OPTION AGREEMENT
(ILX/TEXAS CAPITAL SECURITIES)
This OPTION AGREEMENT is made effective as of January 7, 1997, by and
between Texas Capital Securities, a Texas corporation ("Optionee") and ILX
Incorporated, an Arizona corporation (the "Company").
R E C I T A L S:
Pursuant and subject to that certain letter agreement between the
parties dated as of January 7, 1997 (the "Consulting Agreement"), as modified
herein, the Company desires to grant to Optionee, and Optionee desires to
receive, an option to purchase shares of common stock (the "Common Stock") of
ILX Incorporated, an Arizona corporation ("ILX"), according to the terms and
conditions set forth in this Agreement.
A G R E E M E N T:
NOW THEREFORE, for good and valuable consideration, receipt
and sufficiency of which are acknowledged, the parties agree as follows:
1. Grant of Option. The Company hereby grants to Optionee an option
(the "Option") to purchase up to Five Hundred Thousand (500,000) shares of ILX's
restricted Common Stock (the "Option Shares") as follows:
A. Up to Two Hundred Fifty Thousand (250,000) of the Option Shares are
exercisable on or before June 30, 1997, at $1.25 per share;
B. If all the shares described in sub-paragraph 1.A. above are timely
exercised, up to an additional One Hundred Twenty Five Thousand (125,000) of the
Option Shares are exercisable on or before September 30, 1997, at $1.75 per
share; and
c. If all the shares described in sub-paragraph 1.B. above are timely
exercised, up to an additional One Hundred Twenty Five Thousand (125,000) of the
Option Shares are exercisable on or before December 15, 1997, at $2.00 per
share.
2. Term. The term of this Option (the "Option Term") shall commence
upon the date hereof and shall terminate as described in paragraph 1. hereof;
provided, however, that if Consultant has timely exercised as to all the shares
described in sub-paragraphs 1.A. and 1.B. above and Company exercises its option
to extend the term of the Consulting Agreement on a month-to-month basis, then
the Option Term as to the shares described under sub-paragraph 1.C. above shall
be extended for the same period of time.
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3. Exercises. The Option may be exercised in whole or part. The Option
shall be exercised by delivering to the Company written notice of Consultant's
election to so exercise, and specifying the number of shares to be purchased
(the "Notice"). Any Notice that is given by Consultant to the Company during the
Option Term shall be valid notwithstanding that the delivery of the Option
shares purchased may take place after the expiration of the Option Term.
4. Closing. The closing of any purchase of shares pursuant to an
exercise of the Option shall take place at the office of the Company as soon as
practicable following delivery of the Notice, or at such other time and place as
may be designated by the parties. At the closing, Consultant shall deliver to
the Company a cashiers' check or wire transfer funds in the amount of the
purchase price, together with any other documents that the Company may require
to effect the transfer of the purchased shares from the Company to Consultant.
The Company shall execute and deliver documents appropriate to transfer the
purchased shares to Consultant.
5. Anti-dilution. The number and character of the shares to be
purchased upon the exercise of the Option herein shall be subject to adjustment
as provided in this paragraph. If, after the date hereof, the number of
outstanding shares of common stock of the Company is increased by a stock
dividend payable in shares of common stock, or by a subdivision or split-up of
shares of common stock, or the number of outstanding shares of common stock is
decreased by a combination or reclassification of shares of common stock, or the
Company shall pay or make a dividend or other distribution with respect to
common stock (other than in cash or shares of common stock), or in case of any
capital reorganization or of any reclassification of the common stock or any
change in the outstanding common stock as a result of the consolidation or
merger of the Company with or into any other corporation, or the sale of the
properties and assets of the Company to any other corporation, or any other
transaction, similar or dissimilar to the foregoing, then this Option shall
after the effective date of such stock dividend, subdivision, split-up,
combination, reclassification dividend, other distribution, capital
reorganization, merger, sale or other transaction entitle Consultant to purchase
the kind and number of shares of stock or other securities or property to which
Consultant would have been entitled if it had held the shares purchasable upon
the exercise of this Option immediately prior to such transaction. Nothing
herein shall in any way affect the right of the Company to adjust, reclassify,
reorganize or otherwise make changes in its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any part of
its business or assets.
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6. Securities Laws.
A. Access to Information
Consultant represents and warrants that it has been provided
with access to all information relating to the Company
concerning its condition, financial and otherwise, its
management, its business and its prospects that Consultant has
deemed material. The Company represents that it has provided
Consultant with a copy of the Company's most recent Form 10-K
and any subsequent filing required or filed under the rules
and regulations promulgated under the Securities Act of 1933
as amended (the "Act") or the Securities Exchange Act of 1934
as amended (the "Exchange Act"), if any, (the "Disclosure
Documents"). Consultant acknowledges that it is aware that
because of the Company's financial position and other factors,
the acquisition of the shares to be paid to Consultant as
compensation hereunder involves a high degree of risk,
including the risk that Consultant may lose its entire
investment in such shares. Consultant further represents that
it and its advisors have been afforded the opportunity to
discuss the Company with the Company's management. The Company
represents that it has and will continue to provide Consultant
with any information or documentation requested by Consultant
to verify the accuracy of the information contained in the
Disclosure Documents and will promptly upon Consultant's
request provide Consultant with a copy of any registration
statement or other periodic reporting documents filed pursuant
to the rules and regulations of the Act or the Exchange Act.
Consultant has retained its own legal and business counsel to
the extent Consultant deems necessary, and is not relying on
the Company to explain the Disclosure Documents.
B. Registration of Securities
Consultant understands and acknowledges that any shares
acquired hereunder are being acquired by Consultant for its
own account and not on behalf of any other person, and are
being acquired for investment purposes and not for
distribution. Consultant represents that an investment in such
shares is a suitable investment for Consultant, taking into
consideration the restrictions on transferability affecting
the shares.
Within thirty (30) days following the execution hereof, the
Company agrees to file an amendment to the Registration
Statement on Form S-3 that became effective on or about May
17, 1996 to register the Option Shares (the "Amendment"). The
Company shall not be in violation
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of the foregoing covenant by reason of any delay in the
effectiveness of the Amendment or a requirement by the
Securities and Exchange Commission that an amendment or
amendments to the Amendment be filed prior to, as a condition
of, or following the effective date of the Amendment. The
Company agrees to cause the Amendment to remain effective for
a period of not less than twelve (12) months from the initial
effective date thereof.
In addition, the Company will use its best efforts to provide
a list of states in which the Company has complied with
applicable securities laws and undertakes to comply with the
such states securities laws and regulations. The Company
undertakes to make available for review and comment by
Consultant, on a timely basis and prior to submission with any
regulatory agency, copies of the Amendment. Consultant agrees
that it will not transfer or sell any of the shares acquired
hereunder without registration under the Act and any
applicable state securities laws unless exemptions from such
registration requirements are available.
In connection with the public registration of any shares
acquired hereunder and held by Consultant, Consultant shall
provide to the Company, in a timely fashion, any and all
information required by state and federal securities laws to
be included in the registration statement or any amendment or
any related documents, including any information requested by
the Company. Furthermore, Consultant shall review any and all
materials transmitted to Consultant by the Company concerning
the registration of Consultant's shares and Consultant
immediately shall advise the Company in writing of any
misstatement or omission, in such materials.
C. Restrictions on Transfer
Consultant is aware that the Option Shares have not been
registered under the Act and thus cannot be resold until they
are registered under the Act or unless an exemption from
registration is available, and is aware of the restrictions
imposed on further distribution of the such shares including
the limitations and applicability of Securities and Exchange
Commission Rule 144 and including the restrictive legend to be
placed thereon and stop transfer orders to which it will be
subject. Consultant is an "accredited investor" as defined in
Rule 501(a) of Regulation D under the Act, as amended.
Consultant shall not transfer any shares acquired hereunder
unless and until it has first given written
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notice to the Company describing briefly the manner and nature
of the transfer and until:
(i) A federal registration statement (or amendment thereto)
filed by the Company with respect to such shares is declared
effective; or
(ii) The Company and Consultant shall have complied with SEC
Rule 144; or
(iii) Consultant presents the Company with a "no-action"
letter, satisfactory to the Company, from the SEC with respect
to the proposed transfer; or
(iv) The Company has received opinions from Consultant's
counsel, in form and substance satisfactory to the Company
that such transfer can be made without compliance with the
registration provisions of the Act or other securities laws,
and has received such certifications and agreements from
Consultant and any prospective transferee as the Company deems
appropriate under the circumstances.
Consultant further acknowledges that the Option Shares (the
"Shares") have not been registered under any state securities
laws or regulations and that they may not be transferred
unless Consultant complies with applicable exemptions from any
applicable state securities laws and regulations and the
Company receives evidence satisfactory to it that such
compliance has occurred before each and any transfer by
Consultant of the Shares takes place. Consultant represents
and warrants that it only shall cause or allow the transfer of
any or all of the Shares upon complying with the restrictions
and conditions set forth in the preceding sentence.
Consultant also acknowledges that any certificate representing
Shares (the "Certificate") would otherwise contain a "blue
sky" legend setting forth such restrictions and the conditions
under which Consultant may transfer the Shares (the "Stock
Legend"). However, Consultant desires that the Company cause
the issuance of the Shares without a Stock Legend on the
Certificate to expedite any legal transfer of the Shares from
the Consultant if and when the Consultant may do so upon
compliance with the restrictions and conditions that would
have been set forth in the Stock Legend. The Company hereby
agrees to cause the issuance of the Shares without the Stock
Legend on the Certificate only upon the terms and conditions
set forth above.
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7. Indemnification.
A. The Company agrees to indemnify and hold harmless Consultant
and its agents and employees against any losses, claims,
damages or liabilities, joint or several, to which Consultant
or any such other person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions, suits or proceedings in respect
thereof) arise out of or are based upon any untrue statement
of any material fact contained in the Registration Statement,
the Amendment, any preliminary prospectus, the prospectus, or
any amendment or supplement thereto, or arise out of or are
based upon the omission to state therein a material fact
required to make the statements contained therein not
misleading, and will reimburse the Consultant or any such
other person for any legal or other expenses reasonably
incurred by Consultant or any such other person in connection
with investigating or defending any such loss, claim, damage,
liability, or action, suit or proceeding; provided, however,
that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises
out of or is based, in whole or in part, upon an untrue
statement, or omission or alleged omission from the
Registration Statement, the Amendment, any preliminary
prospectus, the prospectus, or any such amendment or
supplement, in reliance upon and in conformity with
information furnished to the Company by the Consultant. This
indemnity agreement will be in addition to any liability which
the Company may otherwise have.
B. Consultant will indemnify and hold harmless the Company, each
of its directors, each of its officers who has signed the
Registration Statement or the Amendment, and each person, if
any, who controls the Company within the meaning of the Act
against any losses, claims, damages or liabilities to which
the Company or any such other person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions, suits, or proceedings in respect
thereof) arise out of or are based upon any untrue statement
of any material fact contained in the Registration Statement,
the Amendment, any preliminary prospectus, the prospectus, or
any amendment or supplement thereto, or arise out of or are
based on the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading to the extent that such
untrue statement or omission is made or omitted in whole or in
part in reliance upon and in conformity with information
furnished to the Company by Consultant. Consultant will
reimburse any legal or
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other expenses reasonably incurred by the Company or any such
other person in connection with investigating or defending any
such loss, claim, damage, liability, or action, suit or
proceeding. This indemnity agreement will be in addition to
any liability which the Consultant may otherwise have.
C. Promptly after receipt by an indemnified party under this
Agreement of notice of the commencement of any action, suit or
proceeding, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this
Agreement, notify the indemnifying party of the commencement
thereof. In case any such action, suit or proceeding is
brought against any indemnified party, and it notified an
indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein,
and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party,
and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party under this Agreement for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable
costs of investigation.
8. Attorneys' Fees. In any action or proceeding to enforce this Option
or any rights hereunder, the prevailing party shall be entitled to its court
costs and reasonable attorneys' fees in such action or proceeding.
9. Notices. Any and all notices, offers, acceptances or other
communications provided for herein shall be in writing and shall be deemed to
have been sufficiently given when addressed to the party at its address set
forth below, and either hand delivered or deposited in the United States mail,
postage prepaid, by registered or certified mail, return receipt requested.
10. Governing Law. This Option shall be construed in accordance with
and governed by the laws of the State of Arizona.
11. Assignment. The Option may not be assigned by either party hereto
without the written consent of the other but shall be binding upon the
successors of the parties.
12. Entire Agreement. This Agreement contains the entire understanding
and agreement between the parties. There are no other agreements, conditions or
representations, oral or written, express or implied, with regard thereto. This
Agreement may be amended only by a written instrument signed by both parties.
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13. Miscellaneous. If any provision of this Agreement or application
thereof to any person or circumstance shall be deemed or held to be invalid,
illegal, or unenforceable to any extent, the remainder of this Agreement shall
not be affected and the application of such affected provision shall be enforced
to the greatest extent possible under law. A delay or failure by either party to
exercise a right under this Agreement, or a partial or single exercise of that
right, shall not constitute a waiver of that or any other right. The provisions
of this Agreement shall be binding upon the parties, their successors and
assigns.
14. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same agreement.
15. Further Documents. Each party hereby agrees to take such further
actions and execute such further documents as may be reasonably required and
necessary to effectuate the provisions hereof.
IN WITNESS WHEREOF, the parties have entered into this Option Agreement
as of the day and year first above written.
TEXAS CAPITAL SECURITIES
By: /s/ Xxxx XxXxxxxx
--------------------------
Name: Xxxx XxXxxxxx
------------------------
Title: Chief Operating Officer
-----------------------
Address:
0000 Xxxxxxxxxx #0000
Xxxxxxx, XX 00000
ILX INCORPORATED
By: /s/Xxxxxx X Xxxxxxx
--------------------------
Name: Xxxxxx X Xxxxxxx
------------------------
Title: Chairman
Address:
0000 Xxxx Xxxxxxxx Xxxxx 000
Xxxxxxx, XX 00000
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