As filed with the Securities and Exchange Commission on May 16, 1996
Registration No. ______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
AMENDMENT NO. 1
FORM S-3
Registration Statement
Under The
Securities Act of 1933
ILX INCORPORATED
(Exact name of registrant as specified in its charter)
ARIZONA 86-0564171
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2777 East Camelback Road
Phoenix, Arizona 85016
(602) 957-2777
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JOSEPH P. MARTORI
Chief Executive Officer
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
(602) 957-2777
(Name, address, and telephone number, of agent for service)
Copy to:
CAROL A. COLOMBO, ESQ.
Colombo & Bonacci, P.C.
2525 East Camelback Rd., Ste. 840
Phoenix, Arizona 85016
(602) 956-5800
Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]____________________.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]_____________________.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
Title of Each Class Amount Average of Bid & Ask Price of Amount
of Securities to Be Registered to be Common Stock of
Registered as of May 1, 1996 Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, no par value per share 8,734,488* shares $1.28125 $5,295.66*
=============================================================================================================================
</TABLE>
* Pursuant to Rule 429(a) of the Securities Act, this Registration Statement
relates to Registration No. 33-75382 filed on Form S-3 and concerning 7,838,462
shares and with respect to which a fee of $4,388.60 already has been paid. Of
those shares registered at Registration No. 33-75382, 1,157,020 have previously
been disposed of and 6,681,442 continue to be held by the Selling Shareholders.
Accordingly, a registration fee of only $907.06 need by filed for the 2,058,046
shares newly registered hereunder.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
ILX INCORPORATED
8,734,488 Shares of Common Stock, No Par Value
This Prospectus relates to 8,734,488 shares of common stock, no par
value per share (the "Selling Shareholders' Common Stock") of ILX Incorporated
("ILX") that are owned by Alan R. Mishkin, Joseph P. Martori, Edward J. Martori,
Martori Enterprises Incorporated, Nancy J. Stone, William G. Was, Jr., Investor
Resource Services, Inc. and Universal Solutions, Inc. (collectively, the
"Selling Shareholders"). The Selling Shareholders' Common Stock is being offered
for the accounts of the Selling Shareholders.
ILX will not receive any part of the proceeds from the offering of the
Selling Shareholders' Common Stock.
See "RISK FACTORS" for certain considerations relevant to an investment
in the Selling Shareholders' Common Stock.
ILX's Common Stock (the "ILX Common Stock") is quoted on the National
Association of Securities Dealers Automated Quotation Small Cap Market System
under the symbol "ILEX."
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Proceeds to
Price to Public* Commissions* Selling Shareholders*
- --------------------------------------------------------------------------------
Per Unit $ 1.28125 $ 0.05125 $ 1.23
Total $11,191,062.75 $447,642.51 $10,743,420.24
- --------------------------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
------------------
The date of this Prospectus is May __, 1996
- -------------
*Estimated based on the average of the bid and ask price of ILX Common Stock
of $1.28125 as of May 1, 1996 and on an assumed average rate of commissions (as
defined in the Securities Act of 1933 and the rules and regulations under it) of
4% applied to all sales. However, see "PLAN OF DISTRIBUTION." The sales price
received for, and the commissions paid on, the sale of the Selling Shareholders'
Common Stock may vary from the above assumed sales price and commission rate.
Further, ILX rather than the Selling Shareholders will pay the following
estimated expenses of issuance and distribution (see "USE OF PROCEEDS," "SELLING
SHAREHOLDERS" and "PLAN OF DISTRIBUTION"):
Registration Fees $5,295.66; Legal Fees $5,000.00; Printing & Engraving
$1,500.00; Accounting Fees $3,500.00; Transfer Agent's Fees $1,000.00.
<PAGE>
2
AVAILABLE INFORMATION
ILX is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance with
the Exchange Act files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by ILX can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located in Room 3190, Kluczynski Federal
Building, 230 South Dearborn Street, Chicago, Illinois 60604, and at 7 World
Trade Center, New York, New York 10007. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
The ILX Common Stock is listed on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") Small Cap Market System under
the symbol "ILEX". Reports, proxy statements and other information concerning
ILX can be inspected at the National Association of Securities Dealers, Report
Section, 1735 "K" Street, N.W., Washington, D.C. 20006.
INCORPORATION BY REFERENCE
The following documents are hereby incorporated by reference: (i) ILX's
annual report on Form 10-K for the fiscal year ended December 31, 1995 ("ILX's
10-K") and the exhibits attached thereto or incorporated therein; (ii) ILX's
Proxy Statement dated April 19, 1996, which was filed with the Commission on
April 26, 1996 ("ILX's Proxy Statement"); (iii) the description of the ILX
Common Stock set forth in ILX's Registration Statement filed with the Commission
on July 29, 1987, and any and all amendments thereto filed for the purpose of
updating such description; and (iv) ILX's first quarter Form 10-Q for the period
ended March 31, 1996, dated May 8, 1996 and filed with the Commission on May 14,
1996 ("ILX's 10-Q") and the exhibits attached thereto or incorporated therein.
All documents filed by ILX pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
filing of a post-effective amendment (which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold) shall be deemed to be incorporated by reference into this Prospectus and
to be a part of it from the respective dates of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein) modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. Documents relating to ILX (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents or into this Prospectus) are
available, and will be provided without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered upon a written or oral
request to ILX Incorporated, Attention: Nancy J. Stone, 2777 East Camelback
Road, Phoenix, Arizona 85016, telephone number (602) 957-2777.
<PAGE>
3
RISK FACTORS
An investment in ILX Common Stock involves certain risks. In addition
to other information contained in or incorporated by reference into this
Prospectus, prospective purchasers carefully should consider the following risk
factors before purchasing ILX Common Stock.
Nature of Business; Business Plan. Resort development and sales to
owner-users, whether through condominium creation or interval ownership,
including timesharing or vacation club membership, present certain financial and
operational risks that should be considered by each prospective purchaser. These
risks include, but are not limited to, the following:
Unfavorable Publicity; Remarketing Difficulty. The timeshare
or interval ownership industry has been the subject of unfavorable
publicity, particularly with respect to difficulties faced by
purchasers in remarketing their timeshare interests. Negative publicity
might reduce sales and adversely affect the value of ILX's securities,
including ILX Common Stock.
Marketing Expenses High Compared to Sales Prices. The cost of
marketing timeshare interests is a high percentage of the selling price
of the timeshare interests. Although ILX has set the sales prices of
timeshare interests at levels that are believed to be sufficiently high
to cover such costs, there can be no assurance that the timeshare
interests of the projects currently involved or other timeshare
interests of any other given project will continue to be saleable at
such prices. Higher costs could reduce or eliminate profit margins.
Buyer Defaults. Generally, buyers of vacation ownership
interests present a greater risk of default than home mortgagors, even
if they meet credit qualification standards. Private mortgage insurance
or its equivalent is not readily available to cover defaults with
respect to buyers' purchases of vacation ownership interests. If a
buyer defaults, the costs ILX expended to make the associated sale are
not recoverable and such costs must be incurred again after the
timeshare interest has been returned to ILX's inventory for resale.
Lack of Diverse Locations. The attractiveness of interval
ownership in resorts may be enhanced by the availability of exchange
networks allowing owners to "trade" the time they have purchased for
time at another resort. Several companies, including Resort
Condominiums International ("RCI") and Interval International ("II"),
provide broad-based exchange networks. ILX has qualified its Los
Abrigados Resort & Spa, Golden Eagle Resort, Kohl's Ranch Lodge and
Ventura Resort properties for participation in the RCI network, and has
qualified Varsity Clubs of America -- South Bend Chapter, Varsity Clubs
of America -- Tucson Chapter, and Costa Vida Vallarta Resort for
participation in the II network. Neither ILX's ability to qualify
additional properties nor the continued availability of such exchange
networks, however, can be assured. If ILX is unable to respond to
consumer demand for greater choices of locations, it may be at a
competitive disadvantage with companies that can offer such choices.
Potential Competition. Resort development and operation,
including condominiums and timesharing, is a highly competitive
industry. ILX anticipates that it will continue to face keen
competition in all aspects of its operations from organizations that
are larger, better financed and more experienced, such as the Walt
Disney Company, Hilton Hotels Corporation, Hyatt Hotels Corporation and
Marriott International Corporation. There can be no assurance that ILX
will be able to compete successfully with such companies.
Regulation. ILX's timeshare sales are subject to state
regulation by the states in which properties are located and states in
which timeshare interests are marketed or sold. ILX and its subsidiary
companies presently are permitted to market and sell timeshare
interests in
<PAGE>
4
Arizona, Colorado, Florida, Illinois, Indiana, Iowa, Nevada and
Pennsylvania. ILX anticipates that ILX and its subsidiaries will apply
for the right to conduct additional sales operations in various other
states throughout the United States. There can be no assurance that
each or any such state will grant, or continue to grant, ILX the right
to sell its timeshare interests in such states or that, if such right
to conduct sales operations is granted, it will be granted on terms and
conditions acceptable to ILX. Further, if agents or employees of ILX
violate such regulations or licensing requirements, such acts or
omissions might cause the revocation or non-renewal of such licenses
required for the sale by ILX and its subsidiary companies of timeshare
interests in such states. Under certain conditions, timeshare interests
may be considered "securities" under state or federal law, with
consequent time-consuming and expensive requirements for registration
of such interests, licensing of salespeople and compliance with other
regulations. There is no assurance that ILX's interval ownership plans
can be designed definitely to avoid regulation as "securities" under
federal law or the state law in the states where ILX desires to or does
conduct sales or in which its properties are located. If ILX's
timeshare interests are deemed to be securities, there can be no
assurance that ILX will be able to comply with the applicable state and
federal securities requirements and if ILX's timeshare interests are
deemed to be securities, such a determination may create liabilities or
contingencies that may impact ILX's ability to perform its obligations
and may undermine the value of ILX's securities, including ILX Common
Stock.
Failure to Achieve Business Plan. Although ILX intends to
expand its marketing of timeshare interests, no assurance can be given
that ILX will be able to achieve these objectives or that, if these
objectives are achieved, ILX will be profitable.
Potential Lack of Development Financing. ILX's ability to
expand its business to new resort projects, including the development
of additional Varsity Clubs facilities, will in large part depend upon
the availability of financing for the acquisition and development of
such projects. There can be no assurance that adequate additional
financing will continue to be available or that, if it is available, it
will be available on terms and conditions favorable to ILX.
New Concept; Uncertainty of Market Acceptance. ILX's management
believes that the Varsity Clubs concept is new and, as is typical in the case of
a new concept, the ultimate level of demand for and market acceptance of the
Varsity Clubs concept is uncertain. There can be no assurance that VCA will be
able to implement its business strategy or, if the strategy is implemented, that
it will be profitable. Failure of the Varsity Clubs concept could adversely
affect ILX's business and the value of ILX's securities, including ILX Common
Stock. ILX's management is aware of no other timeshare concepts that are
targeted toward VCA's identified market niche, which is the development of high
quality accommodations near prominent colleges and universities with nationally
recognized athletic programs. The hotel industry is, however, quick to recognize
and copy profitable lodging concepts. There can be no assurance that VCA will be
able to capitalize on this perceived market niche, if and to the extent it
exists, before other larger and better financed competitors become aware of and
exploit this opportunity.
Possibility of Downturn in General Economic Conditions. Any substantial
downturn in economic conditions or any significant increase in the cost of fuel
or transportation in general could significantly depress discretionary consumer
spending and, therefore, have a material adverse effect on ILX's sales of
vacation timeshare interests. In addition, the future unavailability of
attractive financing rates and favorable tax treatments (e.g. deductibility of
interest payments for "second homes," including interval ownership weeks) could
adversely affect ILX's business.
<PAGE>
5
Potential Lack of Consumer Receivable Financing. A substantial majority
of ILX's timeshare sales are made on an installment basis. At such time as a
sale is made, ILX is required to pay commissions and other costs that exceed
ILX's cash-up-front receipts. Written arrangements presently exist for both the
sale and financing of consumer receivables created by such installment sales.
The financing is on a recourse basis and thus requires ILX to bear the risk of
consumer default. ILX's ability to sell interval ownership weeks will depend
upon the continued availability of consumer receivable financing. There can be
no assurance that such financing will continue to be available or that, if it is
available, it will be available on terms and conditions favorable to ILX. If
such financing becomes unavailable upon expiration of existing written
arrangements or otherwise, ILX will have to rely upon other methods that could
severely limit ILX's ability to fund future operations. In that regard, an
affiliate of one of ILX's several primary lenders, Bennett Funding, recently
filed for bankruptcy protection. ILX has been informed that said proceedings do
not involve the affiliate with which ILX conducts business. ILX management is of
the opinion that such bankruptcy should have no material impact on its ability
to obtain financing, either from said affiliate or alternate sources.
Dividends. ILX has paid no cash dividends on its common or any series
of preferred stock and it does not contemplate paying cash dividends on its
common stock in the foreseeable future. It is the present intention of ILX's
management to retain future earnings, if any, for use in ILX's business. Failure
to pay dividends on the Series C Stock will entitle the holders thereof to
receive additional ILX Common Stock upon conversion and the increased
liquidation preference attributable to the Cumulation Shares (see "Description
of ILX Securities and Pertinent Arizona Statutes -- Description of Series C
Stock"); however, dividends on the Series C Stock are not otherwise cumulative.
Further, dividends cannot be paid on Series C Stock unless mandatory sinking
fund requirements are met and dividends are paid with respect to ILX's Series A
Stock. The Series B Stock pays no dividends.
Arizona Anti-takeover Provisions. ILX does not have any provisions in
its Articles of Incorporation or Bylaws that directly prohibit the takeover or
change in control of ILX. However, Sections 10-2701 et seq. of the Arizona
Revised Statutes, as amended, restrict a security holder or acquiror from
affecting changes in control of corporations such as ILX or from exercising
voting rights without shareholder approval when shareholdings exceed certain
thresholds. See "Description of ILX Securities and Pertinent Arizona Statutes --
Arizona Anti-takeover Legislation and Anti-takeover Devices." Such statutory
restrictions may adversely hamper future transactions involving a change in
control or potential change in control of ILX or transactions with persons with
shareholdings over specified percentages, thereby depressing the price of ILX
Common Stock or the price of other ILX securities. Further, such restrictions
may adversely affect the ability of one or more holders of ILX securities,
including ILX Common Stock, to effect a change in control of ILX.
Reliance on Key Personnel. ILX relies upon certain key management
employees, including its Chairman and Chief Executive Officer, Joseph P.
Martori, and the loss of any such individual could adversely affect ILX. ILX
believes that its future success will depend upon its ability to attract and
retain key personnel. There can be no assurance that ILX will be able to retain
key members of its current management team or that it will be able to attract
experienced personnel in the future. ILX currently does not have employment
agreements with such personnel.
Voting Control by Existing ILX Shareholders. ILX is required by Arizona
law to elect directors utilizing cumulative voting. By exercising his or her
right to vote cumulatively, a common shareholder would be able to elect a
percentage of directors corresponding to the percentage of the ILX Common Stock
held by such shareholder assuming the existence of a sufficient number of
directorships. ILX's Bylaws authorize a Board of no less than one nor more than
15 directors. ILX currently has eight directorships (seven of which are filled
and one of which is vacant). Consequently, a purchaser must hold 11.11% plus one
share of the ILX Common Stock to be able independently to elect a director.
Martori Enterprises Incorporated, an Arizona corporation ("MEI"), Joseph P.
Martori and Edward J. Martori, collectively, own or have the power to vote
approximately 44.96% of the outstanding ILX Common Stock, and thereby have the
power to elect at least 4 members of the 8 member Board of Directors and to
influence substantially ILX's business and affairs. If the interests of MEI,
Joseph P. Martori and Edward J. Martori, as shareholders, differ from the
interests of the other shareholders,
<PAGE>
6
such other shareholders may be adversely affected by such control. Joseph P.
Martori and Edward J. Martori also are directors of ILX and Joseph P. Martori is
Chairman of the Board and Chief Executive Officer of ILX. Joseph P. Martori and
Edward J. Martori also are controlling shareholders of MEI. Accordingly, MEI,
Joseph P. Martori and Edward J. Martori are able to exert substantial influence
over and in most cases control essentially all of ILX's business and affairs.
ILX's management believes that Alan R. Mishkin owns an amount of ILX Common
Stock sufficient to elect at least one member of the Board of Directors.
Effect of Shares Eligible for Future Sale on Market Price of ILX
Securities. Certain ILX shareholders hold commercially significant amounts of
ILX Common Stock. Such stock is (i) freely tradeable, (ii) may become available
for resale in the open market pursuant to Rule 144 promulgated under the
Securities Act, or (iii) may become freely tradeable pursuant to a registration
of such shares. The sale of commercially significant amounts of ILX Common Stock
under or subsequent to this offering could adversely affect the prevailing
market price of ILX Common Stock. Such sales also could impair ILX's ability to
raise additional capital through the sale of its securities. ILX filed a Form
S-3 Registration Statement on May 9, 1994 (supplemented on August 19, 1994 and
amended under a Registration Statement filed on May 3, 1996 of which the
Prospectus is a part). A total of 8,734,488 shares of ILX Common Stock have been
registered federally pursuant to these Form S-3 Registration Statements. The
market price for the ILX Common Stock may be adversely affected if all of the
Selling Shareholders attempt to sell the Selling Shareholders' Common Stock at
the same time or over a short period of time.
Liquidation. ILX has non-voting Series A Preferred Stock, $10.00 par
value, ("Series A Stock") that is entitled to an annual dividend of $.80 per
share commencing July 1, 1996 provided that the funds are legally available
therefor. The Series A Stock has a liquidation preference that is superior to
the liquidation rights of all other classes of ILX securities. ILX has
non-voting Series B Convertible Preferred Stock, $10.00 par value, ("Series B
Stock") that has a liquidation preference of $10.00 that is junior to the
liquidation preference of the Series A Stock but senior to that of all other
classes of ILX securities. Further, commencing July 1, 1996, each share of the
Series B Stock may be converted into two shares of ILX Common Stock (and the
rate shall be adjusted for dividends paid in ILX Common Stock, stock splits,
reverse splits and stock reclassifications). The Series C Stock is entitled to
an annual dividend of $.60 per share when and as declared by ILX's Board of
Directors (it can not and may not be paid unless the dividend and certain
sinking fund payments are made with respect to the Series A Stock). If ILX does
not pay some or all of the annual dividend, any unpaid amount that accrues
before the fifth anniversary date of the Merger (defined below) is deemed the
"Dividend Arrearage" and a shareholder's Dividend Arrearage, when divided by
$6.00, is the shareholder's "Cumulation Shares." The Series C Stock has a
liquidation preference of $10.00 per share (plus $6.00 per Cumulation Share to
which a shareholder is entitled). The liquidation preference is junior to the
liquidation preference on the Series A Stock and Series B Stock but is senior to
the liquidation rights of the ILX Common Stock. This description of liquidation
provisions of the Series A, Series B and Series C Stock is qualified in its
entirety by the discussion of such provisions contained in "Description of ILX
Securities and Pertinent Arizona Statutes," below.
THE COMPANY
General.
ILX is an Arizona corporation formed in October, 1986 for the purpose
of developing, operating, financing and marketing interval ownership interests,
often referred to as "timeshare" interests, in resort properties and engaging in
other leisure-oriented business activities. ILX's principal executive offices
are located at 2777 East Camelback Road, Phoenix, Arizona 85016, telephone
number (602) 957-2777.
<PAGE>
7
ILX sells timeshare interests in resorts located in Arizona, Colorado,
Florida, Indiana and Mexico. Generally, ILX either owns all or a controlling
interest in the resort itself, or it owns a designated number of timeshare
interests in a resort and has a corresponding right to sell those timeshare
interests to third parties. See "Risk Factors -- Nature of Business; Business
Plan."
ILX owns all or a controlling interest in the following resorts: Los
Abrigados Resort & Spa in Sedona, Arizona, Golden Eagle Resort in Estes Park,
Colorado, Kohl's Ranch Lodge in Gila County, Arizona, Lomacasi Resort in Sedona,
Arizona and Varsity Clubs of America -- South Bend Chapter in Mishawaka,
Indiana.
================================================================================
RESORT OWNERSHIP INTEREST
- --------------------------------------------------------------------------------
1. Los Abrigados Resort & Spa 78.5% Fee Simple
through Subsidiary*
- --------------------------------------------------------------------------------
2. Golden Eagle Resort 100% Fee Simple
- --------------------------------------------------------------------------------
3. Kohl's Ranch Lodge 100% Fee Simple
- --------------------------------------------------------------------------------
4. Lomacasi Resort 75% Fee Simple
through
Subsidiary**
- --------------------------------------------------------------------------------
5. Varsity Clubs of America -- South 100% Fee Simple
Bend Chapter through Subsidiary***
================================================================================
*The Los Abrigados Resort & Spa is owned by Los Abrigados
Partners Limited Partnership ("LAP"). ILE Sedona Incorporated,
a wholly owned subsidiary of ILX, is the general partner of
LAP and owns 71% thereof. ILX is the Class A Limited Partner
and owns 7.5% thereof.
**Lomacasi Resort is owned by The Sedona Real Estate Limited
Partnership #1 ("SRELP"). Lomacasi Resort Incorporated, a
wholly owned subsidiary of Genesis Investment Group, Inc.,
which in turn is a wholly-owned subsidiary of ILX, is the
general partner of SRELP and owns 75% thereof.
***Varsity Clubs of America -- South Bend Chapter is owned by
VCA South Bend Incorporated, which is a wholly owned
subsidiary of Varsity Clubs of America Incorporated, which in
turn is a wholly owned
subsidiary of ILX.
The properties owned by ILX or its subsidiaries are operated as hotels to the
extent of unused or unsold timeshare inventory.
In addition, ILX owns a designated number of timeshare interests in the
following resorts and has a right to sell those timeshare interests to third
party purchasers: Ventura Resort in Boca Raton, Florida and Costa Vida Vallarta
Resort in Puerto Vallarta, Mexico.
<PAGE>
8
================================================================================
RESORT LOCATION
- --------------------------------------------------------------------------------
1. Ventura Resort Boca Raton, Florida
- --------------------------------------------------------------------------------
2. Costa Vida Vallarta Resort Puerto Vallarta,
Mexico
================================================================================
Except for the Costa Vida Vallarta Resort, described below, timeshare
purchasers acquire deed and title to an undivided fractional interest in the
entire resort or to a particular unit or type of unit, which entitles the
purchaser to use a unit at the selected resort and to use the resort's common
areas during a designated time period. On occasion, ILX reacquires a timeshare
interest through a variety of circumstances including, but not limited to,
customers' defaults on their obligation to pay for their timeshare interests. In
those instances, the reacquired timeshare interests are restored to ILX's
inventory for resale.
Each of the above referenced resorts is affiliated with a
not-for-profit organization, the members of which are the owners (including ILX
and its subsidiaries) of timeshare interests in each such resort. These
not-for-profit organizations have certain recorded governing documents that
contain restrictions concerning the use of the resort property and that retain
certain benefits for ILX and its subsidiaries.
With respect to those resort properties owned by ILX or its
subsidiaries (Los Abrigados Resort & Spa; Kohl's Ranch Lodge; Lomacasi Resort
and Varsity Clubs of America -- South Bend Chapter), a portion of the price paid
to ILX by a purchaser of a timeshare interest in those resorts must be paid by
ILX to the holder(s) of the underlying mortgage(s) on the property in order to
release such timeshare interest from the lender's underlying encumbrance. This
"release fee" ensures that the timeshare purchaser can acquire clear title to
his or her timeshare interest.
ILX began marketing timeshare interests in the Ventura Resort in Boca
Raton, Florida in 1987. The Ventura Resort is located across from Boca Beach in
Boca Raton, Florida. ILX is authorized by the states of Arizona and Florida to
sell timeshare interests in Ventura Resort in those states. ILX had
approximately 20 weeks available for sale at December 31, 1995.
In 1986, ILX purchased, and in 1987 began operations at, the Golden
Eagle Resort, which is located in the town of Estes Park, Colorado, within three
miles of the Rocky Mountain National Park. The Golden Eagle Resort, including a
four-story wood-frame main lodge, is situated on approximately 4 acres of land
and is bounded generally by undeveloped forested mountainside land. The lodge
property contains 27 guest rooms, a restaurant, bar, library and outdoor
swimming pool, as well as two other free standing buildings containing 6 guest
rooms and support facilities. Space is available to construct additional suites
in the lodge and adjacent buildings. ILX also owns one unit in a residential
duplex adjacent to the property.
Marketing of timeshare interests in the Golden Eagle Resort began in
1987. ILX offers a minimum of 1,785 timeshare weeks in the Golden Eagle Resort.
Arizona, Colorado and Indiana have authorized ILX to sell timeshare interests in
Golden Eagle Resort in those states. ILX had approximately 501 weeks available
for sale in completed suites at December 31, 1995. The Golden Eagle Resort is,
as of December 31, 1995, encumbered by (i) a note and deed of trust in the
amount of $1,549,990, which is payable in monthly installments of interest at
the rate of 12% per annum and annual installments of principal in the amount of
$100,000, and matures in December, 1998, and (ii) a second deed of trust
securing repurchase obligations relating to borrowings against consumer notes
receivable in the principal amount of $1,195,716 and sales of consumer notes
receivable sold with recourse in the approximate amount of $923,000 at December
31, 1995.
<PAGE>
9
In September, 1988 ILX acquired an ownership interest in the Los
Abrigados Resort & Spa in Sedona, Arizona through BIS-ILE Associates
("BIS-ILE"), a partnership that was formed to acquire and market the property
and in which ILX held an interest as a general partner. See "The Company --
Other Wholly Owned Subsidiaries -- ILE Sedona Incorporated." The Los Abrigados
Resort & Spa is located on the northwest bank of Oak Creek in Sedona, Arizona,
approximately 110 miles northwest of Phoenix. The resort consists of a main
building (which houses the lobby, registration area, executive offices, meeting
space, a health spa and athletic club, food and beverage facilities and support
areas) and 174 suites in 22 one and two story free-standing structures. In
addition, a two bedroom historic homesite that has been renovated to include a
spa and other luxury features is also on the property and has been marketed by
ILX. The resort has an outdoor swimming pool, tennis courts and other
recreational amenities and is situated on approximately 19 acres of land.
Marketing of timeshare interests in the Los Abrigados Resort & Spa
began in February, 1989. ILX, directly and through its wholly owned subsidiary,
ILE Sedona Incorporated, has served as managing general partner of BIS-ILE and
its successor, Los Abrigados Partners Limited Partnership, an Arizona limited
partnership ("LAP"), since inception. A total of 9,100 timeshare weeks may be
sold in Los Abrigados Resort & Spa. Arizona, Colorado, Indiana, Iowa and Nevada
have authorized ILX to sell timeshare interests in Los Abrigados Resort & Spa in
those states. At December 31, 1995, ILX had approximately 3,360 weeks available
for sale, and options to purchase 430 weeks had been extended to owners of
Golden Eagle Resort. In addition, one to two year options have been extended to
certain owners of alternate year usage at Los Abrigados that allow the owners to
increase their ownership to every year usage. (Such options are at prices in
excess of the current prices for such usage.) Also, Genesis Investment Group,
Inc., a wholly owned subsidiary of ILX holds an option to purchase, and is
subject to a put option requiring it to purchase, 492 additional timeshare
weeks, which timeshare weeks will be made available for sale upon exercise of
the option. See "The Company -- Other Wholly Owned Subsidiaries -- Genesis
Investment Group, Inc." The Los Abrigados Resort & Spa is, as of December 31,
1995, encumbered by (i) a deed of trust, securing a note in the amount of
$805,000, which is payable in monthly installments of $80,000 principal and
interest at the rate of prime plus 1.25% and matures in September, 1996, and
(ii) two subordinate deeds of trust of equal priority securing repurchase
obligations relating to borrowings against consumer notes receivable in the
principal amount of $246,828 and sales of consumer notes receivable with
recourse in the amount of approximately $17 million. Subsequent to December 31,
1995, ILX borrowed an additional $1,760,000 from the first deed of trust holder,
and the terms of the note were modified to provide for monthly installments of
$82,833 principal plus interest and to extend the maturity date to June 1998.
On March 1, 1996, ILX indirectly became the 75% general partner of
SRELP that owns the Lomacasi Resort in Sedona, Arizona, a 19 cottage, 5.27 acre
property approximately one mile from the Los Abrigados Resort & Spa. The
property was encumbered by deeds of trust totaling approximately $2.2 million,
including accrued interest, on March 1, 1996. ILX intends initially to use the
resort to provide lodging accommodations to prospective timeshare purchasers at
ILX's Sedona sales office. ILX may offer timeshare interests in the property in
the future.
Effective as of November 21, 1995, ILX, ILES and LAP (collectively
"Developer") entered into a Management Agreement with Bennett Funding
International, Ltd. ("Bennett Funding"), a timeshare lender of ILX, with respect
to the Los Abrigados Resort & Spa. Bennett Funding is to provide general
supervision, strategic planning and consultation with respect to LAP and Los
Abrigados Resort & Spa, and with respect to the marketing and sale of 3,500
timeshare intervals at Los Abrigados Resort & Spa. The term of the Management
Agreement commenced on December 1, 1995 and is to continue for 5 years or such
longer time as may be required to complete the sale of the subject 3,500
timeshare interests. Bennett Funding will have the right to purchase timeshare
receivables of LAP on the same terms and conditions as have been historically
available from Bennett Funding to Developer, except that "holdback" requirements
would be adjusted to terms more favorable to Developer. Bennett Funding has
advanced under the Management Agreement approximately $2.1 million to be used by
Developer for working capital needs associated with Los Abrigados Resort & Spa
and/or LAP and
<PAGE>
10
to reimburse Developer for sums previously expended for capital improvements and
other expenses of Developer. The advance, plus 12% cost of funds factor on the
outstanding balance of the advance, will be repaid in equal monthly installments
over 36 months from one-half of the monthly cash flows from the sale of the
subject 3,500 timeshare intervals. Payment of the advance is guaranteed by ILX,
ILES and LAP. Bennett Funding will receive a management fee equal to one half of
the cash flow from the sale of the 3,500 timeshare intervals, determined on a
monthly basis, less the amount received in such month by Bennett Funding toward
repayment of the advance. LAP has executed and recorded a Declaration of Trust
with respect to the subject timeshare intervals in connection with its
obligations under the Management Agreement. A copy of the Management Agreement
was filed as an exhibit to ILX's 10-K and the foregoing description is qualified
in its entirety by reference to the actual Management Agreement. It is the
position of ILX management that Bennett Funding is in anticipatory breach of the
Management Agreement.
The Costa Vida Vallarta Resort is a beach front resort located in
Puerto Vallarta, Mexico. During 1993, 1994 and 1995, ILX acquired timeshare
weeks in the resort that provide a right to occupy a specific week and unit in
the resort and to use the common areas of the resort (during the week of
occupancy) through and including the year 2009. Arizona, Colorado and Indiana
have authorized ILX to sell timeshare interests in the Costa Vida Vallarta
Resort in those states. ILX had approximately 53 timeshare interests available
for sale as of December 31, 1995.
On June 1, 1995, ILX acquired ownership of Kohl's Ranch Lodge ("Kohl's
Ranch"). Kohl's Ranch is a 10.5 acre property located 17 miles northeast of
Payson, Arizona. It is bordered on the eastern side by Tonto Creek and is
surrounded by Tonto National Forest. The main lodge of Kohl's Ranch contains 41
guest rooms and a variety of common area amenities. Kohl's Ranch also includes
eight 1- and 2-bedroom cabins along Tonto Creek, a triplex cabin with two
1-bedroom units and one efficiency unit, and a free standing building that
contains sales offices and food and beverage facilities.
On June 14, 1995, the Arizona Department of Real Estate approved ILX's
application to sell timeshare interests in Kohl's Ranch. Timeshare sales
commenced in July, 1995. As of December 31, 1995, ILX had approximately 2,574
timeshare weeks available for sale. In addition to the sale of timeshare
interests, ILX intends to continues to operate Kohl's Ranch as a lodge-hotel.
ILX has begun refurbishing Kohl's Ranch, maintaining its authentic ranch
atmosphere and decor. ILX anticipates commencing construction of six new duplex
cabins on the property in the future, thus adding twelve 2-bedroom cabins, for a
total of 64 units and 3,328 timeshare weeks available for sale. Kohl's Ranch is,
as of December 31, 1995, encumbered by (i) a first position note and deed of
trust in the amount of $853,500, payable in equal installments of principal and
interest through December 1998, (ii) a second position note and deed of trust in
the amount of $334,800, which is payable, commencing June 1, 1996, in monthly
installments of $7,500 principal plus interest at the rate of 8% per annum, and
matures on June 1, 2000, and (iii) a third position note and deed of trust
securing repurchase obligations relating to borrowings against consumer notes
receivable in the principal amount of $338,849.
ILX's interval ownership plans compete both with other interval
ownership plans as well as hotels, motels, condominium developments and second
homes. ILX considers its competitive environment to include not only the areas
near its properties but also other vacation destination alternatives. ILX's
competitive posture is based on the distinction of its products, the
desirability of the locations of its properties, the quality of the amenities
ancillary to the timeshare weeks, the value received for the price and the
availability of a variety of destination locations. ILX employs approximately
500 people. ILX plans to continue exploring options for the acquisition or
development and marketing of new resort facilities.
<PAGE>
11
ILX will comply with the requirements of Rules 13e-4 and 14e-1 under
the Securities Exchange Act of 1934 and any other applicable securities laws in
connection with such provisions and any related offers by ILX.
Wholly Owned Subsidiaries of ILX
Varsity Clubs of America Incorporated. In 1988, ILX formed VCA to
participate in a joint venture with a wholly owned subsidiary of Coachman
Incorporated, a publicly traded corporation. In March, 1992, VCA acquired all of
Coachman Incorporated's subsidiary's interest in the Varsity Clubs joint
venture, giving VCA 100% ownership of the venture.
VCA was formed to capitalize on a perceived niche market: the potential
demand for high quality accommodations near prominent colleges and universities
with nationally recognized athletic programs. Large universities host a variety
of sporting, recreational, academic and cultural events that create a
substantial and relatively constant influx of participants, attendees and
spectators. The Varsity Clubs concept is a lodging alternative targeted to
appeal to university alumni, basketball or football season ticketholders,
parents of university students and corporate sponsors of university functions,
among others. The Varsity Clubs concept is designed to address the specific
needs of these individuals and entities by creating specialty timeshare hotels
that have a flexible ownership structure, enabling the purchase of anything from
a single day (such as the first home football game) to an entire football
season. Each Varsity Clubs facility will operate as a hotel to the extent of
unsold or unused timeshare inventory. See "Risk Factors -- New Concept;
Uncertainty of Market Acceptance."
The prototype Varsity Clubs facility is an all-suite, 62 unit lodging
facility that features amenities such as The Stadium (a sports-theme atrium
lounge), a private Member's Lounge, exercise facilities, a swimming pool and
whirlpool spa, complete business services and other facilities popular with the
target market of likely purchasers. The prototype Varsity Clubs facility is
expandable to approximately 90 units, without the need to acquire additional
real property, and can be built in smaller configurations if warranted by a
particular market.
The first Varsity Clubs facility was completed in August 1995 and is
located in Mishawaka, Indiana, approximately 2.8 miles from the University of
Notre Dame. The Indiana facility is owned, to the full extent of unsold
timeshare interests, by VCA South Bend Incorporated, a wholly owned subsidiary
of VCA. VCA South Bend Incorporated is affiliated with Varsity Clubs of America
- -- South Bend Chapter, a not-for-profit corporation whose members are the owners
of timeshare interests in the Indiana facility. Indiana, Arizona, Illinois,
Florida and Pennsylvania have authorized VCA South Bend Incorporated to sell
timeshare interests in the Indiana facility in those states. The Indiana Varsity
Clubs facility is, as of December 31, 1995, encumbered by a first position
mortgage and note in the amount of $4,186,869, the principal of which is payable
through release fees, with interest payable monthly at the rate of 13%. The note
matures in November 1998. The mortgage further secures sales of consumer notes
receivable with recourse in the amount of approximately $2.3 million at December
31, 1995.
The site for the second Varsity Clubs facility was acquired in July,
1995 and is located in Tucson, Arizona, approximately 2.3 miles from the
University of Arizona. The Arizona property is owned by VCA Tucson Incorporated,
a wholly owned subsidiary of VCA, under a contract for sale with a balance of
$701,400. In July, 1995, VCA Tucson Incorporated received a written commitment
for construction financing for the Arizona facility in the amount of $6 million,
which is expected to be sufficient to build and furnish the property. In
addition, the commitment includes up to $20 million in financing for eligible
notes received from the sale of timeshare interests in the Arizona facility. The
associated agreements were filed as exhibits to ILX's 10-K and the foregoing
description is qualified in its entirety by reference to those agreements.
Construction of the Arizona facility is tentatively scheduled to commence in
1996.
<PAGE>
12
VCA is considering various other sites for development of Varsity Clubs
facilities in the next five to seven years, in addition to the Varsity Clubs
facility in Indiana and the proposed facility in Tucson, Arizona. Due to the
existence of larger and better financed competitors in the lodging industry,
ILX's management believes that VCA's ability to capitalize on this perceived
market niche depends, in part, on the successful implementation of a reasonably
aggressive development strategy.
ILE Sedona Incorporated. In September, 1988, ILX acquired, through its
wholly owned subsidiary, ILE Sedona Incorporated ("ILES"), a 40% interest in
BIS-ILE, the owner in fee simple of the Los Abrigados Resort & Spa. During 1989,
ILX acquired additional interests that increased its ownership in BIS-ILE. On
January 8, 1990, BIS-ILE filed a petition for relief with the United States
Bankruptcy Court for the District of Arizona, under Chapter 11 of the Bankruptcy
Code. At that time, ILX owned 55.875% of BIS-ILE. Sales of vacation ownership
interests in Los Abrigados Resort & Spa ceased on January 8, 1990, pending
completion of the Chapter 11 filing. During 1990, while BIS-ILE prepared its
plan of reorganization, and in anticipation of that plan, ILX increased its
interest in BIS-ILE to 89.999%. On August 26, 1991, the Bankruptcy Court
approved BIS-ILE's amended plan of reorganization and sales of vacation
ownership interests in Los Abrigados Resort & Spa resumed on September 20, 1991,
following the successful reorganization. Pursuant to the plan, on September 10,
1991, Los Abrigados Partners Limited Partnership, an Arizona limited partnership
("LAP"), became the successor in interest to BIS-ILE. ILX, directly and through
ILES, owns a total of 78.5% of LAP, which now owns the Los Abrigados Resort &
Spa. LAP's other partners are Alan Mishkin (11.5%) and MEI (10%). ILES serves as
LAP's general partner. LAP has contracted with ILX to manage the resort and to
market fee simple interval ownership interests in the resort through the sale of
membership interests in the Sedona Vacation Club. The management contract
between ILX and LAP will terminate in September, 1996, unless otherwise renewed
pursuant to the terms of the contract or unless sooner terminated by 90% of the
owners of timeshare interests in the Sedona Vacation Club. It is the opinion of
ILX's management that the management contract will be renewed on equal or more
favorable terms to ILX.
Red Rock Collection Incorporated. Red Rock Collection Incorporated, an
Arizona corporation ("Red Rock Collection"), has, since July, 1994, been engaged
in the manufacture and distribution of personal care products. The complete
product line consists of spa and salon formulated products for face, body, bath
and hair care. The Red Rock Collection corporate headquarters are located at
3840 North 16th Street, Phoenix, Arizona. This 8400 square foot building is
leased by Red Rock Collection and houses the executive offices, customer
service, accounting, warehouse and shipping operations, as well as telemarketing
offices for the Company's timeshare sales operations.
Currently, Red Rock Collection products primarily are marketed through
resort properties owned and operated by ILX. This resort-based sales program
includes an upscale amenities line, an in-room gift basket promotion and retail
product sales at ILX resort venues. Red Rock Collection products are also used
by ILX and its subsidiaries as tour promotion incentives. The products are given
as gifts to individuals who attend timeshare tours and presentations. Red Rock
Collection then markets by direct mail to the resort and tour customers who have
received and/or used the Red Rock Collection products. Red Rock Collection is
also exploring opportunities to offer its spa formulated products to outside
developers for premiums, to other resorts and hotels for amenities and through
salons.
On February 2, 1993, ILX acquired, through a stock subscription
offering, 71.4% of the issued and outstanding common stock of Red Rock
Collection. ILX agreed to contribute (at prices mutually acceptable to ILX and
Red Rock Collection) $700,000 in goods and services at Los Abrigados Resort &
Spa in exchange for its Red Rock Collection stock. Effective February 11, 1994,
ILX acquired the remaining 28.6% of Red Rock Collection's issued and outstanding
common stock from Alan R. & Carol Mishkin and from MEI. In exchange for the Red
Rock Collection stock, ILX issued to the Mishkins and MEI each 61,500 shares of
restricted ILX Common Stock and each a promissory note in the principal
<PAGE>
13
amount of $150,000, requiring the payment of 10% interest annually and due and
payable in 36 equal monthly installments of $4,840.08 commencing March 11, 1994
and ending with a final payment on February 11, 1997.
Genesis Investment Group, Inc. Genesis Investment Group, Inc. is an
Arizona corporation, ("Genesis") and, as of November 1, 1993, a wholly owned
subsidiary of ILX. Genesis' business is the holding and liquidating of ownership
interests in real estate (both fee and liens), most of which is unimproved, and
the developing and selling of timeshare interests. In August, 1995, Syracuse
Project Incorporated, a wholly owned subsidiary of Genesis, became the general
partner of Orangemen Club Limited Partnership, a New York limited partnership.
The partnership contracted (on a non-recourse basis) to acquire three floors of
a hotel from Hotel Syracuse, Inc. The hotel is located within 2 miles of
Syracuse University. The purpose of the partnership is to renovate and sell
timeshare interests in the portion of the hotel that is to be acquired by the
partnership. The Genesis subsidiary owns an 80% interest in the partnership. The
associated agreements are incorporated into ILX's 10-K and the foregoing
description is qualified in its entirety by reference to those agreements. The
status of this project is unclear due to the pending bankruptcy of an affiliate
of Hotel Syracuse, Inc. However, all associated agreements are non-recourse to
ILX.
ILX acquired Genesis through the merger of Genesis into ILX's wholly
owned subsidiary, ILE Acquisition Corporation, an Arizona corporation ("ILEAC"),
that was effective on November 1, 1993 (the "Merger"). Pursuant to the Merger,
holders of Genesis common stock received the right to receive five shares of ILX
Common Stock and three shares of Series C Stock for every ten shares of Genesis
common stock. (At the time of the Merger, the Genesis shareholders were entitled
to receive a maximum of 305,964 shares of the Series C Stock and 509,940 shares
of ILX Common Stock.) Since the Merger, Genesis has continued to liquidate its
real estate holdings and has acquired an option to purchase 667 timeshare
intervals at Los Abrigados Resort & Spa. Pursuant to such option, Genesis has
acquired for resale 150 timeshare weeks and Genesis has engaged LAP to market
these timeshare interests.
Prior shareholders of Genesis, who held Genesis stock immediately
preceding the Merger (the "Genesis Shareholders") also received certain rights
(the "Recovery Rights") in certain proceeds of certain lawsuits (the "Lawsuits")
that had been filed by Genesis and two Genesis affiliates, (collectively, the
"Plaintiffs") prior to the Merger. The Lawsuits were filed to recover real
estate from four partnerships that had claimed that their interests in the real
estate were superior to the Plaintiffs' various interests in that real estate.
Genesis agreed that, following the Merger, it would act as agent for the Genesis
Shareholders solely to (i) pursue the Lawsuits in its reasonable discretion, and
(ii) collect and distribute the proceeds of the Recovery Rights, if any, to the
Genesis Shareholders.
Golden Eagle Resort, Inc. Golden Eagle Resort, Inc. was formed in 1987
to serve as the management company for the Golden Eagle Resort in Estes Park,
Colorado. The management contract between ILX and Golden Eagle Resort, Inc.
could terminate on May 31, 1997, unless otherwise renewed pursuant to the terms
of the contract or unless sooner terminated by 90% of the owners of timeshare
interests in the Golden Eagle Resort. It is the opinion of ILX's management that
the management contract will be renewed.
ILE Florida, Inc. ILE Florida, Inc. was formed in 1987 for the purpose
of holding 100% of the issued and outstanding stock of Southern Vacations, Inc.
Southern Vacations, Inc. owns timeshare interests in the Ventura Resort in Boca
Raton, Florida. At the present time, all timeshare interests in the Ventura
Resort are being marketed and sold by ILX in Arizona.
Kohl's Ranch Water Company. Kohl's Ranch Water Company ("KRWC") was
acquired in January 1996. KRWC owns various assets associated with providing
water service to Kohl's Ranch Lodge and various other properties in the
vicinity.
<PAGE>
14
In addition to the above mentioned wholly owned subsidiaries, ILX also
owns three corporations, SHI Health Institute Incorporated, Golden Eagle Realty,
Inc., and Red Rock Worldwide Incorporated, none of which has any assets or
liabilities or is conducting any business at the present time.
Consulting Arrangements
Effective June, 1995, ILX entered into Consulting Agreements with
Investor Resource Services, Inc., a Florida corporation ("IRC"), and Universal
Solutions, Inc., a Colorado corporation ("Universal"), pursuant to which IRC and
Universal agreed to provide certain investor relations, broker relations and
public relations services. Concurrently, IRC and Universal entered into
Consulting Agreements with Martori Enterprises Incorporated ("MEI") under which
MEI, the largest shareholder of ILX, agreed to make certain payments to IRC and
Universal for their services. Under the terms of the Agreements as amended in
the related Option Agreements, each of IRC and Universal receive from ILX a
total of 50,000 shares of ILX Common Stock, plus options to purchase an
additional 250,000 shares of ILX Common Stock at $1.25 per share. ILX has agreed
that the Common Stock received from ILX (including pursuant to the exercise of
an option) may be registered pursuant to the terms of the Consulting Agreements.
Additionally, MEI agreed to transfer to each of IRC and Universal 50,000 shares
of ILX Common Stock together with options to purchase 50,000 shares each at
$1.25 per share. The Consulting Agreements are attached to ILX's 10-K and the
Option Agreements are attached to the Registration Statement of which this
Prospectus is a part, and the above description is qualified in its entirety by
reference to the Consulting Agreements and the Option Agreements.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for ILX were as follows for the
respective periods indicated:
<TABLE>
<CAPTION>
============================================================================================================
Year Ended December 31
- ------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges 2.40 3.48 3.08 1.05
- ------------------------------------------------------------------------------------------------------------
Coverage Deficiency (in thousands) ($307)
============================================================================================================
</TABLE>
Fixed charges consist of interest, the amortization of debt issuance
costs and an estimated interest factor in rentals. Earnings in the years ended
December 31, 1995, December 31, 1994, December 31, 1993 and December 31, 1992
were sufficient to cover the combined fixed charges. Earnings for the year ended
December 31, 1991 were not sufficient to do so. The coverage deficiency for the
year ended December 31, 1991 represents the excess of fixed charges over
earnings.
USE OF PROCEEDS
ILX will not receive any proceeds from the sale of the Selling
Shareholders' Common Stock pursuant to this Prospectus. The Selling
Shareholders' Common Stock offered hereby is offered by the Selling Shareholders
for their own accounts. See "SELLING SHAREHOLDERS." Pursuant to an agreement
among BIS-ILE, ILX, Arthur J. Martori and Alan R. Mishkin dated March 28, 1991
(the "Agreement"), Mr. Mishkin acquired 2,000,000 shares of ILX Common Stock
(the "Mishkin Shares").
<PAGE>
15
Under that Agreement, ILX agreed to register the Mishkin Shares within six
months of the date of Mr. Mishkin's payment for the Mishkin Shares, which
occurred on September 9, 1991. Since the date of that purchase, Mr. Mishkin
contributed 1,166,655 shares of the Mishkin Shares to ILX pursuant to a
Contribution of Capital Agreement dated February 20, 1992 among ILX, Arthur J.
Martori, Wm. Robert Burns, MEI and Mr. Mishkin. In addition, since the date of
his original purchase and payment for the Mishkin Shares, Mr. Mishkin has
allowed ILX to postpone the date of registration of those shares. Mr. Mishkin
requested that ILX register the Mishkin Shares. ILX has done so and,
concurrently, registered the other shares of ILX Common Stock held by the
Selling Shareholders. Pursuant to the Agreement, ILX shall bear all expenses
associated with the registration.
SELLING SHAREHOLDERS
The Selling Shareholders' Common Stock is being offered for the account
of the Selling Shareholders. The table below sets forth certain information as
of March 31, 1996, including the name of each Selling Shareholder, his position,
office or material relationships to ILX or its affiliates within the past three
year period, the number of shares of the Selling Shareholders' Common Stock
owned by each Selling Shareholder prior to the initiation of the offering in May
1994, the number of shares of the Selling Shareholders' Common Stock held by
such Selling Shareholder as of March 31, 1996 and the number of shares of the
Selling Shareholders' Common Stock to be owned by each such Selling Shareholder
upon completion of this Offering, assuming all shares of the Selling
Shareholders' Common Stock offered hereby are sold pursuant to this Offering.
ILX has no knowledge that any Selling Shareholder plans to dispose of any shares
of the Selling Shareholders' Common Stock, except that Investor Resource
Services and Universal Solutions likely will offer at least a portion of their
shares for sale, and MEI will sell 100,000 shares of Common Stock to Investor
Resource Services and Universal Solutions pursuant to the options granted to
them.
<TABLE>
<CAPTION>
POSITION, OFFICE
OR COMMON COMMON COMMON
MATERIAL STOCK COMMON STOCK STOCK
RELATIONSHIP OWNED STOCK OFFERED BENEFICIALLY
WITH ILX OR AT DATE OWNED AS HEREUNDER BY OWNED
SELLING AFFILIATES WITHIN OF INITIAL OF MARCH SELLING AFTER
SHAREHOLDER THREE-YEAR PERIOD OFFERING(1) 31, 1996 SHAREHOLDER OFFERING
----------- ----------------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Joseph P. Martori(2) Chairman, Director, 69,842(3) 22,069(4) 22,069(4) 0
Chief Executive
Officer & Former
President
Edward J. Martori(5) Director 187,707(6) 46,539(6) 46,539(6) 0
Alan R. Mishkin(7) Former Director 2,475,345 2,012,045 2,012,045 0
Douglas L. Newell Former Director 31,702 11,702 11,702 0
Nancy J. Stone President, Chief 127,086 139,586(8) 139,586(8) 0
Financial Officer,
Director & Former
Executive Vice
President
William G. Was, Jr. Former Director 170,000(9) 44,000(10) 44,000(10) 0
Martori Enterprises ** 4,745,488 5,658,547 5,658,547 0
Incorporated(11)
E. Dwayne Former Director 31,292 0 0
Tatalovich
</TABLE>
<PAGE>
16
Investor Resource Consultant 0 400,000 400,000 0
Services(12)
Universal
Solutions(12) Consultant 0 400,000 400,000 0
1. This combined Prospectus relates to the Registration Statement filed on
Form S-3 on May 3, 1996 as well as the Registration Statement filed on
Form S-3 at No. 33-75382. Accordingly, for clarification, the above table
sets forth the shares owned by the Selling Shareholders as of the date of
the initial offering of shares under Registation No. 33-75382.
2. Joseph P. Martori also is a controlling shareholder, officer and director
of Martori Enterprises Incorporated.
3. Includes 15,010 shares of ILX Common Stock held by Joseph P. Martori as
custodian and trustee under a trust dated February 20, 1978 for the
benefit of Christina Ann Martori, and 4,000 shares of ILX Common Stock
held by Joseph P. Martori as custodian for his daughter Arianne Terres
Martori. Does not include Martori Enterprised Incorporated's shares of ILX
Common Stock.
4. Includes 11,010 shares of ILX Common Stock owned by Christina Ann Martori,
daughter of Joseph P. Martori, under a trust dated February 20, 1978,
10,000 shares held by Joseph P. Martori as custodian for his daughter,
Arianne Terres Martori, and 1059 shares held by Joseph P. Martori as
trustee under a trust dated January 30, 1976. Does not include Martori
Enterprises Incorporated's shares of ILX Common Stock.
5. Edward J. Martori also is a controlling shareholder, officer and director
of Martori Enterprises Incorporated. Shareholdings shown do not include
Martori Enterprises Incorporated's shares of ILX Common Stock.
6. Includes 707 shares of ILX Common Stock owned by the Estate of Edward
Joseph Martori of which Edward J. Martori is beneficiary and Joseph P.
Martori is personal representative.
7. Alan R. Mishkin is a limited partner in the Los Abrigados Partners Limited
Partnership.
8. Includes 10,000 shares owned by Michael Stone, husband to Nancy J. Stone.
9. Includes 40,000 shares held in the Was Family Trust.
10. Includes 37,000 shares held in the Was Family Trust.
11. Martori Enterprises Incorporated is a limited partner in the Los Abrigados
Partners Limited Partnership.
12. Effective June, 1995, ILX entered into Consulting Agreements with Investor
Resource Services, Inc., a Florida corporation, ("IRC") and Universal
Solutions, Inc., a Colorado corporation ("Universal"). Pursuant to those
Agreements, IRC and Universal agreed to provide certain investor
relations, broker relations and public relations services. Concurrently,
IRC and Universal entered into Consulting Agreements with Martori
Enterprises Incorporated ("MEI") under which MEI, the largest shareholder
of ILX, agreed to make certain payments to IRC and Universal for their
services. Under the terms of the Agreements as amended by related
Option Agreements, each of IRC and Universal received from ILX a total of
50,000 shares of ILX common stock, plus options to purchase an additional
250,000 shares of ILX common stock at $1.25 per share. ILX has agreed that
the common stock received from ILX (including pursuant to the exercise of
an option) may be registered pursuant to the terms of the Consulting
Agreements. Additionally, MEI agreed to transfer to each of IRC and
Universal 50,000 shares of ILX common stock together with options to
purchase 50,000 shares each at $1.25 per share.
<PAGE>
17
PLAN OF DISTRIBUTION
ILX will not receive any proceeds from the sale of the Selling
Shareholders' Common Stock pursuant to this Prospectus. The shares of the
Selling Shareholders' Common Stock offered hereby may be sold from time to time
directly by or for the account of the Selling Shareholders. The Selling
Shareholders' Common Stock may be sold in one or more transactions (which may
include block transactions) on the NASDAQ Small Cap Market System, in negotiated
transactions, or in a combination of those and other methods of sale, at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at prices otherwise negotiated. The Selling Shareholders may effect
transactions by selling the Selling Shareholders' Common Stock to or through
broker-dealers, and those broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of the Selling Shareholders' Common Stock for whom such
broker-dealers may act as agent (which compensation may be less than or in
excess of customary commissions). The Selling Shareholders and any
broker-dealers that participate in the distribution of the Selling Shareholders'
Common Stock may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commissions received by them and any profit
on the resale of the Selling Shareholders' Common Stock sold by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Upon ILX being notified by the Selling Shareholders, or any of them,
that any material arrangement has been entered into with a broker-dealer for the
sale of the Selling Shareholders' Common Stock through a block trade, special
offering, exchange distribution or other secondary distribution, or a purchase
by a broker or a dealer, a supplemental prospectus will be filed, if required,
pursuant to Rule 424(b) of the Securities Act.
ILX has agreed to bear the expenses of the registration of the Selling
Shareholders' Common Stock, including legal and accounting fees.
DESCRIPTION OF ILX SECURITIES AND PERTINENT ARIZONA STATUTES
Description of ILX Common Stock
Each share of ILX Common Stock entitles the holder thereof to one vote
in all matters submitted to a vote of ILX's shareholders, except that election
of directors shall be by cumulative voting to the extent and in the manner
provided by Arizona law. Cumulative voting requires that in any election for
board members, each share of stock is entitled to a total number of votes equal
to the total number of board members to be elected. Such votes may be cast for
one or more directors as the shareholder desires. No holder of ILX Common Stock
has any preemptive right to subscribe for or purchase additional shares of ILX's
stock. Holders of ILX Common Stock are entitled to share ratably in all
dividends not attributable to the Series A or Series C Stock that are declared
by the Board of Directors and in all assets available for distribution upon
liquidation after giving effect to the liquidation preferences of the Series A,
Series B and Series C Stock.
Description of Series A Stock
Pursuant to the plan of reorganization of BIS-ILE Associates dated
September 10, 1991 (see "The Company--Other Wholly Owned Subsidiaries--ILE
Sedona Incorporated), the unsecured trade creditors of BIS-ILE Associates agreed
to accept 82,540 shares of ILX's non-voting Series A Preferred Stock, $10.00 par
value ("Series A Stock"), in full satisfaction of a debt to such trade creditors
in the amount of $825,400. Accordingly, ILX authorized 110,000 shares of Series
A Stock, 66,011 shares of which remain issued and outstanding at December 31,
1995. Beginning July 1, 1996, the Series
<PAGE>
18
A Stock is entitled to an annual dividend of $.80 per share out of funds legally
available therefor. Dividends may not be paid on ILX Common, Series B or Series
C Stock until the Series A Stock sinking fund requirements and dividends
payments are satisfied.
The Series A Stock has a liquidation preference of $10.00 per share
that is superior to the liquidation preferences of the Series B Stock and Series
C Stock and the liquidation rights on the ILX Common Stock. Prior to June 30,
1996, ILX may redeem the Series A Stock at a price of $10.00 per share.
Beginning January 1, 1993, ILX, through one of its affiliates, is required
quarterly to make provision for a dividend sinking fund in an amount equal to
$100 for each unrescinded timeshare sale at Los Abrigados Resort & Spa made
during the preceding calendar quarter, adjusted for certain conversions of
Series A Stock into Lodging Certificates, as described below.
Before June 30, 1996, each holder of Series A Stock may exchange up to
$35,000 par value of Series A Stock for "Lodging Certificates" at the rate of
one Lodging Certificate for every fifteen shares of Series A Stock so exchanged.
Subject to certain conditions, a Lodging Certificate may be exchanged for one
night's stay at Los Abrigados Resort & Spa. (ILX recently has notified holders
of Series A Stock of an opportunity to exchange their Series A Stock for
lodging, food and beverage at Kohl's Ranch Lodge.) Additionally, a holder of
more than one thousand shares of Series A Stock may exchange one thousand shares
of Series A Stock plus $2,100 for a timeshare membership in the Sedona Vacation
Club at Los Abrigados Resort & Spa in Sedona, Arizona. The foregoing discussion
of the Series A Stock is qualified in its entirety by reference to the
Certificate of Designation of the Series A Stock, a copy of which may be
obtained from ILX.
Description of Series B Stock
Pursuant to the plan of reorganization of BIS-ILE Associates, ILX
authorized and issued 275,000 shares of non-voting Series B Convertible
Preferred Stock, $10.00 par value ("Series B Stock"), in full satisfaction of a
debt to B.I. Sedona, Inc., in the amount of $2,750,000, 55,000 shares of which
remain issued and outstanding at December 31, 1995.
The Series B Stock has a liquidation preference of $10.00 per share
that is junior to the liquidation preference of the Series A Stock but senior to
the liquidation preference of the Series C Stock and the liquidation rights on
the ILX Common Stock. Prior to June 30, 1996, ILX may redeem the Series B Stock
at a price of $10.00 per share. From and after July 1, 1996, each share of
Series B Stock may be converted into two shares of ILX Common Stock. The
conversion rate shall be adjusted for dividends paid in ILX Common Stock, stock
splits, reverse stock splits and stock reclassifications.
Prior to June 30, 1996, a holder of Series B Stock may exchange up to
$100,000 par value of Series B Stock for Lodging Certificates at the rate of one
Lodging Certificate for every fifteen shares of Series B Stock so exchanged.
Additionally, a holder of more than one thousand shares of Series B Stock may
exchange one thousand shares of Series B Stock plus $2,100 for a timeshare
membership in the Sedona Vacation Club at Los Abrigados Resort & Spa in Sedona,
Arizona. The foregoing discussion of the Series B Stock is qualified in its
entirety by reference to the Certificate of Designation for the Series B Stock,
a copy of which may be obtained from ILX.
Description of Series C Stock
In connection with the Merger of Genesis into ILX's wholly-owned
subsidiary, ILX authorized 309,000 shares of non-voting Series C Convertible
Preferred Stock, $10.00 par value ("Series C Stock"). ILX issued 305,652 shares
of Series C Stock, of which 290,472 shares remain issued and outstanding at
December 31, 1995. The Series C Stock has been issued, along with certain shares
of ILX Common Stock, to former Genesis Shareholders in exchange for their
Genesis common stock.
<PAGE>
19
The Series C Stock is entitled to receive dividends, when and as
declared by ILX's Board of Directors, out of any funds legally available
therefore at the rate of $.60 per share per annum (the "Dividend Preference"),
payable in preference and priority to any payment of any dividend on ILX Common
Stock but subordinate and subject to the dividend rights of the Series A Stock.
Except for Cumulation Shares (as hereafter defined) issuable on conversion or
liquidation of the Series C Stock, the right to Dividend Preference is not
cumulative. If, during any year prior to the fifth anniversary (November 1,
1998) of the effective date of the Merger between ILX's wholly owned subsidiary,
ILEAC, and Genesis (see "The Company - Other Wholly Owned Subsidiaries --
Genesis Investment Group, Inc."), the Dividend Preference is not paid in full,
the unpaid portion thereof will accumulate through November 1, 1998 (the total
amount of such cumulation expressed in dollars is referred to herein as the
"Dividend Arrearage"). ILX is not required to pay the Dividend Preference in
cash except upon liquidation. "Cumulation Shares" means the total Dividend
Arrearage (as of the date of calculation thereof) owed to any holder of Series C
Stock with respect to all shares of Series C Stock owned of record by such
holder divided by $6.00. Partial fiscal years are to be equitably prorated. The
Series C Stock has a liquidation preference of $10.00 per share plus any
Dividend Arrearage allocable to such shares. Such liquidation preference is
subordinate to the liquidation preferences of ILX's Series A Stock and Series B
Stock. The Series C Stock may be redeemed by ILX at any time on or after
November 1, 1996 at a price of $10.00 per share plus payment of all declared but
unpaid dividends. At the option of the holder, shares of Series C Stock may be
converted into shares of ILX Common Stock after November 1, 1994 but prior to
November 1, 2003 at a rate of five shares of ILX Common Stock for every three
shares of Series C Stock. A holder of Series C Stock also shall convert the
applicable Dividend Arrearage with respect to such shares into ILX Common Stock
at the rate of one share of ILX Common Stock for every $6.00 of Dividend
Arrearage. This summary of the terms of the Series C Stock is qualified in its
entirety by the Certificate of Designation of the Series C Stock, a copy of
which may be obtained from ILX.
Arizona Anti-takeover Legislation and Anti-takeover Devices
Arizona Revised Statutes Sections 10-2701 et seq. were adopted by the
Arizona legislature in an attempt to prevent corporate "greenmail" and to
restrict the ability to acquire domestic corporations. These statutes generally
apply to business combinations or control share acquisitions of "issuing public
corporations," which are defined as corporations having a class of equity
securities registered pursuant to Section 12 of the Exchange Act or subject to
Section 15(d) of the Exchange Act and either (i) incorporated under the laws of
Arizona or (ii) having a principal place of business or principal executive
office in Arizona, owning or controlling assets in Arizona that have a fair
market value of at least $1,000,000 and having more than 500 employees residing
in Arizona. ILX has securities registered pursuant to Section 12 of the Exchange
Act and is subject to Section 15(d) of the Exchange Act, and therefore is
subject to these statutes. These statutes could impede an acquisition of ILX and
its affiliates.
Arizona Revised Statutes Section 10-2704 limits the ability of a
corporation to repurchase stock from a beneficial owner of more than 5% of the
voting power of an issuing public corporation unless certain conditions are
satisfied. ARS Section 10-2705 limits the ability of the issuing public
corporation to enter into or amend any agreements containing provisions that
increase the current or future compensation of any officer or director of the
issuing public corporation during any tender offer or request or invitation for
tenders of any class or series of shares of the issuing public corporation
(other than an offer, request or invitation by the issuing public corporation).
ARS Section 10-2721 regulates control share acquisitions, defined as a direct or
indirect acquisition of beneficial ownership of shares of an issuing public
corporation that would, when added to all other shares of the issuing public
corporation beneficially owned by the acquiring person, entitle the acquiring
person immediately after the acquisition to exercise either (a) more than 20%
but less than 33-1/3% or (b) at least 33- 1/3% but less than 50% or (c) more
than 50% of the voting power. Among other things, control
<PAGE>
20
share acquisitions exclude statutory mergers and acquisitions, and acquisitions
pursuant to security agreements. Within ten days after engaging in a control
share acquisition, the acquiring person must deliver to the issuing public
corporation an information statement setting forth the identity of the acquiring
person and all of its affiliates, the number and class of securities of the
issuing public corporation beneficially owned before, and to be acquired in, the
control share acquisition, and the terms of the control share acquisition. The
shares acquired in a control share acquisition have all the same voting rights
as other shares in elections for directors, but do not have the right to vote on
other matters unless approved by a resolution of shareholders of the issuing
public corporation other than the acquiring person and any officer or director.
If the shareholders vote not to accord voting rights to the shares acquired by
the acquiring person, the issuing public corporation may redeem the control
shares at their then current market price. Finally, in certain circumstances,
ARS Section 10-2741 prohibits an issuing public corporation or a subsidiary
thereof from engaging in a business combination with any interested shareholder
of the issuing public corporation or any affiliate or associate of the
interested shareholder for three years after the interested shareholder's share
acquisition date.
The constitutionality of these provisions of Arizona law has not been
tested under Arizona or federal law. No assurance can be given that such
statutes would withstand any such constitutional challenge. The existence of
these statutes may make ILX a less attractive merger or acquisition candidate.
Except as described above with respect to the statutory provisions of
the Arizona anti-takeover laws, ILX has not adopted any anti-takeover devices
with respect to its equity or debt securities. See "Risk Factors -- Arizona
Anti-takeover Provisions."
SEC POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Articles 13 and 14 of ILX's Articles of Incorporation, under certain
circumstances, provide for the indemnification of ILX's officers and directors
against liabilities they may incur in such capacities. A summary of the
circumstances in which such indemnification is provided is contained herein, but
that description is qualified in its entirety by reference to Articles 13 and 14
of ILX's Articles of Incorporation.
In general, any director or officer of ILX is eligible to be
indemnified against all expenses, including attorneys' fees, judgments, fines,
punitive damages and amounts paid in settlement, that were incurred in
connection with a proceeding to which the director or officer was a party as a
result of his or her relationship with ILX, unless (1) the individual breached
his or her duty of loyalty to ILX, (2) the individual's acts or omissions are
not in good faith, (3) the individual engaged in intentional misconduct or
knowing violation of law, or (4) indemnification is expressly prohibited by
applicable law. In addition, ILX will not indemnify a director or officer for
any liability incurred in a proceeding initiated (or participated in as an
intervenor or amicus curiae) by the officer or director seeking indemnification
unless such initiation or participation is authorized by the affirmative vote of
a majority of the directors in office.
ILX shall advance funds to pay the expenses of any officer or director
involved in a proceeding provided ILX receives an undertaking that the
individual will repay the funds if it is ultimately determined that he or she is
not entitled to indemnification. The indemnification rights granted to ILX's
officers and directors are deemed to be a legally binding contract between ILX
and each such officer and director. Any repeal, amendment or modification of
Articles 13 or 14 of ILX's Articles of Incorporation shall be effective
prospectively and shall not affect any prior rights or obligations concerning
the indemnification of ILX's officers and directors.
<PAGE>
21
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
LEGAL OPINION
The validity, under Arizona corporate law, of the Selling Shareholders'
Common Stock being offered hereby may be passed upon by the law firm of Colombo
& Bonacci, P.C., 2525 East Camelback Road, Suite 840, Phoenix, Arizona.
<PAGE>
No person is authorized to give any information or to make any representation
not contained in this Prospectus and, if given or made, such information or
representation should not be relied upon as having been authorized. This
Prospectus does not constitute an offer to exchange or sell, or a solicitation
of an offer to exchange or purchase, the securities offered by this Prospectus
in any jurisdiction to or from any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any distribution of the securities to which this Prospectus
relates shall, under any circumstances, create any implication that there has
been no change in the affairs of ILX since the date of this Prospectus.
- --------------------------------------------------------------------------------
8,734,488 Shares
----------
ILX INCORPORATED
Common Stock
-----------------------------------
PROSPECTUS
-----------------------------------
TABLE OF CONTENTS
AVAILABLE INFORMATION ..................................................... 2
INCORPORATION BY REFERENCE ................................................ 2
RISK FACTORS .............................................................. 3
THE COMPANY ............................................................... 6
RATIO OF EARNINGS TO FIXED CHARGES ........................................ 14
USE OF PROCEEDS ........................................................... 14
SELLING SHAREHOLDERS ...................................................... 15
PLAN OF DISTRIBUTION ...................................................... 17
DESCRIPTION OF ILX SECURITIES AND PERTINENT
ARIZONA STATUTES ......................................................... 17
SEC POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES ............................................ 20
LEGAL OPINION ............................................................. 21
--------------------------------
<PAGE>
23
PART II
INFORMATION NOT REQUIRED
IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of expenses incurred in
connection with this Registration Statement. All such expenses will be paid by
ILX.
Registration Fee........................................ $ 5,295.66
Public accountants' fees................................ $ 3,500.00
Legal fees and expenses................................. $ 5,000.00
Printing and engraving expenses......................... $ 1,500.00
Transfer agent's fees................................... $ 1,000.00
-----------
TOTAL......................................... $ 16,295.66
===========
All of the above items, except the Registration Fee, are estimates.
Item 15. Indemnity of the Officers and Directors and Commission Position on
Such Indemnity.
Articles 13 and 14 of ILX's Articles of Incorporation, under certain
circumstances, provide for the indemnification of ILX's officers and directors
against liabilities they may incur in such capacities. A summary of the
circumstances in which such indemnification is provided for is contained herein,
but that description is qualified in its entirety by reference to Articles 13
and 14 of ILX's Articles of Incorporation.
In general, any director or officer of ILX is eligible to be
indemnified against all expenses, including attorneys' fees, judgments, fines,
punitive damages and amounts paid in settlement, that were incurred in
connection with a proceeding to which the director or officer was a party as a
result of his or her relationship with ILX, unless (1) the individual breached
his or her duty of loyalty to ILX, (2) the individual's acts or omissions are
not in good faith, (3) the individual engaged in intentional misconduct or
knowing violation of law, or (4) indemnification is expressly prohibited by
applicable law. In addition, ILX will not indemnify a director or officer for
any liability incurred in a proceeding initiated (or participated in as an
intervenor or amicus curiae) by the officer or director seeking indemnification
unless such initiation or participation is authorized by the affirmative vote of
a majority of the directors in office.
ILX shall advance funds to pay the expenses of any officer or director
involved in a proceeding provided ILX receives an undertaking that the
individual will repay the funds if it is ultimately determined that he or she is
not entitled to indemnification. The indemnification rights granted to ILX's
officers and directors are deemed to be a legally binding contract between ILX
and each such officer and director. Any repeal, amendment or modification of
Articles 13 or 14 of ILX's Articles of Incorporation shall be effective
prospectively and shall not affect any prior rights or obligations concerning
the indemnification of ILX's officers and directors.
<PAGE>
24
Item 16. Exhibits.
The Exhibits required by Item 601 of Regulation S-K have been supplied
as follows:
Exhibit
Numbers Description of Exhibit Page No.
- ------- ---------------------- --------
05 Legal Opinion of Colombo & Bonacci, P.C. *
10 Material Contracts
a. Option Agreement effective June 2, 1995
between ILX and Investor Resource Services, Inc. *
b. Option Agreement effective June 2, 1995
between ILX and Universal Solutions, Inc. *
c. Option Agreement effective June 2, 1995
between MEI and Investor Resource Services, Inc. *
d. Option Agreement effective June 2, 1995
between MEI and Universal Solutions, Inc. *
12 Statement Regarding Computation of Ratios *
23.1 Consent of Colombo & Bonacci, P.C.
23.2 Consent of Deloitte & Touche LLP
* Previously filed
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or
events arising after the effective date of
this Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in this Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement;
Provided, however, that the undertakings set forth in paragraphs 1(i) and 1(ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
<PAGE>
25
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To deliver or cause to be delivered with the Prospectus, to
each person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the Prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the Prospectus, to deliver, or cause to be delivered to each person to
whom the Prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the Prospectus to provide such interim
financial information.
(6) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of Prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(7) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of Prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
hereby certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on May 16, 1996.
ILX INCORPORATED
By /s/ Joseph P. Martori
---------------------------------
Joseph P. Martori, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Joseph P. Martori Chairman/Chief Executive May 16, 1996
- ----------------------- Officer/Director -----------------
Joseph P. Martori
/s/ Nancy J. Stone President/Chief Financial May 16, 1996
- ----------------------- Officer/Director -----------------
Nancy J. Stone
/s/ Denise Janda Vice-President/Controller May 16, 1996
- ----------------------- -----------------
Denise Janda
/s/ Ronald D. Nitzberg Director May 16, 1996
- ----------------------- -----------------
Ronald D. Nitzberg
/s/ Edward J. Martori Director May 16, 1996
- ----------------------- -----------------
Edward J. Martori
/s/ James W. Myers Director May 16, 1996
- ----------------------- -----------------
James W. Myers
/s/ Steven R. Chanen Director May 16, 1996
- ----------------------- -----------------
Steven R. Chanen
/s/ Luis C. Acosta Director May 16, 1996
- ----------------------- -----------------
Luis C. Acosta
May 16, 1996
ILX Incorporated: S-3 Registration Statement
--------------------------------------------
Gentlemen:
We have acted as counsel to ILX Incorporated, an Arizona corporation,
(the "Company") in connection with the registration by the Company of Common
Stock pursuant to a registration statement and one amendment to it filed by the
Company on Form S-3 with respect to the above described securities (the
"Registration Statement").
We hereby consent to the filing of our opinion (in the form of
Exhibit 5 of the Registration Statement), or copies thereof, as an exhibit to
the Registration Statement and all amendments to it. In giving this consent, we
do not admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the SEC thereunder.
Very truly yours,
/s/ Colombo & Bonacci, P.C.
COLOMBO & BONACCI, P.C.
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-03151 of ILX Incorporated on Form S-3 of our
report dated March 27, 1996, appearing in the Annual Report on Form 10-K of ILX
Incorporated for the year ended December 31, 1995.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
May 16, 1996
