As filed with the Securities and Exchange Commission on February 27, 1997
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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.)
2111 East Highland, Suite 210
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
2111 East Highland, Suite 210
Phoenix, Arizona 85016
(602) 957-2777
(Name, address, and telephone number, of agent for service)
Copy to:
HUGH L. HALLMAN, 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
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 February 26, 1997 Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, no par value per share 8,456,988* shares $1.2345 $489.12*
=============================================================================================================================
</TABLE>
* Pursuant to Rule 429(a) of the Securities Act, this Registration Statement
relates to Registrations No. 33-75382 and No. 333-03151 filed on Form S-3 and
concerning 7,838,462 and an additional 2,058,046 shares, respectively, and with
respect to which a fee of $4,388.60 and $907.06 respectively already has been
paid. Of those shares that were registered under both Registrations No. 33-75382
and 333-03151, 1,585,000 have previously been disposed of, expired or are no
longer subject to registration and 7,149,488 continue to be held by the Selling
Shareholders. Accordingly, a registration fee of only $489.12 need be filed for
the 1,307,500 shares newly registered hereunder.
<PAGE>
ILX INCORPORATED
8,456,988 Shares of Common Stock, No Par Value
This Prospectus relates to 8,456,988 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., Douglas L. Newell and Texas Capital Securities
(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 $ 1.2345 $ 0.0494 $ 1.1851
Total $10,440,151.68 $ 417,775.21 $ 10,022,376.47
- --------------------------------------------------------------------------------
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 February __, 1997
- --------
*Estimated based on the average of the bid and ask price of ILX Common
Stock of $1.2345 as of February 26, 1997 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 $489.12; Legal Fees $6,000.00; Printing & Engraving $1,800.00;
Accounting Fees $5,000.00; 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) ILX's quarterly reports on Form
10-Q for the quarters ended March 31, 1996, June 30, 1996, and September 30,
1996 and the exhibits attached thereto or incorporated therein ("ILX's 10-Qs");
(iv) ILX's current reports on Form 8-K dated June 14, 1996, August 5, 1996,
January 1, 1997 and January 7, 1997 ("ILX's 8-Ks") and (v) 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.
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: Samuel Ciatu, 2111 East Highland, Suite
210, 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, operation and
sales to owner-users, through 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. All intervals currently offered
by ILX are qualified for inclusion in either the RCI or II exchange
network. Neither ILX's ability to qualify additional properties nor the
continued availability of such exchange networks to ILX intervals,
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, operation, 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 all states in which ILX properties are located and all
states in which it is marketing and selling timeshare interests. ILX
anticipates that ILX and its subsidiaries will apply for the right to
<PAGE>
4
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 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.
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 and collection of accounts receivable. 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.
Potential Lack of Consumer Receivable Financing. A substantial majority
of ILX's timeshare sales are made on an installment basis. At such time as an
installment sale is made, ILX is required to pay commissions and other costs
that typically exceed cash received from the installment purchaser's down
payment. 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, filed for bankruptcy protection
in 1996. 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.
<PAGE>
5
Debbie Reynolds Hotel & Casino. ILX currently is considering the
acquisition of the Debbie Reynolds Hotel & Casino in Las Vegas, Nevada (the
"Hotel") under the terms of an agreement dated as of October 30, 1996. (See "The
Company -- General.") ILX might do so if and when certain conditions are met by
the current owners. According to the terms of the definitive agreement, if ILX
elects to consummate the transaction (the likelihood of which is described
below, see "The Company -- General"), ILX would pay $4,200,000 in cash that ILX
intends to borrow from third party lenders and to whom ILX likely would be
required to provide recourse mortgages, issue to the Hotel's current owners
3,750,000 shares of ILX Common Stock that ILX would be obligated to register
federally, and assume $5,100,000 in mortgage indebtedness. The mortgage
indebtedness likely would be recourse to ILX's other assets and such
indebtedness, as well as the existence of the the $4,200,000 in debt described
above, may effect ILX's ability to borrow future funds. Further, the issuance of
the 3,750,000 shares of ILX Common Stock will dilute the proportionate interest
of current shareholders of ILX Common Stock and the sale of such stock may
adversely affect the market price for ILX Common Stock. Moreover, the obligation
to pay the Hotel's current owners $4,200,000 in cash may adversely affect ILX's
cash flow and its business operations generally as well as subject ILX's assets
to further liens, thereby hindering ILX's ability to borrow further funds, among
other adverse results. In addition, based on information provided by the Hotel's
current owners regarding the business performance of the Hotel to date, ILX can
make no assurances that ILX will be able to operate the Hotel at a profit if the
transaction is consummated.
Dividends. ILX has paid no cash dividends on its common 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, subject to the Series A
Stock dividend requirement and the mandatory sinking fund requirement. 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
<PAGE>
6
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 nine directorships (eight
of which are filled and one of which is vacant). Consequently, a purchaser must
hold ten percent (10%) 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 41.5% of the outstanding ILX Common
Stock, and thereby have the power to elect at least 4 members of the 9 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, 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 and supplemented it on August 19,
1994. That Registration Statement was amended under a Registration Statement
filed on May 3, 1996, which itself was amended by Amendment No. 1 filed on May
16, 1996. Those statements further are amended by the Registration Statement of
which this Prospectus is a part. A total of 8,456,988 shares of ILX Common Stock
are 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
<PAGE>
7
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. It is engaged
primarily in the business of developing, operating, financing and marketing
interval ownership interests, often referred to as "timeshare" interests, in
resort properties. ILX also operates certain of those resort properties as
hotels, including unused or unsold timeshare inventory. ILX's principal
executive offices are located at 2111 East Highland, Suite 210, Phoenix, Arizona
85016, telephone number (602) 957-2777.
ILX sells timeshare interests in resorts located in Arizona, Colorado,
Florida, Indiana, Hawaii 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 Cottages 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*
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2. Golden Eagle Resort 100% Fee Simple
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3. Kohl's Ranch Lodge 100% Fee Simple
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4. Lomacasi Cottages 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
of LAP and owns 7.5% thereof. The remaining 21.5% of LAP, held
as Class B Limited Partnership interests, are owned by two of
the Selling Shareholders, MEI and Mishkin.
**Lomacasi Cottages 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
VCASB Partners General Partnership, which is owned 50% by ILX
and 50% by VCA South Bend Incorporated, which is a wholly
owned
<PAGE>
8
subsidiary of Varsity Clubs of America Incorporated, which in turn
is a wholly owned subsidiary of ILX.
The properties owned or controlled by ILX or its subsidiaries are operated as
hotels, including 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.
================================================================================
RESORT LOCATION
- --------------------------------------------------------------------------------
1. Ventura Resort Boca Raton, Florida
- --------------------------------------------------------------------------------
2. Costa Vida Vallarta Resort Puerto Vallarta,
Mexico
================================================================================
ILX also has a marketing agreement with Pahio Resorts, which owns and
operates on the island of Kauai, Hawaii, the Pahio at Kauai Beach Villas, Pahio
at Bali Hai Villas, Pahio at The Shearwater and Pahio at Ka'Eo Kai. Under the
marketing agreement ILX may market and sell, subject to regulatory approval,
timeshare interests in Pahio's four Hawaii resorts. ILX intends to market the
Pahio timeshare interests for Pahio at Kauai Beach Villas in Arizona.
Thereafter, ILX may then expand its marketing effort to include the timeshare
interests in other Pahio resorts and to expand such marketing to other states.
Except for the Costa Vida Vallarta Resort, described below, purchasers
of timeshare interests from ILX 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 certain of the resort properties owned by ILX or its
subsidiaries (Los Abrigados Resort & Spa; Kohl's Ranch Lodge 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 title to his or her timeshare
interest free from monetary encumbrances of ILX or its subsidiaries.
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 September 30,1996.
<PAGE>
9
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
on the property. ILX also owns one unit in a residential duplex adjacent to the
property, which is not currently intended to be subject to timesharing.
Marketing of timeshare interests in the Golden Eagle Resort began in
1987. 1,683 timeshare weeks presently exist at the Golden Eagle Resort and an
additional 102 timeshare weeks will be available upon renovation of currently
existing rooms. Arizona, Colorado and Indiana have authorized ILX to sell
timeshare interests in Golden Eagle Resort in those states. ILX had
approximately 596 weeks available for sale in completed suites at September 30,
1996. The Golden Eagle Resort is, as of September 30, 1996, encumbered by (i) a
note and deed of trust in the amount of $1,449,900, 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 $1,161,577 and
sales of consumer notes receivable sold with recourse in the approximate amount
of $773,000 at September 30, 1996.
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 is being 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. 9,100 timeshare weeks exist at 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 September 30, 1996, ILX had approximately 2,915 weeks available
for sale, and options to purchase 432 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, is subject to a put and call option
requiring and allowing it to purchase, 392 additional timeshare interests from
independent third parties, which timeshare weeks are intended to 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 September 30, 1996, encumbered by (i) a deed of trust, securing a
note in the amount of $1,738,167, which is payable in monthly installments of
$82,833 principal and interest at the rate of prime plus 1.25% and matures in
June, 1998, and (ii) two subordinate deeds of trust of equal priority securing
repurchase obligations relating
<PAGE>
10
to borrowings against consumer notes receivable in the principal amount of
$421,000 and sales of consumer notes receivable with recourse in the amount of
approximately $17 million.
On March 1, 1996, ILX indirectly became the 75% general partner of The
Sedona Real Estate Limited Partnership #1, an Arizona limited partnership,
("SRELP") that owns the Lomacasi Cottages in Sedona, Arizona, a 19 unit, 5.27
acre property approximately one mile from the Los Abrigados Resort & Spa. The
property is encumbered by deeds of trust totaling approximately $2,168,000 as of
September 30, 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 was 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 was to continue for 5 years or such
longer time as may have been required to complete the sale of the subject 3,500
timeshare interests. Bennett Funding would 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. Pursuant to the
Management Agreement, Bennett Funding is to advance certain funds to the
Developer. At September 30, 1996, approximately $1.2 million had not yet been
advanced under this Management Agreement; however, an affiliate of Bennett
Funding filed for bankruptcy protection in 1996. While ILX has been informed
that said proceedings do not involve Bennett Funding, Bennett Funding has failed
to fund advances requested by ILX. It is ILX's position that the Management
Agreement, as previously amended, has been anticipatorily breached by Bennett
Funding and its affiliates. ILX is of the opinion that, while further advances
under the Management Agreement may not occur, the bankruptcy will have no
additional material impact on ILX's ability to obtain timeshare financing from
Bennett Funding or alternate sources. ILX intends to use any future payments
under the Management Agreement received by ILX to mitigate present and future
damages sustained by ILX by virtue of the breach by Bennett Funding and its
affiliates of the Management Agreement and other loan transactions between ILX,
its subsidiaries and affiliates, and Bennett Funding and its affiliates. The
balance outstanding under the Management Agreement is $2,185,519 as of September
30, 1996.
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 49 timeshare interests available
for sale as of September 30, 1996.
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.
2,704 timeshare weeks currently exist at Kohl's Ranch. Kohl's Ranch
timeshare interests have been approved for sale in Arizona. Timeshare sales
commenced in July, 1995. As of September 30,
<PAGE>
11
1996, ILX had approximately 2,221 timeshare weeks available for sale. ILX
refurbished Kohl's Ranch, maintaining its authentic ranch atmosphere and decor,
and may add additional units in the future. Kohl's Ranch is, as of September 30,
1996, encumbered by (i) a first position note and deed of trust in the amount of
$630,000, payable in equal installments of principal and interest through
December 1998, (ii) a second position note and deed of trust in the amount of
$246,250, 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 in the pricipal
amount of $1,451,547, which secures ILX's repurchase obligations relating to
borrowings against consumer notes receivable.
In September, 1996, ILX acquired approximately one-half acre of
improved property adjacent to the Los Abrigados resort for a purchase price of
$750,000, consisting of a $185,862 cash down payment and a $564,138 first deed
of trust. ILX intends to make improvements to the property in the amount of
approximately $300,000 and to offer approximately 468 timeshare interests in the
property commencing in 1997. The first deed of trust bears interest at prime
plus 4% with interest payable monthly and principal payable through release fees
as intervals are sold.
On October 30, 1996, ILX entered into a definitive agreement with
Debbie Reynolds Hotel & Casino, Inc., a Nevada corporation ("DRHC")(OTC:DEBI)
and Debbie Reynolds Resorts, Inc., a Nevada corporation ("DRC"), whereby ILX can
acquire, among other assets, the physical assets constituting the Debbie
Reynolds Hotel & Casino in Las Vegas, Nevada (the "Hotel"). The purchase price
for the assets is $16,800,000 and is payable by issuance to DRC of $7,500,000
worth of federally registered shares of ILX's Common Stock valued for purposes
of the transaction at $2.00 per share (totalling 3,750,000 shares), as well as
payment of $4,200,000 in cash, which ILX intends to borrow from third-party
lenders to whom ILX believes it will be required to provide recourse mortgages
against ILX's assets, and ILX's assumption of $5,100,000 in mortgage
indebtedness, which ILX believes likely would be recourse to ILX's assets. The
Hotel consists of 193 rooms in a twelve story structure situated on over six
acres. Hotel amenities include the Debbie Reynolds Hollywood Movie Museum,
Debbie's Star Theater, food and beverage facilities, a pool and a spa, and space
for a full-service casino. Forty-three of the hotel rooms have recently been
renovated and established as timeshare units, providing the opportunity to
market up to 2,193 timeshare interests in the Hotel, of which approximately
one-half have been sold by the current owners. As part of the agreement, Debbie
Reynolds would continue to perform and make regularly scheduled appearances at
the Hotel. (See "Risk Factors -- Debbie Reynolds Hotel & Casino.") If the
transaction is consummated, ILX would offer timeshare interests, would conduct
hotel operations, and would lease to Debbie Reynolds or her nominee for 99 years
facilities that include the showroom, casino space, museum, gift shop, back bar
and certain joint use areas for an approximate lease fee of $150,000 per month,
which is at a rate that DRHC has indicated would not likely be profitable for
DRHC to undertake.
The agreement , entitled "Agreement for Purchase and Sale of Debbie
Reynolds Hotel & Casino," (the "Acquisition Agreement") is attached as Exhibit
10 to the Registration Statement of which this Prospectus is a part. The
description of the Acquisition Agreement is qualified in its entirety by
reference to the Acquisition Agreement. Consummation of the contemplated
transaction was and remains contingent upon approval by the shareholders of
DRHC, satisfaction of various conditions by the sellers, and a due diligence
investigation by ILX. To date, DRHC has not sought the approval of its
shareholders, only a small portion of the conditions have been satisfied by the
sellers, and ILX has not completed its due diligence investigation as a result
of the lack of information made available by the sellers, all of which places an
additional degree of substantial uncertainty upon the likelihood of closing the
transaction as originally anticipated. One condition recently satisfied is that
DRHC provided ILX with DRHC's delinquently filed financial statements for the
year ending December 31, 1995 and the first three quarters of 1996. ILX's
preliminary review of these financial statements revealed lower performance
levels than had previously been anticipated for DRHC, and greater debt owed by
DRHC,
<PAGE>
12
raising additional issues that ILX must now explore. Accordingly, ILX's
management has determined that, until further due diligence is performed and the
other seller contingencies are satisfied, ILX will not be able to determine
whether or not it will proceed to consummate the transaction.
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 and its subsidiaries
employ approximately 600 people. ILX plans to continue exploring options for the
acquisition or development and marketing of new resort facilities.
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
Los Abrigados Partners Limited Partnership. Los Abrigados Resort & Spa
is owned by Los Abrigados Partners Limited Partnership, an Arizona limited
partnership ("LAP"). ILX, directly and through ILE Sedona Incorporated ("ILES"),
owns a total of 78.5% of LAP. LAP's other partners are Alan Mishkin (11.5%) and
MEI (10%), both of whom are Selling Shareholders. 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 automatically renew for consecutive five year terms, commencing March
31, 2001, 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.
Sedona Worldwide Incorporated and Red Rock Collection Incorporated. Red
Rock Collection Incorporated, an Arizona corporation ("Red Rock Collection"),
was a wholly and directly owned subsidiary of ILX. It 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 ILX's timeshare sales operations.
Effective January 1, 1997, ILX and Red Rock Collection entered into
personal service agreements (the "Personal Service Agreements") with celebrity
Debbie Reynolds and her son, Todd Fisher. The Personal Service Agreements
provide, among other things, that Ms. Reynolds will endorse the Red Rock
Collection line of face, body , bath and hair care products. Pursuant to the
Personal Service Agreements and related documents, each of Ms. Reynolds and Mr.
Fisher are to receive from ILX 70,000 shares of the 700,000 issued and
outstanding shares of Red Rock Collection common stock as partial consideration
thereunder.
Also under the Personal Service Agreements, ILX agreed that, within
sixty (60) days from the issuance of such stock to Ms. Reynolds and Mr. Fisher,
which issuance has not yet occurred. ILX would distribute to the existing ILX
shareholders the common stock of Red Rock Collection equal to thirty percent
(30%) of the then issued and oustanding Red Rock Collection common stock. The
Personal Service Agreements further provide that (i) ILX shall undertake
promptly to register the
<PAGE>
13
common stock of Red Rock Collection with the Securities and Exchange Commision
with a view to listing the stock on the National Association of Securities
Dealers Automatic Quotation System (NASDAQ) and (ii) either concurrently with
such registration or by separate registration, and upon the advice of its
underwriters, Red Rock Collection would undertake a public offering of between $
2 million and $5 million.
In November, 1996, ILX activated a wholly owned subsidiary, Sedona
Worldwide Incorporated ("SWW")(formerly "Red Rock Worldwide Incorporated").
Pursuant to a Contribution Agreement to be effective as of January 1, 1997, all
of the issued and outstanding shares of Red Rock Collection are to be exchanged
for shares of SWW, at a rate of four shares of SWW for each share of Red Rock
Collection. As a part of that agreement, SWW is to assume Red Rock Collection's
obligations under the Personal Service Agreements and ILX is to undertake the
various Red Rock Collection stock transfers and registrations using SWW stock
rather than Red Rock Collection stock.
Red Rock Collection products primarily have been 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. SWW is considering other
marketing opportunities, including promotional activities utilizing Ms. Reynolds
for Red Rock collection products. ILX and SWW intend to offer additional product
lines through SWW, including jewelry, artwork and apparel.
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 -- Nature of Business;
Business Plan."
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 VCASB Partners General Partnership ("VCASB"), which is
owned 50% by ILX and 50% by VCA South Bend Incorporated, a wholly owned
subsidiary of VCA.
<PAGE>
14
VCASB 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 VCASB to sell timeshare interests in the Indiana facility in
those states. VCASB had approximately 2,430 timeshare weeks available for sale
as of September 30, 1996. The Indiana Varsity Clubs facility is, as of September
30, 1996, encumbered by a first position mortgage and note in the amount of
$3,023,363 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 ILX's repurchase obligation with respect to the sales
of consumer notes receivable in the amount of approximately $4.1 million at
September 30, 1996.
The site for the second Varsity Clubs facility is located in Tucson,
Arizona, approximately 2.3 miles from the University of Arizona.VCA Tucson
Incorporated, a wholly owned subsidiary of VCA, is acquiring of the property
under a contract for sale with a remaining balance of $491,981 as of September
30, 1996. In July, 1995, VCA Tucson Incorporated received a written commitment
for construction financing for the Arizona facility in the amount of $6 million
at a 13% per annum interest rate, which is expected to be sufficient to build
and furnish the property. $300,000 has been borrowed against this commitment as
of September 30, 1996 for payment of land acquisition costs. 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. Construction of
the Arizona facility is expected to commence in 1998 following the acquisition,
if it takes place, of the Debbie Reynolds Hotel & Casino assets.
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.
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. Lomacasi Resort Incorporated,
an Arizona corporation and the general partner of SRELP, is a wholly owned
subsidiary of Genesis.
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
nonrecourse 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 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 is subject to a put and call option allowing and
requiring Genesis to purchase 667 timeshare interests at Los Abrigados Resort &
Spa. Pursuant to such option, Genesis has acquired for resale 275 timeshare
interest and Genesis has engaged LAP to market these timeshare interests.
Genesis is subject and has the right to purchase an additional 392 timeshare
interests pursuant to the put and call option.
<PAGE>
15
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 and Indiana.
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.
In addition to the above mentioned wholly owned subsidiaries, ILX also
owns three corporations, AVC Development Incorporated, SHI Health Institute
Incorporated, and Golden Eagle Realty, Inc., none of which has any assets or
liabilities or is conducting any business at the present time.
Consulting Arrangements
Effective January 1, 1997, ILX entered into a new Consulting Agreement
with Investor Resource Services, Inc., a Florida corporation ("IRS") pursuant to
which IRS agreed to provide certain investor relations, broker relations and
public relations services. The Agreement suceeds a prior consulting agreement
and associated option agreement, as amended, under which IRS provided similar
services in exchange for 50,000 shares of ILX Common Stock and options to
acquire an additional 250,000 shares of ILX Common Stock, of which IRS exercised
options to purchase 100,000 shares of ILX Common Stock. Under the terms of the
new Agreement, IRS received from ILX options to purchase 350,000 shares of ILX
Common Stock at $1.25 per share and the right to exercise, under an extension of
their terms, options for 150,000 shares of ILX Common Stock previously granted
under a prior consulting agreement and associated option agreement. ILX has
agreed that it would register the Common Stock underlying the options pursuant
to the terms of the Consulting Agreement. The Consulting Agreement is attached
to ILX's 8-K dated January 1, 1997, and the above description is qualified in
its entirety by reference to the Consulting Agreement.
Effective January 7, 1997, ILX entered a Consulting Agreement and an
Option Agreement with Texas Capital Securities ("TCS"). In exchange for TCS's
financial and business advisory services under the Consulting Agreement, ILX
granted TCS options to acquire up to 500,000 shares of ILX Common Stock. TCS may
exercise options for 250,000 shares of Common Stock at a price of $1.25 per
share on or before June 30, 1997. If those options are exercised prior to their
expiration date, TCS may exercise options for an additional 125,000 shares of
Common Stock at a price of $1.75 per share on or before September 30, 1997. If
those additional options are exercised prior to their expiration date, TCS may
exercise options for an additional 125,000 shares of Common Stock at a price of
$2.00 per share on or before December 15, 1997 or such later period as is
extended by ILX if and to the extent ILX extends the term of the Consulting
Agreement. TCS entered a similar consulting agreement with Martori Enterprises
Incorporated ("MEI"), under which MEI, the largest shareholder of ILX,
transferred 50,000 shares of ILX Common Stock then held by MEI to TCS. The TCS
Consulting Agreements with ILX and MEI and the Option Agreement between TCS and
ILX are attached to ILX's 8-K dated January 7, 1997, and the above description
is qualified in its entirety by reference to those Agreements.
<PAGE>
16
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 9 months ended
September 30
- --------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges 2.40 3.48 3.08 1.05 1.92
- --------------------------------------------------------------------------------------------------------------
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 for the nine months
ended September 30, 1996, and for 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"). 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 allowed
ILX to postpone the date of registration of those shares. At Mr. Mishkin's
request, ILX registered Mr. Mishkin's shares, as well as the other shares of ILX
Common Stock held by the Selling Shareholders in May, 1996. Amendment Nos. 1 and
2 were prepared to update certain information in that original registration.
Pursuant to the Agreement with Mr. Mishkin, ILX bears all expenses associated
with the registration and the amendments.
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 January 31, 1997, 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 original
offering in May 1994, the number of shares of the Selling Shareholders' Common
Stock held by such Selling Shareholder as of January 31, 1997 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
<PAGE>
17
Stock, except that Investor Resource Services and Texas Capital Securities
likely will offer at least a portion of their shares for sale, and Mr. Mishkin
may offer a portion of his shares for sale, although ILX knows of no plans that
he intends to do so.
<TABLE>
<CAPTION>
POSITION, OFFICE
OR COMMON COMMON COMMON COMMON
MATERIAL STOCK STOCK STOCK STOCK
RELATIONSHIP OWNED OWNED AS OFFERED BENEFICIALLY
WITH ILX OR AS OF OF HEREUNDER BY OWNED
SELLING AFFILIATES WITHIN MARCH JANUARY SELLING AFTER
SHAREHOLDER THREE-YEAR PERIOD 31, 1996(1) 31, 1997 SHAREHOLDER OFFERING
----------- ----------------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Joseph P. Martori(2) Chairman, Director, 22,069(3) 130,069(4) 130,069(4) 0
Chief Executive
Officer & Former
President
Edward J. Martori(5) Director 46,539(6) 326,539(6) 326,539(6) 0
Alan R. Mishkin(7) Former Director 2,012,045 1,722,045 1,722,045 0
Douglas L. Newell Former Director 11,702 11,702 11,702 0
Nancy J. Stone President, Chief 139,586(8) 177,086(8) 177,086(8) 0
Financial Officer,
Director & Former
Executive Vice
President
William G. Was, Jr. Former Director 44,000(10) 24,000 24,000 0
Martori Enterprises ** 5,658,547 4,956,547 4,956,547 0
Incorporated(11)
Investor Resource Consultant 400,000(9) 609,000(9) 609,000(9) 0
Services(12)
Texas Capital Consultant 0 500,000(9) 500,000(9) 0
Securities(13)
</TABLE>
1. This combined Prospectus relates to the Registration Statement filed on
Form S-3 at No. 333-03151 as well as the Registration Statement filed on
Form S-3 at No. 33-75382. Accordingly, for clarification, this column sets
forth the shares owned by the Selling Shareholders as of the date of the
offering of shares as of March 31, 1996 under Registration No. 333-03151.
2. Joseph P. Martori also is a controlling shareholder, officer and director
of Martori Enterprises Incorporated.
3. Includes 11,010 shares of ILX Common Stock held by Joseph P. Martori as
custodian and trustee under a trust dated February 20, 1978 for the benifit
of Christina Ann Martori and 10,000 shares of ILX Common Stock held by
Joseph P. Martori as custodian for his daughter, Arianne Terres Martori and
1,059 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.
4. Includes 17,010 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, 16,000 shares of ILX Common Stock held by Joseph
P. Martori as custodian for his daughter, Arianne Terres Martori and 1,059
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.
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. Shareholdings shown do not include
Martori Enterprises Incorporated's shares of ILX Common Stock.
7. Alan R. Mishkin is a limited partner in the Los Abrigados Partners Limited
Partnership.
<PAGE>
18
8. Includes 10,000 shares owned by Michael Stone, husband to Nancy J. Stone.
9. The shareholder holding the options giving rise to these shares may also
trade in ILX stock for its own account. The shares set forth on this table
only relate to shares held by such shareholder pursuant to consulting
agreements described below.
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 January 1, 1997, ILX entered into a Consulting Agreement with
Investor Resource Services, Inc., a Florida corporation, ("IRS") under
which IRS agreed to provide certain investor relations, broker relations
and public relations services. Under the terms of the Agreement, IRS
received options to purchase up to 500,000 shares of ILX Common Stock at
$1.25 per share and ILX has agreed to register the Common Stock underlying
the options. (See "The Company -- Consulting Agreements" above.) 150,000 of
the shares of ILX Common Stock already were registered under Registration
No. 333-03151 in connection with a prior consulting agreement that expired
in September, 1996 after IRS had exercised options for 100,000 shares of
ILX Common Stock.
13. Effective January 7, 1997, ILX entered a Consulting Agreement with Texas
Capital Securities, Inc., a Texas corporation ("TCS") under which TCS
agreed to provide certain financial and business advisory services. Under
the terms of the Agreement, TCS received options to purchase up to 500,000
shares of ILX Common Stock at a price ranging from $1.25 to $2.00 per share
(see "The Company -- Consulting Agreements" above). ILX has agreed that it
would register the Common Stock underlying the options pursuant to the
Consulting Agreement.
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.
<PAGE>
19
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--Los
Abrigados Partners Limited Partnership), 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, 60,169 shares of which remain
issued and outstanding at September 30, 1996. Beginning July 1, 1996, the Series
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. Beginning January 1,
1993, ILX, through LAP, 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. 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 September 30, 1996.
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. 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 re-classifications. 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.
<PAGE>
20
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 279,558 shares remain issued and outstanding at
September 30, 1996. 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.
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. Upon conversion of a holder's 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
<PAGE>
21
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 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.
<PAGE>
22
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.
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.
-----------------------------------
TABLE OF CONTENTS
AVAILABLE INFORMATION ..................................................... 2
INCORPORATION BY REFERENCE ................................................ 2
RISK FACTORS .............................................................. 3
THE COMPANY ............................................................... 7
RATIO OF EARNINGS TO FIXED CHARGES ........................................ 16
USE OF PROCEEDS ........................................................... 16
SELLING SHAREHOLDERS ...................................................... 16
PLAN OF DISTRIBUTION ...................................................... 18
DESCRIPTION OF ILX SECURITIES AND PERTINENT
ARIZONA STATUTES ......................................................... 19
SEC POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES ............................................ 21
LEGAL OPINION ............................................................. 22
--------------------------------
8,456,988 Shares
__________
ILX INCORPORATED
Common Stock
__________
PROSPECTUS
__________
<PAGE>
24
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........................................ $ 489.12
Public accountants' fees................................ $ 5,000.00
Legal fees and expenses................................. $ 6,000.00
Printing and engraving expenses......................... $ 1,800.00
Transfer agent's fees................................... $ 1,000.00
----------
TOTAL......................................... $14,289.12
==========
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>
25
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. 28
10 Aquisition Agreement 34
12 Statement Regarding Computation of Ratios 62
23.1 Consent of Colombo & Bonacci, P.C. 63
23.2 Consent of Deloitte & Touche LLP 64
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.
(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.
<PAGE>
26
(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>
27
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 February 27, 1997.
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 2/27/97
Joseph P. Martori Officer/Director --------------
/s/ Nancy J. Stone
- ------------------------ President/Chief Financial 2/27/97
Nancy J. Stone Officer/Director --------------
/s/ Denise Janda
- ------------------------ Vice-President/Controller 2/27/97
Denise Janda --------------
/s/ Ronald D. Nitzberg
- ------------------------ Director 2/27/97
Ronald D. Nitzberg --------------
/s/ Edward J. Martori
- ------------------------ Director 2/27/97
Edward J. Martori --------------
/s/ James W. Myers
- ------------------------ Director 2/27/97
James W. Myers --------------
/s/ Steven R. Chanen
- ------------------------ Director 2/27/97
Steven R. Chanen --------------
/s/ Michael W. Stone
- ------------------------ Director 2/27/97
Michael W. Stone --------------
/s/ Edward S. Zielinski
- ------------------------ Executive Vice-President/ 2/27/97
Edward S. Zielinski Director --------------
February 27 1997
ILX Incorporated
2111 East Highland, Suite 210
Phoenix, Arizona 85016
Gentlemen:
We have acted as counsel to ILX Incorporated, an Arizona corporation,
(the "Company") in connection with its registration of 8,456,988 shares of its
common stock including shares of common stock issuable upon exercise of certain
options (the "Common Stock") currently held by certain third parties (the
"Current Holders"). As such counsel, we have examined and relied upon the
following documents:
1. Form S-3 Registration Statement filed with the Securities and
Exchange Commission ("SEC") on February 27, 1997, as amended
prior to its effective date (the "Registration Statement");
2. Resolutions of the Company's Board of Directors authorizing the
issuance of the Common Stock (the "Resolutions").
3. The Company's Articles of Incorporation certified by the Arizona
Corporation Commission;
4. The Company's Bylaws certified by the Company's Secretary;
5. A specimen of the certificates of the Common Stock;
6. A certificate of the Company's Chief Financial Officer regarding
payments made for the Common Stock and the number of shares of
ILX Common Stock that have been issued and are currently
outstanding;
7. A representation from the Company, satisfactory to us, that the
Company has not been advised that any stop order suspending the
effectiveness of the Registration Statement has been issued or
that any proceedings for that purpose have been initiated or are
pending or contemplated under the Securities Act of 1933, as
amended (the "Act"); and
Exhibit 05
<PAGE>
ILX Incorporated
February 27, 1997
Page 2
8. The letter of Deloitte and Touche dated February 25, 1997
relating to the financial statements in, or incorporated in, the
Registration Statement and other matters referred to therein.
We also have examined and relied upon such certificates of public
officials and others and such other documents as we have deemed relevant and
necessary as a basis for the opinion set forth below. We also exclusively have
relied upon and assumed the accuracy of the representations and warranties as to
factual matters made by various officers of the Company. We exclusively have
relied upon certificates of the Arizona Corporation Commission that the Company,
as a domestic corporation, is in good standing and as to the current form of
articles of incorporation, and on representations that the Company was in good
standing at all times when issuing the Common Stock. We have not made any
independent review or investigation of orders, judgments, rules or other
regulations or decrees by which the Company or any of its respective properties
may be bound or of suits, investigations or proceedings, if any, pending or
threatened against the Company. For purposes of this opinion, we have not
reviewed or examined any documents other than those referred to above, and have
not undertaken or conducted any independent investigation or other inquiry
whatsoever, except as may be specifically stated herein.
Based upon the foregoing, and subject to the limitations, assumptions
and qualifications stated below, we are of the opinion that the Common Stock,
when first issued by the Company to the Current Holders or their predecessor
shareholders, legally was, or would be, issued under Arizona's General
Corporation Law by the Company, and was, or would be, when first issued by the
Company, fully paid and non-assessable.
Our opinion is subject to the following assumptions, qualifications,
limitations and exceptions:
1. In rendering the opinion expressed above with respect to
the Common Stock, we have assumed without investigation, with respect to each
offer, issuance, sale and delivery by the Company of shares of the Common Stock,
each purchase of such shares by the purchaser thereof, each purchase or other
acquisition by the Company of shares of its capital stock, each sale or other
disposition by the seller thereof, each offer, reissuance, resale, and delivery
by the Company of shares so purchased or acquired, and each purchase by the
purchaser thereof (which transactions, including any written and oral agreements
pertaining thereto and the execution, delivery, consummation and performance of
such agreements, collectively are referred to for purposes of this paragraph as
"Transactions," and, individually, a "Transaction") that:
(a) At the time thereof, at all times subsequent thereto, and
as to the Company or any other party, such Transactions did not
violate, result in a breach of, or conflict
<PAGE>
ILX Incorporated
February 27, 1997
Page 3
with any law, rule, regulation, order, judgment, or decree, in each
case whether then or subsequently in effect;
(b) At the time thereof and at all times subsequent thereto,
the persons authorizing each such Transaction for the Company or for
any such other party were acting pursuant to properly granted authority
and did not violate any fiduciary or other duty owed by them;
(c) No event has taken place subsequent to any such
Transaction, or will take place, that would cause any such Transaction
not to comply with any law, rule, regulation, order, judgment, decree,
or duty, or that would permit the Company or any such other party at
any time thereafter to cancel, rescind, or otherwise avoid such
Transaction;
(d) There was no misrepresentation, omission or deceit by the
Company, any such other party, or any other person or entity in
connection with any such Transaction;
(e) Each such Transaction is governed by the laws of the State
of Arizona (without giving effect to provisions regarding conflict of
laws);
(f) Each party to each such Transaction:
(i) if not a natural person, (A) had duly and validly
taken all necessary corporate or other proceedings of the
directors (or a committee of directors), stockholders,
partners, members and all other bodies to authorize the
Transaction and (B) did not, at the time of such Transaction
or thereafter, by entering or consummating such Transaction,
violate or cause a breach of any term of its Articles of
Incorporation, bylaws, or other governing document; and
(ii) whether or not a natural person, (A) had the
power, authority, and capacity to execute, deliver, consummate
and perform each such Transaction, and (B) duly authorized
each such Transaction, and each such Transaction constituted
and now constitutes the legal, valid, and binding obligation
of such other party, and was and is enforceable as to such
other party in accordance with its terms;
(g) At the time thereof and at all times subsequent thereto,
each such Transaction did not, does not now, and will not violate,
result in a breach of, conflict with, or (with or without the giving of
notice or the passage of time or both) entitle any party to terminate
or call a default under any term of any contract, agreement,
instrument, lease, license, arrangement or understanding to which the
Company or any such other party is
<PAGE>
ILX Incorporated
February 27, 1997
Page 4
or becomes a party or to which any of them or any of their respective
properties, assets, or security holders are or will be subject;
(h) Each document pertaining to a Transaction was duly
executed, delivered, and performed by the Company and each other party
to such Transaction;
(i) Each oral agreement pertaining to a Transaction was duly
performed by the Company and each other party to such Transaction,
constituted the legal, valid, and binding obligation of the Company and
each other party to such Transaction, and was enforceable as to the
Company and each other party to such Transaction in accordance with its
terms;
(j) Any share or other security of another corporation
received by the Company in exchange for shares of capital stock of the
Company or in exchange for securities convertible into, entitling the
holder thereof to purchase, or exercisable in exchange for shares of
capital stock of the Company, in any case in a stock-for-stock
acquisition, merger, exchange, recapitalization or otherwise, was
validly authorized, validly issued, fully paid, and non-assessable;
(k) Stock certificates representing the Common Stock were
prepared properly, and the officers of the Company purporting to sign
the stock certificates either manually or by facsimile in fact executed
the certificates (and, if facsimile signatures were used, such
certificates were properly countersigned); and
(l) The consideration for the issuance of the Common Stock was
paid to the Company in cash, in other property (whether tangible or
intangible) or in labor or services actually performed for the Company,
and such consideration did not include promissory notes or promises of
future services.
As used in this paragraph, the term "Company" means the Company and its
predecessors, as well as corporations the stock of which the Company has
obtained in exchange for shares of capital stock of the Company or in exchange
for securities convertible into, entitling the holder thereof to purchase, or
exercisable in exchange for, shares of capital stock of the Company, in any
case, in a stock-for-stock acquisition, merger, exchange recapitalization, or
otherwise.
2. We have assumed without investigation the authenticity of
any document submitted to us as an original, the conformity to the original of
any document submitted to us as a copy, the authenticity of the original of such
latter documents, the conformity to the executed documents of any documents
submitted to us as the form to be executed, the genuineness of all signatures,
and the legal capacity of natural persons. We have assumed
<PAGE>
ILX Incorporated
February 27, 1997
Page 5
without investigation that any certificate, representation (oral or otherwise),
telegram, telex, telecopy or other document on which we have relied, whether or
not given or dated earlier than the date hereof, is authentic and remains
accurate insofar as relevant to this opinion from such earlier date through and
including the date hereof. For purposes of this opinion, we have not reviewed or
examined any other documents and have not undertaken or conducted any
independent investigation or other inquiry whatsoever, except as may be
specifically stated herein. References herein to knowledge of any kind encompass
only the actual present knowledge of only those present attorneys of the
undersigned (acting in such capacity) who have given substantive attention to
the Registration Statement.
3. We have assumed without investigation the due authorization
and execution of the Resolutions by the Company's Board of Directors to the
extent such authorization and execution is a prerequisite to the effectiveness,
validity, binding nature or enforceability of the Resolutions and issuance of
the Common Stock; neither the execution and delivery by the Company, nor the
issuance of the Common Stock, conflicts with or results in a breach of, or
constitutes a default under, any agreement or other obligation to which the
Company is a party or by which it or its property is bound, or results in the
creation or imposition of any encumbrance upon any of its properties; the
Company has obtained all necessary governmental consents, authorizations,
approvals, permits or certificates that were and are required as a condition to
its authorizing and issuing the Common Stock; no fraud or duress has occurred in
connection with the promulgation of the Resolutions; and the Company has not
revoked or modified the Resolutions.
4. We express no opinion as to the possible impact upon the
matters opined upon of the laws, orders or judgments of any jurisdiction other
than United States federal law, and the local law of the State of Arizona
(without reference to Arizona choice-of-law rules). We express no opinion as to
compliance with any antifraud law, rule or regulation relating to securities or
to the sale or issuance thereof.
5. Our opinion is limited to the matters set forth herein and
to the date hereof. No opinion may be inferred or implied beyond the matters
expressly stated herein. Our opinion is applicable only to the addressee hereof
and shall not apply to any other person, firm, corporation or other entity.
6. The opinion expressed herein is subject to bankruptcy,
insolvency, reorganization, arrangement, receivership, conservatorship,
moratorium, fraudulent conveyance or other state and federal laws now or
hereafter affecting the enforcement of creditors' rights in general. We render
no opinion concerning the validity or enforceability of purported waivers, or
provisions regarding insolvency, bankruptcy, or related provisions.
<PAGE>
ILX Incorporated
February 27, 1997
Page 6
7. Our opinion is based upon existing laws, rules and
regulations, and we undertake no obligation to advise you of changes that may be
brought to our attention after the date hereof.
We hereby consent to the filing of this opinion, or copies thereof, as
an exhibit to the Registration Statement. 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.
We are furnishing this opinion to you solely for your use in connection
with the Registration Statement. Except as stated in the prior paragraph, our
opinion is not to be used, reproduced or filed publicly or used by any other
person without our prior written consent, nor shall it be used, quoted,
circulated, or otherwise referred to for any other purposes.
Very truly yours,
/s/ COLOMBO & BONACCI, P.C.
COLOMBO & BONACCI, P.C.
AGREEMENT FOR
PURCHASE AND SALE OF
DEBBIE REYNOLDS HOTEL & CASINO
LAS VEGAS, NEVADA
SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC.
a Nevada corporation
DEBBIE REYNOLDS RESORTS, INC.
a Nevada corporation
BUYER: ILX INCORPORATED
an Arizona corporation
or its nominee
DATE: October 30, 1996
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
-------------------------------
THIS AGREEMENT FOR PURCHASE AND SALE ("Agreement") is made as of the 30th day of
October, 1996, by and between DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada
corporation and its wholly owned subsidiary DEBBIE REYNOLDS RESORTS, INC., a
Nevada corporation (collectively "Seller"), and ILX INCORPORATED, an Arizona
corporation, or its nominee ("Buyer").
R E C I T A L S:
----------------
A. Seller is the owner of certain real property located in the city of
Las Vegas, Clark County, Nevada, comprised of a resort hotel and casino known as
Debbie Reynolds Hotel & Casino (a portion of which has been timeshared) and
certain related personal property and rights, tangible and intangible, as more
particularly described below (the real and personal property and rights may be
sometimes referred to herein as the "Resort", as such term is more fully defined
below).
B. Seller has agreed to sell, and Buyer has agreed to purchase, the
Resort pursuant to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the sufficiency of such consideration being acknowledged, the
parties hereby agree as follows:
A G R E E M E N T
-----------------
Section 1. Sale of Resort
--------------
1.01. Seller shall sell to Buyer, and Buyer shall purchase from Seller, at
the price and upon the terms and conditions set forth in this Agreement:
(a) All that real property located in the County of Clark, State
of Nevada, described on Exhibit "B" attached hereto and incorporated
herein, together will all rights, privileges, easements and
appurtenances thereto, including, without limitation, all of Seller's
right, title and interest in and to any appurtenant land lying within
the right-of-way of any street, road or alley, whether completed or
proposed (the "Property");
(b) All existing and proposed buildings, parking facilities,
structures, signs, improvements, tenements, fixtures and appurtenances
presently located on, under or about the Property and any additional
items located thereon at the time of Closing (the "Improvements");
(c) All of the Resort, restaurant, lounge, museum, showroom,
casino, gift shop, back bar, common area, and other furniture,
furnishings, equipment, fixtures, improvements, inventory, supplies and
other items of personal property and any vehicles customarily located
on the Property or used primarily in connection with the Resort ,
including those items set forth on Exhibit "C" attached hereto and
incorporated herein (the "Personal Property"), but specifically
excluding those items set forth on Exhibit "T" attached hereto and
incorporated herein;
-1-
<PAGE>
(d) All customer lists, timeshare leads, and rental and booking
information owned by Seller (the "Ledgers") and used in conjunction
with the operation of the Resort;
(e) All of Seller's right, title and interest in and to: (i) any
leases affecting the Resort (the "Leases") that have not been paid as
of Closing and that Buyer specifically agrees to assume, if any, and
(ii) any management, service, concession, maintenance, utility and
other contracts and agreements with respect to the maintenance and
operation of the Resort (the "Service Contracts").
(f) All of Seller's right, title and interest in and to all
architectural drawings, plans and specifications, shop drawings and
other design or construction documents relating to the present or
future development of the Resort and construction of the Improvements
(the "Plans and Specifications");
(g) All of Seller's right, title and interest in and to any and
all of the following to the extent they arise out of, are related to
the construction or development of, or are, or have at any time been,
used in connection with the Resort: (i) warranties, guarantees and
indemnities in favor of Seller and claims of Seller against third
parties with respect thereto, with the exception of those claims
described on Exhibit "K-1" attached hereto and incorporated herein,
(ii) licenses, permits, certificates of occupancy or similar documents,
contract rights, and other agreements, whether oral or in writing,
incident to the operation of the Resort, to the extent
transferable,(iii) the goodwill associated with the Resort, (iv) all
designs, surveys, site plans, plats, operating materials, engineering
reports and other technical descriptions, (v) transferable licenses and
permits necessary to operate the Resort as it is presently being
operated, and (vi) all other contracts, assets, and rights owned by
Seller, relating to the business, maintenance, construction, and/or
operation of the Resort (collectively the "Contract Rights and
Intangible Assets");
(h) All of Seller's right, title and interest in and to any
transferable licenses and permits, including without limitation
alcoholic beverage licenses, used in the operation of the Resort, and
all other personal property or rights, tangible or intangible, located
at and used in the operation of the Resort (collectively "Miscellaneous
Items") ;
(i) All of Seller's right, title and interest in Resort
telephone numbers and marketing materials used in marketing the Resort,
whether located at the Resort or elsewhere, including existing
videotapes, photographs, brochures, film, copy and anything relating
thereto ("Advertising Materials"); and
(j) All of Seller's right, title and interest in the timeshare
operation on the Property and any OPC license or lease (the "Timeshare
Operation") and all "in-house" timeshare contracts, purchase agreements
and notes receivable resulting from sales of timeshare intervals at the
Resort prior to Closing and not sold to lenders (the "Timeshare
Paper"), as more particularly described on Exhibit "A".
-2-
<PAGE>
All of the items described in subparagraphs (a) through (j) above are referred
to in this Agreement collectively as the "Resort". Any items excluded from the
foregoing are set forth on Exhibit "T" attached hereto.
1.02 Seller shall convey and Buyer shall accept title to the Property and
Improvements in accordance with the terms of this Agreement by general warranty
deed (Exhibit "D"), subject to all matters of public record shown on the Owners
Title Policy, current taxes and current assessments, and any matter shown on the
A.L.T.A. survey of the Property described in paragraph 3.04 below and approved
by Buyer (collectively the "Permitted Exceptions"). The Personal Property and
Advertising Materials shall be conveyed to Buyer by Bill of Sale (Exhibit "E")
to be executed and delivered by Seller at Closing, free and clear of liens and
encumbrances except the First Lien (as described hereinafter). The Leases,
Service Contracts, Ledgers, , Plans and Specifications, Miscellaneous Items,
Timeshare Operation, Timeshare Paper, and Contract Rights and Intangible Assets
shall be conveyed by Seller pursuant to an Assignment of Leases, Contract Rights
and Intangible Assets (Exhibit "F") or other appropriate assignment or
conveyance document, free and clear of all liens except the First Lien, to be
executed and delivered by Seller and Buyer at Closing.
Section 2. Purchase Price, Apportionments, Escrow Agent
--------------------------------------------
2.01 The purchase price ("Purchase Price") to be paid by Buyer to Seller
for the Resort shall be SIXTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS
($16,800,000.00), plus any additional sum for inventories existing as of
Closing, payable as follows:
(a) Four Million Two Hundred Thousand Dollars ($4,200,000.00) in
cash at Closing (the "Down Payment"), plus any additional sum
representing the cost of any Resort inventory of liquor, food,
beverages and the gift shop (the "Inventory"), to be valued as agreed
by the parties at a joint inventory conducted prior to Closing and as
close thereto as practicable, all of which shall be used by Seller to
satisfy the obligations of Seller described on Exhibit "P";
(b) Five Million One Hundred Thousand Dollars ($5,100,000.00)
(adjusted to the actual balance of principal and interest at Closing)
by, at Buyer's option, either (i) assumption at Closing of Seller's
existing obligations on the existing promissory note, deed of trust or
mortgage, and other loan and security documents by Seller in favor of
Resort Funding, Inc., attached hereto as Exhibit "G" (the "First Lien"
or "Loan Documents"), or (ii) paying the loan evidenced by the Loan
Documents in full at Closing; and
(c) Seven Million Five Hundred Thousand Dollars ($7,500,000.00)
by issuance at Closing of three million seven hundred fifty thousand
(3,750,000) shares of ILX Incorporated Common Stock (the "Shares"),
valued for purposes of this Agreement at Two Dollars ($2.00) per share.
Such stock will be included in a registration statement to be filed on
an appropriate form with the United States Securities and Exchange
Commission within thirty (30) days after the date of substantial
completion of those Exhibits to be attached hereto hereinafter that
provide material information or additional terms to the overall
transaction required to be disclosed in such registration statement.
-3-
<PAGE>
2.02 Except as set forth in paragraph 1.01 and 2.03, Seller shall retain
all the rights and all the obligations with respect to all obligations and
liabilities of the Resort and its operation arising from or relating to the
period on and prior to the date of Closing, including without limitation, all
accounts payable, employees and employee claims, salaries and wages payable,
vacation pay for vacation earned, and payroll taxes associated therewith,
unbooked accounts payable, accounts receivable, cash, cash equivalents, security
deposits, utility and telephone payments, utility deposits, bank deposits, bank
and operating accounts, and all other obligations for the Resort, existing as of
and on the Closing Date and for the period prior thereto, as well as for its
prorata share of current real property taxes and current assessments as of the
Closing Date. Seller's prorata share of real property taxes and assessments
shall be paid to Buyer in cash on the Adjustment Date as defined in paragraph
2.03 hereof if not known and prorated at Closing. Buyer, its wholly owned
subsidiary, or through a management company as Buyer may employ, shall receive
payments paid to the Resort on all Seller's accounts receivable existing as of
the Closing Date as Seller's agent and shall remit all amounts received to
Seller within thirty (30) days of receipt. Such receipt of accounts receivable
shall be undertaken in the usual and ordinary course of the Resort business and
Buyer shall not be required to undertake any solicitations or other effort or
legal action to collect. Receipt of these accounts receivable as set forth above
shall be without cost to Seller. Any payment other than cash delivered for
Seller shall be transmitted in kind by Buyer without recourse to Buyer.
Adjustment for cash security deposits, prepaid or accrued expenses shall be made
as provided in paragraph 2.03 below.
2.03 Buyer and Seller agree that a prorated net adjustment (the "Net
Adjustment") shall be computed as of the Closing Date for any amounts actually
paid to (or to be paid to) and for any amounts actually paid by (or to be paid
by) one party, but otherwise under this Agreement belonging to the other party
or chargeable to the other party, as the case may be. The computations of the
Net Adjustment will be made as of the Closing Date and exclude the cash payment
described in paragraph 2.01(a) above. Buyer and Seller agree to use their best
efforts to ensure that a full accounting of the Net Adjustments be provided no
later than the Closing Date to the extent practicable (the "Adjustment Date").
If Seller owes the Net Adjustment to Buyer, then Buyer shall deduct such amount
from the Down Payment as of the Closing Date. If Buyer owes the Net Adjustment
to Seller, such amount shall be added to the Down Payment, as of the Closing
Date. The parties acknowledge that some items subject to adjustment may not be
received prior to the Adjustment Date, and wherever the context requires,
Adjustment Date shall also mean Supplemental Adjustment Date as defined below.
Accordingly, there shall be a supplemental adjustment determined thirty (30)
days after the Closing Date or such other date or dates as the parties may agree
or which may be necessary if all information has not been received (the
"Supplemental Adjustment Date(s)") for such items, with such supplemental
adjustments to be made as of the Closing Date and paid to the other party within
ten (10) days after the Supplemental Adjustment Date. Buyer and Seller agree
that adjustments will include, but not necessarily be limited to, the following:
(a) Sales and Other Taxes. Any sales, transaction privilege,
gaming or other periodic taxes (except Seller's corporate income tax)
based on pre-Closing Resort revenue, which taxes having been collected
and not paid, or which are due or to become due and the amount known or
determinable at Closing, shall be paid by Seller at Closing. All other
such amounts not so determinable on or before the Adjustment Date,
shall be an adjustment in favor of Buyer unless
-4-
<PAGE>
otherwise paid by Seller. Upon presentation by Buyer of a copy of the
sales or other tax return, with an allocation of Seller's
responsibility therefor, Seller shall reimburse Buyer for such amount
within ten (10) business days after the date of such presentation.
(b) Insurance. If Buyer continues any insurance that Seller has
previously obtained with respect to the Resort, Buyer agrees to
reimburse Seller for the proportionate share of insurance costs prepaid
by Seller for any coverage continued by Buyer after Closing, prorated
as of the Closing Date.
(c) Certain Payments. All Lease, Service Contracts, utility and
telephone payments shall be prorated as of the Closing Date.
(d) Customer Deposits and Prepayments. All unearned customer
deposits and prepayments for services to be performed or goods to be
delivered after Closing, shall be prorated in favor of Buyer as of the
Closing Date.
(e) Utility and Equipment Lease Deposits. All utility and
equipment lease deposits shall be assigned to Buyer at Closing and
shall be an adjustment in favor of Seller on the Adjustment Date.
(f) License Fees. Any prepaid license fees shall be prorated as
of the Closing Date, and shall be an adjustment in favor of Seller on
the Adjustment Date.
(g) Employees and Payroll Related Expenses. At Buyer's option,
Buyer may require that all or any part of the Resort's employees resign
as of the Closing Date. To the extent not so required by Buyer, any
Workmen's Compensation premium deposits to be utilized by Buyer shall
be prorated to the Closing Date, and shall be an adjustment in favor of
Seller on the Adjustment Date. Current wages, salaries, vacation and
sick leave accrued as of the Closing Date shall be an adjustment in
favor of Buyer on the Adjustment Date computed as if the vacation will
be taken and the sick leave used. For purposes of the foregoing, paid
vacation and sick leave shall be deemed paid on a first accrued-first
paid basis.
(h) Ledgers. All amounts receivable for lodging provided prior
to the Closing Date, as shown on the Ledgers, shall be receivables to
be received by Buyer on behalf of Seller as set forth above.
(i) To the extent the foregoing prorations and adjustments are
specifically dealt with in the Hotel Facilities Lease, they shall be
resolved herein in a manner consistent with that document.
(j)For all purposes of proration and allocation of responsibility and liability
as described in this Agreement, the Closing Date and the period prior thereto
are allocated to the Seller, and the period after the Closing Date is allocated
to the Buyer. The words "as of" or "on" the Closing or Closing Date or similar
wording, as well as the words "Closing" or "Closing Date" where appropriate in
the context, shall be interpreted accordingly.
-5-
<PAGE>
2.04 The items below shall be paid as follows:
(a) Seller shall pay all of the obligations described on Exhibit
"P" from the Closing funds through the Escrow Agent.
(b) Seller and Buyer shall each pay one-half (1/2) of the
standard escrow charges in connection with this Agreement.
(c) The cost of the owners title policy provided for in
Paragraph 8.01 shall be paid on the Closing Date as follows:
(i) Seller shall be charged an amount equal to the premium
for standard coverage; and
(ii) Buyer shall pay the additional premium for extended
coverage, and the cost of any special endorsements as may be desired by
Buyer.
(d) The cost of any extended lender's title insurance policy
shall be paid in full by Buyer.
2.05 Seller and Buyer hereby acknowledge and agree that the Purchase
Price, for all purposes relating to this Agreement, shall be allocated among the
various assets comprising the Resort as the parties shall mutually agree in
writing prior to the end of the Feasibility Period and attached hereto as
Exhibit "H".
2.06 First American Title Insurance Company, Las Vegas, Nevada shall act
as the escrow agent ("Escrow Agent") hereunder and shall, among other things, on
the Closing Date, assume responsibility for recording and/or filing all
necessary documents resulting herefrom and shall cause the issuance of the
Policies of title insurance required under Section 8, together with proper
issuance of any reinsurance agreements pertaining to such title insurance
policies, and otherwise accomplish the provisions of this Agreement. Escrow
Agent has acknowledged its agreement to these provisions by signing in the place
indicated on the signature page of this Agreement. The parties agree, if
required by Escrow Agent, to execute and enter into Escrow Agent's standard form
of escrow instructions, all with such modifications as the parties shall
reasonably request.
Section 3. Feasibility and Investigation
-----------------------------
3.01 In consideration of Buyer entering into the mutual covenants in this
Agreement, at any time on or prior to the sixtieth (60th) day after the date of
this Agreement (or as other terms of this Agreement may specifically extend such
period) (the "Feasibility Period"), Buyer may cancel this Agreement and all
agreements relating thereto (except for its indemnity relating to disturbance of
the Resort as described below in this Section) for any reason whatsoever in
Buyer's sole and absolute discretion, by providing to Seller and Escrow Agent
written notice of such cancellation. In the event Buyer timely gives notice of
cancellation in accordance with the provisions hereof, this Agreement shall
become null and void and of no further force or effect whatsoever and neither
party shall have any further rights or obligations to the other
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<PAGE>
hereunder or by reason hereof except for those provisions hereof which are
expressly stated to survive the termination of this Agreement. If, however,
Buyer shall fail to give notice of Buyer's election to cancel at the time and in
the manner as above provided, then Buyer shall be deemed to have waived its
right to do so and Buyer shall continue to be bound by the remaining provisions
of this Agreement.
3.02 Buyer shall have the right to enter and examine the Resort and all
other items being sold pursuant to this Agreement at any time after the
execution of this Agreement, and also have the Resort and such items examined
and copied by any persons whom it shall designate, including without limitation,
accountants, attorneys, contractors, engineers, and environmental testing
personnel. Seller shall permit access to the Resort by Buyer and any persons it
designates, and shall fully cooperate and afford them the opportunity to inspect
such items and perform any tests upon the Resort that Buyer deems necessary or
appropriate. Buyer may utilize the office equipment and office facilities at the
Resort without charge (except for any long distance telephone service). Buyer
will not unreasonably interfere with the business of the Resort.
3.03 As to any physical disturbance of the Property or Improvements or
physical injury to person caused by Buyer or its agents, upon completion of such
studies and investigations, if Buyer cancels the Agreement or thereafter does
not close, Buyer agrees to restore any physical damage to the Property or
Improvements caused by Buyer or its agents to the condition it was in prior to
such damage, and further, without regard to whether or not Buyer shall cancel or
close, to defend, indemnify and hold Seller harmless from and against all
physical injury to persons arising from such activities by Buyer. These
covenants shall survive cancellation of this Agreement.
3.04 Buyer shall pay the cost of any studies and examinations of the
Resort conducted by agents of Buyer, including any "Phase I" environmental
report and any testing in connection therewith. Notwithstanding the foregoing,
as soon as reasonably practicable after execution of this Agreement Seller, at
its expense, shall provide Buyer with an ALTA Urban Class Survey of the Resort
including such Table A items as specified by Buyer, by a Nevada licensed
surveyor in good standing, certified to Buyer, the title insurer and any lender
connected herewith, with such certification containing such other matters as
Buyer shall reasonably request. As soon as practicable after execution hereof,
Seller shall provide Buyer with copies of all existing surveys, environmental
reports and other studies and reports relating to the Resort in Seller's
possession or under its reasonable control.
3.05 Prior to the Closing, and under such reasonable terms and conditions
as Seller may impose, employees and agents of Buyer may stay at the Resort
without charge for lodging, except for incidentals consumed such as long
distance telephone, food and beverages, provided such stay is primarily for the
purpose of conducting feasibility examinations and investigations or otherwise
working on matters related to this transaction.
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3.06 Title Report
------------
(a) As soon as practicable after execution hereof, Seller will,
at Seller's sole cost and expense, deliver to Buyer a commitment for
title insurance relating to the Property prepared by Escrow Agent and
leading to the issuance of an extended owners policy, together with
complete and legible copies of all recorded documents referred to
therein (the "Title Report") and, in the event that the following are
subsequently prepared, agrees to cause Escrow Agent to deliver to Buyer
any updates and supplements thereto or amendments thereof, in each case
together with complete and legible copies of all matters referred to
therein ("Amendments"). Buyer shall have until the later of the end of
the Feasibility Period or five (5) business days after the date of
delivery of any Amendment (which, at Buyer's option, shall extend the
Closing Date accordingly), to notify Seller and Escrow Agent in writing
of Buyer's objection to any matter(s) indicated therein (but only, in
the case of Amendments, with respect to matters not appearing on the
Title Report or any previously delivered Amendment). Notwithstanding
the foregoing, Buyer shall not be entitled to object to any exception
contained in the Title Report (or any Amendment thereof) which is
caused by Buyer's activities under Section 3 hereof (excluding those
resulting from Buyer's discovery of any existing defect or condition).
(b) If Buyer fails to timely object to any title exception
matter disclosed in accordance with the above procedure, Buyer shall be
deemed to have approved the condition of title to the Property. If
Buyer objects to any exception as above provided, Seller shall have
until five (5) business days after the date of delivery of Buyer's
objections to advise Escrow Agent and Buyer in writing with respect to
each specified objection of Seller's election either to (i) take no
action in connection therewith, or (ii) attempt to cause any such
matter(s) to be cured or eliminated at or prior to Close of Escrow.
Insuring over any such item may be done only with Buyer's written
consent in its sole discretion. Seller's failure to give notice within
such five (5) business day period with respect to any of Buyer's
objections shall be deemed to constitute Seller's election to take no
action in connection therewith.
(c) In the event Seller elects or is deemed to have elected to
take no action with respect to any specified objection, Buyer shall
have until the later of the end of the Feasibility Period or five (5)
business days thereafter to advise Escrow Agent and Seller in writing
of its election either to (a) waive such previously specified
objection(s) and close the transaction contemplated hereby in
accordance with the remaining provisions of this Agreement and without
any abatement or reduction of the Purchase Price, or (b) cancel and
terminate the Agreement. Buyer's failure to give written notice within
such period shall be deemed to constitute Buyer's election to waive its
previously specified objections with respect to those matters as to
which Seller has notified or is deemed to have notified Buyer that
Seller will take no action.
(d) With respect to those matters which Seller has notified
Buyer that Seller will attempt to cause to be cured or eliminated (or
insured over with Buyer's consent), Seller shall have until five (5)
business days prior to the Closing (which shall be extended in
accordance with the time periods herein) within which to accomplish the
same; provided, however, that if Seller fails to do so within said
period, or if Seller shall be unable (other than due to its voluntary
act after execution
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hereof causing such disability) to convey title to the Property subject
to and in accordance with the provisions of this Agreement at the
Closing, then Buyer, as its sole and exclusive remedies, may elect
either to (i) waive such previously specified objection(s) and close
the transaction contemplated hereby in accordance with the remaining
provisions of this Agreement and without any abatement or reduction of
the Purchase Price on account thereof, or (ii) cancel this Agreement
and the Escrow, said election of remedies to be evidenced by Buyer's
giving written notice thereof to each of Seller and Escrow Agent at or
prior to the Closing. Buyer's failure to give written notice as
required by the preceding sentence shall be deemed to constitute
Buyer's election to waive its previously specified objection(s). If
Buyer elects to cancel, this Agreement shall become null and void and
of no further force or effect and neither party shall have any further
rights or obligations to the other hereunder or by reason hereof,
except for the provisions hereof which are expressly stated to survive
the termination of the Agreement.
(e) Buyer specifically agrees that nothing herein contained
shall be deemed to impose on Seller any obligation to bring any action
or proceedings, expend any sums or take any other steps of whatever
kind or nature in order to insure over, remove or cure matters
affecting title or to fulfill any condition or expend any monies
therefor unless Seller voluntarily impairs title to the Property or
otherwise voluntarily causes such matter after execution hereof. The
acceptance of the Deed by Buyer shall not diminish Sellers warranties
or any continuing obligation herein.
Section 4. Operations Prior to Closing
---------------------------
Seller covenants and agrees that between the date hereof and the
Closing, Seller will:
4.01 Continue to operate the Resort as heretofore operated in the normal
course of business and in accordance with its customary business practices.
4.02 Perform required maintenance and replacements in accordance with its
customary business practices.
4.03 Afford Buyer and its representatives full access to the Resort and to
Seller's books, records and files relating to the Resort, and make same
available to Buyer whether they are located on or off the Property, at
reasonable times, and without undue delay, up to and including the date of the
Closing.
4.04 Pay, in the normal course of business, and, in any event, prior to
Closing, sums due for work, materials or services furnished or otherwise
incurred in the ownership and operation of the Resort up to and including the
date of Closing, except as otherwise specifically treated in the adjustment
provisions of this Agreement. Not prepay any material item after the date of
this Agreement without the prior written consent of Buyer.
4.05 Except for daily room rental agreements in the ordinary course of
business which are not discounted more than twenty-five percent (25%) from the
full "rack" rate, not enter into any new material agreement, nor renew, amend,
modify or terminate any existing material agreement relating to the Resort
without having obtained the prior written consent of Buyer in each such
instance, which will not be
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unreasonably withheld or delayed. Material agreements will include, without
limitation, airline and travel agent commitments, automobile leases, or room or
other facility commitments which are discounted more than twenty-five percent
(25%) from their full rates.
4.06 Not grant or transfer or permit the grant or transfer of any interest
in the Resort or any item being sold pursuant to this Agreement, or grant any
executory rights in connection therewith, except for any items being replaced
with comparable items of equal or greater value in the ordinary course of
business.
4.07 Not discontinue compliance with governmental requirements applicable
to the Resort.
4.08 Promptly advise Buyer of any threatened or actual litigation or
governmental investigation or proceeding affecting the Resort, its licenses, its
operation, or those persons materially involved in its operation. It shall be a
condition precedent to Buyer's obligation to close that there shall be no such
matters threatened or pending at Closing having a potential significant and
material adverse effect on the Resort or upon Seller's ability to convey the
Resort to Buyer.
4.09 Not permit any material alteration, structural modification or
additions to the Resort, except in the nature of ordinary maintenance.
4.10 Except for daily room rental agreements in the ordinary course of
business, not create (or agree to create) any contract, grant, option, lease,
covenant, restriction, easement, encumbrance or lien on or affecting the Resort,
nor do anything negatively affecting title thereto, without the prior written
consent of Buyer.
4.11 As a condition precedent to Buyer's obligation to close, Seller shall
have duly performed all covenants and other obligations to be performed by it
under this Section 4.
Section 5. The Closing
-----------
5.01 The consummation of this transaction by recording the General
Warranty Deed in accordance with the provisions of the Agreement shall take
place ten (10) days (or as such time may be extended in accordance with the
specific terms of this Agreement) after the date of expiration of the
Feasibility Period or sooner at any time if desired by Buyer upon two (2) days
written notice by Buyer. The date of such recording is referred to in this
Agreement as the "Closing" or the "Closing Date". At the Closing, the parties
hereto agree to take the following acts and make the following deliveries, all
of which will be deemed taken and delivered simultaneously and no one of which
will be deemed completed or delivered until all have been completed or
delivered:
(a) Seller shall execute, acknowledge (as appropriate) and
deliver to Buyer and/or Escrow Agent the following documents:
(1) A General Warranty Deed in the form attached as
Exhibit "D";
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(2) Any documents or affidavits required to be filed or
recorded therewith in connection with Nevada Law;
(3) A Bill of Sale in the form attached as Exhibit "E",
assigning and transferring to Buyer all of Seller's right, title and
interest in and to the Personal Property, Advertising Materials,
Ledgers, and the Plans and Specifications, including without limitation
those items shown on Exhibit "C", free and clear of all claims, liens,
security interests, encumbrances and other charges, except for the
First Lien;
(4) An Assignment of Leases, Contract Rights and
Intangible Assets in the form attached as Exhibit "F", free and clear
of all claims, liens, security interests, and other charges, except for
the First Lien. The schedules to this assignment shall include the
Leases, Service Contracts, Ledgers, Plans and Specifications, Contract
Rights, Intangible Assets, Timeshare Operation items, Timeshare Paper
and related security agreements, and Miscellaneous Items;
(5) Assignments of Seller's interest in all automobiles
and equipment lease-purchase contracts, and appropriate title transfer
documentation properly executed by Seller for all such items owned by
Seller and used for the Resort, free and clear of all claims, liens,
security interests, encumbrances and other charges, except for the
First Lien;
(6) Certificate of Non-Foreign Status in the form attached
hereto as Exhibit "I";
(7) If requested by Buyer, the resignations of all
officers and directors of the Timeshare Operation owners association
who are controlled by Seller, and corresponding replacement with
persons controlled by Buyer;
(8) If requested by Buyer, an assignment of all the
developer's and "declarant's" rights in the governing documents of the
Timeshare Operations, in the form of Exhibit "J" attached hereto;
(9) Such other documents required by this Agreement or as
may reasonably be required by Buyer, its counsel, or Escrow Agent in
order to consummate the transactions which are the subject matter of
this Agreement; and
(10) An opinion of Seller's counsel.
(b) At Closing, Buyer shall pay, execute, acknowledge (as
appropriate) and deliver to Seller and/or Escrow Agent the following:
(1) The Down Payment, in cash or other immediately
available funds;
(2) An assumption of the Loan Documents, if required;
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<PAGE>
(3) Such other documents required by this Agreement or as
may be reasonably required by Seller, its counsel, or Escrow Agent, to
consummate the transactions which are the subject matter of this
Agreement; and
(4) An opinion of Buyer's counsel.
(c) At Closing, the Escrow Agent shall record and deliver the
foregoing documents as appropriate in connection with this Agreement.
Section 6. Covenants, Representations and Warranties of Seller
---------------------------------------------------
Seller represents covenants and warrants to Buyer as following, as of
the date hereof and as of the Closing:
6.01 Seller are corporations, duly organized and validly existing under
the laws of the State of Nevada.
6.02 Seller has the full right and authority to enter into and fully
perform its obligations under this Agreement, subject to obtaining shareholder
approval of the transaction contemplated hereby.
6.03 The persons signing this Agreement on behalf of Seller are authorized
to do so and to bind Seller to the terms hereof.
6.04 At the Closing, Seller is the sole owner of the Resort, subject only
to the First Lien.
6.05 The schedule of Leases set forth in Exhibit "M" attached hereto
("Schedule of Leases") is accurate as of the date hereof, and there are no
Leases or other tenancies in or related to the Resort other than those set forth
therein and room rentals in the ordinary course of business. Copies of all
Leases will be provided to Buyer during the Feasibility Period and all original
Leases shall be delivered to Buyer at Closing. Except as otherwise set forth in
the Schedule of Leases or elsewhere in this Agreement, all of the Leases are in
full force and effect, and none of them has been modified, amended or extended.
Moreover, Seller has no knowledge of any material breach or default, claim of
material breach or default thereunder, or any event which with the passage of
time will become a breach or default, and has received no written notice of any
of the foregoing thereunder.
6.06 A schedule of the Service Contracts, oral or written (indicating
which), is attached hereto as Exhibit "N" ("Schedule of Service Contracts").
Except as otherwise set forth in the Schedule of Service Contracts or elsewhere
in this Agreement, the Service Contracts are in full force and effect, and have
not been modified, amended or extended. Moreover, Seller has no knowledge of any
material breach or default, claim of material breach or default thereunder, or
any event which with the passage of time will become a breach or default. Copies
of all Service Contracts will be provided to Buyer during the Feasibility Period
and the originals shall be delivered to Buyer at Closing. Except as stated on
the Exhibit, all Service Contracts may be canceled immediately upon notice of
same, without penalty or charge.
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6.07 A Permanent Certificate(s) of Occupancy for the Improvements has been
issued by the appropriate governmental authorities and has not been amended or
revoked and a copy will be delivered to Buyer during the Feasibility Period. The
Resort is located within the boundaries of the City of Las Vegas, Nevada.
6.08 Except as set forth in Exhibit "O" attached hereto, the Property and
Improvements are, to the best of Seller's knowledge, in substantial compliance
with the zoning and use requirements of applicable governmental entities. Seller
has received no correspondence or formal notice from any governmental authority
of any existing violation, which has not been cured, or of any circumstances
that with the passage of time or failure to act, or both, would constitute a
violation of any applicable zoning or use requirement.
6.09 To the best of Seller's knowledge, there is no pending or
contemplated condemnation of the Property or Improvements, or any portion
thereof, by any governmental authority, nor is there any existing or proposed
plan to widen, modify or realign any street, alley or roadway adjoining the
Property which would affect access to or use of the Property.
6.10 To the best of Seller's knowledge, and except as qualified by Exhibit
"P" attached hereto, and in related documents set forth on the Exhibit and
provided to Buyer at least ten (10) days prior to the end of the Feasibility
Period, sewage and waste disposal systems and utility and telephone services now
serving the Property and the Improvements are adequate for the present operation
of the Resort.
6.11 Except as set forth in Exhibit "P" attached hereto, and in related
documents set forth on the Exhibit and provided to Buyer at least ten (10) days
prior to the end of the Feasibility Period, Seller has not received notice of
any uncured violations or infringements of any laws (including without
limitation gaming laws and laws related to the Timeshare Operation), rules,
regulations, ordinances, fire or safety codes, life safety requirements,
insurance requirements, covenants, conditions, restrictions (including without
limitation those relating to the Timeshare Operation on the Property),
trademark, service mark or tradename registrations, agreements or rights
applicable to the Resort, and, to the best of Seller's knowledge, the Resort as
customarily, and presently, operated is in substantial compliance with all
applicable laws, rules and regulations.
6.12 Except as set forth in Exhibit "P" attached hereto, and in related
documents set forth on this Exhibit and provided to Buyer at least ten (10) days
prior to the end of the Feasibility Period, to the best of Seller's knowledge:
(a) There are not presently, and have been no, above or
underground storage tanks, dry wells, injection wells, or similar
facilities, PCB transformers, asbestos or Hazardous Material located on
the Resort.
(b) No notice pursuant to any Environmental Law has been
received from, given to, or is presently due to, any governmental
authority pursuant to such Environmental Law.
(c) There are not presently, and have been no, violations on or
by the Resort of any Environmental Law.
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<PAGE>
(d) The Resort is not presently, and has not been, used for the
manufacture, collection, storage, handling, treatment or processing of
any Hazardous Material, nor as a sanitary landfill or open dump, except
for normal quantities of customary products used in the operation of
the Resort.
(e) There is not presently, and has not been, any spill, leakage
or release of any Hazardous Material on or into the soil, water or air,
on or at the Resort or at any real property within one mile of the
boundaries of the Resort.
(f) The Resort is not a state or federal "superfund" site or
study site pursuant to Environmental Law.
(g) Seller agrees to defend, indemnify and hold Buyer harmless
from all loss, cost, damage and expense arising out of any alleged or
actual violation of, or liability under, any Environmental Law, for
events and conditions occurring on or to the Resort by act or omission
to act of Seller or any person on the Resort property during the period
on and prior to the Closing Date. This indemnity does not limit any
statutory or other legal rights available to Buyer. Buyer agrees to
defend, indemnify and hold Seller harmless from all loss, cost, damage
and expense arising out of any alleged or actual violation of, or
liability under, any Environmental Law, for events and conditions
occurring on or to the Resort by act or omission to act of Buyer or any
person on the Resort property during the period after the Closing Date.
(h) "Environmental Law" means, in relation to the Resort and its
operations, any applicable federal, state, county, municipal or other
political subdivision or district, statute, law, rule, regulation,
code, ordinance, or decree relating to health, environment, air, water,
soil, improvements and facilities, the protection of same, and the
contamination and cleanup thereof.
(i) "Hazardous Material" means any hazardous waste, materials,
gases, liquids, substances, improvements or other items defined in any
Environmental Law and regulated thereunder or by any applicable
governmental authority pursuant thereto, including any notification
requirements thereunder to governmental authorities.
6.13 To the best of Seller's knowledge, and except as set forth on Exhibit
"K" attached hereto, no claims, actions, suits, proceedings or investigations by
governmental authorities, employees or former employees or other third parties
are pending or threatened against or relating to the Resort or its operation in
writing or in any court or before any federal, state, municipal or other
governmental department, agency, commission, board or bureau.
6.14 Except as may be set forth on the Title Report, and further except
for current property taxes and current assessments, not delinquent, Seller has
no knowledge of any delinquent tax, assessment, or other obligation affecting
the Resort which is, or may become, a lien on the Resort.
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6.15 Seller has delivered to Buyer financial statements, including
statements of income and expenses dated ________________________________________
(the "Financial Statements") for Seller prepared by KPMG Peat Marwick. To the
best of Seller's knowledge the Financial Statements are true, correct, and
complete as of the date thereof and fairly present the financial operations of
the Resort for the periods stated. Seller makes no representation as to the
future financial performance of the Resort.
6.16 A full and complete schedule of liabilities related to the Resort
which are to be assumed by Buyer pursuant to this Agreement is attached hereto
as Exhibit "L" ("Existing Liabilities"). The Existing Liabilities to the best of
Seller's knowledge are true and correct as to nature and amount. Seller hereby
agrees to defend, indemnify and hold Buyer harmless from any sums owing on
liabilities of the Seller existing on the Closing Date not set forth as an
Existing Liability on Exhibit "L".
6.17 Seller is not prohibited from consummating the transaction
contemplated by this Agreement or from conveying the Resort by any law,
regulation, agreement, instrument, restriction, order or judgment. No
permission, approval or consent by any third party or governmental authority, or
any individual or entity connected with Seller (other than that of Seller's
shareholders) is required in order for Seller to convey the Resort or to
consummate the transaction contemplated by this Agreement.
6.18 Seller has paid in full for all labor performed at, professional
services performed in respect to, and materials, machinery, fixtures and tools
delivered to, furnished to or incorporated into the Resort or which would
otherwise give rise to a lien or a right to lien the Resort, except for the
First Lien.
6.19 The Loan Documents are not in default, nor is there any existing
condition which would cause a default with the mere passage of time. The
principal balance and interest due on the Loan Documents does not exceed Five
Million One Hundred Thousand Dollars ($5,100,000.00). No additional principal
has been advanced or accepted pursuant to the Loan Documents.
6.20 All employees of and at the Resort, including without limitation its
managers, are employees-at-will and may legally be discharged without cause at
any time, including immediately before Closing, without liability to the Buyer
or liability to the Resort. If requested by Buyer, Seller will, in writing, give
notice to and discharge all employees of the Resort, effective immediately prior
to Closing, and not do anything to interfere with any immediate rehire after
Closing of same or all of such employees. Prior to any such events, Seller will
not encourage, support or entice in any way, any satisfactory employee to leave
the employ of the Resort.
6.21 Except as set forth on Exhibit "P" attached hereto and for normal
wear and tear, the Resort, including the buildings, systems, furniture, fixtures
and equipment, are in good condition and repair.
6.22 All licenses and permits necessary to the operation of the Resort are
current and in good standing.
6.23 Seller holds, in good standing, current alcoholic beverage license(s)
from the appropriate governmental liquor authorities in connection with the
operation of the Resort.
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6.24 Up to the Closing Date, the Resort's equipment and facilities have
been adequate to serve its customers during peak demand periods.
6.25 Except as set forth on Exhibit "P" attached hereto, there are no
delinquent taxes, assessments, salaries, wages, contract payments, supplier
payments, or any other delinquent payments of any kind or nature owing from
Seller or the Resort and relating to the Resort, its employees, contractors,
governmental authorities, or any other person or entity dealing with the Resort
and its operation. Any such delinquent payments listed on Exhibit "P" will be
paid by Seller at Closing from the Closing funds through the Escrow Agent.
6.26 Attached hereto as Exhibit "U" is a schedule of all commitments and
reservations for "free" rooms and rooms or other facilities discounted more than
twenty-five percent (25%) from the full rate therefor, for any period after the
sixtieth (60th) day following the date of this Agreement.
6.27 The Timeshare Operation has been operated continuously from its
inception to the present in compliance with all laws, rules and regulations
applicable thereto, including without limitation the sales connected therewith,
and there has been no misrepresentation to purchasers or failure of performance
in connection with any representation or written obligation to any purchaser,
except for tenth (10th) floor (of the Resort) furnishings represented to the
timeshare purchasers. An accurate list of (i) those furnishings, (ii) their
brand and purchase source, and (iii) their cost is set forth on Exhibit "V"
attached hereto, and such furnishings will properly fulfill the obligations to,
and representations made to, the timeshare purchasers. Also shown on Exhibit "V"
is an accurate schedule of all Resort timeshare purchasers (i) whose owners
association dues have been waived and the period of such waiver or (ii) who are
delinquent in the payment of such dues, for how long and the amount of each such
delinquency.
6.28 Seller agrees to inform Buyer in writing immediately upon obtaining
actual knowledge that any of Seller's representations or warranties are
inaccurate.
6.29 It shall be a condition precedent to Buyer's obligation to close this
transaction that Seller's covenants, representations and warranties in this
Agreement be fully performed and true and accurate as of the Closing, and that
the lender will allow Buyer to assume the First Lien without material
modification thereof and without any substantial charge or fee to Buyer.
6.30 "To the best of Seller's knowledge" or references to "Seller's
knowledge" in this Section 6 means any written notice received by Seller
relating to a representation and warranty matter herein, and the personal
knowledge of: Todd Fisher; the general managers of each of the Resort's: hotel
operation, casino operation, maintenance operation, food and beverage operation,
entertainment/museum operation and housekeeping operation; David Crabtree and
Debbie Reynolds.
6.31 Seller agrees to defend, indemnify and hold Buyer harmless from all
loss, cost, damage and expense arising from any breach of, or inaccuracy in, the
covenants, representations and warranties of Seller in this Agreement. Further,
except for liability expressly assumed by Buyer pursuant to the terms hereof,
Seller shall defend, indemnify and hold Buyer harmless from any and all loss,
cost, damage,
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expense and liability to third parties arising out of the Resort, its condition
and operation (including without limitation the Timeshare Operation), and acts
or omissions by Seller, on or prior to the Closing Date.
6.32 No investigation by, or knowledge of Buyer, shall diminish Seller's
indemnities herein or Seller's covenants, representations and warranties.
Section 7. Covenants, Representations and Warranties of Buyer
--------------------------------------------------
Buyer covenants, represents and warrants to Seller as follows:
7.01 Buyer is a corporation duly organized and in good standing under the
laws of the State of Arizona.
7.02 Buyer has the full right and authority to enter into and fully
perform its obligations under this Agreement.
7.03 The persons signing this Agreement on behalf of Buyer are authorized
to do so, and to bind Buyer to the terms hereof.
7.04 Buyer shall assume all of the Existing Liabilities, as shown on
Exhibit "L" attached hereto, and shall pay when due all items appearing thereon.
7.05 Buyer shall defend, indemnify and hold Seller harmless from any and
all liability to third parties arising out of, connected to or resulting from,
any act, transaction, or omission of Buyer occurring after the Closing Date with
respect to the Resort, its condition or the operation thereof, provided however,
that such indemnification shall not (except as may be otherwise herein
specifically provided) extend to any cost, expense or liability arising out of
Seller's indemnifications and warranties or any omission or act of Seller on or
prior to the Closing Date.
7.06 As of the Closing Date, Buyer has inspected the Resort and the books
and records of the Resort and has made all other inquiries which it deems
necessary to satisfy itself as to the condition and the operation of the Resort,
and agrees to accept possession of the Resort in its "as is" condition, except
for the express covenants, representations and warranties of Seller contained in
this Agreement.
7.07 Buyer accepts Seller's assignment to it of all Leases, Service
Contracts and Contract Rights contained in Exhibit "F" related to the Resort and
assumes all obligations of Seller thereunder arising after the Closing Date.
7.08 If Buyer assigns its interest in this Agreement to a nominee, Buyer
shall guarantee the prompt payment and full performance of the nominee in form
approved by Seller.
7.09 Buyer agrees to inform Seller in writing immediately upon obtaining
actual knowledge that any of Buyer's representations or warranties herein are
inaccurate.
-17-
<PAGE>
7.10 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not violate any provision of, or
result in the breach of, any of the terms, provisions, or conditions of, or
constitute a default under or conflict with respect to, any other agreement by
which Buyer is bound.
7.11 The Shares of common stock described in paragraph 2.01(c) above are
authorized but unissued stock of Buyer, and Buyer will deliver or issue to
Seller the Shares free and clear of all liens, encumbrances, security
agreements, options, claims, charges and restrictions (except as may be imposed
by Rule 144 or other state or federal securities laws) and fully paid and
non-assessable.
7.12 The Financial Statements delivered to Seller have been prepared in
accordance with generally accepted accounting principles, and fairly present the
financial position of Buyer as of the respective dates thereof, and the results
of its operations for the period(s) indicated.
7.13 To the best of Buyer's knowledge, there is no suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or threatened against or affecting Buyer which if resolved
adversely to Buyer would have a material adverse affect on Buyer or its
business, assets, or financial condition.
7.14 It shall be a condition precedent to Seller's obligation to close
this transaction that Buyer's covenants, representations and warranties in this
Agreement be fully performed and true and accurate as of the Closing.
Section 8 Title Insurance
---------------
8.01 Seller agrees to cause Escrow Agent to deliver to Buyer, at the
Closing, an ALTA extended coverage owners title insurance policy or a binding
commitment to issue the same as soon after the Closing as is customary (the
"Owners Title Policy") insuring Buyer's title to the Property in the full amount
of the Purchase Price subject only to those matters which Buyer approves or is
deemed to have approved pursuant to Section 3.06 hereof and the printed
exclusions and conditions and customary exceptions set forth in Escrow Agent's
usual form of ALTA extended coverage owners title insurance policy. If Buyer
shall desire any additional endorsements, the cost and responsibility for the
acquisition thereof shall be the responsibility of the Buyer.
8.02 Any lender's title policy required by the First Lien lender at
Closing shall be Buyer's responsibility.
Section 9 Hotel Facilities Lease
----------------------
9.01 Immediately after Closing, Buyer will lease certain of the Resort
facilities to Debbie Reynolds and/or her nominee ("Lessee") pursuant to the
lease to be attached hereto as Exhibit "Q"( the "Hotel Facilities Lease"), which
will be executed and delivered by said at Closing.
-18-
<PAGE>
9.02 In general, the lease will be for a period of ninety-nine (99) years
with an approximate monthly lease payment of $150,000 and will include the
following facilities: showroom, museum, gift shop, casino, back bar and certain
joint use areas. Lessee will maintain such facilities, plus the marquis sign and
the portable display signs around the Resort, and Lessee will share prorata the
Resort's utilities, security and engineering. In addition, the lease will
provide for a license of the tradename "Debbie Reynolds Hotel & Casino" and all
derivatives thereof, and all other logos, trademarks, tradedress and tradenames
used in connection with the Resort (collectively "Names and Marks"). Said
license will be transferable with the Resort if approved by Debbie Reynolds,
which approval will not be unreasonably withheld so long as the transferee meets
certain conditions to be defined in the lease. In the event said approval is not
given, then the lease of facilities may be terminated by Seller;
9.03 The above is illustrative only, and the final terms of the Hotel
Facilities Lease shall be controlling.
Section 10 Certain Other Agreements
------------------------
10.01 In consideration for the use of her name and likeness and associated
goodwill and other services, Debbie Reynolds will personally receive a
percentage of the net profit of any timeshare project at the Resort, as set
forth in the "Timeshare Profit Agreement" attached hereto as Exhibit "R", to be
executed and delivered at Closing.
10.02 A life insurance policy acceptable to Buyer on Debbie Reynolds' life
in the amount of $10,000,000 will be assigned by Seller to Buyer and made
payable to Buyer and delivered to Buyer at Closing.
10.03 On a per project basis, timely, good faith negotiations will take
place at either party's request to place Debbie Reynolds memorabilia and/or
Debbie Reynolds museum displays at other ILX Incorporated locations.
10.04 Seller will cause the "Debbie Reynolds Participation Agreement",
attached hereto as Exhibit "S", wherein Ms. Reynolds agrees to personally be
present, cooperate in and participate in the future activities of the Resort
(including without limitation the hotel and casino) and other ILX Incorporated
business activities (including without limitation Red Rock Collection
Incorporated) and allow for the use of her name and likeness, to be personally
executed by Ms. Reynolds and delivered to Buyer at Closing.
10.05 As additional consideration to Buyer and as a condition to Buyer's
obligations to consummate the transactions hereunder, Debbie Reynolds shall have
entered into a merger agreement and related promotional agreements with Buyer's
wholly-owned subsidiary, Red Rock Collection Incorporated.
10.06 With reference to this Agreement and the specific terms of paragraph
17.13 concerning the timing of exhibit preparation, both parties will commence
immediately, diligently and continuously to complete all remaining due
diligence, complete any and all necessary corporate action, procure any
-19-
<PAGE>
necessary government approvals, and negotiate the definitive exhibits to be
attached hereto, with the goal of Closing prior to the end of 1996.
10.07 Without modifying any other term of this Agreement, Closing shall be
conditional on the procurement of all required governmental approvals for the
transactions and activities contemplated by this Agreement and its exhibits and
the consummation to Buyer's sole and exclusive satisfaction of the matters
described in Section 9 above and this Section 10.
10.08 If Seller is unable to procure the required governmental approvals
for its activities contemplated pursuant to the Hotel Facilities Lease
(including without limitation the appropriate gaming licenses for the casino
operation) within six (6) months after the date of Closing, then Buyer shall
have no further obligations under the Hotel Facilities Lease with respect to the
casino operation and Buyer shall have the right to operate the casino in its
name.
Section 11 Broker
------
Seller and Buyer hereby covenant and agree that each shall indemnify
and defend the other against any costs, claims or expenses, including attorneys'
fees, arising out of any real estate or other brokerage contract executed by, or
similar activities engaged in by, the indemnifying party. The obligations under
this paragraph shall survive the Closing or, if the Closing does not occur, the
termination of this Agreement.
Section 12 Notices
-------
12.01 All notices under this Agreement shall be in writing and shall be
effective when addressed to the person(s) and address(es) as set forth below,
and either:
(a) Delivered to the address(es) by United States Mail or an
established, reputable overnight courier such as Federal Express or
UPS;
(b) Delivered by other messenger to an appropriate employee at
such address(es); or
(c) Received at the telefacsimile number(s) shown below.
12.02 Proof of delivery or receipt is the obligation of the sender.
Refusal of delivery shall constitute delivery.
12.03 Addresses and telephone numbers:
If to Buyer:
------------
Joseph P. Martori, Chairman
ILX Incorporated
2777 East Camelback Road
-20-
<PAGE>
Phoenix, Arizona 85016
Telefacsimile: 602-957-2780
Telephone: 602-957-2777
with a required copy to:
--------
Samuel L. Ciatu, General Counsel
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Telefacsimile: 602-957-2780
Telephone: 602-957-2777
and with a required copy to:
--------
Elliot R. Eisner, Esq.
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Pkwy.
Suite 700
Las Vegas, NV 89109
Telefacsimile: 702-796-7181
Telephone: 702-792-7000
If to Seller:
-------------
Todd Fisher, Chief Executive Officer
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 89109
Telefacsimile: 702-734-2954
Telephone: 702-734-0711
with a required copy to:
--------
David Crabtree
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 89109
Telefacsimile: 702-734-2954
Telephone: 702-734-0711
-21-
<PAGE>
with a required copy to:
--------
Matthew Q. Callister
Callister & Reynolds
823 Las Vegas Blvd. South
Las Vegas, Nevada 89101
Telefacsimile: 702-385-7743
Telephone: 702-385-3343
If to Escrow Agent:
----------------------------
----------------------------
----------------------------
----------------------------
Telefacsimile:
----------------------------
Telephone:
----------------------------
with a required copy to:
--------
----------------------------
----------------------------
----------------------------
----------------------------
Telefacsimile:
----------------------------
Telephone:
----------------------------
Section 13 Survival of Representations, Warranties, Covenants, and
----------------------------------------------------------------
Obligations
- -----------
Except as may be otherwise specifically provided in this Agreement,
all representations, warranties, covenants, indemnities, or other obligations of
both parties set forth in this Agreement shall not be merged into the deed to
Buyer or into any other document relating to the transaction contemplated by
this Agreement, but shall survive the Closing for a period of three (3) years.
-22-
<PAGE>
Section 14 Uniform Commercial Code - Bulk Transfer
---------------------------------------
14.01 The parties believe that this sale is exempt from the application of
the Uniform Commercial Code bulk sale law as it does not involve a seller whose
principal business is the sale of inventory from stock, but involves a resort
hotel the business of which is principally the sale of services.
14.02 To the extent such provisions may apply, unless otherwise requested
by a party prior to the end of the Feasibility Period, Buyer and Seller agree to
waive compliance, as between themselves, with the Bulk Sale provisions of the
Uniform Commercial Code as it may be in force in the State of Nevada.
Section 15 Risk of Loss
------------
15.01 In the event of any damage or loss to all or any substantial portion
of the Property due to casualty or the occurrence of a suit for a taking of any
portion thereof by governmental or quasi-governmental authority after the date
hereof and prior to the Closing Date, Buyer may, as its sole and exclusive
remedy, by written notice given to each of Seller and Escrow Agent on or prior
to the Closing Date, elect either to (i) cancel and terminate this Agreement and
the Escrow, or (ii) receive, by assignment from Seller, all insurance proceeds
and/or condemnation awards, if any, received and/or to be received by Seller as
a result of such casualty or taking (in which case the parties shall proceed to
consummate the transaction without any resulting adjustment of the Purchase
Price).
Section 16 Cancellation and Termination: Remedies for Failure to Close
------------------------------------------------------------
16.01 Wherever this Agreement provides that upon the occurrence of a
condition other than breach or default, one of the parties hereto may elect, or
has the right, to "cancel and terminate" the Agreement, that phrase shall mean
that, unless otherwise herein provided, written notice thereof shall be given to
both Escrow Agent and the other party, and then this Agreement shall immediately
become null and void and of no further force or effect and neither party shall
have any further rights or obligations to the other hereunder or by reason
hereof except for those which by the provisions hereof are expressly stated to
survive any termination of this Agreement. If the notice is one of default or
breach and the matter stated in said notice is not cured, corrected or removed
within three (3) days after the date of receipt of the aforesaid written notice
(Seller and Buyer hereby waiving the "13 day" provision contained in any printed
form escrow instructions), then, unless a different time period and result is
specifically stated in this Agreement, the notice may state cancellation shall
then occur and this Agreement shall automatically become null and void and of no
further force or effect and neither party shall have any further rights or
obligations to the other hereunder or by reason hereof except for those which by
the provisions hereof are expressly stated to survive any termination of this
Agreement.
16.02 If Buyer shall breach or fail to perform or fulfill any of its
pre-Closing or Closing obligations hereunder, then, provided that Seller is not
then in default hereunder, Seller may elect to cancel this Agreement by notice
as provided above, or Seller may exercise any and all other remedies then
available to it at law or in equity (including without limitation bringing suit
for damages, specific performance or any other relief to which it may be
entitled).
-23-
<PAGE>
16.03 If Seller shall breach or fail to perform or fulfill any of its
pre-Closing or Closing obligations hereunder, then, provided that Buyer is not
then in default hereunder, Buyer may elect to cancel this Agreement by notice as
provided above, or Buyer may exercise any and all other remedies then available
to it at law or in equity (including without limitation bringing suit for
damages, specific performance or any other relief to which it may be entitled).
Section 17 Miscellaneous Provisions
------------------------
17.01 This Agreement and the various other documents required hereby
embody and constitute the entire understanding between the parties with respect
to the transaction contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
17.02 This Agreement shall be governed by, and construed in accordance
with, the law of the State of Nevada.
17.03 The section and paragraph headings in this Agreement are inserted
for convenience of reference only and in no way define, describe, limit, expand
or modify the text, scope or intent of this Agreement or any of the provisions
hereof.
17.04 This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs or successors and permitted
assigns.
17.05 This Agreement shall not be binding or effective until properly
executed by both Seller and Buyer.
17.06 As used in this Agreement, the masculine shall include the feminine
and neuter, the singular shall include the plural and the plural shall include
the singular, or vice-versa, all as the context may require.
17.07 Nothing in this Agreement, express or implied, is intended to confer
any rights or remedies whatsoever upon any person, other than the parties hereto
and their respective successors, assigns and transferees.
17.08 Unless provided to the contrary in any particular provision, all
time periods shall refer to calendar days and shall expire at 5:00 p.m., Las
Vegas, Nevada time, on the last of such days; provided, however, that if the
time for the performance of any obligation expires on a day other than a
business day (any day other than a Saturday, Sunday or State of Arizona, State
of Nevada or federal paid legal holiday), the time for performance shall be
extended to the next succeeding day which is a business day. Subject to the
foregoing, timeliness is the essence of this Agreement and of every term and
provision hereof.
-24-
<PAGE>
17.09 Seller and Buyer hereby acknowledge that this Agreement is the
result of continual and ongoing negotiation between the parties. All parties
have arrived at this Agreement through the exercise of equal bargaining power
and any ambiguities herein should be construed against neither party, but should
be given a fair and reasonable interpretation.
17.10 If either Seller or Buyer shall bring any legal action or suit for
any relief against the other, declaratory or otherwise, arising out of this
Agreement, the losing party shall pay the successful party a reasonable sum for
its attorney's fees, expenses, discovery costs and court costs as the court
sitting without a jury shall determine. Any party seeking to be indemnified or
held harmless by the other under the terms of this Agreement shall provide
notice to the indemnifying party of receipt of any indemnified claim or cause of
action, and the indemnifying party shall have the option of joining in the
defense of such claim or cause of action.
17.11 Buyer and Seller shall each provide the other prior to the end of
the Feasibility Period with appropriate resolutions in form and substance
authorizing the respective entities by and through their agents or officers to
enter into and execute this Agreement and the collateral documents associated
herewith.
17.12 Neither Buyer nor Seller will make any public announcement
concerning the transactions contemplated hereby without the review, comment and
approval of the other, which review and comment will be promptly provided and
which approval will not ultimately be withheld so long as no securities law
violation would occur as a result of such announcement.
17.13 Set forth in Exhibit "A" is a list of any and all amendments,
schedules, riders, and other items which are attached hereto but which are not
listed elsewhere herein. All exhibits, schedules, riders or other items attached
to this Agreement are a part of and incorporated by reference into this
Agreement with the same effect as if they were recited at length in the body of
this Agreement. Exhibits C, G, K, L, M, N, O, P, T, U, V and the schedules to
Exhibit F are to be prepared initially by Seller. Seller will use its best
reasonable efforts to prepare, complete and deliver same to Buyer prior to the
end of the thirtieth (30th) day after the date of this Agreement, failing which,
the Feasibility Period shall be extended to the date thirty (30) days after the
date the last of the foregoing completed exhibits is delivered to Buyer. The
parties will use their best good faith, reasonable efforts to agree upon the
form of the remaining exhibits to this Agreement as soon as reasonably
practicable, and in no event later than ten (10) days prior to the end of the
Feasibility Period, failing which, after the end of the Feasibility Period,
either party may cancel this Agreement prior to the occurrence of such
Agreement.
17.14 This Agreement may be executed in counterparts and all signature
(and any notary) pages may be attached to a single document. A telefacsimile
signature shall be valid as an original signature and it shall be the
responsibility of the party (or its agent) telefaxing same to preserve the page
containing the original signature for inspection until the receiving party is
subsequently supplied with an identical page containing an original signature,
which shall occur within seven (7) days after the date of such telefacsimile.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER: ILX INCORPORATED, an Arizona corporation
By:/s/ Joseph P. Martori
-------------------------------------
Joseph P. Martori, Chairman
SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC.,
a Nevada corporation
By:/s/ Todd Fisher
-------------------------------------
Todd Fisher, Chief Executive Officer
DEBBIE REYNOLDS RESORTS, INC.,
a Nevada corporation
By:/s/ Todd Fisher
-------------------------------------
Todd Fisher, Chief Executive Officer
Escrow Agent hereby acknowledges its receipt of a fully executed copy
of this Agreement and agrees to perform the functions assigned to Escrow Agent
hereunder. Escrow Agent, as the party responsible for closing the transaction
contemplated hereby within the meaning of Section 6045(e)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), further agrees to file all
necessary information reports, returns and statements regarding the transaction
required by the Code of such closing agent, including, but not limited to, the
reports required pursuant to Section 6045 of the Code.
ESCROW AGENT:
-------------------------------------
By:
-------------------------------------
Its:
---------------------------------
-26-
<PAGE>
TABLE OF EXHIBITS
Exhibit Title
- ------- -----
A Riders, Amendments and Miscellaneous Items
B Description of Real Property
C Schedules of Personal Property
D Deed
E Bill of Sale
F Assignment of Leases, Contract Rights and Intangible Assets
G Loan Documents - First Lien
H Allocations
I Certificate of Non-Foreign Status
J Assignment of Declarant's Rights
K Suits, Proceedings, Investigations and Claims
K-1 Claims Not Assigned
L Existing Liabilities to be Assumed by Buyer
M Schedule of Leases
N Schedule of Service Contracts
O Summary of Existing Zoning and Use Violations
P Summary of Certain Problems
Q Hotel Facilities Lease
R Timeshare Profit Agreement
S Debbie Reynolds Participation Agreement
T Items Excluded from the Sale
U Discounted Room and Facility Commitments
V Timeshare Operation Items
-27-
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months Ended
September 30 Years Ended December 31,
--------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss)
before income taxes
and after minority
interest $1,458,129 $77,447 $1,986,488 $1,976,231 $1,225,874 ($307,051)
Add fixed charges:
Interest expense 1,406,073 1,265,227 666,141 599,238 643,023 473,598
Amortization of debt
service 56,300 100,200 140,600 93,150 185,209 42,839
Rental expense 122,500 163,333 149,667 105,333 46,000
--------------------------------------------------------------------------------------------------------
Total fixed charges 1,584,873 1,528,760 956,408 797,721 874,232 516,437
--------------------------------------------------------------------------------------------------------
Income (loss) as
adjusted $3,043,002 $1,606,207 $2,942,896 $2,773,952 $2,100,106 $209,386
========================================================================================================
Fixed charges in
excess of earnings $307,051
===============
Ratio of earnings to 1.92 1.05 3.08 3.48 2.40
fixed charges
</TABLE>
February 27, 1997
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 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
2111 East Highland, Suite 210
Phoenix, Arizona 85016
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement 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.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 25, 1997
Exhibit 23.2
