Document:

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                                                                        EX-10.23

                       [GRAPHIC OMITTED][GRAPHIC OMITTED]

                                 MASTER LOAN AND
                               SECURITY AGREEMENT

                                PRIMARY BORROWER:

                              SUNTERRA CORPORATION
                                   95-4582157
                       FEDERAL EMPLOYEE IDENTIFICATION NO.

                             1781 PARK CENTER DRIVE
                             ORLANDO, FLORIDA 32835

                                   $50,000,000

                               SEPTEMBER 30, 1999

                                 RESORT FINANCE
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                                 TABLE OF CONTENTS
                                                                            PAGE
                                                                            ----

1. DEFINITIONS.................................................................1

2. LOAN COMMITMENT; USE OF PROCEEDS............................................5
   2.1   Inventory Loan Commitment; Determination of Advance Amounts...........5
   2.2   Inventory Loan Revolver...............................................5
   2.3   Continuation of Obligations Throughout Term...........................6
   2.4   Use of Advances.......................................................6
   2.5   Repayment of Inventory Loan...........................................6
   2.6   Interest..............................................................6
   2.7   Inventory Loan Minimum Required Payments..............................6
   2.8   Prepayment............................................................7
   2.9   Loan Fee; Custodial Fee; Availability Fee.............................7
   2.10  Application of Proceeds of Collateral and Payments....................7
   2.11  Borrower's Unconditional Obligation to Make Payments..................7

3. SECURITY....................................................................8
   3.1   Grant of Security Interest in Collateral..............................8
   3.2   Ineligible Inventory..................................................8
   3.3   Borrowing Base Reporting..............................................8
   3.4   Maintenance of Security...............................................8

4. CONDITIONS PRECEDENT TO ADVANCES; MINIMUM AMOUNT AND MAXIMUM FREQUENCY OF
   ADVANCES; METHOD OF DISBURSEMENT............................................9
   4.1   Delivery of Loan Documents and Due Diligence Items Prior to Initial
         Advance...............................................................9
   4.2   Additional Conditions Precedent for Subsequent Advances..............11
   4.3   General Conditions Precedent to All Advances.........................11
   4.4   Conditions Satisfied at Borrower's Expense...........................11
   4.5   Minimum Amount and Maximum Frequency of Advances.....................11
   4.6   Disbursement of Advances.............................................11
   4.7   No Waiver............................................................11

5. BORROWER'S REPRESENTATIONS AND WARRANTIES..................................11
   5.1   Good Standing........................................................11
   5.2   Power and Authority; Enforceability..................................12
   5.3   Borrower's Principal Place of Business...............................12
   5.4   No Litigation........................................................12
   5.5   Compliance with Legal Requirements...................................12
   5.6   No Misrepresentations................................................12
   5.7   No Default for Third Party Obligations...............................12
   5.8   Payment of Taxes and Other Impositions...............................12
   5.9   Sales Activities.....................................................12
   5.10  Time-Share Interest Not a Security...................................12
   5.11  Zoning Compliance....................................................12
   5.12  Eligible Inventory...................................................12
   5.13  Association; Assessments and Reserves................................13
   5.14  Title to and Maintenance of Common Areas and Amenities...............13
   5.15  Year 2000............................................................13
   5.16  Survival and Additional Representations and Warranties...............13

6. BORROWER'S COVENANTS.......................................................13
   6.1   Borrower's Affirmative Covenants.....................................13
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   6.2   Borrower's Negative Covenants........................................17
   6.3   Survival of Covenants................................................18

7. DEFAULT....................................................................18
   7.1   Events of Default....................................................18
   7.2   Remedies.............................................................19
   7.3   Application of Proceeds During an Event of Default...................19
   7.4   Uniform Commercial Remedies; Sale; Assembly of Collateral............19
   7.5   Application of Proceeds..............................................19
   7.6   Lender's Right to Perform............................................20
   7.7   Non-Exclusive Remedies...............................................20
   7.8   Waiver of Marshalling................................................20
   7.9   Attorney-in-Fact.....................................................20

8. COSTS AND EXPENSES; INDEMNIFICATION........................................20
   8.1   Costs and Expenses...................................................20
   8.2   Indemnification......................................................20

9. CONSTRUCTION AND GENERAL TERMS.............................................21
   9.1   Payment Location.....................................................21
   9.2   Entire Agreement.....................................................21
   9.3   Powers Coupled with an Interest......................................21
   9.4   Counterparts.........................................................21
   9.5   Notices..............................................................21
   9.6   Successors and Assigns...............................................21
   9.7   Severability.........................................................21
   9.8   Time of Essence......................................................21
   9.9   Miscellaneous........................................................21
   9.10  CHOICE OF LAW........................................................22
   9.11  CHOICE OF JURISDICTION; WAIVER OF VENUE..............................22
   9.12  WAIVER OF JURY TRIAL.................................................22
   9.13  INDUCEMENT TO LENDER.................................................22
   9.14  Compliance With Applicable Usury Law.................................22
   9.15  NO RELATIONSHIP WITH PURCHASERS......................................22
   9.16  NO JOINT VENTURE.....................................................22
   9.17  Standards Applied to Lender's Actions................................22
   9.18  Meaning of Subordination.............................................23
   9.19  Scope of Reimbursable Attorney's Fees................................23
   9.20  Publicity............................................................23
   9.21  Permitted Contests...................................................23
   9.22  Reliance.............................................................23

      Schedule of Additional Terms............................................25
         Exhibit A - Conditions of Eligible Inventory.........................27
         Exhibit B - Permitted Encumbrances...................................29
         Exhibit C - Borrower's Certificate...................................30
         Exhibit D - (NOT USED) ..............................................
         Exhibit E - Additional Conditions to Inventory Loan Advances.........31
         Exhibit E-1 - Request for Inventory Loan Advance and Certification...32
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            This LOAN AND SECURITY AGREEMENT is entered into for good and
valuable consideration, by and between FINOVA CAPITAL CORPORATION, a Delaware
corporation, and SUNTERRA CORPORATION, a Maryland corporation (referred to
herein as the "PRIMARY BORROWER"), together with those business organizations
which are affiliated with Primary Borrower and which either join in the
execution of this Agreement below as a "Borrower" or subsequently join in this
Agreement as a "Borrower" hereunder pursuant to an Assumption Agreement in form
and substance satisfactory to Lender (all such persons being collectively
referred to herein as "BORROWERS").

1.    DEFINITIONS

      As used in this Agreement and the other Loan Documents unless otherwise
expressly indicated in this Agreement or the other Loan Documents, the following
terms shall have the following meanings (such meanings to be applicable equally
both to the singular and plural terms defined)

      "ACCESS AGREEMENT": that certain Agreement Regarding Access to Club
Sunterra dated as of September 30, 1999 by and among Primary Borrower, Lender,
and Club Sunterra, Inc., a Florida corporation and wholly owned subsidiary of
Primary Borrower.

      "ADVANCE": an advance of the proceeds of the Inventory Loan by Lender to,
or on behalf of, Borrower in accordance with the terms and conditions of this
Agreement.

      "AFFILIATE": with respect to any individual or entity, any other
individual or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such individual or entity.

      "AGREEMENT": this Loan and Security Agreement, as it may be from time to
time renewed, amended, restated or replaced.

      "APPLICABLE USURY LAW": the usury law chosen by the parties pursuant to
the terms of PARAGRAPH 9.10 or such other usury law which is applicable if such
usury law is not.

      "APPROVED ALTERNATIVE INTEREST": any ownership right to a dwelling space
in a parcel of real property owned by Primary Borrower or any Subsidiary
Borrower which rights have yet to be included within an established Time-Share
Program pursuant to a Time-Share Declaration, but which Lender has approved as
Eligible Inventory for inclusion as part of the Borrowing Base hereunder. As of
the Closing Date, Lender has agreed that the seventy-five (75) Units located in
the Villas de Santa Fe Time-Share Project, Santa Fe, New Mexico, which is owned
by Primary Borrower, but which Units have not yet been converted into Time-Share
Interests, shall constitute Approved Alternative Interests.

      "ARTICLES OF ORGANIZATION": the charter, articles, operating agreement,
joint venture agreement, partnership agreement, by-laws and any other written
documents evidencing the formation, organization, governance and continuing
existence of an entity.

      "BASIC INTEREST": the meaning given to it in PARAGRAPH 2.6.

      "BORROWER OR BORROWERS": means Primary Borrower, together with each
Subsidiary Borrower, as the same exist from time to time, and subject to the
restrictions on assignment and transfer contained in this Agreement, the
successors and assigns of each such Person.

      "BORROWING BASE": an amount equal to twenty-five percent (25%) of the
Retail Value of the Eligible Inventory.

      "BORROWING BASE REPORT":  the same meaning given to it in PARAGRAPH 3.3.

      "BORROWING BASE SHORTFALL": at any time, the amount by which the unpaid
principal balance of the Inventory Loan exceeds the aggregate Borrowing Base of
all Eligible Inventory.

      "BORROWING TERM": the period commencing on the date of this Agreement and
ending on the close of the Business Day (or if not a Business Day, the first
Business Day thereafter) on the date identified in the Schedule as the Original
Borrowing Term Expiration Date (in the event Primary Borrower does not exercise
the Extension Option) or the Extended Borrowing Term Expiration Date (in the
event Primary Borrower does exercise the Extension Option).

      "BUSINESS DAY": any day other than a Saturday, a Sunday, a national
holiday or a day on which banks in Phoenix, Arizona are required to be closed.

      "CILP ASSIGNMENT": a written assignment to be executed and delivered to
Lender by Borrower and creating in favor of Lender a perfected, direct
collateral assignment of the Contracts, Intangibles, Licenses and Permits in
order to facilitate Performance of the Obligations, as it may be from time to
time renewed, amended, restated or replaced.

      "COLLATERAL": collectively, (a) the Inventory; (b) the Insurance Policies;
(c) all Borrower's rights under all escrow agreements and accounts pertaining to
any of the foregoing; (d) the furniture, fixtures and equipment located in the
Units to which the Inventory relates, to the extent that any Borrower has rights
in such furniture, fixtures or equipment; and (e) any and all other property now
or hereafter serving as security for the Performance of the Obligations, and all
products and proceeds thereof.

      "CONTRACTS, INTANGIBLES, LICENSES, PERMITS": all contracts, licenses,
permits, plans and other intangibles in which Borrower now or hereafter has
rights (but only to
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the extent Borrower has rights in any such items and to the extent such items
primarily pertain to one or more of the Time-Share Projects) and are now or
hereafter used in connection with the marketing and sale of Inventory and the
management and/or operation of the Time-Share Projects in which the Inventory is
situated.

      "DEFAULT RATE": the per annum rate of interest identified in the Schedule
as the Default Rate.

      "ELIGIBLE INVENTORY": all Inventory which conforms to the standards set
forth in EXHIBIT A. Unsold Inventory that has qualified as Eligible Inventory
shall cease to be Eligible Inventory upon the date such Inventory fails to
continue to conform to the standards set forth in EXHIBIT A.

      "ENVIRONMENTAL CERTIFICATE": an environmental certificate executed and
delivered to Lender by Borrower and such other persons as Lender may require, as
it may be from time to time renewed, amended, restated or replaced.

      "EVENT OF DEFAULT": the meaning set forth in PARAGRAPH 7.1.

      "EXTENSION OPTION": the meaning set forth in PARAGRAPH 2.3.

      "GAAP": means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to FINOVA
prior to the date hereof. In the event that changes in GAAP shall be mandated by
the Financial Accounting Standards Board and/or the American Institute of
Certified Public Accountants or any similar accounting body of comparable
standing, or shall be recommended by Borrower's certified public accountants, to
the extent that such changes would modify such accounting terms or the
interpretation or computation thereof as contemplated by this Agreement at the
time of execution hereof, then in such event such changes shall be followed in
defining such accounting terms, and Borrower and Lender shall use reasonable
good faith efforts to agree upon an appropriate amendment to this Agreement to
reflect the original intent of such terms in light of such changes, whereupon
such new accounting terms shall apply.

      "IMPOSITIONS": all real estate, personal property, excise, privilege,
transaction, documentary stamp and other taxes, charges, assessments and levies
(including non-governmental assessments and levies such as maintenance charges,
association dues and assessments under private covenants, conditions and
restrictions) and any interest, costs, fines or penalties with respect thereto,
general and special, ordinary and extraordinary, foreseen and unforeseen, of any
kind and nature whatsoever which at any time prior to or after the execution
hereof may be assessed, levied or imposed.

      "INCIPIENT DEFAULT": an event which after notice and/or lapse of time
would constitute an Event of Default.

      "INSTALLMENT DATE": the meaning given to it in PARAGRAPH 2.7.

      "INSURANCE POLICIES": the insurance policies that Borrower is required to
maintain and deliver pursuant to PARAGRAPH 6.1(c).

      "INTEREST PERIOD": shall mean a thirty (30) day period commencing on each
Interest Rate Determination Date.

      "INTEREST RATE DETERMINATION DATE": shall mean the first Business Day of
each calendar month.

      "INVENTORY": collectively, all unsold Time-Share Interests, together with
any unsold Approved Alternative Interests which may then exist, but as to either
unsold Time-Share Interests or unsold Approved Alternative Interest, solely to
the extent that such interests have been encumbered by Lender pursuant to a
Mortgage.

      "INVENTORY LOAN": the revolving line of credit loan made pursuant to
ARTICLE 2.

      "LEGAL REQUIREMENTS": (a) all present and future judicial decisions,
statutes, regulations, permits or certificates of any governmental authority in
any way applicable to Borrower or its property; and (b) all material contracts
or agreements (written or oral) by which Borrower or its property is bound or,
if compliance therewith would otherwise be in conflict with any of the Loan
Documents, by which Borrower or its property becomes bound with Lender's prior
written consent.

      "LENDER": FINOVA Capital Corporation, a Delaware corporation, and its
successors and assigns.

      "LIBO ADJUSTED RATE": shall mean the rate per annum determined by Lender
by dividing (the resulting quotient to be rounded upward to the nearest 1/100 of
one percent) (i) the per annum rate of interest at which deposits in U.S.
Dollars in an amount substantially equal to the outstanding balance of the
Inventory Loan and having a maturity comparable to the Interest Period are
offered by Citibank, N.A. or its affiliates in the London interbank market at
approximately 11:00 a.m. (London time) on the applicable Interest Rate
Determination Date, by (ii) a number equal to 1.0 minus the aggregate (but
without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the applicable Interest Rate Determination Date
(including, without limitation, basic supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the

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Federal reserve system or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such board) which are required to be maintained by Lender.

      "LIBO RATE": shall mean the per annum rate of interest which is ordinarily
reported on page 3750 of the Telerate Matrix (in U.S. Dollars) that will be paid
for a deposit, in immediately available funds, of a principal amount
substantially equal to the outstanding balance of the Inventory Loan and having
a maturity comparable to the Interest Period; provided, however, if, for
whatever reason, Lender shall be unable to ascertain the LIBO Rate pursuant to
the preceding provisions, the LIBO Rate in such circumstances shall, for the
Interest Period in question, be the LIBO Adjusted Rate.

      "LOAN DOCUMENTS": this Agreement, the Note, the Subsidiary Notes, the
Environmental Certificate, the Access Agreement, the Security Documents, and all
other documents now or hereafter executed in connection with the Inventory Loan,
as they may be from time to time renewed, amended, restated or replaced.

      "LOAN FEE": the amount identified in the Schedule as the Loan Fee.

      "MATERIAL ADVERSE EFFECT": shall mean a material adverse effect on (a) the
business, financial condition, or operations of (i) Primary Borrower
individually or (ii) all Subsidiary Borrowers collectively, (b) the ability of
(i) Primary Borrower individually or (ii) all Subsidiary Borrowers collectively,
to Perform their Obligations to Lender, (c) one or more Time-Share Projects
which, in the aggregate, have contributed at least fifteen percent (15%) of the
total Eligible Inventory constituting the Borrowing Base, or (d) the Collateral.
In determining whether any individual event would result in a Material Adverse
Effect, notwithstanding the fact that such event does not OF ITSELF have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.

      "MATURITY DATE": the date (or if not a Business Day, the first Business
Day hereafter) which is identified in the Schedule as the Maturity Date.

      "MAXIMUM INVENTORY LOAN AMOUNT": the amount identified in the Schedule as
he Maximum Inventory Loan Amount.

      "MEASURING DATE": means the first Business Day of each calendar month
during he Term.

      "MINIMUM OPINION MATTERS": due organization and good standing of Borrower
and (if any) other sureties for the Performance of the Obligations who are not
natural persons; due authorization, execution and delivery of the Loan
Documents; enforceability of the Loan Documents (including choice of law
provisions); compliance of the Inventory Loan with usury laws; the absence of
conflict between the Loan Documents and its Articles of Organization and Legal
Requirements; compliance by Borrower with applicable laws (other than with
respect to instances of noncompliance which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect); compliance
of the Time-Share Program Governing Documents and Time-Share Program Consumer
Documents with applicable laws; and proper perfection of the required liens and
security interests.

      "MINIMUM REQUIRED TIME-SHARE APPROVALS": all registrations/consents to
sell and all final subdivision public reports/public offering
statements/prospectus, as applicable.

      "MORTGAGE": a mortgage/deed of trust/deed to secure debt recorded against
the Inventory in a given Time-Share Project (or other form of development), as
it may be from time to time renewed, amended, restated or replaced.

      "NOTE": the Master Promissory Note to be made and delivered by Primary
Borrower to Lender pursuant to PARAGRAPH 4.1, having a face amount equal to the
Maximum Inventory Loan Amount, dated as of even date herewith, and made payable
to Lender to evidence the Inventory Loan, as it may be from time to time
renewed, amended, restated or replaced, together with any Allonges thereto or
any Subsidiary Notes executed by the Primary Borrower and one or more Subsidiary
Borrowers in order to evidence a portion of the indebtedness evidenced by the
Note.

      "OBLIGATIONS": all obligations, agreements, duties, covenants and
conditions of Borrower to Lender which Borrower is now or hereafter required to
Perform under the Loan Documents.

      "OPENING PREPAYMENT DATE": the date identified in the Schedule as the
Opening Prepayment Date.

      "PERFORMANCE" OR "PERFORM": full, timely and faithful performance.

      "PERMITTED DEBT": the meaning given to it in PARAGRAPH 6.2(B).

      "PERMITTED ENCUMBRANCES": the rights, restrictions, reservations,
encumbrances, easements and liens of record which Lender has agreed to accept,
as set forth in an exhibit which shall be attached to each Mortgage prior to the
time such Mortgage is recorded.

      "PRIMARY BORROWER" Sunterra Corporation, a Maryland corporation.

      "PURCHASE CONTRACTS": a purchase contract pursuant to which any Borrower
sold a Time-Share Interest to a Purchaser.

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<PAGE>

      "PURCHASER": shall mean each owner of one or more Time-Share Interests in
those Time-Share Projects with respect to which unsold Time-Share Interests
constitute a portion of the Eligible Inventory.

      "PURCHASERS": shall mean all Purchasers with respect to a particular
Time-Share Project, taken as a whole (with the result that representations,
warranties or covenants with respect to any Borrower's fulfillment of its
obligations to "Purchasers" shall not be breached as a result of the failure of
Borrower to have performed any obligations as to one or more individual
Purchasers unless such failure arises to the level of a material failure as to
all Purchasers considered collectively).

      "QUIET ENJOYMENT RIGHTS": the meaning given to it in PARAGRAPH 4.1(B).

      "RELEASE FEE": shall have the meaning set forth in PARAGRAPH 3.2.

      "RENEWAL FEE": the meaning given to it in PARAGRAPH 2.9(B).

      "REQUIRED CLOSING DATE": the date identified in the Schedule as the
Required Closing Date.

      "RESOLUTION": a resolution of a corporation certified as true and correct
by an authorized officer of such corporation, a certificate signed by the
manager of a limited liability company and such members whose approval is
required, or a partnership certificate signed by all of the general partners of
such partnership and such other partners whose approval is required.

      "RETAIL VALUE": shall mean (i) with respect to any Time-Share Project that
has had a period of at least twelve consecutive months in which Time-Share
Interests have been sold, the actual average sales price of such Time-Share
Interests achieved during the most recent twelve-month period preceding a given
Measuring Date, and (ii) with respect to any Time-Share Project that has not had
a period of at least twelve consecutive months of sales of Time-Share Interests,
the average retail value of all unsold Time-Share Interests as determined by
Lender in its discretion; provided, that at such time as an individual
Time-Share Project has generated sales of Time-Share Interests for a minimum of
twelve consecutive months, Retail Value shall be established pursuant to clause
(i) of this definition. The Retail Value applicable to Eligible Inventory shall
be established at the time such Eligible Inventory is contributed to the
Borrowing Base, and shall thereafter only be adjusted pursuant to the
revaluation process set forth in PARAGRAPH 2.7(C).

      "SANTA FE RESERVE": shall be a reserve against borrowing availability
hereunder, in the amount of $750,000, with respect to that part of the Eligible
Inventory which consists of Approved Alternative Interests located in the Villas
de Santa Fe Time-Share Project owned by Primary Borrower.

      "SCHEDULE": the Schedule of Additional Terms which follows the signature
pages of the parties.

      "SECURITY DOCUMENTS": the CILP Assignment, the Mortgage, this Agreement
and all other documents now or hereafter securing the Obligations, as they may
be from time to time renewed, amended, restated or replaced.

      "SUBSIDIARY BORROWER": means each Affiliate of Primary Borrower which has
contributed Inventory to the Borrowing Base from time to time throughout the
Term; provided, that references to one or more Subsidiary Borrowers shall only
include entities which own unsold Inventory then constituting a portion of the
Borrowing Base, with the result that any entity which may previously have
contributed Eligible Inventory to the Collateral, but which Eligible Inventory
has now all been sold or otherwise released from the Borrowing Base, shall no
longer be considered a Subsidiary Borrower hereunder (unless such entity
thereafter contributes additional Inventory to the Borrowing Base).

      "SUBSIDIARY NOTES": shall mean those promissory notes made and delivered
by Primary Borrower and individual Subsidiary Borrowers to Lender from time to
time, having a face amount equal to the original Borrowing Base attributable to
the Eligible Inventory contributed by the applicable Subsidiary Borrower, as any
such note may from time to time be renewed, amended, restated or replaced. Each
Subsidiary Note shall indicate that the indebtedness evidenced thereby
constitutes a segregated portion of, and is not in addition to, the indebtedness
evidenced by the Note. Each Subsidiary Borrower shall be liable only with
respect to those Subsidiary Notes as to which such Subsidiary Borrower is a
maker.

      "TERM": the duration of this Agreement, commencing on the date as of which
this Agreement is entered into and ending when all of the Obligations have been
Performed and Lender has no further obligation to extend credit in connection
with the Inventory Loan.

      "THIRD PARTY CONSENTS": those consents which Lender requires Borrower to
obtain, or which Borrower is contractually or legally obligated to obtain, from
others in connection with the transaction contemplated by the Loan Documents.

      "TIME-SHARE ASSOCIATION": the association established in accordance with
each Time-Share Declaration to manage the applicable Time-Share Program and in
which all owners of Time-Share Interests are or will be members.

      "TIME-SHARE DECLARATION": with respect to each Time-Share Project, that
declaration of covenants, conditions and restrictions which has been executed by
Borrower, is recorded in the real estate records of the county where the
Time-Share Project is located, and establishes the Time-Share Program.

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<PAGE>

      "TIME-SHARE INTEREST": an undivided fractional fee simple interest as
tenant-in-common (or an estate for years with a remainder over in fractional fee
simple as tenant-in-common) either (a) in a Unit (coupled with an undivided
fractional fee simple interest as tenant-in-common in the common areas of the
Time-Share Project) or (b) in the entire Time-Share Project, together with the
right to occupy assigned Units for use periods which have been properly reserved
pursuant to the rules and regulations of the Time-Share Program, and the
non-exclusive right to use such common elements during the same occupancy
period.

      "TIME-SHARE MANAGEMENT AGREEMENT": the management agreement from time to
time entered into between the Time-Share Association and the Time-Share Manager
for the management of the Time-Share Program.

      "TIME-SHARE MANAGER": the person from time to time employed by the
Time-Share Association to manage the Time-Share Program.

      "TIME-SHARE PROGRAM": the program created under each Time-Share
Declaration by which purchasers may own Time-Share Interests, enjoy their
respective Time-Share Interests on a recurring basis, and share the expenses
associated with the operation and management of such program.

      "TIME-SHARE PROGRAM CONSUMER DOCUMENTS": the Purchase Contract, notes,
security documents, deed of conveyance, credit application, credit disclosures,
rescission right notices, final subdivision public reports/prospectuses/public
offering statements, receipt for public report, exchange affiliation agreement
and other documents used or to be used by Borrower in connection with the sale
of Time-Share Interests.

      "TIME-SHARE PROGRAM GOVERNING DOCUMENTS": the Time-Share Declaration, the
Articles of Organization for the Time-Share Association, any and all rules and
regulations from time to time adopted by the Time-Share Association, the
Time-Share Management Agreement and any subsidy agreement by which Borrower is
obligated to subsidize shortfalls in the budget of the Time-Share Program in
lieu of paying assessments.

      "TIME-SHARE PROJECT": each Time-Share Project identified in the Schedule
as a Time-Share Project. References herein to one or more Time-Share Projects
shall only include such projects in which Inventory then constituting a portion
of the Borrowing Base is situated, with the result that any project which may
previously have contributed Inventory to the Collateral, but as to which all
such Inventory has now been sold or otherwise released from the Borrowing Base,
shall no longer be considered a Time-Share Project hereunder (unless the owner
of such project thereafter contributes additional Inventory situated in such
project to the Borrowing Base).

      "TITLE INSURER": a title company which is acceptable to Lender and issues
a Title Policy.

      "TITLE POLICY": in connection with each Mortgage which encumbers a part of
the Collateral, an ALTA lender's policy of title insurance in an amount not less
than the Borrowing Base of the Inventory secured by the Mortgage, insuring
Lender's interest in the Mortgage as a perfected, direct, first and exclusive
lien on the Inventory encumbered thereby, subject only to the Permitted
Encumbrances, issued by Title Insurer and in form and substance acceptable to
Lender.

      "UNIT": a dwelling unit in the Time-Share Project.

2.    LOAN COMMITMENT; USE OF PROCEEDS

      2.1 INVENTORY LOAN COMMITMENT; DETERMINATION OF ADVANCE AMOUNTS. Lender
hereby agrees, if Borrower has Performed all of the Obligations then due, to
make Advances to Borrower in accordance with the terms and conditions of this
Agreement for the purposes specified in PARAGRAPH 2.4. The maximum amount of an
Advance shall be equal to (a) the aggregate Borrowing Base for all Eligible
Inventory less (b) the then unpaid principal balance of the Inventory Loan;
provided, however, at no time shall the unpaid principal balance of the
Inventory Loan exceed the Maximum Inventory Loan Amount; and provided further,
that with respect to the first Advance made on the basis of Inventory which has
not previously constituted a portion of the Borrowing Base, the maximum amount
of such Advance shall not exceed the Borrowing Base directly attributable to
such new Inventory. The foregoing notwithstanding, Primary Borrower shall not be
entitled to borrow the amount contained in the Santa Fe Reserve until such time
as (i) those improvements which have been disclosed to Lender prior to the
Closing Date with respect to the Units situated in the Villas de Santa Fe
project have been completed for certain of such Units, and (ii) Primary Borrower
has provided to Lender evidence that all amounts required to complete such
improvements for such Units have been expended. Upon completion of the foregoing
items, Primary Borrower shall be permitted to borrow that percentage of the
Santa Fe Reserve as is equal to the percentage of Approved Alternative Interests
which remain as unsold Time-Share Interests following such conversion (with the
result that Primary Borrower shall not be permitted to borrow such portion of
the Santa Fe Reserve as arose with respect to Approved Alternative Interests
which were sold or otherwise disposed of prior to the time such interests were
converted into Time-Share Interests).

      2.2 INVENTORY LOAN REVOLVER. The Inventory Loan is a revolving line of
credit; however, all Advances shall be viewed as a single loan. Borrower shall
not be entitled to obtain Advances after the expiration of the Borrowing Term
unless Lender, in its discretion, agrees in writing with Borrower to make
Advances thereafter on terms and conditions satisfactory to Lender.

                                       5
<PAGE>

      2.3 CONTINUATION OF OBLIGATIONS THROUGHOUT TERM; RIGHT TO EXTEND. Whether
or not Borrower's right to obtain Advances has terminated, this Agreement and
Borrower's liability for Performance of the Obligations shall continue until the
end of the Term. Borrower shall have the right, exercisable not earlier than one
hundred and twenty (120) days, nor later than sixty (60) days, prior to the
Original Borrowing Term Expiration Date to extend the Borrowing Term (herein,
the "EXTENSION OPTION") through the Extended Borrowing Term Expiration Date;
provided, however, that the Extension Option shall expire and be of no further
force or effect upon the occurrence of an Event of Default at any time prior to
the Original Borrowing Term Expiration Date (regardless of whether or not any
notice from Primary Borrower of its election to exercise the Extension Option
has then been delivered to Lender). In the event Primary Borrower elects to
exercise the Extension Option, Primary Borrower shall pay the Renewal Fee
described in PARAGRAPH 2.9(B) hereof.

      2.4 USE OF ADVANCES. Borrower will use the proceeds of the Inventory Loan
only for working capital and other business purposes.

      2.5 REPAYMENT OF INVENTORY LOAN. The Inventory Loan shall be evidenced by
the Note and shall be repaid in immediately available funds according to the
terms of the Note and this Agreement.

      2.6 INTEREST. Except as otherwise provided in this Note or this Agreement,
interest ("BASIC INTEREST") shall accrue on the unpaid principal balance of the
Inventory Loan from time to time outstanding at the Basic Interest Rate. Basic
Interest shall be calculated on the basis of the actual number of days elapsed
during the period for which interest is being charged predicated on a year
consisting of three hundred sixty (360) days. Installments of principal, Basic
Interest and any other amounts due and payable under the Loan Documents shall
earn interest after they are due at the Default Rate. At the option of Lender,
while an Event of Default exists, interest shall accrue at the Default Rate.

      2.7 INVENTORY LOAN REQUIRED PAYMENTS.

            (a) MONTHLY PAYMENTS; MATURITY. Commencing on the last Business Day
      of the calendar month in which the initial Advance is made and on the last
      Business Day of each succeeding month thereafter during the Borrowing Term
      (each, an "INSTALLMENT DATE"), Borrower will pay to Lender an installment
      payment equal to accrued interest on the then outstanding balance of the
      Inventory Loan. Following expiration of the Borrowing Term, accrued
      interest on the outstanding principal balance of the Inventory Loan shall
      be payable monthly, on the last Business Day of each month, and the
      outstanding principal balance of the Inventory Loan shall be payable
      through the payment of Release Fees concurrently with the sale or other
      disposition of individual items of Inventory until the Maturity Date, at
      which time all outstanding amounts shall be due and payable. Lender shall
      provide to Primary Borrower, on or before the seventh day prior to the end
      of each calendar month, a statement of accrued interest for such month
      (which statement shall assume that the unpaid principal balance of the
      Inventory Loan remains the same from the date of such statement through
      the end of the applicable month). Lender shall deliver such statement of
      accrued interest either via facsimile or e-mail, whichever method of
      delivery is selected by Primary Borrower. In the event actual accrued
      interest for a calendar month is different from the accrued interest set
      forth on any monthly statement as a result of a change in the outstanding
      principal balance of the Inventory Loan, an appropriate adjustment shall
      be calculated by Lender and reflected in the next monthly accrued interest
      statement.

            (b) BORROWING BASE MAINTENANCE. If there exists a Borrowing Base
      Shortfall and Borrower knows of the occurrence of such condition or should
      have known of its occurrence by virtue of reports required to be delivered
      to Lender, Borrower, without notice or demand, will immediately (a) make
      to Lender a principal payment in an amount equal to the Borrowing Base
      Shortfall plus accrued and unpaid interest on such principal payment or
      (b) deliver to Lender additional Eligible Inventory having an aggregate
      Borrowing Base not less than the Borrowing Base Shortfall. Simultaneously
      with the delivery of additional Eligible Inventory to correct a Borrowing
      Base Shortfall, Borrower will deliver to Lender all of the items (except
      for a "REQUEST FOR ADVANCE AND CERTIFICATION") required to be delivered by
      Borrower to Lender pursuant to PARAGRAPH 4.2, together with a "BORROWER'S
      CERTIFICATE" in form and substance identical to EXHIBIT C.

            (c) REVALUATION OF RETAIL VALUE. Each party shall have the right to
      request a revaluation of the Retail Value applicable to all then existing
      Eligible Inventory semi-annually, each such revaluation to occur on a
      mid-year or annual anniversary of the Closing Date. In the event either
      Lender or Borrower requests a revaluation of Retail Value, each Borrower
      owning Eligible Inventory as to which a revaluation has been requested
      shall provide to Lender a summary of the actual sales prices attained
      during the preceding twelve (12) months with respect to the particular
      Eligible Inventory involved, and the average actual sales price realized
      upon sales of Eligible Inventory shall

                                       6
<PAGE>

      become the new Retail Value with respect to the particular Time-Share
      Project in which such Eligible Inventory was sold. The foregoing
      notwithstanding, no revaluation shall take place with respect to any
      Eligible Inventory which has constituted a part of the Collateral for less
      than six (6) months. In the event that such recalculated Retail Value is
      less than the Retail Value originally established when Eligible Inventory
      from such Time-Share Project was contributed to the Borrowing Base, and as
      a result thereof a Borrowing Base Shortfall is created, Borrower shall
      comply with the Borrowing Base maintenance requirements of PARAGRAPH
      2.7(b) above.

      2.8 PREPAYMENT. Without the prior written consent of Lender, Borrower
shall not be entitled to prepay the Inventory Loan except in accordance with the
terms of this Agreement. Commencing on the Opening Prepayment Date applicable to
a given Advance, Borrower shall have the option to prepay such Advance in full
but not in part on any Installment Date, upon thirty (30) days prior written
notice. The foregoing to the contrary notwithstanding, any principal payments
required pursuant to PARAGRAPHS 2.7 OR 3.2 hereof shall not be considered
prepayments which are prohibited hereby, nor shall any prepayment resulting from
the application of (i) insurance proceeds following an insured casualty or (ii)
condemnation proceeds in the event any Units of Inventory are condemned, be
considered prepayments which are prohibited hereby.

      2.9 LOAN FEE; RENEWAL FEE; ADMINISTRATIVE FEE.

            (a) LOAN FEE. Borrower will pay to Lender the Loan Fee in accordance
      with the requirements set forth in the Schedule. The Loan Fee shall be
      earned by Lender upon approval of the Inventory Loan on substantially the
      terms contained in this Agreement, and shall be non-refundable.

            (b) RENEWAL FEE. In the event Primary Borrower elects to exercise
      the Extension Option, Primary Borrower shall pay to Lender on the Original
      Borrowing Term Expiration Date a fee ("RENEWAL FEE") equal to one percent
      (1.0%) of the difference between the Maximum Inventory Loan Amount and the
      outstanding principal balance of the Inventory Loan as of the date ten
      (10) days prior to the Original Borrowing Term Expiration Date.

            (c) ADMINISTRATIVE FEE. In the event Borrower requests more than one
      Advance in any given calendar month, Borrower shall pay to Lender a fee
      ("ADMINISTRATIVE FEE"), equal to $500 for each such additional Advance.

      2.10 APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS. Notwithstanding
anything in the Loan Documents to the contrary, the amount of all payments or
amounts received by Lender with respect to the Inventory Loan shall be applied
to the extent applicable under the Loan Documents: (a) first, to any past due
payments of interest on the Inventory Loan and to accrued interest on the
Inventory Loan through the date of such payment, including any default interest;
(b) then, to any late fees, overdue risk assessments, collection fees and
expenses and any other fees and expenses due to Lender under the Loan Documents
in connection with the Inventory Loan; and (c) last, the remaining balance, if
any, to the unpaid principal balance of the Inventory Loan; provided, however,
while an Event of Default or Incipient Default exists, each payment received
with respect to the Inventory Loan shall be applied to such amounts owed to
Lender by Borrower as Lender in its discretion may determine. In calculating
interest and applying payments as set forth above: (i) interest on the Inventory
Loan shall be calculated and collected through the date payment is actually
received by Lender; (ii) interest on the outstanding balance of the Inventory
Loan shall be charged during any grace period permitted under the Loan
Documents; (iii) at the end of each month, all past due interest and other past
due charges provided for under the Loan Documents with respect to the Inventory
Loan shall be added to the principal balance of the Inventory Loan; and (iv) to
the extent that Borrower makes a payment or Lender receives any payment or
proceeds of the Collateral for Borrower's benefit that is subsequently
invalidated, set aside or required to be repaid to any other person or entity,
then, to such extent, the Obligations in connection with the Inventory Loan
intended to be satisfied shall be revived and continue as if such payment or
proceeds had not been received by Lender, and Lender may adjust the Inventory
Loan balance in order to take into account such repayment, by restoring the
amount of the repayment to the outstanding balance of the Obligations (with the
particular Obligations deemed to have been revived to be such Obligations as
Lender, in its discretion, deems appropriate under the circumstances), giving
retroactive effect to the restoration of such particular Obligations as if the
payment required to be repaid had never been received by Lender. The provisions
of this PARAGRAPH 2.10 are also subject to the parties rights and obligations
under the Loan Documents as to the application of proceeds of the Collateral
following an Event of Default.

      2.11 BORROWER'S UNCONDITIONAL OBLIGATION TO MAKE PAYMENTS. Whether or not
the proceeds from the Collateral shall be sufficient for that purpose, Borrower
will pay when due all payments required to be made pursuant to any of the Loan
Documents, Borrower's obligation to make such payments being absolute and
unconditional.

                                       7
<PAGE>

3.    SECURITY

      3.1 GRANT OF SECURITY INTEREST IN COLLATERAL. To secure the Performance of
all of the Obligations, Borrower hereby grants to Lender a security interest in
and collaterally assigns to Lender the Collateral. Such security interest shall
be absolute, continuing, perfected, direct, first, exclusive and applicable to
all existing and future Advances and to all of the Obligations. In addition,
each Borrower acknowledges and agrees that, for purposes of administrative
convenience to Borrowers collectively, Borrowers have requested, and Lender has
agreed, to permit the Borrowing Base to be calculated on a consolidated basis,
with the further result that the determination of any Borrowing Base Shortfall
which would obligate Borrower to make the payments required by PARAGRAPH 2.7(b)
herein shall only occur if a Borrowing Base Shortfall exists on a consolidated
basis. The foregoing approach results in significant administrative conveniences
to each Borrower, in that each Borrower may benefit from over-collateralization
existing on a consolidated basis by virtue of the fact that such an approach
permits the streamlined release procedure described in first sentence of
PARAGRAPH 3.2 hereof. Accordingly, each Borrower hereby acknowledges that it has
received benefit from the consolidated Borrowing Base Reporting procedure
implemented by this Agreement, and each Borrower acknowledges that the security
interest granted in favor of Lender pursuant to this Agreement, and pursuant to
each of the Mortgages, shall secure, up to the full amount of the Borrowing Base
contributed by each such Borrower, the payment and performance of all
Obligations of each Borrower to Lender. Borrower further warrants and guarantees
the enforceability of Lender's security interest in the Collateral. Lender is
hereby appointed Borrower's attorney-in-fact to take any and all actions in
Borrower's name and/or on Borrower's behalf deemed necessary or appropriate by
Lender with respect to the collection and remittance of payments (including the
endorsement of payment items) received on account of the Collateral; provided,
however, that Lender shall not take any action which is described in PARAGRAPH
7.2(C) unless an Event of Default exists.

      3.2 RELEASE OF COLLATERAL. Borrower shall be entitled to sell or otherwise
dispose of those unsold Time-Share Interests constituting a portion of the
Collateral, and to obtain a partial release of such Time-Share Interests from
the Mortgage in favor of Lender without payment of a release fee, IF at the time
such release is requested: (i) no Event of Default or Incipient Default exists;
(ii) after giving effect to the proposed release of such Inventory, no Borrowing
Base Shortfall will exist or be created; and (iii) Borrower has requested Lender
in writing to release such items of Inventory. In the event that a proposed sale
or other disposition of Inventory will result in a Borrowing Base Shortfall,
then Lender shall only be obligated to release the Inventory being sold upon
satisfaction of the following conditions: (a) no Event of Default or Incipient
Default exists; (b) Borrower has paid a fee ("RELEASE FEE") in an amount equal
to twenty-five percent (25%) of the Retail Value which was allocated to such
item of Inventory at the time such item of Inventory was designated as Eligible
Inventory hereunder and contributed to the Borrowing Base; and (c) Borrower has
requested Lender in writing to release such Inventory. Borrower will prepare all
release documents which shall be in form and substance satisfactory to Lender,
and will deliver them to Lender for execution. Lender will send Borrower the
release documents within a reasonable time after satisfaction of the conditions
precedent specified in the foregoing sentence.

      3.3 BORROWING BASE REPORTING. At least two (2) Business Days prior to the
date any Advance is requested hereunder, or prior to the date upon which
Borrower is requesting a partial release of Time-Share Interests pursuant to
PARAGRAPH 3.2 hereof, Borrower shall provide to Lender a report (herein, the
"BORROWING BASE REPORT") with respect to each Time-Share Project in which unsold
Time-Share Interests make up a part of the Eligible Inventory upon which such
request for an Advance is based, or in which Time-Share Interests proposed to be
released are situated. A form of the Borrowing Base Report is attached hereto as
Exhibit B. Each Borrowing Base Report shall be prepared and presented on both a
consolidated and consolidating basis (i.e., each Borrowing Base Report shall
have a section describing, for all Borrowers, the aggregate of the Eligible
Inventory contributed by such Persons, with separate sections identifying
Eligible Inventory contributed by each individual Time-Share Project or other
form of development). Borrower will also deliver to Lender, promptly after
receipt of a written request for them, such other reports with respect to
Inventory constituting part of the Collateral as Lender may from time to time
reasonably require, provided that the information requested by Lender is readily
available on Borrower's record keeping systems, or can be developed from
information which is readily available. In the event that the information
requested by Lender is neither readily available on Borrower's record keeping
systems nor can it be developed from such readily available information, then
Borrower and Lender shall confer and attempt to identify alternate information
which is readily available to Borrower to be substituted for the information
requested.

      3.4 MAINTENANCE OF SECURITY. Borrower will deliver or cause to be
delivered to Lender and will maintain or cause to be maintained in full force
and effect throughout the Term (except as otherwise expressly provided in such
Loan Document), as security for the Performance of the Obligations, the Security
Documents and all other security required to be given to Lender pursuant to the
terms of this Agreement.

                                       8
<PAGE>

      4. CONDITIONS PRECEDENT TO ADVANCES; MINIMUM AMOUNT AND MAXIMUM FREQUENCY
OF ADVANCES; METHOD OF DISBURSEMENT

      4.1 DELIVERY OF LOAN DOCUMENTS AND DUE DILIGENCE ITEMS PRIOR TO INITIAL
ADVANCE. Lender's obligation to make the initial Advance shall be subject to and
conditioned upon the terms and conditions set forth in the following
subparagraphs and elsewhere in this Agreement, and Lender's obligation to make
each subsequent Advance hereunder shall be subject to satisfaction of the
following terms and conditions, to the extent applicable to any Subsidiary
Borrower not previously a party to this Agreement, or any Time-Share Project and
Eligible Inventory not previously contributed to the Borrowing Base:

            (a) LOAN DOCUMENTS. Borrower shall have delivered to Lender or
      caused to be delivered to Lender the following duly executed, delivered
      (where appropriate) and in form and substance satisfactory to Lender, not
      later than the Required Closing Date:

                  (i)   the Loan Documents;

                  (ii) UCC financing statements for filing and/or recording, as
      appropriate, where necessary to perfect the security interests in the
      Collateral;

                  (iii) the Mortgage applicable to each Time-Share Project in
      which unsold Time-Share Interests have been contributed as Collateral
      hereunder;

                  (iv)  the Title Policy applicable to each Mortgage;

                  (v) a favorable opinion or opinions from independent counsel
      for Borrower, which counsel shall be satisfactory to Lender and which
      opinion shall cover such matters as Lender may require, including, without
      limitation, the Minimum Opinion Matters pertaining to Borrower and the
      Time-Share Project (the foregoing notwithstanding, in the event Lender
      funds an Advance under the Inventory Loan upon the basis of an opinion
      delivered to Lender as to which Lender has not specifically reserved the
      right to require additional opinions or to have such opinion otherwise be
      supplemented, then such opinion shall be deemed acceptable regardless of
      whether each item included within the description of Minimum Opinion
      Matters has been addressed therein);

                  (vi)  the Third Party Consents, if any;

                  (vii) a request for the first Inventory Loan Advance in form
      and substance identical to EXHIBIT E-1; and

                  (viii)such other documents as Lender may reasonably  require
      to effect the intent and purposes of this Agreement.

            (b) ORGANIZATIONAL, TIME-SHARE PROJECT AND OTHER DUE DILIGENCE
      DOCUMENTS. Borrower shall have delivered to Lender (I) with respect to the
      initial Advance hereunder, prior to the earlier of (a) the date of the
      initial Advance or (b) the Required Closing Date; or (II) with respect to
      each subsequent Advance hereunder, at least ten (10) Business Days (unless
      a longer period is expressly specified) prior to the date such Advance is
      requested to be funded, the following items (in applying the following
      provisions, references to Borrower, a Time-Share Project, Title Policies,
      etc., shall be deemed to apply only to those Borrowers which have
      contributed a portion of the Collateral supporting the requested Advance
      and only to the Time-Share Projects from which such contributed Collateral
      is derived):

                  (i) the Articles of Organization of Borrower and (if any)
      other sureties for the Obligations and, if applicable, their respective
      managers, members and partners, to the extent any such entity is not a
      natural person;

                  (ii) the Resolutions of Borrower and (if any) other sureties
      for the Obligations and, if applicable, their respective managers, members
      and partners, to the extent any such entity is not a natural person,
      authorizing the execution and delivery of the Loan Documents, the
      transactions contemplated thereby and such other matters as Lender may
      reasonably require;

                  (iii) a certificate of good standing for Borrower and (if any)
      other sureties for the Performance of the Obligations and, if applicable,
      their respective managers, members and partners, to the extent any such
      entity is not a natural person, from the state of its organization;

                  (iv) at least fifteen (15) Business Days prior to the date of
      the Advance, a Phase I environmental assessment of the Time-Share Project;

                  (v)  evidence that all taxes and assessments on the Time-Share
      Project have been paid;

                  (vi) a title commitment or preliminary title report for the
      issuance of the Title Policy insuring the Mortgage together with copies of
      all documents referred to therein and, in the event responsibility for
      recordation of the Mortgage and such other matters as are involved in the
      escrow with respect thereto are to be handled by a title agent rather than
      by the Title Insurer through a direct operation, a closing

                                       9
<PAGE>

      protection letter issued to Lender with respect to the issuing title agent
      by the Title Insurer;

                  (vii) unless waived in writing by Lender, a 1997 ALTA/ACSM
      survey map of the Time-Share Project prepared by a licensed land surveyor
      acceptable to Lender, certified to Lender in writing and showing the
      Time-Share Project, evidence of access to the Time-Share Project, all
      easements necessary for the operation and use of the Time-Share Project,
      and such other details as Lender may reasonably require; and/or at
      Lender's option, a condominium map if any part of the Time-Share Project
      has been dedicated to a condominium regime;

                  (viii) all permits, licenses, approvals and certificates for
      the occupancy, use and operation of the Time-Share Project for time-share
      and other intended uses, including any necessary architectural committee
      approvals (and, with respect to any newly-completed construction,
      including specifically the certificate of occupancy or other applicable
      form of final governmental approval evidencing that such construction has
      been satisfactorily completed), but excluding the Minimum Required
      Time-Share Approvals;

                  (ix) evidence that the Time-Share Project is zoned for
      time-share and other intended uses and that all approvals required for
      such uses under any covenants, conditions and restrictions have been
      obtained, which evidence shall be deemed satisfied by Borrower providing
      to Lender a copy of the certificate of occupancy (or other applicable form
      of final governmental approval) for the individual Time-Share Project, in
      the absence of any direct evidence indicating non-compliance with
      applicable zoning, the absence of any necessary approval, or a violation
      of any existing covenant, condition or restriction;

                  (x)   at least  fifteen (15)  Business Days prior to such
      Advance, the Minimum Required Time-Share Approvals;

                  (xi) at least fifteen (15) Business Days prior to such
      Advance, a copy of the Time-Share Program Governing Documents;

                  (xii) the Insurance Policies;

                  (xiii) at least fifteen (15) Business Days prior to such
      Advance, evidence that the Time-Share Project is not located within a
      flood prone area or, if within a flood zone, evidence that flood insurance
      has been obtained;

                  (xiv) if requested by Lender, at least fifteen (15) Business
      Days prior to such Advance, evidence of the current and continued
      availability of utilities necessary to serve the Time-Share Project for
      time-share and other intended uses;

                  (xv) if requested by Lender, at least fifteen (15) Business
      Days prior to such Advance, evidence of access to and parking for the
      Time-Share Project adequate for time-share and hotel uses;

                  (xvi) if requested by Lender, a copy of all marketing
      contracts, management contracts, service contracts, operating agreements,
      equipment leases, space leases and other agreements pertaining primarily
      to the Time-Share Project and which are necessary for the sale, operation
      and intended time-share use of the Time-Share Project and are not
      otherwise required pursuant to another item in this paragraph;

                  (xvii) evidence that each owner of a Time-Share Interest will
      have available to it the quiet and peaceful enjoyment of the Time-Share
      Interest (including promised amenities and necessary easements) owned by
      it which cannot be disturbed so long as such owner is not in default of
      its obligations to pay the purchase price of its Time-Share Interest, to
      pay assessments to the Time-Share Association, and to comply with
      reasonable rules and regulations pertaining to the use of the Time-Share
      Interest ("QUIET ENJOYMENT RIGHTS");

                  (xviii)     the items required pursuant to EXHIBIT E; and

                  (xix) such other items as Lender requests which are reasonably
      necessary to evaluate the request for the Advance and the satisfaction of
      the conditions precedent to the Advance.

            (c) CREDIT REPORTS; SEARCH REPORTS; SITE INSPECTIONS. Lender shall
      have received, in form and substance satisfactory to Lender, the results
      of UCC searches with respect to Borrower and the Time-Share Association
      and lien, litigation, judgment and bankruptcy searches for Borrower and
      (if existing) the Time-Share Association conducted in such jurisdictions
      as Lender deems appropriate and having a currency meeting Lender's
      requirements. In addition, a member of Lender's credit department shall
      have visited the Time-Share Project and shall be satisfied with the
      results of such inspection.

            (d) STRUCTURAL AND MECHANICAL. If requested in writing by Lender,
      Borrower shall

                                       10
<PAGE>

      provide to Lender, at Borrower's sole cost and expense, a structural
      inspection report and mechanical inspection report covering the Time-Share
      Project prepared by a construction consultant or engineer acceptable to
      Lender. The results of such structural and mechanical inspection must be
      satisfactory to Lender. In the event the structural and mechanical
      inspection report reveals that repairs must be made to the Time-Share
      Project, Borrower's budget shall include the cost of such repairs.

            (e) YEAR 2000 COMPLIANCE. Evidence satisfactory to Lender that
      Primary Borrower and each Subsidiary Borrower have taken all necessary
      actions to cause each such Person's computer-based systems to be year 2000
      compatible in all material respects (as such concept is more fully
      described in PARAGRAPH 5.15 hereof).

      4.2 ADDITIONAL CONDITIONS PRECEDENT FOR SUBSEQUENT ADVANCES. For each
Advance, Lender's obligation to make such Advance shall be subject to the terms
and conditions set forth in EXHIBIT E, including delivery of the items called
for therein at least five (5) Business Days prior to the date of such Advance.

      4.3 GENERAL CONDITIONS PRECEDENT TO ALL ADVANCES. Lender's obligation to
fund any Advance is subject to and conditioned upon the additional terms and
conditions set forth in the following subparagraphs being satisfied at the time
of such Advance:

            (a) No material adverse change shall have occurred in the Time-Share
      Project, the Collateral, the business or financial condition of Borrower
      (since the date of the latest financial and operating statements given to
      Lender by or on behalf of Borrower), or the ability of Borrower to Perform
      the Obligations.

            (b) There shall have been no material, adverse change in the
      warranties and representations made in the Loan Documents by Borrower
      and/or any surety for the Performance of the Obligations.

            (c) Neither an Event of Default nor Incipient Default shall have
      occurred and be continuing.

            (d) The interest rate applicable to the Advance (before giving
      effect to any savings clause) will not exceed the maximum rate permitted
      by the Applicable Usury Law.

            (e) Borrower shall have paid to Lender the Loan Fee and any other
      applicable fees which are required to be paid at the time of the Advance.

            (f) To the extent that one or more of the Borrowers have requested
      that they be permitted to make payments directly to the applicable Title
      Insurers amounts which include, but are not necessarily limited to the
      premium payable with respect to the issuance of the Title Policies in
      connection with any prior disbursement of an Advance, Lender shall not be
      obligated to fund a subsequent Advance until Borrower has made such
      payment and Lender has received all Title Policies required hereunder. In
      the event that Borrower for any reason fails to make such payment to the
      Title Insurer, Lender shall be entitled to make such payment directly in
      order to cause the Title Policy to be issued, and the amount of any such
      payment shall constitute an Obligation hereunder.

      4.4 CONDITIONS SATISFIED AT BORROWER'S EXPENSE. The conditions to Advances
shall be satisfied by Borrower at its expense.

      4.5 MINIMUM AMOUNT AND MAXIMUM FREQUENCY OF ADVANCES. Advances shall be
made in amounts not less than the amounts identified in the Schedule as the
Minimum Advance Amount. Advances shall be made no more frequently in any
calendar month than the frequency identified in the Schedule as the Maximum
Advance Frequency.

      4.6 DISBURSEMENT OF ADVANCES. Advances may be payable to Borrower; or if
requested by Borrower and approved in writing by Lender, to others, either
severally or jointly with Borrower, for the credit or benefit of Borrower.
Advances shall be disbursed by wire transfer or, at Borrower's option exercised
by written request to Lender, by check or drafts. Borrower will pay Lender's
reasonable charge in connection with any wire transfer, and Lender's current
charge is identified in the Schedule as the Wire Transfer Fee. Lender may, at
its option, withhold from any Advance any sum (including costs and expenses)
then due to it under the terms of the Loan Documents or which Borrower would be
obligated to reimburse Lender pursuant to the Loan Documents if first paid
directly by Lender.

      4.7 NO WAIVER. Although Lender shall have no obligation to make an Advance
unless and until all of the conditions precedent to the Advance have been
satisfied, Lender may, at its discretion, make Advances prior to that time
without waiving or releasing any of the Obligations.

5.    BORROWER'S REPRESENTATIONS AND WARRANTIES

      Borrower hereby represents and warrants to Lender that:

      5.1 GOOD STANDING. Borrower is and duly organized, validly existing and in
good standing as a business organization of the type identified in the Schedule

                                       11
<PAGE>

as Borrower's Type of Business Organization under the laws of the state
identified in the Schedule as Borrower's State of Organization and is in good
standing and authorized to do business in the jurisdiction where the Time-Share
Project is located and in each jurisdiction where Borrower is at any time
selling Time-Share Interests or where at any time the location or nature of its
properties or its business makes such good standing and qualification necessary.
Borrower has full power and authority to carry on its business and own its
property.

      5.2 POWER AND AUTHORITY; ENFORCEABILITY. Borrower has full power and
authority to execute and deliver the Loan Documents and to Perform the
Obligations. All action necessary and required by Borrower's Articles of
Organization and all other Legal Requirements for Borrower to obtain the
Inventory Loan, to execute and deliver the Loan Documents which have been or
will be executed and delivered in connection with the Loan Documents and to
Perform the Obligations has been duly and effectively taken. The Loan Documents
are, and to Borrower's knowledge shall be, legal, valid, binding and enforceable
against Borrower; and do not violate the Applicable Usury Law or constitute a
default or result in the imposition of a lien under the terms or provisions of
any agreement to which Borrower is a party. Except for the Third Party Consents
delivered pursuant to PARAGRAPH 4.1(A) and the consents evidenced by the
Resolutions delivered pursuant to PARAGRAPH 4.1(B), no consent of any
governmental agency or any other person not a party to this Agreement is or will
be required as a condition to the execution, delivery or enforceability of the
Loan Documents.

      5.3 BORROWER'S PRINCIPAL PLACE OF BUSINESS. Borrower's principal place of
business and chief executive office are located at the addresses identified in
the Schedule as Borrower's Principal Place of Business and Borrower's Chief
Executive Office.

      5.4 NO LITIGATION. There is no action, litigation or other proceeding
pending or, to Borrower's knowledge, threatened before any arbitration tribunal,
court, governmental agency or administrative body against Borrower which could
reasonably be expected to result in a Material Adverse Effect, other than with
respect to actions or proceedings involving or relating to the operation of an
individual Time-Share Project only (e.g., personal injury lawsuits) which are
adequately covered by insurance with respect to which the applicable insurance
carrier has neither denied coverage nor delivered to the applicable Borrower a
letter reserving its rights with respect to the claims asserted. Borrower will
promptly notify Lender if any such action, litigation or proceeding is commenced
or threatened, and the foregoing representation and warranty shall be deemed to
be true and accurate at any given time after giving effect to all disclosures of
any hereafter-arising matters of which Borrower has provided notice to Lender
after the date of this Agreement.

      5.5 COMPLIANCE WITH LEGAL REQUIREMENTS. Borrower has complied with all
Legal Requirements, including, without limitation all Legal Requirements of (a)
the state in which the Time-Share Project is located and (b) all other
governmental jurisdictions in which either (i) the Time-Share Project is located
or (ii) Time-Share Interests will be sold or offered for sale, except to the
extent that the failure of Borrower to have complied with any such Legal
Requirements would not reasonably be expected to have a Material Adverse Effect.

      5.6 NO MISREPRESENTATIONS. The Loan Documents and all certificates,
financial statements and written materials furnished to Lender by or on behalf
of Borrower in connection with the Inventory Loan do not contain as of the date
furnished to Lender any untrue statement of a material fact or omit to state a
fact which materially adversely affects or in the future may materially
adversely affect the Time-Share Project, the Collateral, the business or
financial condition of Borrower, or the ability of Borrower to Perform the
Obligations.

      5.7 NO DEFAULT FOR THIRD PARTY OBLIGATIONS. Borrower is not in default
under any other agreement evidencing, guaranteeing or securing borrowed money or
a receivables purchase financing or in violation of or in default under any
material term in any other material agreement, Inventory, order, decree or
judgment of any court, arbitration or governmental authority to which it is a
party or by which it is bound.

      5.8 PAYMENT OF TAXES AND OTHER IMPOSITIONS. Borrower has filed all tax
returns and, subject to the provisions of PARAGRAPH 9.21, has paid all
Impositions, if any, required to be filed by it or paid by it, including real
estate taxes and assessments relating to the Time-Share Project or the
Collateral.

      5.9 SALES ACTIVITIES. Prior to the date of this Agreement, Borrower has
sold Time-Share Interests and offered Time-Share Interests for sale only in the
jurisdictions identified in the Schedule as the Jurisdictions Where Sales And/or
Offers to Sell Have Occurred.

      5.10 TIME-SHARE INTEREST NOT A SECURITY. Borrower has not sold or offered
for sale any Time-Share Interest as an investment. Neither the sale nor the
offering for sale of any Time-Share Interest will constitute the sale or the
offering for sale of a security under any applicable law.

      5.11 ZONING COMPLIANCE. Neither time-share use nor other transient use and
occupancy of the Time-Share Project violates or constitutes or will violate or
constitute a non-conforming use or require a variance under any private covenant
or restriction or any zoning, use or similar law, ordinance or regulation
affecting the use or occupancy of the Time-Share Project.

      5.12 ELIGIBLE INVENTORY. Each unsold Time-Share Interest which is
encumbered in favor of Lender pursuant to this Agreement and against which an
Advance

                                       12
<PAGE>

is requested, or which is encumbered in favor of Lender pursuant to Borrowers'
obligations under PARAGRAPH 2.7 shall constitute Eligible Inventory at the time
such Advance is made. Borrower has Performed in all material respects all of its
obligations to Purchasers, to the extent that Borrower was obligated to have
performed such obligations as of the date hereof, and with respect to any
obligations to Purchasers as to which performance by Borrower is to occur in the
future, Borrower is not aware of any fact or circumstance which causes it to
believe that it will be unable to timely perform those obligations.

      5.13 ASSOCIATION; ASSESSMENTS AND RESERVES. Each Purchaser, upon the
closing of the purchase by such Person of a Time-Share Interest, automatically
became a member of the applicable Time-Share Association, and is thereafter
entitled to remain a member of the Time-Share Association and be entitled to
vote on the affairs thereof, subject only to retaining ownership of a Time-Share
Interest. At all times throughout the Term: (a) the Time-Share Association will
have authority to levy annual assessments to cover the costs of maintaining and
operating the Time-Share Project; (b) to Borrower's knowledge, the Time-Share
Association will be solvent; (c) to Borrower's knowledge, levied assessments
will be adequate to cover the current costs of maintaining and operating the
Time-Share Project and to establish and maintain a reasonable reserve for
capital improvements; and (d) to Borrower's knowledge, there will be no events
which could give rise to a material increase in such costs, except for additions
of subsequent phases of the Time-Share Project that will not materially increase
assessments.

      5.14 TITLE TO AND MAINTENANCE OF COMMON AREAS AND AMENITIES. Except as
otherwise permitted and disclosed by the Time-Share Program Governing Documents:
(a) the Time-Share Association or the owners of Time-Share Interests in common
will at all times own the furnishings in the Units and all the common areas in
the Time-Share Project and other amenities which have been promised or
represented as being available to Purchasers (except to the extent of those
amenities which are available to the Purchasers pursuant to a lease or form of
access other than ownership, which alternate form of access was disclosed to the
Purchasers in the Time-Share Program governing documents), free and clear of
liens and security interests except for the Permitted Encumbrances; (b) no part
of the Time-Share Project is or will be subject to partition by the owners of
Time-Share Interests (provided, however, that individual owners of Time-Share
Interests have the right to partition those Time-Share Interests, which
partition does not affect the Time-Share Project taken as a whole); and (c) all
access roads and utilities and off-site improvements necessary to the use of the
Time-Share Project will have been dedicated to and/or accepted by the
responsible governmental authority or utility company or are owned by an
association of owners of property in a larger planned development or
developments of which the Time-Share Project is a part.

      5.15 YEAR 2000. Borrower has taken all action reasonably believed to be
sufficient to assure that there will be no material adverse change to Borrower's
business by reason of the advent of the year 2000, including without limitation
that all computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after April 1, 1999.

      5.16 SURVIVAL AND ADDITIONAL REPRESENTATIONS AND WARRANTIES. The
representations and warranties and contained in this ARTICLE 5 are in addition
to, and not in derogation of, the representations and warranties contained
elsewhere in the Loan Documents and shall be deemed to be made and reaffirmed
prior to the making of each Advance.

6.    BORROWER'S COVENANTS

      6.1   BORROWER'S AFFIRMATIVE COVENANTS.

            (a) GOOD STANDING. Borrower will maintain its existence as a
      business organization of the type described below when it has signed this
      Agreement, duly organized, validly existing and in good standing as the
      type of organization identified in the Schedule as Borrower's Type of
      Business Organization under the laws of the state identified in the
      Schedule as State of Organization and remain in good standing and
      authorized to do business in the jurisdiction where the Time-Share Project
      is located and in each jurisdiction where Borrower is then selling
      Time-Share Interests or where at any time the location or nature of its
      properties or its business then makes such good standing and qualification
      necessary. Borrower will maintain full authority to Perform the
      Obligations and to carry on its business and own its property.

            (b) COMPLIANCE WITH LEGAL REQUIREMENTS. Borrower will comply with
      all Legal Requirements in all material respects, including, without
      limitation, all Legal Requirements of the state in which the Time-Share
      Project is located and all other governmental jurisdictions in which the
      Time-Share Project is located or in which Time-Share Interests will be
      sold or offered for sale.

            (c) INSURANCE. Borrower will pay the cost of and will maintain and
      deliver to Lender evidence of insurance policies required by Lender which
      cover such risks, are written by insurers and are in amounts and on forms
      satisfactory to Lender. The foregoing notwithstanding, to the extent that
      it is the responsibility of any Time-Share Association to

                                       13
<PAGE>

      maintain insurance which is required by Lender, Borrower shall be
      permitted to perform its obligations pursuant to this PARAGRAPH 6.1(c) by
      delivering evidence to Lender confirming that the necessary insurance is
      being maintained by such Time-Share Association; provided, however, that
      with respect to any Time-Share Association as to which one or more
      Borrower has the power to direct and control its activities, such Borrower
      shall be responsible for providing satisfactory insurance in the event
      such Time-Share Association has failed to do so.

            (d)   REPORTS.

                  (i) FINANCIAL INFORMATION. Commencing with the period ending
      December 31, 1999, Borrower will furnish or cause to be furnished to
      Lender within one hundred twenty (120) days after each fiscal year of the
      subject, a copy of the current annual financial statements of Borrower and
      of each Time-Share Association; and will furnish or cause to be furnished
      to Lender within forty-five (45) days after each interim quarterly fiscal
      period of the subject, a copy of the current financial statements of
      Borrower for the period commencing with the first day of the fiscal year
      and concluding with such quarter end. Such financial statements shall
      contain a balance sheet as of the end of the relevant fiscal period and
      statements of income and of cash flow for such fiscal period (together, in
      each case, with the comparable figures for the corresponding period of the
      previous fiscal year), all in reasonable detail. All financial statements
      shall be prepared in accordance with generally accepted accounting
      principles, consistently applied. All financial statements of Borrower and
      of each Time-Share Association shall be certified by the chief financial
      officer of such entity. Annual statements of Borrower and of each
      Time-Share Association shall be audited, certified by a recognized firm of
      certified public accountants reasonably satisfactory to Lender. Anything
      in this PARAGRAPH 6.1(D)(I) to the contrary notwithstanding, the following
      two conventions shall be applied to Borrower's reporting obligations
      hereunder. With respect to Borrower's required financial information
      hereunder, Borrower shall be permitted to satisfy its reporting
      obligations by providing a copy of Primary Borrower's consolidated
      financial statements as filed with the U.S. Securities and Exchange
      Commission (the "SEC"), as long as those reports are in compliance with
      then existing SEC reporting requirements for publicly traded companies.
      With respect to the financial information required to be provided for the
      various Time-Share Associations, in the event that no Borrower is in
      control of a given Time-Share Association, then Borrower's obligation to
      provide the foregoing financial information shall only require Borrower to
      use its reasonable good faith efforts to obtain and deliver to Lender the
      information requested. In the event that Primary Borrower shall ever cease
      to be a reporting company with the SEC, with the result that the financial
      statements provided by Primary Borrower hereunder shall no longer be
      Primary Borrower's consolidated financial statements as filed with the
      SEC, then upon such occurrence Primary Borrower shall be obligated to
      deliver to Lender, together with such financial statements as Primary
      Borrower does deliver to Lender, a certificate signed by Borrower's chief
      executive officer and chief financial officer stating that, to the best of
      such person's knowledge, there exists no Event of Default or Incipient
      Default or, if any such Event of Default or Incipient Default exists,
      specifying the nature and period of its existence and what action Borrower
      proposes to take with respect to it. Such certificate shall state
      specifically that Borrower is in compliance with PARAGRAPHS 6.1(C), 6.2(B)
      and 6.2(C), along with any required financial covenants. For purposes of
      this paragraph, in the case of a partnership or limited liability company,
      "CHIEF EXECUTIVE OFFICER" of an entity shall mean the general partner,
      member or manager having primary responsibility for the operations of such
      entity; and "CHIEF FINANCIAL OFFICER" of such an entity shall mean the
      general partner, member or manager having primary responsibility for the
      finances of such entity.

                  (ii) LITIGATION. Borrower will promptly notify Lender if any
      action, litigation or other proceeding becomes pending or, to Borrower's
      knowledge, threatened before any arbitration tribunal, court, governmental
      agency or administrative body against Borrower, which could reasonably be
      expected to result in a Material Adverse Effect (exclusive of those items
      which are related to an individual Time-Share Project and with respect to
      which adequate insurance coverage [which has not been denied or reserved
      against] exist, in the manner described in PARAGRAPH 5.4 hereof).

                  (iii) SALES REPORTS. On or before the fifteenth (15th) day
      after the end of each month, Borrower will cause to be furnished to
      Lender, if requested by Lender in writing, a sales report showing the
      number of sales and closings of Time-Share Interests and the aggregate
      dollar amount thereof, including down payments, during such month.

                                       14
<PAGE>

                  (iv) TIME-SHARE PROJECT AND SALES INFORMATION. Borrower will
      deliver current price lists for Time-Share Interests to Lender from to
      time to time within ten (10) Business Days after receipt of a written
      request from Lender to do so. Borrower will deliver to Lender from time to
      time, as available and promptly upon amendment or effective date, upon
      written request from Lender for such information, sales literature,
      registrations/ consents to sell, and final public reports/public offering
      statements/ prospectuses. Borrower will deliver to Lender, upon written
      request from Lender for such information, any changes which Borrower
      proposes or any other person having the power to do so proposes be made to
      the Time-Share Program Governing Documents last delivered to Lender,
      together with a description and explanation of the changes; and other
      items requested by Lender which relate to the Time-Share Interests.

                  (v) RIGHT TO INSPECT. Borrower will at its expense permit
      Lender and its representatives at all reasonable times to inspect the
      Time-Share Project and to inspect, audit and copy Borrower's books and
      records.

                  (vi) TIME-SHARE ASSOCIATION BUDGETS. Borrower will submit to
      Lender (if the same had been requested by Lender in writing) within ten
      (10) days after each is available, proposed annual maintenance and
      operating budgets of the Time-Share Association, certified to be adequate
      by the Time-Share Manager (or if there is not a Time-Share Manager, by an
      authorized officer of the Time-Share Association) and a statement of the
      annual assessment to be levied upon the owners of Time-Share Interests;
      and will use reasonable good faith efforts to cause to be made available
      to Lender for inspection, auditing and copying, upon Lender's request, the
      books and records of the Time-Share Association.

                  (vii) MATERIAL INCREASES TO ASSESSMENTS. If Borrower has
      knowledge or has reason to believe that an event (other than general
      changes in the economy) has occurred or could occur which could give rise
      to a material increase in assessments to cover the then current costs of
      operating the Time-Share Project and to establish and maintain a
      reasonable reserve for capital improvements to the Time-Share Project, it
      will notify Lender of the occurrence of such event.

                  (viii) ADDITIONAL INFORMATION. Borrower will deliver to Lender
      the reports and other information required pursuant to PARAGRAPH 3.3, and
      Borrower will make available such further information as Lender may from
      time to time reasonably request.

            (e)   [INTENTIONALLY NOT USED.]

            (f) PAYMENT OF TAXES AND OTHER IMPOSITIONS. Subject to the
      provisions of PARAGRAPH 9.21, Borrower will file all tax returns and will
      pay all Impositions, if any, required to be filed by it or paid by it,
      including real estate taxes and assessments relating to the Time-Share
      Project or the Collateral. Borrower will provide to Lender (if Lender has
      requested in writing that Borrower provide such information) not more than
      thirty (30) days after such Impositions required to be paid pursuant to
      the preceding sentence become delinquent evidence that all Impositions
      required to be paid pursuant to the preceding sentence on the Units and
      Time-Share Project common areas and related amenities have been paid in
      full.

            (g) PAYMENT OF IMPOSITIONS. Borrower will promptly pay upon demand
      all Impositions imposed upon Lender by any state of the United States or
      political subdivision thereof or the United States by reason of the Loan
      Documents, the Collateral and/or any sale, rental, use, delivery or
      transfer of title to the Collateral, other than any tax measured by net
      income payable by Lender to any State of the United States or political
      subdivision thereof or to the United States of America under SECTION 11 OR
      1201 of the Internal Revenue Code, as amended, in consequence of the
      receipt of payments provided for in the Loan Documents. If it is unlawful
      for Borrower to pay such Impositions, Borrower shall not be required to
      pay such Impositions; but Lender may demand payment of such additional
      amount as is necessary to maintain Lender's yields on the Inventory Loan
      in either a single payment or at Lender's option, in installment payments,
      and Borrower will pay such amount upon demand. If it is unlawful to pay
      such additional amount, Borrower shall not be required to pay it; but
      Lender may demand immediate payment of the Obligations in full, and
      Borrower will pay the Obligations in full within sixty (60) days after
      such demand. If Lender has not received evidence satisfactory to it from
      Borrower that such Impositions have been paid by Borrower within five (5)
      Business Days after demand was made upon Borrower to make such payment,
      Lender may, at its option, pay the same, and Borrower shall immediately
      reimburse Lender for such sums so expended, together with interest at the
      Default Rate.

            (h) FURTHER ASSURANCE. Borrower will execute or cause to be executed
      all

                                       15
<PAGE>

      documents and do or cause to be done all acts reasonably necessary for
      Lender to perfect or evidence and to continue the perfection of the liens
      and security interest of Lender in the Collateral or otherwise to
      reasonably effectuate the intent and purposes of the Loan Documents.

            (i) FULFILLMENT OF OBLIGATIONS TO PURCHASERS. Borrower will fulfill,
      and will cause its Affiliates, agents and independent contractors at all
      times to fulfill, all their respective material obligations to Purchasers.
      Borrower will Perform all of its material obligations under the Time-Share
      Program Consumer Documents and the Time-Share Program Governing Documents.

            (j) MATERIAL INCREASES TO ASSESSMENTS. Borrower (i) will use
      reasonable good faith efforts to cause the Time-Share Association to (A)
      discharge its obligations under the Time-Share Program Governing Documents
      and (B) maintain a reasonable reserve for capital improvements to the
      Time-Share Project; and (ii) so long as Borrower controls the Time-Share
      Association, will cause each such Time-Share Association to maintain a
      budget requiring the payment of dues and assessments which are designed,
      on an annual basis, to make available sufficient funds to adequately
      provide for the maintenance and operating expenses incurred by the
      Time-Share Association, together with a reasonable reserve for capital
      improvements and the amount of any installment of real property taxes
      currently due and payable with respect to the Time-Share Project and
      related amenities, and in the event that, as a result of unexpected
      contingencies, the amount budgeted in any given year fails to adequately
      provide for the foregoing, Borrower shall cause such Time-Share
      Association to take reasonable steps, either in the form of a special
      assessment or through an increase in the annual assessment for upcoming
      years, in order to make-up for any budgetary shortfalls.

            (k) MAINTENANCE OF TIME-SHARE PROJECT AND OTHER PROPERTY. Borrower
      will maintain or cause to be maintained in good condition and repair all
      common areas in the Time-Share Project and other on-site amenities which
      have been promised or represented as being available to Purchasers and
      which are not the responsibility of the Time-Share Association to maintain
      and repair and, to the extent owned by Borrower or an Affiliate of
      Borrower, all portions of improvements in which Units are located and are
      not part of the Time-Share Project. Borrower will maintain or cause the
      Time-Share Association to maintain a reasonable reserve to assure
      compliance with the terms of the foregoing sentence, to the extent that
      Borrower is in control of the applicable Time-Share Association. In
      applying the foregoing provision, Borrower shall be permitted to implement
      the funding of necessary reserves on a staged basis, through increases in
      applicable Time-Share Association dues over a period of one or more years,
      as deemed appropriate by Borrower in its reasonable and prudent business
      judgment, to the extent that such increases would reasonably be expected
      to cause sufficient reserve amounts to be available on or before the date
      the expenditure of funds from such reserves was anticipated to occur. In
      the event Borrower is no longer in control of such Time-Share Association,
      Borrower shall use reasonable good faith efforts to cause such Time-Share
      Association to include within its budget a reasonable reserve to assure
      compliance with the terms of this PARAGRAPH 6.1(K).

            (l) MAINTENANCE OF LARGER TRACT. To the extent either the Time-Share
      Project is part of a larger common ownership regime or planned development
      or parts of buildings in which Units are located are not part of the
      Time-Share Project, Borrower will pay its share of such common expenses as
      has been allocated to the Inventory. Borrower will use commercially
      reasonable efforts to cause all such property which is not part of the
      Time-Share Project to be professionally managed in a first class manner.

            (m) YEAR 2000. Borrower shall take all action reasonably believed to
      be sufficient to assure that there will be no material adverse change to
      Borrower's business by reason of the advent of the year 2000, including
      without limitation that all computer-based systems, embedded microchips
      and other processing capabilities effectively recognize and process dates
      after April 1, 1999. At Lender's request, Borrower shall provide to Lender
      assurance reasonably acceptable to Lender that Borrower's computer-based
      systems, embedded microchips and other processing capabilities are year
      2000 compatible.

            (n) TANGIBLE NET WORTH. Primary Borrower shall maintain, on a
      consolidated basis, Tangible Net Worth (as hereafter defined) in an amount
      of not less than $170,000,000. "TANGIBLE NET WORTH" shall be defined as
      Primary Borrower's stockholders' equity, on a consolidated basis, LESS the
      amount of any intangible assets shown on Primary Borrower's consolidated
      balance sheet. The foregoing covenant shall be tested quarterly,
      commencing December 31, 1999, concurrently with the delivery of Primary
      Borrower's quarterly and

                                       16
<PAGE>

      annual financial information to the SEC, and on the basis of the financial
      information reported to the SEC.

            (o) LEVERAGE RATIO. Primary Borrower shall maintain, on a
      consolidated basis, a ratio of total liabilities to Tangible Net Worth of
      not greater than 6.0:1.0. The foregoing covenant shall be tested
      quarterly, commencing December 31, 1999, simultaneously with, and on the
      basis of, Primary Borrower's financial information as reported to the SEC.

            (p) NET PROFIT MARGIN. Primary Borrower shall maintain, on a
      consolidated basis, a "Net Profit Margin" (as hereafter defined) of at
      least five percent (5%). "NET PROFIT MARGIN" shall be defined, for any
      period of measurement, as Primary Borrower's consolidated net income
      during such period divided by Primary Borrower's consolidated gross
      revenue during the same period (with respect to the determination of both
      net income and gross revenues, excluding the effect of any extraordinary
      gains or losses and any other non-recurring items not in the ordinary
      course of business, as determined in accordance with GAAP). The foregoing
      covenant shall be tested quarterly, commencing December 31, 1999, on the
      basis of the trailing two fiscal quarters most recently completed as of
      each test date, on the basis of Primary Borrower's financial information
      as reported to the SEC.

      6.2   BORROWER'S NEGATIVE COVENANTS.

            (a) CHANGE IN BORROWER'S NAME OR PRINCIPAL PLACE OF BUSINESS.
      Borrower will not change its name or move its principal place of business
      or chief executive office except upon not less than sixty (60) days prior
      written notice to Lender.

            (b) RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. Borrower will not incur
      any additional indebtedness which indebtedness is in any manner secured by
      a lien on all or any part of the Inventory.

            (c) RESTRICTIONS ON LIENS OR TRANSFERS. Borrower, without the prior
      written consent of Lender, will not: (i) sell, convey, lease, pledge,
      hypothecate, encumber or otherwise transfer any security for the
      Performance of the Obligations, except to the extent Borrower is permitted
      to sell unsold Inventory constituting a portion of the Collateral and to
      obtain releases from Lender with respect to such sales, in accordance with
      PARAGRAPH 3.2 hereof; (ii) permit or suffer to exist any liens, security
      interests or other encumbrances on the Inventory, except for the Permitted
      Encumbrances and liens and security interests expressly granted to Lender;
      (iii) sell, convey, lease, transfer or dispose of all or substantially all
      of its assets to another entity; or (iv) enter into any merger,
      consolidation, or other form of corporate reorganization, unless Borrower
      is the surviving corporation of such merger, consolidation or
      reorganization. The foregoing notwithstanding, nothing in this PARAGRAPH
      6.2(C) is intended to restrict or otherwise prohibit the ability of
      Primary Borrower to cause any Affiliate to be merged with or into Primary
      Borrower, as long as Primary Borrower is the surviving entity of such
      merger.

            (d) NO SALES ACTIVITIES PRIOR TO APPROVAL. Borrower will not sell
      any Time-Share Interest or offer any Time-Share Interest for sale in any
      jurisdiction, unless: (i) Borrower has delivered to Lender true and
      complete copies of the Minimum Required Time-Share Approvals required in
      such jurisdiction for its proposed conduct and all other evidence required
      by Lender that Borrower has complied in all material respects with the
      Legal Requirements of such jurisdiction governing its proposed conduct;
      and (ii) Borrower has delivered to Lender the Time-Share Program Consumer
      Documents AND the Time-Share Program Governing Documents which Borrower is
      using in connection with the Time-Share Project and the sale or offering
      for sale of Time-Share Interests in such jurisdiction and such documents
      have been approved by Lender, which approval shall not be unreasonably
      withheld.

            (e) NO MODIFICATION OF TIME-SHARE DOCUMENTS. Borrower will not
      cancel or materially modify, or consent to or suffer to exist any
      cancellation or material modification of any Time-Share Program Governing
      Document. The foregoing notwithstanding, the following events shall not be
      deemed a material modification to any Time-Share Program Governing
      Document requiring the consent of Lender hereunder: (1) the addition of
      Units to any Time-Share Program, to the extent such Units were
      contemplated to be added in stages as an individual Time-Share Project was
      developed, or (2) a conversion of all or a portion of the rights in a
      given Time-Share Project from a structure in which such ownership rights
      are characterized as Time-Share Interests which are identifiable to a
      specific Unit and/or period of time to a structure in which such ownership
      rights are characterized as "points" or other comparable form which may or
      may not be identifiable to a specific Unit and/or period of time, in the
      manner from time to time implemented by Borrower with respect to the

                                       17
<PAGE>

      program that Primary Borrower refers to as "Club Sunterra," provided that
      the resulting interests in each Time-Share Project constitute separately
      identifiable and legally described direct ownership interests in real
      property.

            (f) MAINTENANCE OF LARGER TRACT. To the extent either the Time-Share
      Project is part of a larger common ownership regime or planned development
      or parts of buildings in which Units are located are not part of the
      Time-Share Project, for the period during which Borrower is in control of
      the larger common ownership regime or planned development, Borrower will
      not permit common expenses to be allocated to the Time-Share Project in an
      unreasonably disproportionate manner.

      6.3 SURVIVAL OF COVENANTS. The covenants contained in this ARTICLE 6 are
in addition to, and not in derogation of, the covenants contained elsewhere in
the Loan Documents and shall be deemed to be made and reaffirmed prior to the
making of each Advance.

7.    DEFAULT

      7.1 EVENTS OF DEFAULT. The occurrence of any of the following events or
conditions shall constitute an Event of Default by Borrower under the Loan
Documents:

            (a) failure of Lender to receive from Borrower within five (5)
      Business Days of the date when due and payable (i) any amount payable
      under the Note or (ii) any other payment due under the Loan Documents,
      except for the payment due at the Maturity Date for which no grace period
      is allowed;

            (b) any representation or warranty which is made by a person other
      than Lender and is contained in the Loan Documents or in any certificate
      furnished to Lender under the Loan Documents by or on behalf of Borrower
      proves to be, in any material respect, false or misleading as of the date
      deemed made, and Borrower has failed to cause such representation or
      warranty to become true and correct, in all material respects, within
      thirty (30) days following notice from Lender;

            (c) a default in the Performance of the Obligations set forth in
      PARAGRAPH 6.1(n), 6.1(o), 6.1(p), 6.2(b), 6.2(c)(i), 6.2(c)(iii), OR
      6.2(c)(iv);

            (d) a default in the Performance of the Obligations or a violation
      of any term, covenant or provision of the Loan Documents (other than a
      default or violation referred to elsewhere in this PARAGRAPH 7.1) which
      continues unremedied (i) for a period of thirty (30) days after notice of
      such default or violation to Borrower in the case of a default under or
      violation of PARAGRAPH 6.2(c)(ii) or any default or violation which can be
      cured by the payment of money alone or (ii) for a period of thirty (30)
      days after notice to Borrower in the case of any other default or
      violation;

            (e) an "EVENT OF DEFAULT," as defined in any of the other Loan
      Documents;

            (f) any default by Borrower under any other agreement evidencing,
      guaranteeing or securing borrowed money or a receivables purchase
      financing involving an obligation in excess of One Million Dollars
      ($1,000,000) to make a payment of principal or interest or to repurchase
      receivables;

            (g) any final, non-appealable judgment or decree for money damages
      or for a fine or penalty against Borrower which is not paid and discharged
      or stayed within thirty (30) days thereafter and which, when aggregated
      with all other judgment(s) or decree(s) that have remained unpaid and
      undischarged or are not stayed for such period, are in excess of One
      Million Dollars ($1,000,000);

            (h) any party holding a lien on or security interest in any
      Collateral commences foreclosure or similar sale thereof, unless Borrower
      causes such proceeding to be stayed pending determination of the rights of
      the respective parties with respect to such Collateral, which stay
      continually prevents the party holding the lien or security interest from
      proceeding against the Collateral at issue;

            (i) a material adverse change in the Time-Share Project, the
      Collateral or the business or financial condition of Borrower, which
      change is not enumerated in this PARAGRAPH 7.1, as the result of which
      Lender in good faith deems the prospect of Performance of the Obligations
      materially impaired or the Collateral materially imperiled;

            (j) Borrower shall (i) generally not be paying its debts as they
      become due, (ii) file, or consent by answer or otherwise to the filing
      against it of, a petition for relief or reorganization, arrangement or
      liquidation or any other petition in bankruptcy or insolvency under the
      laws of any jurisdiction, (iii) make an assignment for the benefit of its
      creditors, (iv) consent to the appointment of a custodian, receiver,
      trustee or other officer with similar powers for itself or any substantial
      part of its property, (v) be adjudicated insolvent, (vi) dissolve or
      commence to wind-up its affairs or

                                       18
<PAGE>

      (vii) take any action for purposes of the foregoing; or a petition for
      relief or reorganization, arrangement or liquidation or any other petition
      in bankruptcy or insolvency or the appointment of a custodian under the
      laws of any jurisdiction is filed against Borrower or a custodian is
      appointed for Borrower, the Collateral or any material part of Borrower's
      property and such proceeding is not dismissed and appointment vacated
      within ninety (90) days thereafter;

            (k) any of the events enumerated in PARAGRAPHS 7.1(F), (G), (I) or
      (j) occurs with respect to any general partner or manager of Borrower, if
      Borrower is a partnership or limited liability company, or any surety for
      the Performance of the Obligations; or

            (l) failure of Lender to receive from Borrower, within thirty (30)
      days of the date Borrower knows of such event, notice of any event which
      renders any representation or warranty in any Loan Documents false in any
      material, adverse respect were it made after the occurrence of such
      condition.

      7.2 REMEDIES. At any time after an Event of Default has occurred and while
it is continuing, Lender may but without obligation, in addition to the rights
and powers granted elsewhere in the Loan Documents and not in limitation
thereof, do any one or more of the following:

            (a) cease to make further Advances;

            (b) declare the Note, together with all other sums owing by Borrower
      to Lender in connection with the Inventory Loan, immediately due and
      payable without notice, presentment, demand or protest, which are hereby
      waived by Borrower;

            (c) proceed to protect and enforce its rights and remedies under the
      Loan Documents and to foreclose or otherwise realize upon its security for
      the Performance of the Obligations, or to exercise any other rights and
      remedies available to it at law, in equity or by statute; and

            (d) without notice to Borrower, have a receiver appointed for
      Borrower and/or its property.

      7.3 APPLICATION OF PROCEEDS DURING AN EVENT OF DEFAULT. Notwithstanding
anything in the Loan Documents to the contrary, while an Event of Default
exists, any cash received and retained by Lender in connection with the
Collateral may be applied to payment of the Obligations in the manner provided
in PARAGRAPH 7.5.

      7.4   UNIFORM COMMERCIAL REMEDIES; SALE.

            (a) UCC REMEDIES; SALE OF COLLATERAL. Lender shall have all of the
      rights and remedies of a secured party under the Uniform Commercial Code
      of the State of Arizona and of the state in which the applicable
      Collateral is situated, and all other rights and remedies accorded to a
      Secured Party at equity or law with respect to that portion of the
      Collateral not consisting of an interest in real property. Any notice of
      sale or other disposition of such non-real property Collateral given not
      less than ten (10) days prior to such proposed action in connection with
      the exercise of Lender's rights and remedies shall constitute reasonable
      and fair notice of such action. Lender may postpone or adjourn any such
      sale from time to time by announcement at the time and place of sale
      stated on the notice of sale or by announcement of any adjourned sale,
      without being required to give a further notice of sale. Any such sale may
      be for cash or, unless prohibited by applicable law, upon such credit or
      installment as Lender may determine. Borrower shall be credited with the
      net proceeds of such sale only when such proceeds are actually received by
      Lender in good current funds. Despite the consummation of any such sale,
      Borrower shall remain liable for any deficiency on the Obligations which
      remains outstanding following such sale. All net proceeds recovered
      pursuant to a sale shall be applied in accordance with the provisions of
      PARAGRAPH 7.5.

            (b) LENDER'S RIGHT TO EXECUTE CONVEYANCES. Lender may, in the name
      of Borrower or in its own name, make and execute all conveyances,
      assignments and transfers of the Collateral sold in connection with the
      exercise of Lender's rights and remedies, and Lender is hereby appointed
      Borrower's attorney-in-fact for this purpose.

      7.5 APPLICATION OF PROCEEDS. The proceeds of any sale of all or any part
of the Collateral made in connection with the exercise of Lender's rights and
remedies shall be applied in the following order of priorities; first, to the
payment of all costs and expenses of such sale, including without limitation,
reasonable compensation to Lender and its agents, attorneys' fees, and all other
expenses, liabilities and advances incurred or made by Lender, its agents and
attorneys, in connection with such sale, and any other unreimbursed expenses for
which Lender may be reimbursed pursuant to the Loan Documents; second, to the
payment of all late charges required by the Loan Documents to be paid by
Borrower, in such order and manner as Lender shall in its discretion determine;
third, to the payment of the Obligations, in such order and manner as Lender
shall in its discretion determine, with no amounts applied to payment of

                                       19
<PAGE>

principal until all interest has been paid; fourth, to the other Obligations in
such order and manner as Lender may determine; and last, to the payment to
Borrower, its successors or assigns, or to whosoever may be lawfully entitled to
receive the same, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.

      7.6 LENDER'S RIGHT TO PERFORM. Lender may, at its option, and without any
obligation to do so, pay, perform and discharge any and all obligations agreed
to be paid or Performed in the Loan Documents by Borrower or any surety for the
Performance of the Obligations if (a) such person fails to do so and (b) (i) an
Event of Default exists and at least five (5) Business Day's notice has been
given to such person of Lender's intention to take such action, (ii) the action
taken by Lender involves obtaining insurance which such person has failed to
maintain in accordance with the Loan Documents or to deliver evidence thereof,
or (iii) in the opinion of Lender, such action must be taken because an
emergency exists or to preserve any of the Collateral or its value. For such
purposes Lender may use the proceeds of the Collateral. All amounts expended by
Lender in so doing or in exercising its remedies under the Loan Documents
following an Event of Default shall become part of the Obligations, shall be
immediately due and payable by Borrower to Lender upon demand, and shall bear
interest at the Default Rate from the dates of such expenditures until paid.

      7.7 NON-EXCLUSIVE REMEDIES. No remedy in any Loan Document conferred on or
reserved to Lender is intended to be exclusive of any other remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under any Loan Document or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or power shall be
construed to be a waiver of or acquiescence to any default or a waiver of any
right or power; and every such right and power may be exercised from time to
time and as often as may be deemed expedient.

      7.8 WAIVER OF MARSHALLING. Borrower, for itself and for all who may claim
through or under it, hereby expressly waives and releases all right to have the
Collateral, or any part of the Collateral, marshalled on any foreclosure, sale
or other enforcement of Lender's rights and remedies.

      7.9 ATTORNEY-IN-FACT. For the purpose of exercising its rights and
remedies under PARAGRAPHS 7.2(c) and 7.6, Lender may do so in Borrower's name or
its name and is hereby appointed as Borrower's attorney-in-fact to take any and
all actions in Borrower's name and/or on Borrower's behalf as Lender may deem
necessary or appropriate in its discretion in the accomplishment of such
purposes.

8.    COSTS AND EXPENSES; INDEMNIFICATION

      8.1 COSTS AND EXPENSES. Borrower will pay on demand any and all costs and
expenses incurred by Lender (exclusive of Lender's employees' expenses other
than travel expenses) in connection with the initiation, documentation and
closing of the Inventory Loan, the making of Advances, the protection of the
Collateral, or the enforcement of the Obligations against Borrower, including,
without limitation, all attorneys', inspecting architect's/engineer's and other
professionals' fees (including, without limitation, reasonable out-of-pocket
expenses and reasonable and normal charges of such attorneys' and other
professionals for photocopy, telecopy and computer services, and clerical
overtime), consumer credit reports, and revenue, documentary stamp, transaction
and intangible taxes. Without limiting the generality of the foregoing, if a
bankruptcy proceeding is commenced by or against Borrower or otherwise involving
the Collateral, Lender shall, to the extent not already provided for herein, be
entitled to recover, and Borrower shall be obligated to pay, Lender's attorneys'
fees and costs incurred in connection with: any determination of the
applicability of the bankruptcy laws to the terms of the Loan Documents or
Lender's rights thereunder; any attempt by Lender to enforce or preserve its
rights under the bankruptcy laws or to prevent Borrower or any other person from
seeking to deny Lender its rights thereunder; any effort by Lender to protect,
preserve or enforce its rights against the Collateral, or seeking authority to
modify the automatic stay of 11 U.S.C. SECTION 362 or otherwise seeking to
engage in such protection, preservation or enforcement; or any proceeding(s)
arising under the bankruptcy laws, or arising in or related to a case under the
bankruptcy laws.

      8.2 INDEMNIFICATION. Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, and
defend Lender, its successors, assigns and shareholders (including corporate
shareholders), and the directors, officers, employees, servants and agents of
the foregoing, for, from and against: (a) any and all liability, damage,
penalties, or fines, loss, costs or expenses (including, without limitation,
court costs and attorneys' fees), claims, demands, suits, proceedings (whether
civil or criminal), orders, judgments, penalties, fines and other sanctions
whatsoever asserted against it and arising from or brought in connection with
the Time-Share Project, the Collateral, Lender's status by virtue of the Loan
Documents, creation of liens and security interests, the terms of the Loan
Documents or the transactions related thereto, or any act or omission of
Borrower or an Agent, or their respective employees or agents, whether actual or
alleged unless such act or omission is caused by Lender's gross negligence or
willful misconduct; and (b) any and all brokers' commissions or finders' fees or
other costs of similar type by any party in connection with the Inventory Loan.
Each Borrower and Lender hereby represents and warrants to

                                       20
<PAGE>

the other that neither such Person has engaged the services of a broker of any
other Person to act as an intermediary in connection with the Inventory Loan. On
written request by a person or other entity covered by the above agreement of
indemnity, Borrower will undertake, at its own cost and expense, on behalf of
such indemnitee, using counsel satisfactory to the indemnitee, the defense of
any legal action or proceeding to which such person or entity shall be a party.
At Lender's option, Lender may at Borrower's expense prosecute or defend any
action involving the priority, validity or enforceability of the Collateral.

9.    CONSTRUCTION AND GENERAL TERMS

      9.1 PAYMENT LOCATION. All monies payable under the Loan Documents shall be
paid to Lender at its address set forth following its signature in lawful monies
of the United States of America, unless otherwise designated in the Loan
Documents or by Lender by notice.

      9.2 ENTIRE AGREEMENT. The Loan Documents exclusively and completely state
the rights and obligations of Lender and Borrower with respect to the Inventory
Loan. No modification, variation, termination, discharge, abandonment or waiver
of any of the provisions or conditions of the Loan Documents shall be valid
unless in writing and signed by a duly authorized representative of the party
sought to be bound by such action. The Loan Documents supersede any and all
prior representations, warranties and/or inducements, written or oral,
heretofore made by Lender and Borrower concerning this transaction, including
any commitment for financing.

      9.3 POWERS COUPLED WITH AN INTEREST. The powers and agency hereby granted
by Borrower are coupled with an interest and are irrevocable until the
Obligations have been paid in full and are granted as cumulative to Lender's
other remedies for collection and enforcement of the Obligations.

      9.4 COUNTERPARTS; FACSIMILE SIGNATURES. Any Loan Document may be executed
in counterpart, and any number of copies of such Loan Document which have been
executed by all parties shall constitute one (1) original. Delivery of an
executed counterpart of any Loan Document by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of such Loan Document.
Any party delivering an executed counterpart of any Loan Document by
telefacsimile shall also deliver a manually executed counterpart of such Loan
Document, but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of such Loan Document.

      9.5 NOTICES. All notices, requests or demands required or permitted to be
given under the Loan Documents shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business Day
after such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service; or (c) three (3) Business Days after such
are deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, addressed as shown below, or to such
other address as the party being notified may have designated in a notice given
to the other party. Written notice may be given by telecopy to the telecopier
number shown below or to such other telecopier number as the party being
notified may have designated in a notice given to the other party, which notice
shall be effective on the day of receipt if received during the recipient's
normal business hours on the day of receipt or otherwise on the next Business
Day; provided that such notice shall not be deemed effective unless not later
than the next Business Day, a copy of such notice is hand delivered or deposited
for delivery via courier or in the United States mails in accordance with the
requirements set forth above. The notice addresses and telecopy numbers for
Primary Borrower and Lender are set forth at the end of this Agreement following
their respective signatures. All notices required to be given to any Borrower
may be given to such Borrower at the notice address for Primary Borrower set
forth herein, each Subsidiary Borrower at any time a party to this Agreement
acknowledging that such Subsidiary Borrower maintains executive offices and
functions sufficient for the receipt of notice at the offices of Primary
Borrower.

      9.6 SUCCESSORS AND ASSIGNS. All the covenants of Borrower and all the
rights and remedies of the Lender contained in the Loan Documents shall bind
Borrower, and, subject to the restrictions on merger, consolidation and
assignment contained in the Loan Documents, its successors and assigns, and
shall inure to the benefit of Lender, its successors and assigns, whether so
expressed or not. Borrower may not assign its rights in the Loan Documents in
whole or in part. Except as may be expressly provided in a Loan Document, no
person or other entity shall be deemed a third party beneficiary of any
provision of the Loan Documents.

      9.7 SEVERABILITY. If any provision of any Loan Document is held to be
invalid, illegal or unenforceable under present or future laws, the legality,
validity and enforceability of the remaining provisions of the Loan Documents
shall not in any way be affected or impaired thereby. In lieu of each such
illegal, invalid or unenforceable provision, there shall be added to the Loan
Document affected, a provision that is legal, valid and enforceable and as
similar in terms to such illegal, invalid and unenforceable provision as may be
possible.

      9.8 TIME OF ESSENCE. Time is of the essence in the Performance of the
Obligations.

      9.9 MISCELLANEOUS. All headings are inserted for convenience only and
shall not affect any construction or interpretation of the Loan Documents.
Unless otherwise indicated, all references in a Loan Document to clauses and
other subdivisions refer to the corresponding paragraphs, clauses and other
subdivisions of the Loan

                                       21
<PAGE>

Document; the words "HEREIN," "HEREOF," "HERETO," "HEREUNDER" and words of
similar import refer to the Loan Document as a whole and not to any particular
paragraph, clause or other subdivision; and reference to a numbered or lettered
subdivision of an Article or paragraph shall include relevant matter within the
Article or paragraph which is applicable to but not within such numbered or
lettered subdivision. All Schedules and Exhibits referred to in this Agreement
are incorporated in this Agreement by reference. Whenever the words "including",
"include", or "includes" are used in the Loan Documents, they shall be
interpreted in a non-exclusive manner as though the words, "without limitation,"
immediately followed the same.

      9.10 CHOICE OF LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED THEREIN, THE
LOAN DOCUMENTS AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ARIZONA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND TO THE
EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.

      9.11 CHOICE OF JURISDICTION; WAIVER OF VENUE. EACH OF BORROWER AND LENDER:
(A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF
THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENT OR THE SUBJECT MATTER THEREOF, OR, IF LENDER
INITIATES SUCH ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, AND
THE CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT
TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF BORROWER AND LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY
ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.

      9.12 WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND AGREE THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER ANY LOAN DOCUMENT WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES; AND THEREFORE, THEY AGREE THAT ANY LAWSUIT ARISING
OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING WITHOUT A JURY,
AND KNOWINGLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY SUCH PROCEEDING.

      9.13 INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET FORTH IN THIS
PARAGRAPH ARE A MATERIAL INDUCEMENT FOR LENDER'S MAKING ADVANCES TO BORROWER.

                                     (BORROWER'S INITIALS RE: 9.10 - 9.13 _____)

      9.14 COMPLIANCE WITH APPLICABLE USURY LAW. It is the intent of the parties
hereto to comply with the Applicable Usury Law. Accordingly, notwithstanding any
provisions to the contrary in the Loan Documents, in no event shall the Loan
Documents require the payment or permit the collection of interest in excess of
the maximum contract rate permitted by the Applicable Usury Law.

      9.15 USE OF LENDER'S NAME. EXCEPT AS REQUIRED BY LAW AND FOR FILINGS MADE
WITH THE SECURITIES AND EXCHANGE COMMISSION, ANY STOCK EXCHANGE ON WHICH
BORROWER'S STOCK IS TRADED, ANY REGULATORY AGENCY HAVING JURISDICTION OVER
BORROWER OR ANY OF THE TIME-SHARE PROJECTS, OR WITH RESPECT TO FILINGS REQUIRED
TO BE MADE IN THE LAND RECORDS APPLICABLE TO ANY OF THE TIME-SHARE PROJECTS,
BORROWER WILL NOT, AT ANY TIME, USE THE NAME OF OR MAKE REFERENCE TO LENDER WITH
RESPECT TO THE TIME-SHARE PROJECT, THE SALE OF TIME-SHARE INTERESTS OR
OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF LENDER.

      9.16 NO JOINT VENTURE. THE RELATIONSHIP OF BORROWER AND LENDER IS THAT OF
DEBTOR AND CREDITOR, AND IT IS NOT THE INTENTION OF EITHER OF SUCH PARTIES BY
THIS OR ANY OTHER INVENTORY BEING EXECUTED IN CONNECTION WITH THE INVENTORY LOAN
TO ESTABLISH A PARTNERSHIP, AND THE PARTIES HERETO SHALL NOT UNDER ANY
CIRCUMSTANCES BE CONSTRUED TO BE PARTNERS OR JOINT VENTURERS.

      9.17 STANDARDS APPLIED TO LENDER'S ACTIONS. Unless otherwise specifically
stipulated elsewhere in the Loan Documents, if a matter is left in the Loan
Documents to the decision, requirement, request, determination, judgment,
opinion, approval, consent, satisfaction, acceptance, agreement, option or
discretion of Lender, its

                                       22
<PAGE>

employees, Lender's counsel or any agent for or contractor of Lender, such
action shall be deemed to be exercisable by Lender or such other person in its
sole and absolute discretion and according to standards established in its sole
and absolute discretion. Without limiting the generality of the foregoing,
"OPTION" and "DISCRETION" shall be implied by use of the words "IF" or "MAY."

      9.18 PARTICIPATIONS. Lender shall have the right without the consent of or
notice to the Borrower to grant participating interests in the Inventory Loan,
or to assign all or any portion of Lender's interest in and to the Inventory
Loan to any other Person acceptable to Lender, and may disclose to such other
Person all information relating to Borrower as Lender may deem appropriate in
connection with such sales or assignments, provided that Lender shall obtain
from the Person receiving any such information an agreement to be bound by and
abide with such confidentiality provisions as are then binding upon Lender. The
foregoing notwithstanding, in the event Lender sells participating interests in
the Inventory Loan to any other Persons, Lender shall continue to serve as the
lender with responsibility for administration of the Inventory Loan, shall
continue to be the notice party for purposes of the giving of notices by
Borrower, and shall be responsible for disseminating financial and other
information received from Borrower to each participating lender.

      9.19 SCOPE OF REIMBURSABLE ATTORNEY'S FEES. As used in the Loan Documents,
the term "ATTORNEYS' FEES" includes the reasonable fees of attorneys licensed to
practice law in any jurisdiction, law clerks, paralegals, investigators and
others not admitted to the bar but performing services under the supervision of
a licensed attorney, and the expenses (including, without limitation, normal and
customary charges for telecopy and photocopy services and clerical overtime)
incurred by them in the performance of their services. As used in the Loan
Documents, attorneys' fees incurred by Lender in the enforcement of any remedy
or covenant include, without limitation, attorneys' fees incurred in any
foreclosure of the Security Documents, in protecting or sustaining the lien or
priority of the Collateral, or in any proceeding arising from or connected with
any such matter, including any bankruptcy, receivership, injunction or other
similar proceeding, or any appeal from or petition for review of any such
matter, and with or without litigation.

      9.20 PUBLICITY. Lender is hereby authorized to cause a tombstone to be
published announcing the consummation of this transaction and the aggregate
amount thereof. Borrower consents to such advertising and authorizes Lender to
use Borrower's name, logo, insignia, descriptive art work, trade name,
trademark, or other similar material, whether or not protected by copyright (or
otherwise), in any such advertisement. The foregoing notwithstanding, Lender
shall not issue any press releases concerning this transaction without Primary
Borrower's prior written approval as to the content of such releases, which
approval shall not be unreasonably withheld or conditioned, or unduly delayed.

      9.21 PERMITTED CONTESTS. Notwithstanding anything in the Loan Documents to
the contrary, after prior written notice to Lender, Borrower at its expense may
contest, by appropriate legal or other proceedings conducted in good faith and
with due diligence, the amount or validity of any tax, Imposition, Legal
Requirement or any monetary lien on the Collateral, so long as: (a) in the case
of an unpaid Imposition or lien, such proceedings suspend the collection thereof
from Borrower and the Collateral, and shall not interfere with the payment of
any monies due under the Collateral in accordance with the terms of the Security
Documents; (b) none of the Collateral is, in the judgment of Lender, in any
imminent danger of being sold, forfeited or lost; (c) in the case of a Legal
Requirement, neither Borrower nor Lender is in any danger of any civil or
criminal liability for failure to comply therewith; and (d) Borrower has
furnished such security, if any, as may be required in the proceedings or as
Lender reasonably requests up to one hundred twenty-five percent (125%) of the
amount in controversy.

      9.22 RELIANCE. Lender's examination, inspection, or receipt of information
pertaining to Borrower, the Collateral or the Time-Share Project shall not in
any way be deemed to reduce the full scope and protection of the warranties,
representations and Obligations contained in the Loan Documents.

                              [SIGNATURE PAGE FOLLOWS]

                                      23

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective name, personally or by their duly authorized
representatives as of September 30, 1999.

PRIMARY BORROWER                    SUNTERRA CORPORATION, a Maryland corporation

                                    By:  /s/ Carol W. Sullivan
                                       ------------------------------------
                                       Name: Carol W. Sullivan
                                       Title: Senior Vice President -
                                              Mortgage Portfolio

                                    Primary Borrower's Notice Address and
                                    Telecopy Number:
                                    _______________________________________
                                    _______________________________________
                                    Attention:    General Counsel
                                    Telecopy No.:  (407)   532-1075

                                    with a copy to:

                                    SUNTERRA CORPORATION
                                    9921 Covington Cross Drive, suite 105
                                    Las Vegas, Nevada  89134
                                    Attention:  Ms. Carol Sullivan

                                    with a further copy to:

                                    SCHREEDER, WHEELER & FLINT
                                    Candler Building, 16th Floor
                                    127 Peachtree Street, N.E.
                                    Atlanta, Georgia  30303-1845
                                    Attention:  Leo A. Rose III, Esq.

SUBSIDIARY BORROWERS                ALL SEASONS RESORTS, INC., an Arizona
                                    corporation

                                    By:  /s/ Carol W. Sullivan
                                       ------------------------------------
                                       Name: Carol W. Sullivan
                                       Title: Assistant Treasurer

                                    POWHATTAN ASSOCIATES, a Virginia joint
                                    venture

                                    By: PLANTATION RESORT GROUP, INC., a
                                        Virginia corporation, its Joint Venturer

                                    By:  /s/ Carol W. Sullivan
                                       ------------------------------------
                                       Name: Carol W. Sullivan
                                       Title: Assistant Treasurer

                                    WILLIAMSBURG VACATIONS, INC., a Virginia
                                    corporation, its Joint Venturer

                                    By:  /s/ Carol W. Sullivan
                                       ------------------------------------
                                       Name: Carol W. Sullivan
                                       Title: Assistant Treasurer

                                       24
<PAGE>

                                    GREENSPRINGS ASSOCIATES, a Virginia joint
                                    venture

                                    By: PLANTATION RESORT GROUP, INC., a
                                        Virginia corporation, its Joint Venturer

                                    By: /s/ Carol W. Sullivan
                                       -------------------------------
                                       Name: Carol W. Sullivan
                                       Title: Assistant Treasurer

                                    By: GREENSPRINGS PLANTATION RESORTS, INC., a
                                    Virginia Corporation, its Joint Venturer

                                    By: /s/ Carol W. Sullivan
                                       -------------------------------
                                       Name: Carol W. Sullivan
                                       Title: Assistant Treasurer

                                    Subsidiary Borrowers' Notice Address and
                                    Telecopy Number:

                                    c/o Sunterra Corporation
                                    1781 Park Center Drive
                                    Orlando, Florida 32835
                                    Attn.: General Counsel
                                    Telecopy: (407) 532-1141

LENDER                              FINOVA CAPITAL CORPORATION, a Delaware
                                    corporation

                                    By: Gayle R. McKenzie
                                       -------------------------------
                                       Name: Gayle R. McKenzie
                                       Title: Vice President

                                    Lender's Notice Address and Telecopy Number:

                                    FINOVA Capital Corporation
                                    7272 East Indian School Road, Suite 410
                                    Scottsdale,  Arizona  85251
                                    Attn.:  Vice President-Resort Finance
                                    Telecopy:  (602) 874-6444

                                    with a copy to:

                                    FINOVA Capital Corporation
                                    7272 East Indian School Road, Suite 410
                                    Scottsdale,  Arizona  85251
                                    Attn.:  Vice President-Group Counsel
                                    Telecopy:  (602) 874-6445

                                       25
<PAGE>

                          SCHEDULE OF ADDITIONAL TERMS

      S.1 This Schedule has been incorporated by reference into and form a part
of that Master Loan and Security Agreement dated as of September 30, 1999,
between FINOVA Capital Corporation as "Lender" and Sunterra Corporation as the
"Primary Borrower."

      S.2 To the extent of any inconsistency between this Schedule and the other
provisions of the provisions of the Loan and Security Agreement, the provisions
of this Schedule shall prevail.

      S.3 The provisions of the Loan and Security Agreement are supplemented as
follows (paragraph references are references to paragraphs of the Loan and
Security Agreement) which are intended to be supplemented by the following
provisions:

           (a) (P)1.      Basic Interest Rate: three and three-quarters percent
               (3.75%) per annum in excess of the LIBO Rate or the LIBO
               Adjusted Rate, as applicable, fluctuating monthly on the first
               Business Day of each calendar month based upon the LIBO Rate
               or the LIBO Adjusted Rate, as applicable, in effect on such
               date, provided, however, that in no event shall the Basic
               Interest Rate exceed the maximum contract rate of interest
               permitted by the Applicable Usury Law.

           (b) (P)1.      Default Rate: two percent (2%) above the Basic
               Interest Rate or the maximum contract rate permitted under the
               applicable usury law, whichever is less.

           (c) (P)1. [Intentionally not used.]

           (d) (P)1.      Maximum Inventory Loan Amount: Fifty Million Dollars
               ($50,000,000).

           (e) (P)1.      Extended Borrowing Term Expiration Date: September 30,
               2002.

           (f) (P)1.      Original Borrowing Term Expiration Date: September 30,
               2001.

           (g) (P)1.      Loan Fee: Two Hundred Fifty Thousand Dollars
               ($250,000).

           (h) (P)1.      Maturity Date: September 30, 2003 (if Extension Option
               not exercised) or September 30, 2004 (if Extension Option is
               exercised).

           (i) (P)1.      Opening Prepayment Date. The date 6 months from the
               date of the applicable Advance.

           (j) (P)1.      Required Closing Date. October 31, 1999.

           (k) (P)1.      Initial Time-Share Projects:  Powhattan Plantation,
               Williamsburg, Virginia; Greensprings Plantation, Williamsburg,
               Virginia; Scottsdale Villa Mirage, Scottsdale, Arizona; and
               Villas at Santa Fe, Santa Fe, New Mexico.

           (l) (P)2.9(a). Payment of Loan Fee: The Loan Fee shall be payable in
               the following installments: $75,000 on or before September 30,
               1999, and $425,000 on the Closing Date. Any portion of Borrower's
               $75,000 good faith deposit which was delivered to Lender in
               connection with Primary Borrower's acceptance of Lender's
               Proposal Letter dated August 27, 1999 with respect to the
               facility described by this Agreement that is remaining after the
               payment of Lender's costs and expenses shall be applied toward
               the installment of the Loan Fee which is due on the Closing Date.

                                       26
<PAGE>

           (m) (P)4.5. Minimum Advance Amount: Five Hundred Thousand Dollars
               ($500,000).

           (n) (P)4.5. Maximum Advance Frequency: twice per calendar month with
               a Five Hundred Dollar ($500) charge being imposed in connection
               with the second Advance in any one (1) calendar month. Lender
               shall have the right to withhold the amount of such charge from
               such Advance.

           (o) (P)4.6. Wire Transfer Fee: Twenty-Five Dollars ($25.00).

           (p) (P)5.1, 6.1.  Borrower's Type of Business Organization:
               Primary Borrower - corporation
                              All Seasons Resorts, Inc. - corporation
                              Powhattan Associates - a joint venture
                              Greensprings Associates - a joint venture.

           (q) (P)5.1, 6.1. Borrower's State of Organization:   Primary
               Borrower - Maryland
                              All Seasons Resorts, Inc.- Arizona Powhattan
                              Associates - Virginia Greensprings Associates -
                              Virginia.

           (r) (P)5.3. Borrower's Principal Place of Business: 1781 Park Center
               Drive, Orlando, Florida 32825.

           (s) (P)5.3. Borrower's Chief Executive Office: 1781 Park Center
               Drive, Orlando, Florida 32825

           (t) (P)5.9  Jurisdiction Where Sales and/or Offers to Sell Have
               Occurred:  See Exhibit 5.9 attached hererto.

      S.4 In addition to the other representations, warranties and covenants of
Borrower set forth in the Loan and Security Agreement, Borrower represents,
warrants and covenants that each Borrowing Base Report shall be signed by
Primary Borrower and the applicable Subsidiary Borrower (if any) and shall
contain a representation and warranty of each such Person that all of the
information contained therein (including, but not limited to, the sales of
Time-Share Interests reported therein, and the Retail Value with respect to the
Eligible Inventory located at the applicable Time-Share Project) are true,
complete and accurate in all material respects. Lender shall be entitled to
request copies of sales contracts to provide substantiation as to the actual
sales prices of those items of Inventory sold by Borrower and requested to be
released from the lien of Lender's Mortgage.

                                       27
<PAGE>

                                    EXHIBIT A

                        CONDITIONS OF ELIGIBLE INVENTORY

      (a) The applicable Time-Share Project in which such Inventory exists is
located in the United States.

      (b) The applicable Time-Share Project is owned one hundred percent (100%)
either by Primary Borrower or by an Affiliate of Primary Borrower which joins in
the Loan and Security Agreement as a Subsidiary Borrower thereunder.

      (c) The Time-Share Association established in connection with the
applicable Time-Share Project must be in stable financial condition, as
demonstrated to Lender's satisfaction. Prior to a given Time-Share Project being
approved for the contribution of Eligible Inventory to the Borrowing Base,
Borrower shall have provided to Lender, and Lender shall have reviewed and found
satisfactory, the following information relative to the applicable Time-Share
Association:

            (1)   Most recent audited financial statement;
            (2)   A current statement of the replacement fund balance maintained
                  by such Time-Share Association;
            (3)   A current statement of the operating fund balance maintained
                  by such Time-Share Association;
            (4)   A description of the extent to which such Time-Share
                  Association is entitled to any continuing subsidy from the
                  developer of the applicable Time-Share Project, together with
                  a statement of the extent to which such Time-Share Association
                  has utilized such subsidy during the past three (3) fiscal
                  years;
            (5)   A description of the annual dues paid by owners of Time-Share
                  Interests in such Time-Share Project, broken down to the type
                  of Unit involved; and
            (6)   An identification of the Time-Share Manager applicable to such
                  Time-Share Project, together with such additional information
                  concerning the Time-Share Manager as Lender may request
                  (including without limitation, if such Time-Share Manager is
                  not an Affiliate of Primary Borrower, financial statements for
                  such Time-Share Manager and a description of such Person's
                  experience and qualifications for management of the Time-Share
                  Association).

      (d) With respect to each Time-Share Project, evidence that the Unit(s) in
which the Time-Share Interest(s) are owned and the amenities that have been
promised to the Purchasers (and to prospective purchasers) have been completed
(taking into account the dates upon which any such amenities have been promised
to Purchasers, such that a Time-Share Project shall not be deemed ineligible
hereunder due to the fact that certain amenities have not yet been completed
unless the time by which those amenities were to have been completed, as
represented to the Purchasers, has passed), fully furnished and approved and
ready for occupancy and the furnishings in those Units are free of any lien
except for the Permitted Encumbrances; no Unit or other part of the common areas
of the Time-Share Project is subject to partition; and the time-share use of the
Units and amenities conform to all applicable restrictions and laws, necessary
approvals having been obtained.

      (e) With respect to each Time-Share Project, Borrower shall have provided
to Lender, and Lender shall have reviewed and found satisfactory, the following
information concerning such project and the unsold Time-Share Interests which
are proposed to become Eligible Inventory:

            (1)   Location of the project;
            (2)   Site plan for the project;
            (3)   Total number of Units planned for the project;
            (4)   Number of Units then completed;
            (5)   Number of Units presently under construction;
            (6)   A description of the total amenities which are planned to be
                  included in such project, together with a description of
                  whether such amenities have been constructed and, if such
                  amenities have not yet been constructed, a time-line
                  describing the periods remaining to completion; and
            (7)   A description of the complete amenity package which is to be
                  presented to prospective purchasers of the Time-Share
                  Interests.

                                       28
<PAGE>

      (f) With respect to each Time-Share Project, a description of the
following matters relative to such project's marketing and sales history:

            (1)   The month and year in which sales of Time-Share Interests
                  commenced;
            (2)   Location of the sales and marketing center for such Time-Share
                  Project;
            (3)   A table depicting, for each Time-Share Project, the various
                  sources of tours generated during the prior twelve months as a
                  percentage of total tours generated; and
            (4)   A table describing the annual sales since the sale of
                  Time-Share Interests commenced, broken down by the number of
                  Time-Share Interests sold per year and the average sales price
                  per year for such Time-Share Interests.

      (g) With respect to those specific unsold Time-Share Interests which are
to become Eligible Inventory, Borrower shall have provided to Lender, and Lender
shall have reviewed and found satisfactory, the following information:

            (1) Total number of Units in the applicable Time-Share Project; and
            (2) A report detailing the unsold number of Time-Share Interests,
                categorized by type of Unit involved, price for each Time-Share
                Interest, the total Retail Value of all such unsold Time-Share
                Interests, and the average price at which all unsold Time-Share
                Interests are offered for sale.

      (h) Lender shall have a valid, direct and perfected first lien/security
interest in the Inventory and the proceeds thereof.

      (i) In the event that any Time-Share Project which Borrowers propose to
qualify for the contribution of Eligible Inventory hereunder includes unsold
Time-Share Units which are valued and sold on a points basis (which program
Primary Borrower currently refers to as "Club Sunterra"), such points must
continue to qualify as "Time-Share Interests" as defined herein, and Lender must
be satisfied with the systems and procedures by which Borrowers (1) assure that
points sold are adequately supported by available and completed Units and unsold
Time-Share Interest and (2) calculate the number of points to be assigned to
each unsold Time-Share Interest contributed as Eligible Inventory hereunder. In
the event Borrowers' systems and procedures are not satisfactory to Lender,
Lender reserves the right, in its discretion, to require a quarterly third party
audit, to be conducted at Borrowers' expense, to assure that all points sold and
credited to purchasers are adequately supported by completed Units and unsold
Time-Share Interests therein; PROVIDED, HOWEVER, that for so long as no Event of
Default exists and is continuing, in no event shall the total expense of such
quarterly audits which Borrower is required to bear exceed $7,500 during any
calendar quarter.

                                       29
<PAGE>

                                     EXHIBIT B

                           FORM OF BORROWING BASE REPORT

                                       30
<PAGE>

                                    EXHIBIT C

                             BORROWER'S CERTIFICATE

      {Borrower Name}{Type of Borrower Entity}("BORROWER") hereby certifies to
FINOVA CAPITAL CORPORATION ("LENDER") that the Inventory described in SCHEDULE A
attached hereto and by this reference incorporated herein qualifies as Eligible
Inventory.

      Except as otherwise defined herein or the context otherwise requires, all
capitalized terms used herein have the meaning given to them in the Loan and
Security Agreement between Borrower and Lender dated as of {Month, Day,} {Year},
as it may be from time to time renewed, amended, replaced or restated.

            DATED:  ____________, ______.

            BORROWER:                   {Borrower Name}{Type of Borrower Entity}

                                        By:__________________________________
                                        Type/Print Name:_____________________
                                        Title:_______________________________

                                       31
<PAGE>

                                    EXHIBIT E

                              ADDITIONAL CONDITIONS
                           TO INVENTORY LOAN ADVANCES

      (a) a completed and executed "Request for Inventory Loan Advance and
Certification," in form and substance identical to EXHIBIT E-1.

      (b) a Mortgage in recordable form and otherwise in form and substance
satisfactory to Lender, properly completed, executed and acknowledged (with
respect to any Inventory not previously encumbered).

      (c) if not previously furnished, evidence satisfactory to Lender that: (i)
all Time-Share Interests which are the subject of the Inventory covered by item
(b) above have all necessary and promised on-site and off-site improvements
thereto (taking into account the dates upon which any such improvements have
been promised to Purchasers, such that this condition shall be deemed satisfied
unless the time by which those improvements were to have been completed, as
represented to the Purchasers, has passed) and necessary and promised utilities
are available; (ii) all Units and amenities which are to be available to
Purchasers obligated on the Inventory covered by item (b) above have been
completed in accordance with all applicable building codes and are fully
furnished, necessarily equipped and will be available for use by Purchasers
without disturbance or termination of their use rights so long as they are not
in default of their obligations owed to the applicable Time-Share Association,
or to any Borrower with respect to financing owed by such Purchaser to Borrower
incurred in connection with the purchase of such Purchaser's Time-Share
Interest; and (iii) all furnishings in the Units and amenities are owned either
by the Purchasers directly or by an owners' association or associations in which
the Purchasers are members, free of charges, liens and security interests other
than the Permitted Encumbrances.

      (d) a Title Policy with respect to each Mortgage covered by item (b)
above.

      (e) if requested by Lender following a material change of circumstances or
not more often than annually at Lender's discretion, an opinion from independent
counsel to Borrower satisfactory to Lender with respect to the continued
compliance of the Time-Share Project and such other matters as Lender shall
reasonably require.

      (f) if requested by Lender, such other items which are reasonably
necessary to evaluate the request for the Inventory Loan Advance and the
satisfaction of the conditions precedent thereto.

                                       32
<PAGE>

                                   EXHIBIT E-1

                       REQUEST FOR INVENTORY LOAN ADVANCE
                                AND CERTIFICATION

      The undersigned ("BORROWER") requests FINOVA CAPITAL CORPORATION
("LENDER") to make a Inventory Loan Advance in the sum of
_____________________________ ______________ UNITED STATES DOLLARS (U.S.
$_____________) upon receipt hereof, pursuant to the Loan and Security Agreement
between such parties dated as of {Month Day,}{Year} (with any amendments,
"Agreement").

      Borrower hereby certifies to Lender that (i) the Retail Value of all
Eligible Inventory pledged to Lender is not less than $_______________; (ii) the
Inventory against which the requested disbursement of the Inventory Loan is
sought constitutes Eligible Inventory; (iii) no material adverse change has
occurred in the financial condition or in the business and operations of
Borrower since _______________, _____, the date of the last financial statements
delivered to Lender; (iv) all representations and warranties contained in the
Agreement are true and correct as of the date hereof in all material respects;
(v) neither an Event of Default nor an Incipient Default exists; and (vi)
Borrower has Performed and complied with all agreements, covenants and
conditions required by the Agreement to be Performed and complied with prior to
or at the date of the requested disbursement of the Inventory Loan.

      Except as otherwise defined herein or the context otherwise requires, all
capitalized terms used herein have the meaning given to them in the Agreement.

            DATED:  ________________, ______.

            "BORROWER"               {Borrower Name}, {Type of Borrower Entity}

                                       By:______________________________________
                                          Type/Print Name:______________________
                                          Title:________________________________

                                       33<PAGE>

                                                                        EX-10.24

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

                                 Dutch Elm, LLC

                                   as Company,

                        Sunterra Financial Services, Inc.

                                  as Servicer,

                        LaSalle Bank National Association

                       as Trustee and as Back-up Servicer,

                                    INDENTURE

                          Dated as of December 1, 1999

                                 DUTCH ELM, LLC
                                   $58,700,000
                               VACATION OWNERSHIP
                         RECEIVABLES-BACKED NOTES 1999-B

                               7.52% CLASS A NOTES

                               8.00% CLASS B NOTES

                               8.83% CLASS C NOTES

--------------------------------------------------------------------------------
<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

PRELIMINARY STATEMENT..........................................................1
GRANTING CLAUSES...............................................................2

       ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.1.   Definitions.....................................................4
Section 1.2.   Acts of Noteholders.............................................4
Section 1.3.   Notices, etc. to Trustee, Company and Servicer..................5
Section 1.4.   Notices to Noteholders; Waiver..................................8
Section 1.5.   Effect of Headings and Table of Contents........................9
Section 1.6.   Successors and Assigns..........................................9
Section 1.7.   Severability....................................................9
Section 1.8.   Benefits of Indenture...........................................9
Section 1.9.   Legal Holidays..................................................9
Section 1.10.  Governing Law..................................................10
Section 1.11.  Counterparts...................................................10

                              ARTICLE II. NOTE FORM

Section 2.1.   Form Generally.................................................10
Section 2.2.   Form of Class A, B and C Note..................................10

                             ARTICLE III. THE NOTES

Section 3.1.   Designation of Notes; Certain Related Provisions...............17
Section 3.2.   Denominations..................................................18
Section 3.3.   Execution, Authentication, Delivery and Dating.................18
Section 3.4.   Registration, Registration of Transfer and Exchange............19
Section 3.5.   Limitation on Transfer and Exchange............................20
Section 3.6.   Mutilated, Destroyed, Lost or Stolen Notes.....................20
Section 3.7.   Payment of Principal and Interest..............................21
Section 3.8.   Persons Deemed Owners..........................................22
Section 3.9.   Cancellation...................................................22
Section 3.10.  Tax Treatment..................................................22

              ARTICLE IV. AUTHENTICATION AND DELIVERY OF THE NOTES

Section 4.1.   General Provisions.............................................22
Section 4.2.   Security for Notes.............................................23

                                       i
<PAGE>

Section 4.3.   Delivery of Mortgage Loans.....................................23

                      ARTICLE V. SATISFACTION AND DISCHARGE

Section 5.1.   Satisfaction and Discharge of Indenture........................24
Section 5.2.   Application of Money Held in Trust.............................25
Section 5.3.   Discharge of Security Interest.................................25

                              ARTICLE VI. REMEDIES

Section 6.1.   Events of Default..............................................26
Section 6.2.   Acceleration of Maturity, Rescission and Annulment.............27
Section 6.3.   Remedies.......................................................29
Section 6.4.   Trustee May File Proofs of Claim...............................30
Section 6.5.   Trustee May Enforce Claims without Possession of Notes.........31
Section 6.6.   Allocation of Money Collected..................................31
Section 6.7.   Limitation on Suits............................................32
Section 6.8.   Unconditional Right of Noteholders to Receive Principal and
                   Interest...................................................32
Section 6.9.   Restoration of Rights and Remedies.............................33
Section 6.10.  Rights and Remedies Cumulative.................................33
Section 6.11.  Delay or Omission Not Waiver...................................33
Section 6.12.  Control by Noteholders.........................................33
Section 6.13.  Waiver of Past Defaults........................................34
Section 6.14.  Undertaking for Costs..........................................34
Section 6.15.  Sale of Trust Estate...........................................35
Section 6.16.  Action on Notes................................................36
Section 6.17.  Company Bankruptcy.............................................36

                            ARTICLE VII. THE TRUSTEE

Section 7.1.   Certain Duties and Responsibilities............................36
Section 7.2.   Notice of Default, Cure, Waiver or Rating Action...............38
Section 7.3.   Certain Rights of Trustee......................................38
Section 7.4.   Not Responsible for Recitals or Issuance of Notes..............39
Section 7.5.   May Hold Notes.................................................41
Section 7.6.   Money Held in Trust............................................41
Section 7.7.   Compensation and Reimbursement.................................41
Section 7.8.   Corporate Trustee Requirement; Eligibility.....................42
Section 7.9.   Resignation and Removal; Appointment of Successor..............43
Section 7.10.  Acceptance of Appointment by Successor.........................44
Section 7.11.  Merger, Conversion, Consolidation or Succession to
                   Business of Trustee........................................45

                                       ii
<PAGE>

Section 7.12.  Co-trustees and Separate Trustees..............................45
Section 7.13.  Rights with Respect to the Servicer............................47
Section 7.14.  Servicer as Agent and Bailee of Trustee........................47
Section 7.15.  Representations and Warranties of the Trustee..................48

                     ARTICLE VIII. CONSOLIDATION AND MERGER

Section 8.1.   Company May Not Consolidate, etc...............................49

                       ARTICLE IX. SUPPLEMENTAL INDENTURES

Section 9.1.   Supplemental Indentures without Consent of Noteholders.........50
Section 9.2.   Supplemental Indentures with Consent of Noteholders............51
Section 9.3.   Execution of Supplemental Indentures...........................52
Section 9.4.   Effect of Supplemental Indentures..............................52
Section 9.5.   Reference in Notes to Supplemental Indenture...................52

                         ARTICLE X. REDEMPTION OF NOTES

Section 10.1.  Redemption at the Option of the Servicer; Election To Redeem...53
Section 10.2.  Notice of Redemption by the Company............................53
Section 10.3.  Deposit of the Redemption Price................................54
Section 10.4.  Notes Payable on Redemption Date...............................54
Section 10.5.  Sale for Purposes of Redemption................................55

                              ARTICLE XI. COVENANTS

Section 11.1.  Payment of Principal and Interest..............................56
Section 11.2.  Maintenance of Office or Agency................................56
Section 11.3.  Money for Note Payments To Be Held in Trust....................56
Section 11.4.  Corporate Existence............................................57
Section 11.5.  Protection of Trust Estate.....................................58
Section 11.6.  Negative Covenants.............................................58
Section 11.7.  Statement as to Compliance.....................................59
Section 11.8.  Investment Company Act.........................................60
Section 11.9.  Enforcement of Servicing Agreement and Sale Agreement..........60
Section 11.10. Taxes..........................................................60
Section 11.11. Company Ownership..............................................60
Section 11.12. Nonconsolidation...............................................60
Section 11.13. Representations and Warranties and Covenants...................62
Section 11.14. Opinions as to Trust Estate....................................67
Section 11.15. Indemnification by the Company.................................67

                                      iii
<PAGE>

                 ARTICLE XII. ACCOUNTS, ACCOUNTINGS AND RELEASES

Section 12.1.  Collection of Money............................................67
Section 12.2.  Accounts.......................................................68
Section 12.3.  Reliance on Representations and Warranties.....................71
Section 12.4.  Notice of Incorrect Representations and Warranties.............71
Section 12.5.  Misrepresentations.............................................72
Section 12.6.  Mandatory Repurchase Obligation................................72
Section 12.7.  Subsequent Loans...............................................74
Section 12.8.  Reports by Trustee to Noteholders..............................74
Section 12.9.  Accounting by Trustee to Company...............................75
Section 12.10. Trust Estate...................................................75
Section 12.11. Allocation of Losses...........................................76

                       ARTICLE XIII. APPLICATION OF MONIES

Section 13.1.  Disbursements of Monies out of Collection Account..............77

                                       iv
<PAGE>

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

EXHIBIT D      Form of Certificate with respect to Pre-Paid
               Mortgage Loans

EXHIBIT E      Form of Mortgage and Mortgage Note

                                       v
<PAGE>

         This INDENTURE, dated as of December 1, 1999 (herein, as amended from
time to time as permitted hereby, called the "Indenture"), is entered into by
and among Dutch Elm, LLC, a Nevada limited liability company (together with its
permitted successors and assigns, the "Company"), Sunterra Financial Services,
Inc., a Nevada corporation, as servicer (herein, together with its permitted
successors and assigns, called the "Servicer") and LaSalle Bank National
Association, 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 Dutch Elm, LLC Vacation Ownership
Receivables-Backed Notes 1999-B, consisting of four classes (the "Class A
Notes", the "Class B Notes" and the "Class C Notes", 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 Notes, the Class B
Notes and the Class C Notes.

                                                                  INITIAL
                                            NOTE                   NOTE
                                          INTEREST               PRINCIPAL
DESIGNATION                                 RATE                  BALANCE
-----------                                 ----                  -------

Class A                                     7.52%               $33,700,000
Class B                                     8.00%               $15,000,000
Class C                                     8.83%               $10,000,000

         The Mortgage Loans have an Outstanding Pool Balance as of the Cut-off
Date equal to $65,169,974.

         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
<PAGE>

created hereby, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged.

                               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, whether now owned or hereafter acquired in
and to the Mortgage Loans and the Mortgage Collateral, 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 Dutch Elm Loan Sale Agreement, the rights of the Company under
the Servicing Agreement, all monies received or held by the Servicer in respect
of the Mortgage Loans and the Mortgage Collateral, all proceeds with respect to
the foregoing, including, without limitation, all funds deposited in the
Collection Account, the related Lock-Box Accounts and the Reserve Account and
all Permitted Investments made with such funds, and all rights to enforce the
foregoing.

         Such Grants are made 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 B Notes to payments on the Class A Notes and on the Class
C Notes to payments on the Class A and Class B 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.

         In the case of Initial Mortgage Loans which have been prepaid in full
on or after the Cut-off Date and prior to December 1, 1999, or with respect to
Subsequent Loans which have been prepaid in full on or after the Subsequent Cut-
off Date and prior to the Subsequent Transfer Date, the Company, in lieu of

                                       2
<PAGE>

Granting such Mortgage Loans to the Trustee, will deliver on the Closing Date,
or Subsequent Transfer Date, as applicable, to the Company, or as the Company
may direct, an officer's certificate in substantially the form set forth in
Exhibit D hereto and deposit into the Collection Account on the Closing Date or
the Subsequent Transfer Date, as applicable, all moneys (together with all
earnings, dividends, distributions, income and profits relating thereto)
received or held by the Servicer or on deposit in any Lock-box Account in
respect of such prepaid Mortgage Loans.

         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 this
Indenture, any of the Mortgage Loans, the Dutch Elm Loan 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 this Indenture, the
Mortgage Loans, the Dutch Elm Loan Sale Agreement, the Servicing Agreement or
the Note Purchase Agreement, settle or compromise any claim arising under any of
this Indenture, the Mortgage Loans, the Dutch Elm Loan 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 this Indenture, the Mortgage Loans, the Dutch Elm Loan Sale
Agreement, the Servicing Agreement or the Note Purchase Agreement, to
arbitration thereunder.

         The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions of this Indenture, agrees to act as Paying Agent
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 Dutch Elm Loan 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.

                                       3
<PAGE>

                                  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 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.

                                       4
<PAGE>

(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:
                  Dutch Elm, LLC
                  9921 Covington Cross Drive
                  Suite 105-E
                  Las Vegas, Nevada 89134
                  Attention:  Carol W. Sullivan

                  With a copy to:

                  Richard Goodman and Thomas Bell
                  Sunterra Corporation
                  1781 Park Center Drive
                  Orlando, Florida  32835

                  Servicer:
                  9921 Covington Cross Drive
                  Suite 105
                  Las Vegas, Nevada 89117
                  Attention:  Carol W. Sullivan

                                       5
<PAGE>

                  With a copy to:

                  Thomas Bell

                  SunSera Funding Corp.:
                  9921 Covington Cross Drive
                  Suite 105
                  Las Vegas, Nevada 89134
                  Attention:  Carol W. Sullivan

                  With a copy to:

                  Richard Goodman and Thomas Bell

                  Dutch Elm Holdings, Inc.
                  9921 Covington Cross Drive
                  Suite 105-D
                  Las Vegas, Nevada 89134
                  Attention:  Carol W. Sullivan

                  With a copy to:

                  Richard Goodman and Thomas Bell
                  Sunterra Corporation
                  1781 Park Center Drive
                  Orlando, Florida 32835

                  The Trustee and Back-up Servicer:
                  LaSalle Bank National Association
                  135 South LaSalle Street, Suite 1625
                  Chicago, Illinois  60674-4107
                  Transaction:  Dutch Elm 1999-B
                  Attention:  Asset Backed Security
                                      Trust Services/Dutch Elm  1999-B
                  Tel:  312-904-7895
                  Fax:  312-904-2084

                  DCR:
                  Duff & Phelps Credit Rating Co.
                  17 State Street, 12th Floor
                  New York, New York 10004
                  Attention:  Asset-Backed Monitoring Group/Timeshare

                                       6
<PAGE>

                  Noteholders:

                  Bankers United Life Assurance Company:
                  AEGON USA Investment Management, Inc.
                  Attn: Karen Amstuz
                  4333 Edgewood Road N.E.
                  Cedar Rapids, IA 52499-5112

                  J. Romeo & Co.:
                  The Canada Life Assurance Company
                  330 University Avenue, SP-12
                  Toronto, Ontario, M5G 1R8
                  Attn: Securities Accounting

                  First Columbine Life Insurance Company:
                  ING Investment Management LLC
                  5780 Powers Ferry Road, N.W.
                  Suite 300
                  Atlanta, GA 30327-4349
                  Attn: Securities Accounting

                  Life Investors Insurance Company of America:
                  AEGON USA Investment Management, Inc.
                  Attn: Karen Amstuz
                  4333 Edgewood Road N.E.
                  Cedar Rapids, IA 52499-5112

                  USG Annuity & Life Company:
                  ING Investment Management LLC
                  5780 Powers Ferry Road, N.W.
                  Suite 300
                  Atlanta, GA 30327-4349
                  Attn: Securities Accounting

                  PFL Life Insurance Company:
                  AEGON USA Investment Management, Inc.
                  Attn: Karen Amstuz
                  4333 Edgewood Road N.E.
                  Cedar Rapids, IA 52499-5112

                  Southern Farm Bureau Life Insurance Company:
                  Southern Farm Bureau Life Insurance Company
                  1401 Livingston Lane
                  Jackson, MS 39213
                  Attn: Carol Robertson

                                       7
<PAGE>

                  Nationwide Life and Annuity Insurance Company:
                  Nationwide Life and Annuity Insurance Company
                  One Nationwide Plaza (1-32-05)
                  Columbus, Ohio 43215-2220
                  Attn: Investment Accounting

                  Nationwide Life Insurance Company:
                  Nationwide Life Insurance Company
                  One Nationwide Plaza (1-32-05)
                  Columbus, Ohio 43215-2220
                  Attn: Investment Accounting

                  with a copy to
                  --------------
                  Orrick, Herrington & Sutcliffe LLP
                  666 Fifth Avenue
                  New York, New York 10103
                  Attention:  Louis H. Singer

                  Structured Finance Advisors, Inc.
                  17 Talcott Notch Road
                  Farmington, Connecticut 06032
                  Attention:  Bruce Maier

The Noteholders and Structured Finance Advisors, Inc. shall be entitled to
receive any certificate, report or material notice 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 (except notice in connection with an occurrence of an Event
of Default, which shall be delivered by overnight courier), 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 hereby acknowledges receipt of Schedule I to
the Note Purchase Agreement and agrees to include the appropriate information
therein in the Note Register.

                                       8
<PAGE>

         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

                                       9
<PAGE>

made on such date, but may be made on the next succeeding 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, B and C Note
              -----------------------------

[THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A [AND CLASS B] [AND
CLASS C] 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

                                       10
<PAGE>

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 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.

                                       11
<PAGE>

No. ________                                             Initial Note Principal
                                                 Balance of the Class [A][B][C]
                                                          Notes:  $____________
Class [A][B][C]
PPN: ________________                            Initial Note Principal Balance
                                                     of this Note $____________

                      DUTCH ELM, LLC, VACATION OWNERSHIP
                        RECEIVABLES-BACKED NOTE, 1999-B
                                CLASS [A][B][C]
                    FINAL MATURITY DATE: [_______ 15, 20__]

         Dutch Elm, LLC, a limited liability company duly organized and existing
under the laws of the State of Nevada (the "Company," which term includes any
successor entity under the Indenture referred to below), for value received,
___________ 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][B][C] 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

                                       12
<PAGE>

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 Dutch Elm, LLC Vacation Ownership Receivables-Backed
Notes 1999-B, Class [A][B][C] Notes (herein called the "Notes") issued under an
Indenture dated as of December 1, 1999 (herein called the "Indenture"), among
the Company, Sunterra Financial Services, Inc., as Servicer, LaSalle Bank
National Association, 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 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 constituting the Trust Estate as 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
10% of the Outstanding Note Balance as of the Closing Date. The Notes shall be
redeemed at a redemption price equal to the aggregate

                                       13
<PAGE>

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.

         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 Note 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 Notes are issuable only in registered form without coupons in such
authorized denominations as provided in the

                                       14
<PAGE>

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]

                                       15
<PAGE>

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

                                            [                         ]

                                            BY_________________________________

Attest:

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

                                       16
<PAGE>

                              [FORM OF TRUSTEE'S
                        CERTIFICATE OF AUTHENTICATION]

         This is one of the Class [A][B][C] Notes referred to in the within-
mentioned Indenture.

Dated:

LaSalle Bank National Association
as Trustee

By______________________
    Authorized Officer

                                  ARTICLE III.
                                   THE NOTES

Section 3.1.  Designation of Notes; Certain Related Provisions
              ------------------------------------------------

         The Class A Notes shall be designated generally as the "Dutch Elm, LLC
Vacation Ownership Receivables-Backed Notes 1999-B Class A Notes" of the
Company. The Class B Notes shall be designated generally as the "Dutch Elm, LLC
Vacation Ownership Receivables-Backed Notes 1999-B Class B Notes" of the
Company. The Class C Notes shall be designated generally as the "Dutch Elm, LLC
Vacation Ownership Receivables-Backed Notes 1999-B Class C 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 March 17, 2016. The
Class A, Class B and Class C 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, Class B and Class C Notes that may be authenticated and delivered
hereunder is limited to $33,700,000, $15,000,000 and $10,000,000, 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.

                                       17
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Section 3.2.  Denominations
              -------------

         The Notes are available in a minimum denomination of $500,000 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

                                       18
<PAGE>

evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.

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

                                       19
<PAGE>

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 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, provided, if the holder of such Note
is, or is a nominee for, an Institutional Investor with a net worth of at least
$50,000,000 and has a long term credit rating of "A" or better, such
Institutional Investor's own unsecured agreement of indemnity shall be deemed to
be satisfactory, 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

                                       20
<PAGE>

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).

         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.

                                       21
<PAGE>

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 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

                                       22
<PAGE>

          (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 Trust Estate.

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. The Servicer 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. 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

                                       23
<PAGE>

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.

                                  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
         and which have been replaced or paid as

                                       24
<PAGE>

         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.

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

                                       25
<PAGE>

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) default in the payment of 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, a Sale
         Agreement or the Note Purchase 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;

                  (3) breach of any representation or warranty of the Company or
         a Seller, as applicable, in this Indenture, a Sale Agreement, in the
         Note Purchase Agreement or in any certificate delivered by the Company
         or a Seller affirming such representations and warranties, in each case
         as of the date such representation or warranty was made, which
         representation or warranty remains uncured;

                  (4) a proceeding shall have been instituted in a court having
         jurisdiction in the premises seeking the entry of a decree or order for
         relief in respect of the Company or a Seller under the Federal
         Bankruptcy Code or any other applicable bankruptcy, insolvency or other
         similar Federal

                                       26
<PAGE>

         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, which proceeding
         shall continue undismissed and unstayed and in effect for a period of
         90 consecutive days or any of such relief sought in such proceeding
         shall have been granted; 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), 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

                                       27
<PAGE>

previously unpaid interest) shall become immediately due and payable. The
Trustee shall give notice to each Noteholder and DCR 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,
                  Class B and Class C Notes,

                    (B) the principal of any of the Class A, Class B or Class C
                  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,
                  Class B and Class C 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, Class B and Class C 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.

                                       28
<PAGE>

         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 DCR 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 reasonable reliance
upon the advice of a Person of national reputation in the field of appraisal. If
the Notes have been declared due and payable following an Event of Default and
the

                                       29
<PAGE>

Trustee does not sell or otherwise liquidate the Trust Estate, it shall continue
to hold such Trust Estate and make distributions therefrom pursuant to Section
6.6 hereof.

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

                                       30
<PAGE>

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.

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, but not less frequently than on scheduled Distribution Dates:

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

         SECOND:  To the Servicer, the Servicing Fee;

         THIRD: (in the following order) To the payment, ratably, of (i) accrued
interest on the Class A, Class B and Class C 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,
Class B and Class C Notes, in that order;

                                       31
<PAGE>

                  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.

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

                                       32
<PAGE>

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 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

                                       33
<PAGE>

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 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 100%
         of the Holders of the Outstanding Notes 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

                                       34
<PAGE>

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, transfer or other disposition (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.

(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 C
Noteholder, after all amounts owing on the Class A and Class B Notes have been
paid in full; and in the case of any Class B Noteholder, after all amounts owing
on the Class A 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 some or 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,

                                       35
<PAGE>

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 or a Seller under the Federal Bankruptcy
Code or any other applicable bankruptcy, insolvency or similar federal or state
law without the consent of the Holders 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

                                       36
<PAGE>

         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 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;

                                       37
<PAGE>

                  (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, Waiver or Rating Action
              ------------------------------------------------

         Promptly after the occurrence of any Event of Default known to the
Trustee, the Trustee shall transmit by registered first class mail and facsimile
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.

         The Trustee shall provide to each Noteholder notice of any rating
action taken against the Notes by DCR promptly after receipt.

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 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

                                       38
<PAGE>

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 taken as

                                       39
<PAGE>

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, a
Seller or the Servicer with any covenant or the breach by the Company, a 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, a Seller, the
Servicer or any Mortgagor, any action of the Servicer or a Seller taken in the
name of the Trustee, or the validity of the Servicing Agreement or a 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

                                       40
<PAGE>

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 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 agrees:

                  (a) to pay the Trustee the Trustee Fee, in accordance with
         Section 13.1 hereof, 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

                                       41
<PAGE>

         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 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, the Noteholders
and DCR. 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.

                                       42
<PAGE>

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.

(c) The Trustee may be removed at any time by Act of the Majority Holders,
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

                                       43
<PAGE>

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 Majority Holders 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 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

                                       44
<PAGE>

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. 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 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
(including for purposes of foreclosure), 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

                                       45
<PAGE>

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 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

                                       46
<PAGE>

     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 Servicer 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.

Section 7.14.  Servicer as Agent and Bailee of Trustee
               ---------------------------------------

         Solely for the purpose of perfection of the lien of this Indenture,
each of the Trustee and the Servicer 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

                                       47
<PAGE>

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 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,

                                       48
<PAGE>

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 represents that it has used commercially reasonable best
efforts to cure deficiencies with regards to the manipulation or calculation of
dates beyond December 31, 1999 in the internally maintained computer software
systems used by the Trustee in the conduct of its trust business which
materially and adversely affect its ability to perform its obligations under
this Indenture. The Trustee further represents that it will use commercially
reasonable best efforts to obtain reasonable assurances from each third party
vendor of licensed computer software systems used by the Trustee in the conduct
of its trust business that such vendors shall use commercially reasonable
efforts to cure any deficiencies with regards to the manipulation or calculation
of dates beyond December 31, 1999 and such systems shall contain no deficiencies
with regards to the manipulation or calculation of dates beyond December 31,
1999 which would materially and adversely affect the ability of the Trustee to
perform its obligations under this Indenture.

                                 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.

                                       49
<PAGE>

                                  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) 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.

                                       50
<PAGE>

(b) Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to this Section, the Company shall deliver to
DCR and each Noteholder by overnight mail, 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 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

                                       51
<PAGE>

(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 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

                                       52
<PAGE>

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 Servicer; Election To Redeem
               ------------------------------------------------------------

     The Servicer shall have the right to purchase all, but not less than all,
the Mortgage Loans at the Purchase 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 10% of the aggregate
Outstanding Note Balance as of the Closing Date. The Funds represented by such
Purchase Price shall be used to redeem the Notes in whole, but not in part, at
the Redemption Price, with the excess to be paid to the Company.

     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 Servicer to cause the redemption of the 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 Outstanding Notes from
monies deposited with the Trustee pursuant to Section 10.3.

Section 10.2.  Notice of Redemption by the Company
               -----------------------------------

     Notice of redemption pursuant to Section 10.1 shall be given by facsimile
and registered 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

                                       53
<PAGE>

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 Servicer to be
maintained as provided in Section 11.2.

     Notice of redemption of Notes shall be given by the Servicer or, at
the Servicer 's request, by the Trustee in the name and at the expense of the
Servicer. 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
Servicer shall deposit with the Trustee or with the Paying Agent an amount of
monies sufficient to pay the Redemption Price of all Outstanding Notes 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 Servicer 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 Redemption Date, become due and
payable at the Redemption Price and on such Redemption Date (unless the Servicer
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.

                                       54
<PAGE>

     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 Servicer Request, the Servicer may direct the Trustee to sell the
Mortgage Loans securing the Notes called for redemption for the purpose of
redeeming the Outstanding Notes in accordance with Section 10.1. The Servicer
Request 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 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
Servicer Request, the Trustee shall employ its best efforts to sell the Mortgage
Loans on the terms and conditions specified therein; provided, however, the
Trustee may only sell such Mortgage Loans if (x) no Event of Default shall be
continuing and (y) the amounts required to have been deposited by the Servicer
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
Servicer transferring the Company's 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.

                                       55
<PAGE>

                                  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.

                                       56
<PAGE>

     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 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 shall 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 Nevada, 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

                                       57
<PAGE>

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 or its
operating agreement.

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 Trust Estate 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 12.6 and 12.7); 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

                                       58
<PAGE>

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) (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

(v) 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

(vi) 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

(vii)  engage in any business not permitted by its Operating Agreement; or

(viii) obtain or carry insurance relating to the Mortgage Loans separate from
that required by the Servicing Agreement, unless the Trustee and the Noteholders
shall have the same rights with respect thereto as they have 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, within
30 days after each December 31, March 31, June 30 and September 30 (commencing
December 31, 1999 with the written statement delivered on such date covering the
period from the Closing Date through June 30, 1999), 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

                                       59
<PAGE>

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 twelve-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 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 promptly take all actions necessary, and diligently
pursue all remedies available to it, to enforce the obligations of the Servicer
under the Servicing Agreement and Dutch Elm Holdings, Inc. under the Dutch Elm
Loan 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

                                       60
<PAGE>

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 Note Purchase 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;

         (c) it will not permit the Sellers (other than the Managing
Member), 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 Agreements, 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 Sun Funding, Inc., Terra Loans Corp.
and the Company will disclose that the assets of the Company are not available
to pay creditors of Sun Funding, Inc., Terra Loans Corp. 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 Sunterra Financial
Services, 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;

                                       61
<PAGE>

         (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 as of the Closing Date and with respect to any Subsequent Transfer
Date, 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 Dutch Elm
Loan 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 Dutch Elm
Loan 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

                                       62
<PAGE>

this Indenture, the Dutch Elm Loan 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
Dutch Elm Loan Sale Agreement, the Servicing Agreement and the Note Purchase
Agreement and to perform all of its obligations under this Indenture, the Dutch
Elm Loan 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 Dutch Elm Loan 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 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 Dutch Elm Loan 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,

                                       63
<PAGE>

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 Dutch
Elm Loan 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, 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 Dutch Elm Loan Sale Agreement, the Servicing Agreement or
the Note Purchase

                                       64
<PAGE>

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 issued a certificate of occupancy and
have been completed as required by all 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.

         (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 9921 Covington Cross Drive, Suite
105-E, Las Vegas, Nevada.

                                       65
<PAGE>

         (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 or any Affiliate.

         (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 Dutch Elm Loan 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 or other property on or in respect of a
Mortgage Loan, then, not later than the Business Day following receipt thereof,
the Company shall transfer such Remittance to the Servicer.

         (v) Management. Other than the Managing Member, 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.

         (x) Payment of Review and Renewal Fees. The Company will pay or cause
             ----------------------------------
to be paid to DCR, the annual rating review and renewal fee in respect of the
Notes.

         (y) Form of Mortgage. Each Mortgage or deed of trust and Mortgage Note
             ----------------
is substantially in the form of the Mortgage and Mortgage Note attached as
Exhibit E hereto.

                                       66
<PAGE>

Section 11.14.  Opinions as to Trust Estate.
                ---------------------------
         On or before the date which is 30 days 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 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.

Section 11.15.  Indemnification by the Company.
                ------------------------------

         The Company shall indemnify, defend and hold harmless the
Noteholders and the Trustee from and against any loss, liability or expense
incurred by reason of the Company's gross negligence, willful misfeasance or bad
faith in the performance of its obligations and duties hereunder, reckless
disregard of its obligations and duties hereunder or breach of any provision
hereof.

                                 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

                                       67
<PAGE>

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 Bank National Association), a trust account denominated
"Collection Account -- Dutch Elm, LLC Vacation Ownership Receivables-Backed
Notes 1999-B". 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 (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

                                       68
<PAGE>

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 -- Dutch Elm, LLC Vacation Ownership
Receivables-Backed Notes 1999-B" (the "Reserve Account"), which shall have the
characteristics set forth in this Section 12.2(b). 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 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

                                       69
<PAGE>

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.

         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 Reserve Account in error and remit the same to the Servicer
or as the Servicer may direct.

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

                                       70
<PAGE>

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 the Granting Clause, Section 11.13 above and
Section 3 of the Dutch Elm Loan Sale Agreement, and further agrees that such
Persons are entitled to so rely thereon. The representations and warranties in
the Granting Clause and Section 11.13 above shall survive the Grant of the Trust
Estate 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.

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 Dutch Elm Loan 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,

                                       71
<PAGE>

incorrect or misleading, such party shall promptly deliver to the other parties
hereto, to DCR and the applicable 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 Agreements 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, in writing, 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 such 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
a 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 after the expiration of the 90-day cure period
described in Section 12.5 hereof, related to such 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)

                                       72
<PAGE>

of a Sale Agreement is made, or notice thereof is given, the related Seller, at
its election, may in substitution for such Defective Mortgage Loan sell a
Substitute Mortgage Loan to the Company, which will then pledge such Substitute
Mortgage Loan to the Trustee 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.

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

                                       73
<PAGE>

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;

         (iv) in connection with Subsequent Loans sold by Blue Bison Funding
Corp. to Dutch Elm Holdings, Inc., the Company delivers a release with respect
to such Subsequent Loans executed by Barton Capital Corporation; and

         (v) 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

                                       74
<PAGE>

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 and DCR. 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 DCR and the Holders of Notes to be 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

                                       75
<PAGE>

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.

Section 12.11.  Allocation of Losses
                --------------------

         On each Distribution Date, to the extent the sum of (i) amounts to be
distributed pursuant to clause "seventeenth" of Section 13.1 and (ii) amounts on
deposit in the Reserve Account, are insufficient to cover 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, 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 such Realized Losses, 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 C Notes, until
                                              -----
the remaining principal balance thereof has been reduced to zero; and second, to
                                                                      ------
the Class B Notes, until the remaining principal balance thereof has been
reduced to zero; and third, to the Class A 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.

                                       76
<PAGE>

                                 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;

         second, to the Servicer, the Servicing Fee;
         ------
         third, to the Reserve Account, the amount of any unreimbursed P&I
         -----
Advances related to prior Distribution Dates;

         fourth, to the holders of the Class A 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 B 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 C 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 Notes, the Unpaid Principal
         -------
Shortfall for such class and the Class A 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 B Notes, the Unpaid Principal
         -----
Shortfall for such class and the Class B 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;

                                       77
<PAGE>

         eleventh, to the holders of the Class C Notes, the Unpaid Principal
         --------
Shortfall for such class and the Class C 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 holders of the Class A Notes, an amount equal to,
         ----------
and in reimbursement of, all Realized Losses, if any, previously allocated to
the Class A Notes and not previously reimbursed;

         fourteenth, to the holders of the Class B Notes, an amount equal to,
         ----------
and in reimbursement of, all Realized Losses, if any, previously allocated to
the Class B Notes and not previously reimbursed;

         fifteenth, to the holders of the Class C Notes, an amount equal to, and
         ---------
in reimbursement of, all Realized Losses, if any, previously allocated to the
Class C Notes and not previously reimbursed;

         sixteenth, if a Cumulative Default Trigger has occurred and a
         ---------
Cumulative Default Trigger Cure in respect thereof has not occurred, then to the
Class A, Class B and Class C Noteholders, pro rata, in accordance with their
respective Percentage Interests, in reduction of the Outstanding Note Balance of
each such class of Notes;

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

                                       78
<PAGE>

         (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 Class C Note if such transfer would result in the Company having more than
ninety-nine (99) Noteholders in aggregate, as reflected in the Note Register, in
connection with the Class C Notes. 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 B and Class C Noteholders to receive
payments on their respective Notes are expressly subordinated to the rights of
the Noteholders with earlier alphabetical class designations to receive payments
on their respective Notes.

         (g) Subject to Section 2.3(d) of the Servicing Agreement, 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.

                                       79
<PAGE>

         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:

                                       DUTCH ELM, LLC

                                       By: Dutch Elm Holdings, Inc.

                                       By: /s/ Carol W. Sullivan
                                          ---------------------------
                                       Name:   Carol W. Sullivan
                                       Title:  Secretary

                                       SERVICER:

                                       SUNTERRA FINANCIAL SERVICES, INC.

                                       By: /s/ Carol W. Sullivan
                                          ---------------------------
                                       Name:   Carol W. Sullivan
                                       Title:  Secretary

                                       TRUSTEE AND BACK-UP SERVICER:
                                       LASALLE BANK NATIONAL ASSOCIATION

                                       By: /s/ Ryan Kutty
                                          -----------------------------
                                       Name:  Ryan Kutty
                                       Title:  Assistant Vice President

<PAGE>

                                   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 as of December 1, 1999 among Dutch Elm, LLC
         (the "Company"), Sunterra Financial Services, Inc. as servicer
         (the "Servicer"), LaSalle Bank National Association, as
         trustee (the "Trustee") and as back-up servicer (the "Back-up
         Servicer").

                                       [SELLER/ASSIGNOR]

                                       BY:________________________
                                       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>

                                   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:
<PAGE>

                                   EXHIBIT E

                      FORM OF MORTGAGE AND MORTGAGE NOTE
<PAGE>

                                  APPENDIX A

                             STANDARD DEFINITIONS

         "ACH Payments" means payments of Monthly P&I received from Mortgagors
          ------------
subscribing to the automatic debit option offered by the Servicer.

         "Act" has the meaning given in Section 1.2 of the Indenture.
          ---

         "Affiliate" means with respect to any specified Person means any other
          ---------
Person controlling or controlled by, or under common control with, such
specified Person. For the purposes of this definition, "control" when used with
                                                        -------
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" or
                                                               -----------
"controlled" have meanings correlative to the foregoing.
 ----------

         "Assignment" means, with respect to the Mortgage Loans, the original
          ----------
instruments of assignment of such Mortgage Loans in recordable form by a Seller
in blank or in the name of the Trustee on behalf of the Noteholders.

         "Back-up Servicer" means LaSalle Bank National Association, its
          ----------------
successors and assigns.

         "Bankruptcy Code" means Title 11 of the United States Code as in effect
          ---------------
from time to time.

         "Bent Creek Declaration" means the Master Deed for Bent Creek Golf
          ----------------------
Village Horizontal Property Regime dated November 4, 1997, and recorded on
November 6, 1997, in Book D612, Page 1, in the official records of the
Register's Office for Sevier County, Tennessee, as modified, amended,
supplemented and/or restated.

         "Blue Bison Loan Sale Agreement" means the Loan Sale Agreement, dated
          ------------------------------
as of December 1, 1999, between Blue Bison Funding Corp. and Dutch Elm Holdings,
Inc.

         "Business Day" means any day that is not a Saturday, Sunday or other
          ------------
day on which national banking institutions in the State of New York, the city in
which the Corporate Trust Office is located or the state in which the principal
place of business of the Servicer or, in the case of a Sub-Servicer, where such
Sub-Servicer is located, are authorized or obligated by law or executive order
to be closed.
<PAGE>

         "Charged-off Mortgage Loan" means any Mortgage Loan which is or becomes
          -------------------------
180 or more days delinquent in respect of any payment of principal or interest
or in respect of which the Servicer has received the related deed in lieu of
foreclosure, whichever is earlier.

         "Class A Current Principal Amount" means, for any Distribution Date,
          --------------------------------
the product of (x) the related Percentage Interest and (y) the Current Principal
Amount for such Distribution Date.

         "Class A Note" means any Note designated as a "Class A Note" on the
          ------------
face thereof, in the form set forth in Section 2.2 of the Indenture, and
executed, authenticated and delivered in accordance with the procedures set
forth therein.

         "Class B Current Principal Amount" means, for any Distribution Date,
          --------------------------------
the product of (x) the related Percentage Interest and (y) the Current Principal
Amount for such Distribution Date.

         "Class B Note" means any Note designated as a "Class B Note" on the
          ------------
face thereof, in the form set forth in Section 2.2 of the Indenture, and
executed, authenticated and delivered in accordance with the procedures set
forth therein.

         "Class C Current Principal Amount" means, for any Distribution Date,
          --------------------------------
the product of (x) the related Percentage Interest and (y) the Current Principal
Amount for such Distribution Date.

         "Class C Note" means any Note designated as a "Class C Note" on the
          ------------
face thereof, in the form set forth in Section 2.2 of the Indenture, and
executed, authenticated and delivered in accordance with the procedures set
forth therein.

         "Closing Date" means the date on which Notes are first executed,
          ------------
authenticated and delivered to the Noteholders.

                                      -2-
<PAGE>

         "Code" means the Internal Revenue Code of 1986, as amended.
          ----

         "Collection Account" means the account created, maintained and
          ------------------

denominated as such pursuant to Section 12.2(a) of the Indenture.

         "Collection Account Amount" means, with respect to any Distribution
          -------------------------
Date and the related Collection Period, in each case to the extent deposited in
the Collection Account, (i) Collection Period P&I received during such
Collection Period, (ii) amounts paid by a Seller pursuant to Section 12.6 of the
Indenture during the period from and including the Business Day prior to the
prior Distribution Date (or, in the case of the Initial Distribution Date, from
and including the Cut-off Date) to and including the second Business Day next
preceding such Distribution Date representing the Mortgage Purchase Price with
respect to Mortgage Loans repurchased by the Company or a Seller, as applicable,
pursuant to Section 4.3 or 12.6 of the Indenture, (iii) the Redemption Price
(iv) Insurance Proceeds and Net Liquidation Proceeds received during such
Collection Period (less any amounts withdrawn by the Trustee pursuant to Section
12.7 of the Indenture), (v) the aggregate of the portions of Prepayments
described in clauses (i), (iii) and (iv) of the definition of "Prepayment"
received during such Collection Period, (vi) interest earned on amounts on
deposit in the Lock-Box Accounts and (vii) income from the investment in
Permitted Investments of amounts deposited in the Collection Account pursuant to
the preceding clauses (i)-(vi).

         "Collection Period" means with respect to each Distribution Date, the
          -----------------
period from and including the first day of the month preceding the month in
which such Distribution Date occurs through and including the last day of such
month.

         "Collection Period P&I" means, with respect to any Collection Period,
          ---------------------
the amount equal to the aggregate of the payments of Monthly P&I received by or
on behalf of the Servicer during such Collection Period, from or on behalf of
Mortgagors.

         "Company": Dutch Elm, LLC, a Nevada limited liability company.
          -------

         "Company Order" and "Company Request": A written order or request
          -------------       ---------------
signed in the name of the Company by the Chairman of the Board, President, Vice
President, Treasurer, Assistant Treasurer, Controller, Assistant Controller,
Secretary, or an

                                      -3-
<PAGE>

Assistant Secretary of the Managing Member, and delivered to the Trustee.

         "Comparable Property" means a timeshare estate that (i) is not a
          -------------------
Mortgaged Property and (ii) entitles its owner to the same amount of time,
during the same season, in the same type of unit in the same Resort as the
related Foreclosure Property.

         "Corporate Trust Office" means the office of the Trustee at which the
          ----------------------
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is at the date hereof located at the
address provided in Section 1.3 of the Indenture hereof or at such other address
as the Trustee may designate from time to time by notice to the Noteholders, the
Company and the Servicer.

         "Cumulative Default Trigger" means, on any Distribution Date,
          --------------------------
the Cumulative Default Trigger Ratio exceeds 18%.

         "Cumulative Default Trigger Cure" means (i) with respect to a
          -------------------------------
Cumulative Default Trigger which has occurred (A) such Cumulative Default
Trigger has not continued for a period of three consecutive months, (B) all
amounts in respect of distributions due to the Class A, Class B and Class C
Notes as of such date have been paid or such amounts are on deposit in the
Reserve Account and (C) the Requisite Reserve Amount is on deposit in the
Reserve Account.

         "Cumulative Default Trigger Ratio" means, as of each Record Date, a
          --------------------------------
fraction (expressed as a percentage), the numerator of which is (i) the
Outstanding Principal Balance of all Mortgage Loans that became Defaulted
Mortgage Loans since the Closing Date and the denominator of which is the
aggregate Outstanding Pool Balance as of the Cut-off Date.

         "Current Interest Amount" means (i) with respect to an Interest Accrual
          -----------------------
Period (other than the first Interest Accrual Period) and any class of Note, the
product of the applicable Note Interest Rate and the Outstanding Note Balance of
such class of Note on the related Distribution Date (prior to the application of
distributions on such date), multiplied by a fraction, the numerator of which is
30 and the denominator of which is 360 and (ii) with respect to the first
Interest Accrual Period, and any class of Note, the product of the applicable
Note Interest Rate and the Outstanding Note Balance of such Class of Note on the
related Distribution Date (prior to the application of distributions on such
date), multiplied by a fraction, the numerator of which is the actual number of
days elapsed during such Interest Accrual Period and the denominator of which is
360.

         "Current Interest Shortfall" means, with respect to any
          --------------------------
Distribution Date and any class of Note, the excess of (i) the applicable
Current Interest Amount for such Distribution Date over (ii) the amount
distributed as interest with respect to such class for such Distribution Date.

         "Current Principal Amount" means, with respect to any Distribution Date
          ------------------------
other than the Final Distribution Date, an amount equal to the sum of

         (a)   (i) the aggregate of the respective portions of Monthly P&I and
P&I Advances allocable to principal from or on behalf of Mortgagors due during
such Collection Period,

              (ii) an amount equal to the aggregate of the respective portions
of Net Liquidation Proceeds received during such Collection Period that are
allocable to principal of the

                                      -4-
<PAGE>

related Defaulted Mortgage Loans (other than Charged-off Mortgage Loans) and
Charged-off Mortgage Loans, and

             (iii) the aggregate of the respective portions of Prepayments
allocable to principal of the related Mortgage Loans received during such
Collection Period (less any amounts withdrawn from the Collection Account by the
Trustee pursuant to Section 12.7 of the Indenture)

         minus (b) the aggregate of the respective portions of P&I
         -----
Advances allocable to principal previously withdrawn from the Reserve Account
and not reimbursed.

         On the Final Distribution Date, the Current Principal Amount shall be
an amount equal to the then current outstanding principal balance of the Notes.

         "Current Principal Shortfall" means, with respect to any Distribution
          ---------------------------
Date and any class of Note, the excess of (i) the applicable Current Principal
Amount due for such Distribution Date over (ii) the amount distributed as
principal with respect to such class for such Distribution Date.

         "Cut-off Date" means October 31, 1999.
          ------------

         "Cypress Pointe Resort Declaration" means the Declaration of
          ---------------------------------
Condominium for Cypress Pointe Resort at Lake Buena Vista, a Condominium,
recorded in O.R. Book 4443, page 2736, Public Records of Orange County, Florida,
as modified, amended, supplemented and/or restated.

         "Cypress Pointe II Declaration" means the Declaration of
          -----------------------------
Condominium for Cypress Pointe Resort II, a Condominium, dated April 19, 1996,
recorded in O.R. Book 5044, page 3557, Public Records of Orange County, Florida,
as modified, amended, supplemented and/or restated.

         "DCR" means Duff & Phelps Credit Rating Co. or its successors and
          ---
assigns. If neither such rating organization nor any successor remains in
existence, "DCR" shall be deemed to refer to such other nationally recognized
statistical rating organization or other comparable Person designated by the
Company and approved in writing by the Majority Holders, notice of which
designation shall be given to the Trustee and the Servicer, and specific ratings
of DCR herein referenced shall be deemed to refer to the equivalent ratings of
the party so designated.

         "Default Trigger I" means, on any Distribution Date the average Default
          -----------------
Trigger Ratio calculated on the basis of the three immediately preceding Record
Dates exceeds 8.5% per annum.

         "Default Trigger II" means, on any Distribution Date the average
          ------------------
Default Trigger Ratio calculated on the basis of the three immediately preceding
Record Dates exceeds 12.0% per annum.

                                      -5-
<PAGE>

         "Default Trigger III" means, on any Distribution Date the average
          -------------------
Default Trigger Ratio calculated on the basis of the three immediately preceding
Record Dates exceeds 14.5% per annum.

         "Default Trigger Ratio" means, as of each Record Date, a fraction
          ---------------------
(expressed as a percentage), the numerator of which is the product of (i) the
Outstanding Principal Balance of all Mortgage Loans that first became Defaulted
Mortgage Loans during the related Collection Period and (ii) twelve, and the
denominator of which is the aggregate Outstanding Pool Balance on such Record
Date.

         "Defaulted Mortgage Loan" means (i) any Mortgage Loan which is
          -----------------------
180 or more days delinquent in respect of any payment of principal or interest,
(ii) any Mortgage Loan with respect to which the Servicer has initiated
foreclosure proceedings with respect to the related timeshare estate or has
received the related deed in lieu of foreclosure or (iii) any Mortgage Loan in
respect of which the Servicer shall, prior to the date on which such Mortgage
Loan would otherwise become a Defaulted Mortgage Loan, determine in good faith
that future payments of Monthly P&I will not be made by the Mortgagor.

         "Defaulted Mortgage Loan Unpaid Principal Amount" means, with
          -----------------------------------------------
respect to any Distribution Date and the immediately preceding Collection
Period, the amount, if any, equal to the aggregate Outstanding Principal
Balances of all Mortgage Loans that first became Defaulted Mortgage Loans during
the related Collection Period (to the extent such principal has not previously
been distributed to Noteholders pursuant to Section 13.1 of the Indenture).

         "Defective Mortgage Loan" has the meaning given in Section 12.6(a) of
          -----------------------
the Indenture.

         "Delinquency Trigger Ratio" means, as of each Record Date, a
          -------------------------
fraction (expressed as a percentage), the numerator of which is the Outstanding
Principal Balance of all Delinquent Mortgage Loans (excluding Defaulted Mortgage
Loans) and the denominator of which is the aggregate Outstanding Pool Balance on
such Record Date.

         "Delinquent Mortgage Loan" means, so long as such Mortgage
          ------------------------
Loan is not a Defaulted Mortgage Loan, any Mortgage Loan with respect to which,
as of the end of a Collection Period, any payment of principal and interest
under the Mortgage Loan is 60 or more days past due by an amount in excess of
$20.00.

                                      -6-
<PAGE>

         "Distribution Date" means, (i) with respect to the initial
          -----------------
Collection Period, January 25, 2000, and (ii) thereafter the 25th day of each
calendar month or, if such date is not a Business Day, the next succeeding
Business Day.

         "Due Date" means, as to any installment of Monthly P&I, the
          --------
date upon which such installment is required to be paid pursuant to the related
Mortgage Note, without giving effect to any grace period permitted by such
Mortgage Note or the related Mortgage.

         "Dutch Elm Loan Sale Agreement" means the Loan Sale Agreement, dated
          -----------------------------
as of December 1, 1999, between Dutch Elm, LLC, Dutch Elm Holdings, Inc. and
Sunterra Corporation.

         "Eligible Account" means an account that is either (i)
          ----------------
maintained with a depository institution or trust company the long-term
unsecured debt obligations of which have credit ratings from DCR of "AA-" if
rated by DCR, or if not rated by DCR, from Standard & Poor's of "AA-" or from
Moody's of "Aa3", or better, or which is the principal subsidiary of a holding
company the long-term unsecured debt obligations of which are so rated or (ii)
maintained with a depository institution or trust company the commercial paper
or other short-term unsecured debt obligations of which have credit ratings in
the highest category from DCR, if rated by DCR, or if not rated by DCR, Standard
& Poor's or Moody's, or which is the principal subsidiary of a holding company
the commercial paper or other short-term unsecured debt obligations of which are
so rated, in either case which account is fully insured up to applicable limits
by the Federal Deposit Insurance Corporation; provided, however, that so long as
an account is a trust account maintained with LaSalle National Bank and its
long-term unsecured debt obligations have credit ratings from DCR of "AA-" if
rated by DCR, or if not rated by DCR, from Standard & Poor's of "AA-" or from
Moody's of "Aa3", or better, or it is the principal subsidiary of a holding
company the long-term unsecured debt obligations of which are so rated, such
account is deemed to be an Eligible Account.

         "Event of Default" has the meaning provided in Section 6.1 of
          ----------------
the Indenture.

         "Final Distribution Date" means the Distribution Date on which
          -----------------------
the final distribution in respect of the Notes is made.

         "Final Maturity Date" means March 17, 2016.
          -------------------

         "Foreclosure Property" has the meaning given in Section 2.8(b)
          --------------------
of the Servicing Agreement.

         "Foreign Noteholder" means a beneficial owner of Notes who is not,
          ------------------
for U.S. Federal income tax purposes, (i) a citizen or resident of the U.S.,
(ii) an individual present in the U.S. for 183 days or more in a taxable year,
(iii) a corporation created or organized in the U.S. or under the laws of the
U.S. or the laws of any state, (iv) an estate the income of which is includable
in gross income for U.S. tax purposes regardless of its source, or (v) a trust
if a court within the U.S. is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control substantial decisions of the trust.

                                      -7-
<PAGE>

         "Gatlinburg Town Square Declaration" means the Master Deed
          ----------------------------------
Establishing Gatlinburg Town Square dated May 20, 1986, and recorded on June 6,
1986, in Deed Book 363, Page 839, in the official records of the Recorder's
Office for Sevier County, Tennessee, as modified, amended, supplemented and/or
restated.

         "Gatlinburg Town Village Declaration" means the Master Deed
          -----------------------------------
for Town Village Resort Horizontal Property Regime dated February 4, 1999, and
recorded on February 8, 1999, in Book D648, Page 755, of the official records of
the Register's Office for Sevier County, Tennessee, as modified, amended,
supplemented and/or restated.

         "Grand Beach Declaration" means the Declaration of Condominium
          -----------------------
for Grand Beach Resort, a Condominium, dated as of January 13, 1995, and
recorded in Book 4844, page 2297, in Orange County, Florida, as modified,
amended, supplemented and/or restated.

         "Grant" means to grant, bargain, sell, warrant, alienate,
          -----
remise, release, convey, assign, transfer, mortgage, pledge, create and grant a
security interest in and right of set-off against, deposit, set over and
confirm. A Grant of the security interest in the Mortgage Loans or of any other
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including, without limitation,
the immediate and continuing right to claim, collect, receive and receipt for
payments in respect of the Mortgage Loans, or any other payment due thereunder,
to give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring proceedings in the name
of the Granting party or otherwise, and generally to do and receive anything
which the Granting party is or may be entitled to do or receive thereunder or
with respect thereto.

         "Greensprings Plantation Declaration" means the Declaration of
          -----------------------------------
Project and Timeshare instruments for Greensprings Plantation Resort, dated June
30, 1995, recorded in Deed Book 749, page 67, Clerk's Office of the Circuit
Court for James City County, Virginia, as modified, amended, supplemented and/or
restated.

         "Indenture" means the Indenture, dated as of December 1, 1999,
          ---------
among the Company, the Trustee, the Back-up Servicer and the Servicer, as
originally executed and, if from time to time supplemented or amended by one or
more indentures supplemental thereto entered into pursuant to the applicable
provisions thereof, as so supplemented or amended.

                                      -8-
<PAGE>

         "Initial Distribution Date": January 25, 2000.
          -------------------------

         "Initial Mortgage Loans" means the Mortgage Loans transferred
          ----------------------
by a Seller or the Company, as applicable, on the Closing Date.

         "Initial Reserve Account Deposit" means the product of (i) the
          -------------------------------
aggregate Outstanding Note Balance on the Closing Date and (ii) 5.0%.

         "Institutional Investor" means any "qualified institutional
          ----------------------
buyer" (as defined in Rule 144A promulgated under the Securities Act of 1933, as
amended) or any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any insurance
company, any broker or dealer, or any other similar financial institution or
entity, regardless of legal form.

         "Insurance Proceeds" means (i) proceeds of any insurance
          ------------------
policy, including property insurance policies, casualty insurance policies and
title insurance policies, and (ii) any condemnation proceeds, in each case which
relate to the Mortgage Loans or the Mortgaged Property and are paid to the
Company, the Servicer, any of their respective affiliates or to any mortgagee of
record.

         "Interest Accrual Period" means, with respect to the Initial
          -----------------------
Distribution Date, the period beginning December 16, 1999, and ending on the day
immediately preceding such Distribution Date, and with respect to any other
Distribution Date, the period beginning on the immediately preceding
Distribution Date and ending on the day immediately preceding the current
Distribution Date.

         "Lake Tahoe Declaration" means the Amended and Restated
          ----------------------
Declaration of Covenants, Conditions and Restrictions for Lake Tahoe Vacation
Ownership Resort dated May 1, 1996 and recorded May 21, 1996 as Instrument No.
31589, Book 4716, Page 518, Official Records of El Dorado County, California, as
modified, amended, supplemented and/or restated.

         "Late Fee" means, with respect to any payment of Monthly P&I
          --------
and the related Due Date, the late charge payable by the related Mortgagor in
accordance with the terms of the related Mortgage Note if such payment of
Monthly P&I is received by or on behalf of the Servicer more than the number of
days specified in such Mortgage Note following such Due Date.

                                      -9-
<PAGE>

         "Lien" means a security interest, lien, charge, pledge, equity, or
          ----
encumbrance of any kind.

         "Liquidation" means, with respect to any Defaulted Mortgage
          -----------
Loan or Charged-off Mortgage Loan, the sale of the related Mortgaged Property,
following foreclosure, other enforcement action or the taking of a deed-in-lieu
of foreclosure, to a Person other than the Servicer, a Seller or the Company
(except pursuant to Section 2.8(d) of the Servicing Agreement) and the recording
of a deed of conveyance with respect thereto.

         "Liquidation Expenses" means, with respect to the Liquidation
          --------------------
of any Defaulted Mortgage Loan or Charged-off Mortgage Loan, reasonable
out-of-pocket expenses incurred by the Servicer in connection with such
Liquidation, including without limitation, unpaid property taxes, marketing
costs incurred by the sales agent employed by the Servicer or any of its
affiliates, sales commissions payable to such sales agent and dues or
maintenance fees payable to the condominium association or timeshare
association.

         "Liquidation Proceeds" means, with respect to the Liquidation
          --------------------
of any Defaulted Mortgage Loan (other than Charged-off Mortgage Loan) or
Charged-off Mortgage Loan, amounts actually received in connection with such
Liquidation.

         "Loan Number" means, with respect to any Mortgage Loan, the
          -----------
number assigned to such Mortgage Loan by the Servicer, which number is set forth
in the Schedule of Mortgage Loans.

         "Loan Sale Agreements" means collectively, the Blue Bison Loan
          --------------------
Sale Agreement, the SunSera Loan Sale Agreement and the Dutch Elm Loan Sale
Agreement.

         "Lock-Box Account" means an account created, maintained and
          ----------------
denominated as such pursuant to Section 2.3(a) of the Servicing Agreement, which
shall be an Eligible Account.

         "Lock-Box Bank" means a depository institution or any
          -------------
successor thereto at which a Lock-Box Account is established.

         "Lost Note Affidavit" means, the affidavit to be executed in
          -------------------
connection with any delivery of a copy of an original

                                     -10-
<PAGE>

Mortgage Note in lieu of such original, substantially in the form attached as
Exhibit B to the Indenture.

         "Maintenance Fee" means the fee denominated as the "service
          ---------------
fee" payable by each Mortgagor according to the terms of the related Mortgage
Note on each Due Date.

         "Majority Holders" means the Holders of Outstanding Notes
          ----------------
evidencing Percentage Interests that in the aggregate equal 51% or more of the
aggregate of the denominations of all Outstanding Notes.

         "Managing Member" means Dutch Elm Holdings, Inc., a Nevada
          ---------------
corporation.

         "Maturity Date" means, with respect to any Mortgage Loan, the
          -------------
date on which the last payment of Monthly P&I in respect of such Mortgage Loan
shall be due and payable as specified on the Schedule of Mortgage Loans.

         "Miscellaneous Payments" means, with respect to any Mortgage
          ----------------------
Loan, any amounts received from or on behalf of the related Mortgagor
representing assessments, payments relating to real property taxes, insurance
premiums, condominium association fees, Maintenance Fees and any other payments
not allocable to Monthly P&I under the Mortgages.

         "Monthly P&I" means, with respect to any Mortgage Loan and any
          -----------
Collection Period, the payment of principal and interest due in such Collection
Period pursuant to the related Mortgage Note.

         "Moody's" means Moody's Investors Service, Inc. or its
          -------
successor in interest. If neither such rating agency nor any successor remains
in existence, "Moody's" shall be deemed to refer to such other nationally
recognized statistical rating agency or other comparable Person designated by
the Company, and approved in writing by the Majority Holders, notice of which
designation shall be given to the Trustee and the Servicer, and specific ratings
of Moody's herein referenced shall be deemed to refer to the equivalent ratings
of the party so designated.

         "Mortgage" means the original mortgage, deed of trust or other
          --------
instrument creating a first lien on the Mortgaged Property securing a Mortgage
Loan.

         "Mortgage Collateral" means, with respect to any Mortgage, all
          -------------------
property and rights at any time pledged to secure

                                     -11-
<PAGE>

such Mortgage and all proceeds thereof, together with all rights of the Company
under the Mortgage Loan Documents.

         "Mortgage Files" means the Mortgage Loan Documents and other
          --------------
papers and computerized records customarily maintained by the Servicer in
servicing mortgage loans comparable to the Mortgage Loans.

         "Mortgage Loan" means each loan listed on the Schedule of
          -------------
Mortgage Loans, evidenced by a Mortgage Note and secured by a Mortgage,
including any Substitute Mortgage Loans and Subsequent Loans, but excluding any
such loan which has been released from the lien of the Indenture pursuant to the
terms thereof. Unless the context otherwise requires, the term "Mortgage Loan"
shall include all collateral securing such Mortgage Loan.

         "Mortgage Loan Coupon Rate" means, with respect to any
          -------------------------
Mortgage Loan, the per annum rate of interest set forth in the related Mortgage
Note, used to calculate the interest payment due on such Mortgage Loan.

         "Mortgage Loan Documents" means, with respect to each Mortgage
          -----------------------
Loan and each Mortgagor:

          (i) an original Mortgage Note, executed by the Mortgagor for
          such Mortgage Loan, endorsed in blank (either directly on the
          Mortgage Note or on an allonge affixed thereto), by an
          authorized officer of the originator and showing a complete
          chain of endorsements from the original payee of the Mortgage
          Note to the Trustee:

                    "Pay to the order of _____________, without recourse",

          or if an original Mortgage Note is not available, a copy thereof
          accompanied by an original executed Lost Note Affidavit;

          (ii) an original Mortgage (or a copy thereof certified (which
          may be a blanket certification) by an authorized officer of
          the related originator) with evidence that such Mortgage has
          been recorded in the appropriate recording office;

          (iii) an original assignment of the Mortgage (which may be a
          part of a blanket assignment of more than one Mortgage Loan),
          from the related originator to the

                                     -12-
<PAGE>

         Trustee, in recordable form but unrecorded, signed by an authorized
         officer of originator;

         (iv) an original lender's title insurance policy or master
         policy (or a copy thereof) referencing such Mortgage Loan and
         covering the Trustee for the benefit of the Noteholders; and

         (v) an original of each guarantee, assumption, modification or
         substitution agreement, if any, which relates to the related
         Mortgage Loan (or copy thereof certified by an officer of the
         related originator to be a true and correct copy).

         "Mortgage Note" means the original note or other instrument of
          -------------
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.

         "Mortgage Purchase Price" means, for any Mortgage Loan, the
          -----------------------
Outstanding Principal Balance of the Mortgage Loan together with all interest
thereon accrued at the Mortgage Loan Coupon Rate but unpaid as of the end of the
Collection Period preceding the date of purchase, as calculated by the Servicer.

         "Mortgaged Property" means the timeshare estate at the Resort
          ------------------
which secures a Mortgage Loan.

         "Mortgagor" means, collectively, the obligor or obligors on a
          ---------
Mortgage Note.

         "Net Liquidation Proceeds" means, with respect to any Mortgage
          ------------------------
Loan, the amount derived by subtracting from the Liquidation Proceeds the
related Liquidation Expenses.

         "Note" means any Class A Note, Class B Note or Class C Note, in each
          ----
case authenticated by the Trustee.

         "Noteholder" or "Holder" means the Person in whose name a Note
          ----------      ------
shall be registered in the Note Register, except that, solely for the purposes
of giving consent or granting approval pursuant to the Indenture or the
Servicing Agreement, the interest evidenced by any Note registered in the name
of the Company, a Seller or the Servicer, or any Affiliate of the Company, a
Seller or the Servicer, shall not be taken into account in determining whether
the requisite percentage necessary to effect any such consent shall have been
obtained.

                                     -13-
<PAGE>

         "Note Interest Rate" means (i) with respect to the Class A
          ------------------
Notes, 7.52% per annum; (ii) with respect to the Class B Notes, 8.00% per annum;
and (iii) with respect to the Class C Notes, 8.83% per annum, as applicable,
each based on a 360-day year consisting of twelve 30-day months.

         "Note Purchase Agreement" means the Note Purchase Agreement,
          -----------------------
dated as of December 16, 1999, among the Company and the purchasers named
therein.

         "Note Register" and "Note Registrar" mean the register
          -------------       --------------
maintained and the registrar appointed pursuant to Section 3.4 of the Indenture.

         "Officer's Certificate" means a certificate signed by the
          ---------------------
Chairman, the President, the Executive Vice President, a Vice President, the
Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the
Secretary or an Assistant Secretary, of the Person delivering such certificate.

         "Opinion of Counsel" means a written opinion of counsel
          ------------------
reasonably acceptable to the Trustee (who may, unless otherwise provided herein,
be counsel to the Company or the Servicer) reasonably acceptable in form and
substance to the Trustee.

         "Original Principal Balance" means, with respect to any
          --------------------------
Mortgage Loan, the principal balance of the related Mortgage Note at its date of
origination.

         "Outstanding": With respect to the Notes, as of the date of
          -----------
determination, all Notes theretofore authenticated and delivered under the
Indenture except:

         (i)  Notes theretofore canceled by the Note Registrar or delivered to
         the Note Registrar for cancellation; and

         (ii) Notes in exchange for or in lieu of which other Notes have been
         authenticated and delivered pursuant to the Indenture;

provided, however, that for purposes of determining whether the Holders of the
requisite principal amount of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver, Notes owned by the
Company, the Servicer or a Seller or any Affiliate of the Company, the Servicer
or a Seller shall be disregarded and deemed not to be

                                     -14-
<PAGE>

outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent, or waiver, only Notes which the Trustee knows to be so owned shall be
so disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company, the Servicer or a Seller or any Affiliate of the
Company, the Servicer or a Seller.

        "Outstanding Note Balance" means on any date of determination
         ------------------------
and with respect to any class of Notes, the original principal balance of the
Outstanding Notes of such class as of the Closing Date, reduced by (a) the sum
of all payments of principal paid to such class of Outstanding Notes on all
prior Distribution Dates and (b) the amount equal to (i) any Realized Losses
applied to any such class of Outstanding Notes pursuant to Section 12.11 of the
Indenture less (ii) (A) with respect to the Class A Notes, any payment in
          ----
reimbursement of Realized Losses pursuant to clause "thirteenth" of Section
                                                     ----------
13.11 of the Indenture, (B) with respect to the Class B Notes, any payment in
reimbursement of Realized Losses pursuant to clause "fourteenth" of Section
                                                     ----------
13.11 of the Indenture, and (C) with respect to the Class C Notes, any payment
in reimbursement of Realized Losses pursuant to clause "fifteenth" of Section
                                                        ---------
13.11 of the Indenture.

         "Outstanding Pool Balance" means, as of any date of
          ------------------------
determination, the aggregate Outstanding Principal Balance of the Mortgage
Loans.

         "Outstanding Principal Balance" means, as of any date of
          -----------------------------
determination, with respect to any Mortgage Loan, the Original Principal Balance
thereof as reduced by the amount of principal payments made by or on behalf of
the related Mortgagor (excluding P&I Advances) prior to such date of
determination.

         "Ownership Interest" means as to any Note, any ownership or
          ------------------
security interest in such Note as the Holder thereof and any other interest
therein, whether direct or indirect, legal or beneficial, as owner or pledgee.

         "Parent":  Sunterra Corporation, a Maryland corporation.
          ------

                                     -15-
<PAGE>

         "Paying Agent": LaSalle Bank National Association, as paying
          ------------
agent under the Indenture, or if LaSalle Bank National Association, is not also
the Trustee, any successor Trustee appointed pursuant to the Indenture.

         "P&I Advances" has the meaning given in Section 2.6 of the
          ------------
Servicing Agreement.

         "Percentage Interest" means, as to any class of Notes, a
          -------------------
fraction, the numerator of which is equal to the aggregate Outstanding Note
Balance of the Notes of such class as of the Closing Date, and the denominator
of which is equal to the aggregate Outstanding Note Balance of all of the Notes
as of the Closing Date.

          "Permitted Encumbrances" means, as to any Mortgaged Property,
           ----------------------
(a) the lien of current real property taxes, ground rents, water charges, sewer
rents and assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record, none
of which, individually or in the aggregate, materially interferes with the
current use of the Mortgaged Property or the security intended to be provided by
the related Mortgage or with the Mortgagor's ability to pay his or her
obligations when they become due or materially and adversely affects the value
of the Mortgaged Property and (c) the exceptions (general and specific) set
forth in the related title insurance policy, none of which, individually or in
the aggregate, materially interferes with the security intended to be provided
by such Mortgage or with the Mortgagor's ability to pay his or her obligations
when they become due or materially and adversely affects the value of the
Mortgaged Property.

         "Permitted Investments" means any one or more of the following
          ---------------------
obligations or securities:

         (i) direct obligations of, or obligations fully guaranteed as
         to timely payment of principal and interest by, the United
         States or any agency or instrumentality thereof (having
         original maturities of not more than 365 days), provided such
         obligations are fully backed by the full faith and credit of
         the United States. Such obligations must be limited to those
         instruments that have a predetermined fixed dollar amount of
         principal due at maturity that cannot vary or change. If
         rated, such an obligation must not have an "r" or "t"
         highlighter affixed to its rating by Standard & Poor's or the
         equivalent indicator affixed

                                     -16-
<PAGE>

         by any other Rating Agency. Interest may either be fixed or variable.
         If such interest is variable, interest must be tied to a single
         interest rate index plus a single fixed spread (if any), and move
         proportionately with that index;

         (ii) repurchase obligations with respect to any security described in
         clause (i) above (having original maturities of not more than 365
         days), provided that the short-term deposit or unsecured debt
         obligations of the party agreeing to repurchase such obligations are
         rated in the highest rating category of DCR, if rated by DCR, or if not
         rated by DCR, by either of Moody's or Standard & Poor's or such lower
         rating as will not result in qualification, downgrading or withdrawal
         of the ratings then assigned to the Notes, as evidenced in writing by
         the Rating Agencies. In addition, any such item must not have an "r" or
         "t" highlighter affixed to its rating by Standard & Poor's or the
         equivalent indicator affixed by any other Rating Agency, and its terms
         must have a predetermined fixed dollar amount of principal due at
         maturity that cannot very or change. Interest may either by fixed or
         variable. If such interest is variable, interest must be tied to a
         single interest rate index plus a single fixed spread (if any), and
         move proportionately with that index ;

         (iii) Notes of deposit, time deposits, demand deposits and acceptances
         of any bank or trust company organized under the laws of the United
         States or any state thereof (having original maturities of not more
         than 365 days), the unsecured short term obligations of which are rated
         in the highest rating category of DCR, if rated by DCR, or if not rated
         by DCR, by either of Moody's or Standard & Poor's or such lower rating
         as will not result in qualification, downgrading or withdrawal of the
         ratings then assigned to the Notes, as evidenced in writing by the
         Rating Agencies. In addition, any such item must not have an "r" or "t"
         highlighter affixed to its rating by Standard & Poor's or the
         equivalent indicator affixed by any other Rating Agency, and its terms
         should have a predetermined fixed dollar amount of principal due at
         maturity that cannot vary or change. Interest may either be fixed or
         variable. If such interest is variable, interest must be tied to a
         single interest rate index plus a single fixed spread (if any), and
         move proportionately with that index;

                                     -17-
<PAGE>

         (iv) commercial paper (having original maturities of not more than 365
         days) of any corporation (other than an Affiliate of the Company)
         incorporated under the laws of the United States or any state thereof
         (or if not so incorporated, the commercial paper is United States
         dollar denominated and amounts payable thereunder are not subject to
         any withholding imposed by any non-United States jurisdiction) which is
         rated in the highest rating category of DCR, if rated by DCR, or if not
         rated by DCR, in the highest rating category of either of Moody's or
         Standard & Poor's, or such lower rating as will not result in
         qualification, downgrading or withdrawal of the ratings then assigned
         to the Notes, as evidenced in writing by the Rating Agencies; the
         commercial paper should not have an "r" or "t" highlighter affixed to
         its rating by Standard & Poor's or the equivalent indicator affixed by
         any other Rating Agency, and by its terms must have a predetermined
         fixed dollar amount of principal due at maturity that cannot vary or
         change. Interest may either by fixed or variable. If such interest is
         variable, interest must be tied to a single interest rate index plus a
         single fixed spread (if any), and move proportionately with that index;

         (v) units of money market funds rated in the highest rating category of
         DCR, if rated by DCR, or if not rated by DCR, AAAm by Moody's or AAAm
         or AAAm-G by Standard & Poor's or the equivalent indicator affixed by
         any other Rating Agency (or such lower rating as will not result in
         qualification, downgrading or withdrawal of the ratings then assigned
         to the Notes, as evidenced in writing by DCR) and which seek to
         maintain a constant net asset value;

provided that (1) no investment described hereunder shall evidence either the
right to receive (x) only interest with respect to such investment or (y) a
yield to maturity greater than 120% of the yield to maturity at par of the
underlying obligations; and (2) that no investment described hereunder may be
purchased at a price greater than par if such investment may be prepaid or
called at a price less than its purchase price prior to stated maturity.

         "Person" means any individual, corporation, partnership, joint
          ------
venture, association, joint stock company, trust (including any beneficiary
thereof), limited liability company, unincorporated organization or government
or any agency or political subdivision thereof.

                                     -18-
<PAGE>

         "Plantation Declaration" means the Declaration of Condominium
          ----------------------
for The Plantation at Fall Creek, a Condominium, dated as of February 5, 1993,
and recorded in Book 318, pages 8179-8282, in County at Taney, Missouri, as
modified, amended, supplemented and/or restated.

         "Poco Diablo Declaration" means the Declaration of Dedication
          -----------------------
of Interval Ownership for The Villas at Poco Diablo Time Shared Resort, dated as
of March 6, 1989, and recorded under Document Number 1268, pages 929-958, in
Coconino County, Arizona, as modified, amended, supplemented and/or restated.

         "Polynesian I Declaration" means the Declaration of Condominium of
          ------------------------
Polynesian Isles Resort Condominium I dated September 30, 1983, and recorded in
O.R. Book 687, Page 258, Official Records of Osceola County, Florida, as
modified, amended, supplemented and/or restated.

         "Polynesian II Declaration" means the Declaration of Condominium of
          -------------------------
Polynesian Isles Resort Condominium II dated March 14, 1984, and recorded in
O.R. Book 737, Page 360, Official Records of Osceola County, Florida, as
modified, amended, supplemented and/or restated.

         "Polynesian III Declaration" means the Declaration of Condominium of
          --------------------------
Polynesian Isles Resort Condominium III dated July 6, 1984, and recorded in O.R.
Book 757, Page 553, Official Records of Osceola County, Florida, as modified,
amended, supplemented and/or restated.

         "Polynesian IV Declaration" means the Declaration of Condominium of
          -------------------------
Polynesian Isles Resort Condominium IV dated March 12, 1990, and recorded in
O.R. Book 963, Page 1302, Official Records of Osceola County, Florida, as
modified, amended, supplemented and/or restated.

         "Port Royal Declaration" means the Master Deed for Royal Dunes
          ----------------------
Beach Villas at Port Royal Resort Horizontal Property Regime, dated as of April
5, 1994, and recorded in Book 698, page 940, in County of Beaufort, South
Carolina, as modified, amended, supplemented and/or restated.

         "Powhatan Plantation Declaration" means the Declaration of
          -------------------------------
Project and Timeshare instruments for Powhatan Plantation Resort, dated January
22, 1984, recorded in Deed Book 253, page 190, Clerk's Office of the Circuit
Court for James City County, Virginia, as modified, amended, supplemented and/or
restated.

         "Prepayment" means, with respect to any Mortgage Loan, any of
          ----------
the following: (i) payment by or on behalf of the Mortgagor of the Outstanding
Principal Balance plus all accrued interest with respect to such Mortgage Loan
in advance of its Maturity Date (exclusive of any Defaulted Mortgage Loan), (ii)
payment by the Company to the Trustee of the Mortgage Purchase Price of such
Mortgage Loan in connection with the repurchase of such Mortgage Loan pursuant
to Section 4.3 or 12.6 of the Indenture, (iii) any partial prepayment of
principal received from or on behalf of the relevant Mortgagor, (iv) any
Insurance Proceeds deposited in the Collection Account pursuant to Section
11.13(m) of the Indenture or 2.5 of the Servicing Agreement.

         "Proceeding": Any suit in equity, action at law or other judicial or
          ----------
administrative proceeding.

         "Rating Agency" means any of DCR, Moody's or Standard & Poor's.
          -------------

         "Realized Loss" means as of any date of determination with
          -------------
respect to: (1) each Charged-off Mortgage Loan, an amount (not less than zero)
equal to (a) the unpaid principal balance of such Mortgage Loan, as of the last
day of the Collection Period (the "Realized Loss Date"), immediately preceding
such date of

                                     -19-
<PAGE>

determination, plus (b) without taking into account the amount
described in subclause (1)(d) of this definition, all accrued but unpaid
interest on such Mortgage Loan, at the related Mortgage Loan Coupon Rate to but
not including the Due Date immediately preceding the Realized Loss Date, plus
(c) any related unreimbursed P&I Advances as of the commencement of the
Collection Period in which the Realized Loss Date occurs, together with any new
related P&I Advances made during the Collection Period in which the date of
determination occurs, minus (d) all payments and proceeds, if any, received and
deposited in the Collection Account in respect of such Mortgage Loan, during the
Collection Period immediately preceding the Realized Loss Date, including,
without limitation, Liquidation Proceeds and other payments or recoveries on
account of such Mortgage Loan; (2) each Charged-off Mortgage Loan as to which
any portion of the principal payable thereunder was canceled in connection with
a bankruptcy or similar proceeding involving the related Mortgagor or a
modification, waiver or amendment of such Mortgage Loan granted or agreed to by
the Servicer pursuant to Section 2.9 of the Servicing Agreement, the amount of
such principal so canceled; and (3) each Mortgage Loan as to which the Mortgage
Loan Coupon Rate thereon has been permanently reduced and not recaptured for any
period in connection with a bankruptcy or similar proceeding involving the
related Mortgagor or a modification, waiver or amendment of such Mortgage Loan
granted or agreed to by the Servicer pursuant to Section 2.9 of the Servicing
Agreement, the amount of the consequent reduction in the interest portion of
each successive monthly payment due thereon. Each such Realized Loss determined
pursuant to clause (3) above shall be deemed to have been incurred on the Due
Date for each affected monthly payment.

         "Record Date" means (i) with respect to the Initial Distribution Date,
          -----------
the Closing Date and (ii) thereafter, the close of business on the last Business
Day of a Collection Period.

         "Redemption Date": Any Distribution Date on which Notes are to be
          ---------------
redeemed pursuant to Section 10.1 of the Indenture.

         "Redemption Price": The price at which a Note is to be redeemed
          ----------------
pursuant to the Indenture, equal to the Outstanding Note Balance of
such Note together with interest accrued thereon to the Redemption Date at the
applicable Note Interest Rate (exclusive of installments of interest and
principal maturing on or prior to such date, payment of which shall have been
made to the Holder of such Note on the applicable Record Date or as otherwise
provided in the Indenture).

                                     -20-
<PAGE>

         "Remaining Substitution/Purchase Amount" means, with respect
          --------------------------------------
to any date, an amount equal to (i) 15% of the aggregate Outstanding Principal
Balance of the Mortgage Loans as of the Cut-off Date minus (ii) the aggregate
Outstanding Principal Balance of all Substitute Mortgage Loans and Subsequent
Loans Granted to the Trustee as of their respective Subsequent Cut-off Dates.

         "Remittance" means cash, a wire transfer, or a check, draft or
          ----------
money order.

         "Repurchase Date" has the meaning provided in Section 12.6(a)
          ---------------
of the Indenture.

         "Requisite Reserve Amount" means, as to any Distribution Date,
          ------------------------
an amount equal to the lesser of (i) the greater of (a) the product of (x) the
then current aggregate Outstanding Note Balance and (y) the Reserve Account
Percentage and (b) $500,000, and (ii) the then current Outstanding Note Balance.

         "Reserve Account" has the meaning set forth in Section 12.2(b)
          ---------------
of the Indenture.

         "Reserve Account Percentage" means, with respect to any
          --------------------------
Distribution Date (i) if no Trigger Event has occurred and is continuing, 5.0%,
(ii) if a Trigger Event (other than an event described in clause (ii) of the
definition of "Trigger Event") has occurred and the Class A Notes are
outstanding, until a Trigger Event Cure has occurred, 25.0%, (iii) if a Trigger
Event (other than an event described in clause (ii) of the definition of
"Trigger Event") has occurred, the Class A Notes have been retired and the Class
B Notes are outstanding, until a Trigger Event Cure has occurred, 20.0%, (iv) if
a Trigger Event (other than an event described in clause (ii) of the definition
of "Trigger Event") has occurred and the Class A and the Class B Notes have been
retired, until a Trigger Event Cure has occurred, 15.0% and (v) if the average
Delinquency Trigger Ratio calculated as of the three immediately preceding
Record Dates, exceeds 7.0%, 10.0%.

         "Resorts" means the respective land, buildings and appurtenant
          -------
rights of Sunterra Resorts Cypress Pointe, Sunterra Resorts Greensprings
Plantation, Sunterra Resorts Sedona Springs, Sunterra Resorts Sedona Summit,
Sunterra Resorts Scottsdale Villa Mirage, Sunterra Resorts Villas at Poco
Diablo, Sunterra Resorts Villas of Sedona, Sunterra Resorts The Ridge on Sedona
Golf, Sunterra Resorts Tahoe Beach and Ski,

                                     -21-
<PAGE>

Sunterra Resorts Villas on the Lake, Sunterra Resorts Villas de Santa Fe,
Sunterra Resorts The Plantation at Fall Creek, Sunterra Resorts Powhatan
Plantation, Sunterra Resorts Royal Dunes, Sunterra Resorts The Savoy on South
Beach, Sunterra Resorts Bent Creek Golf Village, Sunterra Resorts Gatlinburg
Town Village, Sunterra Resorts Polynesian, Sunterra Resorts San Luis Bay,
Embassy Vacation Resort Grand Beach, Embassy Vacation Resort Lake Tahoe,
Gatlinburg Town Square and Ridge Tahoe.

         "Responsible Officer": With respect to the Trustee, any officer
          -------------------
within the Corporate Trust Office of the Trustee, including any Vice
President, Assistant Vice President, Secretary or Assistant Secretary, Managing
Director, or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.

         "Ridge Declaration" means the Declaration of Dedication and
          -----------------
Covenants, Conditions, Restrictions and Easements for the Ridge at Sedona Golf
Resort (A Timeshare Project Vacation Ownership Resort), dated as of December 18,
1996, and recorded in Book 3330, page 445, in Yavapai County, Arizona, as
modified, amended, supplemented and/or restated.

         "Ridge Tahoe Declaration" means the Declaration Timeshare
          -----------------------
Covenants, Conditions and Restrictions for the Ridge Tahoe made by Harich Tahoe
Developments, a general partnership recorded February 14, 1984 in book 284 of
Official Records, at Page 5202, Douglas County, Nevada as Document No. 96758, as
modified, amended, supplemented and/or restated.

         "Sale":  Has the meaning specified in Section 6.15 of the Indenture.
          ----

         "Sale Agreements" means the Blue Bison Loan Sale Agreement,
          ---------------
the SunSera Loan Sale Agreement and the Dutch Elm Loan Sale Agreement.

         "Savoy Declaration" means the Declaration of Condominium for
          -----------------
The Savoy on South Beach, a Condominium which is recorded in O.R. Book 17924,
Page 2575, Official Records of Dade County, Florida, as modified, amended,
supplemented and/or restated.

         "Schedule of Mortgage Loans" means the list of Mortgage Loans
          --------------------------
substantially in the form attached as Schedule 1 to the Indenture or Schedule A
to a Loan Sale Agreement, as the case may be, which shall be amended from time
to time to include any Substitute Mortgage Loans and any Subsequent Loans and to
delete any Mortgage Loans released from the lien of the Indenture pursuant to
the terms thereof, which list shall be available in electronic format and shall
include the following information with respect to each such Mortgage Loan as of
the Cut-off Date and each Subsequent Loan as of the Subsequent Cut-off Date:

                                     -22-
<PAGE>

              Loan Number
              Name and Mailing Address of Mortgagor
              Resort
              Interest Rate Per Annum
              Original Principal Balance
              Maturity Date
              Monthly Payment Amount
              Outstanding Principal Balance

         "Sedona Springs Declaration" means the Declaration of
          --------------------------
Covenants, Conditions, Restrictions and Easements for Sedona Springs Resort
(Townhouse Units), dated as of June 6, 1994, and recorded in Book 2846, page
370, in Yavapai County, Arizona, as modified, amended, supplemented and/or
restated.

         "Sedona Summit Declaration" means the Declaration of
          -------------------------
Dedication and Covenants, Conditions, Restrictions and Easements for Sedona
Summit Resort, a Timeshare Resort, dated as of January 17, 1996, and recorded in
Book 3142, page 775, in Yavapai County, Arizona, as modified, amended,
supplemented and/or restated.

         "Seller" means each of SunSera Funding Corp., Dutch Elm Holdings,
          ------
Inc., Sunterra Corporation and its successors and assigns.

         "Servicer Event of Default": has the meaning given in Section 5.1 of
          -------------------------
the Servicing Agreement.

         "Servicer" means, initially, Sunterra Financial Services,
          --------
Inc., in its capacity as the Servicer of the Mortgage Loans under Section 2.1
and, thereafter, any successor servicer pursuant to Section 4.2(b), 4.4 or 5.2
of the Servicing Agreement.

         "Servicer Report" means the report substantially in the form
          ---------------
of Exhibit A to the Servicing Agreement provided by the Servicer to the Trustee
on each Servicer Report Date pursuant to Section 3.1 of the Servicing Agreement.

         "Servicer Report Date" means the twentieth day of each month
          --------------------
in which a Distribution Date occurs; provided, however, that, if such twentieth
day is not a Business Day, the Servicer Report Date shall be the Business Day
immediately following such twentieth day.

         "Servicer Request": A written order or request signed in the
          ----------------
name of the Servicer by its Chairman of the Board, president or a Vice
President, and by its Treasurer, an Assistant

                                     -23-
<PAGE>

Treasurer, Controller, an Assistant Controller, Secretary, or an Assistant
Secretary and delivered to the Trustee.

         "Servicing Agreement": The Servicing Agreement, dated as of
          -------------------
December 1, 1999, entered into by and among the Company, the Servicer, the
Trustee and the Back-up Servicer, as the same may be amended from time to time
in accordance with the provisions thereof.

         "Servicing Fee" means, with respect to any Distribution Date
          -------------
and the related Collection Period, the product of (i) one twelfth, (ii) the
Servicing Fee Percent and (iii) the Outstanding Pool Balance on such
Distribution Date prior to the application of amounts to be distributed on such
Distribution Date.

         "Servicing Fee Percent" means 1% per annum.
          ---------------------

         "Servicing Officer" means any Vice President, Assistant Vice
          -----------------
President, Secretary, Assistant Secretary, or any other officer or assistant
officer of the Servicer or a Subservicer essentially performing functions
similar to those performed by persons who at the time shall be such officers,
respectively, or to whom any corporate matter is referred because of his or her
knowledge of, and familiarity with, the particular subject, and who is involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name appears on a list of servicing officers furnished to the Trustee by
the Servicer or a Subservicer, as applicable, as such list may be amended or
supplemented from time to time.

         "Shortfall Amount" means, with respect to any Distribution
          ----------------
Date, the amount, if any, by which the amounts required to be distributed
pursuant to clauses "first" through "eleventh" of Section 13.1(a) (excluding any
amounts to be deposited in the Reserve Account) of the Indenture exceed the
amount on deposit in the Collection Account with respect to such Distribution
Date.

         "Standard & Poor's" means Standard & Poor's Ratings Services,
          -----------------
a division of The McGraw-Hill Companies, Inc., or its successor in interest. If
neither such rating agency nor any successor remains in existence, "Standard &
Poor's" shall be

                                     -25-
<PAGE>

deemed to refer to such other nationally recognized statistical
rating agency or other comparable Person designated by the Company and approved
in writing by the Majority Holders, notice of which designation shall be given
to the Trustee and the Servicer, and specific ratings of Standard & Poor's
herein referenced shall be deemed to refer to the equivalent ratings of the
party so designated.

         "Stated Maturity Date" means the Maturity Date of the Mortgage
          --------------------
Loan which, as of the Cut-off Date, has the longest remaining amortization term.

         "Subsequent Cut-off Date" means with respect to any Substitute
          -----------------------
Mortgage Loan and Subsequent Loans, the close of business on the last day of the
month preceding the month in which such Substitute Mortgage Loans and Subsequent
Loans are Granted to the Trustee for the benefit of the Noteholders.

         "Subsequent Loans" means the Mortgage Loans Granted to the
          ----------------
Trustee pursuant to Section 12.7 of the Indenture, each of which (i) bears a
fixed rate of interest, (ii) has a Mortgage Loan Coupon Rate at least equal to
the Weighted Average Coupon Rate, (iii) has a Maturity Date which is no later
than the Stated Maturity Date, (v) does not cause a breach of the
representations and warranties in the Indenture and the Dutch Elm Loan Sale
Agreement, (vi) is not more than thirty days past due with respect to any
payment of interest or principal as of the immediately preceding Record Date,
(vii) has not been more than 90 days past due with respect to any payment of
interest or principal on more than one Record Date during the preceding 12
months, (viii) has not been in default, (ix) the related mortgagor (or successor
thereto) was a Mortgagor as of the Cut-off Date and (x) relates to one of the
Resorts.

         "Subsequent Transfer Date" means the last Business Day of each
          ------------------------
Collection Period.

         "Subservicer" means any Person which is subservicing one or
          -----------
more of the Mortgage Loans pursuant to Section 2.2 or Section 5.2(c) of the
Servicing Agreement.

         "Subservicing Agreement" means an agreement between the
          ----------------------
Servicer or the Trustee and a Subservicer relating to the servicing of the
Mortgage Loans.

         "Substitute Mortgage Loan" means a loan substituted for a
           -----------------------
Mortgage Loan having missing or defective documentation pursuant to Section 4.3
of the Indenture or for a Defective

                                     -26-
<PAGE>

Mortgage Loan pursuant to Section 12.6(b) of the Indenture: (i) having as of the
time of substitution a principal balance, after deduction of the principal
portion of the monthly payment due in the month of substitution equal to or
greater than the Outstanding Principal Balance of the Mortgage Loan for which it
is being substituted, (ii) having a Mortgage Loan Coupon Rate equal to or
greater than the Mortgage Loan Coupon Rate of the Mortgage Loan for which it is
being substituted, (iii) otherwise satisfying the requirements of Section 12.6
of the Indenture, (iv) having a Maturity Date which is no later than the Stated
Maturity Date, (v) not causing a breach of the representations and warranties in
the Indenture and the Dutch Elm Loan Sale Agreement, (vi) not being more than
thirty days past due with respect to any payment of interest or principal as of
the immediately preceding Record Date, (vii) having not been more than 90 days
past due with respect to any payment of interest or principal on more than one
Record Date during the preceding 12 months and (viii) relating to one of the
Resorts.

         "SunSera Capital Contribution Agreement" means the Capital
          --------------------------------------
Contribution Agreement, dated as of December 1, 1999, between SunSera Funding
Corp. and Dutch Elm Holdings, Inc.

         "SunSera Loan Sale Agreement" means the Loan Sale Agreement, dated as
          ---------------------------
of December 1, 1999, between SunSera Funding, Corp. and Dutch Elm Holdings, Inc.

         "Sunterra Capital Contribution Agreement" means the Capital
          ---------------------------------------
Contribution Agreement, dated as of December 1, 1999, between Sunterra
Corporation and SunSera Funding Corp.

         "Tahoe Beach Declaration" means the Declaration of Vacation
          -----------------------
Plan (The Tahoe Beach and Ski Club), dated as of July 16, 1984, and recorded in
Book 2319, pages 158-226, in El Dorado County, California, as modified, amended,
supplemented and/or restated.

         "Transaction Documents" mean the Note Purchase Agreement, the
          ---------------------
Indenture, the Servicing Agreement, Sale Agreements, the Sunterra Capital
Contribution Agreement and the SunSera Capital Contribution Agreement.

         "Trigger Event" means on any Distribution Date either (i) the
          -------------
occurrence of Default Trigger I, Default Trigger II or Default Trigger III or
(ii) the average Delinquency Trigger Ratio as of the three immediately preceding
Record Dates, exceeds 7.0%.

                                     -27-
<PAGE>

         "Trigger Event Cure" means (i) with respect to any Trigger
          ------------------
Event which has occurred (other than a Trigger Event in clause (ii) below) (A)
such Trigger Event has not continued for a period of three consecutive months,
(B) all amounts in respect of distributions due to the Class A, Class B and
Class C Notes as of such date have been paid or such amounts are on deposit in
the Reserve Account, (C) the Requisite Reserve Amount (without taking into
account such Trigger Event) is on deposit in the Reserve Account and (D) no
other Trigger Event has occurred, and

         (ii) with respect to any Trigger Event that is of a Trigger Event Type
that has occurred and has been cured at least once since the Closing
Date in accordance with clause (i) above, (A) with respect to the Trigger Event
related to Default Trigger I, the average Default Trigger Ratio calculated on
the basis of the three immediately preceding Record Dates does not exceed 7.5%,
with respect to the Trigger Event related to Default Trigger II for a period of
three consecutive months, the average Default Trigger Ratio calculated on the
basis of the three immediately preceding Record Dates does not exceed 11.0% for
a period of three consecutive months, and with respect to the Trigger Event
related to Default Trigger III, the average Default Trigger Ratio calculated on
the basis of the three immediately preceding Record Dates does not exceed 13.5%
for a period of three consecutive months, (B) all amounts in respect of
distributions due to the Class A, Class B and Class C Notes as of such date have
been paid or such amounts are on deposit in the Reserve Account, (C) the
Requisite Reserve Amount (without taking into account such Trigger Event) is on
deposit in the Reserve Account and (D) no other Trigger Event has occurred. For
purposes of this description, "Trigger Event Type" shall mean either Default
Trigger I, Default Trigger II or Default Trigger III, as the case may be.

         "Trust Estate" means the property of every description Granted
          ------------
pursuant to the "Granting Clauses" of the Indenture and all collections,
distributions and proceeds in respect thereof.

         "Trustee" means, initially, LaSalle Bank, National Association, and,
          -------
thereafter, any successor trustee pursuant to Section 7.9 of
the Indenture.

         "Trustee Fee" means, with respect to each Distribution Date, the
          -----------
product of (i) one twelfth, (ii) two basis points and (iii) the Outstanding
Pool Balance on such Distribution Date prior to the application of amounts to be
distributed on such Distribution Date.

                                     -28-
<PAGE>

         "UCC":  The Uniform Commercial Code as enacted in the relevant state.
          ---

         "Unpaid Interest Shortfall" means, with respect to any Distribution
          -------------------------
Date and any class of Notes, the sum of (i) the Current Interest
Shortfall and (ii) the aggregate of the outstanding Current Interest Shortfalls
incurred prior to such Distribution Date.

         "Unpaid Principal Shortfall" means, with respect to any Distribution
          --------------------------
Date and any class of Notes, the sum of (i) the Current Principal Shortfall and
(ii) the aggregate of the outstanding Current Principal Shortfalls incurred
prior to such Distribution Date.

         "Upgrade Prepayment" means, with respect to any Mortgage Loan
          ------------------
prepaid in full by or on behalf of the related Mortgagor in connection with the
purchase of an additional Vacation Interval or a more expensive Vacation
Interval, the prepayment of principal received by the Trustee.

         "USAP" means the Uniform Single Attestation Program for Mortgage
          ----
Bankers.

         "Vacation Interval" means a fee vacation ownership interest or
          -----------------
timeshare interest at or in a Resort.

         "Villas de Santa Fe Declaration" means the Declaration for
          ------------------------------
Villas de Santa Fe, a Condominium, recorded in Book T462, page 195-294, Records
of Santa Fe County, New Mexico, as modified, amended, supplemented and/or
restated.

         "Villas of Sedona Declaration" means the Declaration of Dedication
          ----------------------------
and Covenants, Conditions, Restrictions and Easements for Villas of
Sedona, dated as of September 11, 1992, and recorded in Book 2531, page 991, in
Yavapai County, Arizona, as modified, amended, supplemented and/or restated.

         "Villas On the Lake Declaration" means the Time Share Declaration of
          ------------------------------
Covenants and Restrictions for Colony Place Interval Ownership
Plan known as Villas On The Lake Resort, dated

                                     -29-

<PAGE>

as of May 30, 1996, and recorded under Document Number 9632539, in Montgomery
County, Texas, as modified, amended, supplemented and/or restated.

         "Weighted Average Coupon Rate" means, with respect to any
          ----------------------------
Distribution Date, the per annum rate of interest equal to the average,
expressed as a percentage and rounded to two decimal places, of the Mortgage
Loan Coupon Rates of all of the Mortgage Loans that were outstanding at the
beginning of the Collection Period immediately preceding such Distribution Date
(or as of the Cut-off Date with respect to the first Distribution Date),
weighted on the basis of their respective Outstanding Principal Balances as of
the beginning of such Collection Period.

         "Year 2000 Problem" means the risk that computer applications
          -----------------
will be unable to perform properly, including performance of date-sensitive
functions involving certain dates after December 31, 1999.

                                     -30-

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