SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

ILX Incorporated
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.

1) Amount previously paid:

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ILX INCORPORATED

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JUNE 23, 1997

To the Shareholders of ILX Incorporated:

Notice is hereby given that the 1997 Annual Meeting of
Shareholders of ILX Incorporated, an Arizona corporation (the "Company"), will
be held at the Los Abrigados Resort & Spa, at 160 Portal Lane, Sedona, Arizona
86336 on the 23rd day of June, 1997 at 11:00 a.m., local time, to consider and
act upon the following proposals:

(a) To elect seven (7) directors to serve until the next annual
meeting of shareholders of the Company, or until their
successors are duly elected and qualified.

(b) To transact such other business as may properly come before
the meeting or any adjournment thereof.

The foregoing matters are more fully explained in the
accompanying Proxy Statement which is hereby made a part of this notice. All
common shareholders of record at the close of business on May 12, 1997, will be
entitled to vote at the meeting.

All shareholders are cordially invited to attend the meeting
in person. You are urged to sign, date and otherwise complete the enclosed proxy
card and return it promptly in the enclosed envelope whether or not you plan to
attend the meeting. If you attend the meeting, you may vote your shares in
person even if you have signed and returned your proxy card.

By order of the Board of Directors,

Stephanie D. Castronova
Secretary

Phoenix, Arizona
April 18, 1997

ILX INCORPORATED

2111 East Highland Avenue, Suite 210
Phoenix, Arizona 85016

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS

To Be Held on June 23, 1997

This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of ILX Incorporated, an
Arizona corporation (the "Company"), for use at the Company's 1997 Annual
Meeting of Shareholders (the "Meeting") to be held on June 23, 1997, at 11:00
a.m., local time, and at any and all adjournments and postponements of the
Meeting. The Meeting will be held at the Los Abrigados Resort & Spa at 160
Portal Lane, Sedona, Arizona 86336. This Proxy Statement and the accompanying
Form of Proxy will be first mailed to shareholders on or about May 19, 1997.

The holders of the Company's common stock of record at the
close of business May 12, 1997, are entitled to vote at the Meeting. A Form of
Proxy is enclosed for use at this meeting if you are unable to attend in person.
The persons named therein as proxies were selected by the Board of Directors of
the Company. The Proxy is solicited by the Board of Directors of the Company. If
a Proxy in the accompanying form is duly executed and returned, it will be voted
as specified therein. If no specification is made, it will be voted in
accordance with recommendations made by the Board of Directors. The Proxy may,
nevertheless, be revoked at any time prior to exercise by delivering written
notice of revocation to the Secretary of the Company or by attending the meeting
and voting in person.

The cost of preparing, assembling and mailing the Notice of
Annual Meeting, Proxy Statement and Form of Proxy and the cost of further
solicitation hereinafter referred to is to be borne by the Company and is
estimated to be nominal. In addition to the use of the mails, it may be
necessary to conduct some solicitation by telephone, telegraph or personal
interview. Any such solicitation will be done by the directors, officers and
regular employees of the Company; and, in addition, banks, brokerage houses and
other custodians, nominees or fiduciaries will be requested to forward proxy
soliciting material to their principals to obtain authorization for the
execution of proxies on their behalf. The Company will not pay such persons any
compensation for soliciting proxies, but such persons will be reimbursed by the
Company for their out-of-pocket expenses incurred in connection therewith.

SPIN-OFF OF SUBSIDIARY

Subject to Board of Director approval at the meeting
immediately following the Annual Meeting of Shareholders on June 23, 1997, it is
the Company's intention to spin-off the issued and outstanding shares of Sedona
Worldwide Incorporated and/or Red Rock Collection Incorporated ("SWW"). All
shareholders of record of ILX Common Stock as of the record date, May 12, 1997,
will receive a prorata share of the outstanding SWW shares. All convertible
preferred shareholders shall have a forty-five day period beginning May 12, 1997
to exchange their preferred shares for common shares. Conversions which occur
during this period will be treated as if they had occurred as of the record
date. Following the spin-off, SWW will be owned by the shareholders of ILX and
SWW will cease to be a wholly-owned subsidiary of the Company.

VOTING

At the close of business on March 31, 1997, the Company had
issued and outstanding 13,064,290 shares of common stock, each share being
entitled to one vote. No other voting class of stock was then or is now
outstanding.

The holders of the majority of the shares of the Company's
common stock outstanding on the record date and entitled to be voted at the
Meeting, whether present in person or by proxy, will constitute a quorum for the
transaction of business at the Meeting and any adjournments and postponements
thereof.

Shareholders have cumulative voting rights with respect to the
election of directors. With cumulative voting, a shareholder is entitled to cast
a number of votes equal to the number of shares held multiplied by the number of
directorships to be filled. A shareholder may cast the votes for one candidate
or distribute the votes among two or more candidates. Abstentions and broker
non-votes are counted for the purposes of determining the presence or absence of
a quorum for the transaction of business. Abstentions are counted in tabulation
of the votes cast on proposals presented to shareholders, whereas broker
non-votes are not counted for purposes of determining whether a proposal has
been approved. The seven nominees receiving the most votes shall be deemed
elected to the Company's Board of Directors.

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of March 31, 1997, certain
information regarding the beneficial ownership of the common stock of the
Company by each person who is known by the Company to own beneficially 5% or
more of the common stock:

Amount and
Nature of
Title Name and Address of Beneficial Percentage
of Class Beneficial Owner(1) Ownership of Class
- -------- ------------------- --------- --------

Common Edward J. Martori 5,283,086 (3) 40.44%
Common Joseph P. Martori 5,087,323 (2) (3) 38.94%
Common Martori Enterprises Incorporated 5,413,155 (4) 41.43%
Common Alan R. Mishkin 1,143,045 8.75%
Common All Executive Officers/Directors 6,105,972(5) 45.96% (5)(6)

(1) Unless otherwise indicated, the business address for all
listed shareholders is c/o the Company, 2111 East Highland
Avenue, Suite 210, Phoenix, Arizona 85016.

(2) Including 17,010 shares owned by Christina Ann Martori,
daughter of Joseph P. Martori, under trust dated February 20,
1978, 16,000 shares 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 trust dated January 30,
1976.

(3) Including 4,956,547 shares owned by Martori Enterprises
Incorporated and 707 shares owned by the Estate of Edward
Joseph Martori of which Edward J. Martori is beneficiary

and Joseph P. Martori is personal representative. Edward J.
Martori and Joseph P. Martori are cousins and are shareholders
in Martori Enterprises Incorporated.

(4) Including 325,832 shares of common stock owned by Edward J.
Martori, 130,069 shares owned by Joseph P. Martori [Note (2)],
707 shares owned by the Estate of Edward Joseph Martori [Note
(3)] and 4,956,547 owned by Martori Enterprises Incorporated.

(5) Shares deemed to be beneficially owned by more than one
officer and/or director were only counted once.

(6) Options for 222,500 shares held by directors and executive
officers are treated as exercised and are included in both the
numerator and the denominator.

The management of the Company is not aware of any change in
control of the Company that has taken place since the beginning of the last
fiscal year, nor of any contractual arrangements or pledges of securities the
operation of the terms of which may at a subsequent date result in a change in
control of the Company.

ELECTION OF DIRECTORS

The entire Board of Directors is to be elected annually, with
each director to hold office until the next annual meeting of shareholders or
until his successor is elected and qualified. The persons named as proxies in
the enclosed Proxy have been designated by the Board of Directors and they
intend to vote "FOR" the election to the Board of Directors of the persons named
below, except where authority is withheld by a shareholder.

Each of the nominees has consented to be named herein and to
serve if elected. However, if any nominee at the time of election is unable or
unwilling to serve as a director or is otherwise unavailable for election, the
shares represented by proxies will be voted for the election of such other
person as the Board of Directors may designate or, in the absence of such
designation, for a nominee selected by the proxy agents named in the enclosed
Form of Proxy.

Certain information concerning the director nominees as of
March 31, 1997, is set forth below. Except as set forth herein, none of the
nominees are officers or directors of any other publicly-owned corporation or
entity.
Director
Name Age Since
---- --- --------

Steven R. Chanen 43 1995
Edward J. Martori 44 1993
Joseph P. Martori 55 1986
James W. Myers 62 1995
Michael W. Stone 42 1996
Nancy J. Stone 39 1989
Edward S. Zielinski 45 1996

Steven R. Chanen has been a director of the Company since July
1995. Since 1987 he has been President and Chief Operating Officer of Chanen
Construction Company, Inc., an Arizona corporation.

Edward J. Martori has been a director of the Company since
December 1993. He has been employed as President of Martori Enterprises
Incorporated, a principal shareholder of the Company, since 1987. He is a cousin
of Joseph P. Martori.

Joseph P. Martori is a founder of the Company and has been a
director since its inception. He has been Chief Executive Officer since January
1994, Chairman of the Board of Directors since September 1991, and was President
from November 1993 through December 1995. From 1985 until January 1994, he was a
member of the Phoenix, Arizona law firm of Brown & Bain, P.A., where he was the
Chairman of the Corporate, Real Estate and Banking Department. Brown & Bain,
P.A. currently serves as legal counsel for the Company. He is a cousin of Edward
J. Martori.

James W. Myers has been a director of the Company since July
1995. Since January 1996, he has been President and founder of Myers Management
and Capital Group, an Arizona based company engaged in management consulting and
financial advisory services. From 1986 to December 1995 he was President and CEO
of Myers Craig Vallone Francoise, Inc., an Arizona corporation engaged in
investment banking and management consulting. He also serves as a director for
the following publicly held companies: National Health Enhancement Systems,
Royal Grip, Inc. and Bowmar Instruments.

Michael W. Stone has been a director of the Company since
July 1996, Vice Chairman of Sedona Worldwide Incorporated since February 1997
and was President of Red Rock Collection Incorporated from July 1993 to February
1997. From 1992 to 1993, he was Vice President of S.L. Cooper and Associates, a
Virginia based company, engaged in the distribution of filing and material
handling equipment, and was responsible for new product development and
introduction, distribution and sales. From 1987 to 1992, he was National Sales
Manager of Richards-Wilcox, an Aurora, Illinois division of White Consolidated
Industries, engaged in manufacturing and sales of office and material handling
equipment. Mr. Stone is the husband of Nancy J. Stone.

Nancy J. Stone has been a director of the Company since April
1989, Executive Vice President and Chief Financial Officer from July 1993 to
December 1995, and President and Chief Financial Officer of the Company since
January 1996 as well as from January 1990 until April 1992. From 1992 until June
1993, she was on the faculty of North Central College in Naperville, Illinois.
From April 1987 until December 1989, she served as the Company's Vice President
of Finance and Secretary. She is certified as a public accountant in the States
of Arizona and Illinois. Ms. Stone is the wife of Michael W. Stone.

Edward S. Zielinski has been a director of the Company since
July 1996, President and Chief Executive Officer of Varsity Clubs of America
Incorporated since July 1996 and Executive Vice President since January 1996. He
was General Manager of Los Abrigados Resort & Spa from December 1992 to June
1996 and was Senior Vice President from January 1994 to December 1995, Vice
President from December 1992 until January 1994, and Executive Assistant Manager
of Los Abrigados Resort & Spa from November 1988 until November 1992.

Board of Directors and Committee Meetings

The Board of Directors of the Company met two times during the
fiscal year ending December 31, 1996. All incumbent directors attended each of
the meetings of the Board of Directors, during the period they were directors,
and the Committees, if any, upon which such director served

during the 1996 fiscal year, except for Steven R. Chanen and Ronald D. Nitzberg,
who each missed one meeting.

The Company's Board of Directors maintains an Audit and
Finance Committee, a Stock Option Committee, a Compensation Committee and an
Executive Committee. There is no nominating committee or any committee
performing that function.

Audit and Finance Committee

The Audit and Finance Committee was comprised in 1996 of Mr.
Ronald D. Nitzberg and Ms. Nancy J. Stone. The Audit and Finance Committee met
once during fiscal year 1996. The functions of the Audit and Finance Committee
are to make recommendations to the Board of Directors as to the selection of the
firm of independent public accountants, review the results of the audit for each
fiscal year, and oversee the Company's policies concerning any sensitive
payments or conflicts of interest.

Stock Option Committee

The Stock Option Committee was comprised in 1996 of Messrs.
Joseph P. Martori, Edward J. Martori and Ronald D. Nitzberg. The Committee met
once during fiscal year 1996. The function of the Committee is to provide
recommendations to the Board of Directors regarding the granting of stock
options to key employees and directors of the Company.

Compensation Committee

The Compensation Committee was comprised in 1996 of Mr.
Edward J. Martori and Ms. Nancy J. Stone. The Committee met once during fiscal
year 1996. The function of the Committee is to provide recommendations to the
Board of Directors regarding compensation changes for executive officers of the
Company and regarding compensation policies and practices of the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a summary of transactions entered into on
behalf of the Company or its subsidiaries since January 1, 1996, in which the
amount involved exceeded $60,000 and in which officers, directors, nominees
and/or greater than 5% beneficial owners of the Company's common stock (or any
immediate family members of the foregoing) had, or will have, a direct or
indirect material interest.

On September 9, 1991, the Company entered into a guarantee fee
agreement with Arthur J. Martori, then an affiliate, and Alan R. Mishkin, who
guaranteed a loan to Los Abrigados Partners Limited Partnership ("LAP") in the
amount of $5,000,000 from The Valley National Bank of Arizona. The affiliates
earned a guarantee fee of $780,000, payable quarterly at the rate of $100 for
each Los Abrigados timeshare interest sold. During 1996, LAP paid $156,650
related to this fee, inclusive of the $60,000 and $22,250 payments described
below. The guarantee fee obligation was further reduced by $32,000 in 1996 in
exchange for office space provided by the Company to Alan R. Mishkin. Also, in
conjunction with the September 9, 1991 transaction, the affiliates were assigned
$185,000 of amounts held back by financial institutions as collateral on the
sale of consumer notes receivable. During 1996, the Company paid $12,820 related
to these holdbacks, inclusive of the $4,410 payment described below. Effective
November 11, 1993, Martori Enterprises Incorporated acquired all of Arthur J.
Martori's interest in ILX and its subsidiaries, including his interests in
guarantee fees and holdbacks, and his interests in notes receivable, described
below. Joseph P. Martori and Edward J. Martori are shareholders

of Martori Enterprises Incorporated. In December 1995, Martori Enterprises
Incorporated agreed to accept as payment $60,000 cash and $100,000 in a
promissory note bearing interest at 10%, interest payable quarterly, principal
due in full in December 1999, in full satisfaction of a remaining obligation
(following payment of $22,250 in guarantee fees and $4,410 in holdbacks in
January 1996) of $173,225 in guarantee fees and $44,073 in holdbacks. Interest
of $7,507 relating to the promissory note was paid in 1996.

Certain affiliates of the Company held a 6% interest in LAP as
Class A limited partners (Edward J. Martori 5%, Martori Enterprises Incorporated
.5%, Wedbush Morgan Securities IRA for Joseph P. Martori .25% and Joseph P.
Martori, Trustee .25%). Class A partners Edward J. Martori and Martori
Enterprises Incorporated were entitled to receive a 13.5% preferred return and
Class A partners Joseph P. Martori as Trustee and Wedbush Morgan Securities for
the benefit of Joseph P. Martori were entitled to receive a 22% preferred
return. In October 1994, the Company acquired all of the Class A partnership
interests in LAP for $1,587,000, effective July 1, 1994. The interests held by
Martori Enterprises Incorporated, Edward J. Martori, Joseph P. Martori as
Trustee and Wedbush Morgan Securities for the benefit of Joseph P. Martori were
acquired in exchange for notes totaling $1,215,750 and cash of $6,000. During
fiscal year 1996, $18,790 in principal and $73,304 in interest payments were
made on the notes to the former affiliated Class A partners. In December 1995,
the terms of the note to Edward J. Martori were modified, to be effective in
January 1996. The new terms extend the maturity date, and allow the holder at
maturity (1999) to exchange the note balance for shares of ILX common stock at
$2 per share, provided the exercise does not cause Edward J. Martori's
ownership, direct or indirect, of the Company to exceed 50%.

Martori Enterprises Incorporated and Alan R. Mishkin hold a
21.5% interest in LAP as Class B limited partners. The Class B Partners are
entitled to 13.5% interest on their original Class B LAP capital contributions
of $250,000 each. During fiscal year 1996, interest payments of $67,685 were
made to the Class B partners. In February 1996, the LAP Partnership Agreement
was amended to provide the Class B Partners, pro rata, a $200 capital
distribution per Los Abrigados timeshare week sold commencing October 1996, in
addition to requiring certain capital distributions previously provided for in
the Partnership Agreement. Distributions of $260,000 to Martori Enterprises
Incorporated and $460,000 to Alan R. Mishkin were made in 1996.

The Company leased from affiliates 41 timeshare interests in
the Stonehouse at Los Abrigados Resort & Spa under a September 1, 1991 license
agreement which provided for a payment of $250 per calendar quarter per
Stonehouse interval for the five year period October 1, 1991 through September
30, 1996. During 1996, lease payments totaling $18,750 were made to Martori
Enterprises Incorporated and Alan R. Mishkin.

On September 10, 1991, the Company entered into a management
agreement with LAP whereby the Company was appointed the exclusive managing and
operating agent for the resort and for the timeshare sales office located at the
resort. The Company was also appointed as the exclusive agent for the marketing
of timeshare interests of LAP. The agreement provides for fees of $25,000 per
month for a term of five years with automatically renewable five-year terms.
Management fees in the amount of $300,000 were earned by the Company during the
1996 fiscal year.

In August 1992, the Company issued to Martori Enterprises
Incorporated, as agent for Edward J. Martori, Martori Enterprises Incorporated,
Arthur J. Martori and Alan R. Mishkin, a $770,000 promissory note bearing
interest at 14%, collateralized by $810,630 in notes receivable. The promissory
note was issued to reduce Class A limited partners' capital contributions by
$500,000, Class A priority

returns by $149,954, Class B accrued interest by $73,772 and loan guarantee fees
by $46,274. Principal payments of $138,009 and interest payments of $29,274 were
made during the 1996 fiscal year.

In February 1994, the Company acquired the minority interests
in Red Rock Collection Incorporated, an Arizona corporation ("RRC"), held by
Alan R. Mishkin and Martori Enterprises Incorporated for consideration of
123,000 shares of restricted ILX common stock and $300,000 in promissory notes
which bore interest at 10% and were payable over a thirty-six month period. The
note to Martori Enterprises Incorporated was satisfied in 1995. During fiscal
year 1996, principal payments of $63,826 and interest payments of $1,888 were
made to Alan R. Mishkin in full satisfaction of the note.

In September 1994, the Company, through Genesis Investment
Group, Inc., assumed from Martori Enterprises Incorporated an existing option
agreement between Martori Enterprises Incorporated and a non-affiliated company
which owned 667 weeks at Los Abrigados Resort & Spa. The option agreement
provides that the Company must, if requested, purchase at $2,100 per interval,
25 intervals per month commencing July 1994, and one-half of the intervals
remaining on an annual basis. The agreement also provides the Company the right
to acquire the intervals for $2,100 each, commencing July 1995. During 1996, 125
intervals were acquired by the Company for $262,500.

In July 1995, the Company borrowed $900,000 from Edward J.
Martori and from Joseph P. Martori as Trustee for Cynthia J. Polich (Cynthia J.
Polich is not an affiliate). The note bore interest at 13.5%, was collateralized
by 320 timeshare interests in Los Abrigados Resort & Spa, and had a maturity
date of July 1998. In December 1995, the terms were modified to extend the
maturity date to December 31, 1999, to reduce the interest rate to 10%, to
reduce the collateral by 100 timeshare interests, to separate the note into two
separate notes, one in the amount of $350,000 and the other in the amount of
$550,000, and to provide, at the holder's option, the ability to convert all or
a portion of the note balance at maturity into ILX common stock at a price of
$2.00 per share, provided, in the case of Edward J. Martori, that the exercise
does not cause his ownership, direct or indirect, of the Company to exceed 50%.
Also in December 1995, the principal balance on the $550,000 note was reduced to
$230,000 as a result of the purchase by Edward J. Martori of the Red Rock
Collection building further described below. Principal payments of $150,000 and
interest payments of $45,360 were made on the notes during fiscal year 1996.

In December 1995, the Company sold the Red Rock Collection
building to Edward J. Martori for $500,000, payable by reduction in an existing
note of $320,000 in December 1995 and payment of the $180,000 mortgage on the
building in January 1996. Red Rock Collection has leased back the building for a
monthly rental of $4,000 through December 1997, and has the option to renew the
lease for three additional one year periods.

In September 1996, the Company purchased from Martori
Enterprises Incorporated 20 timeshare intervals in the Stonehouse at Los
Abrigados Resort & Spa for $260,000. Subsequently, Martori Enterprises
Incorporated purchased 52 timeshare intervals in Kohl's Ranch Lodge for
$260,000.

The above-described transactions are believed to be on terms
no less favorable to the Company than those available in arms' length
transactions with unaffiliated third parties. Each transaction has been approved
by independent directors of the Company who are not parties to the transaction.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth certain information as to the
securities of the Company beneficially owned at March 31, 1997, by (i) each
director and nominee, (ii) each named executive officer and (iii) all directors
and executive officers as a group.

Amount and Nature of Beneficial Percentage
Title of Class Name of Beneficial Owner Ownership of Common Shares of Class
-------------- ------------------------ -------------------------- --------

Common Edward J. Martori 5,283,086 (1) 40.44%
Common Joseph P. Martori 5,087,323 (1)(2) 38.94%
Common Nancy J. Stone 377,086 (4)(5) 2.86%(13)
Common Michael W. Stone 377,086 (6) 2.86%(13)
Common Ronald D. Nitzberg 213,031 (11) 1.63%(13)
Common Edward S. Zielinski 56,600 (7) *(13)
Common James W. Myers 37,000 (8) *(13)
Common Steven R. Chanen 25,000 (8) *(13)
Common George C. Wallach 101,000 (3) *(13)
Common Samuel L. Ciatu 21,000 (9) *(13)
Common Donald D. Denton 12,100 (9)(10) *(13)
Common Alfred R. Francoeur 0 *
Common Directors and Officers as a group 6,105,972 (12) 45.96%(12)(13)
(12 persons)

* Less than 1%.
(1) Including 4,956,547 shares owned by Martori Enterprises Incorporated and
707 shares owned by the Estate of Edward Joseph Martori of which Edward
J. Martori is beneficiary and Joseph P. Martori is personal
representative. Edward J. Martori is a shareholder in Martori Enterprises
Incorporated and a cousin of Joseph P. Martori.
(2) Including 17,010 shares owned by Christina Ann Martori, daughter of
Joseph P. Martori, under trust dated February 20, 1978, 16,000 shares
held by Joseph P. Martori as custodian for his daughter, Arianne Terres
Martori, and 1059 shares held by Joseph P. Martori as trustee under trust
dated January 30, 1976
(3) Including options to purchase 100,000 shares from Martori Enterprises
Incorporated at $1.625 per share.
(4) Including options to purchase 25,000 shares from the Company and 50,000
shares from Martori Enterprises Incorporated at $1.625 per share.
(5) Including 10,000 shares and options to purchase 87,500 shares from the
Company at $1.625 per share held by her husband, Michael W. Stone.
(6) Including 10,000 shares held directly, options to purchase 87,500 shares
from the Company at $1.625 per share and shares held beneficially by his
wife, Nancy J. Stone.
(7) Including options to purchase 30,000 shares from the Company at $1.625
per share, 500 shares held by his wife, Nancy Zielinski, and 1,000 shares
held by Edward S. Zielinski as Custodian for his son, Stefan Edward
Zielinski.
(8) Including options to purchase 25,000 shares from the Company at $1.50 per
share.
(9) Including options to purchase 5,000 shares from the Company at $1.625 per
share.
(10) Including 100 shares held by his wife, Linda Denton.
(11) Including options to purchase 20,000 shares from the Company at $1.625
per share.
(12) Shares deemed to be beneficially owned by more than one officer and/or
director were only counted once.
(13) Options held by directors and officers are treated as exercised and are
included in both the numerator and denominator.

EXECUTIVE MANAGEMENT

The following table sets forth certain information concerning
the Company's executive officers. None of the executive officers are directors
or officers of any other publicly owned corporation or entity.

Name Age Position/Term
- ---- --- -------------

Joseph P. Martori 55 Chairman of the Board September 1991 to Present, President
November 1993 to December 1995.

Nancy J. Stone 39 President January 1996 to Present, Executive Vice President July 1993
to December 1995.

Edward S. Zielinski 45 Executive Vice President January 1996 to Present, President and Chief
Executive Officer of Varsity Clubs of America Incorporated July 1996
to present, Senior Vice President January 1994 to December 1995, Vice
President December 1992 to December 1993.

Michael W. Stone 42 Vice Chairman of Sedona Worldwide Incorporated February 1997 to
Present, President of Red Rock Collection Incorporated July 1993 to
February 1997.

Alfred R. Francoeur 55 President and Chief Operating Officer of Sedona
Worldwide Incorporated February 1997 to Present.

Samuel L. Ciatu 41 Senior Vice President January 1996 to Present, Vice President
December 1993 to December 1995.

Donald D. Denton 36 Senior Vice President January 1996 to Present.

George C. Wallach 60 Senior Vice President January 1996 to Present, Executive Vice
President February 1995 to December 1995.

Joseph P. Martori is a founder of the Company and has been a
director since its inception. He has been Chief Executive Officer since January
1994, Chairman of the Board of Directors since September 1991, and President
from November 1993 to December 1995. From 1985 until January 1994, he was a
member of the Phoenix, Arizona law firm of Brown & Bain, P.A., where he was the
Chairman of the Corporate, Real Estate and Banking Department. Brown & Bain,
P.A. currently serves as legal counsel for the Company.

from December 1992 until January 1994, and Executive Assistant Manager of Los
Abrigados Resort & Spa from November 1988 until November 1992.

Michael W. Stone has been a director of the Company since July
1996, Vice Chairman of Sedona Worldwide Incorporated since February 1997, and
President of Red Rock Collection Incorporated from July 1993 until February
1997. From 1992 to 1993, he was Vice President of S.L. Cooper and Associates, a
Virginia based company, engaged in distribution of filing and material handling
equipment, and was responsible for new product development and introduction,
distribution and sales. From 1987 to 1992, he was National Sales Manager of
Richards-Wilcox, an Aurora, Illinois division of White Consolidated Industries,
engaged in manufacturing and sales of office and material handling equipment.
Mr. Stone is the husband of Nancy J. Stone, a director of the Company and
President and Chief Financial Officer of ILX Incorporated.

Alfred R. Francoeur has been President and Chief Operating
Officer of Sedona Worldwide Incorporated since February 1997. From 1995 to 1996,
he was Director of Marketing and Communications for Newpro, Inc., a direct
marketer of home improvements based in Massachusetts. From 1993 to 1995, he was
Director of International Marketing and Chief Operating Officer for Trans
National Group's Ambassador Vacation Club, a Boston-based vacation club
marketer. From 1973 to 1993, he was President and Creative Director of Signal
Advertising in Manchester, New Hampshire, a full service advertising agency
which he founded.

Samuel L. Ciatu has been Senior Vice President since January
1996, and Vice President from December 1993 to December 1995. From November 1990
to October 1993 he was Director of Marketing for Rawhide Operating Company,
Inc., an Arizona corporation which operates Rawhide, the western-theme
attraction in Scottsdale, Arizona.

Donald D. Denton has been Senior Vice President since January
1996 and Timeshare Sales Manager at Los Abrigados Resort & Spa since February
1993. From January 1990 to January 1993, he was Timeshare General Sales Manager
of Success Marketing, an Arizona company engaged in timeshare sales.

George C. Wallach has been Senior Vice President since January
1996 and was Executive Vice President from February 1995 until December 1995.
From February 1986 until January 1995, he was a member and director of the
Phoenix, Arizona law firm of Brown and Bain, P.A., specializing in real estate
and business transactions.

COMPENSATION OF EXECUTIVE OFFICERS

The following table shows, for the fiscal years ended December
31, 1994, 1995, and 1996, the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to each of the
Company's Chief Executive Officer and other most highly compensated executive
officers receiving compensation in excess of $100,000 in all capacities in which
they serve.

SUMMARY COMPENSATION TABLE

Long Term
Compensation All Other
Annual Compensation Awards Compensation(2)
------------------- --------------------- ---------------
Securities Underlying
Year Salary Bonus Stock Options (#)
---- ------ ----- -----------------

Joseph P. Martori
Chairman and Chief 1996 $136,500 $20,000 - -
Executive Officer 1995 $204,877 - - -
1994 $204,875 - - -

Nancy J. Stone
President 1996 $115,193 $17,500 - -
1995 $125,489 1,953(3) - -
1994 $ 95,646 - 25,000(1) -

Edward S. Zielinski
Executive Vice 1996 $110,388 $19,968(6) - -
President 1995 $ 90,837 $ 1,953(3) - -
1994 $ 76,789 $10,000 30,000 -
Donald D. Denton
Senior Vice President 1996 $ 36,000 $184,246(4) - -
1995 $ 36,000 $135,311(4)(5) - -
1994 $ 36,000 $151,777(4) 5,000 -

Luis C. Acosta (7)
President of Varsity 1996 $ 90,613 $33,365(8) - -
Clubs of America 1995 $125,000 - - -
Incorporated 1994 $114,231 - - -

(1) Excludes options to purchase 50,000 shares from Martori Enterprises
Incorporated for $1.625 per share.
(2) Excludes Profit Sharing Plan contributions on behalf of the executive
officer. During 1994 the Company adopted a Profit Sharing Plan and has
since declared 1994, 1995 and 1996 contributions. No executive officer
was allocated more than $3,800 and $4,000 for the 1994 and 1995 plan
years, respectively. The allocation of the 1996 contribution among
participants has not yet been made. No executive officer is expected to
be allocated more than $4,400 for the 1996 plan year.
(3) Represents 2,500 shares of restricted ILX common stock at $.78125 per
share.
(4) Including commissions on sales of timeshare interests.
(5) Including $1,563 representing 2,000 shares of restricted ILX Common
Stock at $.78125 per share.
(6) Including $3,750 representing 5,000 shares of restricted ILX Common
Stock at $.75 per share.
(7) Luis C. Acosta terminated employment with the Company on October 23,
1996.
(8) Includes bonus paid in 1996 based on services provided in 1995 in the
amount of $10,000 cash, 15,000 shares of unregistered ILX common stock
at $9,375 and $13,990 cancellation of indebtedness.

OPTION GRANTS IN THE LAST FISCAL YEAR

No stock options or stock appreciation rights were granted to
named executive officers or to other employees in 1996.

OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END
OPTION VALUES

The following table sets forth information regarding option
exercises by named executive officers during 1996 and unexercised options held
by named executive officers at December 31, 1996.

Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End ($)
------------ ------------
Shares
Acquired on Value Exercisable (E) Exercisable (E)
Name Exercise (#) Realized ($) Unexercisable (U) Unexercisable (U)
- -------------------- --------------- ------------------- ---------------------- -------------------

Nancy J. Stone 0 $0 25,000(E)(1) $0
0(U) $0
Donald D. Denton 0 $0 5,000(E) $0
0(U) $0
Edward S. Zielinski 0 $0 30,000(E) $0
0(U) $0

(1) Excludes options of Michael W. Stone, her husband, to purchase 87,500
shares at $1.625 per share. Such options were not in-the-money at
December 31, 1996.

OTHER COMPENSATION

The Company's policy is to pay a fee per Board of Directors
meeting attended by directors who are not employees of the Company, and
reimburse all directors for actual expenses incurred in connection with
attending meetings of the Board of Directors. The fee per Board of Directors
meeting attended by a non-employee director is $1,000.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors has
furnished the following report on executive compensation:

It is the Company's policy to compensate its executives in a manner
which aligns their interests with the long-term interests of the
Company's shareholders. Through its compensation policies the Company
also seeks to attract and retain senior executives and reward
executives for their collective and individual contribution to the
leadership and

short-term and long-term growth and profitability of the Company. The
Company compensates its executives through a mixture of base salary,
discretionary bonuses, and discretionary stock and stock option grants.
The principal component of executive compensation to date has been base
salary and, in the case of the executive responsible for timeshare
sales, commission.

Base Salary. Each executive of the Company receives a base salary which
-----------
is intended to be competitive with similarly situated executives in
companies of a similar size and nature. In setting base salaries for
1996, the Compensation Committee considered the executive's position
relative to other executives, overall responsibility, the achievement
of past performance objectives, and compensation information gleaned
informally with respect to similar companies.

In 1994, the salary of the Company's Chief Executive Officer was set
through negotiations with the Board of Directors at an annual rate of
$200,000 plus annual cost of living increases. Accordingly, in November
1995, Mr. Martori's salary was increased to $215,000. For 1996, Mr.
Martori elected to decrease his salary to $135,000. Effective January
1, 1997, it has been increased to $150,000, and discretionary bonuses
of up to $50,000 may be earned and paid in 1997. Mr. Martori's future
salary will be subject to review by and negotiation with the Company's
Board of Directors based upon achievement of subjective and objective
performance factors, with the final salary determination to reflect a
subjective judgment of the Board of Directors.

Discretionary Options. From time to time, the Company has granted stock
---------------------
options to executives to recognize significant performance and to
encourage them to take an equity stake in the Company. In making past
option awards, the Compensation Committee has reviewed the overall
performance of the executives and the Company has awarded options on a
discretionary basis, based upon a largely subjective determination. No
stock options were granted to executive officers during 1996.

Bonuses. From time to time, the Company has granted bonuses either in
-------
cash or stock, or both to executive officers who, in the discretion of
the Company's Compensation Committee, have performed in a manner
meriting recognition above and beyond their base salary.

The Company has established a program for its President and certain
other executive officers whereby they may be granted shares of stock
based on achievement of certain performance criteria. In 1997, 37,500
shares of unregistered stock and 37,500 shares of freely trading stock
have been issued under the program to the President for 1996 and early
1997 performance. Also in 1997, 17,500 freely trading shares have been
issued to the President of Varsity Clubs of America Incorporated. A
similar program is in place for 1997 and early 1998, under which a
comparable number of shares will, if earned, be issued in 1998 to these
officers.

The Company has established a plan for the Senior Vice President
responsible for Kohl's Ranch Lodge timeshare and resort operations
whereby the executive will be granted, on an annual basis, a bonus
equal to ten percent of the net income, subject to direct and indirect
charges, of Kohl's Ranch Lodge. Prior year (cumulative) losses are
offset against cumulative net income in determining the bonus payable.

The Compensation Committee is contemplating the use of similar
performance-based bonuses for other executives. Such bonuses are likely
to be paid in unregistered shares of the Company's common stock.

Profit Sharing Plan. In 1994, the Company adopted a Profit Sharing Plan
-------------------
for the benefit of all employees, including executive officers. A
contribution of $90,000 was declared for the 1996 fiscal year and will
be funded in 1997. Allocation among the participants of the amount to
be contributed has not yet occurred. The allocation is not expected to
exceed $4,400 for any executive officer.

Stock Option Plans
------------------
The Company has adopted 1987, 1992 and 1995 Stock Option Plans pursuant
to which options (which terms as used herein includes both incentive
stock options and non-statutory stock options) may be granted to key
employees, including executive officers, directors and consultants, who
are determined by the Stock Option Committee to have contributed in the
past, or who may be expected to contribute materially in the future, to
the success of the Company. The exercise price of the options granted
pursuant to the Plan shall be not less than the fair market value of
the shares on the date of grant and employee and director holders must
be employees or directors of the Company for at least one year before
exercising the option. Options are exercisable over a five year period
from date of grant if the optionee was a ten percent or more
shareholder immediately prior to the granting of the option and over a
ten-year period if the optionee was not a ten percent shareholder. No
options were granted to executive officers or other employees during
fiscal year 1996.

Compliance with Section 162(m) of Internal Revenue Code. Section 162(m)
-------------------------------------------------------
of the Internal Revenue Code of 1986, as amended ("Tax Code"), limits
the corporate deduction for compensation paid to the named executive
officers identified in the Company's proxy statement to $1,000,000 per
year, unless certain requirements are met. The Compensation Committee
has reviewed the impact of the Tax Code provision on the current
compensation package for executives. No executives will exceed the
applicable limit. The Compensation Committee will continue to review
the impact of this Tax Code Section and make appropriate
recommendations to shareholders in the future.

Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

Mr. Joseph P. Martori is a member of the Stock Option Committee and Ms.
Nancy J. Stone is a member of the Compensation Committee. Mr. Martori
and Ms. Stone are officers of the Company.

Phoenix, Arizona
April 18, 1997 Edward J. Martori
Nancy J. Stone

COMPARISON OF CUMULATIVE TOTAL RETURN AMONG THE COMPANY, NASDAQ
MARKET INDEX AND SIC CODE INDEX

The data below compares the cumulative total return, assuming
reinvestment of dividends, of the Company's common stock with the NASDAQ
National Market Index and the SIC Code 701 Index (hotels and motels) from
January 1, 1992 to December 31, 1996. The Company has selected SIC Code 701
based on its belief that it is the most applicable comparison, based upon the
absence of data regarding publicly owned timeshare companies which derive
substantial revenues from hotel/motel operations.

Comparison of Five Year Cumulative Total Return
among investments in the Company's Common Stock, the
NASDAQ National Market Index and the SIC Code 701 Index

Company 1991 1992 1993 1994 1995 1996
- ------- ---- ---- ---- ---- ---- ----

ILX Incorporated 100.00 110.00 245.01 180.00 230.00 160.00

Industry Index 100.00 142.61 278.62 244.50 253.94 307.87

Broad Market 100.00 100.98 121.13 127.17 164.96 204.98

INDEPENDENT PUBLIC ACCOUNTANTS

At the determination of the Board of Directors, the accounting
firm of Deloitte & Touche LLP, certified public accountants, has served as the
Company's auditors for the fiscal years ending December 31, 1990 through
December 31, 1996. The Board of Directors has not yet selected independent
accountants for the fiscal year ending December 31, 1997.

FINANCIAL INFORMATION

The Company's financial statements and management's discussion
and analysis of the Company's financial condition and results of operation are
set forth in the Company's Annual Report, which is hereby incorporated by
reference. An Annual Report will be mailed to all common shareholders of record
at the close of business on May 12, 1997, concurrently with the mailing of this
Proxy Statement. Upon the written request of any shareholder, the Company will
provide to such shareholder, without charge, a copy of the Company's Annual
Report for the year ended December 31, 1996, without exhibits, as filed with the
Securities and Exchange Commission. Such requests should be directed in writing
to the Company at 2111 East Highland Avenue, Suite 210, Phoenix, Arizona 85016,
Attention: Secretary.

STOCKHOLDER PROPOSALS

In order for proposals to be considered for inclusion in the
Proxy Statement and Proxy for the 1998 Annual Meeting of Shareholders, such
proposals must have been received by the Secretary of the Company no later than
January 21, 1998, and must comply with certain rules and regulations promulgated
by the Securities and Exchange Commission.

OTHER MATTERS

The Company knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, it is the
intention of the persons named on the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten percent
of the Company's common stock are required to report their initial ownership of
the Company's common stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Based solely upon the written
representations of the Company's directors, executive officers and ten percent
holders and review of Forms 3, 4, and 5 and amendments thereto furnished to the
Company, the Company is aware of the following late filings for the year ended
December 31, 1996:

Total
Number of Late Transactions
Individual Reports Covered
- ---------- ------- -------

Alan R. Mishkin 5 21

As of the date of this Proxy Statement, to the Company's
knowledge, Alan R. Mishkin has not yet made the appropriate Form 5 filing.

Phoenix, Arizona
April 18, 1997 The Board of Directors

ILX Incorporated
2111 East Highland Avenue, Suite 210
Phoenix, Arizona 85016

PROXY
This Proxy is solicited on Behalf of the Board of Directors

The undersigned hereby appoints Joseph P. Martori and Nancy J.
Stone as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
Common Stock of ILX Incorporated held of record by the undersigned on May 12,
1997, at the Annual Meeting of Shareholders to be held June 23, 1997, or any
adjournment thereof.

1. ELECTION OF DIRECTORS
FOR all nominees listed below (except as marked below)
------

WITHHOLD AUTHORITY to vote for all nominees
------

NOMINEES FOR TERM ENDING IN 1998: Steven R. Chanen, Edward J. Martori,
Joseph P. Martori, James W. Myers, Michael W. Stone, Nancy J. Stone,
Edward S. Zielinski.

INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name above.

2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.

FOR AGAINST ABSTAIN
------ ------ ------

When properly executed, this Proxy will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted for Proposal 1 and in the proxies' discretion on matters arising under 2.

Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

---------------------------------------
Signature

---------------------------------------
Signature if held jointly

DATED April 18, 1997