Option Agreement

Option Agreement

                                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. 
                                       1

         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
                                        3

                  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 
                                       4

                  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.
                                        5

         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
                                        6

                  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/ Mike McGinnis
             --------------------------
         Name: Mike McGinnis
               ------------------------
         Title: Chief Operating Officer
                -----------------------

         Address:
         5085 Westheimer #4520
         Houston, TX 77056

ILX INCORPORATED

         By: /s/Joseph P Martori
             --------------------------
         Name: Joseph P Martori
               ------------------------
         Title: Chairman

         Address:
         2111 East Highland Suite 210
         Phoenix, AZ 85016
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