INLAND ENTERTAINMENT CORP, DEF 14A, 1998-10-27

INLAND ENTERTAINMENT CORP
DEF 14A, 1998-10-27
MISCELLANEOUS AMUSEMENT & RECREATION

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<PAGE> 1
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 Section 240.14a-11(c) or Section 240.14a-12

INLAND ENTERTAINMENT CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:

----------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2

INLAND ENTERTAINMENT CORPORATION
16868 VIA DEL CAMPO COURT, SUITE 200
SAN DIEGO, CALIFORNIA 92127

------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

------------------------

You are invited to attend the Annual Meeting of Shareholders of Inland
Entertainment Corporation (the "Company") to be held at 10:00 A.M., California
time, on Friday, December 11, 1998, at the executive offices of the Company,
located at 16868 Via Del Campo Court, Suite 200, San Diego, California 92127,
for the following purposes as more fully described in the accompanying Proxy
Statement:

1. To elect eight directors to the Board of Directors to hold office
for a term of one year and until their respective successors are elected
and qualified.

2. To approve an amendment to the Company's 1995 Stock Option Plan to
increase the number of shares of common stock available for issuance
thereunder by 3,000,000.

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

The Board of Directors nominates Richard T. Harrison, Thomas G. Holmes,
Andrew B. Laub, Jana McKeag, G. Fritz Opel, Charles Reibel, Cornelius E.
("Neil") Smyth, and L. Donald Speer, II, for election to the Board of Directors.

The Board of Directors has fixed the close of business on October 21, 1998
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.

EACH SHAREHOLDER IS CORDIALLY INVITED TO BE PRESENT AND TO VOTE AT THIS
ANNUAL MEETING IN PERSON. SHAREHOLDERS ARE REQUESTED TO SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID AND ADDRESSED ENVELOPE, WHETHER
OR NOT THEY EXPECT TO ATTEND. IN THE EVENT A SHAREHOLDER WHO HAS RETURNED A
SIGNED PROXY ELECTS TO ATTEND THE ANNUAL MEETING AND VOTE IN PERSON, THE
SHAREHOLDER WILL BE ENTITLED TO VOTE.

By Order of the Board of Directors,

/s/ CHRISTOPHER WM. VOISIN
-------------------------------
Christopher Wm. Voisin
Secretary

San Diego, California
October 27, 1998
<PAGE> 3

INLAND ENTERTAINMENT CORPORATION
16868 VIA DEL CAMPO COURT, SUITE 200
SAN DIEGO, CALIFORNIA 92127

------------------------

PROXY STATEMENT
------------------------

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Inland Entertainment Corporation (the
"Company") to be voted at the Annual Meeting of Shareholders of the Company to
be held on Friday, December 11, 1998, at the executive offices of the Company,
located at 16868 Via Del Campo Court, Suite 200, San Diego, California 92127, at
10:00 A.M., California time, and at any adjournments thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders and described herein. The approximate date on which this
Proxy Statement and the enclosed form of proxy are first being sent or given to
shareholders is November 5, 1998.

VOTING RIGHTS AND SOLICITATION OF PROXIES

The Board of Directors of the Company (the "Board of Directors" or the
"Board") has fixed the close of business on October 21, 1998 as the record date
for the determination of shareholders entitled to receive notice of, and to vote
at, the Annual Meeting (the "Record Date"). The only outstanding class of stock
of the Company is its common stock, par value $.001 per share ("Common Stock"),
and, at the Record Date, 4,699,186 shares were outstanding. Each share of Common
Stock entitles the record holder on the Record Date to one vote on all matters.
With respect to the election of directors only (Proposal 1), shareholders may
vote in favor of all nominees or withhold their votes as to all nominees or
withhold their votes as to specific nominees.

Any shareholder giving a proxy has the power to revoke the proxy prior to
its exercise. A proxy may be revoked (i) by delivering to the Secretary of the
Company, Christopher Wm. Voisin, at or prior to the Annual Meeting, an
instrument of revocation or a duly executed proxy bearing a date or time later
than the date or time of the proxy being revoked or (ii) at the Annual Meeting
if the shareholder is present and elects to vote in person. Mere attendance at
the Annual Meeting will not serve to revoke a proxy.

All proxies received and not revoked will be voted as directed. If no
directions are specified, such proxies will be voted "FOR" (i) election of the
Board's eight nominees for directors, and (ii) approval of the amendment to the
Company's 1995 Stock Option Plan increasing the number of shares of Common Stock
available for issuance thereunder by 3,000,000. As to any other business which
may properly come before the Annual Meeting, the persons named in such proxies
will vote in accordance with their best judgment, although the Company does not
presently know of any other such business.

A majority of the outstanding shares of Common Stock entitled to vote must
be represented in person or by proxy at the Annual Meeting in order to
constitute a quorum for the transaction of business. Abstentions and non-votes
will be counted for purposes of determining the existence of a quorum at the
Annual Meeting. A candidate for election as a director will be elected by the
affirmative vote of a plurality of the shares of Common Stock present in person
or by proxy, entitled to vote and actually voting at the Annual Meeting. With
respect to Proposal 2 relating to the amendment to the Company's 1995 Stock
Option Plan, the affirmative vote of a majority of the shares of Common Stock
present in person or by proxy at the Annual Meeting and entitled to vote on such
proposal is required for the adoption of such proposal. Abstentions will be
counted as votes against any proposal as to which a shareholder abstains, but
non-votes will have no effect on the voting with respect to any proposal as to
which there is a non-vote. A non-vote may occur when a nominee holding shares of
Common Stock for a beneficial owner does not vote on a proposal because such
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner.

The expenses of soliciting proxies for the Annual Meeting are to be paid by
the Company. Solicitation of proxies may be made by means of personal calls
upon, or telephonic or telegraphic communications with,
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shareholders or their personal representatives by directors, officers and
employees of the Company who will not be specially compensated for such
services. Although there is no formal agreement to do so, the Company may
reimburse banks, brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses in forwarding this Proxy Statement to shareholders
whose Common Stock is held of record by such entities.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table contains certain information as of the Record Date
regarding all persons who, to the knowledge of the Company, were the beneficial
owners of more than 5% of the outstanding shares of Common Stock, each of the
directors of the Company, the nominees for director, each of the executive
officers named in the Summary Compensation Table set forth herein under the
caption "Compensation of Executive Officers" (such officers, collectively, the
"Named Executive Officers") and all directors and executive officers as a group.
The persons named hold sole voting and investment power with respect to the
shares shown opposite their respective names, unless otherwise indicated. The
information with respect to each person specified is as supplied or confirmed by
such person or based upon statements filed with the U.S. Securities and Exchange
Commission (the "SEC").

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP(1)(2) CLASS(1)(2)
---- ----------------- -----------
<S> <C> <C>
Karol M. Schoen(3)..................................... 600,000 12.4%
6437 Sunny Brae Drive
San Diego, California 92119
Jo Ann Speer(4)........................................ 370,000 7.9%
5731 Loma Verde
Rancho Santa Fe, California 92067

Directors/Nominees:
L. Donald Speer, II(5)(6)............................ 1,798,360 37.3%
Andrew B. Laub(6)(7)................................. 170,000 3.5%
G. Fritz Opel(6)(7).................................. 120,000 2.5%
Thomas G. Holmes(6)(7)............................... 20,000 *
Richard T. ("Chip") Harrison(6)...................... 750,000 16.0%
Jana McKeag(7)....................................... 40,000 *
1350 I Street, N.W., Suite 200
Washington, D.C. 20005
Charles Reibel(7).................................... 30,000 *
11755 Wilshire Blvd., Suite 1800
Los Angeles, California 90025
Cornelius E. ("Neil") Smyth(7)....................... 30,000 *
20 Bahama Bend
Coronado, California 92118

Named Executive Officers Who are Not Directors:
Robert Regent(6)(7).................................. 50,000 1.1%
Arthur R. Pfizenmayer(7)(8).......................... 210,000 4.3%
947 Olive Crest Drive
Encinitas, California 92024
All directors and executive officers as a group (9
persons)(9).......................................... 3,008,360 57.0%
</TABLE>

- ---------------
* Less than one percent.

(Footnotes on the following page)

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<PAGE> 5

(Footnotes relating to the preceding page)

(1) Subject to applicable community property and similar statutes.

(2) Includes (a) shares beneficially owned, whether directly or indirectly,
individually or together with associates, and (b) shares of which beneficial
ownership may be acquired within 60 days of the Record Date by exercise of
stock options ("Stock Option Shares").

(3) Includes 122,784 Stock Option Shares.

(4) Jo Ann Speer is the former spouse of L. Donald Speer, II.

(5) Includes 120,000 Stock Option Shares.

(6) The mailing address of such shareholder is in care of Inland Entertainment
Corporation, 16868 Via Del Campo Court, Suite 200, San Diego, California
92127.

(7) All Stock Option Shares.

(8) Mr. Pfizenmayer ceased to be an executive officer and an employee of the
Company on February 13, 1998.

(9) Includes 580,000 Stock Option Shares.

CHANGE IN CONTROL OF THE COMPANY

Arrangements Which May Result in a Change of Control. Pursuant to the
Company's Articles of Incorporation (the "Articles"), no person may become an
officer, director or the beneficial owner of such number of any class or series
of the Company's issued and outstanding capital stock such that he or she shall
hold, directly or indirectly, one of the ten greatest financial interests in the
Company (an "Interested Person") unless such Interested Person agrees in writing
to (i) provide the National Indian Gaming Commission ("Gaming Commission") or
other gaming authority having jurisdiction over the Company's operations
("Gaming Authority") with information regarding such Interested Person,
including information regarding other gaming-related activities of such
Interested Person and financial statements, in such form, and with such updates,
as may be required by the Gaming Commission or other Gaming Authority; (ii)
respond to written or oral questions that may be propounded by the Gaming
Commission or any Gaming Authority; and (iii) consent to the performance of any
background investigation that may be required by the Gaming Commission or any
Gaming Authority, including an investigation of any criminal record of such
Interested Person.

In the event that an Interested Person (i) fails to provide information
requested by the Gaming Commission or any Gaming Authority; (ii) gives the
Gaming Commission or any Gaming Authority cause either to deny approval of or to
seek to void a management contract to which the Company is a party; or (iii)
takes action that will affect the voiding of any such management contract, such
Interested Person shall be required to divest all of the Company's stock owned
by such shareholder within a 90-day period. If the Interested Person is unable
to sell such stock within this period, the Interested Person shall notify the
Company in writing, and the Company shall repurchase such stock at a purchase
price equivalent to the lower of such stock's book value or cost.

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<PAGE> 6

ELECTION OF DIRECTORS

PROPOSAL 1

Under the Articles and Bylaws of the Company (the "Bylaws"), eight persons,
Richard T. Harrison, Thomas G. Holmes, Andrew B. Laub, Jana McKeag, G. Fritz
Opel, Charles Reibel, Cornelius E. ("Neil") Smyth, and L. Donald Speer, II, have
been nominated by the Board of Directors for election at the Annual Meeting to
serve one year terms expiring at the Company's annual meeting in 1999 and until
his or her respective successor is elected and qualified.

The Bylaws provide for not less than three nor more than ten directors, the
exact number within the range being set by the Board of Directors, from time to
time. Currently, the Board of Directors has set that number at eight directors.
Each of the eight nominees, whose term expires at the Annual Meeting, presently
serves as a director and has served continuously as a director of the Company
since the date indicated under the caption "Information with Respect to the
Director Nominees" below. In the event the nominee is unable to or declines to
serve as a director at the time of the Annual Meeting, which is not anticipated,
the persons named in the proxy will vote for the election of such person or
persons as may be designated by the Board of Directors. UNLESS OTHERWISE
DIRECTED IN THE ACCOMPANYING PROXY, THE PERSONS NAMED THEREIN WILL VOTE FOR THE
ELECTION OF THE EIGHT DIRECTOR NOMINEES LISTED BELOW.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
RICHARD T. HARRISON, THOMAS G. HOLMES, ANDREW B. LAUB, JANA MCKEAG, G. FRITZ
OPEL, CHARLES REIBEL, CORNELIUS E. ("NEIL") SMYTH, AND L. DONALD SPEER, II AS
DIRECTORS. A PLURALITY OF THE VOTES CAST AT THE ANNUAL MEETING IS REQUIRED FOR
ELECTION OF EACH NOMINEE.

INFORMATION WITH RESPECT TO THE DIRECTOR NOMINEES

The following table sets forth information regarding the nominees,
including age on the date of the Annual Meeting, present position with the
Company, and other business experience during at least the past five years. With
the exception of Messrs. Reibel and Smyth, each of the other directors/nominees
is an executive officer of the Company or a subsidiary of the Company.

<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND
NAME AGE SINCE OTHER INFORMATION CONCERNING NOMINEE
---- --- --------- ----------------------------------------------
<S> <C> <C> <C>
L. Donald Speer, II............ 49 May 1995 L. Donald Speer, II has served as Chief
Executive Officer and Chairman of the Board of
the Company since May 22, 1995, the effective
date of the merger of Inland Casino
Corporation, a Delaware corporation ("ICC
II"), with and into the Company (the
"Effective Date"), and has served as President
and Chief Operating Officer of the Company
since June 1997. Mr. Speer served as Chief
Executive Officer and Chairman of the Board of
ICC II from June 1994 to the Effective Date.
From March 1991 through June 1994, Mr. Speer
was the founder, Chairman of the Board, Chief
Executive Officer and a director of Inland
Casino Corporation, a Nevada corporation ("ICC
I"), and managing general partner of Inland
Casino Partners, a California general
partnership ("ICP"), each of which were
consolidated into ICC II through a roll-up
transaction in June 1994. Mr. Speer was
President of ICC I from its inception through
March 1994. From July 1986 through January
1992, Mr. Speer was Chairman of the Board,
Chief Executive Officer and a director of
Southwest Gaming, Inc., which provided
operating services for the Desert Oasis Indian
Casino, a poker casino on the Cabazon Indian
Reservation near Indio, California.
</TABLE>

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<PAGE> 7

G. Fritz Opel.................. 55 Oct. 1995 G. Fritz Opel has served as Executive Vice
President, Marketing and Consulting Services
of the Company since June 1996. He served as
Vice President, Marketing and Communications
from October 1995 until June 1996. From July
1995 to October 1995, Mr. Opel was employed by
the Company to coordinate the Company's
marketing activities. From September 1993
through June 1995, Mr. Opel served as a
consultant to the Sycuan Casino, located on
the Sycuan Indian Reservation near San Diego,
California, to other Indian tribes, and to the
Company. From August 1989 through September
1993, Mr. Opel served as Director of Marketing
for the Sycuan Casino.

Jana McKeag.................... 47 Feb. 1996 Jana McKeag has served as a consultant to the
Company from February to March 1996 and Vice
President, Governmental Relations since April
1996. Prior to joining the Company, Ms. McKeag
served from April 1991 through December 1995
as a Commissioner on the National Indian
Gaming Commission. From January through April
1991, Ms. McKeag served as Director of Native
American Programs for the U.S. Department of
Agriculture and from April 1985 to December
1990, she held several senior management and
policy level posts at the U.S. Department of
the Interior including Assistant to the
Assistant Secretary of Indian Affairs.

Thomas G. Holmes............... 50 Oct. 1997 Thomas G. Holmes joined the Company in
September 1997 and was appointed as Vice
President of Technology in October 1997. Prior
to Mr. Holmes' employment with the Company, he
worked for Digital Equipment Corporation
("DEC") from January 1970 to August 1997. In
addition to his technical management
assignments at DEC, Mr. Holmes served in
senior roles in both marketing and sales
functions. While on leave from DEC, Mr. Holmes
served in the U.S. Air Force at Nellis A.F.B.,
Nevada from March 1971 to November 1974 in the
Tactical Electronic Warfare Training Squadron.
</TABLE>

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<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND
NAME AGE SINCE OTHER INFORMATION CONCERNING NOMINEE
---- --- --------- ----------------------------------------------
<S> <C> <C> <C>
Richard T. ("Chip") Harrison... 39 Aug. 1998 Richard T. ("Chip") Harrison is President and
Chief Operating Officer of Cyberworks, Inc., a
wholly-owned subsidiary of the Company
acquired in August 1998. Prior to the
acquisition, Mr. Harrison served as President
and Chief Executive Officer and sole
shareholder of Cyberworks since June 1995. In
addition, Mr. Harrison was founder of Pegsys
Holdings, a system integrator for the
client/server marketplace, where he served as
President from 1990 to 1994. From 1983 to
1990, Mr. Harrison was Chairman, Chief
Executive Officer and President of Peripheral
Systems, Inc., a nationwide systems integrator
and network products distributor.

Charles Reibel................. 48 May 1997 Charles Reibel is a certified public
accountant and has served as President of
Charles Reibel, Inc., C.P.A. since February
1986. Mr. Reibel was retained as the Company's
independent certified public accountant from
March 1991 to June 1994. In addition, Mr.
Reibel has served as President and a director
of Gorilla World, Inc., a privately-held
company that manufactures and distributes
active-wear clothing, since July 1995.

Cornelius E. ("Neil") Smyth.... 72 May 1995 Cornelius E. ("Neil") Smyth served as a
director of ICC II from September 1994 to the
Effective Date. Mr. Smyth is currently
retired. From February 1990 through August
1990, Mr. Smyth was a consultant in the gaming
industry. From March 1989 through February
1990, he was President of Mexican operations
of Caesars World International Inc. and from
September 1983 through March 1989, Mr. Smyth
was Executive Vice President of Latin American
operations for Caesars World International
Inc. From 1981 through 1983, he was President
of the Sands Hotel in Las Vegas. From 1970
through 1981, he was Chief Financial Officer
and Senior Vice President of Caesars Palace in
Las Vegas.
</TABLE>

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<PAGE> 9

INFORMATION WITH RESPECT TO EXECUTIVE OFFICER WHO IS NOT A DIRECTOR NOMINEE

The following table sets forth similar information as that provided for the
director nominees with respect to the only executive officer of the Company who
is not a director nominee.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME AGE OTHER INFORMATION CONCERNING EXECUTIVE OFFICER
---- --- ----------------------------------------------
<S> <C> <C>
Robert Regent.................. 58 Robert Regent has served as Executive Vice President,
Casino Operations of the Company since June 1997. Prior
thereto, from February 1996 to June 1997, Mr. Regent
served as Vice President, Casino Operations of the
Company, and from October 1995 to February 1996, Mr.
Regent served as Director of Casino Operations for the
Company primarily focusing on the Barona Casino. From May
to October 1995, Mr. Regent served as Manager of the
Barona Casino for the Barona Group of Capitan Grande Band
of Mission Indians (the "Barona Tribe"), the principal
client of the Company. Mr. Regent has held numerous
positions with various casinos including Director of
Gaming for the Gold Coast/Gold Shore Casino in Biloxi,
Mississippi from February 1993 to May 1995; Assistant
Casino Manager/Shift Manager for the Splash Casino in
Tunica, Mississippi from September 1992 to February 1993;
and Pit Boss and Shift Manager for the Horseshoe Hotel &
Casino in Las Vegas, Nevada from June 1988 to September
1992.
</TABLE>

INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD

MEETINGS OF THE BOARD AND ITS COMMITTEES

The Board of Directors manages the business of the Company. It establishes
overall policies and standards for the Company and reviews the performance of
management. In addition, the Board has established an Executive Committee, an
Audit Committee and a Compensation Committee whose functions are briefly
described below. The Company has not established a Nominating Committee. The
directors are kept informed of the Company's operations at meetings of the Board
and its committees through reports and analyses and discussions with management.

During the fiscal year ended June 30, 1998 (the "Fiscal Year" or "Fiscal
1998") the Board of Directors met on one occasion. In addition, the Board took
action on eight occasions by Unanimous Written Consent.

Executive Committee. At times when the Board of Directors is not in
session, the Executive Committee is empowered to exercise the authority of the
Board of Directors with respect to the significant day-to-day operational
decisions of the Company. The current members of the Executive Committee are L.
Donald Speer, II, Andrew B. Laub and G. Fritz Opel. During the Fiscal Year, the
Executive Committee met informally on a regular basis.

Audit Committee. The principal duties of the Audit Committee are to (i)
meet with the independent accountants to review and approve the scope of their
audit engagement; (ii) meet with the Company's financial management personnel
and independent accountants to review matters relating to internal accounting
controls, the Company's accounting practices and procedures and other matters
relating to the financial condition of the Company; and (iii) report to the
Board periodically any recommendations the Audit Committee may have with respect
to such matters. The current members of the Audit Committee are Cornelius E.
("Neil") Smyth and Charles Reibel. During the Fiscal Year, the Audit Committee
met on one occasion.

Compensation Committee. The principal functions of the Compensation
Committee are to (i) evaluate the performance of the Company's officers,
including the Chief Executive Officer; (ii) evaluate the recommendations of the
Company's Chief Executive Officer with respect to performance and compensation
of

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<PAGE> 10

all the Company's officers, and thereafter to make recommendations to the Board
relating to the Company's compensation plans and arrangements relating to such
persons, including approval of loans to, or guaranteeing the obligations of,
such officers; and (iii) administer, and make compensation determinations under,
all of the Company's stock option plans. The current members of the Compensation
Committee are Charles Reibel and Cornelius E. ("Neil") Smyth. The Compensation
Committee met on one occasion during the Fiscal Year and acted by Unanimous
Written Consent on eight occasions.

Each of the incumbent directors, except for Jana McKeag and G. Fritz Opel,
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors held during the Fiscal Year (which were held during the
period that such person served as a director) and (ii) the total number of
meetings held by each committee of the Board on which such director served
during the Fiscal Year (which were held during the period that such person
served on such committee).

COMPENSATION OF DIRECTORS

During Fiscal 1998, the directors of the Company who also are employees of
the Company received no additional compensation for their services as directors,
and it is presently intended that this policy will continue. Nonemployee
directors of the Company receive for their services as directors $2,500 per
meeting attended in person or by telephone plus travel expenses incurred in
connection with attendance at each Board of Directors' meeting. In addition,
nonemployee directors who are members of the Audit Committee and the
Compensation Committee receive for their services as members of such committees
$500 per committee meeting attended in person or by telephone plus travel
expenses incurred in connection with attendance at each committee meeting.

Each nonemployee director also is eligible to receive stock options under
the Company's 1996 Nonemployee Directors Stock Option Plan (the "1996 Plan"), a
non-discretionary, formula stock option plan pursuant to which 100,000 shares of
Common Stock have been authorized for issuance. Each nonemployee director who
first becomes a member of the Board of Directors will be granted an option to
purchase 10,000 shares of Common Stock automatically on the date of his or her
election to the Board of Directors. Each nonemployee director also will be
granted an option to purchase 5,000 shares of Common Stock automatically on the
date of each of the Company's Annual Meetings of Shareholders at which such
nonemployee director is elected to the Board of Directors. The exercise price
for all options granted under the 1996 Plan is based on the fair market value of
the Common Stock on the date of grant.

During Fiscal 1998, in addition to the above-referenced compensation for
services as a director (i) Charles Reibel, a nonemployee director, was paid
$4,500 for his services to the Company in connection with his evaluation of the
Company's (a) accounting systems and (b) internal controls for accounting
policies and procedures and (ii) Corneilius E. ("Neil") Smyth, a nonemployee
director, was paid $917 for his services regarding certain gaming-related
research. In addition, each nonemployee director and each director who also is
an officer, key employee or consultant of the Company is eligible to receive
discretionary grants of stock options under the Company's 1995 Stock Option
Plan.

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<PAGE> 11

APPROVAL OF THE AMENDMENT TO
THE COMPANY'S 1995 STOCK OPTION PLAN

PROPOSAL 2

The Company's 1995 Stock Option Plan, as amended (the "1995 Plan" or the
"Plan") provides a means for officers (including officers who are members of the
Board of Directors), other key employees, non-employee directors and consultants
of the Company and its subsidiaries to acquire stock of the Company through
stock options. The purposes of the Plan are to attract and retain persons of
ability as employees, directors and consultants and to motivate such persons to
exert their best efforts on behalf of the Company.

The Board of Directors in August 1998 adopted, subject to shareholder
approval, an amendment to the 1995 Plan to increase the number of shares of
Common Stock available for issuance under the Plan by 3,000,000 shares. The
Board of Directors has directed the submission to a vote of the shareholders a
proposal to approve the amendment to the Plan.

Currently, the number of shares of Common Stock which may be issued and
sold upon the exercise of options granted under the Plan shall not exceed
6,000,000 (subject to adjustment as provided in the Plan). As of the Record
Date, options to purchase 5,885,284 shares of Common Stock have been awarded, of
which options to purchase 51,800 shares have been exercised, options to purchase
195,000 shares have been cancelled and are available for reissuance, and options
to purchase 5,638,484 shares remain outstanding. Accordingly, as of the Record
Date, only 309,716 shares of Common Stock are available to be issued and sold
pursuant to the exercise of options granted under the Plan.

In addition to the 1995 Plan, the Company maintains the Company's 1996
Nonemployee Directors Stock Option Plan (the "1996 Plan"), a non-discretionary,
formula stock option plan in which only nonemployee directors are eligible to
participate, and the Company's 1994 Stock Option Plan, a discretionary plan
authorizing the grant of awards to key employees, directors and consultants of
the Company (the "1994 Plan"). Under the 1996 Plan, 100,000 shares of Common
Stock have been authorized for issuance. As of the Record Date, options to
purchase 50,000 shares have been granted, of which options to purchase 15,000
shares have been exercised and options to purchase 35,000 shares remain
outstanding. Under the 1994 Plan, 2,982,600 shares of Common Stock have been
authorized for issuance. As of the Record Date, options to purchase 69,594
shares have been granted, of which options to purchase 27,838 shares have been
exercised and options to purchase 41,756 shares remain outstanding. At this
time, the Board has determined not to grant awards under the 1994 Plan which
exceed the 69,594 shares of Common Stock already granted (the 1994 Plan and the
1995 Plan are collectively referred to as the "Discretionary Plans").
Accordingly, as of the Record Date, 309,716 shares of Common Stock remained
available for grant under the Discretionary Plans and 50,000 shares of Common
Stock remained available for grant under the 1996 Plan. The Board of Directors
continues to believe that such a compensatory award program is an important
factor in attracting, retaining and motivating officers, other employees,
directors and consultants of the Company and has recognized the need for an
additional number of shares of Common Stock which may be issued and sold in
connection with options granted under the 1995 Plan, the only current
Discretionary Plan under which new awards are being granted.

As is more fully described herein under the caption "Transactions with
Management and Others," in August 1998 the Company acquired Cyberworks, Inc., a
California corporation, which, as of the Record Date, had 33 employees. The
acquisition, which more than doubled the number of employees eligible to
participate in the Plan, was a significant consideration in the Board of
Directors' decision to approve the proposed amendment to increase the number of
shares subject to the Plan by 3,000,000.

In light of the foregoing, the Board of Directors believes that it is
appropriate to increase the number of shares of Common Stock which may be issued
and sold pursuant to the options granted under the 1995 Plan. Accordingly, the
Board of Directors has adopted, subject to shareholder approval, an amendment to
the 1995 Plan. The amendment to the 1995 Plan amends Section 2(a) of the 1995
Plan to increase the number of shares of Common Stock which may be issued and
sold upon the exercise of options granted under the 1995 Plan from 6,000,000 to
9,000,000. If the proposal is not approved by the shareholders at the Annual
Meeting, the Plan will remain in effect; however, as stated above, only 309,716
shares of Common Stock remain

9
<PAGE> 12

available for grant as of the Record Date. If the proposal is approved by the
shareholders at the Annual Meeting, the shareholders may be significantly
diluted upon the exercise of stock options granted under the 1995 Plan because
up to 8,948,200 shares of Common Stock (9,000,000 shares authorized less 51,800
shares previously issued upon exercise of options) will be authorized for
issuance upon the exercise of such stock options, while only 4,699,186 shares of
Common Stock were issued and outstanding as of the Record Date.

The Company has registered with the U.S. Securities and Exchange Commission
(the "Commission") on Form S-8 Registration Statements the 6,000,000 shares of
Common Stock currently issuable under the 1995 Plan, and the Board intends to
cause the additional 3,000,000 shares of Common Stock to be issued under the
amendment to the 1995 Plan to be registered on a Form S-8 Registration Statement
to be filed with the Commission at the Company's expense.

The Plan, as amended, is set forth in full as Appendix A to this Proxy
Statement and is summarized below. Such summary is not intended to be complete
and reference should be made to Appendix A for a complete statement of the terms
and provisions of the Plan, as amended.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK PRESENT IN PERSON OR BY PROXY
AT THE ANNUAL MEETING AND ENTITLED TO VOTE ON THE PROPOSAL IS REQUIRED FOR
APPROVAL OF THIS PROPOSAL.

SUMMARY OF THE 1995 PLAN, AS AMENDED

Shares Subject to the 1995 Plan

Options may be granted covering a maximum of 9,000,000 shares of Common
Stock. Shares covered by options which terminate or are cancelled without
exercise are available for reissuance. Options granted under the 1995 Plan may
be (i) options which are intended to qualify under particular provisions of the
Internal Revenue Code, as in effect from time to time (the "Code"), including
options that are intended to qualify under Section 422 of the Code as incentive
stock options ("Incentive Options") and (ii) options which are not intended to
so qualify under the Code ("Nonstatutory Options"), or combinations thereof. The
1995 Plan provides for appropriate adjustment in the number of shares for which
options may be granted and which are subject to options previously granted in
the event of a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination, exchange of shares or any similar change
affecting the stock. The aggregate number of shares of Common Stock that may be
subject to options granted to any single individual during any period of three
consecutive fiscal years shall not exceed 900,000 shares.

Eligible Persons

All officers (including officers who are members of the Board of
Directors), other key employees, nonemployee directors and nonemployee
consultants (including nonemployee consultants who are members of the Board of
Directors) of the Company or any of its subsidiaries or parents shall be
eligible to receive Nonstatutory Options. All officers and other key employees
of the Company or any of its subsidiaries or parents shall be eligible to
receive Incentive Options; provided, however, to the extent required by the
Code, an officer or key employee who beneficially owns more than 10% of the
Common Stock may only be granted an Incentive Option if the option price is at
least 110% of the fair market value of the Common Stock at the date of grant and
such option by its terms is not exercisable after the expiration of five years
from the date of grant. As of the Record Date, approximately 8 officers
(including officers who are members of the Board), 46 key employees who are not
officers, 2 nonemployee directors and 25 nonemployee consultants of the Company
and its subsidiaries were participating in the 1995 Plan.

Option Price

The price per share at which an Incentive Option may be exercised shall be
at least equal to the fair market value per share at the time the Incentive
Option is granted, and the price per share at which a Nonstatutory Option may be
exercised shall be at least equal to 85% of the fair market value per share at
the

10
<PAGE> 13

time the Nonstatutory Option is granted. For this purpose, fair market value
shall mean (i) if the Common Stock is traded on an exchange, the price at which
a share traded at the close of business on the date of valuation; (ii) if the
Common Stock is traded over-the-counter on the NASDAQ System, the mean between
the bid and asked prices of a share on that system at the close of business on
the date of valuation, or, if the Common Stock is designated a National Market
System security, the price at which a share traded at the close of business on
the date of valuation; and (iii) if neither (i) or (ii) applies, the fair market
value as determined by the Committee (as defined below). As of the Record Date,
the fair market value of a share of Common Stock was $3.25 per share.

Consideration for Shares Purchased

Common Stock purchased upon the exercise of options shall be paid for by
the optionee (i) in cash or by check acceptable to the Committee or in cash
equivalents acceptable to the Committee; (ii) at the discretion of the
Committee, by the transfer to the Company by the optionee of nonforfeitable,
unrestricted shares of Common Stock which are already owned by the optionee
having a fair market value at the time of exercise equal to the option price;
(iii) at the discretion of the Committee, by the issuance of a promissory note
in a form acceptable to the Committee; (iv) with any other legal consideration
the Committee may deem appropriate; or (v) by any combination of such methods of
payment.

Payment of the option price of any Nonstatutory Option also may be made in
whole or in part in the form of shares of Common Stock that are subject to a
risk of forfeiture or restriction on transfer. When paid for with such
consideration, unless otherwise determined by the Committee on or after the date
of the grant, shares of Common Stock received by the optionee upon the exercise
of the Nonstatutory Option shall be subject to the same risks of forfeiture or
restrictions on transfer as applied to the consideration surrendered by the
optionee. However, such risks of forfeiture and restrictions on transfer shall
apply only to the same number of shares of Common Stock received by the optionee
as applied to the forfeitable or restricted shares of Common Stock surrendered
by the optionee.

The Committee has the authority to specify at the time an option is granted
that shares of Common Stock will not be accepted in payment of the option price
until they have been owned by the optionee for a specified period; however, the
1995 Plan does not require any such holding period and would permit immediate
sequential exchanges of shares of Common Stock at the time of exercise of the
option. The requirement of payment in cash shall be deemed satisfied if the
optionee shall have made arrangements satisfactory to the Company with an NASD
broker to implement a cashless exercise and sale procedure. In addition, any
grant of an option may provide for deferred payment of the option price from the
proceeds of sale through an NASD broker of some or all of the shares of Common
Stock to which the exercise relates.

Term of Exercise and Expiration of Options

Options become exercisable at such times and in such installments as the
Committee shall provide in the terms of the individual option agreements.

Each option shall expire on the date established by the Committee which may
not be later than the tenth anniversary of the date of grant; provided, however,
to the extent required by the Code, no Incentive Option granted to an officer or
key employee who beneficially owns more than 10% of the Common Stock shall be
exercisable after the expiration of five years from the date granted.

Cancellation/Regrant

The Committee may, with the concurrence of the optionee, cancel any option
granted under the 1995 Plan and, in connection therewith, the Committee may
authorize the grant of new options (which may or may not cover the same number
of shares which had been the subject of any prior option) in such manner, at
such option price and subject to the same terms, conditions and discretions as,
under the 1995 Plan, would have been applicable had the cancelled options not
been granted.

11
<PAGE> 14

Nontransferability of Options

Options are not transferable by the optionee other than by will or the laws
of descent and distribution, or, except with respect to Incentive Options to the
extent prohibited by the Code, pursuant to a Qualified Domestic Relations Order.
Options are exercisable during the optionee's lifetime only by such optionee or,
in the event of such optionee's legal incapacity to do so, by such optionee's
guardian or legal representative acting in a fiduciary capacity. However, except
with respect to Incentive Options to the extent prohibited by the Code, the
Committee, in its sole discretion, may provide for the transferability of
particular awards under the 1995 Plan as long as such provision will not
disqualify the exemption for other awards under Rule 16b-3.

Certain Corporate Transactions

The Committee may make or provide for such adjustments in the option price
and in the number or kind of shares of Common Stock or other securities covered
by outstanding options as such Committee in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of optionees that would otherwise result from (i) any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Company; (ii) any merger, consolidation,
reorganization, separation, partial or complete liquidation, issuance of rights
or warrants to purchase stock; or (iii) any other corporate transaction or event
having an effect similar to any of the foregoing. Notwithstanding anything to
the contrary, in the event of a merger or consolidation in which the Company is
not the surviving corporation and the agreement of merger or consolidation
provides for the assumption of options granted (and the Company's obligations)
under the 1995 Plan, the shares of common stock or securities of the successor
corporation may be issued under the 1995 Plan in lieu of shares of Common Stock,
subject to the aforementioned adjustments which the Committee may determine are
equitably required, and such substitution of securities shall not require the
consent of any person who is granted options pursuant to the 1995 Plan. The
Committee also may make or provide for such adjustments in the number or kind of
shares of the Common Stock or other securities (including shares of a successor
referenced above) which may be sold under the 1995 Plan and the maximum number
of shares to be awarded to any single individual during any period of three
consecutive fiscal years as such Committee in its sole discretion, exercised in
good faith, may determine is appropriate to reflect any transaction or event
described in the two preceding sentences (subject, however, in the case of
Incentive Options, to the provisions of the Code). Any such substitution of
securities also shall not require the consent of any person who is granted
options pursuant to the Plan.

Administration

The 1995 Plan is administered by a committee of non-employee members of the
Board of Directors (the "Committee") or, in the absence of such a Committee or
in the event of grants to non-employee directors, by the Board of Directors. The
Committee has full power to interpret the 1995 Plan and to establish and amend
rules for its administration. The Committee also is authorized to determine who
from the eligible class of persons shall be granted options and the terms of the
options. Action by the Committee is taken by vote or written consent.

The Board of Directors may at any time amend the 1995 Plan, although no
amendment may increase the number of shares that may be issued and sold under
the 1995 Plan, change the designation of the class of employees eligible to
receive options or cause Rule 16b-3 to cease to be applicable to the 1995 Plan,
without shareholder approval.

FEDERAL INCOME TAX ASPECTS

The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the 1995 Plan based on federal income
tax laws as currently in effect. This summary is not intended to be exhaustive
and does not describe state or local tax consequences.

12
<PAGE> 15

Tax Consequences to Participants

Nonstatutory Options. In general (i) no income will be recognized by an
optionee at the time a Nonstatutory Option is granted; (ii) at exercise,
ordinary income will be recognized by the optionee in an amount equal to the
difference between the option price paid for the shares and the fair market
value of the shares, if unrestricted, on the date of exercise; and (iii) at
sale, appreciation (or depreciation) after the date of exercise will be treated
as either short-term or long-term capital gain (or loss) depending on how long
the shares have been held.

Incentive Options. No income generally will be recognized by an optionee
upon the grant or exercise of an Incentive Option. If shares of Common Stock are
issued to the optionee pursuant to the exercise of an Incentive Option, and if
no disqualifying disposition of such shares is made by such optionee within two
years after the date of grant or within one year after the transfer of such
shares to the optionee, then upon sale of such shares, any amount realized in
excess of the option price will be taxed to the optionee as a long-term capital
gain and any loss sustained will be a long-term capital loss.

If the shares of Common Stock acquired upon the exercise of an Incentive
Option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of such shares at the time of exercise (or, if less, the amount realized
on the disposition of such shares if a sale or exchange) over the option price
paid for such shares. Any further gain (or loss) realized by the participant
generally will be taxed as short-term or long-term capital gain (or loss)
depending on the holding period.

Special Rules Applicable to Officers and Directors. In limited
circumstances where the sale of stock received as a result of a grant or award
could subject an officer or director to suit under Section 16(b) of the Exchange
Act, the tax consequences to the officer or director may differ from the tax
consequences described above. In these circumstances, unless a special election
has been made, the principal difference usually will be to postpone valuation
and taxation of the stock received so long as the sale of the stock received
could subject the officer or director to suit under Section 16(b) of the
Exchange Act, but no longer than six months.

Tax Consequences to Participant's Employer

To the extent that a participant recognizes ordinary income in the
circumstances described above, the participant's employer will be entitled to a
corresponding deduction, provided, among other things, that the deduction meets
the test of reasonableness, is an ordinary and necessary business expense, is
not subject to the $1 million annual compensation limitation set forth in
Section 162(m) of the Code, and is not an "excess parachute payment."

13
<PAGE> 16

COMPENSATION OF EXECUTIVE OFFICERS

The following table discloses compensation paid by the Company during
Fiscal 1998, the fiscal year ended June 30, 1997 ("Fiscal 1997"), and the fiscal
year ended June 30, 1996 ("Fiscal 1996") to (i) the Company's Chief Executive
Officer during Fiscal 1998, (ii) the four most highly-compensated executive
officers, other than the Chief Executive Officer, who were serving as executive
officers at the end of Fiscal 1998, and (iii) one additional individual who
would have been among the four most highly-compensated executive officers, other
than the Chief Executive Officer, but for the fact that he was not serving as an
executive officer at the end of Fiscal 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS-
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) ($)(2) (#) ($)(3)
--------------------------- ---- ------------ -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
L. Donald Speer, II........... 1998 $400,000 $ -- $10,441 300,000 $26,278
Chairman of the Board and 1997 340,481 165,000 16,502 600,000 23,020
Chief Executive Officer, 1996 325,000 100,000 8,553 -- 20,920
President and Chief
Operating Officer
Andrew B. Laub................ 1998 175,000 15,000 7,115 200,000 958
Executive Vice President, 1997 175,000 15,000 14,873 50,000 --
Chief Financial Officer 1996 174,043 -- 13,167 250,000(4) --
and Treasurer
G. Fritz Opel................. 1998 175,000 25,000 53,087 200,000 958
Executive Vice President, 1997 175,000 25,000 10,758 100,000 --
Marketing and Consulting 1996 132,628 -- 25,754 200,000(6) --
Services(5)
Robert Regent................. 1998 165,000 15,000 4,234 -- 958
Executive Vice President, 1997 143,077 -- 5,491 150,000 --
Casino Operations(7) 1996 27,535 -- 6,724 50,000 --
Jana McKeag................... 1998 150,000 7,500 7,317 -- 958
Vice President, 1997 147,069 -- 4,801 50,000 --
Governmental Relations(8) 1996 35,000 -- -- 50,000 --
Arthur R. Pfizenmayer......... 1998 161,537 15,000 29,486 -- 638
Executive Vice President(9) 1997 240,000 15,000 8,308 200,000 --
1996 162,460 -- 6,339 300,000(10) --
</TABLE>

- ---------------
(1) Portions of the salaries for Messrs. Speer, Opel, Regent and Pfizenmayer
and Ms. McKeag were deferred under the Company's 401(k) Plan.

(2) The amounts disclosed in this column include:

(a) L. Donald Speer, II -- In Fiscal 1998, the amount reflects tax gross-up
payments related to long-term disability insurance and automobile
benefits. In Fiscal 1997 and 1996, the amounts reflect tax gross-up
payments related to automobile benefits. Perquisites provided to Mr.
Speer in each of Fiscal 1998, 1997 and 1996 did not meet the disclosure
threshold established by the SEC.

(b) Andrew B. Laub -- In Fiscal 1998, the amount reflects tax gross-up
payments related to long-term disability insurance and automobile
benefits. In Fiscal 1997, the amount reflects tax gross-up payments
related to automobile benefits. In Fiscal 1996, the amount reflects tax
gross-up payments related to automobile and housing benefits.
Perquisites provided to Mr. Laub in each of Fiscal 1998, 1997 and 1996
did not meet the disclosure threshold established by the SEC.

(c) G. Fritz Opel -- In Fiscal 1998, the amount reflects tax gross-up
payments of $16,774 related to long-term disability insurance and
automobile benefits and payments related to perquisites in the amount
of $36,313. The amount attributable to perquisites includes $32,710
related to an

(Footnotes continued on the following page)

14
<PAGE> 17
(Footnotes continued from the preceding page)

automobile lease; the remaining perquisites and related amounts do not
meet the disclosure threshold established by the SEC. In Fiscal 1997,
the amount reflects tax gross-up payments related to automobile
benefits. Perquisites provided to Mr. Opel in Fiscal 1997 did not meet
the disclosure threshold established by the SEC. In Fiscal 1996, the
amount reflects tax gross-up payments of $6,691 related to automobile
benefits and payments related to perquisites in the amount of $19,063.
The amount attributable to perquisites includes $18,042 related to an
automobile allowance; the remaining perquisites and the related amounts
do not meet the disclosure threshold established by the SEC.

(d) Robert Regent -- In Fiscal 1998, the amount reflects tax gross-up
payments related to long-term disability insurance and automobile
benefits. In Fiscal 1997, the amount reflects tax gross-up payments
related to automobile benefits. Perquisites provided to Mr. Regent in
each of Fiscal 1998 and 1997 did not meet the disclosure threshold
established by the SEC. In Fiscal 1996, the amount reflects payments
related to perquisites. The amount attributable to perquisites includes
$6,300 related to an automobile allowance; the remaining perquisites
and the related amounts do not meet the disclosure threshold
established by the SEC.

(e) Jana McKeag -- In Fiscal 1998, the amount reflects tax gross-up
payments related to long-term disability insurance and automobile
benefits. In Fiscal 1997, the amount reflects tax gross-up payments
related to automobile benefits. Perquisites provided to Ms. McKeag in
each of Fiscal 1998, 1997 and 1996 did not meet the disclosure
threshold established by the SEC.

(f) Arthur R. Pfizenmayer -- In Fiscal 1998, the amount reflects tax
gross-up payments of $9,510 related to long-term disability insurance
and automobile benefits and payments related to perquisites in the
amount of $19,976. The amount attributable to perquisites includes
$15,941 related to an automobile lease; the remaining perquisites and
related amounts do not meet the disclosure threshold established by the
SEC. In Fiscal 1997 and 1996, the amounts reflect tax gross-up payments
related to automobile benefits. Perquisites provided to Mr. Pfizenmayer
in each of Fiscal 1997 and 1996 did not meet the disclosure threshold
established by the SEC.

(3) The Fiscal 1998 amounts disclosed in this column reflect payments by the
Company in Fiscal 1998 of premiums for (a) universal life insurance
(reverse split dollar) on behalf of Mr. Speer in the amount of $25,320 and
(b) term life insurance on behalf of Messrs. Speer, Laub, Opel and Regent,
Ms. McKeag and Mr. Pfizenmayer in the amounts of $958, $958, $958, $958,
$958 and $638, respectively.

(4) During Fiscal 1996, options to purchase 250,000 shares of Common Stock at
an exercise price of $5.34 per share were cancelled and were replaced by
options to purchase 250,000 shares of Common Stock at $3.50 per share.

(5) Mr. Opel joined the Company in July 1995.

(6) During Fiscal 1996, options to purchase 100,000 shares of Common Stock at
an exercise price of $5.34 per share were cancelled and were replaced by a
grant of options to purchase 100,000 shares of Common Stock at $3.50 per
share.

(7) The Company became obligated to pay Mr. Regent's compensation in April
1996.

(8) Ms. McKeag joined the Company in April 1996.

(9) Effective February 13, 1998, Mr. Pfizenmayer ceased to be an executive
officer and director of the Company.

(10) During Fiscal 1996, options to purchase 175,000 shares of Common Stock at
an exercise price of $5.34 per share were cancelled and were replaced by
options to purchase 175,000 shares of Common Stock at $3.50 per share.

15
<PAGE> 18

STOCK OPTIONS

Stock Option Grants. During Fiscal 1998, stock options were awarded to
certain of the Named Executive Officers in the amounts and with the terms
indicated in the following table:

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH)(1) DATE
---- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C>
L. Donald Speer, II.............................. 300,000(2) 20.3% $2.50 2/19/08
Andrew B. Laub................................... 200,000(2) 13.6% 2.50 2/19/08
G. Fritz Opel.................................... 200,000(2) 13.6% 2.50 2/19/08
</TABLE>

- ---------------
(1) All options were granted at the market price on the date of grant.

(2) All nonstatutory stock options that vest in five equal annual installments
commencing January 1, 1999.

Option Exercises/Fiscal Year End Value. The following table includes the
number of shares of Common Stock acquired by the Named Executive Officers upon
the exercise of stock options and the aggregate dollar value realized upon such
exercise during Fiscal 1998. Also reported are the number of shares of Common
Stock covered by both exercisable and unexercisable stock options and the value
of such options that are "in the money" as of June 30, 1998, for the Named
Executive Officers.

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. Donald Speer, II......... -0- $ -0- 120,000 780,000 $75,000 $600,000
Andrew B. Laub.............. -0- -0- 170,000 330,000 -0- 200,000
G. Fritz Opel............... -0- -0- 120,000 380,000 12,500 250,000
Robert Regent............... -0- -0- 50,000 150,000 18,750 75,000
Jana McKeag................. -0- -0- 40,000 60,000 6,250 25,000
Arthur R. Pfizenmayer....... 25,000 48,569 210,000 265,000 -0- -0-
</TABLE>

- ---------------
(1) Excludes the value of all unexercised options which have an exercise price
greater than or equal to $3.50, the closing price of the Common Stock on
June 30, 1998 (the last stock trading day of Fiscal 1998).

EMPLOYMENT CONTRACTS WITH CERTAIN NAMED EXECUTIVE OFFICERS

The Company has not entered into any employment contracts with any of the
Named Executive Officers. However, in connection with the resignation of Arthur
R. Pfizenmayer as an officer, director and an employee of the Company on
February 13, 1998, the Company entered into a settlement and release agreement
with Mr. Pfizenmayer and a consulting agreement with Mr. Pfizenmayer's
wholly-owned corporation, Torrey Pines Consultants, Inc. ("Torrey Pines").
Pursuant to the settlement and release agreement, in consideration of the mutual
release by the Company and Mr. Pfizenmayer of all claims and liabilities either
party had or may have had against the other party based on acts or events
occurring on or before the date of the agreement, the Company agreed to (i)
reimburse Mr. Pfizenmayer for premiums paid by him if he elects to participate
in any of the Company's group health insurance plans pursuant to COBRA through
February 28, 1998, and (ii) extend all provisions of the stock options granted
to Mr. Pfizenmayer under the Company's stock option plans through each year that
he or Torrey Pines is engaged as a consultant for the Company. Pursuant to the

16
<PAGE> 19

consulting agreement, the Company retained Torrey Pines as a consultant through
February 13, 1999. As a consultant, Torrey Pines will render such advisory
services and perform such projects as assigned to it from time to time by the
Chairman of the Board of the Company for matters specifically relating to the
Barona Casino and the Barona Tribe. In consideration for the performance of such
consulting services, the Company agreed to pay Torrey Pines $12,500 per month
for the first six months of the consulting term and $8,000 per month for the
second six months of the consulting term. On May 30, 1998, the Company and
Torrey Pines amended the consulting agreement to provide for a consulting fee of
$12,500 per month during the entire twelve months of the consulting term. The
consulting agreement also contains certain confidential information and
non-competition provisions.

CHANGE OF CONTROL ARRANGEMENTS

Certain of the Company's stock option plans, and certain of the individual
stock option agreements entered into thereunder, contain change in control
provisions which, under certain circumstances, trigger the acceleration of
vesting of options granted thereunder.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

On August 27, 1998, the Company acquired 100% of the outstanding equity of
Cyberworks, Inc., a California corporation ("Cyberworks") for an aggregate
purchase price, exclusive of acquisition costs, of $3,560,000. Cyberworks is an
interactive marketing and design company whose principal business is marketing
and developing internet and intranet websites. Pursuant to an Agreement and Plan
of Reorganization dated August 25, 1998, by and among the Company, Inland
Acquisition Corporation ("Acquisition Corp."), Cyberworks and Richard T.
Harrison, the sole shareholder of Cyberworks (the "Reorganization Agreement"),
on August 27, 1998 (the "Effective Date") Acquisition Corp., a wholly-owned
subsidiary of the Company formed to effect the merger, was merged with and into
Cyberworks, with Cyberworks being the surviving corporation and becoming a
wholly-owned subsidiary of the Company (the "Merger Transaction"). At the
Effective Date Cyberworks had 27 employees and as of the Record Date had 33
employees.

On the Effective Date and pursuant to the Merger Transaction, the Company
acquired 100% of the outstanding shares of Cyberworks in connection with the
conversion of each share of Cyberworks common stock into the right to receive
750 shares of Common Stock together with $500 in cash. Richard T. Harrison, as
the sole shareholder of Cyberworks, received 750,000 shares of newly-issued
Common Stock and $500,000 in cash. For purposes of the Merger Transaction, the
fair market value of a share of Common Stock was determined to be $4.08 per
share, this price being established pursuant to a formula set forth in the
Reorganization Agreement.

On the Effective Date, in addition to becoming a principal shareholder of
the Company, Richard T. Harrison, the former President and Chief Executive
Officer of Cyberworks, was appointed a director of the Company. In addition, on
the Effective Date, Mr. Harrison entered into an employment agreement (the
"Employment Agreement") and a noncompetition agreement (the "Noncompetition
Agreement") with the Company and Cyberworks relating to Mr. Harrison's service
as President and Chief Operating Officer of Cyberworks following the Merger
Transaction.

The Employment Agreement provides for an initial base salary of $228,000
per year. The base salary may be adjusted by the Compensation Committee of the
Board of Directors, but may not be reduced below the initial base salary set
forth above. The term of the employment agreement is through August 27, 2001.
The Employment Agreement may be terminated by the Company or Cyberworks for
cause, which is defined as (i) the failure to follow the reasonable instructions
of the Board of Directors of the Company or Cyberworks and the failure to cure
any such breach within 30 days after written notice thereof, (ii) the material
breach of any term of the Employment Agreement and the failure to cure any such
breach within 30 days after written notice thereof, or (iii) the
misappropriation of assets of the Company or any subsidiary resulting in a
material loss to such entity. If the Company or Cyberworks terminates the
Employment Agreement without cause, Mr. Harrison shall be entitled to receive
his salary and benefits then in effect for the remainder of the term of the
agreement, and the vesting of all outstanding stock options and any awards
pursuant to the Company's
17
<PAGE> 20

employee benefit plans shall be immediately accelerated. The Employment
Agreement also provides Mr. Harrison with his salary and benefits then in effect
for the remainder of the term and the acceleration of the vesting of all
outstanding stock options or other stock-based awards if he terminates his
employment for certain enumerated reasons within one year after a change in
control of the Company (as defined in the Employment Agreement). In addition,
the Employment Agreement may be terminated by Mr. Harrison at any time upon 60
days prior written notice.

The Noncompetition Agreement prohibits Mr. Harrison from competing with the
Company and Cyberworks and certain affiliates thereof within the territory of
the United States of America during his employment with the Company or any of
its affiliates and thereafter for the greater of (i) three years from the date
of the Noncompetition Agreement or (ii) the remainder of the then current term
of Mr. Harrison's employment agreement. The Noncompetition Agreement also
prohibits Mr. Harrison from soliciting certain employees, customers and
suppliers of the Company and Cyberworks and certain affiliates thereof during
the noncompetition term.

In September 1996, pursuant to a Stock Purchase and Settlement and Release
Agreement dated September 27, 1996 (the "Stock Purchase Agreement"), by and
among Jonathan Ungar, Alan Henry Woods and the Company, the Company purchased
3,424,913 shares of Common Stock from Mr. Ungar, a former non-employee director
of the Company, and 3,353,331 shares of Common Stock from Mr. Woods. The terms
of the Stock Purchase Agreement include (i) a cash payment of $200,000 upon
closing; (ii) the issuance of unsecured promissory notes in the principal amount
of $3,500,000, with interest at a rate of 10% per annum, payments of interest
only in annual installments for the first three years commencing September 30,
1997, followed by three equal annual installments of principal repayment plus
interest on the remaining balance commencing September 30, 2000; (iii)
contingent obligations (the "Initial Contingent Obligations") to issue a total
of $9,856,488 in unsecured promissory notes ($4,981,276 in principal amount to
Mr. Ungar and $4,875,212 in principal amount to Mr. Woods) including $2,000,000
in principal amount of notes each year for four years, and $1,856,488 in
principal amount of notes to be issued in a fifth year, each note with interest
at 10% per annum, payments of interest only for the first three years, followed
by three equal annual installments of principal plus interest on the remaining
principal balance; and (iv) another contingent obligation (the "Second
Contingent Obligation") to issue an additional $3,000,000 principal amount
($1,515,000 to Mr. Ungar, $1,485,000 to Mr. Woods) in unsecured promissory notes
(or cash, if the Company has closed a firm commitment underwritten public
offering of securities of not less than $35 million prior to the contingencies
being met) when and if certain conditions are met, with interest at the then
"preferred" or "prime" rate of interest charged to the Company by the Company's
principal bank, with interest only for three years from the date of issuance,
followed by two equal annual installments of principal plus interest on the
remaining balance.

The obligations to issue the Initial Contingent Obligations (i.e.,
$2,000,000 in notes for four years and $1,856,488 in notes for a fifth year) are
contingent upon the Company's retained earnings balance being at least
$4,000,000 for the fiscal year ending immediately prior to the date the notes
are to be issued. Dividends paid by the Company and certain other payments, if
any, are to be added back to the retained earnings balance for purposes of this
contingency calculation. The period for determining the Company's obligation to
issue each of the $2,000,000 and $1,856,488 in principal amount of notes is an
eight year period commencing with the fiscal year ending June 30, 1997. If the
$4,000,000 retained earnings test is not met in one year, the Company is not
obligated to issue the notes in that year. However, the test is to be made each
year for eight successive years commencing with the fiscal year ending June 30,
1997, but each year can be used only once during the eight year period, and only
five out of the eight years may be used. In each of September 1997 and September
1998, the Company issued $2,000,000 in principal amount of notes to each of
Messrs. Ungar and Woods in satisfaction of the Initial Contingent Obligations
for the fiscal years ended June 30, 1997 and June 30, 1998, respectively. The
Second Contingent Obligation is subject to the following conditions: (i) the
Barona Tribe enters into a Class III Gaming Compact (the "Compact") with the
State of California which permits the operation of video gaming machines at the
Barona Casino; (ii) at the time that the Barona Tribe enters into the Compact,
the Company has a consulting agreement or similar contractual arrangement with
the Barona Tribe; and (iii) consulting fees paid to the Company by the Barona
Tribe relating to the Barona

18
<PAGE> 21

Casino for any consecutive 12-month period within five years after the Barona
Tribe has entered into the Compact, equals or exceeds one and one-half times
such consulting fees for the year ended June 30, 1996. All of the conditions of
the Second Contingent Obligation have not yet been met. The Company intends to
record as an additional cost of the repurchase of its common stock each
contingent obligation as each contingency is met. All payments pursuant to the
Stock Purchase Agreement are further subject to compliance with certain state
law provisions and the Articles concerning repurchase transactions.

During Fiscal 1997, the Company paid Forrest Gerard, a former non-employee
director of the Company, approximately $63,875 in consulting fees related to the
development of prospective client relationships and gaming activities in New
Mexico.

In the opinion of management, the terms of the above-described transactions
are fair and reasonable and as favorable to the Company as those which could
have been obtained from unrelated third parties at the time of their execution.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who beneficially own more than 10% of a registered class of the
Company's equity securities, to file with the SEC initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than 10% shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the Fiscal Year, the Company's officers, directors
and greater than 10% beneficial owners complied with all Section 16(a) filing
requirements.

RELATIONSHIP OF THE COMPANY WITH INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors selected the firm of Grant Thornton LLP ("Grant
Thornton"), independent certified public accountants, as the Company's auditors
for Fiscal 1998 and have selected such firm to act as auditors for the fiscal
year ending June 30, 1999. Representatives of Grant Thornton are expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions.

19
<PAGE> 22

SHAREHOLDER PROPOSALS

Any proposal that a shareholder of the Company wishes to have included in
the Company's proxy materials relating to the annual meeting of shareholders to
be held in 1999 must be submitted to the Company no later than June 29, 1999. If
such proposal is in compliance with all of the requirements of Rule 14a-8 under
the Exchange Act, it will be included in the proxy statement and set forth on
the form of proxy issued for such annual meeting of shareholders. Shareholder
proposals should be directed to the attention of the Secretary of the Company at
the address of the Company set forth on the first page of this Proxy Statement.

With respect to any proposal that a shareholder of the Company presents at
the annual meeting of shareholders to be held in 1999 that is not submitted for
inclusion in the Company's proxy materials pursuant to Rule 14a-8 under the
Exchange Act, the proxy for such annual meeting of shareholders will confer
discretionary voting authority to vote on such shareholder proposal unless (i)
the Company is notified of such proposal no later than September 21, 1999, and
(ii) the proponent complies with the other requirements set forth in Rule 14a-4
under the Exchange Act.

ANNUAL REPORT

A COPY OF THE ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR (THE "FORM
10-KSB"), INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT
SCHEDULES REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 13A-1 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, MAY
BE OBTAINED BY EACH SHAREHOLDER OF RECORD (AND EACH BENEFICIAL HOLDER) ON THE
RECORD DATE, WITHOUT CHARGE. COPIES OF EXHIBITS TO THE FORM 10-KSB ARE
AVAILABLE, BUT A REASONABLE FEE WILL BE CHARGED TO A SHAREHOLDER REQUESTING
EXHIBITS. ALL SUCH REQUESTS SHOULD BE MADE IN WRITING TO THE COMPANY AT THE
ADDRESS OF THE COMPANY SET FORTH ON THE FIRST PAGE OF THIS PROXY STATEMENT,
ATTENTION: CHRISTOPHER WM. VOISIN, SECRETARY.

By Order of the Board of Directors,

/s/ CHRISTOPHER WM. VOISIN
-------------------------------
Christopher Wm. Voisin
Secretary
San Diego, California
Dated: October 27, 1998

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<PAGE> 23

APPENDIX A

INLAND ENTERTAINMENT CORPORATION

1995 STOCK OPTION PLAN, AS AMENDED

1. Purpose. The purpose of the Inland Entertainment Corporation 1995 Stock
Option Plan is to provide a means whereby Inland Entertainment Corporation (the
"Company") may attract and retain persons of ability as employees, directors and
consultants and motivate such persons to exert their best efforts on behalf of
the Company and any of its subsidiaries or parents.

2. Benefits Available Under Plan.

(a) The total number of shares which may be issued and sold under options
granted pursuant to this Stock Option Plan shall not exceed 9,000,000 shares of
the common stock, $.001 par value per share (the "Common Stock"), of the Company
except to the extent of adjustments authorized by the last sentence of Paragraph
6 of this Stock Option Plan. Such shares may be treasury shares or shares of
original issue or a combination of the foregoing. If any option terminates,
expires or is cancelled with respect to any shares of Common Stock, new options
may thereafter be granted covering such shares of Common Stock.

(b) The aggregate number of shares of Common Stock that may be subject to
options granted under this Stock Option Plan to any single individual during any
period of three consecutive fiscal years (commencing with the fiscal year ending
June 30, 1996) shall not exceed 900,000 shares.

3. Administration. This Stock Option Plan shall be administered by a
committee (the "Committee") of two or more members of the Board of Directors of
the Company, appointed by and holding office at the pleasure of the Board. The
members of the Committee shall be "non-employee directors" within the meaning of
that term in Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended, or any successor rule to the same effect ("Rule 16b-3"). In the
absence of a Committee or in the event of grants to non-employee directors, this
Stock Option Plan shall be administered by the Board of Directors of the
Company, and, in such case, all references to the "Committee" herein shall be
deemed to be references to the Board of Directors.

The Committee may, from time to time and upon such terms and conditions as
it may determine, authorize the granting to officers (including officers who are
members of the Board of Directors), to other key employees, to non-employee
directors and to non-employee consultants (including non-employee consultants
who are members of the Board of Directors) of the Company or any of its
subsidiaries or parents of options to buy from the Company shares of Common
Stock and to fix the number of shares to be covered by each such option.
Successive options may be granted to the same person whether or not the option
or options first granted to such person remain unexercised.

Subject to the express provisions of this Stock Option Plan, the Committee
shall have the authority to construe and interpret this Stock Option Plan and,
to the extent not otherwise defined herein, to define the terms used in this
Stock Option Plan; to prescribe, amend and rescind rules and regulations
relating to the administration of this Stock Option Plan; and to make all other
determinations necessary or advisable for the administration of this Stock
Option Plan. The determinations of the Committee on all matters referred to in
this Paragraph 3 shall be conclusive.

The Committee shall hold meetings at such times and places as it may
determine in accordance with the Bylaws of the Company. A majority of the
members of the Committee shall constitute a quorum at any such meeting. All
determinations of the Committee shall be made by a majority of its members at a
meeting or by the unanimous written consent of all members of the Committee. In
the event action by the Committee is taken by unanimous written consent, the
action of the Committee shall be deemed to be at the date the last Committee
member signs the consent.

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<PAGE> 24

4. Eligibility.

(a) All officers (including officers who are members of the Board of
Directors), other key employees, non-employee directors and non-employee
consultants (including non-employee consultants who are members of the Board of
Directors) of the Company or any of its subsidiaries or parents shall be
eligible to receive Nonstatutory Options (as defined in Paragraph 5(a) herein)
and all officers (including officers who are members of the Board of Directors)
and other key employees of the Company or any of its subsidiaries or parents
shall be eligible to receive Incentive Options (as defined in Paragraph 5(a)
herein).

(b) To the extent required by the Code (as defined in Paragraph 5(a)
herein), any officer or key employee who owns more than ten percent (10%) of the
total combined voting power of all classes of outstanding stock of the Company
or any of its subsidiaries or parents shall not be eligible to receive an
Incentive Option (as defined in Paragraph 5(a) herein) unless (i) the exercise
price of the shares subject to such option is at least one hundred ten percent
(110%) of the fair market value of such shares on the date of grant and (ii)
such option by its terms is not exercisable after the expiration of five years
from the date of grant.

5. Nature, Terms and Conditions of Options.

(a) Options granted under this Stock Option Plan may be (i) options which
are intended to qualify under particular provisions of the Internal Revenue
Code, as in effect from time to time (the "Code"), including options that are
intended to qualify under Section 422 of the Code as incentive stock options
("Incentive Options"), (ii) options which are not intended to so qualify under
the Code ("Nonstatutory Options"), or (iii) combinations of the foregoing.

(b) No option shall run for more than ten years from the date granted;
provided, however, to the extent required by the Code, no Incentive Option
granted to an optionee described in Paragraph 4(b) hereof shall be exercisable
after the expiration of five years from the date granted.

(c) No option shall be transferable by the optionee otherwise than (i) by
will or the laws of descent and distribution or (ii) except with respect to
Incentive Options to the extent prohibited by the Code, pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder.

(d) Options shall be exercisable during the optionee's lifetime only by
such optionee or, in the event of such optionee's legal incapacity to do so, by
such optionee's guardian or legal representative acting in a fiduciary capacity
under state law on behalf of the optionee and under court supervision.

(e) Notwithstanding the foregoing Paragraphs 5(c) and (d), and except with
respect to Incentive Options to the extent prohibited by the Code, the Committee
may make particular awards of transferable options so long as such awards do not
disqualify the availability of the exception offered by Rule 16b-3 for other
awards.

(f) The option price shall be determined by the Committee at or prior to
the time the option is granted; provided, however, that in the case of an
Incentive Option, the option price shall be at least equal to the Fair Market
Value per share at the time the Incentive Option is granted, and in the case of
a Nonstatutory Option, the option price shall be at least equal to eighty-five
percent (85%) of the Fair Market Value per share at the time the Nonstatutory
Option is granted. "Fair Market Value" shall mean: (a) if the Common Stock is
traded on an exchange, the closing price at which a share of Common Stock traded
on the date of valuation; (b) if the Common Stock is traded over-the-counter on
the NASDAQ System, the mean between the bid and asked closing prices of a share
of Common Stock on said System at the close of business on the date of valuation
or, if the Common Stock is designated a National Market System security, the
closing price at which a share of Common Stock traded on the date of valuation;
and (c) if neither (a) nor (b) applies, the fair market value as determined by
the Committee in good faith. Such determination shall be conclusive and binding
on all persons.

(g) In order to exercise options, the person or persons entitled to
exercise them shall give written notice to the Company specifying the number of
shares to be purchased pursuant to the exercise of options. This
A-2
<PAGE> 25

notice shall be accompanied by payment for the shares as provided in Paragraph
5(h) herein. Options may be exercised at such time or times as may be determined
by the Committee at the time of grant.

(h) The option price shall be payable (i) in cash or by check acceptable to
the Committee or in cash equivalents acceptable to the Committee, (ii) at the
discretion of the Committee, by the transfer to the Company by the optionee of
nonforfeitable, unrestricted shares of Common Stock which are already owned by
the optionee having a value at the time of exercise equal to the total option
price, (iii) at the discretion of the Committee, by the issuance of a promissory
note in a form acceptable to the Committee, (iv) with any other legal
consideration the Committee shall in its discretion deem appropriate, including
any form of consideration authorized under Paragraph 5(i) herein, or (v) by any
combination of the foregoing methods of payment as the Committee shall in its
discretion determine. The requirement of payment in cash shall be deemed
satisfied if the optionee shall have made arrangements satisfactory to the
Company with a broker who is a member of the National Association of Securities
Dealers, Inc. ("NASD") to sell a sufficient number of shares being purchased so
that the net proceeds of the sale transaction will at least equal the option
exercise price and pursuant to which the broker undertakes to promptly deliver
the full option exercise price to the Company. In addition, any grant may
provide for a deferred payment of the exercise price from the proceeds of sale
through an NASD broker on the date of exercise of some or all of the shares of
Common Stock to which the exercise relates.

(i) Any grant of a Nonstatutory Option may provide that payment of the
option price may also be made in whole or in part in the form of shares of
Common Stock that are subject to risk of forfeiture or restrictions on transfer.
Unless otherwise determined by the Committee on or after the date of grant,
whenever any option price is paid in whole or in part by means of any of the
forms of consideration specified in this Paragraph 5(i), the shares received by
the optionee upon the exercise of the Nonstatutory Option shall be subject to
the same risks of forfeiture or restrictions on transfer as those that applied
to the consideration surrendered by the optionee; provided, however, that such
risks of forfeiture and restrictions on transfer shall apply only to the same
number of shares received by the optionee as applied to the forfeitable or
restricted shares surrendered by the optionee.

6. Adjustments in Event of Change in Stock. The Committee may make or
provide for such adjustments in the option price and in the number or kind of
shares of the Company's Common Stock or other securities covered by outstanding
options as such Committee in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or enlargement of the rights
of optionees that would otherwise result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, reorganization,
separation, partial or complete liquidation, issuance of rights or warrants to
purchase stock, or (c) any other corporate transaction or event having an effect
similar to any of the foregoing. Notwithstanding anything to the contrary, in
the event of a merger or consolidation in which the Company is not the surviving
corporation and the agreement of merger or consolidation provides for the
assumption of options granted (and the Company's obligations) under this Plan,
the shares of common stock or securities of the successor corporation may be
issued under this Stock Option Plan in lieu of shares of Common Stock, subject
to the aforementioned adjustments which the Committee may determine are
equitably required, and such substitution of securities shall not require the
consent of any person who is granted options pursuant to this Stock Option Plan.
The Committee may also make or provide for such adjustments in the number or
kind of shares of the Common Stock or other securities (including, but not
limited to, shares of a successor referenced above) which may be sold under this
Stock Option Plan and the maximum number of shares to be awarded as specified in
Paragraph 2(b) herein as such Committee in its sole discretion, exercised in
good faith, may determine is appropriate to reflect any transaction or event
described in the two preceding sentences (subject, however, in the case of
Incentive Options, to the provisions of the Code).

7. Stock Option Agreement. The form of each Stock Option Agreement shall be
prescribed, and any Stock Option Agreement evidencing an outstanding option may
with the concurrence of the affected optionee be amended, by the Committee,
provided that the terms and conditions of each such Stock Option Agreement and
amendment are not inconsistent with this Stock Option Plan.

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<PAGE> 26

8. Cancellation of Option. The Committee may, with the concurrence of the
affected optionee, cancel any option granted under this Stock Option Plan. In
the event of any such cancellation, the Committee may authorize the granting of
new options (which may or may not cover the same number of shares which had been
the subject of any prior option) in such manner, at such option price and
subject to the same terms, conditions and discretions as, under this Stock
Option Plan, would have been applicable had the cancelled options not been
granted.

9. Amendment. This Stock Option Plan may be amended from time to time by
the Board of Directors, but without further approval by the shareholders of the
Company no such amendment shall (a) increase the aggregate number of shares of
Common Stock that may be issued and sold under this Stock Option Plan (except
that adjustments authorized by the last sentence of Paragraph 6 herein shall not
be limited by this provision) or (b) change the designation in Paragraph 4
herein of the class of employees eligible to receive options or (c) cause Rule
16b-3 to cease to be applicable to this Stock Option Plan.

10. Effective Date. This Plan shall become effective when adopted by the
Board, but no option granted under the Plan shall become exercisable unless and
until this Stock Option Plan has been duly approved by the Corporation's
shareholders. If such shareholder approval is not obtained within twelve (12)
months after the date of the Board's adoption of this Stock Option Plan, then
notwithstanding any provision herein to the contrary, any options previously
granted under this Stock Option Plan shall terminate and no further options
shall be granted. Subject to such limitation, options may be granted under this
Stock Option Plan at any time after the effective date.

A-4
<PAGE> 27
PROXY

PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS OF

INLAND ENTERTAINMENT CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE

The undersigned shareholder(s) of Inland Entertainment Corporation, a Utah
corporation (the "Company"), hereby appoints Andrew B. Laub, Christopher Wm.
Voisin, or either of them, proxies, each with full power of substitution, for
and in the name of the undersigned at the Annual Meeting of Shareholders of the
Company to be held on December 11, 1998, and at any and all adjournments, to
vote all shares of the capital stock of said Company held of record by the
undersigned on October 21, 1998, as if the undersigned were present and voting
the shares.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED. IN
THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE VOTED FOR PROPOSAL 2, FOR THE
NOMINEES NAMED IN PROPOSAL 1 ON THE REVERSE SIDE AND IN ACCORDANCE WITH THEIR
DISCRETION ON SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.

(CONTINUED AND TO BE VOTED, SIGNED AND DATED ON THE REVERSE SIDE)

<PAGE> 28

THE LISTED NOMINEES AND THE LISTED PROPOSAL HAVE BEEN PROPOSED BY THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL THE NOMINEES
LISTED AND "FOR" THE LISTED PROPOSAL.

[ ] I plan to attend the meeting

1. Election of Directors:

Nominees for election to the Board of Directors:
Richard T. Harrison, Thomas G. Holmes, Andrew B. Laub, Jana McKeag,
G. Fritz Opel, Charles Reibel, Cornelius E. "Neil" Smyth and
L. Donald Speer II.

FOR all the WITHHOLD
nominees listed AUTHORITY
(except as indicated to vote for all
to the contrary) nominees listed

[ ] [ ]

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THE
NOMINEE'S(S') NAME(S) ON THE SPACE PROVIDED BELOW.)

------------------------------------------------------------------------

2. Proposal to approve the amendment to the Company's 1995 Stock Option
Plan to increase the number of shares of common stock available for
issuance thereunder by 3,000,000.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

3. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.

Dated:_____________________, 1998

_________________________________
Signature

_________________________________
Signature (if held jointly)

(Please date this Proxy and sign
exactly as your name appears
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full
title. If there is more than one
trustee, all should sign. All joint
owners should sign.)