<PAGE>   1
                                                                    EXHIBIT 10.3




                                CONTRACT OF SALE


         This Agreement is entered into by and between HARMON/KOVAL LIMITED
LIABILITY COMPANY ("Seller"), and SILVERLEAF RESORTS, INC., a Texas corporation
("Purchaser").

                             W I T N E S S E T H :
                             - - - - - - - - - -
         FOR AND IN CONSIDERATION of the promises, undertakings, and mutual
covenants of the parties herein set forth, Seller hereby agrees to sell and
Purchaser hereby agrees to purchase and pay for all that certain property
hereinafter described in accordance with the following terms and conditions:

                                  ARTICLE I

                                  PROPERTY
                                  --------

         The conveyance by Seller to Purchaser shall be of all the following
described real property, together with all right, title and interest of Seller
in and to any all strips or gores, roads, easements, streets, and ways bounding
said property, and all rights of ingress and egress thereto, and shall include
all improvements and fixtures located or to be located on said property:

                 2.1 acres of land, more or less, located at the southeast
                 corner of Koval Lane and Harmon Avenue in Las Vegas, Clark
                 County, Nevada, and being identified for tax purposes as Clark
                 County Assessor's Parcel #162-21-701-001.

Hereafter the aforesaid real property is referred to collectively as the
"Subject Property."

                                   ARTICLE II

                                 PURCHASE PRICE
                                 --------------

         The purchase price to be paid by Purchaser to Seller for the Subject
Property shall be the sum of Two Million Six Hundred Thousand and No/100
Dollars ($2,600,000.00).  The purchase price shall be payable all in cash at
the closing.
<PAGE>   2
                                  ARTICLE III

                                 EARNEST MONEY
                                 -------------

         Within two (2) business days after final execution of this Contract by
all parties hereto, Purchaser shall deliver Purchaser's check in the amount of
One Hundred Thousand and No/100 Dollars ($100,000.00) to Nevada Title Company,
3800 Howard Hughes Parkway, Suite 920, Las Vegas, Nevada 89169, Attn:  Tina
Stitt (the "Title Company").  The Title Company shall immediately cash the
earnest money check and deposit the proceeds thereof in an interest bearing
account, the earnings from which shall accrue to the benefit of Purchaser
(hereinafter the proceeds of the earnest money check shall be referred to as
the "earnest money").  If Purchaser does not terminate this Contract during the
Contingency Period (as defined in Article V hereinbelow), then the Title
Company shall immediately disburse the entire $100,000.00 earnest money deposit
to Seller; upon such disbursement the $100,000.00 earnest money deposit shall
be non- refundable to the Purchaser except in the event of a default by Seller
hereunder, but, if this Contract closes, then the entire $100,000.00 earnest
money deposit shall be applied in partial satisfaction of the purchase price
payable at closing.

                                   ARTICLE IV

                       PRE-CLOSING OBLIGATIONS OF SELLER
                       ---------------------------------

         Within five (5) business days from the date of execution of this
Contract, Seller shall furnish to Purchaser, each of the following
(collectively, the "Due Diligence Items"):

                 a.       A current commitment (the "Title Commitment") for the
         issuance of an owner's policy of title insurance to the Purchaser from
         the Title Company, together with good and legible copies of all
         documents constituting exceptions to Seller's title as reflected in
         the Title Commitment; and

                 b.       All information of any kind whatsoever in the
         possession of Seller concerning possible development of the Subject
         Property including, but not limited to, any and all plans for the
         development of the Subject Property, any engineering studies of the
         Subject Property, and information relating to obtaining the approval
         of local governing bodies for the development of the Subject Property,
         any information as to when construction on the Subject Property may
         commence, any information regarding present or future zoning of the
         Subject Property, and any information concerning the availability of
         the utilities.

         The Due Diligence Items shall be delivered by Seller to the office of
Purchaser's broker, Golden West Real Estate, Inc., and, upon such delivery,
Purchaser shall be deemed to be in



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receipt thereof for the purpose of commencing the time within which Purchaser
shall conduct its inspection as provided in Article V hereinbelow.

                                   ARTICLE V

                               CONTINGENCY PERIOD
                               ------------------

         Purchaser shall have a period of four (4) business days following the
date on which Seller delivers the Due Diligence Items to Purchaser's broker in
accordance with Article IV hereinabove in which to review and approve each such
item (the "Contingency Period").  If the information to be provided pursuant to
Article IV reflects or discloses any defect, exception or other matter
affecting the Subject Property that is unacceptable to Purchaser, then prior to
the expiration of the Contingency Period Purchaser shall provide the Title
Company and Seller with written notice of Purchaser's objections.  If no
objections are made Purchaser prior to the expiration of the Contingency
Period, then all contingencies shall be deemed waived by Purchaser, and the
earnest money shall be immediately released to Seller.  If written objections
are made by Purchaser in a timely manner, Seller may, at its sole option, elect
to cure or remove the objections raised by Purchaser; provided, however, that
Seller shall have no obligation to do so.  Should Seller elect to attempt to
cure or remove the objections, Seller shall have ten (10) days from the date of
Purchaser's written notice of objections (the "Cure Period") in which to
accomplish the cure.  In the event Seller either elects not to cure or remove
the objections or is unable to accomplish the cure prior to the expiration of
the Cure Period, then Seller shall so notify the Title Company and Purchaser in
writing specifying which objections Seller does not intend to cure, and then
Purchaser shall be entitled, as Purchaser's sole and exclusive remedies, either
to terminate this Contract by providing written notice of termination to Seller
within five (5) days from the date on which Purchaser receives Seller's no-cure
notice (in which case this Contract shall be cancelled, all earnest money shall
be immediately returned to Purchaser by the Title Company, and thereafter
neither Seller nor Purchaser shall have any continuing obligations one unto the
other) or waive the objections and close this transaction as otherwise
contemplated herein.  If Purchaser shall fail to notify Seller in writing of
any objections to the state of Seller's title to the Subject Property as shown
by the Title





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Commitment, then Purchaser shall be deemed to have no objections to the state
of Seller's title to the Subject Property as shown by the Title Commitment, and
any exceptions to Seller's title which have not been objected to by Purchaser
and which are shown in the Title Commitment shall be considered to be
"Permitted Exceptions."  Failure to give notice of termination within the five
(5) day period shall constitute a waiver of all objections, and, in the event
of such waiver, the earnest money shall be immediately released to Seller by
the Title Company.  It is further understood and agreed that any exceptions to
Seller's title which have been objected to by Purchaser and which are
subsequently waived by Purchaser shall be Permitted Exceptions.

                                   ARTICLE VI

              REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLER
              ----------------------------------------------------

         Seller represents and warrants to Purchaser that Seller will have at
closing good and indefeasible fee simple title to the Subject Property free and
clear of all liens, encumbrances, covenants, restrictions, rights-of-way,
easements, and any other matters affecting title to the Subject Property except
for the Permitted Exceptions.

         Seller further covenants and agrees with Purchaser that, from the date
hereof until the closing, Seller shall not sell, assign, or convey any right,
title, or interest whatsoever in or to the Subject Property, or create or
permit to exist any lien, security interest, easement, encumbrance, charge, or
condition affecting the Subject Property (other than the Permitted Exceptions)
without promptly discharging the same prior to closing.

         Seller hereby further represents and warrants to Purchaser, to the
best of Seller's knowledge, as follows:

                 a.      There are no actions, suits, or proceedings pending 
         or, to the best of Seller's knowledge, threatened against Seller or
         otherwise affecting any portion of the Subject Property, at law or in
         equity, or before or by any federal, state, municipal, or other
         governmental court, department, commission, board, bureau, agency, or
         instrumentality, domestic or foreign;

                 b.       The execution by Seller of this Contract and the
         consummation by Seller of the sale contemplated hereby have been duly
         authorized, and do not, and, at the closing date, will not, result in
         a breach of any of the terms or provisions of, or constitute a default
         under any indenture, agreement, instrument, or obligation to which
         Seller is a party or by which the Subject Property or any portion
         thereof is bound, and





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         do not, and at the closing date will not, constitute a violation of
         any regulation affecting the Subject Property; and

                 c.       Seller has not received any notice of any violation
         of any ordinance, regulation, law, or statute of any governmental
         agency pertaining to the Subject Property or any portion thereof.

All of the foregoing representations and warranties of Seller are made by
Seller both as of the date hereof and as of the date of the closing hereunder
and shall survive the closing hereunder.  Notwithstanding the foregoing or
anything to the contrary contained herein, it is understood and agreed that the
representations and warranties set forth hereinabove shall survive the closing
of this Contract only for a period of two (2) years following the closing date,
but not thereafter, and Seller shall have no liability of any kind whatsoever
for any breach thereof except to the extent a claim is asserted against Seller
within such two (2) year period.  If any representations and warranties set
forth herein are determined at any time on or before the date of closing to be
untrue or unfulfilled, then Purchaser, as Purchaser's sole and exclusive
remedy, may terminate this Contract by providing written notice of such
termination to Seller, in which event the earnest money shall be returned to
Purchaser and thereafter neither Seller nor Purchaser shall have any further
liabilities or obligations one unto the other.

                                  ARTICLE VII
         
                        CONDITIONS PRECEDENT TO CLOSING
                        -------------------------------

         The obligation of Purchaser to close this Contract shall, at the
option of Purchaser, be subject to the following conditions precedent:
         
                 a.       All of the representations, warranties and agreements
         of Seller set forth in this Contract shall be true and correct in all
         material respects as of the date hereof and at closing, and Seller
         shall not have on or prior to closing, failed to meet, comply with or
         perform in any material respect any conditions or agreements on
         Seller's part as required by the terms of this Contract; and

                 b.       There shall be no change in the matters reflected in
         the Title Commitment, and there shall not exist any encumbrance or
         title defect affecting the Subject Property not described in the Title
         Commitment except for the Permitted Exceptions.

         If any such condition is not fully satisfied by closing, Purchaser may
terminate this Contract by written notice to Seller whereupon this Contract
shall be cancelled, all earnest money shall be returned to Purchaser by Seller
and thereafter neither Seller nor Purchaser shall have any continuing
obligations one unto the other.





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                                  ARTICLE VIII
         

                                    CLOSING
                                    -------

         The closing hereunder shall take place at the offices of the Title
Company.  The closing shall occur on or before August 7, 1997.  Purchaser shall
notify Seller at least five (5) days in advance of the exact time and date of
closing.
         Purchaser shall have the right to obtain three (3) successive thirty
(30) day extensions of the deadline for closing by delivering to Seller for
each such extension, prior to the then scheduled closing deadline, an
additional One Hundred Thousand and No/100 Dollars ($100,000.00) in
non-refundable earnest money.  If Purchaser exercises this right, then the
deadline for closing of this Contract shall be extended by thirty (30) days in
each instance, and, in each such instance, the purchase price for the Subject
Property shall be increased by Thirty Thousand and No/100 Dollars ($30,000.00).
Each additional $100,000.00 in earnest money which is paid by Purchaser in
order to extend the deadline for closing of this Contract shall be delivered
directly to Seller and shall be non-refundable to Purchaser except in the event
of a default by Seller hereunder, but, if this Contract closes, then any
additional earnest money shall be applied in partial satisfaction of the
purchase price payable hereunder subject to the $30,000.00 increase in purchase
price for each such extension.

                                   ARTICLE IX
         
                        SELLER'S OBLIGATIONS AT CLOSING
                        -------------------------------

         At the closing, Seller shall do the following:
         
                 a.       Deliver to Purchaser a grant bargain and sale deed
         covering the Subject Property, duly signed and acknowledged by Seller,
         which deed shall be in form reasonably acceptable to Purchaser for
         recording and shall convey to Purchaser good and marketable title to
         the Subject Property, free and clear of all liens, rights-of-way,
         easements, and other matters affecting title to the Subject Property,
         except for the Permitted Exceptions.

                 b.       Deliver or cause to be delivered to Purchaser an ALTA
         Standard Owner Policy of Title Insurance (the "Title Policy") insuring
         Purchaser in the amount of the purchase price that Purchaser has
         acquired good and marketable title to the Subject Property, subject
         only to the standard printed exceptions and the Permitted Exceptions.
         Purchaser shall be entitled to request the Title Company to provide at
         Purchaser's sole cost and expense, such endorsements (or amendments)
         to the Title Policy as Purchaser may reasonably require so long as
         such endorsements or amendments are at no cost to Seller nor impose
         additional liability on Seller nor delay the closing.  Purchaser shall
         be responsible for paying the cost of the Title Policy.





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                 c.       Deliver such evidence or other documents that may be
         reasonably required by the Title Company evidencing the status and
         capacity of Seller and the authority of the person or persons who are
         executing the various documents on behalf of Seller in connection with
         the sale of the Subject Property.

                 d.       Deliver a non-withholding statement that will satisfy
         the requirements of Section 1445 of the Internal Revenue Code so that
         Purchaser is not required to withhold any portion of the purchase
         price for payment to the Internal Revenue Service.

                 e.       Deliver to Purchaser any other documents or items
         necessary or convenient in the reasonable judgment of Purchaser to
         carry out the intent of the parties under this Contract.

                                   ARTICLE X
         
                       PURCHASER'S OBLIGATIONS AT CLOSING
                       ----------------------------------

         At the closing, Purchaser shall deliver to Seller the purchase price
for the Subject Property in cash.


                                   ARTICLE XI
         
                             COSTS AND ADJUSTMENTS
                             ---------------------

         At closing, the following items shall be adjusted or prorated between
Seller and Purchaser:

                 a.       Ad valorem taxes for the Subject Property for the
         current calendar year shall be prorated as of the date of closing, and
         Seller shall pay to Purchaser in cash at closing Seller's prorata
         portion of such taxes.  Seller's prorata portion of such taxes shall
         be based upon taxes actually assessed for the current calendar year.

                 b.       All other closing costs, including but not limited
         to, recording and escrow fees shall be divided equally between Seller
         and Purchaser; provided, however, that Seller and Purchaser shall each
         be responsible for the fees and expenses of their respective
         attorneys.

         Seller agrees to indemnify and hold Purchaser harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature (except those items which under the terms of this Contract specifically
become the obligation of Purchaser), brought by third parties and based on
events occurring on or before the date of closing and which are in any way
related to the ownership, maintenance, or operation of the Subject Property,
and all expenses related thereto, including, but not limited to, court costs
and attorneys' fees.

         Purchaser agrees to indemnify and hold Seller harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature, brought by third parties





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and based on events occurring subsequent to the date of closing and which are
in any way related to the ownership, maintenance or operation of the Subject
Property, and all expenses related thereto, including, but not limited to,
court costs and attorneys' fees.

                                  ARTICLE XII
         
                               ENTRY ON PROPERTY
                               -----------------

         Purchaser, Purchaser's agents, employees, servants, or nominees, are
hereby granted the right to enter upon the Subject Property at any time prior
to closing for the purpose of inspecting the Subject Property and conducting
such engineering and mechanical tests as Purchaser may deem necessary or
advisable, any such inspections and tests to be made at Purchaser's sole
expense.  Purchaser agrees to indemnify and hold Seller harmless from and
against any and all losses, damages, costs, or expenses incurred by Seller as a
result of any inspections or tests made by Purchaser.  Purchaser agrees to
provide to Seller copies of any and all reports generated as a result of
Purchaser's inspections of the Subject Property.

                                  ARTICLE XIII
         
                             POSSESSION OF PROPERTY
                             ----------------------

         Possession of the Property free and clear of all uses and
encroachments, except the Permitted Exceptions, shall be delivered to Purchaser
at closing.

                                  ARTICLE XIV
         
                                    NOTICES
                                    -------

         All notices, demands, or other communications of any type given by the
Seller to the Purchaser, or by the Purchaser to the Seller, whether required by
this Contract or in any way related to the transaction contracted for herein,
shall be void and of no effect unless given in accordance with the provisions
of this paragraph.  All notices shall be in writing and delivered to the person
to whom the notice is directed, either in person, by facsimile transmission, or
by United States Mail, as a registered or certified item, return receipt
requested.  Notices delivered by mail shall be deemed given when deposited in a
post office or other depository under the care





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<PAGE>   9
or custody of the United States Postal Service, enclosed in a wrapper with
proper postage affixed, addressed as follows:
         
         Seller:                  Harmon/Koval Limited Liability Company
         ------                   c/o Compass Realty
                                  3900 Paradise Road, Suite 185
                                  Las Vegas, Nevada  89109

         Purchaser:               Silverleaf Resorts, Inc.
         ---------                1221 Riverbend Drive
                                  Suite 120
                                  Dallas, Texas  75247
                                  Telephone No.:  (214) 631-1166
                                  Facsimile No.:  (214) 905-0514


                                   ARTICLE XV

                                    REMEDIES
                                    --------

         In the event that Seller fails to timely comply with all conditions,
covenants and obligations of Seller hereunder, such failure shall be an event
of default and Purchaser shall have the option (i) to terminate this Contract
by providing written notice thereof to Seller, in which event the earnest money
(less $100.00) shall be returned immediately to Purchaser by the Title Company
and the parties hereto shall have no further liabilities or obligations one
unto the other; (ii) to waive any defect or requirement and close this
Contract; or (iii) sue Seller for specific performance.

         In the event that Purchaser fails to timely comply with all
conditions, covenants, and obligations Purchaser has hereunder, such failure
shall be an event of default, and Seller's sole remedy shall be to receive the
earnest money.  The earnest money is agreed upon by and between the Seller and
Purchaser as liquidated damages due to the difficulty and inconvenience of
ascertaining and measuring actual damages, and the uncertainty thereof, and no
other damages, rights, or remedies shall in any case be collectible,
enforceable, or available to the Seller other than in this paragraph defined,
and Seller shall accept the earnest money as Seller's total damages and relief.





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                                  ARTICLE XVI

                                   ASSIGNMENT
                                   ----------

         This Contract may be assigned by the Purchaser to any person, firm,
corporation or other entity which the Purchaser may, at its sole discretion,
chose, but only on condition that any such assignee must assume and agree to
perform all of Purchaser's obligations hereunder.  Purchaser shall promptly
provide Seller with written notice of any assignment made pursuant to this
paragraph.

                                      XVII

                       INTERPRETATION AND APPLICABLE LAW
                       ---------------------------------

         This Agreement shall be construed and interpreted in accordance with
the laws of the State of Nevada.  Where required for proper interpretation,
words in the singular shall include the plural; the masculine gender shall
include the neuter and the feminine, and vice versa.  The terms "successors and
assigns" shall include the heirs, administrators, executors, successors, and
assigns, as applicable, of any party hereto.

                                     XVIII

                                   AMENDMENT
                                   ---------

         This Contract may not be modified or amended, except by an agreement
in writing signed by the Seller and the Purchaser.  The parties may waive any
of the conditions contained herein or any of the obligations of the other party
hereunder, but any such waiver shall be effective only if in writing and signed
by the party waiving such conditions and obligations.

                                  ARTICLE XIX

                                   AUTHORITY
                                   ---------

         Each person executing this Contract warrants and represents that he is
fully authorized to do so.





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                                   ARTICLE XX

                                ATTORNEYS' FEES
                                ---------------

         In the event it becomes necessary for either party to file a suit to
enforce this Contract or any provisions contained herein, the prevailing party
shall be entitled to recover, in addition to all other remedies or damages,
reasonable attorneys' fees and costs of court incurred in such suit.

                                  ARTICLE XXI

                              DESCRIPTIVE HEADINGS
                              --------------------

         The descriptive headings of the several paragraphs contained in this
Contract are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.

                                  ARTICLE XXII

                                ENTIRE AGREEMENT
                                ----------------

         This Contract (and the items to be furnished in accordance herewith)
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith.  No representation,
warranty, covenant, agreement, or condition not expressed in this Contract
shall be binding upon the parties hereto or shall affect or be effective to
interpret, change, or restrict the provisions of this Contract.

                                 ARTICLE XXIII

                            MULTIPLE ORIGINALS ONLY
                            -----------------------

         Numerous copies of this Contract may be executed by the parties
hereto.  Each such executed copy shall have the full force and effect of an
original executed instrument.





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                                  ARTICLE XXIV

                                   ACCEPTANCE
                                   ----------

         Seller shall have until 5:00 o'clock p.m., July 7, 1997, to execute
and return a fully executed original of this Contract to Purchaser, otherwise
this Contract shall become null and void.  Time is of the essence of this
Contract.  The date of execution of this Contract by Seller shall be the date
of execution of this Contract.  If the final date of any period falls upon a
Saturday, Sunday, or legal holiday under the laws of the State of Nevada, then
in such event the expiration date of such period shall be extended to the next
day which is not a Saturday, Sunday, or legal holiday under the laws of the
State of Nevada.

                                  ARTICLE XXV

                             REAL ESTATE COMMISSION
                             ----------------------

         In the event that this Contract closes, but not otherwise, Seller
agrees to pay at closing a real estate commission in the amount of eight
percent (8%) of the purchase price payable hereunder, such commission to be
divided equally between Compass Realty (Seller's representative) and Golden
West Real Estate, Inc. (Purchaser's Representative).  Seller represents and
warrants to Purchaser that Seller has not contacted or entered into any
agreement with any real estate broker, agent, finder, or any other party in
connection with this transaction, and that Seller has not taken any action
which would result in any real estate broker's, finder's, or other fees or
commissions being due and payable to any other party with respect to the
transaction contemplated hereby.  Purchaser hereby represents and warrants to
Seller that Purchaser has not contracted or entered into any agreement with any
real estate broker, agent, finder, or any other party in connection with this
transaction, and that Purchaser has not taken any action which would result in
any real estate broker's, finder's, or other fees or commissions being due or
payable to any other party with respect to the transaction contemplated hereby.
Each party hereby indemnifies and agrees to hold the other party harmless from
any loss, liability, damage, cost, or expense (including reasonable attorneys'
fees) resulting to the other party by reason of a breach of the representation
and warranty made by such party herein.





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Notwithstanding anything to the contrary contained herein, the indemnities set
forth in this Article XXV shall survive the closing.

         EXECUTED on this the 7th day of July, 1997.
                              
                                         SELLER:

                                         HARMON/KOVAL LIMITED LIABILITY COMPANY

                                         LAGUANA CONSOLIDANTS, LLC

                                         By:   /s/ ROBERT SCHULMAN       
                                              ----------------------------------
                                         Name:  Robert Schulman
                                              ----------------------------------
                                         Its:   President
                                              ----------------------------------


         EXECUTED on this the 3rd day of July, 1997.
                                                 

                                         PURCHASER:
                                         --------- 

                                         SILVERLEAF RESORTS, INC.


                                         By:  /s/ ROBERT MEAD
                                              ----------------------------------
                                         Name:  Robert Mead
                                                --------------------------------
                                           Its: CEO                         
                                               ---------------------------------




RECEIPT OF EARNEST MONEY AND ONE (1) EXECUTED COUNTERPART OF THIS CONTRACT IS
HEREBY ACKNOWLEDGED:

TITLE COMPANY:

NEVADA TITLE COMPANY



By: 
   ---------------------------------
Name:
    --------------------------------
Its:
    --------------------------------




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