Silverleaf Resorts, Inc. Announces Stock Sale by Affiliates in Private Transaction

Silverleaf Resorts, Inc. (AMEX:SVL) today announced that
two of its affiliates, Grace Brothers, Ltd. ("Grace") and Robert E.
Mead, the Chairman and Chief Executive Officer of the Company, as
trustee, have entered into definitive agreements for the private
resale of an aggregate of eight million shares of the Company's
presently issued and outstanding common stock to institutional
investors at a price of $3.50 per share (the "Transaction"). Grace has
agreed to sell six million of its beneficially owned shares and Mr.
Mead has agreed to sell two million shares beneficially owned by him
as trustee under a voting trust agreement dated November 1, 1999.
Following the closing of the Transaction, Grace, together with its
affiliate, Grace Investments, Ltd., will be the beneficial owner of
6,118,825 shares, or approximately 16.3% of the Company's shares
outstanding and Mr. Mead will be the beneficial owner of 9,349,417
shares, or approximately 24.9% of the Company's shares outstanding.
Oppenheimer & Co. Inc. acted as the placement agent for the
Transaction. The Transaction, which is subject to customary closing
conditions, is expected to be completed on or about May 26, 2006. The
Company will not receive any proceeds from the sale of these shares.
   "The Company believes that the closing of this transaction will
significantly diversify our existing base of institutional
shareholders and improve the future liquidity of our stock," commented
Sharon K. Brayfield, President of Silverleaf. "We are also pleased
with the caliber of these investors and we will work hard to execute
our business strategy to increase shareholder value."
   The Transaction will be completed pursuant to a securities
purchase agreement dated May 24, 2006 (the "Purchase Agreement") among
the Company, Mr. Mead, as trustee, Grace and each of the investors.
The Purchase Agreement contains representations and warranties by the
Company, Mr. Mead and Grace that are typical of transactions of this
type. In connection with the Transaction, the executive officers and
directors of the Company, including Mr. Mead, have entered into
lock-up agreements in which each has agreed not to sell shares of
common stock held by them until the later of 120 days after the
closing date and 90 days after the effective date of the Registration
Statement. Grace, and its affiliate Grace Investments, Ltd. have also
entered into lock-up agreements in which they have agreed not to sell
shares of the Company's common stock held by them until the later of
120 days after the closing date and 90 days after the effective date
of the Registration Statement; provided however, that the lock up
period for Grace and Grace Investments, Ltd. will in no event exceed
120 days after the closing date.
   The Company has agreed to file a registration statement with the
Securities and Exchange Commission within 30 days to register for
further resale the shares purchased by the institutional investors and
to use its commercially reasonable best efforts to cause the
registration statement to become effective within 90 days (or 120 days
if the SEC reviews the registration statement). In the event that the
Company is unable to satisfy these registration deadlines, the Company
will be required to pay liquidated damages of 1% of the aggregate
purchase price each month until the registration statement is declared
effective, subject to a maximum of 12% of the aggregate purchase
price. Until the registration statement is declared effective, the
shares to be purchased by the institutional investors will not be
registered under the Securities Act of 1933 and may not be offered or
sold in the United States absent an applicable exemption from
registration requirements.

   Based in Dallas, Texas, Silverleaf Resorts, Inc. owns and operates
timeshare resorts with a wide array of country club-like amenities,
such as golf, clubhouses, swimming, tennis, boating, and many
organized activities for children and adults. For additional
information, please visit www.silverleafresorts.com.

   This release contains certain forward-looking statements that
involve risks and uncertainties and actual results may differ
materially from those anticipated. The Company is subject to specific
risks associated with the timeshare industry, the regulatory
environment, and various economic factors. These risks and others are
more fully discussed under the heading "Risk Factors" in the Company's
reports filed with the Securities and Exchange Commission, including
the Company's 2005 Annual Report on Form 10-K (pages 22 through 30
thereof) filed on March 17, 2006.
   For more information or to visit our website, click here:
http://www.b2i.us/irpass.asp?BzID=1358&Nav=0&S=0&L=1