SUBORDINATE TO NATIONSBANK, N.A. (SOUTH) PURSUANT TO
                  INTERCREDITOR AGREEMENT DATED MARCH 13, 1997

                                 PROMISSORY NOTE

$5,850,000.00   (U.S.)                                       Nassau, Bahamas
                                                             March 13, 1997    
                                                   

         FOR VALUE RECEIVED, the undersigned, FIRST AMERICAN RAILWAYS, INC., a
Nevada corporation, having an address at 2445 Hollywood Boulevard, Hollywood
33020 (hereinafter, the "MAKER"), promises to pay to the order of Charles E.
Bradshaw, Jr., his successors or assigns (collectively hereinafter referred to
as the "HOLDER") at Post Office Box 3508, Orlando, Florida 32802, or such other
place as the Holder may from time to time designate in writing, the principal
sum of FIVE MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS ($5,850,000.00), with
interest thereon from the above date, to be paid in lawful money of the United
States of America, which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, as follows:

         From the date of this Promissory Note (the "Note") through the fifth
anniversary hereof (the "Maturity Date"), interest only shall be paid on this
Note at a rate equal to the following schedule:

                  Year 1              9.25% per annum
                  Year 2              9.25% per annum
                  Year 3              9.75% per annum
                  Year 4             10.00% per annum
                  Year 5             10.00% per annum

Such interest is to be paid in quarterly installments commencing on the
fifteenth day of the third month following the date hereof and on the fifteenth
day of each third succeeding month thereafter.

         The outstanding principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be due and payable on the Maturity
Date. Additionally, MAKER shall also pay to HOLDER on or before December 31st of
each year, as applicable, the Deferred Tax Liability Payment as described in
that Addendum to Share Purchase Agreement between MAKER as Buyer and HOLDER as
Shareholder , the applicable terms of which are incorporated herein by this
reference.

         All payments made hereunder, other than the aforementioned Deferred Tax
Liability Payment, shall be applied first to accrued and unpaid interest, and
the balance, if any, to the principal amount outstanding.


                                        1


<PAGE>



         This Note is secured by a Second Deed of Trust dated as of even date
herewith given by The Durango & Silverton Narrow Gauge Railroad Company (the
"Company"), a wholly-owned subsidiary of Maker, to Holder (the "Mortgage") , and
Uniform Commercial Code Financing Statements dated as of even date herewith
given by the Company to Holder (the "UCCs") , and certain other documents
executed in conjunction herewith, all as amended from time to time (the Note,
the Mortgage, the UCCs and the other documents shall collectively hereafter be
referred to as the "Loan Documents").

         This Note and the Loan Documents are subordinate to the lien of that
certain loan given to the Company by NationsBank, N.A. (South), executed
contemporaneously herewith, pursuant to an Intercreditor Agreement between such
lender and HOLDER (the "Replacement Loan"). The covenants, conditions and
requirements imposed upon the borrower under either the Loan Documents or the
Replacement Loan are incorporated herein by this reference and are affirmed by
MAKER as an integral part of this Note and shall continue to be binding upon
MAKER (as to the Loan Documents) and upon the Company (as to the Loan Documents
and the Replacement Loan) even after repayment of the Replacement Loan so long
as this Note remains outstanding; provided, however, that those conditions
existing for the Company prior to the date hereof which may be a default under
the Replacement Loan shall not constitute a cross- default hereunder.

         MAKER may make prepayment(s) hereunder in whole or in part at any time
and from time to time without premium or penalty.

         It is agreed hereby that if any payment of the outstanding principal
balance, or any installment thereof, or any interest thereon, is not made as
above provided; or if default be made in the performance of or compliance with
any of the covenants and conditions of the aforesaid Loan Documents or of the
Replacement Loan, or of any other obligation of MAKER to HOLDER; or upon the
insolvency, bankruptcy or dissolution of the Maker hereof; then, in any or all
such events, the entire amount of principal of this Note with all interest then
accrued, shall, at the option of the Holder and without notice (the Maker hereby
expressly waives notice of such default) become and be due and collectible, time
being of the essence of this Note. If this Note shall not be paid at maturity or
according to the tenor thereof and strictly as above provided, it may be placed
in the hands of an attorney at law for collection, and in that event, each party
liable for the payment hereof, as Maker, endorser, guarantor, or otherwise,
hereby agrees to pay the Holder hereof in addition to the sums above stated, all
of Holder's reasonable costs of collection and attorneys' fees, which shall
include attorneys' fees at prelitigation, pretrial, trial and appellate levels.

         After maturity or default, and continuing until repayment of this Note
in full, whether pre or post judgement, or the default is cured, as applicable,
this Note shall bear interest at the highest rate permitted under then
applicable law; provided, however, in the event there is then no such highest
rate applicable, or in the event said highest rate is otherwise indeterminable,
the parties agree that the applicable rate shall be eighteen percent (18%) per
annum; provided, however, in no event shall such rate exceed the highest rate
permissible under the applicable law in effect from time to time.


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<PAGE>



         Whether or not Holder has exercised its right to accelerate this Note
as hereinabove provided, in the event any required payment hereunder is not
received by Holder within fifteen (15) days after said payment is due, Maker
shall pay Holder a late charge of two and one-half percent (2 1/2%) of the
overdue payment the parties agreeing that said charge is a fair and reasonable
charge for the late payment and shall not be deemed a penalty. As to this Note
and any other instruments securing the indebtedness evidenced hereby, to the
fullest extent allowable by law, Maker, endorsers and guarantors severally: (i)
waive all applicable exemption rights, whether under the Florida Constitution,
Florida or United States laws or otherwise; (ii) waive valuation and
appraisement, presentment, protest and demand, notice of protest, demand and
dishonor and nonpayment of this Note; and (iii) expressly agree to any
substitution, exchange, addition or release of any of the security for the
indebtedness evidenced by this Note or the addition or release of any party or
person primarily or secondarily liable hereon.

         Nothing contained herein, nor in any instrument or transaction related
hereto, shall be construed or so operate as to require the Maker, or any person
liable for the payment of the indebtedness evidenced by this Note, to pay
interest in an amount or at a rate greater than the highest rate permissible
under applicable law in effect from time to time. Should any interest or other
charges paid by the Maker, or any parties liable for the payment of the
indebtedness evidenced by this Note, result in the computation or earning of
interest in excess of the highest rate permissible under applicable law in
effect from time to time, then any and all such excess shall be and the same is
hereby waived by the Holder hereof, and all such excess shall be automatically
credited against and in reduction of the principal balance, and any portion of
said excess which exceeds the principal balance shall be paid by the Holder
hereof to the Maker and any parties liable for the payment of the indebtedness
evidenced by this Note, it being the intent of the parties hereto that under no
circumstances shall the Maker be required to pay interest in excess of the
highest rate permissible under applicable law in effect from time to time. The
Holder may, in determining the maximum rate permitted under applicable law in
effect from time to time, take advantage of any law, rule or regulation in
effect from time to time available to Holder which exempts Holder from any
limits upon the rate of interest it may charge and grants to Holder the right to
charge a higher rate of interest than that otherwise permitted by law.

         This Note is to be construed according to the laws of the State of
Florida and the United States of America. Venue for any action involving this
Note shall be in the United States District Court for Colorado or any court of
general jurisdiction in Colorado.

                                             FIRST AMERICAN RAILWAYS, INC.,
                                             a Nevada corporation

(Corporate Seal)

                                             By:  /S/RAYMOND MONTELEONE
                                                  -----------------------------
                                                  Raymond Monteleone, President


                                        3


<PAGE>


COMMONWEALTH OF THE BAHAMAS

         The foregoing instrument was executed and acknowledged before me this
13th day of  March, 1997, by RAYMOND MONTELEONE, as President of
FIRST AMERICAN RAILWAYS, INC., a Nevada corporation, on its behalf.

                                             /S/ CHERISE F. V. COX
                                             ----------------------------------
                                             Signature of Notary Public


                                             /S/ CHERISE F. V. COX
                                             ----------------------------------
                                             Type, Print or Stamp name of Notary
                                             Public

Personally Known _______________  OR Produced Identification U.S. PASSPORT

Type of identification produced:_______________________________________________


                                        4



<PAGE>
                                    RECEIPT

Received the original of the attached Promissory Note on March 13, 1997.







                                            /S/ L. CLEVELAND HIGHTOWER
                                            ------------------------------------
                                            L. CLEVELAND HIGHTOWER, as agent for
                                            CHARLES E. BRADSHAW, JR.


THE COMMONWEALTH OF
THE BAHAMAS



         I HEREBY CERTIFY THAT on this day, before me, an officer duly
authorized in the State and County aforesaid to take acknowledgements,
personally appeared L. Cleveland Hightower, to me known to be the person
described in and who executed the foregoing instrument and acknowledged before
me that he executed the same.


WITNESS my hand and official seal in the COMMONWEALTH aforesaid this 13th
day of March, 1997.



                                         /S/ CHERISE F. V. COX
                                         ---------------------------------
                                         Notary Public
                                         My commission expires: Dec. 31, 1997


<PAGE>

                   AFFIDAVIT FOR EXECUION OF PROMISSORY NOTE
                          WITHOUT THE STATE OF FLORIDA



THE COMMONWEALTH OF
THE BAHAMAS

         BEFORE ME, the undersigned Notary Public, duly authorized in the County
and State aforesaid to administer oaths and take acknowledgements, personally
appeared the undersigned, to me well known and to me known to be the persons set
forth below who witnessed the execution and delivery of the attached Promissory
Note, and who, first being duly sworn by me did each depose, say and acknowledge
before me that they were present at the time that the said Promissory Note was
executed, that they saw the same executed and delivered by Raymond Monteleone,
and that the other subscribing witness was likewise present and witnessed the
execution and delivery of the foregoing Promissory Note, to a representative of
Charles E. Bradshaw, Jr. at the City of Nassau, Commonwealth of the Bahamas, on
the date written below.



                                            /S/ STEVEN B. HATCHER
                                            -----------------------------------
                                            Subscribing Witness
                                            Print Name: STEPHEN B. HATCHER
                                            Address: 1131 Banburg Trail
                                                     Maitland, Florida 32751

                                            /S/ ILLEGIBLE
                                            -----------------------------------
                                            Subscribing Witness
                                            Print Name: ILLEGIBLE
                                            Address: 1 Financial Plaza
                                                     Ft. Lauderdale, Fl 33304

          
     SWORN TO AND SUBSCRIBED before me and acknowledged to me this 13th day
of March, 1997.


                                            /S/ CHERISE F. V. COX
                                            ---------------------------------
                                            Notary Public, COMMONWEALTH OF
                                                           THE BAHAMAS
                                            Print Name: CHERISE F. V. COX
                                            Address:    83 Shirly Street
                                                        Nassau, Bahamas
                                            My Commission Expires: Dec. 31, 1997
                                            My Commission No. is: N/A