8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: March 31, 2005

(Date of earliest event reported): March 28, 2005

Silverleaf Resorts, Inc.

(Exact name of registrant as specified in its charter)

Texas

(State or other jurisdiction of incorporation)

1-13003	75-2259890
(Commission File Number)	(IRS Employer Identification Number)

1221 River Bend Drive, Suite 120, Dallas, Texas	75247
(Address of principal executive offices)	(Zip Code)

214-631-1166

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a.12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

         (a) Amendment to Conduit Facility Through Silverleaf Finance II, Inc.

      On March 28, 2005, Silverleaf Resorts, Inc. (the “Registrant”) and Silverleaf Finance II, Inc. (“SF-II”), a wholly owned financing subsidiary of the Registrant, entered into a $26.3 million amendment and expansion of an existing conduit term loan agreement with Textron Financial Corporation (“Textron”). Under the terms of the amended Textron conduit facility, the Registrant sold approximately $31.0 million of its vacation interval receivables to SF-II under an amendment to a developer transfer agreement with SF-II. The sales price paid by SF-II was an amount equal to the aggregate principal balances of the transferred receivables. The sale by the Registrant of these vacation interval receivables to SF-II was partially financed by the $26.3 million advance to SF-II under the amended conduit loan agreement. The $26.3 million advance to SF-II under the amended conduit term loan represents approximately 85% of the outstanding balance of the receivables SF-II purchased from the Registrant. All receivables that were sold by the Registrant to SF-II have been pledged as security by SF-II to Textron. Textron’s amended conduit term loan to SF-II will mature in 2014 and bears interest at a fixed annual rate of 7.9%. For a fee the Registrant services receivables sold to SF-II under the amended Textron conduit term loan. The amended conduit term loan agreement contains customary provisions regarding acceleration and certain affirmative and negative covenants.

      The net cash proceeds to the Registrant from the sale of receivables to SF-II under the amended conduit term loan are being used by the Registrant to retire all of the $12.5 million aggregate balance outstanding under two of the Registrant’s non-revolving credit facilities with one of its senior lenders, Heller Financial Inc. The remaining $13.8 million of net cash proceeds are being used by the Registrant to repay a portion of its revolving credit facilities with Textron.

         (b) Repayment of Certain Term Loans and Related Amendments to Senior Revolving Credit Facilities with Textron

      On March 31, 2005, the $20.7 million aggregate outstanding balance due on three term loans owed by the Registrant to Textron (the “Textron Term Loans”) were paid in full by Textron on behalf of the Registrant under the terms and conditions of the Registrant’s three senior revolving credit facilities with Textron (the “Textron Revolving Facilities”). The Textron Term Loans were due to mature in March 2007. Under the Textron Revolving Facilities, Textron has the discretion under certain conditions to advance funds available under the Textron Revolving Facilities and apply those advances to prepay all or a portion of the then remaining balances due under the Textron Term Loans. These conditions include achievement of a loan-to-value ratio under the Textron Revolving Facilities that is less than 75% and availability to the Registrant of unrestricted cash balances of at least $5.0 million. Textron determined these conditions to have been met on March 31, 2005 and that the funds then available to be advanced under the Textron Revolving Facilities were sufficient to repay the entire balance due under the Textron Term Loans. Accordingly, Textron advised the Registrant on March 31, 2005 that it had exercised its rights under the Textron Revolving Facility and had advanced the funds necessary to repay in full the Textron Term Loans.

      Upon the repayment of the Textron Term Loans on March 31, 2005, and the fulfillment of certain other conditions that were met on or before March 31, 2005, various amendments to the loan documents previously entered into between the Registrant and Textron became effective and fully binding upon the Registrant and Textron. These amendments provide for the elimination of certain restrictive covenants under which the Registrant had been operating since its debt restructuring in May 2002. Among other things, the amendments which became effective on March 31, 2005, eliminate the requirements under the Textron Revolving Facilities that the Registrant must have a standby manager for its resorts, or a resort consultant, and that the Registrant operate within a business model under which the Registrant has been required by Textron to operate since November 2003. The amendments also modify the Registrant’s existing tangible net worth covenant under the Textron Revolving Facilities to make this covenant less restrictive. The modification of these covenants under its agreements with Textron allows the Registrant more flexibility in pursuing both new financing arrangements and further modifications to its existing credit facilities.

      (c) $5.0 Million Additional Inventory Loan

      The March 31, 2005 repayment of the Textron Term Loans was made possible in part by a commitment from Textron to provide the Registrant with an additional loan secured by existing timeshare inventory in the amount of $5.0 million (the “Additional Inventory Term Loan”), the proceeds of which were used by the Registrant to repay a portion of the outstanding balance due under the Textron Revolving Facilities. The obligation of Textron to be bound and fund under the Additional Inventory Term Loan was conditioned upon the occurrence of a number of events, including the closing by the Registrant of the sale of certain utility assets previously announced by the Registrant on March 16, 2005. Funding under the Additional Inventory Term Loan occurred on March 31, 2005. The additional Inventory Term Loan matures in March 2007 and it accrues interest at a variable rate equal to the prime rate of interest plus three percent, with a minimum interest rate of six percent.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

      As described in Item 1.01(a) above, Registrant’s wholly owned subsidiary, SF-II, became obligated to Textron on March 28, 2005 for $26.3 million in connection with an amendment and expansion of an existing conduit loan facility through Textron. SF-II is a fully consolidated subsidiary of Registrant for financial accounting purposes. As described in Item 1.01(c) above, on March 31, 2005, Registrant became obligated on a direct financial obligation for $5.0 million in connection with the Additional Inventory Term Loan to Textron. The Registrant’s responses to Item 1.01(a) and Item 1.01(c) of this Form 10-K are hereby incorporated by reference into this Item 2.03.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

Exhibit No.	Description of Exhibit
*10.1	Amendment No. 1 to Developer Transfer Agreement dated as of March 28, 2005 between the Registrant and Silverleaf Finance II, Inc.
*10.2	Amendment No. 1 to Loan and Security Agreement dated as of March 28, 2005 between Silverleaf Finance II, Inc. and Textron Financial Corporation.
*10.3	Second Amendment to Amended and Restated Loan, Security and Agency Agreement (Tranche A) dated as of February 28, 2005 by and among the Registrant, Textron Financial Corporation and Textron Financial Corporation
*10.4	Second Amendment to Amended and Restated Loan, Security and Agency Agreement (Tranche B) dated as of February 28, 2005 by and among the Registrant, Textron Financial Corporation and Textron Financial Corporation
*10.5	Third Amendment to Loan and Security Agreement (Tranche C) dated as of February 28, 2005 by and among the Registrant, Textron Financial Corporation and Textron Financial Corporation
*10.6	First Amendment to Amended and Restated Loan and Security Agreement (Inventory Loan) between the Registrant and Textron Financial Corporation.

* filed herewith

SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

DATE: March 31, 2005	SILVERLEAF RESORTS, INC.
	By:	/S/ HARRY J. WHITE, JR.
		Name:	Harry J. White, Jr.
		Title:	Chief Financial Officer

Exhibit Index

Exhibit No.	Description of Exhibit
*10.1	Amendment No. 1 to Developer Transfer Agreement dated as of March 28, 2005 between the Registrant and Silverleaf Finance II, Inc.
*10.2	Amendment No. 1 to Loan and Security Agreement dated as of March 28, 2005 between Silverleaf Finance II, Inc. and Textron Financial Corporation.
*10.3	Second Amendment to Amended and Restated Loan, Security and Agency Agreement (Tranche A) dated as of February 28, 2005 by and among the Registrant, Textron Financial Corporation and Textron Financial Corporation
*10.4	Second Amendment to Amended and Restated Loan, Security and Agency Agreement (Tranche B) dated as of February 28, 2005 by and among the Registrant, Textron Financial Corporation and Textron Financial Corporation
*10.5	Third Amendment to Loan and Security Agreement (Tranche C) dated as of February 28, 2005 by and among the Registrant, Textron Financial Corporation and Textron Financial Corporation
*10.6	First Amendment to Amended and Restated Loan and Security Agreement (Inventory Loan) between the Registrant and Textron Financial Corporation.

* filed herewith

EX-10.1

Ex. 10.1

EXECUTION COPY

AMENDMENT NO. 1
Dated as of March 28, 2005
to
DEVELOPER TRANSFER AGREEMENT
Dated as of December 19, 2003

     THIS AMENDMENT NO. 1 to DEVELOPER TRANSFER AGREEMENT is entered into as of March 28, 2005 between Silverleaf Resorts, Inc. (the “Company”), a Texas corporation, and Silverleaf Finance II, Inc., a Delaware corporation (“SPV”). Capitalized terms used herein and not defined herein have the meaning ascribed thereto in Schedule I to the Loan and Security Agreement, dated as of December 19, 2003 (as may be amended, restated, supplemented or otherwise modified from time to time, the “SPV Loan Agreement”), between SPV and Textron Financial Corporation (“TFC”).

PRELIMINARY STATEMENTS

     A. The Company and SPV desire to amend certain provisions of the Developer Transfer Agreement, dated as of December 19, 2003, between the Company and SPV (as amended, restated, supplemented or otherwise modified from time to time, the “Developer Transfer Agreement”).

     B. In consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows:

     SECTION 1. Amendments to the Developer Transfer Agreement. Effective as of the date hereof, subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Developer Transfer Agreement is hereby amended as follows:

     1.1 Clause (x) of the proviso to the first sentence of Section 2.1(a) is hereby amended and restated to read as follows:

          “SPV shall not be required to purchase any Conveyed Assets if it does not have sufficient funds to pay for such assets nor shall SPV be permitted to incur Indebtedness to purchase the Receivables, except that prior to March 10, 2005 SPV may incur indebtedness to Developer evidenced by the Subordinated Note for such purpose to the extent that, after giving effect to such indebtedness, the Overcollateralization Amount equals or exceeds the Required Overcollateralization Amount”.

     1.2 Clauses (vi) and (vii) of Section 4.1 is hereby amended and restated in its entirety to read as follows:

          “(vi) the aggregate Outstanding Balance of PPM Receivables in Pool I determined as of the Cut-off Date does not exceed 5% of the aggregate Outstanding Balance of the Sold Receivables and the Contributed Receivables determined as of the Cut-off Date,

and, as of the Second Advance Funding Date, no Pledged Receivable in Pool II is a PPM Receivable; and (vii) as of each Substitution Date, the aggregate Outstanding Balance of Exchange Receivables and Replacement Receivables to be added into Pool I for that Substitution Date that constitute PPM Receivables does not exceed the aggregate Outstanding Balance of the Deleted Receivables and Upgrade Receivables for that Substitution Date that constitute PPM Receivables, and no Substitute Receivable to be added into Pool II is a PPM Receivable.”

     1.3 Section 6.2(a) is hereby amended and restated in its entirety to read:

          “(a) The Company may (but shall not be required to), with the written consent of the Master Servicer, convey Substitute Receivables to SPV, provided that the requirements of Section 3.2 of the SPV Loan Agreement are satisfied, and, at the time of the substitution, SPV is “solvent” within the meaning of applicable fraudulent transfer laws. The Company shall deliver to the Master Servicer, on the tenth Business Day prior to the proposed date of substitution, which proposed date shall be a Payment Date (the “Substitution Date”), a “Substitution Certificate” in the form of Exhibit B identifying (i) all of the Exchange Receivables, and the Delinquent Receivables for which they will be exchanged, and (ii) all Replacement Receivables and the related Upgrade Receivables, and the Company and the SPV each shall certify in such Substitution Certificate that SPV is solvent within the meaning of applicable fraudulent transfer laws. The exchange or replacement of such Receivables shall not become effective until TFC has approved such Substitution Certificate and Sale Assignment on or prior to the Substitution Date. To the extent that the aggregate outstanding balance of all Substitute Receivables transferred to the SPV in exchange for Delinquent Receivables on any day exceeds the then current value of such Delinquent Receivables, (i) the SPV will be required to make a payment to the Company for the amount of such excess in cash, to the extent that the SPV has cash available, or (ii) to the extent the SPV does not have cash available, (A) prior to March 10, 2005, and, if after giving effect to such increase, the Overcollateralization Amount would not be less than the Required Overcollateralization Amount, the SPV will make such payment by increasing the balance of the Subordinated Note, or (B) in any other case, the amount of such excess will be deemed to be a capital contribution by the Company to the SPV. To the extent that the aggregate outstanding balance of all Substitute Receivables transferred to the SPV as a replacement for Upgrade Receivables on any day exceeds the aggregate outstanding balance of such Upgrade Receivables, (i) the SPV will be required to make a payment to the Company for the amount of such excess, in cash to the extent that the SPV has cash available, or (ii) to the extent the SPV does not have cash available, (A) prior to March 10, 2005, and, if after giving effect to such increase, the Overcollateralization Amount would not be less than the Required Overcollateralization Amount, the SPV will make such payment by increasing the balance of the Subordinated Note, or (B) in any other case, the amount of such excess will be deemed to be a capital contribution by the Company to the SPV.”

     1.4 Exhibit B is hereby amended and restated in its entirety to read as set forth on Exhibit B attached hereto.

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     SECTION 2. Acknowledgement. The parties hereto acknowledge and agree that Schedule I to the SPV Loan Agreement is amended concurrently herewith as provided in Amendment No. 1, dated as of the date hereof, to the SPV Loan Agreement (“SPV Loan Agreement Amendment”) and attached hereto as Exhibit A.

     SECTION 3. Conditions Precedent. This Amendment shall become effective and be deemed effective as of the date first above written upon receipt by SPV, TFC and the Administrative Agent of a fully executed copy of this Amendment and upon the satisfaction of the conditions precedent provided for in Section 2 of the SPV Loan Agreement Amendment.

     SECTION 4. Representations, Warranties and Covenants.

     4.1 Upon the effectiveness of this Amendment, the Company hereby reaffirms all covenants, representations and warranties made by it, to the extent the same are not amended hereby, in the Developer Transfer Agreement, as amended hereby and agrees that all such covenants, representations and warranties shall be deemed to have been re-made as of the effective date of this Amendment, except to the extent that any such other covenants, representations and warranties expressly relate solely to an earlier date (in which case such covenants, representations and warranties shall have been true and accurate on and as of such earlier date).

     4.2 The Company hereby represents and warrants (i) that this Amendment constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general principles of equity which may limit the availability of equitable remedies and (ii) upon the effectiveness of this Amendment, no Developer Event of Termination, Event of Default or a Subservicer Event of Default or event which would constitute a Developer Event of Termination, an Event of Default or a Subservicer Event of Default but for the requirement that notice be given or time elapse or both shall have occurred or be continuing.

     4.3 The Company, promptly after the Second Advance Funding Date and to the extent it has not already done so, shall direct or shall cause SPV to direct each Person liable for the payment of any Sold Receivable or Contributed Receivable (including those transferred on the date hereof) to pay each installment thereon to the applicable Account Agent, pursuant to the Lockbox Agreement, unless and until directed otherwise by written notice from the Administrative Agent or, at the Administrative Agent’s direction, from the Company, after which such parties are and shall be directed to make all further payments on the Pledged Receivables in accordance with the directions of the Administrative Agent.

     4.4 A UCC Financing Statement number 040052121681 was filed and recorded on December 29, 2003 in the office of the Secretary of State of Texas naming the Company as Debtor/Seller, SPV as Secured Party/Buyer/First Assignor, TFC as Secured Party/2^nd Assignor and Citicorp North America, Inc., as Administrative Agent (the “Administrative Agent”) as Assignee of Secured Party/2^nd Assignor (the “Texas Filing”). A UCC Financing Statement Amendment was filed and recorded on April 7, 2004 (the “Texas UCC Amendment”). The Company and SPV agree and confirm that the Texas UCC Amendment did not release,

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terminate, or modify the Administrative Agent’s security interest in any Receivables, Conveyed Assets, Collections or other assets constituting Collateral under the SPV Loan Agreement.

     In addition to the existing indemnities under the Developer Transfer Agreement, the Company agrees and confirms that any loss, cost or expense incurred by an Indemnified Party thereunder that results in connection with the filing and recordation of the Texas UCC Amendment and the purported release contemplated thereby, shall benefit from the indemnification provisions of and shall be repaid by the Company in accordance with Section 5.21 of the Developer Transfer Agreement.

     SECTION 5. Reference to and Effect on the Developer Transfer Agreement.

     5.1 Upon the effectiveness of this Amendment, each reference in the Developer Transfer Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” “hereby” or words of like import shall mean and be a reference to the Developer Transfer Agreement as amended hereby, and each reference to the Developer Transfer Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Developer Transfer Agreement shall mean and be a reference to the Developer Transfer Agreement as amended hereby.

     5.2 Except as specifically amended hereby, the Developer Transfer Agreement and the other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

     5.3 The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of SPV, TFC or the Administrative Agent under any Loan Document, nor constitute a waiver of any provision contained therein, except as specifically set forth herein.

     SECTION 6. Costs and Expenses. Developer shall pay all reasonable legal costs and expenses incurred by TFC, the Administrative Agent, SPV or the Company in connection with the negotiation, execution and delivery of this Amendment and the SPV Loan Agreement Amendment.

     SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES. EACH OF THE COMPANY AND SPV HEREBY AGREES TO ACCEPT THE STATE COURTS LOCATED IN NEW YORK, NEW YORK AS HAVING PROPER JURISDICTION AND BEING THE PROPER VENUE FOR ANY LEGAL PROCEEDINGS ARISING OUT OF THIS AMENDMENT AND ANY LOAN DOCUMENTS.

     SECTION 8. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.

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     SECTION 9. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any purpose.

* * * * *

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     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

SILVERLEAF RESORTS, INC.
By:	/S/ HARRY J. WHITE, JR.
	Name: Harry J. White, Jr.
	Title: CFO
SILVERLEAF FINANCE II, INC.
By:	/S/ HARRY J. WHITE, JR.
	Name: Harry J. White, Jr.
	Title: CFO

ACKNOWLEDGED AND AGREED TO BY:

CITICORP NORTH AMERICA, INC.,
as Administrative Agent

By:	/S/ LAIN GUTIERREZ
	Name: Lain Gutierrez
	Title: Vice President
TEXTRON FINANCIAL CORPORATION
By:	/S/ NICHOLAS L. MECCA
	Name: Nicholas L. Mecca
	Title: Managing Director

List of Exhibits Attached to Agreement and not filed herewith:

Ex. A: Amendment to Loan and Security Agreement
Ex. B: Form of Substitution Certificate

B-1

EX-10.2

Ex. 10.2

EXECUTION COPY

AMENDMENT NO. 1
Dated as of March 28, 2005
to
LOAN AND SECURITY AGREEMENT
Dated as of December 19, 2003

     THIS AMENDMENT NO. 1 to LOAN AND SECURITY AGREEMENT is entered into as of March 28, 2005 between SILVERLEAF FINANCE II, INC., a Delaware corporation (“SPV”), and TEXTRON FINANCIAL CORPORATION, a Delaware corporation (“TFC”). Capitalized terms used herein and not defined herein having the meaning ascribed thereto in Schedule I to the Loan and Security Agreement, dated as of December 19, 2003 (as may be amended, restated, supplemented or otherwise modified from time to time, the “SPV Loan Agreement”), between SPV and TFC.

PRELIMINARY STATEMENTS

A. SPV and TFC desire to amend certain provisions of the SPV Loan Agreement in order to extend an additional advance in the principal amount of $26,333,737.55 to SPV to be secured, in part, with additional Receivables pledged under the SPV Loan Agreement, all in accordance with the terms of the SPV Loan Agreement, as amended hereby.

B. In consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

SECTION 1. Amendments to the SPV Loan Agreement. Effective as of the date hereof, subject to the satisfaction of the conditions precedent set forth in Section 2 below, the SPV Loan Agreement is hereby amended as follows:

     1.1 Section 2.1 is hereby amended and restated as follows:

     “2.1 Loan. Upon the terms and subject to the conditions set forth in this Loan Agreement, including satisfaction of the conditions precedent in Section 4, TFC shall make an advance (the “First Advance”) to SPV on December 19, 2003 in a principal amount equal to the lesser of (x) $66,380,808.54 or (y) the Advance Amount then in effect. On March 28, 2005 (the “Second Advance Funding Date”) TFC shall make a second advance in a principal amount equal to $26,333,737.55 (the “Second Advance” and together with the First Advance, the “Loan”); provided, however, the sum of the First Advance and the Second Advance shall not exceed the Advance Amount then in effect. At the request of SPV, on the Closing Date, proceeds of the First Advance will be disbursed by TFC to pay the purchase price of the Receivables acquired by SPV from Developer and to pay dividends to Developer. At the request of SPV, on the Second Advance Funding Date, proceeds of the Second Advance will be disbursed by TFC to pay the purchase price of the Receivables acquired by SPV from Developer and to pay dividends to Developer. Amounts repaid in respect of the Loan may not be reborrowed.”

     1.2 Section 2.2 is hereby amended and restated as follows:

     “2.2 Interest Payment. The aggregate principal amount of the First Advance which is outstanding from time to time shall bear interest at a rate equal to the First Advance Interest Rate or, at TFC’s election and sole discretion after the occurrence of an Event of Default or the First Advance Maturity Date, at the First Advance Default Interest Rate. The aggregate principal amount of the Second Advance which is outstanding from time to time shall bear interest at a rate equal to the Second Advance Interest Rate or, at TFC’s election and sole discretion after the occurrence of an Event of Default or the Second Advance Maturity Date, at the Second Advance Default Interest Rate. Interest, in each case, shall be payable in arrears on each Payment Date in respect of the immediately preceding Settlement Period or, after the occurrence of an Event of Default, the First Advance Maturity Date with respect to interest due on the First Advance or the Second Advance Maturity Date with respect to interest due on the Second Advance, upon demand. Any payment received by TFC later than 12 noon E.S.T. on any Business Day shall be deemed to have been received on the next Business Day.”

     1.3 Section 2.5(a) is hereby amended and restated as follows:

     “(a) Final Payments. SPV agrees to pay (i) the entire outstanding principal balance of the First Advance in full on or before the First Advance Maturity Date and (ii) the entire outstanding principal balance of the Second Advance, together with all other Obligations, in full on or before the Second Advance Maturity Date.”

     1.4 The first sentence of Section 2.5(c) is hereby replaced with the following two sentences:

     “On each Payment Date, SPV shall prepay (i) the principal amount of the First Advance by an amount equal to 85% of the First Advance Principal Distributable Amount and (ii) the principal amount of the Second Advance by an amount equal to 85% of the Second Advance Principal Distributable Amount, in each case, for the immediately preceding Settlement Period. If at any time it is determined, absent manifest error, that the aggregate Outstanding Balance of PPM Receivables in Pool II determined as of the Second Advance Funding Date related to the Second Advance is greater than zero, SPV shall (within one Business Day of such determination) repay such amount to TFC.”

     1.5 Section 2.5(d) is hereby amended and restated as follows:

     “(d) Timeshare Upgrades. With respect to the Pledged Receivables that become Upgrade Receivables during a Settlement Period, and without duplication of principal payments in respect of such Pledged Receivables actually received with respect to such Pledged Receivables, SPV shall be deemed to have received a principal payment in an amount equal to the Outstanding Balance of such Pledged Receivables, and the Subservicer shall remit to the Collection Account, prior to the immediately succeeding Payment Date, the excess of (x) such amount over (y) the amount, if any, deducted from the First Advance Principal Distributable Amount or the Second Advance Principal Distributable Amount, as the case may be, for such Settlement Period pursuant to clause (iv) of the definition of the First Advance Principal Distributable Amount or the Second Advance Principal Distributable Amount.

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     1.6 Clause (ii) of Section 3.2(a) is hereby amended and restated as follows:

     “(ii) the aggregate Outstanding Balance of any Exchange Receivable attributable to Pool I shall not cause the aggregate Outstanding Balance of all Exchange Receivables attributable to Pool I for such Settlement Period and each preceding Settlement Period to exceed 20% of the Initial Advance Amount; the aggregate Outstanding Balance of any Exchange Receivable attributable to Pool II shall not cause the aggregate Outstanding Balance of all Exchange Receivables attributable to Pool II for such Settlement Period and each preceding Settlement Period to exceed 20% of the principal amount of the Second Advance on the Second Advance Funding Date; the aggregate Outstanding Balance of any Replacement Receivables attributable to Pool I shall not cause the aggregate Outstanding Balance of all Replacement Receivables attributable to Pool I for such Settlement Period and each preceding Settlement Period to exceed 20% of the Initial Advance Amount; and the aggregate Outstanding Balance of any Replacement Receivables attributable to Pool II shall not cause the aggregate Outstanding Balance of all Replacement Receivables attributable to Pool II for such Settlement Period and each preceding Settlement Period to exceed 20% of the principal amount of the Second Advance on the Second Advance Funding Date;”

     1.7 Clause (vi) of Section 3.2(a) is hereby amended and restated in its entirety to read:

     “(vi) each of the following shall be true:

          (A) (1) with respect to all Exchange Receivables to be added into Pool I and all Deleted Receivables to be removed from Pool I for such Substitution Date, the aggregate Outstanding Balance of all such Exchange Receivables shall equal or exceed (but only to the extent necessary to allow whole Receivable exchanges) the aggregate Outstanding Balance of all such Deleted Receivables as of such Substitution Date;

               (2) with respect to all Exchange Receivables to be added into Pool II and all Deleted Receivables to be removed from Pool II for such Substitution Date, the aggregate Outstanding Balance of all such Exchange Receivables shall equal or exceed (but only to the extent necessary to allow whole Receivable exchanges) the aggregate Outstanding Balance of all such Deleted Receivables as of such Substitution Date;

          (B) (1) with respect to all Replacement Receivables to be added into Pool I and Upgrade Receivables to be removed from Pool I for such Substitution Date, the aggregate Outstanding Balance of all such Replacement Receivables shall equal or exceed (but only to the extent necessary to allow whole Receivable replacements) the aggregate Outstanding Balance of all such Upgrade Receivables as of such Substitution Date;

               (2) with respect to all Replacement Receivables to be added into Pool II and Upgrade Receivables to be removed from Pool II for such Substitution Date, the aggregate Outstanding Balance of all such Replacement Receivables shall equal or exceed (but only to the extent necessary to allow whole Receivable replacements) the aggregate Outstanding Balance of all such Upgrade Receivables as of such Substitution Date;

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          (C) (1) with respect to all Substitute Receivables to be added into Pool I for such Substitution Date that constitute ONS Receivables, the aggregate Outstanding Balance of all such ONS Receivables shall not exceed the aggregate Outstanding Balance of all Deleted Receivables and Upgrade Receivables to be removed from Pool I for such Substitution Date that constitute ONS Receivables;

               (2) with respect to all Substitute Receivables to be added into Pool II for such Substitution Date that constitute ONS Receivables, the aggregate Outstanding Balance of all such ONS Receivables shall not exceed the aggregate Outstanding Balance of all Deleted Receivables and Upgrade Receivables to be removed from Pool II for such Substitution Date that constitute ONS Receivables;

          (D) (1) with respect to all Substitute Receivables to be added into Pool I for such Substitution Date that constitute PPM Receivables, the aggregate Outstanding Balance of all such PPM Receivables shall not exceed the aggregate Outstanding Balance of all Deleted Receivables and Upgrade Receivables to be removed from Pool I for such Substitution Date that constitute PPM Receivables;

               (2) no Substitute Receivable to be added into Pool II is a PPM Receivables;

          (E) with respect to all Substitute Receivables to be added into Pool I, the aggregate Outstanding Balance of all such Substitute Receivables shall equal or exceed the aggregate Outstanding Balance of all Deleted Receivables and Upgrade Receivables for such Substitution Date that were included in Pool I; and

          (F) with respect to all Substitute Receivables to be added into Pool II, the aggregate Outstanding Balance of all such Substitute Receivables shall equal or exceed the aggregate Outstanding Balance of all Deleted Receivables and Upgrade Receivables for such Substitution Date that were included in Pool II.”

     1.8 Each instance of the term “Maturity Date” in Section 5.6 is hereby replaced with the term “Second Advance Final Maturity Date.”

     1.9 Clauses (vi) and (vii) of Section 6.1 are hereby amended and restated in their entirety as follows:

     “(vi) the aggregate Outstanding Balance of PPM Receivables in Pool I determined as of the Cut-off Date does not exceed 5% of the aggregate Outstanding Balance of the Sold Receivables and the Contributed Receivables determined as of the Cut-off Date, and, as of the Second Advance Funding Date, no Pledged Receivable in Pool II is a PPM Receivable; and (vii) as of each Substitution Date, the aggregate Outstanding Balance of Exchange Receivables and Replacement Receivables to be added into Pool I for that Substitution Date that constitute PPM Receivables does not exceed the aggregate Outstanding Balance of the Deleted Receivables and Upgrade Receivables for that Substitution Date that constitute PPM Receivables, and no Substitute Receivable to be added into Pool II is a PPM Receivable.”

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     1.10 Section 7.6(i) is hereby amended and restated as follows:

     “(i) Monthly Reports. As soon as available and in any event within nine (9) days after the end of each calendar month, a report showing (A)(I) the trial balance of the Pledged Receivables in Pool I and (II) the trial balance of the Pledged Receivables in Pool II; (B)(I) a current aging and delinquency report with respect to the Pledged Receivables in Pool I and (II) a current aging and delinquency report with respect to the Pledged Receivables in Pool II; (C)(I) a report detailing the collections on each of the Pledged Receivables in Pool I and (II) a report detailing the collections on each of the Pledged Receivables in Pool II; (D)(I) an Advance Amount report with respect to the First Advance and, (II) an Advance Amount report with respect to the Second Advance; (E) monthly reports from the Account Agent and Blocked Account Agreement; and (F) other monthly reports required pursuant to the Subservicing Agreement.”

     1.11 Section 7.32 is hereby amended and restated as follows:

     “7.32 Breakage Costs. In the event (i) the First Advance is paid or the Confirmation to the ISDA Master Agreement, dated the Closing Date, is terminated prior to July 1, 2010 or (ii) the Second Advance is paid or the Confirmation to the ISDA Master Agreement, dated as of March 28, 2005, is terminated prior to September 1, 2011, any related breakage costs or early termination payment will be paid by SPV to TFC upon demand therefor.”

     1.12 Schedule I to the SPV Loan Agreement is hereby amended by adding the following new terms, each in the correct alphabetical position:

     First Advance. Defined in Section 2.1 of the SPV Loan Agreement.

     First Advance Default Interest Rate. 9.035% per annum; provided, however that the First Advance Default Interest Rate shall in no event exceed the highest interest rate permitted to be charged under applicable usury laws.

     First Advance Interest Rate. 7.035% per annum.

     First Advance Maturity Date. The earlier of (i) the Payment Date occurring on March, 2014 any (ii) the date on which the First Advance becomes due under Section 9.1 of the SPV Loan Agreement.

     First Advance Principal Distributable Amount. With respect to any Settlement Period, the sum of (i) Principal Collections received during such Settlement Period or deemed to have been received during such Settlement Period pursuant to Section 2.5(d) of the SPV Loan Agreement with respect to Receivables in Pool I, plus (ii) the aggregate Outstanding Balance of all Receivables in Pool I which were actually charged off during such Settlement Period and which were charged off prior to becoming ninety days past due, plus (iii) the aggregate Outstanding Balance of all Receivables in Pool I which are past due 91 to 120 days, minus (iv) the aggregate Outstanding Balance of Replacement Receivables contributed by Developer to SPV on or prior to the Payment Date immediately following such Settlement Period, but only to the extent that (A) such Replacement Receivables relate to Permitted Timeshare Upgrades of Receivables during such Settlement Period, (B) such aggregate Outstanding Balance does not

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exceed the aggregate Outstanding Balance of Receivables that became Upgrade Receivables during such Settlement Period, (C) the conditions to such Replacement Receivables becoming Substitute Receivables pursuant to Section 3.2 of the SPV Loan Agreement are satisfied on or prior to such Payment Date, and (D) such Receivables are included in Pool I.

     Pool I. The pool of Receivables sold or contributed by Developer to SPV and pledged to TFC on the Closing Date and each Substitute Receivable added to Pool I on a Substitution Date.

     Pool II. The pool of Receivables sold or contributed by Developer to SPV and pledged to TFC on the Second Advance Funding Date and each Substitute Receivable added to Pool II on a Substitution Date.

     Second Advance. Defined in Section 2.1 of the SPV Loan Agreement.

     Second Advance Default Interest Rate. 11.90% per annum; provided, however that the Second Advance Default Interest Rate shall in no event exceed the highest interest rate permitted to be charged under applicable usury laws.”

     Second Advance Funding Date. Defined in Section 2.1 of the SPV Loan Agreement.

     Second Advance Interest Rate. 7.90% per annum.

     Second Advance Maturity Date. The earlier of (i) the Payment Date occurring in September, 2011 and (ii) the date on which the Second Advance becomes due under Section 9.1 of the SPV Loan Agreement.

     Second Advance Principal Distributable Amount. With respect to any Settlement Period, the sum of (i) Principal Collections received during such Settlement Period or deemed to have been received during such Settlement Period pursuant to Section 2.5(d) of the SPV Loan Agreement with respect to Receivables in Pool II, plus (ii) the aggregate Outstanding Balance of all Receivables in Pool II which were actually charged off during such Settlement Period and which were charged off prior to becoming ninety days past due, plus (iii) the aggregate Outstanding Balance of all Receivables in Pool II which are past due 91 to 120 days, minus (iv) the aggregate Outstanding Balance of Replacement Receivables contributed by Developer to SPV on or prior to the Payment Date immediately following such Settlement Period, but only to the extent that (A) such Replacement Receivables relate to Permitted Timeshare Upgrades of Receivables during such Settlement Period, (B) such aggregate Outstanding Balance does not exceed the aggregate Outstanding Balance of Receivables that became Upgrade Receivables during such Settlement Period, (C) the conditions to such Replacement Receivables becoming Substitute Receivables pursuant to Section 3.2 of the SPV Loan Agreement are satisfied on or prior to such Payment Date, and (D) such Receivables are included in Pool II.

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     1.13 Schedule I to the SPV Loan Agreement is hereby amended by amending and restating the following definitions:

     Applicable Default Rate. When used with reference to the First Advance, the First Advance Default Interest Rate; when used with reference to Second Advance, the Second Advance Default Interest Rate; and when used otherwise, the higher of the First Advance Default Interest Rate and the Second Advance Default Interest Rate.

     Applicable Interest Rate. When used with reference to the First Advance, the First Advance Default Interest Rate; when used with reference to Second Advance, the Second Advance Interest Rate; and when used otherwise, the higher of the First Advance Interest Rate and the Second Advance Default Interest.

     Cut-off Date. With respect to the Receivables pledged to TFC pursuant to the SPV Loan Agreement on the Closing Date, November 30, 2003, and with respect to the Receivables pledged to TFC pursuant to the SPV Loan Agreement on the Second Advance Funding Date, February 28, 2005.

     Developer Address. 1221 Riverbend Drive, Suite 120, Dallas, Texas 75247, Attention: Mr. Robert Mead, CEO, Telephone: 214-631-1166, Facsimile: 214-905-0514.

     Maturity Date. The First Advance Maturity Date or the Second Advance Maturity Date, as applicable.

     SPV Address. 1221 Riverbend Drive, Suite 120, Dallas, Texas 75247, Attention: Mr. Robert Mead, CEO, Telephone: 214-631-1166, Facsimile: 214-905-0514.

     SPV Hedge Agreement. The ISDA Master Agreement, Schedule and Confirmation, each dated as of December 22, 2003 and the Confirmation, dated as of March 28, 2005, between SPV and TFC, as amended or modified with the prior written consent of TFC and the Administrative Agent.

     SPV Note. Collectively, (i) the Amended and Restated SPV Note, dated the Second Advance Funding Date, in the principal amount of $66,380,808.54 evidencing the First Advance and (ii) the SPV Note, dated the Second Advance Funding Date, in the principal amount of $26,333,737.55 evidencing the Second Advance, in each case, executed and delivered by SPV to the Administrative Agent concurrently with the funding of the Second Advance.

     1.14 Exhibits A, B, E, H and K to the SPV Loan Agreement are hereby amended and restated in their entirety to read as set forth on Exhibit B attached hereto.

     SECTION 2. Conditions Precedent. The obligation of TFC to enter into this Amendment and to fund the Second Advance shall be subject to the satisfaction of the conditions precedent set forth below on or before the Second Advance Funding Date:

     (a) Developer, SPV and the Subject Person shall have executed and delivered (or cause to be executed and delivered, as the case may be, by all parties thereto), to TFC fully executed copies of the following (the “Second Advance Documents”):

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          (i) this Amendment,

          (ii) an Amended and Restated SPV Note, dated as of the Second Advance Funding Date, in the principal amount of $66,380,808.54,

          (iii) a second SPV Note, dated as of the Second Advance Funding Date, in the principal amount of $26,333,737.55,

          (iv) a Sale Assignment, dated as of the Second Advance Funding Date, between Developer and SPV,

          (v) a recordable bill of sale made by Developer evidencing the sale or contribution by Developer to SPV of all Receivables and related Timeshare Mortgages related to the Second Advance and a recordable collateral assignment by SPV to TFC of all Receivables and related Timeshare Mortgages related to the Second Advance,

          (vi) Amendment No. 1 to the Developer Transfer Agreement, dated as of the Second Advance Funding Date, between Developer and SPV,

          (vii) Amendment No. 1 to the Subservicing Agreement, dated as of the Second Advance Funding Date, among TFC, Developer and Textron Business Services Inc.,

          (viii) Amendment No. 1 to the Back-Up Servicing Agreement, dated as of the Second Advance Funding Date, between Developer, TFC and Back-Up Servicer,

          (ix) a Confirmation, dated as of March 28, 2005, to the Master ISDA Agreement, dated as of December 19, 2003, between SPV and TFC, and

          (x) such other instruments and documents as TFC shall require.

     (b) TFC and the Administrative Agent shall have completed, and been satisfied with, its legal and business due diligence regarding the Pledged Receivables related to the Second Advance.

     (c) TFC shall have received from counsel to SPV and Developer, opinions satisfactory to TFC and the Administrative Agent (including as to the addresses thereof), which opinion shall include such matters as were covered by the opinions delivered on the Closing Date, taking into account the matters contemplated by the Second Advance Documents and such other matters as TFC or the Administrative Agent may reasonably request.

     (d) TFC shall have received a Contract Schedule setting forth the Receivables securing the Second Advance.

     (e) All of the following shall be true:

          (i) TFC shall have obtained such searches of the applicable public records as it deems necessary under applicable laws to verify that SPV has a valid ownership

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interest, and TFC has a first and prior perfected Lien and security interest, covering the Collateral, subject only to Permitted Liens and Encumbrances;

          (ii) TFC and Heller Financial Inc. shall have entered into such escrow and pay-off arrangements as TFC shall require, and the conditions to the release of such escrow shall have been satisfied or waived;

          (iii) SPV shall have delivered to TFC Uniform Commercial Code termination statements from prior lenders and financing statements from Developer and SPV covering its portion of the Collateral, recorded in the public records of all Lien Filing Offices in which the Resorts, Developer or SPV are located (as defined by the Code) and filed with each applicable Secretary of State; and

          (iv) the Pledged Receivables shall be endorsed by Developer in favor of SPV and by SPV in favor of TFC.

     (f) All Timeshare Mortgages and Pledged Receivables endorsed and assigned to TFC must have evidence thereon of payment of all required documentary stamps and intangible taxes, if any are required.

     (g) The mortgagee’s title insurance policies shall be in form and substance satisfactory to TFC, shall be issued by the Title Insurance Company, name TFC as the insured party therein, contain such exceptions and conditions to title as TFC shall approve in writing, which approval shall not be unreasonably withheld, shall contain such affirmative coverage as TFC deems reasonably necessary and shall have been delivered to TFC.

     (h) The Subservicer and the Master Servicer shall have agreed upon a revised form of Monthly Report, which revised report will separately report the trial balance, aging and delinquency for, and collections on, Receivables in Pool I and Receivables in Pool II and otherwise reflect the transactions contemplated by the Second Advance Documents.

     (i) The other conditions precedent set forth in Section 4.1 of the SPV Loan Agreement that are not listed above, to the extent applicable to the matters contemplated by the Second Advance Documents, shall have been satisfied.

SECTION 3. Consent. The parties hereto hereby consent to Amendment No. 1 to Developer Transfer Agreement, dated as of the date hereof, between Developer and SPV and attached hereto as Exhibit A.

SECTION 4. Representations, Warranties and Covenants.

     4.1 Upon the effectiveness of this Amendment, SPV hereby reaffirms all covenants, representations and warranties made by it, to the extent the same are not amended hereby, in the Loan Documents, as amended, and agrees that all such covenants, representations and warranties shall be deemed to have been re-made as of the effective date of this Amendment, except to the extent that any such covenants, representations and warranties expressly relate solely to an earlier date (in which case such covenants, representations and warranties shall have been true and accurate on and as of such earlier date). SPV hereby represents, warrants and certifies that,

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as of the date hereof, the outstanding principal amount of the Loan, including the Second Advance as provided for hereunder, does not exceed the Advance Amount.

     4.2 SPV hereby represents and warrants (i) that the Second Advance Documents to which it is a party constitute the legal, valid and binding obligation of SPV enforceable against SPV in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general principles of equity which may limit the availability of equitable remedies and (ii) upon the effectiveness of this Amendment, no Developer Event of Termination, Event of Default, Subservicer Event of Default or event which would constitute a Developer Event of Termination, an Event of Default or a Subservicer Event of Default but for the requirement that notice be given or time elapse or both shall have occurred or be continuing.

     4.3 With respect to the Receivables related to the Second Advance, SPV, promptly after the Second Advance Funding Date, shall direct in writing each Person liable for the payment of any Pledged Receivable, to pay each installment thereon to the applicable Account Agent, pursuant to the Lockbox Agreement, unless and until directed otherwise by written notice from the Administrative Agent or, at the Administrative Agent’s direction, from SPV, after which such parties are and shall be directed to make all further payments on the Pledged Receivables in accordance with the directions of the Administrative Agent.

     4.4 A UCC Financing Statement number 040052121681 was filed and recorded on December 29, 2003 in the office of the Secretary of State of Texas naming the Company as Debtor/Seller, SPV as Secured Party/Buyer/First Assignor, TFC as Secured Party/2^nd Assignor and Citicorp North America, Inc., as Administrative Agent (the “Administrative Agent”) as Assignee of Secured Party/2^nd Assignor (the “Texas Filing”). A UCC Financing Statement Amendment was filed and recorded on April 7, 2004 (the “Texas UCC Amendment”). The Company and SPV agree and confirm that the Texas UCC Amendment did not release, terminate, or modify the Administrative Agent’s security interest in any Receivables, Conveyed Assets, Collections or other assets constituting Collateral under the SPV Loan Agreement.

     In addition to the existing indemnities under the SPV Loan Agreement, SPV agrees and confirms that any loss, cost or expense incurred by an “Indemnified TFC Party” thereunder that results in connection with the filing and recordation of the Texas UCC Amendment and the purported release contemplated thereby, shall benefit from the indemnification provisions of and shall be repaid by SPV in accordance with Section 7.12 of the SPV Loan Agreement.

SECTION 5. Reference to and Effect on the SPV Loan Agreement.

     5.1 Upon the effectiveness of this Amendment, each reference in the SPV Loan Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” “hereby” or words of like import shall mean and be a reference to the SPV Loan Agreement as amended hereby, and each reference to the SPV Loan Agreement in any other document, instrument or agreement executed and/or delivered in connection with the SPV Loan Agreement shall mean and be a reference to the SPV Loan Agreement as amended hereby.

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     5.2 Except as specifically amended hereby, the SPV Loan Agreement (including without limitation the grant of security interests in the Collateral pursuant to Section 3.1 thereof) and the other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

     5.3 The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of TFC or the Administrative Agent under any Loan Document, nor constitute a waiver of any provision contained therein or a release of any Collateral described therein, except as specifically set forth herein.

SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES. SPV HEREBY AGREES TO ACCEPT THE STATE COURTS LOCATED IN NEW YORK, NEW YORK AS HAVING PROPER JURISDICTION AND BEING THE PROPER VENUE FOR ANY LEGAL PROCEEDINGS ARISING OUT OF THIS AMENDMENT AND ANY LOAN DOCUMENTS.

     SECTION 7. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.

     SECTION 8. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any purpose.

* * * * *

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     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

TEXTRON FINANCIAL CORPORATION
By:	/S/ NICHOLAS L. MECCA
	Name: Nicholas L. Mecca
	Title: Managing Director
SILVERLEAF FINANCE II, INC.
By:	/S/ HARRY J. WHITE, JR.
	Name: Harry J. White, Jr.
	Title: CFO

ACKNOWLEDGED AND AGREED TO BY:

CITICORP NORTH AMERICA, INC.,
as Administrative Agent

By:	/S/ LAIN GUTIERREZ
	Name: Lain Gutierrez
	Title: Vice President
SILVERLEAF RESORTS, INC.
By:	/S/ HARRY J. WHITE, JR.
	Name: Harry J. White, Jr.
	Title: CFO

List of Exhibits and Schedules Attached to Agreement and not filed herewith:

Ex. A: Developer Transfer Agreement Amendment
Ex. B: Exhibits to SPV Loan Agreement

EX-10.3

Ex. 10.3

SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN, SECURITY AND AGENCY AGREEMENT (TRANCHE A)

     THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN, SECURITY AND AGENCY AGREEMENT (TRANCHE A) dated as of February 28, 2005 (the “Second Amendment”), is entered into by and among SILVERLEAF RESORTS, INC., a Texas corporation (the “Borrower”), the parties, including TEXTRON FINANCIAL CORPORATION (“TFC”), a Delaware corporation, which execute and deliver this Agreement in their respective capacities as lenders hereunder (collectively, the “Lenders” and each, individually, a “Lender”), and TEXTRON FINANCIAL CORPORATION as facility agent and collateral agent (the “Agent”).

W I T N E S S E T H:

     WHEREAS, Borrower was formerly known as ASCENSION CAPITAL CORPORATION (the “Guarantor”), the successor to ASCENSION RESORTS, LTD., a Texas limited partnership (the “Original Borrower”), by merger of EQUAL INVESTMENT COMPANY, a Texas corporation, ASCENSION RESORTS, LTD. and ASCENSION CAPITAL CORPORATION;

     WHEREAS, TFC, Original Borrower and Guarantor were parties to that certain Loan and Security Agreement dated as of August 15, 1995 (the “Original Agreement”), pursuant to which the Original Borrower executed its Secured Promissory Note in favor of Lender in the amount of $5,000,000.00, as amended to date (the “Original Note”);

     WHEREAS, on December 28, 1995 Ascension Resorts, Ltd. was merged into the Guarantor and Guarantor was thereafter renamed Silverleaf Vacation Club, Inc.;

     WHEREAS, on December 28, 1995, TFC, Borrower and Guarantor amended the Original Agreement pursuant to a First Amendment to Loan and Security Agreement dated as of December 28, 1995 (the “First Amendment to Original Agreement”) to, among other things, evidence TFC’s approval of the merger of Ascension Resorts, Ltd. into Ascension Capital Corporation and to reflect the above-mentioned merger and name change;

     WHEREAS, on October 31, 1996, TFC and Borrower further amended the Original Agreement pursuant to a Second Amendment to Loan and Security Agreement dated as of October 31, 1996 (the “Second Amendment to Original Agreement”) to, among other things, increase the amount of the Loan, decrease the interest rate, and extend the maturity date of the Loan;

     WHEREAS, pursuant to a commitment letter dated January 26, 1999, TFC and Borrower agreed to further modify the terms of the Original Agreement to, among other things, increase the amount of the Loan, decrease the interest rate, extend the maturity date of the Loan and to reflect the change in Borrower’s name to Silverleaf Resorts, Inc.;

     WHEREAS, TFC and Borrower further amended the Original Agreement pursuant to a Third Amendment to Loan and Security Agreement dated as of March 31, 1999 (the “Third Amendment”) to amend the Agreement as provided in the January 26, 1999 commitment letter;

     WHEREAS, TFC and Borrower further amended the Original Agreement pursuant to a Fourth Amendment to Loan and Security Agreement dated as of December 16, 1999 (the “Fourth Amendment”) to, among other things, modify the definitions of Borrowing Base and Eligible Notes Receivable;

     WHEREAS, TFC and Borrower, as a result of certain Events of Default under the Original Agreement, entered into that certain Forbearance Agreement dated as of April 6, 2001 (the “Forbearance Agreement”);

     WHEREAS, TFC and Borrower further amended the Original Agreement pursuant to a Fifth Amendment to Loan and Security Agreement dated as of April 17, 2001 (the “Fifth Amendment”) to, among other things, extend the Revolving Credit Period and to incorporate the terms of the Forbearance Agreement;

     WHEREAS, TFC and Borrower further amended and restated the Original Agreement in its entirety pursuant to an Amended and Restated Loan, Security and Agency Agreement (Tranche A) (as amended and as amended hereby, the “Loan Agreement”) to, among other things, restructure and modify the Loan, including separating the Loan into two separate components – the Revolving Loan Component in the original principal amount of up to $56,894,400.00 and the Term Loan Component in the original principal amount of up to $15,105,600.00; to reduce the Commitment, as defined in the Loan Agreement, to $63,920,000.00 less the outstanding principal balance of the Term Loan Component from time to time and to reduce the aggregate Commitment hereunder, under the Additional Credit Facility and the Tranche C Facility, as such terms are defined in the Loan Agreement, to $136,000,000.00 less the outstanding principal balance of the Term Loan Component and the aggregate term loan component of the Additional Credit Facility and the Tranche C Facility from time to time; and to replace the Amended Note with: (i) an Amended and Restated Secured Promissory Note or Notes in the aggregate original principal amount of $56,894,400.00 in favor of Agent, as agent for each of the Lenders (singly and collectively the “Revolving Loan Component Note”) and (ii) a Secured Promissory Note or Notes in the aggregate original principal amount of $15,105,600.00 in favor of Agent, as agent for each of the Lenders (singly and collectively the “Term Loan Component Note”, and together with the Revolving Loan Component Note, sometimes referred to herein singly and collectively as the “Amended Note”);

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated June 12, 2002 to establish a definition for “modified Eligible Note Receivable”;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated March 27, 2003 to reinstate the maximum allowable ratio of Marketing and Sales Expenses to the Borrower’s net proceeds from the sale of Intervals to a ratio of .550 to 1;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Agreement dated September 25, 2003 to exclude the $28,711,000 increase in Borrower’s allowance

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for doubtful accounts during the quarter ended March 31, 2003 from the calculations of EBITDA, the Interest Coverage Ratio and Consolidated Net Income under the Loan Agreement and to approve the retirement of certain subordinated notes with a face value of $7,620,000;

     WHEREAS, Borrower entered into: (i) a Letter Agreement with TFC dated November 17, 2003 (the “November Letter Agreement”); (ii) an amendment to the Heller Documents dated November 21, 2003; and (iii) an amendment to the Sovereign Documents dated October 1, 2003; each for the purpose of, among other things, waiving certain Events of Default that may have arisen under the Loan Agreement, the Heller Documents and the Sovereign Documents described therein, respectively;

     WHEREAS, Agent and Borrower entered into a First Amendment to the Amended and Restated Loan, Security and Agency Agreement dated as of December 19, 2003 (the “First Amendment”) to, among other things, restructure and modify the Loan, including reducing the Commitment, as defined in the First Amendment, to (i) $44,650,000.00 for the Revolving Loan Component; and (ii) $11,280,000.00 for the Term Loan Component, for a total Commitment under this Agreement of $55,930,000.00 and to reduce the aggregate Commitment under the Loan Agreement, the Additional Credit Facility and the Tranche C Facility, as such terms are defined in the First Amendment, to $95,000,000.00 for the Revolving Loan Component and $24,000,000.00 for the Term Loan Component;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated March 5, 2004 to clarify the definition of “Inventory Loan” and the Maximum Obligation of TFC under the Loan Agreement, the Additional Credit Facility, the Tranche C Credit Facility and the Inventory Loan;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated July 30, 2004 to modify the definition of Collateral in connection with the amendments to the Sovereign Facility dated as of July 30, 2004; and

     WHEREAS, in connection with the Loans to be made by Lenders pursuant to the Loan Agreement, Textron Financial Corporation has agreed to act as facility agent and collateral agent for the other Lenders and to perform such duties with respect to the Loans as are expressly set forth herein;

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Terms. All capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Loan Agreement.

2. Elimination of Requirement for Business Plan. The Loan Agreement is modified in part to add the following provision:

“Elimination of Requirement for Business Plan. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the requirement for Borrower to

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maintain and adhere to the Business Plan is eliminated in all respects from and after the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender.”

3. Definitions. Section 1.1 is hereby amended in part to add the following new paragraphs:

“(sssss) Backup Servicing Agreement. Shall mean that certain Backup Servicing Agreement dated as of April 10, 2001, as amended by the First Amendment to the Backup Servicing Agreement dated as of April 30, 2002.”

“(ttttt) Declarant Rights. Shall mean the rights of the declarant described on Schedule 1.1(c) attached hereto.”

“(uuuuu) Management Agreement. Shall mean that certain Management Agreement by and between Silverleaf Club and Silverleaf Resorts, Inc. dated as of March 28, 1990 as amended to date.”

“(vvvvv) Utility Purchase Agreement. Shall mean that certain Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004.”

“(wwwww) Utility Rights. Shall mean the Facilities, Real Property and Utilities, as those terms are defined in the Utility Purchase Agreement, that are part of the Additional Resort Collateral.”

4. Release of Utility Rights, Additional Resort Collateral and Sovereign Collateral. Section 3 is hereby amended in part to add the following new Section 3.15:

“3.15 Release of Liens. Notwithstanding anything contrary in the Loan Agreement, and provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred:

(a) the Utility Rights shall be released from the Lien of the security interest granted to Lender hereunder on the date that: (i) the sale of the Utility Rights is closed pursuant to the Utility Purchase Agreement; and (ii) the net proceeds of such sale in an amount not less than thirteen million dollars ($13,000,000) is paid to Lender;

(b) the Additional Resort Collateral, except for the Declarant Rights and the Management Agreement, shall be released from the Lien of the security interest

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granted to Lender hereunder on the date that the Term Loan Component has been paid in full;

(c) all collateral securing the Sovereign Facility, which shall mean the Notes Receivable and related Mortgages exclusively assigned to Sovereign in connection with an advance under its loan documents, shall be released from the Lien of the security interest granted to Lender hereunder on the date that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; and (iii) all Collateral is released from any lien granted to Sovereign pursuant to the Sovereign Documents; and

(d) the Declarant Rights and the Management Agreement shall be released from the Liens of the security interest granted to Lender hereunder on the date that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; (iii) Borrower files a negative pledge in a form acceptable to Lender in the land records for each Resort that neither Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered; and (iv) the Declarant Rights and the Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign Documents. Notwithstanding anything herein to the contrary, to the extent that the Declarant Rights or Management Agreement have not already been released from any lien granted to Lender hereunder, on the date that the maximum aggregate Commitment under this Agreement, the Additional Credit Facility and the Tranche C Facility has been reduced to $82,000,000.00 for the Revolving Loan Component, the Declarant Rights and Management Agreement shall be released from the Lien of the security interest granted to Lender hereunder, provided that: (1) Borrower files a negative pledge in a form acceptable to Lender in the land records for each Resort that neither the Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered and (2) the Declarant Rights and Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign Documents.

5. Tangible Net Worth. Provided that: (i) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; and (ii) Tangible Net Worth as of December 31, 2004 meets or exceeds the requirement of the existing Section 7.1(cc)(i) Tangible Net Worth Covenant, Section 7.1(cc)(i) will be deleted in its entirety and replaced with the following new Section 7.1(cc)(i), on the date that: (1) the Term Loan Component has been paid in full; and (2) Borrower has achieved the net

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income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“(i) Tangible Net Worth. Borrower shall at all times have and maintain Tangible Net Worth in an amount which shall not be less than an amount equal to the Tangible Net Worth as stated in the annual audited financial statements as of December 31, 2004 plus (A) fifty percent (50%) of the aggregate amount of proceeds received by Borrower after December 31, 2004 in connection with (1) each issuance by Borrower of any class or classes of capital stock after December 31, 2004, except for stock issued to retire existing unsecured subordinated debt, and (2) each incurrence of unsecured subordinated debt after December 31, 2004, except for unsecured debt issued to retire existing unsecured subordinated debt, plus (B) fifty percent (50%) of the aggregate amount of net income (calculated in accordance with GAAP) of Borrower after December 31, 2004.”

6. Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Section 7.1 is hereby amended in part to add the following new paragraph:

“7.1 (ff) Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the Standby Management Agreement shall be released from the security interest granted to Lender hereunder and Borrower may terminate the agreement with the Standby Manager and Resort Consultant required under Section 7.1(y), and may amend the agreement with the Standby Servicer required under Section 7.1(y) to allow for Warm Backup, as that term is described in Exhibit B to that certain Backup Servicing Agreement among Standby Servicer, Borrower, and Agent dated as of April 10, 2001, as amended to date and, provided that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; (iii) any requirement for the Standby Manager or Resort Consultant is eliminated from the Sovereign Documents; and (iv) the Standby Management Agreement is also released from any security interest granted to Sovereign pursuant to the Sovereign Documents.”

7. Limitation on Other Debt, Further Encumbrances. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(a) will be deleted in its entirety and replaced with the following paragraph on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as

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those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“7.2(a) Limitation on Other Debt, Further Encumbrances. Borrower will not obtain financing and grant liens with respect to the Collateral, except as hereafter provided. Notwithstanding anything herein to the contrary, Borrower may, without first obtaining the written consent of Lender obtain financing and grant liens with respect to any of its assets or other property except for the Collateral and those assets or property restricted by a negative pledge provided: (i) Borrower provides ten days prior written notice to Lender setting forth the terms and conditions of such financing; (ii) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; (iii) such financing does not result in an Event of Default hereunder or under or under Heller Documents, the Sovereign Documents, DZ Documents, Bond Holder Exchange Documents or the documents evidencing any other indebtedness of Borrower; (iv) Lender is promptly provided a copy of the fully executed loan documents relating thereto.”

8. Subordinated Obligations. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(f) will be amended by adding the following sentence to the end of such section on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender.

“Notwithstanding anything to the contrary in this Section 7.2(f), so long as Borrower’s Tangible Net Worth remains in compliance with Section 7.1(cc)(i) Borrower may: (i) retire unsecured subordinated debt with the proceeds from the issuance of stock or the incurrence of unsecured debt, and/or (ii) declare dividends, buy back stock, and perform other equity transactions.”

9. Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(k) will be deleted in its entirety and replaced with the following new Section 7.2(k), on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“(k) Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Borrower may amend or modify the

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Sovereign Documents, the DZ Documents, the Bond Holder Exchange Documents, the Silverleaf Finance II Documents or the documents evidencing any other indebtedness of Borrower, and Borrower may extend, modify, increase or terminate the DZ Facility, the Bond Holder Exchange Transaction, the Sovereign Facility, the TFC Conduit Loan or any other credit facility or loan, without the prior written consent of Lender, provided Borrower provides Lender with (i) ten days prior written notice setting forth the terms and conditions thereof and (ii) a copy of the fully executed loan documents thereof promptly after execution.”

10. Conditions Precedent. This Amendment shall not be effective until all of the following conditions have been satisfied:

(a) Approval of Documents. Borrower has delivered to Lender (with copies to Lender’s counsel), and Lender has reviewed and approved in its sole discretion, the form and content of all of the items specified in Subsections (i) through (vii) below (the “Submissions”). Lender shall have the right to review and approve any changes to the form of any of the Submissions. If Lender disapproves of any changes to any of the Submissions, Lender shall have the right to require Borrower either to cure or correct the defect objected to by Lender or to elect not to fund any Advance. Under no circumstances shall Lender’s failure to approve or disapprove a change to any of the Submissions be deemed to be an approval of such Submissions. All of the Submissions shall be prepared at Borrower’s sole cost and expense.

(i) A certificate in the form attached to the Amendment as Exhibit A-1 to be signed by the president, vice president or secretary of the Borrower;

(ii) Copies of any amendments to the articles of incorporation/charter and bylaws of Borrower not previously delivered to Lender, certified to be true, correct and complete by Borrower and the Secretary of State of the State of Texas and current certificates of good standing for Borrower for the State of Texas and states where the Resorts are located, a current certificate of authority to conduct business by the Secretary of State in each state in which Borrower conducts business;

(iii) A certificate of the Secretary of Borrower certifying the adoption by the Board of Directors of Borrower of a resolution authorizing Borrower to enter into and execute the Amendment and all such documents requested by Lender in the form attached to the Amendment as Exhibit B-1;

(iv) A certificate of the secretary or assistant secretary of Borrower certifying the incumbency, and verifying the authenticity of the signatures of the specified officers of Borrower authorized to sign this Amendment and all such documents requested by Lender in the form attached to the Amendment as Exhibit C-1;

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(v) Fully executed closing documents from the sale of the utility rights which comprise part of the Additional Resort Collateral pursuant to the Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004. Such sale will provide not less than thirteen million dollars ($13,000,000) of net proceeds. Lender hereby authorizes Borrower to consummate the sale of the utility rights subject to the terms and conditions of this Amendment;

(vi) Closing Opinions of Counsels for Borrower;

(vii) Such other agreements, documents, instruments, certificates and materials as Lender may request to evidence the Indebtedness, to evidence and perfect the rights and Liens and security interests of Lender contemplated by the Loan Documents as amended hereby, and to effectuate the transactions contemplated in this Amendment.

(b) Conditions to Closing.

(i) Execution of this Amendment;

(ii) Execution of the amendments to the Additional Credit Facility, the Tranche C Facility and the Inventory Loan dated of even date herewith;

(iii) Borrower shall have delivered to Lender the Inventory Term Loan Note;

(iv) Lender shall have received evidence, in form and substance satisfactory to Lender, that the consent of each party entitled to consent to this Amendment has been obtained;

(v) Borrower shall have paid all fees of all Lenders in connection with this Amendment; and

(vi) Lender shall have delivered originals of all releases of Liens contemplated by this Amendment to Lender’s counsel to be held in escrow until such time as Lender notifies Lender’s counsel that Borrower has satisfied all conditions and is entitled to such releases.

11. Further Documentation. Borrower agrees to execute and deliver to Lender any and all additional documentation as Lender may now or hereafter require in order to effectuate the terms and conditions of this Amendment.

12. Effect of Amendment. The Loan Agreement, as herein amended, shall remain in full force and effect.

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13. Ratification and Confirmation. Except as herein expressly amended, Borrower hereby ratifies, confirms, assumes and agrees to be bound by all of representations, warranties, statements, covenants and agreements set forth in the Loan Agreement and the other Loan Documents, as previously amended. The Borrower reaffirms, restates and incorporates by reference all of the representations, warranties, covenants and agreements made in the Loan Documents as if the same were made as of this date. The Borrower agrees to pay the Loan and all related expenses, as and when due and payable in accordance with the Loan Agreement and the other Loan Documents, and to observe and perform the Obligations, and do all things necessary which are not prohibited by law to prevent the occurrence of any Event of Default. In addition, to further secure, and to evidence and confirm the securing of, the prompt and complete payment and performance by the Borrower of the Loan and all of the Obligations, for value received, Borrower unconditionally and irrevocably assigns, pledges and grants to Lender, and hereby confirms or reaffirms the prior granting to Lender of, a continuing First priority Lien, mortgage and security interest in and to all of the Collateral, except as otherwise set forth herein, whether now existing or hereafter acquired. Also, as provided in the Loan Documents, the Loan is and shall be further secured by the Liens and security interests in favor of Lender in the properties and interests relating to Additional Eligible Resorts, which now or hereafter serve as collateral security for any Obligations. Upon satisfaction of the requirements for approval by Lender of Additional Resorts, Borrower shall record, or cause to be recorded, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements in the appropriate public records of the state in which each Resort is located to further evidence and perfect Lender’s Lien on the Collateral. Borrower agrees to deliver or cause to be delivered by its Affiliates, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements as Lender may deem necessary to further evidence and perfect the Lender’s Lien on the Collateral.

14. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES.

15. General Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

(a) Organization, Standing, Qualification. Borrower: (a) is a duly organized and validly existing Texas corporation duly organized, validly existing and in good standing under the laws of the State of Texas, and (b) has all requisite power, corporate or otherwise, to conduct its business and to execute and deliver, and to perform its obligations under, the Loan Documents.

(b) Authorization, Enforceability, Etc

(i) The execution, delivery and performance by Borrower of the Loan Documents has been duly authorized by all necessary corporate action by Borrower and does not and will not: (1) violate any provision of the certificate or articles of incorporation of Borrower, bylaws of Borrower, or

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any agreement, law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect to which Borrower is a party or is subject; (2) result in, or require the creation or imposition of, any Lien upon or with respect to any asset of Borrower other than Liens in favor of Lenders; or (3) result in a breach of, or constitute a default by Borrower under, any indenture, loan or credit agreement or any other agreement, document, instrument or certificate to which Borrower is a party or by which it or any of its assets are bound or affected.

(ii) No approval, authorization, order, license, permit, franchise or consent of, or registration, declaration, qualification or filing with, any governmental authority or other Person, including without limitation, the Division or the Timeshare Owners’ Association is required in connection with the execution, delivery and performance by Borrower of any of the Loan Documents.

(iii) The Loan Documents constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms.

(c) No Event of Default. No Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred under the Loan Agreement as amended to date, the Additional Credit Facility, Tranche C Facility, the Inventory Loan, the Heller Facility, the Sovereign Facility, DZ Facility, Bond Holder Exchange Facility or any other indebtedness of Borrower.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

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     IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed on their behalf as of the day and year first written above.

Witnessed By:	TEXTRON FINANCIAL CORPORATION
/S/ SEBASTIAN GROMOUDIN	By:	/S/ JOHN D’ANNIBALE
/S/ GINGER HAYES	Name:	John D’Annibale
	Its:	V.P.
	SILVERLEAF RESORTS, INC.
/S/ PATRICIA K. DOREY	By:	/S/ HARRY J. WHITE, JR.
/S/ PENNY J. PELHAM	Name:	Harry J. White, Jr.
	Its:	CFO

STATE OF CONNECTICUT	)
	)	ss: East Hartford
COUNTY OF HARTFORD	)

     At East Hartford in said County and State on this 24 day of February, 2005, personally appeared John D’Annibale, duly authorized Vice President of Textron Financial Corporation, and he acknowledged the foregoing instrument by him signed and sealed to be his free act and deed and the free act and deed of Textron Financial Corporation.

Before me:	/S/ LAURA D'ANGELO
	Notary Public in and for said State
	My Commission Expires: FEB. 28, 2009
	Commissioner of the Superior Court

STATE OF TEXAS	)
	)	ss:
COUNTY OF DALLAS	)

     At _Dallas, Texas___in said County and State on this ___1st___day of ___March___, 2005, personally appeared ___Harry J. White, Jr. duly authorized officer of SILVERLEAF RESORTS, INC., and he/she acknowledged the foregoing instrument by him/her signed and sealed to be his/her free act and deed and the free act and deed of Silverleaf Resorts, Inc., a Texas corporation, on behalf of the corporation.

Before me:	/S/ TAMMY J. MARTIN
	Notary Public in and for said State
	My Commission Expires: 1-6-2009

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EX-10.4

Ex. 10.4

SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN, SECURITY AND AGENCY AGREEMENT (TRANCHE B)

     THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN, SECURITY AND AGENCY AGREEMENT (TRANCHE B) dated as of February 28, 2005 (the “Second Amendment”), is entered into by and among SILVERLEAF RESORTS, INC., a Texas corporation (the “Borrower”), the parties, including TEXTRON FINANCIAL CORPORATION (“TFC”), a Delaware corporation, which execute and deliver this Agreement in their respective capacities as lenders hereunder (collectively, the “Lenders” and each, individually, a “Lender”), and TEXTRON FINANCIAL CORPORATION as facility agent and collateral agent (the “Agent”).

W I T N E S S E T H:

     WHEREAS, Agent and Borrower were parties to that certain Loan, Security and Agency Agreement dated as of December 16, 1999 (the “Original Agreement”), pursuant to which the Borrower executed its Secured Promissory Note in favor of the Agent, as agent for Lenders, in the amount of $71,000,000.00, as amended to date (the “Original Note”);

     WHEREAS, Agent and Borrower entered into a First Amendment to Loan, Security and Agency Agreement dated as of April 17, 2001 (the “First Amendment to Original Agreement”) to, among other things, incorporate the terms of a certain Forbearance Agreement dated as of April 6, 2001;

     WHEREAS, pursuant to the First Amendment to Original Agreement the Original Note was replaced by a Secured Promissory Note or Notes in the aggregate original principal amount of $71,000,000.00 in favor of Lenders;

     WHEREAS, TFC and Borrower further amended and restated the Original Agreement in its entirety pursuant to an Amended and Restated Loan, Security and Agency Agreement (Tranche B) (as amended to date and hereby, the “Loan Agreement”) dated April 30, 2002 to, among other things, restructure and modify the Loan, including separating the Loan into two separate components – the Revolving Loan Component in the original principal amount of up to $56,104,200.00 and the Term Loan Component in the original principal amount of up to $14,895,800.00; to reduce the Commitment, as defined in the Loan Agreement, to $63,022,400.00 less the outstanding principal balance of the Term Loan Component from time to time and to reduce the aggregate Commitment under the Loan Agreement, under the Additional Credit Facility and the Tranche C Facility, as such terms are defined in the Loan Agreement, to $136,000,000.00 less the outstanding principal balance of the Term Loan Component and the aggregate term loan component of the Additional Credit Facility and the Tranche C Facility from time to time; and to replace the Amended Note with: (i) an Amended and Restated Secured Promissory Note or Notes in the aggregate original principal amount of $56,104,200.00 in favor of Lenders (singly and collectively the “Revolving Loan Component Note”) and (ii) a Secured Promissory Note or Notes

in the aggregate original principal amount of $14,895,800.00 in favor of Lenders (singly and collectively the “Term Loan Component Note”, and together with the Revolving Loan Component Note, sometimes referred to herein singly and collectively as the “Note”);

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated June 12, 2002 to establish a definition for “modified Eligible Note Receivable”;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated March 27, 2003 to reinstate the maximum allowable ratio of Marketing and Sales Expenses to the Borrower’s net proceeds from the sale of Intervals to a ratio of .550 to 1;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Agreement dated September 25, 2003 to exclude the $28,711,000 increase in Borrower’s allowance for doubtful accounts during the quarter ended March 31, 2003 from the calculations of EBITDA, the Interest Coverage Ratio and Consolidated Net Income under the Loan Agreement and to approve the retirement of certain subordinated notes with a face value of $7,620,000;

     WHEREAS, Borrower entered into: (i) a Letter Agreement with TFC dated November 17, 2003 (the “November Letter Agreement”); (ii) an amendment to the Heller Documents dated November 21, 2003; and (iii) an amendment to the Sovereign Documents dated October 1, 2003; each for the purpose of, among other things, waiving certain Events of Default that may have arisen under the Loan Agreement, the Heller Documents and the Sovereign Documents described therein, respectively;

     WHEREAS, Agent and Borrower entered into a First Amendment to the Amended and Restated Loan, Security and Agency Agreement dated as of December 19, 2003 (the “First Amendment”) to, among other things, restructure and modify the Loan, including reducing the Commitment, as defined in the First Amendment, to (i) $44,104,600.00 for the Revolving Loan Component; and (ii) $11,040,000.00 for the Term Loan Component, for a total Commitment under this Agreement of $55,144,600.00 and to reduce the aggregate Commitment under the Loan Agreement, the Additional Credit Facility and the Tranche C Facility, as such terms are defined in the First Amendment, to $95,000,000.00 for the Revolving Loan Component and $24,000,000.00 for the Term Loan Component; and to replace the Term Loan Component Secured Promissory Note or Notes with an Amended Secured Promissory Note in the aggregate original principal amount of $11,040,000.00 in favor of Lender (the “Term Loan Component Note”, and together with the Revolving Loan Component Note, sometimes referred to herein singly and collectively as the “Note”);

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated March 5, 2004 to clarify the definition of “Inventory Loan” and the Maximum Obligation of TFC under the Loan Agreement, the Additional Credit Facility, the Tranche C Credit Facility and the Inventory Loan;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to two Letter Amendments dated July 30, 2004 to (i) clarify the priority of security in the Silverleaf Finance II

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Stock and the Silverleaf Finance II Subordinated Note, and (ii) modify the definition of Collateral in connection with the amendments to the Sovereign Facility dated as of July 30, 2004; and

     WHEREAS, in connection with the Loans to be made by Lenders pursuant to the Loan Agreement, Textron Financial Corporation has agreed to act as facility agent and collateral agent for the other Lenders and to perform such duties with respect to the Loans as are expressly set forth herein;

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Terms. All capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Loan Agreement.

2. Elimination of Requirement for Business Plan. The Loan Agreement is modified in part to add the following provision:

“Elimination of Requirement for Business Plan. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the requirement for Borrower to maintain and adhere to the Business Plan is eliminated in all respects from and after the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent.”

3. Definitions. Section 1.1 is hereby amended in part to add the following new paragraphs:

“(sssss) Backup Servicing Agreement. Shall mean that certain Backup Servicing Agreement dated as of April 10, 2001, as amended by the First Amendment to the Backup Servicing Agreement dated as of April 30, 2002.”

“(ttttt) Declarant Rights. Shall mean the rights of the declarant described on Schedule 1.1(c) attached hereto.”

“(uuuuu) Management Agreement. Shall mean that certain Management Agreement by and between Silverleaf Club and Silverleaf Resorts, Inc. dated as of March 28, 1990 as amended to date.”

“(vvvvv) Utility Purchase Agreement. Shall mean that certain Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004.”

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“(wwwww) Utility Rights. Shall mean the Facilities, Real Property and Utilities, as those terms are defined in the Utility Purchase Agreement, that are part of the Additional Resort Collateral.”

4. Release of Utility Rights, Additional Resort Collateral and Sovereign Collateral. Section 3 is hereby amended in part to add the following new Section 3.15:

“3.15 Release of Liens. Notwithstanding anything contrary in the Loan Agreement, and provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred:

(a) the Utility Rights shall be released from the Lien of the security interest granted to Agent hereunder on the date that: (i) the sale of the Utility Rights is closed pursuant to the Utility Purchase Agreement; and (ii) the net proceeds of such sale in an amount not less than thirteen million dollars ($13,000,000) is paid to Agent;

(b) the Additional Resort Collateral, except for the Declarant Rights and the Management Agreement, shall be released from the Lien of the security interest granted to Agent hereunder on the date that the Term Loan Component has been paid in full;

(c) all collateral securing the Sovereign Facility, which shall mean the Notes Receivable and related Mortgages exclusively assigned to Sovereign in connection with an advance under its loan documents, shall be released from the Lien of the security interest granted to Agent hereunder on the date that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent; and (iii) all Collateral is released from any lien granted to Sovereign pursuant to the Sovereign Documents; and

(d) the Declarant Rights and the Management Agreement shall be released from the Liens of the security interest granted to Agent hereunder on the date that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent; (iii) Borrower files a negative pledge in a form acceptable to Agent on the land records for each Resort that neither Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered; and (iv) the Declarant Rights and the Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign

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Documents. Notwithstanding anything herein to the contrary, to the extent that the Declarant Rights or Management Agreement have not already been released from any lien granted to Agent hereunder, on the date that the maximum aggregate Commitment under this Agreement, the Additional Credit Facility, and the Tranche C Credit Facility has been reduced to $82,000,000.00 for the Revolving Loan Component, the Declarant Rights and Management Agreement shall be released from the Lien of the security interest granted to Agent hereunder, provided that: (1) Borrower files a negative pledge in a form acceptable to Agent on the land records for each Resort that neither the Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered and (2) the Declarant Rights and Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign Documents.

5. Tangible Net Worth. Provided that: (i) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; and (ii) Tangible Net Worth as of December 31, 2004 meets or exceeds the requirement of the existing Section 7.1(cc)(i) Tangible Net Worth Covenant, Section 7.1(cc)(i) will be deleted in its entirety and replaced with the following new Section 7.1(cc)(i), on the date that: (1) the Term Loan Component has been paid in full; and (2) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent:

“(i) Tangible Net Worth. Borrower shall at all times have and maintain Tangible Net Worth in an amount which shall not be less than an amount equal to the Tangible Net Worth as stated in the annual audited financial statements as of December 31, 2004 plus (A) fifty percent (50%) of the aggregate amount of proceeds received by Borrower after December 31, 2004 in connection with (1) each issuance by Borrower of any class or classes of capital stock after December 31, 2004, except for stock issued to retire existing unsecured subordinated debt, and (2) each incurrence of unsecured subordinated debt after December 31, 2004, except for unsecured debt issued to retire existing unsecured subordinated debt, plus (B) fifty percent (50%) of the aggregate amount of net income (calculated in accordance with GAAP) of Borrower after December 31, 2004.”

6. Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Section 7.1 is hereby amended in part to add the following new paragraph:

“7.1 (ff) Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the Standby Management Agreement shall be released from the security interest granted to Agent hereunder and Borrower may terminate the agreement with the Standby Manager and Resort Consultant required under Section 7.1(y), and may amend the agreement with the Standby Servicer required under

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Section 7.1(y) to allow for Warm Backup, as that term is described in Exhibit B to that certain Backup Servicing Agreement among Standby Servicer, Borrower, and Agent dated as of April 10, 2001, as amended to date and, provided that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent; (iii) any requirement for the Standby Manager or Resort Consultant is eliminated from the Sovereign Documents; and (iv) the Standby Management Agreement is also released from any security interest granted to Sovereign pursuant to the Sovereign Documents.”

7. Limitation on Other Debt, Further Encumbrances. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(a) will be deleted in its entirety and replaced with the following paragraph on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent:

“7.2(a) Limitation on Other Debt, Further Encumbrances. Borrower will not obtain financing and grant liens with respect to the Collateral, except as hereafter provided. Notwithstanding anything herein to the contrary, Borrower may, without first obtaining the written consent of Agent obtain financing and grant liens with respect to any of its assets or other property except for the Collateral and those assets or property restricted by a negative pledge provided: (i) Borrower provides ten days prior written notice to Agent setting forth the terms and conditions of such financing; (ii) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; (iii) such financing does not result in an Event of Default hereunder or under or under Heller Documents, the Sovereign Documents, DZ Documents, Bond Holder Exchange Documents or the documents evidencing any other indebtedness of Borrower; (iv) Agent is promptly provided a copy of the fully executed loan documents relating thereto.”

8. Subordinated Obligations. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(f) will be amended by adding the following sentence to the end of such section on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent.

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“Notwithstanding anything to the contrary in this Section 7.2(f), so long as Borrower’s Tangible Net Worth remains in compliance with Section 7.1(cc)(i) Borrower may: (i) retire unsecured subordinated debt with the proceeds from the issuance of stock or the incurrence of unsecured debt, and/or (ii) declare dividends, buy back stock, and perform other equity transactions.”

9. Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(k) will be deleted in its entirety and replaced with the following new Section 7.2(k), on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Agent:

“(k) Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Borrower may amend or modify the Sovereign Documents, the DZ Documents, the Bond Holder Exchange Documents, the Silverleaf Finance II Documents or the documents evidencing any other indebtedness of Borrower, and Borrower may extend, modify, increase or terminate the DZ Facility, the Bond Holder Exchange Transaction, the Sovereign Facility, the TFC Conduit Loan or any other credit facility or loan, without the prior written consent of Agent, provided Borrower provides Agent with (i) ten days prior written notice setting forth the terms and conditions thereof and (ii) a copy of the fully executed loan documents thereof promptly after execution.”

10. Conditions Precedent. This Amendment shall not be effective until all of the following conditions have been satisfied:

(a) Approval of Documents. Borrower has delivered to Agent (with copies to Agent’s counsel), and Agent has reviewed and approved in its sole discretion, the form and content of all of the items specified in Subsections (i) through (vii) below (the “Submissions”). Agent shall have the right to review and approve any changes to the form of any of the Submissions. If Agent disapproves of any changes to any of the Submissions, Agent shall have the right to require Borrower either to cure or correct the defect objected to by Agent or to elect not to fund any Advance. Under no circumstances shall Agent’s failure to approve or disapprove a change to any of the Submissions be deemed to be an approval of such Submissions. All of the Submissions shall be prepared at Borrower’s sole cost and expense.

(i) A certificate in the form attached to the Amendment as Exhibit A-1 to be signed by the president, vice president or secretary of the Borrower;

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(ii) Copies of any amendments to the articles of incorporation/charter and bylaws of Borrower not previously delivered to Agent, certified to be true, correct and complete by Borrower and the Secretary of State of the State of Texas and current certificates of good standing for Borrower for the State of Texas and states where the Resorts are located, a current certificate of authority to conduct business by the Secretary of State in each state in which Borrower conducts business;

(iii) A certificate of the Secretary of Borrower certifying the adoption by the Board of Directors of Borrower of a resolution authorizing Borrower to enter into and execute the Amendment and all such documents requested by Agent in the form attached to the Amendment as Exhibit B-1;

(iv) A certificate of the secretary or assistant secretary of Borrower certifying the incumbency, and verifying the authenticity of the signatures of the specified officers of Borrower authorized to sign this Amendment and all such documents requested by Agent in the form attached to the Amendment as Exhibit C-1;

(v) Fully executed closing documents from the sale of the utility rights which comprise part of the Additional Resort Collateral pursuant to the Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004. Such sale will provide not less than thirteen million dollars ($13,000,000) of net proceeds. Agent hereby authorizes Borrower to consummate the sale of the utility rights subject to the terms and conditions of this Amendment;

(vi) Closing Opinions of Counsels for Borrower;

(vii) Such other agreements, documents, instruments, certificates and materials as Agent may request to evidence the Indebtedness, to evidence and perfect the rights and Liens and security interests of Agent contemplated by the Loan Documents as amended hereby, and to effectuate the transactions contemplated in this Amendment.

(b) Conditions to Closing.

(i) Execution of this Amendment;

(ii) Execution of the amendments to the Additional Credit Facility, the Tranche C Credit Facility and the Inventory Loan dated of even date herewith;

(iii) Borrower shall have delivered to Agent the Inventory Term Loan Note;

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(iv) Agent shall have received evidence, in form and substance satisfactory to Agent, that the consent of each party entitled to consent to this Amendment has been obtained;

(v) Borrower shall have paid all fees of Agent and all Lenders in connection with this Amendment; and

(vi) Agent shall have delivered originals of all releases of Liens contemplated by this Amendment to Agent’s counsel to be held in escrow until such time as Agent notifies Agent’s counsel that Borrower has satisfied all conditions and is entitled to such releases.

11. Further Documentation. Borrower agrees to execute and deliver to Agent any and all additional documentation as Agent may now or hereafter require in order to effectuate the terms and conditions of this Amendment.

12. Effect of Amendment. The Loan Agreement, as herein amended, shall remain in full force and effect.

13. Ratification and Confirmation. Except as herein expressly amended, Borrower hereby ratifies, confirms, assumes and agrees to be bound by all of representations, warranties, statements, covenants and agreements set forth in the Loan Agreement and the other Loan Documents, as previously amended. The Borrower reaffirms, restates and incorporates by reference all of the representations, warranties, covenants and agreements made in the Loan Documents as if the same were made as of this date. The Borrower agrees to pay the Loan and all related expenses, as and when due and payable in accordance with the Loan Agreement and the other Loan Documents, and to observe and perform the Obligations, and do all things necessary which are not prohibited by law to prevent the occurrence of any Event of Default. In addition, to further secure, and to evidence and confirm the securing of, the prompt and complete payment and performance by the Borrower of the Loan and all of the Obligations, for value received, Borrower unconditionally and irrevocably assigns, pledges and grants to Agent and each Lender, and hereby confirms or reaffirms the prior granting to Agent and each Lender of, a continuing First priority Lien, mortgage and security interest in and to all of the Collateral, except as otherwise set forth herein, whether now existing or hereafter acquired. Also, as provided in the Loan Documents, the Loan is and shall be further secured by the Liens and security interests in favor of Agent and each Lender in the properties and interests relating to Additional Eligible Resorts, which now or hereafter serve as collateral security for any Obligations. Upon satisfaction of the requirements for approval by Agent of Additional Resorts, Borrower shall record, or cause to be recorded, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements in the appropriate public records of the state in which each Resort is located to further evidence and perfect Agent and each Lender’s Lien on the Collateral. Borrower agrees to deliver or cause to be delivered by its Affiliates, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements as Agent may deem necessary to further evidence and perfect the Agent and each Lender’s Lien on the Collateral.

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14. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES.

15. General Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

(a) Organization, Standing, Qualification. Borrower: (a) is a duly organized and validly existing Texas corporation duly organized, validly existing and in good standing under the laws of the State of Texas, and (b) has all requisite power, corporate or otherwise, to conduct its business and to execute and deliver, and to perform its obligations under, the Loan Documents.

(b) Authorization, Enforceability, Etc

(i) The execution, delivery and performance by Borrower of the Loan Documents has been duly authorized by all necessary corporate action by Borrower and does not and will not: (1) violate any provision of the certificate or articles of incorporation of Borrower, bylaws of Borrower, or any agreement, law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect to which Borrower is a party or is subject; (2) result in, or require the creation or imposition of, any Lien upon or with respect to any asset of Borrower other than Liens in favor of Lenders; or (3) result in a breach of, or constitute a default by Borrower under, any indenture, loan or credit agreement or any other agreement, document, instrument or certificate to which Borrower is a party or by which it or any of its assets are bound or affected.

(ii) No approval, authorization, order, license, permit, franchise or consent of, or registration, declaration, qualification or filing with, any governmental authority or other Person, including without limitation, the Division or the Timeshare Owners’ Association is required in connection with the execution, delivery and performance by Borrower of any of the Loan Documents.

(iii) The Loan Documents constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms.

(c) No Event of Default. No Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred under the Loan Agreement as amended to date, Additional Credit Facility, the Tranche C Credit Facility, the Inventory Loan, the Heller Facility, the Sovereign Facility, DZ Facility, Bond Holder Exchange Facility or any other indebtedness of Borrower.

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THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

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     IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed on their behalf as of the day and year first written above.

Witnessed By:	TEXTRON FINANCIAL CORPORATION
/S/ SEBASTIAN GROMAUDIN
	By:	/S/ JOHN D’ANNIBALE
/S/ LAURIE SPARVEN
	Name:	John D’Annibale
	Its:	V.P.
	SILVERLEAF RESORTS, INC.
/S/ MARK MORTENSON
	By:	/S/ HARRY J. WHITE, JR.
/S/ MIKE NORRIS
	Name:	Harry J. White, Jr.
	Its:	CFO
	WEBSTER BANK, NATIONAL ASSOCIATION, fka WEBSTER BANK
/S/ AURTHUR V. LIPPENS
	By:	/S/ GORDON MASSAVE
Aurthur V. Lippens, V.P.	Name:	Gordon Massave
	Its:	Duly Authorized Signature
	BANK OF SCOTLAND
/S/ KAREN WELCH
	By:	/S/ AMENA NABI
	Name:	Amenda Nabi
	Its:	Assistant Vice President

STATE OF CONNECTICUT	)
	)	ss: East Hartford
COUNTY OF HARTFORD	)

     At East Hartford in said County and State on this _24___day of _February___, 2005, personally appeared _John T. D’Annibale___, duly authorized _VP___of Textron Financial Corporation, and he acknowledged the foregoing instrument by him signed and sealed to be his free act and deed and the free act and deed of Textron Financial Corporation.

Before me:	/S/ CHRISTINE M. CORDERA
	Notary Public in and for said State
	My Commission Expires: April 30, 2007
	Commissioner of the Superior Court

STATE OF TEXAS	)
	)	ss:
COUNTY OF DALLAS	)

     At _Dallas, Texas___in said County and State on this 1^st day of ___March___, 2005, personally appeared ___Harry J. White, Jr. duly authorized officer of SILVERLEAF RESORTS, INC., and he/she acknowledged the foregoing instrument by him/her signed and sealed to be his/her free act and deed and the free act and deed of Silverleaf Resorts, Inc., a Texas corporation, on behalf of the corporation.

Before me:	/S/ TAMMY J. MARTIN
	Notary Public in and for said State
	My Commission Expires: 1-2-2009

STATE OF NEW YORK	)
	)	ss:
COUNTY OF NEW YORK	)

     At ___New York___in said County and State on this _4th___day of _March___, 2005, personally appeared ___Gordon Massave___, duly authorized officer of ___Webster Bank___, and he/she acknowledged the foregoing instrument by him/her signed and sealed to be his/her free act and deed and the free act and deed of Webster Bank, National Association, fka Webster Bank, on behalf of the bank.

Before me:	/S/ JOAN H. HIGHLAND
	Notary Public in and for said State
	My Commission Expires: August 5, 2005

STATE OF NEW YORK	)
	)	ss:
COUNTY OF NEW YORK	)

     At ___in said County and State on this _7^Tth___day of _March___, 2005, personally appeared ___Amena Nabi , duly authorized officer of Bank of Scotland and she acknowledged the foregoing instrument by her signed and sealed to be his/her free act and deed and the free act and deed of Bank of Scotland, a corporation, on behalf of the corporation.

Before me:	/S/ SARA G. ALAIMO
	Notary Public in and for said State
	My Commission Expires: ___

List of Exhibits and Schedules Attached to Agreement and not filed herewith:

Schedule A: Amendments or Restatements to Documents
Schedule B: Existing Resorts
Schedule C: List of Stock and Equity Interests Owned by Borrower
Schedule D: List of Litigation, Suits, Actions, Complaints, Claims or Charges
Schedule E: List of Borrower’s Executive Management
Ex. B-1: Certificate of Corporate Resolutions of the Board of Directors of Silverleaf Resorts, Inc.
Ex. C-1: Certificate of Secretary of Silverleaf Resorts, Inc.

EX-10.5

Ex. 10.5

THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT (TRANCHE C)

     THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (TRANCHE C) dated as of February 28, 2005 (the “Third Amendment”), is entered into by and among SILVERLEAF RESORTS, INC., a Texas corporation (the “Borrower”), the parties, including TEXTRON FINANCIAL CORPORATION (“TFC”), a Delaware corporation, which execute and deliver this Agreement in their respective capacities as lenders hereunder (collectively, the “Lenders” and each, individually, a “Lender”), and TEXTRON FINANCIAL CORPORATION as facility agent and collateral agent (the “Agent”).

W I T N E S S E T H:

     WHEREAS, Borrower is engaged in the business of acquiring, constructing, developing, owning, managing, selling and otherwise dealing with Intervals at the Resorts (as each such term is hereafter defined);

     WHEREAS, Borrower and Lender are parties to that certain Loan and Security Agreement dated as of April 17, 2001, as amended and as amended hereby (the “Loan Agreement”), pursuant to which the Borrower executed its Secured Promissory Note in favor of the Lender in the amount of $10,200,000.00, (the “Original Note”);

     WHEREAS, Lender and Borrower amended the Loan Agreement with the First Amendment to Loan and Security Agreement dated as of April 30, 2002, (the “First Amendment”), to, among other things: (i) restructure and modify the Loan, including separating the Loan into two separate components – the Revolving Loan Component in the amount of up to $8,060,00.00 and the Term Loan Component in the amount of up to $2,140,000.00; (ii) reduce the amount of the Commitment; and (iii) replace the Original Note with a Revolving Loan Component Note and a Term Loan Component Note;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated March 27, 2003 to reinstate the maximum allowable ratio of Marketing and Sales Expenses to the Borrower’s net proceeds from the sale of Intervals to a ratio of .550 to 1;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Agreement dated September 25, 2003 to exclude the $28,711,000 increase in Borrower’s allowance for doubtful accounts during the quarter ended March 31, 2003 from the calculations of EBITDA, the Interest Coverage Ratio and Consolidated Net Income under the Loan Agreement and to approve the retirement of certain subordinated notes with a face value of $7,620,000;

     WHEREAS, Borrower entered into: (i) a Letter Agreement with TFC dated November 17, 2003 (the “November Letter Agreement”); (ii) an amendment to the Heller Documents dated November 21, 2003; and (iii) an amendment to the Sovereign Documents dated October 1, 2003;

each for the purpose of, among other things, waiving certain Events of Default that may have arisen under the Loan Agreement, the Heller Documents and the Sovereign Documents described therein, respectively;

     WHEREAS, TFC and Borrower entered into a Second Amendment to Loan and Security Agreement dated as of December 19, 2003 (the “Second Amendment”) to, among other things, restructure and modify the Loan, including reducing the Commitment, as defined in the First Amendment, to (i) $6,245,400.00 for the Revolving Loan Component; and (ii) $1,680,000.00 for the Term Loan Component, for a total Commitment under this Agreement of $7,925,400.00 and to reduce the aggregate Commitment under the Loan Agreement, the Tranche A Credit Facility, the Tranche B Credit Facility, and the Tranche C Facility, as such terms are defined in the Loan Agreement, to $95,000,000.00 for the Revolving Loan Component and $24,000,000.00 for the Term Loan Component;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated March 5, 2004 to clarify the definition of “Inventory Loan” and the Maximum Obligation of TFC under the Loan Agreement, the Tranche A Credit Facility, the Tranche B Credit Facility and the Inventory Loan;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant a Letter Amendment dated July 30, 2004 to modify the definition of Collateral in connection with the amendments to the Sovereign Facility dated as of July 30, 2004; and

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Terms. All capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Loan Agreement.

2. Elimination of Requirement for Business Plan. The Loan Agreement is modified in part to add the following provision:

“Elimination of Requirement for Business Plan. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the requirement for Borrower to maintain and adhere to the Business Plan is eliminated in all respects from and after the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender.”

3. Definitions. Section 1.1 is hereby amended in part to add the following new paragraphs:

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“(cccccc) Backup Servicing Agreement. Shall mean that certain Backup Servicing Agreement dated as of April 10, 2001, as amended by the First Amendment to the Backup Servicing Agreement dated as of April 30, 2002.”

“(dddddd) Declarant Rights. Shall mean the rights of the declarant described on Schedule 1.1(c) attached hereto.”

“(eeeeee) Management Agreement. Shall mean that certain Management Agreement by and between Silverleaf Club and Silverleaf Resorts, Inc. dated as of March 28, 1990 as amended to date.”

“(ffffff) Utility Purchase Agreement. Shall mean that certain Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004.”

“(gggggg) Utility Rights. Shall mean the Facilities, Real Property and Utilities, as those terms are defined in the Utility Purchase Agreement, that are part of the Additional Resort Collateral.”

4. Release of Additional Resort Collateral and Sovereign Collateral. Section 3 is hereby amended in part to add the following new Section 3.15:

“3.15 Release of Liens. Notwithstanding anything contrary in the Loan Agreement, and provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred:

(a) the Utility Rights shall be released from the Lien of the security interest granted to Lender hereunder on the date that: (i) the sale of the Utility Rights is closed pursuant to the Utility Purchase Agreement; and (ii) the net proceeds of such sale in an amount not less than thirteen million dollars ($13,000,000) is transferred to Lender to be held in escrow until March 31, 2005, on which date Lender shall apply such proceeds to the Revolving Component of this Loan, the Tranche A Credit Facility, and the Tranche B Credit Facility, or sooner if required by Lender to make a contractually obligated payment under the Loan Facilities;

(b) the Additional Resort Collateral, except for the Declarant Rights and the Management Agreement, shall be released from the Lien of the security interest granted to Lender hereunder on the date that the Term Loan Component has been paid in full;

(c) all collateral securing the Sovereign Facility, which shall mean the Notes Receivable and related Mortgages exclusively assigned to Sovereign in connection with an advance under its loan documents, shall be released from the Lien of the security interest granted to Lender hereunder on the date that: (i) the Term Loan

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Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; and (iii) all Collateral is released from any lien granted to Sovereign pursuant to the Sovereign Documents; and

(d) the Declarant Rights and the Management Agreement shall be released from the Liens of the security interest granted to Lender hereunder on the date that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; (iii) Borrower files a negative pledge in a form acceptable to Lender in the land records for each Resort that neither Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered; and (iv) the Declarant Rights and the Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign Documents. Notwithstanding anything herein to the contrary, to the extent that the Declarant Rights or Management Agreement have not already been released from any lien granted to Lender hereunder, on the date that the maximum aggregate Commitment under this Agreement, the Tranche A Credit Facility, and the Tranche B Credit Facility has been reduced to $82,000,000.00 for the Revolving Loan Component, the Declarant Rights and Management Agreement shall be released from the Lien of the security interest granted to Lender hereunder, provided that: (1) Borrower files a negative pledge in a form acceptable to Lender in the land records for each Resort that neither the Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered and (2) the Declarant Rights and Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign Documents.

5. Tangible Net Worth. Provided that: (i) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; and (ii) Tangible Net Worth as of December 31, 2004 meets or exceeds the requirement of the existing Section 7.1(aa)(i) Tangible Net Worth Covenant, Section 7.1(aa)(i) will be deleted in its entirety and replaced with the following new Section 7.1(aa)(i), on the date that: (1) the Term Loan Component has been paid in full; and (2) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“(i) Tangible Net Worth. Borrower shall at all times have and maintain Tangible Net Worth in an amount which shall not be less than an amount

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equal to the Tangible Net Worth as stated in the annual audited financial statements as of December 31, 2004 plus (A) fifty percent (50%) of the aggregate amount of proceeds received by Borrower after December 31, 2004 in connection with (1) each issuance by Borrower of any class or classes of capital stock after December 31, 2004, except for stock issued to retire existing unsecured subordinated debt, and (2) each incurrence of unsecured subordinated debt after December 31, 2004, except for unsecured debt issued to retire existing unsecured subordinated debt, plus (B) fifty percent (50%) of the aggregate amount of net income (calculated in accordance with GAAP) of Borrower after December 31, 2004.”

6. Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Section 7.1 is hereby amended in part to add the following new paragraph:

“7.1 (dd) Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the Standby Management Agreement shall be released from the security interest granted to Lender hereunder and Borrower may terminate the agreement with the Standby Manager and Resort Consultant required under Section 7.1(w), and may amend the agreement with the Standby Servicer required under Section 7.1(w) to allow for Warm Backup, as that term is described in Exhibit B to that certain Backup Servicing Agreement among Standby Servicer, Borrower, and Agent dated as of April 10, 2001, as amended to date and, provided that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; (iii) any requirement for the Standby Manager or Resort Consultant is eliminated from the Sovereign Documents; and (iv) the Standby Management Agreement is also released from any security interest granted to Sovereign pursuant to the Sovereign Documents.”

7. Limitation on Other Debt, Further Encumbrances. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.4(a) will be deleted in its entirety and replaced with the following paragraph on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“7.4(a) Limitation on Other Debt, Further Encumbrances. Borrower will not obtain financing and grant liens with respect to the Collateral, except as hereafter provided. Notwithstanding anything herein to the contrary, Borrower may, without first obtaining the written consent of Lender obtain financing and grant liens with

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respect to any of its assets or other property except for the Collateral and those assets or property restricted by a negative pledge provided: (i) Borrower provides ten days prior written notice to Lender setting forth the terms and conditions of such financing; (ii) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; (iii) such financing does not result in an Event of Default hereunder or under or under Heller Documents, the Sovereign Documents, DZ Documents, Bond Holder Exchange Documents or the documents evidencing any other indebtedness of Borrower; (iv) Lender is promptly provided a copy of the fully executed loan documents relating thereto.”

8. Subordinated Obligations. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.4(f) will be amended by adding the following sentence to the end of such section on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender.

“Notwithstanding anything to the contrary in this Section 7.4(f), so long as Borrower’s Tangible Net Worth remains in compliance with Section 7.1(aa)(i) Borrower may: (i) retire unsecured subordinated debt with the proceeds from the issuance of stock or the incurrence of unsecured debt, and/or (ii) declare dividends, buy back stock, and perform other equity transactions.”

9. Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.4(k) will be deleted in its entirety and replaced with the following new Section 7.4(k), on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“(k) Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Borrower may amend or modify the Sovereign Documents, the DZ Documents, the Bond Holder Exchange Documents, the Silverleaf Finance II Documents or the documents evidencing any other indebtedness of Borrower, and Borrower may extend, modify, increase or terminate the DZ Facility, the Bond Holder Exchange Transaction, the Sovereign Facility, the TFC Conduit Loan or any other credit facility or loan, without the prior written consent of Lender, provided Borrower provides Lender with (i) ten

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days prior written notice setting forth the terms and conditions thereof and (ii) a copy of the fully executed loan documents thereof promptly after execution.”

10. Conditions Precedent. This Amendment shall not be effective until all of the following conditions have been satisfied:

(a) Approval of Documents. Borrower has delivered to Lender (with copies to Lender’s counsel), and Lender has reviewed and approved in its sole discretion, the form and content of all of the items specified in Subsections (i) through (vii) below (the “Submissions”). Lender shall have the right to review and approve any changes to the form of any of the Submissions. If Lender disapproves of any changes to any of the Submissions, Lender shall have the right to require Borrower either to cure or correct the defect objected to by Lender or to elect not to fund any Advance. Under no circumstances shall Lender’s failure to approve or disapprove a change to any of the Submissions be deemed to be an approval of such Submissions. All of the Submissions shall be prepared at Borrower’s sole cost and expense.

(i) A certificate in the form attached to the Amendment as Exhibit A-1 to be signed by the president, vice president or secretary of the Borrower;

(ii) Copies of any amendments to the articles of incorporation/charter and bylaws of Borrower not previously delivered to Lender, certified to be true, correct and complete by Borrower and the Secretary of State of the State of Texas and current certificates of good standing for Borrower for the State of Texas and states where the Resorts are located, a current certificate of authority to conduct business by the Secretary of State in each state in which Borrower conducts business;

(iii) A certificate of the Secretary of Borrower certifying the adoption by the Board of Directors of Borrower of a resolution authorizing Borrower to enter into and execute the Amendment and all such documents requested by Lender in the form attached to the Amendment as Exhibit B-1;

(iv) A certificate of the secretary or assistant secretary of Borrower certifying the incumbency, and verifying the authenticity of the signatures of the specified officers of Borrower authorized to sign this Amendment and all such documents requested by Lender in the form attached to the Amendment as Exhibit C-1;

(v) Fully executed closing documents from the sale of the utility rights which comprise part of the Additional Resort Collateral pursuant to the Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004. Such sale will provide not less

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than thirteen million dollars ($13,000,000) of net proceeds. Lender hereby authorizes Borrower to consummate the sale of the utility rights subject to the terms and conditions of this Amendment;

(vi) Closing Opinions of Counsels for Borrower;

(vii) Such other agreements, documents, instruments, certificates and materials as Lender may request to evidence the Indebtedness, to evidence and perfect the rights and Liens and security interests of Lender contemplated by the Loan Documents as amended hereby, and to effectuate the transactions contemplated in this Amendment.

(b) Conditions to Closing.

(i) Execution of this Amendment;

(ii) Execution of the amendments to the Tranche A Credit Facility, the Tranche B Credit Facility and the Inventory Loan dated of even date herewith;

(iii) Borrower shall have delivered to Lender the Inventory Term Loan Note;

(iv) Lender shall have received evidence, in form and substance satisfactory to Lender, that the consent of each party entitled to consent to this Amendment has been obtained;

(v) Borrower shall have paid all fees of all Lenders in connection with this Amendment; and

(vi) Lender shall have delivered originals of all releases of Liens contemplated by this Amendment to Lender’s counsel to be held in escrow until such time as Lender notifies Lender’s counsel that Borrower has satisfied all conditions and is entitled to such releases.

11. Further Documentation. Borrower agrees to execute and deliver to Lender any and all additional documentation as Lender may now or hereafter require in order to effectuate the terms and conditions of this Amendment.

12. Effect of Amendment. The Loan Agreement, as herein amended, shall remain in full force and effect.

13. Ratification and Confirmation. Except as herein expressly amended, Borrower hereby ratifies, confirms, assumes and agrees to be bound by all of representations, warranties, statements, covenants and agreements set forth in the Loan Agreement and the other Loan Documents, as previously amended. The Borrower reaffirms, restates and incorporates by reference all of the representations, warranties, covenants and agreements made in the Loan Documents as if the same were made as of this date. The Borrower agrees to pay the Loan and all related expenses, as and when due and payable in accordance with the Loan Agreement and

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the other Loan Documents, and to observe and perform the Obligations, and do all things necessary which are not prohibited by law to prevent the occurrence of any Event of Default. In addition, to further secure, and to evidence and confirm the securing of, the prompt and complete payment and performance by the Borrower of the Loan and all of the Obligations, for value received, Borrower unconditionally and irrevocably assigns, pledges and grants to Lender, and hereby confirms or reaffirms the prior granting to Lender of, a continuing First priority Lien, mortgage and security interest in and to all of the Collateral, except as otherwise set forth herein, whether now existing or hereafter acquired. Also, as provided in the Loan Documents, the Loan is and shall be further secured by the Liens and security interests in favor of Lender in the properties and interests relating to Additional Eligible Resorts, which now or hereafter serve as collateral security for any Obligations. Upon satisfaction of the requirements for approval by Lender of Additional Resorts, Borrower shall record, or cause to be recorded, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements in the appropriate public records of the state in which each Resort is located to further evidence and perfect Lender’s Lien on the Collateral. Borrower agrees to deliver or cause to be delivered by its Affiliates, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements as Lender may deem necessary to further evidence and perfect the Lender’s Lien on the Collateral.

14. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES.

15. General Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

(a) Organization, Standing, Qualification. Borrower: (a) is a duly organized and validly existing Texas corporation duly organized, validly existing and in good standing under the laws of the State of Texas, and (b) has all requisite power, corporate or otherwise, to conduct its business and to execute and deliver, and to perform its obligations under, the Loan Documents.

(b) Authorization, Enforceability, Etc

(i) The execution, delivery and performance by Borrower of the Loan Documents has been duly authorized by all necessary corporate action by Borrower and does not and will not: (1) violate any provision of the certificate or articles of incorporation of Borrower, bylaws of Borrower, or any agreement, law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect to which Borrower is a party or is subject; (2) result in, or require the creation or imposition of, any Lien upon or with respect to any asset of Borrower other than Liens in favor of Lenders; or (3) result in a breach of, or constitute a default by Borrower under, any indenture, loan or credit agreement or any other

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agreement, document, instrument or certificate to which Borrower is a party or by which it or any of its assets are bound or affected.

(ii) No approval, authorization, order, license, permit, franchise or consent of, or registration, declaration, qualification or filing with, any governmental authority or other Person, including without limitation, the Division or the Timeshare Owners’ Association is required in connection with the execution, delivery and performance by Borrower of any of the Loan Documents.

(iii) The Loan Documents constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms.

(c) No Event of Default. No Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred under the Loan Agreement as amended to date, the Tranche A Credit Facility, the Tranche B Credit Facility, the Inventory Loan, the Heller Facility, the Sovereign Facility, DZ Facility, Bond Holder Exchange Facility or any other indebtedness of Borrower.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed on their behalf as of the day and year first written above.

Witnessed By:	TEXTRON FINANCIAL CORPORATION
/S/ SEBASTIAN GROMOUDIN
	By:	/S/ JOHN D’ANNIBALE
/S/ GINGER HAYES	Name:	John D’Annibale
	Its:
	SILVERLEAF RESORTS, INC.
/S/ PATRICIA K. DOREY
	By:	/S/ HARRY J. WHITE, JR.
/S/ PENNY J. PELHAM	Name:	Harry J. White, Jr.
	Its:	CFO

STATE OF CONNECTICUT	)
	)	ss: East Hartford
COUNTY OF HARTFORD	)

     At East Hartford in said County and State on this _24___day of _February___, 2005, personally appeared _John D’Annibale___, duly authorized ___Vice President___of Textron Financial Corporation, and he acknowledged the foregoing instrument by him signed and sealed to be his free act and deed and the free act and deed of Textron Financial Corporation.

Before me:	/S/ LAURA D’ANGELO
	Notary Public in and for said State
	My Commission Expires: February 28, 2009
	Commissioner of the Superior Court

STATE OF TEXAS	)
	)	ss:
COUNTY OF DALLAS	)

     At _Dallas, Texas___in said County and State on this 1st day of ___March___, 2005, personally appeared ___Harry J. White, Jr. duly authorized officer of SILVERLEAF RESORTS, INC., and he/she acknowledged the foregoing instrument by him/her signed and sealed to be his/her free act and deed and the free act and deed of Silverleaf Resorts, Inc., a Texas corporation, on behalf of the corporation.

Before me:	/S/ TAMMY J. MARTIN
	Notary Public in and for said State
	My Commission Expires: 1-6-2009

List of Exhibits and Schedules Attached to Agreement and not filed herewith:

Ex. A-1: Borrower’s Certificate
Schedule A: Amendments or Restatements to Documents
Schedule B: Existing Resorts
Schedule C: List of Stock and Equity Interests Owned by Borrower
Schedule D: List of Litigation, Suits, Actions, Complaints, Claims or Charges
Schedule E: List of Borrower’s Executive Management
Ex B-1: Certificate of Corporate Resolutions of the Board of Directors of Silverleaf Resorts, Inc.
Ex C-1: Certificate of Secretary of Silverleaf Resorts, Inc.

EX-10.6

Ex. 10.6

FIRST AMENDMENT TO AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT
(Inventory Loan)

THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of February 28, 2005, (the “First Amendment”) entered into by SILVERLEAF RESORTS, INC., a Texas corporation, (as “Borrower”), and TEXTRON FINANCIAL CORPORATION, a Delaware corporation as (“Lender”).

WITNESSETH:

WHEREAS, Borrower is engaged in the business of acquiring, constructing, developing, owning, managing, selling and otherwise dealing with Intervals at the Resorts (as each such term is hereafter defined);

WHEREAS, Lender and Borrower are parties to that certain Loan and Security Agreement, dated as of December 16, 1999, as amended by that certain First Amendment to Loan and Security Agreement, dated as of April 17, 2001, as further amended by that certain Second Amendment to Loan and Security Agreement, dated as of April 30, 2002, as further amended by that certain Letter Amendment, dated as of March 27, 2003, and as further amended by that certain Third Amendment to Loan and Security Agreement (Inventory Loan), dated as of December 19, 2003 (collectively, the “Original Loan Agreement”).

WHEREAS, pursuant to the Original Loan Agreement, Lender agreed, subject to the terms and conditions of the Original Loan Agreement, to provide to Borrower, for the purpose of providing liquidity in connection with Borrower’s ownership, purchase and warehousing of Intervals (as such term is hereinafter defined), a loan in the maximum amount of $10,000,000 (the “Existing Inventory Loan”), which loan is evidenced by Borrower’s Amended and Restated Secured Promissory Note, dated as of April 30, 2002 (the “Existing Note”);

WHEREAS, Lender and Borrower further amended and restated the Original Loan Agreement in its entirety pursuant to an Amended and Restated Loan, Security and Agency Agreement dated as of March 5, 2004, as amended by that certain Letter Amendment, dated as of April 16, 2004, and as further amended by that certain Letter Amendment, dated as of July 30, 2004 (the “Restated Loan Agreement” and as amended hereby the “Loan Agreement”)

WHEREAS, pursuant to the Restated Loan Agreement, Lender agreed, subject to the terms and conditions of the Restated Loan Agreement, to provide to Borrower, for the purpose of providing liquidity in connection with Borrower’s ownership, purchase and warehousing of Intervals (as such term is hereinafter defined), to make an additional inventory loan to the borrower in the maximum amount of $8,000,000 (the “New Inventory Loan”). The Existing Inventory Loan

and the New Inventory Loan are evidenced by the Existing Note, in the original principal amount of Ten Million Dollars ($10,000,000) and the Borrower’s Secured Promissory Note, dated March 5, 2004, in the original principal amount of Eight Million Dollars ($8,000,000);

WHEREAS, Borrower has requested and Lender has agreed, subject to the terms and conditions herein, that Lender provide an additional inventory loan to Borrower to the maximum amount of $5,000,000 (the “Inventory Term Loan”) for the purpose of repaying the Term Loan Components of the Additional Credit Facility and Existing Credit Facilities.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Terms. All capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Loan Agreement.

2. Elimination of Requirement for Business Plan. The Loan Agreement is modified in part to add the following provision:

“Elimination of Requirement for Business Plan. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the requirement for Borrower to maintain and adhere to the Business Plan is eliminated in all respects from and after the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender.”

3. Definitions. Provided that no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 1.1(ll) will be amended in its entirety and replaced with the following new Section 1.1(ll), on the date that the Term Loan Component has been paid in full:

“(ll) Final Maturity Date. March 31, 2009 with respect to the Existing Inventory Loan and the New Inventory Loan, and March 31, 2007 with respect to the Inventory Term Loan.”

4. Definitions. Section 1.1(tt) is hereby amended in its entirety and replaced with the following new Section 1.1(tt):

“(tt) Interest Rate. The Interest Rate on: (i) the Existing Inventory Loan Note shall be a variable rate, adjusted as of each LIBOR Determination Date, equal to the sum of LIBOR, determined as of each LIBOR Determination Date, plus three and one-quarter percent (3.25%) per annum and (ii) the New Inventory Loan Note and the Inventory Term Loan Note shall be a variable rate, adjusted as of each Prime Rate Determination Date, equal to the sum of the Prime Rate, determined

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as of each Prime Rate Determination Date, plus three percent (3.0%) per annum, provided, however, that at no time shall the Interest Rate on the New Inventory Loan Note or the Inventory Term Loan Note be less than six percent (6.0%) per annum.”

5. Definitions. Section 1.1(ccc) is hereby amended in its entirety and replaced with the following new paragraph:

“(ccc) Loan or Loans. The terms “Loan” and “Loans” mean the Existing Inventory Loan, the New Inventory Loan, and the Inventory Term Loan, singly and collectively, as the context requires.”

6. Definitions. Section 1.1(fff) is hereby amended in its entirety and replaced with the following new Section 1.1(fff):

“(fff) Loan to Retail Value Ratio. The term “Loan to Retail Value Ratio” shall mean the ratio of the outstanding principal balance of the Loan, from time to time, to the Retail Value of the Inventory. The Loan to Retail Value Ratio shall be 15% for the Existing Inventory Loan and the Inventory Term Loan and 11% for the New Inventory Loan.”

7. Definitions. Section 1.1(ooo) is hereby amended in its entirety and replaced with the following new Section 1.1(ooo):

“(ooo) Note. Singly and collectively, the Existing Inventory Loan Note, the New Inventory Loan Note, and the Inventory Term Loan Note.”

8. Definitions. Provided that no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 1.1(uuu) will be amended in its entirety and replaced with the following new Section 1.1(uuu), on the date that the Term Loan Component has been paid in full:

“(uuuu) Term. The term for the Existing Inventory Loan and New Inventory Loan, shall be the period ending March 31, 2009, and for the Inventory Term Loan shall be the period ending March 31, 2007.”

9. Definitions. Section 1.1 is hereby amended in part to add the following new paragraphs:

“(ddddd) Backup Servicing Agreement. Shall mean that certain Backup Servicing Agreement dated as of April 10, 2001, as amended by the First Amendment to the Backup Servicing Agreement dated as of April 30, 2002.”

“(eeeee) Declarant Rights. Shall mean the rights of the declarant described on Schedule 1.1(c) attached hereto.”

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“(fffff) Inventory Term Loan. The term “Inventory Term Loan” shall mean that certain $5,000,000.00 credit facility provided by Lender to Borrower pursuant to Borrower pursuant to this Agreement and evidenced by the Inventory Term Loan Note.”

“(ggggg) Inventory Term Loan Note. The term “Inventory Term Loan Note” shall mean that certain Secured Promissory Note in the form attached as Exhibit A dated as of February 28, 2005, made by Borrower to Lender to evidence the Inventory Term Loan in the maximum principal amount of $5,000,000.00, as it may hereafter be amended from time to time.”

“(hhhhh) Management Agreement. Shall mean that certain Management Agreement by and between Silverleaf Club and Silverleaf Resorts, Inc. dated as of March 28, 1990 as amended to date.”

“(iiiii) Utility Purchase Agreement. Shall mean that certain Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004.”

“(jjjjj) Utility Rights. Shall mean the Facilities, Real Property and Utilities, as those terms are defined in the Utility Purchase Agreement, that are part of the Additional Resort Collateral.”

10. Revolving Loan and Lending Limits. Provided that no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 2.1 will be amended in its entirety and replaced with the following new Section 2.1, on the date that the Term Loan Component has been paid in full:

“(2.1) Revolving Loan and Lending Limits . Upon the terms and subject to the conditions set forth in this Agreement, including but not limited to Section 2.8 hereof, the Lender shall make Advances to the Borrower, of up to $16,000,000 million under the Existing Inventory Loan and the New Inventory Loan and on the Closing Date up to $5,000,0000 under the Inventory Term Loan. Borrower may borrow, repay and reborrow during the Revolving Loan Period, as such term is hereafter defined, principal under the Existing Inventory Loan and the New Inventory Loan in an amount not to exceed at any time in the aggregate the lesser of: (i) the Loan to Retail Value Ratio of the Required Retail Value of the Inventory or (ii) $16,000,000.00 (such amount being the aggregate principal amount of the Existing Inventory Loan and the New Inventory Loan), as reduced as set forth in Section 2.4(b)(ii) hereof. Under no conditions may the Borrower repay and reborrow principal under the Inventory Term Loan. Borrower acknowledges and agrees that Lender may make Advances from the Existing Inventory Loan, the New Inventory Loan and/or the Inventory Term Loan in such manner and amount as Lender may determine in its sole discretion. The

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Revolving Loan Period shall be the period during the Term in which the Borrower may borrower, repay and reborrow Advances and shall terminate in all respects on March 31, 2007. Borrower’s right to receive Advances hereunder shall also be subject to the terms and conditions set forth in that certain Second Amended and Restated Intercreditor Agreement between Lender, Heller, Borrower and Sovereign dated of even date herewith, as may be amended hereafter (the “Intercreditor Agreement”), but only so long as the Intercreditor Agreement remains in full force and effect. Notwithstanding anything herein to the contrary, Borrower acknowledges, confirms and agrees that it shall not be entitled to receive, nor shall Lender be required to make, any Advance if and to the extent that Borrower has failed to substantially adhere to the Business Plan, including the Senior Lender Advance Schedule, as determined by Lender in its sole and absolute discretion, so long as Borrower is required to maintain and adhere to the Business Plan under this Agreement. ”

11. Monthly Payments. Section 2.3(a) is hereby amended in its entirety and replaced with the following new Section 2.3(a):

“(a) Monthly Payments. The Borrower shall pay to the Lender, on the first day of each month and until the respective Loan is paid in full: (1) commencing on March 1, 2005, interest on the outstanding principal balance of the Existing Inventory Loan and New Inventory Loan, from time to time, at the applicable Interest Rate; and (2) commencing on May 1, 2005, an amount equal to $185,000 plus interest on the outstanding principal balance of the Inventory Term Loan, from time to time, at the applicable Interest Rate. Lender shall apply each such payment in the following order: (i) to the payment of all costs or expenses incurred by the Lender pursuant to this Agreement in creating, maintaining, protecting or enforcing the Liens in and to the Collateral and in collecting any amount due to Lender in connection with the Loan; (ii) to any interest accrued at the Default Rate; (iii) to the payment of accrued and unpaid interest at the applicable Interest Rate; (iv) to the reduction of principal of the Inventory Term Loan in an amount up to $185,000; and (v) to the reduction of the principal balance of the Existing Inventory Loan, the New Inventory Loan, and the Inventory Term Loan in such order and manner as Lender may determine in its sole discretion. If the amount of the funds received by Lender with respect to any month is insufficient to pay in full all amounts due from Borrower to Lender under this Agreement, Borrower shall pay the difference to Lender on or before the fifth (5th) day after notice from Lender to Borrower advising Borrower of such insufficiency. ”

12. Payments. Section 2.3 is hereby amended in part by adding the following new Section 2.3(d):

“(d) Final Term Payment. The entire outstanding principal amount of the Inventory Term Loan together with all accrued interest shall be due and payable, without notice or demand, on March 31, 2007. ”

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13. Loan Term. Provided that no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 2.7 will be amended in its entirety and replaced with the following new Section 2.7, on the date that the Term Loan Component has been paid in full:

“2.7 Loan Term. The term of the Loan shall terminate on March 31, 2009, except for the Inventory Term Loan, which shall terminate on March 31, 2007. ”

14. Release of Utility Rights, Additional Resort Collateral and Sovereign Collateral. Section 3 is hereby amended in part to add the following new Section 3.15:

“3.15 Release of Liens. Notwithstanding anything contrary in the Loan Agreement, and provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred:

(a) the Utility Rights shall be released from the Lien of the security interest granted to Lender hereunder on the date that: (i) the sale of the Utility Rights is closed pursuant to the Utility Purchase Agreement; and (ii) the net proceeds of such sale in an amount not less than thirteen million dollars ($13,000,000) is transferred to Lender to be held in escrow until March 31, 2005, on which date Lender shall apply such proceeds to the Revolving Component of the Additional Credit Facility and Existing Credit Facilities, or sooner if required by Lender to make a contractually obligated payment under the Loan Facilities;

(b) the Additional Resort Collateral, except for the Declarant Rights and the Management Agreement, shall be released from the Lien of the security interest granted to Lender hereunder on the date that the Term Loan Component has been paid in full;

(c) all collateral securing the Sovereign Facility, which shall mean the Notes Receivable and related Mortgages exclusively assigned to Sovereign in connection with an advance under its loan documents, shall be released from the Lien of the security interest granted to Lender hereunder on the date that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; and (iii) all Collateral is released from any lien granted to Sovereign pursuant to the Sovereign Documents; and

(d) the Declarant Rights and the Management Agreement shall be released from the Liens of the security interest granted to Lender hereunder on the date that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December

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31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; (iii) Borrower files a negative pledge in a form acceptable to Lender in the land records for each Resort that neither Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered; and (iv) the Declarant Rights and the Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign Documents. Notwithstanding anything herein to the contrary, to the extent that the Declarant Rights or Management Agreement have not already been released from any lien granted to Lender hereunder, on the date that the maximum aggregate Commitment under this Agreement, the Additional Credit Facility and Existing Credit Facilities has been reduced to $82,000,000.00 for the Revolving Loan Component, the Declarant Rights and Management Agreement shall be released from the Lien of the security interest granted to Lender hereunder, provided that: (1) Borrower files a negative pledge in a form acceptable to Lender in the land records for each Resort that neither the Declarant Rights nor the Management Agreement will be assigned, transferred, or encumbered and (2) the Declarant Rights and Management Agreement are also released from any lien granted to Sovereign pursuant to the Sovereign Documents.

15. Tangible Net Worth. Provided that: (i) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; and (ii) Tangible Net Worth as of December 31, 2004 meets or exceeds the requirement of the existing Section 7.1(cc)(i) Tangible Net Worth Covenant, Section 7.1(cc)(i) will be deleted in its entirety and replaced with the following new Section 7.1(cc)(i), on the date that: (1) the Term Loan Component has been paid in full; and (2) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“(i) Tangible Net Worth. Borrower shall at all times have and maintain Tangible Net Worth in an amount which shall not be less than an amount equal to the Tangible Net Worth as stated in the annual audited financial statements as of December 31, 2004 plus (A) fifty percent (50%) of the aggregate amount of proceeds received by Borrower after December 31, 2004 in connection with (1) each issuance by Borrower of any class or classes of capital stock after December 31, 2004, except for stock issued to retire existing unsecured subordinated debt, and (2) each incurrence of unsecured subordinated debt after December 31, 2004, except for unsecured debt issued to retire existing unsecured subordinated debt, plus (B) fifty percent (50%) of the aggregate amount of net income (calculated in accordance with GAAP) of Borrower after December 31, 2004.”

16. Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Section 7.1 is hereby amended in part to add the following new paragraph:

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“7.1 (ff) Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, the Standby Management Agreement shall be released from the security interest granted to Lender hereunder and Borrower may terminate the agreement with the Standby Manager and Resort Consultant required under Section 7.1(y), and may amend the agreement with the Standby Servicer required under Section 7.1(y) to allow for Warm Backup, as that term is described in Exhibit B to that certain Backup Servicing Agreement among Standby Servicer, Borrower, and Agent dated as of April 10, 2001, as amended to date and, provided that: (i) the Term Loan Component has been paid in full; (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender; (iii) any requirement for the Standby Manager or Resort Consultant is eliminated from the Sovereign Documents; and (iv) the Standby Management Agreement is also released from any security interest granted to Sovereign pursuant to the Sovereign Documents.”

17. Limitation on Other Debt, Further Encumbrances. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(a) will be deleted in its entirety and replaced with the following paragraph on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“7.2(a) Limitation on Other Debt, Further Encumbrances. Borrower will not obtain financing and grant liens with respect to the Collateral, except as hereafter provided. Notwithstanding anything herein to the contrary, Borrower may, without first obtaining the written consent of Lender obtain financing and grant liens with respect to any of its assets or other property except for the Collateral and those assets or property restricted by a negative pledge provided: (i) Borrower provides ten days prior written notice to Lender setting forth the terms and conditions of such financing; (ii) no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred; (iii) such financing does not result in an Event of Default hereunder or under or under Heller Documents, the Sovereign Documents, DZ Documents, Bond Holder Exchange Documents or the documents evidencing any other indebtedness of Borrower; (iv) Lender is promptly provided a copy of the fully executed loan documents relating thereto.”

18. Subordinated Obligations. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has

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occurred, Section 7.2(f) will be amended by adding the following sentence to the end of such section on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender.

“Notwithstanding anything to the contrary in this Section 7.2(f), so long as Borrower’s Tangible Net Worth remains in compliance with Section 7.1(cc)(i) Borrower may: (i) retire unsecured subordinated debt with the proceeds from the issuance of stock or the incurrence of unsecured debt, and/or (ii) declare dividends, buy back stock, and perform other equity transactions.”

19. Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Provided no Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred, Section 7.2(k) will be deleted in its entirety and replaced with the following new Section 7.2(k), on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as those net income projections appear in the Business Model dated November 13, 2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“(k) Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt Instruments. Borrower may amend or modify the Sovereign Documents, the DZ Documents, the Bond Holder Exchange Documents, the Silverleaf Finance II Documents or the documents evidencing any other indebtedness of Borrower, and Borrower may extend, modify, increase or terminate the DZ Facility, the Bond Holder Exchange Transaction, the Sovereign Facility, the TFC Conduit Loan or any other credit facility or loan, without the prior written consent of Lender, provided Borrower provides Lender with (i) ten days prior written notice setting forth the terms and conditions thereof and (ii) a copy of the fully executed loan documents thereof promptly after execution.”

20. Conditions Precedent. This First Amendment shall not be effective until all of the following conditions have been satisfied:

(a) Approval of Documents. Borrower has delivered to Lender (with copies to Lender’s counsel), and Lender has reviewed and approved in its sole discretion, the form and content of all of the items specified in Subsections (i) through (vii) below (the “Submissions”). Lender shall have the right to review and approve any changes to the form of any of the Submissions. If Lender disapproves of any changes to any of the Submissions, Lender shall have the right to require Borrower either to cure or correct the defect objected to by Lender or to elect not to fund any Advance. Under no circumstances shall Lender’s failure to approve

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or disapprove a change to any of the Submissions be deemed to be an approval of such Submissions. All of the Submissions shall be prepared at Borrower’s sole cost and expense.

(i) A certificate in the form attached to the First Amendment as Exhibit A-1 to be signed by the president, vice president or secretary of the Borrower;

(ii) Copies of any amendments to the articles of incorporation/charter and bylaws of Borrower not previously delivered to Lender, certified to be true, correct and complete by Borrower and the Secretary of State of the State of Texas and current certificates of good standing for Borrower for the State of Texas and states where the Resorts are located, a current certificate of authority to conduct business by the Secretary of State in each state in which Borrower conducts business;

(iii) A certificate of the Secretary of Borrower certifying the adoption by the Board of Directors of Borrower of a resolution authorizing Borrower to enter into and execute the First Amendment and all such documents requested by Lender in the form attached to the First Amendment as Exhibit B-1;

(iv) A certificate of the secretary or assistant secretary of Borrower certifying the incumbency, and verifying the authenticity of the signatures of the specified officers of Borrower authorized to sign this First Amendment and all such documents requested by Lender in the form attached to the First Amendment as Exhibit C-1;

(v) Fully executed closing documents from the sale of the utility rights which comprise part of the Additional Resort Collateral pursuant to the Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and Algonquin Power Income Fund dated as of August 29, 2004. Such sale will provide not less than thirteen million dollars ($13,000,000) of net proceeds. Lender hereby authorizes Borrower to consummate the sale of the utility rights subject to the terms and conditions of this First Amendment;

(vi) Closing Opinions of Counsels for Borrower;

(vii) Such other agreements, documents, instruments, certificates and materials as Lender may request to evidence the Indebtedness, to evidence and perfect the rights and Liens and security interests of Lender contemplated by the Loan Documents as amended hereby, and to effectuate the transactions contemplated in this First Amendment.

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(b) Conditions to Closing.

(i) Execution of this First Amendment;

(ii) Execution of the amendments to the Additional Credit Facility and Existing Credit Facilities dated of even date herewith;

(iii) Borrower shall have delivered to Lender the Inventory Term Loan Note;

(iv) Lender shall have received evidence, in form and substance satisfactory to Lender, that the consent of each party entitled to consent to this First Amendment has been obtained;

(v) Borrower shall have paid all fees of all Lenders in connection with this First Amendment; and

(vi) Lender shall have delivered originals of all releases of Liens contemplated by this First Amendment to Lender’s counsel to be held in escrow until such time as Lender notifies Lender’s counsel that Borrower has satisfied all conditions and is entitled to such releases.

21. Further Documentation. Borrower agrees to execute and deliver to Lender any and all additional documentation as Lender may now or hereafter require in order to effectuate the terms and conditions of this First Amendment.

22. Effect of Amendment. The Loan Agreement, as herein amended, shall remain in full force and effect.

23. Ratification and Confirmation. Except as herein expressly amended, Borrower hereby ratifies, confirms, assumes and agrees to be bound by all of representations, warranties, statements, covenants and agreements set forth in the Loan Agreement and the other Loan Documents, as previously amended. The Borrower reaffirms, restates and incorporates by reference all of the representations, warranties, covenants and agreements made in the Loan Documents as if the same were made as of this date. The Borrower agrees to pay the Loan and all related expenses, as and when due and payable in accordance with the Loan Agreement and the other Loan Documents, and to observe and perform the Obligations, and do all things necessary which are not prohibited by law to prevent the occurrence of any Event of Default. In addition, to further secure, and to evidence and confirm the securing of, the prompt and complete payment and performance by the Borrower of the Loan and all of the Obligations, for value received, Borrower unconditionally and irrevocably assigns, pledges and grants to Lender, and hereby confirms or reaffirms the prior granting to Lender of, a continuing First priority Lien, mortgage and security interest in and to all of the Collateral, except as otherwise set forth herein, whether now existing or hereafter acquired. Also, as provided in the Loan Documents, the Loan is and shall be further secured by the Liens and security interests in favor of Lender in the properties and interests relating to Additional Eligible Resorts, which now or hereafter serve as collateral security for any Obligations. Upon satisfaction of the requirements for approval by Lender of Additional Resorts, Borrower shall record, or cause to be recorded, such mortgages,

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deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements in the appropriate public records of the state in which each Resort is located to further evidence and perfect Lender’s Lien on the Collateral. Borrower agrees to deliver or cause to be delivered by its Affiliates, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements as Lender may deem necessary to further evidence and perfect the Lender’s Lien on the Collateral.

24. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES.

25. General Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

(a) Organization, Standing, Qualification. Borrower: (a) is a duly organized and validly existing Texas corporation duly organized, validly existing and in good standing under the laws of the State of Texas, and (b) has all requisite power, corporate or otherwise, to conduct its business and to execute and deliver, and to perform its obligations under, the Loan Documents.

(b) Authorization, Enforceability, Etc

(i) The execution, delivery and performance by Borrower of the Loan Documents has been duly authorized by all necessary corporate action by Borrower and does not and will not: (1) violate any provision of the certificate or articles of incorporation of Borrower, bylaws of Borrower, or any agreement, law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect to which Borrower is a party or is subject; (2) result in, or require the creation or imposition of, any Lien upon or with respect to any asset of Borrower other than Liens in favor of Lenders; or (3) result in a breach of, or constitute a default by Borrower under, any indenture, loan or credit agreement or any other agreement, document, instrument or certificate to which Borrower is a party or by which it or any of its assets are bound or affected.

(ii) No approval, authorization, order, license, permit, franchise or consent of, or registration, declaration, qualification or filing with, any governmental authority or other Person, including without limitation, the Division or the Timeshare Owners’ Association is required in connection with the execution, delivery and performance by Borrower of any of the Loan Documents.

(iii) The Loan Documents constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms.

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(c) No Event of Default. No Event of Default or condition, omission or act which, with the passage of time, notice or both, would constitute an Event of Default, has occurred under the Loan Agreement as amended to date, the Additional Credit Facility and Existing Credit Facilities, the Heller Facility, the Sovereign Facility, DZ Facility, Bond Holder Exchange Facility or any other indebtedness of Borrower.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

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     IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed on their behalf as of the day and year first written above.

Witnessed By:	TEXTRON FINANCIAL CORPORATION
/S/ SEBASTIAN GROMOUDIN
	By:	/S/ JOHN D’ANNIBALE
/S/ GINGER HAYES	Name:	John D’Annibale
	Its:	V/P
	SILVERLEAF RESORTS, INC.
/S/ PATRICIA K. DOREY
	By:	/S/ HARRY J. WHITE, JR.
/S/ PENNY J. PELHAM	Name:	Harry J. White, Jr.
	Its:	CFO

STATE OF CONNECTICUT	)
	)	ss: East Hartford
COUNTY OF HARTFORD	)

     At East Hartford in said County and State on this _24___day of ___February , 2005, personally appeared _John D’Annibale duly authorized ___Vice President of Textron Financial Corporation, and he acknowledged the foregoing instrument by him signed and sealed to be his free act and deed and the free act and deed of Textron Financial Corporation.

Before me:	/S/ LAURA D’ANGELO
	Notary Public in and for said State
	My Commission Expires: Feb. 28, 2009
	Commissioner of the Superior Court

STATE OF TEXAS	)
	)	ss:
COUNTY OF DALLAS	)

     At ___Dallas, Texas___in said County and State on this _1st___day of March___, 2005, personally appeared ___Harry J. White, Jr.___, duly authorized officer of SILVERLEAF RESORTS, INC., and he/she acknowledged the foregoing instrument by him/her signed and sealed to be his/her free act and deed and the free act and deed of Silverleaf Resorts, Inc., a Texas corporation, on behalf of the corporation.

Before me:	/S/ TAMMY J. MARTIN
	Notary Public in and for said State
	My Commission Expires: 1-6-2009

List of Exhibits and Schedules Attached to Agreement and not filed herewith:

Ex. A-1: Borrower’s Certificate
Schedule A: Amendments or Restatements to Documents
Schedule B: Existing Resorts
Schedule C: List of Stock and Equity Interests Owned by Borrower
Schedule D: List of Litigation, Suits, Actions, Complaints, Claims or Charges
Schedule E: List of Borrower’s Executive Management
Ex. B-1: Certificate of Corporate Resolutions of the Board of Directors of Silverleaf Resorts, Inc.
Ex. C-1: Certificate of Secretary of Silverleaf Resorts, Inc.