Document:

<PAGE>

                                                           Loan No. 95-227

THIS FIRST AMENDMENT AND RESTATEMENT OF AMENDED, RESTATED AND INCREASED
RECEIVABLES PROMISSORY NOTE NO. 1 AMENDS AND RESTATES IN ITS ENTIRETY THAT
CERTAIN AMENDED, RESTATED AND INCREASED RECEIVABLES PROMISSORY NOTE NO. 1 DATED
DECEMBER 22, 1999, IN THE ORIGINAL PRINCIPAL AMOUNT OF $30,000,000.00, THE
ORIGINAL OF WHICH IS ATTACHED HERETO.

                      FIRST AMENDMENT AND RESTATEMENT OF
                        AMENDED, RESTATED AND INCREASED
                       RECEIVABLES PROMISSORY NOTE NO. 1

$30,000,000.00                                        April 5, 2001

     THIS FIRST AMENDMENT AND RESTATEMENT OF AMENDED, RESTATED AND INCREASED
RECEIVABLES PROMISSORY NOTE NO. 1 amends and restates in its entirety the
following described promissory note as described in that certain Amended and
Restated Interval Receivables Loan and Security Agreement of even date herewith,
as amended, modified or supplemented from time to time in accordance with its
terms (the "Receivables Loan Agreement"), made by Preferred Equities
Corporation, a Nevada corporation, to Heller Financial, Inc.: that certain
Amended, Restated and Increased Receivables Promissory Note No. 1 dated December
22, 1999, in the principal amount of $30,000,000.00; (the "Original Note").
Pursuant to the Receivables Loan Agreement, Maker hereby executes and delivers
to Holder this First Amendment and Restatement of Amended, Restated and
Increased Receivables Promissory Note No. 1 which amends and restates the
Original Note, as follows:

1.   Promise to Pay.
     --------------

     FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Maker") whose address is 4310 Paradise Road, Las Vegas, Nevada 89109, promises
to pay to the order of HELLER FINANCIAL, INC., a Delaware corporation, and its
successors and assigns ("Holder"), in lawful money of the United States of
America and in immediately available funds, the aggregate unpaid principal
amount of all Advances made by Holder to Maker (the "Loan") pursuant to the
Receivables Loan Agreement. This is a revolving Note, the principal amount of
which may increase or decrease from time to time during the term hereof. This
Note shall evidence Advances made under the Receivables Loan Agreement,
notwithstanding that the total aggregate of principal advances and repayments
exceed the original maximum principal amount hereof, and notwithstanding that
the principal balance may be zero at any time. Payments shall be made to Holder
at 500 West Monroe Street, 15th Floor, Chicago, Illinois 60661 (or such other
address as Holder may hereafter designate in writing to Maker).

     The repayment of the Loan evidenced by this Note is secured by the
Receivables Loan Agreement pursuant to which Maker has assigned, pledged and
granted a security interest to Lender in certain receivables related to the sale
of Intervals and other collateral described therein.  This Note, the Receivables
Loan Agreement and any other documents evidencing or securing the Loan or
executed in connection therewith, and any modification, renewal or extension of
any of the foregoing are collectively called the "Receivables Loan Documents".
                                                  --------------------------

     This Note has been issued pursuant to the Receivables Loan Agreement, and
all of the terms, covenants and conditions of the Receivables Loan Agreement
(including all Exhibits thereto) and all other instruments evidencing or
securing the indebtedness hereunder are hereby made a part of this Note and
<PAGE>

are deemed incorporated herein in full. Defined terms used herein and not
otherwise defined shall have the meanings set forth in the Receivables Loan
Agreement.

2.   Principal and Interest
     ----------------------

     So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding and Maker shall pay
interest thereon at a rate equal to a floating rate per annum equal to four
percent (4.0%) plus the Base Rate (the aggregate rate referred to as the
"Interest Rate").  "Base Rate" shall mean the rate published each Business Day
in the Wall Street Journal for deposits maturing ninety (90) days after issuance
       -------------------
under the caption "Money Rates, London Interbank Offered Rates (Libor)."  The
Interest Rate for each calendar month shall be fixed based upon the Base Rate
published prior to and in effect on the first (1st) Business Day of such month.
Interest shall be calculated on a 360 day year and charged for the actual number
of days elapsed.

3.   Payment.
     -------

          This Note is subject to mandatory payments as provided in Section 1.4
of the Receivables Loan Agreement.

          Maker shall pay interest to Lender monthly, in arrears, on the first
day of each calendar month, commencing May 1, 2001, on the unpaid principal
amount of this Note outstanding during the previous calendar month at a
fluctuating interest rate per annum (computed daily on the basis of a year of
360 days and charged for the actual number of days elapsed) equal to the
Interest Rate; provided, however, that after the occurrence of an Event of
               --------  -------
Default under the Receivables Loan Agreement this Note shall bear interest at
the Default Rate set forth below.

     The Loan shall be due and payable on or before March 30, 2006, or any
earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date").

4.   Prepayment.
     ----------

          This Note is (i) subject to mandatory prepayments in whole or in part
as provided in Section 1.5(b) of the Receivables Loan Agreement; and (ii)
permitted optional prepayments in accordance with Section 1.5(a) of the
Receivables Loan Agreement, subject to applicable Prepayment Premiums.

          Not in limitation of any other mandatory prepayment requirements under
the Receivables Loan Agreement, if at any time the outstanding aggregate
principal balance under (i) this Note; (ii) that certain Amended, Restated and
Consolidated Acquisition Promissory Note No. 4 of even date herewith, between
Holder and Maker in the principal amount of $3,784,000 (the "Acquisition Note");
and (iii) that certain Second Amendment and Restatement of Amended, Restated and
Consolidated Revolving Renovation Promissory Note of even date herewith, between
Holder and Maker in the maximum principal amount of $2,500,000.00 (the
"Renovation Note") exceeds $30,000,000.00 or such lesser amount as set forth in
the Receivables Loan Agreement, such excess amount shall be due and payable by
Maker to Holder within five (5) Business Days after notice from Holder without
premium or penalty and such amount shall be applied by Holder to reduce the
outstanding principal balance of any of the above-referenced notes in any manner
or amount that Holder determines.

<PAGE>

5.   Default.
     -------

     A.   Events of Default.
          -----------------

     An "Event of Default" under this Note shall mean the occurrence of any
         ----------------
Event of Default under any of the Receivables Loan Documents, after giving
effect to any applicable grace or cure period.

     B.   Remedies.
          --------

     So long as an Event of Default remains outstanding: (a) interest shall
accrue at a rate equal to the Interest Rate plus four percent (4%) per annum
(the "Default Rate"); (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the Loan immediately due and payable;
and (c) Holder may pursue all rights and remedies available under the
Receivables Loan Agreement or any other Receivables Loan Documents. Holder's
rights, remedies and powers, as provided in this Note and the other Receivables
Loan Documents, are cumulative and concurrent, and may be pursued singly,
successively or together against Maker, any guarantor of the Loan, the security
described in the Receivables Loan Documents, and any other security given at any
time to secure the payment hereof, all at the sole discretion of Holder.
Additionally, Holder may resort to every other right or remedy available at law
or in equity without first exhausting the rights and remedies contained herein,
all in Holder's sole discretion. Failure of Holder, for any period of time or on
more than one occasion, to exercise its option to accelerate the Maturity Date
shall not constitute a waiver of the right to exercise the same at any time
during the continued existence of any Event of Default or any subsequent Event
of Default.

     If any attorney is engaged: (i) to collect the Loan or any sums due under
the Receivables Loan Documents, whether or not legal proceedings are thereafter
instituted by Holder; (ii) to represent Holder in any bankruptcy,
reorganization, receivership or other proceedings affecting creditors' rights
and involving a claim under this Note; (iii) to protect the liens and security
interests of the Receivables Loan Agreement or any of the Receivables Loan
Documents; (iv) to foreclose on the Collateral; (v) to represent Holder in any
other proceedings whatsoever in connection with the Receivables Loan Agreement
or any of the Receivables Loan Documents including post judgment proceedings to
enforce any judgment related to the Receivables Loan Documents; or (vi) in
connection with seeking an out-of-court workout or settlement of any of the
foregoing, then Maker shall pay to Holder all reasonable costs,  attorneys' fees
and expenses in connection therewith, in addition to all other amounts due
hereunder.

6.   Late Charge.
     -----------

     If payments of principal and/or interest, or any other amounts under the
other Receivables Loan Documents are not timely made or remain overdue for a
period of ten (10) days, Maker, without notice or demand by Holder, promptly
shall pay an amount ("Late Charge") equal to four percent (4%) of each
                      -----------
delinquent payment.

7.   Governing Law; Severability.
     ---------------------------

     This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois.  The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.

<PAGE>

8.   Waiver.
     ------

     Maker, for itself and all endorsers, guarantors and sureties of this Note,
and their heirs, successors, assigns and legal representatives, hereby waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note except as provided in the Receivables
Loan Agreement, and agrees that their respective liability shall be
unconditional and without regard to the liability of any other party and shall
not be in any manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by Holder. Maker, for itself and
all endorsers, guarantors and sureties of this Note, and their heirs, legal
representatives, successors and assigns, hereby consents to every extension of
time, renewal, waiver or modification that may be granted by Holder with respect
to the payment or other provisions of this Note, and to the release of any
makers, endorsers, guarantors or sureties, and of any collateral given to secure
the payment hereof, or any part hereof, with or without substitution, and agrees
that additional makers, endorsers, guarantors or sureties may become parties
hereto without notice to Maker or to any endorser, guarantor or surety and
without affecting the liability of any of them.

9.   Security, Application of Payments.
     ---------------------------------

     This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Receivables Loan Documents.  Payments will be applied to
any fees, expenses or other costs Maker is obligated to pay under this Note or
the other Receivables Loan Documents, to interest due on the Loan and to the
outstanding principal balance of the Loan, in any order that Holder, at its sole
option, may deem appropriate.

10.  Miscellaneous.
     -------------

     A.  Amendments.
         ----------

     This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder and Maker.

     B.  Lawful Rate of Interest.
         -----------------------

     In no event whatsoever shall the amount of interest paid or agreed to be
paid to Holder pursuant to this Note or any of the Receivables Loan Documents
exceed the highest lawful rate of interest permissible under applicable law.
If, from any circumstances whatsoever, fulfillment of any provision of this Note
and the other Receivables Loan Documents shall involve exceeding the lawful rate
of interest which a court of competent jurisdiction may deem applicable hereto
("Excess Interest"), then ipso facto, the obligation to be fulfilled shall be
  ---------------         ----------
reduced to the highest lawful rate of interest permissible under such law and
if, for any reason whatsoever, Holder shall receive, as interest, an amount
which would be deemed unlawful under such applicable law, such interest shall be
applied to the principal of the Loan (whether or not due and payable), and not
to the payment of interest, or refunded to Maker if the Loan has been paid in
full.  Neither Maker nor any guarantor or endorser shall have any action against
Holder for any damages whatsoever arising out of the payment or collection of
any such Excess Interest.

     C.  Captions.
         --------

     The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.

<PAGE>

     D.  Notices.
         -------

     Notices shall be given under this Note in conformity with the terms and
conditions of the Receivables Loan Agreement.

     E.  Joint and Several.
         -----------------

     The obligations of Maker under this Note shall be joint and several
obligations of Maker and of each Maker, if more than one, and of each Maker's
heirs, personal representatives, successors and assigns.

     F.  Time of Essence.
         ---------------

     Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.

11.  Venue.
     -----

     MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY
OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE SHALL BE
LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A
SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS. MAKER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN
SAID COUNTY AND STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES C T
CORPORATION SYSTEM, WHOSE ADDRESS IS MAKER, C/O C T CORPORATION SYSTEM, 208 S.
LASALLE STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED AGENT FOR
SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY
SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER PROVIDED A COPY OF SUCH
SERVICE OF PROCESS IS ALSO SENT WITHIN THREE (3) DAYS THEREAFTER TO MAKER EXCEPT
IN THE CASE OF SERVICE OF PROCESS FOR ACTIONS WHEREIN THE MAKER'S RESPONSE IS
DUE IN LESS THAN TWENTY (20) DAYS, A COPY OF SUCH PROCESS WILL BE SENT TO MAKER
ON THE SAME DAY AS SERVICE ON C T CORPORATION SYSTEM. IN THE EVENT SERVICE IS
UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN CHICAGO,
ILLINOIS, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST, APPOINT A
SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS BEHALF AND WITHIN SUCH PERIOD
NOTIFY HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY
APPOINTED, HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A
SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY HOLDER ON THE RECEIVABLES LOAN DOCUMENTS IN ACCORDANCE WITH THIS
PARAGRAPH.

12.  Sale of Loan.
     ------------

     Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note, the Receivables Loan
Agreement and the other Receivables Loan Documents, any guaranties given in
connection with the Loan and any collateral given to secure the Loan.  In the
event Holder sells, transfers, conveys or assigns all of Holder's right, title
and interest in this Note or the Loan, Holder shall give notice thereof to Maker
and Holder shall thereupon be released from liability and obligations of the
Lender

<PAGE>

hereunder and under all other transferred Loan Documents from and after the date
of such transfer provided such transferee agrees to be bound by the obligations
of Lender thereunder and provided such transferee is of equal or greater
financial capacity than Holder. Notice to Maker shall not be required for any
partial sale, transfer, assignment or conveyance of this Note.

13.  Jury Trial Waiver.
     -----------------

     MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY  WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED.  THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT.  MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND
HOLDER HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS.  MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED
(OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.

     IN WITNESS WHEREOF, Maker has executed this Note or has caused the same to
be executed by its duly authorized representatives as of the date first set
forth above.

                            MAKER:

                            Preferred Equities Corporation, a Nevada corporation

                            By:  /s/ Carol W. Sullivan
                               --------------------------

                            Print Name: Carol W. Sullivan
                                        -----------------
                            As Its: Sr. V.P
                                    ---------------------

<PAGE>

                                                                 Loan No. 95-227

THIS SECOND AMENDMENT AND RESTATEMENT OF AMENDED, RESTATED AND CONSOLIDATED
REVOLVING RENOVATION PROMISSORY NOTE AMENDS AND RESTATES THAT CERTAIN FIRST
AMENDMENT AND RESTATEMENT OF AMENDED, RESTATED AND CONSOLIDATED REVOLVING
RENOVATION PROMISSORY NOTE DATED FEBRUARY 1, 2000, IN THE PRINCIPAL AMOUNT OF
$2,500,000, THE ORIGINAL OF WHICH IS ATTACHED HERETO.  ALL DOCUMENTARY STAMP TAX
DUE ON THE ATTACHED FIRST AMENDMENT AND RESTATEMENT OF AMENDED, RESTATED AND
CONSOLIDATED REVOLVING RENOVATION PROMISSORY NOTE DATED FEBRUARY 1, 2000, IN THE
PRINCIPAL AMOUNT OF $2,500,000 HAS BEEN PAID AND AFFIXED TO THE ORIGINAL
MORTGAGE, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT DATED MARCH 29,
1996, AND RECORDED IN THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL
RECORDS BOOK 5038, PAGE 3903, AND THAT CERTAIN NOTICE OF FUTURE ADVANCE NO. 1
DATED DECEMBER 23, 1997, AND RECORDED IN THE PUBLIC RECORDS OF ORANGE COUNTY,
FLORIDA, AT OFFICIAL RECORDS BOOK 5395, PAGE 3490.  NO DOCUMENTARY STAMP TAX OR
INTANGIBLES TAX IS DUE ON THIS SECOND AMENDMENT AND RESTATEMENT OF AMENDED,
RESTATED AND CONSOLIDATED REVOLVING RENOVATION PROMISSORY NOTE.

                      SECOND AMENDMENT AND RESTATEMENT OF
                       AMENDED, RESTATED AND CONSOLIDATED
                      REVOLVING RENOVATION PROMISSORY NOTE

$2,500,000.00                                              April 5, 2001

     THIS SECOND AMENDMENT AND RESTATEMENT OF AMENDED, RESTATED AND CONSOLIDATED
REVOLVING RENOVATION PROMISSORY NOTE amends and restates in its entirety that
certain First Amendment and Restatement of Amended, Restated and Consolidated
Revolving Renovation Promissory Note dated February 1, 2000, in the principal
amount of $2,500,000 (the "Original Note").  Pursuant to that certain Amended
and Restated Acquisition and Construction Loan Agreement between Holder and
Maker of even date herewith, Maker hereby executes and delivers to Holder this
Second Amendment and Restatement of Amended, Restated and Consolidated Revolving
Renovation Promissory Note which amends and restates the Original Note, as
follows:

1.   Promise to Pay.
     --------------

     FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Maker") whose address is 4310 Paradise Road, Las Vegas, Nevada 89109, promises
to pay to the order of HELLER FINANCIAL, INC., a Delaware corporation, and its
successors and assigns ("Holder") the sum of Two Million Five Hundred Thousand
and No/100 Dollars ($2,500,000.00), together with all other amounts added
thereto pursuant to this Note (the "Loan") (or so much thereof as may from time
to time be outstanding), together with interest thereon as hereinafter set
forth, payable in lawful money of the United States of America.  Payments shall
be made to Holder at 500 West Monroe Street, Chicago, Illinois 60661 (or such
other address as Holder may hereafter designate in writing to Maker).

     The repayment of the Loan evidenced by this Note is secured by among other
things (i) that certain Mortgage, Assignment of Rents and Leases and Security
Agreement (the "Mortgage") dated
<PAGE>

March 29, 1996 recorded in the Public Records of Orange County at Official
Records Book 5038, Page 3903, encumbering, among other things, the property
        --------------------
commonly described as Ramada Vacation Suites, located in Orange County, Florida
(the "Property"), and (ii) that certain Interval Receivables Loan and Security
Agreement dated March 28, 1996 (the "Receivables Security Agreement") pursuant
to which Maker has assigned, pledged and granted a security interest to Lender
in certain receivables related to the sale of Interval Units and other
Collateral described therein. This Note, the Amended, Restated and Consolidated
Acquisition Promissory Note No. 4 of even date herewith (the "Acquisition
Note"), the Mortgage, the Amended and Restated Acquisition and Construction Loan
Agreement of even date herewith, as subsequently amended (the "Loan Agreement"),
and any other documents evidencing or securing the Loan or executed in
connection therewith, and any amendment, modification, consolidation,
notification under, renewal or extension of any of the foregoing are
collectively called the "Loan Documents."

     This Note merely amends and restates the Original Note and does not
evidence any additional indebtedness.

     This Note has been issued pursuant to the Loan Agreement, and all of the
terms, covenants and conditions of the Loan Agreement (including all Exhibits
thereto) and all other instruments evidencing or securing the indebtedness
hereunder are hereby made a part of this Note and are deemed incorporated herein
in full.  Defined terms used herein and not otherwise defined shall have the
meanings set forth in the Loan Agreement.

2.   Principal and Interest.
     ----------------------

     So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding, and Maker shall pay
interest thereon at a floating rate of interest per annum equal to four and one-
quarter percent (4.25%) plus the Base Rate (the aggregate rate referred to as
the "Interest Rate"). "Base Rate" shall mean the rate published each business
day in the Wall Street Journal for deposits maturing ninety (90) days after
           -------------------
issuance under the caption "Money Rates, London Interbank Offered Rates
(Libor)". The Interest Rate for each calendar month shall be fixed based upon
the Base Rate published prior to and in effect on the first (1st) business day
of such month.  Interest shall be calculated based on a 360 day year and charged
for the actual number of days elapsed.

     Maker shall be entitled to Advances (as defined in the Loan Agreement)
under this Note in the combined maximum aggregate amount of $5,961,000.00 during
the period ending on April 30, 2002; provided, however, at no time shall the
outstanding combined principal balance under this Note exceed $2,500,000.00.
If, at any time, the outstanding balance hereunder exceeds $2,500,000.00, Maker
shall pay such excess amount to Holder within five (5) business days after
notice from Holder.

3.   Payment.
     -------

     Commencing on December 1, 1997, Maker shall pay interest computed at the
Interest Rate monthly in arrears on the first day of each month.

     Concurrently with Maker's sale of any Interval Unit (as defined in the Loan
Agreement), Maker shall pay to Holder the Interval Release Payment (as defined
in the Loan Agreement) with respect to such Interval Unit.  The portion of the
Interval Release Payment designated as set forth in the Loan Agreement to be
applied to the Renovation Commitment shall be applied first to accrued but
unpaid interest which is past due under this Note, if any, and then to the
outstanding principal balance of this Note.  The balance of the Interval Release
Payment shall be applied as set forth in the Acquisition Note.
<PAGE>

     The outstanding principal balance of the Note together with all accrued
interest shall be due and payable on or before April 30, 2003, or any earlier
date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date").  This Note is subject to
mandatory payments in whole or in part as provided in Section 3.1 of the Loan
Agreement.

4.   Prepayment.
     -----------

     Maker may prepay this Note in full or in part upon not less than three (3)
days prior written notice to Holder.

          Not in limitation of any mandatory prepayment requirements under the
Loan Agreement, if, at any time, the outstanding aggregate principal balance
under (i) this Note; (ii) the Acquisition Note; and (iii) that certain First
Amendment and Restatement of Amended, Restated and Increased Receivables
Promissory Note No. 1 of even date herewith between Holder and Maker in the
maximum principal amount of $30,000,000.00 (the "Receivables Note") exceeds the
aggregate amount of $30,000,000.00, such excess amount shall be due and payable
by Maker to Holder within five (5) business days after notice from Holder
without premium or penalty and such amount shall be applied by Holder to reduce
the outstanding principal of any of the referenced notes in any manner or amount
that Holder determines.

5.   Default.
     -------

     5.1  Events of Default.
          -----------------

     Events of Default hereunder shall be those set forth in the Loan Agreement.

     5.2  Remedies.
          --------

     So long as an Event of Default remains outstanding: (a) interest shall
accrue at a rate equal to the Interest Rate plus four percent (4%) per annum
(the "Default Rate"); (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the Loan immediately due and payable;
and (c) Holder may pursue all rights and remedies available under the Mortgage
or any other Loan Documents.  Holder's rights, remedies and powers, as provided
in this Note and the other Loan Documents, are cumulative and concurrent, and
may be pursued singly, successively or together against Maker, any guarantor of
the Loan, the security described in the Loan Documents, and any other security
given at any time to secure the payment hereof, all at the sole discretion of
Holder.  Additionally, Holder may pursue every other right or remedy available
at law or in equity without first exhausting the rights and remedies contained
herein, all in Holder's sole discretion.  Failure of Holder, for any period of
time or on more than one occasion, to exercise its option to accelerate the
Maturity Date shall not constitute a waiver of the right to exercise the same at
any time during the continued existence of any Event of Default or any
subsequent Event of Default.

     If any attorney is engaged: (i) to collect the Loan or any sums due under
the Loan Documents, whether or not legal proceedings are thereafter instituted
by Holder; (ii) to represent Holder in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving a
claim under this Note; (iii) to protect the liens of the Mortgage or any of the
Loan Documents; (iv) to foreclose the Mortgage or enforce any security interests
under the Loan Documents; (v) to represent Holder in any other proceedings
whatsoever in connection with the Mortgage or any of the Loan Documents
including post judgment proceedings to enforce any judgment related to the Loan
Documents; or (vi) in connection with seeking an out-of-court workout or
settlement of any of the foregoing, then Maker shall pay to Holder all
reasonable costs, attorneys' fees and expenses in connection therewith, in
addition to all other amounts due hereunder.
<PAGE>

6.   Late Charge.
     -----------

     If payments of principal and/or interest, or any other amounts under the
other Loan Documents are not timely made or remain overdue for a period of ten
(10) days, Maker, without notice or demand by Holder, promptly shall pay an
amount ("Late Charge") equal to four percent (4%) of each delinquent payment.

7.   Governing Law: Severability.
     ---------------------------

     This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois.  The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.

8.   Waiver.
     ------

     Maker, for itself and all endorsers, guarantors and sureties of this Note,
and their heirs, successors, assigns, and legal representatives, hereby waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note except as
provided in the Loan Agreement, and all other notices in connection with the
delivery, acceptance, performance, default or enforcement of the payment of this
Note, and agrees that their respective liability shall be unconditional and
without regard to the liability of any other party and shall not be in any
manner affected by any indulgence, extension of time, renewal, waiver or
modification granted or consented to by Holder.  Maker, for itself and all
endorsers, guarantors and sureties of this Note, and their heirs, legal
representatives, successors and assigns, hereby consents to every extension of
time, renewal, waiver or modification that may be granted by Holder regarding
obligations of guarantors, endorsers or sureties with respect to the payment of
other provisions of this Note, and to the release of any makers, endorsers,
guarantors or sureties, and of any collateral given to secure the payment
hereof, or any part hereof, with or without substitution, and agrees that
additional makers, endorsers, guarantors or sureties may become parties hereto
without notice to Maker or to any endorser, guarantor or surety and without
affecting the liability of any of them.

9.   Security, Application of Payments.
     ---------------------------------

     This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Loan Documents and the terms and provisions of the other
Loan Documents are hereby incorporated herein.  Payment will be applied, at
Holder's option, first to any fees, expenses or other costs Maker is obligated
to pay under this Note or the other Loan Documents, second to interest due on
the Loan and third to the outstanding principal balance of the Loan.

10.  Miscellaneous.
     -------------

     10.1  Amendments.
           ----------

     This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder and Maker.

     10.2  Lawful Rate of Interest.
           -----------------------

     In no event whatsoever shall the amount of interest paid or agreed to be
paid to Holder pursuant to this Note or any of the Loan Documents exceed the
highest lawful rate of interest permissible under
<PAGE>

applicable law. If, from any circumstances whatsoever, fulfillment of any
provision of this Note and the other Loan Documents shall involve exceeding the
lawful rate of interest which a court of competent jurisdiction may deem
applicable hereto ("Excess Interest"), then ipso facto, the obligation to be
                                            ---- -----
fulfilled shall be reduced to the highest lawful rate of interest permissible
under such law and if, for any reason whatsoever, Holder shall receive, as
interest, an amount which would be deemed unlawful under such applicable law,
such interest shall be applied to the principal of the Loan (whether or not due
and payable), and not to the payment of interest, or refunded to Maker if such
Loan has been paid in full. Neither Maker nor any guarantor or endorser shall
have any action against Holder for any damages whatsoever arising out of the
payment or collection of any such Excess Interest.

     10.3  Captions.
           --------

     The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.

     10.4  Notices.
           -------

     Notices shall be given under this Note in conformity with the terms and
conditions of the Loan Agreement.

     10.5  Joint and Several.
           -----------------

     The obligations of Maker under this Note shall be joint and several
obligations of Maker and of each Maker, if more than one, and of each Maker's
heirs, personal representatives, successors and assigns.

     10.6  Time of Essence.
           ---------------

     Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.

11.  Sale of Loan.
     ------------

     Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note, the Mortgage, the Loan
Agreement and the other Loan Documents, any guaranties given in connection with
the Loan and any collateral given to secure the Loan.  In the event Holder
sells, transfers, conveys or assigns all of Holder's right, title and interest
in this Note or the Loan, Holder shall give notice thereof to Maker and Holder
shall thereupon be released from liability and obligations of the Lender
hereunder and under all other transferred Loan Documents from and after the date
of such transfer provided such transferee agrees to be bound by the obligations
of Lender thereunder and provided such transferee is of equal or greater
financial capacity than Holder.

12.  Venue.
     -----

     MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY
OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE SHALL BE
LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A
SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS.  MAKER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN
SAID COUNTY AND STATE.  MAKER HEREBY
<PAGE>

IRREVOCABLY APPOINTS AND DESIGNATES C T CORPORATION SYSTEM, WHOSE ADDRESS IS
MAKER, C/O C T CORPORATION SYSTEM, 208 S. LASALLE STREET, CHICAGO, ILLINOIS
60604, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT
SERVICE OF SUCH PROCESS UPON SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF
PROCESS UPON MAKER PROVIDED A COPY OF SUCH SERVICE OF PROCESS IS ALSO SENT
WITHIN THREE (3) DAYS THEREAFTER TO MAKER IN ACCORDANCE WITH THE NOTICE
PROVISIONS OF THE LOAN AGREEMENT PROVIDED, HOWEVER, IN THE CASE OF SERVICE OF
PROCESS FOR ACTIONS WHEREIN MAKER'S RESPONSE IS DUE IN LESS THAN TWENTY (20)
DAYS, A COPY OF SUCH PROCESS WILL BE SENT TO MAKER ON THE SAME DAY AS SERVICE ON
C T CORPORATION SYSTEM. IN THE EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT
MOVES OR CEASES TO DO BUSINESS IN CHICAGO, ILLINOIS, MAKER SHALL, WITHIN TEN
(10) DAYS AFTER HOLDER'S REQUEST, APPOINT A SUBSTITUTE AGENT (IN CHICAGO,
ILLINOIS) ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY HOLDER OF SUCH
APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, HOLDER SHALL, IN
ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE
(5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER
OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY HOLDER ON THE LOAN
DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH.

13.  Jury Trial Waiver.
     -----------------

     MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED.  THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT.  MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND
HOLDER HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS.  MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED
(OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
<PAGE>

     IN WITNESS WHEREOF, Maker has executed this Note or has caused the same to
be executed by its duly authorized representatives as of the date set first
forth above.

                                   MAKER:

                                   PREFERRED EQUITIES CORPORATION, a Nevada
                                   corporation

                                   By:  /s/ Carol W. Sullivan
                                        ----------------------------------
                                            Carol W. Sullivan
                                        ----------------------------------

                                   Its:  SR. V.P
                                        ----------------------------------
<PAGE>

                             AMENDED AND RESTATED
                         ACQUISITION AND CONSTRUCTION
                                LOAN AGREEMENT

                   Between Heller Financial, Inc., as Lender

                                      and

                  Preferred Equities Corporation, as Borrower

                                April 6, 2001
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                            <C>
SECTION 1 ADVANCES OF THE LOAN................................................................................ 1
     1.1     Commitment of Lender; Advances................................................................... 1
             a.     Acquisition Loan.......................................................................... 1
             b.     Renovation Loan........................................................................... 1
     1.2     Maximum Renovation Loan Balance.................................................................. 2
     1.3     Interest......................................................................................... 2
     1.4     Term of Loan..................................................................................... 2
     1.5     Conditions Precedent to Advances................................................................. 2
             a.     Deliveries................................................................................ 2
             b.     Loan Documents............................................................................ 3
             c.     No Default................................................................................ 3
             d.     Representations and Warranties............................................................ 3
             e.     Title Insurance........................................................................... 3
             f.     Costs, Expenses and Fees.................................................................. 3
     1.6     Final Advance.................................................................................... 3
             a.     Completion Certificate.................................................................... 3
             b.     Compliance................................................................................ 4
             c.     No Liens.................................................................................. 4
             d.     Lien Waivers.............................................................................. 4
             e.     Survey.................................................................................... 4
     1.7     Changes in Plans and Specifications, Approved Budget or Approved Construction Schedule........... 4
     1.8     No Waiver........................................................................................ 5

SECTION 2 REPRESENTATIONS AND WARRANTIES OF BORROWER.......................................................... 5
     2.1     Borrower Existence............................................................................... 5
     2.2     Guarantor........................................................................................ 5
     2.3     Financial Statements............................................................................. 5
     2.4     Suits, Actions................................................................................... 5
     2.5     Valid and Binding Obligation, No Breach or Default............................................... 5
     2.6     Title to the Property............................................................................ 5
     2.7     Disclosure....................................................................................... 6
     2.8     System Compliance................................................................................ 6
     2.9     Submittals....................................................................................... 6
     2.10    Utility Availability............................................................................. 6
     2.11    Governmental Requirements........................................................................ 6
     2.12    Property Access.................................................................................. 6
     2.13    Flood Hazards/Wetlands........................................................................... 7
     2.14    Contracts with Affiliates........................................................................ 7
     2.15    Inducement to Lender............................................................................. 7

SECTION 3 COVENANTS AND AGREEMENTS OF BORROWER................................................................ 7
     3.1     Mandatory Principal Payments..................................................................... 7
     3.2     Compliance With Governmental Requirements, Notice of Governmental Authority, [Escrow]............ 7
     3.3     Construction of the Improvements................................................................. 8
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                           <C>
3.4 Correction of Defects....................................................................................  8
3.5 Storage of Materials.....................................................................................  8
3.6 Inspection of the Property and Books and Records.........................................................  8
3.7 Casualty, Condemnation...................................................................................  8
3.8 Application of Advances..................................................................................  9
3.9 Borrower's Deposit....................................................................................... 10
3.10 Direct Disbursement and Application by Lender........................................................... 10
3.11 Costs and Expenses...................................................................................... 10
3.12 Additional Documents.................................................................................... 10
3.13 No Liability of Lender.................................................................................. 10
3.14 No Conditional Sale Contracts, Etc...................................................................... 10
3.15 Defense of Actions...................................................................................... 11
3.16 Prohibition on Transfer of Property or Assignment of Borrower's Interest,
     Change in Management.................................................................................... 11
3.17 Payment of Charges...................................................................................... 11
3.18 Restrictions and Annexation............................................................................. 11
3.19 Current Financial Reports............................................................................... 11
3.20 Tax Receipts............................................................................................ 12
3.21 Notice of Litigation, Claims, and Financial Change...................................................... 12
3.22 No Occupancy Contrary to Builder's Risk Policy.......................................................... 13
3.23 Hold Harmless........................................................................................... 13
3.24 Cross Default, Cross Collateralization.................................................................. 13
3.25 Modifications to Resort Documents....................................................................... 13
3.26 Subordinated Obligations................................................................................ 13
3.27 Approved POS............................................................................................ 13

SECTION 4 RIGHTS AND REMEDIES OF LENDER...................................................................... 14
4.1 Rights of Lender......................................................................................... 14
4.2 Appointment of Lender as Attorney-in-Fact................................................................ 14
4.3 Funds of Lender.......................................................................................... 14
4.4 No Waiver or Exhaustion.................................................................................. 14
4.5 Marshalling Waiver....................................................................................... 14

SECTION 5 MISCELLANEOUS...................................................................................... 14
5.1 Notices.................................................................................................. 15
5.2 Entire Agreement and Modifications....................................................................... 16
5.3 Severability............................................................................................. 16
5.4 Election of Remedies..................................................................................... 16
5.5 Form and Substance....................................................................................... 16
5.6 Limitation on Interest................................................................................... 16
5.7 No Third Party Beneficiary............................................................................... 16
5.8 Borrower in Control...................................................................................... 17
5.9 Number and Gender........................................................................................ 17
5.10 Captions................................................................................................ 17
5.11 Applicable Law.......................................................................................... 17
5.12 Venue................................................................................................... 17
5.13 Jury Trial Waiver....................................................................................... 17
</TABLE>
<PAGE>

<TABLE>
     <S>                                                           <C>
     5.14    Attorneys' Fees....................................   17
     5.15    Commitment Fee.....................................   18
     5.16    Counterparts.......................................   18
</TABLE>

APPENDIX:   Defined Terms

EXHIBITS:
A.  Application for Advance
B.  Approved Budget
C.  Approved Construction Schedule
D.  Approved Timeshare Document Filing Schedule
E.  Form Assignment of Construction Contract
F.  Permitted Exceptions
G.  Property Description
H.  Litigation Disclosure
I.  Approved Transaction
J.  Subordinated Obligations
<PAGE>

                             AMENDED AND RESTATED
                             --------------------
                  ACQUISITION AND CONSTRUCTION LOAN AGREEMENT
                  -------------------------------------------

     THIS AMENDED AND RESTATED ACQUISITION AND CONSTRUCTION LOAN AGREEMENT,
dated _____________________, 2001, is made by and between HELLER FINANCIAL,
INC., a Delaware corporation ("Lender"), and PREFERRED EQUITIES CORP., a Nevada
corporation ("Borrower"), in respect of an acquisition loan and renovation loan
as set forth herein.  All capitalized terms used herein shall have the meanings
ascribed thereto in the Appendix attached hereto and made a part hereof by this
reference.

                                   RECITALS
                                   --------

     A.    This Agreement combines, amends and restates in its entirety that
certain Acquisition and Construction Loan Agreement dated as of March 27, 1996,
as amended by that certain Amendment to Acquisition and Construction Loan
Agreement dated December 23, 1997, that certain Second Amendment to Acquisition
and Construction Loan Agreement dated July 7, 1998, that certain Third Amendment
to Acquisition and Construction Loan Agreement dated December 22, 1999 and that
certain Fourth Amendment to Acquisition and Construction Loan Agreement dated
September 7, 2000, each of which were made by and between Borrower and Lender.

     B.    The current outstanding principal balance of the Acquisition Note is
$1,222,000.00 and the current outstanding principal balance of the Renovation
Note is $240,386.75.

     C.    Borrower desires Lender to extend a secured credit facility to
Borrower in accordance with the terms of this Agreement.

     D.    Borrower's obligations under the Loan Documents are secured inter
alia by the Mortgage.

     E.    Mego Financial Corp., a New York corporation ("Guarantor") shall
guaranty all of the obligations of Borrower to Lender under the Loan Documents.

     F.    All capitalized terms used herein shall have the meanings ascribed
thereto in the Appendix attached hereto and made a part hereof by this
reference.

     NOW, THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants herein contained, Borrower and Lender
hereby agree as follows:

                        SECTION 1 ADVANCES OF THE LOAN

1.1  Commitment of Lender; Advances.

a.   Acquisition Loan.
           Provided the conditions precedent to an Advance have been satisfied,
that there exists no Default or Event of Default, and that the aggregate
outstanding balance due Lender under the Acquisition Loan, the Renovation Loan
and the Interval Receivables Loan shall not exceed $30,000,000.00, Lender shall
advance the undisbursed portion of the Acquisition Loan to Borrower
<PAGE>

concurrently with the recording of that certain Mortgage Modification and
Spreader Agreement No. 2 between Borrower and Lender, dated as of ____________,
2001.

b.   Renovation Loan.
          Provided the conditions precedent to an Advance have been satisfied
and there exists no Default or Event of Default, and further provided that the
outstanding balance of the Renovation Loan shall not exceed the maximum amount
set forth in Section 1.2 below, Lender will make Advances to Borrower in the
aggregate maximum amount of the Renovation Loan as follows:

                (i)   Advance Request Procedures.

From time to time, Borrower shall submit an Application for an Advance to Lender
requesting an Advance under the Renovation Loan for the reimbursement of payment
of costs of labor, materials, and services supplied for the construction of the
Improvements or for the payment of other costs and expenses incident to the
Loan, or the construction of the Improvements, as specified in the Approved
Budget. Borrower shall not submit Applications for an Advance more than two
times per month nor more frequently than once per week, and each Application for
Advance shall be for an amount not less than One Hundred Thousand Dollars and
No/100 ($100,000.00). Each Advance shall be issued by Lender within ten (10)
days of Lender's receipt of Borrower's Application for Advance, provided
Borrower is in compliance with conditions to such Advance set forth herein. In
addition to the conditions set forth below, Lender's obligation to make Advances
shall be subject to the receipt by Lender, on a monthly basis, of reports from
Lender's Inspecting Architects/Engineers certifying that the Improvements are on
schedule under the Approved Completion Schedule(s) and are in compliance with
the Approved Budget and the Plans, as applicable.

                (ii)  Limitations on Advances.

Advances shall be limited to the amounts shown in corresponding line items in
the Approved Budget and shall not exceed the aggregate of (A) 100% of (1) the
costs of labor, materials, and services incorporated in to the Improvements in a
manner acceptable to Lender, plus (2) the purchase price of all uninstalled
materials to be utilized in the construction of the Improvements and to be
stored on the Property, less (B) all prior Advances for payment of costs of
labor, materials, and services for the construction of the Improvements. Lender
shall not be obligated to make an Advance if at any time or pursuant to the
making of such Advance, 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) or if the combined outstanding balance of the
Acquisition Note and the Renovation Note would exceed eighty-five percent (85%)
of the actual cost of all land and improvements subject to the lien of the
Mortgage. The Advances under the Renovation Loan shall be drawn by Borrower
within twelve (12) months of the date hereof.

1.2  Maximum Renovation Loan Balance.
     Notwithstanding anything to the contrary contained in this Loan Agreement
or the Loan Documents, the outstanding principal balance of the Renovation Note
(including all Advances) shall never exceed Two Million Five Hundred Thousand
Dollars and No/100 ($2,500,000.00).

1.3  Interest.
     Interest on the Loan, initially at the Interest Rate and subsequently at
the rate or rates specified in the Acquisition Note and Renovation Note
respectively, shall be computed on the unpaid principal balance which exists
from time to time and shall be computed with respect to each Advance only from
the date of such Advance. Such interest on the Loan shall be paid by Borrower to
Lender on a monthly basis as provided in the applicable note. As a courtesy,
Lender's practice is to send out monthly billing
<PAGE>

statements on or about the twentieth (20th) day of the month prior to the month
in which such payment is due; however, the failure of Lender to send out such a
billing statement shall not relieve Borrower of its obligation to pay interest
in accordance with the applicable notes.

1.4  Term of Loan.
     The Acquisition Loan and Renovation Loan, together with all interest
thereon and all other sums due and owing Lender hereunder or under any of the
Loan Documents, shall be due and payable on the Maturity Date.

1.5  Conditions Precedent to Advances.
     As a condition precedent to each Advance hereunder, Borrower shall satisfy
or deliver evidence of the satisfaction of the following requirements:

a.   Deliveries.
          Borrower will procure and deliver to Lender:

               (i)    An Application for Advance;

               (ii)   An Affidavit of Borrower;

               (iii)  Releases or waivers of mechanics' liens from any
independent third parties providing labor, materials or supplies for
construction of the Improvements;

               (iv)   Copies of checks, paid bills or invoices and purchase
orders for all items in excess of One Thousand Dollars and No/100 ($1,000.00)
showing payment to all such third parties who have furnished materials or
services or performed labor of any kind in connection with the construction of
any of the Improvements covered by the Application for Advance;

               (v)    General ledger detail reports with respect to such
Application for Advance;

               (vi)   Copies of all building and other construction or
development permits ("Permit(s)") and approvals issued through the date of such
Advance; provided, however, that Lender may at its sole discretion elect to
approve Borrower's initial Application for Advance hereunder prior to the
delivery of final Permits to Lender, in which event (a) Borrower shall submit to
Lender Borrower's Permit application together with all Plans and evidence that
the Permit application has been properly filed with the appropriate governmental
authorities, (b) no further Advances shall be made hereunder until receipt of
final, approved Permits has occurred and (c) if final, approved Permits are in
any event not received within thirty (30) days after such initial Advance, such
occurrence shall constitute an Event of Default hereunder;

               (vii)  With respect to any Improvements which have been completed
as required under the Approved Construction Schedule, evidence that all
Governmental Requirements have been satisfied, including, but not limited to,
delivery of certificates of occupancy (or its equivalent) permitting the
Improvements to be legally occupied;

               (viii) Prior to the first Advance for construction of any
Improvement, a fully executed copy of the Assignment of Construction Contract
and a Payment and Completion Bond for construction of the Improvements;

b.   Loan Documents.
<PAGE>

          Borrower shall execute and deliver to, procure for and deposit with,
and, if appropriate, record in the proper records with all filing and recording
fees paid, the Loan Documents and such other documents, instruments, and
certificates as Lender or Title Company may require.

c.   No Default.
          There shall then exist no Default or Event of Default.

d.   Representations and Warranties.
          The representations and warranties made in this Loan Agreement shall
be true and correct in all material respects on and as of the date of each
Advance, with the same effect as if made on that date. Borrower shall inform
Lender of any changes or revisions to the representations and warranties set
forth herein by disclosing such facts in the Affidavit of Borrower.  If any such
changes or revisions are determined by Lender in its sole discretion to be
materially adverse, Lender may refuse to make the requested Advance.

e.   Title Insurance.
          The Title Insurance shall be endorsed and extended to the date of such
Advance to cover each Advance with no additional title exception objectionable
to Lender.

f.   Costs, Expenses and Fees.
          Borrower shall have paid all costs, expenses and fees then due in
accordance with the terms of this Loan Agreement and all of the other Loan
Documents.

1.6  Final Advance.
     As a condition precedent to the final Advance, in addition to all other
requirements herein, completion of all Improvements shall have occurred and
Borrower must deliver the following items to Lender:

a.   Completion Certificate.
           A completion certificate from the Inspecting Architects/ Engineers.

b.   Compliance.
          Evidence that all Governmental Requirements have been satisfied,
including but not limited to, delivery to Lender of (i) a certificate of
occupancy (or its equivalent) if issued by local Governmental Authorities,
permitting the Improvements to be legally occupied, and (ii) evidence that all
Improvements are in compliance with the accessibility requirements of the
federal Fair Housing Act and the state and federal Americans with Disabilities
Act.

c.   No Liens.
           Evidence that no mechanic's or materialman's lien or other
encumbrance remains in effect against the Property.

d.   Lien Waivers.
          Final lien releases or waivers by the Architect, Contractor, and all
subcontractors, materialmen, and other independent third parties who have
supplied labor, materials, or services for the construction of the Improvements,
or who otherwise might be entitled to claim a contractual, statutory, or
constitutional lien against the Property, subject to retainage.
<PAGE>

e.   Survey.
          A survey of all Improvements showing no encroachment off the Resort
or on any easement.

1.7  Changes in Plans and Specifications, Approved Budget or Approved
Construction Schedule.

          Without the prior written approval of Lender there shall be no change
in the Plans, the Approved Budget, the Approved Construction Schedule, or any of
the work or materials for the Improvements which would (a) cause any line item
or category of the cost breakdown (or any detailed cost breakdown) to increase
or decrease in cost exceeding Fifty Thousand Dollars and No/100 ($50,000.00); or
(b) together with costs associated with prior changes in the Plans, the Approved
Budget, the Approved Construction Schedule, or any of the work or materials for
the Improvements, result in an increase in the total costs of such changes over
One Hundred Thousand Dollars and No/100 ($100,000.00); or (c) regardless of
cost, constitute a material change in structure, design, function, or exterior
appearance of any of the Improvements; or (d) cause the estimated time to
complete the Improvements to extend beyond the Improvements Completion Date as
set forth in the Approved Construction Schedule; or (e) reduce the value of
Lender's security; or (f) extend the final Improvements Completion Date or any
interim Improvements Completion Date by more than thirty (30) days.  Requested
changes shall be submitted to Lender for approval on a form acceptable to Lender
accompanied by a copy of the plans and specifications or a revised budget
applicable to the changes.  Lender shall review and approve or disapprove any
such change request within ten (10) days of receipt of such written request from
Borrower.  As a condition to any such approval, Lender may require, in its sole
discretion, confirmation satisfactory to Lender of the cost increase, if any,
which would result from performance of the work contemplated under such change.
If it appears that performance of such work shall result in such an increase,
Lender may, in its sole discretion, condition its approval upon a Borrower's
Deposit of the amount of such increase or other evidence satisfactory to Lender
in its discretion that Borrower has the funds necessary to provide for such cost
increase.

1.8  No Waiver.

     No Advance shall constitute a waiver of any condition precedent to the
obligation of Lender to make any further Advance or preclude Lender from
thereafter declaring the failure of Borrower to satisfy such condition precedent
to be an Event of Default.

             SECTION 2 REPRESENTATIONS AND WARRANTIES OF BORROWER

     Borrower hereby represents and warrants as follows:

2.1  Borrower Existence.
     Borrower is a corporation, duly formed, validly existing and in good
standing under the laws of the State of Nevada and qualified to do business in
the State of Florida with its principal place of business and chief executive
offices at its address set forth above.

2.2  Guarantor.
     Guarantor is a corporation duly formed, validly existing and in good
standing under the laws of the State of New York with its principal place of
business and chief executive offices at 4310 Paradise Road, Las Vegas, Nevada.

2.3  Financial Statements.
     The Financial Statements are true, correct, and complete in all material
respects as of the dates specified therein and the balance sheets, profit and
loss statements and statements of cash flow fairly
<PAGE>

present the financial condition of Borrower and, if required, of Guarantor as of
the dates specified. No material adverse change has occurred in the financial
condition of Borrower or Guarantor since the dates of the Financial Statements.

2.4  Suits, Actions.
      Other than as disclosed on Exhibit "H" hereto, there are no actions,
                                 ----------
suits, or proceedings pending or, to the knowledge of Borrower, threatened, in
any court or before or by any Governmental Authority against or affecting
Borrower, Guarantor, or the Property, which, if adversely determined, would have
a material adverse effect on the Property or impair the ability of Borrower or
Guarantor to complete its obligation under the Loan Documents or which involve
the validity, enforceability, or priority of any of the Loan Documents, at law
or in equity.

2.5  Valid and Binding Obligation, No Breach or Default.
     All of the Loan Documents, and all other documents referred to herein to
which Borrower or Guarantor is a party, upon execution and delivery will
constitute valid and binding obligations of Borrower and Guarantor, enforceable
in accordance with their terms except as limited by Debtor Relief Laws.  The
consummation of the transactions contemplated hereby, and the performance of any
of the terms and conditions hereof and of the other Loan Documents, will not
result in a breach of, or constitute a default in Borrower's or Guarantor's
organizational documents or in any mortgage, deed of trust, lease, promissory
note, loan agreement, credit agreement, partnership agreement, or other
agreement to which Borrower or Guarantor is a party or by which Borrower or
Guarantor may be bound or affected.  To the best of their knowledge, neither
Borrower nor Guarantor is in default of any order of any court or any
requirement of any Governmental Authority.

2.6  Title to the Property.
     Borrower holds (or upon acquisition of the Second Additional Property will
hold) full legal and equitable title to the Property, subject only to the
Permitted Exceptions and the sale of Interval Units in conformance with the
terms of this Agreement.

2.7  Disclosure.
     There is no fact of which Borrower is aware that Borrower has not disclosed
to Lender in writing that could materially adversely affect the property,
business or financial condition of Borrower, Guarantor or the Property. Borrower
has furnished Lender with a true and complete copy of all documents relating to
construction of the Improvements.

2.8  System Compliance.
     The storm and sanitary sewer system, water system, all mechanical systems
of the Property and other parts of the Improvements do (or when constructed
will) comply with all applicable environmental, pollution control and ecological
laws, ordinances, rules and regulations, and all Governmental Authorities having
jurisdiction of the Property have issued or to the best of Borrower's knowledge
will issue all necessary permits, licenses or other authorizations for the
construction of the Improvements (specifically including the named systems).

2.9  Submittals.

     The Loan Documents and all Financial Statements, Plans, budgets, schedules,
opinions, certificates, confirmations, contractor's statements, applications,
rent rolls, affidavits, agreements, Construction Contract, Architectural
Contract and other materials submitted to the Lender in connection with or in
furtherance of the Loan Documents by or on behalf of the Borrower or Guarantor
fully and fairly state in all material respects the matters with which they
purport to deal, and neither misstate any material fact, nor, separately or in
the aggregate, fail to state any material fact necessary to make the statements
made not misleading; provided, however, that such representation and warranty is
made to the
<PAGE>

best of Borrower's knowledge with respect to such materials submitted to Lender
which were prepared by parties other than Borrower or its employees.

2.10 Utility Availability.
     All utility and municipal services required for the construction, occupancy
and operation of the Improvements, including, but not limited to, water supply,
storm and sanitary sewer systems, electric and telephone facilities, are
available for use and tap-on at the boundaries of the Property and will be
available in sufficient amounts for the normal and intended use of the
Improvements, and written permission has been or will be obtained from the
applicable utility companies or municipalities to connect the Improvements into
each of said services.

2.11 Governmental Requirements.
     The Property and the Improvements are and at all times during the Loan will
be constructed, operated and sold in compliance with all zoning requirements,
building codes, subdivision improvement agreements, licensing requirements, all
covenants, conditions and restrictions of record, and all other Governmental
Requirements and there are no Governmental Requirements prohibiting the use and
operation of the Property for timeshare purposes. The zoning and subdivision
approval of the Property and the right and ability to construct, use or operate
the Improvements are not in any way dependent on or related to any real estate
other than the Property. To Borrower's knowledge, there are no, nor are there
any alleged or asserted, violations of Governmental Requirements, law,
regulations, ordinances, codes, permits, licenses, declarations, covenants,
conditions, or restrictions of record, or other agreements relating to the
Property or the Improvements or any part thereof. Borrower has obtained or is
not aware of reasons why it cannot obtain all necessary permits, licenses,
consents and approvals to develop and operate the Property as a time-share
project in accordance with the requirements of this Agreement and to sell the
Interval Units in full compliance with applicable law. Borrower shall not sell
or take reservations for the sale of Interval Units associated with the Second
Additional Property prior to the necessary filings being made or the receipt of
approvals required pursuant to Governmental Requirements.

2.12 Property Access.
     The Property has adequate access through fully improved private or
dedicated roads.

2.13 Flood Hazards/Wetlands.
     The Property is in flood zone "C" as defined in the Flood Disaster
Protection Act of 1973, as amended, and the Property is not located within a
wetlands as defined by any Governmental Authority.

2.14 Contracts with Affiliates.
     Except for the relationships and transactions (the "Approved Transactions")
disclosed to Lender in writing and set forth on Exhibit "I", Borrower owns no
                                                ----------
stock or interest in any other Person and has no affiliates which have any
involvement or interest in the Property in any way. All Approved Transactions
were negotiated in good faith, are arms-length transactions and all terms,
covenants and conditions which govern the Approved Transactions are at market
rate. The representation and warranty made in this Section 2.14 shall remain
true throughout the term of the Loan; provided, however, that Borrower shall
have the right to acquire and create new subsidiaries.

2.15 Inducement to Lender.
     The representations and warranties in this Section 2 and the covenants and
agreements of Borrower set forth in Section 3 below and contained in the Loan
Documents are made by Borrower as an inducement to Lender to make the Loan and
Borrower understands that Lender is relying on such representations, warranties,
covenants and agreements which shall be true and correct at all times while the
Loan is outstanding and shall survive any (a) bankruptcy proceedings involving
Borrower, Guarantor
<PAGE>

or the Property, or (b) foreclosure of the Mortgage, or (c) conveyance of title
to the Property to the Lender in lieu of foreclosure of the Mortgage.

Acceptance of each Advance constitutes reaffirmation, as of the date of such
acceptance, of the representations, warranties, covenants and agreements of
Borrower in the Loan Documents except as disclosed in the Affidavit of Borrower
(if accepted by Lender), on which Lender shall rely in making such Advance.

                SECTION 3 COVENANTS AND AGREEMENTS OF BORROWER

     Borrower hereby covenants and agrees as follows:

3.1  Mandatory Principal Payments.

     a.  At the time each Interval Unit is sold, Borrower shall pay Lender the
applicable Interval Release Payment, which payment shall be applied under the
Loan as set forth herein and in the other Loan Documents.  Commencing with the
first month after the first Improvements Completion Date, no later than the
tenth (10th) day of each month, Borrower shall deliver to Lender a sales report
for the Resort showing all sales of Interval Units during the immediately prior
month, which sales report shall be certified by Borrower as accurate.  On or
before the fifteenth (15th) day and the last day of each month, Lender shall
provide Borrower with partial releases from the lien of the Mortgage for each
Interval Unit for which Lender has been paid the applicable Interval Release
Payment at least five (5) days prior to such date.

     b.  So long as there is any indebtedness outstanding under the Acquisition
Note or the Renovation Note, if during the period of this Loan Agreement ending
on the following dates ("Ending Dates"), the aggregate Interval Release Payments
and other payments pursuant to this paragraph that are paid commencing on the
date hereof to the Lender by such Ending Date does not equal or exceed the
following amounts ("Aggregate Payments"), the Borrower shall pay the amount of
such shortfall immediately to Lender:

     Ending Dates           Aggregate Payments
     ------------           ------------------

     July 31, 2001          $  756,875
     October 31, 2001       $1,513,750
     January 31, 2002       $2,270,625
     April 30, 2002         $3,027,500
     July 31, 2002          $3,784,375
     October 31, 2002       $4,541,250
     January 31, 2003       $5,298,125
     April 30, 2003         maturity date

     c.  Mandatory payments made hereunder shall be applied by allocating such
payments in the same manner as the Interval Release Payments.

3.2  Compliance With Governmental Requirements, Notice of Governmental
Authority.
     Borrower shall timely comply with all Governmental Requirements applicable
to the Borrower, the Improvements and the Resort. Borrower shall timely comply
with and promptly furnish to Lender true and complete copies of any notice or
claim by any Governmental Authority pertaining to the Property.

<PAGE>

3.3  Construction of the Improvements.
     Borrower shall commence construction of the Improvements on or before the
Commencement Date and the construction of the Improvements shall be prosecuted
with diligence and continuity, in a good and workmanlike manner, and in
accordance with sound building and engineering practices, all applicable
Governmental Requirements, the Plans, the Approved Budget, the Approved
Construction Schedule, and shall comply with all covenants, conditions and
restrictions affecting the Property. Borrower shall not permit cessation of work
for a period in excess of thirty (30) days without the written consent of Lender
(unless such cessation is caused by strike, riot, shortage of materials or acts
of God, in which case such cessation shall not exceed sixty (60) days), and
shall complete construction of the Improvements on or before the applicable
Improvements Completion Date, free and clear of all liens other than the
Permitted Exceptions and the Loan Documents (except those as to which Borrower
has furnished a bond or other security acceptable to Lender and otherwise
complied with the requirements of Section 3.18 below).

3.4  Correction of Defects.
     Borrower shall correct or cause to be corrected (a) any defect in the
Improvements, (b) any material departure in the construction of the Improvements
from the Plans, (c) any violation of any Governmental Requirements, or any
violation of any covenants, conditions and restrictions affecting the Property,
if applicable, and (d) any encroachment by any part of the Improvements, or any
structure located on the Property, on any easement, property line, or restricted
area, or any encroachment by any such structure on any building setback line.

3.5  Storage of Materials.
     Borrower shall cause all materials supplied for, or intended to be utilized
in, the construction of the Improvements, but not affixed to or incorporated
into the Improvements or the Property, to be stored on the Property, with
adequate safeguards, as reasonably required by Lender, to prevent loss, theft,
damage, or commingling with other materials or projects.

3.6  Inspection of the Property and Books and Records.
     Borrower shall permit Lender, and its agents and representatives, to enter
upon the Property and any location where materials intended to be utilized in
the construction of the Improvements are stored, for the purpose of inspection
of the Property and such materials at all reasonable times. Borrower shall
permit Lender at all reasonable times, upon five (5) days advance written notice
to Borrower, to examine and copy the books and records of Borrower pertaining to
the Loan and the Property, and all sales and marketing records, contracts,
statements, invoices, bills, and claims for labor, materials, and services
supplied for the construction of the Improvements.

3.7  Casualty, Condemnation.
     Borrower shall promptly notify Lender of any fire or other casualty or any
notice of taking or eminent domain action or proceeding affecting the Property,
or the threat of any such action or proceeding of which Borrower becomes aware.
Provided no Event of Default then exists and Borrower certifies as to same, the
net insurance proceeds shall be paid to Lender but shall be made available by
Lender for the restoration or repair of the Property if: (i) in Lender's
reasonable judgment (a) restoration or repair and the continued operation of the
Resort is economically feasible, and (b) the value of Lender's security is not
reduced; (ii) the cost of restoration or repair does not exceed the net
insurance proceeds or Borrower or the Association shall provide a Borrower's
Deposit or other evidence satisfactory to Lender in its sole discretion that
Borrower or the Association can pay all costs of restoration in excess of such
net insurance proceeds; (iii) the loss does not occur in the six (6) month
period preceding the Maturity Date as defined in the Acquisition Note and the
Renovation Note; (iv) Borrower has sufficient business interruption insurance to
provide alternative accommodations for all owners or users of Interval Units at
the Resort affected by such casualty loss; and (v) Lender's Inspecting
Architect/Engineers certify that the

<PAGE>

restoration of the Property can be completed at least ninety (90) days prior to
the Maturity Date. Borrower or the Association shall pay all amounts, in
addition to the net insurance proceeds, necessary to pay in full the cost of the
restoration or repair.

     Notwithstanding the foregoing, it shall be a condition precedent to any
disbursement of insurance proceeds held by Lender hereunder that Lender shall
have approved (x) all plans and specifications for any proposed repair or
restoration; (y) the construction schedule; and (z) the architect's and general
contractor's contracts for restoration. Lender may establish other conditions it
deems reasonably necessary to assure the work is fully completed in a good and
workmanlike manner free of all liens or claims by reason thereof, and in
compliance with all applicable laws, rules and regulations. At Lender's option,
the net insurance proceeds shall be disbursed pursuant to a construction escrow
acceptable to Lender. If an Event of Default then exists, or any of the
conditions set forth in this subsection have not been met or satisfied, the net
insurance proceeds (after deduction of Lender's reasonable costs and expenses,
if any, in collecting same) shall be applied to the Loan in such order and
manner as Lender may elect, whether or not due and payable, with any excess paid
to Borrower.

     The proceeds of any award, payment or claim for damages, direct or
consequential, in connection with any condemnation or other taking of any
Interval Unit or any portion of the Property, or for conveyances in lieu of
condemnation, are hereby assigned to and shall be paid to Lender to the extent
of any then outstanding indebtedness. Lender is authorized (but is under no
obligation) to collect any such proceeds. The proceeds of any such award shall
be made available by Lender for repair or restorations of the Property in the
same manner and upon the same conditions as those set forth above for net
insurance proceeds.

     Anything to the contrary herein notwithstanding, for so long as any part of
the Property is subject to the Declaration of CCRs, any and all insurance
proceeds arising from any damage or destruction to the Property and any and all
awards and payments with respect to condemnation or conveyances in lieu thereof
received by Borrower or Lender shall be delivered and paid out thereby to the
insurance trustee under the Declaration of CCRs, to be distributed and used in
accordance with the provisions of the Declaration of CCRs.

3.8  Application of Advances.
     Borrower shall apply all Advances for reimbursement of costs and expenses
specified in the Approved Budget, and for no other purpose.

3.9  Borrower's Deposit.
     In accordance with Sections 1.7 and 3.7 above, Lender may require a
Borrower's Deposit to be made which Lender shall place in an interest bearing
account and disburse in accordance with Sections 1.7 or 3.7 as applicable.

3.10 Direct Disbursement and Application by Lender.
     Upon an Event of Default, Lender shall have the right, but not the
obligation, to disburse and directly apply the proceeds of any Advance or the
unadvanced balance of the Loan to the satisfaction of any of Borrower's
obligations hereunder or under any of the other Loan Documents. Any Advance by
Lender for such purpose, except Borrower's Deposit, shall be part of the Loan
and shall be secured by the Loan Documents. Borrower hereby authorizes Lender to
hold, use, disburse, and apply the Loan and the Borrower's Deposit, if any, for
payment of costs of construction of the Improvements, reasonable expenses
incident to the Loan and the Property, and the payment or performance of any
obligation of Borrower hereunder or under any of the other Loan Documents.
Borrower hereby assigns and pledges the proceeds of the Loan and the Borrower's
Deposit to Lender for such purposes. Upon an Event of Default, Lender may
advance and incur such Costs as Lender reasonably deems necessary for the
completion of

<PAGE>

construction of the Improvements and to preserve the Property, and any other
security for the Loan, and such Costs, even though in excess of the amount of
the Loan, shall be secured by the Loan Documents and payable to Lender.

3.11 Costs and Expenses.
     Borrower shall pay when due all costs and expenses required by this Loan
Agreement, including, without limitation, (a) all taxes and assessments
applicable to the Property, (b) all fees, charges and taxes in connection with
filing or recording the Loan Documents, (c) all fees and commissions lawfully
due to brokers, salesmen, and agents in connection with the Loan or the
Property, (d) the cost of the Survey, (e) all premiums for the Insurance
Policies, and (f) all other costs and expenses payable to third parties incurred
by Borrower in connection with the consummation of the transactions contemplated
by this Loan Agreement. Any costs and expenses to be paid by Borrower to Lender
shall be due as a condition precedent to any Advance, or at Lender's election,
within ten (10) days of Borrower's receipt of written notification of such costs
and expenses from Lender.

3.12 Additional Documents.
     Borrower shall execute and deliver to Lender, from time to time as
requested by Lender, such other documents as shall reasonably be necessary to
provide the rights and remedies to Lender granted or provided for by the Loan
Documents.

3.13 No Liability of Lender.
     Lender shall have no liability, obligation, or responsibility whatsoever
with respect to the construction of the Improvements except to advance the Loan
and the Borrower's Deposit pursuant to this Loan Agreement. Lender shall not be
obligated to inspect the Property or the construction of the Improvements, nor
be liable or responsible for any defect in the Property or the Improvements by
reason of inspecting same, nor be liable for the performance or default of
Borrower, Architect, the Inspecting Architects/Engineers, Contractor, or any
other party, or for any failure to construct, complete, protect, or insure the
Improvements, or for the payment of costs of labor, materials, or services
supplied for the construction of the Improvements, or for the performance of any
obligation of Borrower whatsoever. Nothing, including without limitation any
Advance or acceptance of any document or instrument, shall be construed as a
representation or warranty, express or implied, to any party by Lender.

3.14 No Conditional Sale Contracts, Etc.
     No materials, equipment, or fixtures shall be supplied, purchased, or
installed for the construction of the Improvements pursuant to security
agreements, conditional sale contracts, lease agreements, or other arrangements
or understandings whereby a security interest or title is retained by any party
or the right is reserved or accrues to any party to remove or repossess any
materials, equipment, or fixtures intended to be utilized in the construction or
operation of the Improvements.

3.15 Defense of Actions.
     Lender may (but shall not be obligated to) commence, appear in, or defend
any action or proceeding purporting to affect the Loan, the Property, or the
respective rights and obligations of Lender and Borrower pursuant to this Loan
Agreement. Lender may (but shall not be obligated to) pay all reasonable
necessary expenses, including reasonable attorneys' fees and expenses incurred
in connection with such proceedings or action, which Borrower agrees to repay to
Lender on demand; provided, however, in any action directly between Borrower and
Lender, the provisions of Section 6.14 shall apply.

3.16 Prohibition on Transfer of Property or Assignment of Borrower's Interest,
Change in Management.
     Borrower shall not (a) create any new ownership interest in Borrower, or
(b) except for the (1) sale of Interval Units in arms length transactions, (2)
the lien of the Loan Documents, (3) the transfer of

<PAGE>

personal property permitted herein, or (4) the Permitted Exceptions, transfer,
lease or mortgage (i) all or any part of the Property, or any interest therein,
or (ii) any ownership interest in Borrower (including any interest in the
profits, losses or cash distributions in any way relating to the Property)
except this shall not serve to prohibit the sale or hypothecation by Borrower of
notes and mortgages generated by Borrower in connection with the sale of
Interval Units subject to Lender's Funding Option as set forth in the Interval
Receivables Loan.

3.17 Payment of Charges.

      Borrower shall promptly pay or cause to be paid when due all costs and
expenses incurred in connection with the Property and the construction of the
Improvements, and Borrower shall keep the Property free and clear of any lien,
tax, judgment, charge, or claim (the "Charges") other than the encumbrances of
the Mortgage, the Permitted Exceptions, and other liens approved in writing by
Lender.  Notwithstanding anything to the contrary contained in this Loan
Agreement, Borrower may (a) discharge in accordance with applicable law any such
Charge or contest the validity or amount of any claim of any contractor,
consultant, architect, or other Person providing labor, materials, or services
with respect to the Property, (b) contest any tax or special assessments levied
by any Governmental Authority, and (c) contest the enforcement of or compliance
with any Governmental Requirements.  Any such contest on the part of Borrower
shall not be an Event of Default hereunder and shall not be the basis for a
release of Lender from any obligation it may have to make Advances hereunder
provided that (i) during the pendency of any such contest Borrower shall, if
requested by Lender, furnish to Lender and Title Company an indemnity bond from
a corporate surety satisfactory to Lender and Title Company in an amount equal
to one hundred fifty percent (150%) of the amount being contested or other
security reasonably acceptable to them; and (ii) Borrower shall pay any amount
adjudged by a court of competent jurisdiction (including appellate courts) to be
due, with all costs, interest, and penalties thereon, before such judgment
becomes a lien on the Property; and (iii) Borrower fulfills all of Borrower's
obligations under this Loan Agreement during the pendency of any such contest.

3.18 Restrictions and Annexation.

      Other than the Permitted Exceptions, Borrower shall not impose any
covenants, easements or other encumbrances upon the Property, execute or file
any subdivision plat affecting the Property, or consent to the annexation of the
Property to any city without the prior written consent of Lender, which shall
not be unreasonably withheld.

3.19 Current Financial Reports.

      So long as any portion of the Loan remains outstanding, Borrower shall
furnish the following to Lender:

          a.  Quarterly Financial Reports.  Within sixty (60) days after the end
              ---------------------------
          of each fiscal quarterly period, unaudited financial statements of
          Borrower and Guarantor, certified by the chief financial officer of
          the subject thereof.

          b.  Year-End Financial Reports.  As soon as available and in any event
              --------------------------
          within one hundred and twenty (120) days after the end of each fiscal
          year of Borrower, Guarantor, and the Association: (i) the balance
          sheets of Borrower, Guarantor, and the Association as of the end of
          such year and the related statements of income and cash flow for such
          fiscal year; (ii) a schedule of all outstanding indebtedness of
          Borrower, Guarantor, and the Association describing in reasonable
          detail each such debt or loan outstanding and the principal amount and
          amount of accrued and unpaid interest with respect to each such debt
          or loan; and (iii) with respect to the financial statements of
          Borrower, Guarantor, and the Association, copies of reports from a
          firm of independent certified public accountants selected by Borrower,
          which report shall be unqualified as to going concern and scope of

<PAGE>

          audit and shall state that such financial statements present fairly
          the financial position of Borrower, Guarantor, and the Association as
          of the dates indicated and the results of its operations and cash flow
          for the periods indicated in conformity with GAAP.

          c.  Audit Reports.  Promptly upon receipt thereof, one (1) copy of
              -------------
          each other report submitted to Borrower by independent public
          accountants in connection with any annual, interim or special audit
          made by them of the books of Borrower.

          d.  Other Reports.  Such other reports, statements, notices or written
              -------------
          communications relating to the Borrower, Guarantor, the Association,
          any other party or the Resort as Lender may require, in its reasonably
          discretion.

          e.  SEC Reports.  Promptly upon their becoming available one (1) copy
              -----------
          of each financial statement, report, notice or proxy statement sent by
          Borrower or Guarantor to security holders generally, and of each
          regular or periodic report and any registration statement, prospectus
          or written communication (other than transmittal letters) in respect
          thereof filed by Borrower or Guarantor with, or received by Borrower
          or Guarantor in connection therewith from, any securities exchange or
          the Securities and Exchange Commission or any successor agency.

3.20 Tangible Net Worth.  At all times that indebtedness is outstanding under
the Loan or Lender is obligated to make Advances, Borrower agrees to maintain a
minimum tangible net worth, calculated quarterly pursuant to Section 3.19(a) and
in accordance with GAAP, in the amount of the sum of Twenty-five Million and
No/100 Dollars ($25,000,000.00) plus sixty percent (60%) of Borrower's positive
net income (i.e. net revenue from sales less expenses) as reported on Borrower's
most current annual financial statement commencing with fiscal year 2000.  As of
the date of the prior fiscal quarter end, Borrower's tangible net worth is in
the amount set forth on Schedule 3.20-23 attached hereto.

3.21 Debt to Tangible Net Worth Ratio. At all times indebtedness is outstanding
under the Loan or Lender is obligated to make Advances, Borrower agrees to
maintain the ratio of all current and long-term notes payable by Borrower to
Borrower's tangible net worth (the "Debt to Tangible Net Worth Ratio"),
determined in accordance with GAAP, and calculated quarterly pursuant to Section
3.19(a), in an amount not greater than 4.0:1.  As of the date hereof, Borrower's
Debt to Tangible Net Worth Ratio is in the amount set forth on Schedule 3.20-33
attached hereto.

3.22 EBITDA.  The ratio of EBITDA to total revenues (the "EBITDA Ratio") for
Borrower, calculated quarterly pursuant to Section 3.19(a) and in accordance
with GAAP on a trailing twelve (12) month basis shall at all times that
indebtedness is outstanding under the Loan or Lender is obligated to make
Advances be equal to or greater than 12.5 percent.  As of the date hereof,
Borrower's EBITDA Ratio is in the amount set forth on Schedule 3.20-33 attached
hereto.

3.23 Total Interest Coverage.  The ratio of EBITDA to total interest expense
("Total Interest Coverage Ratio") for Borrower, calculated quarterly pursuant to
Section 3.19(a) and in accordance with GAAP on a trailing four (4) quarter basis
shall at all times that indebtedness is outstanding under the Loan or Lender is
obligated to make Advances not be less than 1.25:1.  As of the date hereof,
Borrower's Total Interest Coverage Ratio is in the amount set forth on Schedule
3.20-33 attached hereto.

3.24 Tax Receipts.

      Borrower shall furnish Lender with receipts or tax statements marked
"Paid" to evidence the payment of all taxes levied on the Property prior to the
date such taxes become delinquent.

<PAGE>

3.25 Notice of Litigation, Claims, and Financial Change.

     Borrower shall update on a quarterly basis, with such detail as may be
requested by Lender, the Litigation Schedule attached hereto as Exhibit "H" and
promptly inform Lender of (a) any litigation against Borrower or Guarantor or
affecting the Property, which, if determined adversely, might have a material
adverse effect upon the financial condition of Borrower or Guarantor or upon the
Property, or might cause an Event of Default, (b) any claim or controversy which
might become the subject of such litigation, and (c) any material adverse change
in the financial condition of Borrower or Guarantor.

3.26 No Occupancy Contrary to Builder's Risk Policy.

     The Improvements or any element thereof shall not be occupied until
Borrower has obtained and furnished to Lender (a) a certificate of occupancy (or
its equivalent), if applicable, issued by the local Governmental Authorities
with jurisdiction over construction of the Improvements, and (b) replacement
coverage in the form of an all-risk insurance policy upon the completed
Improvements or element thereof, which policy will not be impaired by the
occupancy of the Improvements and is reasonably satisfactory to Lender.

3.27 Hold Harmless.

     Except for Lender's acts or omissions which constitute gross negligence or
willful misconduct, Borrower shall defend, at its own cost and expense, and hold
Lender harmless from, any proceeding or claim in any way relating to the
Property or the Loan Documents.  Subject to the provisions of Section 5.14, all
Costs incurred by Lender in protecting its interests hereunder, including all
court costs and reasonable attorney's fees and expenses, shall be borne by
Borrower.  The provisions of this Section shall survive the payment in full of
the Loan and all other indebtedness secured by the Mortgage and the release of
the Mortgage as to events occurring and causes of action arising before such
payment and release.

3.28 Cross Default, Cross Collateralization.

     The documents and instruments evidencing and securing the Interval
Receivables Loan shall also secure the Loan.  Any Event of Default under the
Interval Receivables Loan shall also be an Event of Default hereunder.  Any
Event of Default hereunder or under the other Loan Documents shall be an Event
of Default under the Receivables Loan Agreement.

3.29 Modifications to Resort Documents.

     Borrower shall not, without Lender's prior written consent which shall not
be unreasonably withheld, amend, modify or supplement the Declaration of CCRs or
any of the other documents relating to the creation or operation of the
timeshare project on the Resort (the "Resort Documents") unless such amendment,
modification or supplement is required either to cause additional Interval Units
to be annexed into the timeshare regime or by law, whereupon Borrower shall
implement same and give prompt written notice thereof to Lender.  Lender shall
provide its written consent or denial of such request within thirty (30) days of
Lender's receipt of such request together with necessary supporting
documentation.

3.30 Subordinated Obligations.

     All indebtedness of Borrower to any shareholder, Partner, or Affiliate of
Borrower shall be subordinated to the Acquisition Note, the Renovation Note, and
to any indebtedness secured under the Interval Receivables Loan.  Borrower
hereby represents and warrants to Lender that those matters described on Exhibit
                                                                         -------
"J" hereto constitute all Borrower's debts, liabilities and obligations to any
---
Affiliates of Borrower except for salaries and other compensation due officers
and directors as of the date of this Agreement.

<PAGE>

     Upon an Event of Default, Borrower will not, directly or indirectly, (a)
permit any payment to be made in respect of any indebtedness, liabilities or
obligations direct or contingent, to any Affiliates, which payments shall be and
are hereby made subordinate to the payment of principle of, and interest on, the
Acquisition Note, the Renovation Note, or any indebtedness secured under the
Interval Receivables Loan, or (b) permit the amendment, rescission or other
modification of any of Borrower's subordinated obligations in such a manner as
to affect adversely the lien priority of the Lender in any property, real or
personal, pledged to secure any of the foregoing Loan Documents.

3.31 Approved POS.

      Prior to engaging in the sale of any Interval Unit with respect to any
condominium unit within the portion of the Resort located within the Second
Additional Property, Borrower shall obtain approval of the POS, including such
portion of the Resort located within the Second Additional Property, from the
Florida Bureau of Timeshare.  Borrower shall secure Lender's approval, which
shall not be unreasonably withheld, of any POS or any material modification of
an existing POS, to be submitted to the Florida Bureau of Timeshare for final
approval, and Borrower shall not engage in the sale of any Interval Units except
pursuant to a POS approved by Lender.

                   SECTION 4   RIGHTS AND REMEDIES OF LENDER

4.1  Rights of Lender.

      Upon the occurrence of an Event of Default, Lender shall have the right,
in addition to any other right or remedy of Lender as set forth in the Loan
Documents, but not the obligation, (a) to declare the Loan immediately due and
payable, (b) to terminate Lender's obligation to disburse the Loan and the
Borrower's Deposit and all other obligations of Lender hereunder and under the
Loan Documents, and (c) in its own name or in the name of Borrower, to enter
into possession of the Property, to perform all work necessary to complete the
construction of the Improvements substantially in accordance with the Plans,
Governmental Requirements, and the requirements of any lessee, if applicable,
and to employ watchmen and other safeguards to protect the Property.

4.2  Appointment of Lender as Attorney-in-Fact.

      Borrower hereby appoints Lender as the attorney-in-fact of Borrower, with
full power of substitution, and in the name of Borrower, if Lender elects to do
so, upon the occurrence of an Event of Default, to (a) use such sums as are
reasonably necessary, including any proceeds of the Loan and the Borrower's
Deposit, if any, make such changes or corrections in the Plans, the construction
of the Improvements, the Approved Budget, the Approved Construction Schedule,
and employ such architects, engineers, and contractors as may be reasonably
required for the purpose of completing the construction of the Improvements
substantially in accordance with the Plans and Governmental Requirements;  (b)
execute all applications and certificates in the name of Borrower which may be
required for completion of construction of the Improvements; (c) endorse the
name of Borrower on any checks or drafts representing proceeds of the Insurance
Policies, or other checks or instruments payable to Borrower with respect to the
Property; (d) do every act with respect to the construction of the Improvements
which Borrower may do; and (e) prosecute or defend any action or proceeding
incident to the Property.  The power of attorney granted hereby is a power
coupled with an interest and is irrevocable.  Lender shall have no obligation to
undertake any of the foregoing actions, and, if Lender should do so, it shall
have no liability to Borrower for the sufficiency or adequacy of any such
actions taken by Lender.

4.3  Funds of Lender.

      Any funds of Lender used for any purpose referred to in this Article 4
shall constitute Advances secured by the Loan Documents and shall bear interest
at the rate specified in the Renovation Note to be applicable after default
hereunder.

<PAGE>

4.4  No Waiver or Exhaustion.

      No waiver by Lender of any of its rights or remedies hereunder, in the
other Loan Documents, or otherwise, shall be considered a waiver of any other or
subsequent right or remedy of Lender; no delay or omission in the exercise or
enforcement by Lender of any rights or remedies shall ever be construed as a
waiver of any right or remedy of Lender; and no exercise or enforcement, of any
such rights or remedies shall ever be held to exhaust any right or remedy of
Lender.

4.5  Marshalling Waiver.

      Borrower waives any and all rights to require the marshalling of assets in
connection with the exercise of any of the remedies hereunder.

                           SECTION  5  MISCELLANEOUS

5.1  Notices.

      Any notice or other communication required or permitted to be given shall
be in writing addressed to the respective party as set forth below and may be
personally served, telecopied, or sent by overnight courier, or sent by
registered or certified U.S. Mail return receipt requested, and shall be deemed
given: (a) if served in person, when served; (b) if telecopied, on the date of
transmission if before 3:00 p.m. (Chicago time) on a business day otherwise, on
the next business day; provided that a confirmation of the receipt of any such
telecopy is obtained and retained by the sending party and that a hard copy of
such notice is also sent pursuant to (c) or (d) below; (c) if by overnight
courier, on the first business day after delivery to the courier; or (d) if by
certified or registered U.S. Mail, return receipt requested, on the fourth (4th)
day after deposit in the mail postage prepaid.  For purposes of this Agreement,
the term "business day" shall mean a day on which banks are open for business in
Illinois.

Notices to Borrower:     Ramada Vacation Suites/
                         Preferred Equities Corporation
                         Attn: Jon A. Joseph, General Counsel
                         4310 Paradise Road
                         Las Vegas, Nevada 89109
                         Telecopy: (702) 369-4398

With copies to:          Ramada Vacation Suites/
                         Preferred Equities Corporation
                         Attn: Gregg McMurtie
                         4310 Paradise Road
                         Las Vegas, Nevada  89109
                         Telecopy: (702) 369-4398

                         Ramada Vacation Suites/
                         Preferred Equities Corporation
                         Attn: Carol Sullivan
                         4310 Paradise Road
                         Las Vegas, Nevada  89109
                         Telecopy: (702) 369-4398

Notices to Lender:       Heller Financial, Inc.
                         Attn: Portfolio Manager, Vacation Ownership Finance
                         Loan No. 95-227
                         500 West Monroe St., 30th Fl.
                         Chicago, Illinois 60661

<PAGE>

                         Telecopy: (312) 441-7924

With a copy to:          Heller Financial, Inc.
                         Real Estate Financial Services
                         Attn: Group General Counsel
                         Loan No. 95-227
                         500 West Monroe St. 31/st/ Fl.
                         Chicago, Illinois 60661
                         Telecopy: (312) 441-7872

5.2  Entire Agreement and Modifications.

      The Loan Documents constitute the entire understanding and agreement
between the undersigned with respect to the transactions arising in connection
with the Loan and supersede all prior written or oral understandings and
agreements between the undersigned in connection therewith.  No provision of
this Loan Agreement or the other Loan Documents may be modified, waived,
terminated, supplemented, changed or amended except by a written instrument
executed by both parties hereto.

5.3  Severability.

      In case any of the provisions of this Loan Agreement shall for any reason
be held to be invalid, illegal, or unenforceable, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof, and this Loan
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.

5.4  Election of Remedies.

      Lender shall have all of the rights and remedies granted in the Loan
Documents and available at law or in equity, and these same rights and remedies
shall be cumulative and may be pursued separately, successively, or concurrently
against Borrower, Guarantor, or any property encumbered by the Loan Documents,
at the sole discretion of Lender.  The exercise or failure to exercise any of
the same shall not constitute a waiver or release thereof or of any other right
or remedy, and the same shall be nonexclusive.

5.5  Form and Substance.

      All documents, certificates, insurance policies, evidence, and other items
required under this Loan Agreement to be executed and/or delivered to Lender
shall be in form and substance reasonably satisfactory to Lender.

5.6  Limitation on Interest.

      In no event whatsoever shall the amount of interest paid or agreed to be
paid to Lender pursuant to this Loan Agreement, the Acquisition Note or
Renovation Note or any of the Loan Documents exceed the highest lawful rate of
interest permissible under applicable law.  If, from any circumstances
whatsoever, fulfillment of any provision of this Loan Agreement, the Acquisition
Note, the Renovation Note and the other Loan Documents shall involve exceeding
the lawful rate of interest which a court of competent jurisdiction may deem
applicable hereto ("Excess Interest"), then ipso facto, the obligation to be
                                            ---- -----
fulfilled shall be reduced to the highest lawful rate of interest permissible
under such law and if, for any reason whatsoever, Lender shall receive, as
interest, an amount which would be deemed unlawful under such applicable law,
such interest shall be applied to the outstanding principal balance of the Loan
(whether or not due and payable), and not to the payment of interest, or shall
be refunded to Borrower if such Loan has been paid in full.  Neither Borrower
nor Guarantor or any endorser shall have any action against Lender for any
damages whatsoever arising out of the payment or collection of any such Excess
Interest.

5.7  No Third Party Beneficiary.

<PAGE>

     This Loan Agreement is for the sole benefit of Lender and Borrower and is
not for the benefit of any third party.

5.8  Borrower in Control.

     In no event shall Lender's rights and interests under the Loan Documents be
construed to give Lender the right to, or be deemed to indicate that Lender is
in control of the business, management or properties of Borrower or has power
over the daily management functions and operating decisions made by Borrower.

5.9  Number and Gender.

     Whenever used herein, the singular number shall include the plural and the
plural the singular, and the use of any gender shall be applicable to all
genders.  The duties, covenants, obligations and warranties of Borrower in this
Loan Agreement shall be joint and several obligations of Borrower and of each
Borrower if more than one.

5.10 Captions.

     The captions, headings, and arrangements used in this Loan Agreement are
for convenience only and do not in any way affect, limit, amplify, or modify the
terms and provisions hereof.

5.11 Applicable Law.

     This Loan Agreement and the Loan Documents shall be governed by and
construed in accordance with the laws of the State of Illinois (without regard
to conflicts of law principles) and the laws of the United States applicable to
transactions within such state, except that the provisions of the laws of the
State of Florida shall be applicable to the creation, perfection and enforcement
of the lien created by the Mortgage.

5.12 Venue.

     BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF COOK STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT,
SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. BORROWER HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE
OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS
BEEN POSTED.

5.13 Jury Trial Waiver.

     BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.  BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.
BORROWER AND LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF
REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
<PAGE>

5.14 Attorneys' Fees.

     In any action hereunder between the parties hereto, the prevailing party
shall be entitled to reasonable attorneys' fees and costs including those for
pretrial, trial and appellate proceedings.

5.15 Commitment Fee.

     In addition to fees due to Lender in connection with prior commitments,
Borrower has agreed to pay Lender a commitment fee hereunder in the amount of
the greater of (i) Forty Thousand Dollars and No/100 ($40,000.00) and (ii) one
percent (1%) of each Advance in connection with the Acquisition Loan and the
Renovation Loan, which Borrower agrees is fully earned and payable.  At the
funding of the Acquisition Loan, Borrower shall pay Lender the sum of Twenty-
five Thousand Six Hundred Twenty Dollars and No/100 ($25,620.00) which
represents one percent (1%) of the Acquisition Loan Advance and shall thereafter
pay lender one percent (1%) of each Advance.  The aggregate amount of such
commitment fees shall be no less than Forty Thousand Dollars and No/100
($40,000.00).

5.16 Counterparts.

     This Agreement may be signed in multiple counterparts which taken together
shall constitute the entire agreement between the parties.

5.17 Borrower's Confirmation and Inducement to Lender.

     In connection with the execution of this Agreement, Borrower hereby
certifies that (a) all of 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, (b) as of the date hereof there are no Events of
Default hereunder, and (c) all of the Loan Documents as defined herein are in
full force and effect.

     As consideration for, and as a mutual inducement to Lender entering into
this Agreement, Borrower and Guarantor each hereby waive and release any and all
claims, setoffs, counterclaims and defenses either has as of the date hereof
with respect to the credit facility and performance by Lender under the Loan
Documents, and each hereby acknowledges that Lender has fully performed all of
its obligations for which performance was required on or before the date hereof
and is not in default under the Loan Documents.  Execution of this Agreement
shall not be deemed to constitute a waiver or release by Lender of any its
rights or remedies under the Loan Documents.

     The parties hereto have executed this Agreement or have caused the same to
be executed by their duly authorized representatives as of the date first above
written.

BORROWER:                                         LENDER:

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

BY:  /s/ Carol W. Sullivan                       BY:   /s/ Dennis K. Holland
     ---------------------                             ----------------------

         Carol W. Sullivan                                   Dennis K Holland
--------------------------                        ---------------------------
Print Name                                        Print Name

Its:   Sr. V. P.                                  Its:   Sr. V. P.
    ----------------------                            -----------------------
<PAGE>

                                    APPENDIX
                                    --------

                                 DEFINED TERMS
                                 -------------

     For purposes of this Loan Agreement, the following terms shall have the
respective meanings assigned to them:

     Acquisition Loan.  A loan from Lender to Borrower in the amount of
$11,367,000.00, $8,805,000.00 of which has been previously advanced to Borrower
and the repayment of which is secured by the Mortgage, and the balance of which
shall be advanced pursuant to the terms hereof in order to facilitate Borrower's
acquisition of the Second Additional Property in an amount equal to the lesser
of Two Million Five Hundred Sixty-two Thousand Dollars and No/100
($2,562,000.00) or 100% of Borrower's cost to acquire the Property pursuant to
that certain Purchase and Sale Agreement dated November 14, 2000, between
Borrower, as purchaser, and Villas at Monterey Limited Partnership, a Florida
limited partnership, as seller.

     Acquisition Note.  The Amended, Restated and Consolidated Acquisition
Promissory Note No. 4 from Borrower to Lender evidencing the Acquisition Loan
dated of even date herewith, which is in the original principal amount of Three
Million Seven Hundred Eighty-four Thousand Dollars and No/100 ($3,784,000.00).

     Advance.  A disbursement by Lender of any of the proceeds of the Loan.
Each Advance shall be for reimbursement to Borrower of amounts paid by Borrower
through the date of such Advance in accordance with the Approved Budget.

     Affidavit of Borrower.  A sworn affidavit of Borrower (and such other
parties as Lender may require) to the effect that all statements, invoices,
bills, and other expenses incident to the acquisition of the Property and the
construction of the Improvements incurred to a specified date, whether or not
specified in the Approved Budget, have been paid in full, except for amounts
retained pursuant to the Construction Contract.

     Affiliate.  Any Person that (i) directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
Borrower, Guarantor or (ii) any officer, director, member, or partner of
Borrower or Guarantor or any relative of any of the foregoing.  The term
"Control" shall mean possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person whether
through ownership of voting securities, by contract or otherwise.

     Application for Advance.  A written application, in the form of Exhibit "A"
                                                                     -----------
attached hereto, by Borrower (and such other parties as Lender may require) to
Lender specifying by name of, current address of, and amount owed to all
independent third parties to whom Borrower is obligated for labor, materials, or
services supplied for the construction of the Improvements and all other
expenses incident to the Loan, the Property, and the construction of the
Improvements and specifying those budgeted items which have been performed by
Borrower's employees, requesting an Advance for reimbursement for the payment of
such items, containing an Affidavit of Borrower, accompanied by such schedules,
affidavits, releases, waivers, statements, invoices, bills, and other documents
as Lender and Title Company may reasonably request.

     Approved Budget.  The budget attached as Exhibit "B" hereto, or such other
                                              -----------
budget as may be approved by Lender in writing, for the renovation of forty-two
(42) two-bedroom condominium units to
<PAGE>

be used for timeshare purposes on the Property. The term Approved Budget shall
also include any decreases or increases as permitted hereunder in accordance
with Section 2.7 hereof.

     Approved Construction Schedule.  The schedule and order of renovation and
construction of the Improvements set forth in Exhibit "C" attached hereto, or
                                              -----------
such other schedule as may be approved by Lender in writing, and any
modifications thereto permitted in accordance with Section 2.7.

     Approved Timeshare Document Filing Schedule.  The schedule attached hereto
as Exhibit "D", or such other schedule as may be approved by Lender in writing,
   -----------
for filing and approval of the timeshare public offering statement for the
Resort with and by all Governmental Authorities for the sale of Interval Units
and the operation of the Resort.

     Architect.  Stanley Paul Hoelle, Architect, the architect for design of the
plans and specifications for the Improvements.

     Architectural Contract.  All written agreements between Borrower and
Architect for architectural services pertaining to construction of the
Improvements.

     Association.  The association created pursuant to the Declaration of CCRs.

     Borrower's Deposit.  Such cash sums as Lender may deem necessary pursuant
to Section 3.7 (for completion of repair or reconstruction of casualty or
condemnation loss) or Section 1.7 (for budget increases or changes to the
Plans).

     Completion.  The substantial completion of the Improvements in accordance
with the Approved Budget, the Approved Construction Schedule, the Construction
Contract, the Architectural Contract and the Plans, as evidenced by (i) a
certificate of occupancy (or its equivalent), if applicable, permitting legal
occupancy thereof issued by the local Governmental Authorities with jurisdiction
over construction of the Improvements, (ii) a certificate of the contractor in
form and substance satisfactory to Lender regarding completion of the
Improvements, and (iii) a certificate of the Inspecting Architects/Engineers in
form and substance satisfactory to Lender.

     Construction Contract.  All construction contracts executed by Borrower for
the construction of the Improvements, including, without limitation, contracts
between Borrower and Contractor.

     Contractor.  The general contractor to be retained by Borrower for the
construction of the Improvements.  At least sixty (60) days prior to
commencement of construction of the Improvements, Borrower shall submit to
Lender for approval the Plans and the fully executed Assignment of Construction
Contract substantially in the form attached as Exhibit "E" attached hereto or
                                               -----------
such other form as Lender may reasonably accept.

     Costs.  All reasonable expenditures and expenses which may be paid or
incurred by or on behalf of Lender including repair costs, payments to remove or
protect against liens, attorneys' fees for pre-trial, trial and appellate
matters (including fees of Lender's inside counsel), receivers' fees,
appraisers' fees, engineers' fees, accountants' fees, independent consultants'
fees (including environmental consultants), all costs and expenses incurred in
connection with any of the foregoing, Lender's out-of-pocket costs and expenses
related to any audit or inspection of the Property, outlays for documentary and
expert evidence, stenographers' charges, stamp taxes, intangible taxes,
publication costs, and costs (which may be estimates as to items to be expended
after entry of an order or judgment) for procuring all such abstracts of title,
title and UCC searches, and examination, title insurance policies, and similar
data and assurances with respect to title as Lender may deem reasonably
necessary either to prosecute any action or to
<PAGE>

evidence to bidders at any foreclosure sale of the Property the true condition
of the title to, or the value of, the Property.

     Debtor Relief Laws.  Any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar
laws affecting the rights or remedies of creditors generally, as in effect from
time to time.

     Declaration of CCRs.  The term "Declaration of CCRs" shall mean
collectively the Declaration of Covenants, Conditions and Restrictions for
Ramada Vacation Suites, and any supplements, amendment, or modifications thereto
to be created and recorded in the public records of Orange County, Florida
governing the Property.

     Default.  Any event which, with the giving of notice or the passage of time
or both, would become an Event of Default.

     Event of Default.  Occurrence of any one of the following:

          (a) Any indebtedness evidenced, governed or secured by any of the Loan
Documents is not paid within five (5) days of the date when due, whether by
acceleration or otherwise.

          (b) Borrower's failure to maintain any of the Insurance Policies or
any transfer of or lien or encumbrance imposed upon the Property or any part
thereof or interest therein in violation of Sections 3.16 or 3.17 below or any
other restriction on transfer or liens set forth in the Loan Documents.

          (c) Any covenant in this Agreement, other than matters governed by
paragraphs (a) and (b) above, is not fully and timely performed, and Borrower
does not cure such failure to perform for a period of thirty (30) days after
written notice thereof from Lender to Borrower (provided, however, that if any
such failure concerning a non-monetary covenant or condition is reasonably
susceptible of cure but not within said thirty (30) day period, then no Event of
Default shall be deemed to exist hereunder so long as Borrower commences such
cure within said thirty (30) day period and diligently and in good faith pursues
such cure to completion within ninety (90) days of said written notice from
Lender to Borrower).

          (d) Any Default or Event of Default or any failure of Borrower to
abide by the terms of or fulfill its obligations under this Loan Agreement and
the other Loan Documents, after the passage of any applicable cure period set
forth therein.

          (e) Any statement, representation or warranty in the Loan Documents,
any Financial Statements or any other writing delivered to Lender in connection
with the Loan is false, misleading or erroneous in any material respect.

          (f) Once construction has begun, the cessation of the construction of
the Improvements for more than thirty (30) days without the written consent of
Lender, unless such cessation is caused by strike, riot, shortage of materials
or acts of God, provided that an Event of Default shall exist if such cessation
continues for more than sixty (60) days for any reason.

          (g) Failure of the construction of the Improvements or any materials
for which an Advance has been requested to substantially comply with the Plans,
the Approved Budget, the Approved Construction Schedule, or any Governmental
Requirements, which noncompliance is not cured to Lender's satisfaction within
thirty (30) days after written notice from Lender to Borrower.
<PAGE>

          (h) Completion of the Improvements or any element thereof has not
occurred on the applicable Improvements Completion Date as set forth in the
Approved Construction Schedule subject to strike, riot, shortage of materials,
acts of God or other matters beyond the control of Borrower; provided, however,
that an Event of Default shall exist if Completion is delayed for more than
sixty (60) days for any reason beyond the Final Completion Date.

          (i)  The Borrower or Guarantor:

                (1) does not pay its debts as they become due or admits in
writing its inability to pay its debts or makes a general assignment for the
benefit of creditors; or

                (2) commences any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any Debtor Relief Laws; or

                (3) in any involuntary case, proceeding or other action
commenced against it which seeks to have an order for relief entered against it,
as debtor, or seeks reorganization, arrangement, liquidation, dissolution or
composition of it or its debts under any Debtor Relief Laws, (i) fails to obtain
a dismissal of such case, proceeding or other action within sixty (60) days of
its commencement, or (ii) converts the case from one chapter of the Federal
Bankruptcy Code to another chapter, or (iii) is the subject of an order for
relief; or

                (4) conceals, removes, or permits to be concealed or removed any
part of its property, with intent to hinder, delay or defraud its creditors or
any of them, or makes or suffers a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or makes
any transfer of its property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or suffers or permits,
while insolvent, any creditor to obtain a lien upon any of its property through
legal proceedings which is not vacated within sixty (60) days from the date
thereof; or

                (5) has a trustee, receiver, custodian or other similar official
appointed for, or take possession of, all or any part of the Property or any
other of its property or has any court take jurisdiction of any other of its
property which continues for a period of sixty (60) days (except where a shorter
period is specified in the immediately following subparagraph (6)); or

                (6) fails to have discharged within a period of thirty (30) days
any attachment, sequestration, or similar writ levied upon any property of such
owner; or

                (7) fails to pay within thirty (30) days of issuance or entry
any final money judgment, after appeal, and subject to Section 3.18 any tax,
lien, or attachment in the amount of Fifty Thousand Dollars and No/100 ($50,000)
or greater.

          (j)  Title to all or any part of the Property (other than (i) obsolete
or worn personal property replaced by adequate substitutes of equal or greater
value than the replaced items when new or (ii) personal property no longer
necessary for the operation of the Property, provided removal of such personal
property does not materially affect the value or operation of the Property)
shall become vested in any party other than the Borrower, whether by operation
of law or otherwise, except for the conveyance of Interval Units in the ordinary
course of business and in accordance with this Loan Agreement and the other Loan
Documents.

<PAGE>

          (k) Borrower records or permits to be recorded against the Property a
Notice of Limitation limiting future advances which may be made under the
Mortgage.

          (l) Any default by Borrower under the documents and instruments
evidencing and securing the Interval Receivables Loan after the passage of any
applicable grace or cure period.

          (m) Failure by Borrower to meet the requirements of the Approved
Timeshare Document Filing Schedule.

          (n) Failure of the Borrower or Guarantor to maintain the minimum
tangible net worth as set forth in Section 3.20.

          (o) Failure of at least two of the following individuals, unless
replaced in a timely manner with others who are reasonably acceptable to Lender,
to remain the principal officers of Borrower with authority to make all material
business decisions on behalf of Borrower: Jerome Cohen, Herb Hirsch, Jon Joseph,
Gregg McMurtie and Carol Sullivan.

     Financial Statements.  All financial statements, reports, summaries and
other financial information delivered by Borrower to Lender as of the date of
this Agreement.

     GAAP.  Generally accepted accounting principles, applied on a consistent
basis, set forth in Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants and/or in statements of the Financial
Accounting Standards Board which are applicable in the circumstances as of the
date in question; and the requisite that such principles be applied on a
consistent basis means that the accounting principles in a current period are
comparable in all material respects to those applied in a preceding period, with
any exceptions thereto noted.

     Governmental Authority.  The United States of America, the state and county
in which the Resort is located, and any other governmental authorities having
jurisdiction over Borrower, Guarantor, the Property or the sale of Interval
Units.

     Governmental Requirements.  All Federal, State and local rules,
regulations, ordinances, laws and statutes which affect the Property or
Borrower's right to sell Interval Units.

     Guarantee.  The Payment and Completion Guaranty executed by Guarantor to
the Lender.

     Guarantor. Mego Financial Corp., a New York corporation.

     Improvements.  The 162 condominium units to be sold as Interval Units, the
Amenity Building, the parking area and pool area, and the Gate House, including
the 42 two-bedroom condominium units as described in the Plans, the Approved
Budget and the Approved Construction Schedule.  References in this Loan
Agreement to construction of Improvements means construction or renovation of
the Improvements, as applicable.

     Improvements Completion Date.  The deadline for Completion of each element
of the Improvements as set forth on the Approved Construction Schedule.

     Inspecting Architects/Engineers.  Such employees, representatives and
agents of Lender or third parties, who will, from time to time, conduct
inspections of the Property, review Borrower's compliance with this Loan
Agreement and offer other services related thereto.
<PAGE>

     Insurance Policies.  The following insurance policies:

          (a) All-risk builder's risk insurance during the construction of any
Improvements, in an amount equal to 100% of the replacement cost of the
Property, providing all-risk coverage on the Property and materials stored on
the Property and elsewhere, and including the perils of collapse, water damage
and, if requested by Lender, flood, sinkhole, earthquake, business interruption
and other risks;

          (b) All-risk insurance on the Property until the Loan is paid in full,
as determined by Lender, in the amount of at least 100% of the replacement cost
of the Property or in such amounts as Lender may reasonably require, providing
all-risk coverage on the Property, and, if requested by Lender, to include the
perils of flood, earthquake, business interruption and other risks;

          (c) Comprehensive General Liability Insurance for owners and
contractors, including blanket contractual liability, products and completed
operations, personal injury (including employees), independent contractors and
explosion, hazards for not less than Two Million Dollars and No/100
($2,000,000.00) arising out of any one occurrence or in any increased amount
reasonably required by Lender;

          (d) Workers' Compensation Insurance for contractors for statutory
limits; and

          (e) Such other insurance, including but not limited to business
interruption insurance, as Lender may reasonably require.

     All Insurance Policies shall be issued on forms and by companies reasonably
satisfactory to Lender and shall be delivered to Lender or in the alternative,
certificates of such insurance shall be delivered to Lender if such insurance is
obtained through blanket policies of Borrower.  All-risk Insurance Policies
shall have loss made payable to Lender as mortgagee together with the standard
mortgage clause in a form satisfactory to Lender.  Comprehensive General
Liability, Comprehensive Automobile Liability and Workers' Compensation
coverages shall have a provision giving Lender thirty (30) days, prior notice of
cancellation or material change of the coverage.

     Interest Rate.  A floating rate per annum equal to the Base Rate plus four
and twenty-five one hundredths percent (4.25%) (the aggregate rate referred to
as the "Interest Rate").  "Base Rate" shall mean the rate published each
business day in The Wall Street Journal for deposits maturing ninety (90) days
                -----------------------
after issuance under the caption "Money Rates, London Interbank Offered Rates
(LIBOR)".  The Interest Rate for each calendar month shall be fixed based upon
the Base Rate published prior to and in effect on the first (1st) business day
of such month.  Interest shall be calculated based on a 360 day year and charged
for the actual number of days elapsed.

     Interval Receivables Loan.  The financing arrangements entered into between
Borrower and Lender whereby Lender is providing Borrower with financing for
certain receivables of Borrower generated from Borrower's sale of Interval
Units, which is evidenced by the Receivables Loan Agreement.

     Interval Release Payment. Mandatory payments in the amount calculated by
dividing (i) the combined total outstanding balance of the Acquisition Loan and
the Renovation Loan by (ii) the number of unsold Interval Units, and multiplying
the result of the foregoing division by 1.25, per Interval Unit to be applied
first to interest due and payable and then to the principal balance outstanding
from time to time under the Acquisition Loan and the Renovation Loan to be paid
upon the sale of each Interval Unit and
<PAGE>

applied to the outstanding balance of the Acquisition Loan and the Renovation
Loan in such amounts as Lender may determine from time to time in Lender's sole
discretion; provided, however, that Lender shall have the right to make
adjustments from time to time to the Interval Release Payment amount in the
event that Lender determines the Advances will not be fully repaid on or prior
to the sale of eighty percent (80%) of the Interval Units. The sale of such
Interval Units may be by (i) direct cash payment to Borrower, or (ii)
installment purchase financed by Borrower or third parties. Upon the making of
these Interval Release Payments and provided Borrower is not in default
hereunder, Lender shall release such Interval Unit from the Mortgage.

     Interval Unit.  The term "Interval Unit" shall have the same meaning as the
term "Interval" in the Receivables Loan Agreement.

     Loan.  The loan by Lender to Borrower, in the maximum amount of the
Acquisition Loan and Renovation Loan, not to exceed, in the aggregate, the
advance of (a) the lesser of (i) Eleven Million Three Hundred Sixty-seven
Thousand Dollars and No/100 ($11,367,000.00), which amount includes the
additional Acquisition Loan commitment of Two Million Five Hundred Sixty-two
Thousand Dollars and No/100 ($2,562,000.00) being granted herein, or (ii) 100%
of the cost 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 Five Million Nine Hundred Sixty-one Thousand Dollars and
No/100 ($5,961,000.00) over the term of the Loan, and which amount includes the
additional Renovation Loan commitment in the amount of One Million Four Hundred
Thirty-eight Thousand Dollars and No/100 ($1,438,000.00) being granted herein,
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.  Notwithstanding the
foregoing, 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 shall exceed Thirty Million Dollars
and No/100 ($30,000,000.00), or if the combined outstanding balance of the
Acquisition Note and the Renovation Note shall exceed eighty-five percent (85%)
of the actual cost of all land and improvements subject to the lien of the
Mortgage, Borrower shall within five (5) business days after notice from Lender
to Borrower pay to Lender such excess amount.

     Loan Documents.  This Loan Agreement, the Mortgage, the Acquisition Note,
the Renovation Note, the Guarantee, the financing statements, and such other
instruments evidencing, securing, perfecting or pertaining to the Loan as shall,
from time to time, be executed and delivered by Borrower, Guarantor, or any
other party to Lender pursuant to this Loan Agreement, including, without
limitation, each Affidavit of Borrower, each Application for Advance, and the
Approved Budget.

     Maturity Date. April 30, 2003.

     Mortgage.  That certain Mortgage, Assignment of Rents and Leases and
Security Agreement dated March 29, 1996, and recorded in Official Records Book
5038, Page 3903, as modified by that certain Notice of Future Advance No. 1
dated December 23, 1997, that certain Mortgage Modification dated July 7, 1998,
that certain Notice of Future Advance No. 2 dated October 19, 1999, that certain
Notice of Future Advance No. 3 dated December 22, 1999, that certain Mortgage
Modification and Spreader Agreement dated February 1, 2000, that certain Notice
of Future Advance No. 4 dated February 1, 2000, that certain Notice of Future
Advance No. 5 dated September 7, 2000, that certain Mortgage Modification and
Spreader Agreement No. 2 dated of even date herewith and that certain Notice of
Future Advance No. 6 dated of even date herewith, securing the payment of the
Acquisition Note and Renovation Note, and the payment and performance of all
obligations specified in the Mortgage and the Loan Documents, and evidencing a
valid and enforceable lien on the Property.
<PAGE>

     Permitted Exceptions.  Those exceptions to and encumbrances on title to the
Property which Lender has approved at the date of this Loan Agreement and which
are described on Exhibit "F" hereto.
                 -----------

     Person. Any individual, trust, estate, partnership, limited liability
company, corporation or any other incorporated or unincorporated organization.

     Plans.  The final working drawings and specifications for the construction
of the Improvements, which have been prepared by the Architect and approved by
Lender and as may be modified pursuant to Section 1.7.

     POS.  A public offering statement, permit, or other report covering the
Resort that includes all information, documents, and exhibits that are required
by the state or states where the Interval Units will be sold for the lawful sale
and marketing of timeshare intervals.

     Property.  The land described in Exhibit "G" attached hereto and
                                      -----------
incorporated herein by reference, together with the Second Additional Property,
and where the context requires shall also mean the Improvements and all other
property constituting the "Property," as described in the Mortgage.

     Receivables Loan Agreement.  That certain Loan and Security Agreement of
even date herewith executed by Borrower and Lender with respect to the Interval
Receivables Loan.

     Renovation Loan.  A loan from Lender to Borrower to facilitate Borrower's
construction and renovation of the Improvements in a cumulative aggregate amount
not to exceed Five Million Nine Hundred Sixty-one Thousand Dollars
($5,961,000.00), which amount is inclusive of the additional commitment in the
amount of One Million Four Hundred Thirty-eight Thousand Dollars ($1,438,000.00)
being granted under the Renovation Loan hereby and all Advances made under the
Renovation Loan prior to the date hereof, for construction and renovation;
provided, however, at no time shall the principal balance outstanding under the
Renovation Note exceed Two Million Five Hundred Thousand Dollars and No/100
($2,500,000.00).

     Renovation Note.  The Second Amendment and Restatement of Amended, Restated
and Consolidated Revolving Construction Promissory Note of even date herewith
from Borrower to Lender in the original principal amount of Two Million Five
Hundred Thousand Dollars and No/100 ($2,500,000.00), which Renovation Note
evidences the Renovation Loan.

     Resort. "Ramada Vacation Suites Orlando," a timeshare condominium developed
by Borrower as a timeshare project on the Property.

     Second Additional Property. The land described in Exhibit "K" attached
                                                       -----------
hereto and incorporated herein by reference and where the context requires shall
also mean the Improvements and all other property constituting a portion of the
"Property" and located thereon.

     Survey.  A current survey of the Property, including the Second Additional
Property, meeting the standards of the American Land Title Association and
certified by the surveyor to Lender in form and substance satisfactory to
Lender, and if applicable, a recorded plat or map of the Property, as required
by Lender, which such plat or map shall be approved and accepted by all
Governmental Authorities having jurisdiction of the Property.

     Title Company.  First American Title Insurance Company.
<PAGE>

                                   EXHIBIT A

                            APPLICATION FOR ADVANCE
                            -----------------------

DATE:___________________________

Heller Financial, Inc.
Attn: Portfolio Manager, Vacation Ownership Finance
500 West Monroe St., 30th Fl.
Chicago, Illinois 60661

     RE:  Loan No. 95-227

          $ ____________ credit facility described in that certain Amended and
          Restated Acquisition and Construction Loan Agreement (the "Acquisition
          Loan Agreement") between Heller Financial, Inc. ("Lender") and
          ___________________ ("Borrower")

Dear Sir or Madam:

     In  accordance with the terms of the Acquisition Loan Agreement, Borrower
wishes to obtain an Advance of $_______________________ on ___________________,
20____.  All terms used herein, unless otherwise specified, shall have the
meanings assigned in the Acquisition Loan Agreement.  In order to induce Lender
to make such Advance, Borrower hereby represents and warrants to Lender:

          1.  No Event of Default has occurred, and no event which, with the
passage of time or notice or both, would constitute an Event of Default has
occurred or will occur as a result of the Advance requested herein.

          2.  The representations and warranties contained in the Acquisition
Loan Agreement are true, correct and complete in all material respects to the
same extent as though made on the date of the Acquisition Loan Agreement except
for any representation or warranty limited by its terms to a specific date and
taking into account any amendments to the schedules or exhibits as a result of
any subsequent disclosures made by Borrower in writing to and approved by
Lender.

          3.  Borrower is in compliance with each and every one of its
covenants, agreements and obligations under the Loan Agreement.

          4.  Borrower has no defenses or offsets with respect to the payment
of any amounts due Lender.

          5.  Lender has performed all of its obligations to Borrower.

                              BORROWER:

                              By: _________________________________

                              Its: _________________________________
<PAGE>

                                   EXHIBIT B

                                APPROVED BUDGET
                                ---------------
<PAGE>

                                   EXHIBIT C

                         APPROVED CONSTRUCTION SCHEDULE
                         ------------------------------

1.   Commence Construction of First twelve (12) (Building G) units on or before
     thirty (30) days after the date of this Agreement (the "Commencement
     Date").

2.   First twelve (12) (Building G) units to be completed on or before 90 days
     after the Commencement Date.

3.   Second eighteen (18) (Building F) units to be completed on or before 120
     days after the Commencement Date.

4.   Last twelve (12) (Building E) units to be completed on or before 180 days
     after the Commencement Date (the "Final Completion Date").
<PAGE>

                                   EXHIBIT D

                  APPROVED TIMESHARE DOCUMENT FILING SCHEDULE
                  -------------------------------------------

I.   Completed drafts of the proposed, revised public offering statement
     incorporating the portion of the Resort located within the Second
     Additional Property, including any proposed material amendment to the
     Declaration of CCRs (collectively, the "POS Amendments"), shall be
     delivered to Lender for review and approval on or before sixty (60) days
     after the date of this Agreement.

II.  Borrower shall provide redrafts of the POS Amendments including all
     exhibits thereto, to Lender for final review within fifteen (15) days of
     receipt of Lender's comments.

III. Borrower within ten (10) days of  receipt of final approval of the POS
     Amendments from Lender and completion of the renovation shall file the POS
     Amendments with the Florida Division of Land Sales, Condominiums and Mobile
     Homes, Bureau of Timeshare.

IV.  Borrower shall obtain final approval of the POS Amendments no later than
     sixty (60) days following submission to the Florida Division of Land Sales,
     Condominiums and Mobile Homes, Bureau of Timeshare.
<PAGE>

                                   EXHIBIT E

                  FORM OF ASSIGNMENT OF CONSTRUCTION CONTRACT
                  -------------------------------------------
<PAGE>

                                   EXHIBIT F

                             PERMITTED EXCEPTIONS
                             --------------------
<PAGE>

                                  EXHIBIT G

                             PROPERTY DESCRIPTION
                             --------------------
<PAGE>

                                   EXHIBIT H

                             LITIGATION DISCLOSURE
                             ---------------------
<PAGE>

                                   EXHIBIT I

                             APPROVED TRANSACTION
                             --------------------
<PAGE>

                                   EXHIBIT J

                           SUBORDINATED OBLIGATIONS
                           ------------------------
<PAGE>

                                   EXHIBIT K

                    SECOND ADDITIONAL PROPERTY DESCRIPTION
                    --------------------------------------
<PAGE>

                                                                 Loan No. 95-227

THIS AMENDED, RESTATED AND CONSOLIDATED ACQUISITION PROMISSORY NOTE NO. 4
AMENDS, RESTATES AND CONSOLIDATES (a) THAT CERTAIN AMENDED, RESTATED AND
CONSOLIDATED ACQUISITION PROMISSORY NOTE NO. 3 DATED SEPTEMBER 7, 2000, IN THE
ORIGINAL PRINCIPAL AMOUNT OF $3,121,600.00, OF WHICH $1,222,000 IS OUTSTANDING
AS OF THE DATE HEREOF, AND (b) THAT CERTAIN FUTURE ADVANCE ACQUISITION
PROMISSORY NOTE NO. 5 OF EVEN DATE HEREWITH, IN THE PRINCIPAL AMOUNT OF
$2,562,000.00, THE ORIGINALS OF WHICH ARE ATTACHED HERETO. ALL DOCUMENTARY STAMP
TAX DUE ON THE ATTACHED AMENDED, RESTATED AND CONSOLIDATED ACQUISITION
PROMISSORY NOTE NO. 3 DATED SEPTEMBER 7, 2000, IN THE PRINCIPAL AMOUNT OF
$3,121,600.00 HAS BEEN PAID AND AFFIXED TO THE ORIGINAL MORTGAGE, ASSIGNMENT OF
RENTS AND LEASES AND SECURITY AGREEMENT DATED MARCH 29, 1996, AND RECORDED IN
THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL RECORDS BOOK 5038,
PAGE 3903, NOTICE OF FUTURE ADVANCE NO. 2 DATED OCTOBER 19, 1999, AND RECORDED
IN THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL RECORDS BOOK 5868,
PAGE 14, NOTICE OF FUTURE ADVANCE NO. 3 DATED DECEMBER 22, 1999, AND RECORDED IN
THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL RECORDS BOOK 5298,
PAGE 4171, NOTICE OF FUTURE ADVANCE NO. 4 DATED FEBRUARY 1, 2000, AND RECORDED
IN THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL RECORDS BOOK 5945,
PAGE 3125 AND NOTICE OF FUTURE ADVANCE NO. 5 DATED SEPTEMBER 7, 2000, AND
RECORDED IN THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL RECORDS
BOOK 6086, PAGE 1136. ALL DOCUMENTARY STAMP TAX DUE ON THE ATTACHED FUTURE
ADVANCE ACQUISITION PROMISSORY NOTE NO. 5 OF EVEN DATE HEREWITH, IN THE
PRINCIPAL AMOUNT OF $2,562,000.00 HAS BEEN PAID AND AFFIXED TO THE NOTICE OF
FUTURE ADVANCE NO. 6 OF EVEN DATE HEREWITH TO WHICH REFERENCE IS MADE HEREIN. NO
DOCUMENTARY STAMP TAX OR INTANGIBLES TAX IS DUE ON THIS AMENDED, RESTATED AND
CONSOLIDATED ACQUISITION PROMISSORY NOTE NO. 4.

                      AMENDED, RESTATED AND CONSOLIDATED
                       ACQUISITION PROMISSORY NOTE NO. 4

                                                                   April 5, 2001
$__________                                                        -------

     THIS AMENDED, RESTATED AND CONSOLIDATED ACQUISITION PROMISSORY NOTE NO. 4
amends, restates and consolidates in their entirety the following described
promissory notes as are described in that certain Amended and Restated
Acquisition and Construction Loan Agreement of even date herewith as
subsequently amended, made by Preferred Equities Corporation, a Nevada
corporation, to Heller Financial, Inc.: (i) that certain Amended, Restated and
Consolidated Acquisition Promissory Note No. 3 dated September 7, 2000, in the
original principal amount of $3,121,600.00 and (ii) that certain Future Advance
Acquisition Promissory Note No. 5 of even date herewith, in the principal amount
of $2,562,000.00; ((i) and (ii) being jointly referred to as the "Original
Notes"). Pursuant to that certain Amended and Restated Acquisition and
Construction Loan Agreement between Holder and Maker of even date herewith,
Maker hereby executes and delivers to Holder this Amended, Restated and
<PAGE>

Consolidated Acquisition Promissory Note No. 4 which amends, restates and
consolidates the Original Notes, as follows:

1.   Promise to Pay.
     --------------

     FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Maker") whose address is 4310 Paradise Road, Las Vegas, Nevada 89109, promises
to pay to the order of HELLER FINANCIAL, INC., a Delaware corporation, and its
successors and assigns ("Holder") the sum of Three Million Seven Hundred Eight-
four Thousand Dollars and No/100 ($3,784,000.00), together with all other
amounts added thereto pursuant to this Note (the "Loan") (or so much thereof as
may from time to time be outstanding), together with interest thereon as
hereinafter set forth, payable in lawful money of the United States of America.
Payments shall be made to Holder at 500 West Monroe Street, Chicago, Illinois
60661 (or such other address as Holder may hereafter designate in writing to
Maker).

     The repayment of the Loan evidenced by this Note is secured by among other
things (i) that certain Mortgage, Assignment of Rents and Security Agreement
dated March 29, 1996 (the "Mortgage") recorded in the Public Records of Orange
County, Florida at Official Records Book 5038, Page 3903, encumbering, among
other things, the property commonly described as Ramada Vacation Suites at Tango
Bay located in Orange County, Florida (the "Property"), and (ii) that certain
Interval Receivables Loan and Security Agreement dated March 28, 1996 (the
"Receivables Security Agreement") pursuant to which Maker has assigned, pledged
and granted a security interest to Lender in certain receivables related to the
sale of Interval Units and other Collateral described therein. This Note, the
Second Amendment and Restatement of Amended, Restated and Consolidated Revolving
Renovation Promissory Note of even date herewith (the "Renovation Note"), the
Mortgage, the Amended and Restated Acquisition and Construction Loan Agreement
of even date herewith (the "Loan Agreement") and any other documents evidencing
or securing the Loan or executed in connection therewith, and any amendment,
modification, consolidation, notification under, renewal or extension of any of
the foregoing are collectively called the "Loan Documents."

     This Note has been issued pursuant to the Loan Agreement, and all of the
terms, covenants and conditions of the Loan Agreement (including all Exhibits
thereto) and all other instruments evidencing or securing the indebtedness
hereunder are hereby made a part of this Note and are deemed incorporated herein
in full. Defined terms used herein and not otherwise defined shall have the
meanings set forth in the Loan Agreement.

2.   Principal and Interest.
     ----------------------

     So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding, and Maker shall pay
interest thereon, at a floating rate of interest per annum equal to four and
one-quarter percent (4.25%) plus the Base Rate (the aggregate rate referred to
as the "Interest Rate"). "Base Rate" shall mean the rate published each business
day in the Wall Street Journal for deposits maturing ninety (90) days after
           -------------------
issuance under the caption "Money Rates, London Interbank Offered Rates
(Libor)". The Interest Rate for each calendar month shall be fixed based upon
the Base Rate published prior to and in effect on the first (1st) business day
of such month. Interest shall be calculated based on a 360 day year and charged
for the actual number of days elapsed.

3.   Payment.
     -------

     Commencing on May 1, 1996, Maker shall pay interest computed at the
Interest Rate monthly in arrears on the first day of each month during the term
of this Note.

<PAGE>

     Concurrently with Maker's sale of any Interval Unit (as defined in the Loan
Agreement), Maker shall pay to Holder the Interval Release Payment (as defined
in the Loan Agreement) with respect to such Interval Unit. The portion of the
Interval Release Payment designated as set forth in the Loan Agreement to be
applied to the Acquisition Commitment shall be applied first to accrued but
unpaid interest which is past due hereunder, if any, and then to the outstanding
principal balance of this Note. The balance of the Interval Release Payment
shall be applied as set forth in the Renovation Note.

     The outstanding principal balance of this Note together with all accrued
interest shall be due and payable on or before April 30, 2003, or any earlier
date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date"). This Note is subject to
mandatory payments in whole or in part as provided in Section 3.1 of the Loan
Agreement as amended from time to time.

4.   Prepayment.
     ----------

     Maker may prepay this Note in full or in part upon not less than three (3)
days prior written notice to Holder.

     Not in limitation of any mandatory prepayment requirements under the Loan
Agreement, if, at any time, the outstanding aggregate principal balance under
(i) this Note; (ii) the Renovation Note; and (iii) that certain First Amendment
and Restatement of Amended, Restated and Increased Receivables Promissory Note
No. 1 of even date herewith, between Holder and Maker in the maximum principal
amount of $30,000,000.00 (the "Receivables Note") exceeds the aggregate amount
of $30,000,000.00, such excess amount shall be due and payable by Maker to
Holder within five (5) business days after notice from Holder without premium or
penalty and such amount shall be applied by Holder to reduce the outstanding
principal of any of the referenced notes in any manner or amount that Holder
determines.

5.   Default.
     -------

     5.1  Events of Default.
          -----------------

     Events of Default hereunder shall be those set forth in the Loan Agreement.

     5.2  Remedies.
          --------

     So long as an Event of Default remains outstanding: (a) interest shall
accrue at a rate equal to the Interest Rate plus four percent (4%) per annum
(the "Default Rate"); (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the Loan immediately due and payable;
and (c) Holder may pursue all rights and remedies available under the Mortgage
or any other Loan Documents.  Holder's rights, remedies and powers, as provided
in this Note and the other Loan Documents, are cumulative and concurrent, and
may be pursued singly, successively or together against Maker, any guarantor of
the Loan, the security described in the Loan Documents, and any other security
given at any time to secure the payment hereof, all at the sole discretion of
Holder. Additionally, Holder may pursue every other right or remedy available at
law or in equity without first exhausting the rights and remedies contained
herein, all in Holder's sole discretion. Failure of Holder, for any period of
time or on more than one occasion, to exercise its option to accelerate the
Maturity Date shall not constitute a waiver of the right to exercise the same at
any time during the continued existence of any Event of Default or any
subsequent Event of Default.

     If any attorney is engaged: (i) to collect the Loan or any sums due under
the Loan Documents, whether or not legal proceedings are thereafter instituted
by Holder; (ii) to represent Holder in any

<PAGE>

bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Note; (iii) to protect the
liens of the Mortgage or any of the Loan Documents; (iv) to foreclose the
Mortgage or enforce any security interests under the Loan Documents; (v) to
represent Holder in any other proceedings whatsoever in connection with the
Mortgage or any of the Loan Documents including post judgment proceedings to
enforce any judgment related to the Loan Documents; or (vi) in connection with
seeking an out-of-court workout or settlement of any of the foregoing, then
Maker shall pay to Holder all reasonable costs, attorneys' fees and expenses in
connection therewith, in addition to all other amounts due hereunder.

6.   Late Charge.
     -----------

     If payments of principal and/or interest, or any other amounts under the
other Loan Documents are not timely made or remain overdue for a period of ten
(10) days, Maker, without notice or demand by Holder, promptly shall pay an
amount ("Late Charge") equal to four percent (4%) of each delinquent payment.

7.   Governing Law: Severability.
     ---------------------------

     This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois. The invalidity illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.

8.   Waiver.
     ------

     Maker, for itself and all endorsers, guarantors and sureties of this Note,
and their heirs, successors, assigns, and legal representatives, hereby waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note except as provided in the Loan
Agreement, and agrees that their respective liability shall be unconditional and
without regard to the liability of any other party and shall not be in any
manner affected by any indulgence, extension of time, renewal, waiver or
modification granted or consented to by Holder. Maker, for itself and all
endorsers, guarantors and sureties of this Note, and their heirs, legal
representatives, successors and assigns, hereby consents to every extension of
time, renewal, waiver or modification that may be granted by Holder regarding
obligations of guarantors, endorsers or sureties with respect to the payment of
other provisions of this Note, and to the release of any makers, endorsers,
guarantors or sureties, and of any collateral given to secure the payment
hereof, or any part hereof, with or without substitution, and agrees that
additional makers, endorsers, guarantors or sureties may become parties hereto
without notice to Maker or to any endorser, guarantor or surety and without
affecting the liability of any of them.

9.   Security, Application of Payments.
     ---------------------------------

     This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Loan Documents and the terms and provisions of the other
Loan Documents are hereby incorporated herein. Payment will be applied, at
Holder's option, first to any fees, expenses or other costs Maker is obligated
to pay under this Note or the other Loan Documents, second to interest due on
the Loan and third to the outstanding principal balance of the Loan.

<PAGE>

10.  Miscellaneous.
     -------------

     10.1   Amendments.
            ----------

     The Note may not be terminated or amended orally, but only by a termination
or amendment in writing signed by Holder and Maker.

     10.2   Lawful Rate or Interest.
            -----------------------

     In no event whatsoever shall the amount of interest paid or agreed to be
paid to Holder pursuant to this Note or any of the Loan Documents exceed the
highest lawful rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Note and the
other Loan Documents shall involve exceeding the lawful rate of interest which a
court of competent jurisdiction may deem applicable hereto ("Excess Interest"),
then ipso facto, the obligation to be fulfilled shall be reduced to the highest
     ---- -----
lawful rate of interest permissible under such law and if, for any reason
whatsoever, Holder shall receive, as interest, an amount which would be deemed
unlawful under such applicable law, such interest shall be applied to the
principal of the Loan (whether or not due and payable), and not to the payment
of interest, or refunded to Maker if such Loan has been paid in full. Neither
Maker nor any guarantor or endorser shall have any action against Holder for any
damages whatsoever arising out of the payment or collection of any such Excess
Interest.

     10.3   Captions.
            --------

     The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.

     10.4   Notices.
            -------

     Notices shall be given under this Note in conformity with the terms and
conditions of the Loan Agreement.

     10.5   Joint and Several.
            -----------------

     The obligations of Maker under this Note shall be joint and several
obligations of Maker and of each Maker, if more than one, and of each Maker's
heirs, personal representatives, successors and assigns.

     10.6   Time of Essence.
            ---------------

     Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.

11.  Sale of Loan.
     ------------

     Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note, the Mortgage, the Loan
Agreement and the other Loan Documents, any guaranties given in connection with
the Loan and any collateral given to secure the Loan. In the event Holder sells,
transfers, conveys or assigns all of Holder's right, title and interest in this
Note or the Loan, Holder shall give notice thereof to Maker and Holder shall
thereupon be released from liability and obligations of the Lender hereunder and
under all other transferred Loan Documents from and after the date of such
transfer provided such

<PAGE>

transferee agrees to be bound by the obligations of Lender thereunder and
provided such transferee is of equal or greater financial capacity than Holder.

12.  Venue.
     -----

     MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY
OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE SHALL BE
LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A
SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS. MAKER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN
SAID COUNTY AND STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES C T
CORPORATION SYSTEM, WHOSE ADDRESS IS MAKER, C/O C T CORPORATION SYSTEM, 208 S.
LASALLE STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED AGENT FOR
SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY
SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER PROVIDED A COPY OF SUCH
SERVICE OF PROCESS IS ALSO SENT WITHIN THREE (3) DAYS THEREAFTER TO MAKER IN
ACCORDANCE WITH THE NOTICE PROVISIONS OF THE LOAN AGREEMENT PROVIDED, HOWEVER,
IN THE CASE OF SERVICE OF PROCESS FOR ACTIONS WHEREIN MAKER'S RESPONSE IS DUE IN
LESS THAN TWENTY (20) DAYS, A COPY OF SUCH PROCESS WILL BE SENT TO MAKER ON THE
SAME DAY AS SERVICE ON C T CORPORATION SYSTEM. IN THE EVENT SERVICE IS
UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN CHICAGO,
ILLINOIS, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST, APPOINT A
SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS BEHALF AND WITHIN SUCH PERIOD
NOTIFY HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY
APPOINTED, HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A
SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY HOLDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH.

13.  Jury Trial Waiver.
     -----------------

     MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER
HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT EACH OF
THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.
MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.

<PAGE>

     IN WITNESS WHEREOF, Maker has executed this Note or has caused the same to
be executed by its duly authorized representatives as of the date set first
forth above.

                                      MAKER:

                                      PREFERRED EQUITIES CORPORATION, a Nevada
                                      corporation

                                      By:  /s/ Carol W. Sullivan
                                           ------------------------------
                                               Carol W. Sullivan

                                      Its: Sr. V. P.
                                           ------------------------------

<PAGE>

This instrument prepared by
and return to:

ROSEMARY O'SHEA, ESQ.
BAKER & HOSTETLER LLP
2300 Sun Bank Center
200 South Orange Avenue
Post Office Box 112
Orlando, Florida  32802
(407) 649-4000

               MORTGAGE MODIFICATION AND SPREADER AGREEMENT NO. 2

          This Mortgage Modification and Spreader Agreement No. 2
("Modification"), dated as of the 6/th/ day of April 2001, is made by
and between PREFERRED EQUITIES CORPORATION, a Nevada corporation ("Mortgagor")
whose address is 4310 Paradise Road, Las Vegas, Nevada 89109, and HELLER
FINANCIAL, INC., a Delaware corporation ("Mortgagee"), whose address is 500 West
Monroe Street, 17th Floor, Chicago, Illinois 60661.

                                   Recitals:
                                   ---------

     A.  Mortgagor and Mortgagee entered into that certain Amended and Restated
Acquisition and Construction Loan Agreement of even date herewith (the "Loan
Agreement"), the terms and provisions of which are incorporated herein by
reference; and

     B.  Pursuant to the Loan Agreement, Mortgagor executed and delivered to
Mortgagee that certain Mortgage, Assignment of Rents and Leases and Security
Agreement dated March 29, 1996, and recorded in Official Records Book 5038, Page
3903, as modified by that certain Notice of Future Advance No. 1 dated December
23, 1997, that certain Mortgage Modification dated July 7, 1998, that certain
Notice of Future Advance No. 2 dated October 19, 1999, that certain Notice of
Future Advance No. 3 dated December 22, 1999, that certain Notice of Future
Advance No. 4 dated February 1, 2000, that certain Mortgage Modification and
Spreader Agreement dated February 1, 2000, that certain Notice of Future Advance
No. 5 dated September 7, 2000 and that certain Notice of Future Advance No. 6 of
even date herewith, all recorded in the Public Records of Orange County, Florida
(collectively, the "Mortgage") encumbering the real and personal property
described in the Mortgage ("Property"); and

     C.  Pursuant to the Loan Agreement, the Acquisition Commitment was amended
to be increased by and include, among other amounts, an additional Two Million
Five Hundred Sixty-two Thousand Dollars and No/100 ($2,562,000.00) for the
purpose of acquiring additional condominium units (the "Additional Units")
adjacent to the existing Resort Property for the development of additional
timeshare units, and the Renovation Commitment was amended thereby to be
increased by and include an additional One Million Four Hundred Thirty-eight
Thousand Dollars and No/100 ($1,438,000.00) (jointly, the "Increased
Commitments") for the purpose of construction and renovation of the Additional
Units; and

     D.  In partial satisfaction of the conditions precedent to the advance of
funds by Mortgagee to Mortgagor under the Increased Commitments, Mortgagor
desires spread the lien of the Mortgage to encumber the Second Additional
Property, as set forth herein.
<PAGE>

          In consideration of the promises in this Modification, and the sum of
ten dollars ($10.00), the receipt and sufficiency of which are acknowledged
hereby, the parties agree as follows:

          1.  The above recitals are true and correct and incorporated herein by
reference.

          2.  Mortgagor does hereby mortgage, convey, assign, warrant, transfer,
pledge and grant to Mortgagee all of Mortgagor's right, title and interest in
and to the following described property and all proceeds thereof (collectively,
the "Second Additional Property") all of which shall be deemed and addition to
and a part of the Property as such term is defined in the Mortgage, and the lien
of the Mortgage upon which shall secure the payment and performance, as
applicable, of all the terms, covenants, duties, obligations and conditions set
forth in the Mortgage:

          A.  The real estate described on Exhibit A attached hereto (hereafter
                                           ---------
deemed a part of the Land);

          B.  All of the following (hereafter collectively deemed a part of the
Improvements):  all buildings, improvements and fixtures now or in the future
located or to be constructed on the Land; all machinery, appliances, equipment,
furniture, fixtures and all other personal property of every kind or nature
located in or on, or attached to, or used or to be used in connection with the
Land, the buildings, improvements or fixtures located thereon; all building
materials and goods procured for use or in connection with the foregoing; and
all additions, substitutions and replacements to any of the foregoing;

          C.  To the extent assignable, all plans, specifications, architectural
renderings, drawings, soil test reports, and other reports or examination or
analysis of the Land or the Improvements;

          D.  All easements, rights-of-way, water courses, mineral rights, water
rights, air rights and appurtenances in any way belonging, relating or
appertaining to any of the Land or Improvements, or which hereafter shall in any
way belong, relate or be appurtenant thereto (hereafter deemed a part of the
Appurtenances);

          E.  All agreements permitting the use or occupancy of the Land and/or
Improvements now or hereafter entered into (hereafter deemed a part of the
Leases) and all proceeds from the sale of any interest in the Land and/or
Improvements, including without limitation proceeds from the sale of Interval
Units (as defined in the Loan Agreement) which have not been released from the
Mortgage, rents, prepayments, security deposits, termination payments,
royalties, profits, issues and revenues from the Land and/or Improvements from
time to time accruing under the Leases (hereafter deemed to be a part of the
Rents), reserving to Mortgagor, however, so long as no Event of Default has
occurred under the Mortgage, the right to receive and apply the Rents in
accordance with the terms and conditions of Section 7 of the Mortgage;

          F.  All claims, demands, judgments, insurance proceeds, refunds,
reserves, deposits, rights of action, awards of damages, compensation,
settlements and other rights to the payment of money hereafter made resulting
from or relating to (i) the taking of the Land or the Improvements or any part
thereof under the power of eminent domain, (ii) any damage (whether caused by
such taking, by casualty or otherwise) to the Land, Property, Improvements or
Appurtenances or any part thereof, or (iii) the ownership or operation of the
Property;

          G.  To the extent assignable, all contracts for the sale of Interval
Units not released in accordance with the Mortgage, management contracts and
resort affiliation or exchange club agreements
<PAGE>

executed by Mortgagor, permits, certificates, insurance policies (as related to
the Land and the Improvements), logos, trademarks, tradenames, copyrights,
licenses, approvals, other contracts, purchase and sale agreements, purchase
options, entitlements, development rights and authorizations, however
characterized, issued or in any way furnished for or for the benefit of the
acquisition, construction, development, operation and use of the Land,
Improvements and/or Leases, including building permits, environmental
certificates, licenses, certificates of operation, warranties, guaranties and
Mortgagor's rights as declarant, developer, owner or otherwise under governing
documents or restrictive covenants affecting the Property whether now or
hereafter existing;

          H.  All accounts, contract rights, general intangibles, chattel paper,
documents, instruments, inventory, goods, and equipment arising from or located
on the Land or Improvements and all books and records relating to the foregoing;

          I.  Any monies on deposit with or for the benefit of Mortgagee,
including deposits for the payment of real estate taxes and any cash collateral
account;

          J.  All proceeds, products, replacements, additions, substitutions,
renewals and accessions of and to the Land, Improvements, Appurtenances or any
other property described in the preceding granting clauses; and

          K.  Any and all after-acquired right, title or interest of Mortgagor
in and to any property described in the preceding granting clauses.  Any other
provision hereof to the contrary notwithstanding, the Property does not include
any Interval Unit released from the Mortgage, or, subject to Lender's Funding
Option as set forth in the Amended and Restated Interval Receivables Loan and
Security Agreement of even date herewith, the proceeds of any sale thereof, or
any instrument or agreement evidencing or securing the same or executed in
connection therewith.

          TO HAVE AND TO HOLD the Second Additional Property and all parts
thereof together with the rents, issues, profits and proceeds thereof, unto
Mortgagee to its own proper use, benefit, and advantage forever, subject,
however, to the terms, covenants, and conditions of the Mortgage.

          3.  This Modification shall be binding on the successors and assigns
of the parties.

          4.  All capitalized terms not defined herein shall be given the
meanings assigned thereto in the Mortgage, and if not defined therein then as
defined in the Loan Agreement.
<PAGE>

          In witness whereof, Mortgagor and Mortgagee have caused this
Modification to be executed the day and year first written above.

                                          "MORTGAGOR"

                                          PREFERRED EQUITIES CORPORATION,
                                          a Nevada corporation

/s/ Mark Prasse
-----------------------
Witness
Mark Prasse                               By: /s/ Carol W. Sullivan
-----------------------                      ----------------------
Print Name

/s/ Linda DeGirolamo                         Carol W. Sullivan
-----------------------                   -------------------------
Witness                                   Print Name

Linda DeGirolamo
-----------------------
Print Name                                Its: Sr. V.P.
                                              ---------------------

                                                   [SEAL]

                                          "MORTGAGEE"

                                          HELLER FINANCIAL, INC.

/s/ M Fonsera
------------------------
Witness
MARIA FONSERA                             By: /s/ Dennis K. Holland
------------------------                     ----------------------
Print Name
Valerie Boulden                               DENNIS K. HOLLAND
-----------------------                   -------------------------
Witness                                   Print Name
Valerie Boulden
-----------------------
Print Name                                Its: Sr. V.P.
                                              ---------------------

                                                   [SEAL]
<PAGE>

STATE OF NEVADA        )
         -----------
                       )  SS.
COUNTY OF CLARK        )
          ----------

     The foregoing instrument was acknowledged before me this 5 day of APRIL,
                                                              -        -----
2001, by CAROL W. SULLIVAN, as SR. V.P. of PREFERRED EQUITIES CORPORATION, a
         -----------------     --------
Nevada corporation, on behalf of the corporation. He/She is personally known to
me or has produced NEVADA DL identification.
                   ---------

                                        Syonia L. Garcia
                                        --------------------------------
                                        (Notary Signature)

          (NOTARY SEAL)                 Syonia L. Garcia
                                        --------------------------------
                                        (Notary Name Printed)
                                        NOTARY PUBLIC

                                        Commission No. 00-64553-1
                                                      ------------------

STATE OF ILLINOIS      )
         -----------
                       )  SS.
COUNTY OF COOK         )
          ----------

     The foregoing instrument was acknowledged before me this 10th day of
----------------------, 2001, by _________________, as _______________________
Heller Financial, Inc., a Delaware corporation, on behalf of the corporation.
He/She is personally known to me or has produced _______________ as
identification.

                                        Jacqueline L. Taylor
                                        --------------------------------
                                        (Notary Signature)

          (NOTARY SEAL)
                                        ________________________________
                                        (Notary Name Printed)
                                        NOTARY PUBLIC
                                        Commission No.__________________

<PAGE>

Loan No. 95-227

                             AMENDED AND RESTATED
                             --------------------
                          LOAN AND SECURITY AGREEMENT
                          ---------------------------

     THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement")
dated April 6, 2001, is made by and between Preferred Equities Corporation, a
Nevada corporation ("Borrower"), whose address is 4310 Paradise Road, Las Vegas,
Nevada 89109, and Heller Financial, Inc., a Delaware corporation ("Lender"),
whose address is 500 West Monroe Street, 30th Floor, Chicago, Illinois 60661.

                                   RECITALS
                                   --------

     A.   This Agreement amends and restates in its entirety that certain
Interval Receivables Loan and Security Agreement dated as of March 28, 1996, as
amended by that certain Amendment to Interval Receivables Loan and Security
Agreement dated December 23, 1997, that certain Second Amendment to Interval
Receivables Loan and Security Agreement dated July 7, 1998, that certain
Amendment No. 2 to Interval Receivables Loan and Security Agreement dated March
1, 1999, and that certain Fourth Amendment to Interval Receivables Loan and
Security Agreement dated December 22, 1999, by and between Borrower and Lender.

     B.   Borrower desires Lender to extend a secured credit facility to
Borrower in accordance with the terms of this Agreement.

     C.   Borrower's obligations under the Loan Documents will be secured inter
alia by a security interest in certain Notes Receivable.

     D.   Mego Financial Corp., a New York corporation ( "Guarantor") shall
guaranty all of the obligations of Borrower to Lender under the Loan Documents.

     E.   All capitalized terms used herein shall have the meanings ascribed
thereto in the Appendix attached hereto and made a part hereof by this
reference.

     NOW, THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants herein contained, Borrower and Lender agree
as follows:

                             SECTION 1 - THE LOAN
                             -------  -----------

     1.1  Loan.
          ----

          (a)  Availability. During the Revolving Period, Lender shall make
               ------------
Advances to Borrower not in excess of Availability provided that Borrower
satisfies all conditions set forth in Section 3 hereof. Advances shall be (a) in
minimum amounts of $100,000 each, and (b) made no more frequently than four (4)
times each month nor more than one (1) time each week; provided, however, that,
subject to Availability, any request for an Advance of less than $100,000 or for
any Advance in excess of the number of Advances permitted in any week or month
shall be honored by Lender if accompanied by payment to Lender of a fee (the
"Service Charge") of $3,000 for each such Advance. Except in connection with a
prepayment mandated under Section 1.5(b)(i) below, any amounts repaid during the
Revolving Period may be reborrowed during the Revolving Period.
<PAGE>

          (b)  Excess Availability. Lender shall make Advances of Excess
               -------------------
Availability to Borrower not more often than once per month and within fifteen
(15) days of Borrower's delivery to Lender of written request therefor
accompanied by Monthly Reports evidencing such Excess Availability to Lender's
satisfaction.

     1.2  Term. The term of the Loan shall expire on the last day of March,
          ----
2006.

     1.3  Interest Rate. The outstanding principal balance of the Loan together
          -------------
with all other Indebtedness shall bear interest at the Interest Rate; provided,
however, that after the occurrence of an Event of Default the Loan will bear
interest at the Default Rate.

     1.4  Payments.
          --------

          (a)  Monthly Payments. All funds collected by the Lockbox Agent from
               ----------------
the Financed Notes Receivable shall be paid to Lender at least weekly pursuant
to the Lockbox Agreement, and applied in the following order:  first to the
payment of costs and expenses incurred by Lender in collecting any amounts due
in connection with the Loan; second, to the payment of accrued but unpaid
interest on the Loan; and thereafter to the reduction of the principal balance
of the Loan.  If the funds received by Lender from the Lockbox Agent with
respect to any month are insufficient to pay interest in full, Borrower shall
pay the difference to Lender within five (5) days of written notice from Lender.
Payments received by Borrower directly from any Purchaser shall be delivered to
the Lockbox Agent within two (2) Business Days.

          (b)  Final Payment. The Indebtedness shall be payable in full on the
               -------------
Maturity Date.

     1.5  Prepayments.
          -----------

          (a)  Voluntary Prepayments. Prepayments of the Loan (i) shall not be
               ---------------------
permitted during the Revolving Period, and (ii) may be made in whole, but not in
part, upon five (5) days prior written notice to Lender at any time after the
end of the Revolving Period upon payment of the applicable Prepayment Premium
(whether such prepayment results from voluntary payments by Borrower,
acceleration, or otherwise); provided, however, that payments or prepayments of
Financed Notes Receivable made by Purchasers shall not violate this Section
1.5(a), no Prepayment Premium shall be payable as a result of any such payment
by Purchasers and no voluntary prepayment of the Loan, whether in whole or in
part, shall occur prior to the full repayment of the Acquisition and
Construction Loan.

          (b)  Mandatory Prepayments.
               ---------------------

               (i)   Excess Outstandings. If at any time the outstanding
                     -------------------
principal balance of the Loan exceeds the Maximum Exposure, Borrower shall,
within five (5) Business Days after notice, either (A) prepay the Loan in an
amount necessary to reduce the principal balance of the Loan, or (B) deliver to
Lender such additional or replacement Eligible Notes Receivable, in either event
such that the remaining outstanding principal balance of the Loan is equal to or
less than the Maximum Exposure. If at any time the combined outstanding balance
due to Lender under the Acquisition and Construction Loan and the Loan exceeds
$30,000,000.00, Borrower shall, within five (5) Business Days after notice
prepay the Loan in an amount necessary to reduce the foregoing balance due to
Lender to an amount equal to or less than $30,000,000.00.

               (ii)  Ineligible Financed Note Receivable. If at any time after
                     -----------------------------------
the expiration of the Revolving Period a Financed Note Receivable ceases to be
an Eligible Note Receivable, Borrower shall, within five (5) Business Days after
notice, and in accordance with Lender's instructions

<PAGE>

designating one of the following courses of action chosen by Lender in Lender's
sole discretion, either (A) prepay the Loan in an amount equal to the balance
due under such Financed Note Receivable, or (B) deliver to Lender one (1) or
more Eligible Notes Receivable having an outstanding aggregate principal balance
equal to or in excess of the outstanding principal balance of such Financed Note
Receivable. Thereafter, at Borrower's request Lender shall return such
ineligible Note Receivable to Borrower and, within five (5) days of Lender's
receipt from Borrower of a completed assignment relating to such Note Receivable
and the Mortgage securing the same, in form acceptable to Lender substantially
in the form attached hereto as Exhibit A, Lender shall execute such instrument
                               ---------
and return it to Borrower.

               (iii) No Prepayment Premium. No Prepayment Premium shall be due
                     ---------------------
in connection with any mandatory prepayment made in accordance with Sections
1.5(b)(i) or (ii) above.

     1.6  Commitment Fee. The Commitment Fee has been fully earned by Lender.
          --------------
Borrower has agreed to pay Lender, in addition to amounts previously paid to
Lender, an additional Commitment Fee in the amount of $105,000.00, which shall
be due and payable in the amount of $25,000.00 upon the date hereof, with the
balance of $80,000.00 payable in four (4) installments of $20,000.00 each, due
and payable on the thirtieth (30th), sixtieth (60th), ninetieth (90th) and one-
hundred twentieth (120th) days hereafter.   Borrower hereby authorizes Lender to
advance any such sum to itself which may be due and payable at the time of any
Advance.

                            SECTION 2 - COLLATERAL
                            -------  -------------

     2.1  Grant of Security Interest. To secure the payment and performance of
          --------------------------
the Indebtedness, Borrower does hereby unconditionally and irrevocably assign,
pledge and grant to Lender a first priority continuing security interest and
lien in and to the right, title and interest of Borrower in the following
property of Borrower, whether now owned or existing or hereafter acquired
regardless of where located (collectively, the "Collateral"):

          (a)  The Financed Notes Receivable;

          (b)  The Mortgages and Purchase Documents;

          (c)  All rights of Borrower, its Affiliates, successors or assigns, as
relates to any Interval which is the subject of a Financed Note Receivable;

          (d)  All deposits, accounts, accounts receivable, general intangibles
and other receivables arising under or in connection with the Pledged Documents,
together with all payments, privileges and benefits arising out of the
enforcement thereof, and all funds held in any deposit accounts related to any
of the Financed Notes Receivable;

          (e)  All policies of title insurance related to the Mortgages;

          (f)  All documents, instruments, pledged assets and chattel paper
relating to the Pledged Documents and the other properties and rights described
as Collateral herein;

          (g)  All cash and other monies and property of Borrower in the
possession or under the control of Lender;

          (h)  All books, records, ledger cards, files, correspondence, computer
tapes, disks and software relating to the Pledged Documents or any other
Collateral described herein;

<PAGE>

          (i)  All management, marketing, servicing, maintenance or other
similar contracts for the Resort; and

          (k)  All proceeds, extensions, amendments, additions, improvements,
betterments, renewals, substitutions and replacements of the foregoing.

     2.2  Upgraded Notes Receivable. Notwithstanding anything to the contrary
          -------------------------
set forth in this Agreement, Borrower may, upon five (5) days' prior written
notice to Lender, supplement or replace Financed Notes Receivables with Upgraded
Notes Receivable without Lender's prior consent so long as no Event of Default
exists and is continuing. Upon the replacement of a Financed Note Receivable
with an Upgraded Note Receivable, the replaced Note Receivable shall be deemed
"ineligible" and shall be returned to Borrower in accordance with the provisions
of Section 1.5(b)(ii).

     2.3  Security Agreement. This Agreement shall be deemed a security
          ------------------
agreement as defined in the Code, and the remedies for any violation of the
covenants, terms and conditions of the agreements herein contained shall be
cumulative and be as prescribed (a) herein, or (b) by general law, or (c) as to
such part of the Collateral which is also reflected in any filed financing
statement, by the specific provisions of the Code now or hereafter enacted, all
at Lender's sole election.

                 SECTION 3 - CONDITIONS PRECEDENT TO ADVANCES
                 -------  -----------------------------------

     The obligation of Lender to make Advances is subject to satisfaction of all
of the conditions set forth below.

     3.1  Closing Deliveries.  Lender shall have received, in form and substance
          ------------------
satisfactory to Lender, all documents, instruments and information identified on
the Closing Checklist heretofore delivered by Lender to Borrower, other than
items designated thereon by Lender as post-closing items, including, without
limitation, executed legal opinions, issued by counsel acceptable to Lender, in
form and content acceptable to Lender substantially in the form attached hereto
as Exhibit B.
   ---------

     3.2  Deliveries Prior to Each Advance. Prior to each Advance, Lender shall
          --------------------------------
have received all documents, instruments and information identified on Schedule
3.2, including, but not limited to, the average score based on FICO guidelines
calculated on a sample drawn by Lender from all the accounts submitted with each
Request for Advance.  Requests for Advance shall be made at least five (5)
Business Days prior to the requested date of disbursement and shall be in the
form of Exhibit C hereto.
        ---------

     3.3  Security Interests. Lender shall have received satisfactory evidence
          ------------------
that all security interests and liens granted to Lender pursuant to this
Agreement or the other Loan Documents have been duly perfected and constitute
first priority liens on the Collateral.

     3.4  Representations and Warranties. The representations and warranties
          ------------------------------
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of the date of funding of the Advance except
for any representation or warranty limited by its terms to a specific date and
taking into account any amendments to the Schedules or Exhibits as a result of
any disclosures made by Borrower to Lender after the date hereof and approved by
Lender.

     3.5  No Default. No Event of Default shall have occurred.
          ----------

     3.6  Performance of Agreements. Borrower shall have performed in all
          -------------------------
material respects all agreements (including, without limitation, those relating
to the Acquisition and Construction Loan), paid

<PAGE>

all fees, costs and expenses and satisfied all conditions which any Loan
Document provides shall be paid or performed by it as of such date.

     3.7  Governmental Approvals. Borrower shall have obtained all approvals,
          ----------------------
licenses, permits and consents for (a) Borrower's operation of that portion of
the Resort then open and (b) the sale of Intervals which are the subject of any
requested Advance.

              SECTION 4 - GENERAL REPRESENTATIONS AND WARRANTIES
              -------  -----------------------------------------

     Borrower hereby represents and warrants to Lender as follows, which
representations and warranties shall remain true throughout the term of the
Loan:

     4.1  Existence. Borrower is a corporation duly formed, validly existing and
          ---------
in good standing under the laws of the State of Nevada with its principal place
of business at 4310 Paradise Road, Las Vegas Nevada 89109. Borrower is in good
standing under the laws of the State of Nevada and is authorized to transact
business in the State of Florida. In the event Borrower moves its principal
place of business, Borrower shall provide Lender with at least thirty (30) days
prior notice and thereafter shall prior to such relocation provide Lender at
Borrower's expense with such modified Loan Documents or additions thereto as may
be required by Lender to continue Lender's perfected security interests
hereunder.

     4.2  Authorization and Enforceability.
          --------------------------------

          (a)  Execution. The Loan Documents have been duly authorized, executed
               ---------
and delivered and constitute the duly authorized, valid and legally binding
obligations of Borrower, enforceable against Borrower and the other parties
signatory thereto (other than Lender) in accordance with their respective terms.

          (b)  Other Agreements. The execution, delivery and compliance with the
               ----------------
terms and provisions of the Loan Documents will not (i) to the best of
Borrower's knowledge, violate any provisions of law or any applicable
regulation, order or other decree of any court or governmental entity, or (ii)
conflict or be inconsistent with, or result in any default under, any material
contract, agreement or commitment to which Borrower is bound.

     4.3  Financial Statements and Business Condition. Borrower's and
          -------------------------------------------
Guarantor's financial statements fairly present the respective financial
conditions and (if applicable) results of operations of Borrower and Guarantor
as of the date or dates thereof and for the periods covered thereby. All such
financial statements, other than those prepared on behalf of a natural person,
if any, were prepared in accordance with GAAP except that quarterly statements
are subject to year-end adjustments and may not contain footnotes. Except for
any such changes heretofore expressly disclosed in writing to Lender, there has
been no material adverse change in the respective financial conditions of
Borrower or Guarantor from the financial conditions shown in their respective
financial statements. Borrower is able to pay all of its debts as they become
due, and Borrower shall maintain such solvent financial condition, giving effect
to all obligations, absolute and contingent, of Borrower. Borrower's obligations
under this Agreement and under the Loan Documents will not render Borrower
unable to pay its debts as they become due. The present fair market value of
Borrower's assets is greater than the amount required to pay its total
liabilities.

     4.4  Taxes. All ad valorem taxes and other taxes and assessments against
          -----
the Resort and the Collateral that are currently due and payable have been paid
and there exist no delinquent or past due amounts, and Borrower knows of no
basis for any additional taxes or assessments against the Resort or

<PAGE>

the Collateral. Borrower has filed all required tax returns and has paid all
taxes shown to be due and payable on such returns, including interest and
penalties, and all other taxes which are payable by it, to the extent the same
have become due and payable. Borrower shall collect and pay any applicable sales
or rental tax respecting the sale or rental of any Intervals.

     4.5  Litigation and Proceedings. Except as disclosed in Schedule 4.5
          --------------------------
attached hereto, there are no actions, suits, proceedings, orders or injunctions
pending or, to the best of Borrower's knowledge, threatened against or affecting
Borrower, Guarantor, the Timeshare Association or any Affiliate, at law or in
equity, or before or by any governmental authority. Neither Borrower nor
Guarantor has received any notice from any court or governmental authority
alleging that such Person or any Affiliate or the Timeshare Association has
violated the Timeshare Act, any of the rules or regulations thereunder, or any
other applicable laws.

     4.6  Licenses and Permits. Borrower possesses all requisite franchises,
          --------------------
certificates of convenience and necessity, operating rights, licenses, permits,
consents, authorizations, exemptions and orders as are necessary to carry on its
business as now being conducted.

     4.7  Full Disclosure. No information, exhibit or written report furnished
          ---------------
by or on behalf of Borrower to Lender in connection with the Loan contains any
material misstatement of fact or omits any material fact necessary to make the
statement contained herein or therein not misleading.  Borrower knows of no
legal or contractual restriction which will prevent it from offering or selling
Intervals to Purchasers in any state where it is selling Intervals.

     4.8  Employee Benefit Plans. Borrower is in compliance in all material
          ----------------------
respects with all applicable provisions of the Employee Retirement Income
Security Act, the Internal Revenue Code and all other applicable laws and the
regulations and interpretations thereof with respect to all employee benefit
plans adopted by Borrower for the benefit of its employees.  No material
liability has been incurred by Borrower which remains unsatisfied for any
funding obligation, taxes or penalties with respect to any such employee benefit
plan.

     4.9  Representations as to the Resort.
          --------------------------------

          (a)  Title; Prior Liens. Borrower has good and marketable title to the
               ------------------
Resort (excluding sold Intervals).  Borrower is not in default under any of the
documents evidencing or securing any indebtedness which is secured, wholly or in
part, by the Resort, and no event has occurred which with the giving of notice,
the passage of time or both, would constitute a default under any of the
documents evidencing or securing any such indebtedness.  There are no liens or
encumbrances against the Resort other than the Permitted Exceptions.

          (b)  Access. The Resort has direct access to a publicly dedicated road
               ------
over a recorded easement and all roadways, if any, inside the Resort are or will
be after the first  Advance common areas under the Declaration.

          (c)  Utilities. Electric, gas, sewer, water facilities and other
               ---------
necessary utilities are lawfully available in sufficient capacity to service the
Resort and any easements necessary to the furnishing of such utility service
have been obtained and duly recorded.

          (d)  Amenities. All amenities described in the sales prospectus and
               ---------
the Public Reports for the Resort are completed, or a bond insuring their
completion has been posted. Such amenities include those listed in Schedule
4.9(d) attached hereto. Each Purchaser of an Interval has

<PAGE>

access to and the use of all of the amenities and public utilities of the Resort
as and to the extent provided in the Declaration and the Public Reports.

          (e)  Construction. All costs arising from the construction of any
               ------------
improvements and the purchase of any equipment, inventory, or furnishings
located in or on Units for which Financed Notes Receivables are given have been
paid.

     4.10 Timeshare Interval Exchange Network. Borrower shall at all times
          -----------------------------------
from and after the initial Advance, be a member and participant, pursuant to a
validly executed and enforceable agreement in writing, in Resort Condominium
International ("RCI") or Interval International ("II") and the Resort shall, at
the time of the initial Advance either be designated a Gold Crown Resort by RCI
or have a comparable designation from II. Borrower shall pay or cause to be paid
all fees and other amounts due and owing under such agreement and not otherwise
be in default thereunder. Borrower may, without the Lender's prior approval,
become a member of and participant in Interval International.

     4.11 Collateral.
          ----------

          (a)  Title. Borrower has good and marketable title to the Collateral,
               -----
free and clear of any lien, security interest, charge or encumbrance except for
(i) the security interest created by this Agreement or otherwise created in
favor of Lender, and (ii) the Permitted Exceptions. No financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except such as may have been filed in favor of
Lender. Borrower shall defend Lender against and save it harmless from all
claims of any Persons other than Lender with respect to the Collateral, and this
indemnity shall include all reasonable attorneys' fees and legal expenses.

          (b)  Binding Obligations. On the date of the assignment and delivery
               -------------------
to Lender, each Financed Note Receivable and Upgraded Note Receivable
constitutes an Eligible Note Receivable and Borrower is not aware of any facts
or information which would cause such Financed Note Receivable to be ineligible
hereunder.

          (c)  Community Property. The Pledged Documents were executed by
               ------------------
Purchasers in connection with the purchase of Intervals and, as to individuals,
bind the marital community of married individual partners, to the extent
community property statutes are applicable.

                       SECTION 5 - AFFIRMATIVE COVENANTS
                       -------  ------------------------

          So long as any portion of the Indebtedness remains unpaid or Lender is
committed to make Advances hereunder, Borrower covenants as follows:

     5.1  Payment and Performance of Indebtedness. Borrower shall pay and
          ---------------------------------------
promptly perform all of the obligations hereunder and under the Loan Documents.

     5.2  Maintenance of Insurance.
          ------------------------

          (a)  Policies. The Resort shall at all times and for so long as any
               --------
Indebtedness remains outstanding be kept insured with such general liability
coverage and such other coverages acceptable to Lender, by carrier(s), in
amounts and in form at all times satisfactory to Lender, which carrier(s),
amounts and form shall not be changed without the prior written consent of
Lender.  All required insurance may be maintained by the Timeshare Association
as required by the Declaration, provided that in the event such Timeshare
Association fails to maintain any insurance required under this Section 5.2(a),
then Borrower shall be required to obtain and maintain such insurance.

<PAGE>

          (b)  Proofs of Claim. In case of loss or damage or other casualty,
               ---------------
Borrower shall give immediate written notice thereof to the insurance carrier(s)
and to Lender. Subject to the prior rights of the Timeshare Association under
the Declaration, Lender is authorized and empowered, and Borrower hereby
irrevocably appoints Lender as its attorney-in-fact (such appointment is coupled
with an interest), at Lender's option, to make or file proofs of loss or damage
and to settle and adjust any claim under insurance policies which insure against
such risks, or to direct Borrower, in writing, to agree with the insurance
carrier(s) on the amount to be paid in regard to such loss.

          (c)  Loss or Casualty. Provided no Event of Default then exists and
               ----------------
Borrower certifies as to same, the net insurance proceeds shall be made
available for the restoration or repair of the Resort if (i) in Lender's
reasonable judgment: (A) restoration or repair and the continued operation of
the Resort is economically feasible; (B) the value of Lender's security is not
reduced; and (C) the casualty loss does not exceed the net insurance proceeds
available for restoration, or Borrower or the Timeshare Association provides a
deposit in the amount of any such excess or other evidence satisfactory to
Lender that funds are otherwise available to pay any excess costs of
restoration; and (ii) the loss does not occur in the six (6) month period
preceding the Maturity Date and Lender's independent consultant certifies that
the restoration of the Property can be completed at least ninety (90) days prior
to the Maturity Date. Borrower shall pay, or cause to be paid, all amounts, in
addition to the net insurance proceeds, necessary to pay in full the cost of the
restoration or repair. Notwithstanding anything to the contrary contained
herein, for so long as any part of the Resort is subject to the Declaration, any
and all insurance proceeds received by Lender arising from any damage or
destruction to the Resort shall be delivered and paid out by Lender to the
insurance trustee under the Declaration, to be distributed and used in
accordance with the provisions of the Declaration.

          Notwithstanding the foregoing, it shall be a condition precedent to
any disbursement of insurance proceeds held by Lender hereunder that Lender
shall have approved (x) all plans and specifications for any proposed repair or
restoration; (y) the construction schedule; and (z) the architect's and general
contractor's contracts for restoration exceeding $100,000. Lender may establish
other conditions it deems reasonably necessary to assure the work is fully
completed in a good and workmanlike manner free of all liens or claims by reason
thereof, and in compliance with all applicable laws, rules and regulations. At
Lender's option, the net insurance proceeds shall be disbursed pursuant to a
construction escrow acceptable to Lender. If an Event of Default then exists, or
any of the conditions set forth in this subsection have not been met or
satisfied, the net insurance proceeds shall be applied to the Indebtedness in
such order and manner as Lender may elect, whether or not due and payable, with
any excess paid to Borrower.

     5.3  Condemnation. The proceeds of any award, payment or claim for damages,
          ------------
direct or consequential, in connection with any condemnation or other taking of
any Unit or Interval which is the subject of a Financed Note Receivable or part
thereof, or for conveyances in lieu of condemnation, are hereby assigned to and
shall be paid to Lender to the extent of any then outstanding indebtedness.
Lender is authorized (but is under no obligation) to collect any such proceeds.
Lender may, in its sole discretion, elect to make such proceeds available for
repair or restoration of the Resort in the same manner and upon the same
conditions as set forth above for net insurance proceeds or apply the net
proceeds of any such condemnation award (after deduction of Lender's reasonable
costs and expenses, if any, in collecting the same) in reduction of the
Indebtedness in such order and manner as Lender may elect, whether due or not.
Notwithstanding anything to the contrary contained herein, for so long as any
part of the Resort is subject to the Declaration, any and all awards and payment
received by Lender arising from any condemnation or conveyances in lieu thereof
relating to the Resort shall be delivered and paid out by Lender to the
insurance trustee under the Declaration, to be distributed and used in
accordance with the provisions of the Declaration.

<PAGE>

     5.4  Inspections and Audits. Borrower shall, at such reasonable times
          ----------------------
during normal business hours and as often as may be reasonably requested, permit
any agents or representatives of Lender to inspect the Resort and any of
Borrower's assets (including financial and accounting books and records), to
examine and make copies of and abstracts from the records and books of account
of Borrower or the timeshare unit owner's association or servicer under the
Servicing Agreement and to discuss its affairs, finances and accounts with any
of its officers, employees or independent public accountants. Borrower
acknowledges that Lender intends to conduct such audits and inspections on at
least an annual basis. Borrower shall make available to Lender all credit
information in Borrower's possession or under Borrower's control with respect to
Purchasers as Lender may request. All audits, inspections of the Resort and
credit investigations shall be at Borrower's expense; provided, however, that
except with respect to any audits, inspections of the Resort or credit
investigations after an Event of Default hereunder, Borrower shall not be
required to pay in excess of Five Thousand Dollars and No/100 ($5,000.00) in any
calendar year for audit, inspections of the Resort or credit investigations
performed during such year. After the occurrence of an Event of Default,
Borrower shall be required to pay all fees, cost and expenses incurred by Lender
for any and all Resort inspections, audits and any other diligence relating to
Borrower's finances or books and records.

     5.5  Reporting Requirements. So long as the Indebtedness remains unpaid,
          ----------------------
Borrower shall furnish the following to Lender:

          (a)  Monthly Reports. To the extent not provided to Lender pursuant to
               ---------------
the requirements of the Servicing Agreement, within ten (10) days after the end
of each calendar month, reports showing through the end of the preceding month,
(i) the following information with respect to each Financed Note Receivable:
(A) the opening and closing balances, (B) all payments received allocated to
interest, principal, late charges, taxes or the like, (C) the rate of interest,
(D) an itemization of delinquencies, extensions, refinances, prepayments,
upgrades, payoffs, cancellations and other adjustments,  (E) the remaining term,
and (F) the nature and status of any claims asserted or legal action pending
with respect thereto; and (ii) the weighted average interest rate and the
average remaining term of all Financed Notes Receivable.

          (b)  Sales and Inventory Reports. Within ten (10) days after the end
               ---------------------------
of each quarter, a quarterly report showing all sales and cancellations of sales
of Intervals, in form and content satisfactory to Lender; and within thirty (30)
days after the end of each fiscal year of Borrower, an annual sales and
inventory report for the Resort detailing the sales of all Intervals during such
fiscal year and the available inventory of Units and Intervals, certified by
Borrower to be true, correct and complete and otherwise in the form approved by
Lender.

          (c)  Quarterly Financial Reports. Within sixty (60) days after the end
               ---------------------------
of each fiscal quarterly period, unaudited financial statements of Borrower and
Guarantor and the Timeshare Association, certified by the chief financial
officer of the subject thereof.

          (d)  Year-End Financial Reports. As soon as available and in any event
               --------------------------
within one hundred and twenty (120) days after the end of each fiscal year of
Borrower, Guarantor and Timeshare Association: (i) the balance sheets of
Borrower, Guarantor and Timeshare Association as of the end of such year and the
related statements of income and cash flow for such fiscal year; (ii) a schedule
of all outstanding indebtedness of Borrower, Guarantor and Timeshare Association
describing in reasonable detail each such debt or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt or loan; and (iii) with respect to the financial statements of
Borrower, Guarantor and Timeshare Association, copies of reports from a firm of
independent certified public accountants selected by Borrower, which report
shall be unqualified as to going concern and scope of audit and shall state that
such financial statements present fairly the financial position of Borrower,

<PAGE>

Guarantor and Timeshare Association as of the dates indicated and the results of
its operations and cash flow for the periods indicated in conformity with GAAP.

          (e)  Audit Reports. Promptly upon receipt thereof, one (1) copy of
               -------------
each other report submitted to Borrower by independent public accountants in
connection with any annual, interim or special audit made by them of the books
of Borrower;

          (f)  Other Reports. Such other reports, statements, notices or written
               -------------
communications relating to the Borrower, Guarantor, the Timeshare Association or
the Resort as Lender may require, in its reasonably discretion.

          (g)  SEC Reports. Promptly upon their becoming available one (1) copy
               -----------
of each financial statement, report, notice or proxy statement sent by Borrower
or Guarantor to security holders generally, and of each regular or periodic
report and any registration statement, prospectus or written communication
(other than transmittal letters) in respect thereof filed by Borrower or
Guarantor with, or received by Borrower or Guarantor in connection therewith
from, any securities exchange or the Securities and Exchange Commission or any
successor agency.

          (h)  Accounting for Defaulted Notes. All financial reporting for
               ------------------------------
Borrower shall incorporate either current charge-offs in the amount of the
principal balance of Defaulted Notes (as defined below) or allowances equal to
or greater than the principal balance of Defaulted Notes, in accordance with
GAAP, where "Defaulted Notes" for purposes of this provision shall mean the
principal balance of all of Borrower's Notes Receivable which are either ninety
(90) days or more contractually delinquent or are properly deemed uncollectible
by Borrower or Guarantor on the basis of the maker's bankruptcy, foreclosure on
such note or other similar criteria.

     5.6  Records. Borrower shall keep adequate records and books of account
          -------
reflecting all financial transactions of Borrower, including sales of Intervals.

     5.7  Management. The manager and the management contracts for the Resort
          ----------
shall at all times be satisfactory to Lender.  Lender hereby approves Borrower
as the manager of the Resort.  For so long as Borrower controls the Timeshare
Association for the Resort, unless required by law Borrower shall not change the
Resort manager or amend, modify or waive any provision of or terminate the
management contract for the Resort without the prior written consent of Lender,
which consent shall not be unreasonably withheld.  At least two of the following
individuals, unless replaced in a timely manner with others who are reasonably
acceptable to Lender who shall approve or reject a proposed replacement within
thirty (30) days of written request, shall remain the principal officers of
Borrower and shall have authority to make all material business decisions:
Jerome Cohen, Herb Hirsch, Jon Joseph, Gregg McMurtie and Carol Sullivan.

     5.8  Tangible Net Worth. At all times Indebtedness is outstanding or
          ------------------
Lender is obligated to make Advances, Borrower agrees to maintain a minimum
tangible net worth, calculated quarterly pursuant to Section 5.5(c) and in
accordance with GAAP, in the amount of the sum of Twenty-five Million and No/100
Dollars ($25,000,000.00) plus sixty percent (60%) of Borrower's positive net
income (i.e. net revenue from sales less expenses) as reported on Borrower's
most current annual financial statement commencing with fiscal year 2000.  As of
the date of the prior fiscal quarter end, Borrower's tangible net worth is in
the amount set forth on Schedule 5.8-13 attached hereto.

     5.9  Debt to Tangible Net Worth Ratio. At all times Indebtedness is
          --------------------------------
outstanding or Lender is obligated to make Advances, Borrower agrees to maintain
the ratio of all current and long-term notes payable by Borrower to Borrower's
tangible net worth (the "Debt to Tangible Net Worth Ratio"),

<PAGE>

determined in accordance with GAAP, and calculated quarterly pursuant to Section
5.5(c), in an amount not greater than 4.0:1. As of the date hereof, Borrower's
Debt to Tangible Net Worth Ratio is in the amount set forth on Schedule 5.8-13
attached hereto.

     5.10 EBITDA. The ratio of EBITDA to total revenues (the "EBITDA Ratio")
          ------
for Borrower, calculated quarterly pursuant to Section 5.5(c) and in accordance
with GAAP on a trailing twelve (12) month basis shall at all times Indebtedness
is outstanding or Lender is obligated to make Advances be equal to or greater
than 12.5 percent.  As of the date hereof, Borrower's EBITDA Ratio is in the
amount set forth on Schedule 5.8-13 attached hereto.

     5.11 Total Interest Coverage. The ratio of EBITDA to total interest expense
          -----------------------
("Total Interest Coverage Ratio") for Borrower, calculated quarterly pursuant to
Section 5.5(c) and in accordance with GAAP on a trailing four (4) quarter basis
shall at all times Indebtedness is outstanding or Lender is obligated to make
Advances not be less than 1.25:1. As of the date hereof, Borrower's Total
Interest Coverage Ratio is in the amount set forth on Schedule 5.8-13 attached
hereto.

     5.12 Orlando Delinquency Rate. At all times Indebtedness is outstanding or
          ------------------------
Lender is obligated to make Advances, Borrower agrees to maintain the ratio of
(i) the principal balance of all Notes Receivable, the principal balances of
which are sixty (60) days or more delinquent to (ii) the principal balance of
all Notes Receivable, determined in accordance with GAAP on a three (3) month
rolling basis ("Orlando Delinquency Rate"), and calculated monthly pursuant to
Section 5.5(a), in an amount not greater than 0.10:1. As of the date hereof,
Borrower's Delinquency Rate is in the amount set forth on Schedule 5.8-13
attached hereto.

     5.13 Overall Delinquency Rate. At all times Indebtedness is outstanding or
          ------------------------
Lender is obligated to make Advances, Borrower shall, with respect to all of its
operations, maintain the ratio of (i) the aggregate principal balance of all
notes receivable given by purchasers of timeshare intervals and all notes
receivable given by purchasers of parcels of land including, but not limited to,
recreational vehicle lots, the principal balances of which are sixty (60) days
or more delinquent to (ii) the principal balance of all such foregoing notes
receivable, determined in accordance with GAAP on a three (3) month rolling
basis ("Overall Delinquency Rate"), and calculated monthly pursuant to Section
5.5(a), in an amount not greater than 0.10:1. As of the date hereof, the Overall
Delinquency Rate is in the amount set forth on Schedule 5.8-.13 attached hereto.

     5.14 Maintenance. Borrower shall maintain the Resort in good repair,
          -----------
working order and condition and shall make or cause to be made all necessary
replacements to the Resort.

     5.15 Proceeds. Immediately upon Borrower's receipt of proceeds from the
          --------
sale of any of the Collateral, Borrower shall deliver such proceeds to Lender in
their original form and, pending delivery to Lender, Borrower will hold such
proceeds as agent for Lender and in trust for Lender.

     5.16 Release and Bonding of Liens. In the event any lien or liens are
          ----------------------------
attached to any Collateral which individually or in the aggregate exceed Fifty
Thousand Dollars ($50,000.00), Borrower shall, within ten (10) days after such
attachment, either (a) cause such lien to be released of record, or (b) provide
Lender with a bond in accordance with the applicable laws of the state in which
the Resort is located, issued by a corporate surety acceptable to Lender, in an
amount acceptable to Lender and in form acceptable to Lender, or (c) provide
Lender with such other security as Lender may reasonably require.
Notwithstanding anything to the contrary contained herein, Borrower (a) may
contest the validity or amount of any claim, (b) may contest any tax or special
assessments levied by any governmental authority, and (c) may contest the
enforcement of or compliance with any governmental requirements and

<PAGE>

any such contest on the part of Borrower shall not be an Event of Default
hereunder; provided, however, that during the pendency of any such contest
Borrower shall otherwise comply with the requirements of this paragraph, and
provided further, Borrower shall pay any amount adjudged by a court of competent
jurisdiction (including appellate courts) to be due, with all cost, interest and
penalties thereon, before such judgment becomes a lien on the Collateral.

     5.17 Claims. Borrower shall (a) promptly notify Lender of (i) any claim,
          ------
action or proceeding affecting the Resort or the Collateral, or any part
thereof, or any of the security interests granted hereunder, and (ii) any
action, suit, proceeding, order or injunction of which Borrower becomes aware
after the date hereof pending or threatened against or affecting Borrower, any
Guarantor or any Affiliate; (b) at the request of Lender, appear in and defend,
at Borrower's expense with counsel selected by Borrower subject to Lender's
approval, any such claim, action or proceeding; and (c) comply in all respects,
and shall cause Guarantors and all Affiliates to comply in all respects, with
the terms of any orders imposed on such Person by any governmental authority.

     5.18 Use of Lender Name. Borrower will not, and will not permit any
          ------------------
Affiliate to, without the prior written consent of Lender, use the name of
Lender or the name of any affiliates of Lender in connection with any of their
respective businesses or activities, except in connection with internal business
matters, administration of the Loan and as required in dealings and public
filings with governmental agencies.

     5.19 Other Documents. Borrower will maintain accurate and complete files
          ---------------
relating to the Financed Notes Receivable and other Collateral to the
satisfaction of Lender, and such files will contain copies of each Note
Receivable together with the purchase agreements, truth-in-lending statements,
all relevant credit memoranda and all collection information and correspondence
relating to such Financed Notes Receivable.

     5.20 Subordinated Obligations. All indebtedness of Borrower to any
          ------------------------
Affiliate of Borrower shall be subordinated to the Loan. Such subordination
shall be in accordance with the terms and conditions of the form of
Subordination Agreement attached hereto as Exhibit "H". Borrower hereby
                                           -----------
represents and warrants to Agent that those matters described on Exhibit "H".
                                                                 -----------
Borrower's debts, liabilities and obligations to any Affiliates of Borrower
except for salaries and other compensation due officers and directors as of the
date of this Agreement. Upon or during the pendency of Event of Default Borrower
will not, directly or indirectly, (a) permit any payment to be made in respect
of any indebtedness, liabilities or obligations direct or contingent, to any of
the foregoing, which payments shall be and are hereby made subordinate to the
payment of principal of, and interest on, the Note, or (b) permit the amendment,
rescission or other modification of any of Borrower's subordinated obligations
in such a manner as to affect adversely the lien priority of the Lender in any
property, real or personal, pledged to secure any of the foregoing Loan
Documents.

     5.21 Loan Servicing. Lender hereby acknowledges that Borrower shall be the
          --------------
Servicer. The Servicing Agreement shall be satisfactory to Lender in its sole
discretion. Borrower may not amend or terminate the Servicing Agreement without
Lender's prior approval, and Borrower agrees not to interfere with the servicing
agent's performance of its duties under the Servicing Agreement or to take any
action that would be inconsistent in any way with the terms of the Servicing
Agreement. The Servicing Agreement shall be cancelable by Lender upon the
occurrence of any default under the Loan Documents. If the Servicer is Borrower
or an Affiliate, no servicing fees shall be paid if a default under any Loan
Document has occurred and is continuing. All servicing fees, and the costs and
expenses of the servicing agent, shall be paid by Borrower.

<PAGE>

     5.22 Custodian. Lender shall have the right at any time to utilize
          ---------
Custodian to maintain custody of the Collateral.  Borrower agrees not to
interfere with Custodian's performance of its duties under the Custodial
Agreement or to take any action that would be inconsistent in any way with the
terms of the Custodial Agreement. All custodial fees, and the costs and expenses
of the Custodian, shall be paid by Borrower.

     5.23 Compliance with Laws. The Borrower, and each of the Units in which
          ---------------------
Intervals are being sold, shall comply with, conform to and obey each and every
judgment, law, statute, rule and governmental regulation applicable to it and
each indenture, order, instrument, agreement or document to which it is a party
or by which it is bound, the non-compliance with or violation of which could
have a material adverse effect upon the Collateral, the Resort or any portion
thereof, including, without limitation, each of the Units.

     5.24 Cross Default. Any Event of Default hereunder or under the other Loan
          -------------
Documents shall be an Event of Default under the Acquisition and Construction
Loan. Any Event of Default under the Acquisition and Construction Loan shall be
an Event of Default hereunder.

                        SECTION 6 - NEGATIVE COVENANTS
                        -------  ---------------------

     So long as any portion of the Indebtedness remains unpaid or Lender is
committed to lend hereunder, unless Lender otherwise consents in writing,
Borrower hereby covenants and agrees with Lender as follows:

     6.1  Consolidation and Merger. Borrower will not without Lender's consent,
          ------------------------
which may be granted or withheld in Lender's sole discretion, consolidate with
or merge into any other Person or permit any other Person to consolidate with or
merge into it.

     6.2  Restrictions on Transfers. Borrower shall not, without obtaining the
          -------------------------
prior written consent of Lender, which may be granted or withheld in Lender's
sole discretion, (a) transfer, sell, pledge, convey, assign or encumber all or
any portion of the Resort or the Collateral (or contract to do any of the
foregoing, including options to purchase and so called "installment sales
contracts"), except for Permitted Exceptions, sales of Intervals to Purchasers
in arms-length transactions, transfers of personal property no longer necessary
for the operation of the Resort and transfers of personal property promptly
replaced with the acquisition of personal property of equivalent value; (b)
permit any sale, assignment, encumbrance, dilution or other disposition of any
ownership interests in Borrower (including any right to receive profits, losses
or cash flow related to the Resort) that would cause Guarantor to either (i) own
less than less than a fifty-one percent (51%) interest in Borrower, or (ii)
cease to have a controlling interest in Borrower; provided, however, subject to
                                                  -----------------
the Funding Option (defined below), this Section shall not prohibit the sale or
hypothecation of Note Receivables generated from Intervals released by Lender as
Collateral for the Loan in accordance with this Agreement or released pursuant
to the Acquisition and Construction Loan.  In addition, if at least two of the
following fail to remain a principal officer of Borrower, and Borrower fails to
replace such persons in a timely manner with others who are reasonably
acceptable to Lender, with authority to make all material business decisions,
then Lender may at Lender's option, declare all of the indebtedness evidenced by
the Note to be immediately due and payable, and Lender may invoke any remedies
permitted by the Loan Instruments: Jerome Cohen, Herb Hirsch, Jon Joseph, Gregg
McMurtie and Carol Sullivan. Intestate transfers or transfers by devise shall
not constitute a transfer for the purposes of the foregoing provisions.

<PAGE>

     6.3  Timeshare Regimen. Without Lender's prior written consent which shall
          -----------------
be granted or denied within thirty (30) of receipt of Borrower's written request
therefor, Borrower shall not amend, modify or terminate the Declaration or the
covenants, conditions, easements or restrictions against the Resort (or any
portion thereof), except that if any amendment or modification is required
either (a) to cause additional Units and Intervals to be annexed into the
timeshare regimen of the Resort, or (b) by law, Borrower shall implement the
same and give prompt written notice thereof to Lender.

     6.4   Collateral.  Borrower shall not take any action (nor permit or
           ----------
consent to the taking of any action) which might reasonably be anticipated to
impair the value of the Collateral or any of the rights of Lender in the
Collateral. Borrower shall not (i) modify or amend any of the Pledged Documents
without Lender's prior written consent, or (ii) grant extensions of time for the
payment of, compromise for less than the full face value, release in whole or in
part any Purchaser liable for the payment of, or allow any credit whatsoever
except for the amount of cash to be paid upon, any Collateral or any instrument
or document representing the Collateral. At all times Indebtedness is
outstanding or Lender is obligated to make Advances, Borrower agrees to not
permit the ratio of (i) the principal balance of all Notes Receivable, the terms
of which have been modified to provide more favorable repayment terms including,
but not limited to changes to the maturity date, payment schedule and interest
rate, to (ii) the principal balance of all Notes Receivable, determined in
accordance with GAAP, and calculated monthly pursuant to Section 5.5(a), to
exceed an amount greater than 0.05:1; provided, however, that Borrower's program
of requiring additional down payments from Purchasers in the minimum amount of
the greater of (i) fifty (50) percent of the sales price of the Interval and
(ii) Purchaser's equity in the Interval, whereupon Borrower refinances
Purchasers' remaining balance due at an interest rate of five (5) percent for a
maximum of three (3) years, adjusting the term to maintain a monthly payment of
at least sixty dollars ($60.00), shall not be deemed to be a modification of a
Note Receivable for purposes of calculating the foregoing ratio.

     6.5  No Sales Outside of Certain States. Borrower shall not market,
          ----------------------------------
attempt to sell or sell any Intervals outside of the States of Florida, Nevada,
California, Colorado, Illinois and Texas unless, prior to taking any such
actions, Borrower delivers to Lender the applicable Compliance Documents.

     6.6  Contracts. Borrower shall not materially amend, modify or assign to
          ---------
any other party any management, marketing, servicing, maintenance or other
similar contract for the Resort.

     6.7  Restricted Transfer and Encumbrance of Units and Intervals. Except for
          ----------------------------------------------------------
the sale of a Unit or Interval to a Purchaser and the related Mortgage for such
Interval, and the encumbrance of such Unit or Interval as security for the Loan
or the Acquisition and Construction Loan, Borrower shall not otherwise assign,
convey, transfer or cause to be encumbered any interest in any Unit or Interval.
All easements, declarations of covenants, conditions and restrictions and
private and public dedications affecting such unsold Units and Intervals shall
be submitted to Lender for its approval (which shall be granted or not within
thirty (30) days of receipt of Borrower's written request therefor) and such
approval must be obtained prior to the execution or granting of any thereof by
Borrower. Nothing herein shall be construed to release Borrower from its
obligations under the Funding Option.

                         SECTION 7 - EVENTS OF DEFAULT
                         -------  --------------------

     An "Event of Default" shall exist if any of the following shall occur:

     7.1  Payments. Borrower shall fail to make any payment of the Indebtedness
          --------
within five (5) days of the date such payment is due.

<PAGE>

     7.2  Failure to Permit Inspections.  Borrower shall fail to strictly comply
          -----------------------------
with the provisions of Section 5.4 of this Agreement.

     7.3  Covenant Defaults.  Borrower shall fail to perform or observe any
          -----------------
covenant, agreement or obligation contained in this Agreement or in any of the
Loan Documents (other than any covenant or agreement obligating Borrower to pay
the Indebtedness), and such failure shall continue for thirty (30) days after
Lender delivers written notice thereof to Borrower, provided, however, if the
failure is incapable of cure within such thirty (30) day period and Borrower
shall be diligently pursuing a cure, such thirty (30) day cure period shall be
extended by an additional period not to exceed sixty (60) days.

     7.4  Warranties or Representations.  Any representation or other statement
          -----------------------------
made by or on behalf of Borrower in this Agreement, in any of the Loan Documents
or in any instrument furnished in compliance with or in reference to the Loan
Documents, shall be false, misleading or incorrect in any material respect as of
the date made.

     7.5  Bankruptcy.  A petition under any Chapter of  Title 11 of the United
          ----------
States Code or any similar law or regulation is filed by or against Borrower or
Guarantor (and in the case of an involuntary petition in bankruptcy, such
petition is not discharged within sixty (60) days of its filing), or a
custodian, receiver or trustee for any of the Resort then owned by Borrower is
appointed, or Borrower or Guarantor makes an assignment for the benefit of
creditors, or any of them are adjudged insolvent by any state or federal court
of competent jurisdiction, or any of them admit their insolvency or inability to
pay their debts as they become due or an attachment or execution is levied
against any of the Resort then owned by Borrower.

     7.6  Attachment, Judgment, Tax Liens.  The issuance, filing or levy against
          -------------------------------
Borrower or Guarantor of one or more attachments, injunctions, executions, tax
liens or judgments for the payment of money cumulatively in excess of $50,000,
which is not discharged in full or stayed within thirty (30) days after issuance
or filing.

     7.7  Suspension of Sales.  The issuance of any stay order, cease and desist
          -------------------
order or similar judicial or nonjudicial sanction that materially adversely
limits or otherwise materially adversely affects any Interval sales activities,
and, with respect to any such sanction only, such sanction is not dismissed,
terminated or rescinded within thirty (30) days after issuance.

     7.8  Default by Borrower in Other Agreements.  Any default by Borrower in
          ----------------------------------------
the payment of indebtedness for borrowed money after the expiration of any
applicable grace or cure period which individually or in the aggregate at any
time exceeds Fifty Thousand Dollars ($50,000.00); 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; or any
default which permits the holders of such indebtedness to elect a majority of
the Board of Directors of Borrower.

     7.9  Default by Guarantors.  Any default by Guarantor under the terms of
          ---------------------
the Guaranty or any other document executed by Guarantor in connection with the
Loan, after the expiration of any applicable notice and cure periods.

     7.10 Default under Acquisition and Construction Loan.  An Event of Default
          -----------------------------------------------
shall occur with respect to the Acquisition and Construction Loan or under the
Acquisition and Construction Loan Documents, and such default is not cured
within the applicable cure period set forth therein.
<PAGE>

                              SECTION 8 - REMEDIES
                              -------  -----------

     8.1  Remedies Upon Default.  Upon the occurrence of an Event of Default,
          ---------------------
Lender may take any one or more of the following actions, all without notice to
Borrower:

          (a) Acceleration.  Declare the unpaid balance of the Indebtedness, or
              ------------
any part thereof, immediately due and payable, whereupon the same shall be due
and payable.

          (b) Termination of Obligation to Advance.  Terminate any commitment of
              ------------------------------------
Lender to lend under this Agreement in its entirety, or any portion of any such
commitment, to the extent Lender shall deem appropriate.

          (c) Judgment.  Reduce Lender's claim to judgment, foreclose or
              --------
otherwise enforce Lender's security interest in all or any part of the
Collateral by any available judicial procedure.

          (d) Sale of Collateral.  Exercise all the rights and remedies of a
              ------------------
secured party on default under the Code (whether or not the Code applies to the
affected Collateral) including (i) require Borrower to, and Borrower hereby
agrees that it will, at its expense and upon request of Lender forthwith,
assemble all or part of the Collateral within Borrower's control as directed by
Lender and make it available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties; (ii) enter upon any premises of
Borrower and take possession of the Collateral; and (iii) sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any of the
Lender's offices or elsewhere, at such time or times, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms as Lender
may deem commercially reasonable.  Borrower agrees that, to the extent notice of
sale shall be required by law, ten (10) days notice of the time and place of any
sale shall constitute reasonable notification.  At any sale of the Collateral,
if permitted by law, Lender may bid (which bid may be, in whole or in part, in
the form of cancellation of indebtedness) for the purchase of the Collateral or
any portion thereof for the account of Lender.  Borrower shall remain liable for
any deficiency.  Lender shall not be required to proceed against any Collateral
but may proceed against Borrower directly.  To the extent permitted by law,
Borrower hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter enacted.

          (e) Receiver.  Apply by appropriate judicial proceedings for
              --------
appointment of a receiver for the Collateral, or any part thereof, and Borrower
hereby consents to any such appointment.

          (f) Exercise of Other Rights.  Exercise any and all other rights or
              ------------------------
remedies afforded by any applicable laws or by the Loan Documents as Lender
shall deem appropriate, at law, in equity or otherwise, including the right to
bring suit or other proceeding, either for specific performance of any covenant
or condition contained in the Loan Documents or in aid of the exercise of any
right or remedy granted to Lender in the Loan Documents.

     8.2  Application of Collateral; Termination of Agreements.  Upon the
          ----------------------------------------------------
occurrence of an Event of Default, Lender may apply against the Indebtedness any
and all Collateral in its possession, any and all balances, credits, deposits,
accounts, reserves, indebtedness or other moneys due or owing to Borrower held
by Lender hereunder or under any other financing agreement or otherwise, whether
accrued or not.

     8.3  Waivers.  No waiver by 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 Lender in exercising any right or remedy under the Loan 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

<PAGE>

other or further exercise thereof, or the exercise of any other right or remedy
under the Loan Documents or otherwise. Further, Borrower and Guarantor severally
waive notice of the occurrence of any Event of Default, presentment and demand
for payment, protest, and notice of protest, notice of intention to accelerate,
acceleration and nonpayment, and agree that their liability shall not be
affected by any renewal or extension in the time of payment of the Indebtedness,
or by any release or change in any security for the payment or performance of
the Indebtedness, regardless of the number of such renewals, extensions,
releases or changes. Borrower also hereby waives the right to assert any statute
of limitations as a bar to the enforcement of the lien created by any of the
Loan Documents or to any action brought to enforce the Note or any other
obligation secured by the Loan Documents.

     8.4  Cumulative Rights.  All rights and remedies available to Lender under
          -----------------
the Loan Documents shall be cumulative and in addition to all other rights and
remedies granted to Lender at law or in equity, whether or not the Indebtedness
is due and payable and whether or not Lender shall have instituted any suit for
collection or other action in connection with the Loan Documents.

                     SECTION 9 - CERTAIN RIGHTS OF LENDER
                     -------  ---------------------------

     9.1  Protection of Collateral.  Lender may at any time and from time to
          ------------------------
time take such actions as Lender deems necessary or appropriate to protect
Lender's liens and security interests in and to preserve the Collateral.
Borrower agrees to cooperate fully with all of Lender's efforts to preserve the
Collateral and Lender's liens and security interests therein.

     9.2  Performance by Lender.  If Borrower fails to perform any agreement
          ---------------------
contained herein, Lender may, but shall not be obligated to, cause the
performance of, such agreement, and the expenses of Lender incurred in
connection therewith shall be payable by Borrower pursuant to Section 9.3 below.

     9.3  Fees and Expenses.  Borrower agrees to promptly pay all reasonable
          -----------------
Costs and all such Costs shall be included as additional Indebtedness bearing
interest at the then applicable Interest Rate under the Note including Default
Rate, if applicable, until paid.

     9.4  Assignment of Lender's Interest.  Lender shall have the right to
          -------------------------------
assign all or any portion of its rights in this Agreement to any subsequent
holder or holders of the Indebtedness provided that such holder agrees to be
bound by the terms and conditions of this Agreement.

     9.5  Notice to Purchaser. Borrower authorizes both Lender and the Custodian
          -------------------
(but neither Lender nor the Custodian shall be obligated) to communicate at any
time and from time to time, whether prior to or after a sale of an Interval,
with any Purchaser or any other Person primarily or secondarily liable under a
Financed Note Receivable with regard to the lien of Lender thereon and any other
matter relating thereto.  Lender may perform, at Borrower's expense, any and all
credit investigations as Lender may deem necessary to determine whether any such
Purchaser meets the requirements to be an Eligible Notes Receivable.

     9.6  Collection of Notes.  Borrower shall direct and authorize each party
          -------------------
liable for the payment of the Financed Notes Receivable to pay each installment
thereon to Lockbox Agent pursuant to the Lockbox Agreement, until otherwise
directed by Lender.  Following the occurrence of an Event of Default, Lender
shall have the right to (a) require that all payments due under the Financed
Notes Receivable be paid directly to Lender, and to receive, collect, hold and
apply the same in accordance with the provisions of this Agreement, and (b) take
such remedial action available to it for the enforcement of any defaulted
Financed Note Receivable including the foreclosure of any Mortgage securing the
payment thereof.  Borrower hereby further irrevocably authorizes, directs and
empowers Lender to collect and
<PAGE>

receive all checks and drafts evidencing such payments and to endorse such
checks or drafts in the name of Borrower and upon such endorsements, to collect
and receive the money therefor.

     Upon payment and satisfaction in full of all Indebtedness, Lender will, at
Borrower's request and sole expense, give written notice as necessary to
redirect payment of the Financed Notes Receivable as requested by Borrower.

     9.7  Power of Attorney.  Borrower does hereby irrevocably constitute and
          -----------------
appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of substitution, for Borrower and in Borrower's name, place and
stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in
the name of Borrower and in favor of Lender as provided in Section 9.6 above;
(b) during the existence of an Event of Default to demand and receive from time
to time any and all property, rights, titles, interests and liens hereby sold,
assigned and transferred, or intended so to be, and to give receipts for same;
and (c) upon the occurrence and during the continuance of any Event of Default
hereunder, (i) to institute and prosecute in the name of Borrower or otherwise,
but for the benefit of Lender, any and all proceedings at law, in equity, or
otherwise, that Lender may deem proper in order to collect, assert or enforce
any claim, right or title, of any kind, in and to the property, rights, titles,
interests and liens hereby sold, assigned or transferred, or intended so to be,
and to defend and compromise any and all actions, suits or proceedings in
respect of any of the said property, rights, titles, interests and liens, and
(ii) generally to do all and any such acts and things in relation to the
Collateral as Lender shall in good faith deem advisable.  Borrower hereby
declares that the appointment made and the powers granted pursuant to this
Section are coupled with an interest and are and shall be irrevocable by
Borrower in any manner, or for any reason, unless and until all obligations of
Borrower to Lender have been satisfied.

     9.8  Indemnification of Lender.  Borrower shall indemnify Lender and hold
          -------------------------
Lender harmless from and against any and all liabilities, indebtedness, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses, and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Lender, in any way  relating to or arising out of (a)
this Agreement and the Loan Documents and/or (b) any of the transactions
contemplated therein or thereby (including those in any way relating to or
arising out of the violation by Borrower of any federal or state laws including
the Interstate Land Sales Act or the Timeshare Act) unless caused by Lender's
gross negligence or intentional misconduct.  Upon receiving knowledge of any
suit, claim or demand asserted by a third party that Lender believes is covered
by this indemnity, and subject to the condition that no Event of Default under
this Agreement shall then exist, Lender shall give Borrower notice of the matter
and an opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel satisfactory to Lender.  Notwithstanding any defense by Borrower of any
such suit, claim or demand, Lender shall have the right to participate in any
material decision affecting the conduct or settlement of any dispute or
proceeding for which indemnification may be claimed.

     9.9  Lender's Right to Provide Financing.  Borrower hereby covenants with
          -----------------------------------
Lender that, until full repayment of the Acquisition and Construction Loan has
occurred, Lender shall have, and Lender is hereby granted, an exclusive right
and option (the "Funding Option") to provide all secured financing for Notes
Receivable generated from the sale of Intervals in the Resort by Borrower or any
Affiliate to Purchasers.  The Funding Option may be exercised or not exercised
in Lender's sole discretion.  Borrower shall submit to Lender a written request
for financing under the Funding Option and Lender shall, within thirty (30)
Business Days after receipt of such written request notify Borrower in writing
if Lender elects to exercise such Funding Option and provide the requested
financing, with the closing for such financing to occur within thirty (30) days
after Lender's election to exercise the Funding Option.  The failure of Lender
to exercise the Funding Option with respect to any Borrower request therefor
shall not terminate Lender's right to exercise the Funding Option with respect
to any subsequent request.  Any credit facility established by Lender pursuant
to the Funding Option shall be on the same
<PAGE>

terms and conditions as the Loan. Notwithstanding anything contained herein to
the contrary, it is expressly agreed and understood that any financing to be
extended pursuant to the Funding Option shall be subject to approval by Lender's
loan committee in accordance with Lender's standard credit guidelines, and it is
further expressly understood and agreed that Lender is under no obligation to
exercise the Funding Option and that nothing in this Section 9.9 shall be deemed
or construed to create any such obligation.

     9.10 Attorneys' Fees.  In any action hereunder between Borrower and Lender
          ---------------
the substantially prevailing party shall be entitled to reasonable attorneys'
fees and costs for pretrial, trial and appellate proceedings.

                          SECTION 10 - MISCELLANEOUS
                          -------   ----------------

     10.1 Notice.  Any notice or other communication required or permitted to
          ------
be given shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied or sent by overnight courier or
U.S. Mail and shall be deemed given:  (a) if served in person, when served; (b)
if telecopied, on the date of transmission if before 3:00 p.m. (Chicago time) on
a Business Day, otherwise on the next Business Day; provided that a hard copy of
                                                    --------
such notice is also sent pursuant to (c) or (d) below; (c) if by overnight
courier, on the first business day after delivery to the courier; or (d) if by
U.S. Mail, certified or registered mail, return receipt requested on the fourth
(4th) day after deposit in the mail postage prepaid.

Notices to Borrower:     Ramada Vacation Suites/
                         Preferred Equities Corporation
                         Attn: Jon Joseph, General Counsel
                         4310 Paradise Road
                         Las Vegas, Nevada  89109
                         Telecopy: (702) 369-4398

Notices to Lender:       Heller Financial, Inc.
                         Attn: Portfolio Manager, Vacation Ownership Finance
                         Loan No. 95-227
                         500 West Monroe St., 30th Fl.
                         Chicago, Illinois 60661
                         Telecopy: (312) 441-7924

With a copy to:          Heller Financial, Inc.
                         Real Estate Financial Services
                         Attn: Group General Counsel
                         Loan No. 95-227
                         500 West Monroe St. 31/st/ Fl.
                         Chicago, Illinois 60661
                         Telecopy: (312) 441-7872

     10.2 Survival.  All representations, warranties, covenants and agreements
          --------
made by Borrower herein, in the other Loan Documents or in any other agreement,
document, instrument or certificate delivered by or on behalf of Borrower under
or pursuant to the Loan Documents shall be considered to have been relied upon
by Lender and shall survive the delivery to Lender of such Loan Documents and
the extension of the Indebtedness (and each part thereof), regardless of any
investigation made by or on behalf of Lender.
<PAGE>

     10.3  Governing Law. This Agreement shall be governed by and shall be
           -------------
construed and enforced in accordance with the internal laws of the State of
Illinois, (without regard to conflicts of law principles) and applicable laws of
the United States.

     10.4  Invalid Provisions.  If any provision of this Agreement or any of the
           ------------------
other Loan Documents is held to be illegal, invalid or unenforceable under
present or future laws effective during the term thereof, such provision shall
be fully severable, this Agreement and the other Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect.

     10.5  Counterparts; Effectiveness.  This Agreement may be signed in any
           ---------------------------
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were on the same instrument.  This
Agreement shall become effective upon Lender's receipt of one or more
counterparts hereof signed by Borrower and Lender.

     10.6  Lender Not Fiduciary.  The relationship between Borrower and Lender
           --------------------
is solely that of debtor and creditor, and Lender has no fiduciary or other
special relationship with Borrower, and no term or provision of any of the Loan
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.

     10.7  Entire Agreement.  This Agreement, including the Exhibits and other
           ----------------
Loan Documents and agreements referred to herein embody the entire agreement
between the parties hereto, supersedes all prior agreements and understandings
between the parties whether written or oral relating to the subject matter
hereof and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no oral agreements among
Lender, Borrower or Guarantor or between any two or more of them.  This
Agreement may be modified or changed only in a writing executed by both Lender
and Borrower and/or the other affected parties.

     10.8  Consent to Advertising and Publicity.  Borrower hereby consents that
           ------------------------------------
Lender may issue and disseminate to the public information describing the credit
accommodation entered into pursuant to this Agreement.

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

     10.10 Broker's Fees.  Lender and Borrower represent and warrant to each
           -------------
other that there are no brokers, finders' or other similar fees or commitments
due with respect to the transactions described in the Agreement.  Each party
shall defend, save and hold the other party harmless from all claims of any
Persons for any breach by the indemnifying party of the foregoing representation
and warranty, which indemnity shall include reasonable attorneys' fees and legal
expenses and costs.

     10.11 Borrower's Confirmation and Inducement to Lender. In connection with
           ------------------------------------------------
the execution of this Agreement, Borrower hereby certifies that (a) all of
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, (b) as of the date hereof there are no Events of Default hereunder, and
(c) all of the Loan Documents as defined herein are in full force and effect.

     As consideration for, and as a mutual inducement to Lender entering into
this Agreement, Borrower and Guarantor hereby waive and release any and all
claims, setoffs, counterclaims and defenses either has as of the date hereof
with respect to the credit facility and performance by Lender under the
<PAGE>

Loan Documents, and each hereby acknowledges that Lender has fully performed all
of its obligations and is not in default under the Loan Documents. Execution of
this Agreement shall not be deemed to constitute a waiver or release by Lender
of any its rights or remedies under the Loan Documents.

     10.12  Venue.  BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
            -----
FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK STATE OF ILLINOIS AND
IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER,
AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

     10.13  Jury Trial Waiver. BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE
            -----------------
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  BORROWER AND LENDER ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS.  BORROWER AND LENDER WARRANT AND REPRESENT THAT EACH
HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

     The parties hereto have executed this Agreement or have caused the same to
be executed by their duly authorized representatives as of the date first above
written.

BORROWER:                            LENDER:

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

BY: /s/ Carol W. Sullivan            BY: /s/ Dennis K. Holland
   ----------------------               -----------------------

        Carol W. Sullivan                    Dennis K. Holland
-------------------------            --------------------------
Print Name                           Print Name

Its:      SR. V.P.                    Its:      SR. V.P.
    ---------------------                ----------------------
<PAGE>

APPROVED BY:

GUARANTOR:

MEGO FINANCIAL CORP.,
a New York corporation

BY: /s/ Jon A. Joseph
   ------------------

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

Its:      Sr. V.P.
    -----------------<PAGE>

                                                                     Exhibit 4.1

                               3COM CORPORATION
                            1994 STOCK OPTION PLAN

     1.   Purpose.  The 3Com Corporation 1994 Stock Option Plan (the "Plan") is
          -------
          established to create additional incentive for eligible employees of
          3Com Corporation and any successor corporation thereto (collectively
          referred to as the "Company"), and any present or future parent and/or
          subsidiary corporations of such corporation (all of whom along with
          the Company being individually referred to as a "Participating
          Company" and collectively referred to as the "Participating Company
          Group"), to promote the financial success and progress of the
          Participating Company Group.  For purposes of the Plan, a parent
          corporation and a subsidiary corporation shall be as defined in
          sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as
          amended (the "Code").

     2.   Administration.
          --------------

          (a)   General.  The Plan shall be administered by the Board of
                -------
                Directors of the Company (the "Board") and/or by a duly
                appointed committee of the Board having such powers as shall be
                specified by the Board.  Any subsequent references herein to the
                Board shall also mean the committee if such committee has been
                appointed and, unless the powers of the committee have been
                specifically limited, the committee shall have all of the powers
                of the Board granted herein, including, without limitation, the
                power to terminate or amend the Plan at any time, subject to the
                terms of the Plan and any applicable limitations imposed by law.
                All questions of interpretation of the Plan or of any options
                granted under the Plan (an "Option") shall be determined by the
                Board, and such determinations shall be final and binding upon
                all persons having an interest in the Plan and/or any Option.

          (b)   Options Authorized.  Options may be only nonqualified stock
                ------------------
                options, that is, options which are not incentive stock options
                as defined in section 422 of the Code.

          (c)   Authority of Officers.  Any officer of a Participating Company
                ---------------------
                shall have the authority to act on behalf of the Company with
                respect to any matter, right, obligation, or election which is
                the responsibility of or which is allocated to the Company
                herein, provided the officer has apparent authority with respect
                to such matter, right, obligation, or election.

     3.   Eligibility.  The Options may be granted only to employees of the
          -----------
          Participating Company Group; provided, however, that no Option may be
          granted to (i) a person who, at the time of such grant, is an officer
          or director of the Company or a beneficial owner of more than ten
          percent (10%) of any class of equity securities of the Company
          registered pursuant to section 12 of the Securities Exchange Act of
          1934, as amended, or (ii) any person whose eligibility to participate
          in the Plan would require the Company to obtain shareholder approval
          of the Plan pursuant to the Bylaws of the National Association of
          Securities Dealers (and any schedules thereto) or the provisions
          contained in the New York Stock Exchange Listed Company Manual.  For
          purposes of the foregoing sentence, "employees" shall include
          prospective employees
<PAGE>

          to whom Options are granted in connection with written offers of
          employment with the Participating Company Group. The Board shall, in
          the Board's sole discretion, determine which eligible persons shall be
          granted Options (an "Optionee"). An Optionee may, if otherwise
          eligible, be granted additional Options.

     4.   Shares Subject to Option.  Options shall be options for the purchase
          ------------------------
          of the authorized but unissued common stock of the Company (the
          "Stock"), subject to adjustment as provided in paragraph 9 below. The
          maximum number of shares of Stock which may be issued under the Plan
          shall be One Hundred Eighty Three Million Six Hundred Eighty Three
          Thousand Nine Hundred Twenty Six (183,683,926) shares (as adjusted for
          the Palm Factor). In the event that any outstanding Option for any
          reason expires or is terminated or canceled and/or shares of Stock
          subject to repurchase are repurchased by the Company, the shares
          allocable to the unexercised portion of such Option, or such
          repurchased shares, may again be subjected to an Option.

     5.   Time for Granting Options.  The Plan shall continue until terminated
          -------------------------
          by the Board or until all of the shares of Stock reserved for issuance
          under the Plan have been issued, whichever shall first occur.

     6.   Terms, Conditions and Form of Options.  Subject to the provisions of
          -------------------------------------
          the Plan, the Board shall determine for each Option (which need not be
          identical) the number of shares of Stock for which the Option shall be
          granted, the exercise price of the Option, the exercisability of the
          Option, and all other terms and conditions of the Option not
          inconsistent with the Plan.  Options granted pursuant to the Plan
          shall be evidenced by written agreements specifying the number of
          shares of Stock covered thereby, in such form as the Board shall from
          time to time establish, and shall comply with and be subject to the
          following terms and conditions:

          a)   Exercise Price.  The exercise price for each Option shall be
               --------------
               established in the sole discretion of the Board; provided,
               however, that the exercise price per share shall not be less than
               the fair market value, as determined by the Board, of a share of
               Stock on the date of the granting of the Option. Notwithstanding
               the foregoing, an Option may be granted with an exercise price
               lower than the minimum exercise price set forth above if such
               Option is granted pursuant to an assumption or substitution for
               another option in a manner qualifying with the provisions of
               section 424(a) of the Code.

          (b)  Exercise Period of Options.  The Board shall have the power to
               --------------------------
               set the time or times within which each Option shall be
               exercisable or the event or events upon the occurrence of which
               all or a portion of each Option shall be exercisable and the term
               of each Option; provided, however, that no Option shall be
               exercisable after the expiration of ten (10) years after the date
               such Option is granted.

          (c)  Payment of Exercise Price.  Payment of the exercise price for
               -------------------------
               the number of shares of Stock being purchased pursuant to any
               Option shall be made (i) in cash, by check, or cash equivalent,
               (ii) by tender to the Company of shares of the Company's stock
               owned by the Optionee having a value, as determined by the Board
               (but without regard to any restrictions on transferability
               applicable to such stock by reason of federal or state securities
               laws or agreements with an underwriter for the Company), not less
               than the exercise price, (iii) by the assignment of the proceeds
               of a sale of some or all of the shares being acquired upon the
               exercise of an Option (including, without limitation, through
<PAGE>

               an exercise complying with the provisions of Regulation T as
               promulgated from time to time by the Board of Governors of the
               Federal Reserve System), or (iv) by any combination thereof. The
               Board may at any time or from time to time, by adoption of or by
               amendment to the form of Standard Option Agreement described in
               paragraph 7 below, or by other means, grant Options which do not
               permit all of the foregoing forms of consideration to be used in
               payment of the exercise price and/or which otherwise restrict one
               (1) or more forms of consideration. Notwithstanding the
               foregoing, an Option may not be exercised by tender to the
               Company of shares of the Company's stock to the extent such
               tender of stock would constitute a violation of the provisions of
               any law, regulation and/or agreement restricting the redemption
               of the Company's stock.

          (x)  Unless otherwise provided by the Board, an Option may not be
               exercised by tender to the Company of the Company's stock unless
               such shares of the Company's stock either have been owned by the
               Optionee for more than one (1) year or were not acquired,
               directly or indirectly, from the Company.

          (y)  The Company reserves, at any and all times, the right, in the
               Company's sole and absolute discretion, to establish, decline to
               approve and/or terminate any program and/or procedures for the
               exercise of Options by means of an assignment of the proceeds of
               a sale of some or all of the shares of Stock to be acquired upon
               such exercise.

     7.   Standard Form of Stock Option Agreement.
          ---------------------------------------

          (a)  Nonqualified Stock Options.  Unless otherwise provided for by
               --------------------------
               the Board at the time an Option is granted, an Option shall
               comply with and be subject to the terms and conditions set forth
               in the form of nonqualified stock option agreement attached
               hereto as Exhibit A and incorporated herein by reference.
                         ---------

          (b)  Standard Term for Options.  Unless otherwise provided for by the
               -------------------------
               Board in the grant of an Option, any Option granted hereunder
               shall be exercisable for a term of ten (10) years.

     8.   Authority to Vary Terms.  The Board shall have the authority from time
          -----------------------
          to time to vary the terms of the Standard Option Agreement described
          in paragraph 7 above either in connection with the grant of an
          individual Option or in connection with the authorization of a new
          standard form or forms; provided, however, that the terms and
          conditions of such revised or amended standard form or forms of stock
          option agreement shall be in accordance with the terms of the Plan.
          Such authority shall include, but not by way of limitation, the
          authority to grant Options which are immediately exercisable.

     9.   Effect of Change in Stock Subject to Plan.  Appropriate adjustments
          -----------------------------------------
          shall be made in the number and class of shares of Stock subject to
          the Plan and to any outstanding Options and in the exercise price of
          any outstanding Options in the event of a stock dividend, stock split,
          reverse stock split, combination, reorganization, reclassification, or
          like change in the capital structure of the Company.

     10.  Transfer of Control.  For purposes hereof, "Control Company" shall
          -------------------
          mean the Participating Company whose stock is subject to the Option.
          An "Ownership Change"

<PAGE>

          shall be deemed to have occurred in the event any of the following
          occurs with respect to the Control Company.

          (a)   a direct or indirect sale or exchange by the shareholders of the
                Control Company of all or substantially all of the stock of the
                Control Company;

          (b)   a merger in which the Control Company is a party; or

          (c)   the sale, exchange, or transfer of all or substantially all of
                the Control Company's assets (other than a sale, exchange, or
                transfer to one (1) or more corporations where the shareholders
                of the Control Company before such sale, exchange, or transfer
                retain, directly or indirectly, at least a majority of the
                beneficial interest in the voting stock of the corporation(s) to
                which the assets were transferred).

                A "Transfer of Control" shall mean an Ownership Change in which
                the shareholders of the Control Company before such Ownership
                Change do not retain, directly or indirectly, at least a
                majority of the beneficial interest in the voting stock of the
                Control Company. In the event of a Transfer of Control, any
                unexercisable and/or unvested portion of the outstanding Options
                shall be immediately exercisable and vested as of 30 days prior
                to the Transfer of Control unless the surviving, continuing,
                successor, or purchasing corporation, as the case may be (the
                "Acquiring Corporation") assumes the Company's rights and
                obligations under outstanding stock option agreements or
                substitutes options for the Acquiring Corporation's stock for
                such outstanding Options. The exercise and/or vesting of any
                Option that was permissible solely by reason of this paragraph
                10 shall be conditioned upon the consummation of the Transfer of
                Control. Any Options which are neither assumed by the Acquiring
                Corporation nor exercised as of the date of the Transfer of
                Control shall terminate effective as of the date of the Transfer
                of Control.

11.       Provision of Information.  Each Optionee shall be given access to
          ------------------------
          information concerning the Company equivalent to that information
          generally made available to the Company's common shareholders.

12.       Options Non-Transferable.  Unless otherwise provided by the Board,
          ------------------------
          during the lifetime of the Optionee, the Option shall be exercisable
          only by the Optionee, and no Option shall be assignable or
          transferable by the Optionee, except by will or by the laws of descent
          and distribution.

13.       Termination or Amendment of Plan or Options.  The Board, including any
          -------------------------------------------
          duly appointed committee of the Board, may terminate or amend the Plan
          or any Option at any time.  In any event, no amendment may adversely
          affect any then outstanding Option or any unexercised portion thereof,
          without the consent of the Optionee.
<PAGE>

                                   EXHIBIT A
                                   ---------

                               STANDARD FORM OF
                               3COM CORPORATION

                      NONQUALIFIED STOCK OPTION AGREEMENT

3Com Corporation (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement and the 3Com Corporation
1994 Stock Option Plan (the "Plan"), all of the terms of which are incorporated
by reference herein.

     1.   Definitions:

          (a)   "Notice" shall mean the "3Com Corporation NOTICE OF GRANT OF
                STOCK OPTIONS AND GRANT AGREEMENT" which is attached hereto.

          (b)   "Optionee" shall mean the individual whose name is set forth in
                the Notice.

          (c)   "Date of Option Grant" shall mean the "Date of Grant" set forth
                in the Notice.

          (d)   "Number of Option Shares" shall mean the "Total Number of Shares
                Granted" as set forth in the Notice.  Such number of shares of
                common stock of the Company may be adjusted from time to time
                pursuant to paragraph 9 below.

          (e)   "Exercise Price" shall mean the "Option Price per Share" set
                forth in the Notice.  Such price per share as adjusted from time
                to time pursuant to paragraph 9 below.

          (f)   "Initial Exercise Date" shall be the Initial Vesting Date.

          (g)   "Initial Vesting Date" shall be the date occurring one  (1) year
                after the Date of Option Grant

          (h)   Determination of "Vested Ratio"

                (1)  Determination of "Vested Ratio" for employees outside of
                     the U.K.:

                                                           Vested Ratio
-----------------------------------------------------------------------

Prior to Initial Vesting Date                                         0

On Initial Vesting Date, for each full                              1/4
year of the Optionee's continuous
employment by a Participating Company from
the Date of Option Grant until the Initial Vesting Date

Plus
----

For each full year of the Optionee's                                1/4
<PAGE>

continuous employment by a Participating
Company from the Initial Vesting Date

In no event shall the Vested Ratio exceed 1/1.

                (2)  Determination of "Vested Ratio" for employees receiving
                     grants under the Plan or any U.K. sub-plan of the Plan:

                                              Vested Ratio
----------------------------------------------------------

Prior to Initial Vesting Date                            0

On Initial Vesting Date, for each full                 1/4
year of the Optionee's continuous
employment by a Participating Company from
the Date of Option Grant until
the Initial Vesting Date

Plus
----

For each full year of the Optionee's                   1/4
continuous emplyoment by a Participating
Company from the Initial Vesting Date

In no event shall the Vested Ratio exceed 1/1.

          (i)   "Option Term Date" shall mean the date ten (10) years after the
                Date of Option Grant.

          (j)   "Code" shall mean the Internal Revenue Code of 1986, as amended.

          (k)   "Company" shall mean 3Com Corporation, a California corporation,
                and any successor corporation thereto.

          (l)   "Participating Company" shall mean (i) the Company and (ii) any
                present or future parent and/or subsidiary corporation of the
                Company while such corporation is a parent or subsidiary of the
                Company.  For purposes of this Option Agreement, a parent
                corporation and a subsidiary corporation shall be as defined in
                sections 424(e) and 424(f) of the Code.

          (m)   "Participating Company Group" shall mean at any point in time
                all corporations collectively which are then a Participating
                Company.

     2.   Status of the Option.  This Option is intended to be a nonqualified
          --------------------
          stock option and shall not be treated as an incentive stock option as
          described in Section 422 of the Code.

     3.   Administration.  All questions of interpretation concerning this
          --------------
          Option Agreement shall be determined by the Board of Directors of the
          Company (the "Board") and/or by a duly appointed committee of the
          Board having such powers as shall be specified by the Board.  Any
          subsequent references herein to the Board shall also mean the
          committee if such committee has been appointed and, unless the powers
          of the
<PAGE>

          committee have been specifically limited, the committee shall have all
          of the powers of the Board granted in the Plan, including, without
          limitation, the power to terminate or amend the Plan at any time,
          subject to the terms of the Plan and any applicable limitations
          imposed by law. All determinations by the Board shall be final and
          binding upon all persons having an interest in the Option. Any officer
          of a Participating Company shall have the authority to act on behalf
          of the Company with respect to any matter, right, obligation, or
          election which is the responsibility of or which is allocated to the
          Company herein, provided the officer has apparent authority with
          respect to such matter, right, obligation, or election.

     4.   Exercise of the Option.
          ----------------------

          (a)   Right to Exercise.  The Option shall first become exercisable on
                -----------------
                the Initial Exercise Date.  The Option shall be exercisable on
                and after the Initial Exercise Date and prior to the termination
                of the Option in the amount equal to the Number of Option Shares
                multiplied by the Vested Ratio as set forth in paragraph 1 above
                less the number of shares previously acquired upon exercise of
                the Option.  In no event shall the Option be exercisable for
                more shares than the Number of Option Shares.

          (b)   Method of Exercise.  The Option may be exercised by written
                ------------------
                notice to the Company which must state the election to exercise
                the Option, the number of shares for which the Option is being
                exercised and such other representations and agreements as to
                the Optionee's investment intent with respect to such shares as
                may be required pursuant to the provisions of this Option
                Agreement.  The written notice must be signed by the Optionee
                and must be delivered in person or by certified or registered
                mail, return receipt requested, to the Chief Financial Officer
                of the Company, or other authorized representative of the
                Participating Company Group, prior to the termination of the
                Option as set forth in paragraph 6 below, accompanied by full
                payment of the exercise price for the number of shares being
                purchased.

          (c)   Form of Payment of Exercise Price.  Such payment shall be made
                ---------------------------------
                (i) in cash, by check, or cash equivalent, (ii) by tender to the
                Company of shares of the Company's common stock owned by the
                Optionee having a value not less than the exercise price, which
                either have been owned by the Optionee for more than one (1)
                year or were not acquired, directly or indirectly, from the
                Company, (iii) by Immediate Sales Proceeds, as defined below, or
                (iv) by any combination of the foregoing.  Notwithstanding the
                foregoing, the Option may not be exercised by tender to the
                Company of shares of the Company's common stock to the extent
                such tender of stock would constitute a violation of the
                provisions of any law, regulation and/or agreement restricting
                the redemption of the Company's common stock.  "Immediate Sales
                Proceeds" shall mean the assignment in form acceptable to the
                Company of the proceeds of a sale of some or all of the shares
                acquired upon the exercise of the Option pursuant to a program
                and/or procedure approved by the Company (including, without
                limitation, through an exercise complying with the provisions of
                Regulation T as promulgated from time to time by the Board of
                Governors of the Federal Reserve System).  The Company reserves,
                at any and all times, the right, in the Company's sole and
                absolute discretion, to decline to approve any such program
                and/or procedure.
<PAGE>

          (d)   Tax Withholding.  At the time the Option is exercised, in whole
                ---------------
                or in part, or at any time thereafter as requested by the
                Company, the Optionee hereby authorizes payroll withholding and
                otherwise agrees to make adequate provision for foreign, federal
                and state tax withholding obligations of the Company, if any,
                which arise in connection with the Option, including, without
                limitation, obligations arising upon (i) the exercise, in whole
                or in part, of the Option, (ii) the transfer, in whole or in
                part, of any shares acquired on exercise of the Option, or (iii)
                the lapsing of any restriction with respect to any shares
                acquired on exercise of the Option.

          (e)   Certificate Registration.  The certificate or certificates for
                ------------------------
                the shares as to which the Option shall be exercised shall be
                registered in the name of the Optionee, or, if applicable, the
                heirs of the Optionee.

          (f)   Restrictions on Grant of the Option and Issuance of Shares.  The
                ----------------------------------------------------------
                grant of the Option and the issuance of the shares upon exercise
                of the Option shall be subject to compliance with all applicable
                requirements of federal or state law with respect to such
                securities.  The Option may not be exercised if the issuance of
                shares upon such exercise would constitute a violation of any
                applicable federal or state securities laws or other law or
                regulations.  In addition, no Option may be exercised unless (i)
                a registration statement under the Securities Act of 1933, as
                amended (the "Securities Act"), shall at the time of exercise of
                the Option be in effect with respect to the shares issuable upon
                exercise of the Option or (ii) in the opinion of legal counsel
                to the Company, the shares issuable upon exercise of the Option
                may be issued in accordance with the terms of an applicable
                exemption from the registration requirements of the Securities
                Act.  THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE
                EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
                ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
                WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.  As a condition
                to the exercise of the Option, the Company may require the
                Optionee to satisfy any qualifications that may be necessary or
                appropriate, to evidence compliance with any applicable law or
                regulation and to make any representation or warranty with
                respect thereto as may be requested by the Company.

          (g)   Fractional Shares.  The Company shall not be required to issue
                -----------------
                fractional shares upon the exercise of the Option.

     5.   Non-Transferability of the Option.  The Option may be exercised during
          ---------------------------------
          the lifetime of the Optionee only by the Optionee and may not be
          assigned or transferred in any manner except by will or by the laws of
          descent and distribution.

     6.   Termination of the Option.  The Option shall terminate and may no
          -------------------------
          longer be exercised on the first to occur of (a) the Option Term Date
          as defined above, (b) the last date for exercising the Option
          following termination of employment as described in paragraph 7 below,
          or (c) upon a Transfer of Control as described in paragraph 8 below.

     7.  Termination of Employment.
         -------------------------
<PAGE>

          (a)   Termination of the Option.  If the Optionee ceases to be an
                -------------------------
                employee of the Participating Company Group for any reason
                except death or disability within the meaning of section 422(c)
                of the Code, the Option, to the extent unexercised and
                exercisable by the Optionee on the date on which the Optionee
                ceased to be an employee, may be exercised by the Optionee
                within three (3) months after the date on which the Optionee's
                employment terminates, but in any event no later than the Option
                Term Date.  If the Optionee's employment with the Participating
                Company Group is terminated because of the death or disability
                of the Optionee within the meaning of section 422(c) of the
                Code, the Option, to the extent unexercised and exercisable by
                the Optionee on the date on which the Optionee ceased to be an
                employee, may be exercised by the Optionee (or the Optionee's
                legal representative) at any time prior to the expiration of
                twelve (12) months from the date the Optionee's employment
                terminated, but in any event no later than the Option Term Date.
                The Optionee's employment shall be deemed to have terminated on
                account of death if the Optionee dies within three (3) months
                after the Optionee's termination of employment.

          (b)   Termination of Employment Defined.  For purposes of this
                ---------------------------------
                paragraph 7, the Optionee's employment shall be deemed to have
                terminated either upon an actual termination of employment or
                upon the Optionee's employer ceasing to be a Participating
                Company.

          (c)   Extension if Exercise Prevented by Law.  Except as provided in
                --------------------------------------
                this paragraph 7, the Option shall terminate and may not be
                exercised after the Optionee's employment with the Participating
                Company Group terminates unless the exercise of the Option in
                accordance with this paragraph 7 is prevented by the provisions
                of paragraph 4(f) above.  If the exercise of the Option is so
                prevented, the Option shall remain exercisable until three (3)
                months after the date the Optionee is notified by the Company
                that the Option is exercisable, but in any event no later than
                the Option Term Date.

          (d)   Leave of Absence.  For purposes hereof, the Optionee's
                ----------------
                employment with the Participating Company Group shall not be
                deemed to terminate if the Optionee takes any military leave,
                sick leave, or other bona fide leave of absence approved by the
                Company of ninety (90) days or less.  In the event of a leave in
                excess of ninety (90) days, the Optionee's employment shall be
                deemed to terminate on the ninety-first (91st) day of the leave
                unless the Optionee's right to reemployment with the
                Participating Company Group remains guaranteed by statute or
                contract.  Notwithstanding the foregoing, however, a leave of
                absence shall be treated as employment for purposes of
                determining the Optionee's Vested Ratio if and only if the leave
                of absence is designated by the Company as (or required by law
                to be) a leave for which vesting credit is given.

     8.   Transfer of Control.  For purposes hereof, "Control Company" shall
          -------------------
          mean the Participating Company whose stock is subject to the Option.
          An "Ownership Change" shall be deemed to have occurred in the event
          any of the following occurs with respect to the Control Company.

          (a)   a direct or indirect sale or exchange by the shareholders of the
                Control Company of all or substantially all of the stock of the
                Control Company;
<PAGE>

          (b)   a merger in which the Control Company is a party; or

          (c)   the sale, exchange, or transfer of all or substantially all of
                the Control Company's assets (other than a sale, exchange, or
                transfer to one (1) or more corporations where the shareholders
                of the Control Company before such sale, exchange, or transfer
                retain, directly or indirectly, at least a majority of the
                beneficial interest in the voting stock of the corporation(s) to
                which the assets were transferred).

                A "Transfer of Control" shall mean an Ownership Change in which
                the shareholders of the Control Company before such Ownership
                Change do not retain, directly or indirectly, at least a
                majority of the beneficial interest in the voting stock of the
                Control Company.  In the event of a Transfer of Control, fifty
                percent (50%) of the outstanding and unvested options of
                employees shall vest when both of the following conditions are
                met:  (i) a "Transfer of Control"; and (ii) actual termination
                of employment within the ensuing 12-month period.  Otherwise,
                any unexercisable and/or unvested portion of the Option shall be
                immediately exercisable and vested as of 30 days prior to the
                Transfer of Control unless the surviving, continuing, successor,
                or purchasing corporation, as the case may be (the "Acquiring
                Corporation") assumes the Company's rights and obligations under
                this Option Agreement or substitutes options for the Acquiring
                Corporation's stock for the Option.  The exercise and/or vesting
                of any Option that was permissible solely by reason of this
                paragraph 8 shall be conditioned upon the consummation of the
                Transfer of Control.  The Option shall terminate effective as of
                the date of the Transfer of Control to the extent that the
                Option is neither assumed or substituted for by the Acquiring
                Corporation nor exercised as of the date of the Transfer of
                Control.

     9.   Effect of Change in Stock Subject to the Option.  Appropriate
          -----------------------------------------------
          adjustments shall be made in the number, exercise price and class of
          shares of stock subject to the Option in the event of a stock
          dividend, stock split, reverse stock split, combination,
          reorganization, reclassification, or like change in the capital
          structure of the Company.  In the event a majority of the shares which
          are of the same class as the shares that are subject to the Option are
          exchanged for, converted into, or otherwise become shares of another
          corporation (the "New Shares"), the Company may unilaterally amend the
          Option to provide that the Option is exercisable for New Shares.  In
          the event of any such amendment, the number of shares and the exercise
          price shall be adjusted in a fair and equitable manner.

     10.  Rights as a Shareholder or Employee.  The Optionee shall have no
          -----------------------------------
          rights as a shareholder with respect to any shares covered by the
          Option until the date of the issuance of a certificate or certificates
          for the shares for which the Option has been exercised.  No adjustment
          shall be made for dividends or distributions or other rights for which
          the record date is prior to the date such certificate or certificates
          are issued, except as provided in paragraph 9 above.  Nothing in the
          Option shall confer upon the Optionee any right to continue in the
          employ of a Participating Company or interfere in any way with any
          right of the Participating Company Group to terminate the Optionee's
          employment at any time.

     11.  Legends.  The Company may at any time place legends referencing any
          -------
          applicable federal or state securities law restrictions on all
          certificates representing shares of
<PAGE>

          stock subject to the provisions of this Option Agreement. The Optionee
          shall, at the request of the Company, promptly present to the Company
          any and all certificates representing shares acquired pursuant to the
          Option in the possession of the Optionee in order to effectuate the
          provisions of this paragraph.

     12.  Binding Effect.  This Option Agreement shall inure to the benefit of
          --------------
          and be binding upon the parties hereto and their respective heirs,
          executors, administrators, successors and assigns.

     13.  Termination or Amendment.  The Board, including any duly appointed
          ------------------------
          committee of the Board, may terminate or amend the Plan and/or the
          Option at any time; provided, however, that no such termination or
          amendment may adversely affect the Option or any unexercised portion
          hereof without the consent of the Optionee.

     14.  Integrated Agreement.  This Option Agreement constitutes the entire
          --------------------
          understanding and agreement of the Optionee and the Participating
          Company Group with respect to the subject matter contained herein, and
          there are no agreements, understandings, restrictions,
          representations, or warranties among the Optionee and the Company
          other than those as set forth or provided for herein.  To the extent
          contemplated herein, the provisions of this Option Agreement shall
          survive any exercise of the Option and shall remain in full force and
          effect.

     15.  Applicable Law.  This Option Agreement shall be governed by the laws
          --------------
          of the State of California.

The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof.  The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.

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