January 7, 1997
Gentlemen:
Texas Capital Securities will act as nonexclusive financial advisor to
ILX Incorporated, an Arizona corporation, and its subsidiaries and affiliates
(the "Company"). Texas Capital Securities will assist the Company in identifying
potential partners and/or sources of capital, and in analyzing, structuring,
negotiating and effecting a business combination and/or common ventures with
partners, on terms and conditions of this letter. Texas Capital's fees as
described below, shall be payable whether or not all of these activities are
required to be performed in connection with a business combination and/or a
common venture.
In this regard, Texas Capital Securities proposes to undertake certain
activities on the Company's behalf, including the following:
(1) developing with the Company's wholly-owned subsidiary, Red
Rock Collection Incorporated, a business plan to eventually go
public;
(2) advising the Company as to structure, form and valuation of
proposed business combinations and common ventures and
financing;
(3) counseling with the Company as to strategy and tactics for
initiating discussions and negotiating with the prospective
partners and/or sources of capital, and, if requested by the
Company, participating in such negotiations and discussions;
(4) assuming an agreement in principle is reached for a definitive
business combination and/or financing, assisting the Company
in negotiating a definitive acquisition agreement and/or
letter of intent; and
(5) rendering such other financial advisory services as may from
time to time be agreed upon by Texas Capital Securities and
the Company.
The Company agrees to grant to Texas Capital Securities an option to
purchase 500,000 shares of common stock of the Company, pursuant to a mutually
agreeable Option Agreement, which will be registered with the S.E.C. and,
thereafter, shall be free trading shares currently traded on the NASDAQ Stock
Exchange. Upon option exercise, the shares payable to Texas Capital shall be
delivered to 5085 Westheimer #4520, Houston, Texas 77056.
In addition to any fees that may be payable to Texas Capital under this
letter, the Company agrees to reimburse Texas Capital, upon request made from
time to time, for its actual out-of-pocket expenses, including reasonable legal
and other professional expenses incurred after the date hereof in connection
with Texas Capital's activities under this letter. Texas Capital will obtain the
Company's consent in writing before incurring any out-of-pocket expenses in
excess of $500.
The Company will furnish Texas Capital with such information as the
Company and Texas Capital believe appropriate to the assignments contemplated
hereunder (all such information so furnished being the "Information"). The
Company recognizes and confirms that Texas Capital (a) will use and rely
primarily on the Information and on information available from generally
recognized public sources in performing the services contemplated by this letter
without independently verifying the same, (b) does not assume responsibility for
the accuracy or completeness of the Information and such other information, and
(c) will not make an appraisal of any assets of the Company, or any prospective
partner.
Texas Capital's engagement hereunder shall be for the initial term of
one year commencing upon the date hereof, subject to extension beyond such
initial one (1) year term on a month-to-month basis at the option of the
Company, it being understood that the provisions relating to the payment of fees
and expenses (to the extent such expenses are incurred prior to termination) and
any right of first refusal with respect to future financing will survive the
termination of Texas Capital's engagement for any reason whatsoever.
Please confirm that the following foregoing correctly sets forth our
agreement by signing and returning to Texas Capital Securities the duplicate
copy of this letter enclosed herewith.
Very truly yours,
Texas Capital Securities
By:/s/ Mike McGinnis
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Name: Mike McGinnis
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Title: Chief Operating Officer
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Accepted and Agreed to as of the date
first written above:
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ILX Incorporated
By: /s/Joseph P Martori
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Name: Joseph P Martori
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Title: Chairman
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