Ex.
        10.4

      


      [Silverleaf
        letterhead]

      


      


      December
        16, 2005

      


      Sovereign
        Bank

      One
        Financial Plaza

      Providence,
        Rhode Island 02903

      


      Attention:
        Mr. John T. Baer

      


      
        	
                Re:

              	
                Termination
                  of Inventory and Receivables Revolving Credit
                  Agreement

              


      

      


      Ladies
        and Gentlemen:

      


      Reference
        is hereby made to the revolving credit facility (the "Credit Facility")
        established pursuant to a certain Inventory and Receivables Revolving Credit
        Agreement dated as of July 30, 2004, as amended from time to time (the "Credit
        Agreement"), among Silverleaf Resorts, Inc. (the "Borrower"), Sovereign Bank,
        as
        agent (in such capacity, the "Agent"), and Sovereign Bank and the other lenders
        party thereto (the "Lenders"). Capitalized terms used herein without definition
        have the meanings specified therefor in the Credit Agreement.

      


      This
        letter will confirm that the Borrower has requested that the Credit Facility
        be
        terminated, and the Agent and the Lenders have agreed to permit such
        termination, on the following terms and conditions:

      


      1.
        Immediately upon the occurrence of the Termination Effective Date (as hereafter
        defined), and provided that the Termination Effective Date has occurred by
        2:00
        p.m., Eastern Time, on December 30, 2005, the Agent and the Borrower agree
        that
        (a) the Credit Facility and the Commitments shall automatically and without
        need
        for further documentation be terminated in their entirety, (b) the Borrower
        shall no longer request, and the Lenders shall no longer advance, any Loans
        or
        other amounts under the Credit Agreement or any other Loan Documents, and
        (c)
        the Agent promptly shall (i) return to the Borrower any items of Collateral
        in
        its possession or in the possession of its custodian, (ii) cause each Lender
        to
        return the original Notes marked "PAID" (or words to a similar effect) to
        the
        Borrower, and (iii) execute and/or authorize to be filed and/or recorded
        all
        instruments necessary to evidence the termination of all interests of the
        Agent
        and the Lenders in any Collateral, to the extent securing the Obligations,
        all
        at the Borrower's sole cost and expense. Notwithstanding the foregoing, any
        Obligations of the Borrower under any Loan Document which by their terms
        are to
        survive the termination of, and the payment of outstanding amounts under,
        the
        Credit Facility, including, without limitation,

      


      


      


      1221
        River Bend Drive • Suite 120 • Dallas, Texas 75247 • 214-631-1166 • Fax
        214-631-1178


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      


      Sovereign
        Bank 

      Page
        2

      


      indemnification
        and reinstatement obligations, shall survive the termination of the Credit
        Facility pursuant to this letter agreement, and each such obligation is hereby
        reaffirmed.

      


      2.
        The
        Agent's and the Lenders' agreement to accept the termination of the Credit
        Facility by the Borrower as provided herein is subject to the satisfaction
        by
        the Borrower of all of the following conditions (with the time and date as
        of
        which all such conditions are timely satisfied or have been waived by the
        Agent
        in writing, in its sole discretion, being referred to herein as the "Termination
        Effective Date"):

      


      (a)
        The
        payment to the Agent, for the account of the Lenders, as applicable, in
        immediately available, lawful U.S. funds of any outstanding principal, accrued
        and unpaid interest, and any outstanding fees and expenses provided for under
        the Credit Agreement.

      


      (b)
        Prompt payment to Riemer & Braunstein LLP of legal fees and costs relating
        to the Credit Facility, including in connection with the termination of the
        Credit Facility as provided herein.

      


      (c)
        From
        the date hereof to and including the Termination Effective Date, the Borrower
        shall not have requested any Loans.

      


      3.
        The
        Borrower hereby absolutely and unconditionally releases, remises, and forever
        discharges the Agent, the Lenders, and their affiliates, directors, officers,
        employees, agents, attorneys, and successors and assigns from any and all
        claims
        which the Borrower now has or ever had in any way arising under or relating
        to
        the Credit Facility or any transactions thereunder. The foregoing release
        shall
        be deemed restated and reaffirmed in its entirety as of the Termination
        Effective Date.

      


      4.
        This
        letter agreement may be executed in multiple counterparts, which, taken
        together, shall constitute one single agreement. Delivery of an executed
        counterpart of this letter agreement by telecopier or e-mail shall be equally
        as
        effective as delivery of a manually executed counterpart of this letter
        agreement.

      


      5.
        Time
        is of the essence.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      


      Sovereign
        Bank 

      Page
        3

      


      If
        you
        are in agreement with the foregoing, please execute the enclosed copy of
        this
        letter agreement where indicated and return it to the undersigned.

      


      Very
        truly yours,

      


      SILVERLEAF
        RESORTS, INC.

      


      By:
        /S/
        HARRY J. WHITE, JR.

      Name:
        Harry J. White, Jr.

      Title:  
        Chief Financial Officer

      


      


      Accepted
        and agreed this 16th day of 

      December,
        2005.

      


      SOVEREIGN
        BANK

      


      


      By:
        /S/
        CHRISTINA LOURENCO

      Name:
         Christina
        Lourenco

      Title:   
        Banking
        Officer