<PAGE>   1
                                                                    EXHIBIT 10.1

                             SUNTERRA FINANCE L.L.C.
                                   AS COMPANY,
                             SIGNATURE RESORTS, INC.
                                  AS SERVICER,
                              LASALLE NATIONAL BANK
                       AS TRUSTEE AND AS BACK-UP SERVICER,
                                   INDENTURE
                            DATED AS OF MAY 1, 1998




                      SIGNATURE RESORTS VACATION OWNERSHIP
                         RECEIVABLES-BACKED NOTES 1998-A




                              6.36% CLASS A-1 NOTES

                              6.85% CLASS A-2 NOTES

                              7.07% CLASS A-3 NOTES



<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----

<S>            <C>                                                                                             <C>
PRELIMINARY STATEMENT ............................................................................................1
GRANTING CLAUSES .................................................................................................2

                        ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.1.   Definitions .......................................................................................3
Section 1.2.   Acts of Noteholders................................................................................3
Section 1.3.   Notices, etc. to Trustee, Company and Servicer.....................................................4
Section 1.4.   Notices to Noteholders; Waiver.....................................................................5
Section 1.5.   Effect of Headings and Table of Contents...........................................................6
Section 1.6.   Successors and Assigns.............................................................................6
Section 1.7.   Severability ......................................................................................6
Section 1.8.   Benefits of Indenture..............................................................................6
Section 1.9.   Legal Holidays ....................................................................................6
Section 1.10.  Governing Law .....................................................................................7
Section 1.11.  Counterparts ......................................................................................7

                                              ARTICLE II. NOTE FORM

Section 2.1.   Form Generally ....................................................................................7
Section 2.2.   Form of Class A-1, A-2 and A-3 Note................................................................7

                                             ARTICLE III. THE NOTES

Section 3.1.   Designation of Notes; Certain Related.............................................................13
Section 3.2.   Denominations ....................................................................................14
Section 3.3.   Execution, Authentication, Delivery and Dating....................................................14
Section 3.4.   Registration, Registration of Transfer and Exchange...............................................15
Section 3.5.   Limitation on Transfer and Exchange...............................................................15
Section 3.6.   Mutilated, Destroyed, Lost or Stolen Notes........................................................16
Section 3.7.   Payment of Principal and Interest.................................................................17
Section 3.8.   Persons Deemed Owners.............................................................................17
Section 3.9.   Cancellation .....................................................................................17
Section 3.10.  Tax Treatment ....................................................................................18

                               ARTICLE IV. AUTHENTICATION AND DELIVERY OF THE NOTES

Section 4.1.   General Provisions................................................................................18
Section 4.2.   Security for Notes................................................................................18
Section 4.3.   Delivery of Mortgage Loans........................................................................19

                                       ARTICLE V. SATISFACTION AND DISCHARGE

Section 5.1.   Satisfaction and Discharge of Indenture...........................................................20
Section 5.2.   Application of Money Held in Trust................................................................21
</TABLE>

                                       i

<PAGE>   3

<TABLE>
<S>            <C>                                                                                             <C>
Section 5.3.   Discharge of Security Interest....................................................................21

                                               ARTICLE VI. REMEDIES

Section 6.1.   Events of Default.................................................................................21
Section 6.2.   Acceleration of Maturity, Rescission and Annulment................................................22
Section 6.3.   Remedies .........................................................................................24
Section 6.4.   Trustee May File Proofs of Claim..................................................................25
Section 6.5.   Trustee May Enforce Claims without Possession of Notes............................................26
Section 6.6.   Allocation of Money Collected.....................................................................26
Section 6.7.   Limitation on Suits...............................................................................27
Section 6.8.   Unconditional Right of Noteholders to Receive Principal and Interest..............................27
Section 6.9.   Restoration of Rights and Remedies................................................................27
Section 6.10.  Rights and Remedies Cumulative....................................................................28
Section 6.11.  Delay or Omission Not Waiver......................................................................28
Section 6.12.  Control by Noteholders............................................................................28
Section 6.13.  Waiver of Past Defaults...........................................................................28
Section 6.14.  Undertaking for Costs.............................................................................29
Section 6.15.  Sale of Trust Estate..............................................................................29
Section 6.16.  Action on Notes...................................................................................30
Section 6.17.  Company Bankruptcy................................................................................30

                                             ARTICLE VII. THE TRUSTEE

Section 7.1.   Certain Duties and Responsibilities...............................................................31
Section 7.2.   Notice of Default, Cure or Waiver.................................................................32
Section 7.3.   Certain Rights of Trustee.........................................................................32
Section 7.4.   Not Responsible for Recitals or Issuance of Notes.................................................33
Section 7.5.   May Hold Notes ...................................................................................34
Section 7.6.   Money Held in Trust...............................................................................35
Section 7.7.   Compensation and Reimbursement....................................................................35
Section 7.8.   Corporate Trustee Requirement; Eligibility........................................................36
Section 7.9.   Resignation and Removal; Appointment of Successor.................................................36
Section 7.10.  Acceptance of Appointment by Successor............................................................38
Section 7.11.  Merger, Conversion, Consolidation or Succession to Business of Trustee............................38
Section 7.12.  Co-trustees and Separate Trustees.................................................................39
Section 7.13.  Rights with Respect to the Servicer...............................................................40
Section 7.14.  Servicer as Agent and Bailee of Trustee...........................................................41
Section 7.15.  Representations and Warranties of the Trustee.....................................................41

                                      ARTICLE VIII. CONSOLIDATION AND MERGER

Section 8.1.   Company May Not Consolidate, etc..................................................................42

                                        ARTICLE IX. SUPPLEMENTAL INDENTURES

Section 9.1.   Supplemental Indentures without Consent of Noteholders............................................42

</TABLE>

                                       ii

<PAGE>   4

<TABLE>
<S>            <C>                                                                                               <C>
Section 9.2.   Supplemental Indentures with Consent of Noteholders...............................................43
Section 9.3.   Execution of Supplemental Indentures..............................................................44
Section 9.4.   Effect of Supplemental Indentures.................................................................45
Section 9.5.   Reference in Notes to Supplemental Indenture......................................................45

                                          ARTICLE X. REDEMPTION OF NOTES

Section 10.1.  Redemption at the Option of the Company; Election To Redeem.......................................45
Section 10.2.  Notice of Redemption by the Company...............................................................46
Section 10.3.  Deposit of the Redemption Price...................................................................46
Section 10.4.  Notes Payable on Redemption Date..................................................................46
Section 10.5.  Sale for Purposes of Redemption...................................................................47

                                               ARTICLE XI. COVENANTS

Section 11.1.  Payment of Principal and Interest.................................................................48
Section 11.2.  Maintenance of Office or Agency...................................................................48
Section 11.3.  Money for Note Payments To Be Held in Trust.......................................................48
Section 11.4.  Corporate Existence...............................................................................49
Section 11.5.  Protection of Trust Estate........................................................................50
Section 11.6.  Negative Covenants................................................................................50
Section 11.7.  Statement as to Compliance........................................................................51
Section 11.8.  Investment Company Act............................................................................52
Section 11.9.  Enforcement of Servicing Agreement and Sale Agreement.............................................52
Section 11.10. Taxes ............................................................................................52
Section 11.11. Company Ownership.................................................................................52
Section 11.12. Nonconsolidation..................................................................................52
Section 11.13. Representations and Warranties and Covenants......................................................53
Section 11.14. Opinions as to Trust Estate.......................................................................57

                                  ARTICLE XII. ACCOUNTS, ACCOUNTINGS AND RELEASES

Section 12.1.  Collection of Money...............................................................................58
Section 12.2.  Accounts .........................................................................................58
Section 12.3.  Reliance on Representations and Warranties........................................................61
Section 12.4.  Notice of Incorrect Representations and Warranties................................................62
Section 12.5.  Misrepresentations................................................................................62
Section 12.6.  Mandatory Repurchase Obligation...................................................................62
Section 12.7.  Subsequent Loans..................................................................................64
Section 12.8.  Reports by Trustee to Noteholders.................................................................64
Section 12.9.  Accounting by Trustee to Company..................................................................65
Section 12.10. Trust Estate .....................................................................................65
Section 12.11. Allocation of Losses..............................................................................66

                                        ARTICLE XIII. APPLICATION OF MONIES

Section 13.1.  Disbursements of Monies out of Collection Account.................................................66

</TABLE>

                                      iii

<PAGE>   5


<TABLE>
<S>              <C>
APPENDIX A       Standard Definitions


SCHEDULE I       Schedule of Mortgage Loans


EXHIBIT A        Form of Assignment of Note


EXHIBIT B        Form of Lost Note Affidavit


EXHIBIT C        Form of Substitute Form W-9

</TABLE>


                                       iv


<PAGE>   6

                  This INDENTURE, dated as of May 1, 1998 (herein, as amended
from time to time as permitted hereby, called the "Indenture"), is entered into
by and among Sunterra Finance L.L.C., a Georgia limited liability company
(together with its permitted successors and assigns, the "Company"), Signature
Resorts, Inc., a Maryland corporation, as servicer (herein, together with its
permitted successors and assigns, called the "Servicer") and LaSalle National
Bank, a nationally chartered bank, as trustee (together with its permitted
successors and assigns, the "Trustee") and as back-up servicer (together with
its permitted successors and assigns, the "Back-up Servicer").


                              PRELIMINARY STATEMENT

                  The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance of three classes of Signature Resorts
Vacation Ownership Receivables-Backed Notes 1998-A, consisting of three classes
(the "Class A-1 Notes", the "Class A-2 Notes" and the "Class A-3 Notes" and,
collectively, the "Notes"). The cash proceeds from the sale of such Notes are to
be used by the Company to purchase the Mortgage Loans.

                  The following table sets forth the designation, Note Interest
Rate and aggregate Initial Note Principal Balance for the Class A-1 Notes, the
Class A-2 Notes and the Class A-3 Notes.


<TABLE>
<CAPTION>
                                                                                      Initial
                                                     Note                              Note
                                                   Interest                          Principal
Designation                                          Rate                             Balance
-----------                                          ----                             -------
<S>                                                <C>                              <C>        
Class A-1                                            6.36%                          $37,470,866
Class A-2                                            6.85%                          $50,000,000
Class A-3                                            7.07%                          $12,800,614

</TABLE>

                  The Mortgage Loans have an Outstanding Pool Balance as of the
Cut-off Date equal to $106,671,788.

                  All covenants and agreements made by the Company and the
Servicer herein are for the benefit and security of the Noteholders. The Company
and the Servicer are entering into this Indenture, and the Trustee is accepting
the duties as trustee created hereby, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged.



<PAGE>   7

                                GRANTING CLAUSES

                  The Company hereby Grants to the Trustee for the exclusive
benefit of the Holders, a lien upon and a security interest (which the Company
represents and warrants will be a perfected first-priority security interest) in
all of the Company's right, title and interest in and to the Mortgage Loans,
including without limitation all interest due and principal received on or with
respect to the Mortgage Loans after the Cut-off Date, all Net Liquidation
Proceeds and Insurance Proceeds received after the Cut-off Date with respect to
any Mortgaged Property to which any Mortgage Loans relate, all security
interests in the Mortgaged Property securing such Mortgage Loans, the Mortgage
Loan Documents relating to such Mortgage Loans duly endorsed as appropriate, the
Mortgage Files, any insurance policies related to the Mortgage Loans, the rights
of the Company under the Sale Agreement, all proceeds with respect to the
foregoing, including, without limitation, all funds deposited in the Collection
Account, the related Lock-Box Account and the Reserve Account and all Permitted
Investments made with such funds, and all rights to enforce the foregoing.

                  Such Grants are made, however, in trust, to secure (i) the
Notes, securing all Notes of each Class equally and ratably without prejudice,
priority or distinction among the Notes of any such Class by reason of
difference in time of authentication or delivery or otherwise but, as between
each Class of Notes as a group and each other Class of Notes as a group, subject
to the subordination of payments on the Class A-2 Notes to payments on the Class
A-1 Notes and on the Class A-3 Notes to payments on the Class A-1 and Class A-2
Notes, as provided in Section 13.1 hereof, (ii) the payment of all other sums
payable under this Indenture, and (iii) compliance with the provisions of this
Indenture, all as provided in this Indenture.

                  Except as hereinafter provided, the Company does hereby
warrant and represent that it has not permitted and hereby covenants that it
will not permit the creation of any Lien other than the Lien of this Indenture
with respect to any part of the Trust Estate, so long as this Indenture shall
remain in effect, to anyone other than the Trustee, and that it will not, except
as provided in this Indenture, enter into any agreement amending or
supplementing any of the Mortgage Loans, the Sale Agreement, the Servicing
Agreement or the Note Purchase Agreement, execute or grant any waiver or
modification of, or consent under, the terms of any of the Mortgage Loans, the
Sale Agreement, the Servicing Agreement or the Note Purchase Agreement, settle
or compromise any claim arising under any of the Mortgage Loans, the Sale
Agreement, the Servicing Agreement or the Note Purchase Agreement or submit or
consent to the submission of any dispute, difference or other matter arising
under or in respect of any of the Mortgage Loans, the Sale Agreement, the
Servicing Agreement or the Note Purchase Agreement, to arbitration thereunder.


                                       2
<PAGE>   8

                  The Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions of this Indenture and agrees to
perform the duties herein required. So long as any Note remains outstanding, the
Trustee shall act for the benefit of the Noteholders as their interests may
appear to the extent provided herein.

                  The Trustee agrees to maintain in its possession each Mortgage
File delivered to it pursuant to Section 2(b) of the Sale Agreement unless and
until such Mortgage File is released from the lien hereof pursuant to Article
Twelve hereof.

                  All things necessary to make this Indenture a valid agreement
of the Company in accordance with its terms have been done.

                                   ARTICLE I.
                       DEFINITIONS AND OTHER PROVISIONS OF
                               GENERAL APPLICATION

                  Section 1.1.  Definitions

                  (a) Except as otherwise expressly provided herein or unless
the context otherwise requires, the capitalized terms used in the Indenture
shall have the respective meanings specified in the Standard Definitions set
forth as Appendix A hereto, which is incorporated herein by this reference. The
definitions of such terms are equally applicable both to the singular and plural
forms of such terms.

                  (b) All references in this instrument to designated
"Articles," "Sections," "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions of this
instrument as originally executed or if amended or supplemented, as so amended
and supplemented. The words "herein," "hereof," "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section, Subsection or other subdivision. Reference to the Trustee's
duties under this Indenture shall include its duties as Trustee as set forth in
the Servicing Agreement.

                  Section 1.2.  Acts of Noteholders

                  (a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or 



                                       3
<PAGE>   9

instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 7.1) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section 1.2.

                  (b) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any manner which the Trustee deems
sufficient.

                  (c) The ownership of Notes shall be proved by the Note
Register.

                  (d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Note shall bind the Holder
of every Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered to
be done by the Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Note.

                  Section 1.3. Notices, etc. to Trustee, Company, Servicer and
DCR

                  Except as otherwise provided, any request, demand,
authorization, direction, notice, consent, waiver or Act of Noteholders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with the following parties, shall be deemed to have been
duly made upon, given or furnished to, or filed with, when delivered by hand,
sent by overnight courier or by telecopy, addressed to the appropriate parties
at their addresses designated herein or to such other address as the party to be
notified may have otherwise designated in a notice given as provided in this
Section. A hard copy of any item delivered by telecopy shall also be sent by
overnight mail on the day of such telecopy delivery.

                  The Company:
                  Sunterra Finance L.L.C.
                  1875 S. Grant Street, Suite 650-A
                  San Mateo, California  94402
                  Attention:  Michael Depatie, CFO

                  With a copy to:  Drew Hutton

                  Signature Resorts, Inc.:
                  1875 S. Grant Street, Suite 650
                  San Mateo, California  94402
                  Attention:  Michael Depatie, CFO



                                       4
<PAGE>   10

                  With a copy to:

                  Drew Hutton,
                  Corporate Counsel

                  Sellers (except All Seasons Resorts, Inc., an Arizona
                  corporation and All Seasons Resorts, Inc., a Texas
                  corporation):
                  1875 S. Grant Street, Suite 650
                  San Mateo, California  94402
                  Attention:  Michael Depatie, CFO

                  With a copy to:

                  Drew Hutton,
                  Corporate Counsel

                  All Seasons Resorts, Inc., an Arizona corporation and
                  All Seasons Resorts, Inc., a Texas corporation
                  561 Highway 179
                  Sedona, Arizona  86336
                  Attention:  Drew Hutton

                  The Trustee and Back-up Servicer:
                  LaSalle National Bank
                  135 South LaSalle Street, Suite 1625
                  Chicago, Illinois  60674-4107
                  Attention:  Signature Resorts 1998-A

                  DCR:
                  Duff & Phelps Credit Rating Co.
                  55 East Monroe Street, Suite 3800
                  Chicago, Illinois  60603
                  Attention:  Asset-Backed Monitoring Group

Any Noteholder shall be entitled to receive any certificate, report or material
notice reasonably requested in writing, delivered by any Person under this
Agreement. Any notice to be provided to DCR shall be provided thereto by the
Trustee.

                  Section 1.4.  Notices to Noteholders; Waiver

                  Where this Indenture provides for notice, reports and
communication to Noteholders of any event, such notice, reports or communication
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and by regular mail, or by facsimile followed by regular mail or by
overnight courier, to each Noteholder affected by such event, at its address as
it appears on the Note Register (with a copy to not more than two other Persons,
at the addresses set forth in the Note Register), not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. Any such notice, report or communication shall only be deemed given upon
receipt at the address set forth in the Note Register. The Trustee 



                                       5
<PAGE>   11


hereby acknowledges receipt of Exhibit B to the Note Purchase Agreement and
agrees to include the appropriate information therein in the Note Register.

                  Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.

                  In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Trustee shall be
deemed to be a sufficient giving of such notice.

                  Section 1.5.  Effect of Headings and Table of Contents

                  The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.

                  Section 1.6.  Successors and Assigns

                  All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.

                  Section 1.7.  Severability

                  In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

                  Section 1.8.  Benefits of Indenture

                  Nothing in this Indenture or in the Notes, expressed or
implied, shall give to any Person, other than the parties hereto, any Paying
Agent which may be appointed pursuant to the provisions hereof and any of their
successors hereunder and the Noteholders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.

                  Section 1.9.  Legal Holidays

                  In any case where the date of any Distribution Date shall not
be a Business Day, then (notwithstanding any other provision of the Notes or
this Indenture) payment need not be made on such date, but may be made on the
next succeeding 



                                       6
<PAGE>   12

Business Day with the same force and effect as if made on the nominal date of
any such Distribution Date and, assuming timely payments on such subsequent
Business Day, no interest shall accrue on the payment due on the Notes on such
Payment Date for the period from and after any such nominal date.

                  Section 1.10.  Governing Law

                  This Indenture and each Note shall be construed in accordance
with and governed by the laws of the State of New York, without giving effect to
any conflict of laws principles thereof.

                  Section 1.11.  Counterparts

                  This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

                                   ARTICLE II.
                                    NOTE FORM

                  Section 2.1.  Form Generally

                  The Notes and the certificates of authentication shall be in
substantially the forms set forth in Section 2.2, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon, as may be
required to comply with the rules of any securities exchange on which the Notes
may be listed, or as may, consistently herewith, be determined by the officers
executing such Notes, as evidenced by their execution of the Notes. Any portion
of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.

                  Section 2.2.  Form of Class A-1, A-2 and A-3 Note

[THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1 [AND CLASS A-2]
NOTES AS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.]

THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES
LAWS AND THE COMPANY HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"), AND ACCORDINGLY THIS NOTE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS EXCEPT IN A
TRANSACTION THAT IS EXEMPTED UNDER THE SECURITIES ACT (INCLUDING TRANSFER MADE
PURSUANT TO RULE 144A 



                                       7
<PAGE>   13

UNDER THE SECURITIES ACT) AND APPLICABLE STATE SECURITIES LAWS AND BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) (A "QIB") OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (D) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE WITH A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUERS) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."

THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE
NAMED HEREIN OR ITS SUCCESSOR.


No. ________                                              Initial Note Principal
                                            Balance of the Class [A-1][A-2][A-3]
                                                           Notes:  $____________
Class [A-1][A-2][A-3]
PPN: ________________                             Initial Note Principal Balance
                                                      of this Note $____________

                      SIGNATURE RESORTS VACATION OWNERSHIP
                         RECEIVABLES-BACKED NOTE, 1998-A
                              CLASS [A-1][A-2][A-3]
                      FINAL MATURITY DATE: [April 25, 2014]


         Sunterra Finance L.L.C., a limited liability company duly organized and
existing under the laws of the State of Georgia (the "Company," which term
includes any successor entity under the Indenture referred to below), for value
received, ___________ 



                                       8
<PAGE>   14

hereby promises to pay to ______________________, or registered assigns, the
principal sum of _______________________ Dollars ($_______________) in monthly
installments beginning on the Initial Distribution Date, and to pay interest
monthly in arrears on the unpaid portion of said principal sum (and, to the
extent that the payment of such interest shall be legally enforceable, on any
overdue installment of interest on this Note) on the twenty-fifth day of each
calendar month or, if such twenty-fifth day is not a Business Day, the Business
Day immediately following (each a "Distribution Date"), for the Interest Accrual
Period immediately preceding such Distribution Date until such unpaid principal
is fully paid, at a rate per annum equal to ___% (the "Note Interest Rate");
provided, however, that interest on any amount of principal or interest that is
not timely paid when due shall accrue interest until paid at the Note Interest
Rate. Each monthly installment of principal payable on this Note on any Payment
Date shall be payable pursuant to Section 13.1 of the Indenture until the Class
[A-1][A-2][A-3]Notes have been paid in full. Any remaining unpaid portion of the
then Outstanding Note Balance of this Note shall be due and payable no later
than the Final Maturity Date referred to above. The interest and principal so
payable on any Distribution Date shall, as provided in the Indenture, be paid to
the Person in whose name this Note is registered on the Record Date for such
Distribution Date.

                  The principal of and interest due on this Note are payable,
without presentment, to the Person whose name appears as the registered Holder
of this Note on the Note Register on the Record Date for the Distribution Date
by wire or other transfer in immediately available funds to the account
specified in writing by such Holder at least three Business Days prior thereto
or as otherwise provided in the Indenture, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts. Funds represented by checks returned undelivered
shall be held for payment to the Person entitled thereto, subject to the terms
of the Indenture, at the office or agency in the United States of America
designated as such by the Company for such purpose pursuant to the Indenture.

                  Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.

                  This Note is one of a duly authorized issue of Notes of the
Company designated as its Signature Resorts Vacation Ownership
Receivables-Backed Notes 1998-A, Class [A-1][A-2][A-3] Notes (herein called the
"Notes") issued under an Indenture dated as of May 1, 1998 (herein called the
"Indenture"), among the Company, Signature Resorts, Inc., as Servicer, LaSalle
National Bank, as trustee (the "Trustee," which term includes any successor
Trustee under the Indenture) and as back-up servicer (the "Back-up Servicer"),
to which Indenture reference is hereby 


                                       9
<PAGE>   15

made for a statement of the respective rights thereunder of the Company, the
Trustee and the Holders of the Notes, and the terms upon which the Notes are,
and are to be, authenticated and delivered. All terms used in this Note which
are defined in the Indenture shall have the meanings assigned to them in the
Indenture. Certain provisions of the Indenture are described in this Note. The
Indenture shall govern in the event that the provisions of this Note are
inconsistent therewith.

                  As provided in the Indenture, the Notes are secured by certain
Mortgage Loans and by certain other collateral (the "Trust Estate") described in
the Indenture. The Notes are equally and ratably secured by the collateral
pledged therefor to the extent provided by the Indenture.

                  Unless earlier declared, or they otherwise become due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
at the option of the Company before such time except that the Notes shall be
redeemable at the option of the Company in whole, but not in part, on any
Distribution Date at such time as the aggregate Outstanding Note Balance is
equal to or less than 15% of the Outstanding Note Balance as of the Closing
Date. The Notes shall be redeemed at a redemption price equal to the aggregate
Outstanding Note Balance thereof, plus accrued interest thereon through the
redemption date. If an Event of Default as defined in the Indenture shall occur
and be continuing, the principal of all the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture.

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note may be registered on
the Note Register of the Company, upon surrender of this Note for registration
of transfer at the office or agency of the Trustee in the United States of
America, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Notes of the same Class, of authorized denominations and for the same aggregate
Outstanding Note Balance, shall be issued to the designated transferee or
transferees.

                  Prior to due presentment for registration of transfer of this
Note, the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes
whether or not this Note be overdue, and neither the Company, the Trustee, nor
any such agent shall be affected by notice to the contrary.



                                       10
<PAGE>   16

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under the
Indenture at any time by the Company with the consent of the Holders of at least
51% of the aggregate Outstanding Notes Balance of each class of Notes. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate Note Principal Balance of Outstanding Notes of one or
more Classes, on behalf of the Holders of all Notes, to waive compliance by the
Company with certain provisions of the Indenture and certain past defaults and
their consequences under the Indenture. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also prohibits
the Company from amending its charter without the consent of the Majority
Holders.

                  The Notes are issuable only in registered form without coupons
in such authorized denominations as provided in the Indenture and subject to
certain limitations therein set forth. The Notes are exchangeable for Notes of a
like Outstanding Note Balance as of the Closing Date of the same Class of a
different authorized denomination, as requested by the Holder surrendering same.

                  This Note and the Indenture shall be governed by and construed
in accordance with the laws of the State of New York.

                  No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Note in accordance with the Indenture at the times, place and rate, and in
the coin or currency, herein prescribed.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]



                                       11
<PAGE>   17


                  IN WITNESS WHEREOF, Sunterra Finance L.L.C. has caused this
instrument to be signed, manually or in facsimile, by its Managing Member.



                                        SUNTERRA FINANCE L.L.C.


                                        BY
                                          --------------------------------------

Attest:

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



                                       12
<PAGE>   18

                               [FORM OF TRUSTEE'S
                         CERTIFICATE OF AUTHENTICATION]

                  This is one of the Class [A-1][A-2][A-3]Notes referred to in
the within-mentioned Indenture.


Dated:

LaSalle National Bank,
as Trustee


By______________________
    Authorized Officer


                                  ARTICLE III.
                                    THE NOTES

                  Section 3.1.  Designation of Notes; Certain Related Provisions

                  The Class A-1 Notes shall be designated generally as the
"Signature Resorts Vacation Ownership Receivables-Backed Notes 1998-A Class A-1
Notes" of the Company. The Class A-2 Notes shall be designated generally as the
"Signature Resorts Vacation Ownership Receivables-Backed Notes 1998-A Class A-2
Notes" of the Company. The Class A-3 Notes shall be designated generally as the
"Signature Resorts Vacation Ownership Receivables-Backed Notes 1998-A Class A-3
Notes" of the Company.

                  All Notes of each class at any time simultaneously outstanding
shall be identical in respect of place or places of payment and dates of
payments with all other Notes of such class. Notes of each class shall have the
same Note Interest Rate as all other Notes of such class.

                  The Stated Maturity of each Class of Notes shall be April 25,
2014. The Class A-1, Class A-2 and Class A-3 Notes shall be assigned on or
before the Closing Date ratings of "AAA", "A" and "BBB", respectively, by DCR.

                  The aggregate Outstanding Note Balance as of the Closing Date
of the Class A-1, Class A-2 and Class A-3 Notes that may be authenticated and
delivered hereunder is limited to $37,470,866, $50,000,000 and $12,800,614,
respectively, except for Notes authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Notes of the same class
pursuant to Sections 3.4, 3.6 or 9.5 hereof.



                                       13
<PAGE>   19

                  Section 3.2.  Denominations

                  The Notes are available in a minimum denomination of
$1,000,000 original principal amount and integral multiples of $100,000 in
excess thereof; provided, however, that one Note of each Class may be issued in
a denomination that includes any residual amount.

                  Section 3.3.  Execution, Authentication, Delivery and Dating

                  The Notes shall be executed on behalf of the Company by its
President or one of its Vice Presidents and attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the Notes
may be manual or facsimile. The Notes may be printed, lithographed, typewritten,
mimeographed or otherwise produced.

                  Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication or delivery of such Notes or did
not hold such offices at the date of authentication or delivery of such Notes.

                  At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company together with a Company Order authorizing authentication thereof to the
Trustee for authentication; and, upon receipt of such Notes, the Trustee shall
authenticate and deliver such Notes as in this Indenture provided and not
otherwise. Notwithstanding anything herein to the contrary, the aggregate
original principal amount of each class of the Notes that may be authenticated
and delivered under this Indenture is limited to the aggregate Outstanding Note
Balance for that Class as of the Closing Date, except for Notes authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of Notes pursuant to Section 3.4, 3.6 or 9.5 hereof.

                  Each Note shall bear on its face the Closing Date and be dated
as of the date of its authentication.

                  No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears to be on such
Note a certificate of authentication substantially in the form provided for
herein, executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder.



                                       14
<PAGE>   20

                  Section 3.4. Registration, Registration of Transfer and
Exchange

                  The Trustee, in its capacity as registrar of the Notes (the
"Note Registrar"), shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Notes and the registration of transfers of
Notes.

                  Upon surrender for registration of transfer of any Note at the
Corporate Trust Office of the Trustee to be maintained as provided in Section
11.2, the Company shall execute, and the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more new Notes
of any authorized denominations, of the same class and of a like Outstanding
Note Balance as of the Closing Date.

                  At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denominations of the same class and of a like
Outstanding Note Balance as of the Closing Date, upon surrender of the Notes to
be exchanged at such office or agency. Whenever any Notes are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is entitled to
receive.

                  All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of such transfer or exchange.

                  Every Note presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed, by the Holder thereof
or his attorney duly authorized in writing. The form of assignment set forth at
Exhibit A hereof shall be deemed to be satisfactory for purposes of the last
preceding sentence.

                  No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Section 9.5 not involving any
registration of transfer.

                  Section 3.5.  Limitation on Transfer and Exchange

                  The Notes have not been registered or qualified under the
Securities Act of 1933 (the "1933 Act") or the securities laws of any state. No
transfer of any Note shall be made unless 


                                       15
<PAGE>   21

such transfer is made pursuant to an effective registration statement under the
1933 Act and registration or qualification under applicable state securities
laws or is exempt from such registration or qualification. In the event that a
transfer is to be made in reliance upon an exemption from the 1933 Act and
applicable state securities laws, the Trustee shall require, in order to assure
compliance with the 1933 Act, that the owner desiring to effect such transfer
and such owner's prospective transferee each certify to the Company and Trustee
in writing the facts surrounding the transfer in the form of either Exhibit 1 or
Exhibit 2 to the Note Purchase Agreement. The Trustee may conclusively rely upon
a Rule 144A Representation Letter from the prospective transferee in the form
attached as Exhibit 2 to the Note Purchase Agreement or upon an investment
letter from the prospective transferee in the form attached as Exhibit 1 to the
Note Purchase Agreement to establish the availability of such exemption. Neither
the Company nor the Trustee is obligated to register or qualify the Notes under
the 1933 Act or any other securities law.

                  The Trustee shall have no liability to the Trust Estate or
otherwise arising from a transfer of any such Note in reliance upon a
certification or Rule 144A Representation Letter described in this Section 3.5.

                  Section 3.6.  Mutilated, Destroyed, Lost or Stolen Notes

                  If (i) any mutilated Note is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Trustee by the Noteholder
an agreement of indemnity in form and substance reasonably satisfactory to the
Trustee to save the Company and the Trustee harmless, then, in the absence of
notice to the Company or the Note Registrar that such Note has been acquired by
a bona fide purchaser, the Company shall execute and upon its request the
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a new Note of the same Class, tenor
and Outstanding Note Balance as of the Closing Date, bearing a number not
contemporaneously outstanding; provided, however, that if any such mutilated,
destroyed, lost or stolen Note shall have become or shall be about to become due
and payable the Company in its discretion may, instead of issuing a new Note,
pay such Note.

                  Upon the issuance of any new Note under this Section, the
Company or the Trustee may require the payment by the Holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee
connected therewith).



                                       16
<PAGE>   22

                  Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes of the same Class duly issued hereunder.

                  The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.

                  Section 3.7.  Payment of Principal and Interest

                  The principal of and interest due on the Notes of each Class
are payable, without presentment, to the Person whose name appears as the Holder
of such Note on the Record Date on the Note Register for the related Class by
wire or other transfer in immediately available funds to the account specified
in writing by such Holder in the Note Purchase Agreement, in the case of the
Noteholders, or otherwise specified in writing by such Holder at least three
Business Days prior to the Record Date for the Distribution Date on which wire
or other transfers are to commence. Such payment shall be in such coin or
currency of the United States of America as at the time of tender is legal
tender for the payment of public and private debts. Funds representing any such
checks returned undelivered shall be held in accordance with Section 11.3.
Payments to each Noteholder shall be made pursuant to Section 13.1 hereof. Upon
request, the Holder shall surrender such Note at the Corporate Trust Office of
the Trustee within 30 days after such payment.

                  Section 3.8.  Persons Deemed Owners

                  Prior to due presentment for registration of transfer of any
Note, the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Note is registered as the owner of such Note
for the purpose of receiving payments of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.

                  Section 3.9.  Cancellation

                  All Notes surrendered to the Trustee following, or at the time
of, payment or for registration of transfer or exchange (including Notes
surrendered to any Person other than the Trustee which shall be delivered to the
Trustee) shall be promptly canceled by the Trustee. All canceled Notes held by
the Trustee shall be held by the Trustee in accordance with its standard



                                       17
<PAGE>   23

retention policy unless the Company shall direct in a timely manner by a Company
Order that they be returned to it.

                  Section 3.10.  Tax Treatment

                  The Company has structured this Indenture and the Notes with
the intention that the Notes will qualify under the applicable tax law as
indebtedness of the Company. The Company and each Noteholder, by acceptance of
its Note, agree to treat the Notes as debt of the Company for all purposes.

                                   ARTICLE IV.
                    AUTHENTICATION AND DELIVERY OF THE NOTES

                  Section 4.1.  General Provisions

                  The Notes shall be executed by the Company and delivered to
the Trustee for authentication and thereupon the same shall be authenticated and
delivered by the Trustee upon its receipt of a Company Order and upon compliance
with the conditions of Section 4.2, and upon delivery to the Trustee of the
following:

                  (1) a copy of the Company's Board Resolution authorizing the
         execution and delivery of this Indenture and the Notes; and

                  (2) either (i) a certificate or other official document
         evidencing the due authorization, approval or consent of any government
         body or bodies, at the time having jurisdiction in the premises, and
         that the authorization, approval or consent of no other governmental
         body is required for valid issuance of the Notes, or (ii) an Opinion of
         Counsel that no such authorization, approval or consent of any
         governmental body is required.

                  Section 4.2.  Security for Notes

                  The Notes shall be executed by the Company and delivered to
the Trustee for authentication and thereupon the same shall be authenticated and
delivered to the Company by the Trustee upon receipt of a Company Order and
upon:

                  (a) establishment for the benefit of the Trustee on behalf of
the Noteholders of the Lockbox Accounts, the Collection Account and the Reserve
Account; and

                  (b) delivery by the Company to the Trustee, and receipt by the
Trustee of the Mortgage Files and the Grant of all of the Company's right,
title, and interest in and to the Mortgage Loans.



                                       18
<PAGE>   24

                  Section 4.3.  Delivery of Mortgage Loans

                  In connection with the assignment of all of the Company's
right, title and interest in and to the Mortgage Loans and related Mortgage Loan
Documents, the Company has delivered to, and deposited with, the Trustee the
Mortgage Loans and related Mortgage Loan Documents. The Trustee acknowledges
receipt of the files representing Mortgage Loan Documents and declares that it
holds and will hold such Mortgage Loan Documents in trust for the use and
benefit of all present and future Noteholders and will submit the related
Assignments for recording within three Business Days after the Closing Date at
the expense of the Company. The Trustee shall deliver a certification on the
Closing Date, indicating that it has reviewed each Mortgage File and the
Schedule of Mortgage Loans and has determined that: except as set forth on the
schedule of exceptions attached thereto, all required documents have been
executed and received, that such documents relate to the Mortgage Loans
identified on the Schedule of Mortgage Loans, and each Mortgage File contains an
original Mortgage Note related to each such Mortgage Loan executed by the
Mortgagor listed on the Schedule of Mortgage Loans either endorsed in blank by
the original payee or showing a complete chain of title through to the Trustee.
The Trustee agrees, for the benefit of Noteholders, to review each Mortgage Loan
Document delivered to it after the Closing Date within 30 days after the Grant
of the related Mortgage Loan to the Trustee to ascertain that all required
documents related to such Mortgage Loan have been executed and received, and
that such documents relate to the Mortgage Loans identified in the Schedule of
Mortgage Loans that have been provided to it and that each related Mortgage File
contains an original Mortgage Note related to each such Mortgage Loan executed
by the Mortgagor listed on the Schedule of Mortgage Loans either endorsed in
blank by the original payee or showing a complete chain of title through to the
Trustee. If the Trustee finds any document or documents constituting a part of
the Mortgage Loan Documents to be missing or defective in any material respect,
the Trustee shall promptly so notify the Company and the Seller and request that
the Seller correct or cure such omission or defect within 90 days from the date
the Seller was notified of such omission or defect. If within such 90-day period
the Seller fails to cure such omission or defect, then the Company shall cause
the Seller to deposit the Mortgage Purchase Price for the related Mortgage Loan
in the Collection Account on the second Business Day prior to the Distribution
Date relating to the Collection Period in which such 90-day period expired or
cause to be substituted a Substitute Mortgage Loan pursuant to Section 12.6(b)
hereof. Any such repurchased Mortgage Loan, upon deposit of the related Mortgage
Purchase Price or substitution of a Substitute Mortgage Loan, shall be released
from the Trust Estate by the Trustee to the Company or its designee within one
Business Day of such deposit or substitution.



                                       19
<PAGE>   25

                                   ARTICLE V.
                           SATISFACTION AND DISCHARGE

                  Section 5.1.  Satisfaction and Discharge of Indenture

                  This Indenture shall cease to be of further effect (except as
to any surviving rights of registration of transfer and exchange or payment)
with respect to the Notes and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes and shall pay, assign,
transfer and deliver to the Company upon Company Order all cash, securities and
other property held by it as part of the Trust Estate (except for amounts
required to pay and discharge the entire indebtedness of the Notes), when

                  (1)      either

                                    (A) all Notes theretofore authenticated and
                  delivered (other than Notes which have been destroyed, lost or
                  stolen and which have been replaced or paid as provided in
                  Section 3.6) have been delivered to the Trustee for
                  cancellation; or

                                    (B) all Notes not theretofore delivered to
                  the Trustee for cancellation have become due and payable and
                  the Company has irrevocably deposited or caused to be
                  deposited with the Trustee, in trust for the purpose, an
                  amount sufficient to pay and discharge the entire indebtedness
                  on such Notes not theretofore delivered to the Trustee for
                  cancellation;

                  (2) the Company has paid or caused to be paid all other sums
         payable hereunder by the Company; and

                  (3) the Company has delivered to the Trustee and each
         Noteholder an Officers' Certificate and an Opinion of Counsel each
         stating that all conditions precedent herein provided for relating to
         the satisfaction and discharge of this Indenture with respect to the
         Notes have been complied with.

                  Notwithstanding the satisfaction and discharge of this
Indenture, the Company's obligations in Sections 3.4, 3.6, 7.7, 11.2 and 11.3,
the Trustee's obligations in Section 5.2 and the rights and immunities of the
Trustee under this Indenture shall survive until the Notes are no longer
Outstanding. Thereafter the obligations of the Company in Section 7.7 and the
Trustee in Section 5.2 and the rights and immunities of the Trustee under this
Indenture shall survive.



                                       20
<PAGE>   26

                  Section 5.2.  Application of Money Held in Trust

                  All monies deposited with the Trustee pursuant to Section 5.1
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent as the Trustee may determine, to the Persons entitled thereto, of
the principal and interest for whose payment such money has been deposited with
the Trustee.

                  Section 5.3.  Discharge of Security Interest

                  Upon satisfaction and discharge of the Indenture as specified
in Section 5.1, the Trustee shall, on written demand of and at the expense of
the Company and upon being supplied with instruments appropriate for the
purpose, execute and the Company shall file all documents (including without
limitation UCC Form 3) necessary to discharge all liens, mortgages, chattel
mortgages and other security interests filed with any governmental board or body
with respect to the Mortgage Loans, and any other assets of the Trust Estate,
and the Trustee shall otherwise cooperate in any way necessary to restore full
unencumbered title in the Mortgage Loans to the Company or its designee.

                                   ARTICLE VI.
                                    REMEDIES

                  Section 6.1.  Events of Default

                  "Event of Default" wherever used herein means any one of the
following events (whatever the reason for such Event of Default and without
regard to whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

                  (1) the Company shall fail to distribute or cause to be
         distributed to Holders of Notes all or part of any payment of interest
         or principal required to be made under the terms of such Notes or this
         Indenture when due;

                  (2) default in the performance, or breach of any covenant of
         the Company or a Seller, as applicable, in this Indenture or the Sale
         Agreement and continuance of such default or breach for a period of 30
         days after the earlier of (i) the date on which the Company or such
         Seller, as applicable, shall first have knowledge of such default or
         breach and (ii) the date on which written notice, specifying such
         default or breach and requiring it to be remedied and stating that such
         notice is a "Notice of Default" hereunder shall have been given to the
         Company or such Seller, as applicable, by the Trustee or any
         Noteholder;



                                       21
<PAGE>   27

                  (3) breach of any representation or warranty of the Company or
         a Seller, as applicable, in this Indenture, the Sale Agreement or in
         the Note Purchase Agreement, in each case as of the date such
         representation or warranty was made;

                  (4) the entry of a decree or order for relief by a court
         having jurisdiction in the premises in respect of the Company or the
         Seller under the Federal Bankruptcy Code or any other applicable
         bankruptcy, insolvency or other similar Federal or State law, or
         appointing a receiver, liquidator, assignee, trustee, or sequestrator
         (or other similar official) of the Company or a Seller or of any
         substantial part of its respective property, or ordering the winding up
         or liquidation of its respective affairs; or

                  (5) the institution by the Company or a Seller of proceedings
         to be adjudicated a bankrupt or insolvent, or the consent by either of
         them to the institution of bankruptcy or insolvency proceedings against
         either of them, or the filing by either of them of a petition or answer
         or consent seeking reorganization or relief under the Federal
         Bankruptcy Code or any other applicable Federal or State law, or the
         consent by either of them to the filing of any such petition or to the
         appointment of a receiver, liquidator, assignee, trustee or
         sequestrator (or other similar official) of the Company or such Seller
         or of any substantial part of its respective property, or the making by
         either of them of an assignment for the benefit of creditors, or the
         admission by either of them in writing of its respective inability to
         pay its debts generally as they become due, or the taking of corporate
         action by the Company or the Seller in furtherance of any such action;
         or

                  (6) the occurrence and continuance of a Servicer Event of
Default.

                  Section 6.2. Acceleration of Maturity, Rescission and
Annulment

                  If an Event of Default of the kind specified in clause (4) or
(5) of Section 6.1 occurs, the unpaid principal amount of all of the Notes shall
automatically become immediately due and payable without notice, presentment or
demand of any kind. If an Event of Default (other than an Event of Default of
the kind specified in clause (4) or (5) of Section 6.1) occurs and is
continuing, then and in every such case the Trustee may or at the direction of
the Majority Holders (or, if the only Event of Default occurring is an Event of
Default with respect to a Seller or Servicer set forth in clauses (2), (3) or
(6) of Section 6.1, then the Holder or the Holders of 66 2/3% of the aggregate
Outstanding Note Balance of the Notes), together with the consent of at least
51% of the Holders of the Class of Notes with the highest rating from DCR
(determined as of the Delivery 



                                       22
<PAGE>   28

Date) which has payments of interest or principal due and owing from any prior
Distribution Date, if any, the Trustee shall declare the principal of all of the
Notes to be immediately due and payable, by a notice in writing to the Company
(and to the Trustee if given by Noteholders), and upon any such declaration such
principal (together with all accrued and previously unpaid interest) shall
become immediately due and payable. The Trustee shall give notice to each
Noteholder of such declaration. Notwithstanding the foregoing, the Trustee may
not declare the Notes to be due and payable pursuant to this Section 6.2 as a
result of an Event of Default arising solely from the Company's failure to
perform its agreements set forth in Section 7.7.

                  At any time after such a declaration of acceleration has been
made, but before any Sale of the Trust Estate has been made or a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of 66 2/3% of the aggregate
Outstanding Note Balance of the Notes, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequence if

                  (1) the Company has paid or deposited with the Trustee a sum
         sufficient to pay

                                    (A) all overdue installments of interest on
                  all Class A-1, Class A-2 and Class A-3 Notes,

                                    (B) the principal of any of the Class A-1,
                  Class A-2 or Class A-3 Notes which has become due otherwise
                  than by such declaration of acceleration and interest thereon
                  at the applicable Note Interest Rate,

                                    (C) to the extent that payment of such
                  interest is lawful, interest upon overdue installments of
                  interest on the Class A-1, Class A-2 and Class A-3 Notes at
                  the rate specified therefor in the applicable Notes, and

                                    (D) all sums paid or advanced by the Trustee
                  hereunder and the Back-up Servicer under the Servicing
                  Agreement and the reasonable compensation, expenses,
                  disbursements and advances of the Trustee, its agents and
                  counsel; and

                  (2) all Events of Default, other than the nonpayment of the
         principal of the Class A-1, Class A-2 and Class A-3 Notes which have
         become due solely by such acceleration, have been cured or waived as
         provided in Section 6.13.

                  No such rescission shall affect any subsequent default or
impair any right consequent thereon.



                                       23
<PAGE>   29

                  Subsequent to any such declaration of acceleration and so long
as such declaration and its consequences has not been rescinded and annulled,
prior to the exercise by the Trustee of the remedies set forth in Section 6.3(b)
or (c) the Trustee shall give the Noteholders ten days' notice of its intention
to take such actions.

                  Section 6.3.  Remedies

                  If an Event of Default shall have occurred and be continuing,
the Trustee may, after notification to all Noteholders and, at the direction of
the Majority Holders, shall do one or more of the following:

                  (a) institute Proceedings for the collection of all amounts
then payable on the Notes, or under this Indenture in respect of the Notes,
whether by declaration or otherwise, enforce any judgment obtained, and collect
from the Trust Estate securing the Notes the monies adjudged due;

                  (b) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more Sales called and conducted in any manner
permitted by law;

                  (c) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the portion of the
Trust Estate securing the Notes; and

                  (d) exercise any remedies of a secured party under the UCC or
other applicable law and take any other appropriate action to protect and
enforce the rights and remedies of the Trustee or the Holders of the Notes
hereunder;

provided, however, except for any Sale conducted pursuant to Section 10.5, that
without the consent of the Holders of 66 2/3% of the aggregate Outstanding Note
Balance of the Notes, the Trustee may not sell or otherwise liquidate the Trust
Estate or any portion thereof unless, in the reasonable judgment of the Trustee
after consultation with a Person of national reputation in the field of
appraisal of property of the type comprising the Mortgaged Property, the
proceeds of such Sale or Proceedings or liquidation distributable to the
Noteholders will be sufficient to discharge in full the amounts then due and
unpaid upon the Notes for principal and interest. The Trustee shall have no
liability for any public Sale or private Sale conducted in reliance upon the
advice of a Person of national reputation in the field of appraisal. In the
event that the Trustee does not sell or otherwise liquidate the Trust Estate, it
shall continue to hold such Trust Estate and make distributions therefrom
pursuant to Article Thirteen hereof.



                                       24
<PAGE>   30

                  Section 6.4.  Trustee May File Proofs of Claim

                  In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial Proceeding, relating to the Company or any other obligor upon the
Notes or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of any Class of
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, to intervene in such proceeding or otherwise,

                  (i) to file and prove a claim for all amounts owing and unpaid
         in respect of the Notes and to file such other papers or documents and
         take such other action including participating as a member or
         otherwise, in any committee of creditors appointed in the matter, as
         may be necessary or advisable in order to have the claims of the
         Trustee (including any claim for the reasonable compensation, expenses,
         disbursements and advances of the Trustee, its agents and counsel) and
         of the Noteholders allowed in such judicial Proceeding;

                  (ii) to petition for lifting of the automatic stay and
         thereupon to foreclose upon the Trust Estate as elsewhere provided
         herein; and

                  (iii) to collect and receive any monies or other property
         payable or deliverable on any such claims and to distribute the same;

and any receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such judicial Proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7.

                  Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan or reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
Proceeding.



                                       25
<PAGE>   31

                  Section 6.5. Trustee May Enforce Claims without Possession of
Notes

                  All rights of actions and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any Proceeding relating thereto,
and any such Proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements, indemnities and advances of the Trustee, its agents and counsel,
be for the benefit of the Holders of the Notes in respect of which such judgment
has been recovered applied to payments on the Notes in the order set forth in
Section 6.6.

                  Section 6.6.  Allocation of Money Collected

                  If the Notes have been declared due and payable following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, any money collected by the Trustee with respect to the
Notes pursuant to this Article (and any funds then held or thereafter received
by the Trustee) shall be applied in the following order, at the date or dates
fixed by the Trustee:

                  FIRST: To the payment of all amounts due the Trustee under
Section 7.7;

                  SECOND: If Signature Resorts, Inc. is not the Servicer
hereunder, to the Servicer, the Servicing Fee;

                  THIRD: (in the following order) To the payment of (i) accrued
interest on the Class A-1, Class A-2 and Class A-3 Notes, in that order,
including interest (to the extent such interest has been collected by the
Trustee or a sum sufficient therefor has been so collected and payment thereof
is legally enforceable at the rate prescribed therefor in the applicable Notes)
on overdue installments of interest, and (ii) the Outstanding Note Balances of
the Class A-1, Class A-2 and Class A-3 Notes, in that order;

                  FOURTH: To the payment of all reasonable costs and expenses
incurred by any Holder in connection with the enforcement of its rights
hereunder or under the Notes, ratably, without preference or priority of any
kind; and

                  FIFTH: To the payment of any surplus to or at the written
direction of the Company or any other person legally entitled thereto.



                                       26
<PAGE>   32

                  Section 6.7.  Limitation on Suits

                  No Holder shall have any right to institute any Proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless

                  (1) such Holder has previously given written notice to the
         Trustee of a continuing Event of Default;

                   (2) the Holders of 10% of the aggregate Outstanding Note
         Balance of the Notes shall have made written request to the Trustee to
         institute Proceedings in respect of such Event of Default in its own
         name as Trustee hereunder;

                   (3) such Holder or Holders have offered to the Trustee
         indemnity reasonably satisfactory to it against the costs, expenses and
         liabilities to be incurred in compliance with such request;

                   (4) the Trustee for 30 days after its receipt of such notice,
         request and offer of indemnity has failed to institute any such
         Proceeding; and

                   (5) no direction inconsistent with such written request has
         been given to the Trustee during such 30 day period by the Majority
         Holders;

it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided.

                  Section 6.8. Unconditional Right of Noteholders to Receive
Principal and Interest

                  Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Note as such principal
and interest becomes due and payable and to institute suit for the enforcement
of any such payment, and such right shall not be impaired without the consent of
such Holder.

                  Section 6.9.  Restoration of Rights and Remedies

                  If the Trustee or any Noteholder has instituted any Proceeding
to enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case the Company, the
Trustee and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to 



                                       27
<PAGE>   33

their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Noteholders shall continue as though no such Proceeding has been
instituted.

                  Section 6.10.  Rights and Remedies Cumulative

                  No right or remedy herein conferred upon or reserved to the
Trustee or to the Noteholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

                  Section 6.11.  Delay or Omission Not Waiver

                  No delay or omission of the Trustee or of any Noteholder to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Noteholders, or any of them, may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the
Noteholder or Noteholders, as the case may be.

                  Section 6.12.  Control by Noteholders

                  The Holders of 51% of the aggregate Outstanding Note Balance
of each class of Notes shall have the right to direct in writing the decision
whether to conduct, and the time, method and place of conducting, any Proceeding
for any remedy available to the Trustee with respect to the Notes or exercising
any trust or power conferred on the Trustee with respect to the Notes; provided
that:

                  (1) such direction shall not be in conflict with any rule of
         law or with this Indenture, and

                  (2) the Trustee may take any other action deemed proper by the
         Trustee which is not inconsistent with such direction;

provided, however, that, subject to Section 7.1, the Trustee need not take any
action which it determines might involve it in liability or be unjustly
prejudicial to the Noteholders not consenting.

                  Section 6.13.  Waiver of Past Defaults

                  The Holders of 51% of the aggregate Outstanding Note Balance
of each class of Notes may waive, in writing, any past 


                                       28
<PAGE>   34

Event of Default with respect to the Notes hereunder and its consequences,
except an Event of Default

                  (1) in the payment of the principal of or interest on any
         Note, or a default described in Section 6.1 (4) or (5), or

                  (2) in respect of a covenant or provision hereof which under
         Article Nine cannot be modified or amended without the consent of the
         Holder of each Outstanding Note affected thereby.

                  Upon any such waiver, such Event of Default shall cease to
exist and shall be deemed to have been cured for every purpose of this
Indenture. The Trustee, upon receipt thereof, shall transmit by mail to DCR
notice of such waiver specifying the date on which the Event of Default was
waived promptly after the occurrence of such waiver.

                  Section 6.14.  Undertaking for Costs

                  All parties to this Indenture agree, and each Holder of any
Note by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee, as Trustee and
as Back-up Servicer, for any action taken, suffered or omitted by it as Trustee
or as Back-up Servicer, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 6.14 shall not apply to any suit instituted by the
Trustee or to any suit instituted by any Noteholder or group of Noteholders,
holding in the aggregate more than 10% in Outstanding Note Balance of all Notes,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or interest on any Note when due.

                  Section 6.15.  Sale of Trust Estate

                  (a) The power to effect any sale (a "Sale") of any portion of
the Trust Estate pursuant to Section 6.3 shall not be exhausted by any one or
more Sales as to any portion of the Trust Estate remaining unsold, but shall
continue unimpaired until the entire Trust Estate securing the Notes shall have
been sold or all amounts payable under this Indenture with respect thereto shall
have been paid. The Trustee may from time to time postpone any Sale by public
announcement made at the time and place of such Sale. It is hereby expressly
agreed that the Trustee is not limited to any amount fixed by law as
compensation for any Sale.



                                       29
<PAGE>   35

                  (b) Any Noteholder may bid for and acquire any portion of the
Trust Estate securing the Notes in connection with any Sale thereof. In lieu of
paying cash for the entire purchase price therefor, any Noteholder, after
deducting the costs, charges and expenses (including reasonable attorney's fees)
incurred by the Trustee in connection with such Sale (and, in the case of any
Class A-3 Noteholder, after all amounts owing on the Class A-1 and Class A-2
Notes have been paid in full; and in the case of any Class A-2 Noteholder, after
all amounts owing on the Class A-1 Notes have been paid in full) may make
settlement for any portion of the purchase price remaining by crediting against
amounts owing on the Notes held by it or other amounts owing to such Noteholder
secured by this Indenture, the portion of the net proceeds of such Sale to which
such Noteholder would be entitled hereunder.

                  (c) The Servicer and the Company covenant and agree that a
Sale of the entirety of the Mortgage Loans and Mortgaged Properties by a public
Sale held not less than ten days after notice thereof is commercially
reasonable.

                  (d) The Trustee shall execute and deliver an appropriate
instrument of transfer, provided to it by the Servicer, transferring its
interest in any portion of the Trust Estate in connection with a Sale thereof.
In addition, the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Company to transfer and convey its interest in any
portion of the Trust Estate in connection with a Sale thereof, and to take all
action necessary to effect such Sale. No purchaser or transferee at such a sale
shall be bound to ascertain the Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
monies.

                  Section 6.16.  Action on Notes

                  The Trustee's right to seek and recover judgment on the Notes
or under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture. Neither
the lien of this Indenture nor any rights or remedies of the Trustee or the
Noteholders shall be impaired by the recovery of any judgment by the Trustee
against the Company or by the levy of any execution under such judgment upon any
portion of the Trust Estate or upon any of the assets of the Company.

                  Section 6.17.  Company Bankruptcy

                  The Trustee agrees, and each Holder of the Notes by its
acceptance of any note shall be deemed to agree, that it will not join in any
proceeding to commence a case against the Company under the Federal Bankruptcy
Code or any other applicable bankruptcy, insolvency or similar federal or state
law without 


                                       30
<PAGE>   36

the consent of more than 66 2/3% of the aggregate Outstanding Note Balance of
the Notes.

                                  ARTICLE VII.
                                   THE TRUSTEE

                  Section 7.1.  Certain Duties and Responsibilities

                  (a) Except during the continuance of an Event of Default:

                  (1) the Trustee undertakes to perform such duties and only
         such duties as are specifically set forth in this Indenture and in the
         Servicing Agreement, and no implied covenants or obligations shall be
         read into this Indenture or in the Servicing Agreement against the
         Trustee; and

                  (2) in the absence of bad faith on its part, the Trustee may
         conclusively rely, as to the truth of the statements and the
         correctness of the opinions expressed therein, upon certificates or
         opinions furnished to the Trustee and conforming to the requirements of
         this Indenture; but in the case of any such certificates or opinions
         which by any provision hereof are specifically required to be furnished
         to the Trustee, the Trustee shall be under a duty to examine the same
         to determine whether or not they conform to the requirements of this
         Indenture.

                  (b) In case an Event of Default (of which the Trustee has
actual knowledge) has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of his own affairs.

                  (c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

                  (1) this Subsection shall not be construed to limit the effect
         of Subsection (a) of this Section;

                  (2) the Trustee shall not be liable for any error of judgment
         made in good faith by a Responsible Officer, unless it shall be proved
         that the Trustee was negligent in ascertaining the pertinent facts;

                  (3) the Trustee shall not be liable with respect to any action
         taken or omitted to be taken by it in good faith in accordance with the
         direction of the Majority Holders relating to the time, method and
         place of conducting any Proceeding for any remedy available to the
         Trustee, or 


                                       31
<PAGE>   37

         exercising any trust or power conferred upon the Trustee, under this
         Indenture with respect to the Notes or under the Servicing Agreement;

                  (4) no provision of this Indenture shall require the Trustee
         to expend or risk its own funds or otherwise incur any financial
         liability in the performance of any of its duties hereunder, or in the
         exercise of any of its rights or powers, if it shall have reasonable
         grounds for believing that repayment of such funds or adequate
         indemnity against such risk or liability is not reasonably assured to
         it, provided that nothing herein contained shall excuse the Trustee for
         failure to perform its duties as Trustee under this Indenture or the
         Servicing Agreement;

                  (5) the Trustee shall not be charged with knowledge of any
         default hereunder or under the Servicing Agreement or any other fact or
         circumstance upon the occurrence of which it may be required to take
         action hereunder unless one of its Responsible Officers has actual
         knowledge thereof; and

                  (6) the Trustee shall have no obligation to ascertain whether
         any payment of interest on an overdue installment of interest is
         legally enforceable.

                  (d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.

                  Section 7.2.  Notice of Default, Cure or Waiver

                  Promptly after the occurrence of any Event of Default known to
the Trustee, the Trustee shall transmit by mail to all Holders, as their names
and addresses appear on the Note Register, and DCR notice of such Event of
Default hereunder known to the Trustee, unless such Event of Default shall have
been cured or waived.

                  The Trustee shall provide to DCR and each Noteholder prompt
notice of any Event of Default known to it, and of any cure (including waiver)
thereof, together with a written explanation of the manner in which and time at
which such Event of Default was cured or waived.

                  Section 7.3.  Certain Rights of Trustee

                  Subject to Section 7.1:

                  (a) the Trustee may, in the absence of bad faith on its part,
conclusively rely and shall be protected in acting or refraining from acting
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, note or other obligation,
paper 


                                       32
<PAGE>   38

or document believed by it to be genuine and to have been signed or presented by
the proper party or parties;

                  (b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;

                  (c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers' Certificate of the
Servicer or the Company;

                  (d) the Trustee may, in its reasonable judgment, consult with
in-house counsel or any other counsel nationally-recognized in securitization
with regard to legal questions arising out of or in connection with this
Indenture, and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;

                  (e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Noteholders pursuant to this Indenture, unless such
Noteholders shall have offered to the Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses (including legal fees and
expenses) and liabilities which might be incurred by it in compliance with such
request or direction; and

                  (f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.

                  Except as otherwise agreed by it in writing, the Trustee shall
not be responsible for the payment of any interest on amounts deposited with it
hereunder.

                  Section 7.4. Not Responsible for Recitals or Issuance of Notes

                  (a) The recitals contained herein and in the Notes, except the
certificates of authentication on the Notes, shall be 


                                       33
<PAGE>   39

taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity, adequacy or condition of the Trust Estate or any part thereof, or
as to the title of the Company thereto or as to the security afforded thereby or
hereby, or as to the validity or genuineness of any securities at any time
pledged and deposited with the Trustee hereunder or as to the validity or
sufficiency of this Indenture or of the Notes. The Trustee shall not be
accountable for the use or application by the Company of Notes or the proceeds
thereof or of any money paid to the Company or upon Company Order or for the use
or application by the Servicer of any amounts paid to the Servicer under any
provisions hereof.

                  (b) Except as otherwise expressly provided herein and without
limiting the generality of the foregoing, the Trustee shall have no
responsibility or liability for or with respect to the existence or validity of
any Mortgaged Property or Mortgage Loan, the perfection of any security interest
(whether as of the date hereof or at any future time), the maintenance of or the
taking of any action to maintain such perfection, the validity of the assignment
of any portion of the Trust Estate to the Trustee or of any intervening
assignment, the review of any Mortgage Loan (it being understood that the
Trustee has not reviewed and does not intend to review the substance or form of
any such Mortgage Loan or any Mortgage Loan Document) the performance or
enforcement of any Mortgage Loan or Mortgage Loan Document, the compliance by
the Company, the Seller or the Servicer with any covenant or the breach by the
Company, the Seller or the Servicer of any warranty or representation made
hereunder or in any related document or the accuracy of any such warranty or
representation, any investment of monies in the Collection Account or Reserve
Account or any loss resulting therefrom, the acts or omissions of the Company,
the Seller, the Servicer or any Mortgagor, any action of the Servicer or the
Seller taken in the name of the Trustee, or the validity of the Servicing
Agreement or the Sale Agreement.

                  (c) The Trustee shall not have any obligation or liability
under any Mortgage Loan by reason of or arising out of this Indenture or the
granting of a security interest in such Mortgage Loan hereunder or the receipt
by the Trustee of any payment relating to any Mortgage Loan pursuant hereto, nor
shall the Trustee be required or obligated in any manner to perform or fulfill
any of the obligations of the Company under or pursuant to any Mortgage Loan, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it, or the sufficiency of any performance by any
party, under any Mortgage Loan.

                  Section 7.5.  May Hold Notes

                  The Trustee, any Paying Agent, Note Registrar or any other
agent of the Company, in its individual or any other 



                                       34
<PAGE>   40

capacity, may become the owner or pledgee of Notes and if operative, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Note Registrar or such other agent.

                  Section 7.6.  Money Held in Trust

                  Money received by the Trustee pursuant to this Indenture shall
be held in trust for the purposes set forth herein. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required herein or required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed by the
Trustee in writing with the Company except with respect to income or gain or
investments that are its obligation in its corporate capacity.

                  Section 7.7.  Compensation and Reimbursement

                  The Company and the Servicer agree:

                  (a) to pay the Trustee the Trustee Fee, in accordance with
         Section 13.1 hereof and Section 2.14 of the Servicing Agreement, as
         reasonable compensation for all services rendered by it hereunder
         (which Trustee's Fee shall not be limited by any provision of law in
         regard to the compensation of a trustee of an express trust);

                  (b) to reimburse the Trustee upon its request for all
         reasonable expenses, disbursements and advances incurred or made by the
         Trustee in accordance with any provision of this Indenture (including
         the reasonable compensation and the expenses and disbursements of the
         Trustee's agents and counsel) or the Servicing Agreement, except any
         such expense, disbursement or advance as may be attributable to its
         negligence or bad faith; and

                  (c) to indemnify the Trustee, its officers, directors,
         employees, custodians, nominees and agents for, and to hold them
         harmless against, any loss, liability or expense incurred without
         negligence or bad faith on their part, arising out of or in connection
         with the acceptance or administration of this trust and performance
         hereunder and under the Servicing Agreement in accordance with the
         terms hereof, including the costs and expenses of defending itself
         against any claim or liability in connection with the exercise or
         performance of any of its powers or duties hereunder and including any
         loss, liability or expense incurred by it as Back-up Servicer without
         negligence or bad faith.

                  As security for the performance of the Company under this
Indenture, the Trustee shall have a lien and right to payment, prior to the lien
of the Noteholders and all 



                                       35
<PAGE>   41

other Persons, upon the Trust Estate. The Trustee shall not institute any
proceeding solely to enforce its lien which would involve the Sale or other
disposition of the Trust Estate until at least 91 days have elapsed since the
date on which all of the Notes have been paid or discharged. The Trustee shall
not be entitled to reimbursement of the expenses described in Section 7.7(b)
above pursuant to Section 13.1(a) hereof, unless, at least 30 days prior to the
related Distribution Date, the Trustee has submitted to the Servicer a written
request for such reimbursement and the Servicer has failed to comply with such
request on or prior to such Distribution Date.

                  Section 7.8.  Corporate Trustee Requirement; Eligibility

                  There shall at all times be a Trustee hereunder which shall at
all times be a depository institution or trust company organized and doing
business under the laws of the United States of America or any State thereof;
authorized under such laws to exercise corporate trust powers; have a combined
capital and surplus of at least $500,000,000; and be subject to supervision or
examination by federal or state authorities; provided, however, that any
successor Trustee shall in addition be an institution with long-term, unsecured
debt obligations rated "AA" or better by DCR or any other rating acceptable to
DCR. If such corporation shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 7.8, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall immediately notify the Company, the
Servicer and the Noteholders. In the event of such occurrence, the Company or
the Servicer may cause the Trustee to resign immediately in the manner and with
the effect hereinafter specified in this Article.

                  Section 7.9. Resignation and Removal; Appointment of Successor

                  (a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 7.10.

                  (b) The Trustee may resign at any time by giving written
notice thereof to the Company, the Servicer, DCR and to the Noteholders. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 90 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.



                                       36
<PAGE>   42

                  (c) The Trustee may be removed at any time by Act of the
Holders of 51% of the aggregate Outstanding Note Balance of each class of Notes,
delivered to the Trustee and to the Company.

                  (d) If at any time:

                  (1) the Trustee shall cease to be eligible under Section 7.8
         and shall fail to resign after written request therefor by the Company
         or by any such Noteholder, or

                  (2) the Trustee shall become incapable of acting or shall be
         adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
         property shall be appointed or any public officer shall take charge or
         control of the Trustee or of its property or affairs for the purpose of
         rehabilitation, conservation or liquidation,

then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 6.14, any Noteholder who has been a bona
fide Holder of a Note for at least six months (provided that the Notes have been
Outstanding for at least six months, otherwise the Holder of the Note that has
been outstanding for the longest period of time) may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.

                  (e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee that meets the requirements set forth in Section 7.8. If no
successor Trustee shall have been so appointed by the Company within 30 days
after such resignation or removal or by the Majority Holders pursuant to Section
7.9(f), any Noteholder who has been a bona fide Holder of Notes for at least six
months (provided that the Notes have been outstanding for at least six months)
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor trustee.

                  (f) Notwithstanding Section 7.9(e) hereof, under the following
circumstances a successor Trustee may be appointed by Act of the Holders of 51%
of the aggregate Outstanding Note Balance of each class of Notes delivered to
the Company and (unless the office of the Trustee is then vacant) any retiring
Trustee: (a) a vacancy shall exist at any time in the office of the Trustee for
any cause; (b) the Company shall not have appointed a successor Trustee within
30 days after the Trustee's resignation or removal; or (c) less than one year
shall have passed after the appointment by the Company of a successor Trustee
pursuant to Section 7.9(e). Any successor Trustee appointed by such Act of the
Majority Holders shall, forthwith upon its acceptance of such appointment,
become the successor 



                                       37
<PAGE>   43

Trustee and supersede the successor Trustee, if any, appointed by the Company.

                  (g) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Servicer, DCR and the Holders of Notes as their names and addresses appear in
the Note Register. Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.

                  (h) The Trustee shall be paid all amounts outstanding upon
such resignation or removal and the obligations of the Company and the Servicer
in Section 7.7 hereof shall survive such resignation or removal.

                  Section 7.10.  Acceptance of Appointment by Successor

                  Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and the Noteholders and the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its reasonable charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trust of the
retiring Trustee, and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.7 (which lien may be
exercised whether or not the Notes have been paid, satisfied or discharged in
full, in accordance with the provisions of said Section 7.7). Upon request of
any such successor Trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts.

                  No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.

                  Section 7.11. Merger, Conversion, Consolidation or Succession
to Business of Trustee

                  Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be 



                                       38
<PAGE>   44

otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case any Notes have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes.

                  Section 7.12.  Co-trustees and Separate Trustees

                  At any time or times, for the purpose of meeting the legal
requirements of any jurisdiction in which any of the Trust Estate may at the
time be located, the Company and the Trustee shall have power to appoint, and,
upon the written request of the Trustee or of the Holders of Notes representing
at least 25% of the aggregate Outstanding Note Balance of any Class, the Company
shall for such purpose join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, of all or any part of such Trust Estate, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Company does
not join in such appointment within 15 days after the receipt by it of a request
so to do, or in case an Event of Default has occurred and is continuing, the
Trustee alone shall have power to make such appointment.

                  Should any written instrument from the Company be required by
any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power, any
and all such instruments shall, on request, be executed, acknowledged and
delivered by the Company.

                  Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms, namely:

                  (1) The Notes shall be authenticated and delivered and all
         rights, powers, duties and obligations hereunder in respect of the
         custody of securities, cash and other personal property held by, or
         required to be deposited or pledged with, the Trustee hereunder, shall
         be exercised solely by the Trustee.

                  (2) The rights, powers, duties and obligations hereby
         conferred or imposed upon the Trustee in respect of any property
         covered by such appointment shall be conferred or imposed upon and
         exercised or performed by the Trustee or by 



                                       39
<PAGE>   45

         the Trustee and such co-trustee or separate trustee jointly, as shall
         be provided in the instrument appointing such co-trustee or separate
         trustee, except to the extent that under any law of any jurisdiction in
         which any particular act is to be performed, the Trustee shall be
         incompetent or unqualified to perform such act, in which event such
         rights, powers, duties and obligations shall be exercised and performed
         by such co-trustee or separate trustee.

                  (3) The Trustee at any time, by an instrument in writing
         executed by it, with the concurrence of the Company evidenced by a
         Board Resolution, may accept the resignation of or remove any
         co-trustee or separate trustee, appointed under this Section, and, in
         case an Event of Default has occurred and is continuing, the Trustee
         shall have power to accept the resignation of, or remove, any such
         co-trustee or separate trustee without the concurrence of the Company.
         Upon the written request of the Trustee, the Company shall join with
         the Trustee in the execution, delivery and performance of all
         instruments and agreements necessary or proper to effectuate such
         resignation or removal. A successor to any co-trustee or separate
         trustee that has so resigned or been removed may be appointed in the
         manner provided in this Section.

                  (4) No co-trustee or separate trustee hereunder shall be
         personally liable by reason of any act or omission of the Trustee or
         any other such trustee hereunder nor shall the Trustee be liable by
         reason of any act or omission of any co-trustee or separate trustee
         hereunder.

                  (5) Any Act of Noteholders delivered to the Trustee shall be
         deemed to have been delivered to each such co-trustee and separate
         trustee.

                  Section 7.13.  Rights with Respect to the Servicer

                  (a) The Trustee may terminate all rights and powers of the
Servicer at any time, in accordance with the terms of the Servicing Agreement.

                  (b) If the Company shall have knowledge of the occurrence of
any default or event of default under the Servicing Agreement, the Company shall
promptly notify the Trustee in writing, the Noteholders and DCR thereof, and
shall specify in such notice the action, if any, the Company is taking in
respect of such event of default.

                  (c) Upon any termination of the original Servicer's rights and
powers pursuant to the Servicing Agreement, a successor Servicer may be
appointed in accordance with the provisions thereof, and if no successor is so
appointed the Trustee shall serve as Servicer in accordance with the provisions
of the Servicing Agreement.



                                       40
<PAGE>   46

                  Section 7.14.  Servicer as Agent and Bailee of Trustee

                  Solely for the purpose of perfection of the lien of this
Indenture, the Trustee hereby acknowledges that the Servicer is acting as agent
and bailee of the Trustee for the benefit of the Noteholders as secured party in
holding any items constituting a part of the Trust Estate, including any
Mortgage Loans and the Mortgage Files relating to the Mortgage Loans and monies,
which from time to time come into the possession of the Servicer (of which the
Trustee shall retain a copy, other than in connection with Mortgage Loans
released pursuant to this Indenture) provided that, with respect to any other
duties pursuant to said Servicing Agreement, the Servicer is acting as an
independent contractor. It is intended that, by the Servicer's acceptance of
such agency pursuant to the Servicing Agreement, the Trustee for the benefit of
the Noteholders, as secured party, shall be deemed to have possession of such
monies and other items for purposes of the UCC as adopted in the state in which
such property is held by the Servicer. Subject to Section 7.1 hereunder, the
Trustee shall not be liable for any act or omission of the Servicer in its
capacity as agent and bailee of the Trustee.

                  Section 7.15.  Representations and Warranties of the Trustee

                  The Trustee hereby makes the following representations and
warranties on which the Company, the Servicer and Noteholders shall be entitled
to rely:

                  (i) The Trustee is a nationally chartered bank duly organized,
         validly existing, and in good standing under the laws of its place of
         organization;

                  (ii) The Trustee has full power, authority and legal right to
         execute, deliver, and perform this Indenture and the Servicing
         Agreement, and has taken all necessary action to authorize the
         execution, delivery, and performance by it of this Indenture and the
         Servicing Agreement;

                  (iii) The execution, delivery and performance by the Trustee
         of this Indenture and the Servicing Agreement (a) does not violate any
         provision of any law or any order, writ, judgment, or decree of any
         court, arbitrator, or governmental authority applicable to the Trustee
         or any of its assets, (b) does not violate any provision of the
         corporate charter or by-laws of the Trustee, and (c) does not violate
         any provision of, or constitute, with or without notice or lapse of
         time, a default under, or result in the creation or imposition of any
         Lien on, any properties included in the Trust Estate pursuant to the
         provisions of any mortgage, indenture, contract, agreement, or other
         undertaking to which the Trustee is a party, which violation or default
         could reasonably be expected to materially and 



                                       41
<PAGE>   47

         adversely affect the Trustee's performance or ability to perform its
         duties under this Indenture and the Servicing Agreement or the
         transactions contemplated in this Indenture and the Servicing
         Agreement;

                  (iv) The execution, delivery and performance by the Trustee of
         this Indenture and the Servicing Agreement does not require the
         authorization, consent, or approval of, the giving of notice to, the
         filing or registration with, or the taking of any other action in
         respect of, any governmental authority or agency regulating the banking
         and corporate trust activities of the Trustee;

                  (v) This Indenture and the Servicing Agreement has been duly
         executed and delivered by the Trustee and constitutes the legal, valid,
         and binding agreement of the Trustee, enforceable in accordance with
         its terms, and the Trustee meets the requirements of Section 7.8
         hereof;

                  (vi) The Notes have been duly authenticated by the Trustee;
         and

                  (vii) The Trustee is currently modifying its computer systems
         and applications with the intention of being year 2000 ready by August
         31, 1999.



                                  ARTICLE VIII.
                            CONSOLIDATION AND MERGER

                  Section 8.1. Company May Not Consolidate, etc.

                  The Company shall not consolidate or merge with or into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person.

                                   ARTICLE IX.
                             SUPPLEMENTAL INDENTURES

                  Section 9.1. Supplemental Indentures without Consent of
Noteholders

                  (a) Without the consent of the Holders of any Notes, the
Company, when authorized by a Board Resolution, the Servicer and the Trustee, at
any time and from time to time, may enter into one or more supplemental
indentures provided that such action shall not result in a reduction or
withdrawal of the then current rating on any class of Notes as confirmed by DCR
in writing, in form satisfactory to the Trustee, for any of the following
purposes; provided, further, that no such supplemental indenture shall have any
of the effects described in clauses (1) 



                                       42
<PAGE>   48

through (6) of the proviso to Section 9.2 hereof or adversely affect the
interest of the Holders of any Notes:

                  (1) to correct or amplify the description of any property at
         any time subject to the lien of this Indenture, or better to assure,
         convey and confirm unto the Trustee any property subject or required to
         be subjected to the lien of this Indenture, or to subject additional
         property to the lien of this Indenture; or

                  (2) to add to the conditions, limitations and restrictions on
         the authorized amount, terms and purposes of issue, authentication and
         delivery of the Notes, as herein set forth, additional conditions,
         limitations and restrictions thereafter to be observed; or

                  (3) to add to the covenants of the Company, for the benefit of
         the Holders of the Notes, or to surrender any right or power herein
         conferred upon the Company; or

                  (4) to convey, transfer, assign, mortgage or pledge any
         property to or with the Trustee; or

                  (5) to cure any ambiguity, to correct or supplement any
         provision herein which may be defective or inconsistent with any other
         provisions with respect to matters or questions arising under this
         Indenture, which shall not be inconsistent with the provisions of this
         Indenture; or

                  (6) to evidence the succession of the Trustee pursuant to
         Article 7.

                  (b) Promptly after the execution by the Company and the
Trustee of any supplemental indenture pursuant to this Section, the Company
shall mail to DCR and each Noteholder, a notice setting forth in general terms
the substance of such supplemental indenture together with a copy of such
supplemental indenture. Any failure of the Company to mail such notice and copy,
or any defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.

                  Section 9.2. Supplemental Indentures with Consent of
Noteholders

                  With the consent of the Holders of more than 51% of aggregate
Outstanding Note Balance of each class of Notes, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into one or more supplemental
indentures for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, this Indenture modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided
that, unless the unanimous consent of the Noteholders is received, such action
shall not result in a 


                                       43
<PAGE>   49

reduction or withdrawal of the then current rating on any class of Notes as
confirmed by DCR in writing, in form satisfactory to the Trustee; and provided
further that no such supplemental indenture shall, without the consent of all
Holders of each class of Outstanding Notes affected thereby:

                  (1) reduce the Outstanding Note Balance of any Note or the
         Note Interest Rate thereon or change the amount or priority or time of
         any payment on any Note or any place of payment where, or the coin or
         currency in which, any Note or the interest thereon is payable, or
         impair the right to institute suit for the enforcement of any such
         payment; or

                  (2) impair or adversely affect the Trust Estate except as
         otherwise permitted herein; or

                  (3) modify or alter the provisions of the definition of the
         term "Outstanding"; or

                  (4) modify or alter the provisions of the proviso to Section
         6.3; or

                  (5) modify any of the provisions of this Section 9.2 or any
         provision herein requiring the consent, waiver, approval or Act of the
         Holder or Holders of any particular amount of the Outstanding Note
         Balance of any Class of Notes; or

                  (6) permit the creation of any lien ranking prior to or on a
         parity with the lien of this Indenture with respect to any part of a
         Trust Estate or terminate the lien of this Indenture on any property at
         any time subject hereto or deprive the Holder of any Note of the
         security afforded by the lien of this Indenture.

                  It shall be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture.

                  Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to this Section, the Company shall mail to
DCR and each Noteholder a notice setting forth in general terms the substance of
such supplemental indenture together with a copy of such supplemental indenture.
Any failure of the Company to mail such notice and copy, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.

                  Section 9.3.  Execution of Supplemental Indentures

                  In executing or accepting any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to be supplied with, and prior to
executing any supplemental 


                                       44
<PAGE>   50

indenture pursuant to Section 9.1 the Trustee shall require (and subject to
Section 7.1 shall be fully protected in relying upon), an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
duties or immunities under this Indenture or otherwise.

                  Section 9.4.  Effect of Supplemental Indentures

                  Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

                  Section 9.5.  Reference in Notes to Supplemental Indenture

                  Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.

                                   ARTICLE X.
                               REDEMPTION OF NOTES

                  Section 10.1. Redemption at the Option of the Company;
Election To Redeem

                  The Notes are redeemable at the option of the Company in
whole, but not in part, at the Redemption Price, on any Distribution Date
(hereinafter referred to as a "Redemption Date") occurring after such time as
the aggregate Outstanding Note Balance is equal to or less than 15% of the
aggregate Outstanding Note Balance as of the Closing Date.

                  Installments of interest and principal due on or prior to a
Redemption Date shall continue to be payable to the Holders of Notes called for
redemption as of the relevant Record Dates according to their terms and the
provisions of Section 3.7. The election of the Company to redeem any Notes
pursuant to this Section shall be evidenced by a Board Resolution directing the
Trustee to make the payment of the Redemption Price on all of the Notes to be
redeemed from monies deposited with the Trustee pursuant to Section 10.3.



                                       45
<PAGE>   51

                  Section 10.2.  Notice of Redemption by the Company

                  Notice of redemption pursuant to Section 10.1 shall be given
by first class mail, postage prepaid, mailed not less than 30 days prior to the
applicable Redemption Date, to the Trustee, DCR and to each Holder of
Outstanding Notes, at its address in the Note Register.

                  All notices of redemption shall state:

                  (1)      the Redemption Date;

                  (2)      the Redemption Price;

                  (3) that on the Redemption Date, the Redemption Price shall
         become due and payable upon each such Note, and that interest thereon
         shall cease to accrue on such date upon the payment of the Redemption
         Price; and

                  (4) the place where such Notes are to be surrendered within 30
         days after the Redemption Date, which shall be the office or agency of
         the Company to be maintained as provided in Section 11.2.

                  Notice of redemption of Notes shall be given by the Company
or, at the Company's request, by the Trustee in the name and at the expense of
the Company. Failure to give notice of redemption, or any defect therein, to any
Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.

                  Section 10.3.  Deposit of the Redemption Price

                  On or before the Business Day next preceding any Redemption
Date, the Company shall deposit with the Trustee or with the Paying Agent an
amount of monies sufficient to pay the Redemption Price of all Notes which are
to be redeemed on such Redemption Date (less any portion of such payment set
aside from monies in the Collection Account or the Reserve Account for the Notes
to be redeemed).

                  In the case of a redemption pursuant to which a sale under
Section 10.5 is to be held, on or before the Business Day next preceding the
related Redemption Date, the Company shall deposit with the Trustee or with the
Paying Agent an amount of money equal to the amount by which the Redemption
Price is reasonably expected to exceed the proceeds of the sale plus an amount
of money sufficient to pay the Trustee's fees and expenses reimbursable to the
Trustee in accordance with Section 7.7.

                  Section 10.4.  Notes Payable on Redemption Date

                  Notice of redemption having been given as provided in Section
10.2, the Notes to be redeemed shall, on the applicable 


                                       46
<PAGE>   52

Redemption Date, become due and payable at the Redemption Price and on such
Redemption Date (unless the Company shall default in the payment of the
Redemption Price) such Notes shall cease to bear interest. On the Redemption
Date, the Holders of such Notes shall be paid the Redemption Price by the Paying
Agent; provided, however, that installments of principal and interest which are
due on or prior to the Redemption Date shall be payable to the Holders of such
Notes registered as such on the relevant Record Dates according to their terms
and the provisions of Section 3.7.

                  If the Holders of any Note called for redemption shall not be
so paid, the principal shall, until paid, continue to bear interest from the
Redemption Date at the related Note Interest Rate until payment of principal is
made.

                  Section 10.5.  Sale for Purposes of Redemption

                  (a) By Company Order, the Company may direct the Trustee to
sell the Mortgage Loans securing the Notes called for redemption for the purpose
of redeeming the Notes which are to be redeemed in accordance with Section 10.1.
The Company Order shall (i) specify the time and place of the sale, terms and
the manner in which the sale is to be conducted and (ii) be accompanied by an
Officers' Certificate certifying that no Event of Default under the Indenture
with respect to the Notes to be redeemed shall be continuing. The date of any
such sale shall be the Redemption Date and the amount of the proceeds from such
sale shall equal or exceed the Redemption Price. Upon receipt of such Company
Order, the Trustee shall employ its best efforts to sell the Mortgage Loans
securing the Notes on the terms and conditions specified therein; provided,
however, the Trustee may only sell such Mortgage Loans if (x) no Event of
Default with respect to the Notes collateralized by such Mortgage Loans shall be
continuing and (y) the amounts required to have been deposited with the Trustee
or a Paying Agent pursuant to Section 10.3 shall have been so deposited. The
Trustee shall deposit all proceeds from such sale (net of the Trustee's fees and
expenses in connection with such sale, which fees and expenses shall not reduce
the amount of such proceeds below the Redemption Price) in the Collection
Account.

                  (b) The Trustee shall execute and deliver an appropriate
instrument of conveyance, without recourse, warranty or representation,
delivered to it by the Company transferring its interest in any portion of the
Mortgage Loans securing the Notes in connection with a sale thereof. In
addition, the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Company to transfer and convey the Company's interest in
any portion of such Mortgage Loans in connection with a sale thereof, and to
take all action necessary to effect such sale. No purchaser or transferee at
such a sale shall be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or to see to the application of any
monies.



                                       47
<PAGE>   53

                                   ARTICLE XI.
                                    COVENANTS

                  Section 11.1.  Payment of Principal and Interest

                  The Company shall duly and punctually pay the principal of and
interest on the Notes in accordance with the terms of the Notes and this
Indenture.

                  Section 11.2.  Maintenance of Office or Agency

                  The Company shall maintain an office or agency within the
United States of America where Notes may be presented or surrendered for
payment, where Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company hereby initially appoints the Trustee
its office or agency for each of said purposes. The Company shall give prompt
written notice to the Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Company shall fail to
maintain any such office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office, and the Company hereby appoints the
Trustee at its Corporate Trust Office its agent to receive all such
presentations, surrenders, notices and demands.

                  Section 11.3.  Money for Note Payments To Be Held in Trust

                  The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent shall:

                  (1) hold all sums held by it in respect of payments on Notes
         in trust for the benefit of the Noteholders entitled thereto until such
         sums shall be paid to such Persons or otherwise disposed of as herein
         provided;

                  (2) give the Trustee notice of any default by the Company (or
         any other obligor upon the Notes) in the making of any payment; and

                  (3) at any time during the continuance of any such default,
         upon the written request of the Trustee, forthwith pay to the Trustee
         all sums so held in trust by such Paying Agent.

                  The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying 



                                       48
<PAGE>   54

Agent to pay, to the Trustee all sums held in trust by such Paying Agent, such
sums to be held by the Trustee upon the same trusts as those upon which such
sums were held by such Paying Agent; and, upon such payment by any Paying Agent
to the Trustee, such Paying Agent shall be released from all further liability
with respect to such money.

                  Subject to any applicable escheat law, any money deposited
with the Trustee or any Paying Agent in trust for payment to Noteholders on any
Payment Date and remaining unclaimed for three years after such payment has
become due and payable shall be paid to the Company on Company Request; and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, shall at the expense of the Company cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the city in which
the Corporate Trust Office is located, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining shall be repaid to the Company. The Trustee may also adopt and employ,
at the expense of the Company, any other reasonable means of notification of
such repayment (including, but not limited to, mailing notice of such repayment
to Noteholders whose right to or interest in monies due and payable but not
claimed is determinable from the records of any Paying Agent, at the last
address as shown on the Note Register for each such Noteholder). Notwithstanding
the foregoing, nothing herein shall be deemed to require the Trustee to give or
cause the publication of any notice of the repayment of such monies to the
Company and the Trustee shall not be liable to the Noteholders or the Trust
Estate for its failure to provide or cause such notice.

                  Section 11.4.  Corporate Existence

                  The Company shall keep in full effect its existence, rights
and franchises as a limited liability company under the laws of the State of
Georgia, shall operate in accordance with, and subject to the limitations set
forth in, its operating agreement, and shall obtain and preserve its
qualification to do business as a foreign limited liability company in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Indenture or the Notes. The Company shall
promptly deliver to DCR and each Noteholder a copy of any amendment to its
charter.



                                       49
<PAGE>   55

                  Section 11.5.  Protection of Trust Estate

                  The Company shall from time to time execute and deliver all
such supplements and amendments hereto (a copy of which shall be provided to the
Noteholders) and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and shall take such
other action as is necessary or advisable to:

                  (i) Grant more effectively all or any portion of the Trust
         Estate;

                  (ii) maintain or preserve the lien of this Indenture or carry
         out more effectively the purposes hereof;

                  (iii) perfect, publish notice of, or protect the validity of
         any Grant made or to be made by this Indenture;

                  (iv) enforce any of the Mortgage Loans or, where appropriate,
         any security interest in the Collateral and the proceeds thereof; or

                  (v) preserve and defend title to the Trust Estate and the
         rights of the Trustee and the Noteholders therein against the claims of
         all persons and parties.

                  Section 11.6.  Negative Covenants

                  So long as any Notes are Outstanding, the Company shall not:

                  (i) sell, transfer, exchange or otherwise dispose of any of
         the Trust Estate (except as expressly permitted by Section 10.5 and
         except as provided in Sections 12.3, 12.4 and 12.5); or

                  (ii) claim any credit on, or make any deduction from, the
         principal or interest payable in respect of the Notes by reason of the
         payment of any taxes levied or assessed upon any of the Trust Estate;
         or

                  (iii) other than in accordance with the restrictions set forth
         therein, amend its organizational documents without the consent of the
         Majority Holders; provided, the Company shall not amend the
         organizational documents if the effect of any such amendment would be
         to result in a reduction or withdrawal of the then current rating of
         DCR assigned to the Notes as confirmed in writing by DCR; or

                  (iv) issue the Class A-1, Class A-2 or Class A-3 Notes unless
         such Classes have been rated at least "AAA", "A" and "BBB",
         respectively, by DCR; or



                                       50
<PAGE>   56

                  (v) (a) permit the validity or effectiveness of this Indenture
         to be impaired, or permit this Indenture to be amended, hypothecated,
         subordinated, terminated or discharged, or permit any Person to be
         released from any covenants or obligations of this Indenture, except as
         may be expressly permitted hereby and thereby, (b) except to the extent
         permitted under this Indenture, permit any lien, charge, security
         interest, mortgage or other encumbrances to be created on or extended
         to or otherwise arise upon or burden the Trust Estate or any part
         thereof or any interest therein or the proceeds thereof or incur any
         indebtedness other than the Notes, or (c) permit this Indenture to not
         constitute a valid first priority perfected security interest in the
         Trust Estate; or

                  (vi) change the location of its chief executive office without
         thirty days' prior written notice to the Trustee, accompanied by such
         evidence of actions taken as shall be necessary to continue the
         perfection of the lien on the Collateral; or

                  (vii) incur any indebtedness not permitted by its operating
         agreement, or assume or guaranty any indebtedness of any other entity
         other than the indebtedness evidenced by the Notes; or

                  (viii) engage in any business not permitted by its Operating
         Agreement, or

                  (ix) obtain or carry insurance relating to the Mortgage Loans
         separate from that required by the Servicing Agreement, unless the
         Trustee shall have the same rights with respect thereto as it has with
         respect to the insurance required by the Servicing Agreement.

                  Section 11.7.  Statement as to Compliance

                  The Company shall deliver to the Trustee, the Noteholders and
DCR, on or before each December 31, March 31, June 30 and September 30
(commencing September 30, 1998, with the written statement delivered on such
date covering the period from the Closing Date through September 30, 1998), a
written statement signed by the Chairman or the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Controller or an Assistant
Controller of the Company, stating, as to each signer thereof, that

                  (1) a review of the activities of the Company during the
         preceding three-month period and of performance under this Indenture
         has been made under his supervision and

                  (2) the Company has fulfilled all its obligations under this
         Indenture throughout such period, or, if there has been a default in
         the fulfillment of any such 



                                       51
<PAGE>   57

         obligation, specifying each such default known to him and the nature
         and status thereof.

                  Section 11.8.  Investment Company Act

                  The Company shall conduct its operations in a manner which
shall not subject it to registration as an "investment company" under the
Investment Company Act of 1940.

                  Section 11.9. Enforcement of Servicing Agreement and Sale
Agreement

                  The Company shall take all actions necessary, and diligently
pursue all remedies available to it, to enforce the obligations of the Servicer
under the Servicing Agreement and the Seller under the Sale Agreement to secure
its and the Noteholders' rights thereunder, provided that, prior to taking any
action in the name of the Trustee, it shall receive the written consent of the
Trustee.

                  Section 11.10.  Taxes

                  The Company shall pay or cause to be paid all taxes when due
and payable or levied against its assets, properties or income, including any
property that is part of the Trust Estate.

                  Section 11.11.  Company Ownership

                  The Company agrees that its books and records will reflect its
ownership of the Mortgage Loans and that such Mortgage Loans are subject to the
security of the Trustee on behalf of the Noteholders.

                  Section 11.12.  Nonconsolidation

                  The Company agrees that so long as any Notes are Outstanding,
it will be operated such that it will not be substantively consolidated in the
bankruptcy estate of the Parent or any Affiliate thereof and will not have its
separate existence disregarded in the event of a bankruptcy of the Parent or
Affiliate thereof. Without limiting the foregoing, the Company agrees that:

                  (a) it will pay its own expenses, neither the Sellers nor the
Parent will guarantee any of the Company's obligations other than pursuant to
the Sale Agreement and neither the Sellers, the Parent nor any Affiliate thereof
will lend funds to the Company for the payment of expenses;

                  (b) it will conduct its business exclusively on its own
stationery and all correspondence by the Company will be in its own name;



                                       52
<PAGE>   58

                  (c) it will not permit the Sellers, the Parent or any
Affiliate thereof to be involved in the daily management of the Company;
provided, however, an officer of the Parent or any such Affiliate shall not be
prohibited from serving as an officer of the Company;

                  (d) except in accordance with its organizational documents, it
will not engage in any intercompany transactions with the Sellers, the Parent or
any Affiliate thereof, except as provided in the Sale Agreement, the Servicing
Agreement or this Indenture;

                  (e) it will maintain company records and books of account
separate and distinct from the Sellers' and the Parent's corporate records and
the records of any Affiliate thereof and maintain corporate formalities and
separate business offices and telephone number;

                  (f) the financial statements of the Sellers, the Parent and
the Company will disclose that the assets of the Company are not available to
pay creditors of the Sellers, the Parent or any Affiliate thereof and will
reflect the separate corporate existence of the Company;

                  (g) it will not act as agent for the Sellers, the Parent or
any Affiliate thereof and agrees that it will not authorize the Sellers, the
Parent or any Affiliate thereof to act as its agent, except in Signature
Resorts, Inc.'s capacity as Servicer under the Servicing Agreement;

                  (h) its managing member shall maintain at least one
Independent Director as required in the managing member's certificate of
incorporation;

                  (i) it will maintain its assets separate and distinct from the
Sellers' assets, the Parent's assets and the assets of any Affiliate thereof,
and shall not permit its assets to be commingled with those of the Sellers, the
Parent or any Affiliate thereof;

                  (j) it shall not become contractually liable for the payment
of any liability of the Sellers or the Parent; and

                  (k) it will not modify or amend its operating agreement with
respect to the purpose or purposes for which it is organized.

                  Section 11.13.  Representations, Warranties and Covenants

                  The Company makes the following representations, warranties
and covenants as to itself, which representations and warranties speak as of the
Closing Date and with respect to any 



                                       53
<PAGE>   59

Subsequent Transfer Date, such representations and warranties shall be deemed to
speak as of such Subsequent Transfer Date:

                  (a) Due Formation; Valid Existence; Good Standing and Limited
Purpose. The Company is a limited liability company duly organized and validly
existing in good standing under the laws of the jurisdiction of its formation;
and is duly qualified to do business as a foreign limited liability company and
in good standing under the laws of each jurisdiction where the character of its
property, the nature of its business or the performance of its obligations under
this Indenture, the Sale Agreement, the Servicing Agreement or the Note Purchase
Agreement makes such qualification necessary except where the failure to be so
qualified will not have a material adverse effect on the business of the Company
or its ability to perform its obligations under this Indenture, the Sale
Agreement, the Servicing Agreement or the Note Purchase Agreement or any other
documents or transactions contemplated hereunder or the validity or
enforceability of the Mortgage Loans.

                  (b) Possession of Licenses, Certificates, Franchises and
Permits. The Company holds, and at all times during the term of this Indenture,
the Sale Agreement, the Servicing Agreement or the Note Purchase Agreement will
hold, all material licenses, certificates, franchises and permits from all
governmental authorities necessary for the conduct of its business and has
received no notice of proceedings relating to the revocation of any such
license, certificate, franchise or permit, which singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would materially and
adversely affect its ability to perform its obligations under this Indenture,
the Sale Agreement, the Servicing Agreement or the Note Purchase Agreement or
any other documents or transactions contemplated hereunder or the validity or
enforceability of the Mortgage Loans.

                  (c) Authority and Power. The Company has, and at all times
during the term of this Indenture will have, all requisite power and authority
to own its properties, to conduct its business, to execute and deliver this
Indenture, the Sale Agreement, the Servicing Agreement and the Note Purchase
Agreement and to perform all of its obligations under this Indenture, the Sale
Agreement, the Servicing Agreement and the Note Purchase Agreement. The Company
has all requisite power and authority to acquire, own and Grant to the Trustee
as part of the Trust Estate the Mortgage Loans.

                  (d) Authorization, Execution and Delivery; Valid and Binding.
This Indenture, the Sale Agreement, the Servicing Agreement or the Note Purchase
Agreement and all other documents and instruments required or contemplated
hereby to be executed and delivered by the Company have been duly authorized,
executed and delivered by the Company and, assuming the due execution and
delivery by the other party or parties hereto and thereto, constitute legal,
valid and binding agreements enforceable 



                                       54
<PAGE>   60

against the Company in accordance with their respective terms subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the enforceability of creditors' rights
generally applicable in the event of the bankruptcy, insolvency or
reorganization of the Company and to general principles of equity.

                  (e) No Violation of Law, Rule, Regulation, etc. The execution,
delivery and performance by the Company of this Indenture, the Sale Agreement,
the Servicing Agreement or the Note Purchase Agreement and any other documents
and transactions in connection herewith to which the Company is a party do not
and will not (i) violate any of the provisions of the Certificate of Formation
or operating agreement of the Company, (ii) violate any provision of any law,
governmental rule or regulation currently in effect applicable to the Company or
its properties or by which the Company or its properties may be bound or
affected, including, without limitation, any bulk transfer laws, (iii) violate
any judgment, decree, writ, injunction, award, determination or order currently
in effect applicable to the Company or its properties or by which the Company or
its properties are bound or affected, (iv) conflict with, or result in a breach
of, or constitute a default under, any of the provisions of any material
indenture, mortgage, deed of trust, contract or other instrument to which the
Company is a party or by which it is bound or (v) result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, mortgage, deed of trust, contract or other instrument.

                  (f) Governmental Consent. No consent, approval, order or
authorization of, and no filing with or notice to, any court or other
governmental authority in respect of the Company is required in connection with
the authorization, execution, delivery or performance by the Company of this
Indenture, the Sale Agreement, the Servicing Agreement or the Note Purchase
Agreement or any of the other documents or transactions contemplated hereunder.

                  (g) Defaults. The Company is not in default under any material
agreement, contract, instrument or indenture to which the Company is a party or
by which it or its properties is or are bound, or with respect to any order of
any court, administrative agency, arbitrator or governmental body which would
have a material adverse effect on the transactions contemplated hereunder; and
no event has occurred which with notice or lapse of time or both would
constitute such a default with respect to any such agreement, contract,
instrument or indenture, or with respect to any such order of any court,
administrative agency, arbitrator or governmental body.

                  (h) Insolvency. The Company will be solvent at all relevant
times prior to, and will not be rendered insolvent by,



                                       55
<PAGE>   61

the transfer of the Mortgage Loans to the Trust Estate. Prior to the date
hereof, the Company did not, and is not about to, engage in any business or
transaction for which any property remaining with the Company would constitute
an unreasonably small amount of capital. In addition, the Company has not
incurred debts that would be beyond the Company's ability to pay as such debts
matured.

                  (i) Pending Litigation or Other Proceedings. There is no
pending or, to the best of the Company's knowledge, threatened action, suit,
proceeding or investigation before any court, administrative agency, arbitrator
or governmental body against or affecting the Company which, if decided
adversely, would materially and adversely affect (i) the condition (financial or
otherwise), business or operations of the Company, (ii) the ability of the
Company to perform its obligations under, or the validity or enforceability of,
this Indenture, the Sale Agreement, the Servicing Agreement or the Note Purchase
Agreement or any other documents or transactions contemplated under this
Indenture, (iii) any Mortgaged Property or title of any Mortgagor to any
Mortgaged Property or (iv) the Trustee's ability to foreclose or otherwise
enforce the liens of the Mortgage Loans.

                  (j) All Eligible Mortgage Loans Granted to the Trustee. Each
Mortgage Loan which has been acquired by the Company and Granted to the Trustee
was owned by the applicable Seller, prior to the Company's acquisition thereof,
free and clear of all liens other than Permitted Encumbrances and was related to
a Resort.

                  (k) Information. No document, certificate or report furnished
or required to be furnished by the Company pursuant to this Indenture, when
taken as a whole with the other information provided by the Indenture, contains
or will contain when furnished any untrue statement of a material fact or fails
or will fail to state a material fact necessary in order to make the statements
contained therein not misleading.

                  (l) Condominium Units Complete. The condominium units related
to the Mortgage Loans in the Resorts have been completed as required by
applicable state and local laws.

                  (m) Delivery of Insurance Proceeds. In the event that the
Company shall have received any Insurance Proceeds, to the extent such Insurance
Proceeds are not used to rebuild or repair the related Mortgaged Property, the
Company shall promptly deposit such Insurance Proceeds into the Collection
Account.

                  (n) No Deficiency Accumulation. As of the Closing Date, the
Company has not incurred any "accumulated funding deficiency" (as such term is
defined under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code) with respect to any "employee benefit plan" (as such
term is defined under ERISA) sponsored by the Company.



                                       56
<PAGE>   62

                  (o) Taxes. The Company has timely filed all tax returns
(Federal, state and local) which are required to be filed and has paid all taxes
related thereto, other than those which are being contested in good faith.

                  (p) Place of Business. The principal place of business and
chief executive office of the Company are located at 1875 S. Grant Street, Suite
650-A, San Mateo, California 94402.

                  (q) Name. The legal name of the Company is as set forth in
this Agreement and the Company does not use any other tradenames, fictitious
names, assumed names or "doing business as" names.

                  (r) Subsidiaries and Consolidation. The Company has no
subsidiaries and will be operated in such a manner so as not to be substantively
consolidated in the bankruptcy estate of the Parent.

                  (s) No Adverse Change. Since its formation, there has been no
change in the business, operations, financial condition, properties or assets of
the Company which would have a material adverse effect on its ability to perform
its obligations under this Indenture or materially adversely affect the
transactions contemplated under this Indenture, the Sale Agreement, the
Servicing Agreement or the Note Purchase Agreement.

                  (t) Securities Laws. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.

                  (u) Remittance to the Servicer. In the event that any
Mortgagor should remit to the Company any payment on a Mortgage Loan, then, not
later than the Business Day following receipt thereof, the Company shall
transfer such Remittance to the Servicer.

                  (v) Management. The Sellers are not involved in the day-to-day
management of the Company and the Company maintains its assets separately from
the assets of the Sellers.

                  (w) Rating Confirmation. So long as any Notes are outstanding,
the Company shall, prior to sponsoring any trusts or issuing any other debt or
guarantees, obtain from DCR a confirmation of its ratings on the Notes.

                  Section 11.14.  Opinions as to Trust Estate.

                  On or before the earliest anniversary of the Closing Date on
which a financing statement filed in connection with the Trust Estate expires,
the Company shall furnish to each Noteholder an Opinion of Counsel stating
either that, in the opinion of such counsel, such action has been taken with
respect 



                                       57
<PAGE>   63

to the recording, filing, re-recording and re-filing of this Indenture, any
indentures supplemental hereto and any other requisite documents, as applicable,
and with respect to the execution and filing of any financing statements and
continuation statements as is necessary to maintain the first perfected Lien and
security interest created by this Indenture with respect to the Trust Estate or
stating that in the opinion of such counsel no such action is necessary to
maintain such lien and security interest.

                                  ARTICLE XII.
                       ACCOUNTS, ACCOUNTINGS AND RELEASES

                  Section 12.1.  Collection of Money

                  In accordance with the terms and conditions set forth herein,
the Trustee may demand payment or delivery of, and shall receive and collect,
directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture and in accordance with the Servicing
Agreement. The Trustee shall hold all such money and property so received by it
as part of the Trust Estate and shall apply it as provided in this Indenture. If
any default occurs in the making of any payment or performance under any
Mortgage Loan, the Trustee, upon Company or Servicer Request may, and upon the
written request of the Holders of more than 50% of the aggregate Outstanding
Note Balance of any Class of Notes shall subject to Section 7.1, take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate Proceedings. Any such action
shall be without prejudice to any right to claim an Event of Default under this
Indenture and to proceed thereafter as provided in Article Six.

                  Section 12.2.  Accounts

                  (a) Prior to the Closing Date, the Trustee shall open and
maintain or cause to be opened and maintained, at a depository institution
(which shall initially be LaSalle National Bank), a trust account denominated
"Collection Account -- Signature Resorts Vacation Ownership Receivables-Backed
Notes 1998-A". Funds deposited in the Collection Account shall be held in trust
for the Holders of the Notes for the uses and purposes set forth herein. The
Collection Account shall at all times be an Eligible Account, shall relate
solely to the Notes, the Mortgage Loans and Permitted Investments and the
Trustee shall have the exclusive right to withdraw funds therefrom. The
Collection Account shall be segregated on the books and records of the Trustee,
and the funds deposited therein shall not be subject to, and shall be protected
from, all claims, liens, and encumbrances of any creditors or depositors of the
Trustee 




                                       58
<PAGE>   64

(whether made directly, or indirectly through a liquidator or receiver of the
Trustee).

                  So long as no Servicer Event of Default shall have occurred
and be continuing, all or any portion of the Collection Account shall be
invested by the Trustee at the Servicer's written direction in one or more
Permitted Investments with the appropriate maturity meeting the requirements set
forth below. If the Servicer does not direct the Trustee to invest funds
deposited in the Collection Account, or if a Servicer Event of Default shall
have occurred and be continuing, such funds shall be invested by the Trustee in
Permitted Investments listed in clause (v) of the definition of "Permitted
Investments" herein. All Permitted Investments shall be in the name of the
Trustee. All income or other gain from investment of monies deposited in the
Collection Account shall be deposited in the Collection Account immediately upon
receipt thereof, and any loss resulting from Permitted Investment shall be
charged to the Collection Account. The maximum permissible maturity or, if
applicable, the latest redemption date of any Permitted Investments made with
amounts that will constitute part of the Collection Account Amount for a
particular Distribution Date shall be not later than the Business Day preceding
such Distribution Date or a Redemption Date, as applicable; provided, however,
that if the Collection Account is maintained with the Trustee, for Permitted
Investments on which the Trustee is the obligor (including repurchase agreements
on which the Trustee in its commercial capacity is liable as principal), such
Permitted Investments may mature on such Distribution Date. No Permitted
Investment may be sold prior to its maturity or required redemption.

                  Amounts held in the Collection Account which represent the
final payment due to Noteholders on the Final Distribution Date shall, to the
extent not distributed on the Final Distribution Date, be held uninvested
pending distribution to the Noteholders in accordance with this Indenture.

                  On any day, based on an Officer's Certificate of the Servicer,
the Trustee shall withdraw amounts specified therein and certified to have been
deposited into the Collection Account in error and remit the same to the
Servicer or as the Servicer may direct.

                  (b) Prior to the Closing Date, the Trustee shall establish a
trust account denominated "Reserve Account -- Signature Resorts Vacation
Ownership Receivables-Backed Notes 1998-A" (the "Reserve Account"), which shall
have the characteristics set forth in this Section. Funds deposited in the
Reserve Account shall be held in trust by the Trustee for the Holders of the
Notes for the uses and purposes set forth herein. The Reserve Account shall at
all times be an Eligible Account, shall relate solely to the Notes and Permitted
Investments and the Trustee shall have the exclusive right to withdraw funds
therefrom. The Reserve Account shall be segregated on the books 


                                       59
<PAGE>   65

and records of the Trustee, and the funds deposited therein shall not be subject
to, and shall be protected from, all claims, liens, and encumbrances of any
creditors or depositors of the Trustee (whether made directly, or indirectly
through a liquidator or receiver of the Trustee).

                  On the Closing Date, the Company shall deposit in the Reserve
Account the Initial Reserve Account Deposit. Any deposit to the Reserve Account
shall be made by wire transfer of immediately available funds in accordance with
instructions provided by the Trustee.

                  With respect to each Distribution Date, after making the
distributions required pursuant to clauses "first" through "eleventh" of Section
13.1(a), after making the distributions required pursuant to clauses "first"
through "ninth" if the Trustee has received notice from the Servicer that a
Default Trigger II has occurred and is continuing, and after making the
distributions required pursuant to clauses "first" through "seventh" if the
Trustee has received notice from the Servicer that Default Trigger III has
occurred and is continuing, the Trustee shall withdraw from the Collection
Account an amount up to any positive difference between the Requisite Reserve
Amount and the amount then on deposit in the Reserve Account, and deposit such
amount in the Reserve Account.

                  On the second Business Day preceding each Distribution Date,
the Trustee shall (i) withdraw from the Reserve Account (to the extent of funds
on deposit therein) an amount equal to the Shortfall Amount and (ii) upon
receipt of instruction from the Servicer pursuant to Section 2.6 of the
Servicing Agreement, withdraw from the Reserve Account (to the extent of funds
on deposit therein) an amount equal to the P&I Advances for the related
Collection Period, and deposit such amounts into the Collection Account by 5:00
p.m. New York City time on the Business Day prior to the Distribution Date.

                  On the Business Day immediately preceding the first
Distribution Date following any date of determination on which the amount on
deposit in the Reserve Account exceeds the Requisite Reserve Amount after taking
into account the distributions to be made on such Distribution Date, as
applicable, the Trustee shall withdraw from the Reserve Account the amount of
such excess and deposit the same in the Collection Account for distribution in
accordance with Section 13.1(a).

                  On the Business Day immediately preceding the Final
Distribution Date hereunder the Trustee shall withdraw all amounts then on
deposit in the Reserve Account, deposit the same into the Collection Account,
and thereafter terminate the Reserve Account.

                  So long as no Servicer Event of Default shall have occurred
and be continuing, all or any portion of the amounts on 



                                       60
<PAGE>   66

deposit in the Reserve Account shall be invested by the Trustee at the
Servicer's written direction in one or more Permitted Investments with the
appropriate maturity meeting the requirements set forth below. If the Servicer
does not direct the Trustee to invest funds deposited in the Reserve Account, or
if a Servicer Event of Default shall have occurred and be continuing, such funds
shall be invested by the Trustee in Permitted Investments listed in clause (v)
of the definition of "Permitted Investments" herein. All Permitted Investments
shall be in the name of the Trustee. All income or other gain from investment of
monies deposited in the Reserve Account shall be deposited in the Reserve
Account immediately upon receipt thereof and any loss resulting from Permitted
Investment shall be charged to the Reserve Account. The maximum permissible
maturity or, if applicable, the latest redemption date of any Permitted
Investments made with amounts on deposit in the Reserve Account for a particular
Distribution Date shall be not later than two Business Days preceding such
Distribution Date; provided, however, that if the Reserve Account is maintained
with the Trustee, for Permitted Investments on which the Trustee is the obligor
(including repurchase agreements on which the Trustee in its commercial capacity
is liable as principal), such Permitted Investments may mature on such
Distribution Date; and provided, further, that all funds invested in Permitted
Investments of the type described in clause (v) of the definition of "Permitted
Investments" must be withdrawn from such Permitted Investment no later than such
Distribution Date if such investment is managed by the Trustee, and two Business
Days prior to the Distribution Date if not managed by the Trustee. No Permitted
Investment may be sold prior to its maturity or required redemption.

                  Section 12.3.  Reliance on Representations and Warranties

                  The Company agrees and acknowledges that the Trustee and the
Noteholders have relied and will continue to rely upon each of the
representations and warranties in Section 11.13 above and Section 3 of the Sale
Agreement, and further agrees that such Persons are entitled to so rely thereon.
The representations and warranties in Section 11.13 above shall survive the
Grant of the Mortgage Loans to the Trustee and shall continue in full force and
effect, notwithstanding any restrictive or qualified endorsement on the Mortgage
Notes and notwithstanding subsequent termination of this Indenture. The
representations and warranties in Section 11.13 above shall be unimpaired by any
review and examination of the Mortgage Files or other documents evidencing or
relating to the Mortgage Loans or any failure on the part of the Trustee to
review or examine the Mortgage Files and such other documents and shall inure to
the benefit of any permitted transferee of the Trustee.



                                       61
<PAGE>   67

                  Section 12.4. Notice of Incorrect Representations and
Warranties

                  If any party hereto during the term of this Indenture
discovers, or receives notice from the Trustee, that any of the representations
or warranties contained in Section 3 of the Sale Agreement are, in any material
respect, false, incorrect or misleading, or if any such party obtains knowledge
of any event or circumstance that would reasonably cause such party to believe
that any of such representations or warranties are, in any material respect,
false, incorrect or misleading, such party shall promptly deliver to the other
parties hereto, to DCR and the Seller notice of a breach of such representation
or warranty.

                  Section 12.5.  Misrepresentations

                  If any of the representations or warranties contained in
Section 3(b) of the Sale Agreement are, in any material respect, false,
incorrect or misleading as to any Mortgage Loan, the Trustee, upon receiving
notice or otherwise obtaining knowledge of such fact, shall request the related
Seller, at its expense, to take such action as is necessary to cause such false,
incorrect or misleading representation or warranty to be, in all material
respects, true, correct and not misleading, within 90 days following the giving
of written notice to the Seller by the Trustee of such false, incorrect or
misleading representation or warranty, or following the discovery thereof by
such Seller. Such Seller will promptly deliver written notice of any such
discovery to the Trustee. Such Seller will also promptly deliver written notice
to the Trustee as to the actions taken to cure any such false, incorrect or
misleading representation or warranty.

                  Section 12.6.  Mandatory Repurchase Obligation

                  (a) If within the applicable time period set forth in Section
12.5 above the applicable Seller fails to cure, in all material respects, any
representation or warranty with respect to any Mortgage Loan in Section 3(b) of
the Sale Agreement which is, in any material respect, false, incorrect or
misleading, then, the Company shall cause to be repurchased each Mortgage Loan
with respect to which such false, incorrect or misleading representation or
warranty was made (each, a "Defective Mortgage Loan") on the Distribution Date
following the first Record Date on which such Mortgage Loan became a Defective
Mortgage Loan (a "Repurchase Date").

                  (b) Each Defective Mortgage Loan shall be so repurchased at
the Mortgage Purchase Price therefor, which shall be paid into the Collection
Account in immediately available funds on such Repurchase Date; provided,
however, that in the case of a Defective Mortgage Loan as to which discovery of
a breach of a representation or warranty contained in Section 3(b) of the Sale
Agreement is made, or notice thereof is given, the related Seller, at its
election, may in substitution for such



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<PAGE>   68

Defective Mortgage Loan pledge to the Trustee a Substitute Mortgage Loan upon
the satisfaction of the following conditions:

                  (i) the related Seller executes and delivers an Assignment of
         the Substitute Mortgage Loan to the Company or at the direction of the
         Company, to the Trustee;

                  (ii) the related Seller delivers, or causes to be delivered,
         the Mortgage Loan Documents to the Trustee; and

                  (iii) the related Seller, in an Officer's Certificate,
         confirms all representations and warranties of Section 3 of the Sale
         Agreement and provides to the Trustee copies of all necessary filings
         and recording. The Servicer shall file and record such documents.

                  In connection with the substitution of one or more Substitute
Mortgage Loans for one or more Defective Mortgage Loans, the Servicer shall
determine the amount (if any) by which the aggregate principal balance of all
such Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Outstanding Principal Balance of all such Defective Mortgage Loans (in
each case after application of the principal portion of the Monthly Payments due
in the month of substitution that are to be distributed to Noteholders in the
month of substitution) and provide the applicable Seller with notice of the
amount of such shortfall. Such Seller shall deposit the amount of such shortfall
into the Collection Account on the day of substitution, without any
reimbursement therefor. The applicable Seller shall give notice in writing to
the Trustee of such event, which notice shall be accompanied by an Officer's
Certificate as to the calculation of such shortfall. On any date of
determination, the aggregate Outstanding Principal Balance of the Substitute
Mortgage Loans as of the related dates of substitution shall not exceed 3% of
the Outstanding Pool Balance as of the Cut-Off Date.

                  Upon satisfaction of such conditions, the Servicer shall add
the Substitute Mortgage Loan to, and delete the Defective Mortgage Loan from,
the Schedule of Mortgage Loans. Such substitution shall be effected prior to the
first Distribution Date that occurs more than 90 days after the related Seller
becomes aware, or should have become aware, or receives written notice from the
Trustee, of the breach referred to in Section 12.5 hereof.

                  (c) Upon (i) payment by the related Seller of an amount equal
to the Mortgage Purchase Price or (ii) provision by the Company of a Substitute
Mortgage Loan in accordance with Section 12.6(b), as the case may be, the
Trustee shall deliver to the related Seller such duly executed instruments as
may be necessary to release the lien of this Indenture on the Defective Mortgage
Loan. Upon the repurchase of or substitution for a Defective Mortgage Loan under
this Section 12.6, this Indenture shall terminate as to the Mortgage Loan so
repurchased or 



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<PAGE>   69

substituted. Upon such repurchase or substitution, the related Mortgage Loan
Documents shall be redelivered to the Seller.

                  Section 12.7.  Subsequent Loans

                  (a) With respect to any Collection Period in which the Trustee
receives any Upgrade Prepayments, the Company may elect to Grant one or more
Subsequent Loans during such Collection Period in accordance with the provisions
of this Section.

                  (b) On any Subsequent Transfer Date, provided the conditions
set forth in paragraph (c) below are satisfied and no Event of Default shall
have occurred and be continuing, the Trustee shall withdraw from the Collection
Account an amount equal to the least of (i) the aggregate Mortgage Purchase
Price for the Subsequent Loans to be Granted on such date, (ii) any amounts
representing Upgrade Prepayments then on deposit in the Collection Account and
(iii) the Remaining Substitution/Purchase Amount; and shall pay such amount to
the applicable Seller(s) on behalf of the Company.

                  (c) The Trustee shall only be required to withdraw and pay any
amounts referred to in paragraph (b) above, upon the satisfaction of the
following conditions on or prior to the Subsequent Transfer Date:

                  (i) the Company executes and delivers a Notice of Subsequent
         Loan(s) to the Trustee at least two Business Days prior to the related
         Subsequent Transfer Date;

                  (ii) the Company delivers, or causes the related Seller(s) to
         deliver, the related Mortgage Loan Documents to the Trustee;

                  (iii) the Company delivers to the Trustee copies of all
         necessary filings and recordings which the Servicer shall file and
         record; and

                  (iv) the Company delivers a bringdown True Sale opinion with
         respect to such Subsequent Loans.

                  Section 12.8.  Reports by Trustee to Noteholders and DCR

                  On each Distribution Date, the Trustee shall or cause the
Servicer to report to each Holder of Notes and DCR the amount of payments to
such Noteholders which represents principal and the amount which represents
interest, and shall contemporaneously advise the Company of all such payments.
The Trustee may satisfy its obligations under this Section 12.8 by delivering
(or by causing the Servicer to deliver) the Servicer Report to each such Holder
of the Notes. Based on notice delivered by the Servicer, on or before the 30th
day prior to the Final Distribution Date, the Trustee shall provide notice to
the Holders of Notes to be 



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<PAGE>   70

paid on the Final Distribution Date for such Notes. Such notice shall include
(1) a statement that if the appropriate payments are made on the Final
Distribution Date, interest shall cease to accrue as of the Final Distribution
Date and (2) a statement that following the final payment of all principal and
accrued interest on such Notes that Holders thereof are required to surrender
the same to the Trustee within 30 days.

                  Section 12.9.  Accounting by Trustee to Company

                  Within five Business Days following each Distribution Date,
the Trustee shall render to the Company and each Noteholder an accounting of:

                  (i) the aggregate funds deposited in each of the Collection
         Account and the Reserve Account subsequent to the immediately preceding
         Distribution Date;

                  (ii) the amount of principal and the amount of interest paid
         to the Holders of each Class of Notes;

                  (iii) any funds remaining in the Collection Account after (A)
         payments of interest and principal as set forth pursuant to clause (ii)
         above and (B) payments of all other amounts payable from the Collection
         Account pursuant to Section 13.1(a), including an accounting of such
         payments;

                  (iv) any discrepancy between the aggregate amount of principal
         remaining on the Notes after giving effect to the principal payment on
         the Notes on such Distribution Date and the aggregate amount of
         principal remaining on the Notes as set forth on the Servicer Report.

                  Section 12.10.  Trust Estate

                  (a) The Trustee may, and when required by the provisions of
Articles Five, Six and Twelve of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Trustee's
interest in the same, in a manner and under circumstances which are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Trustee as provided in this Article Twelve shall be
bound to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any monies.

                  (b) At the written request of the Company and upon being
supplied with appropriate forms therefor, the Trustee shall, at such time as
there are no Notes Outstanding and all amounts due under this Indenture have
been paid and the lien of the Indenture has been discharged in accordance with
Section 5.1 hereof, release the Trust Estate from the lien of this Indenture.



                                       65
<PAGE>   71

                  Section 12.11.  Allocation of Losses

                  On each Distribution Date, to the extent the sum of (i)
amounts to be distributed pursuant to clause "thirteenth" of Section 13.1 and
(ii) amounts on deposit in the Reserve Account, are insufficient to cover
Realized Losses, prior to the distributions to be made on such date pursuant to
Section 13.1, the Trustee shall allocate to the respective Notes as follows the
aggregate of all Realized Losses with respect to the Mortgage Loans that were
incurred at any time following the Cut-off Date through the end of the related
Collection Period, and in any event that were not previously allocated pursuant
to this Section 12.11 on any prior Distribution Date, but only to the extent
that the aggregate outstanding principal balance of the Notes as of such
Distribution Date (after taking into account all of the distributions to be made
on such Distribution Date pursuant to Section 13.1), exceeds the sum of (x) the
Outstanding Pool Balance and (y) amounts then on deposit in the Reserve Account,
immediately following such Distribution Date: first, to the Class A-3 Notes,
until the remaining principal balance thereof has been reduced to zero; second,
to the Class A-2 Notes, until the remaining principal balance thereof has been
reduced to zero; and third, to the Class A-1 Notes, until the remaining
principal balance thereof has been reduced to zero. Any allocation of such
Realized Losses to a class of Notes shall be made by reducing the respective
principal balances thereof by the amount so allocated. All such Realized Losses,
if any, allocated to a class of Notes shall be allocated among the respective
Notes of such class, pro rata.

                                  ARTICLE XIII.
                              APPLICATION OF MONIES

                  Section 13.1. Disbursements of Monies out of Collection
Account

                  (a) On each Distribution Date, unless distributions are
governed by Section 6.6 hereof, the Trustee shall distribute, based on the
information contained in the Servicer's Report, to the extent of the amount on
deposit in the Collection Account with respect to such Distribution Date, funds
in the Collection Account as follows:

                  first, to the Trustee, the Trustee Fee and any reasonable
out-of-pocket expenses due to the Trustee and not previously paid by the
Servicer;

                  second, to the Servicer, the Servicing Fee, less any
reasonable out-of-pocket expenses due to the Trustee and not previously paid to
the Trustee by the Servicer;

                  third, to the Reserve Account, the amount of any unreimbursed
P&I Advances;



                                       66
<PAGE>   72

                  fourth, to the holders of the Class A-1 Notes, the Current
Interest Amount for such class and any Unpaid Interest Shortfalls with respect
to prior Distribution Dates;

                  fifth, to the holders of the Class A-2 Notes, the Current
Interest Amount for such class and any Unpaid Interest Shortfalls with respect
to prior Distribution Dates;

                  sixth, to the holders of the Class A-3 Notes, the Current
Interest Amount for such class and any Unpaid Interest Shortfalls with respect
to prior Distribution Dates;

                  seventh, to the holders of the Class A-1 Notes, the Unpaid
Principal Shortfall for such class and the Class A-1 Current Principal Amount;

                  eighth, if Default Trigger III has occurred, to the Reserve
Account, an amount up to the difference between the amount then on deposit
therein, and the Requisite Reserve Amount;

                  ninth, to the holders of the Class A-2 Notes, the Unpaid
Principal Shortfall for such class and the Class A-2 Current Principal Amount;

                  tenth, if Default Trigger II has occurred (but Default Trigger
III is not in effect), to the Reserve Account, an amount up to the difference
between the amount then on deposit therein, and the Requisite Reserve Amount;

                  eleventh, to the holders of the Class A-3 Notes, the Unpaid
Principal Shortfall for such class and the Class A-3 Current Principal Amount;

                  twelfth, to the Reserve Account, an amount up to the
difference between the amount then on deposit therein, and the Requisite Reserve
Amount;

                  thirteenth, to the Company, any amounts remaining in the
Collection Account.

                  Distributions to Noteholders shall be made by wire or other
transfer of funds pursuant to written instructions (in the case of a Noteholder
that is a corporation, signed by an authorized officer thereof) delivered to the
Trustee at least three Business Days prior to a Distribution Date, and provided,
further, that the final distribution in retirement of the Notes shall be made as
set forth in this Indenture.

                  (b) The Trustee and any Paying Agent on behalf of the Company
shall comply with all requirements of the Code, Treasury Regulations and
applicable state and local law with respect to the withholding from any
distributions made by it to any Noteholder of any applicable withholding taxes
imposed thereon 


                                       67
<PAGE>   73

and with respect to any applicable reporting requirements in connection
therewith.

                  (c) To prevent backup withholding on payments made with
respect to the Notes, each Noteholder is required to provide the Trustee with
(i) the Noteholder's correct Taxpayer Identification Number ("TIN") by
completing the form set forth as Exhibit C hereto (Substitute Form W-9),
certifying that the TIN provided on the Substitute Form W-9 is correct and that
(A) such Noteholder is exempt from backup withholding, (B) the Noteholder has
not been notified by the Internal Revenue Service ("IRS") that the Noteholder is
subject to backup withholding as a result of failure to report all interest or
dividends or (C) the IRS has notified the Noteholder that the Noteholder is no
longer subject to backup withholding and (ii) if applicable, an adequate basis
for exemption. A Foreign Noteholder may qualify as an exempt recipient by
submitting to the Trustee a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that Noteholder's exempt status.

                  (d) The Trustee or other Note Registrar shall not permit a
transfer of a Note if such transfer would result in the Company having more than
one hundred Noteholders as reflected in the Note Register. In addition, no
entity that is a partnership, grantor trust or S corporation may acquire a Note
if (i) substantially all of the value of the interest of a person owning an
interest in such entity is attributable to the entity's (direct or indirect)
interest in the Note, and (ii) a principal purpose of the use of the tiered
arrangement is to permit the Company to satisfy the 100-person limitation in
paragraph (h)(1)(ii) of Section 1.7704-1 of the Treasury Regulations.

                  (e) The foregoing provisions of this Section 13.1
notwithstanding, any monies deposited in the Collection Account for purposes of
redeeming Notes pursuant to Article Ten shall, subject to Section 11.3, remain
in the Collection Account until paid or set aside for the purpose of such
redemption.

                  (f) (i) The rights of the Class A-2 and Class A-3 Noteholders
to receive payments on their respective Notes are expressly subordinated to the
rights of the Noteholders with earlier numerical class designations to receive
payments on their respective Notes.

                  (g) In making the withdrawals and payments required by Section
13.1(a) and in making the reports and accounting referred to in Section 12.8,
the Trustee shall act in accordance with the information set forth in the
Servicer Report furnished it by the Servicer for the payment of Mortgage Loans
received in the related Due Period and shall be fully protected in relying
thereon, unless a Responsible Officer of the Trustee has actual knowledge that
such information is incorrect.



                                       68
<PAGE>   74


                  IN WITNESS WHEREOF, the Company, the Trustee and the Servicer
have caused this Indenture to be duly executed by their respective officers
thereunto duly authorized and their respective seals, duly attested, to be
hereunto affixed, all as of the day and year first above written.

                                COMPANY:

                                SUNTERRA FINANCE L.L.C.


                                By: Sunterra Mortgage, Inc., Its Managing Member

                                By: /s/ DEWEY W. CHAMBERS
                                    --------------------------------------------
                                       Name:  Dewey W. Chambers
                                       Title: Vice President


                                SERVICER:

                                SIGNATURE RESORTS, INC.



                                By: /s/ DEWEY W. CHAMBERS
                                    --------------------------------------------
                                       Name:  Dewey W. Chambers
                                       Title: Vice President


                                TRUSTEE AND BACK-UP SERVICER:
                                LASALLE NATIONAL BANK



                                By: /s/ 
                                    --------------------------------------------
                                       Name:
                                       Title:


<PAGE>   75


                                    EXHIBIT A

                          (FORM OF ASSIGNMENT OF NOTE)

                  For value received the undersigned hereby sells, assigns and
transfers unto ___________________ whose social security or other tax
identifying number is _______________________ a note as hereinafter described
and hereby irrevocably constitutes and appoints ___________________, attorney,
to transfer the same on the Note Register of the Trustee with full power of
substitution in the premises.


                              Description of Note:

                  Class __ Note No.___ with an Outstanding Note Balance as of
                  the Closing Date of $_____________ issued under that certain
                  Indenture dated May 1, 1998 among Sunterra Finance L.L.C. (the
                  "Company"), Signature Resorts, Inc. as servicer (the
                  "Servicer"), LaSalle National Bank, as trustee (the "Trustee")
                  and as back-up servicer (the "Back-up Servicer").


                                [SELLER/ASSIGNOR]


                                By: /s/ 
                                    --------------------------------------------
                                    Name:
                                    Title:

Dated: ____________________


NOTE:         The signature to this assignment must correspond with the name as
              written on the face of the Note herein described in every
              particular, without alterations or enlargement or any change
              whatsoever.


Signature Guaranteed:


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


NOTE:    Signature(s) must be guaranteed by a participant in a signature
         medallion program.


                                      A-1

<PAGE>   76


                                    EXHIBIT B

                               LOST NOTE AFFIDAVIT

STATE OF NEW YORK )                LOST NOTE
                  )        SS.:    AFFIDAVIT
COUNTY OF NEW YORK)

____________________________________________ being duly sworn, deposes and says:

That deponent is a _________________________________

That the deponent held or received the mortgage note relating to ______________
(the "Mortgage Note") at __________________ their premises located at
____________________________________ .


         That to the best of deponent's knowledge the Mortgage Note was lost or
destroyed


                                            [Deponent]

                                            ------------------------------------
                                            Name:
                                            Title:

                                      B-1