REPAYMENT GUARANTY
THIS REPAYMENT GUARANTY (the "Guaranty") is made as of October 4, 1994
by ILX INCORPORATED, an Arizona corporation (the "Guarantor"), whose address is
set forth in Paragraph 9 hereof, in favor of BANK ONE, ARIZONA, NA, a national
banking association ("Holder"), whose address is Real Estate Lending Division,
P.O. Box 29542, Phoenix, Arizona 85038.
1. Except as otherwise provided in this Guaranty, all terms
defined in that certain Promissory Note of even date herewith
by and between LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an
Arizona limited partnership ("Maker"), and Holder (as it may
be amended and modified from time to time) (the "Note") shall
have the same meaning when used in this Guaranty. Such defined
terms are denoted in the Note and in this Guaranty by initial
capital letters.
2. In order to induce Holder to loan to Maker the sum of TWO
MILLION AND NO/100 DOLLARS ($2,000,000) (the "Loan"), to be
evidenced by the Note of even date herewith executed by Maker
and payable to the order of Holder, Guarantor hereby
unconditionally and irrevocably, jointly and severally,
guarantees to Holder and to its successors, endorsees and/or
assigns, (i) the full and prompt payment of the principal sum
of the Note in accordance with its terms when due, by
acceleration or otherwise, together with all interest accrued
thereon, (ii) the full and prompt payment of all other sums,
together with all interest accrued thereon, when due under the
terms of the Note, and in any deed of trust, security
agreement, loan agreement, lease assignment and other
assignment or agreement referred to in the Note and/or now or
hereafter evidencing or securing the Note or setting forth
obligations of Maker in connection with the Loan (which
documents, together with the Note, are collectively referred
to herein as the "Loan ---- Documents") and (iii) the full and
complete performance of all other obligations of Maker now or
hereafter arising pursuant to the Loan Documents. The
obligations guaranteed pursuant to this Paragraph 2 are
hereinafter referred to as the "Guaranteed Obligations".
3. Guarantor agrees, represents and warrants to Holder as
follows:
(a) Guarantor shall continue to be liable under this
Guaranty and the provisions hereof shall remain in
full force and effect notwithstanding (i) any
modification, agreement or stipulation between Maker
and Holder, or their respective successors and
assigns, with respect to the Loan Documents or the
obligations encompassed thereby, including, without
limitation, the Guaranteed Obligations; (ii)
Holder's waiver of or failure to enforce any of the
terms, covenants or conditions contained in the Loan
Documents or in any modification thereof, including,
without limitation, the Deed of Trust; (iii) any
release of Maker or any other guarantor from any
liability with respect to the Guaranteed
Obligations; or (iv) any release or subordination of
any real or personal property then held by Holder as
security for the performance of the Guaranteed
Obligations.
(b) Guarantor's liability under this Guaranty shall
continue until all sums due under the Note have been
paid in full and until all Guaranteed Obligations of
Maker to Holder have been satisfied, and shall not
be reduced by virtue of any payment by Maker of any
amount due under the Note or under any of the Loan
Documents or by Holder's recourse to any collateral
or security. Each Guarantor acknowledges that Holder
may apply any payment made by Maker to Holder to any
obligation of Maker to Holder under the terms of any
Loan Documents in such amounts and such manner as
Holder may elect, regardless of whether such
application complies with any instruction or
designation given or made by Maker with respect to
such payment and agrees that any such application
shall not in any manner reduce, extinguish or
otherwise affect the liability of the Guarantor
hereunder.
(c) Guarantor has and will continue to have full and
complete access to any and all information
concerning the transactions contemplated by the Loan
Documents or referred to therein, the value of the
assets owned or to be acquired by Maker, Maker's
financial status and its ability to pay and perform
the Guaranteed Obligations owed to Holder. Guarantor
further warrants and represents that he has approved
copies of the Loan Documents and is fully informed
of the remedies Holder may pursue, with or without
notice to Maker, in the event of default under the
Note or other Loan Documents. So long as any of the
Guaranteed Obligations remains unsatisfied or owing
to Holder, Guarantor shall keep himself fully
informed as to all aspects of Maker's financial
condition and the performance of the Guaranteed
Obligations.
4. The liability of Guarantor under this Guaranty is a guaranty
of payment and performance and not of collectibility, and is
not conditioned or contingent upon the genuineness, validity,
regularity or enforceability of the Loan Documents or other
instruments relating to the creation or performance of the
Guaranteed Obligations or the pursuit by Holder of any
remedies which it now has or may hereafter have with respect
thereto under the Loan Documents, at law, in equity or
otherwise.
5. Guarantor hereby waives to the extent permitted by law: (i)
all notices to Guarantor, to Maker, or to any other person,
including, but not limited to, notices of the acceptance of
this Guaranty or the creation, renewal, extension,
modification or accrual of any of the Guaranteed Obligations
owed to Holder and, except to the extent set forth in
Paragraph 7 hereof, enforcement of any right or remedy with
respect thereto, and notice of any other matters relative
thereto; (ii) diligence and demand of payment, presentment,
protest, dishonor and notice of dishonor; (iii) any statute of
limitations affecting Guarantor's liability hereunder or the
enforcement thereof; and (iv) all principles or provisions of
law which conflict with the terms of this Guaranty. Guarantor
further agrees that Holder may enforce this Guaranty upon the
occurrence and during the continuation of an Event of Default
under the Note or the Loan Documents (as Event of Default is
defined therein), notwithstanding the existence of any dispute
between Maker and Holder with respect to the existence of the
default or performance of the Guaranteed Obligations or any
counterclaim, set-off or other claim which Maker may allege
against Holder with respect thereto. Moreover, Guarantor
agrees that his obligations shall not be affected by any
circumstances which constitute a legal or equitable discharge
of a guarantor or surety.
6. Guarantor agrees that Holder may enforce this Guaranty without
the necessity of resorting to or exhausting any security or
collateral or proceeding against Maker or any other guarantor,
including without limitation, any other Guarantor named
herein. Guarantor hereby waives the right to require Holder to
proceed against Maker, to proceed against any other guarantor,
including without limitation any other Guarantor named herein,
to foreclose any lien on any real or personal property, to
exercise any right or remedy under the Loan Documents, to
pursue any other remedy or to enforce any other right.
7. (a) Guarantor agrees that nothing contained herein shall
prevent Holder from suing on the Note or from
exercising any rights available to it thereunder or
under any of the Loan Documents and that the exercise
of any of the aforesaid rights shall not constitute a
legal or equitable discharge of any of the
Guarantors. Guarantor hereby authorizes and empowers
Holder to exercise, in its sole discretion, any
rights and remedies, or any combination thereof,
which may then be available to Holder, since it is
the intent and purpose of Guarantor that the
obligations hereunder shall be absolute, independent
and unconditional under any and all circumstances.
Without limiting the generality of the foregoing,
Guarantor hereby expressly waives any and all
benefits under Arizona Revised Statutes ("A.R.S.")
Sections 12-1641 through 12-1646 and Rule 17(f) of
the Arizona Rules of Civil Procedure. Notwithstanding
any foreclosure of the lien of any deed of trust or
security agreement with respect to any or all of any
real or personal property secured thereby, whether by
the exercise of the power of sale contained therein,
by an action for judicial foreclosure or by an
acceptance of a deed in lieu of foreclosure,
Guarantor shall remain bound under this Guaranty.
(b) Guarantor hereby waives and relinquishes all rights
of subrogation, contribution and reimbursement from
or against Maker or against any collateral or
security. Guarantor further agrees that, to the
extent the waiver of its rights of subrogation,
contribution and reimbursement as set forth herein is
found by a court of competent jurisdiction to be void
or voidable for any reason, any rights of subrogation
Guarantor may have against Maker or against any
collateral or security shall be junior and
subordinate to any right Holder may have against
Maker and to all right, title and interest Holder may
have in any collateral or security. Holder may use,
sell or dispose of any item of collateral or security
as it sees fit without regard to any subrogation
right Guarantor may have, and upon disposition or
sale, any right of subrogation Guarantor may have
shall terminate. With respect to the enforced
collection of the Guaranteed Obligations or the
foreclosure of any security interest in any personal
property collateral then securing the Guaranteed
Obligations, Holder agrees to give Guarantor five (5)
days' prior written notice, in the manner set forth
in Paragraph 9 hereof, of any sale or disposition of
any such personal property collateral, other than
collateral which is perishable, threatens to decline
speedily in value, is of a type customarily sold on a
recognized market, or is cash, cash equivalents,
certificates of deposit or the like.
(c) Guarantor's sole right with respect to any such
foreclosure of real or personal property collateral
shall be to bid at such sale in accordance with
applicable law. Guarantor acknowledges and agrees
that Holder may also bid at any such sale and in the
event such collateral is sold to Holder in whole or
in partial satisfaction of the Guaranteed
Obligations, Guarantor shall have no further right or
interest with respect thereto. Notwithstanding
anything to the contrary contained herein, no
provision of this Guaranty shall be deemed to limit,
decrease, or in any way to diminish any rights of
set-off Holder may have with respect to any cash,
cash equivalents, certificates of deposit or the like
which may now or hereafter be put on deposit with
Holder by Maker.
(d) To the extent any dispute exists at any time between
or among any of the guarantors as to Guarantor's
right to contribution or otherwise, Guarantor agrees
to indemnify, defend and hold Holder harmless for,
from and against any loss, damage, claim, demand,
cost or any other liability (including reasonable
attorneys' fees and costs) Holder may suffer as a
result of such dispute.
(e) Guarantor hereby subordinates any liabilities or
indebtedness of Maker held by Guarantor to the
obligation of Maker to Holder under the Loan
Documents or any other instrument of indebtedness;
provided, however, that unless and until an Event of
Default shall have occurred, Maker may make and
Guarantor may accept regular payments of principal
and interest on such liabilities and indebtedness as
the same shall become due and payable.
8. (a) Guarantor warrants and represents that any financial
statements of Guarantor heretofore delivered to
Holder are true and correct in all material respects.
(b) Guarantor covenants and agrees to immediately notify
Holder of any material adverse change in Guarantor's
financial status.
9. All notices, requests and demands to be made hereunder to the
parties hereto shall be in writing and shall be delivered by
hand, or sent by registered or certified mail, postage
prepaid, through the United States Postal Service to the
addresses shown below or such other addresses which the
parties may provide to one another in accordance herewith.
Such notices, requests and demands, if sent by mail, shall be
deemed given two (2) days after deposit in the United States
mail, and if delivered by hand shall be deemed given when
delivered.
To Guarantor: ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
To Holder: Bank One, Arizona, NA
Real Estate Lending Division
P.O. Box 29542
Phoenix, Arizona 85038
10. This Guaranty shall be binding upon Guarantor, its successors
and assigns and shall inure to the benefit of and shall be
enforceable by Holder, its successors, endorsees and assigns.
Any married person executing this Guaranty agrees that
recourse may be had against community assets and against his
or her separate property for the satisfaction of all
obligations herein guaranteed. As used herein, the singular
shall include the plural, and the masculine shall include the
feminine and neuter and vice versa, if the context so
requires.
11. If any or all of the Guaranteed Obligations are not paid when
due or if an Event of Default occurs, Guarantor agrees to pay
all costs of enforcement and collection and preparation
therefore (including, without limitation, reasonable
attorney's fees) whether or not any action or proceeding is
brought (including, without limitation, all such costs
incurred in connection with any bankruptcy, receivership, or
other court proceedings (whether at the trial or appellate
level).
12. This Guaranty shall be governed by and construed in accordance
with the laws of the State of Arizona, without giving effect
to conflict of laws principles.
13. This Guaranty is solely for the benefit of Holder, its
successors, endorsees and assigns, and is not intended to nor
shall it be deemed to be for the benefit of any third party,
including Maker.
14. If any provision of this Guaranty is unenforceable, the
enforceability of the other provisions shall not be affected
and they shall remain in full force and effect.
15. This Guaranty may be executed in counterparts, all of which
executed counterparts shall together constitute a single
document.
16. (a) Binding Arbitration. Holder and Guarantor hereby
agree that all controversies and claims arising
directly or indirectly out of this Guaranty shall at
the written request of any party be arbitrated
pursuant to the applicable rules of the American
Arbitration Association. The arbitration shall occur
in the State of Arizona. Judgment upon any award
rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The Federal Arbitration
Act shall apply to the construction and
interpretation of this arbitration agreement.
(b) Arbitration Panel. A single arbitrator shall have the
power to render a maximum award of one hundred
thousand dollars. When any party files a claim in
excess of this amount, the arbitration decision shall
be made by the majority vote of three arbitrators. No
arbitrator shall have the power to restrain any act
of any party.
(c)
Provisional Remedies, Self-Help, and Foreclosure. No
provision of subparagraph (a) shall limit the right
of any party to exercise self-help remedies, to draw
on any letters of credit, to foreclose against any
real or personal property collateral, or to obtain
any provisional or ancillary remedies (including but
not limited to injunctive relief or the appointment
of a receiver) from a court of competent
jurisdiction. At Holder's option, it may enforce its
right under a mortgage by judicial foreclosure, and
under a deed of trust either by exercise of power of
sale or by judicial foreclosure. The institution and
maintenance of any remedy permitted above shall not
constitute a waiver of the rights to submit any
controversy or claim to arbitration. The statute of
limitations, estoppel, waiver, laches, and similar
doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any
arbitration proceeding.
17. Guarantor shall maintain:
(a) As of the end of each fiscal quarter, an Owner's
Equity Percentage equal to or exceeding thirty-five
percent (35%). "Owner's Equity Percentage" means the
result obtained by dividing (i) Tangible Net Worth by
(ii) total assets, less Intangible Assets.
"Intangible Assets" means all intangible assets under
GAAP, including, without limitation, copyrights,
franchises, goodwill, licenses, loan origination
fees, non-competition covenants, organization or
formation expenses, patents, shares of the capital
stock of Guarantor, service marks, service names,
trademarks, trade names, write-up in the book value
of any asset in excess of the acquisition cost of the
asset to Guarantor, any amount, however designated on
the balance sheet, representing the excess of the
purchase price paid for assets or stock acquired over
the value assigned thereto on the books of Guarantor,
loans and advances to stockholders, directors,
officers, and employees of Guarantor, unamortized
leasehold improvements expense not recoverable at the
end of the lease term, unamortized debt discount, and
deferred discount. "Tangible Net Worth" means (i) the
sum of all capital accounts of Guarantor (including,
without limitation, any paid-in capital, capital
surplus, and retained earnings), plus (ii) the book
value, in accordance with GAAP, of the limited
partnership interest in Maker of shareholders of
Guarantor, as determined by Holder, less (iii) the
sum of the value on Guarantor's books of all
Intangible Assets.
(b) As of the end of each fiscal quarter, a Debt to
Equity Percentage equal to or less than 1.15 to 1.
"Debt to Equity Percentage" means the result obtained
by dividing (i) Debt of Guarantor by (ii) Tangible
Net Worth. "Debt" means, without limitation, (a) any
indebtedness for borrowed money, (b) all indebtedness
evidenced by bonds, debentures, notes, letters of
credit, drafts or similar instruments, (c) all
indebtedness to pay the deferred purchase price of
property or services, but not including accounts
payable and accrued expenses arising in the ordinary
course of business, (d) all capitalized lease
obligations, (e) all Debt of others secured by a lien
on any asset, whether or not such Debt is assumed by
Guarantor or guaranteed by Guarantor, and (f) all
Debt of others guaranteed by Guarantor and all other
indebtedness that would appear as a liability upon a
balance sheet of Guarantor prepared in accordance
with GAAP.
(c) At all times, cash, cash equivalents, and readily
marketable securities, free and clear of all liens
and encumbrances, in an aggregate amount not less
than $500,000.
18. At all times, Guarantor shall own all outstanding capital
stock of ILE Sedona Incorporated, an Arizona corporation
("ILE"), and ILE shall be the only general partner in Maker
with an ownership interest therein of not less than that held
on and as of the date hereof.
19. Guarantor hereby represents and warrants to Holder the
following:
(a) Organization and Powers. Guarantor is a corporation,
duly organized and validly existing under the laws of
the State of Arizona, and is qualified to transact
business in the State of Arizona. Guarantor has all
requisite power and authority, rights and franchises
to own and operate its properties, to carry on its
businesses as now conducted and as proposed to be
conducted, and to enter into and perform this
Agreement and the other Loan Documents. The address
of the Guarantor's chief executive office and
principal place of business is 2777 East Camelback
Road, Phoenix, Arizona 85016.
(b) Good Standing. Guarantor has made all filings and is
in good standing in the State of Arizona and in each
other jurisdiction in which the character of the
property it owns or the nature of the business it
transacts makes such filings necessary or where the
failure to make such filings could have a materially
adverse effect on the business, operations, assets or
condition (financial or otherwise) of Guarantor.
(c) Non-Foreign Status. Guarantor is not a "foreign
corporation," "foreign partnership," "foreign trust,"
or "foreign estate," as those terms are defined in
the Internal Revenue Code and the regulations
promulgated thereunder. Guarantor's U.S. employer
identification number is as set forth in the
Certification of Non-Foreign Status.
(d) Authorization. The execution, delivery and
performance of each of this Guaranty by Guarantor and
each other Loan Document to be executed and delivered
by Guarantor are within Guarantor's powers and have
been duly authorized by all necessary action by
Guarantor.
(e) No Conflict. The execution, delivery and performance
of this Guaranty and the other Loan Documents by
Guarantor will not violate (i) Guarantor's Articles
of Incorporation or Bylaws; or (ii) any legal
requirement affecting Guarantor or any of its
properties; or (iii) any agreement to which Guarantor
is bound or to which it is a party and will not
result in or require the creation (except as provided
in or contemplated by this Agreement) of any lien
upon any of such properties.
(f) Binding Obligations. This Guaranty and each of the
other Loan Documents executed by Guarantor have been
duly executed by Guarantor, and are legally valid and
binding obligations of Guarantor, enforceable against
Guarantor in accordance with their terms, except as
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and by
general principles of equity.
(g) No Material Defaults. There exists no material
violation of or material default by Guarantor and, to
the best knowledge of Guarantor, no event has
occurred which, upon the giving of notice or the
passage of time, or both, would constitute a material
default with respect to any mortgage, instrument,
agreement or document by which Guarantor, or any of
its properties is bound.
(h) Litigation; Adverse Facts. There is no action, suit,
investigation, proceeding or arbitration (whether or
not purportedly on behalf of the Guarantor) at law or
in equity or before or by any foreign or domestic
court or other governmental entity (a "Legal
Action"), pending or, to the knowledge of Guarantor,
threatened against or affecting Guarantor or any of
its assets which could reasonably be expected to
result in any material adverse change in the
business, operations, assets or condition (financial
or otherwise) of Guarantor or would materially and
adversely affect Guarantor's ability to perform its
obligations under this Guaranty and the other Loan
Documents. There is no basis known to Guarantor for
any such action, suit or proceeding. Guarantor is not
(a) in violation of any applicable law which
violation materially and adversely affects or may
materially and adversely affect the business,
operations, assets or condition (financial or
otherwise) of Guarantor, (b) subject to, or in
default with respect to any other legal requirement
that would have a materially adverse effect on the
business, operations, assets or condition (financial
or otherwise) of Guarantor, or (c) in default with
respect to any agreement to which Guarantor is a
party or to which it is bound. There is no Legal
Action pending or, to the knowledge of Guarantor,
threatened against or affecting Guarantor questioning
the validity or the enforceability of this Agreement
or any of the other Loan Documents.
(i) Payment of Taxes. All tax returns and reports of
Guarantor required to be filed by it have been timely
filed, and all taxes, assessments, fees and other
governmental charges upon Guarantor and upon its
properties, assets, income and franchises which are
due and payable have been paid when due and payable.
Guarantor knows of no proposed tax assessment against
it that would be material to the condition (financial
or otherwise) of Guarantor, and Guarantor has not
contracted with any government entity in connection
with such taxes.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of
the day and year first above written.
INCORPORATED, an Arizona corporation
By: Joseph P. Martori
---------------------------
Name: Joseph P. Martori
-------------------------
Title: Chairman/President
-----------------------