Exhibit 10.2

                               CANYON PORTAL MOTEL
                               280 N. HIGHWAY 89A


                                      LEASE

                                 SEDONA, ARIZONA





                         LANDLORD: CANYON PORTAL, L.L.C.

                        TENANT: ILX RESORTS INCORPORATED

                   PREMISES: CANYON PORTAL MOTEL; TRADING POST
                   SHOPS - SPACE 3; AND TRADING POST ADDITION
                  SHOPS - SPACES 9, 10 AND A PORTION OF SPACE 8


                         EFFECTIVE DATE: OCTOBER 1, 2000
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                                TABLE OF CONTENTS

SECTION 1 -  FUNDAMENTAL LEASE PROVISIONS AND DEFINITIONS......................1

SECTION 2 -  PREMISES..........................................................2

SECTION 3 -  GENERAL PROVISIONS................................................2
   3.1       Option............................................................2
   3.2       No Co-Tenancy Requirement.........................................2
   3.3       Name Change.......................................................3

SECTION 4 -  LEASE TERM........................................................3
   4.1       Term..............................................................3
   4.2       Holding Over......................................................3
   4.3       Abandonment.......................................................3
   4.4       Surrender of Premises.............................................3

SECTION 5 -  RENT, SECURITY DEPOSIT AND PARKING................................3
   5.1       Rent..............................................................3
   5.2       Reserves for Furniture Fixtures & Equipment.......................5
   5.3       Parking...........................................................6
   5.4       Security Deposit..................................................6
   5.5       Tenant Option to Terminate........................................6

SECTION 6 -  NO COUNTERCLAIM OR ABATEMENT OF RENT..............................6
   6.1       No Notice.........................................................6
   6.2       No Conditional Payment............................................6

SECTION 7 -  USE OF PREMISES...................................................7
   7.1       Use...............................................................7
   7.2       Prohibited Conduct................................................7
   7.3       Prescribed Conduct................................................7

SECTION 8 -  CONSTRUCTION OF IMPROVEMENTS......................................8
   8.1       Construction by Tenant............................................8
   8.2       Construction by Landlord..........................................8
   8.3       Representations and Warranties of Landlord........................9

SECTION 9 -  TENANT OBLIGATIONS...............................................10
   9.1       Payment by Tenant................................................10
   9.2       Payment by Landlord..............................................11
   9.3       Proof of Payment.................................................11
   9.4       Personal Property Taxes..........................................11
   9.5       Premises Utilities...............................................11

                                        i
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SECTION 10 - COMMON AREA MAINTENANCE..........................................11
   10.1      Expenses.........................................................11
   10.2      Common Area Expenses Estimates...................................13

SECTION 11 - MAINTENANCE AND REPAIRS BY TENANT................................13
   11.1      Tenant's Obligation..............................................13
   11.2      Prohibited Acts..................................................14
   11.3      Rights of Landlord...............................................14

SECTION 12 - REPAIR BY LANDLORD...............................................14
   12.1      Repair by Landlord...............................................14
   12.2      Hazardous Materials..............................................15

SECTION 13 - LIENS............................................................16
   13.1      No Liens.........................................................16
   13.2      Tenant's Obligations.............................................16
   13.3      Removal of Liens by Tenant.......................................16
   13.4      Removal of Lien by Landlord......................................16

SECTION 14 - INSURANCE........................................................17
   14.1      Project Insurance................................................17
   14.2      Tenant's Property................................................17
   14.3      Tenant's Operations..............................................17
   14.4      Certificate of Insurance.........................................18
   14.5      Insurance Companies..............................................18
   14.6      Failure to Procure Insurance.....................................18
   14.7      Repair of Tenant.................................................18
   14.8      Repair by Landlord...............................................19

SECTION 15 - DAMAGE OR DESTRUCTION............................................19
   15.1      Tenant Obligations...............................................19
   15.2      Lease Termination................................................19

SECTION 16 - LANDLORD RESERVATION.............................................20

SECTION 17 - INDEMNIFICATION..................................................20
   17.1      By Tenant........................................................20
   17.2      By Landlord......................................................21
   17.3      Waiver of Claims.................................................21

SECTION 18 - ASSIGNMENT AND SUBLETTING........................................21
   18.1      Landlord Consent.................................................21
   18.2      In Writing.......................................................22
   18.3      Lease Transfer...................................................22

SECTION 19 - SUBJECT TO MASTER LEASE..........................................23

                                       ii
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SECTION 20 - DEFAULTS BY TENANT...............................................24
   20.1      Event of Default.................................................24
   20.2      Re-Enter of Premises.............................................25
   20.3      Lease Termination................................................25
   20.4      Reletting........................................................25
   20.5      Survival of Liability............................................25
   20.6      Cumulative Remedies..............................................26
   20.7      Sublessee Defaults...............................................26
   20.8      Cure Period......................................................27
   20.9      Late Charges.....................................................27

SECTION 21 - CONDEMNATION.....................................................27

SECTION 22 - TENANT'S WAIVER OF STATUTORY RIGHTS..............................28

SECTION 23 - WAIVER OF PERFORMANCE............................................28

SECTION 24 - REMEDIES CUMULATIVE..............................................28

SECTION 25 - CONVEYANCE BY LANDLORD...........................................28

SECTION 26 - NO PERSONAL LIABILITY TO LANDLORD................................28

SECTION 27 - ATTORNEYS' FEES..................................................29

SECTION 28 - PROVISIONS SUBJECT TO APPLICABLE LAW.............................29

SECTION 29 - RIGHT TO CURE....................................................29
   29.1      Right to Cure Tenant's Defaults..................................29
   29.2      Right to Cure Landlord's Defaults................................29

SECTION 30 - NOTICES .........................................................30

SECTION 31 - SIGNS............................................................30

SECTION 32 - INSPECTION AND PRESENTING FOR SALE OR LEASE......................31

SECTION 33 - ESTOPPEL CERTIFICATE.............................................31

SECTION 34 - RECORDING........................................................31

SECTION 35 - SUBORDINATION AND NON-DISTURBANCE................................32

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SECTION 36 - MISCELLANEOUS....................................................32
   36.1      Definition of Tenant.............................................32
   36.2      Tenant...........................................................32
   36.3      Gender and Number................................................32
   36.4      Modifications and Waivers........................................32
   36.5      Binding Effect...................................................32
   36.6      Severability.....................................................33
   36.7      Governing Law and Jurisdiction...................................33
   36.8      Entire Agreement.................................................33
   36.9      Time is of the Essence...........................................33
   36.10     Brokers..........................................................33

                                       iv
<PAGE>
                              CANYON PORTAL, L.L.C.

                                      LEASE

SECTION 1 - FUNDAMENT AL LEASE PROVISIONS AND DEFINITIONS.

Landlord:      Canyon Portal, L.L.C., an Arizona limited liability company

Tenant:        ILX Resorts Incorporated, an Arizona corporation

Trade Name:    Canyon Portal Motel

Lease Term:    Commencement Date:              October 1, 2000

               Termination Date:               December 31, 2010 (or as extended
                                               by Section 3.1 )

Premises:      1.   The  existing  20  room Canyon Portal Motel (i) including 12
                    older rooms to be renovated plus (ii) an additional 20 rooms
                    to be built by  Landlord  at its  expense  for a total of 40
                    rooms.

               2.   Trading  Post lease  space 3 with  approximately  753 square
                    feet.

               3.   Trading  Post  Addition  lease  spaces  (i)  9 and  10  with
                    approximately l,784 square feet; and (ii) a portion of lease
                    space 8 with approximately 688 square feet.

               4.   Non-exclusive  use of the  laundry  facility  located in the
                    basement of the North Retail Building to Canyon Portal.

               5.   Use of 45 parking spaces as described in Section 5.3 of this
                    Lease.

               6.   Use  of the  Project  monument  sign  existing  adjacent  to
                    Highway 89A.

Minimum Annual Base Rental:   The Minimum Annual Base Rent ("Rent")  shall be as
                              set forth in Sections 5.1 (A), (B), (C) and (D) of
                              this Lease.

Address of Landlord:          Canyon Portal, L.L.C.
                              P.O. Box 10239
                              Sedona, AZ 86339
                              Telephone: (520) 282-5387
                              Fax: (520) 282-5902
<PAGE>
With a Copy to:               Spector Law Offices, P.C.
                              6900 E. Camelback Road, Suite 640
                              Scottsdale, AZ 85251
                              Telephone: (480) 941-0221
                              Fax: (480) 990-9093

Address of Tenant:            2111 E. Highland, Suite 210
                              Phoenix, AZ 85016
                              Telephone: (602)957-2777
                              Fax: (602) 957-2290

     The foregoing  Fundamental  Lease  Provisions  are an integral part of this
Lease,  and each  reference  in the body of the Lease to any  Fundamental  Lease
Provision  shall be  construed to  incorporate  all of the terms set forth above
with respect to such Provisions.

SECTION 2 - PREMISES.

     A site  plan  showing  the  boundaries  of the  Premises  and its  relative
location  within a larger  commercial  development  comprised  of four  elements
including the Trading Post Shops, Canyon Portal Shops, North Retail Building and
Canyon  Portal  Motel  (the  "Project")  is  attached  hereto as  Exhibit A. The
Premises are  included in the Project for the  purposes of this Lease.  Tenant's
acceptance  of the  Premises  and  agreement  to the terms of this Lease are not
conditioned upon any  representation by Landlord of the number of square feet in
the Premises.  Landlord has  represented  that it will,  at Landlord's  expense,
renovate 12 existing  motel rooms,  construct 20 new motel rooms and provide the
Trading Post lease  spaces for use as a motel  office  pursuant to the terms set
forth in Section 8.

SECTION 3 - GENERAL PROVISIONS.

     3.1 OPTION.  The Lease Term will be  automatically  extended  for  one-year
periods  after  December 31, 2010 up to December  31, 2038,  unless on or before
August 31st of any year after 2010 written notice is given by Tenant to Landlord
that it will not continue the Lease in full force and effect.  In that case, the
Lease will terminate December 31st of the year such notice is given.

     3.2 NO CO- TENANCY REQUIREMENT.  Excluding the Premises,  Landlord reserves
the right to effect such  tenancies in the Project as Landlord,  in the exercise
of its sole business  judgment,  shall determine to best promote the interest of
the Project. Subject to Section 7.1, Tenant is not relying on the fact, nor does
Landlord  represent,  that any  specific  tenant  or kind of tenant or number of
tenants shall, during the term of this Lease, occupy any space in the Project.

     3.3 NAME  CHANGE.  Landlord  reserves  the right to change  the name of the
Project  from time to time during the term of this Lease.  Tenant  reserves  the
right to change the name of the  Premises  (motel)  from time to time during the
term of this Lease.

                                        2
<PAGE>
SECTION 4 - LEASE TERM.

     4.1 TERM.  The term of this Lease  (herein  called the "Lease  Term" or the
"Term") is set forth in Section 1 as it may be extended by Section  3.1,  unless
the Term is sooner terminated as provided in this Lease.

     4.2 HOLDING OVER. If Tenant,  upon expiration or termination of this Lease,
either by lapse of time or otherwise, remains in possession of the Premises with
Landlord's written consent,  but without a new lease reduced to writing and duly
executed,  Tenant shall be deemed to be occupying  the Premises as a tenant from
month to month,  subject to all  covenants,  conditions  and  provisions of this
Lease.  If Tenant  remains in possession  without  Landlord's  written  consent,
Tenant  shall be deemed to be in wrongful  hold over and shall be subject to all
the  rights  and  remedies  provided  to  Landlord  under this Lease and by law,
including  but not  limited  to  forcible  entry and  detainer  actions or other
eviction processes.  During any hold over period,  without a reasonable claim of
right by Tenant,  the monthly Rent shall be one hundred fifty percent  (150%) of
Tenant's monthly Rent payable during the last month of the Term of this Lease.

     4.3  ABANDONMENT.  If  Tenant,  prior  to the  expiration  of  this  Lease,
relinquishes possession of the Premises without Landlord's written consent, such
relinquishment shall be deemed to be an abandonment of the Premises and an Event
of Default under this Lease.

     4.4  SURRENDER  OF  PREMISES.  Upon any  termination  of this Lease for any
reason,  Tenant  shall  immediately  surrender  possession  of the  Premises  to
Landlord in good and tenantable repair,  reasonable wear and tear excepted,  and
shall  surrender  all keys and all  copies  of such  keys  for the  Premises  to
Landlord  at the place then fixed for the  payment of Rent or other  agreed upon
location.

SECTION 5 - RENT, SECURITY DEPOSIT AND PARKING.

     5.1 RENT.

          A. MOTEL RENT.  Commencing October 1, 2000, there will only be 8 rooms
available at Canyon Portal Motel. The Rent will be $10,000.00 per month. At such
time as each of the  additional 12 rooms have been  properly  renovated and made
available  to Tenant,  the Rent will be  increased by $667.00 per month for each
room made available with such Rent payable commencing the first day of the month
after such room(s) are renovated and made available. Provided, however, when the
12th room is renovated and made available,  the additional Rent shall be $663.00
per  month so the total  Rent for the 12 rooms is an  additional  $8,000.00  per
month. At such time as the full 40 rooms are available  (estimated to be June 1,
2001),  Landlord is in possession of a Certificate of Occupancy from the City of
Sedona and Landlord  has  substantially  completed  any  punchlist  items to the
reasonable satisfaction of Tenant (the Tenant shall be included in the punchlist
process),  the Rent will be increased to  $37,000.00  per month.  This Rent will
remain in effect  until  December  31, 2005 and then will  increase as set forth
below.

                                       3
<PAGE>
     Beginning January 1, 2006 through December 31, 2006         $40,000.00
               January 1, 2007 through December 31, 2007         $40,500.00
               January 1, 2008 through December 31, 2008         $41,000.00
               January 1, 2009 through December 31, 2009         $41,500.00
               January 1, 2010 through December 31, 2010         $42,000.00

     B. MOTEL OFFICE RENT - LEASE SPACES 9 & 10. Commencing October 1, 2000, the
Rent for the Trading Post  Addition  lease spaces 9 and 10 will be $1,500.00 per
month through May 31, 2001.  Commencing June 1, 2001 through  December 31, 2005,
the Rent will be  $3,500.00  per  month.  Commencing  January  1,  2006  through
December 31, 2010, the Rent will be $3,750.00 per month.

     C. MOTEL  OFFICE RENT - TRADING POST LEASE SPACE 3.  Commencing  October 1,
2000,  the Rent for the Trading Post lease Space 3 will be  $3,573.85  per month
through  December 31, 2000 and thereafter  will be increased each January 1st by
increasing the prior year's monthly Rent pursuant to Section 5.1(E).

     D. MOTEL OFFICE RENT - TRADING POST ADDITION SPACE 8. Commencing October 1,
2000,  the Rent for the portion of Trading Post  Addition  lease Space 8 will be
$2,580.00 per month through  December  31,2000 and thereafter  will be increased
each January 1st by increasing the prior year's monthly Rent pursuant to Section
5.1(E).

     E. The Rents  provided  for in this  Section  5.1 shall  each be subject to
adjustment  as  described  herein  commencing  on (i)  January  1,  2011 for the
Premises referred to in Section 5.1(A) and (B); and (ii) January 1, 2001 for the
Premises  referred to in Section  5.1(C) and (D),  and for each year  thereafter
(each  date an  "Adjustment  Date")  as  follows.  The  base for  computing  the
adjustment is the Consumers' Price Index for All Urban Consumers,  United States
Cities  Average  published by the United States  Department of Labor,  Bureau of
Labor  Statistics  (the  "Index"),  which was in effect on September  1st of the
second Lease year (the calendar year) prior to any Adjustment  Date  ("Beginning
Index").  For example,  the adjustment for Lease year 2011 would be based on the
Beginning  Index for September 1, 2009. The Index published for September 1st of
each year previous to each Lease Year  thereafter  ("Extension  Index") is to be
used in determining  the amount of the adjustment.  For example,  the adjustment
for the year 2011 would be based on the  Extension  Index for September 1, 2010.
If the Extension Index has increased over the Beginning  Index, the base monthly
Rent for the following  year shall be set by  multiplying  the base monthly Rent
for the  previous  year,  e.g.,  for the 12th Lease  month,  by a fraction,  the
numerator of which is the Extension  Index and the  denominator  of which is the
Beginning Index. However, the adjustment to the Rent shall be no less than three
percent  (3%)  compounded  per annum of the base monthly Rent in the prior Lease
Year for the Premises. As an example, if (i) the Beginning Index on September 1,
2009 is 111.0; the Extension Index on September 1, 2010 is 115.0; and Motel Rent
under Section 5.1(A) for December, 2010 is $42,000, then the Motel Rent for each
month of calendar  year 2011 will be $42,000 (x) 115.0 (%) 111 = $43,513.51  per
month.

          If the Index is  changed  so that the base year  differs  from that in
effect when the Term commences,  the Index shall be converted in accordance with
the conversion factor published by the United States Department of Labor, Bureau

                                       4
<PAGE>
of Labor  Statistics.  If the Index is  discontinued or revised during the Term,
such other  government  index or computation  with which it is replaced shall be
used in order to obtain  substantially  the same  result as would be obtained if
the Index had not been discontinued or revised.

          F. Tenant  shall pay to Landlord the Rents set forth in Section 5.1 of
this Lease in twelve (12) equal monthly  installments during each Lease Year, in
advance,  on the first day of each  calendar  month.  The Rental and  Additional
Charges  hereinafter  provided  for shall be paid in lawful  money of the United
States to Landlord  at its  address or at such other place as Landlord  may from
time to time designate in writing.

          G. All rental  amounts  are "net"  rent to  Landlord.  All  Additional
Charges  (all other  charges to Tenant  described in this Lease) shall be deemed
Rent whether or not expressly  designated as such, and shall be paid in addition
to the Rent at the times and in the manner provided for in this Lease.

     5.2 RESERVES FOR FURNITURE FIXTURES & EQUIPMENT.  There will be reserved by
Tenant  separate  from the Rent the  amount of  $3,500.00  per month  commencing
January 1, 2002. These funds can be co-mingled with other reserve funds on other
properties  owned or  managed  by  Tenant.  Within 60 days after the end of each
calendar  year,  Tenant will send to Landlord a report of the reserve  funds set
aside and the expenditures  from the reserve funds for Canyon Portal showing the
balance of the reserve  funds for Canyon  Portal.  The funds  reserved  shall be
spent by Tenant for  Furniture,  Fixtures & Equipment  at the  Premises so as to
maintain the Furniture,  Fixtures & Equipment in good repair and condition.  The
reserved funds may be spent at the reasonable  discretion of Tenant.  At the end
of the Lease Term, or any extension thereof, any reserve funds not expended will
be paid to Landlord.

     5.3 PARKING.  There will be reserved for Tenant 20 parking  spaces that are
exclusively  reserved on a 24 hour a day basis.  An additional 25 spaces will be
labeled as "Reserved for Motel Parking Only after 4:00 p.m." All parking  spaces
in front of the Motel Office (as reflected on Exhibit A) will be included in the
20 parking spaces reserved exclusively for Tenant.

     5.4 SECURITY DEPOSIT. No Security Deposit is required under this Lease.

     5.5 TENANT OPTION TO  TERMINATE.  If 40 rooms are not available for use (as
defined in Section 5.1(A) above) by Tenant on or before August 31, 2001, Tenant,
at its option,  may: (i) Terminate  this Lease by giving fifteen (15) days prior
written  notice  delivered  to Landlord on or before  August 31,  2001;  or (ii)
Continue  this Lease in full force and effect as to the (8)  original  rooms and
(12) renovated  rooms, and at such time as all of the 20 new rooms are available
for  use  (defined  for  the  purpose  of  this  subparagraph   (ii),  only,  as
substantially  completed  except for normal  "punchlist"  items),  Landlord will
notify Tenant in writing, and Tenant shall have fifteen (15) days after the date
of receipt of such notice to accept  such 20 new rooms in its sole and  absolute
discretion,  by written notice  delivered to Landlord on or before the fifteenth
(15th) day of such  period.  If no such  notice is  delivered,  the 20 new rooms
shall be deemed rejected.

                                       5
<PAGE>
     If the new rooms are  accepted by the Tenant,  rent shall then  commence on
such rooms upon the conditions described in Section 5.1(A) of this Lease.

     If the new  rooms are not  accepted  by  Tenant:  (iii) The rent for the 20
rooms  retained by Tenant will be forty-five  percent (45%) of the Rent schedule
in Section 5.1(A) beginning January 1, 2006, and $18,000 per month prior to that
time upon  completion of the  renovation of the 12 rooms as described in Section
5.1(A),  and (iv)  Landlord  and Tenant  will  mutually  work  together  so that
Landlord will be able to operate the 20 new rooms as a separate  motel  facility
at the Project.

SECTION 6 - NO COUNTERCLAIM OR ABATEMENT OF RENT.

     6.1 NO NOTICE.  Except as expressly  provided  herein,  Rent and Additional
Charges  and all other sums  payable  by Tenant  shall be paid  without  notice,
demand,  counterclaim,  setoff, recoupment,  deduction or defense of any kind or
nature and without  abatement,  suspension,  deferment,  diminution or reduction
except an offset  will be allowed to Tenant if  Landlord is in default to Tenant
on payments to Tenant on any loan made by Tenant to Landlord,  including but not
limited to a loan of $100,000 made by Tenant, as Holder, to Landlord,  as Maker,
contemporaneously with the effective date of this Lease.

     6.2 NO CONDITIONAL  PAYMENT. NO PAYMENT BY TENANT OR RECEIPT BY LANDLORD OF
A LESSER AMOUNT THAN THE TOTAL OF ALL SUMS DUE  HEREUNDER  SHALL BE DEEMED TO BE
OTHER THAN AN ACCOUNT OF THE EARLIEST STIPULATED RENT, NOR SHALL ANY ENDORSEMENT
OR STATEMENT ON ANY CHECK,  OTHER PAYMENTS OR ANY ACCOMPANYING  LETTER BE DEEMED
AS ACCORD AND/OR SATISFACTION AND LANDLORD MAY ACCEPT SUCH CASH AND/OR NEGOTIATE
SUCH CHECK OR PAYMENT  WITHOUT  PREJUDICE  TO  LANDLORD'S  RIGHT TO RECOVER  THE
BALANCE  OF SUCH  RENT OR PURSUE  ANY OTHER  REMEDY  PROVIDED  IN THIS  LEASE OR
OTHERWISE,  REGARDLESS OF WHETHER LANDLORD MAKES ANY NOTATION ON SUCH INSTRUMENT
OF  PAYMENT  OR  OTHERWISE  NOTIFIES  TENANT  THAT SUCH  ACCEPTANCE,  CASHING OR
NEGOTIATION  OF SUCH PAYMENT IS WITHOUT  PREJUDICE TO ANY OF LANDLORD'S  RIGHTS.
TENANT SPECIFICALLY WAIVES THE PROVISIONS OF A.R.S. 47-1207.

SECTION 7 - USE OF PREMISES.

     7.1  USE.  Tenant  shall  not  use or  permit  the  Premises  to be used in
violation of the laws,  ordinances,  regulations and  requirements of the United
States,  the  State of  Arizona,  Coconino  County,  the City of  Sedona  or any
subdivision  or  department  thereof  or any other  authority  or agency  having
jurisdiction over the Premises or the Project. Tenant acknowledges other tenants
at the  Project may have  certain  exclusive  uses,  a list of which is attached
hereto as Exhibit B.  Tenant  shall not sell any items  which are  protected  by
other tenants'  exclusivity  rights.  Landlord shall not grant any rights to any
tenant which would compete with any material  business operated by Tenant at the
Project.

                                       6
<PAGE>
     7.2 PROHIBITED CONDUCT. Except by prior written consent of Landlord, Tenant
shall not:

          A. Use or operate  any  machinery  that,  in  Landlord's  opinion,  is
harmful to the  Premises or the Project or  disturbing  to other  tenants in the
building of which the Premises is a part (except as is reasonably  necessary for
alterations or repairs); use any loud speakers, televisions,  stereos, radios or
other  devices in a manner so as to be heard or seen  outside the  Premises;  or
display  merchandise  on the  exterior  of the  Premises  either for sale or for
promotional purposes.

          B. Do or suffer to be done any act, matter or thing  objectionable  to
the fire,  casualty or liability insurance carriers whereby any insurance now in
force or  hereafter  to be placed on the  Premises or the  Project,  or any part
thereof, shall become void or suspended, or whereby the same shall be rated as a
more  hazardous  risk than at the date when Tenant  receives  possession  of the
Premises.  In case of a  breach  of this  covenant,  in  addition  to all  other
remedies of Landlord  hereunder,  Tenant agrees to pay to Landlord as additional
rent any and all  increase or  increases  of premiums  on  insurance  carried by
Landlord on the Premises or the Project.

          C. Do or cause to be done any act, matter or thing in violation of any
federal, state, county or local law, statute, regulation, rule or ordinance.

     7.3 PRESCRIBED  CONDUCT.  At all times  throughout  the Lease Term,  Tenant
shall:

          A.  Comply  with any and all  requirements  of any of the  constituted
public  authorities  and with the terms of any state or federal statute or local
ordinance or regulation applicable to Tenant or its use, safety,  cleanliness or
occupation of the Premises,  and save Landlord  harmless from penalties,  fines,
costs, expenses or damages resulting from Tenant's failure to do so.

          B. Give Landlord  prompt  written notice of any accident,  fire,  pest
infestation, or damage occurring on or to the Premises.

          C. Load and unload  goods at such times in the areas and through  such
entrances as may be  designated  for  "Delivery"  by Landlord.  Such trailers or
trucks  shall not be  permitted  to remain  parked  overnight in any area of the
Project, whether loaded or unloaded. Designated fire lanes shall not be used for
the loading or unloading of merchandise, parking or standing of running vehicles
at any time. The unlawful use of such fire lanes may result in the towing of the
offending  vehicle and subject the owner or user thereof to all applicable fines
established by the City of Sedona and/or Landlord.

          D. Conduct its business in the Premises in all respects in a dignified
manner and in accordance with high standards of motel operation. Tenant will not
engage in any deceptive  marketing or sales efforts that offend the customers of
the  Project,  its Tenants or in any way conduct its  operations  in a "discount
sale" manner.

                                       7
<PAGE>
          E. Comply with all  reasonable  rules and  regulations  of Landlord in
effect at the time of the  execution of this Lease or at any time or times,  and
from time to time,  promulgated  by Landlord which  Landlord,  in its reasonable
discretion, shall deem necessary in connection with the Premises or the Project.

SECTION 8 - CONSTRUCTION OF IMPROVEMENTS.

     8.1  CONSTRUCTION BY TENANT.  Tenant shall not make or cause to be made any
structural alterations, additions or improvements to the Premises, without first
obtaining Landlord's written approval, which shall not be unreasonably withheld.
Tenant shall present to Landlord plans and  specifications  for such work at the
time  approval  is  sought.   Landlord  may  condition  its  approval  upon  the
requirement that Tenant, or its contractor,  secure and bear the cost of a labor
and  materials  payment  bond for any  single  improvement  costing in excess of
$100,000.  All  alterations,   improvements,  additions  and  fixtures  made  or
installed by Tenant shall remain upon the Premises at the  expiration or earlier
termination of this Lease and shall become the property of Landlord.

     8.2 CONSTRUCTION BY LANDLORD.  Landlord shall, at its expense, construct 20
new motel rooms and  renovate 12 existing  motel  rooms.  The 20 new motel rooms
will be  constructed  pursuant to plans  prepared by Don Woods  Architect  dated
July,  2000 and reflecting the following  Index to Drawings.  These Drawings are
incorporated herein by this reference.

          A1        SITE PLAN
          A2        DEMOLITION PLAN
          A3        FLOOR PLAN/ARCHITECTURAL ELECTRIC
          A4        BUILDING SITE PLAN-GROUND LEVEL
          A5        BUILDING SITE PLAN-UPPER LEVEL/STAIR
          A6        SUITE PLANS AND SCHEDULES
          A6        EXTERIOR ELEVATIONS
          A7        EXTERIOR ELEVATIONS AND DETAILS
          A8        BUILDING SECTION/INTERIOR ELEVATIONS
          C1        GENERAL NOTES/DETAILS
          C2        GRADING AND DRAINAGE PLANS
          S1.1      STRUCTURAL NOTES
          S1.2      TYPICAL DETAILS
          S2.1      FOUNDATION PLAN
          S2.2      FLOOR FRAMING PLAN
          S2.3      ROOF FRAMING PLAN
          S3.1      FOUNDATION DETAILS
          S4.1      FLOOR FRAMING DETAILS
          S4.2      FRAMING DETAILS
          S5.1      ROOF FRAMING DETAILS
          MP1       MECHANICAL PLANS
          MP2       PLUMBING PLAN

                                       8
<PAGE>

The  renovation  of the 12 motel rooms will be done  pursuant  to  architectural
plans  prepared  by Don  Woods  Architect  and dated  August  16,  2000.  Tenant
acknowledges  receipt of the plans for both the construction of the 20 new rooms
and renovation of the 12 rooms.  The construction and renovation will be done by
Landlord at its expense in substantial  compliance with the above plans subject,
however,  to  modifications  required  by the City of  Sedona in order to secure
building  permits  and also  subject  to  removal  of a walkway  connecting  the
buildings which blocks view corridors.

     8.3  REPRESENTATIONS  AND  WARRANTIES  OF  LANDLORD.   Landlord  makes  the
following representations and warranties:

          A. This Lease has been duly  authorized  and  executed by Landlord and
constitutes  the  valid  and  binding  obligation  of  Landlord  enforceable  in
accordance  with its  terms.  The  execution  and  performance  of this Lease by
Landlord does not conflict  with or  constitute a default  under any  agreement,
mortgage, lease or other instrument by which Landlord is or may be bound.

          B. Landlord has no actual  knowledge and has received no notice of any
pending or  threatened  claim,  action,  suit,  proceeding  or other  litigation
affecting the Project, Premises or any portion thereof, or under any outstanding
contract, if any, to which Landlord is a party, in any court or before or by any
governmental authority having jurisdiction.

          C. The Premises are free from liens of mechanics and materialmen.

          D. To Landlord's  actual  knowledge,  there exist no current  material
violations of any federal, state, county or municipal laws, ordinances, building
codes,  orders,  regulations  or  requirements  affecting  any  portion  of  the
Premises.

          E. Landlord has no actual knowledge of any agreements,  commitments or
understandings  pursuant to which  Landlord is required to dedicate  any part of
the Premises or to grant any  easement,  water  rights,  rights-of-way,  road or
license  for  ingress  and  egress  or other use in  respect  to any part of the
Premises  whether on account  of the  development  of  adjacent  or nearby  real
property or otherwise.

          F. To Landlord's actual knowledge, it is not in material default or in
material breach of any written covenant, condition,  restriction,  right-of-way,
easement or other written agreement affecting the Premises.

          G. Landlord has sufficient  monies available through a loan with Owens
Mortgage  Investment Fund ("Owens") to complete all construction  required under
this Lease with completion to occur  approximately June 1, 2001. Upon completion
of such  construction,  the 20 new rooms will be of no less  quality  than the 8
rooms completed in 1998 and all rooms will be furnished with furniture, fixtures
and equipment of no less quality than the furnishings in such 8 rooms.  Attached
as  Exhibit  C is a  line-item  breakdown  on  the  Owens  loan  which  Landlord
represents is sufficient to complete and will be spent on the  construction  and
other expenditures reflected on Exhibit C.

                                       9
<PAGE>
          H. Landlord shall pay all monies due as rent to the Master Landlord to
keep in full force and effect the Master Lease referred to in Section 19 of this
Lease.  In the  event  that  Landlord  defaults  in the  payment  of any rent or
otherwise,  under the  Master  Lease,  Tenant  shall have the option to take any
action,  including making payments of rent directly to the Master  Landlord,  in
order to cure such  default by Landlord  as tenant  under the Master  Lease.  If
Tenant, in order to cure such defaults, is required to expend funds in excess of
that owed by Tenant to Landlord for Rent,  Tenant shall deduct such amounts from
the next amounts owing to Landlord under this Lease.  In addition,  Tenant shall
earn  interest at 12% on advanced  monies  which are in excess of Tenant' s Rent
with the  interest  to be  deducted  from the next  monies  owed to  Landlord by
Tenant.

SECTION 9 - TENANT OBLIGATIONS.

     9.1 PAYMENT BY TENANT.  Tenant shall pay and discharge  punctually,  as and
when the same shall  become due and  payable,  each and every cost,  expense and
obligation of every kind and nature,  foreseen or unforseen,  arising out of the
possession,  operation,  maintenance,  alteration,  repair,  rebuilding,  use or
occupancy  of the  Premises  by  Tenant.  Tenant  shall  also pay and  discharge
punctually,  as and when the same shall become due and payable without  penalty,
personal property,  business,  occupation and occupational license taxes, water,
sewer, electricity,  telephone charges and fees and all sales and use taxes owed
to  governmental  entities  arising out of the motel rental to its customers and
guests.

     9.2 PAYMENT BY  LANDLORD.  Tenant shall not be required to pay or reimburse
Landlord  for: (i) any local,  state or federal  capital  levy,  franchise  tax,
revenue  tax,  income tax,  or profits tax of Landlord  unless and to the extent
such levy,  tax or imposition is in lieu of or a substitute  for any other levy,
tax or imposition now or later in existence upon or with respect to the Premises
which, if such other levy, tax or imposition were in effect, would be payable by
Tenant under the provisions hereof;  (ii) any estate,  inheritance,  devolution,
succession  or  transfer  tax which may be imposed  upon or with  respect to any
transfer  (other  than taxes in  connection  with a  conveyance  by  Landlord to
Tenant) of Landlord's  interest in the Premises;  or (iii) any lien arising from
the  unilateral  acts or  omissions  of Landlord  and  unrelated to a default of
Tenant under this Lease.

     9.3 PROOF OF PAYMENT.  Tenant,  upon Landlord's  request,  shall furnish to
Landlord  within  thirty  (30)  days  thereafter  proof  of the  payment  of any
obligation to be paid by Tenant.

     9.4 PERSONAL PROPERTY TAXES.  Tenant shall be responsible for and shall pay
before delinquency all taxes levied or assessed against any personal property of
any kind owned or placed in, upon or about the Premises by Tenant. Tenant hereby
agrees to protect and hold harmless Landlord and the Premises from any liability
for Tenant' s share of any and all such taxes,  assessments and charges together
with any interest, penalties or other charges thereby imposed, and from any sale
or other  proceedings  to enforce  payment  thereof,  and to pay all such taxes,
assessments and charges before delinquency and before same become a lien.

                                       10
<PAGE>
     9.5 PREMISES  UTILITIES.  Tenant shall be responsible for any and shall pay
for all  utilities  used or  consumed  in or upon the  Premises  as and when the
charges  shall  become due and payable  during the Term.  Tenant  shall make all
appropriate  applications  to  local  utility  companies  and pay  all  required
deposits.  In no event shall Landlord be liable for any  interruption or failure
in the supply of any utilities to the Premises.

SECTION 10 - COMMON AREA MAINTENANCE.

     10.1  EXPENSES.  For the Term  hereof,  Tenant  shall pay to  Landlord,  as
Additional Rent, Tenant's  "Proportionate  Share" of: (i) all costs of operation
and  maintenance  of the  Common  Areas of the  Project;  (ii) all  Common  Area
utilities;  (iii) all real  estate and  assessment  taxes  levied  and  assessed
against  the  Project;  (iv) all  insurance  coverage  upon the  Project and its
operations;  and (v) Landlord's  management fee.  Tenant's  Proportionate  Share
shall be payable in equal monthly  installments at the same time Rent is payable
hereunder,  without  demand and without  any  deduction  or set-off  whatsoever.
Tenant's  Proportionate  Share  shall be not less than the ratio  that  Tenant's
total  floor  area  bears to the total  floor  area of all the  retail and motel
buildings  (as measured by Landlord) in the Project  which are from time to time
completed  as of the first day of each  calendar  quarter.  For the period  from
October 1, 2000 through May 31, 2001, the Tenant's  Proportionate Share shall be
36.25%. For the period from approximately June 1, 2001 and thereafter, Tenant' s
Proportionate  Share shall be 51.11 % (after completion of the 20 rooms).  These
Common Area percentages are based on a square footage analysis by Landlord.

          A. FOR PURPOSES OF THIS SECTION 10.1:

               1. The cost of operation and maintenance of the common facilities
includes  all  expenditures  incurred by or on behalf of Landlord in keeping and
maintaining the foundations, exterior walls, floors and roofs of the Common Area
of the Project, all repairs to and replacements of equipment associated with the
Project including, but not limited to, the cost of operating and maintaining the
common facilities,  including without limitation,  the cost of all of Landlord's
gardening and  landscaping,  the current portion of any assessments  against the
Project for any purpose, repairs,  preventive maintenance,  repainting including
restriping of parking lot and access ways, updating and maintenance of directory
signs,  rental of signs and equipment,  lighting,  sanitary  control,  cleaning,
sweeping,  removal of ice,  snow,  trash,  rubbish,  garbage  and other  refuse,
depreciation  over a period of not  exceeding  sixty (60)  months of  machinery,
equipment and other assets used in the operation and maintenance of the Project,
repair,  maintenance or replacement of onsite water lines, sanitary sewer lines,
septic tanks,  leach lines and  evapotranspiration  beds,  storm water lines and
electrical  lines  and  equipment  serving  the  property,  the cost of  police,
security and traffic  control  services,  reasonable  reserves  for  anticipated
expenditures,  the  cost and  maintenance  and  upkeep  of the  public  restroom
facilities,  and the cost of all personnel required to supervise,  implement and
accomplish  all  of  the  foregoing,  including  but  not  limited  to,  on-site
management and maintenance personnel. Notwithstanding the above, the Common Area
costs shall be reimbursed by any  insurance  recoveries on Landlord's  insurance
with  respect to Common Area items or  recovery  by Landlord  from any breach of
warranty by a contractor or subcontractor  with respect to Common Area items. In
addition,  the Manager shall charge and be paid an additional fee of ten percent
(10%) of the total of all Common Area  Expenses,  excluding  real property taxes
and insurance, to cover supervision, administration and overhead of the Project.

                                       11
<PAGE>
               2. Real Estate  Taxes  include all taxes,  assessments  and other
governmental fees or charges, general and specific,  ordinary and extraordinary,
of any kind and nature whatsoever, including but not limited to, assessments for
public  improvements  or  benefits,  which  shall,  during the Term  hereof,  be
assessed,  levied,  or imposed  upon the  Project or  Landlord  or become due or
payable.

               3.  Insurance  coverage  upon  the  Project  and  its  operations
includes the cost of all Landlord's  insurance relating to the common facilities
of the Project as a whole or the operations thereon,  including, but not limited
to: casualty insurance, flood insurance, rent loss insurance, fire insurance and
extended coverage, on all buildings in the Project, as well as general liability
insurance,  umbrella  liability  insurance,  bodily  injury,  public  liability,
property damage liability,  automobile  insurance,  sign insurance and any other
insurance carried by the Landlord in coverage limits selected by the Landlord.

               4.  Landlord's  Management Fee is comprised of  compensation  and
fees  paid  by  Landlord  to an  independent  management  agent  or  broker  for
management of the Project, or if Landlord manages the Project on its own behalf,
such fees shall be  stipulated  to be and computed as three  percent (3%) of the
Rent  received by Landlord  from Tenant for the fiscal year in question  for the
portions  of the  Premises  referred  to in  Sections  5.1(C)  and  (D)  with no
management  fee due as to the  portion of the  Premises  referred  to in Section
5.1(A) and (B).

     10.2 COMMON AREA  EXPENSES  ESTIMATES.  At the  beginning of each  calendar
year,  Landlord shall have the right to prospectively  estimate the total amount
of  Common  Area  Expenses  anticipated  for  such  year,  based  on  Landlord's
experience  and  the  latest  available  tax  information,  and  Landlord  shall
thereafter  notify Tenant of the portion of estimated Common Area Expenses which
Tenant shall be expected to pay each month.  Within  ninety (90) days  following
the end of the  applicable  calendar  year,  Landlord  shall  furnish  Tenant  a
statement  ("Statement")  setting  forth the  amount of the actual  Common  Area
Expenses for such year,  showing in adequate detail the manner in which Tenant's
portion of Common Area  Expenses  has been  computed  and the  payments  made by
Tenant for Common Area  Expenses  during such year.  If the amount  collected by
Landlord  from  Tenant for  estimated  Common Area  Expenses  exceeds the actual
amount of Common Area Expenses for such year,  Landlord  shall refund the excess
within  thirty  (30) days or shall  apply any  credit  to the next  Common  Area
Expense payment to be made by Tenant.  If Tenant' s payments of estimated Common
Area  Expenses are less than the total amount of actual Common Area Expenses for
such year,  Tenant shall pay the deficiency within thirty (30) days from receipt
of the Statement.

SECTION 11 - MAINTENANCE AND REPAIRS BY TENANT.

     11.1  TENANT'S  OBLIGATION.  Tenant  shall keep and maintain in good order,
condition  and repair,  reasonable  wear and tear excepted  (including  any such
replacement, periodic painting and restoration as is required for that purpose),
the  Premises  and every  part  thereof  and any and all  appurtenances  thereto
wherever  located,  including  but not limited  to, the  exterior  and  interior

                                       12
<PAGE>
portion of all doors,  door checks,  door locks,  windows,  plate  glass,  store
front, all plumbing and sewage facilities within the Premises,  all alterations,
improvements  and  installations  made by Tenant and any repairs  required to be
made due to burglary or other  illegal  entry into the  Premises.  Tenant  shall
maintain and bear the expense of the light fixtures and bulbs,  air-conditioning
units and filters, heating units or furnace,  janitorial services, interior pest
control, and the like.

     11.2 PROHIBITED ACTS. Tenant shall not cause or permit  accumulation of any
debris or extraneous  matter on the roof of the Premises and will be responsible
for any  damage  caused  thereto by any acts of Tenant,  its  agents,  servants,
employees or  contractors.  Tenant  shall place any rubbish,  broken down boxes,
trash or other excess matter only in such containers as are authorized from time
to time by Landlord; keep the Premises (including all exterior surfaces and both
sides of all glass) clean,  orderly,  sanitary and free from objectionable odors
and from  insects,  vermin,  and other  pests;  and keep the  outside  areas and
sidewalks  immediately  adjoining the Premises  clean and free from empty boxes,
trash of any kind, ice and any other obstructions or safety hazards.

     11.3  RIGHTS  OF  LANDLORD.  If Tenant  refuses  or fails to  commence  and
complete  repairs  or  maintenance  required  herein  promptly  and  adequately,
Landlord  may,  but shall not be required  to, make and  complete the repairs or
perform the maintenance.  The cost of such repairs or maintenance  shall be paid
immediately by Tenant to Landlord as additional Rent upon demand.

SECTION 12 - REPAIR BY LANDLORD.

     12.1 REPAIR BY  LANDLORD.  Landlord  shall keep and maintain in good repair
the  foundation,  exterior  walls,  floors and roof of the building in which the
Premises are located  (but the same shall be included in the cost of  operations
and maintenance of the common facilities as defined in Section 10), exclusive of
doors, door frames, door checks,  door locks,  windows and window frames located
in exterior building walls. Landlord shall not, however, be required to make any
such  repairs  when such  repairs are the result of misuse or neglect by Tenant,
its agents, employees, invitees, licensees or contractors,  except to the extent
covered by Project insurance.  Any repairs required to be made by reason of such
Tenant  misuse or  neglect  shall be the  responsibility  of  Tenant,  the above
provisions  to the  contrary  notwithstanding,  except to the extent  covered by
Project insurance.  Except as provided herein, Landlord shall have no obligation
to alter or modify the Premises,  or any part thereof, or to repair and maintain
any  plumbing,  heating,   electrical,   air-conditioning  or  other  mechanical
installation in the Premises. Under no circumstances shall Landlord be obligated
to repair, replace or maintain any plate glass or door or window glass no matter
what the cause, except to the extent covered by Project insurance.

     12.2  HAZARDOUS  MATERIALS.   Exclusive  of  Hazardous  Materials  normally
associated with Tenant's  permitted use, if any, Tenant covenants and agrees not
to use, generate, release, manage, treat, manufacture, store, or dispose of, on,
under or about,  or transport  to or from (any of the  foregoing  hereinafter  a
"Use") the Premises any Hazardous Materials (other than "De Minimis" amounts (as
defined  below)).  Tenant  further  covenants  and  agrees  to pay all costs and

                                       13
<PAGE>
expenses associated with enforcement, removal, remedial or other governmental or
regulatory  actions,  agreements  or order  threatened,  instituted or completed
pursuant to any Hazardous Materials Laws, and all audits, tests, investigations,
cleanup, reports and other such items incurred in connection with any efforts to
complete,   satisfy  or  resolve  any  matters,  issues  or  concerns,   whether
governmental  or  otherwise,  arising out of or in any way related to the Use of
Hazardous  Materials in any amount by Tenant, its employees,  agents,  invitees,
subtenants,  licensees, assignees or contractors. For purposes of this Lease (i)
the term  "Hazardous  Materials"  shall  include but not be limited to asbestos,
urea formaldehyde,  polychlorinated biphenyls, automotive and petroleum products
and byproducts (including, without limitation, gasoline, diesel and other fuels,
new,  used  and  recycled  oil,  grease,  brake  fluid,  antifreeze,  and  other
automotive  fluids installed in or recovered from service vehicles or otherwise,
and any other fuel  additive,  derivative,  lubricant  or  byproduct  generated,
stored  or  used  in  Tenant's  business  operation  or  otherwise   occurring),
pesticides,  radioactive  materials,  hazardous wastes, toxic substances and any
other related or dangerous  toxic or hazardous  chemical,  material or substance
defined as hazardous or  regulated or as a pollutant or  contaminant  in, or the
use of or exposure to which is  prohibited,  limited,  governed or regulated by,
any Hazardous  Materials  Laws;  (ii) the term "De Minimis"  amounts shall mean,
with  respect  to any given  level of  Hazardous  Materials,  that such level or
quantity of Hazardous Materials in any form or combination of forms (a) does not
constitute a violation of any Hazardous  Materials  Laws; and (b) is customarily
employed in, or associated  with,  similar  retail or motel projects in Coconino
County,  Arizona;  and (iii) the term "Hazardous  Materials Laws" shall mean any
federal,  state, county,  municipal,  local or other statute,  law, ordinance or
regulation now or hereafter enacted which may relate or legislate the protection
of  human  health  or  the  environment,   including  but  not  limited  to  the
Comprehensive  Environment Response,  Compensation and Liability Act of 1980, 42
U.S.C.  Section 9601, ET SEQ.; the Hazardous  Materials  Transportation  Act, 49
U.S.C.  Section 1801, ET SEQ.;  the Resource  Conservation  and Recovery Act, 42
U.S.C. Section 6901, ET SEQ.; the Federal Water Pollution Control Act, 33 U.S.C.
Section  1251,  ET SEQ.;  the Toxic  Substances  Control Act of 1976,  15 U.S.C.
Section  2601,  ET  SEQ.;   Ariz.   Rev.  Stat.  Ann.  Title  49  (The  "Arizona
Environmental  Quality Act of 1986");  and any rules,  regulations or guidelines
adopted or promulgated  pursuant to any of the foregoing as they may be adopted,
amended or replaced from time to time.

SECTION 13 - LIENS.

     13.1 NO LIENS.  Tenant  shall have no  authority  to do any act or make any
contract  which may  create or be the  basis  for any  lien,  mortgage  or other
encumbrance  upon any  interest of Landlord in the Premises or which would cause
any document to be recorded  against the Premises or the Project.  Should Tenant
cause any construction,  alterations, rebuildings,  restorations,  replacements,
changes, additions, improvements or repairs to be made on the Premises, or cause
any labor to be  performed  or  material  to be  furnished  thereon,  therein or
thereto,  neither  Landlord nor the Premises  shall under any  circumstances  be
liable for the payment of any expense incurred or for the value of any work done
or material  furnished,  and Tenant  shall be solely and wholly  responsible  to
contractors,  laborers and  materialmen for performing such labor and furnishing
such  material.  Tenant shall have the right to subject its  Tenant's  leasehold
interest to a lien that is limited solely to Tenant's leasehold estate.

                                       14
<PAGE>
     13.2 TENANT'S  OBLIGATIONS.  Any alterations or improvements made by Tenant
to the Premises must be paid for by Tenant when such alterations or improvements
are made.  Nothing in this Lease shall be construed to authorize  Tenant, or any
person dealing with or under Tenant, to charge the Rents of the Premises, or the
property and  buildings of which the  Premises  form a part,  or the interest of
Landlord in the state of the Premises,  with a mechanics' lien or encumbrance of
any kind, and under no circumstances  shall Tenant be construed to be the agent,
employee  or   representative  of  the  Landlord  in  the  making  of  any  such
improvements or alterations to the Premises.

     13.3  REMOVAL OF LIENS BY TENANT.  If,  because of any act or omission  (or
alleged act or  omission) of Tenant,  any  mechanic's,  materialman's,  or other
lien,  charge  or order  for the  payment  of money  shall be filed or  recorded
against the Premises or against  Landlord  (whether or not such lien,  charge or
order is valid or enforceable as such), Tenant shall, at its own expense, either
cause the same to be  discharged  of record  pursuant  to A.R.S.  ss.33-1004  or
otherwise cause such discharge,  within thirty (30) days after Tenant shall have
received  notice of the filing  thereof,  or Tenant  may,  within  such  period,
furnish to Landlord a bond satisfactory to Landlord against such lien, charge or
order,  in which case  Tenant  shall have the right in good faith to contest the
validity or amount thereof.

     13.4  REMOVAL OF LIEN BY LANDLORD.  If,  because of any act or omission (or
alleged act or omission) of Landlord,  any mechanic's,  materialman's,  or other
lien,  charge  or order  for the  payment  of money  shall be filed or  recorded
against the  Premises  or against  Tenant  (whether or not such lien,  charge or
order is valid or  enforceable  as such),  Landlord  shall,  at its own expense,
either cause the same to be discharged of record pursuant to A.R.S.  ss.33-1004,
or otherwise cause such discharge,  within thirty (30) days after Landlord shall
have received notice of the filing thereof, or Landlord may, within such period,
furnish to Tenant a bond  satisfactory  to Tenant  against such lien,  charge or
order,  in which case Landlord shall have the right in good faith to contest the
validity or amount thereof.

SECTION 14 - INSURANCE.

     14.1 PROJECT  INSURANCE.  Landlord  bears the risk of and shall insure as a
Common  Area  Expense as  practical  or as required by  Landlord's  Lender,  the
operation of the Project as a whole or the common areas thereof.  Such insurance
shall  include,  but is not limited to,  general  liability and umbrella  excess
liability  (with  coverage  of  at  least  $3,000,000),  bodily  injury,  public
liability,  property damage liability, fire and extended coverage in amounts not
less than eighty  percent  (80%) of the  replacement  cost of the Project,  sign
insurance and the like in coverage limits selected by Landlord. Tenant shall pay
to Landlord its  "Proportionate  Share" of such insurance as provided in Section
10 above.

     14.2 TENANT'S PROPERTY. Tenant agrees that all property owned by it in, on,
or about the Premises shall be at the sole risk and hazard of the Tenant, except
for  matters  covered by Project  insurance  and  subject to the  provisions  of
Paragraph  17.2 of this Lease.  Subject to the  provisions of Paragraph  17.2 of
this Lease,  Landlord shall not be liable or responsible  for any loss or damage
to Tenant,  or anyone  claiming under or through Tenant,  or otherwise,  whether
caused by or resulting  from a peril required to be insured  hereunder,  or from
water,  gas leakage,  plumbing,  electricity  or electrical  apparatus,  pipe or

                                       15
<PAGE>
apparatus of any kind, the elements or other similar or dissimilar  causes,  and
whether or not  originating  in the Premises or elsewhere.  Tenant shall require
all policies of risk insurance  carried by it on its property in the Premises to
contain or be endorsed with the provision in and by which the insurer designated
therein shall waive its right of subrogation against Landlord.

     14.3  TENANT'S  OPERATIONS.  Except as may be  provided  otherwise  in this
Lease,  all  operations  conducted by Tenant shall be at Tenant's  sole risk. In
addition, Tenant shall procure insurance for its operations as follows:

          A.  Tenant  shall keep in force at its own  expense  public  liability
insurance and comprehensive  general liability insurance,  including contractual
liability insurance  sufficient to cover all phases and aspects of the operation
and conduct of its business,  with minimum limits of $2,000,000.00 on account of
bodily injuries to or death of one person and $3,000,000.00 on account of bodily
injuries  to or death of more than one person as a result of anyone  accident or
disaster,  and  $2,000,000.00  as a result of damage to  property.  Such  dollar
amounts  shall be  adjusted  each  five-year  period by a cost of  living  index
factor.

          B. Tenant  shall keep and  maintain in force  during the Term  hereof,
plate glass insurance upon windows and doors in the Premises as required by this
Lease  unless  Landlord  maintains  such  insurance on behalf of all Tenants and
treats it as a Common Area Expense.

     14.4 CERTIFICATE OF INSURANCE.  Tenant shall provide annually to Landlord a
Certificate of Insurance  listing  Landlord as an additional named insured under
the  Tenant's  policies of  insurance  required by this  Lease.  Landlord  shall
provide  annually to Tenant a  Certificate  of  Insurance  listing  Tenant as an
additional named insured under the Landlord's  policies of insurance required by
this Lease.

     14.5 INSURANCE COMPANIES.  The policies affording the insurance required by
this Lease shall be with companies (rated A-[minus] VII or better,  A. M. Best's
Key Rating Guide) authorized to do business in the State of Arizona and shall be
in a form reasonably  satisfactory to Landlord,  shall provide  replacement cost
coverage,  shall name Landlord as an additional  insured,  and shall provide for
payment of loss thereunder to Landlord and Tenant as their interests may appear.
The policies or  certificates  evidencing  such insurance  shall be delivered to
Landlord  on or before  the  Commencement  Date and  renewals  thereof  shall be
delivered to Landlord at least thirty (30) days prior to the expiration dates of
the respective policies.  Alternatively,  the insurance required by this Section
14 may be provided  under a blanket  policy to the Tenant's  existing  insurance
policy.

     14.6 FAILURE TO PROCURE  INSURANCE.  In the event either Tenant or Landlord
shall fail to procure  insurance  required of Tenant under this Lease or fail to
maintain  the same in force  continuously  during  the  Term,  or any  extension
thereof,  the other party shall be entitled to procure such  insurance  and such
party shall, upon demand,  immediately be reimbursed by the defaulting party for
such premium expense,  failing which, the  non-defaulting  party may declare the
other party in default under this Lease.

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     14.7  REPAIR  OF  TENANT.  In the event of loss  under  any such  policy or
policies,  required to be provided by Tenant, Tenant shall promptly proceed with
the  repair  and  restoration  of  the  damaged  or  destroyed  improvements  in
accordance with Section 15 of this Lease. The insurance  proceeds,  if less than
$100,000.00, shall be paid to Tenant for application to such repair, restoration
or  remediation,  so long as (a) Tenant is not then in default under this Lease,
and (b) Tenant expressly covenants in writing with Landlord to expend such funds
for the repair,  restoration or remediation of the Premises and the improvements
therein, and to furnish Landlord with documentation  evidencing such expenditure
of funds for work and  improvements  incorporated  in the Premises within thirty
(30) days following  completion of such repair,  restoration or remediation.  If
the insurance proceeds exceed $100,000.00, the same shall be paid to and held in
trust by the  Landlord  pursuant  to Section  15 of this  Lease.  All  insurance
proceeds  described  in  this  Section  14.7  shall  be  paid  upon  architects'
certificates and contractors', subcontractors' and materialmen's waivers of lien
for the cost and expense of repair, restoration or remediation of the damage. If
at any time such insurance  proceeds shall be insufficient to pay fully the cost
of  completion of such repair,  restoration  or  remediation,  Tenant shall upon
demand of Landlord pay a sufficient portion of such cost so that it shall appear
to the reasonable satisfaction of Landlord that the amount of insurance money in
the hands of Tenant or Landlord, as applicable, shall at all times be sufficient
to pay for the completion of the repairs,  restoration  or remediation  free and
clear  of all  liens.  Upon  the  completion  of  the  repairs,  restoration  or
remediation,  free and clear of all liens, any surplus of insurance monies shall
be paid to Tenant, provided that Tenant is not then in default hereunder. In the
event that this Lease shall have been  terminated  for any  material  default of
Tenant  under any of the terms  and  provisions  contained  in this  Lease,  all
proceeds of insurance in the hands of Tenant or Landlord and all claims  against
insurers shall be and become the absolute property of Landlord.

     14.8 REPAIR BY LANDLORD.  If all or any part of the Premises are damaged by
fire or other  catastrophe  covered by any insurance policy carried by Landlord,
Landlord  shall  repair or  replace  the  damaged  part of the  Premises  to its
condition  immediately prior to the occurrence.  The repair or replacement shall
be  commenced  and  completed  within a  reasonable  time after the  occurrence.
Landlord's  liability  with respect to the obligation to repair or replace shall
be limited to the extent of the  proceeds  of any  insurance  policy  carried by
Landlord, which policy shall have minimum limits required by this Lease.

SECTION 15 - DAMAGE OR DESTRUCTION.

     15.1 TENANT OBLIGATIONS. In the event of damage to or destruction of any of
the  improvements on the Premises by fire or other  casualty,  Tenant shall give
Landlord immediate notice thereof and shall, at Tenant's own expense and whether
or not the insurance proceeds are sufficient for the purpose,  promptly commence
and  thereafter  diligently  pursue  completion  of the repair,  restoration  or
rebuilding of the same so that upon  completion of such repairs,  restoration or
rebuilding,   the  value  and  rental  value  of  the   improvements   shall  be
substantially  equal to the value and rental value thereof  immediately prior to
the occurrence of such fire or other casualty.  Tenant hereby  expressly  waives
any  statutory  right  to  terminate  this  Lease  in the  event  of  damage  or
destruction  of  the  Premises  or  all  or any  portion  of  the  buildings  or
improvements thereon.

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     15.2 LEASE TERMINATION.  Notwithstanding anything to the contrary contained
herein,  if the  Premises  should  be  rendered  untenantable  by fire or  other
casualty  during  the last two (2)  years  of the  Term to the  extent  of fifty
percent (50%) or more of the replacement cost of the Premises, Tenant shall have
the option to terminate this Lease by notice to Landlord  within sixty (60) days
after the occurrence of such damage or destruction. Upon termination, this Lease
and the Term hereof shall cease and come to an end as of the  effective  date of
such notice  (which shall be not less than thirty (30) nor more than ninety (90)
days after the notice and shall be specified in the notice).  Any unearned  Rent
or other charges shall be  apportioned as of the effective date and Tenant shall
assign to Landlord all of its rights to the  insurance  proceeds  arising out of
damage or  destruction  to the  improvements  and shall pay  Landlord  (when the
information is  ascertained)  the  difference  between the value of the property
damaged or destroyed,  prior to the damage or  destruction,  and the amount,  if
any, of the insurance proceeds.

SECTION 16 - LANDLORD RESERVATION.

     Landlord  expressly  reserves  the right to enter upon the Premises for the
purpose of installing, using, maintaining,  renewing and replacing such overhead
or underground water, gas, sewer, and other pipe lines, and telephone,  electric
and  power  lines,  cables  and  conduits  as  Landlord  may deem  desirable  in
connection  with the  development or use of the Project.  Landlord shall use its
good faith  efforts to minimize any  interruption  to the tenants of the Project
during the work contemplated by this Section. Landlord will reduce Tenant's Rent
in proportion to any material  interference  with Tenant's business which occurs
as a consequence of the use of any such easement.

SECTION 17 - INDEMNIFICATION.

     17.1 By Tenant.  Excepting  any  responsibility  allocated  to  Landlord by
reason of its  negligence  or by the terms of this  Lease  (excluding  from this
exception,  however,  any responsibility  allocated to Landlord by reason of its
failure  to  enforce  the terms of this  Lease  against  Tenant),  Tenant  shall
indemnify,  defend  and  hold  Landlord  harmless  for,  from  and  against  all
liabilities,  obligations,  claims, suits, damages, penalties, causes of action,
costs and expenses (including without limitation, reasonable attorneys' fees and
expenses)  imposed  upon or asserted  against  Landlord by reason of the acts or
omissions of Tenant, its agents, employees,  contractors,  suppliers, licensees,
invitees and guests and/or the  occurrence  of any of the  following  during the
Term except for conditions  existing at the  commencement  of the Lease Term, or
conditions or events caused during the Lease Term by Landlord,  its contractors,
employees,  agents or invitees: (i) any use, nonuse or condition of the Premises
or any part thereof; (ii) any accident, injury to or death of persons (including
workmen) or loss of or damage to property  occurring on or about the Premises or
any part  thereof;  (iii) any failure on the part of Tenant to perform or comply
with any of the provisions of this Lease; (iv) by or at the direction of Tenant,
performance  of any labor or services or the  furnishings  of any  materials  or
other  property in respect of the  Premises or any part thereof  (excluding  any
such  matters  performed  or  furnished  by or at the  request of  Landlord  and
unrelated to a default of Tenant  under this  Lease);  or (v) any failure on the
part of  Tenant  to clean up  and/or  dispose  of any  Hazardous  Materials,  as
described in Section 12.2 above,  in accordance  with the  requirements  of this
Lease and applicable  law. In the event  Landlord  should be made a defendant in

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any action,  suit or  proceeding  brought by reason of any such  occurrence  for
which  Tenant is  primarily  responsible  and  except to the  extent  Landlord's
insurance is also  applicable,  Tenant  shall,  at its own  expense,  resist and
defend such  action,  suit or  proceeding  or cause the same to be resisted  and
defended  by legal  counsel  designated  by Tenant but  reasonably  approved  by
Landlord.  If any such  action,  suit or  proceeding  should  result  in a final
judgment  against  Landlord,  Tenant shall  promptly  satisfy and discharge such
judgment or shall cause such judgment to be promptly  satisfied and  discharged.
The  obligations  of Tenant  under this Section 17 arising by reason of any such
occurrence  taking  place  while  this  Lease is in  effect  shall  survive  the
termination of this Lease.

     17.2 BY LANDLORD.  Landlord shall save, defend, hold harmless and indemnify
Tenant for,  from and  against  all  liabilities,  obligations,  claims,  suits,
damages,  penalties,  causes of action, costs and expenses  (including,  without
limitation,  reasonable  attorneys' fees and expenses)  imposed upon or asserted
against  Tenant by reason of the  negligence  or wrongful act of Landlord or its
agents, contractors, servants or employees.

     17.3 WAIVER OF CLAIMS.  Except to the extent of (i) coverage by  Landlord's
insurance;  (ii)  any  warranty  by  Landlord  herein;  or (iii)  warranties  or
liabilities  on  the  part  of  Landlord  or  its  contractors  responsible  for
construction   or  remodeling   of  the  Premises,   Landlord  and  its  agents,
contractors,  servants  or  employees  and shall not be liable  for,  and Tenant
hereby  releases  all claims for,  damage to persons and  property  sustained by
Tenant or any person  claiming  through Tenant  resulting from any theft,  fire,
accident,  occurrence  or condition  in, on or about the Premises or building of
which they are a part,  including,  but not  limited  to, such claims for damage
resulting   from  (i)  any  defect  in  or  failure  of  plumbing,   heating  or
air-conditioning  equipment,  electric  wiring or  installation  thereof,  water
pipes,  stairs,  railings or walks; (ii) any equipment or appurtenances  needing
repair;  (iii) the bursting,  leaking or running of any tank, wash stand,  water
closet,  waste pipe,  drain or any other pipe or tank in or about the  Premises;
(iv) the backing up of any sewer pipe or down spout;  (v) the escape of steam or
hot water;  (vi) water, snow or ice being upon or coming through the roof or any
other  place upon or near the  Premises or  otherwise;  (vii) the falling of any
fixture,  plaster or stucco; and (viii) broken glass. Landlord hereby assigns to
Tenant a  non-exclusive  right to the benefits and enforcement of all warranties
by contractors, subcontractors and suppliers arising out of the work by Landlord
in the construction or renovation of the Premises.

SECTION 18 - ASSIGNMENT AND SUBLETTING.

     18.1 LANDLORD  CONSENT.  Tenant shall not transfer or assign this Lease, or
any  interest in this  Lease,  or sublet the  Premises  or any  portion  thereof
without first obtaining the written consent of Landlord, which consent shall not
be unreasonably  withheld  subject to performance of the terms and conditions of
this  Section 18.  Consent  shall be given if the transfer is to an affiliate or
subsidiary  of  Tenant  as long as Tenant  is not  released  from  post-transfer
obligations under the Lease. Any attempted  transfer,  assignment or subletting,
including any involuntary  transfers or assignments by operation of law, without
such consent  shall be void and confer no rights upon any third  person,  and at
the option of Landlord,  shall cause a termination of this Lease, in which event
such third  person  shall  occupy the  Premises as a tenant at  sufferance.  The
acceptance of any Rent payments by Landlord from any such alleged assignee shall
not  constitute  approval  of the  assignment  or  subletting  of this  Lease by
Landlord.  No transfer,  assignment  or subletting  shall relieve  Tenant of its

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liability  for  the  full  performance  of all of  the  provisions,  agreements,
covenants and  conditions of this Lease.  A consent by Landlord to one transfer,
assignment or subletting shall not operate as a waiver of this Section as to any
future  transfer,  assignment or subletting,  and this Section 18 shall apply to
any transferee, assignee or subtenant.

     18.2 IN WRITING. Each transfer,  assignment,  and subletting to which there
has been  consent  shall be by an  instrument  in writing  in a form  reasonably
satisfactory to Landlord,  and shall be executed by the transferor,  assignor or
sublessor; and the transferee, assignee, or sublessee shall agree in writing for
the  benefit  of  Landlord  to  assume,  to be  bound  by,  and to  perform  the
provisions,  covenants  and  conditions  of this  Lease  to be  done,  kept  and
performed by Tenant.  One  executed  copy of such  written  instrument  shall be
delivered to Landlord. A consent to any transfer, assignment or subletting shall
not  constitute  waiver or discharge of the  provisions of this  paragraph  with
respect to a subsequent  transfer,  assignment or subletting.  The acceptance of
Rent  from any  other  person  shall  not be deemed to be a waiver of any of the
provisions of this Lease or a consent to the transfer,  assignment or subletting
of the Premises.

     18.3 LEASE TRANSFER.

          A. Tenant  shall pay to Landlord a Lease  Transfer  Fee (as defined in
Section 18.3(8) below) upon the occurrence of any of the following  events:  (i)
Tenant sells, transfers or assigns (directly,  by operation of law or otherwise)
its interest in the Lease or in the business being  conducted at the Premises to
any other person or legal entity; (ii) a sale, transfer or assignment (directly,
by  operation  of law or  otherwise)  of all or any portion of the  ownership of
stock or ownership interest in the present Tenant entity or any successor entity
(except  as allowed by Section  18.1 )  including  but not  limited to any sale,
transfer  or  assignment  by  merger,   recapitalization,   reorganization,   or
restructure  except  this  subsection  shall  not apply to any  publicly  traded
company;  or (iii)  Tenant  enters into a sublease,  license,  use or  occupancy
agreement  with any other  person or entity  for the leased  Premises  (items in
sub-paragraphs  i, ii, and iii are  collectively  referred to as a  "Transfer").
This Lease Transfer Fee is specifically  negotiated to compensate Landlord for a
Transfer  of  Premises  that Tenant  acknowledges  is in short  supply in Uptown
Sedona,  Arizona.  Should Tenant, for any reason,  reacquire the leased premises
after any sale, sublease or transfer,  there will be no "transfer fee" to Tenant
upon the reacquisition of the Premises. However, any subsequent action by Tenant
that meets the  requirements  of items (i), (ii), or (iii) above,  shall subject
Tenant to a new Transfer  Fee. The offer of Landlord to enter into this Lease is
specifically  contingent upon Tenant agreeing to pay the Lease Transfer Fee. Any
failure of Tenant to pay a Lease Transfer Fee entitles Landlord immediately, and
without  notice,  to  terminate  this Lease.  The Lease  Transfer  Fee is not in
substitution  of  other  provisions  of this  Lease  concerning  assignment  and
subletting, which are in full force and effect.

          B. A Lease  Transfer  Fee shall be paid by Tenant to  Landlord in cash
upon the date of the Transfer in an amount of Two Thousand  Dollars  ($2,000.00)
with such amount to be increased by a cost of living adjustment.  This provision
is not  applicable  to any  Transfer to or from an affiliate  or  subsidiary  of
Tenant.

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<PAGE>
          C. As a condition of approval of a Transfer after December 31, 2010 to
any entity that is not in the timeshare  business,  Landlord  shall enter into a
Lease amendment with the assignee  increasing the Rent to the then-market rental
for the Premises, as reasonably determined by Landlord and assignee.

          D.  Landlord   shall  be  entitled  to  review  in  detail  the  motel
experience,  the intended use on the Premises,  financial capability and tourist
marketing  experience of any assignee to determine if such proposed  assignee is
suitable as a tenant in the Project.  Tenant  acknowledges  that Landlord has no
obligation to consent to Transfers and that Landlord, after a review of proposed
assignee,  may  reject,  based on  reasonable  judgment,  such  assignee  as not
suitable for the Project.  This  provision is not applicable to a Transfer to an
affiliate or subsidiary of Tenant.

SECTION 19 - SUBJECT TO MASTER LEASE.

     Tenant acknowledges that this Lease is subordinate to a Master Lease of the
Project among CARLA LEPORI CONIGLIO, Trustee of the CARLA LEPORI CONIGLIO LIVING
TRUST and Trustee of the MARIANA  PACINI  TRUST,  as amended,  dated January 28,
1983,  CARLA LEPORI  CONIGLIO,  ROBERT A.  PACINI,  DORIS  GREENE,  DORIS PACINI
GREENE,  Trustee of the DORIS PACINI GREENE REVOCABLE LIVING TRUST, dated August
17, 1994,  CARA M.  CONIGLIO,  LISA P. KAUFMANN,  PHILIP M.  CONIGLIO,  JR., and
ATHERTON VENTURES, a California general  partnership,  collectively as Landlord,
and CANYON PORTAL,  L.L.C., an Arizona limited liability company as Tenant.  The
Master Lease is recorded in Coconino  County at Docket 1362, Page 162. A copy of
the Master Lease and the related collection  agreement at Pioneer Title has been
provided to Tenant which shall keep the terms and conditions of the Master Lease
confidential from other tenants of Landlord at the Project.

SECTION 20 - DEFAULTS BY TENANT.

     20.1 EVENT OF DEFAULT.  Each of the following occurrences shall be an Event
of Default hereunder:

          A. If Tenant fails to pay any Rent when due and such failure continues
for ten (10) days after  written  notice  following  the payment due date or the
date the bill is received by Tenant from Landlord, whichever is later.

          B. If Tenant  fails to pay any  monies  due  Landlord  for  Additional
Charges  or for any other  sums due  under  this  Lease or any  other  agreement
between  Landlord  and  Tenant  ("Other  Payments")  within  ten (10) days after
written  notice to Tenant that Tenant is in default of such payment.  Such Other
Payments  shall be due within ten (10) days after  Landlord sends its invoice to
Tenant unless otherwise provided in this Lease.

          C.  Except as  otherwise  provided in Section  20.8 of this Lease,  if
Tenant  defaults  or  breaches  any  of  the  other  (non-monetary)   covenants,
agreements, conditions or undertakings herein to be kept, observed and performed
by Tenant and such default  continues for twenty (20) days after notice  thereof
in writing to Tenant.

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<PAGE>
          D. If Tenant  files any  petition  under any chapter or section of the
Federal  Bankruptcy  Code or any similar law,  state or federal,  whether now or
hereafter existing, or shall file an answer admitting insolvency or inability to
pay its debts.

          E. If  Tenant  fails to obtain a stay of any  involuntary  proceedings
under any chapter or section of the Federal  Bankruptcy  Code within  sixty (60)
days after the institution thereof.

          F. If a trustee or  receiver  is  appointed  for Tenant or for a major
portion of its property or for any portion of the Premises and such  appointment
is not vacated and dismissed  within sixty (60) days thereafter and in any event
prior to any action  adverse to the  interest of Tenant or Landlord  having been
taken by such trustee or receiver.

          G. If any court takes  jurisdiction of a major portion of the property
of  Tenant  or any  part  of the  Premises  in any  involuntary  proceeding  for
dissolution,  liquidation or winding up of Tenant and such  jurisdiction  is not
relinquished or vacated within sixty (60) days.

          H. If Tenant makes an assignment for the benefit of its creditors.

          I. If Tenant  fails to occupy and operate the business in the Premises
for ten (10) consecutive  days,  unless  operation is impracticable  for reasons
beyond control of Tenant.

     20.2  RE-ENTER OF PREMISES.  Upon the  occurrence  of any such  Event(s) of
Default  and at any time  thereafter,  Landlord  shall  have the  right,  at its
election, to re-enter the Premises, or any part thereof,  either with or without
process of law, and to expel,  remove and evict Tenant and all persons occupying
or upon the same under  Tenant,  using such force as may be lawful and necessary
in so doing,  and to possess the  Premises and enjoy the same as in their former
estate and to take full  possession  of and control  over the  Premises  and the
buildings and  improvements  thereon and to have, hold and enjoy the same and to
receive all rental income of and from the same. No reentry by Landlord  shall be
deemed an  acceptance  of a  surrender  of this  Lease,  nor shall it absolve or
discharge  Tenant from any liability  under this Lease.  Upon such reentry,  all
rights of Tenant to occupy or possess the Premises shall cease and terminate.

     20.3 LEASE TERMINATION. Upon the occurrence of any such Event(s) of Default
and at any time thereafter, Landlord shall have the right, at its election, with
or without  re-entry as  provided in Section  20.2,  to give  written  notice to
Tenant  stating that this Lease shall  terminate  on the date  specified by such
notice,  and upon the date  specified  in such  notice  this  Lease and the Term
hereby demised and all rights of Tenant  hereunder  shall  terminate.  Upon such
termination, Tenant shall quit and peacefully surrender to Landlord the Premises
and the buildings and improvements then situated thereon.

     20.4  RELETTING.  At any time and from time to time  after  such  re-entry,
Landlord may relet the Premises and the buildings and improvements  thereon,  or
any part thereof,  in the name of Landlord or otherwise,  for such term or terms
(which  may be  greater  or less than the  period  which  would  otherwise  have
constituted  the  balance  of the Term of this  Lease),  and on such  conditions

                                       22
<PAGE>
(which may include  concessions  or free rental) as Landlord,  in its reasonable
discretion,  may  determine  and may collect  and receive the rental  therefore.
However,  in no event  shall  Landlord  be under  any  obligation  to relet  the
Premises and the buildings and improvements  thereon,  or any part thereof,  and
Landlord  shall in no way be  responsible  or liable for any failure to relet or
for any failure to collect any rental due upon any such  reletting.  Even though
it may relet the Premises, Landlord shall have the right thereafter to terminate
this  Lease  and all of the  rights of  Tenant  in or to the  Premises.  Nothing
contained in the foregoing shall be deemed a waiver or  relinquishment by Tenant
of any duty imposed by law on Landlord to mitigate its damages.

     20.5 SURVIVAL OF LIABILITY.  Unless  Landlord shall have notified Tenant in
writing that it has elected to terminate this Lease,  no such re-entry or action
in lawful  detainer or otherwise  to obtain  possession  of the  Premises  shall
relieve Tenant of its liability and obligations  under this Lease;  and all such
liability and  obligations  shall survive any such reentry.  In the event of any
such reentry,  whether or not the Premises and the  buildings  and  improvements
thereon,  or any part  thereof,  shall  have  been  relet,  Tenant  shall pay to
Landlord the entire rental and all other  charges  required to be paid by Tenant
up to the time of such reentry of this Lease, and thereafter  Tenant,  until the
end of what  would  have  been the Term of this  Lease  in the  absence  of such
reentry,  shall be liable to Landlord, and shall pay to Landlord, as damages for
Tenant's default:

          A. The amount of Rent and  Additional  Charges  which would be payable
under this Lease by Tenant if this Lease were still in effect, less

          B.  The  net  proceeds  of  any  reletting,  after  deducting  all  of
Landlord's  expenses  in  connection  with  such  reletting,  including  without
limitation  all  repossession  costs,  brokerage  commissions,  legal  expenses,
attorneys'  fees,   alteration  costs  and  expenses  of  preparation  for  such
reletting.

          Tenant  shall be liable  for and pay such  damages  to  Landlord  on a
monthly  basis on the first day of each month and Landlord  shall be entitled to
recover from Tenant monthly as the same shall arise. The excess,  if any, in any
month or months, of the net proceeds described in this subparagraph (B) actually
received  by  Landlord  over the  Rental and  Additional  Charges  described  in
subparagraph (A) above shall belong to Landlord, provided that such excess shall
be credited and applied against Tenant's future  obligations  arising under this
Section  20.5 as the same become due and payable by Tenant  hereunder,  and that
Tenant   shall   remain   liable  for  future   deficiencies,   as   applicable.
Notwithstanding any such reentry without  termination,  Landlord may at any time
thereafter,  by written  notice to  Tenant,  elect to  terminate  this Lease for
Tenant's previous breach.

     20.6  CUMULATIVE  REMEDIES.  Each  right and remedy of  Landlord  or Tenant
provided  for in this Lease shall be  cumulative  and in addition to every other
right or remedy  provided for in this Lease or now or hereafter  existing at law
or in equity or by statute or  otherwise;  and the  exercise or beginning of the
exercise  by  Landlord  or Tenant of anyone or more of such  rights or  remedies
shall not preclude the  simultaneous  or later exercise by Landlord or Tenant of
any or all other rights or remedies  provided for in this Lease now or hereafter
existing at law or in equity or by statute or otherwise.

                                       23
<PAGE>
     20.7 SUBLESSEE DEFAULTS. Any violation of any covenant or provision of this
Lease,  whether  by act or  omission,  by any  sublessee  or any  other  persons
occupying any portion of the Premises under the rights of Tenant shall be deemed
a violation of such provision by Tenant and a default under this Lease. Any such
violation shall not be deemed to be a default hereunder if and so long as Tenant
in good faith and at its own expense  takes and  diligently  pursues any and all
steps it is  entitled  to take and  which  steps if  completed  will  cure  said
default.

     20.8 CURE PERIOD.  Notwithstanding  any other  provision  of this  Section,
Landlord agrees that if the default complained of, other than for the payment of
monies, is of such a nature that the same cannot be cured within the twenty (20)
day period for curing as specified in the written notice relating thereto,  then
such default  shall be deemed to be cured if Tenant within such period of twenty
(20) days shall have commenced  thereof and shall continue  thereafter  with all
due  diligence to effect such cure and does so complete the same with the use of
such diligence as aforesaid.

     20.9 LATE CHARGES.  A late charge of Three Hundred Dollars  ($300.00) shall
be assessed to any payment  required to be made by Tenant to Landlord  under the
terms of this Lease not received by Landlord  within ten (10) days after its due
date  (regardless  of whether  Tenant has been given  notice of such  failure of
payment). If Tenant tenders to Landlord a check that is returned marked "NSF" or
its equivalent,  Tenant shall pay Landlord a charge in the amount of Two Hundred
Dollars ($200.00).  Tenant's failure to pay any such late charge within ten (10)
days after  Landlord's  written  demand  therefor  shall  constitute an Event of
Default  hereunder.  In addition to the payments set forth in the  preceding two
sentences,  Tenant shall pay Landlord  interest at the rate of eighteen  percent
(18%) per annum from the date any payment is due until the date such  payment is
actually received by Landlord.

SECTION 21 - CONDEMNATION.

     If title to all or any  portion  of the  Premises  is taken by a public  or
quasi-public  authority  under any statute or by right of eminent  domain of any
governmental body, whether such loss or damage results from condemnation of part
or all of the Premises,  Tenant shall not be entitled to  participate or receive
any part of the  damages  or award  except  where  the same  shall  provide  for
Tenant's moving or other reimbursable expenses, the portion thereof allocated to
the taking of Tenant's trade fixtures,  equipment and personal  property or to a
loss of  business  by Tenant.  Should any power of eminent  domain be  exercised
after Tenant is in possession, such exercise shall not void or impair this Lease
unless the amount of the Premises so taken  substantially and materially impairs
the  usefulness  of the  Premises  for the purposes for which they are leased in
which case,  either  party may cancel  this Lease by notice to the other  within
sixty (60) days after such possession.  Should only a portion of the Premises be
taken and the Premises continue to be reasonably  suitable for Tenant's use, the
Rent shall be reduced from the date of such  possession in direct  proportion to
the reduction in the square footage of the Premises.

SECTION 22 - TENANT'S WAIVER OF STATUTORY RIGHTS.

     In the event of any  termination  of the Term (or any  repossession  of the
Premises),  Tenant so far as permitted by law, waives (i) any notice of re-entry
or of the institution of legal proceedings to that end; and (ii) the benefits of
any laws now or hereafter in force exempting property from liability for Rent or
for debt.

                                       24
<PAGE>
SECTION 23 - WAIVER OF PERFORMANCE.

     No failure by Landlord or Tenant to insist upon the strict  performance  of
any  term or  condition  hereof  or to  exercise  any  right,  power  or  remedy
consequent  upon a breach  thereof and no  submission by Tenant or acceptance by
Landlord of full or partial Rent during the continuance of any such breach shall
constitute  a waiver of any such  breach or of any such  term.  No waiver of any
breach shall affect or alter this Lease (which shall  continue in full force and
effect),  or the  respective  rights of Landlord  or Tenant with  respect to any
other then-existing or subsequent breach.

SECTION 24 - REMEDIES CUMULATIVE.

     Each right,  power and remedy  provided  for in this Lease now or hereafter
existing at law, in equity or otherwise  shall be cumulative  and concurrent and
shall be in addition to every other right,  power or remedy provided for in this
Lease now or hereafter existing at law, in equity or otherwise; and the exercise
or beginning of the exercise of anyone or more of the rights, powers or remedies
provided for in this Lease shall not preclude the simultaneous or later exercise
of any or all such other rights, powers or remedies.

SECTION 25 - CONVEYANCE BY LANDLORD.

     In the event Landlord or any successor  Landlord  shall conveyor  otherwise
dispose of the Premises, it shall thereupon be released from all liabilities and
obligations  imposed upon Landlord under this Lease (except those accruing prior
to such conveyance or other  disposition)  and such  liabilities and obligations
shall be binding  solely on the then owner of the  Premises.  This release shall
not be  applicable to any monies owed by Landlord to Tenant under any loans made
by Tenant to Landlord.

SECTION 26 - NO PERSONAL LIABILITY TO LANDLORD.

     Tenant  shall look  solely to  Landlord's  interest  in the Project for the
satisfaction  of any  judgment  or  decree  requiring  the  payment  of money by
Landlord  based upon any  default  under this  Lease,  and no other  property or
assets of Landlord,  or any partner or member of, or shareholder  in,  Landlord,
shall  be  subject  to  levy,  execution  or other  enforcement  procedures  for
satisfaction of any such judgment or decree.

SECTION 27 - ATTORNEYS' FEES.

     In the event  Landlord  brings an action to enforce  its rights  under this
Lease or to bring suit for  possession of the Premises,  for the recovery of any
sum due  hereunder,  or for any other  relief  against  Tenant,  declaratory  or
otherwise,  arising out of a breach of any term of this  Lease,  or in the event
Tenant should bring any action for any relief against  Landlord,  declaratory or

                                       25
<PAGE>
otherwise,  arising out of this Lease, the prevailing party shall be entitled to
receive from the other party reasonable attorneys' fees and reasonable costs and
expenses,  which shall be deemed to have accrued due to the commencement of such
action, such sums to be determined by the court sitting without a jury.

SECTION 28 - PROVISIONS SUBJECT TO APPLICABLE LAW.

     All rights,  powers and remedies provided herein shall be exercised only to
the extent that the exercise  thereof shall not violate any  applicable  law and
are intended to be limited to the extent necessary so that they shall not render
this Lease invalid or  unenforceable  under any  applicable  law. If any term of
this Lease shall be held to be invalid,  illegal or unenforceable,  the validity
of the other terms of this Lease shall in no way be affected thereby.

SECTION 29 - RIGHT TO CURE.

     29.1 RIGHT TO CURE TENANT'S DEFAULTS.  In the event Tenant shall breach any
term,  covenant or  provision of this Lease,  Landlord may at any time,  without
notice,  cure such  breach for the  account  and at the  expense  of Tenant.  If
Landlord at any time, by reason of such breach,  is compelled to payor elects to
pay any sum of money or to do any act that will  require  the payment of any sum
of money, or is compelled to incur any expense,  including reasonable attorneys'
fees,  incurred  in  instituting,   prosecuting  or  defending  any  actions  or
proceedings to enforce Landlord's rights under this Lease or otherwise,  the sum
or sums so paid by Landlord,  with all  interest,  costs and  damages,  shall be
deemed to be  Additional  Charges and shall be paid by Tenant to Landlord on the
first day of the month  following  the incurring of such expenses of the payment
of such sums and shall  include  interest at the rate of eighteen  percent (18%)
per  annum  from the date  Landlord  makes a  payment  until  Tenant  pays  such
Additional Charges in full.

     29.2 RIGHT TO CURE LANDLORD'S DEFAULTS.  In the event Landlord shall breach
any term,  covenant or provision of this Lease,  Tenant may at any time, without
notice,  cure such breach for the account  and at the  expense of  Landlord.  If
Tenant at any time,  by reason of such  breach,  is compelled to payor elects to
pay any sum of money or to do any act that will  require  the payment of any sum
of money, or is compelled to incur any expense,  including reasonable attorneys'
fees,  incurred  in  instituting,   prosecuting  or  defending  any  actions  or
proceedings to enforce Landlord's rights under this Lease or otherwise,  the sum
or sums so paid by Tenant, with all interest,  costs and damages,  shall be paid
by Landlord to Tenant on the first day of the month  following  the incurring of
such expenses of the payment of such sums and shall include interest at the rate
of eighteen percent (18%) per annum from the date Landlord makes a payment until
Landlord pays such additional charges in full.

SECTION 30 - NOTICES.

     Any notice to be given by Landlord or Tenant  shall be given in writing and
delivered  in person  or by  overnight  mail  service  to  Landlord  or  Tenant,
forwarded  by  certified  or  registered  mail,  postage  prepaid,  or sent  via
facsimile  transmission,  to the  address  indicated  in the  Fundamental  Lease
Provisions,  unless the party  giving  any such  notice  has been  notified,  in
writing,  of a change of address.  Any such notice shall be deemed effective (a)
upon receipt or refusal to accept delivery, if personally delivered;  (b) on the

                                       26
<PAGE>
next business day following delivery by the overnight  courier;  (c) in the case
of certified mailing, on the date of actual delivery as shown by the addressee's
receipt; or (d) in the case of facsimile  transmission,  upon receipt (a written
confirmation of successful  transmission from the transmitting facsimile machine
being prima facie evidence of such receipt). Burden of proof of delivery is upon
the sender.

SECTION 31 - SIGNS.

     A. Tenant shall not place,  alter,  exhibit,  inscribe,  paint or affix any
sign, awning,  canopy,  advertisement,  notice or other lettering on any part of
the  Premises,  or of the building of which the Premises is a part,  unless such
signs comply with applicable  ordinances or other governmental  restrictions and
rules.

     B. The Master Landlord,  referenced in Section 19, is the owner of the real
property  situated  adjacent to the Project which real  property  extends to Oak
Creek and is  approximately  3.5 acres ("Master  Landlord  Adjacent  Property").
Ingress  and  egress to and from  Highway  89A to the Master  Landlord  Adjacent
Property  is to and from  Sinagua  Plaza  Drive.  The Master  Landlord  Adjacent
Property  does not  front  Highway  89A.  At such  time as the  Master  Landlord
Adjacent  Property is developed,  Tenant agrees that Landlord,  at its expenses,
will prepare an overall  signage plan for a combination  of the Master  Landlord
Adjacent  Property and the Project real property.  The goal of such signage plan
is that the  development  on the Master  Landlord  Adjacent  Property  will have
signage on Highway 89A.  Tenant  agrees to cooperate in good faith with Landlord
and Master  Landlord in developing  the signage plan,  which shall be subject to
Tenant's approval,  which will not be unreasonably  withheld. It is contemplated
by the Landlord and Tenant that the City of Sedona may require  changes from the
existing  signage,  including the Project monument sign and such changes will be
made by Landlord at its expense. In any event, Tenant shall continue to have use
of a Project  monument  sign along  Highway 89A, but such use may be shared with
signage for the development on the Master Landlord Adjacent Property.

SECTION 32 - INSPECTION AND PRESENTING FOR SALE OR LEASE.

     Upon not less than two (2)  business  days notice to Tenant,  Landlord  may
inspect the Premises so that  Landlord or its lender or the Master  Landlord can
determine  that the Premises is being  maintained in good repair and  condition.
Landlord  hereby  reserves the right during  usual  business  hours to enter the
Premises  and to show the same for  purposes  of sale,  lease or  mortgage,  and
during  the last six (6)  months  of the term of this  Lease,  or the  extension
thereof,  to  exhibit  the  same  to any  prospective  tenant,  and  to  display
appropriate signage during the six (6) month period for such sale or lease which
signage does not  unreasonably  interfere  with Tenant's  business.  Prospective
purchasers  or tenants  authorized  by Landlord may inspect the Premises  during
reasonable hours at any time.

SECTION 33 - ESTOPPEL CERTIFICATE.

     Tenant will execute,  acknowledge and deliver to Landlord,  within five (5)
business days following request therefor, a certificate certifying (a) that this
Lease is  unmodified  and in full force (or,  if there have been  modifications,
that the  Lease is in full  force and  effect,  as  modified,  and  stating  the

                                       27
<PAGE>
modifications);  (b) the dates,  if any, to which Rent,  Additional  Charges and
other  sums  payable  hereunder  have been  paid;  (c) that no  notice  has been
received  by  Tenant  of any  default  which  has not been  cured,  except as to
defaults  specified  in such  certificate;  and (d) subject to Section 35 below,
this Lease is and shall be  subordinate to any existing or future deed of trust,
mortgage or security  agreement  placed upon the  Premises or the Project by the
Landlord or owner of the Property.  Any claim of Tenant in  contradiction of any
of the foregoing  matters must be set forth with specificity in the certificate.
Any  such  certificate  may be  relied  upon  by any  prospective  purchaser  or
encumbrancer  of the Premises or any part thereof.  Tenant's  failure to deliver
such  certificate  within the time  permitted  hereby shall be  conclusive  upon
Tenant  that this  Lease is in full force and  effect,  except to the extent any
modification has been represented by Landlord, and there are no uncured defaults
in Landlord's performance, and that not more than one month's Rent has been paid
in advance.  In  addition,  at  Landlord's  option,  after  notice to Tenant and
expiration of applicable  grace period under this Lease,  such failure of Tenant
to  deliver  such  certificate  shall  constitute  an Event of  Default.  Tenant
acknowledges  and agrees  that the  promise to issue  such  statements  pursuant
hereto are a material  consideration  inducing Landlord to enter into this Lease
and that the breach of such  promise  shall be deemed a material  breach of this
Lease.

SECTION 34 - RECORDING.

     This Lease may not be  recorded by any means,  without the express  written
consent of  Landlord  and Tenant.  However,  a  Memorandum  of Lease in the form
attached as Exhibit D shall be executed and recorded.

SECTION 35 - SUBORDINATION AND NON-DISTURBANCE.

     This Lease is hereby  declared to be subject and subordinate to the lien of
any  present or future  encumbrance  or  encumbrances  upon the  Premises or the
Project,  irrespective  of the time of execution or the time of recording of any
such   encumbrance  or   encumbrances.   Landlord  shall  obtain  for  Tenant  a
non-disturbance  agreement  in  recordable  form from (i) any lender which has a
lien on the  Premises,  now or in the future;  and (ii) the  landlord  (Coniglio
family) to the Landlord  under the Master Lease  referenced  in Section 19. This
subordination  is subject  to the right of Tenant  upon a  foreclosure  or other
action  taken under any  mortgage by the holders  thereof to have this Lease and
the rights of Tenant  hereunder  not be disturbed  but to continue in full force
and  effect  so long as  Tenant  shall  not be in  default  hereunder.  The word
"encumbrance" as used herein includes mortgages, deeds of trust or other similar
instruments, and modifications,  extensions,  renewals and replacements thereof,
and any and all advances  thereunder.  Tenant may record such  subordination and
non- disturbance agreement.

SECTION 36 - MISCELLANEOUS.

     36.1   DEFINITION  OF  TENANT.   The  Term  "Tenant"  shall  include  legal
representatives, successors and permitted assigns. All covenants herein shall be
made binding upon Tenant and  construed to be equally  applicable to and binding
upon its agents,  employees and others  claiming the right to be in the Premises
or in the building or in the building through, under or above Tenant.

                                       28
<PAGE>
     36.2 TENANT.  If more than one individual,  firm, or corporation shall join
as Tenant,  singular context shall be construed to be plural wherever  necessary
and the covenants of Tenant shall be the joint and several  obligations  of each
party signing as Tenant and when the parties signing as Tenant are partners,  it
shall be the obligation of the firm and of the individual members thereof.

     36.3 GENDER AND NUMBER.  Whenever from the context it appears  appropriate,
each item stated in the singular shall include the plural and vice versa and the
masculine,  feminine, or neuter form shall included the masculine,  feminine and
neuter forms.

     36.4 MODIFICATIONS AND WAIVERS. No change,  modification,  or waiver of any
provision of this Lease shall be valid or binding  unless it is in writing dated
after the date hereof and signed by the parties  intended to be bound. No waiver
of any breach, term, or condition of this Lease by either party shall constitute
a subsequent waiver of the same or any other breach, term, or condition.

     36.5  BINDING  EFFECT.  This Lease shall be binding upon and shall inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.  This provision  shall not be deemed to grant Tenant any
right to assign this Lease or sublet the Premises or any part thereof other than
as provided in this Lease.

     36.6  SEVERABILITY.  To the fullest extent  possible each provision of this
agreement  shall be  interpreted  in such fashion as to be  effective  and valid
under  applicable  law.  If any  provision  of this  Lease is  declared  void or
unenforceable  with respect to particular  circumstances,  such provision  shall
remain in full force and effect in all other circumstances.  If any provision of
this Lease is declared void or  unenforceable,  such  provision  shall be deemed
severed from this Lease, which shall otherwise remain in full force and effect.

     36.7 GOVERNING LAW AND JURISDICTION.  Except where preempted by the laws of
the United States or the rules or regulations  of any agency or  instrumentality
thereof, this Lease is to be interpreted,  construed and governed by the laws of
the State of Arizona. The parties irrevocably and unconditionally  submit to the
exclusive  jurisdiction  of the  Superior  Court of the State of Arizona for the
County of Coconino in connection with any legal action or proceeding arising out
of or relating to this Lease and the parties waive any objection relating to the
basis  for  personal  or in rem  jurisdiction  or to  venue  which it may now or
hereafter have in any such suit, action or proceeding.

     36.8  ENTIRE  AGREEMENT.  This  instrument  constitutes  the  sole and only
agreement  between Landlord and Tenant  respecting the Premises,  the leasing of
the Premises to the Tenant,  or the Lease term herein  specified,  and correctly
sets forth the  obligations  of the  Landlord and Tenant to each other as of its
date.  Any  agreements  or  representations  by the  Landlord  to the Tenant not
expressly set forth in this  instrument  are void and  unenforceable.  All prior
agreements and  understanding of the parties with respect to such subject matter
are  hereby   superseded.   No   representations,   promises,   agreements,   or
understandings contained in this Lease regarding the subject matter hereof shall
be of any force or effect unless in writing,  executed by the party to be bound,

                                       29
<PAGE>
and dated on or  subsequent  to the date  hereof.  Captions and headings are for
convenience  only  and  shall  not  alter  any  provision  or  be  used  in  the
interpretation of this Lease.

     36.9 TIME IS OF THE ESSENCE.  Time is of the essence of this Lease and each
and every provision hereof. Any extension of time granted for the performance of
any duty under this Lease shall not be  considered  an extension of time for the
performance of any other duty under this Lease.

     36.10 BROKERS.  Each party  represents and warrants to the other party that
it has not entered into any agreement with, nor otherwise had any dealings with,
any broker or agent in  connection  or  execution of this Lease which could form
the  basis of any  claim by any such  broker  or agent  for a  brokerage  fee or
commission,  finder's  fee,  or any  other  compensation  of any kind or  nature
against the other in connection with this Leasehold.

LANDLORD:                                    TENANT:

CANYON PORTAL, L.L.C.,                       ILX RESORTS INCORPORATED,
an Arizona limited liability company         an Arizona corporation

By:  Canyon Portal Properties, Inc.
Its: Managing Member                         /s/ JOSEPH P. MARTORI
                                             -----------------------------------
                                             By: Joseph P. Martori
     /s/ TOM VAN SICKLE                      Its: Chairman of the Board
     ------------------------------------    Date: September 26, 2000
     By: Tom Van Sickle
     Its: President
     Date: September 25, 2000

By:  HIDC Investments, L.L.C.,
     an Arizona limited liability company
Its: Member


     /s/ JACK GECHMAN
     ------------------------------------
     By: Jack Gechman
     Its: Manager

     Date:
          -------------------------------


/s/ AL SPECTOR
-----------------------------------------
By:  Al Spector
Its: Member
Date: September 26, 2000

                                       30
<PAGE>
LIST OF EXHIBITS

A.   Premises - Cross Hatched Area

B.   Exclusive Use of Tenants at Project

C.   Owens Loan Breakdown

D.   Memorandum of Lease
<PAGE>
                                    Exhibit A

This page contains the preliminary  architectual  rendering of the site plan for
the Canyon Portal Properties in Sedona, Arizona.

<PAGE>

                                    EXHIBIT B
                              CANYON PORTAL, L.L.C.
                                TENANT EXCLUSIVES


                               TRADING POST SHOPS

TENANT                                             EXCLUSIVE
------                                             ---------
Rocky's                         No Exclusives

Red Rock Jeep Tours             No Exclusives

Bronco Jewelry                  No Exclusives

Burkhalter's                    No Exclusives

Naja                            No Exclusives


                               CANYON PORTAL SHOPS

TENANT                                             EXCLUSIVE
------                                             ---------
Pink Jeeps                      No Exclusives

Wendeli's                       Exclusive  in the Canyon  Portal  Shops  Complex
                                (the approximate 5,000 square foot building) for
                                a  delicatessen,  bakery,  photo  processing and
                                equipment,  and for Landlord approved souvenirs,
                                gifts  and tee  shirts.  Landlord  has taken the
                                position that because  Tenant never has sold any
                                of  the  above   items  or   engaged   in  these
                                businesses,  Tenant has waived  this  exclusive,
                                but in any  event,  it  applies  only to the one
                                building.

TCBY                            Exclusive in the Canyon Portal Shops Complex for
                                the sale of yogurt or ice cream

Bear Facts                      No Exclusives

Bronco Jewelry                  No Exclusives

Rocky Mountain Chocolate        Exclusive  right  to  sell  assorted  chocolates
                                (bulk and packaged), fudge, and caramel apples.

Sunterra                        RMI  (the  Sunterra   tenant   entity)  has  the
                                exclusive rights to market timeshare  properties
                                from its lease  location,  and the  "hawking" of
                                goods  and   services   and  the   marketing  of
                                timeshare properties.


                              NORTH RETAIL BUILDING

TENANT                                             EXCLUSIVE
------                                             ---------
Red Canyon Gallery              Tenant  has an  exclusive  in the  North  Retail
                                Building  for  the  sale of  fine  arts,  bronze
                                sculpture,    oils,    watercolors,     pastels,
                                hand-blown   glass,   manmade  metal  furniture,
                                silver  and  gold  designer   jewelry  with  the
                                exception that other tenants may sell such items
                                as long as the floor space devoted to such items
                                does  not  exceed  20%  of  the  total  of  that
                                tenant's premises.

Sedona Turquoise Trading        Tenant  has an  exclusive  for the North  Retail
                                Building  to  sell  authentic  Indian-made  sand
                                paintings,  moccasins  and  Indian  pottery.  In
                                addition,   Tenant  has  an  exclusive  to  sell
                                authentic Indian-made turquoise jewelry with the
                                exception  that  other  tenants  may  sell  such
                                turquoise  jewelry  as long as the  floor  space
                                devoted  to such  sales  does not  exceed 20% of
                                such tenant's premises.

Nicrin (Rocky's Shirt Shop)     No Exclusives

Canyon Breeze Restaurant        Exclusive on a restaurant and lounge facility at
                                the Canyon Portal Project.
<PAGE>
                                    EXHIBIT C
Loan No: 50544/Phase II
Submitted by: Canyon Portal, L.L.C.

                         Draw Request No. 1 Prepared for
                              Owens Financial Group

<TABLE>
<CAPTION>
                                                                 WORK COMPLETED
                                                             -----------------------
                                                                FROM                                                BALANCE
                                                              PREVIOUS                     TOTAL                       TO
ITEM                                             SCHEDULED   APPLICATION                  TO DATE        %           FINISH
 NO.         DESCRIPTION OF WORK                   VALUE        (D+E)    THIS PERIOD       (D+E)       (F/C)          (C-F)
 ---         -------------------                   -----        -----    -----------       -----       -----          -----
<S>   <C>                                      <C>              <C>      <C>            <C>             <C>      <C>
 1    CONSTRUCTION - TRITON - 20 NEW ROOMS     $1,047,739.00    $0.00    $ 23,651.00    $ 23,651.00     2.26%    $1,024,088.00
 2    CONSTRUCTION - NELSON - REHAB 12 ROOMS   $  204,898.00    $0.00    $ 15,000.00    $ 15,000.00     7.32%    $  189,898.00
 3    ARCHITECTURAL & ENGINEERING              $   30,000.00    $0.00    $ 26,481.00    $ 26,481.00    88.27%    $    3,519.00
 4    CITY OF SEDONA PERMITS & FEES            $   78,600.00    $0.00    $ 68,600.00    $ 68,600.00    87.28%    $   10,000.00
 5    CITY OF SEDONA PARKING AGREEMENT         $  216,000.00    $0.00    $108,000.00    $108,000.00    50.00%    $  108,000.00
 6    TELEPHONE SYSTEM & FURNITURE             $  185,000.00    $0.00    $      0.00    $      0.00     0.00%    $  185,000.00
 7    OWENS FEES & COSTS                       $   95,000.00    $0.00    $      0.00    $      0.00     0.00%    $   95,000.00
14    MISCELLANEOUS & CONTINGENCY              $   42,763.00    $0.00    $      0.00    $      0.00     0.00%    $   42,763.00
                                               -------------    -----    -----------    -----------    ------    -------------
                                               $1,900,000.00    $0.00    $241,732.00    $241,732.00    12.72%    $1,658,268.00
                                               -------------    -----    -----------    -----------    -----     -------------
</TABLE>

Canyon Portal, L.L.C.

By:
   ---------------------------
   Al Spector, Agent
   09/21/00
<PAGE>
                                    EXHIBIT D

When Recorded Return to:
Al Spector, Esq.
Spector Law Offices, P.C.
6900 E. Camelback Road, Suite 640
Scottsdale, AZ 85251

                               MEMORANDUM OF LEASE

     This  Memorandum of Lease is entered into this 26th day of September,  2000
between CANYON PORTAL, L.L.C., an Arizona limited liability company ("Landlord")
and ILX RESORTS INCORPORATED, an Arizona corporation ("Tenant").

     Landlord  and Tenant  hereby give notice to the public  that  Landlord  has
granted  (and  hereby  grants)  to Tenant a Lease on the motel  located  on real
property  more  particularly   described  on  Exhibit  A,  attached  hereto  and
incorporated herein by this reference.

     The term of this Lease shall commence on the first day of October, 2000 and
will terminate on December 31, 2010,  unless  extended  pursuant to the terms of
the Lease which  extensions,  if all are  exercised,  can extend to December 31,
2038. The Lease  described in this  Memorandum was granted by Landlord to Tenant
in a Lease of even date herewith,  the terms of which are incorporated herein by
this reference.  Further  information  concerning the Lease may be obtained from
Tenant at the following address:

                                Al Spector, Esq.
                            SPECTOR LAW OFFICES, P.C.
                        6900 E. Camelback Road, Suite 640
                              Scottsdale, AZ 85251
                              Phone: (480) 941-0221
                               Fax: (480) 990-9093

                                       or

                              Mr. Joseph P. Martori
                            ILX RESORTS INCORPORATED
                           2111 E. Highland, Suite 210
                                Phoenix, AZ 85016
                              Phone: (602) 957-2777
                               Fax: (602) 957-2290
<PAGE>
TENANT:                                 LANDLORD:

ILX RESORTS, INCORPORATED               CANYON PORTAL, L.L.C., an
 an Arizona corporation                 Arizona limited liability company

                                        By: Canyon Portal Properties, Inc.
                                        Its: Managing Member
/s/ Joseph P. Martori
-----------------------------------
By: Joseph P. Martori                   /s/ Tom Van Sickle
Its: Chairman of the Board              ----------------------------------------
                                        By: Tom Van Sickle
                                        Its: President

                                        By: HIDC Investments, L.L.C.,
                                            an Arizona limited liability company
                                        Its: Member


                                             -----------------------------------
                                             By: Jack Gechman
                                             Its: Manager


                                        ----------------------------------------
                                        By: Al Spector
                                        Its: Member

STATE OF ARIZONA    )
                    )    ss:
COUNTY OF MARICOPA  )

     The  foregoing  instrument  was  acknowledged  before me this ______ day of
September,  2000 by Joseph P. Martori,  the Chairman of the Board of ILX Resorts
Incorporated, an Arizona corporation.


                                        ----------------------------------------
                                        Notary Public

STATE OF ARIZONA    )
                    )    ss:
COUNTY OF MARICOPA  )

     The  foregoing  instrument  was  acknowledged  before me this ______ day of
September,  2000 by Tom Van Sickle,  the President of Canyon Portal  Properties,
Inc.,  an Arizona  corporation  which is the Managing  Member of Canyon  Portal,
L.L.C., an Arizona limited liability company.


                                        ----------------------------------------
                                        Notary Public
<PAGE>
STATE OF ARIZONA    )
                    )    ss:
COUNTY OF MARICOPA  )

     The  foregoing  instrument  was  acknowledged  before me this ______ day of
September,  2000 by Jack Gechman,  the Manager of HIDC  Investments,  L.L.C., an
Arizona limited liability company,  which is a Member of Canyon Portal,  L.L.C.,
an Arizona limited liability company.



                                        ----------------------------------------
                                        Notary Public

STATE OF ARIZONA    )
                    )    ss:
COUNTY OF MARICOPA  )

     The  foregoing  instrument  was  acknowledged  before me this ______ day of
September,  2000 by Al Spector,  who is a Member of Canyon  Portal,  L.L.C.,  an
Arizona limited liability company.



                                        ----------------------------------------
                                        Notary Public