Document:

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                                                                  EXHIBIT 10.204

                               THIRD AMENDMENT TO
                   ACQUISITION AND CONSTRUCTION LOAN AGREEMENT

               THIS THIRD AMENDMENT TO ACQUISITION AND CONSTRUCTION LOAN
AGREEMENT (the "Third Amendment") is made as of the 22nd day of December, 1999
by and between Heller Financial, Inc., a Delaware corporation ("Lender") whose
address is 500 West Monroe Street, Chicago, Illinois 60661 and Preferred
Equities Corporation, a Nevada corporation ("Borrower") whose address is 4310
Paradise Road, Las Vegas, Nevada 89109.

               WHEREAS, the parties entered into that certain Acquisition and
Construction Loan Agreement dated March 27, 1996, as amended by that certain
Amendment to Acquisition and Construction Loan Agreement dated December 23, 1997
and that certain Second Amendment to Acquisition and Construction Loan Agreement
dated July 7, 1998 (collectively and as amended hereby, the "Agreement"); and

               WHEREAS, the parties desire to further amend the Agreement
pursuant to the terms and conditions as set forth herein.

               NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties agree as follows:

               1. The Recitals set forth above are true and correct and
incorporated herein by reference.

               2. Section 1.1 regarding Acquisition Commitment is hereby amended
to provide that the term "Acquisition Commitment" shall be deemed to be
increased hereby and include (i) an additional One Million Dollars and No/100
($1,000,000.00) , which taken together with the One Million Dollars and No/100
($1,000,000.00) acquisition commitment set forth in that certain Letter
Agreement between Lender and Borrower dated as of October 19, 1999, shall be
hereafter jointly referred to as the "First Supplemental Acquisition Commitment"
in the amount of Two Million Dollars and No/100 ($2,000,000.00) and shall be for
the purpose of providing Borrower with additional working capital subject to any
agreement regarding the use of such funds under Section 2.1 of the Agreement as
amended hereby and (ii) an additional Nine Hundred Forty Thousand Dollars and
No/100 ($940,000.00) (the "Second Supplemental Acquisition Commitment") for the
purpose of acquiring eighteen (18) condominium units (the "Additional Units")
adjacent to the existing Resort for the development of additional timeshare
units (jointly, the "Supplemental Acquisition Commitments"); provided, however,
that the Supplemental Acquisition Commitments shall only be advanced pursuant to
the terms and upon satisfaction of the conditions set forth in Section 2.1 as
modified hereby.

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               3. Section 1.2 regarding Acquisition Note is hereby amended to
add to the end thereof the phrase "together with any and all promissory notes
given to evidence funds advanced pursuant to the Supplemental Acquisition
Commitments, and shall also include any and all amendments, modifications and
substitutions thereof, including, but not limited to, that certain Future
Advance Acquisition Promissory Note No. 1 dated as of October 19, 1999, in the
amount of One Million Dollars and No/100 ($1,000,000.00), and that certain
Future Advance Acquisition Promissory Note No. 2, in the amount of One Million
Dollars and No/100 ($1,000,000.00) to be given in connection with the advance of
the balance of the First Supplemental Acquisition Commitment, all of which shall
be replaced by an Amended, Restated and Consolidated Acquisition Promissory Note
No. 1 which shall evidence the First Supplemental Acquisition Commitment in the
amount of Two Million Dollars and No/100 ($2,000,000.00) plus the outstanding
balance of that certain Amended and Restated Acquisition Promissory Note dated
December 23, 1997 in the original principal amount of Four Million Eight Hundred
Sixty-Five Thousand Dollars ($4,865,000.00)."

               4. Section 1.46 regarding Renovation Commitment is hereby amended
to provide that the term "Renovation Commitment" shall be deemed to be increased
by and include an additional Seven Hundred Sixty Thousand Dollars and No/100
($760,000.00) (the "Supplemental Renovation Commitment") for the purpose of
construction and renovation of the Additional Units; provided, however, that the
Supplemental Renovation Commitment shall only be advanced pursuant to the terms
and upon satisfaction of the conditions applicable to Advances of the Renovation
Commitment and the terms and conditions that specifically apply to the
Supplemental Renovation Commitment.

               5. Section 1.6 regarding Approved Budget is hereby amended to
provide that the term "Approved Budget" shall also be deemed to refer to any
exhibit executed by Borrower and Lender setting forth an approved budget for the
renovation of the Additional Units to be used for timeshare purposes, the
expenses of which shall be reimbursed under the Supplemental Renovation
Commitment pursuant to the terms and conditions hereof, and the approval of
which budget shall be a condition precedent to any Advance under the
Supplemental Renovation Commitment.

               6. Section 1.7 regarding Approved Construction Schedule is hereby
amended to provide that the term "Approved Construction Schedule" shall also be
deemed to refer to any exhibit executed by Borrower and Lender setting forth the
approved schedule and order of renovation and construction of the Additional
Units and any modifications thereto permitted in accordance with Section 2.7,
and the approval of which schedule shall be a condition precedent to any Advance
under the Supplemental Renovation Commitment.

               7. Section 1.8 regarding Approved Timeshare Document Filing
Schedule is hereby amended to provide that the term "Approved Timeshare Document
Filing Schedule" shall also be deemed to refer to any exhibit executed by
Borrower and Lender setting forth the approved schedule for filing and approval
of the Timeshare Public Offering Statement for the Additional Units with and by
all Governmental Authorities for the sale of Interval Units and the operation of

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the Additional Units as a portion of the Resort Property, and the approval of
which schedule shall be a condition precedent to any Advance under the
Supplemental Renovation Commitment.

               8. Section 1.19 regarding Declaration of CCRs is hereby amended
to provide that the term "Declaration of CCRs" shall be deemed to include any
supplemental declaration that subjects the Additional Units to the governance of
the Declaration of CCRs.

               9. Section 1.27 regarding Guarantee is hereby amended to add to
the end thereof the phrase "together with all amendments, modifications and
substitutions thereof."

               10. Section 1.29 regarding Improvements is hereby amended to
provide that the term "Improvements" shall also be deemed to refer to the
Additional Units upon their acquisition by Borrower.

               11. Section 1.38 regarding Loan is deleted in its entirety and
replaced by the following:

               The term "Loan" shall mean the loan by Lender to Borrower, in the
        maximum amount of the Acquisition and Renovation Commitment, not to
        exceed, in the aggregate, the advance of (a) the lesser of Seven Million
        Eight Hundred Five Thousand Dollars and No/100 ($7,805,000.00) or 90% of
        the costs of acquisition of the Property plus (b) 100% of the costs of
        labor, materials, and services supplied for the construction of the
        Improvements and all other expenses incident to construction of the
        Property, as to each item only to the extent specified in the Approved
        Budget which amount shall not exceed a total of Four Million Five
        Hundred Twenty-Three Thousand Dollars and No/100 ($4,523,000.00) over
        the term of the Loan and shall not exceed the amount of Two Million Five
        Hundred Thousand Dollars and No/100 ($2,500,000.00) outstanding at any
        one time.

               12. Section 1.39 regarding Loan Commitment is deleted in its
entirety and replaced by the following:

               The term "Loan Commitment" shall mean a maximum of Twelve Million
        Three Hundred Twenty-Eight Thousand Dollars and No/100 ($12,328,000.00),
        which is the maximum amount of Advances of the Loan which Lender may be
        obligated to make under this Loan Agreement, and is comprised of the
        Acquisition Commitment and the Renovation Commitment.

               13. Section 1.41 regarding Mortgage is hereby amended to provide
that the term "Mortgage" shall be deemed to refer to the existing Mortgage
together with any modification or amendment thereto for the purpose of spreading
the lien thereof to the Additional Property (defined below).

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               14. Article I - Definitions is hereby amended to add the
following defined term:

               The term "Overlook Repayment" shall mean the receipt by Lender of
        all outstanding amounts due Lender under that certain Interval
        Receivables Loan and Security Agreement between Borrower and Lender and
        dated as of the 6th day of August 1996, as modified by that certain
        First Modification to the Interval Receivables Loan and Security
        Agreement dated as of the 7th day of July 1998 (collectively, the
        "Overlook Receivables Loan"), and that certain Acquisition and
        Renovation Loan Agreement between Borrower and Lender and dated as of
        the 6th day of August 1996, as modified by that certain First
        Modification to the Acquisition and Renovation Loan Agreement dated as
        of the 7th day of July 1998 (collectively, the "Overlook Acquisition and
        Renovation Loan"), and any further amendments, modifications and
        substitutions therefor.

               15. Section 1.43 regarding Permitted Exceptions is hereby amended
to provide that the term "Permitted Exceptions" shall also include, at such time
as the Resort is expanded to include Additional Property (as defined below),
such exceptions to and encumbrances on title that have been approved by Lender
and set forth on an exhibit to the Agreement to be executed by Borrower and
Lender.

               16. Section 1.45 regarding Property is hereby amended to provide
that the term "Property" shall also be deemed to include and refer to the
property upon which the Additional Units are located (the "Additional Property")
at the time the Additional Units are acquired by Borrower, the legal description
of which shall be set forth in an exhibit to be executed hereafter by Borrower
and Lender.

               17. Section 2.1 regarding Commitment of Lender is hereby amended
by adding the following thereto:

               The initial One Million Dollars and No/100 ($1,000,000.00) of the
        First Supplemental Acquisition Commitment has been advanced by Lender to
        Borrower, as evidenced by that certain Future Advance Acquisition
        Promissory Note No.1 dated October 19, 1999, for application by Borrower
        to the payment of its accounts payable.

               Upon Lender's receipt of the portion of Overlook Repayment due
        Lender under the Overlook Acquisition and Renovation Loan and Borrower's
        delivery to Lender of a statement executed by Borrower which describes
        Borrower's intended use of the One Million Dollars and No/100
        ($1,000,000.00) balance of funds to be advanced under the First
        Supplemental Acquisition Commitment (the "Statement of Use"), and
        provided that such Statement of Use is acceptable to Lender as set forth
        below, the balance of the First Supplemental Acquisition Commitment
        shall be made available and applied as set forth in the Agreement and
        the Statement of Use, concurrently with the recording of a Notice of
        Future Advance and delivery of a Future Advance Acquisition Promissory
        Note. Borrower and Lender hereby agree that the Statement of Use shall
        be acceptable to Lender if it

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        provides that Five Hundred Thousand Dollars and No/100 ($500,000.00)
        shall be used for working capital purposes and that that remaining Five
        Hundred Thousand Dollars and No/100 ($500,000.00) shall be used for the
        establishment of Borrower's sales centers or off-premises contact
        operations, provided that the budgets for such centers and operations
        are acceptable to Lender in Lender's sole discretion.

               In addition to and separate from Lender's commitment to advance
        the First Supplemental Acquisition Commitment as set forth above,
        commencing November 1, 1999, and ending April 15, 2000, and provided
        that Lender has received the Overlook Repayment and that the Conditions
        Precedent to Second Supplemental Acquisition Commitment (defined below)
        have been satisfied, the Second Supplemental Acquisition Commitment
        shall be made available concurrently with the recording of a Mortgage
        Spreader Agreement and Notice of Future Advance and the delivery of
        Future Advance Promissory Note made by Borrower, which shall together
        spread the lien of the Mortgage to encumber the Additional Property and
        Additional Units and evidence Lender's advance of funds to reimburse
        Borrower for up to ninety percent (90%) of the acquisition costs of the
        Additional Property and Additional Units to be sold as Interval Units,
        the acquisition of which shall have occurred prior to March 31, 2000.
        The Conditions Precedent to Second Supplemental Acquisition Commitment
        shall be defined as and consist of the approval in Lender's sole
        discretion of the following items with respect to the Additional
        Property or Additional Units, as applicable: Survey, flood hazard
        certification, mortgagee title commitment, Phase I environmental audit,
        appraisal, building inspection report, certificate of occupancy and
        evidence of compliance with Fair Housing Act and Americans with
        Disabilities Act.

               Subject to all conditions precedent applicable to advances of the
        Renovation Commitment and provided that Lender has received the Overlook
        Repayment and that Borrower has acquired the Additional Property,
        commencing November 1, 1999, the Supplemental Renovation Commitment
        shall be made available for reimbursement of renovation costs for the
        Additional Units in accordance with the Agreement.

               Until such time as the Overlook Repayment has been received by
        Lender, Lender shall not be obligated to make any Advances or disburse
        any portion of the Acquisition Commitment or the Renovation Commitment
        if at any time the combined outstanding balance of the Acquisition Note,
        the Renovation Note and the Promissory Note given by Borrower to Lender
        pursuant to the Interval Receivables Loan would exceed Eighteen Million
        Dollars and No/100 ($18,000,000.00). Upon and after such time as the
        Overlook Repayment has been received by Lender, Lender shall not be
        obligated to make any Advances or disburse any portion of the
        Acquisition Commitment or the Renovation Commitment if at any time the
        combined outstanding balance of the Acquisition Note, the Renovation
        Note and the Promissory Note given by Borrower to Lender pursuant to the
        Interval Receivables Loan would exceed Thirty Million Dollars and No/100
        ($30,000,000.00).

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               18. Section 2.4 regarding Advances is hereby amended by adding
the following:

        Lender shall withhold twenty percent (20%) of all advances under the
Supplemental Renovation Commitment (the "Reservation") to be held by Lender
until such time as all conditions precedent set forth in the Agreement to the
final Advance under the Supplemental Renovation Commitment have been satisfied,
whereupon the Reservation shall be disbursed together with the final Advance.

               19. Section 4.1(b) regarding Mandatory Payments is hereby deleted
and replaced with the following:

        So long as there is any indebtedness outstanding under the Acquisition
Note or the Renovation Note, if during the period of the Loan Agreement ending
on the following dates ("Ending Dates"), the outstanding principal balance of
the Loan evidenced by such notes exceeds the following amounts ("Maximum
Principal Balance"), the Borrower shall pay the amount of such excess
immediately to Lender:

<TABLE>
<CAPTION>
Ending Dates                               Maximum Principal Balance
------------                               -------------------------
<S>                                        <C>
February 28, 2000                          $2,333,000.00
May 31, 2000                               $1,860,000.00
August 31, 2000                            $1,391,000.00
November 30, 2000                          $  925,000.00
February 28, 2001                          $463,000.00;
</TABLE>

provided, however, that if Lender shall have advanced funds to Borrower under
the Second Supplemental Acquisition Commitment and Supplemental Renovation
Commitment, the following Ending Dates and Maximum Principal Balances shall be
applicable, and any excess thereof shall be immediately payable by Borrower to
Lender:

<TABLE>
<CAPTION>
<S>                                        <C>
February 28, 2000                          $3,368,000.00
May 31, 2000                               $3,183,000.00
August 31, 2000                            $2,907,000.00
November 30, 2000                          $2,440,000.00
February 28, 2001                          $1,978,000.00.
</TABLE>

               20. Section 6.16 regarding Commitment Fee is hereby amended by
adding the following thereto:

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               Borrower has agreed to pay Lender a commitment fee in the amount
        of one percentage point in connection with the First Supplemental
        Acquisition Commitment. Borrower has previously paid Lender the amount
        of Ten Thousand Dollars and No/100 ($10,000.00) which represents a
        portion of the Lender's commitment fee payable in connection with the
        First Supplemental Acquisition Commitment. At the time of Lender's
        receipt of the portion of the Overlook Repayment due Lender under the
        Overlook Acquisition and Renovation Loan and the satisfaction of other
        conditions precedent to the advance of the balance of the First
        Supplemental Acquisition Commitment, Lender shall be paid a commitment
        fee of Ten Thousand Dollars and No/100 ($10,000.00) representing the
        balance of the commitment fee payable in connection with the First
        Supplemental Acquisition Commitment, together with the amount of
        Forty-Three Thousand Seven Hundred Fifty Dollars and No/100 ($43,750.00)
        representing the balance of the loan fee payable in connection with
        availability under the Interval Receivables Loan , all of which shall be
        withheld by Lender from disbursement of the balance of the First
        Supplemental Acquisition Commitment.

               Buyer has further agreed to pay Lender a commitment fee in the
        amount of one percentage point in connection with the Second
        Supplemental Acquisition Commitment and in connection with the
        Supplemental Renovation Commitment, each of which shall be payable by
        Borrower and withheld from disbursements by Lender at the time funds are
        advanced under such commitments.

               21. In connection with this Amendment, Borrower hereby certifies
that (a) all Borrower's representations, warranties, covenants and agreements
contained in the Agreement are true and correct and in full force and effect as
of the date hereof with the exception that (i) the Financial Statements
referenced in Section 3.3 of the Agreement are true, correct and complete as
reflected in the quarterly financial report dated May 31, 1999, and the monthly
financial report dated July 31, 1999, and (ii) there are no material adverse
changes to the information reflected in the disclosure of litigation matters
concerning PEC and dated October 6, 1999 and attached hereto as Exhibit "A", (b)
as of the date hereof there are no Events of Default thereunder, and (c) all of
the Loan Instruments as defined therein are in full force and effect.

               22. Except as modified by this Amendment, all other terms and
conditions of the Agreement and other Loan Instruments shall remain in full
force and effect. Should Borrower currently be in default under the Agreement,
which default would not have existed if this Amendment were effective, such
default is hereby waived.

               23. As consideration for, and as a mutual inducement to Lender
entering into this Amendment, Borrower hereby waives and releases any and all
setoffs, counterclaims and defenses it has of the date hereof with respect to
the Loans and performance by Lender under the Loan Instruments, and hereby
acknowledges that Lender has fully performed all of its obligations and is not
in default under the Loan Instruments. Execution of this Amendment shall not be

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deemed to constitute a waiver or release by Lender of any its rights or remedies
under the Loan Instruments.

               IN WITNESS whereof the parties have executed this Agreement as of
the date above.

PREFERRED EQUITIES CORPORATION,             HELLER FINANCIAL, INC., a
a Nevada corporation                        Delaware corporation

By:  /s/ JON A. JOSEPH                      By:
     -----------------------------              -----------------------------

         Jon A. Joseph
----------------------------------          ---------------------------------
Print Name                                  Print Name

Its:       Vice President                   Its:
    ------------------------------              -----------------------------

                                            APPROVED BY GUARANTOR:

                                            MEGO FINANCIAL CORP., a
                                            New York corporation

                                            By: /s/ JON A. JOSEPH
                                               ------------------------------

                                                     Jon A. Joseph
                                           ----------------------------------

                                            Print Name

                                            Its:     Vice President
                                                -----------------------------

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deemed to constitute a waiver or release by Lender of any its rights or remedies
under the Loan Documents.

               IN WITNESS whereof the parties have executed this Agreement as of
the date above.

PREFERRED EQUITIES CORPORATION,             HELLER FINANCIAL, INC., a
a Nevada corporation                        Delaware corporation

By:  /s/ JON A. JOSEPH                      By: /s/ DENNIS K. HOLLAND
     -----------------------------              -----------------------------

         Jon A. Joseph                              Dennis K. Holland
----------------------------------          ---------------------------------
Print Name                                  Print Name

Its:  Vice President                        Its:  Senior Vice President
    ------------------------------              -----------------------------

                                            APPROVED BY GUARANTOR:

                                            MEGO FINANCIAL CORP., a
                                            New York corporation

                                            By: /s/ JON A. JOSEPH
                                               ------------------------------

                                                     Jon A. Joseph
                                           ----------------------------------

                                            Print Name

                                            Its:     Vice President
                                                -----------------------------

                                       8<PAGE>   1
                                                                  EXHIBIT 10.205

                       GENERAL LOAN AND SECURITY AGREEMENT
                                (INVENTORY LOAN)

                                      AMONG

                             STEAMBOAT SUITES, INC.
                         PREFERRED EQUITIES CORPORATION

                                       AND

                          TEXTRON FINANCIAL CORPORATION

                          DATED AS OF DECEMBER 17, 1999

<PAGE>   2

SECTION 1.     INTERPRETATION OF THIS AGREEMENT
        1.1    Terms Defined
        1.2    Directly or Indirectly
        1.3    Headings
        1.4    Accounting Principles

SECTION 2.     ADVANCES AND NOTES
        2.1    Inventory Advances; Inventory Loan
        2.2    Issuance of Note; Rate of Interest; Receipt of Payments
        2.4    Release Payments; Voluntary Prepayments of Inventory Loan
        2.5    Participating Lender
        2.6    Commitment Fee

SECTION 3.     COLLATERAL
        3.1    Security
        3.2    Undertakings Regarding Collateral
        3.3    Financing Statements
        3.4    Location of Collateral; Books and Records
        3.5    Insurance of Collateral
        3.6    Condemnation
        3.7    Taxes Affecting Collateral
        3.8    Discharge of Liens Affecting Collateral
        3.9    Use of Resort
        3.10   Other Timeshare Covenants
        3.11   Protection of Collateral; Assessments; Reimbursement
        3.12   Interest on Lender Paid Expenses
        3.13   Lender Responsibility
        3.14   Notice to Obligors
        3.15   Release of Lien on Unsold Inventory Timeshare Intervals

SECTION 4.     REPRESENTATIONS AND WARRANTIES
        4.1    Subsidiaries and Capital Structure
        4.2    Corporate Organization and Authority
        4.3    Business and Property
        4.4    Financial Statements
        4.5    Full Disclosure
        4.6    Pending Litigation
        4.7    Title to Properties
        4.8    Trademarks; Licenses and Permits
        4.9    Transaction Is Legal and Authorized
        4.10   No Defaults
        4.11   Governmental Consent
        4.12   Taxes
        4.13   Use of Proceeds
        4.14   Compliance with Law
        4.15   Restrictions of Debtor
        4.16   Brokers' Fees
        4.17   Deferred Compensation Plans
        4.18   Labor Relations

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        4.19   Validity and Enforceability
        4.20   Validity of Liens Granted to Lender
        4.21   Timeshare Regimen Reports
        4.22   The Timeshare Intervals
        4.23   Pre-Sale of Timeshare Intervals

SECTION 5.     CONDITIONS PRECEDENT TO ACQUISITION INVENTORY ADVANCE AND
               EFFECTIVENESS OF THIS AGREEMENT
        5.1    Opinions of Counsel
        5.2    Warranties and Representations True as of Closing Date
        5.3    Compliance with this Agreement
        5.4    Officer's Certificates; Secretary's Certificates; Good-Standing
               Certificates
        5.5    Uniform Commercial Code Financing Statements
        5.6    Assignment of Property-Related Contracts
        5.7    Intentionally Deleted
        5.8    Guaranty Agreement
        5.9    Subordination of Indebtedness
        5.10   Expenses
        5.11   Inventory Note; Inventory Deed of Trust
        5.12   Title Insurance; Casualty Insurance
        5.13   Environmental Site Assessment Report
        5.14   Taxes
        5.15   Inspection
        5.16   Survey
        5.17   Engineering Report
        5.18   Intentionally Deleted
        5.19   Intentionally Deleted
        5.20   First Lienholder Status; Quit-Claim Deed; Proxy Acknowledged
        5.21   Proceedings Satisfactory

SECTION 6.     Intentionally Deleted

SECTION 7.     COVENANTS
        7.1    Payment of Taxes and Claims
        7.2    Maintenance of Properties; Corporate Existence; Stock Ownership;
               Renovations; Supervisory Architect; Indebtedness; Liens; Business
        7.3    Payment of Notes and Maintenance of Office
        7.4    Sale of Properties
        7.5    Consolidation and Merger
        7.6    Guaranties
        7.7    Compliance with Environmental Laws
        7.8    Transactions with Affiliates; Principal Properties
        7.9    Use of the Lender Name
        7.10   Subordinated Obligations
        7.11   Notice of Legal Proceedings
        7.12   Further Assurances
        7.13   Financial Statements
        7.14   Officers' Certificate
        7.15   Inspection

SECTION 8.     EVENTS OF DEFAULT

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        8.1    Default
        8.2    Default Remedies

SECTION 9.     REVIVAL OF OBLIGATIONS AND LIENS

SECTION 10.    MISCELLANEOUS
        10.1   Governing Law
        10.2   Expenses and Closing Fees
        10.3   Parties, Successors and Assigns
        10.4   Notices
        10.5   Total Agreement
        10.6   Survival
        10.7   Litigation
        10.8   Power of Attorney
        10.9   Survival of Indemnities
        10.10  Conflicting Obligations; Rights and Remedies

Schedule 1a    --    Property Description of Hilltop Resort
Schedule 1b    --    Property Description of Steamboat Resort
Schedule 2     --    Property-Related Contracts
Schedule 3     --    Affiliates and Capital Structure
Schedule 4     --    Reserved
Schedule 5     --    Reserved
Schedule 6     --    Litigation
Schedule 7     --    Title Exceptions
Schedule 8     --    Personal Property Exceptions
Schedule 9     --    Permitted Leases and Rentals of Units
Schedule 10    --    Hazardous Substances
Schedule 11    --    Use of Proceeds
Schedule 12    --    Licenses, Permits, Etc. Not Obtained
Schedule 13    --    Deferred Compensation Plans
Schedule 14    --    Payment Instructions
Schedule 15    --    Address of Debtor for Books and Records
Schedule 16    --    Address of Debtor for Notices
Schedule 17    --    Address of Lender for Notices
Schedule 18          Description of Defaulted Note

Exhibit A      --    Form of Inventory Deed of Trust
Exhibit B      --    Form of Inventory Note
Exhibit C      --    Form of Proxy
Exhibit D      --    Form of Request for Lien Release
Exhibit E      --    Form of Partial Release from Inventory Deed of Trust
Exhibit F      --    Form of UCC-3 Partial Release
Exhibit G      --    [Reserved.]

Exhibit H      --    Form of Opinion from [Ballard]
                     Spahr Andrews & Ingersol
Exhibit I      --    Form of Opinion of Lionel Sawyer & Collins

                                       4
<PAGE>   5

Exhibit J      --    Form of Opinion of [Greenbury Tranig]
Exhibit K      --    Form of Steamboat's Officer's Certificate
Exhibit L      --    Form of Steamboat's Secretary's Certificate
Exhibit M      --    Form of Preferred Equities' Secretary's Certificate
Exhibit N      --    Form of Mego Financials Secretary's Certificate
Exhibit O      --    Form of Guaranty Agreement
Exhibit P      --    Form of Assignment of Rents
Exhibit Q            Form of Officers Certificate - Financial Statements

                                       5
<PAGE>   6

                       GENERAL LOAN AND SECURITY AGREEMENT
                                (INVENTORY LOAN)

        THIS GENERAL LOAN AND SECURITY AGREEMENT (as amended from time to time,
this "Agreement"), made and executed as of the 17th day of December, 1999, by
and among TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as secured
party (herein referred to as the "Lender"), PREFERRED EQUITIES CORPORATION, a
Nevada corporation, and STEAMBOAT SUITES, INC., a Colorado corporation, each
jointly and severally as debtor (collectively herein referred to as the
"Debtor").

BACKGROUND:

        Lender and Steamboat Suites, Inc. ("Steamboat") are parties to a General
Loan and Security Agreement dated October 5, 1994 amended by First Amendment to
General Loan and Security Agreement dated as of February 27, 1995, Second
Amendment to General Loan and Security Agreement dated as of November 30, 1995,
Third Amendment to General Loan and Security Agreement dated as of November 29,
1996, Fourth Amendment to General Loan and Security Agreement dated as of June
30, 1999, and letter amendments dated respectively September 23, 1996, December
10, 1997 and October 15, 1999 (collectively "Existing Loan Agreement"). Such
Existing Loan Agreement evidences a $15,000,000 receivable loan and a $7,500,000
original inventory loan to Steamboat for the Steamboat Resort (as defined
below). The obligations of the Existing Loan Agreement are guaranteed by
Preferred Equities Inc. ("Preferred") and Mego Financial Corp. Steamboat and
Preferred have requested an extension of the Existing Loan Agreement and
increase of the inventory loan to provide financing to both Steamboat and
Preferred and to include the Hilltop Resort (as defined below). Lender has
agreed to such request and determined to provide an inventory loan and a
receivable loan facility to both Preferred and Steamboat so long as the Existing
Loan Agreement is rewritten and the loans are evidenced by separate loan
agreements. For purposes of maintaining and continuity of agreement between
Steamboat and Lender, this Agreement shall be considered as necessary, an
amendment and restatement of the Existing Loan Documents and not a prepayment
under the terms thereof. Any defined terms used herein and not defined in
Section 1 hereof shall have meanings assigned in the Existing Loan Agreement. It
is the intention of Lender and Debtor that the inventory loan and receivable
loan be cross collateralized and cross defaulted during the term of each loan
and with all other indebtedness owed to Lender by either Debtor. To that end,
certain security documents shall evidence and secure both loans and all other
obligations owed by Steamboat or Preferred to Lender.

SECTION 1. INTERPRETATION OF THIS AGREEMENT

        1.1 TERMS DEFINED.

        As used in this Agreement, the following terms shall have the following
respective meanings set forth below or set forth in the Section referred to
following such term:

               ADVANCE -- means the Inventory Advance.

               AFFILIATE -- means any Person

                      (a) which directly or indirectly through one or more
               intermediaries controls, or is controlled by, or is under common
               control with, the Debtor;

<PAGE>   7

                      (b) which beneficially owns or holds 5% or more of any
               class of the Voting Stock of the Debtor; or

                      (c) 5% or more of the Voting Stock (or in the case of a
               Person which is not a corporation, 5% or more of the equity
               interest) of which is beneficially owned or held by the Debtor.

        The term "control" means the possession, directly or indirectly, of the
        power to direct or cause the direction of the management and policies of
        a Person, whether through the ownership of Voting Stock, other voting
        Securities, by contract or otherwise.

               AGENCY AGREEMENT - means an agreement among the Debtor, the
        Collection Agent and the Lender, reasonably satisfactory in form and
        substance to the Lender, relating to lockbox services in connection with
        a post office box and a related lockbox account.

               AGREEMENT OR THIS AGREEMENT -- as defined in the preamble hereto.

               AMENITY BUILDING -- means that certain building built at the
        Steamboat Resort which contains, among other things, a lobby, a
        hospitality coffee bar, a hot tub, a sauna and sales facilities, and to
        have individual ski storage lockers affixed thereto.

               ASSIGNMENT OF RENTS -- as defined in Section 5.11 of this
        Agreement.

               ASSOCIATION AND ASSOCIATIONS -- means collectively or
        individually, as applicable, The Suites at Steamboat Owners'
        Association, a Colorado nonprofit corporation, or any successor
        association thereto as provided in the Steamboat Timeshare Documents and
        Hilltop Resort Owners Association, Inc., a Colorado nonprofit
        corporation, or any successor association thereto as provided in the
        Hilltop Timeshare Documents.

               BOOKS AND RECORDS -- means all books, records, computer tapes,
        disks, software and microfiche records of the Debtor related to the
        Resorts.

               BUILDING -- means Building A and/or Building B and/or Building I.

               BUILDING A -- means the first residential building at the
        Steamboat Resort, designated "Building A," which consists of 30 Units,
        as provided in the Steamboat Declaration.

               BUILDING B -- means the second residential building at the
        Steamboat Resort, designated "Building B" which consists of 30 Units, as
        provided in the Steamboat Declaration.

               BUILDING I - means the residential building at the Hilltop Resort
        which consists of 56 residential units and 2 commercial condominium
        units.

               BUSINESS DAY -- means a day other than a Saturday or Sunday or a
        day on which banks in the State of Nevada, the State of Rhode Island or
        the State of Connecticut are required or authorized by law to be closed
        (other than for a general banking moratorium or holiday for a period
        exceeding 4 consecutive days).

               CHANGE IN MANAGEMENT -- means that Preferred and/or Guarantor
        shall cease to own, directly or indirectly, in the aggregate 100% of the
        total combined voting power of all classes of

                                       2
<PAGE>   8

        Voting Stock or other equity interests of any Person which shall have
        managerial and/or supervisory operational responsibilities in respect of
        the Resort.

               CLOSING DATE -- means, December 17, 1999.

               COLORADO UNIFORM COMMERCIAL CODE -- means the Uniform Commercial
        Code as adopted and in force in the State of Colorado, as from time to
        time in effect.

               COLLATERAL -- as defined Section 3.1 of this Agreement.

               COLLECTION AGENT -- at any time means the Person, acting as agent
        for the Lender, which is responsible for receiving payments under the
        Pledged Notes Receivable from the Makers thereof and which is a party to
        an Agency Agreement and pursuant thereto maintains or may maintain one
        or more lockbox accounts for the deposit of payments in respect of
        Pledged Notes Receivable.

               COMMITMENT LETTER -- means that certain letter dated October 12,
        1999 from the Lender to Debtors, which letter was accepted by Debtors on
        October 13, 1999.

               COMMON AMENITIES -- means the common areas and other amenities at
        the Resorts as contemplated in the Declarations which any purchaser of a
        Timeshare Interval shall be entitled to use pursuant to the
        Declarations. "Common Amenities" shall include the amenities offered in
        the Amenity Building of the Steamboat Resort.

               COMPENSATION -- as defined in Section 3.1(g) of this Agreement.

               CONDEMNATION COMPENSATION -- as defined in Section 3.6(a) of this
        Agreement.

               CONTRACT -- means any purchase and sale agreement between one or
        more natural Persons and the Debtor which agreement provides for the
        sale by the Debtor to such natural Person or Persons of one or more
        Timeshare Intervals.

               DEBTOR -- as defined in the preamble hereto.

               DECLARATION OR DECLARATIONS -- means collectively and
        individually the Steamboat Declaration and the Hilltop Declaration.

               DECLARANT -- the status of the Debtor as the declarant under
        applicable Colorado law and under the respective Declarations and the
        Articles of Incorporation and By-Laws of the respective Associations.

               DEFAULT -- means an event or condition the occurrence of which
        would, with the lapse of time or the giving of notice or both, become an
        Event of Default.

               DEFAULT RATE -- means, at any time, the per annum rate of
        interest equal to the Interest Rate, then in effect, plus 2% per annum;
        provided, however, that the Default Rate shall in no event exceed the
        Maximum Rate.

               DORFINCO -- means Dorfinco Corporation, a Delaware corporation.

                                       3
<PAGE>   9

               ENVIRONMENTAL PROTECTION LAW -- means each federal, state,
        county, regional or local law, statute, or regulation enacted in
        connection with or relating to the protection or regulation of the
        environment, including, without limitation, those laws, statutes, and
        regulations regulating the disposal, removal, production, storing,
        refining, handling, transferring, processing, or transporting of
        Hazardous Substances, and any regulations issued or promulgated in
        connection with such statutes by any governmental authority and any
        orders, decrees or judgments issued by any court of competent
        jurisdiction in connection with any of the foregoing.

               EQUIPMENT -- means the furniture, fixtures and furnishings of
        each Unit and all fixtures, fittings, machinery, appliances, equipment,
        apparatus, furnishings and personal Property of every nature found on or
        used in connection with the Resorts, but excluding motor vehicles,
        Property owned by the Associations, Property owned by occupants of the
        Units and telephone and computer equipment leased in the ordinary course
        of business.

               EVENT OF DEFAULT -- as defined in Section 8.1 of this Agreement.

               FAIR MARKET VALUE -- at any time with respect to any Property
        means the sale value of such Property that would be realized in an
        arm's-length sale at such time between an informed and willing buyer,
        and an informed and willing seller, under no compulsion to buy or sell,
        respectively.

               GUARANTY -- as defined in Section 7.6(b) of this Agreement.

               GUARANTY AGREEMENT -- as defined in Section 5.8 of this
        Agreement.

               GUARANTOR -- means Mego Financial.

               HAZARDOUS SUBSTANCES -- means any and all pollutants,
        contaminants, toxic or hazardous wastes or any other substances that
        might pose a hazard to health or safety, the removal of which may be
        required or the generation, manufacture, refining, production,
        processing, treatment, storage, handling, transportation, transfer, use,
        disposal, release, discharge, spillage, seepage or filtration of which
        is or shall be restricted, prohibited or penalized by any Environmental
        Protection Law (including, without limitation, asbestos, urea
        formaldehyde foam insulation and polychlorinated biphenyls); provided,
        however, that "Hazardous Substances" shall not include any substance
        used by the Debtor, any homeowner or their respective agents in the
        ordinary course of business in compliance with applicable Environmental
        Protection Laws.

               HILLTOP DECLARATION -- means that certain Condominium Declaration
        with Timeshare Ownership, Covenants, Conditions and Restrictions Hilltop
        Resort, A Condominium Declaration dated January 5, 1998 and recorded
        with the Office of the Clerk and Recorder for Routt County, Colorado on
        February 18, 1998 in Book 743, Page 478 as amended from time to time in
        accordance with the terms and provisions thereof and hereof.

               HILLTOP RESORT -- means the Property described on Schedule 1-A
        hereto, including, without limitation, all of the currently existing and
        hereafter created buildings, Units, Timeshare Intervals, Common
        Amenities in respect thereof and all other currently existing or
        hereafter constructed buildings, structures and improvements of every
        nature whatsoever now or hereafter situated on, or serving, said
        Property.

               IMPOSITIONS -- as defined in Section 3.7 of this Agreement.

                                       4
<PAGE>   10

               INSURANCE PREMIUMS -- as defined in Section 3.5(a) of this
        Agreement.

               INTEREST RATE -- means, with respect to any calendar month, a per
        annum rate of interest equal to the greater of:

                      (a)  8.75%, or

                      (b)  the sum of

                           (i)  2.0%, plus

                           (ii) the Prime Rate then in effect for such month.

        The interest rate for each calendar month shall be based upon the Prime
        Rate in effect at 9:00 a.m. (Eastern time) on the 1st day of such month.
        The term "Prime Rate" shall mean the "prime rate" as announced from time
        to time by Chase Manhattan Bank, N.A. or any successor thereto. In the
        event Chase Manhattan Bank, N.A., or any successor thereto, shall
        discontinue announcement of said Prime Rate, a comparable index
        designated by the Lender shall be used in calculating the Interest Rate.
        It is expressly agreed that the use of the term "prime rate" or any
        other similar designation is not intended to, nor does it, imply that
        said rate of interest is a preferred rate of interest or one which is
        offered by Chase Manhattan Bank, N.A. or any successor thereto to its
        most creditworthy customers.

               INVENTORY ADVANCE - as defined in Section 2.1(a) of this
        Agreement.

               INVENTORY DEED OF TRUST -- means that certain combination deed of
        trust, security agreement and fixture financing statement, substantially
        in the form of Exhibit A to this Agreement, as the same may be amended
        from time to time.

               INVENTORY LOAN -- means, at any time, the non-revolving loan
        facility comprised of a maximum of $8,400,000 attributed as follows:
        $2,200,000 refinancing the existing inventory loan advanced by Lender
        for Steamboat Resort and $6,200,000 refinancing the Hilltop Resort .
        Such principal amount represents a 17% advance against the retail value
        of the remaining unsold inventory at the Resorts.

               INVENTORY MATURITY DATE -- means December 1, 2002.

               INVENTORY NOTE -- as defined in Section 2.2(a) of this Agreement.

               LENDER -- as defined in the preamble to this Agreement.

               LETTER OF INTENT -- means, with respect to any request by the
        Debtor regarding (a) an extension of the Receivables Commitment Period,
        (b) additional loans to be extended to it by the Lender or (c) the sale
        of Notes Receivable by the Debtor to the Lender, a letter from the
        Lender to the Debtor expressing an interest in such request, provided
        that any such Letter of Intent may incorporate or be subject to
        conditions and contingencies as are customarily included in such letters
        and shall not be deemed to be an acceptance of any offer of the Debtor
        in such request or a commitment or offer by the Lender to make loans to,
        or purchase Notes Receivable from the Debtor.

                                       5
<PAGE>   11

               LIEN -- any interest in Property securing an obligation owed to,
        or a claim by, a Person other than the owner of the Property, whether
        such interest is based on the common law, statute or contract, and
        including, but not limited to, attachments, judgments or tax liens
        (except for inchoate tax liens which arise in connection with taxes not
        yet due and payable) and the security interest or lien arising from a
        mortgage, encumbrance, pledge, conditional sale or trust receipt or a
        lease, consignment or bailment for security purposes. The term "Lien"
        shall include reservations, exceptions, encroachments, easements,
        rights-of-way, covenants, conditions, restrictions, leases and other
        title exceptions and encumbrances affecting Property. For the purpose of
        this Agreement, the Debtor shall be deemed to be the owner of any
        Property which it has acquired or holds subject to a conditional sale
        agreement or other arrangement pursuant to which title to the Property
        has been retained by or vested in some other Person for security
        purposes.

               LOAN -- means the Inventory Loan.

               LOAN COSTS -- as defined in Section 10.2 of this Agreement.

               MAKER -- means any natural Person, who shall have, in a bona fide
        transaction, purchased a Timeshare Interval and executed a Contract and
        a Note Receivable in respect thereof.

               MANDATORY INVENTORY PREPAYMENT - means any prepayment required by
        Section 2.4(c) of this Agreement.

               MAXIMUM RATE -- as defined in Section 2.2(b) of this Agreement.

               MEGO FINANCIAL -- means Mego Financial Corp., a New York
        corporation.

               MONTHLY AVERAGE WEIGHTED LOAN BALANCE -- means, for any calendar
        month with respect to the Inventory Loan the quotient of

                      (a) the aggregate of the Daily Loan Balances for each of
               the days of such month in respect of such Loan divided by

                      (b) the number of days in such month.

        For purposes of this definition, "Daily Loan Balance" shall mean, for
        any day, the principal balance of the Inventory Loan outstanding as of
        the close of business of the Lender for such day after giving effect to
        all payments received made during such day.

               NOTES -- means the Inventory Note.

               NOTE RECEIVABLE -- means any promissory note made payable to the
        order of the Debtor which provides for payment of the deferred purchase
        price of one or more Timeshare Intervals purchased by the Maker thereof.

               OBLIGATIONS -- means all sums now or hereafter loaned, advanced
        or incurred by the Lender to or on behalf of the Debtor under this
        Agreement, the Receivable Loan Security Documents, the Inventory Note
        and any other Security Document (including, without limitation, accrued
        and unpaid interest, unpaid prepayment premium and Loan Costs), and the
        full, prompt and complete performance of all obligations owed by, or
        undertakings or indemnities of, Debtor arising hereunder or thereunder.

                                       6
<PAGE>   12
               PEC OBLIGATIONS -- means all sums now or hereafter loaned,
        advanced or incurred by the Lender or Dorfinco to or on behalf of
        Preferred under the Loan and Security Agreement dated as of August 12,
        1998, as amended, and Loan and Security Agreement dated as of July 31,
        1991, as amended, together with any amendments thereto, and Security
        Documents (including, without limitation, accrued and unpaid interest,
        unpaid prepayment premium and Loan Costs), and the full, prompt and
        complete performance of all obligations owed by, or undertakings or
        indemnities of, Debtor arising hereunder or thereunder.

               PARTICIPATING LENDER -- means any Person which (a) shall have
        been granted the right by the Lender to participate in any of the Notes
        and the Collateral and (b) shall have entered into a participation
        agreement in form and substance satisfactory to the Lender which shall
        provide, inter alia, that the Participating Lender shall communicate and
        deal only with the Lender with respect to the Participating Lender's
        interest in the Notes and the Collateral.

               PERMITTED EXCEPTIONS -- means the title exceptions set forth in
        Schedule 7 of this Agreement.

               PERSON -- means an individual, partnership, corporation, trust,
        unincorporated organization, or a government or agency or political
        subdivision thereof.

               PHASE II COMMITMENT LETTER - means, with respect to any Letter of
        Intent issued by the Lender, a letter from the Lender to the Debtor
        whereby the Lender offers to extend credit to, or purchase Notes
        Receivable from, the Debtor substantially in accordance with the terms
        and conditions set forth in such Letter of Intent. Such offer may be
        subject to such conditions and contingencies as are customarily found in
        commitment letters.

               PLEDGED CONTRACT -- means any Contract related to a Pledged Note
        Receivable, which Pledged Note Receivable evidences the payment of the
        deferred purchase price of one or more Timeshare Intervals provided for
        in such Contract.

               PLEDGED NOTE RECEIVABLE DEED OF TRUST -- with respect to any
        Pledged Note Receivable financing the purchase of a Timeshare Interval
        means a deed of trust, in form and substance reasonably acceptable to
        the Lender, (a) which deed of trust shall have created a first priority
        Lien in and to such Timeshare Interval, (b) which deed of trust shall
        have been duly recorded (and all fees and taxes in connection therewith
        paid by the Debtor) in the appropriate land records, (c) the original of
        which deed of trust, which shall contain an appropriate official
        acknowledgement of its due recordation in the appropriate local land
        records, shall have been delivered to the Lender by the Debtor, provided
        that if such original deed of trust has been delivered for recordation
        but has not yet been returned to the Debtor, the Debtor shall deliver to
        the Lender a copy of such original deed of trust, certified by the
        Debtor to be a true copy, together with a certificate of the Debtor
        certifying that such original deed of trust has been delivered for
        recordation, provided, further, that the Debtor shall deliver to the
        Lender the original deed of trust containing an official acknowledgement
        of its due recordation within 60 days of the purchase of the related
        Timeshare Interval, (d) which deed of trust shall have been assigned to
        the Lender by the Debtor pursuant to an assignment, in form and
        substance reasonably acceptable to the Lender (and such assignment shall
        have been duly recorded {and all fees and taxes in connection therewith
        paid by the Debtor} in the appropriate land records) and (e) in respect
        of which deed of trust a mortgagee's title insurance policy shall have
        been issued by a title insurance company acceptable to the Lender and
        delivered to the Lender (each such mortgagee's title insurance policy
        shall be in form and substance reasonably satisfactory to the Lender and
        its counsel {all exceptions thereto, other than

                                       7
<PAGE>   13

        Permitted Exceptions, being subject to the approval of the Lender and
        its counsel} and shall name the Lender, by way of an endorsement thereto
        {which endorsement shall have been delivered to the Lender}, as the
        insured party thereon, and the amount of coverage provided by each such
        mortgagee's title insurance policy shall not be less than the principal
        amount of such Pledged Note Receivable.

               PLEDGED NOTES RECEIVABLE -- means any Note Receivable which shall
        have been assigned and delivered to the Lender pursuant to the
        Receivables Loan Agreement and not reassigned or redelivered by the
        Lender to the Debtor.

               PREFERRED OR PREFERRED EQUITIES -- means Preferred Equities
        Corporation, a Nevada corporation.

               PRIME RATE -- as defined in the definition of "Interest Rate" in
        this Section 1.1.

               PROPERTY OR PROPERTIES -- means any interest in any kind of
        property or asset of Debtor, whether real, personal or mixed, or
        tangible or intangible.

               PROPERTY-RELATED CONTRACT -- as defined in Section 3.1(b) of this
        Agreement.

               RECEIVABLES LOAN -- means, that certain $15,000,000 Timeshare
        Interval receivable loan made or to be made by lender to Debtor and all
        documents.

               RECEIVABLE LOAN AGREEMENT -- means that certain General Loan and
        Security Agreement among Lender and Debtor of even date hereof to
        provide for the Receivables Loan.

               RECEIVABLE LOAN SECURITY DOCUMENTS - means Security Documents
        defined under the Receivable Loan Agreement.

               RELEASE FEE -- as defined in Section 3.15 of this Agreement.

               RELEASE PRICE -- means, with respect to any Unsold Inventory
        Timeshare Interval, $ 3,075 or such other amounts necessary to retire
        the Inventory Loan upon an 80% sell out of the then remaining Unsold
        Inventory Timeshare Intervals.

               RESORT OR RESORTS -- collectively means the Hilltop Resort and
        Steamboat Resorts.

               SECURITY -- shall have the same meaning as in Section 2(1) of the
        Securities Act of 1933, as amended.

               SECURITY DOCUMENTS -- means this Agreement, the Inventory Note,
        all assignments of Property-Related Contracts, the Agency Agreement, the
        Inventory Deed of Trust, the Guaranty Agreement, all Receivable Loan
        Security Documents and all assignments, instruments, certificates,
        notices and other documents executed and delivered in connection with
        the transactions contemplated herein.

               STEAMBOAT DECLARATION -- means that certain Amended and Restated
        Declaration with Timeshare Ownership Covenants, Conditions and
        Restrictions, The Suites at Steamboat, A Condominium dated March 21,
        1995 and recorded with the Office of the Clerk and Recorder for Routt
        County, Colorado on March 22, 1995 in Book 706, Page 337.

                                       8
<PAGE>   14

               STEAMBOAT RESORT -- means the Property described on Schedule 1B
        hereto, including, without limitation, all of the currently existing and
        hereafter created buildings, Units, Timeshare Intervals, Common
        Amenities in respect thereof and all other currently existing or
        hereafter constructed buildings, structures and improvements of every
        nature whatsoever now or hereafter situated on, or serving, said
        Property, including, without limitation, the Amenity Building.

               STEAMBOAT OR STEAMBOAT SUITES -- means Steamboat Suites, Inc., a
        Colorado corporation.

               SUBORDINATION AGREEMENT -- as defined in Section 5.9 of this
        Agreement.

               SUBSIDIARY -- means any present or future corporation of which
        the Debtor owns, directly or indirectly, more than 50% of the Voting
        Stock.

               TIMESHARE DOCUMENTS - collectively or Hilltop Timeshare Documents
        or Steamboat Timeshare Documents respectively means all documents and
        instruments establishing, memorializing, governing, or affecting the
        rights and obligations of the purchasers of Timeshare Intervals in and
        to a Unit, including, without limitation, the documents and certificates
        creating and effecting the timeshare regimen for such Unit, which shall
        include, without limitation, the respective Declarations, the Articles
        of Incorporation and By-Laws of the Associations, any restrictive
        covenants in respect of such regimen and all other project instruments
        in respect of such regimen.

               TIMESHARE INTERVAL -- means (i) (A) an estate for years in and to
        any Unit which shall confer an exclusive right to use, occupy and
        possess such or any other similar Unit for a stipulated week or a week
        in a stipulated season, together with a vested remainder as a tenant in
        common in such Unit at the end of such estate for years, all as more
        particularly provided for by the Declarations and the other Timeshare
        Documents in respect of such Unit or (B) a freehold estate in any Unit
        created by the Declarations and the other Timeshare Documents in respect
        of such Unit, which freehold estate shall entitle the owner thereof to
        the exclusive use and occupancy of one of the 51 annually recurring
        weekly timeshare periods or a week in a stipulated season established
        and designated in said Declarations in respect of such Unit or any other
        similar Unit and (ii) the proportionate interest in the Common Amenities
        related to such Unit, as set forth in the Declarations.

               TITLE INSURANCE POLICY {BLANKET} -- as defined in Section 5.12
        hereof.

               UNIT -- means any unit (within the meaning of such term in the
        Declaration) in any Building.

               UNSOLD INVENTORY TIMESHARE INTERVAL -- means, at any time, any
        Timeshare Interval arising out of a Unit, which Timeshare Interval
        shall, as at such time, not have been released from the Lien of the
        Inventory Deed of Trust.

               VOTING STOCK -- means securities of any class or classes of a
        corporation the holders of which are ordinarily, in the absence of
        contingencies, entitled to elect a majority of the corporate directors
        (or Persons performing similar functions) of such corporation.

        1.2 DIRECTLY OR INDIRECTLY.

                                       9
<PAGE>   15

        Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provisions
shall be applicable whether such action is taken directly or indirectly by such
Person.

        1.3 HEADINGS.

        Section headings have been inserted in this Agreement as a matter of
convenience of reference only; such section headings are not a part of this
Agreement and shall not be used in the interpretation of this Agreement.

        1.4 ACCOUNTING PRINCIPLES.

        Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be determined or made in accordance with generally
accepted accounting principles, procedures and practices consistently applied at
the time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.

SECTION 2. ADVANCES AND NOTES.

        2.1 INVENTORY ADVANCES; INVENTORY LOAN.

               (a) INVENTORY ADVANCES. The Lender agrees, pursuant to the terms
        of this Agreement and subject to the satisfaction of the conditions
        precedent in Section 5 of this Agreement, to make a one time advance
        (an "Inventory Advance") to the Debtor for the purposes stated herein.

               Other than payments of the Release Price with respect to
        Timeshare Intervals that have been sold, the application of insurance
        proceeds to the prepayment of the Inventory Loan pursuant to Section 3.5
        hereof or the application of Condemnation Compensation pursuant to
        Section 3.6 hereof, the Debtor may not prepay Inventory Advances, and in
        no circumstance may it re-borrow previously paid Inventory Advances. The
        Inventory Loan shall be payable in the manner set forth in Section 2.4
        of this Agreement and in the Inventory Note. The Inventory Loan shall be
        due and payable on the Inventory Maturity Date together with any accrued
        interest thereon then remaining unpaid and any other amounts then due in
        connection therewith, under the Inventory Note or under any of the other
        Security Documents relating to, or otherwise securing, the Inventory
        Loan.

               (b) LENDING LIMITS: Debtor acknowledges, agrees and confirms that
        the obligations of Lender after giving effect to all participations is
        limited to a maximum aggregate principal amount of $19,000,000. Debtor
        further acknowledges, agrees and confirms that the obligation of Lender
        to make the full amount of the Receivable Loan shall be subject to
        Lender participating $7,500,000 of the Receivable Loan.

        2.2 ISSUANCE OF NOTE; RATE OF INTEREST; RECEIPT OF PAYMENTS.

               (a) INVENTORY NOTE. The Debtor shall authorize, issue and deliver
        to the Lender a promissory note (as amended from time to time, the
        "Inventory Note") substantially in the form attached to this Agreement
        as Exhibit B.

                                       10
<PAGE>   16

               (b) RATE OF INTEREST: INVENTORY LOAN. Interest shall accrue on
        the Inventory Loan and be due monthly in arrears on the first (1st)
        Business Day of each month, as more particularly provided in the last
        sentence of this paragraph, and shall be paid as provided in Section 2.4
        of this Agreement. Subject to the accrual of interest on the Inventory
        Loan after the occurrence of a Default or Event of Default, as more
        particularly provided below in this clause (b), the Monthly Average
        Weighted Loan Balance in respect of the Inventory Loan for each calendar
        month shall bear interest at a rate per annum equal to the Interest
        Rate.

               Interest shall be calculated under this clause (b) on the basis
        of actual days elapsed over a period of a 360-day year.

               The Inventory Loan shall bear interest as of the date of the
        Lender's wiring of funds thereof through the date of the receipt by the
        Lender of the repayment of such Loan (if the repayment of all or any
        portion of the Loan is received by the Lender later than 3:00 p.m.
        Eastern time, then interest accrual thereon shall be through the next
        Business Day following such receipt). After the occurrence of an Event
        of Default or after the Inventory Maturity Date (if the aggregate
        principal balance of the Inventory Loan is not paid in full on the
        Inventory Maturity Date), the Inventory Loan will bear interest at the
        Default Rate.

               The Debtor and the Lender intend to comply at all times with
        applicable usury laws. All agreements between the Debtor and the Lender,
        whether now existing or hereafter arising and whether written or oral,
        are hereby limited so that in no contingency, whether by reason of
        demand or acceleration of the maturity of any Note or otherwise, shall
        the interest contracted for, charged, received, paid or agreed to be
        paid to the Lender exceed the maximum amount permissible under
        applicable law, or in the absence of a maximum allowable rate under
        applicable law, then, 45% per annum (the "Maximum Rate"). The Lender
        may, in determining the Maximum Rate in effect from time to time, take
        advantage of any law, rule or regulation in effect from time to time
        available to the Lender which exempts the Lender from any limit upon the
        rate of interest it may charge or grants to the Lender the right to
        charge a higher rate of interest than that otherwise permitted by
        applicable law. If, from any circumstance whatsoever, interest would
        otherwise be payable to the Lender in excess of the Maximum Rate, the
        interest payable to the Lender shall be reduced to the Maximum Rate; and
        if from any circumstance the Lender shall ever receive anything of value
        deemed interest by applicable law in excess of the Maximum Rate, an
        amount equal to any excessive interest shall be applied to the reduction
        of the principal of the Loan and not to the payment of interest, or if
        such excessive interest exceeds the unpaid balance of principal of the
        Loan, such excess shall be refunded to the Debtor. All interest paid or
        agreed to be paid to the Lender shall, to the extent permitted by
        applicable law, be amortized, prorated, allocated and spread throughout
        the full period until payment in full of the principal so that the
        interest on the Loan for such full period shall not exceed the Maximum
        Rate. The Debtor agrees that in determining whether or not any interest
        payment under the Security Documents exceeds the Maximum Rate, any
        non-principal payment (except payments specifically described in the
        Security Documents as "interest") including without limitation,
        prepayment fees and late charges, shall to the maximum extent not
        prohibited by law, be an expense, fee or premium rather than interest.
        The Lender hereby expressly disclaims any intent to contract for, charge
        or receive interest in an amount which exceeds the Maximum Rate. The
        provisions of this Agreement, the Notes, and all other Security
        Documents are hereby modified to the extent necessary to conform with
        the limitations and provisions of this paragraph, and this paragraph
        shall govern over all other provisions in any document or agreement now
        or hereafter existing. This paragraph shall never be superseded or
        waived unless there is a written document executed by the Lender and the
        Debtor, expressly declaring the usury limitation set forth in this

                                       11
<PAGE>   17

        paragraph to be null and void, and no other method or language shall be
        effective to supersede or waive this paragraph.

               (c) INTEREST AND OTHER PAYMENTS DUE ON HOLIDAYS. If any payment
        due on, or with respect to, this Agreement, the Notes or any other
        Security Document shall fall due on a day other than a Business Day,
        then such payment shall be made on the 1st Business Day following the
        day on which such payment shall have so fallen due; provided that if all
        or any portion of such payment shall consist of a payment of interest,
        for purposes of calculating such interest, such payment shall be deemed
        to have been originally due on such first following Business Day, and
        such interest shall accrue and be payable to (but not including, subject
        to clause (d) below) the actual date of payment.

               (d) APPLICATION OF PAYMENTS RECEIVED AFTER 3:00 P.M. Any payment
        actually received by the Lender at or before 3:00 p.m. Eastern time, by
        federal funds wire transfer on any Business Day, shall be deemed to have
        been received by the Lender on such day. Any payment actually received
        by the Lender after 3:00 p.m. Eastern time, by federal funds wire
        transfer on any Business Day, shall be deemed to have been received on
        the next following Business Day. All payments received by the Lender on
        a day other than a Business Day, or in a manner other than by federal
        funds wire transfer, shall be deemed to have been received by the Lender
        on the Business Day such amounts actually become available to the Lender
        prior to 3:00 p.m. Eastern time in immediately available funds.

        2.3 INTENTIONALLY DELETED

        2.4 RELEASE PAYMENTS; VOLUNTARY PREPAYMENTS OF INVENTORY LOAN.

               (a) RELEASE PAYMENTS. Payments of Release Prices in respect of
        Unsold Inventory Timeshare Intervals shall be applied by the Lender when
        received in good, collected funds as follows:

                      FIRST, towards the payment of fees, costs and expenses as
               set forth in Section 10.2 of this Agreement, in each case, as the
               same may have arisen in respect of the Inventory Loan,

                      SECOND, towards the payment of all unpaid Release Fees in
               respect of the Inventory Loan,

                      THIRD, towards the payment of all billed and unpaid
               interest, if any, in respect of the Inventory Loan,

                      FOURTH, to the payment of the principal amount of the
               Inventory Loan,

                      FIFTH, towards the payment of fees, costs and expenses as
               set forth in Section 10.2 of this Agreement, in each case, as the
               same may have arisen in respect of the Receivables Loan,

                      SIXTH, to the payment of the principal amount of the
               Receivables Loan.

                      SEVENTH, to the payment of any other Obligations or PEC
               Obligations unpaid and in default

                                       12
<PAGE>   18

               Interest which accrues on the Inventory Loan in respect of any
        month shall be due and payable on, and shall be paid by the Debtor on,
        the first (1st) Business Day of the immediately following month.

               (b) VOLUNTARY PREPAYMENTS. Debtor shall not have the right to
        prepay the Inventory Loan, except as provided in Section 2.1(a),

               (c) MANDATORY PREPAYMENT. Debtor shall make payments in addition
        to the Release Payments on or before the following anniversary dates to
        the extent necessary so that the principal balance of the Inventory Loan
        does not exceed the following levels:

<TABLE>
<CAPTION>
                      Date                         Principal Balance Remaining
                      ----                         ---------------------------
               <S>                                 <C>
               December 1, 2000                           $6,200,000
               December 1, 2001                            3,000,000
               December 1, 2002                                 -0-
</TABLE>

        2.5 PARTICIPATING LENDER.

        The Lender shall have the right, without prior notice to the Debtor or
the approval of the Debtor, to designate one or more Participating Lenders and
to grant to such Participating Lenders participations in the Receivable Loan
Agreement and/or the Inventory Loan, on terms and conditions satisfactory to the
Lender. In the event that the Lender so designates a Participating Lender and
grants such Participating Lender a participation in any of such Loans, such
Participating Lender shall communicate and deal only with the Lender in respect
to such Participating Lender's interest in any of such Loans and the Collateral
and the Debtor shall communicate and deal hereunder only with the Lender and not
with any Participating Lender.

        2.6 COMMITMENT FEE.

        The Debtor has paid to the Lender the full amount of the commitment fee,
as provided for in the Commitment Letter.

SECTION 3. COLLATERAL

        3.1 SECURITY.

        For the purpose of securing the prompt and complete payment and
performance by the Debtor of all of the Obligations and the PEC Obligations, the
Debtor does unconditionally and irrevocably hereby grant to the Lender a
security interest in, and a Lien upon, the following Property of the Debtor,
whether now owned or hereafter acquired (such Property being herein referred to
as the "Collateral"):

               (a) all of the Debtor's right, title and interest in, to and
        under all Pledged Notes Receivable (now or hereafter existing) pledged
        under the Receivable Loan Agreement together with all deposits,
        accounts, accounts receivable, contract rights, general intangibles and
        other receivables arising under or in connection with such Pledged Notes
        Receivable or otherwise securing the obligations thereunder of the
        Makers thereof, together with all payments and other proceeds thereunder
        (including, without limitation, all Pledged Contracts, Pledged Note
        Receivable Deeds of Trust, documents, instruments, title insurance and
        chattel paper relating thereto and all proceeds, Property rights,
        privileges and benefits arising out of the enforcement thereof);

                                       13
<PAGE>   19

               (b) all of the Debtor's right, title and interest in, to and
        under (including, without limitation, all revenues, proceeds, rents and
        other benefits derived from) any franchises (excluding the Hospitality
        Franchise Systems and Ramada Franchise Systems license agreements),
        permits, trade names, trademarks (and goodwill associated therewith),
        approvals, leasehold interests (whether as lessor or lessee), management
        contracts, marketing contracts, maintenance contracts, utility
        contracts, security contracts, licensing contracts, Timeshare Documents
        or other similar contracts and all guaranties of any of the foregoing,
        including, without limitation, the contracts set forth on Schedule 2 to
        this Agreement (individually, a "Property-Related Contract" and,
        collectively, the "Property-Related Contracts") relating, in each case,
        to one or more Units or Timeshare Intervals or to the Resort;

               (c) all other accounts, contract rights, general intangibles,
        documents, instruments and proceeds of the Debtor related to the
        Property described in clause (a) or clause (b) above, or otherwise
        connected with, or related to, the operation and/or use of the Resort
        (including, without limitation, all rights of the Debtor in and to
        unearned or prepaid Insurance Premiums, Impositions or other charges for
        utilities and any deposits with respect thereto relating to the Resort
        and any interest thereon and any Compensation that would be payable in
        respect of any Pledged Note Receivable Deed of Trust) including any
        construction, architect and engineering contracts entered into or to be
        entered into by the Debtor in connection with the refurbishing of the
        Resorts;

               (d) all Books and Records;

               (e) all Equipment;

               (f) all of the Debtor's right, title and interest of whatever
        character (whether as owner, vendor, mortgagee, chattel lessee,
        Declarant, Unit owner, Timeshare Interval owner or otherwise, whether
        vested or contingent and whether now owned or hereafter acquired) in and
        to (i) the Resorts, including, without limitation, all Timeshare
        Intervals (now existing or hereafter created) in the Resort (whether
        sold or unsold), (ii) the Declarations (including, without limitation,
        its Development Rights or Special Declarant Rights, as such terms are
        defined in the Colorado Common Interest Ownership Act), (iii) all
        building materials, supplies and other Property now or hereafter stored
        at or delivered to the Resorts or any other location for installation in
        or on the Resorts, (iv) except to the extent included in clause (a),
        clause (b) or clause (c) above, all rents, issues, profits and
        condemnation awards now or hereafter belonging or in any way pertaining
        to the Resorts and/or any building, structure or improvement now or
        hereafter located at the Resorts, provided that nothing in this clause
        (iv) shall limit or restrict the right of the Debtor to collect "Rents"
        as defined, and provided for, in the Assignment of Rents and (v) any and
        all plans, specifications, drawings, books, records, marketing materials
        and similar items now or hereafter relating to the Resorts, the
        operation thereof, any rights of the Debtor thereto or any interest
        therein;

               (g) all of the Debtor's right, title and interest of whatever
        character (whether as owner, chattel lessee, Declarant, Unit owner,
        Timeshare Interval owner or otherwise, whether vested or contingent and
        whether now owned or hereafter acquired) in and to any and all
        judgments, settlements, claims, awards, insurance proceeds and other
        proceeds and compensation, and any interest thereon (collectively,
        "Compensation"), now or hereafter made or payable in connection with (i)
        any casualty or other damage to all or any part of the Resorts, (ii) any
        condemnation proceedings affecting the Resorts or any rights thereto or
        any interest therein, (iii) any damage to or taking of the Resorts or
        any rights thereto or any interest therein arising from or otherwise
        relating to any exercise of the power of eminent domain (including,
        without

                                       14
<PAGE>   20

        limitation, any and all Compensation for change of grade of streets or
        any other injury to or decrease in the value of the Resorts), or any
        conveyance in lieu of or under threat of any such taking, (iv) any and
        all proceeds of any sale, assignment or other disposition of the Resorts
        or any rights thereto or any interest therein, (v) any and all proceeds
        of any other conversion (whether voluntary or involuntary) of the
        Resorts or any rights thereto or any interest therein or to cash or any
        liquidated claim relating thereto, and (vi) any and all refunds and
        rebates of or with respect to any Insurance Premium, any Imposition or
        any other charge for utilities relating to the Resorts (including,
        without limitation, any and all refunds and rebates of or with respect
        to any deposit or prepayment relating to any such Insurance Premium,
        Imposition or charge), and any and all interest thereon, whether now or
        hereafter payable or accruing; and

               (h) all other "Mortgaged Property," as such term is defined in
        the Inventory Deed of Trust, whether such Collateral shall be presently
        in existence or whether it shall be acquired or created by the Debtor at
        any time hereafter, wherever located, together with the products and
        proceeds thereof, and any replacements, additions and/or accessions
        thereto and substitutions thereof and after-acquired Property related to
        the Resort, provided that any Collateral which shall have been released
        by the Lender from the Liens provided for herein or in any other
        Security Document shall not be deemed to have again become subject to
        such Liens solely by virtue of becoming after-acquired Property of the
        Debtor.

               The Lender agrees that, upon the release of a Timeshare Interval
        from the Inventory Deed of Trust, the Lender will release any security
        interest , the Lender any related Notes Receivable that are not Pledged
        Notes Receivable at such time, together with all documents, instruments,
        chattel paper, proceeds, revenues, Property rights, privileges and other
        benefits relating thereto. In addition to its agreements in the
        immediately preceding sentence, the Lender further agrees that, upon the
        incurrence by the Debtor of indebtedness other than to the Lender as
        permitted in Section 7.2(i) hereof, or the sale of Notes Receivable by
        the Debtor to a Person other than the Lender as permitted in Section 7.4
        hereof, and the written request of the Debtor, the Lender will release
        its security interest under any Security Document (including, without
        limitation, the Inventory Deed of Trust), in any Notes Receivable that
        are not Pledged Notes Receivable at such time and are either being
        pledged in connection with the incurrence of such indebtedness or being
        sold in connection with such sale, as the case may be, together with all
        documents, instruments, chattel paper, proceeds, revenues, Property
        rights, privileges and other benefits relating thereto.

        To the extent that the Debtor satisfies:

               (a) the requirements of Section 7.2(i) hereof with respect to the
        incurrence of additional indebtedness in connection with the financing
        of Notes Receivable not pledged to the Lender under this Agreement or

               (b) the requirements of Section 7.4 hereof with respect to the
        sale of Notes Receivable not pledged to the Lender under this Agreement

and, in either case, if no Event of Default shall then exist, the Lender agrees,
upon receipt of a written request of the Debtor therefor, to enter into an
intercreditor agreement, which shall be in form and substance reasonably
satisfactory to the Lender and its counsel, with any other lender providing such
financing to the Debtor or any purchaser purchasing such Notes Receivable from
the Debtor, which intercreditor agreement shall provide:

                                       15
<PAGE>   21

               (a) for an equal and ratable sharing between the Lender and such
        other lender or such purchaser of any security interest in, and Lien
        upon, the Collateral described in clause (b), in clause (c) (but only to
        the extent that clause (c) shall relate to Property described in clause
        (b)), clause (d) and clause (e) above, provided that the Lender shall
        not be obligated to effect any such sharing if such other lender or
        purchaser shall have failed to perfect its security interest in, and
        Lien upon, said Collateral,

               (b) that such other lender or purchaser shall recognize the
        priority and exclusivity of the Lender's security interest in, and Lien
        upon, all of the Collateral described in clause (a) above and in clause
        (c) above (to the extent that clause (c) shall relate to Property
        described in clause (a) above),

               (c) that the Lender shall recognize the priority and exclusivity
        of the other lender's or purchaser's security interest in, and Lien
        upon, the Notes Receivable specifically pledged or sold and (in each
        case) delivered to such other lender or such purchaser by the Debtor and
        in and to the accounts, contract rights, general intangibles and
        instruments, documents and proceeds in respect thereof, and

               (d) for a proportionate sharing of the voting rights granted by
        the Debtor to the Lender pursuant to Section 3.9(c) hereof, provided
        that such other lender has provided for an assignment of such voting
        rights to itself.

The Lender may, in its sole discretion, require the Debtor to deliver to the
Lender certified copies of the documents of such other lender or such purchaser
providing for such financing or sale and the exhibits and other instruments to
be delivered in connection therewith, all of which shall be reasonably
satisfactory to the Lender. All actions taken in connection with the execution
of any such intercreditor agreement shall be reasonably satisfactory to the
Lender and its counsel.

        3.2 UNDERTAKINGS REGARDING COLLATERAL.

               (a) The Lender shall not be required to take any steps to perfect
        or maintain the perfection of its security interest in the Collateral
        and no loss of, or damage to, the Collateral shall release the Debtor
        from any of the Obligations.

               (b) Notwithstanding that the Lender has agreed hereunder to make
        Receivable Advances under the Receivable Loan Agreement to the Debtor
        only in respect of Eligible Notes Receivable (as defined in the
        Receivable Loan Agreement), the Lender shall have a security interest
        in, and may collect payments under, all of the Pledged Notes Receivable
        of the Debtor.

               (c) The execution and delivery of this Agreement, and the
        granting of the Liens in and to the Collateral, shall not subject the
        Lender to, or transfer or pass to the Lender or in any way affect or
        modify, the liability of the Debtor under any or all of the Pledged
        Notes Receivable, the Pledged Contracts, the Property-Related Contracts
        or in connection with the Resort, the Declaration or the Association's
        Articles of Incorporation or By-Laws, it being understood and agreed
        that notwithstanding this Agreement, and the granting of the Liens in
        and to the Collateral, all of the obligations of the Debtor (whether as
        owner, chattel lessee, vendor, mortgagee, Declarant, Unit owner,
        Timeshare Interval owner or otherwise) to each and every other party
        under each and every one of the Pledged Notes Receivable, the Pledged
        Contracts and the Property-Related Contracts and/or in connection with
        the Resort or the Declaration and Articles of Incorporation and By-Laws
        of the Association shall be and remain enforceable by such other party,
        its successors and assigns, only against the Debtor or Persons other
        than the Lender, and

                                       16
<PAGE>   22

        the Lender has not assumed any of the obligations or duties of the
        Debtor under or with respect to any of the Pledged Notes Receivable, the
        Pledged Contracts or the Property-Related Contracts or otherwise in
        connection with the Resort or the Declaration or the Articles of
        Incorporation or By-Laws of the Association.

               (d) The Debtor hereby agrees and acknowledges that neither the
        acceptance of this Agreement or any other Security Document by the
        Lender nor the exercise of, or failure to exercise, any right, power or
        remedy in this Agreement or in any other Security Document conferred
        upon the Lender shall be deemed or construed to obligate the Lender to
        pay any sum of money, take any other action or incur any liability in
        connection with, or collect or realize upon, any of the Pledged Notes
        Receivable, the Pledged Contracts or any other Collateral. It is further
        agreed and understood by the Debtor that the Lender shall not be liable
        in any way for any cost, expense or liability connected with, or any
        charge or liability arising from, any of the Pledged Notes Receivable,
        any of the Pledged Contracts, any of the Property-Related Contracts or
        any other Collateral.

               (e) The Debtor hereby agrees to indemnify the Lender, and hold it
        harmless, from any and all liability, loss or damage which it may or
        might incur by reason of any and all claims and demands whatsoever which
        may be asserted against the Lender arising out of, as a result of, or
        otherwise connected with, the Liens hereby granted to the Lender by the
        Debtor under or in respect of any of the Pledged Notes Receivable, the
        Property-Related Contracts or any other Collateral by reason of (i) the
        failure by the Debtor to perform any obligations or undertakings
        required to be performed by the Debtor under or in connection with any
        of such Pledged Notes Receivables, the Pledged Contracts, the
        Property-Related Contracts or any other Collateral, (ii) any failure by
        the Debtor, in connection with any of such Pledged Notes Receivable, the
        Pledged Contracts, the Property-Related Contracts or any other
        Collateral, to comply with any applicable federal, state or local
        consumer credit, sale rescission or usury statute, including, without
        limitation, any such statute of any state in which a Maker may reside,
        the Consumer Credit Protection Act, as amended, the Federal Trade
        Commission Act, as amended, the Colorado Uniform Consumer Credit Code,
        as amended, all rules and regulations promulgated under the foregoing
        statutes, acts and codes, the Interstate Land Sales Full Disclosure Act,
        the Colorado Condominium Ownership Act and the rules and regulations
        promulgated thereunder and the Colorado Common Interest Ownership Act
        and the rules and regulations promulgated thereunder, and (iii) failure
        by the Debtor to comply with any applicable federal, state or local
        statutes or ordinances and the rules and regulations promulgated
        thereunder pertaining to the renovation, construction, use or operation
        of the Resort (including, without limitation, the Units) or to otherwise
        discharge its duties and obligations under applicable law and under the
        Declaration or the Association's Articles of Incorporation or By-Laws as
        Declarant.

        3.3 FINANCING STATEMENTS/PERFECTION DOCUMENTS.

        The Debtor agrees, at its own expense, to execute the financing
statements required by the Colorado Uniform Commercial Code together with any
and all other instruments or documents and take such other action, including
delivery of such instruments and documents, as may be necessary to perfect, and
to continue the perfection of, the Lender's security interest and Liens in the
Collateral and, unless prohibited by law, the Debtor hereby authorizes the
Lender to execute and file any such financing statement on the Debtor's behalf.
The parties agree that a legible carbon, photographic or other reproduction of
this Agreement or of a financing statement shall be sufficient as a financing
statement.

        3.4 LOCATION OF COLLATERAL; BOOKS AND RECORDS.

                                       17
<PAGE>   23

        All tangible Collateral (other than Collateral delivered to the Lender
and other than certain Books and Records which may be kept on Steamboat Suite's
or Preferred Equities' premises in Las Vegas, Nevada) which is personal Property
is to remain, at all times, on the premises of the Debtor in Steamboat Springs,
Colorado and the Debtor represents and warrants to the Lender that all of the
currently existing tangible Collateral is now located there, and the Debtor will
not transfer the Collateral from such premises to other locations without the
prior written approval of the Lender. The Debtor shall, upon receipt of a
written request therefor from the Lender, deliver to the Lender, then current
copies of all computer tapes, disks, software and microfiche records
constituting, in whole or in part, the Books and Records.

        3.5 INSURANCE OF COLLATERAL.

               (a) MAINTENANCE OF INSURANCE. The Debtor agrees to maintain, or
        cause to be maintained, insurance, with financially sound and reputable
        insurers acceptable to the Lender, with respect to the Buildings, the
        Units and the personal Property located therein (including, without
        limitation, the furniture, fixtures and furnishings thereof), all other
        equipment and other personal Property of every nature whatsoever now or
        hereafter located in or on, or attached to, and used or intended to be
        used in connection with the Resort, the Common Amenities (including,
        without limitation, the Amenity Building) and the Pledged Notes
        Receivable, the Pledged Contracts and the Books and Records, against
        casualties, contingencies, hazards and such other risks (including,
        without limitation, (i) fire, hurricane, tornado, wind damage, and such
        other risks insured against by a standard all-risk property and fire
        insurance policy and endorsement for extended coverage and (ii) flood
        insurance, if required by applicable law) and in such amounts as shall
        be reasonably satisfactory to the Lender (such insurance to be
        maintained during the refurbishing of the Resorts and to cover materials
        in as well as adjacent to the structures so insured; such insurance
        shall also be maintained prior to such refurbishing as well as after
        such refurbishing); provided, however, that such casualty insurance
        shall (A) in no case be in an amount less than an amount sufficient to
        rebuild the Buildings, the Units or the Common Amenity which shall have
        suffered the loss and replace any of the personal Property located
        therein and (B) be sufficient to provide funds to fully compensate
        owners of Timeshare Intervals in and to such Building and/or Unit for
        any inability to utilize such Building, Unit and/or Common Amenity
        during any period following a loss to such Building, Unit or Common
        Amenity. The Debtor shall deliver copies of the policies of such
        insurance to the Lender, with satisfactory lender's loss payable
        endorsements naming the Lender as loss payee to the extent of its
        interest and as such interest may appear on the Closing Date, as set
        forth in Section 5.12 hereof and within 15 days after the Closing Date,
        Debtor shall deliver a certification from the insurance company or
        insurance companies issuing such policies certifying that such copies
        are true and correct. Each such policy of insurance or endorsement shall
        contain a clause requiring the insurer to give not less than 30 days'
        prior written notice to the Lender in the event of cancellation of the
        policy for any reason whatsoever and a clause that the interest of the
        Lender shall not be impaired or invalidated by any act or neglect of the
        Debtor or owner of the Property nor by the occupation of the premises
        for purposes more hazardous than are permitted by said policy. If the
        Debtor shall fail to provide and pay for such insurance, or have the
        same provided and paid for, the Lender may, at the Debtor's expense,
        procure the same, but shall not be required to do so. The Debtor agrees
        to deliver to the Lender, promptly as rendered, true copies of all
        reports made by the Debtor in any reporting form to insurance companies.
        The Debtor shall maintain or caused to be maintained insurance with
        financially sound and reputable insurers with respect to its Property
        and business (including, without limitation, the Collateral) covering
        any public liability of the Debtor, its officers, agents or employees
        (including, without limitation, damage by Debtor or its officers, agents
        or employees or the Association to the Property of other Persons, any
        bodily injury caused by Debtor or its officers, agents or employees to
        any other Person, or any negligent act or other similar liability of
        Debtor or its officers, agents or

                                       18
<PAGE>   24

        employees) and in such amounts as are satisfactory to the Lender; the
        Lender shall be named as a co-insured thereon.

               The Debtor shall, on or prior to August 15 of each year,
        commencing on August 15, 2000, submit to the Lender insurance
        certificates showing the type and amounts of insurance coverage
        maintained, or caused to be maintained, by Debtor in respect of the
        Resort, the then current premium cost in respect thereof and the amount
        of such cost which shall have been previously paid. The Debtor shall, to
        the extent permitted by applicable law, cause all casualty policies of
        insurance provided under the Declarations to have mortgagee endorsements
        in respect of the Lender's interests in and to the Timeshare Interval
        that is the subject of any Pledged Note Receivable.

               The Debtor shall pay, or cause to be paid, all premiums on the
        aforesaid insurance policies and all other fees and charges payable in
        connection with such insurance policies (such premiums, fees and charges
        being collectively referred to herein as "Insurance Premiums") not later
        than the due date thereof. If the Debtor shall fail to pay, or cause to
        be paid, any such Insurance Premiums, the Lender may (but shall not be
        obligated to), at Debtor's expense, pay the same. Any such payment shall
        be subject to Section 3.11 hereof.

               If the Mortgaged Property (as defined in the Inventory Deed of
        Trust) is sold at a foreclosure sale or if the Lender shall acquire
        title to said Mortgaged Property, the Lender shall have all of the
        right, title and interest of the Debtor in and to all insurance policies
        required under this clause (a) and the unearned premiums thereon,
        related to the Mortgaged Property, and in and to the proceeds resulting
        from any damage to said Mortgaged Property prior to such sale or
        acquisition.

               (b) CONDOMINIUM/TIMESHARE INSURANCE PROCEEDS. The Lender
        acknowledges that application of all or a portion of any proceeds of
        insurance may be subject to the Colorado Condominium Ownership Act, the
        Colorado Common Interest Ownership Act and the terms and provisions of
        the Declaration, and the foregoing requirements in this Section 3.5
        shall be subject thereto (unless such laws may be modified by agreement
        and have been so modified). For so long as the Inventory Loan shall
        remain outstanding, any proceeds of insurance payable by the
        Association, any manager retained by it or by the Declarant in respect
        of any Unit or Timeshare Interval to the Debtor under the Declarations,
        the Associations' Articles of Incorporation or By-Laws or under
        applicable Colorado law shall be promptly paid and/or turned over to the
        Lender as proceeds of the Collateral and applied either in accordance
        with Colorado law or, if no such requirement exists, to the prepayment
        of the Loan without prepayment penalty (after deducting therefrom all
        out-of-pocket costs and expenses of the Lender in respect thereof),
        first, as provided in Section 2.1(a) hereof and second, as provided in
        the Receivable Loan Agreement. Without limiting the immediately
        preceding sentence, any proceeds of insurance in respect of any Unit or
        Timeshare Interval received by the Debtor or received by the Debtor as
        Declarant or received by the Associations at a time during which

                      (i) the Debtor (as Debtor or as Declarant) or any
               Affiliate shall be the only owner or owners of Units or Timeshare
               Intervals, or

                      (ii) the insurance provisions of the Declarations shall
               have been suspended, shall be promptly paid and/or turned over to
               the Lender (and the Debtor, as Debtor or as Declarant, shall
               cause such payment and/or turnover) as proceeds of the Collateral
               and applied to the prepayment of the Loan (after deducting
               therefrom all out-of-pocket costs

                                       19
<PAGE>   25

               and expenses of the Lender in respect thereof), first, as
               provided in Section 2.1(a) hereof and second, as provided in the
               Receivable Loan Agreement.

               (c) MISCELLANEOUS APPLICATION OF INSURANCE PROCEEDS. Subject to
        the terms, provisions and requirements of the Declarations and
        applicable Colorado law and to the extent that clause (b) above shall
        not be applicable, the Lender is hereby irrevocably authorized and
        appointed the agent and attorney-in-fact of the Debtor (with full right
        of substitution) to adjust or compromise any insured loss in respect of
        the Resort and to collect and receive the proceeds from any such policy
        in respect of any such loss, which appointment shall be deemed to be
        coupled with an interest. Each insurance company issuing any of the
        above-mentioned insurance policies is hereby irrevocably authorized and
        directed to make payment in respect of any such loss (whether or not the
        Lender shall have exercised its option to adjust or compromise such
        loss) directly to the Lender alone and not to the Debtor and the Lender
        jointly. The Debtor shall immediately pay over to the Lender any such
        payments received directly from any such insurance company. The Lender
        is hereby irrevocably authorized and appointed the agent and
        attorney-in-fact of the Debtor (with full right of substitution) to
        endorse the Debtor's name on any instrument in payment of such proceeds,
        which appointment shall be deemed to be coupled with an interest. Such
        insurance proceeds received by the Lender shall not be, nor be deemed to
        be, trust funds and may be commingled with the general funds of the
        Lender. No interest shall be payable in respect of any such insurance
        proceeds received by the Lender. After deducting from such insurance
        proceeds any expenses incurred by the Lender in the adjustment or
        compromise of such loss or in the collection or handling of such funds
        (including, without limitation, attorneys' fees and disbursements), the
        Lender shall

                      (i) if an Event of Default shall then exist, apply such
               net insurance proceeds to the prepayment of the Loan, first, as
               provided in Section 2.1(a) hereof and second, as provided in the
               Receivable Loan Agreement;

                      (ii) if no Event of Default shall then exist and such loss
               shall not have been in respect of all, or substantially all, of
               the Property in respect of the Resort and shall have exceeded
               $20,000 and if the insurer which paid such insurance proceeds
               shall not claim any right of participation and/or assignment of
               rights in respect of the Lender with respect to the Obligations,
               either deliver the net insurance proceeds to the Debtor as
               contemplated in clause (A) below but subject to the conditions
               set forth in said clause (A) or apply the same as contemplated in
               clause (B) below:

                             (a) (1) the Debtor shall have, within 30 days of
                      such loss, delivered to the Lender a written undertaking
                      to rebuild, restore and/or repair the Property of the
                      Resorts damaged or destroyed;

                                    (2) the Debtor shall have, within 60 days of
                      such loss, submitted to the Lender for its approval (x)
                      plans and specifications in respect of such rebuilding,
                      restoration and/or repairing, which plans and
                      specifications shall be reasonably satisfactory to the
                      Lender and which shall have been prepared by an architect
                      reasonably satisfactory to the Lender, (y) an estimate of
                      all costs of such rebuilding, restoration and/or repairing
                      signed by such architect and (z) copies of approvals or
                      consents of all necessary governmental authorities;

                                    (3) at the time of each disbursement
                      contemplated by subclause (8) below, the Lender shall be
                      reasonably satisfied that such net insurance proceeds,
                      together with any additional funds made available for such

                                       20
<PAGE>   26

                      purpose by the Debtor and deposited with the Lender, shall
                      be sufficient to effect such rebuilding, restoration
                      and/or repairing in accordance with the aforesaid plans
                      and specifications, free and clear of all Liens except the
                      Liens contemplated or otherwise permitted herein and in
                      the other Security Documents;

                                    (4) at the time of each disbursement
                      contemplated by subclause (8) below, the Lender shall be
                      reasonably satisfied that such rebuilding, restoration
                      and/or repairing can be completed within any applicable
                      time limitation imposed by law or, if there are no such
                      time limitations, within a reasonable period of time;

                                    (5) at the time of each disbursement
                      contemplated by subclause (8) below, the Lender shall be
                      reasonably satisfied that, after such application and such
                      rebuilding, restoration and/or repairing (taking into
                      account any restrictions imposed by law or agreement on
                      such rebuilding, restoration and/or repairing or on the
                      use of the Resorts after such rebuilding, restoration
                      and/or repairing), the Resorts shall have a Fair Market
                      Value substantially the same as, or greater than, the Fair
                      Market Value of the Resorts immediately prior to the
                      occurrence of such damage or destruction;

                                    (6) at the time of each disbursement
                      contemplated by subclause (8) below, no Property-Related
                      Contract shall have been terminated or, if any
                      Property-Related Contract shall have been terminated, the
                      Lender shall be reasonably satisfied that the Debtor will
                      be able to replace such Property-Related Contract
                      reasonably promptly;

                                    (7) the holder of any encumbrance senior to
                      the Liens provided herein or in any other Security
                      Document in respect of the Resort shall have consented and
                      agreed to the application of insurance proceeds as set
                      forth in this clause (A); and

                                    (8) the disbursement of such net insurance
                      proceeds shall be in accordance with terms, conditions and
                      procedures customarily followed by prudent institutional
                      lenders in making construction loans in similar amounts
                      and on such other terms, conditions and procedures as the
                      Lender may reasonably require (as evidenced by its written
                      notice thereof to the Debtor prior to the first
                      disbursement pursuant to this subclause (8)) to assure the
                      proper application of such proceeds and the continuing
                      performance by the Debtor of its obligations hereunder and
                      under the other Security Documents, including without
                      limitation, receipt by the Lender of evidence of suitable
                      payment bonds with respect to all material contracts and
                      Builder's All Risk Insurance and a certificate from the
                      Debtor certifying that (x) all rebuilding, restoration
                      and/or repairing to the date of such disbursement has been
                      performed substantially in accordance with the aforesaid
                      plans and specifications and that there have been no
                      material changes or modifications made in such plans and
                      specifications, (y) the labor, services and/or materials
                      to be paid by such disbursement have been performed upon,
                      or furnished in respect of, the rebuilding, restoration
                      and/or repairing of the Resort and (z) no Event of Default
                      exists at the time of such disbursement, or

                             (B) the Lender shall apply such net insurance
                      proceeds to the prepayment of the Loan, first, as provided
                      in Section 2.1(a) of this Agreement

                                       21
<PAGE>   27

                      and second, as provided in the Receivable Loan Agreement,
                      if the Lender shall not have received the written
                      confirmation referred to in subclause (A)(1) above within
                      the time period required therefor or if the Debtor shall
                      have informed the Lender, in writing, of its intention not
                      to rebuild, repair and restore the Resort or the Lender
                      shall have determined the same at any time during the
                      rebuilding, repairing or restoration process referred to
                      in clause (A) above;

                      (iii) if no Event of Default shall then exist and such
               loss shall not have been in respect of all, or substantially all,
               of the Resort and shall not have exceeded $20,000, deliver all of
               such net insurance proceeds to the Debtor and the Debtor shall
               thereupon be obligated to, and shall, promptly rebuild, repair
               and restore the Property of the Resort subject to such loss (or
               shall cause such Property to be so promptly rebuilt, repaired and
               restored) to the equivalent of its condition immediately prior to
               such loss, whether or not such net insurance proceeds shall be
               sufficient to cover the costs thereof, and shall certify, within
               120 days of such loss, to the Lender that such rebuilding,
               repairing and restoration has been completed and paid for in
               full; or

                      (iv) if no Event of Default shall then exist and if such
               loss shall be in respect of all, or substantially all, of the
               Resort, apply such net insurance proceeds to the prepayment of
               the Loan, first, as provided in Section 2.1(a) of this Agreement
               and second, as provided in the Receivable Loan Agreement.

               Any payment of insurance proceeds over to the Debtor, as provided
        above, shall not affect the Lien of this Agreement or any other Security
        Document as security for the Obligations. Notwithstanding any such loss,
        the Debtor shall continue to pay interest and principal at the
        applicable rate and amounts and at the applicable times provided in this
        Agreement and in the Notes. Although the Lender intends to use
        reasonable efforts to collect such insurance proceeds in a timely
        fashion, the Lender shall not be responsible for any failure to collect
        any proceeds due under the terms of any insurance policy, regardless of
        the cause of such failure. Any balance of such net insurance proceeds
        remaining after the aforesaid application thereof shall, if no Event of
        Default shall then exist, belong, or be paid to, as the case may be, the
        Debtor, provided that, if an Event of Default shall then exist, the
        Debtor shall promptly deliver any such balance to the Lender and such
        balance shall be applied as a prepayment of the Loan, first, as provided
        in Section 2.1(a) hereof and second, as provided in the Receivable Loan
        Agreement.

               (D) DEBTOR UNDERTAKINGS. In the event of any casualty or loss in
        respect of the Resort (including, without limitation, any of the
        Collateral), (i) the Debtor shall immediately notify the Lender of the
        same, (ii) the Lender may, in addition to its rights as beneficiary
        under the Inventory Deed of Trust, elect to exercise the voting rights
        of the Debtor as "Lienholder" in respect of any Pledged Note Receivable
        Deed of Trust or as the owner of any Timeshare Interval, as such voting
        rights are provided for under the Declaration, regarding all matters of
        repair and restoration and (iii) the Debtor shall pay all assessments as
        required by the Declaration and/or the Association's Articles of
        Incorporation or By-Laws for repair and restoration due to inadequacy of
        insurance.

               Debtor agrees to cause any contractor hired by it to effect any
        of the refurbishing of the Resort to carry adequate insurance in respect
        of bodily injury or other personal liability or property damage in
        respect of its employees or other third persons in connection with such
        refurbishing or construction. Certificates of such insurance shall be
        filed with the Lender prior to commencement of work and shall be
        reasonably acceptable to the Lender in form and substance.

                                       22
<PAGE>   28

        3.6 CONDEMNATION.

               (a) CONDOMINIUM/TIMESHARE CONDEMNATION COMPENSATION. Any
        compensation, awards, damages, claims, rights of action, proceeds,
        payment and other relief (collectively, "Condemnation Compensation") of,
        or on account of, any damage or taking of all or any part of the Resort
        in connection with any condemnation proceedings or any exercise of the
        power of eminent domain (or any conveyance in lieu of or under threat of
        any such taking), including, without limitation, any such Condemnation
        Compensation for change of grade of streets or any other injury to or
        decrease in the value of all or any part of the Resort payable by the
        Association, any manager retained by it or by the Declarant in respect
        of any Unit or Timeshare Interval to the Debtor under the Declaration,
        the Association's Articles of Incorporation or By-Laws or under
        applicable Colorado law shall be promptly paid and/or turned over to the
        Lender as proceeds of the Collateral and applied to the prepayment of
        the Loan, first, as provided in Section 2.1(a) hereof and second, as
        provided in the Receivable Loan Agreement.

               (b) APPLICABLE LAW.

                      (i) The Lender acknowledges that application of all or a
               portion of any Condemnation Compensation may be subject to the
               Colorado Condominium Ownership Act, the Colorado Common Interest
               Ownership Act and the terms and provisions of the Declaration,
               and the foregoing requirements in this Section 3.6 shall be
               subject thereto (unless such laws may be modified by agreement
               and have been so modified).

                      (ii) Any Condemnation Compensation in respect of any Unit
               or Timeshare Interval received by the Debtor or received by the
               Debtor as Declarant or received by the Association at a time
               during which

                             (a) only the Debtor (as Debtor or as Declarant) or
                      any Affiliate shall be the only owner of Units or
                      Timeshare Intervals or

                             (b) the condemnation provisions of the Declaration
                      shall have been suspended shall be promptly paid and/or
                      turned over to the Lender (and the Debtor, as Debtor or as
                      Declarant, shall cause such payment and/or turnover) as
                      proceeds of the Collateral and applied to the prepayment
                      of the Loan, first, as provided in Section 2.1(a) hereof
                      and second, as provided in the Receivable Loan Agreement .

               (c) MISCELLANEOUS APPLICATION OF CONDEMNATION COMPENSATION.
        Subject to the requirements, terms and provisions of the Declaration and
        applicable Colorado law and to the extent that clause (b) above shall
        not be applicable, the Lender shall be entitled to all Condemnation
        Compensation of, or on account of, any damage or taking of all or any
        part of the Resort in connection with any condemnation proceedings or
        any exercise of the power of eminent domain (or any conveyance in lieu
        of or under threat of any such taking), including, without limitation,
        any such Condemnation Compensation for change of grade of streets or any
        other injury to or decrease in the value of all or any part of the
        Resort. All such Condemnation Compensation, and the right thereto, is
        hereby assigned to the Lender and included in the Collateral. The Debtor
        shall promptly execute such further assignments of any such Condemnation
        Compensation as the Lender may require, and the Lender shall take all
        steps to assure that such Condemnation Compensation shall be paid to the
        Lender alone, and not to the Debtor and the Lender jointly, and that
        such Condemnation Compensation at all times shall be free and clear of
        any Liens, charges or encumbrances of any kind whatsoever, except the
        Liens

                                       23
<PAGE>   29

        permitted or otherwise provided for herein or in the other Security
        Documents. The Lender is hereby irrevocably authorized and appointed the
        agent and attorney-in-fact of the Debtor (with full right of
        substitution) to endorse the Debtor's name on any instrument in payment
        of such Condemnation Compensation, which appointment shall be deemed to
        be coupled with an interest.

               The Lender is hereby irrevocably authorized and appointed the
        agent and attorney-in-fact of the Debtor (with full right of
        substitution) to commence, appear in and prosecute in its own and/or the
        Debtor's name any action or proceeding relating to any condemnation or
        exercise of the power of eminent domain, to settle or compromise any
        claim in connection therewith and to collect and receive such
        Condemnation Compensation and give proper receipts and acquittances
        therefor, which appointment shall be deemed to be coupled with an
        interest. The Debtor from time to time shall promptly deliver to the
        Lender any and all instruments and authorizations which the Lender may
        request to enable the Lender to take any such action. Such Condemnation
        Compensation received by the Lender shall not be, nor be deemed to be,
        trust funds and may be commingled with the general funds of the Lender.
        No interest shall be payable in respect of any such Condemnation
        Compensation. After deducting from such Condemnation Compensation any
        expenses incurred by the Lender in connection therewith (including,
        without limitation, attorneys' fees and disbursements), the Lender shall

                      (i) if an Event of Default shall then exist, apply such
               net Condemnation Compensation to the prepayment of the Loan,
               first, as provided in Section 2.1(a) of this Agreement and
               second, as provided in the Receivable Loan Agreement;

                      (ii) if no Event of Default shall then exist, such damage
               or taking shall have not been in respect of all, or substantially
               all, of the Resort, such damage or taking shall not have rendered
               the remainder of the Resort economically inviable or unusable to
               the same extent and in the same manner as it was immediately
               prior to such damage or taking, and the Condemnation Compensation
               payable in respect thereof shall have exceeded $20,000, either
               deliver the Condemnation Compensation to the Debtor as
               contemplated in clause (A) below but subject to the conditions
               set forth in said clause (A) or apply the same as contemplated in
               clause (B) below:

                             (a)   (1) the Debtor shall have, within 30 days of
                      such condemnation or taking, delivered to the Lender a
                      written undertaking to rebuild, restore and/or repair the
                      Property of the Resort not condemned or taken;

                                    (2) the Debtor shall have, within 60 days of
                      such condemnation or taking, submitted to the Lender for
                      its approval (x) plans and specifications in respect of
                      such rebuilding, restoration and/or repairing, which plans
                      and specifications shall be reasonably satisfactory to the
                      Lender and which shall have been prepared by an architect
                      reasonably satisfactory to the Lender, (y) an estimate of
                      all costs of such rebuilding, restoration and/or repairing
                      signed by such architect and (z) copies of approvals or
                      consents of all necessary governmental authorities;

                                    (3) at the time of each disbursement
                      contemplated by subclause (8) below, the Lender shall be
                      reasonably satisfied that such Condemnation Compensation,
                      together with any additional funds made available for such
                      purpose by the Debtor and deposited with the Lender, shall
                      be sufficient to effect such rebuilding, restoration
                      and/or repairing in accordance with the

                                       24
<PAGE>   30

                      aforesaid plans and specifications, free and clear of all
                      Liens except the Liens contemplated or otherwise permitted
                      herein and in the other Security Documents;

                                    (4) at the time of each disbursement
                      contemplated by subclause (8) below, the Lender shall be
                      reasonably satisfied that such rebuilding, restoration
                      and/or repairing can be completed within any applicable
                      time limitation imposed by law or, if there are no such
                      time limitations, within a reasonable period of time;

                                    (5) at the time of each disbursement
                      contemplated by subclause (8) below, the Lender shall be
                      reasonably satisfied that, after such application and such
                      rebuilding, restoration and/or repairing (taking into
                      account any restrictions imposed by law or agreement on
                      such rebuilding, restoration and/or repairing or on the
                      use of the Resort after such rebuilding, restoration
                      and/or repairing), the Resort shall have a Fair Market
                      Value substantially the same as, or greater than, the Fair
                      Market Value of the Resort immediately prior to the
                      occurrence of such condemnation or taking;

                                    (6) at the time of each disbursement
                      contemplated by subclause (8) below, no Property-Related
                      Contract shall have been terminated or, if any
                      Property-Related Contract shall have been terminated, the
                      Lender shall be reasonably satisfied that the Debtor will
                      be able to replace such Property-Related Contract
                      reasonably promptly;

                                    (7) the holder of any encumbrance senior to
                      the Liens provided herein or in any other Security
                      Document in respect of the Resort shall have consented and
                      agreed to the application of Condemnation Compensation as
                      set forth in this clause (A); and

                                    (8) the disbursement of such Condemnation
                      Compensation shall be in accordance with terms, conditions
                      and procedures customarily followed by prudent
                      institutional lenders in making construction loans in
                      similar amounts and on such other terms, conditions and
                      procedures as the Lender may reasonably require (as
                      evidenced by its written notice thereof to the Debtor
                      prior to the first disbursement pursuant to this subclause
                      (8)) to assure the proper application of such proceeds and
                      the continuing performance by the Debtor of its
                      obligations hereunder and under the other Security
                      Documents, including without limitation, receipt by the
                      Lender of evidence of suitable payment bonds with respect
                      to all material contracts and Builder's All Risk Insurance
                      and a certificate from the Debtor certifying that (x) all
                      rebuilding, restoration and/or repairing to the date of
                      such disbursement has been performed substantially in
                      accordance with the aforesaid plans and specifications and
                      that there have been no material changes or modifications
                      made in such plans and specifications, (y) the labor,
                      services and/or materials to be paid by such disbursement
                      have been performed upon, or furnished in respect of, the
                      rebuilding, restoration and/or repairing of the Resort and
                      (z) no Event of Default exists at the time of such
                      disbursement, or

                             (b) the Lender shall apply such Condemnation
                      Compensation to the prepayment of the Loan, first, as
                      provided in Section 2.1(a) of this Agreement and second,
                      as provided in the Receivable Loan Agreement, if Lender
                      (or its agent) shall have not received the written
                      confirmation referred to in subclause

                                       25
<PAGE>   31

                      (A)(1) above within the time period required therefor or
                      if the Debtor shall have informed the Lender, in writing,
                      of its intention not to rebuild, repair and restore the
                      Resort or the Lender shall have determined the same at any
                      time during the rebuilding, repairing or restoration
                      process referred to in clause (A) above;

                      (iii) if no Event of Default shall then exist and such
               damage or taking shall not have been in respect of all, or
               substantially all, of the Resort and the Condemnation
               Compensation payable in respect thereof shall not have exceeded
               $20,000, deliver all of such net Condemnation Compensation to the
               Debtor and the Debtor shall thereupon be obligated to, and shall,
               promptly rebuild, repair and restore the Resort (or shall cause
               the Resort to be so promptly rebuilt, repaired and restored) such
               that the Resort is useable to the same extent and in the same
               manner, and is in substantially an equivalent condition, after
               such damage or taking as it was immediately prior to such damage
               or taking, whether or not such net Condemnation Compensation
               shall be sufficient to cover the costs thereof, and shall
               certify, within 120 days of such damage or taking, to the Lender
               that such rebuilding, repairing and restoration has been
               completed and paid for in full; or

                      (iv) if no Event of Default shall then exist and if such
               damage or taking loss shall be in respect of all, or
               substantially all, of the Resort or the Resort is no longer
               economically viable or no longer useable to the same extent and
               in the same manner after such damage or taking as it was
               immediately prior to such damage or taking, apply such net
               Condemnation Compensation to the prepayment of the Loan, first,
               as provided in Section 2.1(a) of this Agreement and second, as
               provided in the Receivable Loan Agreement.

               The Lender may release such net Condemnation Compensation to the
        Debtor without affecting the Lien of this Agreement or any other
        Security Document as security for the Obligations. Any balance of such
        net Condemnation Compensation remaining after the aforesaid application
        thereof shall, if no Event of Default shall then exist, belong to, or be
        paid to, as the case may be, the Debtor, provided that, if an Event of
        Default shall then exist, the Debtor shall promptly deliver any such
        balance to the Lender and such balance shall be applied as a prepayment
        of the Loan, first, as provided in Section 2.1(a) hereof and second, as
        provided in the Receivable Loan Agreement. Notwithstanding any such
        condemnation, the Debtor shall continue to pay interest and principal at
        the applicable rate and amounts and at the applicable times provided in
        this Agreement and in the Notes. Although the Lender intends to use
        reasonable efforts to collect such Condemnation Compensation, in a
        timely fashion, the Lender shall not be responsible for any failure to
        collect such Condemnation Compensation, regardless of the cause of such
        failure.

               (d) DEBTOR UNDERTAKINGS. In the event of any condemnation or
        taking in respect of the Resort (including, without limitation, any of
        the Collateral), (i) the Debtor shall immediately notify the Lender of
        the same, (ii) the Lender may, in addition to its rights as beneficiary
        under the Inventory Deed of Trust, elect to exercise the voting rights
        of the Debtor as "Lienholder" in respect of any Pledged Note Receivable
        Deed of Trust or as the owner of any Timeshare Interval, as such voting
        rights are provided for under the Declaration, regarding all matters of
        repair and restoration and (iii) the Debtor shall pay all assessments as
        required by the Declaration and/or the Association's Articles of
        Incorporation or By-Laws for repair and restoration due to inadequacy of
        the Condemnation Compensation.

        3.7 TAXES AFFECTING COLLATERAL.

                                       26
<PAGE>   32

        The Debtor shall pay or cause to be paid, on or before the last day when
they may be paid without interest or penalty, all taxes, assessments, rates,
dues, charges, fees, levies, excises, duties, fines, impositions, liabilities,
obligations and encumbrances (including, without limitation, water and sewer
rents and charges, charges for setting or repairing meters and charges for other
utilities or services), general or special, ordinary or extraordinary, foreseen
or unforeseen, of every kind whatsoever, now or hereafter imposed, levied or
assessed by any public or quasi-public authority or instrumentality upon or
against any of the Collateral or the use, occupancy or possession of the Resort,
or upon or against this Agreement, the Notes or the other Security Documents,
the Obligations or the interest of the Lender in the Pledged Notes Receivable,
the Pledged Note Receivable Deeds of Trust or the Inventory Deed of Trust or any
other item of Collateral (provided that this Section 3.7 shall not be construed
to require the Debtor to pay any income tax imposed upon the general income of
the Lender), as well as all assessments and other governmental charges imposed,
levied or assessed in respect of any Collateral, and any and all interest, costs
and penalties on or with respect to any of the foregoing (collectively, the
"Impositions"). Upon request by the Lender, the Debtor shall deliver to the
Lender receipts or other satisfactory proof of payment of any Impositions.

        The Debtor shall not claim, demand or be entitled to receive any
reduction of, or credit toward, any Imposition on account of the Obligations. No
deduction shall be claimed from the taxable value of any Collateral or the
Resort by reason of the Obligations, any of the Security Documents or the
interest of the Lender in the Collateral.

        If existing laws or procedures governing the taxation of mortgages,
security documents or debts secured by mortgages or other security documents
shall be changed in any manner after the date hereof so as to materially
adversely impair the security of the Inventory Deed of Trust or the security
interest herein granted or granted in any of the other Security Documents or to
reduce the net income to the Lender in respect of the Obligations (excluding
from any such determination of net income any reduction in such net income
attributable to a change in taxes imposed on, or measured by, the net income of
the Lender), then, upon request by the Lender, the Debtor shall pay to the
Lender or to the taxing authority (if so directed by the Lender), all taxes,
charges and related costs for which the Lender may be liable as a result
thereof.

        The Debtor shall pay, or cause to be paid, when due, any and all
recording (mortgage or personal property), intangible property and documentary
stamp taxes, all similar taxes, and all filing, registration and recording fees,
which are now or hereafter may become payable in connection with the
Obligations, the Inventory Deed of Trust, this Agreement, any of the other
Security Documents, the Receivable Loan Security Documents or any of the other
Collateral. The Debtor shall pay when due any and all excise, transfer and
conveyance taxes which are now or hereafter may become payable in connection
with the Obligations, the Inventory Deed of Trust, any Pledged Note Receivable
Deed of Trust, this Agreement or any of the other Security Documents, or in
connection with any foreclosure of the Inventory Deed of Trust, any Pledged Note
Receivable Deed of Trust or any other foreclosure of any Collateral under this
Agreement or under any of the other Security Documents, or any other transfer of
any item of Collateral in extinguishment of all or any part of the Obligations
or any other enforcement of the rights of the Lender with respect thereto.

        3.8 DISCHARGE OF LIENS AFFECTING COLLATERAL.

        If any mechanic's, laborer's, materialman's, statutory or other Lien
(other than Permitted Exceptions) shall be filed or otherwise imposed upon or
against any item of the Collateral or the Resort, then the Debtor shall, within
30 days after being given notice of the filing of such Lien or otherwise
becoming aware of the imposition of such Lien, cause such Lien to be vacated or
discharged of record by payment, deposit, bond, final order of a court of
competent jurisdiction or otherwise.

                                       27
<PAGE>   33

        Except with respect to the Pledged Notes Receivable and the Pledged Note
Receivable Deeds of Trust, the Debtor shall have the right, at its sole expense,
to contest the validity of any such Lien or of the claim evidenced or secured
thereby, by appropriate proceedings commenced prior to the expiration of the
aforesaid 30-day period and thereafter diligently and continuously conducted in
good faith to final determination, in which event the Debtor shall not be
required to cause any such Lien to be vacated or discharged of record in
accordance with the immediately preceding paragraph if, and only so long as:

               (a) no final judicial determination in respect of any foreclosure
        or other enforcement proceeding in respect of such Lien or the claim
        evidenced or secured thereby shall have been rendered and no nonjudicial
        foreclosure proceeding or sale in respect of such Lien or such claim
        shall have been commenced;

               (b) no claim for liability of any kind shall have been asserted
        against the Lender in connection with such Lien or the claim evidenced
        or secured thereby; and

               (c) if such Lien shall secure a claim of more than $20,000, the
        Debtor shall have established an escrow with the Lender, or shall have
        delivered to the Lender a satisfactory bond issued by a surety
        acceptable to the Lender or a satisfactory letter of credit for the
        benefit of the Lender issued by a bank acceptable to the Lender, in each
        case in an amount estimated by the Lender to be adequate to cover (i)
        the unpaid amount of such claim, (ii) all interest, penalties and
        similar charges which reasonably can be expected to accrue by reason of
        such contest or by reason of such nonpayment, and (iii) all costs, fees
        and expenses (including, without limitation, attorneys' fees and
        disbursements) which reasonably can be expected to be incurred in
        connection therewith by the Lender, which escrow, bond or letter of
        credit shall be maintained in effect throughout such contest and the
        amount of which shall be increased from time to time if reasonably
        required by the Lender to cover the foregoing amounts in subclause (i),
        subclause (ii) and subclause (iii).

        The Debtor shall inform the Lender, in advance and in writing, of its
intention to contest any Lien securing a claim, or such claim itself, under this
Section 3.8 if such claim shall exceed $20,000.

        Upon termination of any such contest (whether by final determination or
otherwise), or at any time during the course of any such contest that the
conditions relieving the Debtor of its obligation to cause such Lien to be
vacated or discharged shall no longer be satisfied or shall be discovered not to
have been satisfied, the Debtor shall cause such Lien to be vacated or
discharged of record. At the Lender's option, the escrow established or bond or
letter of credit, as the case may be, delivered pursuant to this Section 3.8 may
be, in the case of the escrow, liquidated, or, in the case of the bond or the
letter of credit, drawn upon, at such time and the proceeds thereof may be
applied to payment of all or any part of the claim evidenced or secured by such
Lien and the interest, penalties, charges, costs, fees and expenses (including,
without limitation, attorneys' fees and disbursements) referred to in subclause
(ii) and subclause (iii) of the immediately preceding paragraph. Promptly after
such Lien has been vacated or discharged of record, the Debtor shall deliver to
the Lender evidence reasonably satisfactory to the Lender that such Lien has
been vacated or discharged of record. Thereafter, the amount then remaining in
the escrow established pursuant to this Section 3.8 or such bond or letter of
credit, as the case may be, shall be returned to the Debtor free and clear of
the Lien of this Agreement or any other Security Document so long as no Event of
Default shall have occurred and be continuing or, if an Event of Default shall
have occurred and be continuing, shall be retained by the Lender as part of the
Collateral.

        If any Lien shall not be vacated or discharged as required by this
Section, then, in addition to any other right or remedy of the Lender, the
Lender may, but shall not be obligated to, discharge such Lien in

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<PAGE>   34

such manner as the Lender may select, and the Lender shall be entitled, if the
Lender shall so elect, to compel the prosecution of an action for the
foreclosure of such Lien by the lienor and, if the Lender shall so elect, to pay
the amount of any judgment in favor of such lienor with interest, costs and
allowances. Upon request by the Lender, the Debtor shall pay to the Lender, or
to any other Person designated by the Lender, the amount of all payments made by
the Lender as provided above and all costs, expenses and liabilities (including,
without limitation, attorneys' fees and disbursements) incurred by the Lender in
connection therewith, together with interest thereon at the Default Rate from
the date paid or incurred by the Lender until the date so paid to, or as
directed by, the Lender. To the extent permitted by law, the Lender shall
thereupon be subrogated to the rights of such lienor and any such payments made
by the Lender pursuant to this Section 3.8 shall be secured by the Collateral.

        3.9 USE OF RESORTS; VOTING RIGHTS OF DEBTOR; LENDER CONSENT TO TIMESHARE
DECLARATION AMENDMENT.

               (a) RESORTS. The Debtor shall not, as Declarant, Timeshare
        Interval owner or Unit owner, without the prior written consent of the
        Lender.

                      (i) request or otherwise initiate, consent to or acquiesce
               in any zoning classification or reclassification of either
               Resorts or the adoption, issuance, imposition or amendment of any
               other law, ordinance, rule, regulation, order, judgment,
               injunction or decree relating to the use, occupancy, operation,
               development or disposition of the Resort or which would limit the
               use of the Units or the Timeshare Intervals therein or reduce its
               or their Fair Market Value,

                      (ii) request or otherwise initiate, consent to or
               acquiesce in the annexation of any part of either Resort by or
               into any municipality or other governmental or quasi-governmental
               unit,

                      (iii) execute, file or record any subdivision plat
               affecting either Resort or request or otherwise initiate, consent
               to or acquiesce in any subdivision of the Resort ,

                      (iv) enter into, consent to or otherwise cause, permit or
               suffer either Resort to become subject to any covenant, agreement
               or other arrangement restricting or limiting the use, occupancy,
               operation, development or disposition thereof (other than any
               covenant of this Agreement or the other Security Documents and
               the Declarations ),

                      (v) materially and substantially modify, alter, remove or
               improve the Common Amenities without the prior written consent of
               the Lender (except for the creation of additional common elements
               and limited common elements resulting from the refurbishing of
               the Buildings),

                      (vi) except as set forth in Schedule 9 of this Agreement,
               maintain the Units and/or Timeshare Intervals owned by it for
               lease or as a rental project,

                      (vii) add or withdraw real Property from either Resort, or
               create additional Units (beyond those Units existing or planned
               for in the Buildings in accordance with, and pursuant to, the
               Declarations , or

                      (viii) permit the Units or any Timeshare Interval to be
               used other than for nonpermanent residential purposes;

                                       29
<PAGE>   35

               provided that the Debtor may create additional Timeshare
        Intervals within the Hilltop Resort so long as Debtor notifies the
        Lender promptly thereof.

               (b) USE BY PUBLIC. The Debtor shall not cause, permit or suffer
        the Resorts to be used by the public without restriction (except as
        required by applicable law) or in any manner that might tend to impair
        the Debtor's right, title and interest in and to the Resorts or in any
        manner that might make possible any claim of adverse usage or adverse
        possession by the public or any claim of implied dedication of all or
        any part of the Resorts.

               (c) VOTING RIGHTS. The Debtor hereby appoints and constitutes the
        Lender as its attorney-in-fact (with full power of substitution) to
        exercise all of its voting rights pertaining to any Unit or Timeshare
        Interval owned by the Debtor or in which the Debtor has an interest
        giving rise to the right to vote (whether as Declarant, as "Lienholder"
        under any Pledged Note Receivable Deed of Trust or otherwise). This
        power of attorney is coupled with an interest and shall be irrevocable
        for so long as any Obligations are owing by the Debtor to the Lender.
        This power of attorney may be used from time to time in the sole
        discretion of the Lender if there shall exist an Event of Default, or a
        material casualty, condemnation or taking shall have occurred with
        respect to the Resort or any part thereof. The Debtor agrees to execute,
        from time to time, such other documents as the Lender may request
        (including, without limitation, the form of proxy substantially in the
        form of Exhibit C to this Agreement; which proxy shall, at the request
        of the Lender, be renewed every 11 months and shall be modified to
        include Timeshare Intervals in addition to Units) and file the same with
        the Secretary of the Association in accordance with the Association's
        By-Laws.

               Except with the prior written consent of the Lender, the Debtor
        shall not propose or vote for or consent to any modification of, or
        amendment to, the Declarations or the Associations' Articles of
        Incorporation or By-Laws which could have (in the reasonable sole
        opinion of the Lender) an adverse effect on the Collateral or the
        operation or prospects of the Resorts. In each case under the
        Declarations and/or the Associations' Articles of Incorporation or
        By-Laws in which the consent or the vote of "Lienholders" in respect of
        the Units and/or Timeshare Intervals (including any such case in which
        the Debtor would be considered to be a "Lienholder" by virtue of any
        Pledged Note Receivable Deed of Trust) is provided for or is required,
        or in which the Debtor's consent is required (as Declarant or as an
        owner of a Unit or a Timeshare Interval or as a vendor or mortgagee) for
        any proposed action, the Debtor shall not vote or give such consent
        without obtaining the prior written consent of the Lender if such action
        (in the reasonable sole opinion of the Lender) could have an adverse
        effect on the Collateral or the operation or prospects of the Resort.

        3.10 OTHER TIMESHARE COVENANTS.

               (a) ACCESS. The Debtor shall have caused the owners of Timeshare
        Intervals to have direct access to a publicly dedicated road and shall
        cause all private roadways and parking lots or areas inside of the
        Resorts to be common elements or limited common elements under the
        Declaration.

               (b) UTILITIES. The Debtor shall have caused electric, gas, sewer,
        and water service and other necessary utilities to be available to the
        Units in sufficient capacity to service the Units.

               (c) USE OF AMENITIES. The Debtor shall have caused each purchaser
        of a Timeshare Interval to have access to, and the use of, all of the
        amenities and public utilities relating to the Unit in which such
        Timeshare Interval is located (consistent with the contractual
        provisions and

                                       30
<PAGE>   36

        rules and regulations existing with respect to such amenities and public
        utilities), including, without limitation, the Common Amenities.

               (d) TIMESHARE REGIMEN. The Debtor shall do all things necessary
        in order to preserve the condominium and timeshare regimens in respect
        of each of the Units.

               (e) EXCHANGE PROGRAM. The Debtor shall maintain its membership
        in, and the Timeshare Intervals eligibility for, the timeshare exchange
        program of Resorts Condominium International, Inc or Interval
        International, Inc.

               (f) LOCAL LEGAL COMPLIANCE. The Debtor shall comply, and shall
        cause the Units and the Buildings to comply, with all applicable
        restrictive covenants, zoning or land use ordinances and building codes,
        health laws and regulations, and all other applicable laws, rules,
        ordinances and regulations.

               (g) REGISTRATION COMPLIANCE. The Debtor shall maintain, or cause
        to be maintained, all necessary consents, franchises, approvals, and
        exemption certificates, and the Debtor will make, or cause to be made,
        all registrations or declarations with any government or any agency or
        department thereof required in connection with the Units, the Buildings,
        and the Timeshare Intervals and the occupancy, use and operation of the
        Units and the Buildings, and the sale and offering for sale of Timeshare
        Intervals.

               (h) RECORDS. The Debtor shall maintain accurate and complete
        files relating to the Pledged Notes Receivables and the other Collateral
        (as well as in respect of all other Notes Receivable) to the reasonable
        satisfaction of the Lender, and such files will contain copies of each
        Pledged Note Receivable and the Pledged Contract and Pledged Note
        Receivable Deed of Trust related thereto, copies of all relevant credit
        memoranda relating thereto, and all collection information and
        correspondence relating thereto received from the Collection Agent.

               (i) PROPERTY-RELATED CONTRACTS. Except as required by applicable
        law, the Debtor shall not materially modify or amend, or (subject to the
        rights and obligations of the Associations under the Declarations or the
        Associations' Articles of Incorporation or By-Laws) permit to be
        materially modified or amended, any material Property-Related Contract
        without the prior written consent of the Lender, which consent shall not
        be unreasonably withheld, or enter into, or (subject to the rights and
        obligations of the Associations under the Declarations or the
        Associations' Articles of Incorporation or By-Laws) permit to be entered
        into, any new material Property-Related Contract without the prior
        written consent of the Lender, which consent shall not be unreasonably
        withheld. The Debtor shall deliver any proposed amendment or
        modification of an existing Property-Related Contract or proposed new
        Property-Related Contract to the Lender at least 30 days prior to the
        execution thereof and shall request the Lender's consent to the form and
        substance of such amendment, modification or new Property-Related
        Contract. If the Debtor shall not have received a written response to
        such request from the Lender within 20 days of the delivery of such
        amendment, modification or new Property-Related Contract to the Lender,
        then the Debtor shall send a second request via nationally recognized
        overnight courier. Failure by the Lender to respond to such second
        request within 10 days of receipt thereof shall be deemed to constitute
        a consent to such request. The Debtor shall perform all of its
        obligations in a timely fashion under each Property-Related Contract.

               (j) UNDERTAKING. The Debtor shall perform each and every
        covenant, agreement, and undertaking applicable to the Debtor (whether
        as Declarant, owner of a Unit, owner of a

                                       31
<PAGE>   37

        Timeshare Interval or otherwise) under the Declarations and/or the
        Association's Articles of Incorporation or By-Laws.

               (k) NOTICES. The Debtor shall promptly deliver to the Lender
        copies of each written notice or request, financial statement, budget or
        other information received by the Debtor under or with respect to the
        Declarations and/or the Associations' Articles of Incorporation or
        By-Laws, whether in its capacity as Declarant, owner of a Unit, owner of
        a Timeshare Interval, Lienholder or otherwise.

        3.11 PROTECTION OF COLLATERAL; ASSESSMENTS; REIMBURSEMENT.

        All Insurance Premiums and all expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all Impositions on any of the Collateral or in respect of the sale or other
disposal thereof shall be borne and paid by the Debtor or the Debtor shall cause
the Association or any manager retained by it to pay the same, as provided for
in the Declaration and/or the Association's Articles of Incorporation or
By-Laws. The Debtor shall promptly pay, as the same become due and payable, its
share of all Insurance Premiums, expenses, Impositions and/or assessments as
required by the Declaration and/or the Association's By-Laws. If the Debtor
shall fail to pay, or cause to be paid, any such Insurance Premiums, expenses,
Impositions and/or assessments, the Lender may, at the Debtor's expense, pay the
same.

        If, by reason of any suit or proceeding of any kind, nature or
description against the Debtor, or by the Debtor or any other party against any
other Person, or by reason of any other facts or circumstances, which in the
Lender's sole discretion makes it advisable for the Lender to seek counsel for
the protection and preservation of the Collateral, or to defend its own
interest, such expenses and counsel fees shall be allowed to the Lender and
borne and paid by the Debtor.

        3.12 INTEREST ON LENDER PAID EXPENSES.

        All sums paid or incurred by the Lender under this Section 3, and any
and all other sums for which the Debtor may become liable hereunder, and all
costs and expenses (including payments to other Lien holders and attorneys'
fees, legal expenses and court costs) which the Lender may incur in enforcing or
protecting its Lien on, or rights and interest in, the Collateral or any of its
rights or remedies under this Agreement or any other Security Document or in
respect of any of the transactions contemplated herein or therein shall (a) be
considered as additional indebtedness owing by the Debtor to the Lender
hereunder and, as such, shall be secured by all of the Collateral and (b) accrue
interest at the Default Rate from the date paid or incurred by the Lender until
paid in full by the Debtor.

        3.13 LENDER RESPONSIBILITY.

        The Lender shall not be (a) obligated or responsible for, the payment of
any of the amounts or sums referred to in this Section 3 or (b) liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto other than, to the extent it elects to safekeep the
Pledged Notes Receivable or any of the other Timeshare Documents related
thereto, to exercise the standard of care in respect thereof which would be
exercised by an institutional custodian similarly situated to the Lender and
similarly engaged in the safekeeping of collateral and, in any case, shall not
be liable or responsible in any way for any diminution in the value of the
Collateral or for any act or default of any manager of the Resort or the
Collection Agent and shall not be liable for any warranty (implied or express)
whether created by statute, at law or pursuant to the Declaration or any other
Timeshare Document.

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<PAGE>   38

        Upon the full, final and indefeasible payment of all Obligations , the
Lender shall release its Liens in and to the Collateral, execute in favor of the
Debtor any UCC release or termination statement in respect thereof and reassign
and deliver to the Debtor all Pledged Notes Receivables and the other Collateral
then in the physical possession of the Lender or its agent (without recourse and
without representations or warranties of any kind). The Debtor shall bear all
out-of-pocket expenses (including, without limitation, legal fees and
disbursements of the Lender) in connection with such release, reassignment and
delivery. All such release and/or termination documentation shall be reasonably
satisfactory to the Lender and its counsel. To the extent that all obligations
in respect of any Pledged Note Receivable shall have been fully, finally and
indefeasibly paid by the Maker thereof, the Lender, upon receipt of a written
request from the Debtor, shall reassign and deliver to the Debtor such Pledged
Note Receivable and/or Pledged Note Receivable Deed of Trust related thereto and
all other related documentation in the possession of the Lender (all without
recourse and without representations or warranties of any kind), shall release
any Lien the Lender may have therein and shall execute and deliver to the Debtor
any UCC release statement in respect thereof. The Debtor shall bear all expenses
(including, without limitation, legal fees and disbursements of the Lender) in
connection with such reassignment and delivery. All such reassignment and
release documentation shall be reasonably satisfactory to the Lender and its
counsel.

        3.14 RELEASE OF LIEN ON UNSOLD INVENTORY TIMESHARE INTERVALS.

               (a) INCREMENTAL RELEASE. The Lender agrees to execute and deliver
        to the Debtor the documents referred to below pursuant to which the Lien
        in its favor in and to any Unsold Inventory Timeshare Interval created
        by this Agreement, the Inventory Deed of Trust or any other Security
        Document will be released if, but only if, all of the following
        conditions shall have been fully satisfied:

                      (i) the full Release Price in respect of such Unsold
               Inventory Timeshare Interval shall have been paid to the Lender
               in good, collected funds;

                      (ii) a request, substantially in the form of Exhibit D
               attached hereto, shall have been completed and executed by the
               Debtor and submitted to the Lender not less than 5 Business Days
               in advance of the date on which the Debtor desires to consummate
               such release together with a (nonrefundable) administrative
               processing fee of $50 for each Unsold Inventory Timeshare
               Interval to be so released (a "Release Fee");

                      (iii) a request for partial release of deed of trust,
               substantially in the form of Exhibit E attached hereto or such
               other form reasonably acceptable to the Lender and its counsel,
               and a partial release of security interest, substantially in the
               form of Exhibit F attached hereto, shall have been completed by
               the Debtor and submitted to the Lender with the aforesaid
               request; and

                      (iv) no Event of Default shall then exist.

        The Debtor shall bear the responsibility of recording any and all
documents executed by the Lender under this Section 3.15. The Debtor shall pay
all escrow costs and recording costs in respect of such documents. If the Debtor
shall have established an escrow in respect of any sale of an Unsold Inventory
Timeshare Interval to a bona fide consumer purchaser, the Lender shall deposit
the documents to be executed by it pursuant to clause (iii) above in such escrow
if

                             (A) the documentation establishing such escrow is
                      in form and substance satisfactory to the Lender and such
                      documentation shall have been

                                       33
<PAGE>   39

                      submitted to the Lender together with the written request
                      referred to in clause (ii) above,

                             (B) the escrowee under such escrow documentation is
                      satisfactory to the Lender,

                             (C) such escrow documentation provides that
                      simultaneously with the release from such escrow of the
                      documents referred to in clause (iii) above, the Release
                      Price in respect of the Unsold Inventory Timeshare
                      Interval to be so released shall be wired via Federal
                      Reserve Bank wire (in immediately available funds) to the
                      Lender,

                             (D) such escrow documentation provides that such
                      escrow will be consummated within 5 Business Days of the
                      Lender's depositing of such release documents therein or
                      such release documents shall be returned to the Lender by
                      the escrowee of such escrow and

                             (E) at the time of the depositing of such
                      documentation into such escrow, all of the conditions in
                      clauses (ii) through (iv) above shall have been fully
                      satisfied.

                      (b) FULL RELEASE OF INVENTORY DEED OF TRUST. Upon the
               full, final and indefeasible payment of all Obligations in
               respect of the Inventory Loan and if no Event of Default shall
               then exist, the Lender shall release the Inventory Deed of Trust
               and the Assignment of Rents and shall release its Liens in and to
               the Collateral under clause (f), clause (g) and clause (h) of
               Section 3.1 hereof and its Liens in respect of the Development
               Rights or Special Declarant Rights, as such terms are defined in
               the Colorado Common Interest Ownership Act, of the Debtor under
               the assignment referred to in Section 5.6 hereof (provided that
               its Lien in and to all other Collateral described in Section 3.1
               hereof or in any other Security Document (including, without
               limitation, its Lien in and to the Pledged Notes Receivable, the
               Pledged Note Receivable Deeds of Trust, the Pledged Contracts,
               any Compensation payable to Lender by virtue of its position as
               beneficiary under any Pledged Note Receivable Deed of Trust, and
               all proceeds and payments in respect thereof) shall not be
               released and is expressly retained to secure the Receivables
               Loan). The Debtor shall bear all out-of-pocket expenses
               (including, without limitation, legal fees and disbursements of
               the Lender) in connection with such releases, provided that a
               release of the Inventory Deed of Trust pursuant to this clause
               (b) shall not require the payment of Release Fees with respect to
               remaining Unsold Inventory Timeshare Intervals. All documentation
               in connection with any of the aforesaid releases shall be
               reasonably satisfactory to the Lender and its counsel.

SECTION 4. REPRESENTATIONS AND WARRANTIES

        As an inducement to the Lender to make the Inventory Loan, each Debtor
warrants and represents, as of the date hereof, and covenants to the Lender as
follows:

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<PAGE>   40

        4.1 SUBSIDIARIES AND CAPITAL STRUCTURE.

        Steamboat Suites has no Subsidiaries. Schedule 3 to this Agreement
states (a) the name of each of the Affiliates of each Debtor and the nature of
the affiliation, (b) the number, nature and the holder of the outstanding
Securities of each Debtor, (c) the number of authorized, issued and treasury
shares of each Debtor, and (d) the name of each subsidiary of Preferred
Equities.

        4.2    CORPORATE ORGANIZATION AND AUTHORITY.

               (a) Steamboat Suites is a corporation duly organized, validly
        existing and in good standing under the laws of the State of Colorado;

               (b) Preferred Equities is a duly organized, validly existing and
        in good standing under the laws of the State of Nevada.

               (c) Each Debtor has all requisite power and authority and
        necessary licenses and permits to own and operate its Properties and to
        carry on its business as now conducted; and

               (d) EACH DEBTOR has duly qualified and is authorized to do
        business and is in good standing as a foreign corporation in each
        jurisdiction where the character of its Properties or the nature of its
        activities makes such qualification necessary or desirable.

        4.3 BUSINESS AND PROPERTY.

        Form 10K dated as of August 31, 1999 filed by Guarantor with the United
States Securities and Exchange Commission and delivered by Debtor to Lender and
except as set forth in the Form 10K correctly describes the general nature of
the businesses and Properties (including all owned real Property, leases and
leasehold interests) of each Debtor. Except as set forth in the Form 10K the
Debtor has not changed its name, been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.

        4.4 FINANCIAL STATEMENTS.

        The Debtor shall have delivered tax returns and balance sheets and
statements of income and expenses of the Debtor and financial statements
required under the Existing Loan Documents.

        4.5 FULL DISCLOSURE.

        Neither this Agreement nor any written statement made by the Debtor in
connection with this transaction contains any untrue statement of a material
fact or omits a material fact necessary to make the statements contained herein
or therein not misleading. There is no fact which the Debtor has not disclosed
to the Lender in writing which materially affects adversely or, so far as the
Debtor can now foresee, will materially affect adversely the Property, business,
prospects, profits or condition (financial or otherwise) of the Debtor or the
ability of the Debtor to perform its Obligations under this Agreement, the Notes
or the other Security Documents.

                                       35
<PAGE>   41

        4.6 PENDING LITIGATION.

        Except as set forth in Schedule 6 to this Agreement, there are no
proceedings pending, or to the knowledge of the Debtor threatened, against or
affecting the Debtor, any Affiliate, the Guarantor, the Resort or any Unit in
any court or before any governmental authority or arbitration board or tribunal
which involve the possibility of materially and adversely affecting the
Property, business, prospects, profits or condition (financial or otherwise) of
the Debtor or the ability of the Debtor to perform its obligations under this
Agreement, the Notes or the other Security Documents, provided that no such
proceedings shall be deemed to satisfy such material and adverse effect standard
if such proceeding shall have been commenced by one or more of the aforesaid
Persons as plaintiff and no counterclaim is pending in respect thereof against
such Person. Neither the Debtor nor any Affiliate nor the Resort nor any Unit is
in default with respect to any order of any court, governmental authority or
arbitration board or tribunal.

        4.7 TITLE TO PROPERTIES.

        The Debtor has good and marketable title in fee simple (or its
equivalent under applicable law) to the Resorts free from Liens except as set
forth on Schedule 7 to this Agreement, and has good title to, and is the sole
owner of, all Personal Property related to the Resorts which it purports to own
(including, without limitation, the personal Property constituting the
Collateral), which personal Property is free from all Liens except as set forth
on Schedule 8 to this Agreement. Except as set forth on Schedule 9 hereto, the
Resorts are not subject to any leases.

        Neither the buildings in which the Units are located nor the Resorts are
under investigation with respect to, and is not in violation of, any
Environmental Protection Law. No proceedings have been commenced against, nor
notice received by, the Debtor or any Affiliate concerning any alleged violation
of any Environmental Protection Law. Neither the buildings in which the Units
are located nor the Resort is, or has been, the subject of any threatened,
proposed or actual cleanup or other protective or remedial action relating to
any Hazardous Substances, whether pursuant to any Environmental Protection Law
or otherwise. There are no Hazardous Substances in, on, or under the buildings
in which the Units are located or the Resort, except as set forth on Schedule 10
to this Agreement and except as used or stored in compliance with all applicable
Environmental Protection Laws or, with respect to ordinary cleaning materials
and supplies, as customarily and prudently used or stored in operations similar
to the Units or the Resort.

        The Debtor shall cause all asbestos located in the Resort to be removed
by a duly licensed asbestos abatement contractor, all in accordance with
applicable federal and Colorado law.

        4.8 TRADEMARKS; LICENSES AND PERMITS.

        The Debtor owns or possesses all of the trademarks, service marks, trade
names, copyrights, franchises and licenses, and rights with respect thereto
necessary for the conduct of its business as now conducted and as proposed to be
conducted, without any known conflict with the rights of others.

                                       36
<PAGE>   42

        4.9 TRANSACTION IS LEGAL AND AUTHORIZED.

        The execution and delivery of this Agreement, each of the Notes and the
other Security Documents by the Debtor and the grant of the Liens to the Lender
with respect to the Collateral by the Debtor and compliance by the Debtor with
all of the provisions of this Agreement, each of the Notes and the other
Security Documents are:

               (a) within the corporate powers of the Debtor;

               (b) duly authorized and approved by the Board of Directors of the
        Debtor; and

               (c) valid and legal acts and will not conflict with, or result in
        any breach in any of the provisions of, or constitute a default under,
        or result in the creation of any Lien (except Liens contemplated under
        this Agreement or any other Security Document) upon any Property of the
        Debtor under the provisions of, any agreement, charter instrument, bylaw
        or other instrument to which the Debtor is a party or by which its
        Property may be bound.

        4.10 NO DEFAULTS.

        No Default or Event of Default exists, and there is no violation in any
material respect of any term of any agreement, charter instrument, bylaw or
other instrument to which the Debtor is a party or by which it may be bound.

        4.11 GOVERNMENTAL CONSENT.

        Neither the nature of the Debtor, or of any of its businesses or
Properties, or any relationship between the Debtor and any other Person, or any
circumstance in connection with the execution or delivery of this Agreement, any
of the Notes or the other Security Documents, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Debtor, as a condition of the
execution, delivery or performance of this Agreement, any of the Notes or any
other Security Document.

        4.12 TAXES.

        The Debtor is not in default with respect to the payment of any taxes
levied or assessed against it or any of its assets and has not failed to file
any tax return required to be filed by it.

        4.13 USE OF PROCEEDS.

        The proceeds from the Inventory Loan will be used as set forth on
Schedule 11 to this Agreement. None of the transactions contemplated in this
Agreement will violate or result in the violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Debtor does
not intend to carry or purchase any "margin security" within the meaning of said
Regulation G. None of the proceeds will be used to purchase or carry (or
refinance any borrowing, the proceeds of which were used to purchase or carry)
any "margin security" within the meaning of said Regulation.

        4.14 COMPLIANCE WITH LAW.

                                       37
<PAGE>   43

        The Debtor

               (a) is not in violation of any laws, ordinances, governmental
        rules or regulations to which it is subject; and

               (b) except as set forth in Schedule 12 hereto, has not failed to
        obtain any licenses, permits, franchises or other governmental
        authorizations, or make or cause to be made any registrations or
        declarations with any government or agency or department thereof,
        necessary to the ownership of its Property or to the conduct of its
        business;

which violation or failure to obtain or register would materially adversely
affect the business, prospects, profits, Property or condition (financial or
otherwise) of the Debtor.

        4.15 RESTRICTIONS OF DEBTOR.

        The Debtor is not a party to any contract or agreement which restricts
its right or ability to incur indebtedness with respect to the Resort, or
prohibits the execution of, or compliance with, this Agreement or any of the
other Security Documents by the Debtor. The Debtor has not agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of its Property constituting the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien other than the Liens provided for
herein and in the other Security Documents.

        4.16 BROKERS' FEES.

        The Debtor and the Lender hereby agree that there are no brokers or
finders which are entitled to receive compensation for their services rendered
to the Debtor with respect to the transactions described in this Agreement.

        4.17 DEFERRED COMPENSATION PLANS.

        Except as set forth on Schedule 13 hereto, the Debtor has no pension,
profit sharing or other compensatory or similar plan providing for a program of
deferred compensation for any employee or officer which is subject to any
requirement of the Employee Retirement Income Security Act of 1974, as amended.

        4.18 LABOR RELATIONS.

        The employees of the Debtor are not a party to any collective bargaining
agreement with the Debtor.

        4.19 VALIDITY OF LIENS GRANTED TO LENDER.

        Except with respect to the Permitted Exceptions and Liens subject to the
sharing provisions of the last paragraph of Section 3.1 hereof, all Liens
granted to the Lender in respect of the Collateral are, and shall continue to
be, prior in right and superior to all other Liens granted to, or held by, any
other Person.

SECTION 5. CONDITIONS PRECEDENT TO INVENTORY ADVANCE AND EFFECTIVENESS
           OF THIS AGREEMENT.

        The effectiveness of this Agreement and the obligation of the Lender to
make the Inventory Advance shall be subject to the following conditions
precedent:

                                       38
<PAGE>   44

        5.1 OPINIONS OF COUNSEL.

        The Lender shall have received from Ballard Spahr Andrews & Ingersoll,
special Colorado counsel for the Debtor, a closing opinion substantially in the
form of Exhibit H attached to this Agreement dated the Closing Date, from Lionel
Sawyer & Collins, special counsel to Preferred Equities, a closing opinion
substantially in the form of Exhibit I attached to this Agreement and from
Greenberg Traurig, special counsel to Mego Financial, a closing opinion
substantially in the form of Exhibit J attached to this Agreement.

        5.2 WARRANTIES AND REPRESENTATIONS TRUE AS OF CLOSING DATE.

               (a) The warranties and representations contained in this
        Agreement shall (except as affected by transactions contemplated by this
        Agreement) be true in all material respects on the Closing Date with the
        same effect as though made on and as of that date.

               (b) The Debtor shall not have taken any action, or permitted any
        condition to exist which would have been prohibited by any provision of
        this Agreement if such provision had been binding and effective at all
        times during the period from October 12, 1999 to and including the
        Closing Date.

        5.3 COMPLIANCE WITH THIS AGREEMENT.

        The Debtor shall have performed and complied with all covenants,
agreements and conditions contained herein which are required to be performed or
complied with by it before or on the Closing Date.

        5.4 OFFICER'S CERTIFICATES; SECRETARY'S CERTIFICATES; GOOD-STANDING
CERTIFICATES.

               (a) The Lender shall have received a certificate, substantially
        in the form of Exhibit K to this Agreement, dated as of the Closing Date
        and signed by the President or a Vice-President of the Debtor,
        certifying that the conditions specified in Section 5.2(a), Section
        5.2(b) and Section 5.3 of this Agreement have been fulfilled.

               (b) The Lender shall have received a certificate of the Secretary
        or any Assistant Secretary of Steamboat Suites , substantially in the
        form of Exhibit L to this Agreement, dated as of the Closing Date,
        certifying (i) the adoption by the Board of Directors of Steamboat
        Suites of a resolution authorizing Steamboat Suites to enter into this
        Agreement and the transactions and instruments contemplated hereby and
        (ii) the incumbency and authority of, and verifying the specimen
        signatures of, the officers of Steamboat Suites authorized to execute
        and deliver this Agreement, the Note, the other Security Documents and
        the other documents contemplated hereunder.

               (c) Steamboat Suites shall have delivered to the Lender, in form
        satisfactory to the Lender, a recent good standing certificate from the
        Secretary of State of Colorado certifying the Steamboat's due corporate
        existence.

               (d) The Debtor shall have delivered to the Lender, in form
        satisfactory to the Lender, (i) recent certificates of the Secretary of
        State of Colorado certifying the due corporate existence of the
        Associations, (ii) copies of the Articles of Incorporation and all
        amendments thereto and (iii) copies of the By-Laws of the Associations.

                                       39
<PAGE>   45

               (e) The Lender shall have received a certificate of the Secretary
        or any Assistant Secretary of Preferred Equities, substantially in the
        form of Exhibit M to this Agreement, dated as of the Closing Date,
        certifying (i) the adoption by the Board of Directors of Preferred
        Equities of a resolution authorizing Preferred Equities to enter into
        this Agreement and the transactions and instruments contemplated hereby
        and (ii) the incumbency and authority of, and verifying the specimen
        signatures of, the officers of Preferred Equities authorized to execute
        and deliver this Agreement, the Note, the other Security Documents and
        the other documents contemplated thereunder.

               (f) Preferred Equities shall have delivered to the Lender, in
        form satisfactory to the Lender, a recent good standing certificate from
        the Secretary of State of Nevada certifying Preferred Equities' due
        corporate existence.

               (g) The Lender shall have received a certificate of the Secretary
        or any Assistant Secretary of Mego Financial, substantially in the form
        of Exhibit N to this Agreement, dated as of the Closing Date, certifying
        (i) the adoption by the Board of Directors of Mego Financial of a
        resolution authorizing Mego Financial to enter into the Guaranty
        Agreement and the transactions and instruments contemplated thereby and
        (ii) the incumbency and authority of, and verifying the specimen
        signatures of, the officers of Mego Financial authorized to execute and
        deliver the Guaranty Agreement and the other documents contemplated
        thereunder.

               (h) Mego Financial shall have delivered to the Lender, in form
        satisfactory to the Lender, a recent good standing certificate from the
        Secretary of State of New York certifying Mego Financial's due corporate
        existence.

        5.5 UNIFORM COMMERCIAL CODE FINANCING STATEMENTS.

        All filings of Uniform Commercial Code financing statements and all
other filings and actions necessary to perfect the Lender's security interests
in and to the Collateral shall have been filed and confirmation thereof
received.

        5.6 ASSIGNMENT OF PROPERTY-RELATED CONTRACTS.

        The Debtor shall have delivered to the Lender certified copies of all
material Property-Related Contracts and executed and delivered in favor of the
Lender an assignment or assignments thereof, each in form and substance
satisfactory to the Lender and its counsel. All such Property-Related Contracts
shall be satisfactory to the Lender in form and substance. Each Person (other
than the Debtor) which is a party to any such Property-Related Contract shall
have been notified of the assignment thereof.

        5.7 INTENTIONALLY DELETED

        5.8 GUARANTY AGREEMENT.

         Guarantor shall have executed and delivered to the Lender a Guaranty
Agreement (as amended from time to time, individually, a "Guaranty Agreement"
and, collectively, the "Guaranty Agreements") substantially in the form of
Exhibit O attached to this Agreement.

        5.9 SUBORDINATION OF INDEBTEDNESS.

                                       40
<PAGE>   46

        The Debtor, the Lender and Guarantor shall have entered into one or more
Subordination Agreements, substantially in the form of Exhibit A attached to the
Guaranty Agreements (individually, a "Subordination Agreement" and,
collectively, the "Subordination Agreements").

        5.10 EXPENSES.

        The Debtor shall have paid all fees and expenses required to be paid by
it pursuant to Section 10.2 of this Agreement and shall have paid the commitment
fee referred to in Section 2.6 hereof.

        5.11 INVENTORY NOTE; INVENTORY DEED OF TRUST.

        The Debtor shall have executed , the Inventory Note and the Inventory
Deed of Trust. The Inventory Deed of Trust shall have been recorded, as of the
Closing Date, in the Office of the Clerk and Recorder for Routt County, Colorado
and all taxes, recording fees and other fees and charges required by applicable
law to be paid in connection therewith shall have been duly paid in full. The
Inventory Deed of Trust shall have created a valid Lien in and to the Resort in
respect of the Obligations subject to no other Liens except to the extent
permitted by Section 7.2(j) of this Agreement.

        The Debtor shall have executed and delivered to the Lender an assignment
of leases and rents (as may be amended from time to time, the "Assignment of
Rents"), substantially in the form of Exhibit P to this Agreement. The
Assignment of Rents shall have been recorded in the Office of the Clerk and
Recorder for Routt County, Colorado and all taxes, recording fees and other fees
and charges required by applicable law to be paid in connection therewith shall
have been duly paid in full. The Assignment of Rents shall have created a valid
Lien in and to the Property referred to therein in respect of the Obligations
subject to no other Liens except to the extent permitted by Section 7.2(j) of
this Agreement.

        5.12 TITLE INSURANCE; CASUALTY INSURANCE.

        The Debtor shall have delivered to the Lender a mortgagee's title
insurance policy (issued to the Lender and in full force and effect) in respect
of the Inventory Deed of Trust (the "Title Insurance Policy {Blanket}") together
with such endorsements thereto as the Lender may require, dated the Closing
Date. The Title Insurance Policy {Blanket} (a) shall have been issued by a title
insurance company which is satisfactory to the Lender, (b) shall be in form and
substance satisfactory to the Lender and its special counsel, (c) shall be in
amount not less than the principal amount of the Inventory Loan, (d) shall
insure that the Inventory Deed of Trust creates a valid first Lien in and to the
Resorts free and clear of all defects, encumbrances and other Liens unacceptable
to the Lender and (e) shall contain such further endorsements and affirmative
coverage as the Lender may request, All premiums in respect of such Title
Insurance Policy {Blanket} shall have been paid in full and evidence thereof
shall have been delivered to the Lender.

        The Debtor shall have delivered to the Lender certificates of insurance
evidencing the insurance policies and endorsements required to be delivered
pursuant to Section 3.5 hereof, together with copies of such insurance policies
certified by the Debtor to be true and correct except as otherwise provided in
Section 3.5. All premiums in respect of such insurance policies shall have been
paid in full and evidence thereof shall have been delivered to the Lender.

        5.13 ENVIRONMENTAL SITE ASSESSMENT REPORT.

        Except as may have been waived by the Lender, the Debtor (at its own
expense) shall have delivered to the Lender not less than 10 Business Days prior
to the Closing Date a Phase I environmental

                                       41
<PAGE>   47

survey of the Hilltop Resort. The Phase I environmental survey shall provide
that the Lender may rely thereon in connection with its making Advances
hereunder.

        5.14 TAXES.

        The Debtor shall have delivered to the Lender copies of the most recent
tax receipts for the Resorts and each of the Units (or certificates in respect
thereof) evidencing no delinquency in the payment thereof and that each of the
Units has been segregated from all other Property at the Resort on the
applicable municipal tax rolls.

        5.15 INSPECTION.

        The Debtor shall have permitted the Lender or its representatives to
make an inspection/audit of its books, accounts and records and such other
papers as it may desire and of its premises and the Resorts, as the Lender may
in its sole discretion determine. Such inspection/audit shall have been
satisfactory to the Lender (in its sole determination).

        5.16 SURVEY.

        The Debtor shall have delivered to the Lender the existing as-built
survey of the Resorts; such survey shall be prepared in accordance with
ALTA/ACSM 1988 Minimum Survey Requirements by a licensed surveyor acceptable to
the Lender and shall be dated (or re-certified) as of a recent date and shall
contain a certification noted thereon in form and substance satisfactory to the
Lender; such survey shall show no easements, rights-of-way, party walls,
encroachments, streets or alleys which interfere with the use, enjoyment or
market value of the Units.

        5.17 ENGINEERING REPORT.

        The Debtor shall have delivered to the Lender a current engineering
report or reports which shall be in form and substance satisfactory to the
Lender and shall confirm that the Buildings and their Units are structurally and
mechanically sound. The engineering report shall provide that the Lender may
rely thereon in connection with its making Advances hereunder. The Lender shall
also deliver a letter addressed to the Lender from the engineering firm that
produced said engineering report stating how any problems or issues reported in
the report at the Resorts have been or are to be resolved; such letter shall be
satisfactory to Lender.

        5.18 INTENTIONALLY DELETED.

        5.19 INTENTIONALLY DELETED.

        5.20 FIRST LIENHOLDER STATUS; QUIT-CLAIM DEED; PROXY ACKNOWLEDGED.

        The Debtor shall have informed the Associations, in writing, as to the
first Lienholder status of the Lender in and to the Units and the Associations
shall have recognized the Lender as such First Lienholder. The Associations
shall have acknowledged and recognized the proxy referred to in Section 3.9
hereof.

        5.21 PROCEEDINGS SATISFACTORY.

        All actions taken in connection with the execution of this Agreement,
the Inventory Note, any other Security Document and all documents and papers
relating thereto shall be satisfactory to the Lender

                                       42
<PAGE>   48

and its counsel. The Lender shall be satisfied with its physical inspection of
the Units and the Resorts. The Lender and its counsel shall have received copies
of such documents and papers as the Lender or such counsel may reasonably
request in connection therewith, all in form and substance satisfactory to the
Lender and its counsel, including, without limitation, certified copies of the
Declarations and the Associations' Articles of Incorporation and By-Laws.

SECTION 6. INTENTIONALLY DELETED.

SECTION 7. COVENANTS

        The Debtor covenants that on and after the date hereof and so long as
any Obligation of the Debtor to the Lender exists as follows:

        7.1 PAYMENT OF TAXES AND CLAIMS.

        Except as otherwise provided for in Section 3.8 hereof, the Debtor shall
pay, or cause to be paid, before they become delinquent:

               (a) all taxes, assessments and governmental charges or levies
        imposed upon it or its Property at the Resort, including, without
        limitation, the Collateral; and

               (b) all claims or demands of materialmen, mechanics, carriers,
        warehousemen, landlords and other like Persons which, if unpaid, might
        result in the creation of a Lien upon its Property at the Resort,
        including, without limitation, the Collateral.

        7.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; STOCK OWNERSHIP;
            RENOVATIONS; SUPERVISORY ARCHITECT; INDEBTEDNESS; LIENS; BUSINESS.

        The Debtor shall:

               (a) PROPERTY -- maintain its Property at the Resort in good
        repair, working order and condition and make all necessary renewals,
        repairs, replacements, additions, betterments and improvements thereto
        and, without limiting the generality of the foregoing, maintain, or
        cause to be maintained, the Resort in good repair, working order and
        condition and shall make, or shall cause to be made, all necessary
        repairs, replacements, additions, betterments and improvements to the
        Resort;

               (b) INSURANCE -- maintain, or cause to be maintained, insurance
        as required by Section 3.5 of this Agreement;

               (c) FINANCIAL RECORDS -- (i) keep true books of records and
        accounts (including, without limitation, the Books and Records) in which
        full and correct entries will be made of all its business transactions
        and (ii) reflect in its financial statements adequate accruals and
        appropriations to reserves, all in accordance with generally accepted
        accounting principles, practices and procedures at the time in effect
        and consistently applied;

               (d) CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done all
        things necessary or required (i) to preserve and keep in full force and
        effect its corporate existence, rights, powers and franchises,
        including, without limitation, its authorization to do business in the
        State of Colorado and (ii) to cause Preferred Equities to continue to
        own 100% of all legal and beneficial interest in all of the Voting Stock
        and other capital stock of Steamboat Suites ;

                                       43
<PAGE>   49

               (e) COMPLIANCE WITH LAW -- not be in violation of (i) any laws,
        ordinances, governmental rules and regulations to which it is subject,
        and to that end, the Debtor shall not fail to obtain any licenses,
        permits, franchises or other governmental authorizations necessary to
        the ownership of its Properties or to the conduct of its business, which
        violation or failure to obtain might materially and adversely affect the
        business, prospects, profits, Property or condition (financial or
        otherwise) of the Debtor, including, without limitation, any zoning,
        land use, subdivision control or Environmental Protection Laws
        applicable to its real Property (including, without limitation, the
        Units and the Resort), (ii) any statutes, rules and regulations, whether
        now or hereafter in force, in such jurisdictions as the Debtor may make
        sales of Timeshare Intervals relating to the right to do business in any
        of such jurisdictions and (iii) any applicable federal, state or
        municipal statutes, rules and regulations relating to sales of Timeshare
        Intervals and the manner of evidencing and financing the same,
        including, without limitation, the Consumer Credit Protection Act, as
        amended, the Federal Trade Commission Act, as amended, and Federal
        Reserve Board Regulation Z, as amended, to the end that all of the
        Pledged Notes Receivable, the Pledged Contracts related thereto and the
        Pledged Note Receivable Deeds of Trust securing any of such Pledged
        Notes Receivable shall be valid, binding and legally enforceable in
        accordance with their respective terms subsequent to the assignment
        thereof to the Lender;

               (f) DEFERRED COMPENSATION PLANS -- to the extent that it has one
        or more pension, profit sharing or other compensatory or similar plans
        providing for a program of deferred compensation for any employee or
        officer, be in compliance with all requirements of the Employee
        Retirement Income Security Act of 1974, as amended, and the rules and
        regulations promulgated in connection therewith;

               (g) RENOVATIONS AND CONSTRUCTION -- retain only duly licensed and
        qualified architects, engineers, contractors and subcontractors to
        complete the renovations at the Resorts , provided that the Debtor may
        use qualified employees to complete such renovations and construction;

               (h) EQUITY CONTRIBUTIONS -- until such time as all obligations of
        the Debtor under the Inventory Loan, the Inventory Note and the
        Inventory Deed of Trust have been fully and indefeasibly satisfied, not
        pay out as a dividend or other distribution (in cash or Property) or
        otherwise transfer back (directly or indirectly by loans, investments,
        redemption of capital stock, repurchase of capital stock or otherwise)
        or return to Preferred Equities or any other Affiliate for so long as
        any Obligation shall be outstanding or the Lender shall have any
        obligation hereunder to make Inventory Advance or Receivable Advances
        the equity capital contributions previously made to Steamboat by
        Preferred Equities;

               (i) INDEBTEDNESS/RIGHT OF FIRST REFUSAL -- not incur any
        indebtedness (other than the Loan and the leasing of motor vehicles,
        telephone and computer equipment in the ordinary course of business) in
        respect of the Collateral and/or the Resorts, whether such indebtedness
        is secured or unsecured, and not permit the Association to incur any
        indebtedness, whether secured or unsecured, provided that the Debtor may
        incur additional indebtedness for borrowed money secured principally by
        Notes Receivable (other than the Pledged Notes Receivable) if, but only
        if, the following conditions shall have been satisfied:

                      (i) the Debtor shall have, at any time within the 120-day
               period prior to the termination of the Receivables Commitment
               Period (as defined in the Receivable Loan Agreement), delivered
               to the Lender a written request for Lender's issuance to the
               Debtor of a Letter of Intent in respect of its borrowing of
               additional moneys to be secured

                                       44
<PAGE>   50

               principally by Notes Receivable (other than the Pledged Notes
               Receivable) on the terms and conditions to be outlined by the
               Debtor in such request (such terms to include, as applicable, the
               extension of the then current Receivables Commitment Period, the
               term of any new facility, the advance rate, the rate of interest,
               the borrowing base requirements, the revolving period and such
               other terms with respect to such borrowing as are customarily
               included in letters of intent);

                      (ii) at the time of the delivery of such written request
               to the Lender, the borrowing availability of the Debtor under the
               Receivables Borrowing Base (as defined in the Receivable Loan
               Agreement) is less than the requested additional indebtedness or
               the Receivables Commitment Period will terminate within 120 days;

                      (iii) one of the following shall be true:

                             (A) the Lender shall not have delivered to the
                      Debtor a Letter of Intent in respect of the Debtor's
                      aforesaid request within 20 days after the Lender's
                      receipt of such request; or

                             (B) the Lender shall have delivered to the Debtor a
                      written response in respect of the Debtor's aforesaid
                      request rejecting the same; or

                             (C) (1) the Lender shall have delivered to the
                      Debtor a Letter of Intent in respect of the Debtor's
                      aforesaid request within 20 days after the Lender's
                      receipt of such request and (2) within 10 days after
                      receipt of such Letter of Intent, the Debtor shall have
                      informed the Lender that, in the good faith opinion of the
                      Debtor, such Letter of Intent fails to materially satisfy
                      the terms outlined in the aforesaid Debtor's request; or

                             (D) (1) the Lender shall have delivered to the
                      Debtor a Letter of Intent in respect of the aforesaid
                      Debtor's request within 20 days after the Lender's receipt
                      of such request, (2) within 10 days after receipt of such
                      Letter of Intent, the Debtor shall have executed and
                      returned such Letter of Intent to the Lender, and (3)
                      within 30 days after receipt of such executed Letter of
                      Intent by the Lender, the Lender shall have failed to
                      issue to the Debtor a Phase II Commitment Letter in
                      respect of such Letter of Intent;

                      (iv) the Debtor shall not have made more than 2 other such
               requests under this clause (i) and/or under Section 7.4 hereof
               during the then current fiscal year of the Debtor; and

                      (v) no Event of Default shall exist at the time of the
               delivery of the aforesaid written request;

               (j) LIENS -- (i) not allow any Liens or encumbrances whatsoever
        to attach to the Collateral and/or the Resort other than the Liens and
        security interests of the Lender created by the Security Documents, any
        Liens in favor of the Association under the Declaration, the Liens set
        forth on Schedule 7, Schedule 8 and Schedule 9 hereto and any Liens
        permitted in connection with additional indebtedness for borrowed money
        permitted under clause (i) above or in connection with the sale of Notes
        Receivable under Section 7.4 hereof and (ii) cause the Liens and
        security interests of the Lender created by the Security Documents in
        and to the Collateral to continue to be valid, enforceable, perfected
        Liens and security interests subject to no other Liens

                                       45
<PAGE>   51

        except as set forth in this Agreement or in any other Security Document
        and in Schedule 7, Schedule 8 and Schedule 9 hereto;

               ((k) MATERIAL ADVERSE EFFECT -- not undertake any action that
        would have a material adverse effect on the operation of the Resort or
        the Collateral; and

               (l) NOTIFICATION OF CLAIMS -- promptly notify the Lender of any
        claim, action or proceeding affecting title to the Collateral, or any
        part thereof, or any of the security interests granted hereunder, and,
        at the request of the Lender, appear in and defend, at the Debtor's
        expense, any such claim, action or proceeding.

        7.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.

        The Debtor shall punctually pay or cause to be paid the principal and
interest (and prepayment premium, if any) to become due in respect of the Note
according to the terms thereof (all of which are incorporated herein by
reference). All payments hereunder or under the Note shall be made in accordance
with the payment instructions set forth in Schedule 14 to this Agreement. The
Debtor shall maintain an office in Steamboat Springs, Colorado and/or Las Vegas,
Nevada where notices, presentations and demands in respect of this Agreement,
the Notes or any other Security Document may be made upon the Debtor. Such
offices shall be maintained at the addresses of the Debtor set forth on Schedule
15 to this Agreement until such time as the Debtor shall so notify the Lender,
in writing, of any change of location of such offices. The books and records of
the Debtor shall be maintained at the Las Vegas, Nevada office of the Debtor.
The Debtor shall not change its name without 30-day prior written notice to the
Lender.

        7.4 SALE OF PROPERTIES.

        Without the prior written consent of the Lender, the Debtor shall not
sell, lease, transfer or otherwise dispose of any of the Collateral, provided
that the Debtor may sell the Unsold Inventory Timeshare Intervals in the
ordinary course of its business to unaffiliated consumers and remove and dispose
of (and receive the proceeds thereof) in the ordinary course of its business,
free from any Liens created or contemplated by this Agreement, items of
Collateral consisting of Equipment which shall have become worn out or obsolete
and provided further that the Debtor may sell Notes Receivable (other than the
Pledged Notes Receivable) if, but only if, the following conditions shall have
been satisfied:

               (a) the Debtor shall have delivered to the Lender a written
        request for Lender's issuance to the Debtor of a Letter of Intent in
        respect of its sale to the Lender of Notes Receivable (other than the
        Pledged Notes Receivable) on the terms and conditions to be outlined by
        the Debtor in such request (such terms to include, the par value of such
        Notes Receivable, the purchase price of such Notes Receivable and such
        other terms with respect to such sale as are customarily included in
        letters of intent);

               (b) one of the following shall be true:

                      (i) the Lender shall not have delivered to the Debtor a
               Letter of Intent in respect of the Debtor's aforesaid request
               within 20 days after the Lender's receipt of such request; or

                      (ii) the Lender shall have delivered to the Debtor a
               written response in respect of the Debtor's aforesaid request
               rejecting the same; or

                                       46
<PAGE>   52

                      (iii) (A) the Lender shall have delivered to the Debtor a
               Letter of Intent in respect of the Debtor's aforesaid request
               within 20 days after the Lender's receipt of such request and (B)
               within 10 days after receipt of such Letter of Intent, the Debtor
               shall have informed the Lender that, in the good faith opinion of
               the Debtor, such Letter of Intent fails to materially satisfy the
               terms outlined in the aforesaid Debtor's request; or

                      (iv) (A) the Lender shall have delivered to the Debtor a
               Letter of Intent in respect of the aforesaid Debtor's request
               within 20 days after the Lender's receipt of such request, (B)
               within 10 days after receipt of such Letter of Intent, the Debtor
               shall have executed and returned such Letter of Intent to the
               Lender, and (C) within 30 days after receipt of such executed
               Letter of Intent by the Lender, the Lender shall have failed to
               issue to the Debtor a Phase II Commitment Letter in respect of
               such Letter of Intent;

               (c) the Debtor shall not have made more than 2 other such
        requests under this Section 7.4 and/or under Section 7.2(i) hereof
        during the then current fiscal year of the Debtor; and

               (d) no Event of Default shall exist at the time of the delivery
        of the aforesaid written request.

        7.5 CONSOLIDATION AND MERGER.

        Without the prior written consent of Lender, the Debtor shall not
consolidate with or merge into any other Person or permit any other Person to
consolidate with or merge into it or consent or agree to a Change in Management.

        7.6 GUARANTIES.

               (a) Except as required by applicable law or any government agency
        having regulatory authority with respect to the sale of the Timeshare
        Intervals, the Debtor shall not become liable in respect of, or be
        liable in respect of, any Guaranty except the endorsement in the
        ordinary course of business of negotiable instruments for deposit or
        collection.

               (b) "Guaranty" by any Person shall mean all obligations of such
        Person guaranteeing or in effect guaranteeing any indebtedness, dividend
        or other obligation of any other Person (the "primary obligor") in any
        manner, whether directly or indirectly, including but not limited to
        obligations incurred through an agreement, contingent or otherwise, by
        such Person:

                      (i) to purchase such indebtedness or obligation or any
               Property or assets constituting security therefor;

                      (ii) to advance or supply funds

                             (A) for the purchase or payment of such
                      indebtedness or obligation, or

                             (B) to maintain working capital or other balance
                      sheet conditions or otherwise to advance or make available
                      funds for the purchase or payment of such indebtedness or
                      obligation;

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<PAGE>   53

                      (iii) to lease Property or to purchase any Security or
               other Property or services primarily for the purpose of assuring
               the owner of such indebtedness or obligation of the ability of
               the primary obligor to make payment of the indebtedness or
               obligation; or

                      (iv) otherwise to assure the owner of the indebtedness or
               obligation of the primary obligor against loss in respect
               thereof.

        7.7 COMPLIANCE WITH ENVIRONMENTAL LAWS.

        The Debtor shall comply, and shall cause the Resorts to be in
compliance, in a timely and diligent fashion with

               (a) all Environmental Protection Laws (including, without
        limitation, all federal, state and local environmental or
        pollution-control laws, regulations, orders and decrees governing the
        emission of waste water effluent, the treatment, transportation,
        disposal, generation and storage of solid and hazardous waste, hazardous
        and toxic substances and air pollution, and/or setting forth general
        environmental conditions),

               (b) any other applicable requirements for conducting, on a timely
        basis, periodic tests and monitoring for contamination of ground water,
        surface water, air and/or land, and for biological toxicity of the
        aforesaid and

               (c) the regulations of each relevant federal, state or local
        authority administering environmental laws, ordinances or regulations,

to the extent that the failure to so comply could have a material and adverse
effect on the business, prospects, profits, Property or condition (financial or
otherwise) of the Debtor or the Resorts.

        Without limiting the generality of the foregoing, the Debtor shall not
release or otherwise dispose of any Hazardous Substance or any other substance
regulated, controlled or described as hazardous under any Environmental
Protection Law on or beneath any real Property owned, leased or otherwise used
by the Debtor or allow the same to occur with respect to the Resorts; and no
asbestos, urea formaldehyde foam, polychlorinated biphenyls, aluminum wire or
lead-containing paint shall be installed or used on any such Property or the
Resorts. The Debtor shall not take or suffer to be taken any act or omission
that would subject it or the Resorts to liability under any Environmental
Protection Law which liability could have a material and adverse effect on the
business, prospects, profits, Property or condition (financial or otherwise) of
the Debtor or the Resorts.

        The Lender shall have the right, but shall not be obligated, to notify
any state, federal or local governmental authority of information which may come
to its attention with respect to Hazardous Substances on or emanating from the
Resorts and the Debtor irrevocably releases the Lender from any claims of loss,
damage, liability, expense or injury relating to or arising from, directly or
indirectly, any such disclosure. The Lender will notify the Debtor prior to or
contemporaneously with any action taken by the Lender pursuant to this
paragraph, provided that the failure by the Lender to provide such notification
shall not affect any action so taken.

        Without limiting the scope and the effectiveness of the foregoing
undertakings in this Section 7.7, the Debtor agrees to indemnify and hold the
Lender harmless from and against any losses, liabilities, damages, claims,
causes of action, costs or expenses (including, without limitation, attorneys'
fees and disbursements), arising from, incurred by, or asserted against, the
Lender in connection with any cleanup,

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<PAGE>   54

removal or similar protective or remedial action that may be required or
undertaken by any governmental authority as a result of the presence of any
Hazardous Substances at the Resort, the release of any other Hazardous Substance
on or from the Resort or the generation, treatment, storage, handling or
disposal of any Hazardous Substances on or from the Resort (unless such
presence, release, generation, treatment, storage, handling or disposal is
directly caused by the Lender or by any agent of the Lender acting under the
Lender's direct orders). The liability of the Debtor to the Lender under this
paragraph shall survive any assignment, transfer, discharge or foreclosure of
the Inventory Deed of Trust or any transfer of the Resort (or any portion
thereof) by deed in lieu of foreclosure or otherwise, and any one or more
transfers of the Resort (or any portion thereof) by deed or otherwise, by
whosoever made.

        If the Debtor fails to diligently take any action required under this
Section 7.7 or by any governmental entity with respect to the cleanup, control
or reporting of any Hazardous Substances, materials or wastes in, on, from or
under the Resort, the Lender, at its option, may enter upon the Resort, retain
such experts and consultants at the expense of the Debtor and take such action
as the Lender deems advisable, and the Lender may advance such sums of money as
it deems necessary, with respect to the cleanup, control or reporting of any
such substances, materials or wastes in, on or under the Resort. The Debtor
shall pay to the Lender immediately and upon demand, all sums of money so
advanced or expended by the Lender pursuant to this paragraph, together with
interest on each such advance at the Default Rate, and all such sums, and the
interest thereon, shall be secured by the Collateral. The Lender will notify the
Debtor prior to or contemporaneously with any action taken by the Lender
pursuant to this paragraph, provided that the failure by the Lender to provide
such notification shall not affect any action so taken.

        7.8 TRANSACTIONS WITH AFFILIATES; PRINCIPAL PROPERTIES.

        The Debtor shall not enter into any transaction including, without
limitation, the purchase, sale or exchange of Property or the rendering of any
service with any Affiliate except in the ordinary course of, and pursuant to the
reasonable requirements of, the Debtor's business and upon fair and reasonable
terms no less favorable to the Debtor than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate. Steamboat Suites shall
have no Subsidiaries.

        7.9 USE OF THE LENDER NAME.

        The Debtor shall not, nor shall it permit any Affiliate to, without the
prior written consent of the Lender, use the name of the Lender or the name of
any affiliate of the Lender in connection with any of its respective businesses
or activities, except in connection with internal business matters and as
required in dealings with governmental agencies.

        7.10 SUBORDINATED OBLIGATIONS.

        The Debtor shall not, directly or indirectly, (a) permit any payment to
be made in respect of any indebtedness, liabilities or obligations, direct or
contingent, which are subordinated by the terms thereof or by separate
instrument to the payment of principal of, and interest on, the Notes except in
accordance with the terms of such subordination, (b) permit the amendment,
rescission or other modification of any such subordination provisions of any of
the Debtor's subordinated obligations in such a manner as to affect adversely
the Lender's Lien or the prior position of the Notes, or (c) permit the
unscheduled prepayment or redemption of all or any part of any subordinated
obligations of the Debtor except in accordance with the terms of such
subordination and except as provided in this Section 7.10 in respect of
indebtedness extended to Steamboat Suites by Preferred Equities and except for
payments pursuant to tax sharing agreements. The Debtor shall cause Guarantor to
subordinate all indebtedness, liabilities or obligations, direct or contingent,
owing to it from the Debtor to the payment of the Obligations. The

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<PAGE>   55

Debtor shall cause each of its other Affiliates to subordinate all indebtedness,
liabilities or obligations, direct or contingent, owing to it from the Debtor to
the payment of the Obligations. The terms of such subordination shall be
satisfactory to the Lender. Such subordination may permit payments by the Debtor
in respect of such subordinated indebtedness, liabilities or obligations if (i)
in the case of all such indebtedness other than that owing to Preferred
Equities, such payments are regularly scheduled payments and the terms of such
regularly scheduled payments are acceptable to the Lender and, in the case of
such indebtedness owing to Preferred Equities and except for payments pursuant
to the tax sharing agreements, no such payments (whether for interest, principal
or otherwise), shall be permitted or made for so long as the Inventory Loan is
outstanding and thereafter any payments of principal and interest may be made
(subject to the requirements of clause (ii) and (iii) which follow), (ii) no
Default or Event of Default then exists or, after giving effect to such payment,
would exist and (iii) the Debtor would not be rendered insolvent, made unable to
pay its debts as they come due or be left without adequate capital to pursue its
business after giving effect to such payment.

        7.11 NOTICE OF LEGAL PROCEEDINGS.

        Promptly upon becoming aware of the existence thereof, the Debtor shall
deliver to the Lender written notification of the institution of any litigation,
legal proceeding or dispute with any Person, entity or governmental authority in
any way involving the Debtor, the Guarantor, the Resort, the Collateral or any
of the Debtor's other assets as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, would materially
adversely affect the Debtor, the Guarantor, the Resort, or the Collateral.

        7.12 FURTHER ASSURANCES.

        The Debtor shall from time to time execute and deliver to the Lender
such other instruments, certificates and documents and shall take such other
action and do all other things as may from time to time be reasonably requested
by the Lender in order to implement or effectuate the provisions of, or more
fully perfect the rights granted or intended to be granted by the Debtor to the
Lender pursuant to the terms of, this Agreement, the Notes or any other Security
Document. The Debtor agrees, in its capacity as Declarant (to the extent
permitted by applicable law), to cause the Association to take such action and
to do all other things as may from time to time be reasonably requested by the
Lender in order to implement or effectuate the provisions of this Agreement and
the other Security Documents.

        7.13 FINANCIAL STATEMENTS. The Debtor shall submit to the Lender the
following:

               (a) ANNUAL STATEMENTS -- As soon as practicable after the end of
        each fiscal year of the Debtor, and in any event no later than 120 days
        thereafter, duplicate copies of:

                      (i) a balance sheet of the Debtor (including all assets
               and liabilities of, or in respect of, the Resort) as at the end
               of such fiscal year, and

                      (ii) a statement of income of the Debtor (including the
               operations of the Resort) for such fiscal year, and

                      (iii) a statement of changes in cash flows of the Debtor
               (including the cash flows of, or in respect of, the Resort)
               during such fiscal year, and

                      (iv) a statement of material changes of accounting
               policies, presentations or principles during such fiscal year,
               and

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<PAGE>   56

                      (v) notes to such financial statements.

               Each of the above shall have been prepared in reasonable detail
        and in accordance with generally accepted accounting principles,
        procedures and practices consistently applied and shall set forth, in
        each case, in comparative form the figures for the previous fiscal year,
        and shall be certified as complete and correct by the principal
        financial officer of the Debtor. The Debtor shall also deliver to the
        Lender with the above financial statements a report, certified as
        complete and correct by the chief accounting officer of the Debtor,
        showing all sales and cancellations made in respect of Timeshare
        Intervals at the Resort for the fiscal year of the Debtor then most
        recently ended and in respect of which said financial statements shall
        have been prepared. The above financial statements shall be accompanied
        by a certificate of the chief accounting officer of the Debtor, which
        certificate shall be acceptable to the Lender and shall, without
        qualification, state that such financial statements present the
        financial condition of the Debtor and have been prepared in accordance
        with generally accepted accounting principles consistently applied.

               (b) QUARTERLY STATEMENTS -- As soon as practicable after the end
        of each fiscal quarter of the Debtor, and in any event no later than 90
        days thereafter, duplicate copies of:

                      (i) a balance sheet of the Debtor (including all assets
               and liabilities of, or in respect of, the Resort) as at the end
               of such fiscal quarter, and

                      (ii) a statement of income of the Debtor (including the
               operations of the Resort) for such quarter and (in the case of
               the second and third quarters) for the portion of the fiscal year
               ending with such quarter, and

                      (iii) a statement of changes in cash flows of the Debtor
               (including the cash flows of, or in respect of, the Resort)
               during such quarter and (in the case of the second and third
               quarters) for the portion of the fiscal year ending with such
               quarter, and

                      (iv) a statement of material changes of accounting
               policies, presentations or principles during such quarter.

               Each of the above shall have been prepared in reasonable detail
        and in accordance with generally accepted accounting principles,
        procedures and practices consistently applied (other than the
        preparation of notes to such financial statements), subject to changes
        resulting from year-end adjustments, and shall set forth in each case in
        comparative form the figures for the corresponding periods in the
        immediately preceding fiscal year, and shall be certified as complete
        and correct by the chief accounting officer of the Debtor.

               (c) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- Promptly upon
        becoming aware of the existence of any condition or event which
        constitutes a Default or an Event of Default, a written notice
        specifying the nature and period of existence thereof and what action
        the Debtor is taking or proposes to take with respect thereto.

               (d) NOTICE OF CLAIMED DEFAULT -- Immediately upon becoming aware
        that the holder of any obligation or of any evidence of indebtedness or
        other Security of the Debtor or Guarantor has given notice or taken any
        other action with respect to a claimed default or event of default
        thereunder, a written notice specifying the notice given or action taken
        by such holder and the nature of the claimed default or event of default
        and what action the Debtor is taking or proposes to take with respect
        thereto.

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<PAGE>   57

               (e) MATERIAL ADVERSE DEVELOPMENTS -- Immediately upon becoming
        aware of any development or other information which may materially and
        adversely affect the Property, business, prospects, profits or condition
        (financial or otherwise) of the Debtor or the ability of the Debtor to
        perform its obligations under this Agreement, the Notes or the other
        Security Documents, telephonic, telefax or telegraphic notice specifying
        the nature of such development or information and the anticipated
        effect.

               (f) FINANCIAL INFORMATION. As promptly as possible after the
        receipt thereof, all financial statements, budgets and other information
        distributed by the Association. The Debtor, as Declarant or otherwise,
        shall cause the Association to prepare annual financial statements,
        substantially as provided in clause (a) above, and an annual budget, and
        shall deliver the same to the Lender within 120 days of the end of each
        of its fiscal years.

               (g) REQUESTED INFORMATION -- With reasonable promptness, such
        other data and information as from time to time may be reasonably
        requested by the Lender.

        7.14 OFFICERS' CERTIFICATE.

        The financial statements delivered to the Lender pursuant to Section
7.13(a) and Section 7.13(b) of this Agreement shall be accompanied by a
certificate , substantially in the form of Exhibit Q, of the President or a
Vice-President and the Treasurer or an Assistant Treasurer of the Debtor setting
forth:

               (a) COVENANT COMPLIANCE -- the information (including detailed
        calculations) required in order to establish whether the Debtor was in
        compliance with all financial covenants contained in Section 7 of this
        Agreement during the period covered by the financial statements or
        reports then being furnished; and

               (b) EVENT OF DEFAULT -- that the signers have reviewed the
        relevant terms of the Agreement (and all other agreements and exhibits
        between the parties) and have made, or caused to be made, under their
        supervision, a review of the transactions and conditions of the Debtor
        from the beginning of the period covered by the financial statements or
        reports being delivered therewith to the date of the certificate and
        that such review has not disclosed the existence during such period of
        any condition or event which constitutes a Default or Event of Default
        or, if any such condition or event existed or exists or will exist,
        specifying the nature and period of existence thereof and what action
        the Debtor has taken or proposes to take with respect thereto.

        7.15 INSPECTION.

        The Debtor shall permit the Lender or its representatives to make such
inspections/audits of its books, accounts, records, orders, original
correspondence and such other papers as it may desire and of its premises, the
Resort, the Units, and the other Collateral, from time to time, as the Lender
may in its sole discretion determine. The Debtor shall supply copies of such
records and papers as the Lender may reasonably request, and shall permit the
Lender to discuss the Debtor's respective affairs, finances and accounts with
the Debtor's officers, employees and independent public accountants (and by this
provision the Debtor hereby authorizes said accountants to discuss with the
Lender the finances and affairs of the Debtor), all at reasonable times and as
often as may be desired by the Lender. The Debtor further agrees to supply the
Lender with such other reasonable information relating to the Debtor and the
Collateral as the Lender may request. With respect to any inspections and/or
audits referred to in this Section 7.15, the Debtor shall pay for all
out-of-pocket costs and reasonable expenses incurred by the Lender (including,
without limitation, travel expenses, but excluding salaries of employees of the
Lender) and shall promptly reimburse the Lender therefor upon receipt by the
Debtor of a written demand therefor from the Lender.

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<PAGE>   58

SECTION 8. EVENTS OF DEFAULT

        8.1 DEFAULT.

        The Debtor hereby covenants, agrees and acknowledges that an Event of
Default shall exist under this Agreement if any of the following events or
conditions (each, an "Event of Default") shall occur and be continuing:

               (a) PAYMENTS -- (i) failure to make any payment of interest on
        the Inventory Note, (ii) failure to make any payment of interest on the
        Receivables Note ; (iii) failure to make any payment of principal of, or
        prepayment premium on, the Inventory Note or the Receivable Note ; (iv)
        failure to make any Mandatory Inventory Prepayment, ; or (v) failure to
        make any other payment required pursuant to the terms of this Agreement,
        the Note or any other Security Document or Receivable Loan Security
        Documents; in each case on or before 2 Business Days after the date such
        payment is due; or

               (b) WARRANTIES OR REPRESENTATIONS -- any warranty, representation
        or other statement made or furnished to the Lender by or on behalf of
        the Debtor or Guarantor in this Agreement or any other Security Document
        proves to have been false or misleading in any material respect when
        made or furnished; or

               (c) COLLATERAL AND FINANCIAL COVENANTS -- failure by Debtor to
        comply with any covenant set forth in Section 3.5, Section 3.6, and
        Section 7 of this Agreement; or

               (d) OTHER COVENANTS -- failure by the Debtor to comply with any
        other covenant relating to the Debtor contained in this Agreement or any
        other Security Document, and the continuance of such failure for more
        than 20 days after such failure shall have first become known to any
        officer of the Debtor or Guarantor; or

               (e) MATERIAL ADVERSE CHANGE -- any material adverse change in or
        in respect of the Collateral (including, without limitation, the
        termination of any applicable timeshare or condominium regimen {whether
        by consent of the condominium or timeshare owners thereunder or
        otherwise}, any modification or amendment to the Declaration which
        shall, in the opinion of the Lender, adversely affect the Collateral or
        the operations or prospects of the Resort, or the substantial
        destruction of any uninsured Building, or any Unit) or in the financial
        condition of the Debtor or Guarantor; or

               (f) INSOLVENCY -- (i) a receiver, liquidator, custodian or
        trustee of the Debtor or Guarantor, or of all or any of the Property of
        any of them, shall be appointed by court order and such order remains in
        effect for more than 50 days; or an order for relief shall be entered
        with respect to the Debtor or Guarantor, or the Debtor or Guarantor
        shall be adjudicated a bankrupt or insolvent; or any of the Property of
        any of them shall be sequestered by court order and such order remains
        in effect for more than 50 days; or a petition shall be filed against
        the Debtor or Guarantor under any bankruptcy, reorganization,
        arrangement, insolvency, readjustment of debt, dissolution or
        liquidation law of any jurisdiction, whether now or hereafter in effect,
        and shall not be dismissed within 50 days after such filing; or (ii) the
        Debtor or Guarantor shall file a petition in voluntary bankruptcy or
        seeking relief under any provision of any bankruptcy, reorganization,
        arrangement, insolvency, readjustment of debt, dissolution or
        liquidation law of any jurisdiction, whether now or hereafter in effect,
        or shall consent to the filing of any petition against it under any such
        law; or (iii) the Debtor or Guarantor shall make an assignment for the
        benefit of its

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<PAGE>   59

        creditors, or shall admit in writing its inability, or shall fail, to
        pay its debts generally as they become due, or shall consent to the
        appointment of a receiver, liquidator or trustee of the Debtor or
        Guarantor, or of all or any part of the Property of any of them; or

               (g) JUDGMENT -- final judgment or judgments for the payment of
        money, the aggregate of which exceeds $100,000, shall be outstanding
        against one or more of the Debtor and the Guarantor and any of such
        judgments shall have been outstanding for more than 30 days from the
        date of its entry and shall not have been discharged in full or stayed;
        or

               (h) DEFAULT IN LENDER AGREEMENTS -- any default (after giving
        effect to the expiration of any applicable grace periods) under, and as
        defined in, the Receivable Loan Agreement, or any other agreement, now
        existing or hereafter entered into, between (i) the Debtor and the
        Lender or any affiliate of the Lender, (ii) Preferred Equities and the
        Lender or any affiliate of the Lender (including, without limitation,
        Dorfinco), (iii) Mego Financial and the Lender or any affiliate of the
        Lender (including, without limitation, Dorfinco) or (iv) any Affiliate
        of the Debtor and the Lender or any affiliate of the Lender (including,
        without limitation, Dorfinco); or

               (i) DEFAULT BY DEBTOR IN OTHER AGREEMENTS -- any default by the
        Debtor or Guarantor in the payment of indebtedness for borrowed money;
        any other default under such indebtedness which accelerates or permits
        the acceleration (after the giving of notice or passage of time, or
        both) of the maturity of such indebtedness, whether or not such default
        has been waived by the holder of such indebtedness, provided that any
        such acceleration or permitted acceleration with respect to a default by
        Guarantor shall be an Event of Default only if such acceleration or
        permitted acceleration could reasonably be expected to have a material
        adverse affect on Guarantor and provide further that any default with
        respect to that indebtedness described on Schedule 18 shall not be an
        Event of Default hereunder unless such default becomes an unappealable
        judgment against Debtor; or

               (j) SUSPENSION OF SALES -- the issuance of any stay order, cease
        and desist order or similar judicial or nonjudicial sanction limiting or
        otherwise affecting the sale of Timeshare Intervals in any state or any
        jurisdiction thereof in which the Debtor shall have made a material
        percentage of sales of Timeshare Intervals and any one of such orders or
        sanctions shall have been outstanding for more than 30 days from the
        date of its entry and shall not have been discharged in full or stayed
        by appeal, bond or otherwise; or

               (k) GUARANTY -- any Guaranty Agreement shall have been
        terminated, revoked or declared invalid.

        8.2 DEFAULT REMEDIES.

               (a) ACCELERATION OF OBLIGATIONS; RIGHT TO DISPOSE OF COLLATERAL.
        If an Event of Default under Section 8.1(f) of this Agreement shall
        occur, then the Obligations shall, automatically and without notice or
        demand by the Lender, become at once due and payable, and the Debtor
        will forthwith pay to the Lender, in addition to any and all sums and
        charges otherwise due in respect of the Obligations, the entire
        principal of and interest accrued on and the Inventory Note. If any
        other Event of Default shall occur, all of the Obligations shall, at the
        option of the Lender, and without notice or demand by the Lender, become
        at once due and payable, and the Debtor will forthwith pay to the
        Lender, in addition to any and all sums and charges otherwise due in
        respect of the Obligations, the entire principal of and interest accrued
        on the Inventory Note . The Lender shall have all the rights and
        remedies of a secured party under the Colorado Uniform Commercial Code,
        all the rights and remedies of a beneficiary under the Inventory Deed of
        Trust

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<PAGE>   60

        and all other legal and equitable rights to which it may be entitled,
        including, without limitation and without further notice to Debtor, the
        right to continue to collect all payments being made on the Pledged
        Notes Receivable and to apply such payments to the Obligations and to
        sue in its own name (or the name of the Debtor) the obligor under any
        defaulted Pledged Note Receivable. The Lender shall also have the right
        to require the Debtor to assemble the Collateral, at the Debtor's
        expense, and make it available to the Lender at a place to be designated
        by the Lender, which is reasonably convenient to both parties, and the
        Lender shall have the right to take immediate possession of the
        Collateral and may enter any of the premises of the Debtor or wherever
        the Collateral shall be located, in accordance with applicable law, and
        to keep and store the same on said premises until sold (and if said
        premises be the Property of the Debtor, the Debtor agrees not to charge
        the Lender for storage thereof for a period of at least 90 days after
        sale or disposition of such Collateral). The Debtor and the Lender agree
        that 10 days' notice to the Debtor of any public or private sale or
        other disposition of Collateral shall be reasonable notice thereof and
        such sale shall be at such location(s) as the Lender shall designate in
        said notice. The Lender shall have the right to bid at any such sale on
        its own behalf.

               In view of the fact that federal and state securities laws may
        impose certain restrictions on the methods by which a sale of
        Collateral, if comprised of Securities, may be effected after an Event
        of Default, the Debtor agrees that, upon the occurrence and continuance
        or existence of an Event of Default, the Lender may, from time to time,
        attempt to sell all or any part of such Collateral by means of a private
        placement restricting the bidding and prospective purchasers to those
        who will represent and agree that they are purchasing for investment
        only and not for, or with a view to, distribution. In so doing, and
        without limiting any other means of private placement, the Lender may
        solicit offers to buy such Collateral, or any part of it for cash, from
        a limited number of investors deemed by the Lender, in its reasonable
        judgment, to be responsible parties who might be interested in
        purchasing the Collateral, and if the Lender solicits such offers from
        not less than four (4) such investors (and otherwise acts in good
        faith), then the acceptance by the Lender of the highest offer obtained
        therefrom shall be deemed to be a commercially reasonable method of
        disposition of such Collateral.

               (b) APPLICATION OF COLLATERAL; TERMINATION OF AGREEMENTS. Upon
        the occurrence of any Event of Default, the Lender may, with or without
        proceeding with such sale or foreclosure or demanding payment of the
        Obligations, without notice, terminate the Lender's further performance
        under this Agreement to extend Receivables Advances to the Debtor,
        without further liability or obligation by the Lender, and may also, at
        any time, appropriate and apply (as provided below) to any Obligations
        any and all Collateral in its possession and any and all balances,
        credits, deposits, accounts, reserves, indebtedness or other monies due
        or owing to the Debtor held by the Lender hereunder or under any other
        financing agreement or otherwise, whether accrued or not. Neither such
        termination, nor the termination of this Agreement by lapse of time, the
        giving of notice or otherwise, shall absolve, release or otherwise
        affect the liability of the Debtor in respect of transactions prior to
        such termination, or affect any of the Liens, security interests,
        rights, powers and remedies of the Lender hereunder, but they shall, in
        all events, continue until all of the Obligations are satisfied.

               (c) APPLICATION OF PROCEEDS. To the extent permitted under
        applicable law, the proceeds of any exercise of rights with respect to
        Collateral or any part thereof shall be paid to and applied as follows:

                      FIRST, to the payment of

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<PAGE>   61

                             (i) all costs and charges in connection therewith,
                      including, without limitation, (A) attorneys' fees for
                      advice, counsel or other legal services, (B) costs and
                      expenses incurred as a result of pursuing, reclaiming,
                      seeking to reclaim, taking, keeping, removing, storing,
                      advertising for sale, selling and foreclosing on the
                      Collateral and any and all other charges and expenses in
                      connection therewith, and (C) any costs and expenses
                      (including, without limitation, costs and expenses in the
                      management and operation of the Resort) provided for in
                      the Assignment of Rents, the Inventory Deed of Trust or
                      any other Security Document,

                             (ii) all taxes, assessments or Liens superior to
                      the Lien of this Agreement or the other Security
                      Documents, except any taxes, assessments or other superior
                      Liens subject to which any sale of Collateral may have
                      been made,

                             (iii) all fees, costs and expenses as set forth in
                      Section 10.2 of this Agreement, and

                             (iv) all Release Fees;

                      SECOND, towards the payment of accrued and unpaid interest
               then due and payable, if any, at the Default Rate in respect of
               the Loan,

                      THIRD, towards the payment of all other accrued and unpaid
               interest, if any, then due and payable in respect of the Loan,

                      FOURTH, to the payment of the principal amount of the
               Loan, and

                      FIFTH, to the payment of the surplus, if any, to the
               Debtor, its successors and assigns, or to whomsoever may be
               lawfully entitled to receive the same, provided that if any
               Obligations then due and payable shall not have been paid in
               full, any such surplus shall continue to be held as Collateral
               hereunder and shall continue to be subject to the terms and
               conditions hereof until such Obligations then due and payable
               shall have been paid in full.

               The Debtor shall remain liable hereunder for payment of any
        deficiency owing on the Obligations after application of such proceeds.

               To the extent that any amount allocated to any of the payment
        categories set forth above is insufficient to fully satisfy all of the
        Obligations referred to in said category, such amount shall be allocated
        ratably to each of such Obligations in accordance with the ratio that
        the amount of such Obligation bears to the aggregate amount of such
        Obligations referred to in such category.

               (d) REMEDIES CUMULATIVE. All covenants, conditions, provisions,
        warranties, guaranties, indemnities and other undertakings of the Debtor
        contained in this Agreement, or in any document referred to herein or
        contained in any agreement supplementary hereto or in any schedule given
        to the Lender or contained in any other agreement between the Lender and
        the Debtor, heretofore, concurrently or hereafter entered into,
        including, without limitation, the Inventory Deed of Trust, shall be
        deemed cumulative to and not in derogation or substitution of any of the
        terms, covenants, conditions or agreements of the Debtor herein
        contained. The failure or delay of the Lender to exercise or enforce any
        rights, Liens, powers or remedies hereunder or under any of the
        aforesaid agreements or other documents or security or Collateral shall
        not

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<PAGE>   62

        operate as a waiver of such Liens, rights, powers and remedies, but all
        such Liens, rights, powers and remedies shall continue in full force and
        effect until the Loan and all other Obligations shall have been fully
        satisfied. All Liens, rights, powers and remedies herein provided for
        are cumulative and none are exclusive.

        The acceptance by the Lender at any time and from time to time of
partial payments of the Obligations shall not be deemed to be a waiver of any
Event of Default then existing. No waiver by the Lender of any Event of Default
shall be deemed to be a waiver of any other or subsequent Event of Default. No
delay or omission by the Lender in exercising any right or remedy under the
Security Documents shall impair such right or remedy or be construed as a waiver
thereof or an acquiescence therein, nor shall any single or partial exercise of
any such right or remedy preclude other or further exercise thereof, or the
exercise of any other right or remedy under the Security Documents or otherwise.

SECTION 9. REVIVAL OF OBLIGATIONS AND LIENS

        The Debtor expressly agrees that if the Debtor makes a payment to the
Lender, which payment or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, or otherwise required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then to the extent of such repayment, the
Obligations or any part thereof intended to be satisfied and the Liens provided
for hereunder securing the same shall be revived and continued in full force and
effect as if said payment had not been made.

SECTION 10. MISCELLANEOUS

        10.1 GOVERNING LAW.

        This Agreement and all transactions, assignments and transfers
hereunder, and all the rights of the parties hereto shall be governed as to the
validity, construction, enforcement and in all other respects by the internal
laws of the State of Colorado. To the extent any provision of this Agreement is
not enforceable under applicable law, such provision shall be deemed null and
void and shall have no effect on the remaining portions of this Agreement.

        10.2 EXPENSES AND CLOSING FEES.

        Whether or not the transactions contemplated hereunder are completed,
the Debtor shall pay all expenses of Lender relating to negotiating, preparing,
documenting, closing and enforcing this Agreement and relating to the making by
the Lender of any Advances hereunder to the Debtor (the "Loan Costs"),
including, but not limited to:

               (a) the cost of reproducing this Agreement, the Inventory Note,
        and the other Security Documents;

               (b) the fees and disbursements of the Lender's counsel (including
        in-house counsel) and Lender's special Colorado counsel;

               (c) the Lender's out-of-pocket expenses, including, without
        limitation, Lender's out-of-pocket expenses in connection with any
        audits in respect of the Debtor and/or the Collateral conducted by
        Lender prior to the date hereof (but excluding salaries of employees of
        the Lender);

                                       57
<PAGE>   63

               (d) all fees and expenses (including fees and expenses of the
        Lender's counsel and Lender's special Colorado counsel) relating to any
        amendments, waivers, consents or review of documents in connection with
        any subsequent closings pursuant to the provisions of this Agreement ;

               (e) all costs, outlays, attorneys' fees and expenses of every
        kind and character had or incurred in (i) the enforcement of any of the
        provisions of, or rights and remedies under, this Agreement, any
        assignment agreement, or any other Security Document and (ii) the
        preparation for, negotiations regarding, consultations concerning, or
        the defense of legal proceedings involving, any claim or claims made or
        threatened against the Lender arising out of this transaction or the
        protection of the Collateral securing the Obligations, expressly
        including, without limitation, the defense by the Lender of any legal
        proceedings instituted or threatened by any Person to seek to recover or
        set aside any payment or setoff theretofore received or applied by the
        Lender with respect to the Obligations; and

               (f) all taxes levied against or paid by the Lender (other than
        taxes on, or measured by, the income or profits of the Lender) and all
        filing and recording fees, costs and expenses which may be incurred by
        the Lender with respect to the filing or recording of any document or
        instrument relating to the transactions described in this Agreement.

        10.3 PARTIES, SUCCESSORS AND ASSIGNS.

        This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns (except that the
Debtor may not assign any of its rights hereunder), and all representations,
covenants, provisions and agreements by or on behalf of the Debtor which are
contained in this Agreement shall inure to the benefit of the successors and
assigns of the Lender. Except as provided in this Section 10.3, this Agreement
shall not create and shall not be construed as creating any rights enforceable
by, or benefits in favor of, any Person not a party hereto.

        10.4 NOTICES.

        All notices or demands by either party to the other relating to this
Agreement shall, except as otherwise provided herein, be in writing and sent by
certified or registered United States mail, first class postage prepaid and
return receipt requested, or by a nationally recognized overnight courier
service with all delivery fees prepaid. Notices shall be deemed received (a) on
the 3rd succeeding Business Day following deposit in the United States mail,
certified or registered and first class postage prepaid and return receipt
requested or (b) upon delivery if sent by nationally recognized overnight
courier with all delivery fees prepaid. Notices and demands shall be addressed,
if to the Debtor, at the mailing address set forth on Schedule 16 to this
Agreement or to such other address as the Debtor may from time to time specify
in writing or, if to the Lender, at the mailing address of the Lender set forth
on Schedule 17 hereto or to such other address as the Lender may from time to
time specify in writing to the Debtor.

        10.5 TOTAL AGREEMENT.

        This Agreement, including the Exhibits, the Schedules and the other
agreements referred to herein, is the entire agreement between the parties
hereto relating to the subject matter hereof, incorporates or rescinds all prior
agreements and understandings between the parties hereto relating to the subject
matter hereof, and may not be changed or terminated orally or by course of
conduct. This Agreement may be modified or changed only in a writing executed by
both the Lender and the Debtor. The failure or delay of the Lender to exercise
or enforce any rights, Liens, powers, remedies, conditions

                                       58
<PAGE>   64

or other terms hereunder or under any other agreement or instrument executed in
connection herewith shall not operate as a waiver of any such rights, Liens,
powers, remedies, conditions or other terms.

        10.6 SURVIVAL.

        All warranties, representations and covenants made by the Debtor herein
or in any certificate or other instrument delivered by it or on its behalf under
this Agreement shall be considered to have been relied upon by the Lender and
shall survive the delivery to the Lender of the Notes regardless of any
investigation made by the Lender or on its behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Debtor hereunder.

        10.7 LITIGATION.

        EACH OF THE DEBTOR AND THE LENDER HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY
BE COMMENCED ARISING OUT OF THIS AGREEMENT, THE NOTES, ANY OTHER SECURITY
DOCUMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER
CAUSE OR DISPUTE WHATSOEVER BETWEEN THE DEBTOR AND THE LENDER OF ANY KIND OR
NATURE.

        THE DEBTOR AND THE LENDER HEREBY AGREE THAT THE FOLLOWING COURTS:
        STATE COURT: COLORADO DISTRICT COURT FOR THE SECOND DISTRICT SITTING AT
DENVER; FEDERAL COURT: UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO
SITTING AT DENVER, OR, (TO THE EXTENT PERMITTED BY APPLICABLE COLORADO LAW) AT
THE OPTION OF THE LENDER, ANY OTHER COURT LOCATED IN THE STATE OF COLORADO IN
WHICH IT SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH SHALL HAVE
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL HAVE
NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE DEBTOR AND THE LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT
OR TO ANY MATTER ARISING HEREFROM. THE DEBTOR AND THE LENDER EXPRESSLY SUBMIT
AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED IN ANY SUCH COURT.

        THE STIPULATIONS OF THE DEBTOR AND THE LENDER IN THIS SECTION 10.7 SHALL
SURVIVE THE FINAL PAYMENT OF ALL OF THE OBLIGATIONS OF THE DEBTOR AND THE
RESULTING TERMINATION OF THIS AGREEMENT.

                                                               INITIALS____/____

                                       59
<PAGE>   65

        10.8 POWER OF ATTORNEY.

        The Debtor hereby makes, constitutes and appoints the Lender the true
and lawful agent and attorney-in-fact of the Debtor, with full power of
substitution, (a) to receive, open and dispose of all mail addressed to the
Debtor relating to the Pledged Notes Receivable or the Pledged Contracts related
thereto; (b) to open all such mail and remove therefrom any notes, checks,
acceptances, drafts, money orders or other instruments constituting Collateral,
with full power to endorse the name of the Debtor upon any such notes, checks,
acceptances, drafts, money orders, instruments or other documents, and to effect
the deposit and collection thereof (in accordance with the procedures
established therefor in the Agency Agreement), and the Lender shall have the
further right and power to endorse the name of the Debtor on any documents
relating to the Collateral; (c) to execute on behalf of the Debtor assignments,
notices of assignment, financing statements and other public records and notices
in respect of the Pledged Notes Receivable or the Pledged Contracts related
thereto; (d) to notify Makers of Pledged Notes Receivable to make all payments
thereunder directly to the Lender at an address to be designated by the Lender
and to execute and send other notices to Makers of such Pledged Notes Receivable
or the Pledged Contracts related thereto; and (e) to do any and all things
necessary or take action in the name and on behalf of the Debtor to carry out
the intent of this Agreement, including, without limitation, the grant of the
security interest provided herein and to perfect and protect the security
interest granted to the Lender with respect to the Collateral and the Lender's
rights created under this Agreement. The Debtor agrees that neither the Lender
nor any of its agents, designees or attorneys-in-fact will be liable for any
acts of commission or omission, or for any error of judgment or mistake of fact
or law with respect to the exercise of the power of attorney granted under this
Section 10.8 except for its own gross negligence or willful misconduct. The
power of attorney granted under this Section 10.8 is coupled with an interest
and shall be irrevocable during the term of this Agreement.

        10.9 SURVIVAL OF INDEMNITIES.

        All indemnities set forth in this Agreement shall survive the execution
and delivery of this Agreement and the execution and delivery of the Notes as
well as the payment in full of the Notes and the otherwise full performance of
this Agreement.

        10.10 CONFLICTING OBLIGATIONS; RIGHTS AND REMEDIES.

        To the extent that the terms of any of the Security Documents contain
conflicting obligations, the terms set forth in this Agreement shall be deemed
to be the controlling terms, provided that all rights and remedies of the Lender
under the Security Documents are cumulative and in addition to every other right
or remedy, and no right or remedy is intended to be exclusive of any other right
or remedy.

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<PAGE>   66

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

DEBTOR:                                     LENDER:

STEAMBOAT SUITES, INC.                      TEXTRON FINANCIAL CORPORATION

By:_________________________________        By:________________________________
   Title:  President                           Title: Assistant Vice President

[CORPORATE SEAL]

PREFERRED EQUITIES CORPORATION

By:_________________________________
   Title:  President

[CORPORATE SEAL]

                                       61
<PAGE>   67

STATE OF               )
                       )  ss.
COUNTY OF              )

        At in said County and State on this _____ day of December, 1999,
personally appeared _________________, duly authorized officer of Steamboat
Suites, Inc., and he/she acknowledged the foregoing instrument by him/her signed
and sealed to be his/her free act and deed and the free act and deed of
Steamboat Suites, Inc.

        Before me:
                             Notary Public in and for said State
                             My Commission expires:

STATE OF               )
                       )  ss.
COUNTY OF              )

        At in said County and State on this _______ day of December, 1999,
personally appeared , duly authorized officer of Preferred Equities Corporation,
and he/she acknowledged the foregoing instrument by him/her signed and sealed to
be his/her free act and deed and the free act and deed of Textron Financial
Corporation.

        Before me:
                             Notary Public in and for said State
                             My Commission expires:

                                       62

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