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                                                                  EXHIBIT 10.138


                                                         [HARTSEL SPRINGS RANCH]
                                      NOTE

U.S. $4,000,000.00                                            February ___, 1998
                                                                Phoenix, Arizona


                  FOR VALUE RECEIVED, the undersigned PREFERRED EQUITIES
CORPORATION, a Nevada corporation ("Maker"), promises to pay to FINOVA CAPITAL
CORPORATION, a Delaware corporation ("Lender"), or order, at such place as the
holder of this Note ("Holder") may from time to time designate in writing, in
lawful money of the United States of America, the principal sum of up to FOUR
MILLION AND NO/100 DOLLARS (U.S. $4,000,000.00), or so much thereof as has been
disbursed and not repaid, together with interest on the unpaid principal balance
from time to time outstanding from the date hereof until paid, as more fully
provided for below.

                  This Note is executed pursuant to the terms of that certain
Second Amended and Restated and Consolidated Loan and Security Agreement dated
effective as of May 15, 1997 between Maker and Lender (such Amended and Restated
and Consolidated Loan and Security Agreement, as may be further amended, the
"Loan Agreement"). All capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Loan Agreement, the applicable provisions
of which are incorporated herein by reference.

                  Interest due under this Note shall (a) accrue daily on the
basis of the actual number of days in the computation period, (b) be calculated
on the basis of a year consisting of 360 days, and (c) be payable monthly in
arrears on the later of (i) ten (10) days after Lender mails an invoice or
statement therefor to Maker or (ii) the due date set forth in said invoice or
statement. Interest shall accrue initially at an annual interest rate ("Initial
Interest Rate") equal to Prime (as hereinafter defined) in effect on the date of
the initial advance of the loan evidenced by this Note ("Initial Prime") plus
two percent (2%) per annum, subject to adjustment on each Interest Rate Change
Date (as hereinafter defined), but in no event to exceed the maximum contract
rate permitted under the Applicable Usury Law (as hereinafter defined). The
interest rate shall change on each Interest Rate Change Date by adding to or
subtracting from the Initial Interest Rate, as the case may be, the change, if
any, between Initial Prime and Prime in effect on the applicable Interest Rate
Change Date. As used in this Note, the following capitalized terms shall have
the meaning set forth opposite them below:

                           "Prime" shall mean the rate of interest publicly
         announced, from time to time, by Citibank, N.A., New York, New York
         ("Citibank"), as the corporate base rate of interest charged by
         Citibank to its most creditworthy 

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         commercial borrowers notwithstanding the fact that some borrowers of
         Citibank may borrow from Citibank at rates of less than such announced
         Prime rate; and

                           "Interest Rate Change Date" means (a) the first
         business day of Citibank during the calendar month following the date
         of the initial advance of the loan evidenced by this Note and (b) the
         first business day of Citibank during each successive month thereafter.

                  In the event the Project Release Fees applicable to the
Project with respect to which Advances under the Note are made do not reduce the
unpaid principal balance of this Note, as of the first anniversary of the date
hereof, to an unpaid principal balance of no more than Three Million Dollars
($3,000,000), Maker shall within ten (10) days thereafter pay to Lender a
principal payment in an amount equal to the amount by which the unpaid principal
balance of this Note exceeds Three Million Dollars ($3,000,000). In the event
the Project Release Fees described above do not reduce the unpaid principal
balance of this Note, as of the second anniversary of the date hereof, to an
unpaid principal balance of no more than One Million Five Hundred Thousand
Dollars ($1,500,000), Maker shall within ten (10) days thereafter pay to Lender
a principal payment in an amount equal to the amount by which the unpaid
principal balance of this Note exceeds One Million Five Hundred Thousand Dollars
($1,500,000). Notwithstanding anything herein to the contrary, if not sooner
paid, the entire remaining balance of this Note, together with all accrued and
unpaid interest and all other sums due and owing hereunder, shall be due and
payable in full on the third anniversary of the date hereof.

                  Payments of principal and/or interest shall, at the option of
Holder, earn interest after they are due at a rate ("Overdue Rate") equal to (a)
two percent (2%) per annum above the rate otherwise payable hereunder or (b) the
maximum contract rate permitted under the Applicable Usury Law, whichever of (a)
or (b) is lesser. Furthermore, in the event of the occurrence of an Event of
Default (as the term "Event of Default" is defined in the Loan Agreement) the
unpaid principal balance of this Note shall, at the option of Holder, accrue
interest at the Overdue Rate.

                  All payments made under this Note shall be applied first
against amounts due hereunder or under the Loan Agreement, other than principal
and interest; second, against interest then due under this Note; and third,
against the principal of this Note.

                  In the event any installment of principal and/or interest
required to be made in connection with the indebtedness evidenced hereby is not
paid when due and, except in the case of the final installment, for which no
grace period is allowed, such default continues for five (5) days after notice
thereof to Maker or an Event of Default occurs, Holder may, at its option,
without notice or demand, declare immediately due and payable 



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the entire unpaid principal balance hereof, all accrued and unpaid interest
thereon, and all other charges owing in connection with the loan evidenced
hereby.

                  The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rate, calculated and applied to the principal balance of this Note in accordance
with the provisions of this Note; (ii) Overdue Rate, calculated and applied to
the amounts due under this Note in accordance with the provisions hereof; (iii)
all Mortgage Loan Fees, Project Incentive Fees and other Fees as provided in the
Loan Agreement; and (iv) all Additional Sums (as hereinafter defined), if any.
Maker agrees to pay an effective contracted for rate of interest which is the
sum of the above referenced elements.

                  All fees, charges, goods, things in action or any other sums
or things of value (other than amounts described in the immediately previous
paragraph), paid or payable by Maker (collectively, the "Additional Sums"),
whether pursuant to this Note, the Loan Agreement, the other Documents or any
other documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that under
any applicable law may be deemed to be interest with respect to this lending
transaction, for the purpose of any applicable law that may limit the maximum
amount of interest to be charged with respect to this lending transaction, shall
be payable by Maker as, and shall be deemed to be, additional interest, and for
such purposes only, the agreed upon and "contracted for rate of interest" of
this lending transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums.

                  Maker shall have no right to prepay this Note, other than
through the application of the above-referenced Project Release Fees.

                  In the event that Holder institutes legal proceedings to
enforce this Note and Holder is the prevailing party in such proceeding, Maker
agrees to pay Holder, in addition to any indebtedness due and unpaid, all costs
and expenses of such proceedings, including, without limitation, attorneys'
fees.

                  Holder shall not by any act or omission or commission be
deemed to waive any of its rights or remedies hereunder unless such waiver be in
writing and signed by an authorized officer of Holder and then only to the
extent specifically set forth therein; a waiver on one occasion shall not be
construed as continuing or as a bar to or waiver of such right or remedy on any
other occasion. All remedies conferred upon Holder by this Note or any other
instrument or agreement connected herewith or related hereto shall be cumulative
and none is exclusive and such remedies may be exercised concurrently or
consecutively at Holder's option.

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                  Every person or entity at any time liable for the payment of
the indebtedness evidenced hereby waives: presentment for payment, protest and
demand; notice of protest, demand, dishonor and nonpayment of this Note; and
trial by jury in any litigation arising out of, relating to or connected with
this Note or any instrument given as security herefor. Every such person or
entity further consents that Holder may renew or extend the time of payment of
any part or the whole of the indebtedness at any time and from time to time at
the request of any other person or entity liable therefor. Any such renewals or
extensions may be made without notice to any person or entity liable for the
payment of the indebtedness evidenced hereby.

                  This Note is given and accepted as evidence of indebtedness
only and not in payment or satisfaction of any indebtedness or obligation.

                  Time is of the essence with respect to all of Maker's
obligations and agreements under this Note.

                  This Note and all of the provisions, conditions, promises and
covenants hereof shall be binding in accordance with the terms hereof upon
Maker, its successors and assigns, provided nothing herein shall be deemed
consent to any assignment restricted or prohibited by the terms of the Loan
Agreement. If more than one (1) person or other entity has executed this Note as
Maker, the obligations of such persons and entities shall be joint and several.

                  This Note has been executed and delivered in Phoenix, Arizona,
and the obligations of Maker hereunder shall be performed in Phoenix, Arizona.
THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ARIZONA AND, TO
THE EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.
Maker (a) hereby irrevocably submits itself to the process, jurisdiction and
venue of the courts of the State of Arizona, Maricopa County, and to the
process, jurisdiction and venue of the United States District Court for Arizona,
for the purposes of suit, action or other proceedings arising out of or relating
to this Note or the subject matter hereof brought by Holder and (b) without
limiting the generality of the foregoing, hereby waives and agrees not to assert
by way of motion, defense or otherwise in any such suit, action or proceeding
any claim that Maker is not personally subject to the jurisdiction of the
above-named courts, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper.

                  It is the intent of the parties to comply with the usury law
("Applicable Usury Law") applicable pursuant to the terms of the preceding
paragraph or such other usury law which is applicable if the law chosen by the
parties is not. Accordingly, it is agreed that notwithstanding any provisions to
the contrary in this Note, or in any of the documents securing payment hereof or
otherwise relating hereto, in no event shall this 

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Note or such documents require the payment or permit the collection of interest
in excess of the maximum contract rate permitted by the Applicable Usury Law. In
the event (a) any such excess of interest otherwise would be contracted for,
charged or received from Maker or otherwise in connection with the loan
evidenced hereby, or (b) the maturity of the indebtedness evidenced by this Note
is accelerated in whole or in part, or (c) all or part of the principal or
interest of this Note shall be prepaid, so that under any of such circumstance
the amount of interest contracted for, shared or received in connection with the
loan evidenced hereby, would exceed the maximum contract rate permitted by the
Applicable Usury Law, then in any such event (1) the provisions of this
paragraph shall govern and control, (2) neither Maker nor any other person or
entity now or hereafter liable for the payment hereof will be obligated to pay
the amount of such interest to the extent that it is in excess of the maximum
contract rate permitted by the Applicable Usury Law, (3) any such excess which
may have been collected shall be either applied as a credit against the then
unpaid principal amount hereof or refunded to Maker, at Holder's option, and (4)
the effective rate of interest will be automatically reduced to the maximum
amount of interest permitted by the Applicable Usury Law. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law: (x) all calculations of interest which are made for
the purpose of determining whether such rate would exceed the maximum contract
rate permitted by the Applicable Usury Law shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated term of
the loan evidenced hereby, all interest at any time contracted for, charged or
received from Maker or otherwise in connection with such loan; and (y) in the
event that the effective rate of interest on the loan should at any time exceed
the maximum contract rate allowed under the Applicable Usury Law, such excess
interest that would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law shall be paid to Holder from time to time,
if and when the effective interest rate on the loan otherwise falls below the
maximum amount permitted by the Applicable Usury Law, to the extent that
interest paid to the date of calculation does not exceed the maximum contract
rate permitted by the Applicable Usury Law, until the entire amount of interest
which would have otherwise been collected had there been no ceiling imposed by
the Applicable Usury Law has been paid in full. Maker further agrees that should
the maximum contract rate permitted by the Applicable Usury Law be increased at
any time hereafter because of a change in the law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum contract
rate permitted by the Applicable Usury Law be decreased because of a change in
the law, such decreases shall not apply to the indebtedness evidenced hereby
regardless of when incurred.

                  Lender by acceptance hereof and Maker by execution hereof
hereby agrees that the Project Incentive Fee with respect to the Additional
Project for which advances under this Note are made equals Thirty-One Thousand
Ninety Dollars ($31,090) (i.e., 1,552 Lots X $20.00 per Lot = $27,700).



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                  In the event of any conflict or inconsistency between the
provisions of this Note and the provisions of the Loan Agreement, the provisions
of the Loan Agreement shall control.

This Note is secured by a Deed of Trust, Assignment of Rents and Proceeds and
Security Agreement (the "Hartsel Deed of Trust") of even date herewith executed
by Maker, as Trustor, for the benefit of Lender, as Beneficiary, and encumbering
real and personal property situated in Park County, Colorado, and more
particularly described therein.

                                     "MAKER"

                                     PREFERRED EQUITIES CORPORATION, 
                                     a Nevada corporation


                                     By: ______________________________
                                         Name: ________________________
                                         Its: _________________________

Federal Taxpayer Identification
Number:  88-0106662

Address:
4310 Paradise Road
Las Vegas,  Nevada  89109
Attention:  President



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This instrument was prepared by 
and after recording return to:

Randall S. Dalton, Esq.
Gammage & Burnham
Two North Central Avenue
18th Floor
Phoenix, Arizona  85004



                          DEED OF TRUST, ASSIGNMENT OF
                    RENTS AND PROCEEDS AND SECURITY AGREEMENT
                             [HARTSEL SPRINGS RANCH]


                  THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND PROCEEDS AND
SECURITY AGREEMENT ("Deed of Trust") is made as of the 18th day of February,
1998, by and among PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Trustor"), whose mailing address is 4310 Paradise Road, Las Vegas, Nevada
89109-6597, and the Public Trustee for Park County, Colorado ("Trustee"), for
the benefit of FINOVA CAPITAL CORPORATION, a Delaware corporation
("Beneficiary"), having an office and mailing address at 7272 East Indian School
Road, Suite 410, Scottsdale, Arizona 85251 (Attn: Vice President - Law).

                              W I T N E S S E T H:

                  Beneficiary has loaned to Trustor the principal sum of up to
Four Million and No/100 Dollars (U.S. $4,000,000.00) ("Loan"), under the
circumstances set forth in the Loan Agreement, as defined below, which Loan is
evidenced by a Promissory Note of even date herewith (as from time to time
modified, extended, renewed, replaced or restated, the "Note").

                                    ARTICLE I
                                GRANTING CLAUSES

                  NOW, THEREFORE, in consideration for the making of the Loan,
for the purpose of securing (a) the timely repayment of the Loan, as evidenced
by the Note, with interest thereon, (b) the timely repayment of that certain
Second Amended and Restated Promissory Note dated May 15, 1997 (the "Receivables
Note") in the principal amount of Seventy-Five Million United States Dollars
(U.S. $75,000,000.00), (c) the timely repayment of that certain Second Amended
and Restated Promissory Note [Headquarters and FCFC Property] dated as of June
5, 1996 (the "Office Note") in the original principal amount of Six Million
Seven Hundred Seventy-Three Thousand Seven Hundred Seventy-Eight and 74/100
United States Dollars (U.S. $6,773,778.74), as amended, (d) the timely repayment



<PAGE>   8

of that certain Promissory Note (the "Towers Note") dated as of December 13,
1995, as amended pursuant to that Amendment No. 1 to Promissory Note [Towers
Lobby] dated as of August 16, 1996, in the original principal amount of One
Million Two Hundred Eighty-Six Thousand One Hundred Twenty-Six and No/100 United
States Dollars (U.S. $1,286,126.00), as amended, (e) the timely repayment of
that certain Promissory Note (the "Ida Building Addition Note") dated as of
December 13, 1995 in the original principal amount of One Million Five Hundred
Thousand United States Dollars (U.S. $1,500,000), as amended, (f) the timely
repayment of that certain Promissory Note (the "Aloha Bay Note") dated as of
September 22, 1995 in the original principal amount of Three Million Six Hundred
Thousand United States Dollars (U.S. $3,600,000), as amended, (g) the timely
repayment of that certain Promissory Note (the "Ida Building One Note") dated as
of January 26, 1995 in the original principal amount of Two Million Nine Hundred
Ninety-Nine Thousand Seven Hundred and No/100 United States Dollars (U.S.
$2,999,700.00), as amended, (h) the timely repayment of that certain Promissory
Note (the "Ida Building Two Note") dated as of April 27, 1995 in the original
principal amount of One Million Seven Hundred Fifty-Five Thousand and No/100
United States Dollars (U.S. $1,755,000.00), as amended, (i) the timely repayment
of that certain Promissory Note (the "Winnick Building Addition Note") dated as
of December 13, 1995 in the original principal amount of Two Million One Hundred
Thousand United States Dollars (U.S. $2,100,000.00), as amended, (j) the timely
repayment of that certain Promissory Note (the "Second Winnick Building Addition
Note") dated as of May 15, 1997 in the original principal amount of One Million
Eight Hundred Eighteen Thousand and No/100 Dollars (U.S. $1,818,000.00), as
amended, (k) the timely repayment of the Note, (l) the timely repayment of any
and all indebtedness evidenced by any Project Note as may be executed by Trustor
for the benefit of Beneficiary after the date hereof and as contemplated by the
Loan Agreement hereinafter described, (m) the timely payment of the Hartsel
Springs Ranch Incentive Fee ("Incentive Fee") in the amount of Thirty-One
Thousand Forty and No/100 United States Dollars (U.S. $31,040.00), the
obligation for payment of which is set forth in the Loan Agreement hereafter
described, (n) the full, timely and faithful performance of and compliance with
("Performance") all the covenants and conditions made by Trustor herein, in the
Note, in the Receivables Note, in the Office Note, in the Towers Note, in the
Ida Building Addition Note, in the Aloha Bay Note, in the Ida Building One Note,
in the Ida Building Two Note, in the Winnick Building Addition Note, in the
Second Winnick Building Addition Note, in any Project Note, in the Second
Amended and Restated and Consolidated Loan and Security Agreement between
Trustor and Beneficiary dated effective as of May 15, 1997, as may be
subsequently amended (as so amended and restated, the "Loan Agreement"), in the
Documents (as defined in the Loan Agreement), and in each and every other
document executed in connection therewith, other than the Environmental
Certificate with Representations, Covenants and Warranties of even date herewith
executed in connection with the Premises (the "Environmental Certificate") 

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<PAGE>   9

and in any and all modifications, extensions, renewals, replacements or
restatements of any of the foregoing (this Deed of Trust, the Note, the
Receivables Note, the Office Note, the Towers Note, the Ida Building Addition
Note, the Aloha Bay Note, the Ida Building One Note, the Ida Building Two Note,
the Winnick Building Addition Note, the Second Winnick Building Addition Note,
any Project Note, the Loan Agreement, the Documents and the other documents
(exclusive of the Environmental Certificate), as from time to time modified,
extended, renewed, replaced or restated, are collectively referred to as the
"Loan Documents"), and also (n) the payment of any and all other indebtedness,
direct or contingent (other than arising out of the Environmental Certificate),
that may now or hereafter become owing to Beneficiary from Trustor or any
successor-in-ownership of the Trust Property (all of the foregoing secured
obligations collectively "Obligations" or individually "Obligation"), Trustor
hereby irrevocably grants, conveys, bargains, sells, assigns, warrants and
confirms unto Trustee, its successors and assigns, in trust, with power of sale
and right of entry and possession, all of Trustor's right, title and interest in
and to the real estate located in Park County, Colorado, and more fully
described in Exhibit A attached hereto and by this reference incorporated herein
("Premises") (the Premises and other rights, titles and interests hereby
granted, conveyed, bargained, sold and assigned to Trustee and/or Beneficiary as
provided below are collectively referred to as the "Trust Property").

                  TOGETHER WITH all of Trustor's right, title and interest in
and to all buildings and other improvements now or hereafter erected on the
Trust Property, all building materials at any time intended to be incorporated
into the improvements now or hereafter erected on the Trust Property and all
fixtures, equipment, machinery, appliances, furniture, furnishings and other
articles of personal property of Trustor of every kind and nature whatsoever now
or hereafter located on the Trust Property, and used, intended for use or usable
in connection with the operation of the Trust Property, including, without
limitation, all heating, lighting, laundry, incinerating and power equipment,
engines, pipes, pumps, tanks, motors, conduits, switchboards, plumbing,
cleaning, fire prevention, fire extinguishing, refrigerating, ventilating and
communications apparatus, air cooling and air conditioning apparatus, elevators,
escalators, shades, awnings, screens, storm doors and windows, wall beds,
stoves, ranges, refrigerators, freezers, food and beverage preparation and
serving equipment, cabinets, partitions, ducts, compressors, canopies,
furnishings, garbage and rubbish disposals, counters, bathtubs, sinks, basins,
carpets, floor and wall coverings, drapes, swimming pool equipment, inventory,
merchandise and proceeds therefrom and all substitutions and replacements
therefor; it being understood and agreed that all such property is part and
parcel of the Trust Property and appropriated to the use thereof, and whether
affixed or annexed to the Trust Property or not, shall for the purpose of this
Deed of Trust be deemed conclusively to be a portion of the security for the
Performance of the Obligations;

                  TOGETHER WITH all of the right, title and interest of Trustor,
now or hereafter acquired in and to all and singular the tenements,
hereditaments, rights of way, easements, riparian rights, water and water rights
and water rights applications appurtenant or pertaining to the Premises or
necessary for the operation of the Premises for its intended 



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<PAGE>   10

purpose, as well as all rights in ditches for the irrigation of the Trust
Property and shares of stock evidencing such rights, and such other rights,
liberties and privileges now or hereafter belonging or appertaining thereto;

                  TOGETHER WITH, subject to the assignment thereof to
Beneficiary pursuant to Article III hereof or otherwise, all income, rents,
royalties, revenues, issues, profits, fees and other proceeds of the Trust
Property, including, without limitation, all of the right, title and interest of
Trustor, now or hereafter acquired, as lessor or seller, as the case may be, in
and to all leases, subleases, assignments, co-occupancy or co-tenancy
agreements, sales contracts, installment sales agreements and purchase money
notes pertaining to the Trust Property, or any part thereof, and all security
documents related to any of the foregoing;

                  TOGETHER WITH all right, title and interest of Trustor, now or
hereafter acquired, in and to any and all strips and gores of land adjacent to
and used in connection with the Premises and all right, title and interest of
Trustor, now owned or hereafter acquired, in, to and under the ways, streets,
sidewalks and alleys now or hereafter adjoining the Premises;

                  TOGETHER WITH, subject to any assignment thereof to
Beneficiary, all of Trustor's rights and as "declarant", "developer", "owner"
and/or otherwise under the governing documents or restrictive covenants
affecting the Trust Property, if any, including, without limitation, owners'
association charters or articles or certificate of incorporation, bylaws and
rules and regulations related thereto, if any, whether now or hereafter existing
(collectively, the "Project Documents");

                  TOGETHER WITH, insofar as permitted by applicable law and
subject to any assignment thereof to Beneficiary, any licenses, contracts,
management contracts or agreements pursuant to which any third party is
rendering services to Trustor, franchise agreements, insurance policies
pertaining to the ownership, operation or maintenance of the Trust Property (but
only to the extent they so pertain), to the extent assignable, permits,
authorizations or certificates, now or hereafter required or used in connection
with the ownership, operation or maintenance of the Trust Property;

                  TOGETHER WITH, subject to any assignment thereof to
Beneficiary, all rights of Trustor under that certain License Agreement between
Trustor and Hartsel Springs Ranch of Colorado, Inc. to the name "Hartsel Springs
Ranch" and all intangibles, choses in action, names, logos, trademarks, trade
names and copyrights now or hereafter used in connection with the Trust Property
(except with respect to the name "Ramada Vacation Suites");

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<PAGE>   11

                  TOGETHER WITH all replacements, substitutions or renewals of
or additions to, all products of, and all books, records and files of Trustor
pertaining in whole or in part to any of the foregoing;

                  AND TOGETHER WITH, subject to the assignment thereof to
Beneficiary pursuant to Article II hereof, to the extent hereinafter provided,
all proceeds and payments of the conversion, voluntary or involuntary, of any of
the foregoing, into cash or otherwise, including, without limitation, all
accounts, all condemnation awards in respect to any taking by eminent domain or
otherwise payable to the extent hereinafter provided in Article II, and all
proceeds of any insurance required to be maintained by Trustor pursuant to this
Deed of Trust, whether payable to Trustor or otherwise.

                  TO HAVE AND TO HOLD the Trust Property with all and singular
the rights, easements and appurtenances thereunto appertaining unto Trustee, its
successors and assigns forever, in trust for the benefit and security of the
Beneficiary, for the purposes and uses herein set forth.

                  PROVIDED ALWAYS that upon Performance of all of the
Obligations, this Deed of Trust shall be subject to termination and reconveyance
and shall be released in the manner provided by law, but at the expense of
Trustor; otherwise to be and remain in full force and effect.

                                   ARTICLE II
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

                  TO BETTER SECURE THE OBLIGATIONS, TRUSTOR, JOINTLY AND
SEVERALLY IF MORE THAN ONE, REPRESENTS, WARRANTS, COVENANTS AND AGREES WITH
TRUSTEE AND BENEFICIARY AS FOLLOWS:

                  2.1      TRUSTOR; GOOD STANDING; AUTHORITY TO CONVEY; 
                           PERFORMANCE OF THE OBLIGATIONS.

                           (a) Trustor is a corporation duly organized and
         validly existing and in good standing under the laws of the State of
         Nevada and is qualified to do business and in good standing in each
         jurisdiction where the location or nature of the properties used or its
         business, as the same is being or is proposed to be conducted, makes
         such qualification necessary (except where failure to do so would not
         (i) adversely affect Beneficiary's ability to realize upon this Deed of
         Trust or the other security for the Performance of the Obligations or
         (ii) materially adversely affect the business or financial condition of
         Trustor or the ability of Trustor to complete Performance of the
         Obligations), with powers and authority adequate for executing,
         delivering and Performing under the Loan Documents, for undertaking and
         Performing the Obligations, and for carrying on its business and owning
         its property. Trustor will, 

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<PAGE>   12

         until Trustor has completed Performance of all of the Obligations,
         maintain such powers, authority and qualifications.

                           (b) Trustor has good right and power to convey the
         Trust Property and to execute and deliver this Deed of Trust. All
         action necessary and required by Trustor's governance documents and by
         all applicable laws for the obtaining of the Loan and for the execution
         and delivery of this Deed of Trust and all other Loan Documents
         executed and delivered in connection with the Loan has been duly and
         effectively taken; and this Deed of Trust is and will be, and all other
         Loan Documents are and will be legal, valid, binding and enforceable
         against Trustor in accordance with their respective terms (subject,
         however, to bankruptcy, insolvency, reorganization, arrangement,
         moratorium, or other similar laws relating to or affecting the rights
         of creditors generally and general principles of equity), and do not
         violate the usury laws of the State where the Premises are located. The
         execution, delivery and Performance of the Obligations of this Deed of
         Trust and the other Loan Documents do not and will not violate,
         constitute a default under, or (other than the lien in favor of
         Beneficiary) result in the creation or imposition of any lien, charge
         or encumbrance upon any of the properties or assets of Trustor pursuant
         to the terms of, any provision of: any law, regulation, judgment,
         decree, order, franchise or permit applicable to Trustor; Trustor's
         governance documents; or any contract or other agreement or instrument
         to which Trustor is a party or by which Trustor or Trustor's assets are
         bound. Except for such consents as have been disclosed in writing to
         Beneficiary and have been obtained and are in full force and effect, no
         consent of any government or agency thereof, or of any other person,
         firm or entity not a party hereto is or will be required as a condition
         to the valid execution, delivery, performance or enforceability of the
         Loan Documents.

                           (c) Trustor will Perform when due all the
Obligations.

                  2.2      TITLE.

                           (a) Trustor is lawfully seized of a good and
         marketable title in fee simple in the Premises and of a good and
         marketable title in fee simple as to the buildings and other
         improvements erected thereon and has good and legal title to the rest
         of the Trust Property. The Trust Property is free from liens, claims,
         restrictions or encumbrances, except for such liens, claims,
         restrictions or encumbrances as are listed in Exhibit B attached hereto
         and by this reference incorporated herein ("Permitted Encumbrances").

                           (b) Trustor does hereby warrant and shall forever
         defend the Trust Property against the claims of all persons whatsoever.



                                     - 6 -
<PAGE>   13

                  2.3      INSURANCE.

                           (a) Throughout the term of the Deed of Trust, Trustor
         will provide, maintain and deliver or cause to be provided, maintained
         and delivered, at no cost or expense to Beneficiary, such insurance as
         is from time to time required in writing by the Beneficiary, written by
         such insurers, in such amounts and forms and with such limits,
         deductibles and retentions as are satisfactory to Beneficiary.

                           (b)      RESERVED.

                           (c) A complete certified copy of each policy signed
         by an authorized insurance company representative, shall be delivered
         to the Beneficiary from time to time, as requested by Beneficiary.

                           (d) If any policy required by Beneficiary is not
         received by Beneficiary as required by Beneficiary, Beneficiary
         reserves the right to procure such insurance and pay the premium
         therefor; and such sum shall, without notice or demand, become
         immediately due and payable with interest from the date of its advance
         until received by Beneficiary from Trustor at the Overdue Rate (as the
         term "Overdue Rate" is defined in the Note) and secured hereby. In any
         event, failure to deliver any required insurance policy within the
         requirements prescribed in this Deed of Trust will constitute an Event
         of Default and require immediate cure by the Trustor.

                           (e) Trustor will furnish to Beneficiary, from time to
         time upon request, within fifteen (15) days following any such request,
         a certificate signed by the Trustor and the appropriate insurance
         carrier representative containing a detailed list of the insurance
         policies then outstanding and in force on the Trust Property.

                           (f) Trustor will promptly notify Beneficiary of any
         damage to or destruction of the Trust Property costing more than Twenty
         Five Thousand Dollars ($25,0000) to repair or restore, whether or not
         the same is covered by insurance, and if so covered, will promptly make
         proof of loss relating thereto. Beneficiary may make proof of loss to
         the Trust Property if not made promptly by Trustor. Trustor hereby
         authorizes Beneficiary, at Beneficiary's option, to be named as the
         loss-payee on any insurance policy and to adjust or compromise in the
         name of Trustor any loss covered by any insurance policy on the Trust
         Property; provided, however, that Beneficiary's right to adjust or
         compromise any loss shall be available to Beneficiary only if the
         Project Documents give Trustor the right to adjust or compromise such
         loss. As between Trustor and Beneficiary, Trustor hereby authorizes
         Beneficiary, at Beneficiary's option, to collect and receipt the
         proceeds from any such policy and use such proceeds as set forth in
         subparagraph (g) below. To the extent, but only to the 

                                     - 7 -
<PAGE>   14

         extent, that the Project Documents provide that insurance proceeds
         would be payable to Trustor, such proceeds shall be paid directly to
         Beneficiary instead of to Trustor or Trustor and Beneficiary jointly.

                           (g) To the extent, but only to the extent, that the
         Project Documents provide that insurance proceeds would be payable to
         Trustor, the proceeds of all insurance shall, at the option of
         Beneficiary, be applied by Beneficiary in reduction of the indebtedness
         secured hereby in such order as Beneficiary shall determine whether the
         same be then matured or unmatured (unless otherwise elected by
         Beneficiary, no such application shall be deemed to be an advance
         payment of any subsequently accruing fixed sum), used to fulfill any of
         the Obligations, or paid over, subject to such terms and conditions as
         Beneficiary may in its sole but reasonable discretion then impose,
         wholly or in part to Trustor by Beneficiary for the repair and
         restoration of the Trust Property or for any other purpose or object
         satisfactory to Beneficiary. If insurance proceeds are paid over to
         Trustor for the purpose of repair and restoration of the Trust
         Property, Beneficiary, without limitation of its right to impose other
         terms and conditions, may require receipt and approval by itself and
         its architect of plans and specifications for the work to be done;
         disbursement of proceeds not more frequently than monthly for work done
         against invoices, lien waivers, title insurance policy endorsements and
         architect's certifications; title policy endorsements, retention of
         holdbacks until completion of construction and expiration of mechanic's
         lien periods; and receipt of assurance adequate to Beneficiary in its
         sole judgment that the proceeds remaining after disbursement will be
         sufficient to complete such repair and replacement. Trustor hereby
         assigns to Beneficiary for the uses and purposes aforesaid all
         insurance required by this Deed of Trust and the proceeds thereof.
         Beneficiary shall not be responsible for the insolvency of any insurer
         or any insurance underwriter. Furthermore, other than to the extent
         resulting from the gross negligence or willful misconduct of
         Beneficiary, Beneficiary shall not be responsible for such insurance or
         for the collection of any insurance moneys. Application of insurance
         proceeds by Beneficiary, regardless of the manner or order, shall not
         waive Performance of the Obligations, cure or waive any default by
         Trustor in the Performance of the Obligations, or invalidate or affect
         any act done hereunder because of any such default. Beneficiary shall
         not be obligated to see to the proper application of insurance proceeds
         paid over to Trustor.

                  2.4      CONDEMNATION OF TITLE OR USE; EMINENT DOMAIN; SPECIAL
                           PROVISIONS.

                           (a) All awards heretofore or hereafter made by any
         public or quasi-public authority to the present and all subsequent
         owners of the Trust Property by virtue of an exercise of the right of
         eminent domain by such authority, including, without limitation, any
         award for a taking (whether direct or indirect) of title, possession or
         right of access to a public way, or for any change of grade or streets


                                     - 8 -
<PAGE>   15

         affecting the Trust Property (collectively, "Condemnation Awards"), are
         hereby assigned to Beneficiary. Beneficiary, at its option, is hereby
         authorized, directed and empowered to collect and receive the proceeds
         of any such awards from the authorities making the same and to give
         proper receipts and acquittances therefor. Such proceeds shall be
         received, held, applied and used as set forth in paragraph 2.3(g)
         hereof with respect to insurance proceeds. If prior to the receipt by
         Beneficiary of such award or payment the Trust Property shall have been
         sold on foreclosure of this Deed of Trust, Beneficiary shall have the
         right to receive such award or payment to the extent of any deficiency
         found to be due upon such sale, with interest thereon, at the rate
         provided in the Note, notwithstanding any rule of law or provision, if
         any, herein or in any of the other Loan Documents forbidding deficiency
         judgments or personal liability, and whether or not a deficiency
         judgment on this Deed of Trust shall have been sought or denied. Upon
         request by Beneficiary, Trustor will make, execute and deliver any and
         all assignments and other instruments sufficient for the purpose of
         effectuating the assignment of all such awards to Beneficiary.
         Beneficiary shall have the right to intervene and participate in any
         proceeding for and in connection with any taking referred to in this
         paragraph; provided, however, that if such intervention shall not be
         permissible or permitted by the court, Trustor will, at its expense,
         consult with Beneficiary, its attorneys and experts and make all
         reasonable efforts to cooperate with them in any defense of such
         proceedings. Trustor will not, without Beneficiary's prior written
         consent, enter into any agreement for the taking of the Trust Property
         or any part thereof with any person or persons authorized to acquire
         the same by condemnation or eminent domain.

                           (b) Anything to the contrary herein notwithstanding,
         for so long as any part of the Trust Property is subject to the Project
         Documents, any and all insurance proceeds arising from damage or
         destruction to the Trust Property and any and all Condemnation Awards
         received by Beneficiary shall be delivered and paid out by Beneficiary
         to the Insurance Trustee, if any, under the Project Documents, to be
         distributed and used in accordance with the provisions of the Project
         Documents.

                  2.5      RESTRICTIONS ON TRANSFER, MERGER AND CONSOLIDATION;  
                           NO ADDITIONAL LIENS.

                           (a) To the extent not prohibited by applicable law
         and except as may be expressly permitted herein or in the Loan
         Agreement, Trustor will not, without the prior written consent of
         Beneficiary: (i) sell, convey, lease, sublease, assign, mortgage,
         pledge, encumber or otherwise transfer the Trust Property or any part
         thereof other than the sale of Units or Lots (as defined in the Loan
         Agreement) in the ordinary course of business or (ii) assign or
         hypothecate any rent, issues, profits or proceeds from the Trust
         Property (other than Purchaser Notes and Purchaser Mortgages, as each
         of those terms is defined in the Loan Agreement). Any such act shall be
         expressly subject to this Deed of Trust and the prior lien created
         hereby, and 

                                     - 9 -
<PAGE>   16

         written consent of Beneficiary to any one such act shall not be
         construed to be a waiver of this provision with respect to any
         subsequent act.

                           (b) Without limiting the generality of the foregoing,
         neither Trustor nor any other person have or shall have, without the
         prior written consent of Beneficiary, any right, power or authority to
         create, incur, permit, or suffer to be placed or imposed upon the Trust
         Property any lien, security interest or other charge or encumbrance
         whatsoever, except this Deed of Trust, the Permitted Encumbrances and
         such other liens and security interests, if any, as may be expressly
         permitted herein. If any such prohibited lien shall arise, Trustor will
         promptly discharge such lien; provided, however, that Trustor shall
         have the right to contest in good faith, with due diligence and
         appropriate proceedings, at no cost or expense to Beneficiary, the
         validity, applicability, or amount of any such lien, provided further,
         however, that Trustor, prior to commencing such contest, shall have
         furnished to Beneficiary a bond or other security in such form,
         substance and amount as is reasonably satisfactory to Beneficiary.

                  2.6      TAXES, ASSESSMENTS.

                           (a) TRUSTOR WILL PAY OR CAUSE TO BE PAID WHEN DUE,
         AND INDEMNIFY AND HOLD HARMLESS Trustee, Beneficiary, their successors,
         assigns and shareholders and the directors, officers, employees, agents
         and servants of the foregoing from all taxes (including, without
         limitation, revenue and documentary stamp taxes, intangible taxes, ad
         valorem real estate and personal property taxes), assessments, water,
         sewer and other utility rates, rents and charges, license and
         registration fees and excises, together with any penalties, fines or
         interest thereon, in each case whether general or special, ordinary or
         extraordinary, foreseen or unforeseen, of every character in respect of
         the Trust Property or any of the Loan Documents, which at any time
         prior to Performance of the Obligations may be imposed on or become a
         lien upon (i) Trustee or Beneficiary, (ii) the Trust Property or any
         part thereof or any rent or other income or proceeds therefrom, (iii)
         the occupancy, operation, use, possession or disposition thereof
         (including, without limitation, any disposition in exercise of the
         rights of Beneficiary arising from an Event of Default (as hereinafter
         defined)), or (iv) any activity conducted on or in connection with the
         Trust Property or part thereof (all such taxes, assessments, rents,
         rates, charges, fees, excises and any such penalties, fines or interest
         thereon, collectively "Impositions" ). The Obligation to pay
         Impositions shall not apply to any Imposition measured by the net
         income payable by Beneficiary in consequence of the receipt of payments
         of principal and/or interest called for in the Note or commitment fees,
         if any, paid in connection with the Loan. The Obligation to pay
         Impositions shall include the Obligation to pay any increase to
         Beneficiary in federal income taxes owing to such jurisdictions as a
         result of inclusion in income of Beneficiary of any amount required by
         this paragraph to be paid to or for Beneficiary.


                                     - 10 -
<PAGE>   17
 
                          (b) If claim is made against Beneficiary for any
         Imposition, Beneficiary will use reasonable efforts to promptly notify
         Trustor thereof (but failure to do so shall not prejudice Beneficiary's
         rights hereunder).

                           (c) If the burden of any Imposition cannot lawfully
         be shifted from Beneficiary to Trustor, then all sums hereby secured,
         without any deduction, shall, at the option of the Beneficiary, become
         due and payable upon demand, notwithstanding anything contained herein
         or any law heretofore or hereafter enacted.

                           (d) Trustor has filed or caused to be filed all tax
         returns which are required to be filed by it and (except to the extent
         being contested in good faith and for the payment of which adequate
         security has been provided) has paid or caused to be paid all taxes
         shown to be due or payable on such returns and all Impositions which
         are due and payable.

                           (e) Trustor will furnish to Beneficiary receipts or
         other evidence satisfactory to Beneficiary showing payment of all ad
         valorem real estate and personal property taxes and assessments within
         30 days of the final due date of such taxes and assessments. If such
         receipts or other evidence of payment is not provided, Beneficiary may
         take such action as Beneficiary deems necessary, at Trustor's expense,
         to obtain such evidence of payment.

                           (f) Trustor shall have the right to contest in good
         faith, with due diligence and appropriate proceedings, at no cost or
         expense to Beneficiary, the validity, applicability or amount of such
         Impositions; provided, however, that Trustor, prior to commencing such
         contest, shall have furnished to Beneficiary a bond or other security
         in such form, substance and amount as is reasonably satisfactory to
         Beneficiary.

                  2.7      IMPOUNDS.

                           (a) Upon the occurrence of an Event of Default and at
         all times thereafter, Trustor will upon written request of Beneficiary
         make monthly deposits with Beneficiary of the following: (i) an
         installment of the taxes and special assessments levied or to be levied
         against the Trust Property and (ii) an installment of the premium or
         premiums that will become due and payable to renew the insurance on the
         Trust Property. Such installments are to be equal to the estimated
         taxes and assessments and premium or premiums for such insurance next
         due (as reasonably estimated by Beneficiary giving due consideration to
         the previous year's tax and premiums), less all installments already
         paid therefor, and divided by the number of months that are to elapse
         before one (1) month prior to the date when such taxes and assessments
         or premium or premiums shall become delinquent. If the Trust Property


                                     - 11 -
<PAGE>   18

         is a part of a larger tract for purposes of real estate taxation,
         Trustor shall have or cause to have the property taxes assessed
         separately; or, if a separate assessment is not possible, Trustor, upon
         request of Beneficiary, will make the monthly deposits for an
         installment of taxes and special assessments calculated for the larger
         tract. If amounts paid to Beneficiary under the provisions of this
         paragraph are insufficient to discharge the Obligation for such taxes
         and assessments or insurance premiums as the same become due, Trustor
         will pay to Beneficiary upon demand such additional sums as may be
         required to fully pay and discharge this Obligation.

                           (b) Nothing in this paragraph shall release Trustor
         of its Obligation to pay taxes, assessments and insurance premiums as
         the same become due and payable to the extent that provision is not
         made for such payment pursuant to the terms of this paragraph. To the
         extent not prohibited by law, deposits made under this paragraph shall
         not be deemed to be held in trust and may be commingled with
         Beneficiary's general funds; and Beneficiary shall have no liability to
         Trustor for any interest on such deposits.

                           (c) If, by reason of any Event of Default,
         Beneficiary declares all indebtedness secured hereby to be due and
         payable, Beneficiary, to the extent not prohibited by applicable law,
         may, at its option and without notice, then apply any funds in the
         impounds account against such indebtedness in such order as Beneficiary
         may in its discretion determine. Application of such funds to the
         indebtedness secured hereby shall not cure or waive any default by
         Trustor in the Performance of the Obligations or invalidate any act
         done hereunder because of any such default. The enforceability of the
         Obligations herein relating to taxes, assessments and insurance
         premiums shall not be affected except insofar as those Obligations have
         been met by compliance with this paragraph.

                           (d) Beneficiary may from time to time, at its option,
         waive, and after any such waiver reinstate, any or all provisions
         hereof requiring such deposits, by notice to Trustor. While any such
         waiver is in effect, Trustor will pay Impositions and insurance
         premiums as herein elsewhere provided.

                  2.8 COMPLIANCE WITH INSURANCE TERMS, LAWS, ETC. Trustor has
complied, and will comply or cause compliance with and will not suffer or permit
any violation of: (a) all terms of any insurance policy covering or applicable
to the Trust Property or any part thereof, all requirements of the issuer of any
such policy, and all orders, rules, regulations and other requirements of the
National Fire Protection Association (or any other body exercising similar
functions) applicable to or affecting the Trust Property or any use or condition
of the Trust Property; and (b) all laws, ordinances, regulations, covenants,
conditions and restrictions affecting Trustor or the Trust Property; provided,
however, that Trustor shall have the right to contest in good faith, with due
diligence and appropriate proceedings, at no cost or expense to Beneficiary, the
validity or applicability of such law, 

                                     - 12 -
<PAGE>   19

         ordinance, regulation, covenant, condition or restriction, provided
         further, however, that Trustor, prior to commencing such contest, shall
         have furnished to Beneficiary a bond or other security in such form,
         substance and amount as is reasonably satisfactory to Beneficiary.

                  2.9      ALTERATIONS, MAINTENANCE, INSPECTION, REPAIR.

                           (a) Trustor (i) will not, without the prior written
         consent of Beneficiary, make any material alteration to the Trust
         Property or remove, demolish, or alter the design or structural
         character of any building now or hereafter erected upon the Trust
         Property, unless otherwise permitted herein or required by law; (ii)
         will not, without the prior written consent of Beneficiary, remove or
         permit the removal from the Premises of any fixtures, equipment,
         machinery, appliances, fixtures, furniture, furnishings or other items
         of personal property which constitute part of the Trust Property,
         except in the ordinary course of business or unless otherwise permitted
         herein; (iii) will promptly repair or cause to be repaired any portions
         of the Trust Property that may be damaged or destroyed (regardless of
         the sufficiency of insurance and condemnation proceeds) and will not
         commit or suffer waste upon the Trust Property, but will at all times
         make or cause to be made such repairs, maintenance and renewals and
         replacements, or otherwise, as may be necessary to maintain the Trust
         Property and condition thereof in good order and repair; (iv) will keep
         or cause the Trust Property to be kept free of rubbish and other
         unsightly conditions; (v) will keep or cause all buildings and other
         improvements on the Trust Property to be kept free of dry rot, fungus,
         termites and all other harmful or destructive pests; (vi) will keep or
         cause all ornamental plants, trees and shrubs on the Trust Property to
         be kept neatly pruned and in good condition; and (vii) will complete,
         subject to clauses (i) and (iii) above, promptly, in a good and
         workmanlike manner and in substantial conformity with plans and
         specifications approved in writing by Beneficiary any improvements now
         or hereafter commenced.

                           (b) Nothing contained in this Deed of Trust and/or
         any of the other Loan Documents shall constitute any consent or request
         by Trustee or Beneficiary, express or implied, for the performance of
         any labor or service or the furnishing of any materials or other
         property in respect of the Trust Property, or be construed to give
         Trustor any right, power or authority to contract for or permit the
         performance of any labor or services or the furnishing of any materials
         or other property in such fashion as would permit the making of any
         claim against Trustee or Beneficiary in respect thereof or any claim
         that any lien based on the performance of such labor or services or the
         furnishing of any such materials or other property is prior to this
         Deed of Trust. During the performance of any such labor or services or
         the furnishing of any such materials or other property with respect to
         the Trust Property or the Premises, Trustor will post in conspicuous
         locations notices reasonably sufficient to 

                                     - 13 -
<PAGE>   20

         advise the suppliers of such services or materials of the
         non-responsibility of Beneficiary with respect to the same.

                  2.10     USE; ZONING.

                           (a) Trustor will use the Trust Property for the 
         purposes of selling residential lots.

                           (b) The use of the Trust Property for residential
         purposes above does not and will not violate any private covenant or
         restriction affecting the Trust Property. The Trust Property is zoned
         for residential use and the Trust Property is not a part of a larger
         tract of land owned or leased by Trustor or any of its affiliates, or
         otherwise considered as part of one zoning lot, or, if it is, any
         authorization or variance required for the subdivision of such larger
         tract which a sale of the Trust Property would entail has been obtained
         from all the appropriate governmental authorities, so that the Trust
         Property constitutes one zoning lot (including street access and
         parking and utility facilities, if relevant) capable of being conveyed
         as such. The necessary rights-of-way for all roads necessary for the
         full utilization of the Trust Property for its intended purposes have
         been acquired, and/or have been dedicated to public use and accepted by
         the appropriate governmental authority.

                           (c) Trustor will not, without Beneficiary's prior
         written consent, seek, join in or consent to any change in any private
         covenant, zoning law or other public or private restriction, which
         change would limit the use of the Trust Property or any part thereof or
         reduce its fair market value.

                  2.11     ESTABLISHMENT AND MAINTENANCE OF THE DEED OF TRUST; 
                           FURTHER ASSURANCES.

                           (a) Trustor will establish and maintain this Deed of
         Trust, subject only to the Permitted Encumbrances and such other liens
         and security interests, if any, as may be expressly permitted herein,
         as a Deed of Trust and lien and security interest on the Trust Property
         and any other property intended to be encumbered and on all renewals
         and replacements of all such property. Trustor will perform all acts
         and execute all instruments necessary or required by Beneficiary in
         order to permit the immediate registration and/or recordation of this
         Deed of Trust at the appropriate office for the foregoing purposes in
         the county where the Premises are located. Trustor will furnish to
         Beneficiary from time to time such proof as Beneficiary may reasonably
         request with respect to Trustor's compliance with the foregoing.

                           (b) Trustor will pay all expenses incurred by Trustee
         and/or Beneficiary in connection with the preparation, completion,
         registration and/or recordation of this Deed of Trust or any other
         Document.

                                     - 14 -
<PAGE>   21

                           (c) If this Deed of Trust or any provision hereof
         shall be deemed invalidated in whole or in part by any present or
         future law or any decision of any court having jurisdiction, Trustor
         will execute and deliver such other and further instruments and do such
         things as in the sole opinion of Beneficiary will carry out the true
         intent and spirit of this Deed of Trust. From time to time, Trustor
         will execute and deliver such further documents and assurances as in
         the sole opinion of Beneficiary may be required to more effectively
         subject the Trust Property and any other property intended to be
         transferred or encumbered to or for the benefit of Trustee or
         Beneficiary as security for the Performance of the Obligations.

                           (d) Trustor, at its sole cost and expense, will
         appear in and prosecute or defend any action or proceeding that may
         affect the priority of this Deed of Trust or the security of
         Beneficiary hereunder, and will pay all costs and expenses (including
         the cost of searching title and attorneys' fees) incurred in such
         action or proceeding. Beneficiary may, at its option, appear in and
         defend any action or proceeding purporting to affect the priority of
         this Deed of Trust or the security hereof or the rights or powers of
         Trustee and/or Beneficiary. All amounts paid, suffered or incurred by
         Beneficiary in exercising the authority herein granted, including,
         without limitation, court costs, attorneys' fees and other expenses,
         with interest at the Note Rate (or at the Overdue Rate in the event
         such advance is necessary as a result of the occurrence of an Event of
         Default or an event which with notice, passage of time or both, would
         constitute an Event of Default (an "Incipient Default") ) from the date
         of advance until paid, shall, without notice or demand, immediately be
         due and payable by Trustor to Beneficiary and be secured by this Deed
         of Trust. The Note Rate means the rate of interest at which the unpaid
         principal balance of the Note accrues in the absence of an Event of
         Default.

                  2.12 RIGHT OF BENEFICIARY TO ACT. If there be commenced any
action or proceedings affecting the Trust Property or the title thereto, or if
Trustee or Beneficiary be made a party to any action or proceeding because of
its status hereunder, or if Trustor defaults in the Performance of any of its
Obligations, then Beneficiary, or Trustee upon written instruction from
Beneficiary (the legality thereof to be determined solely by Beneficiary),
without obligation to do so, may procure such abstracts or other evidence of
title as it deems necessary; may appear in any such action as Beneficiary deems
advisable; perform such Obligations and for such purposes may enter upon the
Trust Property; and shall become subrogated to the lien and rights of all
persons to whom payments have been made in performing the Obligations. For any
of such purposes, including court costs, attorneys' fees and expenses,
Beneficiary may advance such sums of money as it deems necessary. Such sums
advanced, with interest from the date of advance at the Note Rate (or the
Overdue Rate in the event such advance is necessary as a result of the
occurrence of an Event of Default or Incipient Default) until paid, shall,
without notice or demand, immediately be due from Trustor to Beneficiary and be
secured by this Deed of Trust. Beneficiary shall be the sole 

                                     - 15 -
<PAGE>   22

judge of the legality, validity and priority of any claim, lien, encumbrance,
tax, assessment and premium it discharges pursuant hereto and of the amount
necessary to be paid in satisfaction thereof. Any action taken by Beneficiary or
Trustee pursuant to this paragraph shall not waive Performance of any
Obligation, cure or waive any default by Trustor in the Performance of the
Obligations, or invalidate or affect any act done hereunder because of such a
default. The foregoing notwithstanding, Beneficiary agrees to use reasonable
efforts to give Trustor five (5) days prior written notice as to the taking of
any action pursuant to this Section 2.12 unless (i) the delay incurred in taking
such action, pending the giving of such notice, would further jeopardize the
Trust Property or the lien of this Deed of Trust or (ii) Beneficiary takes such
action as a result of the occurrence of an Event of Default.

                  2.13 RISK OF LOSS; INDEMNITY. As between Trustor and
Beneficiary, Trustor assumes the entire risk of loss of the Trust Property from
any cause whatsoever and further assumes all risks and liability for the Trust
Property, and the use and operation thereof, and for injuries or deaths of
persons and damage to property, however arising from or incident to such use or
operation, whether such injury or death to persons be of agents or employees of
Trustor or of third parties and such damage to property be of Trustor or of
others. TRUSTOR WILL SAVE AND HOLD HARMLESS and defend Trustee and Beneficiary,
their successors, assignees and shareholders (including corporate shareholders)
and the directors, officers, employees, agents and servants of the foregoing,
from any and all losses, costs, expenses (including court costs and attorneys'
fees), damages, demands, claims, suits, proceedings (whether civil or criminal),
orders and judgments, penalties, fines and other sanctions (collectively,
"Damages") arising or incurred because of or incident to (a) the Trust Property
or the actual or alleged management, control, condition, destruction,
disposition, use or operation thereof; (b) any brokerage fees arising from or in
connection with the making of the Loan, (c) any incorrectness in the assurance
which the Trustor hereby gives: (i) that there are no present violations on the
Premises of any enforceable covenants, conditions, or restrictions; (ii) that,
except to the extent shown as Permitted Encumbrances, there are no encroachments
of buildings, structures, or improvements located on the Premises onto adjoining
lands, nor any encroachments onto said land of buildings, structures, or
improvements located on adjoining lands; (d)(i) any future violations on the
Premises of any covenants, conditions, or restrictions occurring prior to
acquisition of title to said estate or interest by the Beneficiary, provided
such violations result in loss or impairment of the lien of this Deed of Trust,
or result in loss or impairment of the title to said estate or interest if the
Beneficiary shall acquire such title in satisfaction of the indebtedness secured
by this Deed of Trust; (ii) unmarketability of the title to said estate or
interest by reason of any violations on the Premises, occurring prior to
acquisition of title to the Premises by the Beneficiary, of any covenants,
conditions or restrictions; (e) any interest or claims not shown by the public
records which could be ascertained by an inspection of the Premises; (f)
easements or claims of easements not shown by public records; and; (g)
discrepancies, conflicts and boundary lines, shortage in area, encroachments and
any facts which a correct survey and inspection of the Premises would disclose,
and which are not shown by the public records, unless in any of the foregoing
cases, the Damages arise from the gross negligence or willful misconduct of 

                                     - 16 -
<PAGE>   23

the person or entity seeking indemnification. On written request by a person or
other entity covered by the above agreement of indemnity, Trustor will
undertake, at its own cost and expense, on behalf of such indemnitee, using
counsel satisfactory to the indemnitee, the defense of any legal action or
proceeding to which such indemnitee shall be a party, provided that such action
or proceeding shall result from, or grow or arise out of any of the events set
forth in this paragraph.

                  2.14 NON-DEFAULT STATUS. Except as disclosed in the exhibit
delivered pursuant to paragraph 8.3(a) of the Loan Agreement, Trustor is not in
default of any payment on account of indebtedness for borrowed money or in
violation of or default under any material term of any agreement, instrument,
undertaking, or order, decree or judgment of any court, arbitration or
governmental authority to which it is a party or by which it or its assets are
bound. Trustor is fully familiar with all of the covenants, terms and conditions
of the Loan Documents and is not in default thereunder. No act or event has
occurred which after notice and/or lapse of time would constitute such a default
or an Event of Default.

                  2.15 APPROVALS AND REPORTS. Trustor has obtained or has caused
to be obtained all necessary consents, licenses, permits, franchises, approvals
and exemption certificates and has made or caused to be made all registrations
or declarations with each government or any agencies or departments thereof that
are required in connection with the Trust Property and the use thereof as
contemplated herein; and the same are in full force and effect. All such filings
and reports delivered to any governmental authority have been truthfully
completed and duly filed; and true and complete copies of such applications,
consents, licenses, permits, franchises, exemption certificates, approvals,
filings and reports have been delivered to Beneficiary. Trustor undertakes to
continue in full force and effect all of the foregoing and will obtain any new
or additional governmental approvals as become necessary for the Performance of
the Obligations.

                  2.16 LITIGATION. There is no action, litigation or other
proceeding pending or threatened before any arbitration tribunal, court,
governmental agency or administrative body against Trustor which, if adversely
determined, would adversely affect Beneficiary's ability to realize upon this
Deed of Trust or the other security for the Performance of the Obligations or
would materially adversely affect the business or financial condition of
Trustor, or impair the ability of Trustor to complete Performance of the
Obligations; or which questions the validity of any of the Loan Documents.

                  2.17 FULL DISCLOSURE. Neither this Deed of Trust nor any other
Document, certificate, financial statement or written material furnished to
Beneficiary by or on behalf of Trustor in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. To the extent any of such documents is a contract,
such document constitutes the legal, valid and binding obligation of the parties
thereto in accordance with its terms (subject, however, to bankruptcy,
insolvency, 

                                     - 17 -
<PAGE>   24

reorganization, arrangement, moratorium, or other similar laws relating to or
affecting the rights of creditors generally and general principles of equity),
no party thereto is in material default thereunder, and Trustor knows of no
reason why any party thereto has a right to terminate the contract prematurely
for failure of a stated condition or otherwise. There is no fact known to
Trustor which materially adversely affects or in the future may (so far as
Trustor can now foresee) materially adversely affect the business or financial
condition of Trustor which has not been set forth specifically in detail in the
Loan Documents or the certificates, financial statements or other written
materials furnished to Beneficiary in connection with the transactions
contemplated hereby.

                  2.18     RESERVED.

                  2.19     ENVIRONMENTAL REPRESENTATIONS.

                           (a) Except as may be otherwise expressly stated in
         the Disclosure Schedule (as defined in the Environmental Certificate),
         Trustor hereby represents, covenants and warrants to Beneficiary and
         its successors and assigns, as follows:

                                    (i) The location and construction,
                  occupancy, operation and use of all improvements now and
                  hereafter attached to or placed, erected, constructed or
                  developed as a portion of the Trust Property (the
                  "Improvements") do not and will not violate any applicable
                  laws, statute, ordinance, rule, regulation, policy, order or
                  determination of any federal, state, local or other
                  governmental authority ("Governmental Authority") or any board
                  of fire underwriters (or other body exercising similar
                  functions), or any restrictive covenant or deed restriction
                  affecting any portion of the Trust Property, including without
                  limitation, any applicable zoning ordinances and building
                  codes, flood disaster laws and health and environmental laws,
                  rules and regulations (hereinafter collectively called the
                  "Applicable Laws").

                                    (ii) Without in any way limiting the
                  generality of (i) above, neither the Trust Property nor
                  Trustor are the subject of any pending or, to the best of
                  Trustor's knowledge, threatened investigation or inquiry by
                  any Governmental Authority, or are subject to any remedial
                  obligations under any Applicable Laws pertaining to health or
                  the environment ("Applicable Environmental Laws"), including,
                  without limitation, the Comprehensive Environmental Response,
                  Compensation, and Liability Act of 1980, as amended
                  ("CERCLA"), the Resource Conservation and Recovery Act of
                  1987, as amended ("RCRA"), and the Toxic Substances Control
                  Act, The Clean Air Act, and The Clean Water Act, and
                  applicable state laws, and this representation and warranty
                  would continue to be true and correct following disclosure to
                  any applicable Governmental Authority of all relevant facts,

                                     - 18 -
<PAGE>   25

                  conditions and circumstances pertaining to the Trust Property
                  and/or Trustor and which are known to Trustor.

                                    (iii) Trustor is not required to obtain any
                  permits, licenses or authorizations to construct, occupy,
                  operate or use any portion of the Trust Property by reason of
                  any Applicable Environmental Laws, or if any such permits,
                  licenses or authorizations are required by any Applicable
                  Environmental Laws, such permits, licenses or authorizations
                  have, as of the date hereof, been obtained.

                                    (iv) Trustor has taken all steps necessary
                  to determine and has determined that, to the best of its
                  knowledge, no hazardous substances, solid wastes, or other
                  substances known or suspected to pose a threat to health or
                  the environment ("Hazards") have been disposed of or otherwise
                  released on or to the Trust Property or exist on or within any
                  portion of the Trust Property in violation of any Applicable
                  Environmental Law. No prior use, either by Trustor or, to the
                  best of Trustor's knowledge, after diligent inquiry, the prior
                  owners of the Trust Property, has occurred which violates any
                  Applicable Environmental Laws. The use which Trustor makes and
                  intends to make of the Trust Property will not result in the
                  disposal or release of any hazardous substance, solid waste or
                  Hazards on, in or to the Trust Property in violation of any
                  Applicable Environmental Law. The terms "hazardous substance"
                  and "release" shall each have the meanings specified in
                  CERCLA, including, without limitation, petroleum products and
                  petroleum wastes of any kind, and the terms "solid waste" and
                  "disposal" (or "disposed") shall each have the meanings
                  specified in RCRA; provided, however, that in the event either
                  that CERCLA or RCRA is amended so as to broaden the meaning of
                  any term defined thereby, such broader meaning shall apply
                  subsequent to the effective date of such amendment; and
                  provided further that, to the extent that the laws of the
                  State of Colorado establish a meaning for "hazardous
                  substance", "release", "solid waste", or "disposal" which is
                  broader than that specified in either CERCLA or RCRA, such
                  broader definition shall apply.

                                    (v) To the best of Trustor's knowledge and
                  belief, there are no on-site or off-site locations where
                  hazardous substances, including such substances as asbestos
                  and Polychlorinated Biphenyls, solid wastes, or Hazards from
                  the Trust Property have been stored, treated, recycled or
                  disposed of.

                                    (vi) To the best of Trustor's knowledge and
                  belief, there has been no litigation brought or threatened nor
                  any settlement reached by or with any parties alleging the
                  presence, disposal, release, or threatened release, of any
                  hazardous substance, solid wastes or Hazards from the use or
                  operation of the Trust Property.

                                     - 19 -
<PAGE>   26

                                    (vii) To the best of Trustor's knowledge and
                  belief after diligent investigation and inquiry, the Trust
                  Property is not on any federal or state "Superfund" list, and
                  not on EPA's Comprehensive Response, Compensation & Liability
                  System (CERCLIS) list or on any state environmental agency
                  list of sites under consideration for CERCLIS, nor subject to
                  any environmentally related liens.

                                    (viii) Neither Trustor nor, to the best of
                  Trustor's knowledge and belief, any tenant of any portion of
                  the Trust Property, has received any notice from any
                  Governmental Authority with respect to any violation of any
                  Applicable Laws.

                                    (ix) Trustor shall not cause any violation
                  of any Applicable Environmental Laws, nor permit any tenant of
                  any portion of the Trust Property to cause such a violation,
                  nor permit any environmental liens to be placed on any portion
                  of the Trust Property.

                  All of the foregoing representations and warranties, as
supplemented from time to time, shall be continuing and shall be true and
correct for the period from the date hereof through and as of the date of the
full release and reconveyance of this Deed of Trust, with the same force and
effect as if made each day throughout such period.

                           (b) Trustor shall conduct and complete all
         investigations, studies, sampling, and testing and all remedial,
         removal, and other actions necessary to clean up and remove hazardous
         substances, solid wastes or Hazards on, in, from or affecting any
         portion of the Trust Property (i) in accordance with all Applicable
         Environmental Laws, (ii) to the reasonable satisfaction of Beneficiary
         and (iii) in accordance with the orders and directives of all
         Governmental Authorities. Trustor shall (i) give notice to Beneficiary
         immediately upon (A) Trustor's receipt of any notice from any
         Governmental Authority of a violation of any Applicable Laws or
         acquiring knowledge of the receipt of any such notice by any tenant of
         any portion of the Trust Property and (B) acquiring knowledge of the
         presence of any hazardous substances, solid wastes or Hazards (other
         than those described in the Disclosure Schedule) on the Trust Property
         in a condition that is resulting or could reasonably be expected to
         result in any adverse environmental impact in violation of Applicable
         Environmental Laws, with a full description thereof; (ii) promptly
         comply with all Applicable Environmental Laws requiring the notice,
         removal, treatment, or disposal of such hazardous substances, solid
         wastes or Hazards and provide Beneficiary with satisfactory evidence of
         such compliance; and (iii) provide Beneficiary, within thirty (30) days
         after demand by Beneficiary, with a bond, letter of credit, or similar
         financial assurance evidencing to Beneficiary's satisfaction that
         sufficient funds are available to pay the cost of removing, treating,
         and disposing of such hazardous 

                                     - 20 -
<PAGE>   27

         substances, solid wastes or Hazards and discharging any assessments
         that may be established on the Trust Property as a result thereof.

                           (c) If Beneficiary shall ever have reason to believe
         that there are hazardous substances, solid wastes or Hazards (other
         than those described in the Disclosure Schedule) affecting any of the
         Trust Property, Beneficiary (by its officers, employees and agents) at
         any time and from time to time, either prior to or after the occurrence
         of an Event of Default under this Deed of Trust, may contract for the
         services of persons (the "Site Reviewers") to perform environmental
         site assessments ("Site Assessments") on the Trust Property for the
         purpose of determining whether there exists on the Trust Property any
         environmental condition that could result in any liability, cost, or
         expense to the owner, occupier, or operator of such Trust Property
         arising under any Applicable Environmental Laws. The Site Assessments
         may be performed at any time or times, upon reasonable notice, and
         under reasonable conditions established by Trustor that do not impede
         the performance of the Site Assessments. The Site Reviewers are hereby
         authorized to enter upon the Trust Property for such purposes. The Site
         Reviewers are further authorized to perform both above and below the
         ground testing for environmental damage or the presence of hazardous
         substances, solid wastes and Hazards on the Trust Property and such
         other tests on the Trust Property as may be necessary to conduct the
         Site Assessments in the reasonable opinion of the Site Reviewers.
         Trustor will supply to the Site Reviewers such historical and
         operational information regarding the Trust Property as may be
         reasonably requested by the Site Reviewers to facilitate the Site
         Assessment and will make available for meetings with the Site Reviewers
         appropriate personnel having knowledge of such matters, if any. On
         request, Beneficiary shall make the results of such Site Assessments
         fully available to Trustor, which (prior to an Event of Default under
         this Deed of Trust) may, at its election, participate under reasonable
         procedures in the direction of such Site Assessments and the
         description of tasks of the Site Reviewers. The cost of performing such
         Site Assessments shall be paid by Trustor upon demand of Beneficiary.

                           (d) Without limiting the generality of any other
         provision of this Deed of Trust, Trustor hereby DEFENDS, INDEMNIFIES
         AND HOLDS HARMLESS Beneficiary, its employees, agents, shareholders,
         officers, directors, and assigns, or any person who acquires title at a
         foreclosure sale, private trustee's sale, or deed in lieu of such
         proceedings (collectively, the "Indemnified Parties"), from and against
         any claims, demands, obligations, penalties, fines, suits, liabilities,
         settlements, damages, losses, costs or expenses (including, without
         limitation, attorney and consultant fees and expenses, investigation
         and laboratory fees and expenses, cleanup costs, and court costs and
         other litigation expenses) of whatever kind or nature, known or
         unknown, contingent or otherwise, arising out of or in any way related
         to (i) the presence, disposal, release, threatened release, removal or
         production of any hazardous substances, solid wastes or Hazards which
         are on, in, 

                                     - 21 -
<PAGE>   28

         from or affecting any portion of the Trust Property; (ii) any personal
         injury (including wrongful death) or Trust Property damage (real or
         personal) arising out of or related to such hazardous substances, solid
         wastes or Hazards; (iii) any lawsuit brought or threatened, settlement
         reached, or order by Governmental Authority relating to such hazardous
         substances, solid wastes or Hazards; and/or (iv) any violation of any
         Applicable Laws or demands of Governmental Authorities, or violation of
         any policies or requirements of Beneficiary relating to Applicable Laws
         or demands of Governmental Authorities, which are based upon or in any
         way related to such hazardous substances, solid wastes or Hazards,
         regardless of whether or not any of the conditions described under any
         of the foregoing subsections (i) through (iv), inclusive, was or is
         caused by or within the control of Trustor. Trustor agrees, upon notice
         and request by an Indemnified Party, to contest and defend any demand,
         claim, suit, proceeding or action with respect to which Trustor has
         hereinabove indemnified and held the Indemnified Parties harmless and
         to bear all costs and expenses of such contest and defense. Trustor
         further agrees to reimburse any Indemnified Party upon demand for any
         costs or expenses incurred by any Indemnified Party in connection with
         any matters with respect to which Trustor has hereinabove indemnified
         and held the Indemnified Parties harmless. Beneficiary agrees to use
         reasonable efforts to give Trustor prior written notice as to the
         incurring of such costs or expenses for which Beneficiary would seek
         reimbursement unless the delay in incurring such costs and expenses,
         pending the giving of such notice, would further jeopardize the Trust
         Property or the lien of this Deed of Trust. The provisions of this
         paragraph shall be in addition to any other obligations and liabilities
         Trustor may have to Beneficiary at common law, in equity or under
         documentation executed in connection with the Loan, and shall survive
         the closing, funding and payment in full of the Loan, as well as any
         foreclosure of the Loan or granting of any deed in lieu of foreclosure
         and the recordation of any release of the lien of this Deed of Trust.

                           (e) Beneficiary shall have the right, but not the
         obligation, without in any way limiting Beneficiary's other rights and
         remedies under this Deed of Trust, to enter onto the Trust Property or
         to take such other actions as it deems necessary or advisable to clean
         up, remove, resolve, or minimize the impact of, or otherwise deal with
         (collectively, "Remediate" or as a noun, "Remediation"), any hazardous
         substances, solid wastes or Hazards on or affecting the Trust Property
         following receipt of any notice from any person or entity asserting the
         existence of any hazardous substances, solid wastes or Hazards
         pertaining to the Trust Property or any part thereof that, if true,
         could result in an order, notice, suit, imposition of a lien on the
         Trust Property, or other action or that, in Beneficiary's sole opinion,
         could jeopardize Beneficiary's security under this Deed of Trust. All
         reasonable costs and expenses paid or incurred by Beneficiary in the
         exercise of any such rights shall be secured by this Deed of Trust and
         shall be payable by Trustor upon demand. The foregoing notwithstanding,
         prior to Beneficiary incurring any costs or expenses described in this
         subparagraph 2.19(e), Beneficiary shall give Trustor not less than


                                     - 22 -
<PAGE>   29

         fifteen (15) days prior written notice (unless public health or safety
         reasons dictate a shorter notice period, in which case the notice shall
         state the shortened period which it provides) of its intent to incur
         any such expenses, and shall not incur any such expenses if Trustor
         responds within the notice period that it will perform any legal
         obligations it has incurred under any Applicable Environmental Law to
         Remediate hazardous substances, solid wastes and Hazards on or
         affecting the Trust Property and thereafter promptly commence to do so
         and diligently prosecute such Remediation to a conclusion as required
         hereunder and by Applicable Environmental Laws.

                           (f) Trustor acknowledges that Beneficiary has and
         will rely upon the representations, covenants, warranties and
         agreements set forth in closing and funding the Loan and the making of
         the foregoing representations, warranties and covenants is an essential
         condition but for which Beneficiary would not close or fund the Loan.
         The representations, covenants, warranties and agreements herein
         contained shall be binding upon Trustor, its successors, assigns and
         legal representatives and shall inure to the benefit of Beneficiary,
         its successors, assigns and legal representatives.

                  2.20     COMPLIANCE WITH AMERICANS WITH DISABILITIES 
                           ACT OF 1990.

                           (a) Trustor hereby represents, covenants and warrants
         to Beneficiary, its successors and assigns, as follows:

                                    (i) Trustor has made and will make all
                  modifications and/or provided and will provide all
                  accommodations which may be required to be made or provided by
                  Trustor pursuant to 42 U.S.C. ss. 12101, et seq., and all
                  applicable rules and regulations promulgated thereunder (the
                  "ADA") in order to accommodate the needs and requirements of
                  disabled persons, including, without limitation, disabled
                  employees of Trustor and shall otherwise comply or cause
                  compliance with all provisions of the ADA.

                                    (ii) Trustor has received no notice or
                  complaint regarding any noncompliance with the ADA of the
                  Trust Property or of Trustor's employment practices and, to
                  the best of Trustor's knowledge, there has been no threatened
                  litigation alleging any such noncompliance by Trustor or the
                  Trust Property.

                           (b) Trustor shall promptly provide Beneficiary with
         copies of all notices or claims which may be received by Trustor and
         involving claims made by any individual, entity or governmental agency
         as to any alleged noncompliance of the Trust Property or Trustor's
         employment practices with the requirements of the ADA.


                                     - 23 -
<PAGE>   30
                           (c) Trustor shall observe and comply and shall ensure
         that all and other occupants of the Trust Property observe and comply
         in all material respects with all obligations and requirements of the
         ADA as it applies to the Trust Property, which shall include, without
         limitation, installing or constructing all improvements or alterations
         which may be necessary to cause the Trust Property to be accessible to
         all persons as and to the extent required by the ADA.

                           (d) Without limiting the generality of any other
         provision of this Deed of Trust, Trustor shall indemnify, defend and
         hold harmless Beneficiary, its successors and assigns, and the
         directors, officers, employees, agents and servants of the foregoing,
         from any and all losses, costs, expenses (including court costs and
         attorneys' fees), damages, demands, claims, suits, proceedings, orders
         and judgments, penalties, fines and other sanctions arising from any
         claim that the Trust Property or occupant thereof is not in compliance
         with the requirements of the ADA or that Trustor has otherwise
         discriminated against any disabled person in violation of the ADA.

                                   ARTICLE III

                     ASSIGNMENT OF RENTS AND SALES PROCEEDS;
                               SECURITY AGREEMENT

                  3.1      ASSIGNMENT OF RENTS.

                           (a) Trustor hereby absolutely assigns and transfers
         to Beneficiary (i) all the right, title and interest of Trustor in and
         to all existing and future lease agreements, occupancy agreements and
         use agreements relating to the Trust Property or any part thereof
         (whether written or oral and whether for a definite term or month to
         month) (collectively "Leases"), (ii) all right and power of Trustor to
         amend, cancel or terminate any Leases and (iii) all Trustor's income,
         rents, royalties, revenues, issues, profits, fees, and other proceeds
         (including, without limitation, room sales) from the Trust Property
         (collectively "Rents"). Rents, for purposes of this Deed of Trust,
         shall not include Purchaser Notes arising from the sale of Lots to the
         extent that such Lots have been released from the lien of this Deed of
         Trust. This assignment shall extend to and cover any and all extensions
         and renewals of Leases and to all security for the obligations of the
         lessees or occupants thereunder and any and all guaranties or
         indemnities of or similar arrangements with respect to any such
         obligations. This assignment is given to facilitate Performance of the
         Obligations. In pursuance of this assignment, and not in lieu hereof,
         Trustor will, to the extent this assignment does not extend to future
         Leases and otherwise when requested by Beneficiary, execute and deliver
         to Beneficiary separate assignments of the Leases, the terms of such
         assignments being incorporated herein by reference.



                                     - 24 -
<PAGE>   31

                           (b) Trustor hereby authorizes and directs the lessees
         and tenants of the Trust Property that upon written notice from
         Beneficiary, all payments required under the Leases, or in any way
         respecting same, including payments past due, shall be made directly to
         the Beneficiary as they become due. Trustor hereby relieves such
         lessees and tenants from any liability to Trustor by reason of such
         payments being made to Beneficiary. Nevertheless, until Beneficiary
         notifies in writing Trustor or such lessees and tenants that such
         payments are to be made to Beneficiary, Trustor shall be entitled to
         collect all Rents. Beneficiary is hereby authorized to give such
         notification upon the occurrence of an Event of Default and at any time
         thereafter while such Event of Default is continuing.

                           (c) All Rents collected by Trustor shall be applied
         in the following manner:

                           FIRST, to the payment of all taxes and lien
         assessments levied and due and payable against the Trust Property,
         where provision for paying such is not otherwise made to the
         satisfaction of Beneficiary;

                           SECOND, to the payment of ground rents (if any) due 
         and payable with respect to the Trust Property;

                           THIRD, to the payment of the Obligations due and 
         owing to Beneficiary;

                           FOURTH, to the payment of current operating costs and
         expenses (including repairs, maintenance and necessary acquisitions of
         property and expenditures for capital improvements) arising in
         connection with the Trust Property; and

                           FIFTH, to Trustor or its designee.

                           All Rents collected by Beneficiary may be applied to
         the items above listed in any manner that Beneficiary deems advisable
         and without regard to the aforestated priorities. Receipt by
         Beneficiary of the Rents shall not constitute a waiver of any right
         that Beneficiary may enjoy under this Deed of Trust or under applicable
         law; nor shall the receipt and application thereof cure any default
         hereunder, or invalidate or affect any act done in connection with such
         default, including without limitation, any foreclosure proceeding or
         any foreclosure sale authorized by this Deed of Trust and applicable
         law. Beneficiary does not assume any obligation of the lessor under any
         of the Leases, and no liability shall attach to Beneficiary for failure
         or inability to collect any Rents. Trustor will (i) timely fulfill or
         perform each and every term, covenant and provision of each Lease to be
         fulfilled or performed by the lessor thereunder; (ii) give prompt
         notice to Beneficiary of each 

                                     - 25 -
<PAGE>   32

         notice under the Leases received by Trustor, together with a complete
         copy of such notice; and (iii) enforce, short of termination thereof,
         the Performance of each and every term, covenant and provision of each
         Lease. Trustor, without first obtaining the prior written consent of
         Beneficiary, will not: accept Rent payments for more than one month in
         advance; cancel, modify, renew, accept the surrender of, or consent to
         the subordination of, any Lease; or in any way release or impair
         Beneficiary's right to proceed against (A) any security for the payment
         and performance of the obligations of the lessees under the Leases or
         of any guarantors or sureties of any such obligations, or (B) any
         person primarily or secondarily liable for the payment and performance
         of such obligations.

                           (d) This assignment is not a delegation of Trustor's
         duties under the Leases and does not operate to make Beneficiary a
         mortgagee in possession or place upon Beneficiary responsibility for
         the control, care, management or repair of the Trust Property or for
         the performance of any of the terms and conditions of any of the
         assigned Leases nor does this assignment operate to make Beneficiary
         responsible or liable for (i) any waste committed on the Trust Property
         by the tenants or any other person, (ii) any dangerous or defective
         condition of the Trust Property or (iii) any negligence in the
         management, upkeep, repair or control of the Trust Property resulting
         in loss, injury or death to any tenant, invitee, licensee, employee or
         stranger. Without limiting the generality of any other provision of
         this Deed of Trust, TRUSTOR SHALL AND DOES HEREBY AGREE TO INDEMNIFY
         AND TO HOLD BENEFICIARY HARMLESS from and against any and all
         liability, loss or damage which may or might be incurred by reason of
         this assignment unless caused by Beneficiary's gross negligence or
         willful misconduct. Should Beneficiary incur any liability by reason of
         this assignment or in defense of any claim or demand for loss or damage
         as provided above, the amount thereof and all related costs and
         expenses, including, without limitation, attorneys' fees, together with
         interest thereon at the Overdue Rate from the date paid by Beneficiary
         until repaid by Trustor, shall be secured hereby and Trustor shall
         reimburse Beneficiary therefor immediately upon demand.

                           (e) Trustor represents and warrants that: (i) Trustor
         is the owner of the landlord's interest in the Leases, if any, with
         full power and authority to assign the same together with the Rents;
         (ii) there are no outstanding assignments or pledges of the Leases or
         Rents; (iii) Trustor has not anticipated the payment of any Rents for
         more than one (1) month in advance; and (iv) there are no defaults now
         existing under any of the Leases and there exists no state of facts
         which, with the giving of notice or lapse of time or both, would
         constitute a default under any of the Leases.



                                     - 26 -
<PAGE>   33

                  3.2      SECURITY AGREEMENT.

                           (a) To the extent any of the Trust Property is
         property covered by the Uniform Commercial Code ("UCC Property"), this
         Deed of Trust constitutes a security agreement and Trustor hereby
         grants to Beneficiary, as secured party, a security interest in the
         Trust Property and the proceeds thereof in favor of Beneficiary for the
         purpose of securing Performance of the Obligations. This security
         interest shall be self-operative with respect to the UCC Property, but
         Trustor will execute and deliver on demand such security agreements,
         financing statements and other instruments as Beneficiary may request
         in order to impose and/or perfect the lien and security interest hereof
         more specifically upon any of the UCC Property. Should the lien and/or
         security interest of this Deed of Trust on any UCC Property be subject
         to a prior security agreement covering such UCC Property, then upon the
         occurrence of an Event of Default, all the right, title and interest of
         Trustor in and to any and all deposits made in connection with the
         transaction whereby such prior security agreement was made are hereby
         assigned to Beneficiary, together with the benefit of any payments now
         or hereafter made in connection with such transactions.

                           (b) The UCC Property is used primarily for business
         (other than farm) purposes.

                           (c) Trustor shall replace or cause to be replaced
         with property of equal or greater value all portions or items of UCC
         Property which are consumed or worn out in ordinary usage. Trustor may
         sell or dispose of only that part of the UCC Property that it is
         obliged to replace and has replaced; and, unless Beneficiary then
         agrees otherwise in writing, all proceeds from any such sale or
         disposition in excess of the amount expended for such replacements
         shall promptly be paid over by Trustor to be applied against the
         indebtedness secured hereby, whether or not such indebtedness is then
         due and payable. The foregoing notwithstanding, Trustor may sell or
         dispose and not replace UCC Property which in the aggregate, after
         taking into account all other items of UCC Property that have been sold
         or disposed and not replaced, is not of a material value and is not
         material to or necessary for the continued operation of the Premises
         for the purposes for which it is intended; provided, however, that
         unless Beneficiary then agrees otherwise in writing, all proceeds from
         such sale or disposition shall be promptly paid over by Trustor to be
         applied against the indebtedness secured hereby, whether or not such
         indebtedness is then due and payable.

                           (d) Trustor warrants that its chief executive office
         and principal place of business is as set forth at the beginning of
         this Deed of Trust. Trustor further warrants that the UCC Property is
         located at the Premises. Trustor will immediately notify Beneficiary in
         writing of any change in its principal place of business/chief

                                     - 27 -
<PAGE>   34

         executive office/residence, as the case may be, and of any change in
         location of the UCC Property not removed or replaced as permitted or
         required by the terms of this Deed of Trust.

                           (e) All covenants of Trustor contained in this Deed
         of Trust, whether or not expressly referred to herein, shall apply to
         the UCC Property to the extent applicable to the UCC Property. The
         covenants and warranties of Trustor and the rights and remedies of
         Beneficiary contained in this paragraph are in addition to, and not in
         limitation of, those contained in the other provisions of the Deed of
         Trust.

                           (f) This Deed of Trust shall be deemed a financing
         statement filed as a fixture filing; provided the filing of any other
         financing statement relating to the UCC Property shall not be construed
         to diminish any of Beneficiary's rights or priorities hereunder.

                  3.3 SERVICING AGENT. Beneficiary may, at its option, require
that so long as Beneficiary is entitled to collect such payments, all payments
on the Leases be collected by a servicing agent according to the terms of a
servicing agreement in form and substance satisfactory to Beneficiary. Trustor
will promptly pay all costs in connection therewith.

                  3.4 POWER OF ATTORNEY. Upon and during the continuance of an
Event of Default, Beneficiary shall have the right, but not the obligation: (a)
to demand and receive payment and performance and to enforce any and all of
Trustor's rights with respect to the Leases and the personal property covered
hereby; (b) to exercise any right and to perform any obligation of Trustor under
or in connection with the Project Documents, the Leases and any other instrument
covered hereby, at Trustor's expense; (c) with respect to rights to payment and
performance assigned hereunder, while an Event of Default exists, to make
extension agreements, release persons liable thereon or securities for payment
or other performance, and settle and compromise disputes in connection with
those rights; (d) while an Event of Default exists, to modify, cancel, or accept
the surrender of the terms of any Lease; (e) to take any action Beneficiary may
deem necessary or desirable to perfect the assignments and the security interest
made and granted to Beneficiary hereunder; and (f) to perform all these acts in
the name of Trustor or in the name of Beneficiary with the same force and effect
as if performed by Beneficiary in the absence of this provision. For all of the
foregoing purposes, Trustor irrevocably appoints Beneficiary, until Performance
of the Obligations, as its attorney-in-fact. All such actions may be taken
without notice to Trustor and without being called to account therefor by
Trustor.

                  3.5 RELATIONSHIP. Nothing in this instrument shall be
construed to obligate Beneficiary to discharge or perform the duties of Trustor
under the Project Documents, the Leases or any other instrument or of a landlord
to a tenant or to impose any liability as a result of the exercise of the right
to collect rents or proceeds under a Lease; nor shall Beneficiary be responsible
or liable in any manner with respect to the Trust Property or the 

                                     - 28 -
<PAGE>   35

use, occupancy or enjoyment of all or any part thereof. Nothing herein shall be
construed as establishing a partnership or joint venture between Trustor and
Beneficiary.

                                   ARTICLE IV
                              DEFAULTS AND REMEDIES

                  4.1 EVENTS OF DEFAULT AND REMEDIES. The following events and
occurrences shall constitute an event of default ("Event of Default") under this
Deed of Trust:

                           (a) other than a default or violation referred to
         elsewhere in this Paragraph 4.1, an "Event of Default" as defined in
         the Loan Agreement occurs, or an act or event occurs under the Loan
         Agreement, whether or not denominated as an "Event of Default", which
         expressly entitles Beneficiary to accelerate Performance of any of the
         Obligations and/or exercise its remedies;

                           (b) there is a default in the Performance of any of
         the terms of paragraphs 2.3 or 2.5(a) hereof or Trustor knowingly
         violates or suffers or permits the violation of any of the warranties
         or conditions of the policies of insurance required under paragraph
         2.3;

                           (c) any party holding a mortgagee's or beneficiary's
         interest under a mortgage or deed of trust or any other lien or
         security interest on any part of the Trust Property commences
         foreclosure or sale thereof; or

                           (d) Trustor vacates or abandons the Trust Property.

                  4.2 REMEDIES. At any time after an Event of Default has
occurred, to the extent not prohibited by the applicable law:

                           (a) Beneficiary may without further demand, protest
         or notice of any kind to Trustor, declare all indebtedness secured
         hereby to be due and payable immediately, and upon such declaration the
         same shall be immediately due and payable, together with applicable
         premiums, and collectible by an action at law; and/or

                           (b) Beneficiary may commence proceedings for the
         complete or partial foreclosure of this Deed of Trust by commencing an
         action to foreclose this Deed of Trust as a mortgage and/or deed of
         trust and/or cause Trustee to exercise the power of sale herein
         granted; and/or

                           (c) Trustee and/or Beneficiary may without regard to
         the adequacy of any security for the Performance of the Obligations,
         personally, or by any of its and/or their agents or employees, or by a
         receiver appointed by a court of competent 

                                     - 29 -
<PAGE>   36

         jurisdiction, enter into and upon all or any part of the Trust Property
         and may exclude Trustor, its agents and servants therefrom; and having
         and holding the same, may in its and/or their own name(s) or the name
         of Trustor, as it/they deems best, control, lease, manage and operate
         the Trust Property, conduct the business thereof, and exercise all
         rights and powers of Trustor with respect thereto, including, without
         limitation, the Leases, either personally or by its agents, employees
         or receivers; and upon every such entry, Trustee and/or Beneficiary at
         the expense of Trustor, from time to time, either by purchase, repair
         or construction, may maintain, restore and insure the Trust Property;
         and likewise, from time to time, at the expense of Trustor, Trustee
         and/or Beneficiary may make all necessary or proper repairs, renewals
         and replacements and such useful alterations, additions, betterments
         and improvements thereto and thereon as to it may seem advisable; and
         Trustee and/or Beneficiary shall be entitled to collect and receive all
         Rents and to apply them in the manner Beneficiary is entitled to apply
         them pursuant to paragraph 3.1 hereof; and/or

                           (d) Beneficiary shall be entitled, as a matter of
         right, to the appointment of a receiver of the Trust Property and the
         court may appoint a receiver, either before or after judgment, without
         notice and without regard to the solvency or insolvency of Trustor or
         any Guarantor (as defined in the Loan Agreement) at the time of the
         application for such receiver and without regard to the then value of
         the Trust Property or any other security held for Performance of the
         Obligations; and such receiver shall have full power and authority to
         collect the Rents and all other powers necessary or incidental for the
         protection, possession, control, management and operation of the Trust
         Property, at the expense of the Trust Property and of Trustor, to
         maintain, restore and insure the Trust Property, and to pay all taxes,
         assessments and other charges arising in connection therewith; and/or

                           (e) Trustee and/or Beneficiary may take such steps to
         protect and enforce its rights whether by action, suit or proceeding in
         equity or at law for the specific performance of any covenant,
         condition or agreement in this Deed of Trust or any of the other Loan
         Documents, or in aid of the execution of any power herein expressly or
         impliedly granted, or for any foreclosure hereunder or for the
         enforcement of any other appropriate legal or equitable remedy, or
         otherwise as Beneficiary shall elect; and/or

                           (f) Trustee and/or Beneficiary may take possession of
         the personal property covered hereby and may enter and remain upon the
         Trust Property to protect the personal property; and upon written
         notice from Trustee and/or Beneficiary, Trustor will assemble the
         personal property and make it available to Beneficiary at the Trust
         Property or at any other place designated in the notice, which shall be
         reasonably convenient to both parties; and/or

                                     - 30 -
<PAGE>   37

                           (g) all of the Trust Property (both realty and
         personalty) is encumbered as one unit, and all the Trust Property, at
         Beneficiary's option, may be foreclosed or sold in the same proceeding
         or in separate proceedings; and all of the Trust Property (both realty
         and personalty) may, at Beneficiary's option, be sold as such in one
         unit as a going business; and/or

                           (h) Beneficiary may exercise the "declarant's,"
         "developer's" and "owner's" rights under the Project Documents (it
         being agreed and understood that such right is reserved to the Trustor
         other than upon the occurrence of and during the continuance of an
         Event of Default); and/or

                           (i) Trustee and/or Beneficiary may assert such other
         rights and remedies as they may have hereunder or under any of the
         other Loan Documents, at law, in equity or by statute, including those
         of a secured party and of a mortgagee and/or trust deed beneficiary.

                  4.3 POWER OF SALE. Beneficiary may foreclose the lien of this
Deed of Trust, insofar as it encumbers the Trust Property, either by judicial
action or by non-judicial foreclosure through the Trustee. Foreclosure through
Trustee will be initiated by Beneficiary's filing of its notice of election and
demand for sale with Trustee. Upon the filing of such notice of election and
demand for sale, Trustee shall promptly comply with all notice and other
requirements of the laws of Colorado then in force with respect to such sales,
and shall give four (4) weeks' public notice of the time and place of such sale
by advertisement weekly in some newspaper of general circulation then published
in the county or city and county in which the Trust Property is located. Any
sale conducted by Trustee pursuant to this section shall be held at the front
door of the county courthouse for such county or city and county, or on the
Trust Property, or at such other place as similar sales are then customarily
held in such county or city and county, provided that the actual place of sale
shall be specified in the notice of sale. The proceeds of any sale under this
section shall be applied first to the fees and expenses of the officer
conducting the sale, and then to the reduction or discharge of the Obligations;
any surplus remaining shall be paid over to Trustor or to such other person or
persons as may be lawfully entitled to such surplus. At the conclusion of any
foreclosure sale, the officer conducting the sale shall execute and deliver to
the purchaser at the sale a certificate of purchase which shall describe the
property sold to such purchaser and shall state that upon expiration of the
applicable periods for redemption, the holder of such certificate will be
entitled to a deed to the property described in the certificate. After the
expiration of all applicable periods of redemption, unless the property sold has
been redeemed by Trustor, the officer who conducted such sale shall execute and
deliver an appropriate deed to the holder of the certificate of purchase or the
last certificate of redemption, as the case may be, and such deed shall operate
to divest Trustor and all persons claiming under Trustor of all right, title,
and interest, whether legal or equitable, in the property described in the deed.
Nothing in this section dealing with foreclosure procedures or specifying
particular actions to be taken by Beneficiary or by Trustee or any similar

                                     - 31 -
<PAGE>   38

officer shall be deemed to contradict or add to the requirements and procedures
now or hereafter specified by Colorado law, and any such inconsistency shall be
resolved in favor of Colorado law applicable at the time of foreclosure. Trustee
may postpone sale of all or any portion of the Trust Property by public
announcement at such time and place of sale, and from time to time thereafter
may postpone such sale by public announcement at the time fixed by the preceding
postponement. The recitals in any deed executed pursuant to this power of sale
of any matters or facts shall be conclusive proof of the truthfulness thereof.
At any time before Trustee's sale pursuant to this paragraph, Beneficiary may
rescind any notice of breach or default and of election to cause the Trust
Property to be sold by executing and delivering to Trustee a written notice of
such rescission, which notice, when recorded, shall also constitute a
cancellation of any prior declaration of default and demand for sale. The
exercise by Beneficiary of such right of rescission shall not constitute a
waiver of any breach or default then existing or subsequently occurring; impair
the right of Beneficiary to execute and deliver to Trustee, as above provided,
other declarations of default and demands for sale, and notices of breach or
default, and of election to cause the Trust Property to be sold to satisfy the
Obligations; or otherwise affect any provision, covenant or condition of the
Note and/or of this Deed of Trust and/or of any of the other Loan Documents or
any of the rights, obligations or remedies of the parties thereunder or
hereunder. Beneficiary may, by following the procedures and satisfying the
requirements prescribed by applicable law, foreclose only a portion of the Trust
Property and, in such event, said foreclosure shall not affect the lien of this
Deed of Trust on the remaining portion of the Trust Property not foreclosed.

                  4.4      RIGHTS, POWERS AND REMEDIES CUMULATIVE; WAIVER.

                           (a) Each and every power and remedy in this Deed of
         Trust specifically given to Beneficiary shall be cumulative and shall
         be in addition to every other power and remedy specifically given in
         the Loan Documents or now or hereafter existing at law, in equity, or
         by statute. Each and every such power and remedy may be exercised from
         time to time and as often and in such order as may be deemed expedient
         by Beneficiary; and the exercise or the beginning of the exercise of
         any power or remedy shall not be construed to be a waiver of the right
         to exercise at the same time or thereafter any other power or remedy.
         No delay or omission by Beneficiary in the exercise of any right or
         power or in the pursuit of any remedy accruing upon the occurrence of
         any Event of Default shall impair any such right, power or remedy or be
         construed to be a waiver thereof or of any such Event of Default or to
         be any acquiescence therein; nor shall the acceptance by Beneficiary of
         any security or any payment on or performance of any of the other
         Obligations, though made after default, be deemed a waiver of any right
         to take advantage of any future Event of Default or of any past Event
         of Default not completely cured thereby.

                           (b) Whenever by the terms of this Deed of Trust or
         any other Document Beneficiary is given any option, such option may be
         exercised when the 

                                     - 32 -
<PAGE>   39

         right accrues or at any time thereafter; provided, however, that in the
         event such option is exercisable upon the occurrence of an Event of
         Default, such option may be exercised only during the continuance of
         such Event of Default.

                           (c) Any failure by Beneficiary to insist upon the
         strict performance by Trustor of any of the terms and provisions hereof
         shall not be deemed to be a waiver of any of the terms and provisions
         hereof, and Beneficiary, notwithstanding any such failure, shall have
         the right thereafter to insist upon the strict performance by Trustor
         of any and all of the terms and provisions of this Deed of Trust to be
         performed by Trustor. Neither Trustor nor any other person now or
         hereafter obligated for the Performance of the whole or any part of the
         Obligations shall be relieved of such Obligation (i) by reason of the
         failure of Trustee or Beneficiary to comply with any request of Trustor
         or of any other person so obligated to take action to foreclose this
         Deed of Trust or otherwise enforce any of the provisions of this Deed
         of Trust or any other Document or any other Obligation, or (ii) by
         reason of the release, regardless of consideration, of the whole or any
         part of the security held for the Performance of the Obligations of any
         person primarily or secondarily liable for the Performance of the
         Obligations, or (iii) by reason of the failure to join any person in a
         foreclosure proceeding, or (iv) by reason of any transfer of the Trust
         Property or any part thereof by Trustor or any subsequent owner of the
         Trust Property, or (v) by reason of any agreements or stipulations
         between any subsequent owner or owners of the Trust Property, or any
         part thereof, and Beneficiary with reference to the Trust Property,
         this Deed of Trust or any of the other Loan Documents, including,
         without limitation, any agreements or stipulations extending the time
         of payment or modifying the terms of the Obligations or this Deed of
         Trust without first having obtained the consent of Trustor or such
         other person; and in the last event, Trustor and all such other persons
         shall continue to be liable hereunder and under the other Loan
         Documents according to such agreements or stipulations unless expressly
         released and discharged in writing by Beneficiary. Any such action may
         be taken without the consent of any junior lienholder and without
         impairing or affecting the lien of this Deed of Trust or the priority
         of such lien over any subordinate lien; and Beneficiary may resort for
         the Performance of the Obligations to its several securities therefor
         in such order and manner as Beneficiary may elect.

                  4.5 POWER OF ATTORNEY. Beneficiary is hereby irrevocably
appointed the true and lawful attorney-in-fact of Trustor, in its name and
stead, to make all necessary conveyances, assignments, transfers and deliveries
of the Trust Property sold pursuant to this Article IV; and for that purpose,
Beneficiary may execute all necessary instruments of conveyance, assignment and
transfer, and may substitute one or more persons with like power, Trustor hereby
ratifying and confirming all that its attorney or such substitute or substitutes
shall lawfully do by virtue hereof. Nevertheless, if so requested by
Beneficiary, Trustor will ratify and confirm any such sale or sales by executing
and delivering to Trustee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment 

                                     - 33 -
<PAGE>   40

of Beneficiary, for that purpose and are designated in such request. Any such
sale or sales made under or by virtue of this Article IV whether made under the
power of sale granted in this Deed of Trust or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, shall operate to
divest all the estate, right, title, interest, claim and demand whatsoever,
whether at law or in equity, of Trustor in and to the Trust Property and rights
so sold, and shall be a perpetual bar both at law and in equity against Trustor
and against any and all persons claiming or who may claim the same, or any part
thereof from, through or under Trustor.

                  4.6 BENEFICIARY'S RIGHT TO BID AND PURCHASE. Upon any sale
made under or by virtue of this Article IV, including, without limitation, made
under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, any person,
including, without limitation, Beneficiary, its agents or employees may bid for
and acquire the Trust Property or any part thereof. If Beneficiary's bid is
successful, Beneficiary, in lieu of paying cash for the Trust Property covered
thereby, may make settlement for the purchase price by crediting upon the
indebtedness secured hereby, in such order as Beneficiary may determine, the net
sales price after deducting therefrom the expenses of the sale and the costs of
the action and any other sums which Beneficiary is authorized to deduct under
this Deed of Trust.

                  4.7 APPLICATION OF PROCEEDS OF SALE. To the extent not
prohibited by the applicable law, the purchase money and other proceeds of any
sale made under or by virtue of this Article IV, together with any other sums
which then may be held by Beneficiary under this Deed of Trust as part of the
Trust Property or the proceeds thereof, whether under the provisions of this
Deed of Trust or otherwise, shall be applied as follows:

                           FIRST, to the payment of the costs and expenses of
         such sale, including reasonable compensation to Trustee and
         Beneficiary, their agents and attorneys, and the expenses of any
         judicial proceedings wherein the same may be made, and of all advances
         made hereunder or under any other Loan Documents securing the
         Performance of the Obligations (together with interest on all such
         advances at the Overdue Rate from the date of advance until received by
         Beneficiary or Trustee), as the case may be, and to the payment of all
         taxes, assessments or liens prior to the lien of this Deed of Trust,
         except any taxes, assessments, liens or other charges, subject to which
         the Trust Property shall have been sold;

                           SECOND,  to the payment of the whole  amount  then 
         due,  owing and unpaid upon the Note, including premium, if any;

                           THIRD, to the payment of any other Obligations; and

                                     - 34 -
<PAGE>   41

                           FOURTH, to the payment of the surplus, if any, to
         Trustor, its successors or assigns, or to whosoever may be lawfully
         entitled to receive the same upon its written request, or as any court
         of competent jurisdiction may direct.

                  4.8 RIGHT TO RECOVER JUDGMENT. To the extent permitted by the
applicable law, Beneficiary shall be entitled to recover judgment on the Note
either before or after or during the pendency of any proceedings for the
enforcement of the provisions of this Deed of Trust; and the right of
Beneficiary to recover such judgment shall not be affected by any entry or sale
hereunder, or by the exercise of any other right, power or remedy for the
enforcement of the provisions of this Deed of Trust, or the foreclosure of the
lien hereof. In the event of a sale of the Trust Property and of the application
of the proceeds of sale, as herein provided, to the payment of the Obligations,
Beneficiary shall be entitled to enforce payment of and to receive all amounts
then remaining due and unpaid upon the Note, and to enforce payment of all other
charges, payments and costs due under this Deed of Trust and the other Loan
Documents; and shall be entitled to recover judgment for any portion of the
Obligations remaining unpaid, with interest at the Overdue Rate from the date of
entry of such judgment to the date that payment is actually received by
Beneficiary from Trustor.

                  4.9 CERTAIN ASSURANCES. Trustor will not at any time insist
upon, or plead, or in any manner whatever claim or take any benefit or advantage
of any stay or extension or moratorium law, any homestead law or any exemption
from execution or sale of the Trust Property or any part thereof, now or at any
time hereafter in force, which may affect the covenants and terms of performance
of this Deed of Trust or Trustor will not claim, take or insist upon any benefit
or advantage of any law now or hereafter in force providing for the valuation or
appraisal of the Trust Property, or any part thereof, prior to any sale or sales
thereof which may be made pursuant to any provision herein, or pursuant to the
decree, judgment or order of any court of competent jurisdiction; or, after any
such sale or sales, claim or exercise any right under any statute heretofore or
hereafter enacted to redeem the property so sold or any part thereof. Trustor
hereby expressly waives to the extent not prohibited by law all benefit or
advantage of any such law or laws, and covenants not to hinder, delay or impede
the execution of any power herein granted or delegated to Trustee and/or
Beneficiary, but to suffer and permit the execution of every power as though no
such law or laws had been made or enacted. Trustor, for itself and all who may
claim under it, waives, to the extent that they lawfully may, all right to have
the Trust Property marshalled upon any foreclosure hereof.

                  4.10 EXPENSES. Trustor will pay all costs, charges and
expenses, including attorneys' fees and court costs, which Trustee and/or
Beneficiary may incur in collecting any sum secured hereby or in exercising any
of the remedies hereunder; and all such costs and expenses shall be secured by
this Deed of Trust and, without notice or demand, be payable by Trustor to
Beneficiary, as the case may be, with interest at the Overdue Rate from the date
of advance until received by Beneficiary from Trustor.

                                     - 35 -
<PAGE>   42

                  4.11 TRUSTOR TENANT AT WILL AFTER SALE. Trustor agrees that
after any sale hereunder, Trustor and/or all parties occupying the Trust
Property, or any part thereof, shall, at the option of the purchaser(s) at such
sale, be mere tenants at the will and sufferance of the purchaser(s) at such
sale or sales, and that such purchaser(s) shall be entitled to immediate
possession thereof, and that if Trustor or any such tenant or tenants fail to
vacate the Trust Property, or any part thereof immediately at such purchaser's
request, such purchaser(s) may, and shall have the right to, file or institute
an action in forcible entry and detainer or institute or maintain any other
action or suit or exercise any other rights or remedies given landlords under
any statute or law. Notwithstanding the above, however, at the option of any
purchaser at such sale, any tenant leases covering the Trust Property or any
part thereof in effect at the time of such sale shall remain in full force and
effect and such purchaser(s) shall automatically become the "landlord"
thereunder with all rights and obligations accruing to the landlord thereunder.

                                    ARTICLE V
                                  MISCELLANEOUS

                  5.1 BENEFICIARY'S ACCOUNT. All moneys payable hereunder or
under the other Loan Documents shall be paid to Beneficiary in Phoenix, Arizona,
at its address first above mentioned, unless otherwise designated by Beneficiary
by notice.

                  5.2 MODIFICATION. This Deed of Trust, the Loan Agreement and
the Loan Documents exclusively and completely state the rights of Beneficiary
and Trustor with respect to the Trust Property. No modification, variation,
termination, discharge or abandonment hereof and no waiver of any of the
provisions or conditions hereof shall be valid unless in writing and signed by
duly authorized representatives of Beneficiary and Trustor or the successors,
transferees or assigns of either, subject, however, to the limitations herein on
Trustor with respect to assignment, merger and consolidation. This Deed of Trust
supersedes any and all prior representations, warranties and/or inducements,
written or oral, heretofore made by Beneficiary (other than in the other Loan
Documents) concerning this transaction, which are null and void and of no force
or effect whatsoever.

                  5.3 POWERS COUPLED WITH AN INTEREST. The powers and agency
hereby granted by Trustor are coupled with an interest and are irrevocable until
Performance of the Obligations and are granted as cumulative to Beneficiary's
other remedies for the enforcement of Performance of the Obligations.

                  5.4 COUNTERPARTS. This Deed of Trust may be executed
simultaneously in any number of identical copies, any number of which having
been executed by all parties hereto shall constitute an original for all
purposes.

                  5.5 NOTICE. Any notice required or permitted to be given
hereunder shall be given in the manner set forth in the Loan Agreement.
Notwithstanding anything herein to 

                                     - 36 -
<PAGE>   43

the contrary, if any notice given to Trustor by Trustee or Beneficiary is given
in the manner permitted or required by a statute of the State where the Premises
are located, such notice shall be deemed to have been effectively given
regardless of whether notice has been given in the manner required by the Loan
Agreement.

                  5.6 BINDING EFFECT. This Deed of Trust shall inure to the
benefit of and be binding upon Beneficiary and Trustor, and, subject to the
provisions of paragraph 2.5, their heirs, legatees, devisees, personal
representatives, administrators, executors, successors and assigns. The term
"Trustor" shall mean both the original Trustor and any subsequent owner or
owners of any of the Trust Property. The term "Beneficiary" shall mean the owner
and holder, including pledgees, of the Note, whether or not named as Beneficiary
herein. Whenever in this Deed of Trust reference is made to "Trustee", it shall
be construed to mean the trustee or trustees for the time being, whether
original or successors or successor in the trust; and that all title, estate,
rights, powers, trusts and duties hereunder given or appertaining to or
devolving upon the trustee if more than one, shall be in each Trustee so that
any action hereunder or purporting to be hereunder of any one of the original or
any successor trustee shall for all purposes be considered to be as effective as
the action of every trustee.

                  5.7 SEVERABILITY. If any one or more of the provisions
contained in this Deed of Trust shall be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby; provided that where the provisions of any invalidating law may be
waived, they are hereby waived by Trustor to the fullest extent possible.

                  5.8 INTERPRETATION. All headings are inserted for convenience
only and shall not affect any construction or interpretation of this Deed of
Trust. The provisions of this Deed of Trust shall apply to the parties according
to the context hereof and without regard to the number or gender of words and
expressions used herein. Unless otherwise indicated, all references herein to
clauses and other subdivisions refer to the corresponding paragraphs, clauses
and other subdivisions of this Deed of Trust; the words "herein", "hereof",
"hereto", "hereunder" and words of similar import refer to this Deed of Trust as
a whole and not to any particular paragraph, clause or other subdivision hereof;
and reference to a numbered or lettered subdivision of an Article or paragraph
shall include relevant matter within the Article or paragraph which is
applicable to but not within such numbered or lettered subdivision.

                  5.9 CHOICE OF LAW. THIS DEED OF TRUST HAS BEEN DELIVERED IN
PHOENIX, ARIZONA. THE PROVISIONS OF THIS DEED OF TRUST AND ALL RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA AND, TO THE EXTENT
THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES. HOWEVER, 

                                     - 37 -
<PAGE>   44

THE INTERNAL LAWS OF THE STATE WHERE THE PREMISES ARE LOCATED SHALL APPLY TO THE
APPOINTMENT OF TRUSTEES, TO THE CREATION OF LIENS AND TO ANY FORECLOSURE,
FORECLOSURE SALE, APPOINTMENT OF A RECEIVER OR OTHER REMEDY WITH RESPECT TO THAT
PORTION OF THE TRUST PROPERTY CONSISTING OF REAL PROPERTY.

                  5.10 JURISDICTION AND VENUE. TRUSTOR AND TRUSTEE HEREBY AGREE
THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY TRUSTOR AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THE LOAN DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF
ARIZONA, MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF ARIZONA OR, IF BENEFICIARY INITIATES SUCH ACTION, IN ADDITION TO THE
FOREGOING COURTS ANY COURT IN WHICH BENEFICIARY SHALL INITIATE SUCH ACTION, TO
THE EXTENT SUCH COURT HAS JURISDICTION. TRUSTOR AND TRUSTEE HEREBY EXPRESSLY
SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED BY TRUSTOR OR BENEFICIARY IN ANY OF SUCH COURTS. TRUSTOR AND TRUSTEE
WAIVE ANY CLAIM THAT PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. THE EXCLUSIVE
CHOICE OF FORUM FOR TRUSTOR SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT BY BENEFICIARY OF ANY JUDGMENT OBTAINED IN ANY OTHER
FORUM OR THE TAKING, BY BENEFICIARY, OF ANY ACTION TO ENFORCE THE SAME IN ANY
OTHER APPROPRIATE JURISDICTION, AND TRUSTOR HEREBY WAIVES THE RIGHT TO
COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.

                  5.11 WAIVER OF RIGHT TO JURY TRIAL. BENEFICIARY AND TRUSTOR
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN
DOCUMENTS OR WITH RESPECT TO THE TRANSACTION CONTEMPLATED THEREBY WOULD BE BASED
UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY
LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

                                                               INITIALS   ______

                  5.12     [INTENTIONALLY NOT USED]

                  5.13     [INTENTIONALLY NOT USED]


                                     - 38 -
<PAGE>   45

                  5.14     [INTENTIONALLY NOT USED]

                  5.15 RECONVEYANCE BY TRUSTEE. Upon (a) Performance of all of
the Obligations owed to Beneficiary under the Note and this Deed of Trust, (b)
payment in full of the Incentive Fee, (c) surrender to Trustee of this Deed of
Trust and the Note for cancellation and retention, and (d) payment of the
Trustee's fees, Trustee shall reconvey, without warranty, the Trust Property
then held hereunder. The recitals in such reconveyance of any matters or facts
shall be conclusive proof of the truthfulness thereof. The grantee in such
reconveyance may be described as "the person or persons legally entitled
thereto."

                  5.16 SUBROGATION OF BENEFICIARY. Beneficiary shall be
subrogated for further security to the lien, although released of record, of any
and all encumbrances paid out of the proceeds of the loan secured by this Deed
of Trust.

                  5.17 LIMITATION IN INTEREST. It is the intent of Trustor and
Beneficiary to comply with the usury law ("Applicable Usury Law") which is
applicable pursuant to the terms of paragraph 5.9 hereof or which is applicable
if the law chosen by the parties is not. Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Deed of Trust or in any
of the other Loan Documents, in no event shall this Deed of Trust or the other
Loan Documents require the payment or permit the collection of interest in
excess of the maximum contract rate permitted by the Applicable Usury Law. If
(a) any such excess of interest otherwise would be contracted for, charged or
received from Trustor or otherwise in connection with the Obligations, (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the principal or interest of the Obligations shall be prepaid, so that
under any of such circumstances the amount of interest contracted for, charged
or received in connection with the Obligations would exceed the maximum contract
rate permitted by the Applicable Usury Law, then in any such event (1) the
provisions of this paragraph shall govern and control, (2) neither Trustor nor
any other person or entity now or hereafter liable for the payment hereof will
be obligated to pay the amount of such interest to the extent that it is in
excess of the maximum contract rate permitted by the Applicable Usury Law, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount of the Obligations to Trustor or
refunded to Trustor, at Beneficiary's option, and (4) the effective rate of
interest will be automatically reduced to the maximum contract rate permitted by
the Applicable Usury Law. It is further agreed, without limiting the generality
of the foregoing, that to the extent permitted by the Applicable Usury Law: (x)
all calculations of the rate of interest which are made for the purpose of
determining whether such rate would exceed the maximum contract rate permitted
by the Applicable Usury Law shall be made by amortizing, prorating, allocating
and spreading during the period of the full stated term of the Obligations, all
interest at any time contracted for, charged or received from Trustor or
otherwise in connection with the Obligations; and (y) in the event that the
effective rate of interest on the Obligations should at any time exceed the
maximum contract rate permitted by the Applicable Usury Law, such 

                                     - 39 -
<PAGE>   46

excess interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to Beneficiary from
time to time, if and when the effective interest rate on the Obligations
otherwise falls below the maximum contract rate permitted by the Applicable
Usury Law, to the extent that interest paid to the date of calculation does not
exceed the maximum contract rate permitted by the Applicable Usury Law, until
the entire amount of interest which would have otherwise been collected to such
date of calculation had there been no ceiling imposed by the Applicable Usury
Law has been paid in full. Trustor further agrees that should the maximum
contract rate permitted by the Applicable Usury Law be increased at any time
hereafter because of a change in the law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all Obligations
regardless of when incurred; but, again to the extent not prohibited by
Applicable Usury Law, should the maximum contract rate permitted by the
Applicable Usury Law be decreased because of a change in the law, such decreases
shall not apply to the Obligations regardless if arising from an advance of the
Loan after the effective date of such decrease.

                  5.18 TRUSTOR'S CERTIFICATION. Trustor, upon written request of
Beneficiary made in the manner provided herein for the giving of notices, will
certify in writing to Beneficiary or to any proposed assignee of the Obligations
within seven (7) days after receiving such request, the amount then owing on the
Note, the amount of any other Obligations then owing to Trustor's knowledge, and
whether any off-sets or defenses exist against the Obligations or against this
Deed of Trust or any other Loan Documents. In the event Trustor fails to return
such certification to Beneficiary within the period stated, then the amount
owing on the Note and the amount of any other Obligations then owing to
Beneficiary, as stated in Beneficiary's request, shall be deemed accurate and
correct, and Trustor shall thereby have waived and released any rights of offset
or other defenses which might exist against the Obligations or against this Deed
of Trust or any other Loan Documents.

                  5.19     TIME OF  ESSENCE. Time is of the essence in the 
Performance of the Obligations by trustor.

                  5.20 ADDRESS. Trustor requests that a copy of any Notice of
Default and a copy of any Notice of Sale hereunder be mailed to Trustor at its
mailing address set forth in the introductory paragraph to this Deed of Trust.

                  5.21 BENEFICIARY'S DISCRETION. Unless otherwise specified
herein, whenever Beneficiary must exercise its discretion under the Loan
Documents or give or withhold its consent under the Loan Documents, such
discretion or consent may be exercised, given or withheld in Beneficiary's sole
and absolute discretion except as otherwise set forth in the Loan Documents to
the contrary.

                                     - 40 -
<PAGE>   47

                                   ARTICLE VI
                               SPECIAL PROVISIONS

                  6.1 INTERVAL RELEASES. Beneficiary hereby agrees that it will
promptly release from the lien of this Deed of Trust and from the effect of any
UCC financing statement an individual Lot (as defined in the Loan Agreement) in
the Premises which is sold by Trustor, upon the satisfaction of the following
terms and conditions:

                           (i) The payment to Beneficiary of a Project Release
         Fee in the amount of Three Thousand Six Hundred Dollars ($3,600.00 )
         with respect to such Lot, which shall be applied as an ordinary payment
         of principal under the Note;

                           (ii) No Event of Default shall have occurred and be
         continuing and no event shall then exist, which with notice, passage of
         time or both, would constitute an Event of Default;

                           (iii) The Purchaser (as defined in the Loan
         Agreement) of the Lot must not be affiliated with the Trustor or with
         any of the Control Group (as defined in the Loan Agreement);

                           (iv) The Lot to be released must have been sold by
         Trustor in the ordinary course of Trustor's business in a bona fide,
         arms-length transaction;

                           (v) Beneficiary shall have received a written request
         for such release in which Trustor certifies as to compliance with items
         (i) through (v) above and further certifies that all of the
         requirements for such release have been satisfied; and

                           (vi) Trustor has paid all of Beneficiary's
         out-of-pocket expenses incurred in connection with such release and has
         submitted to Beneficiary all necessary documents with respect to the
         same.

For purposes hereof, a person or entity shall be deemed affiliated with Trustor
or with the Control Group, if it is a shareholder, officer, director, agent,
employee, salesman, broker or creditor of Trustor or the Control Group, or a
relative of Trustor, of the Control Group or of any of the foregoing, or any
other person or entity related to or affiliated with Trustor or the Control
Group, including, without limitation, the Guarantor (as defined in the Loan
Agreement) and any independent contractor. No partial release of a Lot pursuant
hereto shall impair or affect Beneficiary's remaining security interest as it
pertains to those portions of the Premises remaining subject hereto. Upon the
release of a Lot from the lien of this Deed of Trust, such Lot shall no longer
be deemed part of the Trust Property. Upon the release of a Lot from this Deed
of Trust, such release will also constitute a release from the lien of this Deed
of Trust, of any Purchaser Notes or Purchaser Mortgages (as defined in the Loan

                                     - 41 -
<PAGE>   48

Agreement) subsequently arising from the sale of such Lot; provided, however,
that notwithstanding the foregoing, such Purchaser Notes and Purchaser Mortgages
shall be subject to Beneficiary's security interest to the extent that such
Purchaser Notes or Purchaser Mortgages constitute Receivables Collateral (as
defined in the Loan Agreement).

                  6.2   VARIABLE RATE. The Note contains the following language
with respect to fluctuations in the rate of interest payable thereunder:

                           Interest shall accrue initially at an annual interest
         rate ("Initial Interest Rate") equal to Prime (as hereinafter defined)
         in effect on the date of the initial advance of the loan evidenced by
         this Note ("Initial Prime") plus two percent (2%) per annum, subject to
         adjustment on each Interest Rate Change Date (as hereinafter defined),
         but in no event to exceed the maximum contract rate permitted under the
         Applicable Usury Law (as hereinafter defined). The interest rate shall
         change on each Interest Rate Change Date by adding to or subtracting
         from the Initial Interest Rate, as the case may be, the change, if any,
         between Initial Prime and Prime in effect on the applicable Interest
         Rate Change Date. As used in this Note, the following capitalized terms
         have the meaning set forth opposite them below:

                           "Prime" shall mean the rate of interest publicly
         announced, from time to time, by Citibank, N.A., New York, New York
         ("Citibank"), as the corporate base rate of interest charged by
         Citibank to its most creditworthy commercial borrowers notwithstanding
         the fact that some borrowers of Citibank may borrow from Citibank at
         rates of less than such announced Prime rate; and

                           "Interest Rate Change Date" means (a) the first
         business day of Citibank during the calendar month following the date
         of the initial advance of the loan evidenced by this Note, and (b) the
         first business day of Citibank during each successive month thereafter.



                      [Signatures appear on following page]


                                     - 42 -
<PAGE>   49

                  IN WITNESS WHEREOF, this Deed of Trust is duly executed as of
the day and year first above written.


                                       PREFERRED EQUITIES CORPORATION, a 
                                       Nevada corporation

                                                                       "Trustor"
                                       By:  ____________________________________
                                            Name: ______________________________
                                            Title:______________________________


                                       _____ Check here to confirm that 
                                       Paragraph 5.11 has been initialed.





                                     - 43 -
<PAGE>   50


STATE OF __________)
                   ) ss.
County of _________)

                  The foregoing instrument was acknowledged before me this ____
day of February, 1998, by ___________________ as the ____________________ of
Preferred Equities Corporation, a Nevada corporation on behalf of the
corporation.

                  GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of
___________, 1998.

                                    _____________________________________
                                    Notary Public in and for ____________
                                    County, _____________________________



NOTARY SEAL:




                                     - 44 -
<PAGE>   51



                                    EXHIBIT A

                                LEGAL DESCRIPTION




                                     - 45 -
<PAGE>   52



                                    EXHIBIT B

                              PERMITTED EXCEPTIONS


                  [TO INCLUDE THE CC&R'S WHICH ARE BEING RECORDED]



                                     - 46 -
<PAGE>   53


                              CONSENT OF GUARANTOR
                             (HARTSEL SPRINGS RANCH)



                  The undersigned, MEGO FINANCIAL CORP., a New York corporation
(formerly named Mego Corp.) ("Guarantor"), hereby acknowledges that Guarantor
executed and delivered to GREYHOUND REAL ESTATE FINANCE COMPANY, an Arizona
corporation ("GREFCO"), an Amended and Restated Guarantee and Subordination
Agreement dated as of May 10, 1989 (the "Guarantee"), guaranteeing performance
of the obligations of PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Borrower"), to Lender (as hereinafter defined) under the Loan Agreement, the
Note and other Documents (as the terms "Loan Agreement," "Note" and "Documents"
are defined in the Guarantee).

                  GREFCO has assigned the Note and all of GREFCO's rights and
obligations under the Loan Agreement and the other Documents to FINOVA CAPITAL
CORPORATION, a Delaware corporation (formerly known as Greyhound Financial
Corporation) ("Lender"), pursuant to a plan of liquidation between GREFCO and
Lender.

                  With Guarantor's ratification, consent and approval, Borrower
and Lender amended and restated the Loan Agreement pursuant to that certain
Second Amended and Restated Loan and Consolidated Loan and Security Agreement
dated May 15, 1997 (the "Amended and Restated Loan Agreement").

                  Guarantor hereby acknowledges that, pursuant to the terms of
the Amended and Restated Loan Agreement, Lender proposes to advance to Borrower
an additional principal sum of up to Four Million and No/100 Dollars
($4,000,000.00) (the "Hartsel Loan"). Guarantor further acknowledges that the
Hartsel Loan is evidenced by that certain Note in the principal amount of
$4,000,000.00, dated February __, 1998, executed by Borrower and payable to the
order of Lender (as from time to time modified, extended, renewed, replaced or
restated, the "Hartsel Project Note"), and secured, in part, by that certain
Deed of Trust, Assignment of Rents and Proceeds and Security Agreement of even
date with the Hartsel Project Note executed by Borrower, as trustor, for the
benefit of Lender, as beneficiary, and encumbering the real and personal
property described therein (as from time to modified and amended, the "Hartsel
Deed of Trust") and that certain side letters and other documents are being
executed in connection with the Hartsel Loan (as from time to time modified,
extended, renewed, replaced or restated the "Hartsel Ancillary Documents").


<PAGE>   54

                  Guarantor consents to the Hartsel Project Note, the Hartsel
Deed of Trust and the Hartsel Ancillary Documents and agrees that (i) the
Guarantee shall remain in full force and effect, (ii) that the obligations of
the Guarantor under the Guarantee are joint and several with those of each other
Obligor (as that term is defined in the Guarantee), (iii) Guarantor's liability
under the Guarantee shall continue undiminished by the Hartsel Project Note, the
Hartsel Deed of Trust, and the Hartsel Ancillary Documents and (iv) all terms,
conditions and provisions set forth in the Hartsel Project Note, the Hartsel
Deed of Trust and the Hartsel Ancillary Documents and all other Documents
executed therewith, are hereby ratified, approved and confirmed.

                  Guarantor reaffirms as if made on the date hereof all of
Guarantor's representations and warranties contained in the Guarantee except as
otherwise set forth in the Amended and Restated Loan Agreement or on EXHIBIT 1
attached hereto. Guarantor acknowledges that as of the date hereof, it has (a)
no defense, counterclaim, offset, cross-complaint, claim or demand or any nature
whatsoever which can be asserted as a basis to seek affirmative relief or
damages from Lender or GREFCO or as a basis to reduce or eliminate all or any
part of its liability under the Guarantee, and (b) no other claim against Lender
or GREFCO with respect to any portion of the transaction described in the
Documents.

                  IN WITNESS WHEREOF, Guarantor has hereunto executed this
instrument as of the _____ day of ___________, 1998.


                                                MEGO FINANCIAL CORP., a New York
                                                corporation



                                                By _____________________________
                                                Its ____________________________


                                     - 2 -
<PAGE>   55


STATE OF _____________   )
                         ) ss.
COUNTY OF ___________    )

                  BEFORE ME, the undersigned authority, a Notary Public in and
for the County and State aforesaid, on this day personally appeared
_____________________
____________________________________________________________________, known to
me to be the __________________________ of MEGO FINANCIAL CORP., a New York
corporation, who acknowledged to me that the same was the free act and deed of
such corporation and that s/he being authorized by proper authority to do so,
executed the same on behalf of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.

                  GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____ day of
_____________, 1998.



                                        ________________________________________
                                        Notary Public
My Commission Expires:

---------------------



                                     - 3 -
<PAGE>   56

                                  EXHIBIT 1 TO
                              CONSENT OF GUARANTOR

             EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES REAFFIRMED
                      BY GUARANTOR PURSUANT TO THIS CONSENT

                            [IF NONE, INSERT "NONE"]






<PAGE>   57

                 ENVIRONMENTAL CERTIFICATE WITH REPRESENTATIONS,
                            COVENANTS AND WARRANTIES
                             [HARTSEL SPRINGS RANCH]


                  The undersigned, PREFERRED EQUITIES CORPORATION, a Nevada
corporation ("Borrower"), hereby executes this Certificate for the purpose of
inducing FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender"), to make
a loan to Borrower in the stated principal sum of up to $4,000,00.00 (the
"Loan"), which Loan is to be secured by, among other things, a Deed of Trust,
Assignment of Rents and Proceeds and Security Agreement [Hartsel Springs Ranch]
(the "Mortgage"), dated as of even date herewith, to the Public Trustee of Park
County, Colorado, as Trustee, encumbering certain real and personal property as
therein described, including the land more particularly described in Exhibit A
attached hereto and made a part hereof and all improvements thereon
(collectively, the "Property").

                  1. REPRESENTATIONS, COVENANTS AND WARRANTIES. Except as may be
otherwise expressly stated in the Disclosure Schedule attached hereto as Exhibit
B and made a part hereof, Borrower hereby represents, covenants and warrants to
Lender and its successors and assigns, as follows:

                           (a) The location and construction, occupancy,
         operation and use of all improvements now and hereafter attached to or
         placed, erected, constructed or developed as a portion of the Property
         (the "Improvements") do not and will not violate any applicable laws,
         statute, ordinance, rule, regulation, policy, order or determination of
         any federal, state, local or other governmental authority
         ("Governmental Authority") or any board of fire underwriters (or other
         body exercising similar functions), or any restrictive covenant or deed
         restriction affecting any portion of the Property, including without
         limitation, any applicable zoning ordinances and building codes, flood
         disaster laws and health and environmental laws, rules and regulations
         (hereinafter collectively called the "Applicable Laws").

                           (b) Without in any way limiting the generality of (a)
         above, neither the Property nor Borrower are the subject of any pending
         or, to the best of Borrower's knowledge, threatened investigation or
         inquiry by any Governmental Authority, or are subject to any remedial
         obligations under any Applicable Laws pertaining to health or the
         environment ("Applicable Environmental Laws"), including, without
         limitation, the Comprehensive Environmental Response, Compensation, and
         Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation
         and Recovery Act of 1987, 

<PAGE>   58

         as amended ("RCRA"), and the Toxic Substances Control Act, The Clean
         Air Act, and The Clean Water Act, and applicable state laws, and this
         representation and warranty would continue to be true and correct
         following disclosure to any applicable Governmental Authority of all
         relevant facts, conditions and circumstances pertaining to the Property
         and/or Borrower.

                           (c) Borrower is not required to obtain any permits,
         licenses or authorizations to construct, occupy, operate or use any
         portion of the Property by reason of any Applicable Environmental Laws,
         or if any such permits, licenses or authorizations are required by any
         Applicable Environmental Laws, such permits, licenses or authorizations
         have, as of the date hereof, been obtained.

                           (d) Borrower has taken all steps reasonably necessary
         to determine and has determined that, to the best of its knowledge, no
         hazardous substances, solid wastes, or other substances known or
         suspected to pose a threat to health or the environment ("Hazards")
         have been disposed of or otherwise released on or to the Property or
         exist on or within any portion of the Property. No prior use, either by
         Borrower or, to the best of Borrower's knowledge, after due inquiry,
         the prior owners of the Property, has occurred which violates any
         Applicable Environmental Laws. The use which Borrower makes and intends
         to make of the Property will not result in the disposal or release of
         any hazardous substance, solid waste or Hazards on, in or to the
         Property in violation of any Applicable Environmental Laws. The terms
         "hazardous substance" and "release" shall each have the meanings
         specified in CERCLA, including, without limitation, petroleum products
         and petroleum wastes of any kind, and the terms "solid waste" and
         "disposal" (or "disposed") shall each have the meanings specified in
         RCRA; provided, however, that in the event either that CERCLA or RCRA
         is amended so as to broaden the meaning of any term defined thereby,
         such broader meaning shall apply subsequent to the effective date of
         such amendment; and provided further that, to the extent that the laws
         of the State of Colorado establish a meaning for "hazardous substance",
         "release", "solid waste", or "disposal" which is broader than that
         specified in either CERCLA or RCRA, such broader definition shall
         apply.

                           (e) To the best of Borrower's knowledge and belief,
         there are no on-site or off-site locations where hazardous substances
         generated from the Property, including such substances as asbestos and
         Polychlorinated Biphenyls, solid wastes, or Hazards, have been stored,
         treated, recycled, or disposed of.

                                     - 2 -
<PAGE>   59

                           (f) To the best of Borrower's knowledge and belief,
         there has been no litigation brought or threatened nor any settlement
         reached by or with any parties alleging the presence, disposal,
         release, or threatened release, of any hazardous substance, solid
         wastes or Hazards from the use or operation of the Property.

                           (g) To the best of Borrower's knowledge and belief
         after diligent investigation and inquiry, the Property is not on any
         federal or state "Superfund" list, and not on EPA's Comprehensive
         Response, Compensation & Liability System (CERCLIS) list or on any
         state environmental agency list of sites under consideration for
         CERCLIS, nor subject to any environmentally related liens.

                           (h) Neither Borrower nor, to the best of Borrower's
         knowledge and belief, any tenant of any portion of the Property, has
         received any notice from any Governmental Authority with respect to any
         violation of any Applicable Laws.

                           (i) Borrower shall not cause any violation of any
         Applicable Environmental Laws, nor permit any tenant of any portion of
         the Property to cause such a violation, nor permit any environmental
         liens to be placed on any portion of the Property.

                  All of the foregoing representations and warranties, as
supplemented from time to time, shall be continuing and shall be true and
correct for the period from the date hereof through and as of the date of the
final payment of all indebtedness owed by Borrower to Lender and the final
performance of all obligations under all instruments evidencing, governing,
securing or relating to such indebtedness, with the same force and effect as if
made each day throughout such period, and all of such representations and
warranties shall survive such payment and performance.

                  2. COVENANT TO CLEAN UP AND NOTIFY. Borrower shall conduct and
complete all investigations, studies, sampling, and testing and all remedial,
removal, and other actions necessary to clean up and remove hazardous
substances, solid wastes or Hazards on, in, from or affecting any portion of the
Property (a) in accordance with all Applicable Environmental Laws, (b) to the
reasonable satisfaction of Lender, and (c) in accordance with the orders and
directives of all Governmental Authorities. Borrower shall (a) give notice to
Lender immediately upon (i) Borrower's receipt of any notice from any
Governmental Authority of a violation of any Applicable Laws or acquiring
knowledge of the receipt of any such notice by any tenant of any portion of the
Property and (ii) acquiring knowledge of the presence of any hazardous
substances, solid wastes or Hazards (other than those described in Exhibit B
attached hereto) on the Property in a condition that is resulting or could

                                     - 3 -
<PAGE>   60

reasonably be expected to result in any adverse environmental impact in
violation of Applicable Environmental Laws, with a full description thereof; (b)
promptly comply with all Applicable Environmental Laws requiring the notice,
removal, treatment, or disposal of such hazardous substances, solid wastes or
Hazards and provide Lender with satisfactory evidence of such compliance; and
(c) provide Lender, within thirty (30) days after demand by Lender, with a bond,
letter of credit, or similar financial assurance evidencing to Lender's
satisfaction that sufficient funds are available to pay the cost of removing,
treating, and disposing of such hazardous substances, solid wastes or Hazards
and discharging any assessments that may be established on the Property as a
result thereof.

                  3. SITE ASSESSMENT. If Lender shall ever have reason to
believe that there are hazardous substances, solid wastes or Hazards (other than
those described in Exhibit B attached hereto) affecting any of the Property,
Lender (by its officers, employees and agents) at any time and from time to
time, either prior to or after the occurrence of an Event of Default under the
Loan Agreement pursuant to which the Loan is made, may contract for the services
of persons (the "Site Reviewers") to perform environmental site assessments
("Site Assessments") on the Property for the purpose of determining whether
there exists on the Property any environmental condition that could result in
any liability, cost, or expense to the owner, occupier, or operator of such
Property arising under any Applicable Environmental Laws. The Site Assessments
may be performed at any time or times, upon reasonable notice, and under
reasonable conditions established by Borrower that do not impede the performance
of the Site Assessments. Subject to the provisions of the Declaration (as
defined in the Loan Agreement), the Site Reviewers are hereby authorized to
enter upon the Property for such purposes. Subject to the provisions of the
Declaration, the Site Reviewers are further authorized to perform both above and
below the ground testing for environmental damage or the presence of hazardous
substances, solid wastes and Hazards on the Property and such other tests on the
Property as may be necessary to conduct the Site Assessments in the reasonable
opinion of the Site Reviewers. Borrower will supply to the Site Reviewers such
historical and operational information regarding the Property as may be
reasonably requested by the Site Reviewers to facilitate the Site Assessment and
will make available for meetings with the Site Reviewers appropriate personnel
having knowledge of such matters, if any. On request, Lender shall make the
results of such Site Assessments fully available to Borrower, which (prior to an
Event of Default) may, at its election, participate under reasonable procedures
in the direction of such Site Assessments and the description of tasks of the
Site Reviewers. The cost of performing such Site Assessments shall be paid by
Borrower upon demand of Lender.

                  4. INDEMNITY AND HOLD HARMLESS. Borrower hereby defends,
indemnifies and holds harmless Lender, its employees, agents, shareholders,
officers and directors (collectively, the "Indemnified Parties"), from and
against any claims, 

                                     - 4 -
<PAGE>   61

demands, obligations, penalties, fines, suits, liabilities, settlements,
damages, losses, costs or expenses (including, without limitation, attorney and
consultant fees and expenses, investigation and laboratory fees and expenses,
cleanup costs, and court costs and other litigation expenses) of whatever kind
or nature, known or unknown, contingent or otherwise, arising out of or in any
way related to (i) the presence, disposal, release, threatened release, removal
or production of any hazardous substances, solid wastes or Hazards which are on,
in, from or affecting any portion of the Property; (ii) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
or related to such hazardous substances, solid wastes or Hazards; (iii) any
lawsuit brought or threatened, settlement reached, or order by Governmental
Authority relating to such hazardous substances, solid wastes or Hazards; and/or
(iv) any violation of any Applicable Laws, or demands of Governmental
Authorities, or violation of any policies or requirements of Lender relating to
Applicable Laws or demands of Governmental Authorities, which are based upon or
in any way related to such hazardous substances, solid wastes or Hazards,
regardless of whether or not any of the conditions described under any of the
foregoing subsections (i) through (iv), inclusive, was or is caused by or within
the control of Borrower. Borrower agrees, upon notice and request by an
Indemnified Party, to contest and defend any demand, claim, suit, proceeding or
action with respect to which Borrower has hereinabove indemnified and held the
Indemnified Parties harmless and to bear all costs and expenses of such contest
and defense. Borrower further agrees to reimburse any Indemnified Party upon
demand for any costs or expenses incurred by any Indemnified Party in connection
with any matters with respect to which Borrower has hereinabove indemnified and
held the Indemnified Parties harmless. Lender agrees to use reasonable efforts
to give Borrower prior written notice as to the incurring of such costs or
expenses for which Lender would seek reimbursement unless the delay in incurring
such costs and expenses, pending the giving of such notice, would further
jeopardize Lender's collateral or security interest. The provisions of this
paragraph shall be in addition to any other obligations and liabilities Borrower
may have to Lender at common law, in equity or under documentation executed in
connection with the Loan, and shall survive the closing, funding and payment in
full of the Loan, as well as any foreclosure of the Loan or granting of any deed
in lieu of foreclosure and the recordation of any release of the lien of any
security interest securing repayment of the Loan.

                  5. LENDER'S RIGHT TO REMOVE HAZARDOUS MATERIALS. Lender shall
have the right, but not the obligation, without in any way limiting Lender's
other rights and remedies, to enter onto the Property or to take such other
actions as it deems necessary or advisable to clean up, remove, resolve, or
minimize the impact of, or otherwise deal with (collectively "Remediate" or as a
noun, "Remediation"), any hazardous substances, solid wastes or Hazards on or
affecting the Property following receipt of any notice from any person or entity
asserting the existence of any 

                                     - 5 -
<PAGE>   62

hazardous substances, solid wastes or Hazards pertaining to the Property or any
part thereof that, if true, could result in an order, notice, suit, imposition
of a lien on the Property, or other action or that, in Lender's sole opinion,
could jeopardize Lender's security. All reasonable costs and expenses paid or
incurred by Lender in the exercise of any such rights shall be payable by
Borrower upon demand. The foregoing notwithstanding, prior to Lender incurring
any costs or expenses described in this Paragraph 5, Lender shall give Borrower
not less than fifteen (15) days prior written notice (unless public health or
safety reasons dictate a shorter notice period, in which case the notice shall
state the shortened period which it provides) of its intent to incur any such
expenses, and shall not incur any such expenses if Borrower responds within the
notice period that it will perform any legal obligations it has incurred under
any Applicable Environmental Law to Remediate hazardous substances, solid wastes
and Hazards on or affecting the Property and thereafter promptly commence to do
so and diligently prosecute such Remediation to a conclusion as required
hereunder and by Applicable Environmental Laws.

                  6. RELIANCE AND BINDING NATURE. Borrower acknowledges that
Lender has and will rely upon the representations, covenants, warranties and
agreements set forth in closing and funding the Loan and that the execution and
delivery of this Certificate is an essential condition but for which Lender
would not close or fund the Loan. The representations, covenants, warranties and
agreements herein contained shall be binding upon Borrower, its successors,
assigns and legal representatives and shall inure to the benefit of Lender, its
successors, assigns and legal representatives.

                  Dated and Effective as of this ____ day of __________, 1998.

                                             PREFERRED EQUITIES CORPORATION, 
                                             a Nevada corporation



                                             By: _______________________________
                                                 Name: _________________________
                                                 Title: ________________________

                                                                      "Borrower"




                                     - 6 -
<PAGE>   63



                                    EXHIBIT A

                                LEGAL DESCRIPTION


<PAGE>   64



                                    EXHIBIT B

                               DISCLOSURE SCHEDULE




<PAGE>   65


                           HARTSEL SPRINGS SIDE LETTER

                                February 18, 1998



Preferred Equities Corporation
4310 Paradise Road
Las Vegas, Nevada 89109-6597


                  Re:      FINOVA Mortgage Loan Facility

Gentlemen:

                  Reference is made to that certain Second Amended and Restated
and Consolidated Loan and Security Agreement dated May 15, 1997 between FINOVA
Capital Corporation, a Delaware corporation ("Lender") and Preferred Equities
Corporation, a Nevada corporation ("Borrower") (the "Loan Agreement"). Unless
otherwise defined herein, all capitalized terms used herein shall have the same
meaning as set forth in the Loan Agreement.

                  This Side Letter is being executed in connection with an
Advance by Lender of no more than Four Million Dollars ($4,000,000) of the
Mortgage Loan Facility in order to finance the purchase by Borrower of One
Thousand Five Hundred Fifty-Two (1,552) platted lots located in Park County,
Colorado and commonly known as Hartsel Springs Ranch (the "Hartsel Springs
Lots").

                  This Side Letter Agreement will confirm certain agreements
between the Borrower and the Lender concerning the Hartsel Springs Lots and the
advance of the Mortgage Loan Facility made in connection therewith and shall
constitute an amendment to the Loan Agreement and Documents.

                  1.  The Hartsel Springs Lots shall be deemed an Additional 
Project.

                  2.  The definition of Documents as set forth in the Loan
Agreement, shall be amended to include each now existing and hereafter created
Project Note, each now existing and hereafter created Mortgage securing the
payment of each such Project Note and this Side Letter.

                  3.  Subject to the satisfaction of all conditions precedent to
the making of an Advance of the Receivables Loan as set forth in the Loan
Agreement, 
<PAGE>   66

Preferred Equities Corporation
February 18, 1998
Page 2



Lender agrees to make Advances of the Receivables Loan, from time to time,
against Instruments or Contracts arising from the sale of the Hartsel Springs
Lots.

                  4.  At such time as Borrower establishes a sales office for
the sale of the Hartsel Springs Lots and in the event such sales office is not
located on the property which is the subject matter of the Mortgage otherwise
encumbering the Hartsel Springs Lots, Borrower shall, within ten (10) days
following the establishment of such sales office, grant to Lender a lien on and
security interest in such sales office as security for the payment and
performance of the Obligations.

                  5.  Paragraph (d) of Exhibit I-C (Conditions of Eligible
Receivables) to the Loan Agreement shall be amended as follows:

                     (i) The word "or" appearing immediately prior to "(iv)"
          shall be deleted;

                     (ii) The "." at the end of such paragraph shall be deleted
          in favor of "; and"; and

                     (iii) A clause (v) shall be added reading as follows:

                                    (v) In the case of Receivables Collateral
                  encumbering Lots, consecutive monthly installments of
                  principal and interest having a remaining term exceeding one
                  hundred and twenty (120) months but not exceeding one hundred
                  and forty four (144) months; provided that no more than One
                  Million Dollars ($1,000,000) of the Receivables Loan shall be
                  used to finance Eligible Receivables described in this clause
                  (v).

                  6.  Borrower warrants and represents to Lender that the
Amended and Restated Real Estate Purchase and Sale Agreement (the "Purchase
Agreement") dated as of November 25, 1997 between Mercantile Equities
Corporation, Hartsel Springs Ranch of Colorado, Inc. and Borrower, a copy of
which was forwarded to Lender's counsel, is a true and correct copy thereof, is
the sole agreement with respect to the purchase by Borrower of the Hartsel
Springs Lots and has not been amended, modified or superseded. The Hartsel
Springs Lots constitutes One Thousand Five Hundred Fifty-Two Lots (1,552) all of
which will be purchased by Borrower pursuant to the Purchase Agreement. The Lots
identified in the Purchase Agreement as the Fifty Four (54) "South Ranch Partial
Lots" are subject to plat restrictions requiring that the partial lots in the
subdivision known as "Hartsel Ranch" be sold together with the corresponding
partial lot in the subdivision known as "Estates of Colorado". As a 
<PAGE>   67

Preferred Equities Corporation
February 18, 1998
Page 3



result of such plat restrictions, the South Ranch Partial Lots shall be deemed
to constitute Twenty Seven (27) Hartsel Springs Lots.

                  7. As a condition precedent to Lender's obligation to make an
Advance of the Mortgage Loan Facility for purposes of acquiring the Hartsel
Springs Lots, Borrower shall deliver to Lender the following (all as defined in
the Purchase Agreement) all of which shall be subject to the approval of Lender:

                  (a) The Water Opinion (which shall run in favor of Lender and
                      Borrower);

                  (b) Preliminary copies of all Governmental Approvals;

                  (c) All Licenses; (d) The Cease and Desist Order;

                  (e) Seller's Litigation Schedule;

                  (f) Consent from the Seller as to the collateral assignment to
                      Lender of the License;

                  (g) Satisfactory letter of explanation from the Borrower
                      concerning the item set forth on Seller's Litigation
                      Schedule as "Whistleblower"

                  (h) Satisfactory letter of explanation from the Purchaser
                      under the Purchase Agreement concerning the item set forth
                      in Seller's Litigation Schedule as "Bluegreen
                      Corporation"; and

                  8. Borrower agrees to comply in all respects with the Cease
and Desist Order and give Lender evidence upon Lender's request as to such
compliance. Borrower agrees to indemnify Lender and its successors and assigns
from all loss or liability to Lender and such successors and assigns arising
from the failure of Borrower to fully comply with the Cease and Desist Order.

                  9. On or before April, 6, 1998, and under all circumstances
prior to any obligation on the part of the Lender to make an Advance of the
Receivables Loan against Instruments or Contracts arising from the sale of the
Hartsel Springs Lots, Borrower shall deliver to Lender final unconditional
copies of all Governmental Approvals.

                  10. Lender shall withhold the sum of Thirty Two Thousand
Dollars ($32,000) from the Advance of the Mortgage Loan Facility which is the
subject matter of this Side Letter (the "Holdback") until such time as Lender
has received and 
<PAGE>   68

Preferred Equities Corporation
February 18, 1998
Page 4



approved a Water Opinion in form and substance acceptable to Lender and from a
Colorado attorney acceptable to Lender which indicates to the satisfaction of
Lender that the owner of each Hartsel Springs Lot within Unit 99 of Hartsel
Ranch can be issued a permit to drill and operate a well for household use in
one (1) single family residence. Borrower represents and warrants to Lender that
the Purchaser under the Purchase Agreement has agreed to the aforementioned
Holdback. Lender will advance the Holdback upon receipt of the aforementioned
Water Opinion on the condition that there does not then exist an Event of
Default or any act or event which with notice, passage of time or both, would
constitute an Event of Default and on the further condition that Lender is
satisfied that the priority of its Deed of Trust recorded against the Hartsel
Springs Lots is not adversely affected as a result of such Advance.

                  In the event the foregoing represents an accurate statement of
the agreements that have been reached please sign and return this letter to the
undersigned.

                                                     FINOVA Capital Corporation


                                                     By: _______________________
                                                         Name:__________________
                                                         Its:___________________



Accepted this 18th day of February, 1998.

Preferred Equities Corporation,
a Nevada corporation


By: ____________________________
    Name:_______________________
    Its:________________________



RSD/slg


<PAGE>   69

                REQUEST FOR ADVANCE AND DISBURSEMENT INSTRUCTIONS



                  The undersigned, as ___________________________________ of
PREFERRED EQUITIES CORPORATION, a Nevada corporation, hereby instructs FINOVA
CAPITAL CORPORATION ("FINOVA") to advance Three Million Nine Hundred Sixty-Eight
Thousand and 00/100 Dollars ($3,968,000.00)1 in immediate available funds, which
funds shall be distributed as follows:

       1.      Security Title Guaranty Company                    $3,948,160.00

                        Bank:    Colorado National Bank
                        ABA Routing No.:        102000021
                        For Credit to:  United Title Companies, Inc.
                        Account Number:  120412789832
                        Reference:  Security Title Guaranty Co.
                        Order Number:  X017658A98
                        Reference:  Escrow No. XO 57278A97

       2.      FINOVA Capital Corporation                         $   19,840.00

               (Loan Fee - $19,840.00)

                                        Total Funds Disbursed:    $3,968,000.00

                  The undersigned acknowledges and agrees that, even though all
or a portion of the disbursements described above are to be directed to entities
other than



--------------------------------
1    Maximum Funding by FINOVA                                    $4,000,000.00
     Less: Holdback                                               (   32,000.00)
                                                                  -------------
     Total Advance                                                $3,968,000.00

<PAGE>   70

the undersigned, receipt of such disbursements by such payees shall constitute
receipt of the proceeds by the undersigned.


Dated:  February ____, 1998.

                                               PREFERRED EQUITIES CORPORATION, a
                                               Nevada corporation



                                               By: _____________________________
                                                     Name:
                                                     Title:






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