GUARANTY

       THIS GUARANTY by ILE Sedona Incorporated,  an Arizona  corporation,  with
offices  located  at  2111  East  Highland,   Suite  210,   Phoenix,   AZ  85016
("Guarantor")  for the benefit of Resort Funding,  Inc; a Delaware  corporation,
with offices located at Two Clinton Square,  Syracuse, New York 13202 ("RFI") is
made as of the fifteenth (15th) day of June, 1997 ("Guaranty").

       WHEREAS RFI is entering into a Settlement  Agreement  ("Agreement") and a
Promissory  Note (Note) with Los  Abrigados  Partners  Limited  Partnership,  an
Arizona limited partnership,  ILE Sedona  Incorporated,  an Arizona corporation,
and ILX Incorporated, an Arizona corporation (collectively "Developers") bearing
even date herewith; and

       WHEREAS,  RFI is willing to enter  into the  Agreement  and the Note with
Developers  only if  Guarantor  agrees to guaranty  the full,  timely,  faithful
performance  of, payment under and compliance  with the Agreement,  the Note and
all other  documents and  agreements  called for  thereunder  (collectively  the
"Documents").

       NOW,  THEREFORE,  in order to induce RFI to enter into the  Agreement and
the Note with the Developers and for other good and valuable consideration,  the
sufficiency   of  which   is   hereby   acknowledged,   the   Guarantor   hereby
unconditionally covenants and agrees with RFI as follows:

1. The Guarantor hereby unconditionally guaranties to RFI:

              (a) The full,  complete and punctual  performance by Developers of
       all the terms,  covenants,  obligations  and conditions  contained in the
       documents ("Obligations") and

              (b) The payment of all sums at any time owed by  Developers  under
       the Documents as and when the same shall become due and payable,  whether
       at maturity by acceleration  or otherwise,  according to the terms of the
       Documents and all losses,  cost,  expenses and reasonable  attorneys fees
       incurred  by reason of the  occurrence  of an event of default  under the
       Documents (collectively, the "Indebtedness").  In the case of any failure
       by Developers  to pay the  Indebtedness  when due, the  Guarantor  hereby
       unconditionally  agrees to immediately  make such payment as and when the
       same shall become due and payable,  whether at maturity,  by acceleration
       or otherwise.

2.   Guarantor   hereby  agrees  that  its   Obligations   hereunder   shall  be
unconditional, irrespective of:

             (a) The absence of any attempt to collect  from  Developers  or any
       other Guarantor;
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             (b)  Whether  any  other  action  has been  instituted  or taken to
       enforce the same;

             (c) The waiver or consent by RFI with respect to any  provisions of
       the Documents;

             (d) The validity or  enforceability  of the Guaranty against one or
       more of any other guarantors;

             (e)  The  validity  or  enforceability  of  the  Agreement  or  the
       Documents; or

             (f) Any other circumstance which might otherwise constitute a legal
       or equitable discharge or defense of a Guarantor.

3. Guarantor hereby waives diligence, presentment, demand for payment, filing of
claims with a court in the event of  receivership  or bankruptcy of  Developers,
protest or notice with respect to the  Indebtedness  and all demands  whatsoever
and  covenants  that its  Guarantee  will not be  discharged  except by complete
performance of the Obligations of Developers contained in the Documents.

4. Upon the  occurrence  of an Event of Default by  Developers,  RFI may, at its
option,  proceed directly and at once, without notice,  against the Guarantor to
collect and recover the full amount of its liability  hereunder,  or any portion
thereof,   without  proceeding  against  Developers  or  any  other  person,  or
foreclosing upon,  selling,  or otherwise disposing of or collecting or applying
any  property,  real  or  personal,  RFI may  then  hold as  security  for  such
Indebtedness.

5. Guarantor  authorizes RFI without notice or demand and without  affecting the
liability of the Guarantor hereunder, from time to time to:

             (a) Renew,  extend,  accelerate  or  otherwise  change the time for
       payment of, or otherwise change the terms of the Indebtedness or any part
       thereof;

             (b) Accept partial payment on the Indebtedness;

             (c) Take and hold security for the payment under this  Guarantee or
       of the  Indebtedness  and exchange,  enforce,  waive and release any such
       security;

             (d) Apply  such  security  and  direct  the order or manner of sale
       thereof as RFI in its discretion may determine;

             (e) Settle, release, compromise, collect or otherwise liquidate any
       Indebtedness  and/or  any  security  therefore  in  any  manner,  without
       affecting or impairing the Obligations of Guarantor hereunder; and
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             (f) RFI may,  without notice,  assign this Guarantee in whole or in
       part.

6. Guarantor shall have no right of subrogation  and Guarantor  waives any right
to enforce any remedy which RFI now has or may hereafter have against Developers
and any benefit of, and any right to  participate  in, any  security at any time
held by RFI.  Guarantor waives set-off,  counterclaim,  presentment,  demand for
performance,  notice of non-performance,  protest,  notice of protest, notice of
dishonor and notice of acceptance of the Guaranty and of the existence, creation
or incurring of new or additional indebtedness.

7. Guarantor will not take any action which will either:

             (a) Force the sale of Developers'  Property in order to satisfy the
       Indebtedness; or

             (b)  Affect  in any  manner  any and all of RFI's  liens,  security
       interests,  claims  or  rights  of any  kind  that  RFI may  now  have or
       hereafter acquire against Developers of Developers's Property.

8.  Guarantor  will  refrain  from  taking  any  action  which  is  in  any  way
inconsistent with or in derogation of the rights of RFI hereunder.

9. This  Guarantee  constitutes  the entire  understanding  of the parties  with
respect to the subject  matter hereof and this Guaranty or any provision  hereof
may be amended, terminated,  changed, waived or discharged only by an instrument
in writing signed by RFI and the Guarantor hereunder.

10. No failure or delay by RFI or the holder or  assignee  of any  agreement  in
exercising any right,  power or privilege  hereunder or thereunder shall operate
as a waiver thereof;  nor shall any single or partial  exercise thereof preclude
any other or further  exercise  thereof or the  exercise of any right,  power or
privilege.

11. In the event that one or more of the  provisions of this Guaranty  shall for
any reason be held to be invalid,  illegal or unenforceable in any respect, such
invalidity,  illegality or unenforceability shall not affect any other provision
of this  Guaranty,  but this  Guaranty  shall be construed  as if such  invalid,
illegal or unenforceable provision had never been contained herein.

12. This Guaranty and the rights of the parties  hereunder shall be interpreted,
construed  and enforced in accordance  with the laws and public  policies of the
State of New York, without regard to the principles of conflict of laws.
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13.  In any  action  to  enforce  the  provisions  of  this  Guaranty,  personal
jurisdiction  and venue shall be, at the option of RFI, in the Supreme  Court of
the State of New York,  County of Onondaga or the United States  District  Court
for the Northern District of New York.

       IN WITNESS WHEREOF, this guaranty has been executed by the undersigned on
the date above first written.

GUARANTOR

ILE SEDONA INCORPORATED



By: /s/ Joseph P. Martori
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    Joseph P. Martori, Chairman
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