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                                                                    EXHIBIT 10.5

                                 TFC LETTERHEAD

Textron Financial Corporation                            333 East River Drive
Subsidiary of Textron Inc.                               Suite 104
                                                         East Hartford, CT 06108
                                                         (860) 282-7776 Phone
                                                         (860) 282-9053 Fax

Mr. Scott A. Silvay, Vice President
Webster Bank
344 Main Street
Kensington, CT 06037

Bank of Scotland
566 Fifth Avenue
New York, NY 10017

Robert E. Mead, Chief Executive Officer
Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 105
Dallas, TX 75221

July ___, 2004

RE:   $71,000,000 credit facility [Tranche B] (the "Loan") provided to
      Silverleaf Resorts, Inc. ("Borrower") pursuant to that certain Amended and
      Restated Loan, Security and Agency Agreement (Tranche B) dated as of April
      30, 2002, as amended by that certain Letter Amendment dated March 27,
      2003, as further amended by the First Amendment to Amended and Restated
      Loan, Security and Agency Agreement dated as of December 19, 2003, and as
      further amended by that certain Letter Amendment dated March 5, 2004 (the
      "Loan Agreement")

Ladies and Gentlemen:

Reference is hereby made to the Loan Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to such terms
in the Loan Agreement.

This letter agreement ("Letter Agreement") shall confirm that, for purposes of
the Loan Agreement and all Loan Documents (including Section 3.1 of the Loan
Agreement) the Silverleaf Finance II Stock and the Silverleaf Finance II
Subordinated Note shall secure the Term Loan Component, the Revolving Loan
Component, the Existing Inventory Loan (as such term is defined in the inventory
Loan Agreement) and the New Inventory Loan (as such term is defined in the
Inventory Loan Agreement) as follows:

      (a)   The Term Loan Component shall be secured by a subordinate security
            interest in the Silverleaf Finance II

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            Stock and the Silverleaf Finance II Subordinated Note subject to the
            terms and conditions set forth in the SPV Subordination Agreement;

      (b)   The Revolving Loan Component and the Existing Inventory Loan shall
            be secured, pari passu, by a subordinate security interest in the
            Silverleaf Finance II Stock and the Silverleaf Finance II
            Subordinated Note subject to the security interest securing the Term
            Loan Component and subject to the terms and conditions set forth in
            the SPV Subordination Agreement;

      (c)   The New Inventory Loan shall be secured by a subordinate security
            interest in the Silverleaf Finance II Stock and the Silverleaf
            Finance II Subordinated Note subject to the security interest
            securing the Term Loan Component, the Revolving Loan Component and
            the Existing Inventory Loan Component and subject to the terms and
            conditions set forth in the SPV Subordination Agreement

Any proceeds received by Textron Financial Corporation, as Agent, in connection
with the Silverleaf Finance II Stock or the Silverleaf Finance II Subordinated
Note shall be applied: (i) first to the repayment of the Term Loan Component;
(ii) after repayment of the Term Loan Component in full, then to the repayment
of the Revolving Loan Component and Existing Inventory Loan, pari passu; and
(iii) after repayment of the Term Loan Component, Revolving Loan Component and
Existing Inventory Loan in full, then to the repayment of the New Inventory
Loan.

In addition, this Letter Agreement shall confirm that, for purposes of the Loan
Agreement and all Loan Documents (including Section 3.1 of the Loan Agreement)
the Additional Resort Collateral and the Silverleaf Finance I, Inc. Stock shall
secure the Term Loan Component, the Revolving Loan Component, the Existing
Inventory Loan and the New Inventory Loan as follows:

      (a)   The Term Loan Component and the Existing Inventory Loan shall be
            secured, pari passu, by a first priority security interest in the
            Additional Resort Collateral and the Silverleaf Finance I, Inc.
            Stock;

      (b)   The Revolving Loan Component shall be secured by a second priority
            security interest in the Silverleaf Finance I, Inc. Stock and the
            Additional Resort Collateral, subject only to the security interest
            securing the Term Loan Component and the Existing Inventory Loan;

      (c)   The New Inventory Loan shall be secured by a subordinate security
            interest in the Silverleaf Finance I, Inc. Stock and the Additional
            Resort Collateral, subject only to the security interest securing
            the Term Loan Component, the Existing Inventory Loan and the
            Revolving Loan Component.

Any proceeds received by Textron Financial Corporation, as Agent, in connection
with the Silverleaf Finance I, Inc. Stock or the Additional Resort Collateral
shall be applied:

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(i) first to the repayment of the Term Loan Component and the Existing Inventory
Loan, pari passu; (ii) after repayment of the Term Loan Component and the
Existing Inventory Loan in full, then to the repayment of the Revolving Loan
Component; and (iii) after repayment of the Term Loan Component, the Existing
Inventory Loan and the Revolving Loan Component in full, then to the repayment
of the New Inventory Loan.

This Letter Agreement may be executed in two or more counterparts, all of which
together shall be considered a single instrument. Delivery of an executed
counterpart of a signature page to this Letter Agreement by facsimile shall be
effective as delivery of a manually executed counterpart of this Letter
Agreement.

This letter does not constitute an amendment or waiver of any term or condition
of the Loan Agreements, and all such terms and conditions shall remain in full
force and effect.

Please confirm your acknowledgement of and agreement with the terms of this
Letter Agreement by signing in the appropriate space below.

                                                  Very truly yours,
                                                  TEXTRON FINANCIAL CORPORATION,
                                                  A Delaware corporation

                                                  /s/ John D'Annibale
                                                  -----------------------------
                                                  By:  John D'Annibale
                                                  Its: V.P.

The undersigned party acknowledges its agreement with the terms and conditions
of this Letter Agreement:

                                                  SILVERLEAF RESORTS, INC.

                                                  /s/ Robert E. Mead
                                                  -----------------------------
                                                  By:  Robert E. Mead
                                                  Its: CEO

                                                  WEBSTER BANK

                                                  /s/ Scott A. Silvay
                                                  -----------------------------
                                                  By:  Scott A. Silvay
                                                  Its: Vice President

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                                                  BANK OF SCOTLAND

                                                  /s/ Amena Nabi
                                                  ------------------------------
                                                  By:  Amena Nabi
                                                  Its: Assistant Vice President