would adversely affect the Company's
results of operations, liquidity, and 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 regulations mandate, but the consequence of violating the Orders 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.

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 acknowledged that Silverleaf
independently resolved ten consumer complaints referenced in the Agreed Order,
discontinued the practices complained of, and registered the Destination Resorts
during 1995 and 1996, the Texas Real Estate Commission ordered Silverleaf to
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 directed
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 has encountered and expects to encounter
some level of additional 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.
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<PAGE> 73

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
certain of 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 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. The Company has not tested its properties for radon.
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 several
of its Existing Resorts in order to identify potential environmental concerns.
Also, the Company has obtained more recent Phase I environmental assessments for
each of the remaining Existing Resorts and New Resorts. These Phase I
assessments were 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, and the
preparation and issuance of written reports. 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's results of operations, liquidity, or financial position.

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<PAGE> 74

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. See "Risk Factors -- Possible Environmental Liabilities".

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". The Texas Natural
Resources Conservation Commission ("TNRCC") is the primary state umbrella agency
regulating utilities at the 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 resorts in Missouri. The
Environmental Protection Agency, division of Water Pollution Control, and the
Illinois Commerce Commission are the primary state agencies regulating water
utilities in Illinois. 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 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. Currently, the Holly Lake Resort's
water supply facilities do not comply with certain Texas rules regarding minimum
water capacity. Accordingly, the Company plans to build an additional water
storage facility at Holly Lake, with construction expected to begin in the third
quarter of 1998.

OTHER REGULATION. 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 (other than the Oak N'
Spruce Resort which has not yet been reviewed for ADA compliance) 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, 1997, the Company employed 1,559 persons. The Company
believes employee relations are good. None of the employees are represented by a
labor union.

INSURANCE

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's results of operation,
liquidity or financial position. The Company self-insures for property damage to
certain vehicles and heavy equipment. See "Risk Factors -- Natural Disasters;
Uninsured Loss".

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LEGAL PROCEEDINGS

The Company is a party to litigation and is subject to 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 "-- Description of New Resorts -- Gulf Coast
Resort", "Risk Factors -- Regulation of Marketing and Sales of Vacation
Intervals and Related Laws" and "Risk Factors -- Development, Construction, and
Property Acquisition Activities".

DESCRIPTION OF CERTAIN INDEBTEDNESS

EXISTING INDEBTEDNESS. The Company has revolving credit agreements with
three lenders providing for loans up to an aggregate of $115.0 million, which
the Company uses to finance the sale of Vacation Intervals and for working
capital needs. The Company also has a $12.0 million facility for such purpose
which will be paid from proceeds of the Equity Offering and the Note Offering
and not renewed. Additionally, the Company has a revolving credit agreement with
one of its lenders providing for loans up to $15.0 million to finance
construction which facility was not utilized in 1997. The Company has a $10.0
million non-revolving line of credit which has been used to finance development
of units at the Fox River and Timber Creek resorts and the acquisition of the
Oak N' Spruce Resort, the two Galveston sites, and the Las Vegas site, and which
becomes due upon the closing of the Equity Offering. The other foregoing loans
mature between December 1999 and October 2005, and are collateralized (or
cross-collateralized) by customer notes receivable, construction in process,
land, improvements, and related equipment of certain of the Existing Resorts and
New Resorts. These credit facilities bear interest at variable rates tied to the
prime rate, LIBOR or the corporate rate charged by certain banks. The credit
facilities secured by customer notes receivable limit advances to 70% of the
unpaid balance of certain eligible customer notes receivable.

The Company's credit facilities contain restrictive and financial
covenants, including covenants relating to (i) the maintenance of a minimum net
worth ranging up to $67 million, minimum liquidity, including a debt to equity
ratio of not greater than 2.5 to 1 and a senior debt to equity ratio of not
greater than 2.0 to 1, (ii) restrictions on liens against and dispositions of
collateral, (iii) restrictions on distributions to affiliates and prepayments of
loans from affiliates, (iv) restrictions on changes in control and management of
the Company, (v) restrictions on sales of substantially all of the assets of the
Company, and (vi) restrictions on mergers, consolidations or other
reorganizations of the Company. Under certain credit facilities, a sale of all
or substantially all of the assets of the Company, a merger, consolidation or
reorganization of the Company, or other changes of control of the ownership of
the Company would constitute an event of default and permit the lenders to
accelerate the maturity thereof. The credit facilities also include customary
events of default, including, without limitation, (i) failure to pay principal,
interest or fees when due, (ii) untruth of any representation of warranty, (iii)
failure to perform or timely observe covenants, (iv) defaults under other
indebtedness, and (v) bankruptcy.

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The following table summarizes the Company's loans, other notes payable and
capital lease obligations at December 31, 1997:

<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
$60 million revolving loan due December 1999, extendable for
a period of one year, with drawings permitted until
maturity, at an interest rate of LIBOR plus 2.55%, secured
by customer notes receivable.............................. $ 1,529
$40 million revolving loan due October 2005 with drawings
permitted until October 31, 2000, at a variable rate of
LIBOR plus 2.5%, secured by customer notes receivable..... 22,137
$15 million revolving loan due November 2002 with drawings
permitted until November 30, 1998, at an interest rate of
Prime plus 2%, secured by customer notes receivable....... 12,596
$12 million loan due May 2003, at a variable rate of 2.75%
plus a Base Rate (11.25% at December 31, 1997), secured by
customer notes receivable................................. 4,122
$10 million revolving construction loan due October 2000
with drawings permitted until April 30, 1999 at a variable
rate of LIBOR plus 3.5%, secured by land, construction in
process and customer notes receivable..................... 0(a)
$10 million non-revolving line of credit due upon the
earlier of the Equity Offering or January 2000 with
drawings permitted until December 1998 at a variable rate
of LIBOR plus 3%, secured by land, improvements, and
equipment of various Existing Resorts and New Resorts..... 4,070(b)
Various notes, due from January 1998 through October 2002,
collateralized by various assets with interest rates
ranging from 4.2% to 14.0%................................ 1,785
-------
Total notes payable............................... 46,239
Capital lease obligations................................... 2,632
-------
Total notes payable and capital lease
obligations...................................... $48,871
=======
</TABLE>

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

(a) In March 1998, the borrowing capacity under this facility was increased to
$15.0 million.

(b) A non-binding letter of intent has been executed to increase the borrowing
capacity to $15.0 million and to convert the facility to a revolving loan.

At December 31, 1997, prime rate was 8.5% and LIBOR rates were from 5.72%
to 5.81%.

Substantially all notes payable will be repaid from the proceeds of the
Equity Offering and the Note Offering. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- -- Liquidity and Capital Resources".

Credit Suisse First Boston Mortgage Capital, L.L.C. ("CSFBMC"), an
affiliate of Credit Suisse First Boston Corporation, is the lender under the
$60.0 million revolving loan and $10.0 million non-revolving line of credit. As
of December 31, 1997, the Company was indebted to CSFBMC in the amount of $5.6
million.

The Company's future lending and development activities will likely be
financed with indebtedness under the existing revolving credit facilities or
under credit facilities to be obtained by the Company in the future. Such new
credit facilities would likely be collateralized by the Company's assets and
contain restrictive covenants. However, the Company does not presently have
binding agreements to extend the terms of its existing financing arrangements or
for any replacement financing arrangements upon the expiration of such funding
commitments, and there can be no assurance that alternative or additional
arrangements can be made on terms that are satisfactory to the Company.
Accordingly, future sales of Vacation Intervals may be limited by both the
availability of funds to finance customer purchases of Vacation Intervals and by
reduced demand which may result if the Company is unable to provide financing to
purchasers of Vacation Intervals. 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.

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<PAGE> 77

The foregoing summary of certain provisions of the credit facilities is
subject to and qualified in its entirety by reference to the terms of the credit
facilities, copies of which are filed as exhibits (or incorporated by reference)
to the Registration Statement of which this Prospectus is a part.

THE NOTE OFFERING. The Company is also offering $75.0 million aggregate
principal amount of % Senior Subordinated Notes due 2008. The payment of
the principal of and premium (if any) and interest on the Notes is fully and
unconditionally guaranteed, jointly and severally, on a senior subordinated
basis by all existing and future domestic subsidiaries of the Company, subject
to certain exceptions. The Notes will be redeemable, in whole or in part, at the
option of the Company after approximately five years. In addition, prior to
approximately three years from the date of issue, the Company may redeem up to
an aggregate of 33 1/3% of the aggregate principal amount of the Notes with the
proceeds of one or more public offerings of the Company's Common Stock;
provided, however, that at least 66 2/3% of the aggregate principal amount of
the Notes originally issued remains outstanding after any such redemption. Upon
a change of control of the Company, holders of the Notes will have the right to
require the Company to repurchase all or a portion of such holder's Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, to the date of repurchase. The Notes will be general unsecured
obligations of the Company and will be subordinated in right of payment to all
existing and future senior debt of the Company and will be effectively
subordinated, subject to the subsidiary guarantees, to all indebtedness and
other obligations of the Company's subsidiaries. The Indenture pursuant to which
the Notes will be issued will contain certain covenants that, among other
things, limit the ability of the Company and certain of its subsidiaries to
incur additional indebtedness and issue preferred stock, pay dividends or make
other distributions, repurchase equity interests or subordinated indebtedness,
enter into certain transactions with affiliates, sell assets of the Company or
certain of its subsidiaries, issue or sell equity interests of the Company's
subsidiaries or enter into certain mergers and consolidations. In addition,
under certain circumstances, the Company will be required to offer to purchase
the Notes at a price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest to the date of purchase, with the proceeds of certain assets
sales.

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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.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert E. Mead........................ 51 Chairman of the Board and Chief
Executive Officer
Sharon K. Brayfield................... 37 Director and President
David T. O'Connor..................... 56 Executive Vice President -- Sales
Joe W. Conner......................... 41 Chief Financial Officer, Treasurer
Thomas C. Franks...................... 44 Vice President -- Investor Relations
and Governmental Affairs, President of
Silverleaf Resort Acquisitions, Inc.
Larry H. Fritz........................ 45 Vice President -- Marketing
Ioannis N. Gioldasis.................. 47 Vice President -- Promotions
Robert G. Levy........................ 49 Vice President -- Resort Operations
James J. Oestreich.................... 57 Vice President -- Marketing
Development
Sandra G. Cearley..................... 36 Secretary
Stuart Marshall Bloch................. 55 Director
James B. Francis, Jr. ................ 48 Director
Michael A. Jenkins.................... 55 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 18 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. For the past five years and through April
1997, Ms. Brayfield was also the President 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. Mr. O'Connor has served as the Company's Executive Vice
President -- Sales for the past two years and as Vice President -- Sales since
1991. In such capacities he directed all field sales, including the design and
preparation of all training materials, incentive programs, and follow-up sales
procedures. For the five year period ended May 12, 1997, Mr. O'Connor was 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 Administration 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.

THOMAS C. FRANKS was hired in August 1997 as President of a newly-formed,
wholly-owned subsidiary of the Company, Silverleaf Resort Acquisitions, Inc. In
February 1998, Mr. Franks was also named as Vice President -- Investor Relations
and Governmental Affairs for the Company. Mr. Franks has more than 15 years of
experience in the timeshare industry and is responsible for acquisitions and
industry and governmental relations. Mr. Franks served as the President of ARDA
from February 1991 through July 1997.

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<PAGE> 79

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 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.

ROBERT G. LEVY was appointed Vice President -- Resort Operations in March
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 thereto, Mr. Levy spent 18 years in hotel, motel,
and resort management, and was associated with the Sheraton, Ramada Inn, and
Holiday Inn hotel chains.

JAMES J. OESTREICH joined the Company in February 1998 as Vice
President -- Marketing Development. A company owned by Mr. Oestreich, Bull's Eye
Marketing, Inc. ("Bull's Eye"), has served as a marketing consultant to the
Company since August 1995. From January 1991 to August 1995, Mr. Oestreich
served as Vice President of Sales and Marketing for Casablanca Express, Inc.
From August 1995 until joining the Company, Mr. Oestreich served as President of
Bull's Eye, a provider of marketing services to the resort and direct sales
industries.

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.

STUART MARSHALL BLOCH was elected as a Director of the Company in July
1997. Since 1972, Mr. Bloch has been a partner in the law firm of Ingersoll &
Bloch, in Washington, D.C. Ingersoll & Bloch has served as general counsel to
ARDA since 1972. Mr. Bloch is also currently serving as counsel to the law firm
of Holland & Knight, LLC. Mr. Bloch is the founding director and a past
president of the International Foundation for Timesharing. Mr. Bloch has
authored numerous articles dealing with real estate law and the timeshare
industry.

JAMES B. FRANCIS, JR. was elected as a Director of the Company in July
1997. 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 was elected as a Director of the Company in July 1997.
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

The Board of Directors currently has five members and three committees
which were formed after the IPO: (i) an Executive Committee, (ii) an Audit
Committee, and (iii) a Compensation Committee. Members of these committees serve
until the next annual meeting of Directors and until their successors are
elected and qualified.

EXECUTIVE COMMITTEE. In July 1997, the Board of Directors established an
executive committee (the "Executive Committee"), which is authorized in the
intervals between meetings of the Board of Directors to perform all of the
rights and duties of the Board of Directors, except the power to declare
dividends or distributions on stock, approve any merger or share exchange which
does not require shareholder approval, amend the Bylaws, issue stock other than
as permitted by statute, recommend to the shareholders any action that requires
shareholder approval, or exercise rights delegated to the Audit Committee or
Compensation Committee. The current members of the Executive Committee are Ms.
Brayfield and Messrs. Francis and Mead.

AUDIT COMMITTEE. In July 1997, the Board of Directors established an audit
committee (the "Audit Committee"), which consists of two or more directors who
meet the independence requirements imposed by the NYSE's Audit Committee Policy.
The Audit Committee makes recommendations concerning the engagement of

78
<PAGE> 80

independent public accountants, reviews the plans and results of the audit
engagement, approves professional services provided by the independent public
accountants, reviews the independence of the independent public accountants and
the adequacy of the Company's internal accounting controls, and considers the
range of audit and non-audit fees. The current members of the Audit Committee
are Messrs. Bloch and Jenkins.

COMPENSATION COMMITTEE. In July 1997, the Board of Directors established a
compensation committee (the "Compensation Committee"), which at all times will
consist of two or more directors, a majority of whom are non-employee directors
within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 (an
"Independent Director") to determine compensation for the Company's senior
executive officers and to administer the Company's 1997 Stock Option Plan. The
current members of the Compensation Committee are Messrs. Francis and Jenkins.
For the year ended December 31, 1997, the Compensation Committee and the Board
of Directors made all decisions regarding executive compensation and
administration of the 1997 Stock Option Plan.

The Board of Directors of the Company does not have a nominating committee
or any other committee except as set forth above.

CLASSIFIED BOARD OF DIRECTORS

The Company's Board of Directors is divided into three classes serving
staggered terms. The Board of Directors consists of one Class I director (Mr.
Bloch), 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 director, the Class II directors and the Class III
directors will expire upon the election and qualification of successor directors
at the annual meeting of shareholders to be 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. The term of the Company's sole
Class I director (Mr. Bloch) is scheduled to expire at the Company's May 1998
annual shareholders meeting; however, in February 1998 the Board of Directors
nominated Mr. Bloch for a second term. If elected by the shareholders at the May
1998 annual meeting, Mr. Bloch will continue to serve until the Company's 2001
annual shareholders meeting.

DIRECTOR COMPENSATION

The Company has granted to each Independent Director (Messrs. Bloch,
Francis, and Jenkins), as directors' fees, options to purchase 40,000 shares of
Common Stock at $16 per share. Such options vest in three equal portions over a
term of three years, with the first vesting period occurring in May 1998. The
options expire in June 2007. In addition to such option grants, each of the
Independent Directors receive a stipend (currently $1,000) for attending
meetings 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.

DIRECTORS AND OFFICERS INSURANCE

The Company has purchased a directors and officers liability insurance
policy with coverage typical for a public company. The directors and officers
liability insurance policy insures (i) the officers and directors of the Company
from any claim arising out of an alleged wrongful act by such person while
acting as an officer or director of the Company, (ii) the Company to the extent
it has indemnified an officer and director for such loss, and (iii) the Company
for losses incurred in connection with claims made against the Company for
covered wrongful acts.

INDEMNIFICATION

The Company's articles of incorporation ("Charter") provide 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 of 1933 (the
"Securities Act") is against public policy and unenforceable under the
Securities Act.

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<PAGE> 81

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The following table sets forth the annual base
salary and other annual compensation that the Company paid in 1997 to the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers whose cash compensation (salary and bonus) on an
annualized basis exceeded $100,000 (the "Named Executive Officers").

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- ------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR SALARY(A) BONUS COMPENSATION(B) (#)
--------------------------- ---- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Robert E. Mead,.............. 1997 $500,000 $ -- $ -- --
Chief Executive Officer
Sharon K. Brayfield,......... 1997 133,101 -- 298,761 --
President
David T. O'Connor,........... 1997 -- -- 726,310(c) 200,000
Executive Vice President --
Sales
Joe W. Conner,............... 1997 158,428 20,000 -- 35,000
Chief Financial Officer
Larry H. Fritz,.............. 1997 95,417 -- 60,140 25,000
Vice President -- Marketing
</TABLE>

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

(a) These amounts are shown before elective contributions by the Named
Executive Officers in the form of salary reductions under the Company's
Section 125 Flexible Benefit Plan. Such plan is available to all employees.

(b) Except as otherwise noted, these amounts represent additional compensation
based on sales of Vacation Intervals and other sales-related criteria. See
"-- Employment and Noncompetition Agreements".

(c) Through May 11, 1997, a portion of this amount was 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". Of this amount,
$1,725 represents a perquisite for personal use of a company automobile.

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.

The 1997 Stock Option Plan is administered by the Compensation Committee,
which selects the individuals to whom options are to be granted and determines
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. Presently, a
maximum of 1,100,000 shares are reserved for issuance under the Plan and options
for 1,004,500 shares have been granted. The Company will file a Registration
Statement to register such shares.

Nonqualified stock options 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 are designed to comply with the provisions of the
Code and are 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.

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<PAGE> 82

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. In
February 1998, the Board of Directors approved an amendment to the Plan
reserving an additional 500,000 shares of Common Stock for issuance under the
Plan; however, this amendment will not become effective unless it is approved by
the shareholders.

OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1997. The following table
contains information concerning the grant of stock options under the Company's
1997 Stock Option Plan made during the year ended December 31, 1997 to the Named
Executive Officers. The table also lists potential realizable values of such
options on the basis of assumed annual compounded stock appreciation rates of 5%
and 10% over the life of the options which are set for a maximum of ten years.
No options were exercised during 1997 by any of the Named Executive Officers.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL EXERCISE ANNUAL RATE OF SHARE
SECURITIES OPTIONS GRANTED TO OR BASE PRICE APPRECIATION(B)
UNDERLYING EMPLOYEES IN PRICE PER EXPIRATION ----------------------
NAME OPTIONS GRANTED(A) FISCAL YEAR SHARE DATE 5% ($) 10% ($)
---- ------------------ ------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Mead............... -- -- -- -- -- --
Sharon K. Brayfield.......... -- -- -- -- -- --
David T. O'Connor............ 200,000 22.8 $16.00 6/5/07 $2,012 $5,100
Joe W. Conner................ 35,000 4.0 $16.00 6/5/07 $ 352 $ 892
Larry H. Fritz............... 25,000 2.9 $16.00 6/5/07 $ 252 $ 637
</TABLE>

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

(a) These options will vest in four equal increments on the first, second,
third and fourth anniversaries of the date of the grant.

(b) The potential realizable value (in thousands of dollars) is reported net of
the option price, but before income taxes associated with exercise. These
amounts represent assumed annual compounded rates of appreciation at 5% and
10% only from the date of grant to the expiration date of the option. The
rates of appreciation shown in this table are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Common Stock.

OPTIONS/SAR EXERCISES AND YEAR-END VALUE TABLE.

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SAR AT MONEY OPTIONS/ SARS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END ($)(A)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Mead................ -- -- -- -- -- --
Sharon K. Brayfield........... -- -- -- -- -- --
David T. O'Connor............. -- -- -- 200,000 -- $1,300
Joe W. Conner................. -- -- -- 35,000 -- $ 298
Larry H. Fritz................ -- -- -- 25,000 -- $ 213
</TABLE>

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

(a) The value at year end (in thousands of dollars) is reported net of the
option price.

SECTION 162(M) LIMITATION. In general, under Section 162(m) of the Code,
income tax deductions of publicly-held corporations may be limited to the extent
total compensation (including base salary, annual bonus, stock option exercises
and non-qualified benefits paid) for certain executive officers exceeds $1
million (less the amount of any "excess parachute payments" as defined in
Section 280G of the Code) in any one year. However, under Section 162(m), the
deduction limit does not apply to certain "performance-based compensation"
established by an independent compensation committee which is adequately
disclosed to, and approved by, the shareholders.

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.

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<PAGE> 83

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,
use of a company vehicle, and other fringe benefits such as 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 with the Company which provides for an annual base salary
of $133,101, use of a company vehicle, and other fringe benefits such as 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.

Effective May 12, 1997, Mr. O'Connor entered into an employment agreement
with the Company 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 of upgrades and revenue per guest. The Company will also provide Mr.
O'Connor with use of a company vehicle and other fringe benefits such as 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. See "Certain Relationships and Related Transactions".

In July 1997, Mr. Franks entered into an employment agreement with the
Company which provides for an annual base salary of $325,000, use of a company
vehicle, and other fringe benefits such as 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;
however, if the Company terminates Mr. Franks for other than "good cause", the
Company shall be obligated to make a severance payment to him in an amount equal
to his annual base salary. In connection with Mr. Franks employment, in August
1997, the Company purchased a house for $531,000 and leased the house to Mr.
Franks for 13 months at a rental equal to (i) the Company's interest on a
$418,000 mortgage loan incurred in connection with the purchase, plus (ii)
insurance and taxes, which amount is currently $3,124 per month. Mr. Franks has
the option to purchase the house at the end of the 13-month term for $531,000,
plus 8% per annum on the Company's down payment for the house ($113,000). The
Company also granted him nonqualified options to purchase 100,000 shares of
Common Stock pursuant to the 1997 Stock Option Plan at $16.00 per share, which
options will vest in equal installments over a four-year period beginning August
1998.

In January 1998, Mr. Oestreich entered into an employment agreement with
the Company which provides for an annual base salary of $300,000, use of a
company vehicle, and other fringe benefits such as health insurance, vacations
and sick leave as determined by the Board of Directors of the Company from time
to time. Mr. Oestreich will also receive additional compensation equal to .5% of
Vacation Interval sales directly attributable to his efforts. The Company also
granted him nonqualified and incentive stock options to purchase 100,000 shares
of Common Stock pursuant to the 1997 Stock Option Plan at $22.84 per share,
which options will vest in equal installments over a four-year period beginning
December 1998.

In January 1998, Allen Hudson entered into an employment agreement with the
Company, contingent upon his commencement of full-time services no later than
July 1, 1998. Mr. Hudson will serve as Executive Vice President of Architecture
and Engineering Services for a term of four years from the date he commences
work. Mr. Hudson's agreement provides for an annual base salary of $350,000, use
of a company vehicle, and other fringe benefits such as health insurance,
vacations and sick leave as determined by the Board of Directors of the Company
from time to time. Mr. Hudson will also receive $500,000 to be paid over a three
year period as compensation for and in consideration of the exclusivity of his
services. The Company also granted him nonqualified options to purchase 25,000
shares of Common Stock pursuant to the 1997 Stock Option Plan at an exercise
price equal to the average of the high and low trading prices of the Common
Stock on the effective date of his employment agreement. The options will vest
in equal installments over a four-year period beginning one year after he
commences work. The agreement provides that upon Mr. Hudson's relocation to the
Dallas/Ft. Worth area, the Company will purchase his Branson, Missouri
condominium for $108,000.

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<PAGE> 84

Each of the employment agreements discussed above provides 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. The agreements with Mr. Mead, Ms. Brayfield, and Mr.
O'Connor provide that such persons 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 with Messrs. Oestreich and Hudson contain substantially similar
restrictions which will be effective for a period of one year following
termination of the agreement.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

REPAYMENT OF AFFILIATED DEBT

Approximately $9.9 million of the net proceeds from the IPO in June 1997
were used to repay outstanding debt to Mr. Mead and affiliated persons or
entities. The Company repaid 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, simultaneously repaid their debt
to the Company. Such affiliated debt is explained below:

<TABLE>
<CAPTION>
COMPONENTS OF AMOUNT PAID
AFFILIATED DEBT OF THE COMPANY IN JUNE 1997
------------------------------ --------------
(IN THOUSANDS)
<S> <C>
Debt of CBI to Mr. Mead(a).................................. $ 6,101
Debt of Silverleaf to Mr. Mead and affiliates(b)............ 8,298
Debt of Silverleaf to Pace, STG and Ralph
Brotherton(c)(d)(e)....................................... 563
-------
Total............................................. 14,962
Less:
Receivable from Mr. Mead(a)............................... (4,727)
Receivable from STG and Pace(f)........................... (363)
-------
Net Affiliated Party Debt of Silverleaf........... $ 9,872
=======
</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 bore interest at 8% per annum,
and the loans by Mr. Mead to CBI bore 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 paid to
Mr. Mead from the Company and the remaining receivable paid by Mr. Mead to
the Company in June 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.

(c) Includes approximately $417,000 paid to Pace Finance Company ("Pace"), a
Texas corporation wholly owned by Mr. Mead. Pace loaned the Company
approximately $541,000, $655,000 and $0, in 1995, 1996 and 1997,
respectively. The Company secured such loans by pledging notes secured by
Vacation Intervals with an aggregate principal balance of approximately
$901,000, $1.1 million and $0 million, in 1995, 1996 and 1997, respectively.
The Company made payments to Pace of approximately $636,000, $863,000 and
$275,000, in 1995, 1996 and 1997, respectively.

(d) Includes approximately $96,000 paid to STG Investments ("STG"), a Texas
general partnership owned by trusts beneficially owned by Mr. Mead's
children.

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<PAGE> 85

(e) Includes approximately $50,000 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 did not bear interest.

(f) In June 1997, STG and Pace paid Silverleaf approximately $221,000 and
$142,000, 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 $555,000 in 1995. To secure such
loans, in 1995 the Company pledged to FFC notes secured by Vacation Intervals
with an aggregate principal balance of approximately $740,000. The Company made
principal and interest payments to FFC of approximately $871,000 in 1995.

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

The Company paid Hudson & Company, Inc., Mr. Hudson's architectural firm,
approximately $338,000, $421,000, and $401,000, during 1995, 1996, and 1997,
respectively, for architectural services rendered to the Company.

TRANSACTIONS WITH RELATED INDIVIDUALS

In March 1997, Mr. Mead entered into a lease agreement with the Company
which granted him 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
agreed to pay the annual property taxes on 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.

Mr. Mead 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 agreed to pay the
Company the higher of (i) its acquisition cost plus an additional 15% per annum
(approximately $464,000), or (ii) the appraised fair market value of these
properties. In September 1997, Mr. Mead reimbursed the Company for its cost
(plus 15%) of the condominium in Mexico and the residential property in Texas.
Pending the receipt of an appraisal on the condominium in Mexico, Mr. Mead has
agreed to pay an additional sum to the Company to the extent the appraised fair
market value of the properties exceeds the amount paid by Mr. Mead.

In connection with the IPO in June 1997, the Company entered into a
Registration Rights Agreement with Mr. Mead with respect to 7,625,000 of his
shares of Common Stock. The Company has agreed to pay all expenses associated
with the registration of Mr. Mead's shares offered for sale in this Prospectus
(500,000 shares plus any shares subject to the Underwriters' over-allotment
option).

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<PAGE> 86

During 1995, the Company loaned $15,000 to Ms. Brayfield at 8.0% 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.

During 1996, the Company was a party to a consulting agreement with Francis
Enterprises, Inc. ("FEI"), a Texas corporation which is wholly owned by Mr.
Francis, a 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 Mr. Francis 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 $430,000, $539,000, and $302,000 in
sales commissions in 1995, 1996, and 1997, respectively. See
"Management -- Executive Compensation".

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

Mr. Bloch serves as counsel to the law firm of Holland & Knight, LLC. The
Company has retained the services of Holland & Knight for limited purposes.

In February 1998, the Company purchased the stock of Bull's Eye Marketing,
Inc. ("Bull's Eye") for $250,000 from Mr. Oestreich, the sole shareholder of
Bull's Eye.

Mr. Hudson's employment agreement provides that upon his relocation to
Dallas, the Company will be obligated to purchase his Branson, Missouri
condominium for $108,000 in cash. In addition to his salary, Mr. Hudson will
also receive $500,000 to be paid over a three-year period as compensation for
and in consideration of the exclusivity of his services.

For information concerning employment agreements with certain officers see
"Management -- Employment and Noncompetition Agreements".

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 1995, 1996 and 1997,
the Company reported management fees from the Master Club of approximately $2.5
million, $2.2 million, and $2.3 million, respectively. 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 1995,
1996 and 1997, the Master Club charged the Company approximately $1.9 million,
$2.1 million, and $2.6 million, respectively, for expenses attributable to the
Company. 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 $1.3 million at the end of 1996 and 1997,
respectively. See "Business -- Clubs/Master Club".

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<PAGE> 87

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of December 31, 1997 and as
adjusted to reflect the sale of 2,000,000 shares of Common Stock by the Company
and 500,000 shares of Common Stock by the Selling Shareholder 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 or Named Executive Officer of the Company, and (iii) all directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO THE BENEFICIAL OWNERSHIP
EQUITY OFFERING AFTER THE EQUITY OFFERING(B)
NAME AND ADDRESS OF ----------------------- NUMBER OF SHARES -----------------------------
BENEFICIAL OWNER(A) SHARES PERCENTAGE BEING OFFERED(B) SHARES PERCENTAGE
------------------- --------- ---------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Robert E. Mead(c)...... 7,625,100 67.4% 500,000 7,125,100 53.5%
Sharon K.
Brayfield(c)......... 86,517 * -- 86,517 *
David T. O'Connor(c)... -- -- -- -- --
Joe W. Conner(c)....... -- -- -- -- --
Larry H. Fritz(c)...... -- -- -- -- --
Stuart Marshall
Bloch(d)............. 14,333(e) * -- 14,333(e) *
James B. Francis,
Jr.(f)............... 15,333(e) * -- 15,333(e) *
Michael A.
Jenkins(g)........... 13,333(e) * -- 13,333(e) *
--------- ---- ------- --------- ----
All directors and
executive officers as
a group (13
persons)............. 7,754,616 68.6% 500,000 7,254,616 54.5%
========= ==== ======= ========= ====
</TABLE>

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

* Less than 1%.

(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. None of such persons has the right, pursuant to
stock options or otherwise, to acquire shares of the Company's Common Stock
within 60 days.

(b) Does not reflect the possible sale of up to an additional 375,000 shares of
Common Stock by the Selling Shareholder upon the exercise of the
Underwriters' over-allotment option.

(d) The address of such person is 1401 16th St., N.W., Washington, D.C. 20036.

(e) Includes options to purchase 13,333 shares, which options are exercisable
within 60 days from the date hereof.

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

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

86
<PAGE> 88

DESCRIPTION OF CAPITAL STOCK

Upon the consummation of the Equity 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, 13,311,517 shares of which will be outstanding after the Equity
Offering, and (ii) 10,000,000 shares of Preferred Stock, par value $0.01 per
share, none of which will be outstanding after the Equity 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
Equity Offering will be fully paid and nonassessable and the holders thereof
will not have preemptive rights.

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 Equity Offering.

TRANSFER AGENT AND REGISTRAR

ChaseMellon Shareholder Services, L.L.C. serves as the Company's transfer
agent and registrar.

CERTAIN PROVISIONS OF TEXAS LAW AND THE COMPANY'S CHARTER AND BYLAWS

The following paragraphs summarize certain provisions of the Company's
Charter and Bylaws, as well as Texas corporate law, 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 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 holds office initially for a

87
<PAGE> 89

term expiring at the annual meeting of shareholders to be held in 1998, another
class holds office initially for a term expiring at the annual meeting of
shareholders to be held in 1999 and another class holds 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.

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.

BUSINESS COMBINATIONS

The Texas Business Combination Law ("TBCL") prohibits certain "business
combinations" (including a merger, share exchange, conversion, or, in certain
circumstances, an asset transfer, issuance or reclassification of equity
securities), between a Texas corporation ("Corporation") and any person or
entity that, individually or through an affiliate, is or was the beneficial
owner of twenty percent or more of the voting power of the Corporation's shares
("Affiliated Shareholder"), during the three-year period immediately following
the date that the Affiliated Shareholder became the beneficial owner of twenty
percent or more of the voting power of the then-outstanding voting stock of the
Corporation. A business combination with an Affiliated Shareholder is not
prohibited if the business combination is approved by: (i) the board of
directors of the Corporation before the date the Affiliated Shareholder first
became an Affiliated Shareholder, or (ii) the affirmative vote of the holders of
at least two-thirds of the outstanding voting shares of the Corporation, other
than the shares beneficially owned by the Affiliated Shareholder, at a meeting
of the shareholders called not less than six months after the Affiliated
Shareholder first became an Affiliated Shareholder. The rules prohibiting
business combinations do not apply if the original articles of incorporation or
bylaws of the Corporation, or, in certain circumstances, an amendment to the
articles of incorporation or bylaws, contain a provision expressly electing not
to be governed by the TBCL. Neither Silverleaf's Articles of Incorporation nor
its Bylaws contain any such provision.

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

88
<PAGE> 90

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 10% 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 shareholder 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 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 for (i)
a breach of the duty of loyalty to the corporation or its shareholders, (ii) an
act or omission not in good faith that is a breach of a duty to the corporation
or that involves intentional misconduct or a knowing violation of the law, (iii)
a transaction in which the director or officer received an improper benefit, or
(iv) other statutory exceptions.

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 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.

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.

89
<PAGE> 91

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1998 (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Credit Suisse First Boston
Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, and EVEREN
Securities, Inc., are acting as representatives (the "Representatives"), have
severally but not jointly agreed to purchase from the Company and the Selling
Shareholder the following respective numbers of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
EVEREN Securities, Inc......................................

---------
Total.............................................
=========
</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.

Mr. Mead 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
375,000 additional shares at the 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 and the Selling Shareholder have 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 Underwriters
and such dealers may allow a discount of $ per share on sales to certain other
dealers. After the public offering, the public offering price and concession and
discount to dealers may be changed by the Representatives.

The Underwriters have informed the Company that they will not confirm sales
of the shares of Common Stock to any accounts over which they exercise
discretionary authority.

The Company, the Selling Shareholder, and the Company's 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

90
<PAGE> 92

for any shares of Common Stock without the prior written consent of Credit
Suisse First Boston Corporation for a period of 120 days after the date of this
Prospectus.

The Company and the Selling Shareholder have 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 are listed on the NYSE.

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 NYSE 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, has entered into two loan
agreements with the Company: a revolving loan commitment for up to $60.0 million
of borrowings secured by customer notes receivable from Silverleaf Owners and a
$10.0 million non-revolving line of credit secured by land, improvements, and
equipment of various Existing Resorts and New Resorts. At December 31, 1997, the
Company was indebted to CSFBMC in the amount of $5.6 million. The Company
intends to use more than 10% of the net proceeds from the sale of the Common
Stock to repay this indebtedness owed by it to CSFBMC, and the Company has met
the requirements of Rules 2710(c)(8)(B)(i) and 2720(b)(3) of the NASD Conduct
Rules.

To the best of its knowledge, the Company is currently in compliance with
the terms of the credit facilities with CSFBMC. The decision of Credit Suisse
First Boston Corporation to distribute the shares of Common Stock was made
independently of CSFBMC which had no involvement in determining whether or when
to distribute the shares of Common Stock under the Equity Offering or the terms
of the Equity Offering. Credit Suisse First Boston Corporation will not receive
any benefit from the Equity Offering other than its respective portion of the
underwriting commissions and discounts.

91
<PAGE> 93

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 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, 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 (ONTARIO PURCHASERS)

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. Following a
decision of the U.S. Supreme Court, it is possible that Ontario purchasers will
not be able to rely upon the remedies set out in Section 12(2) of the United
States Securities Act of 1933 where securities are being offered under a U.S.
private placement memorandum such as this document.

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 Equity 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 Common Stock for investment by the purchaser under relevant Canadian
legislation.

92
<PAGE> 94

LEGAL MATTERS

Certain legal matters with respect to 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. Latham & Watkins, Los Angeles,
California, is acting as counsel for the Underwriters in connection with the
Equity Offering.

EXPERTS

The consolidated financial statements of Silverleaf Resorts, Inc. at
December 31, 1995, 1996, and 1997 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 is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports and other information with the
Commission. 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. 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 are listed
on the NYSE.

93
<PAGE> 95

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2

Financial Statements

Consolidated Balance Sheets at December 31, 1996 and
1997................................................... F-3

Consolidated Statements of Income for the years ended
December 31, 1995, 1996, and 1997...................... F-4

Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1995, 1996, and 1997.......... F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996, and 1997...................... F-6

Notes to Consolidated Financial Statements................ F-7
</TABLE>

F-1
<PAGE> 96

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, 1996 and 1997
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
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, 1996 and 1997 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas
February 24, 1998 (March 6, 1998 as to the last two paragraphs of Note 15)

F-2
<PAGE> 97

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
------- --------
<S> <C> <C>
Cash and equivalents........................................ $ 973 $ 4,970
Restricted cash............................................. -- 200
Notes receivable, net....................................... 55,794 92,036
Amounts due from affiliates................................. 6,237 1,389
Inventory................................................... 10,300 28,310
Land, equipment, building and utilities, net................ 12,633 21,629
Land held for sale.......................................... 466 466
Prepaid and other assets.................................... 2,860 7,401
Net assets of discontinued operations....................... 1,589 --
------- --------
TOTAL ASSETS...................................... $90,852 $156,401
======= ========

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Accounts payable and accrued expenses..................... $ 3,156 $ 5,106
Amounts due to affiliates................................. 14,765 --
Unearned revenues......................................... 1,790 3,122
Income taxes payable...................................... 3,650 1,500
Deferred income taxes, net................................ 4,843 14,037
Notes payable and capital lease obligations............... 41,986 48,871
------- --------
Total Liabilities................................. 70,190 72,636
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 at December 31, 1996 and 11,311,517 shares
issued and outstanding at December 31, 1997............ 77 113
Additional paid-in capital................................ 13,470 64,577
Retained earnings......................................... 7,115 19,075
------- --------
Total Shareholders' Equity........................ 20,662 83,765
------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $90,852 $156,401
======= ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 98

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Vacation Interval sales................................ $ 34,091 $ 45,907 $ 68,682
Interest income........................................ 3,968 6,297 9,149
Interest income from affiliates........................ 393 377 247
Management fee income.................................. 2,478 2,187 2,331
Lease income........................................... 1,310 1,717 1,415
Other income........................................... 1,832 1,440 3,234
--------- ---------- ----------
Total revenues................................. 44,072 57,925 85,058
--------- ---------- ----------
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales........................ 3,280 2,805 6,600
Sales and marketing.................................... 17,850 21,839 30,559
Provision for uncollectible notes...................... 6,632 8,733 10,524
Operating, general and administrative.................. 8,780 10,116 12,230
Depreciation and amortization.......................... 863 1,264 1,497
Interest expense to affiliates......................... 1,403 880 422
Interest expense to unaffiliated entities.............. 2,206 3,879 4,242
--------- ---------- ----------
Total costs and operating expenses............. 41,014 49,516 66,074
--------- ---------- ----------
Income from continuing operations before income taxes.... 3,058 8,409 18,984
Income tax expense....................................... 1,512 3,140 7,024
--------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS........................ 1,546 5,269 11,960
DISCONTINUED OPERATIONS:
Income (loss) from operations (less applicable income
taxes of $0 in 1995 and a benefit of $99 in 1996.... (1,484) (168) --
Loss on disposal including provision for operating
Losses during the phase out period (plus applicable
income tax benefit of $74 in 1996).................. -- (127) --
--------- ---------- ----------
Total loss from discontinued operations........ (1,484) (295) --
--------- ---------- ----------
NET INCOME..................................... $ 62 $ 4,974 $ 11,960
========= ========== ==========
INCOME PER SHARE FROM CONTINUING OPERATIONS -- Basic and
Diluted................................................ $ 0.20 $ 0.68 $ 1.22
========= ========== ==========
NET INCOME PER SHARE -- Basic and Diluted................ $ 0.01 $ 0.64 $ 1.22
========= ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -- Basic... 7,590,295 7,711,517 9,767,407
========= ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING -- Diluted................................. 7,590,295 7,711,517 9,816,819
========= ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 99

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<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, 1995...................... 7,588,952 $ 76 $(45) $ 8,006 $ 2,079 $10,116
Contributions...................... 209,082 2 -- 5,563 -- 5,565
Repurchase and retirement of Common
Stock........................... (86,517) (1) -- (99) -- (100)
Realized loss on investments
available for sale.............. -- -- 45 -- -- 45
Net income......................... -- -- -- -- 62 62
----------- ---- ---- ------- ------- -------
DECEMBER 31, 1995.................... 7,711,517 77 -- 13,470 2,141 15,688
Net income......................... -- -- -- -- 4,974 4,974
----------- ---- ---- ------- ------- -------
DECEMBER 31, 1996.................... 7,711,517 77 -- 13,470 7,115 20,662
Issuance of Common Stock........... 3,600,000 36 -- 51,107 -- 51,143
Net income......................... -- -- -- -- 11,960 11,960
----------- ---- ---- ------- ------- -------
DECEMBER 31, 1997.................... 11,311,517 $113 $ -- $64,577 $19,075 $83,765
=========== ==== ==== ======= ======= =======
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 100

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 62 $ 4,974 $ 11,960
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 863 1,264 1,497
Discontinued operations................................ 1,476 3,794 1,589
Loss on investment in joint venture.................... 151 -- --
(Gain) Loss on disposal of land, equipment, building
and utilities......................................... 116 64 (34)
Loss on sale of marketable securities.................. 9 -- --
Deferred tax provision................................. 871 1,975 9,194
Increase (decrease) in cash from changes in assets and
liabilities (exclusive of amounts contributed):
Restricted cash...................................... -- -- (200)
Amounts due from affiliates.......................... 452 (1,734) 551
Inventory............................................ (380) (5,846) (18,010)
Prepaid and other assets............................. 42 (1,559) (4,541)
Accounts payable and accrued expenses................ 161 394 1,950
Amounts due to affiliates............................ (711) 114 (286)
Interest payable to affiliates....................... (41) 1,238 (6,244)
Unearned revenues.................................... 23 701 1,332
Income taxes payable................................. 619 996 (2,150)
-------- -------- --------
Net cash provided by (used in) operating
activities...................................... 3,713 6,375 (3,392)
-------- -------- --------
INVESTING ACTIVITIES:
Proceeds from sale of marketable securities............... 59 -- --
Issuance of notes receivable from affiliates.............. (237) (208) --
Collections of notes receivable from affiliates........... -- -- 4,297
Proceeds from sales of land, equipment, building and
utilities.............................................. -- -- 1,176
Proceeds from sales of land held for sale................. 733 600 --
Purchases of land, equipment, building and utilities...... (4,497) (4,162) (8,692)
Notes receivable, net..................................... (15,662) (20,226) (36,242)
-------- -------- --------
Net cash used in investing activities............. (19,604) (23,996) (39,461)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings from unaffiliated entities....... 22,668 26,648 54,069
Payments on borrowings to unaffiliated entities........... (4,005) (8,939) (50,127)
Proceeds from borrowings from affiliates.................. 2,468 619 68
Payments on borrowings to affiliates...................... (1,117) (1,112) (8,303)
Net proceeds from initial public offering................. -- -- 51,143
Discontinued operations................................... (1,340) (2,334) --
-------- -------- --------
Net cash provided by financing activities......... 18,674 14,882 46,850
-------- -------- --------
NET INCREASE (DECREASE) IN CASH............................. 2,783 (2,739) 3,997
CASH AND EQUIVALENTS
BEGINNING OF PERIOD....................................... 929 3,712 973
-------- -------- --------
END OF PERIOD............................................. $ 3,712 $ 973 $ 4,970
======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Interest paid, net of amounts capitalized................. $ 1,946 $ 3,003 $ 10,007
Income taxes paid......................................... 17 -- --
Assets contributed........................................ 14,489 -- --
Liabilities assumed with contributed assets............... 8,924 -- --
Land and equipment acquired under capital leases.......... 409 814 2,943
Repurchase of Common Stock through issuance of debt....... 100 -- --
Costs incurred in connection with initial public
offering............................................... -- -- 6,457
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 101

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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 acquiring timeshare resorts; (ii) marketing and selling one-week annual and
biennial vacation intervals ("Vacation Intervals") to new prospective 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 in-house sales, marketing,
financing, and property management capabilities and coordinates all aspects of
expansion of its ten 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 provided. 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
years ended December 31, 1996 and 1997, reflect the operations of the Company
and its wholly owned subsidiaries, Condominium Builders, Inc. ("CBI"), Villages
Land, Inc. ("VLI"), Silverleaf Travel, Inc. ("STI"), Database Research, Inc.
("DRI"), and Silverleaf Acquisitions, Inc. ("SAI"), a wholly owned subsidiary
formed in July 1997 for the purpose of acquiring additional timeshare
operations.

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.

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, 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. Under this
method, the portion of revenue applicable to costs incurred, as compared to
total estimated construction and direct selling costs, is recognized in the
period of sale. The remaining amount is deferred and recognized as the remaining
costs are incurred. 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 the lower of its original historical cost basis or market
value 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.

F-7
<PAGE> 102
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 price and cost of sales is the
incremental increase in the cost of the Vacation Interval purchased. A provision
for estimated customer returns (customer returns represent cancellations of
properly recorded sales transactions which occur within one year after the sale)
is reported net against Vacation Interval sales.

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 probable. When inventory is returned to the Company any
unpaid note receivable balances, net of the lower of historical cost or market
of the Vacation Interval which is the amount at which the Vacation Interval is
being restored to inventory, are charged against the previously established
allowance for uncollectible notes.

Revenues related to one-time Sampler contracts, which entitles the
prospective owner to sample a resort for various periods, are recorded as
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 in the period the corresponding
revenue is recognized.

Cash and Equivalents -- Cash and equivalents consist of all highly liquid
investments with an original 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.

Restricted cash -- Restricted cash consists of a certificate of deposit
which serves as collateral for a construction bond.

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 uncollectible 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 (which occur more than one year after the sale) and losses
experienced, including losses related to previously sold notes receivable which
became delinquent and were reacquired pursuant to the recourse obligations
discussed herein. Recourse to the Company on sales of customer 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 are placed back into inventory at the lower of their 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.

Impairment -- Company management routinely reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.

F-8
<PAGE> 103
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Land, Equipment, Building and Utilities -- Land, equipment (including
equipment under capital lease), building 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 for all fixed assets, other than land, using the
straight-line method over the estimated useful life of the asset, ranging from 3
to 20 years.

Discontinued Operations -- During 1996, the Company adopted a plan to
discontinue its development and sale of condominiums by CBI. Those 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 -- The Company has adopted the new computation and
disclosure requirements of Statement of Financial Accounting Standards ("SFAS")
No. 128 -- "Earnings Per Share." Basic earnings per share is computed by
dividing net income by the weighted average shares outstanding. Earnings per
share assuming dilution is computed by dividing net income by the weighted
average number of shares and equivalent shares outstanding. The number of
equivalent shares is computed using the treasury stock method which assumes that
the increase in the number of shares resulting from the exercise of the stock
options described in Note 9 is reduced by the number of shares which could have
been repurchased by Silverleaf with the proceeds from the exercise of the
options. In 1997, the weighted average shares outstanding was calculated by
increasing the average weighted average shares outstanding by the assumed
issuance of 321,737 shares upon exercise of the options and the repurchase of
272,325 shares with the proceeds of the exercise of such options.

No options were granted or outstanding prior to 1997.

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.

F-9
<PAGE> 104
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reclassification -- During 1997 the Company began classifying the
components of the previously reported provision for uncollectible notes into the
following three categories based on the nature of the item; credit losses,
customer returns and customer releases (customer releases represent voluntary
cancellations of properly recorded sales transactions which in the opinion of
management is consistent with the maintenance of overall customer goodwill).
Provision pertaining to credit losses, customer returns and customer releases
are classified in Provision for uncollectible notes, Vacation Interval sales,
and Operating, general and administrative, respectively. The Company has
reclassified these amounts within the previously reported financial statements
to conform to the classification for the year ended December 31, 1997. The
reclassification has no balance sheet effect and has no effect on previously
reported net income. The reclassification had the effect of decreasing Vacation
Interval sales, decreasing the provision for uncollectible notes, and increasing
Operating, general and administrative for the years ended December 31, 1995,
1996 and 1997 as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Vacation Interval sales................................ $ 1,794 $ 2,196 $ 2,829
Provision for uncollectible notes...................... (2,512) (3,342) (4,044)
Operating, general and administrative.................. 718 1,146 1,215
------- ------- -------
Net.......................................... $ -- $ -- $ --
======= ======= =======
</TABLE>

Information affected by this reclassification contained elsewhere in the notes
to consolidated financial statements has also been updated.

In addition, certain other reclassifications have been made to the 1995 and 1996
financial statements to conform to 1997 presentation. These reclassifications
had no effect on net income.

SFAS No. 130 -- SFAS No. 130, "Reporting on Comprehensive Income",
establishes standards for reporting and presenting comprehensive income in the
financial statements and will be effective for Silverleaf beginning in 1998. At
present, Management believes that the adoption of this statement will not have a
material impact on the Company's financial statements.

SFAS No. 131 -- SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", redefines how operating segments are determined and
requires disclosure of certain financial and descriptive information about a
company's operating segments. SFAS No. 131 may require additional disclosures
and will be effective for Silverleaf beginning in 1998.

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

F-10
<PAGE> 105
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 has not engaged 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, internally
generated funds and proceeds from the IPO. 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.

Geographic Concentration -- The Company's notes receivable are primarily
originated in Texas, Missouri and Illinois. 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
with construction occurring in other markets including Illinois and Nevada. 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, 1997 was approximately 14.5%.

In connection with the Sampler program the Company routinely enters into
notes receivable with terms of 10 months. These notes receivable totaled $1,568
at December 31, 1996 and $1,523 at December 31, 1997, 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, 1997:

<TABLE>
<S> <C>
1998........................................................ $ 12,868
1999........................................................ 13,872
2000........................................................ 16,018
2001........................................................ 18,497
2002........................................................ 21,359
Thereafter.................................................. 22,043
--------
104,657
Less allowance for uncollectible notes...................... (12,621)
--------
Notes receivable, net............................. $ 92,036
========
</TABLE>

Estimated customer returns of $2,829 have been excluded from the above
schedule.

F-11
<PAGE> 106
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, 1995, 1996 and 1997:

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Unaffiliated third parties.............................. $565 $ -- $ --
Affiliates.............................................. -- -- --
---- ---- ----
Total notes receivable sold................... $565 $ -- $ --
==== ==== ====
</TABLE>

The following schedule summarizes outstanding principal maturities of notes
receivable sold with recourse as of December 31, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- ------
<S> <C> <C>
Unaffiliated third parties.................................. $ 9,693 $6,550
Affiliates.................................................. 1,355 841
------- ------
Total outstanding notes receivable sold with
recourse........................................ $11,048 $7,391
======= ======
</TABLE>

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 the years ended December 31,
1995, 1996, and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Balance, beginning of period......................... $ 8,102 $ 8,067 $ 9,698
Provision for credit losses and other items.......... 7,350 9,879 11,739
Receivables charged off.............................. (7,385) (8,248) (8,816)
------- ------- -------
Balance, end of period............................... $ 8,067 $ 9,698 $12,621
======= ======= =======
</TABLE>

Provision for credit losses for the years ended December 31, 1995, 1996,
and 1997, was $6,632, $8,733, and $10,524, respectively.

5. LAND, EQUIPMENT, BUILDING AND UTILITIES

The Company's land, equipment, building and utilities consists of the
following at December 31, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1997
------- -------
<S> <C> <C>
Land........................................................ $ 1,346 $ 4,727
Vehicles and equipment...................................... 2,066 1,808
Utility plant, building and facilities...................... 3,398 4,930
Office furniture and equipment.............................. 4,013 8,066
Improvements................................................ 5,551 7,006
------- -------
16,374 26,537
Less accumulated depreciation............................... (3,741) (4,908)
------- -------
Net land, equipment, building and utilities................. $12,633 $21,629
======= =======
</TABLE>

F-12
<PAGE> 107
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation and amortization expense for the years ended December 31,
1995, 1996, and 1997, was $863, $1,264, and $1,497, 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 is
included in the consolidated income tax return of the Company (See Note 12).

Income tax expense consists of the following components for the years ended
December 31, 1995, 1996 and 1997:

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current:
Federal............................................ $ 618 $ 992 $1,500
State.............................................. 17 -- --
------ ------ ------
Total current tax expense.................. 635 992 1,500
Deferred tax expense................................. 877 1,975 5,524
------ ------ ------
Total income tax expense................... $1,512 $2,967 $7,024
====== ====== ======
</TABLE>

A reconciliation of income taxes on reported pretax income at statutory
rates to actual income tax expense for the years ended December 31, 1995, 1996
and 1997, is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- --------------
DOLLARS RATE DOLLARS RATE DOLLARS RATE
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Income tax at statutory rates................ $1,040 34% $2,700 34% $6,454 34%
State income taxes, net of Federal Tax
benefit.................................... 92 3% 238 3% 570 3%
Other........................................ 380 12% 29 1% -- --
------ -- ------ -- ------ --
Total income tax expense........... $1,512 49% $2,967 38% $7,024 37%
====== == ====== == ====== ==
Income tax expense attributable to:
Continuing operations...................... $1,512 $3,140 $7,024
Discontinued operations.................... -- (173) --
------ ------ ------
Total income tax expense........... $1,512 $2,967 $7,024
====== ====== ======
</TABLE>

F-13
<PAGE> 108
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amounts for deferred tax assets and liabilities as of December 31, 1996 and
1997, are as follows:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Installment sales income.................................. $16,056 $30,207
Other..................................................... 34 --
------- -------
Total deferred tax liabilities.................... 16,090 30,207
------- -------
Deferred tax assets:
Other..................................................... 2,287 162
Alternative minimum tax credit............................ 3,650 1,500
Net operating loss carryforward........................... 5,310 14,508
------- -------
Total deferred tax assets......................... 11,247 16,170
------- -------
Net deferred tax liability........................ $ 4,843 $14,037
======= =======
</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 estimable as of December 31, 1997.

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 current AMT payable balance
was adjusted in 1997 to reflect the change in method of accounting for
installment sales under AMT granted by the Internal Revenue Service effective as
of January 1, 1997. 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 2012. 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. Management believes that it will be able to utilize its net
operating losses from normal operations or in the event an ownership change
should occur which could limit the utilization of the NOL; the Company could
implement a strategy to accelerate income recognition for federal income tax
purposes to utilize the existing NOL. 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, 1997:

<TABLE>
<CAPTION>
EXPIRATION DATES
----------------
<S> <C>
2007................................................... $ 315
2008................................................... --
2009................................................... 1,385
2010................................................... 5,353
2011................................................... 4,239
2012................................................... 27,919
-------
$39,211
=======
</TABLE>

F-14
<PAGE> 109
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable and capital lease obligations related to continuing
operations at December 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
$40 million revolving loan agreement ($25 million at
December 31, 1996), which contains certain financial
covenants, due October 2005, principal and interest
payable from the proceeds obtained from customer notes
receivable which are pledged as collateral for the note,
at an interest rate of LIBOR plus 2.5%.................... $20,139 $22,137
$12 million revolving loan agreement which contains certain
financial covenants, due May 2003, principal and interest
payable from the proceeds obtained from customer notes
receivable which are pledged as collateral for the note,
at an interest rate of Base plus 2.75% (11.25% at December
31, 1997)................................................. 6,004 4,122
$7.5 million revolving line of credit, which contains
certain financial covenants, retired during 1997, with
monthly interest payments at Base plus 2.75%.............. 4,000 --
$60 million revolving loan agreement ($40 million at
December 31, 1996), which contains certain financial
covenants, due December 1999, principal and interest
payable from the proceeds obtained on customer notes
receivable pledged as collateral for the note, at an
interest rate of LIBOR plus 2.55%......................... 278 1,529
$15 million revolving loan agreement which contains certain
financial covenants, due November 2002, principal and
interest payable from the proceeds obtained from customer
notes receivable which are pledged as collateral for the
note, at an interest rate of Prime plus 2%................ 4,278 12,596
$5.4 million note payable, which contains certain financial
covenants, due October 1999, secured by certain assets of
the Company, interest only payments due through April
1998, with payments of principal and interest due monthly
thereafter until maturity on October 9, 1999, at an
interest rate of Prime plus 2%............................ 5,201 --
$10 million line of credit due January 2000, with drawings
permitted until December 1998, at a variable rate of LIBOR
plus 3%, secured by land, improvements, and equipment of
various Existing Resorts and New Resorts.................. -- 4,070
$10 million revolving construction loan due October 2000,
with drawings permitted until April 1999, a variable rate
of LIBOR plus 3.5% secured by land, construction in
process and customer notes receivable..................... -- --
Various notes, due from January 1998, through October 2002,
collateralized by various assets with interest rates
ranging from 4.2% to 14.0%................................ 1,022 1,785
------- -------
Total notes payable............................... 40,922 46,239
Capital lease obligations................................... 1,064 2,632
------- -------
Total notes payable and capital lease
obligations...................................... $41,986 $48,871
======= =======
</TABLE>

Prime rate at December 31, 1997, was 8.5%.

Applicable LIBOR rates at December 31, 1997, ranged from 5.72% to 5.81%.

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

F-15
<PAGE> 110
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to (i) maintain an aggregate minimum tangible net worth ranging from $12 million
to $67 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, 1997:

<TABLE>
<S> <C>
1998........................................................ $ 7,626
1999........................................................ 11,231
2000........................................................ 6,604
2001........................................................ 6,541
2002........................................................ 6,791
Thereafter.................................................. 10,078
-------
Total............................................. $48,871
=======
</TABLE>

Total interest expense for the years ended December 31, 1995, 1996 and 1997
was $3,609, $4,759 and $4,664, respectively. Interest of $516, $711 and $823 was
capitalized during the years ended 1995, 1996 and 1997, respectively.

As of December 31, 1997 approximately $75,000 of assets of the Company were
pledged as collateral.

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 a contingent
liability for the notes receivable sold with recourse. The total amount of the
contingent liability was equal to the uncollected balance of the notes as of
December 31, 1997. 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, 1995, 1996 and 1997, was $310, $481 and $886, 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 at
December 31, 1997:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998........................................................ $1,096 $1,081
1999........................................................ 900 990
2000........................................................ 651 937
2001........................................................ 177 883
2002........................................................ 100 620
------ ------
Total minimum future lease payments......................... 2,924 $4,511
======
Less amounts representing interest.......................... (292)
------
Present value of future minimum lease payments.............. $2,632
======
</TABLE>

F-16
<PAGE> 111
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Equipment acquired under capital leases consists of the following at
December 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Amount of equipment under capital leases.................... $2,240 $4,743
Less accumulated depreciation............................... (599) (861)
------ ------
$1,641 $3,882
====== ======
</TABLE>

Effective January 1, 1997, the Company entered into three year employment
agreements with two executive officers which provide 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.

In May 1997, 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.

In July 1997, the Company entered into an employment agreement with an
executive officer of the Company. Either party may terminate the agreement upon
30 days notice to the other. The agreement provides for an annual base salary,
options for the purchase of Common Stock, and other fringe benefits.
Additionally, if the officer is terminated without "good cause", the Company
shall be obligated to make severance payments in an amount equal to the
officer's annual base salary. In connection with this officer's employment, in
August 1997, the Company purchased a house for $531 and leased the house to the
officer for 13 months at a rental rate equal to the Company's interest,
insurance and taxes, currently approximately $3 per month. The officer has the
option to purchase the home at the end of the 13 month term for $531 plus 8% per
annum on the Company's down payment for the house.

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.

9. EQUITY

The Company completed its initial public offering in June 1997 of 3,600,000
shares of Common Stock at $16.00 per share (the "IPO"). Costs incurred in
connection with the IPO were approximately $6.5 million. Net proceeds were used
primarily for the repayment of amounts owed to affiliates and notes payable to
third parties.

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 which
included a note receivable from the Company of $10,869. 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 $8,924 consisting primarily of notes payable to
affiliates of $7,631. These amounts were included within the financial

F-17
<PAGE> 112
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

statements of the Company until their repayment during 1997. 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 promissory note. As of December 31, 1996
the amount owed under this agreement was $67 and is included in amounts due to
affiliates. This note was paid in full in June 1997.

During 1997, the Company established a stock option plan (the "1997 Stock
Option Plan" or "Plan"). The 1997 Stock Option Plan provides for the award of
nonqualified stock options to directors, officers, and key employees, and the
grant of incentive stock options to salaried key employees. Nonqualified stock
options will provide for the right to purchase Common Stock at a specified price
which may be less than or equal to 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. In February 1998, the Board of
Directors approved an amendment to the plan reserving an additional 500,000
shares of Common Stock for issuance under the plan; however, this amendment will
not become effective unless it is approved by the shareholders.

Outstanding options have a graded vesting schedule, with equal installments
of shares exercisable up through four years of the original grant date. These
options are exercisable at prices ranging from $16.00 to $24.50 per share and
expire 10 years from the date of grant.

Stock option transactions are summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Options outstanding, beginning of year...................... -- --
Granted..................................................... 877,000 $17.90
Exercised................................................... -- --
Forfeited................................................... (15,000) $16.00
------- ------
Options outstanding, end of year............................ 862,000 $17.93
======= ======
Exercisable, end of year.................................... -- --
======= ======
</TABLE>

For shares outstanding at December 31,1997:

<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE
NUMBER FAIR VALUE AVERAGE REMAINING
RANGE OF EXERCISE PRICES OF SHARES OF OPTIONS EXERCISE PRICE LIFE IN YEARS
- ------------------------ --------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C>
$16.00-$24.50.............................. 862,000 $11.51 $17.93 10
</TABLE>

F-18
<PAGE> 113
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has adopted the disclosure-only provisions of Statement of
Financial Standards No. 123 -- "Accounting for Stock Based Compensation" ("SFAS
No. 123"). The Company applies the accounting methods of Accounting Principles
Board Opinion No. 25 ("APB No. 25") and related Interpretations in accounting
for its stock options. Accordingly, no compensation cost has been recognized for
the options. Had compensation costs for the options been determined based on the
fair value at the grant date for the awards in 1997 consistent with the
provisions of SFAS No. 123, the Company's net income and net income per share
would have been the pro forma amounts indicated below (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Net income -- as reported............................... $11,960
Net income -- pro forma................................. 11,404
Net income per share -- as reported:
Basic and diluted..................................... 1.22
Net income per share -- pro forma:
Basic................................................. 1.17
Diluted............................................... 1.16
</TABLE>

The fair value of the options granted are estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
expected volatility of 56.5%, risk-free interest rate of 6.625%, expected life
of 7 years and no distribution yield.

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 whereby 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, 1995, 1996 and 1997, the Company recorded
management fees from Master Club of $2,478, $2,187, and $2,296, 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, 1995, 1996
and 1997, the Company incurred $1,911, $2,108, and $2,617, respectively, of
expenses under this agreement.

At December 31, 1996 the net amount receivable from Master Club totaled
$1,133 and at December 31, 1997 the net receivable from Master Club totaled
$1,282. 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 $430, $539, and $302 during the years ended
December 31, 1995, 1996, and 1997, respectively.
F-19
<PAGE> 114
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. During 1997 the Company and
subsidiaries purchased the remainder of Pace's inventory of notes receivable at
a cash price of $16.

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

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Notes receivable from the principal shareholder, due
December 31, 1997, bearing interest at rates ranging from
8.0%-9.0%................................................. $4,128 $ --
Notes receivable from the other shareholder, which bore
interest at 8%, such Note being forgiven and included in
compensation expense during 1996.......................... -- --
Receivables from other affiliated parties................... 169 --
Interest on shareholders notes receivable................... 371 --
------ ------
4,668 --
Timeshare owners associations and other, net................ 436 107
Amount due from Master Club................................. 1,133 1,282
------ ------
Total amounts due from affiliates................. $6,237 $1,389
====== ======
</TABLE>

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

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Note payable to Capital Venture I, due December 31, 1997,
bearing interest at 12.0%................................. $ 1,570 $ --
Note payable to principal shareholder, due December 31,
1997, bearing interest at 9.0%............................ 810 --
Note payable to Pace Finance Company due December 31, 1997,
bearing interest at prime plus 3.5% (11.75% at December
31, 1996)................................................. 362 --
Notes payable to principal shareholder, due December 31,
1997, bearing interest at 8.0%............................ 5,153 --
Other affiliated entities (see below), bearing interest at
9.0%...................................................... 340 --
Accrued interest payable to Capital Venture I............... 2,671 --
Accrued interest payable to principal shareholder........... 3,179 --
Accrued interest payable to other affiliated entities (see
below).................................................... 394 --
Accounts payable to other affiliated entities............... 286 --
------- -------
Total notes payable to affiliates................. $14,765 $ --
======= =======
</TABLE>

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

During 1997, the Company paid off affiliate debt and accrued interest
totaling approximately $15.0 million and received payments of approximately $5.0
million of affiliate notes receivable and accrued interest. The payment to
affiliates was made with funds from the IPO. On the consolidated balance sheet
dated December 31, 1997, the remaining due from affiliates relates to the Master
Club and the various homeowners' associations.

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

The Company agreed to sell to the principal shareholder the Company's
interest in a condominium and a residential dwelling at a price in excess of the
Company's carrying value. As of December 31, 1996, the carrying

F-20
<PAGE> 115
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

value of these assets totaled approximately $450. In September 1997, the
principal shareholder paid the Company $508 for these assets, subject to
adjustment for an appraisal of the condominium.

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.

The Company paid an employee's architectural firm the amounts of $338, $421
and $401, during 1995, 1996 and 1997, respectively, for architectural services
rendered to the Company.

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
obligations 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. All anticipated future costs of
carrying and selling the remaining inventory of CBI were accrued as of December
31, 1996. Based on the formal plan adopted by the Company, substantially all
assets were sold and liabilities repaid by December 31, 1997 and no accrual for
losses was required. The net assets of the subsidiary as of December 31, 1996
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Inventory of unsold condominiums............................ $1,939
Other Assets................................................ 50
Accounts payable and accrued expenses....................... (199)
Net reserve for gain (loss) on discontinued operations...... (201)
------
Net assets of discontinued operations............. $1,589
======
</TABLE>

The loss from discontinued operations was $1,484, $295 and $0 for the years
ended December 31, 1995, 1996, and 1997 respectively, net of income tax benefits
of $173 for the year ended December 31, 1996. There was no tax effect applicable
to the year ended December 31, 1995, since the discontinued operations were
contained in an S-corporation, and taxable losses were passed directly through
to its shareholder.

Basic and diluted earnings per share from discontinued operations are as
follows for the years ended December 31, 1995, 1996 and 1997:

<TABLE>
<CAPTION>
1995 1996 1997
----- ----- ----
<S> <C> <C> <C>
Loss per share from discontinued operations................. $(.19) $(.04) $--
===== ===== ===
</TABLE>

F-21
<PAGE> 116
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. ACQUISITIONS

In August 1997, the Company acquired certain land and amenities located
near St. Louis, Missouri and Chicago, Illinois for $2.9 million. The Company is
developing these properties as Drive-to Resorts.

In August 1997, the Company acquired certain land adjacent to the Hill
Country Resort located in Comal County, Texas, for $394. The Company intends to
develop this land as an expansion to the Hill Country Resort.

In November 1997, the Company acquired a parcel of land near the "strip" in
Las Vegas, Nevada, for $2.7 million. This property is intended for development
as a new Destination Resort.

In December 1997, the Company acquired the Oak N' Spruce Resort in the
Berkshire Mountains of western Massachusetts for $5.1 million as a new Drive-to
Resort to serve the greater New York City market. The Company intends additional
development at Oak N' Spruce.

Also in December 1997, the Company acquired a tract of land in Galveston,
Texas for approximately $485. The Company intends to develop this land as a new
beach-front Gulf Coast Destination Resort.

14. SUBSIDIARY GUARANTEES

All subsidiaries of the Company will guarantee the Notes (as defined in
Note 15) which would be issued in the proposed offering of $75.0 million of
Senior Subordinated Notes. The separate financial statements of each
guaranteeing subsidiary (each, a "Guarantor Subsidiary") are not presented
because the Company's management has concluded that such financial statements
are not material to investors. The guarantee of each Guarantor Subsidiary is
full and unconditional and joint and several and each Guarantor Subsidiary is a
wholly-owned subsidiary of the Company.

Combined summarized operating results of the Guarantor Subsidiaries are as
follows (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
------- ----- -----
<S> <C> <C> <C>
Revenues................................................ $ 433 $ 761 $ 407
======= ===== =====
Loss from continuing operations, before income taxes.... $ (285) $(346) $(140)
======= ===== =====
Net loss from discontinued operations, net of a benefit
of $257 in 1996....................................... $(1,990) $(438) $ --
======= ===== =====
Net loss................................................ $(1,433) $(656) $ (88)
======= ===== =====
</TABLE>

Combined summarized balance sheet information of the Guarantor Subsidiaries
is as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Land, equipment, inventory and utilities, net............... $1,288 $1,985
Net assets of discontinued operations....................... 1,589 --
Other assets................................................ 1,107 825
------ ------
Total assets...................................... $3,984 $2,810
====== ======
Investment by parent (includes equity and amounts due to
parent)................................................... $3,633 $2,810
Other liabilities........................................... 351 --
------ ------
Total liabilities and equity...................... $3,984 $2,810
====== ======
</TABLE>

At December 31, 1997, there is no subsidiary of the Company the capital
stock of which will comprise a substantial portion of the collateral for the
Notes within the meaning of Rule 3-10 of Regulation S-X.

F-22
<PAGE> 117
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SUBSEQUENT EVENTS

In January 1998, the Company entered into an agreement with Crown Resort
Co., LLC ("Crown") to acquire timeshare management rights at eight resorts in
Alabama, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee,
and Texas for $3.8 million. As part of this arrangement, Silverleaf will also
acquire any unsold Vacation Intervals at the eight resorts. This proposed
acquisition is subject to satisfactory completion of customary due-diligence
procedures; accordingly, there is no assurance that the proposed acquisition
will be completed.

In January 1998, the Company entered into an employment agreement proposing
to make an individual an executive officer of the Company. The agreement does
not become effective until the individual relocates to Dallas, Texas, which must
occur before July 1, 1998. The agreement provides for an annual base salary,
options for the purchase of Common Stock, and other fringe benefits. The
agreement also provides for the purchase of the employee's condominium, upon the
individual's relocation to Dallas, for $108. Additionally, if the officer is
terminated without "good cause", the Company shall be obligated to make
severance payments in an amount equal to the officer's base annual salary.

Also, in January 1998, the Company entered into an agreement for the
purchase of all issued and outstanding shares of a California marketing
corporation for $250. This purchase agreement was entered into in conjunction
with a December 1997 employment agreement entered into with an executive
officer.

In February 1998, the Company acquired a parcel of land in Galveston,
Texas, for approximately $1.2 million. The Company intends to develop this
parcel, along with an adjoining parcel acquired in December 1997 as a new
beach-front Destination Resort.

In February 1998, the Company entered into two agreements, one to acquire a
golf course and undeveloped land near Atlanta, Georgia for $3.5 million, and
another to acquire undeveloped land near Kansas City, Missouri for $1.6 million.
The proposed acquisitions are subject to satisfactory completion of customary
due diligence procedures; accordingly, there is no assurance that either
proposed acquisitions will be completed.

The Company is proposing to sell 2,000,000 shares of Company Common Stock
(the "Equity Offering"). In addition to the 2,000,000 shares being offered for
sale by the Company, the majority shareholder of the Company is offering to sell
500,000 additional shares of the Company.

The Company is also proposing to offer $75.0 million aggregate principal
amount of Senior Subordinated Notes due 2008 (the "Notes"). If issued, the Notes
will be general unsecured obligations of the Company, ranking subordinate in
right of payment to all senior indebtedness of the Company, including
indebtedness under the Company's revolving credit facilities (the "Note
Offering"). The consummation of the Equity Offering is not conditioned upon the
Note Offering; however, the consummation of the Note Offering is conditioned
upon the Equity Offering.

F-23
<PAGE> 118

INSIDE BACK COVER

CAPTION: "Silverleaf's Operations are Vertically Integrated -- Centralized
Operations."

1. First Picture -- photo of exterior of Silverleaf's offices. Caption:
"Centralized Marketing -- Silverleaf Resorts, Inc. Corporate
Headquarters -- Dallas, Texas."

2. Second Picture -- photo of interior of Silverleaf's offices. Caption:
"Sophisticated Telemarketing Technology at Corporate
Headquarters -- Dallas, Texas."

3. Third Picture -- photo of covered wagon drawn by mules accompanied by
three horseback riders. Caption: "Resort Operations -- Management of
Member Activities at Resorts -- Covered Wagon Rides -- Piney Shores
Resort, Conroe, Texas -- Lodge Getaway."

4. Fourth Picture -- photo of exterior of timeshare units. Caption:
"Standardized design, engineering and construction procedures ensure
uniform quality."
<PAGE> 119

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

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 THE UNDERWRITERS. 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>
Summary............................... 5
Risk Factors.......................... 17
Use of Proceeds....................... 30
Common Stock Price Range.............. 31
Dividend Policy....................... 31
Capitalization........................ 32
Unaudited Pro Forma Condensed
Consolidated Financial
Information......................... 33
Selected Consolidated Historical
Financial and Operating
Information......................... 37
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 39
The Timeshare Industry................ 46
Business.............................. 49
Management............................ 77
Certain Relationships and Related
Transactions........................ 83
Principal and Selling Shareholders.... 86
Description of Capital Stock.......... 87
Certain Provisions of Texas Law and
the Company's Charter and Bylaws.... 87
Underwriting.......................... 90
Notice to Canadian Residents.......... 92
Legal Matters......................... 93
Experts............................... 93
Additional Information................ 93
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

======================================================

SILVERLEAF RESORTS LOGO

SILVERLEAF RESORTS, INC.
2,500,000 Shares
Common Stock
($0.01 par value)

P R O S P E C T U S

CREDIT SUISSE FIRST BOSTON

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

EVEREN SECURITIES, INC.
- ------------------------------------------------------
<PAGE> 120

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................................. $ 22,823
Accounting fees and expenses................................ 400,000
Blue Sky fees and expenses.................................. 6,500
Legal fees and expenses..................................... 425,000
Printing and engraving expenses............................. 450,000
Transfer Agent fees......................................... 5,000
Miscellaneous expenses...................................... 100,000
----------
TOTAL............................................. $1,409,323
==========
</TABLE>

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

* to be filed by amendment

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.

The Company has entered 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. The
Company has directors' and officers' insurance which insures them against
certain acts and omissions in the course of their duties.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

None.

II-1
<PAGE> 121

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+1.1 -- Form of Underwriting Agreement between Registrant and
Credit Suisse First Boston Corporation et al.
3.1 -- Charter of Silverleaf Resorts, Inc. (incorporated by
reference to Exhibit 3.1 to Amendment No. 1 dated May 16,
1997 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
3.2 -- Bylaws of Silverleaf Resorts, Inc. (incorporated by
reference to Exhibit 3.2 to Registrants Annual Report on
Form 10-K for year ended December 31, 1997).
4.1 -- Form of Stock Certificate of Registrant (incorporated by
reference to Exhibit 4.1 to Amendment No. 1 dated May 16,
1997 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
+5.1 -- Form of Opinion of Meadows, Owens, Collier, Reed, Cousins
& Blau LLP regarding the legality of Common Stock being
registered (including consent).
*10.1 -- Registration Rights Agreement between Registrant and
Robert E. Mead.
10.2.1 -- Employment Agreement between Registrant and Robert E.
Mead (incorporated by reference to Exhibit 10.2.1 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.2.2 -- Employment Agreement between Registrant and David T.
O'Connor (incorporated by reference to Exhibit 10.2.2 to
Amendment No. 1 dated May 16, 1997 to Registrant's
Registration Statement on Form S-1, File No. 333-24273).
10.2.3 -- Employment Agreement between Registrant and Sharon K.
Brayfield (incorporated by reference to Exhibit 10.2.3 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.2.4 -- Employment Agreement between Registrant and Thomas Franks
(incorporated by reference to Exhibit 10.6 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.2.5 -- Memorandum Agreement, dated August 21, 1997, between
Registrant and Thomas C. Franks (incorporated by
reference to Exhibit 10.7 to Registrant's Form 10-Q for
quarter ended September 30, 1997).
10.2.6 -- Employment Agreement, dated January 16, 1998, between
Registrant and Allen L. Hudson (incorporated by reference
to Exhibit 10.2.6 to Registrant's Annual Report on Form
10-K for year ended December 31, 1997).
10.2.7 -- Employment Agreement, dated January 20, 1998, between
Registrant and Jim Oestreich (incorporated by reference
to Exhibit 10.2.7 to Registrant's Annual Report on Form
10-K for year ended December 31, 1997).
10.3 -- 1997 Stock Option Plan of Registrant (incorporated by
reference to Exhibit 10.3 to Amendment No. 1 dated May
16, 1997 to Registrant's Registration Statement on Form
S-1, File No. 333-24273).
10.3.1 -- Nonqualified Stock Option Agreement (David T. O'Connor)
(incorporated by reference to Exhibit 10.1 to
Registrant's Form 10-Q for quarter ended June 30, 1997).
10.3.2 -- Incentive Stock Option Agreement (Joe W. Conner)
(incorporated by reference to Exhibit 10.2 to
Registrant's Form 10-Q for quarter ended June 30, 1997).
</TABLE>

II-2
<PAGE> 122

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.3.3 -- Incentive Stock Option Agreement (Larry H. Fritz)
(incorporated by reference to Exhibit 10.3 to
Registrant's Form 10-Q for quarter ended June 30, 1997).
10.3.4 -- Non-Qualified Stock Option Agreement (Thomas Franks)
(incorporated by reference to Exhibit 10.8 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.5 -- Non-Qualified Stock Option Agreement (Stuart M. Bloch)
(incorporated by reference to Exhibit 10.9 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.6 -- Non-Qualified Stock Option Agreement (James B. Francis,
Jr.) (incorporated by reference to Exhibit 10.10 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.7 -- Non-Qualified Stock Option Agreement (Michael A. Jenkins)
(incorporated by reference to Exhibit 10.11 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.8 -- Non-Qualified Stock Option Agreement, dated January 21,
1998, between Registrant and Joe W. Conner (incorporated
by reference to Exhibit 10.3.8 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
10.3.9 -- Non-Qualified Stock Option Agreement, dated January 20,
1998, between Registrant and Jim Oestreich (incorporated
by reference to Exhibit 10.3.9 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
10.4 -- Master Club Agreement between the Master Club and the
resort clubs named therein (incorporated by reference to
Exhibit 10.4 to Registrant's Registration Statement on
Form S-1, File No. 333-24273).
10.5 -- Management Agreement between Registrant and the Master
Club (incorporated by reference to Exhibit 10.5 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.6 -- Revolving Loan and Security Agreement, dated October
1996, by CS First Boston Mortgage Capital Corp.
("CSFBMCC") and Silverleaf Vacation Club, Inc.
(incorporated by reference to Exhibit 10.6 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.7 -- Amendment No. 1 to Revolving Loan and Security Agreement,
dated November 8, 1996, between CSFBMCC and Silverleaf
Vacation Club, Inc. (incorporated by reference to Exhibit
10.7 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.8 -- Loan and Security Agreement among Textron Financial
Corporation ("Textron"), Ascension Resorts, Ltd. and
Ascension Capital Corporation, dated August 15, 1995
(incorporated by reference to Exhibit 10.9 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.9 -- First Amendment to Loan and Security Agreement, dated
December 28, 1995, between Textron and Silverleaf
Vacation Club, Inc. (incorporated by reference to Exhibit
10.10 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.10 -- Second Amendment to Loan and Security Agreement, dated
October 31, 1996, executed by Textron and Silverleaf
Vacation Club, Inc. (incorporated by reference to Exhibit
10.11 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.11 -- Restated and Amended Loan and Security Agreement, dated
December 27, 1995, between Heller Financial, Inc.
("Heller") and Ascension Resorts, Ltd. (incorporated by
reference to Exhibit 10.12 to Registrant's Registration
Statement on Form S-1, File No. 333-24273).
</TABLE>

II-3
<PAGE> 123

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.12 -- Loan and Security Agreement, dated December 27, 1995,
executed by Ascension Resorts, Ltd. and Heller
(incorporated by reference to Exhibit 10.13 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.13 -- Amendment to Restated and Amended Loan and Security
Agreement, dated August 15, 1996, between Heller and
Silverleaf Vacation Club, Inc. (incorporated by reference
to Exhibit 10.14 to Registrant's Registration Statement
on Form S-1, File No. 333-24273).
10.14 -- Loan and Security Agreement, between Greyhound Financial
Corporation and Ascension Resorts, Ltd., dated August 12,
1994 (incorporated by reference to Exhibit 10.5 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.15 -- Amendment No. 1 to Loan and Security Agreement between
Finova Capital Corporation and Ascension Resorts, Ltd.,
dated July 24, 1995 (incorporated by reference to Exhibit
10.16 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.16 -- Amendment No. 2 to Loan and Security Agreement among
Ascension Resorts, Ltd., Ascension Capital Corporation,
and Finova Capital Corporation, dated December 13, 1995
(incorporated by reference to Exhibit 10.17 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.17 -- Form of Indemnification Agreement (between Registrant and
all officers, directors, and proposed directors)
(incorporated by reference to Exhibit 10.18 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.18 -- 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) (incorporated by
reference to Exhibit 10.19 to Registrant's Registration
Statement on Form S-1, File No. 333-24273).
10.19 -- Agreement for Professional Services between Silverleaf
Vacation Club, Inc. and Hudson and Company, Inc., dated
November 12, 1996 (incorporated by reference to Exhibit
10.20 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.20 -- 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
(incorporated by reference to Exhibit 10.22 to Amendment
No. 1 dated May 16, 1997 to Registrant's Registration
Statement on Form S-1, File No. 333-24273).
10.21 -- First Amendment to Management Agreement, dated January 1,
1993, between Master Endless Escape Club and Ascension
Resorts, Ltd. (incorporated by reference to Exhibit 10.23
to Amendment No. 1 dated May 16, 1997 to Registrant's
Registration Statement on Form S-1, File No. 333-24273).
10.22 -- Contract of Sale, dated May 2, 1997, between Registrant
and third-party (incorporated by reference to Exhibit
10.24 to Amendment No. 1 dated May 16, 1997 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.23 -- Amendment to Loan Documents, dated December 27, 1996,
among Silverleaf Vacation Club, Inc., Ascension Resorts,
Ltd., and Heller Financial, Inc. (incorporated by
reference to Exhibit 10.25 to Amendment No. 1 dated May
16, 1997 to Registrant's Registration Statement on Form
S-1, File No. 333-24273).
10.24 -- Contract of Sale between Thousand Trails, Inc. and
Registrant (approximately 98.475 acres, Galveston County,
Texas) (incorporated by reference to Exhibit 10.1 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
</TABLE>

II-4
<PAGE> 124

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.25 -- Contract of Sale between R.J. Novelli, Sr., et al and
Registrant (approximately 21.5 acres, Galveston County,
Texas) (incorporated by reference to Exhibit 10.2 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.26 -- Contract of Sale between Harmon/Koval Limited Liability
Company and Registrant (2.1 acres, Clark County, Nevada)
(incorporated by reference to Exhibit 10.3 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.27 -- Second Amendment to Restated and Amended Loan and
Security Agreement between Heller Financial, Inc. and
Registrant ($40 million revolving credit facility)
(incorporated by reference to Exhibit 10.4 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.28 -- Construction Loan Agreement between Heller Financial Inc.
and Registrant ($10 million revolving construction loan
facility) (incorporated by reference to Exhibit 10.5 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.29 -- Real Estate Contract of Sale dated September 30, 1997,
between Registrant and Robert E. Mead (incorporated by
reference to Exhibit 10.12 to Registrant's Form 10-Q for
quarter ended September 30, 1997).
10.30 -- Master Club Agreement dated September 25, 1997 between
Registrant and Timber Creek Resort Club (incorporated by
reference to Exhibit 10.13 to Registrant's Form 10-Q for
quarter ended September 30, 1997).
10.31 -- Loan Agreement, dated December 19, 1997, between Credit
Suisse First Boston Mortgage Capital, L.L.C. and
Registrant (incorporated by reference to Exhibit 10.31 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.32 -- Amendment to Loan Documents, dated December 22, 1997,
between Registrant and Credit Suisse First Boston
Mortgage Capital, L.L.C. (incorporated by reference to
Exhibit 10.32 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.33 -- Second Amendment to Management Agreement, dated December
31, 1997, between Master Club and Registrant
(incorporated by reference to Exhibit 10.33 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.34 -- Master Club Agreement, dated January 5, 1998, between
Master Club and Oak N' Spruce Resort Club (incorporated
by reference to Exhibit 10.34 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
10.35 -- Contract of Sale, dated November 13, 1997, between Oak N'
Spruce Management, Inc., Beartown Development, Inc.,
Bruce Hagedorn and Doug Richie, and Registrant
(incorporated by reference to Exhibit 10.35 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.36 -- Contract of Sale, dated January 12, 1998, between Crown
Resort Co. L.L.C., Richard W. Dickson and Robert G.
Garner, and Registrant (incorporated by reference to
Exhibit 10.36 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.37 -- Contract of Sale, dated February 18, 1998, between
Registrant and Michael J. McDermott (incorporated by
reference to Exhibit 10.37 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1997).
10.38 -- Contract of Sale, dated February 19, 1998, between
Registrant and Lee R. Roper (incorporated by reference to
Exhibit 10.38 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.39 -- Contract of Sale, dated February 19, 1998, between
Registrant and J. Phillip Ballard, Jr., and Eagle Greens
Ltd. (incorporated by reference to Exhibit 10.39 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
</TABLE>

II-5
<PAGE> 125

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.40 -- Stock Purchase Agreement, dated January 15, 1998, between
Silverleaf Resorts, Inc. and Jim Oestreich (incorporated
by reference to Exhibit 10.40 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
10.41 -- Contract of Sale, dated May 2, 1997, between Registrant
and Thousand Trails, Inc. (incorporated by reference to
Exhibit 10.41 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.42 -- First Amendment to Contract of Sale, dated July 25, 1997,
between Registrant and Thousand Trails, Inc.
(incorporated by reference to Exhibit 10.42 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.43 -- Master Club Agreement, dated November 13, 1997, between
Master Club and Fox River Resort Club (incorporated by
reference to Exhibit 10.43 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1997).
*10.44 -- Amendment to Contract of Sale, dated February 13, 1998,
between Crown Resort Co. L.L.C., Richard W. Dickson,
Robert G. Garner, and Registrant.
**10.45 -- Letter agreement, dated March 16, 1998, between Heller
Financial, Inc. and Registrant.
+21.1 -- Subsidiaries of Silverleaf Resorts, Inc.
+23.1 -- Consent of Meadows, Owens, Collier, Reed, Cousins & Blau,
L.L.P. (included as a part of Exhibit 5.1)
*23.2 -- Consent of Deloitte & Touche LLP.
+24.1 -- Power of Attorney (included as part of page II-7 of this
Registration Statement).
+27.1 -- Financial Data Schedule.
</TABLE>

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

* Previously filed with Registrant's Amendment No. 1 to Form S-1, File No.
333-47423, filed March 16, 1998.

** Filed herewith

+ Previously filed with Registrant's Form S-1, File No. 333-47423, filed
March 6, 1998.

(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-6
<PAGE> 126

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.

II-7
<PAGE> 127

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Silverleaf Resorts, Inc. has duly caused this Amendment No. 2 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on April 1, 1998.

SILVERLEAF RESORTS, INC.

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

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to 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 April 1, 1998
- ----------------------------------------------------- Executive Officer (Principal
Robert E. Mead Executive Officer)

/s/ SHARON K. BRAYFIELD* Director and President April 1, 1998
- -----------------------------------------------------
Sharon K. Brayfield

/s/ JOE W. CONNER* Chief Financial Officer and April 1, 1998
- ----------------------------------------------------- Treasurer (Principal Financial
Joe W. Conner and Accounting Officer)

/s/ STUART MARSHALL BLOCH* Director April 1, 1998
- -----------------------------------------------------
Stuart Marshall Bloch

/s/ JAMES B. FRANCIS, JR.* Director April 1, 1998
- -----------------------------------------------------
James B. Francis, Jr.

/s/ MICHAEL A. JENKINS* Director April 1, 1998
- -----------------------------------------------------
Michael A. Jenkins
</TABLE>

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

*By Robert E. Mead pursuant to Power of Attorney

II-8
<PAGE> 128

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.3.4 -- Non-Qualified Stock Option Agreement (Thomas Franks)
(incorporated by reference to Exhibit 10.8 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.5 -- Non-Qualified Stock Option Agreement (Stuart M. Bloch)
(incorporated by reference to Exhibit 10.9 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.6 -- Non-Qualified Stock Option Agreement (James B. Francis,
Jr.) (incorporated by reference to Exhibit 10.10 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.7 -- Non-Qualified Stock Option Agreement (Michael A. Jenkins)
(incorporated by reference to Exhibit 10.11 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.3.8 -- Non-Qualified Stock Option Agreement, dated January 21,
1998, between Registrant and Joe W. Conner (incorporated
by reference to Exhibit 10.3.8 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
10.3.9 -- Non-Qualified Stock Option Agreement, dated January 20,
1998, between Registrant and Jim Oestreich (incorporated
by reference to Exhibit 10.3.9 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
10.4 -- Master Club Agreement between the Master Club and the
resort clubs named therein (incorporated by reference to
Exhibit 10.4 to Registrant's Registration Statement on
Form S-1, File No. 333-24273).
10.5 -- Management Agreement between Registrant and the Master
Club (incorporated by reference to Exhibit 10.5 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.6 -- Revolving Loan and Security Agreement, dated October
1996, by CS First Boston Mortgage Capital Corp.
("CSFBMCC") and Silverleaf Vacation Club, Inc.
(incorporated by reference to Exhibit 10.6 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.7 -- Amendment No. 1 to Revolving Loan and Security Agreement,
dated November 8, 1996, between CSFBMCC and Silverleaf
Vacation Club, Inc. (incorporated by reference to Exhibit
10.7 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.8 -- Loan and Security Agreement among Textron Financial
Corporation ("Textron"), Ascension Resorts, Ltd. and
Ascension Capital Corporation, dated August 15, 1995
(incorporated by reference to Exhibit 10.9 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.9 -- First Amendment to Loan and Security Agreement, dated
December 28, 1995, between Textron and Silverleaf
Vacation Club, Inc. (incorporated by reference to Exhibit
10.10 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.10 -- Second Amendment to Loan and Security Agreement, dated
October 31, 1996, executed by Textron and Silverleaf
Vacation Club, Inc. (incorporated by reference to Exhibit
10.11 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.11 -- Restated and Amended Loan and Security Agreement, dated
December 27, 1995, between Heller Financial, Inc.
("Heller") and Ascension Resorts, Ltd. (incorporated by
reference to Exhibit 10.12 to Registrant's Registration
Statement on Form S-1, File No. 333-24273).
10.12 -- Loan and Security Agreement, dated December 27, 1995,
executed by Ascension Resorts, Ltd. and Heller
(incorporated by reference to Exhibit 10.13 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
</TABLE>
<PAGE> 130

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.13 -- Amendment to Restated and Amended Loan and Security
Agreement, dated August 15, 1996, between Heller and
Silverleaf Vacation Club, Inc. (incorporated by reference
to Exhibit 10.14 to Registrant's Registration Statement
on Form S-1, File No. 333-24273).
10.14 -- Loan and Security Agreement, between Greyhound Financial
Corporation and Ascension Resorts, Ltd., dated August 12,
1994 (incorporated by reference to Exhibit 10.5 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.15 -- Amendment No. 1 to Loan and Security Agreement between
Finova Capital Corporation and Ascension Resorts, Ltd.,
dated July 24, 1995 (incorporated by reference to Exhibit
10.16 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.16 -- Amendment No. 2 to Loan and Security Agreement among
Ascension Resorts, Ltd., Ascension Capital Corporation,
and Finova Capital Corporation, dated December 13, 1995
(incorporated by reference to Exhibit 10.17 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.17 -- Form of Indemnification Agreement (between Registrant and
all officers, directors, and proposed directors)
(incorporated by reference to Exhibit 10.18 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.18 -- 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) (incorporated by
reference to Exhibit 10.19 to Registrant's Registration
Statement on Form S-1, File No. 333-24273).
10.19 -- Agreement for Professional Services between Silverleaf
Vacation Club, Inc. and Hudson and Company, Inc., dated
November 12, 1996 (incorporated by reference to Exhibit
10.20 to Registrant's Registration Statement on Form S-1,
File No. 333-24273).
10.20 -- 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
(incorporated by reference to Exhibit 10.22 to Amendment
No. 1 dated May 16, 1997 to Registrant's Registration
Statement on Form S-1, File No. 333-24273).
10.21 -- First Amendment to Management Agreement, dated January 1,
1993, between Master Endless Escape Club and Ascension
Resorts, Ltd. (incorporated by reference to Exhibit 10.23
to Amendment No. 1 dated May 16, 1997 to Registrant's
Registration Statement on Form S-1, File No. 333-24273).
10.22 -- Contract of Sale, dated May 2, 1997, between Registrant
and third-party (incorporated by reference to Exhibit
10.24 to Amendment No. 1 dated May 16, 1997 to
Registrant's Registration Statement on Form S-1, File No.
333-24273).
10.23 -- Amendment to Loan Documents, dated December 27, 1996,
among Silverleaf Vacation Club, Inc., Ascension Resorts,
Ltd., and Heller Financial, Inc. (incorporated by
reference to Exhibit 10.25 to Amendment No. 1 dated May
16, 1997 to Registrant's Registration Statement on Form
S-1, File No. 333-24273).
10.24 -- Contract of Sale between Thousand Trails, Inc. and
Registrant (approximately 98.475 acres, Galveston County,
Texas) (incorporated by reference to Exhibit 10.1 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.25 -- Contract of Sale between R.J. Novelli, Sr., et al and
Registrant (approximately 21.5 acres, Galveston County,
Texas) (incorporated by reference to Exhibit 10.2 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
</TABLE>
<PAGE> 131

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.26 -- Contract of Sale between Harmon/Koval Limited Liability
Company and Registrant (2.1 acres, Clark County, Nevada)
(incorporated by reference to Exhibit 10.3 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.27 -- Second Amendment to Restated and Amended Loan and
Security Agreement between Heller Financial, Inc. and
Registrant ($40 million revolving credit facility)
(incorporated by reference to Exhibit 10.4 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.28 -- Construction Loan Agreement between Heller Financial Inc.
and Registrant ($10 million revolving construction loan
facility) (incorporated by reference to Exhibit 10.5 to
Registrant's Form 10-Q for quarter ended September 30,
1997).
10.29 -- Real Estate Contract of Sale dated September 30, 1997,
between Registrant and Robert E. Mead (incorporated by
reference to Exhibit 10.12 to Registrant's Form 10-Q for
quarter ended September 30, 1997).
10.30 -- Master Club Agreement dated September 25, 1997 between
Registrant and Timber Creek Resort Club (incorporated by
reference to Exhibit 10.13 to Registrant's Form 10-Q for
quarter ended September 30, 1997).
10.31 -- Loan Agreement, dated December 19, 1997, between Credit
Suisse First Boston Mortgage Capital, L.L.C. and
Registrant (incorporated by reference to Exhibit 10.31 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.32 -- Amendment to Loan Documents, dated December 22, 1997,
between Registrant and Credit Suisse First Boston
Mortgage Capital, L.L.C. (incorporated by reference to
Exhibit 10.32 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.33 -- Second Amendment to Management Agreement, dated December
31, 1997, between Master Club and Registrant
(incorporated by reference to Exhibit 10.33 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.34 -- Master Club Agreement, dated January 5, 1998, between
Master Club and Oak N' Spruce Resort Club (incorporated
by reference to Exhibit 10.34 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
10.35 -- Contract of Sale, dated November 13, 1997, between Oak N'
Spruce Management, Inc., Beartown Development, Inc.,
Bruce Hagedorn and Doug Richie, and Registrant
(incorporated by reference to Exhibit 10.35 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.36 -- Contract of Sale, dated January 12, 1998, between Crown
Resort Co. L.L.C., Richard W. Dickson and Robert G.
Garner, and Registrant (incorporated by reference to
Exhibit 10.36 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.37 -- Contract of Sale, dated February 18, 1998, between
Registrant and Michael J. McDermott (incorporated by
reference to Exhibit 10.37 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1997).
10.38 -- Contract of Sale, dated February 19, 1998, between
Registrant and Lee R. Roper (incorporated by reference to
Exhibit 10.38 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.39 -- Contract of Sale, dated February 19, 1998, between
Registrant and J. Phillip Ballard, Jr., and Eagle Greens
Ltd. (incorporated by reference to Exhibit 10.39 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.40 -- Stock Purchase Agreement, dated January 15, 1998, between
Silverleaf Resorts, Inc. and Jim Oestreich (incorporated
by reference to Exhibit 10.40 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1997).
</TABLE>
<PAGE> 132

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.41 -- Contract of Sale, dated May 2, 1997, between Registrant
and Thousand Trails, Inc. (incorporated by reference to
Exhibit 10.41 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1997).
10.42 -- First Amendment to Contract of Sale, dated July 25, 1997,
between Registrant and Thousand Trails, Inc.
(incorporated by reference to Exhibit 10.42 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997).
10.43 -- Master Club Agreement, dated November 13, 1997, between
Master Club and Fox River Resort Club (incorporated by
reference to Exhibit 10.43 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1997).
*10.44 -- Amendment to Contract of Sale, dated February 13, 1998,
between Crown Resort Co. L.L.C., Richard W. Dickson,
Robert G. Garner, and Registrant.
**10.45 -- Letter agreement, dated March 16, 1998, between Heller
Financial, Inc. and Registrant.
+21.1 -- Subsidiaries of Silverleaf Resorts, Inc.
+23.1 -- Consent of Meadows, Owens, Collier, Reed, Cousins & Blau,
L.L.P. (included as a part of Exhibit 5.1)
**23.2 -- Consent of Deloitte & Touche LLP.
+24.1 -- Power of Attorney (included as part of page II-7 of this
Registration Statement).
+27.1 -- Financial Data Schedule.
</TABLE>

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

* Previously filed with Registrant's Amendment No. 1 to Form S-1, File No.
333-47423, filed March 16, 1998.

** Filed herewith

+ Previously filed with Registrant's Form S-1, File No. 333-47423, filed
March 6, 1998.

<PAGE> 1

Exhibit 10.45

March 16, 1998

Mr. Robert Mead
Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 120
Dallas, Texas 75247

Re: $10,000,000 Construction Loan (the "Loan") from Heller Financial, Inc.
("Heller") to Silverleaf Resorts, Inc. ("Borrower"), dated October
31, 1997.

Gentlemen:

Reference is made to that certain Construction Loan Agreement dated
October 31, 1997 (the "Loan Agreement") between Silverleaf Resorts, Inc.
("Borrower") and Heller Financial, Inc. ("Lender"). All capitalized terms used
herein shall have the meanings ascribed to them in the Loan Agreement unless
otherwise defined in this commitment letter ("Commitment Letter").

We are pleased to advise you that Lender has approved a $5,000,000
increase to the existing $10,000,000 Construction Loan (referred hereafter as
the "Modified Loan"), to be made to Borrower upon the terms and subject to the
conditions set forth in the existing Loan Agreement dated October 31, 1997.
The additional $5,000,000 in availability will be reserved under the Modified
Loan to finance new unit construction at the Borrower's proposed 2.1 acre Las
Vegas timeshare project located at the corner of Koval Lane and Harmon Avenue.
Lender's obligation to make the Loan is conditioned upon satisfaction of the
matters set forth below to the satisfaction of Lender.

1. There shall have been no material adverse change since October 31,
1997 in the business affairs, assets, or financial condition of
Borrower.

2. There shall be no litigation or proceeding pending, or to the best of
Borrower's knowledge, threatened, which if decided adversely would
materially and adversely affect either (a) the business affairs,
assets, or financial condition of Borrower or (b) the prospects for
repayment of the Loan.

3. No Event of Default under the existing Loan Agreement shall have
occurred and be continuing, and Borrower shall have fulfilled all of
the other terms and conditions of the existing Loan Agreement and this
Commitment Letter.

4. The proposed Las Vegas project will be subject to the same due
diligence and funding requirements as for all other Silverleaf
resorts, as stated in the Loan Agreement dated October 31, 1997.
<PAGE> 2
5. Payment of $50,000 commitment fee in immediately available funds
payable upon acceptance of this commitment.

Borrower acknowledges and agrees that:

1. All findings and results of Lender's independent consultants, and all
other information and reports delivered to and/or compiled by and/or
prepared by Lender, are for the exclusive benefit of Lender and may
not be relied upon by Borrower or any other party.

2. Borrower may not assign this Commitment Letter to any third party.

3. Time is of the essence of this Commitment Letter.

4. The terms and conditions of this Commitment Letter supersede all prior
discussions, negotiations and agreements between Lender and Borrower.
This Commitment Letter may be modified only in writing duly executed
by both parties. There are no third-party beneficiaries to this
Commitment Letter.

This Commitment Letter shall not constitute a binding agreement unless
Borrower executes and returns the enclosed duplicate original counterpart
hereof without any modifications thereto not later than March 23, 1998. If not
accepted and returned on or prior thereto, this Commitment Letter shall
automatically be null and void.

This Commitment shall terminate on April 30, 1999 regardless of
whether or not Lender has disbursed any of the additional $5,000,000 for the
Las Vegas project.

Very truly yours,

HELLER FINANCIAL, INC.

By: /s/ ILLEGIBLE
----------------------------

Its: Vice President

The terms of the foregoing Commitment Letter, are hereby accepted and agreed to
this 18 day of March, 1998.

BORROWER:

SILVERLEAF RESORTS, INC.

By: /s/ SHARON K. BRAYFIELD
----------------------------
Sharon K. Brayfield

Its: President

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Amendment No. 2 to Registration Statement No.
333-47423 of Silverleaf Resorts, Inc. of our report dated February 24, 1998
(March 6, 1998 as to the last two paragraphs of Note 15), appearing in the
Prospectus, which is part of this Registration Statement and to the reference to
us under the headings "Summary Consolidated Historical Financial and Operating
Information," "Unaudited Pro Forma Condensed Consolidated Financial
Information," "Selected Consolidated Historical Financial and Operating
Information" and "Experts" in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas

April 1, 1998