JILLIANS ENTERTAINMENT CORP, PRE13E3/A, 1996-08-27

JILLIANS ENTERTAINMENT CORP
PRE13E3/A, 1996-08-27
MISCELLANEOUS AMUSEMENT & RECREATION

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

AMENDMENT NO. 2 TO

SCHEDULE 13E-3

RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)

JILLIAN'S ENTERTAINMENT CORPORATION, A FLORIDA CORPORATION
(Name of the Issuer)

JILLIAN'S ENTERTAINMENT CORPORATION, A FLORIDA CORPORATION
JILLIAN'S ENTERTAINMENT CORPORATION, A DELAWARE CORPORATION
(Name of Person(s) Filing statement)

COMMON STOCK, PAR VALUE $.001 PER SHARE 477420103
(Title of Class of Securities) (CUSIP Number of Class of Securities)

Steven L. Foster
Chief Executive Officer
Jillian's Entertainment Corporation
727 Atlantic Avenue, Suite 600
Boston, Massachusetts 02111
(617) 350-3111

(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)

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

Copies to:

Sylvia M. Mahaffey, Esq.
Denise R. Cade, Esq.
SHAW, PITTMAN, POTTS & TROWBRIDGE
2300 N Street, N.W.
Washington, D.C. 20037

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

This statement is filed in connection with (check the appropriate box):

a. /x/ The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities
Act of 1933.
c. / / A tender offer.
d. / / None of the above.

Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. /x/

CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
TRANSACTION VALUATION(1) AMOUNT OF FILING FEE
- ----------------------------------------------------------------------------------------------------
<S> <C>
$2,131,632 $426.33
- ----------------------------------------------------------------------------------------------------
</TABLE>

/x/ CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(a)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY
PAID. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR
THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.

Amount previously paid: $426.33 Filing parties: Jillian's Entertainment
Corporation
Form or registration no: Schedule 14A Date filed: November 13, 1995

(1) Pursuant to Rule 0-11(b), the filling fee was determined at 1/50 of 1% of
$2,131,632, the amount to be received by the Other Shareholders for their
shares of Common Stock in the Merger.
<PAGE> 2
CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Item in
-------
Schedule 13E-3 Caption in Preliminary Proxy Statement
-------------- --------------------------------------
<S> <C>
Item 1(a) . . . . . . . . . . . . . . INTRODUCTION

Item 1(b) . . . . . . . . . . . . . . VOTING AND PROXY INFORMATION -- Record Date; Outstanding
Shares; Voting

Item 1(c)-(d) . . . . . . . . . . . . MARKET INFORMATION

Item 1(e)-(f) . . . . . . . . . . . . Not Applicable

Item 2 . . . . . . . . . . . . . . . AVAILABLE INFORMATION and EXECUTIVE OFFICERS AND
DIRECTORS OF THE COMPANY

Item 3 . . . . . . . . . . . . . . . PRIOR CONTACTS BETWEEN THE COMPANY AND CERTAIN
AFFILIATES

Item 4(a) . . . . . . . . . . . . . . PROPOSAL TO APPROVE THE MERGER

Item 4(b) . . . . . . . . . . . . . . SPECIAL FACTORS -- Alternatives Considered and PROPOSAL
TO APPROVE THE MERGER

Item 5(a)-(e) . . . . . . . . . . . . Not Applicable

Item 5(f)-(g) . . . . . . . . . . . . SPECIAL FACTORS -- Certain Effects of the Merger

Item 6(a) . . . . . . . . . . . . . . FINANCING OF THE MERGER

Item 6(b) . . . . . . . . . . . . . . FEES AND EXPENSES

Item 6(c)-(d) . . . . . . . . . . . . Not Applicable
</TABLE>

- 2 -
<PAGE> 3
<TABLE>
Item in
-------
Schedule 13E-3 Caption in Preliminary Proxy Statement
-------------- --------------------------------------
<S> <C>
Item 7(a)-(c) . . . . . . . . . . . . SPECIAL FACTORS -- Background of the Merger and --
Purposes and Reasons for the Merger

Item 7(d) . . . . . . . . . . . . . . SPECIAL FACTORS

Item 8(a)-(b) . . . . . . . . . . . . SPECIAL FACTORS -- Board of Directors Determination of
Fairness of the Proposal and -- Opinion of the Financial
Advisor

Item 8(c) . . . . . . . . . . . . . . VOTING AND PROXY INFORMATION -- Record Date; Outstanding
Shares; Voting and PROPOSAL TO APPROVE THE MERGER --
Vote Required and Recommendation of the Board of
Directors

Item 8(d)-(e) . . . . . . . . . . . . SPECIAL FACTORS -- Board of Directors Determination of
Fairness of the Merger

Item 8(f) . . . . . . . . . . . . . . Not Applicable

Item 9(a)-(b) . . . . . . . . . . . . SPECIAL FACTORS -- Background of the Merger -- Certain
Effects of Borrowings and Equity Financing and --
Opinion of the Financial Advisor

Item 9(c) . . . . . . . . . . . . . . SPECIAL FACTORS -- Opinion of the Financial Advisor

Item 10(a) . . . . . . . . . . . . . VOTING AND PROXY INFORMATION -- Record Date; Outstanding
Shares; Voting; SPECIAL FACTORS -- Interests of Certain
Persons in the Merger and SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Item 10(b) . . . . . . . . . . . . . Not Applicable
</TABLE>

- 3 -
<PAGE> 4
<TABLE>
Item in
-------
Schedule 13E-3 Caption in Preliminary Proxy Statement
-------------- --------------------------------------
<S> <C>
Item 11 . . . . . . . . . . . . . . . Not Applicable

Item 12 . . . . . . . . . . . . . . . INTRODUCTION, VOTING AND PROXY INFORMATION -- Record
Date; Outstanding Shares; Voting and PROPOSAL TO APPROVE
THE MERGER -- Vote Required and Recommendation of the
Board of Directors

Item 13(a) . . . . . . . . . . . . . PROPOSAL TO APPROVE THE MERGER -- Rights of Dissenting
Shareholders

Item 13(b)-(c) . . . . . . . . . . . Not Applicable

Item 14(a) . . . . . . . . . . . . . SELECTED FINANCIAL DATA; MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS and FINANCIAL STATEMENTS OF THE COMPANY

Item 14(b) . . . . . . . . . . . . . Not Applicable

Item 15 . . . . . . . . . . . . . . . VOTING AND PROXY INFORMATION -- Solicitation of Proxies

Item 16 . . . . . . . . . . . . . . . Additional information concerning the Rule 13e-3
transaction is set forth in the Preliminary Proxy
Statement, and the Appendices thereto, a copy of which
is attached hereto as Exhibit (d)(1)

Item 17 . . . . . . . . . . . . . . . Separately included herewith
</TABLE>

- 4 -
<PAGE> 5
ITEM 1. Issuer and Class of Security Subject to the Transaction.

(a) The information set forth in the Preliminary Proxy Statement
under "INTRODUCTION" is incorporated herein by reference.

(b) The information set forth in the Preliminary Proxy Statement
under "VOTING AND PROXY INFORMATION -- Record Date; Outstanding Shares; Voting"
is incorporated herein by reference.

(c)-(d) The information set forth in the Preliminary Proxy Statement
under "MARKET INFORMATION" is incorporated herein by reference.

(e)-(f) Not applicable.

ITEM 2. Identity and Background.

The information set forth in the Preliminary Proxy Statement under
"AVAILABLE INFORMATION" and "EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY"
is incorporated herein by reference. Neither Jillian's Entertainment
Corporation, a Florida corporation, Jillian's Entertainment Corporation, a
Delaware corporation, nor any of the other persons or entities with respect to
whom information is given in response to this Item 2 (x) has been convicted
during the last five years in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (y) was a party during the last five
years to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining further violations of, or prohibiting
activities, subject to, federal or state securities laws or finding any
violation of such laws.

ITEM 3. Past Contacts, Transactions or Negotiations.

The information set forth in the Preliminary Proxy Statement under
"PRIOR CONTACTS BETWEEN THE COMPANY AND CERTAIN AFFILIATES" is incorporated
herein by reference.

ITEM 4. Terms of the Transaction.

(a) The information set forth in the Preliminary Proxy Statement
under "PROPOSAL TO APPROVE THE MERGER" is incorporated herein by reference.

(b) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS -- Alternatives Considered" and "PROPOSAL TO APPROVE THE
MERGER" is incorporated herein by reference.

ITEM 5. Plans or Proposals of the Issuer or Affiliate.

(a)-(e) Not applicable.

- 5 -
<PAGE> 6
(f)-(g) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS -- Certain Effects of the Merger" is incorporated herein
by reference.

ITEM 6. Source and Amount of Funds or Other Consideration.

(a) The information set forth in the Preliminary Proxy Statement
under "FINANCING OF THE MERGER" is incorporated herein by reference.

(b) The information set forth in the Preliminary Proxy Statement
under "FEES AND EXPENSES" is incorporated herein by reference.

(c)-(d) Not applicable.

ITEM 7. Purpose(s), Alternatives, Reasons and Effects.

(a)-(c) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS -- Background of the Merger" and "-- Purposes and
Reasons for the Merger" is incorporated herein by reference.

(d) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS" is incorporated herein by reference.

ITEM 8. Fairness of the Transaction.

(a)-(b) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS -- Board of Directors Determination of Fairness of the
Proposal" and "-- Opinion of the Financial Advisor" is incorporated herein by
reference.

(c) The information set forth in the Preliminary Proxy Statement
under "VOTING AND PROXY INFORMATION -- Record Date; Outstanding Shares; Voting"
and "PROPOSAL TO APPROVE THE MERGER -- Vote Required and Recommendation of the
Board of Directors" is incorporated herein by reference.

(d)-(e) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS -- Board of Directors Determination of Fairness of the
Merger."

(f) Not applicable.

ITEM 9. Reports, Opinions, Appraisals and Certain Negotiations.

(a)-(b) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS -- Background of the Merger -- Certain Effects of
Borrowings and Equity Financing" and " -- Opinion of the Financial Advisor" is
incorporated herein by reference.

- 6 -
<PAGE> 7
(c) The information set forth in the Preliminary Proxy Statement
under "SPECIAL FACTORS -- Opinion of the Financial Advisor" is incorporated
herein by reference

ITEM 10. Interest in Securities of the Issuer.

(a) The information set forth in the Preliminary Proxy Statement
under "VOTING AND PROXY INFORMATION -- Record Date; Outstanding Shares;
Voting," "SPECIAL FACTORS -- Interests of Certain Persons in the Merger" and
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" is
incorporated herein by reference.

(b) Not applicable.

ITEM 11. Contracts, Arrangements or Understandings with Respect to
the Issuer's Securities.

Not applicable.

ITEM 12. Present Intention and Recommendation of Certain
Persons with Regard to the Transaction.

The information set forth in the Preliminary Proxy Statement under
"INTRODUCTION," "VOTING AND PROXY INFORMATION -- Record Date; Outstanding
Shares; Voting" and "PROPOSAL TO APPROVE THE MERGER -- Vote Required and
Recommendation of the Board of Directors" is incorporated herein by reference.

ITEM 13. Other Provisions of the Transaction.

(a) The information set forth in the Preliminary Proxy Statement
under "PROPOSAL TO APPROVE THE MERGER -- Rights of Dissenting Shareholders" is
incorporated herein by reference.

(b)-(c) Not applicable.

ITEM 14. Financial Information.

(a) The information set forth in the Preliminary Proxy Statement under
"SELECTED FINANCIAL DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" and "FINANCIAL STATEMENTS OF THE COMPANY"
is incorporated herein by reference.

(b) Not applicable.

- 7 -
<PAGE> 8

ITEM 15. Persons and Assets Employed, Retained or Utilized.

The information set forth in the Preliminary Proxy Statement under
"VOTING AND PROXY INFORMATION -- Solicitation of Proxies" is incorporated
herein by reference.

ITEM 16. Additional Information.

Additional information concerning the Rule 13e-3 transaction is set
forth in the Preliminary Proxy Statement and the Appendices thereto, a copy of
which is attached hereto as Exhibit (d)(1).

ITEM 17. Material to be Filed as Exhibits.

(b) (3) Letter, dated May 23, 1996, relating to the engagement of
Hampshire Securities Corporation by Jillian's Entertainment Corporation, a
Florida corporation.

(b) (4) Letter, dated May 23, 1996, relating to the purchase of
common stock of Jillian's Entertainment Corporation, a Delaware corporation, by
Island Partners, Ltd.

(d) (1) Notice of Special Meeting of Shareholders, Preliminary Proxy
Statement, with Appendices and Form of Proxy for Special Meeting.

(d) (3) Consent of BDO Seidman, LLP.

- 8 -
<PAGE> 9
SIGNATURE

After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

August 27, 1996

JILLIAN'S ENTERTAINMENT
CORPORATION, a Florida corporation

By: /s/ STEVEN L. FOSTER
---------------------------------
Steven L. Foster
Chief Executive Officer

JILLIAN'S ENTERTAINMENT
CORPORATION, a Delaware corporation

By: /s/ STEVEN L. FOSTER
---------------------------------
Steven L. Foster
Sole Director*

*As of the date hereof, no executive officer has been appointed.

- 9 -
<PAGE> 10
EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C> <C>
(b)(1) Draft Fairness Opinion, dated October 2, 1995, of Bannon & Co., *
Inc.

(b)(2) Presentation of Bannon & Co., Inc. to the Board of Directors of *
Jillian's Entertainment Corporation, a Florida corporation, dated
October 2, 1995.

(b)(3) Letter, dated May 23, 1996, relating to the engagement of
Hampshire Securities Corporation by Jillian's Entertainment
Corporation, a Florida corporation.

(b)(4) Letter, dated May 23, 1996, relating to the purchase of common
stock of Jillian's Entertainment Corporation, a Delaware
corporation, by Island Partners, Ltd.

(d)(1) Notice of Special Meeting of Shareholders, Preliminary Proxy
Statement, with Appendices and Form of Proxy for Special Meeting.

(d)(2) Consent of Bannon & Co., Inc. *

(d)(3) Consent of BDO Seidman, LLP
</TABLE>

- ------------------
* Filed on November 13, 1995.

- 10 -

<PAGE> 1

Jillian's Entertainment Corporation
727 Atlantic Avenue
Suite 600
Boston, Massachusetts 02111
Telephone: (617) 350-3111
Facsimile: (617) 350-5606

May 23, 1996

Hampshire Securities Corporation
640 Fifth Avenue
New York, New York 10019
Attention: Douglas M. Suliman, Jr.

Re: Engagement of Hampshire Securities Corporation

Dear Mr. Suliman:

This letter agreement (this "Agreement") is entered into as of the
date first above written by and between Jillian's Entertainment Corporation, a
Florida corporation (the "Company"), and Hampshire Securities Corporation
("Hampshire"), to set forth the terms and conditions pursuant to which
Hampshire has been retained by the Company as its exclusive agent in connection
with potential private placements of debt or equity issued by the Company or by
a new corporation ("Newco") to be used as a merger vehicle in a "going private"
transaction of the Company under Rule 13e-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and other potential transactions as
further described in Section 3(i) (A), (B), (C) or (D) hereof (the
"Transactions").

In consideration of the premises and mutual undertakings herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and Hampshire agree as follows:

1. Retention: The Company hereby retains Hampshire as its
exclusive agent in connection with the Transactions through the end of the
Exclusivity Period (as hereinafter defined). The Company represents that it is
not currently in active discussions or operating under or bound to any
agreement or commitment with any other entity or person with respect
<PAGE> 2
Hampshire Securities Corporation
May 23, 1996
Page 2

to the Transactions. Hampshire agrees to use its best efforts to present any
and all proposals to the Company with respect to Transactions on or before
September 30, 1996 or such later date as mutually agreed upon by the Company
and Hampshire (the "Exclusivity Period"). This engagement shall continue in
effect through the Exclusivity Period, except that, notwithstanding anything to
the contrary herein the provisions of the paragraphs hereof regarding (i)
compensation and reimbursement shall survive the term of this engagement and
(ii) indemnification and contribution and confidentiality shall survive the
term of this engagement and any assignment of this Agreement.

Upon Hampshire's presentation of a proposal with respect to a
Transaction acceptable to the Company, the Company shall use its best efforts
in good faith to reach a definitive agreement as to the terms and conditions of
the Transaction, and such agreement shall be consistent with the terms and
conditions of this Agreement. The consummation of a Transaction which
contemplates a merger of the Company with Newco shall be subject to the
approval of the stockholders of the Company as required by law. The Company
and Hampshire agree that the definitive agreement as to the terms and
conditions of the Transaction must be reached between the Company and the other
parties thereto prior to the expiration of the Exclusivity Period. Anything in
this Agreement to the contrary notwithstanding, if Hampshire shall propose a
Transaction during the Exclusivity Period and Hampshire, the Company and the
other parties thereto shall reach agreement with respect thereto following the
expiration of the Exclusivity Period with respect to such Transaction,
Hampshire shall be entitled to the Fee (as hereinafter defined) as more
particularly described herein below. Hampshire agrees that the Company is not
required to accept any proposal with respect to a Transaction made by Hampshire
during the Exclusivity Period. The parties' goal is to raise between
$6,000,000 and $12,000,000 for the benefit of the Company and/or Newco.

2. Deregistration. The Company acknowledges that a condition to
the consummation of a Transaction may be that the registration of the Company's
common stock, par value $.001 per share (the "Common Stock"), under the
Exchange Act be terminated. If deregistration is a condition, all parties
shall cooperate to satisfy the deregistration requirements imposed by the
Federal securities laws and regulations.

3. Exclusive Dealings. The Company agrees that during the
Exclusivity Period, it will not, without the express prior written consent of
Hampshire, (i) solicit, initiate or encourage the submission of any proposal or
offer from any person (other than Hampshire) relating to a (A) liquidation,
dissolution or recapitalization, (B) merger or consolidation, (C)
acquisition, purchase or sale of any substantial portion of either the
<PAGE> 3
Hampshire Securities Corporation
May 23, 1996
Page 3

Company's or Newco's outstanding securities or assets, or (D) similar
transaction or business combination involving the Company, Newco or the
subsidiaries of the Company or Newco, or (ii) participate in any discussions
or negotiations with any person other than Hampshire, any of its directors,
officers, employees or agents (including Douglas M. Suliman, Jr.) regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner, any effort or attempt by any third party to do
or seek any of the foregoing. The Company shall notify Hampshire immediately
if any person makes any proposal, offer, inquiry or contact with respect to any
of the foregoing. Any provision of this Agreement to the contrary
notwithstanding, the Company and Hampshire acknowledge that the Company is
bound by its fiduciary obligations and that the Company must act in accordance
with those obligations.

4. Compensation.

(a) Fee. As compensation for Hampshire's services heretofore
and hereafter rendered as provided herein, upon the consummation of a
Transaction prior to the end of the Exclusivity Period, whether or not such
Transaction is effected as a result of the efforts of Hampshire, Hampshire
shall be paid an amount equal to five percent (5%) of (i) the gross amount of
proceeds of the sale of any debt or equity sold by the Company or Newco prior
to such termination, or (ii) if no debt or equity is sold in connection with a
Transaction, the gross amount paid to shareholders of the Company and any other
compensation (including but not limited to non-competition, salary and bonus
payments) paid to officers of the Company as a result of a Transaction (the
"Fee"). If within two years after the termination of Hampshire's engagement
hereunder, one or more Transactions shall occur with a party or parties
introduced by Hampshire to the Company or Newco prior to such termination, then
the Company shall pay Hampshire the Fee at the closing of each such
Transaction, up to an aggregate of $600,000 (including any Fees paid to
Hampshire pursuant to its engagement hereunder).

(b) Expenses. The Company shall reimburse Hampshire from
time to time for the reasonable out-of-pocket expenses as they are incurred in
connection with the performance of its services hereunder, including but not
limited to, travel, entertainment, printing and courier, or accountants
retained by it (but shall not include the fees or expenses of Hampshire's
counsel), upon receipt of appropriate receipts for same; provided, however,
that the Company's obligation to reimburse Hampshire for such out-of-pocket
expenses shall be limited to $10,000. In addition to the foregoing, the
Company shall reimburse Hampshire for any reasonable fees and expenses of its
counsel incurred in connection with the preparation of any offering circular
relative to a Transaction and relative to compliance by
<PAGE> 4
Hampshire Securities Corporation
May 23, 1996
Page 4

the Company and/or Newco with Federal securities laws and rules and state blue
sky statutes and regulations in connection with consummation of a Transaction,
and any such reimbursements shall count toward the aforereferenced $10,000.
The Company shall bear all other costs and expenses incident to the effecting
of a Transaction, including all expenses and fees incident to securing
shareholder approval, compliance with Federal and state securities laws and
other fees and disbursements of counsel and accountants retained by the Company
or Newco.

5. Confidential Information.

(a) Hampshire shall treat any and all information disclosed
by the Company and its subsidiaries to Hampshire regarding the Company and its
subsidiaries in connection with any Transaction proposal and any Transaction
as confidential and privileged (the "Confidential Information"), and shall use
the Confidential Information for the exclusive purpose of considering and
presenting Transaction proposals to the Company or Newco, including discussing
such Transaction proposals with potential investors in the Company or Newco,
and negotiating an agreement with the Company or Newco setting forth the terms
and conditions of the Transaction. For purposes of this Agreement,
Confidential Information includes, but is not limited to, the records, books,
data, ideas, customer lists, marketing plans, financial and technical
information, models, programs, processes and other information of the Company
and its subsidiaries. For purposes of this Agreement, Confidential
Information does not include information generally known in the industry or in
the public domain concerning the Company and its subsidiaries or information
concerning the Company and its subsidiaries which is disclosed to Hampshire by
third parties who have a right to do so.

(b) In the event that Hampshire does not present a Transaction
proposal acceptable to the Company within the Exclusivity Period, immediately
upon the expiration of the Exclusivity Period, Hampshire agrees to deliver
promptly upon the written request of the Company to the Company all
Confidential Information, in whatever form, provided to Hampshire, including
Confidential Information given to Hampshire's agents and potential investors in
Newco or the Company.

(c) For a period of five (5) years from the date hereof,
Hampshire shall not disclose, disseminate or transfer, either verbally or by
any other means, to a third party any of the Confidential Information without
the express prior written consent of the Company, which consent the Company may
withhold in its absolute discretion. The foregoing, or anything else contained
in this Agreement, notwithstanding, Hampshire shall be under no prohibition,
restriction or limitation from disclosing or producing Confidential Information
<PAGE> 5
Hampshire Securities Corporation
May 23, 1996
Page 5

pursuant to any interrogatories or other document request to which a response
is ordered by a court, subpoena or order of a court or other lawful authority
having jurisdiction over the Company or Hampshire which Hampshire reasonably
believes to be bona fide. Hampshire shall give the Company notice of any such
subpoena or order promptly following receipt of any such interrogatories,
subpoena or order and prior to Hampshire's disclosure or production of
Confidential Information. Notwithstanding anything to the contrary in this
Agreement, Hampshire shall not take any action with respect to any such
interrogatories, subpoena or order unless and until (i) Hampshire has notified
the Company in writing, (ii) the Company has had an opportunity to respond
thereto and (iii) with respect to any such order, the court has considered
confidentiality objections.

(d) Hampshire acknowledges that the Confidential Information is
material, nonpublic information for purposes of Section 10 of the Exchange Act
and the regulations promulgated thereunder. Accordingly, until consummation
of a Transaction, neither Hampshire nor any of its affiliates who receives
Confidential Information shall make purchases or sales of shares of Common
Stock or any other security convertible into or exchangeable for or
exercisable for shares of Common Stock. In the event that a Transaction is
not consummated, for a period of six (6) months from the date hereof neither
Hampshire nor any of its affiliates shall make purchases or sales of shares of
Common Stock or any other security convertible into or exchangeable into or
exercisable for shares of Common Stock. For purposes of this Agreement,
"affiliate" shall mean any person who directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the person specified. For purposes of this definition, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the specified
person, whether through the ownership of voting securities, by contract or
otherwise.

6. Compliance with Agreement. Hampshire shall inform all employees,
officers, directors and agents and all potential investors in Newco or the
Company who receive any Confidential Information of its confidential
nature and shall advise all such persons that they are required to hold the
Confidential Information in confidence as a condition of their receipt and
review thereof. Hampshire agrees that it shall cause all potential investors
in Newco or the Company to acknowledge the terms and conditions of such
confidential treatment prior to their receipt of Confidential Information.
<PAGE> 6
Hampshire Securities Corporation
May 23, 1996
Page 6

7. Licenses. Hampshire represents and warrants that it and its
agents have and/or will have prior to undertaking any actions that constitute
an offer or sale of securities, all governmental licenses (including both
Federal and state broker-dealer or agent licenses) required under all
applicable law to perform its obligations under this Agreement.

8. Compliance with Laws.

(a) Hampshire shall comply in all material respects with
all applicable Federal and state laws and regulations in connection with its
activities contemplated hereby. Unless consented to by the Company in writing,
Hampshire shall neither take any action nor omit to take any action in
connection therewith which would cause a Transaction to be effected other than
in compliance with Section 4(2) of, or Regulation D or Regulation S promulgated
under, the Securities Act of 1933, as amended (the "Act").

(b) The Company shall comply in all material respects with all
applicable Federal and state laws and regulations in connection with its
activities related to any Transaction. Unless consented to by Hampshire in
writing, the Company shall neither take any action nor omit to take any action
in connection therewith which could cause a Transaction to be effected other
than in compliance with Section 4(2) of, or Regulation D or Regulation S
promulgated under, the Act.

9. Indemnification.

(a) The Company agrees to indemnify and hold harmless Hampshire,
each of its directors, officers, employees and agents and each person, if any,
who controls it within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which Hampshire, or any
such director, nominee, officer, employee, agent or controlling person, may
become subject, under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) (i)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (A) any definitive Proxy Statement or other
final document filed by the Company or Newco with the Securities and Exchange
Commission (the "Commission") in connection with a Transaction, (B) any blue
sky application or other document executed by the Company or Newco in
connection with a Transaction or based upon written information furnished by
the Company filed in any state or other jurisdiction in order to qualify any or
all of the securities issued by the Company or
<PAGE> 7
Hampshire Securities Corporation
May 23, 1996
Page 7

Newco in a Transaction under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), (C) any offering document distributed by the Company or Newco or
on behalf of the Company (which has been approved by the Company or Newco, as
applicable, in writing for such distribution) in connection with a Transaction
("Offering Documents"), or (ii) arise out of or are based upon the omission or
alleged omission to state in any such definitive Proxy Statement or other final
document, Offering Documents, or any amendment or supplement thereto, or in any
Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of Hampshire specifically
for use in the preparation of the definitive Proxy Statement, other final
document or Offering Documents or any such amendment or supplement thereof or
any such Blue Sky Application. This indemnity will be in addition to any
liability which the Company may otherwise have.

(b) Hampshire will indemnify and hold harmless the Company, each
of its directors, nominees for director named in any definitive Proxy
Statement, other final document or Offering Documents or any Blue Sky
Application and officers and each person, if any, who controls the Company
within the meaning of Section 15 the Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) to which
the Company or any such director, nominee, officer or controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Proxy Statement, other final document, any
Offering Document, or any amendment or supplement thereto, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in the Proxy Statement, any Offering Document, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by Hampshire specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which
Hampshire may otherwise have.
<PAGE> 8
Hampshire Securities Corporation
May 23, 1996
Page 8

(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify in writing the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to any indemnified party otherwise than
under this Section 9. In case any such action is brought against any
indemnified party, and such indemnified party notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that the indemnifying party may wish to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the fees and expenses of such additional
counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party or (ii) the named parties to any such action (including any
impleaded parties) include both indemnified parties and the indemnifying party
and in the judgment of such indemnified parties, it is advisable for such
indemnified parties to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified parties, it being understood, however,
that the indemnifying party shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys plus appropriate local counsel for such indemnified parties if deemed
necessary or advisable by the indemnifying party, which firm shall be
designated in writing by the indemnified parties). Any such fees and expenses
payable by the indemnifying party shall be paid to the indemnified parties
entitled thereto as incurred by the indemnified parties. No settlement of any
action against an indemnified party shall be made without the consent of the
indemnified party, which consent shall not be unreasonably withheld in light of
all factors of importance to such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action. No indemnified party
shall consent to any settlement of any action against such indemnified
<PAGE> 9
Hampshire Securities Corporation
May 23, 1996
Page 9

party without the consent of the indemnifying party, which consent shall not be
unreasonably withheld.

(d) In order to provide for just and equitable contribution
under the Act in any case in which (i) either party makes claims for
indemnification pursuant hereto but it is judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions hereof provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of either
party, then the Company on the one hand and Hampshire on the other shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (which shall, for all purposes of this Agreement, include,
but not be limited to, all reasonable costs of defense and investigation and
all reasonable attorneys' fees) in either such case (after contribution from
others) in such proportions that Hampshire is responsible in the aggregate for
that portion of such losses, claims, damages or liabilities represented by the
percentage that the fee paid to Hampshire bears to the aggregate amount of
gross proceeds received by the Company or Newco in the relevant Transaction,
and the Company shall be responsible for the remaining portion; provided,
however, that if such allocation is not permitted by applicable law then the
relative fault of the Company and Hampshire and controlling persons, in the
aggregate, in connection with the statements or omissions which resulted in
such damages and other relevant equitable considerations shall also be
considered. The relative fault shall be determined by reference to, among
other things, whether in the case of an untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact, such
statement or alleged statement or omission or alleged omission relates to
information supplied to the Company, or Hampshire and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and Hampshire agree (a) that it
would not be just and equitable if the respective obligations of the Company
and Hampshire to contribute pursuant to this paragraph were to be determined by
pro rata or per capita allocation of the aggregate damages (even if Hampshire
in the aggregate were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the first sentence of this paragraph and (b) that the
contribution of Hampshire shall not be in excess of its fee actually received
pursuant to this Agreement. No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, (i) the word "Company" includes
any officer, director, or person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act and (ii) the word
"Hampshire"

<PAGE> 10
Hampshire Securities Corporation
May 23, 1996
Page 10

includes each of its directors, officers, employees and agents and each person,
if any, who controls Hampshire within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. If the full amount of the contribution
specified in this paragraph is not permitted by law, then Hampshire and each
person who controls Hampshire shall be entitled to contribution from the
Company, its officers, directors and controlling persons to the full extent
permitted by law. The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11
of the Act other than the Company and Hampshire. No contribution shall be
requested with regard to the settlement of any matter from any party who did
not consent to the settlement; provided, however, that such consent shall not
be unreasonably withheld in light of all factors of importance to such party.

10. Miscellaneous.

(a) All questions concerning the validity, operation and
interpretation of this Agreement and the performance of the obligations imposed
upon the parties hereunder shall be governed by the laws of the State of New
York, as applicable, without regard to its choice of law provisions which would
require application of the laws of another jurisdiction.

(b) This Agreement embodies all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.

(c) Every provision of this Agreement is severable, and the
invalidity or unenforceability of any term or provision shall not affect
the validity or enforceability of the remainder of this Agreement.

(d) This Agreement will bind and inure to the benefit of the
parties hereto and their respective successors and assigns and the officers,
directors, employees, agents and controlling persons referred to in Section 9
and no other person will have any rights or obligations hereunder.
<PAGE> 11
Hampshire Securities Corporation
May 23, 1996
Page 11

(e) This Agreement and any rights or duties hereunder shall not
be assigned by the Company or Hampshire without the express prior written
consent of the other party, except that upon the termination of Douglas
M. Suliman Jr.'s employment with Hampshire with respect to Transactions
hereunder, this Agreement and all of Hampshire's rights and duties under this
Agreement shall automatically be assigned and delegated to Island Partners Ltd.
without further action by any party, provided that Island Partners Ltd. shall
have obtained, prior to the time of the assignment and delegation, all
governmental licenses (including both Federal and state broker-dealer or agent
licenses) required under all applicable law to perform its obligations under
this Agreement. Except as otherwise provided herein, upon such delegation and
assumption of obligations, Hampshire shall be relieved and fully discharged
from all of its rights and obligations hereunder, except with respect to Fees
accrued and unpaid, if any, to the date of assignment.

(f) All notices or other communications under this Agreement
shall be in writing and shall be deemed to have been given if delivered by
hand, by facsimile transmission, by overnight courier, or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
parties at the following address (or at such other addresses as shall be given
by like notice): (i) if to the Company, Jillian's Entertainment Corporation,
727 Atlantic Avenue, Suite 600, Boston, Massachusetts 02111, facsimile
(617) 350-5606, with a copy to Shaw, Pittman, Potts & Trowbridge, 2300 N Street,
N.W., Washington, D.C. 20037, attention: Steven L. Meltzer, Esq., facsimile
(202) 663-8007, and (ii) if to Hampshire, 640 Fifth Avenue, New York, NY
10019, facsimile (212) 641-3603, with copies to (A) Stroock & Stroock & Lavan,
Seven Hanover Square, New York, NY 10004, attention: Mark A. Rosenbaum, Esq.,
facsimile (212) 806-6006, and (B) Brock, Fensterstock, Silverstein, McAuliffe &
Wade, LLC, One Citicorp Center, 153 East 53rd Street, New York, NY 10022,
attention: Robert Steven Brown, Esq., facsimile (212) 371-5500.
<PAGE> 12
Hampshire Securities Corporation
May 23, 1996
Page 12

(g) For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto. Each
such counterpart shall be, and shall be deemed to be, an original instrument,
but all such counterparts taken together shall constitute one and the same
agreement.

JILLIAN'S ENTERTAINMENT
CORPORATION

By: /s/ Steven L. Foster
-----------------------------
Steven L. Foster,
Chief Executive Officer

AGREED AND ACCEPTED:

HAMPSHIRE SECURITIES CORPORATION

By: /s/ Michael J. Chill
-----------------------------
Michael J. Chill,
Vice President

<PAGE> 1

Island Partners, Ltd.
70 Walnut Street
Wellesley, Massachusetts 02181

May 23, 1996

Jillian's Entertainment Corporation
727 Atlantic Avenue
Suite 600
Boston, Massachusetts 02111
Attention: Steven L. Foster
Chief Executive Officer

Re: Subscription for Stock

Dear Mr. Foster:

This is to confirm our agreement that the undersigned has agreed to
purchase, and Jillian's Entertainment Corporation ("Jillian's") has agreed to
sell to the undersigned, the number of shares (the "Shares") of common stock of
Newco (as defined in Jillian's definitive Proxy Statement filed with the
Securities and Exchange Commission (the "Proxy Statement")) set forth below,
concurrently with the consummation of Transactions (as defined in the
Engagement Letter Agreement between Jillian's and Hampshire Securities
Corporation ("Hampshire") of even date herewith (the "Engagement Letter"))
having gross proceeds to Jillian's or Newco as follows:

Gross Proceeds Shares
-------------- ------

(1) On the first $6 million 300,000 Shares
of gross proceeds

(2) Plus, on gross proceeds in one Share per
excess of the amount $40 of gross
referred to in (1) above, proceeds
up to an additional $4 million
in gross proceeds
<PAGE> 2
Jillian's Entertainment Corporation
May 23, 1996
Page 2

(3) Plus, on gross proceeds in one Share per
excess of the amounts $20 of gross
referred to in (1) and (2) above, proceeds
up to an additional $2 million
in gross proceeds

In addition, if within two years after the termination of Hampshire's
engagement under the Engagement Letter, one or more Transactions shall occur
with a party or parties introduced by Hampshire or permitted assigns to
Jillian's or Newco prior to such termination and Hampshire shall have raised
less than $12 million pursuant to its engagement under the Engagement Letter,
then the undersigned shall be entitled to purchase at the closing of each such
Transaction a number of Shares equal to the following: with respect to gross
proceeds to Jillian's or Newco of such Transaction(s) (together with gross
proceeds to Jillian's or Newco from previous Transactions) between (i) $6
million and $10 million in the aggregate, the gross proceeds to Jillian's or
Newco of such Transaction divided by $40, and (ii) $10 million and $12
million in the aggregate, the gross proceeds to Jillian's or Newco of such
Transaction divided by $20.

The purchase price for the Shares shall be $.50 per Share and shall be
payable by delivery of a promissory note or notes, the principal of which shall
be payable in full at the end of seven years (or earlier at the election of the
undersigned) and which shall bear interest payable annually at the "Applicable
Federal Rate" prescribed under Section 1274(d) of the Internal Revenue Code of
1986, as amended, compounded annually). The amount of Shares to be purchased
and the price payable therefor shall be equitably adjusted in the event of a
recapitalization of Newco or Jillian's is effected in connection with the
Merger (as defined in the Proxy Statement) or a Transaction other than as is
contemplated by the Proxy Statement.

The undersigned shall be entitled to registration rights with respect
to the Shares which are comparable to any such rights granted to investors in
any Transaction.

The rights of the undersigned hereunder may not be assigned by the
undersigned, in part or in whole, without the prior consent of Jillian's, which
consent shall not be unreasonably withheld.
<PAGE> 3
Jillian's Entertainment Corporation
May 23, 1996
Page 3

Please confirm our agreement by executing and delivering to the
undersigned the copy of this letter provided to you.

ISLAND PARTNERS, LTD.

By: /s/ Douglas M. Suliman, Jr.
----------------------------
Douglas M. Suliman, Jr.,
President

AGREED AND ACCEPTED BY:

JILLIAN'S ENTERTAINMENT CORPORATION

By: /s/ Steven L. Foster
--------------------------
Steven L. Foster,
Chief Executive Officer

<PAGE> 1

PRELIMINARY COPY

JILLIAN'S ENTERTAINMENT CORPORATION
727 ATLANTIC AVENUE, SUITE 600
BOSTON, MASSACHUSETTS 02111

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON _____________, 1996

To the Shareholders:

Notice is hereby given that a special meeting (together with any
adjournments(s) thereof, the "Special Meeting") of the shareholders (the
"Shareholders") of Jillian's Entertainment Corporation, a Florida corporation
(the "Company"), will be held at ____________________, ____________________,
____________________, at __:__ _.M., Eastern Time, on ___________, 1996. Only
Shareholders who were shown on the Company's records as holders of issued and
outstanding shares of common stock, par value $.001 per share (the "Common
Stock") in the Company as of the close of business on June 10, 1996 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting.
Each Shareholder is entitled to one vote in person or by proxy for each share
of Common Stock held by such Shareholder on the Record Date.

The Special Meeting is being held for the following purposes:

1. To consider and vote upon a proposal (the "Proposal") to
approve a merger (the "Merger") by and between the Company and Jillian's
Entertainment Corporation, a recently formed Delaware corporation ("Newco").
Under the Merger, each share of Common Stock owned immediately prior to
consummation of the Merger will be converted into the right to receive cash of
$0.50 per share, without interest (a "Merger Payment"), provided that such
Common Stock is held by a Shareholder, other than certain employees of the
Company, that (i) is the beneficial owner of less than 101,000 shares of Common
Stock as of the Record Date, (ii) is the beneficial owner of at least 101,000
shares of Common Stock as of the Record Date and elects to receive a Merger
Payment in respect of the shares of Common Stock beneficially owned by such
holder, or (iii) holds its shares through a broker or dealer registered under
the Securities Exchange Act of 1934, as amended and does not provide the
Company with evidence regarding the number of shares beneficially owned by such
holder.

2. To transact such other business as may properly come before
the Special Meeting.
<PAGE> 2
The accompanying Proxy Statement sets forth in more detail information
concerning the Merger.

Whether or not you expect to attend the meeting in person, you are
urged to sign and date the enclosed proxy and return the same promptly so that
your shares of Common Stock may be represented and voted at the Special
Meeting.

BY ORDER OF THE BOARD OF DIRECTORS,

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

Secretary

Boston Massachusetts

____________, 1996

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE SIGN,
DATE AND COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE GIVING
OF THE PROXY WILL NOT AFFECT YOUR RIGHTS TO VOTE AT THE MEETING IF THE PROXY IS
REVOKED AS SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.

2
<PAGE> 3

PRELIMINARY COPY

JILLIAN'S ENTERTAINMENT CORPORATION
727 ATLANTIC AVENUE, SUITE 600
BOSTON, MASSACHUSETTS 02111

PROXY STATEMENT FOR A SPECIAL MEETING
OF SHAREHOLDERS

TO BE HELD ON _____________, 1996

INTRODUCTION

This Proxy Statement is being furnished on behalf of Jillian's
Entertainment Corporation, a Florida corporation (the "Company"), in connection
with the solicitation of proxies to be voted at a special meeting (together
with any adjournment(s) thereof, the "Special Meeting") of shareholders of the
Company (the "Shareholders"). The Special Meeting is to be held at __:__ _.m.,
Eastern Time, on _____________, 1996, at ____________________________,
_____________________________, _____________________________. This Proxy
Statement and the Proxy are first being mailed to Shareholders on or about
____________, 1996.

The Board of Directors of the Company (the "Board") is soliciting the
proxies of the Shareholders who were shown on the Company's records as holders
of issued and outstanding shares of common stock, par value $.001 per share
(the "Common Stock") in the Company as of the close of business on June 10,
1996 (the "Record Date") to consider and vote upon a proposal (the "Proposal")
to approve a merger (the "Merger") by and between the Company and Jillian's
Entertainment Corporation, a recently formed Delaware corporation ("Newco").

Under the terms of the Merger (i) the Company will be merged with and into
Newco, and Newco shall be the surviving company in the Merger (the "Surviving
Company"), (ii) each share of Common Stock owned immediately prior to
consummation of the Merger by any Shareholder that is the beneficial owner of
at least 101,000 shares of Common Stock as of the Record Date and that does not
elect to receive cash of $0.50 per share, without interest (a "Merger Payment")
in respect of each share of Common Stock beneficially owned by such Shareholder
(any such Shareholder being hereinafter referred to as an "Initial Continuing
Shareholder") will be converted into the right to receive one share of common
stock of Newco, (iii) each share of Common Stock owned immediately prior to
consummation of the Merger by any Shareholder, other than an Employee
Continuing Shareholder (as defined below), that (A) is the beneficial owner of
less than 101,000 shares of Common Stock as of the

<PAGE> 4

Record Date, (B) is the beneficial owner of 101,000 or more shares of Common
Stock as of the Record Date, but elects to receive a Merger Payment in respect
of each share of Common Stock beneficially owned by such holder, or (C) holds
its shares through a broker or dealer registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and does not provide the Company
with evidence regarding the number of shares beneficially owned by such holder
(any of such persons or entities being hereinafter referred to as an "Other
Shareholder") will be converted into the right to receive a Merger Payment,
(iv) each stock option or warrant to purchase a share or shares of Common Stock
outstanding immediately prior to consummation of the Merger will be converted
into the right to purchase the same number of shares of common stock of Newco
on the same terms and conditions, and (v) if the aggregate number of shares of
Common Stock beneficially owned by an employee of the Company, who does not
qualify as an Initial Continuing Shareholder, on the Record Date plus the
aggregate number of shares of Common Stock underlying stock options or warrants
held by such employee on the Record Date, whether or not such options or
warrants are then exercisable, total at least 101,000 shares of Common Stock
(any such employee being hereinafter referred to as an "Employee Continuing
Shareholder" and, together with the Initial Continuing Shareholders, the
"Continuing Shareholders"), then each such share of Common Stock held of record
by the Employee Continuing Shareholder immediately prior to consummation of the
Merger will be converted into the right to receive one share of common stock of
Newco and each such stock option or warrant held by the Employee Continuing
Shareholder immediately prior to consummation of the Merger will be converted
into the right to purchase the same number of shares of common stock of Newco
on the same terms and conditions.

-2-
<PAGE> 5
such Broker-Dealer Shareholder, the beneficial owner of such shares provides
the Company with a letter of identification from the Broker-Dealer Shareholder
identifying such person as the beneficial owner, as of the Record Date, of the
number of shares specified in the letter of identification. In addition, in
order to qualify to be treated as an Other Shareholder for purposes of the
Merger, a beneficial owner of 101,000 or more shares of Common Stock as of the
Record Date must indicate on a form that will be supplied by the Company the
Shareholder's desire to receive a Merger Payment for each share of Common Stock
owned by such Shareholder. See "Proposal to Approve the Merger -- Payment for
Common Stock in the Merger." If a beneficial owner of 101,000 or more shares
of Common Stock as of the Record Date does not complete and deliver such form
in accordance with the instructions thereto, such Shareholder will be treated
as a Continuing Shareholder for purposes of the Merger.

The Company has determined that approximately $2,500,000 in cash will be
required in order to make the Merger Payments. The Company intends to use
funds obtained from the private placement of at least $6,000,000 of equity
and/or subordinated debt securities of the Surviving Company (the "Private
Placement") to make the Merger Payments, and it is a condition to consummation
of the Merger that the Company raise a minimum of $6,000,000 in gross proceeds
from the Private Placement. See "Financing of the Merger" and "Proposal to
Approve the Merger -- Structure of the Merger" and "Proposal to Approve the
Merger -- Certain Conditions to the Merger."

Approval of the Merger will require the favorable vote of the majority of
all shares of Common Stock. As of the Record Date, there were 9,137,798 issued
and outstanding shares of Common Stock held of record by approximately 3,400
Shareholders. As of the Record Date, the members of the Board and the
executive officers of the Company owned an aggregate of 1,340,850 shares
(approximately 14.7 percent of the total shares of Common Stock outstanding).
Only one member of the Board and/or executive officer of the Company was the
beneficial owner of 101,000 or more shares of Common Stock as of the Record
Date. Such Shareholder held a total of 1,323,600 shares (approximately 14.4
percent of the total shares of Common Stock outstanding) as of the Record Date.
Such Shareholder has informed the Company in writing that he will not elect to
receive a Merger Payment in respect of each share of Common Stock beneficially
owned by him. Consequently, he will be treated as a Continuing Shareholder for
purposes of the Merger. In addition, such Shareholder has informed the Company
that he intends to vote all of the shares of Common Stock held by him FOR the
Proposal. For additional information concerning the beneficial ownership of
shares of Common Stock, see "Security Ownership of Certain Beneficial Owners
and Management."

The Board believes that the Merger is fair to the Other Shareholders, and
in the best interest of the Company and the Shareholders, and unanimously
recommends that Shareholders vote FOR approval of the Merger. In making this
recommendation, the Board is

-3-
<PAGE> 6

relying upon, among other things, the opinion of Bannon & Co., Inc. (the
"Financial Advisor") (which the Company retained to determine the fairness of
the Merger Payment) that the Merger Payment of $0.50 per share of Common Stock
is fair to the Other Shareholders, as of __________, 1996. See "Special
Factors -- Board of Directors Determination of Fairness of the Proposal" and
"Special Factors -- Opinion of the Financial Advisor."

If the Merger is consummated, the Company will become an entity the
securities of which are privately held. The registration of the Common Stock
under the Exchange Act will terminate, resulting in the suspension of the
Company's obligations to file periodic reports such as Forms 10-KSB, 10-QSB and
8-K. Since the Common Stock will no longer be publicly held, the Company will
be relieved of the obligation to comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act, and the executive officers and directors
of the Company and Shareholders owning more than 10 percent of the Common Stock
will be relieved of the reporting requirements and "short swing" trading
restrictions under Section 16 of the Exchange Act. In addition, the Common
Stock will be delisted from the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), which will terminate the Company's
public trading market and relieve the Company of any further obligations to
comply with the rules and regulations relating to NASDAQ listing.

AVAILABLE INFORMATION

The Company is currently subject to the informational requirements of the
Exchange Act, and, in accordance therewith, files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information can be
inspected and copies obtained from the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.

The Company has filed with the Commission a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (the "Schedule 13E-3") under the Exchange Act.
This Proxy Statement does not contain all of the information set forth in the
Schedule 13E-3, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. The Schedule 13E-3

-4-
<PAGE> 7
and any amendments thereto, including exhibits filed as a part thereof, may be
examined and copied at the principal executive offices of the Company during
regular business hours by any Shareholder or such Shareholder's representative
who has been so designated in writing.

THESE TRANSACTIONS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTIONS OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.

The date of this Proxy Statement is ___________, 1996.

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TABLE OF CONTENTS

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INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

SUMMARY OF PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Meeting and Proxy Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Financing of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 19
Certain Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Opinion of the Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Material Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Regulatory Requirements and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

VOTING AND PROXY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Record Date; Outstanding Shares; Voting . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Revocability of Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SPECIAL FACTORS 27
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Bank and Equipment Lease Financing . . . . . . . . . . . . . . . . . . . . . . . . 29
Seller, Landlord and Municipal Financing . . . . . . . . . . . . . . . . . . . . . 32
Equity and Debt Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Current Effects of Borrowings and Equity Financing . . . . . . . . . . . . . . . . 39
Alternatives Considered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Payments to the Other Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Opinion of the Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Board of Directors Determination of Fairness of the Proposal . . . . . . . . . . . . . . . . 54
Certain Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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Material Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Federal Income Tax Consequences for Continuing Shareholders . . . . . . . . . . . . 61
Federal Income Tax Consequences for Other Shareholders . . . . . . . . . . . . . . 63
Federal Income Tax Consequences for Holders of Warrants to
Purchase Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Federal Income Tax Consequences for Holders of Options to
Purchase Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Purposes and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 64
Effect If the Merger is Not Approved . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

PROPOSAL TO APPROVE THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Certain Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Amounts Paid in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Payment for Common Stock in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Lock-Up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Vote Required and Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . 71

REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

FINANCING OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

BUSINESS AND PROPERTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Jillian's Clubs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Description of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Administrative Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Jillian's Clubs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 85
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Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
First Quarter Ended June 30, 1996 Compared
to First Quarter Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . 85
Fiscal Year Ended March 31, 1996 Compared to Fiscal Year
Ended March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

PRIOR CONTACTS BETWEEN THE COMPANY AND
CERTAIN AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

MARKET INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
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SUMMARY OF PROXY STATEMENT

The following is a brief summary of certain information contained in this
Proxy Statement. This summary is not intended to be complete and is qualified
in its entirety by reference to the more detailed information appearing
elsewhere in this Proxy Statement, including any Appendices hereto.
Shareholders are urged to review the entire Proxy Statement carefully.

Business of the Company

The Company is a Florida corporation whose primary business is the
operation of upscale billiard clubs. The Company, through wholly owned
subsidiaries, currently wholly or partially owns, operates and manages ten
billiard clubs, which are located in Miami, Florida; Seattle, Washington;
Cleveland, Ohio; Cleveland Heights, Ohio; Pasadena, California; Worcester,
Massachusetts; Champaign, Illinois; Annapolis, Maryland; Long Beach,
California; and Tacoma, Washington. The principal executive offices of the
Company are located at 727 Atlantic Avenue, Suite 600, Boston, Massachusetts
02111. See "Business and Properties of the Company."

Background of the Merger

The decision of the Board of Directors of the Company (the "Board") to
present a proposal (the "Proposal") to approve a merger (the "Merger") by and
between the Company and Jillian's Entertainment Corporation, a recently formed
Delaware corporation ("Newco") to the Shareholders marked the culmination of a
process that began in late 1994. The Merger is subject to satisfaction of
various conditions, including but not limited to the Company's ability to raise
at least $6,000,000 in gross proceeds through a private placement of debt or
equity. See "Financing of the Merger," below. At that time, the Board
determined that it might be necessary to restructure the Company in order to
create the potential for improving the Company's ability to raise funds both
for working capital and for further expansion and development of its billiard
club business in accordance with its business plans. In the Board's view, the
Company has an obligation to use its best efforts to continue to increase the
value of each Shareholder's investment in the Company. Although the Board
believed that the Company had satisfied this objective in part, the Board
determined that it could not continue to fully satisfy this objective without
further expansion of the Company's operations and an increase in the number of
clubs operating under the Company's name. The Board recognized that since the
Company began its upscale billiard club business in 1990, the Company had
experienced a net operating loss in each year other than 1993, the Company had
difficulty obtaining financing for development of additional clubs and the
Company had not been able to take full advantage of its position as a public
company through equity or debt offerings of its securities or the securities of
its subsidiaries and, since 1993, management believes that no analysts had
followed the Common Stock. In addition, the Board recognized that since mid
1993 the Common Stock had not traded above approximately $1.06 per share, and
has not

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traded above $0.50 per share since March 16, 1995. See "Market Information."
As of the date of this Proxy Statement, each of these factors continues to be
true.

The Company was one of the pioneers in the concept of upscale billiard
clubs. However, the billiard club business requires significant amounts of
cash, and the Company has not had sufficient cash to operate optimally or
expand its business in accordance with its business plans. As a result, the
Company was not able to develop billiard clubs quickly enough to attain a
dominant position in the upscale billiard club market prior to the entry of a
number of competitors operating single outlets or multiple units into this
market. In all but one year since it began its billiard club business in 1990,
the Company has experienced a net operating loss. During this same period, the
number of competitors in the upscale entertainment business that own multi-unit
entertainment facilities has increased, and a number of these competitors have
opened billiard clubs in areas where the Company otherwise might have
established clubs if it had been able to obtain sufficient capital to do so.
For example, Clicks Billiards, which dominates the Southwest and Southeast
upscale billiard club markets, has opened 26 billiard clubs in those regions;
Pinkies has opened 14 billiard clubs at sites in Arizona, Colorado, Nevada and
other Southwest states; Boston Billiard Clubs has opened six billiard clubs in
the Northeast region; Fats Billiard Clubs has established five billiard clubs
in Southern California; and Champions Billiards has opened five billiard clubs
in the Washington, D.C. metropolitan area. Other competitors have opened
larger clubs, or entertainment centers, which offer diverse forms of
entertainment, such as billiards, electronic games, restaurant and bar services
and night club-style entertainment. For example, Dave & Busters, Inc., a
public company based in St. Louis, Missouri, operates seven entertainment
centers throughout the United States, and America Live operates a chain of
eight entertainment centers throughout the United States. See "Business and
Properties of the Company -- Description of Business -- General."

Since it began its billiard club business, the Company has had difficulty
raising capital at the rate it believes would have been necessary either to
maximize or to benefit from its position as a pioneer in the industry. During
this period, the Company has had difficulty obtaining bank, as well as
equipment lease, financing, and when the Company has been able to obtain such
financing, the Company's poor financial condition generally has adversely
affected its ability to obtain financing on more favorable terms. See "Special
Factors -- Background of the Merger -- Bank and Equipment Lease Financing."

The Company has been more successful in its efforts to obtain seller,
landlord or municipal financing and has used such financing to partially fund
the acquisition or construction of all of its billiard clubs. In all but one
case, however, the Company collateralized the financing with the assets or
stock of the subsidiary through which the Company owns the club, leaving the
Company with reduced sources of collateral to obtain additional financing for
working capital and further expansion and development and risking the
possibility that

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the Company could lose its interests in these clubs. See "Special Factors --
Background of the Merger -- Seller, Landlord and Municipal Financing."

In addition, the Company has attempted to raise capital for expansion
through private placements of equity and debt instruments. Because of the
dilutive effect that such issuances would have on the value of the Common Stock
in the hands of the existing Shareholders, the Company has attempted to raise
capital in this manner only as a last resort. Despite its efforts, the Company
has had only modest success in raising capital through private placements of
its Common Stock, of debt instruments or of the equity interests in its
subsidiaries. While the Company believed that its guarantee of favorable
returns and offering of early buy-outs would help attract investors, it was
advised during its discussions with potential investors that such investors had
no confidence that the Company could fulfill its guarantees or buy-out
responsibilities, based on the Company's history of poor performance, and if
the Company had insufficient assets or cash flow, it would be doubtful that an
investor with standing to sue would be provided with the rights guaranteed the
investor in the offering. See "Special Factors -- Background of the Merger --
Equity and Debt Financing."

While the Company has had modest success in raising capital through
private placements of its Common Stock and the equity interests in its
subsidiaries, it has not considered it advisable to attempt to raise capital
through public offerings of its equity or debt securities. Currently, there is
only a limited trading market for the Common Stock (see "Market Information")
and the Board believes that the Common Stock is not being followed by market
analysts because the Company has not received any communications from market
analysts in the past several years. The Company has made no attempt to get
analysts to follow the Common Stock or to retain an investment banking firm to
underwrite a public offering of the Common Stock, however, because, in light of
the Company's history of poor performance to date the Company believes that
such attempts would be unsuccessful. Further, the Board recognizes that the
Company has had an unusual history, in that its present involvement in the
billiard club industry is different from the purposes for which it was
initially incorporated. See "Business and Properties of the Company."
Further, the Company has not shown any strong earnings in the course of its
operations in the billiard club industry and is not in the best position to
support optimistic or dramatic market statements. In addition, since mid 1993,
the Common Stock has not traded above approximately $1.06 per share, and has
not traded above $0.50 per share since March 16, 1995. See "Special Factors --
Background of the Merger -- Equity and Debt Financing."

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been able to develop sites in other more attractive areas where such financing
has not been available. The Company's reliance on this type of financing has
resulted in the encumbrance of the assets and/or stock of all but one of the
subsidiaries through which it owns its billiard clubs. The unavailability of
such collateral has, in turn, contributed to the Company's difficulty in
obtaining bank and equipment lease financing. Further, the Company's history
of poor performance has inhibited its ability to raise capital through the
private placement of its securities or the securities of its subsidiaries.

The Board believes that the Company's inability to raise capital has
significantly contributed to the fact that the Company has experienced net
losses for all but one of the past five years, and such lack of profit, in
turn, has prevented the Company from significantly improving its position in
the upscale billiard club market through expansion and development. Management
believes that there are a number of markets in which the Company could have
achieved market dominance or acquired a more substantial share of the market if
the Company had had sufficient capital either to enter the market earlier or to
commence and expand its operations in that market at an earlier date. Because
the Company has instead had limited amounts of capital available, it has had to
expand the number of clubs that it operates slowly, and the construction of
those clubs has, in some cases, been delayed due to lack of funds at a
particular time. Such delays, in some instances, have required the Company to
pay rent prior to commencement of operations at those clubs, which resulted in
increased expense for the Company without any offsetting increase in operating
income. As a result, delays resulting in the payment of pre-opening rent have
had a direct impact on the costs associated with developing the clubs. The
Board believes that the value of the Common Stock also has been depressed due
to the Company's failure to achieve profitable operations on a continuing
basis. As a result, the Company's ability to raise capital through the public
or private sale of its Common Stock has been limited. The Board, therefore, is
of the view that the Company's profitability would cause an increase in the
market for, and value of, the Common Stock, which in turn would increase the
Company's attractiveness as an investment and thereby further facilitate
capital rasing activities.

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the federal securities laws. Management indicated that this cost savings,
which the Company estimates to be approximately $75,000 per year, could cause
the Company to be more attractive to the types of well-capitalized and
sophisticated investors that are willing to invest substantial amounts of
capital in an enterprise. In addition, in the experience of certain members of
the Board, investors generally are not willing to commit significant amounts of
capital to an enterprise that, like the Company, does not have a history of
profitable operations unless the number of shareholders is relatively small and
composed primarily of individuals who either are actively involved in the
operations of the Company or are family members of such persons. Further,
management of the Company believes that the additional disclosure regarding
company operations, stock ownership and compensation of, or payments to,
persons with a significant investment in the company that is required by the
federal securities laws applicable to a public company is often unacceptable to
investors that are considering a substantial investment in a company. The
Board believes that the Company could be an attractive investment, even at this
time, because the infusion of additional capital would enable the Company to
expand its business and thereby increase the likelihood that the Company will
become profitable, due in part to the Company's ability, as a larger company,
to achieve economies of scale. However, a substantial investment in a company,
such as the Company, that does not have a history of profitable operations, but
whose prior operating history and relative position in its markets indicate
that a significant infusion of capital could produce profitable operating
results on a consistent basis in the future, may be more likely to prove
profitable (and, therefore, may be more attractive to a potential investor) if
the company is a private company. In the experience of management, based on
its discussions with potential investors in the Company, the additional
attraction of a private company lies in the belief of many potential investors
that the full value of the stock of a private company is less likely to be
reflected in the price at which the stock may be transferred than is the case
for the stock of a public company.

At a meeting on January 23, 1995, the Board specifically considered
eliminating the Company's status as a public company. The Board believes that
the elimination of the Company's status as a publicly held company would
provide the Company with greater flexibility in structuring financing
arrangements and attracting additional potential sources of capital. For
example, the Board believes that, as a private company, the Company might be
better able to attract investors that are willing to invest significant amounts
in the Company for the reasons discussed above. In addition, this change in
the Company's status would allow the Company to reduce or eliminate certain
costs associated with its status as a public company. Such costs include those
incurred to pay the Transfer Agent; those required to audit the financial
statements of the Company in compliance with federal securities laws and
regulations; those required to communicate with the approximately 3,400
Shareholders; and those required to make the necessary filings with, and
otherwise comply with the regulations of, the Securities and Exchange
Commission (the "Commission") and the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), including legal fees

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and expenses. The Board estimates that the annual savings for the Company due
to the reduction or elimination of these costs would be approximately $75,000.
See "Special Factors -- Purposes and Reasons for the Merger."

In addition, at the January 23, 1995 Board meeting, the Board authorized
Steven L. Foster, Chairman of the Board, to retain a valuation expert to
evaluate the Company in connection with the Company's consideration of becoming
a private company. In March 1995, Mr. Foster engaged Bannon & Co., Inc. (the
"Financial Advisor") to undertake a study to enable it to render an opinion
with respect to the proposed consideration to be offered in a going private
transaction as an independent third party and present a fairness opinion to the
Board. See "Special Factors -- Opinion of the Financial Advisor."

After Mr. Foster selected the Financial Advisor, the Board began an
analysis of methods of structuring a transaction that would have the effect of
eliminating the Company's status as a publicly held company while maximizing
Shareholder value. The Board considered transactions that could have the
effect of taking the Company private, but would retain the interest in the
Company or any successor to the Company of each Shareholder that beneficially
owns at least 101,000 shares of Common Stock as of the close of business on
June 10, 1996 and that does not elect to receive cash of $0.50 per share,
without interest (a "Merger Payment") in respect of each share of Common Stock
beneficially owned by such Shareholder (an "Initial Continuing Shareholder")
and each Shareholder who is an employee of the Company and does not qualify as
an Initial Continuing Shareholder and who beneficially owns shares of Common
Stock as of the close of business on June 10, 1996 (the "Record Date") in an
amount that, when added to the aggregate number of shares of Common Stock
underlying stock options or warrants beneficially owned by such employee on the
Record Date, whether or not such options or warrants are then exercisable,
totals at least 101,000 shares of Common Stock (an "Employee Continuing
Shareholder" and, together with the Initial Continuing Shareholders, the
"Continuing Shareholders"). After considering a number of possible
transactions, as described under "Special Factors -- Background of the Merger
- -- Alternatives Considered," at its meeting on October 2, 1995, the Board
unanimously determined that the Merger would be the most efficient method for
taking the Company private and paying some Shareholders a fair price for their
interests in the Company, as well as retaining the interests of other
Shareholders in the Company or a successor to the Company. The Board has
structured the proposed Merger so that (i) the Company will be merged into
Newco (the "Surviving Company"), (ii) each Shareholder that (A) beneficially
owns less than 101,000 shares of Common Stock as of the Record Date, (B)
beneficially owns 101,000 or more shares of Common Stock as of the Record Date,
but elects to receive a Merger Payment in respect of each share of Common Stock
beneficially owned by such holder, or (C) holds of record through a broker or
dealer (a "Broker-Dealer Shareholder") registered under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") and does not provide the
Company with evidence regarding the number of shares beneficially owned by such

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holder (an "Other Shareholder") will have the right to receive a Merger
Payment, (iii) each share of Common Stock held by a Continuing Shareholder will
be converted into the right to receive one share of common stock of Newco
and/or each stock option or warrant of the Company held by a Continuing
Shareholder will be converted into the right to purchase the same number of
shares of common stock of Newco on the same terms and conditions. The Board
initially determined that Shareholders that beneficially own at least 101,000
shares of Common Stock should receive shares of common stock in Newco in the
Merger so that the Merger would satisfy one of the requirements necessary for
the Merger to have no federal income tax consequences to the Company and,
therefore, would make it more attractive to a potential investor that could
supply the funds necessary to make the Merger Payments. However, despite this
requirement, the Board subsequently decided to also give Shareholders that
beneficially own at least 101,000 shares of Common Stock the option to
liquidate their investment in the Company in the Merger. See "Special Factors
- -- Background of the Merger -- Alternatives Considered" and "-- Material
Federal Income Tax Consequences."

On April 29, 1996, the Board authorized the Company to retain Hampshire
Securities Corporation, a New York corporation that specializes in underwriting
private placements of debt and equity and public offerings of small and
medium-sized companies and providing such companies with business valuations
and strategic advice on non-recurring transactions such as mergers and
acquisitions and restructurings (the "Placement Agent"), to structure a
transaction designed to raise $6,000,000 to $12,000,000 in gross proceeds to be
used for the Merger Payments, among other things. See "Financing of the
Merger," below.

Meeting and Proxy Information

A special meeting (together with any adjournment(s) thereof, the "Special
Meeting") of Shareholders will be held at __:__ _.m., Eastern Time, on
_____________, 1996, at _____________________________,
_____________________________, ______________ for the purposes of: (i)
considering and voting upon the Proposal to approve the Merger, and (ii)
transacting such other business as may properly come before the Special
Meeting.

Only Shareholders of record at the close of business on June 10, 1996
(i.e., the Record Date) will be entitled to vote at the Special Meeting. As of
the Record Date, there were 9,137,798 issued and outstanding shares of Common
Stock held by approximately 3,400 Shareholders of record. Each Shareholder is
entitled to one vote in person or by proxy for each share of Common Stock held
by such Shareholder on the Proposal submitted to a vote of the Shareholders at
the Special Meeting. The Proposal will be approved if and only if it receives
the favorable vote of the majority of all shares of Common Stock outstanding on
the Record Date.

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<PAGE> 18

The Merger

The description of the proposed Agreement and Plan of Merger (the "Merger
Agreement") included in this Proxy Statement is a summary of the principal
terms currently expected to be included, and should not be viewed as complete.
The form of Merger Agreement will become available only upon negotiation of the
final terms thereof with the investors in the private placement of equity
and/or subordinated debt securities of the Surviving Company (the "Private
Placement"), and the following description is, therefore, subject to change and
qualified in its entirety by reference to the definitive Merger Agreement. See
"Financing of the Merger." The Company will make copies of the form of Merger
Agreement available to any Shareholder without cost upon request when the form
of Merger Agreement becomes available.

If the Merger is approved, then, subject to the terms and conditions of
the Merger Agreement, (i) the Company will be merged with and into Newco when
Articles of Merger are filed and recorded with the Secretary of State of the
State of Florida and a Certificate of Merger and Certificate of Amendment to
the articles of incorporation of the Surviving Company are filed and recorded
with the Secretary of State of the State of Delaware (the "Effective Time"),
and each share of Common Stock held by an Other Shareholder (the "Other Common
Stock") will be converted into the right to receive the Merger Payment of $0.50
in cash, without interest; (ii) the Other Common Stock will be canceled; (iii)
each share of Common Stock owned by a Continuing Shareholder will be converted
into a share of common stock of the Surviving Company; (iv) each stock option
issued under the stock option plans or warrants of the Company to purchase a
share or shares of Common Stock outstanding immediately prior to consummation
of the Merger will be converted into the right to purchase the same number of
shares of common stock of Newco on the same terms and conditions; (v) Newco
will be the Surviving Company in the Merger, and the Company will cease to
exist as a result of the Merger; (vi) the articles of incorporation and bylaws
of Newco will be the articles of incorporation and bylaws of the Surviving
Company; and (vii) the name of the Company shall be the name of the Surviving
Company. Immediately after the Effective Time, the Other Shareholders will
possess no interest in, or rights as Shareholders of, the Company, and the
Company will be wholly owned by the Continuing Shareholders. For a description
of how the Company will calculate the number of shares of Common Stock held by
each holder of record on the Record Date for purposes of determining a
Shareholder's status as a Continuing Shareholder or Other Shareholder, see
"Voting and Proxy Information -- Record Date; Outstanding Shares; Voting."

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<PAGE> 19

Other Shareholders. The Board believes that, as a private company, the Company
might be better able to attract venture capitalists for the reasons set forth
above under "Background of the Merger." In addition, the Board believes that
operating the Company as a private company that does not include the Other
Shareholders will significantly reduce or eliminate certain costs that
currently are necessary to operation of the Company. The Board estimates that
the annual savings for the Company due to the reduction or elimination of these
costs would be approximately $75,000. See "Background of the Merger --
Purposes and Reasons for the Merger."

The Board expects that if the Proposal is not approved by the
Shareholders, or if the Merger is not consummated for any other reason, the
Board will continue to manage the Company as an ongoing business. In addition,
if the Proposal is not approved by the Shareholders, the Placement Agent will
not consummate the Private Placement. See "Financing of the Merger." No other
transaction is currently under consideration by the Company as an alternative
to the Merger, although the Company from time to time may explore other
alternatives if the Proposal is not approved.

Financing of the Merger

The Company has determined that approximately $2,500,000 in cash will be
required in order to make the Merger Payment with respect to each share of
Common Stock held by an Other Shareholder. The Company has retained the
Placement Agent (i.e., Hampshire Securities Corporation) to raise $6,000,000 to
$12,000,000 in gross proceeds through the Private Placement and intends to use
funds obtained from the Private Placement to make the Merger Payments, as well
as to provide Newco, following its merger with the Company, with funds for
working capital and the development of additional billiard clubs. However,
the Placement Agent has no obligation to consummate any Private Placement if
the Proposal is not approved by the Shareholders. See "Financing of the
Merger." The respective obligations of the Company and Newco to consummate the
Merger are contingent upon, among other things, the Company's success in
consummating a Private Placement that raises at least $6,000,000 in gross
proceeds within 180 days after the Proposal is approved by the Shareholders.
See "Proposal to Approve the Merger -- Conditions to the Merger."
Consequently, even if the Proposal is approved by the requisite vote of the
Shareholders, the Merger will not be consummated unless the Company raises a
minimum of $6,000,000 in gross proceeds from the Private Placement and closes
the transaction within 180 days of such Shareholder approval. If this
condition is not satisfied, the Company will not consummate the Merger or make
Merger Payments to any Continuing Shareholder. In that event, the Company will
continue to conduct its operations as a public company. There can be no
assurance, however, that the Company will raise any funds from the Private
Placement or that the Private Placement raising at least $6,000,000 in gross
proceeds will be consummated within 180 days after the Proposal is approved by
the Shareholders.

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<PAGE> 20

The Board believes that the Placement Agent will be able to raise at least
$6,000,000 in a Private Placement, despite the Company's modest success in
raising capital since it began its billiard club business in 1990, because
investors in a Private Placement would be investing in the equity and/or
subordinated debt securities of the Surviving Company, which will have
substantially more funds available to it for the conduct of its business and
operations than has been the case for the Company. Management believes that
this more substantial capitalization will enable the Surviving Company to
develop additional clubs and expand the business and thereby realize a net
operating profit beginning in its first year of operation. As a result, the
Placement Agent has advised the Company, and management believes, that the
terms of the proposed investment in the equity and/or the subordinated debt
securities of the Surviving Company will prove attractive to potential
investors. In addition, the consummation of any Private Placement is
conditioned on, among other things, the deregistration of the Common Stock
under the Exchange Act and the delisting of the Common Stock from NASDAQ. See
"Financing of the Merger." The Board believes that the Surviving Company's
status as a private company would make it more attractive to well-capitalized
and sophisticated investors for the reasons set forth above under "Background
of the Merger." Further, the Company has retained the Placement Agent, a
corporation with experience in raising capital for small to medium-sized
entities in the entertainment/leisure industry and providing strategic advice
regarding capital planning to such entities, to conduct the Private Placement.
See "Special Factors -- Background of the Merger -- Alternatives Considered."

As of the date of this Proxy Statement, the Placement Agent has neither
sought nor received any letters of intent or expressions of interest from
potential investors in a Private Placement. Consequently, there is no
indication that the Placement Agent will consummate a Private Placement at all.
As of the date of this Proxy Statement, the Company does not intend to sell
securities in the Private Placement to any affiliate of the Company.

Recommendation of the Board of Directors

The Board unanimously approved the Merger and recommends a vote FOR
approval of the Merger. The Board believes that the Merger, including the
process by which the Merger was decided upon and the Merger Payment, is fair
to, and in the best interest of, each Shareholder, including each Other
Shareholder who is not a controlling person of the Company and each Continuing
Shareholder who is not a controlling person of the Company. In reaching this
conclusion, the Board considered a number of factors, including but not limited
to the following: (i) the opinion of the Financial Advisor rendered to the
Other Shareholders that the Merger Payment of $0.50 per share of Common Stock
is fair to the Other Shareholders, as of ____________, 1996, (ii) the Company's
financial condition and operating losses, the market price of the Common Stock,
and the trading market for the Common Stock and the manner in which these
matters compared to those of certain other publicly traded companies that the
Financial Advisor determined were comparable in certain limited respects to the

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<PAGE> 21

Company (the "Comparison Companies"), (iii) the Board's own knowledge regarding
the financial condition, results of operations and projections of the Company
for fiscal 1996, as well as current industry, economic and market conditions,
(iv) the Merger Payment in relation to current market prices, historical market
prices and purchase prices paid by members of the Board and executive officers
and other Shareholders owning more than five percent of the issued and
outstanding shares of Common Stock as of the Record Date during the past two
years, (v) the effect that the Merger may have on the liquidity of the shares
of common stock of the Surviving Company held by each Continuing Shareholder,
including each Continuing Shareholder who is not a controlling person of the
Surviving Company, and (vi) the desirability of soliciting indications of
interest in purchasing the Company or otherwise purchasing the shares of Common
Stock held by the Other Shareholders. See "Special Factors -- Board of
Directors Determination of Fairness of the Merger."

Interests of Certain Persons in the Merger

Steven L. Foster, as Chief Executive Officer and Chairman of the Board of
the Company, is the only member of the Board and/or executive officer of the
Company that was the beneficial owner of 101,000 or more shares of Common Stock
as of the Record Date. Mr. Foster has informed the Company in writing that he
will not elect to receive a Merger Payment in respect of each share of Common
Stock beneficially owned by him. Consequently, he will be treated as a
Continuing Shareholder for purposes of the Merger. Mr. Foster, as an
executive officer and director of the Company and as an Initial Continuing
Shareholder, and Hugh Brennan, as Director of Construction of the Company and
as an Employee Continuing Shareholder, are each participants on both sides of
the proposed Merger because they will be shareholders in the Surviving Company.
Their continuing interest in the Company, as well as certain other effects of
the Merger, present each of them with a conflict of interest in voting for the
Proposal and recommending that the Other Shareholders vote for the Proposal.
In addition, each Continuing Shareholder, even if not a member of management or
employee of the Company, has an interest in voting their shares of Common Stock
in favor of the Proposal because their interests in the Merger are not the same
as those of the Other Shareholders. See "Special Factors -- Certain Effects of
the Merger." Twelve Shareholders beneficially owned at least 101,000 shares of
Common Stock as of the Record Date. Each of these Shareholders will be treated
as an Initial Continuing Shareholder for purposes of the Merger, unless any of
them makes an election to receive a Merger Payment for each share of Common
Stock owned by each of them, in which case such electing Shareholders will be
treated as Other Shareholders for purposes of the Merger. See "Proposal to
Approve the Merger -- Payment for Common Stock in the Merger." As of the date
of this Proxy Statement, _____ of these Shareholders, including Mr. Foster,
have informed the Company in writing that they will not elect to receive a
Merger Payment in respect of each share of Common Stock beneficially owned by
each of them. Consequently, as of the date of this Proxy Statement, there are
a total of ___ Continuing Shareholders, _____ Initial Continuing

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<PAGE> 22

Shareholders and one Employee Continuing Shareholder.

As of the Record Date, Mr. Foster held a total of 1,323,600 shares
(approximately 14.4 percent of the total shares of Common Stock outstanding),
the members of the Board and the executive officers of the Company owned an
aggregate of 1,340,850 shares (approximately 14.7 percent of the total shares
of Common Stock outstanding), and Mr. Rubin held a total of 1,264,465 shares
(approximately 13.8 percent of the total shares of Common Stock outstanding).
See "Security Ownership of Certain Beneficial Owners and Management." If the
Merger is consummated, immediately thereafter, Messrs. Foster and Rubin, as
Continuing Shareholders, will own the same number of shares of common stock in
the Surviving Company as they owned in the Company. See "Proposal to Approve
the Merger -- Certain Effects of the Merger." However, the actual, individual
percentage of equity ownership of Messrs. Foster and Rubin, as well as all
other Continuing Shareholders, in the Surviving Company will depend upon the
type and amount of securities of the Surviving Company issued in the Private
Placement. Accordingly, the relative equity ownership interests of any
individual or group of Continuing Shareholders cannot be determined at this
time. See "Financing of the Merger."

Consummation of the Merger could have a positive effect on the liquidity
of the shares of common stock of the Surviving Company held by each Continuing
Shareholder, including each Continuing Shareholder who is a controlling person
of the Surviving Company. The Merger will not be consummated unless the
Company raises at least $6,000,000 in gross proceeds from the Private
Placement. If the Private Placement is consummated, after deducting the
Merger Payments of approximately $2,500,000, expenses associated with
consummation of the Merger of approximately $__________ and expenses associated
with consummation of the Private Placement of approximately $550,000, the
Surviving Company will have approximately $__________ for the development of
additional billiard clubs and working capital. See "Financing of the Merger"
and "Fees and Expenses." Such an infusion of capital may enable the Surviving
Company to expand its business and improve its profitability, which in turn
would be likely to make the Surviving Company more attractive to potential
investors. Consequently, consummation of the Merger may indirectly result in
the creation of a market for the common stock of the Surviving Company.

The Merger Agreement is expected to permit continuing indemnification in
accordance with the articles of incorporation and bylaws of the Surviving
Company, of directors and executive officers of the Company to the fullest
extent permitted under applicable state law, including indemnification relating
to the period occurring prior to the Effective Time. See "Proposal to Approve
the Merger -- Indemnification."

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<PAGE> 23

Certain Effects of the Merger

If the Merger is consummated, the Other Shareholders will no longer have
an equity interest in the Company. Instead, each Other Shareholder will have
the right to receive the Merger Payment of $0.50 per share of Common Stock in
cash. The Other Shareholders will no longer be subject to the inherent risks
of investing in a Company with a history of poor performance, but will also be
denied the opportunity to participate in any future growth of the Company after
the Effective Time. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations -- Financial Condition."

The Continuing Shareholders, who include Steven L. Foster, Chief Executive
Officer and Chairman of the Board of the Company, and Hugh Brennan, Director of
Construction of the Company, will have an opportunity to share in the future
results of operations of the Surviving Company and to take advantage of any
increase in the value of such Company's assets if the Merger is consummated.
There can be no assurance, however, that the value of these assets will
increase or as to whether there will be any future distributions by the
Surviving Company. The Company has never declared a cash dividend. See
"Market Information."

Consummation of the Merger through the Private Placement would likely
result in the execution by the Continuing Shareholders of agreements which
would restrict their ability to transfer any shares of common stock of Newco
received in the Merger and in which they represented that they had no plan or
intention to dispose of the shares of common stock of Newco. See "Proposal to
Approve the Merger -- Lock-Up Agreements."

It is anticipated that all of the current officers and directors of the
Company will continue to hold the same positions in Newco, although the form of
the Merger Agreement has not yet been negotiated. Except as described in this
Proxy Statement, there will be no other relationships that will continue
between the Company and any persons who are officers, directors or Shareholders
of the Company as of the date of this Proxy Statement. See "Special Factors --
Certain Effects of the Merger."

The Company, as a result of the Merger, will become an entity the
securities of which are privately held. The registration of the Common Stock
under the Exchange Act will terminate, resulting in the suspension of the
Company's obligations to file periodic reports such as Forms 10-KSB, 10-QSB and
8-K. Since the Common Stock will no longer be publicly held, the Company will
be relieved of the obligation to comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act, and the executive officers and directors
of the Company and Shareholders owning more than 10 percent of the Common Stock
will be relieved of the reporting requirements and "short swing" trading
restrictions under Section 16 of the Exchange Act. In addition, the Common
Stock will be delisted from NASDAQ,

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<PAGE> 24

which will terminate the Company's public trading market and the Company no
longer will be required to comply with the rules and regulations relating to
NASDAQ listing.

In addition, if the Merger is consummated, all of the Company's loan
obligations and guaranteed return, buy-out and registration rights obligations
undertaken in connection with the private placement of the securities of
certain of its subsidiaries will continue in the Surviving Company. See
"Special Factors -- Background of the Merger -- Current Effects of Borrowings
and Equity Financing."

Opinion of the Financial Advisor

The Financial Advisor rendered its opinion to the Other Shareholders that
the Merger Payment of $0.50 per share of Common Stock is fair to the Other
Shareholders, as of ____________, 1996. The opinion is being delivered to
the Other Shareholders as Appendix __ to this Proxy Statement.

In conducting its analysis and arriving at its opinion, the Financial
Advisor considered such financial and other factors as it deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company; (ii) the financial projections provided to it by the Company for the
Company's 1996 fiscal year; and (iii) the historical and current market for the
Common Stock and for the equity securities of the Comparison Companies. The
Financial Advisor assumes no responsibility for and expresses no view as to
such forecasts or the assumptions on which they were based. The Financial
Advisor also took into account its assessment of general economic, market and
financial conditions and its knowledge of the entertainment industry as well as
its experience in connection with similar transactions and securities valuation
generally. The Financial Advisor's opinion was based on conditions as they
existed and could be evaluated on ___________, 1996, the date of its opinion.
In rendering its opinion, the Financial Advisor reviewed, among other things,
certain publicly available information relating to the Company and performed
such studies and analyses as it considered appropriate, including, among other
things, a comparison of the financial and operational results and certain other
financial and stock market information of the Company with similar information
of the Comparison Companies. In connection with the engagement, the Financial
Advisor did not make an independent evaluation or appraisal of the assets or
liabilities of the Company (or its affiliates), and the Company did not furnish
the Financial Advisor any such evaluation or appraisal.

Material Federal Income Tax Consequences

The Merger should be treated as a reorganization under section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code") (a
so-called "Type A reorganization"), provided it is structured as described in
this Proxy Statement and each Continuing

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<PAGE> 25

Shareholders enters into a lock-up agreement, as described in "Proposal to
Approve the Merger -- Lock-Up Agreements." If the Merger is treated as a Type
A reorganization, Continuing Shareholders should not recognize any gain or loss
as a result of the Merger, and the tax basis of each Continuing Shareholder in
the shares of common stock of Newco received in the Merger should be equal to
such Shareholder's adjusted tax basis in the shares of Common Stock surrendered
in the Merger. See "Special Factors -- Material Federal Income Tax
Consequences -- Federal Income Tax Consequences for Continuing Shareholders."

Regardless of whether the Merger is treated as a Type A reorganization,
each of the Other Shareholders will recognize gain or loss as a result of the
Merger equal to the difference, if any, between (i) the Merger Payment received
by such Other Shareholder and (ii) such Other Shareholder's adjusted tax basis
in such Shareholder's shares of Common Stock immediately prior to the
consummation of the Merger. See "Special Factors -- Material Federal Income
Tax Consequences -- Federal Income Tax Consequences for Other Shareholders."

Regulatory Requirements and Conditions

No federal or state regulatory approvals must be obtained in connection
with the Proposal. However, certain filings will be required to be made with
the Secretary of State of the State of Florida and the State of Delaware in
order to effect the Merger.

Market Information

The Common Stock is traded in the over-the-counter market and is included
for quotation on NASDAQ under the symbol "QBAL." On June 10, 1996, the average
of high and low bid prices of the Common Stock was $0.25 per share. On
_________, 1996, the last full day of trading for which quotations were
available at the time of printing of this Proxy Statement, the average of the
high and low bid prices of the Common Stock was $_____ per share. Despite the
fact that the Common Stock is quoted on NASDAQ, there is currently only a
limited trading market for the Common Stock. See "Market Information."

Rights of Dissenting Shareholders

Any Shareholder objecting to the Proposal is not entitled to any statutory
rights of dissent or appraisal under Florida law or the Articles of
Incorporation or Bylaws of the Company.

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<PAGE> 26

VOTING AND PROXY INFORMATION

Record Date; Outstanding Shares; Voting

The Board of Directors of the Company (the "Board") has fixed the close of
business on June 10, 1996 as the record date (the "Record Date") for
determination of shareholders of the Company (the "Shareholders") entitled to
receive notice of and to vote on a proposal (the "Proposal") to approve a
merger (the "Merger") by and between the Company and Jillian's Entertainment
Corporation, a recently formed Delaware corporation ("Newco"). Accordingly,
only Shareholders of record at the close of business on the Record Date will be
entitled to vote at a special meeting (together with any adjournment(s)
thereof, the "Special Meeting") of Shareholders.

Under the terms of the Merger (i) the Company will be merged with and into
Newco, and Newco shall be the surviving company in the Merger, (ii) each share
of common stock, par value $.001 per share (the "Common Stock") owned
immediately prior to consummation of the Merger by any Shareholder that is the
beneficial owner of at least 101,000 shares of Common Stock as of the Record
Date and that does not elect to receive cash of $0.50 per share, without
interest (a "Merger Payment") in respect of each share of Common Stock
beneficially owned by such Shareholder (any such Shareholder being hereinafter
referred to as an "Initial Continuing Shareholder") will be converted into the
right to receive one share of Common Stock of Newco, (iii) each share of Common
Stock owned immediately prior to consummation of the Merger by any Shareholder,
other than an Employee Continuing Shareholder (as defined below), that (A) is
the beneficial owner of less than 101,000 shares of Common Stock as of the
Record Date, (B) is the beneficial owner of 101,000 or more shares of Common
Stock as of the Record Date, but elects to receive a Merger Payment in respect
of each share of Common Stock beneficially owned by such holder, or (C)
holds its shares through a broker or dealer registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and does not provide the
Company with evidence regarding the number of shares beneficially owned by such
holder (any of such persons or entities being hereinafter referred to as an
"Other Shareholder") will be converted into the right to receive a Merger
Payment, (iv) each stock option issued under the Company's Consolidated Stock
Option Plan, 1994 Director, Adviser and Key Employee Stock Option Plan and 1995
Director, Adviser and Key Employee Stock Option Plan (the "Stock Option Plans")
or warrant of the Company to purchase a share or shares of Common Stock
outstanding immediately prior to consummation of the Merger will be converted
into the right to purchase the same number of shares of common stock of Newco
on the same terms and conditions, and (v) if the aggregate number of shares of
Common Stock beneficially owned by an employee of the Company, who does not
qualify as an Initial Continuing Shareholder, on the Record Date plus the
aggregate number of shares of Common Stock underlying stock options or warrants
held by such employee on

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<PAGE> 27

the Record Date, whether or not such options or warrants are then exercisable,
total at least 101,000 shares of Common Stock (any such employee being
hereinafter referred to as an "Employee Continuing Shareholder" and, together
with the Initial Continuing Shareholders, the "Continuing Shareholders"), then
each such share of Common Stock held of record by the Employee Continuing
Shareholder immediately prior to consummation of the Merger will be converted
into the right to receive one share of common stock of Newco, and each such
stock option or warrant held by the Employee Continuing Shareholder immediately
prior to consummation of the Merger will be converted into the right to
purchase the same number of shares of common stock of Newco on the same terms
and conditions.

For purposes of determining a Shareholder's status as a Continuing
Shareholder or Other Shareholder, the Company will rely upon the Company's
shareholder list to determine the beneficial holders of its Common Stock and to
calculate the number of shares of Common Stock held by each such holder on the
Record Date. The Company will treat each holder of record of issued and
outstanding shares of Common Stock as the beneficial owner of such shares of
Common Stock, except that, (i) in making such calculation, the Company will
aggregate shares of Common Stock held of record by an individual with those
held of record by the individual's spouse, their children under the age of 18
and trusts of which one or more of their children under the age of 18 is the
beneficiary, and treat all such shares as being beneficially owned by a single
individual, and (ii) the Company will not treat holders of record who are
brokers or dealers registered under the Exchange Act (such brokers or dealers
being hereinafter referred to as "Broker-Dealer Shareholders") as the
beneficial owners of such shares. In the case of any Broker-Dealer
Shareholder, the number of shares held by such Broker-Dealer Shareholder will
not be treated as being held by a single individual for the purposes of
determining whether a Broker-Dealer Shareholder qualifies to be treated as a
Continuing Shareholder for purposes of the Merger. Rather, a Broker-Dealer
Shareholder will be treated as an Other Shareholder unless, as to a particular
number of shares held of record by such Broker-Dealer Shareholder, the
beneficial owner of such shares of such beneficial owner provides the Company
with a letter of identification from the Broker-Dealer Shareholder identifying
such person as the beneficial owner, as of the Record Date, of the number of
shares specified in the letter of identification. In addition, in order to
qualify to be treated as an Other Shareholder for purposes of the Merger, a
beneficial owner of 101,000 or more shares of Common Stock as of the Record
Date must indicate on a form that will be supplied by the Company the
Shareholder's desire to receive a Merger Payment for each share of Common Stock
owned by such Shareholder. See "Proposal to Approve the Merger -- Payment for
Common Stock in the Merger." If a beneficial owner of 101,000 or more shares
of Common Stock as of the Record Date does not complete and deliver such form
in accordance with the instructions thereto, such Shareholder will be treated
as a Continuing Shareholder for purposes of the Merger.

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<PAGE> 28

As of the Record Date, there were 9,137,798 issued and outstanding shares
of Common Stock held by approximately 3,400 Shareholders of record. As of the
Record Date, the members of the Board and the executive officers of the Company
owned an aggregate of 1,340,850 shares (approximately 14.7 percent of the total
shares of Common Stock outstanding). Only one Continuing Shareholder is a
member of the Board and/or an executive officer of the Company. Such
Continuing Shareholder held a total of 1,323,600 shares (approximately 14.4
percent of the total shares of Common Stock outstanding) as of the Record Date
and has informed the Company that he intends to vote all shares of Common Stock
held by him FOR the Proposal. For additional information concerning the
beneficial ownership of shares of Common Stock, see "Security Ownership of
Certain Beneficial Owners and Management."

Each Shareholder is entitled to one vote in person or by proxy for each
share of Common Stock held by such Shareholder on the Proposal submitted to a
vote of the Shareholders at the Special Meeting. Votes cast in person or by
proxy at the Special Meeting will be tabulated by American Stock Transfer (the
"Transfer Agent"), who will determine whether a quorum is present. The
Proposal will be approved if and only if it receives the favorable vote of the
majority of all shares of Common Stock outstanding on the Record Date. The
Transfer Agent will treat abstentions as shares of Common Stock that are
present and entitled to vote for purposes of determining the approval of such
matter. In addition, if a broker submits a proxy indicating that it does not
have discretionary authority as to certain shares of Common Stock to vote on a
particular matter, those shares will not be treated as present and entitled to
vote for purposes of determining the approval of such matter, but will be
treated as present for purposes of determining whether a quorum is present at
the Special Meeting.

Proxy

The proxy set forth on the proxy card which is enclosed with this Proxy
Statement (the "Proxy") contains a space where each Shareholder may indicate
whether such Shareholder chooses to vote such Shareholder's shares of Common
Stock in favor of or against the Proposal or to abstain from voting. If the
Proxy is duly completed and returned to the Transfer Agent, the Proxy will be
voted in accordance with the instructions thereon. If a Shareholder returns
the Proxy duly executed, but does not indicate the manner in which the Proxy is
to be voted, the Proxy will be voted FOR the Proposal.

Revocability of Proxy

A Shareholder may revoke or amend the Shareholder's Proxy at any time
prior to the Proxy's exercise at the Special Meeting by executing a
subsequently dated Proxy or by filing a written request with _______________,
Secretary of the Company, at 727 Atlantic Avenue, Suite 600, Boston,
Massachusetts 02111, to revoke or amend the Proxy.

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The giving of a Proxy does not preclude the right of a Shareholder to vote in
person should the Shareholder giving the Proxy attend the Special Meeting and
choose to do so.

Solicitation of Proxies

This Proxy Statement is submitted, and Proxies are being solicited by, the
Board in support of the Proposal. The expense of solicitation of Proxies will
be borne by the Company. The Board and certain officers or other employees of
the Company may solicit proxies by telephone, telegram or personal interview
or may engage a third party to do so. The Board will request that custodians,
nominees and fiduciaries forward proxy materials to the beneficial owners of
shares of Common Stock, and the Company will reimburse such persons for
reasonable expenses incurred in connection therewith.

If you have any questions concerning this proxy solicitation or the
procedure to be followed to execute and deliver a Proxy, please contact
_______________ at 727 Atlantic Avenue, Suite 600, Boston, Massachusetts 02111
or by telephone at (617) 350-3111.

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

The principal executive offices of the Company are located at 727 Atlantic
Avenue, Suite 600, Boston, Massachusetts 02111, and the telephone number of the
Company at such address is (617) 350-3111. The principal executive offices of
Newco are located at 727 Atlantic Avenue, Suite 600, Boston, Massachusetts
02111, and the telephone number of Newco at such address is (617) 350-3111.

SPECIAL FACTORS

Background of the Merger

General. The Board's decision to present the Proposal to the Shareholders
marked the culmination of a process that began in late 1994. The Merger is
subject to satisfaction of various conditions, including but not limited to the
Company's ability to raise at least $6,000,000 in gross proceeds through a
private placement of debt or equity. See "Financing of the Merger." At that
time, the Board determined that it might be necessary to restructure the
Company in order to create the potential for improving the Company's ability to
raise funds both for working capital and for further expansion and development
of its billiard club business in accordance with its business plans. In the
Board's view, the Company has an obligation to use its best efforts to continue
to increase the value of each Shareholder's investment in the Company.
Although the Board believed that the Company had satisfied this objective in
part, the Board determined that it could not continue to fully satisfy this
objective without further expansion of the Company's operations and an increase
in the number of clubs

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operating under the Company's name. The Board recognized that since the
Company began its upscale billiard club business in 1990, the Company had
experienced a net operating loss in each year other than 1993, the Company had
difficulty obtaining financing for development of additional clubs and the
Company had not been able to take full advantage of its position as a public
company through equity or debt offerings of its securities or the securities of
its subsidiaries and, since 1993, management believes that no analysts had
followed the Common Stock. In addition, the Board recognized that since mid
1993 the Common Stock had not traded above approximately $1.06 per share, and
has not traded above $0.50 per share since March 16, 1995. See "Market
Information." As of the date of this Proxy Statement, each of these factors
continues to be true.

Since 1990, the Company's primary business has been the operation of
upscale billiard clubs. The Company, through wholly owned subsidiaries,
currently wholly or partially owns, operates and manages ten billiard clubs,
which are located in Miami, Florida; Seattle, Washington; Cleveland, Ohio;
Cleveland Heights, Ohio; Pasadena, California; Worcester, Massachusetts;
Champaign, Illinois; Annapolis, Maryland; Long Beach, California; and Tacoma,
Washington. The Cleveland Heights, Worcester, Champaign and Annapolis clubs
are owned by limited partnerships in which wholly owned subsidiaries of the
Company are the general partners, with 87 percent, 25 percent, 43 percent and
79 percent ownership interests, respectively. See "Business and Properties of
the Company."

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throughout the United States, and America Live operates a chain of eight
entertainment centers throughout the United States. See "Business and
Properties of the Company -- Description of Business -- General."

Since it began its billiard club business, the Company has had difficulty
raising capital at the rate it believes would have been necessary either to
maximize or to benefit from its position as a pioneer in the industry. As
described in more detail below, during this period, the Company has had
difficulty obtaining bank, as well as equipment lease, financing, and when the
Company has been able to obtain such financing, the Company's poor financial
condition generally has adversely affected its ability to obtain financing on
more favorable terms.

Bank and Equipment Lease Financing. The Company has attempted to obtain
loans in principal amounts of between $100,000 and $600,000 to be used as
working capital and for business expansion and development from at least 15
financial institutions during the past five years, including First Union Bank
("First Union"), where the Company maintains its business accounts, and U.S.
Trust Bank, where Steven L. Foster, the Chief Executive Officer and Chairman of
the Board of the Company, maintains certain of his personal and other business
accounts. The Company sought a variety of structures for these loans
(including secured and unsecured lines of credit and term loans) in an effort
to increase the likelihood that the Company would obtain approval of one or
more of these loan requests. All but two of the Company's loan requests were
denied because, according to communications from such lending institutions to
the Company, the Company did not meet the lending criteria of the institutions.
These lending institutions also advised the Company that its poor financial
condition and lack of available collateral were the principal reasons for the
credit denials.

Both of the loans that the Company was able to obtain came from Evergreen
National Bank, a Seattle bank in which the subsidiary of the Company that owns
the Seattle billiard club, Jillian's Billiard Club of Seattle, Inc. ("Jillian's
- - Seattle"), maintains an account. In 1994, Evergreen National Bank loaned the
Company $200,000 for working capital. The loan, which matures in May 1999 and
bears interest at the rate of 9.5 percent, is collateralized by all of the
common stock of Jillian's - Seattle. In addition, the loan is guaranteed by
the Company. At the time of the loan, Jillian's - Seattle had assets of
approximately $860,000 and had generated annual cash flow in excess of
$320,000. At March 31, 1996, the end of the Company's 1996 fiscal year,
Jillian's - Seattle had assets and cash flow of approximately $760,000 and
$650,000, respectively. At March 31, 1996, the Company was in compliance with
its obligations under the loan, and the loan had a principal balance of
$144,537. The Company believes, based on the historical operations of the
Seattle club, that it will have sufficient working capital in the future to
make the scheduled loan payments. If the Company fails to make the required
loan payments, it could lose all ownership interest in the Seattle club.

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In December 1995, the Company obtained a $300,000 loan from Evergreen
National Bank to develop the Tacoma, Washington, billiard club. The loan,
which matures in December 2000 and bears interest at the rate of 9.5 percent,
is collateralized by all of the assets of the subsidiary through which the
Company owns the Tacoma billiard club, Jillian's Billiard Club of Tacoma, Inc.
("Jillian's - Tacoma"), and all of the common stock of Jillian's - Seattle.
In addition, the loan is guaranteed by the Company and Jillian's - Seattle. At
March 31, 1996, Jillian's - Tacoma had assets and cash flow of approximately
$2,211,000 and $272,000, respectively, and Jillian's - Seattle had assets and
cash flow of approximately $760,000 and $650,000, respectively, as mentioned
above. At March 31, 1996, the Company was in compliance with its obligations
under the loan, and the loan had a principal balance of $284,357. The Company
believes, based on the current operations of the Tacoma club, that it will
have sufficient working capital in the future to make the scheduled loan
payments. If the Company fails to make the required loan payments, it could
effectively lose all rights to continue the operations of the Tacoma club if
Evergreen National Bank becomes the owner of that club's assets and could lose
all ownership interest in the Seattle club.

In addition, the Company had difficulty demonstrating that it was
creditworthy in connection with a First Union loan. The loan, originally in
the amount of $440,000 with United National Bank, was obtained in 1989 by an
unaffiliated trust to purchase 206,825 shares of Common Stock from a
Shareholder. At the time the loan was made, the Company had not began its
billiard club business. In addition, at the time the loan was made, neither
the Company nor any of its affiliates had any prior relationship with the
unaffiliated trust. While no affiliate of the Company had any prior
relationship with the Shareholder at that time, the Company had engaged in
discussions, initiated by the Shareholder, with the Shareholder earlier in 1989
regarding the Shareholder's acquisition of additional shares of Common Stock,
the merger of the Company into one or more shell entities owned by the
Shareholder and the Shareholder's potential nomination to the Board. The
Company did not believe that any of the Shareholder's proposals were in the
best interest of the Company. Because the Company believed that the
Shareholder's continued equity interest in the Company would be disruptive to
the Company's business, in connection with the acquisition of the loan by the
unaffiliated trust, the Company entered into an agreement with the trust in
November 1989 whereby the Company agreed to repurchase the 206,825 shares of
Common Stock from the trust at $1.64 per share immediately upon the demand of
the trust (the "Put"). See "Financial Statements of the Company." When United
National Bank refused to renew the loan and First Union refinanced it in 1992,
the Company became a guarantor and a co-obligor of the loan in exchange for the
trust's agreement not to exercise the Put. In addition to First Union's
requirement that the trust use the 206,825 shares of Common Stock (which was
trading at over $1 per share at that time) as collateral for the loan, the Bank
required that the Company, in its capacity as co-obligor of the loan, provide
as cash collateral a $240,000 certificate of deposit. First Union required the
Company to maintain the certificate of deposit as collateral even after the
outstanding principal balance of the loan had been reduced to

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<PAGE> 33

$262,500 at December 31, 1994. In April 1995, $103,413 in net proceeds from
the sale, at $0.50 per share, of the 206,825 shares of Common Stock was used to
pay down the loan, and in June 1995, approximately $159,000 of the $240,000
certificate of deposit was used to pay the remaining balance of the loan. See
"Financial Statements of the Company."

In addition to bank financing, the Company also has attempted to obtain
$10,000 to $300,000 in equipment financing from leasing companies during the
past five years. During this time, the Company submitted at least 30
applications for equipment financing to leasing companies, 11 of which were
accepted. The approximately 19 applications that were rejected were denied for
the same reasons the Company was unable to obtain bank credit from all but one
of the 15 financial institutions to which it applied: the Company had a
history of poor performance and lacked available collateral other than the
equipment to be purchased.

The Company was successful in obtaining two equipment leases from Leasing
Technology, Inc. However, both of these leases resulted in the encumbrance of
the assets of one of its clubs and the stock of another one of its clubs.
Specifically, in March 1994, the Company financed with Leasing Technology, Inc.
certain equipment for, and leasehold improvements in, the Annapolis, Maryland
billiard club for $300,000 at an annual lease rate of 12 percent. The lease
was collateralized by all of the equity securities of the subsidiary through
which the Company owns the Kendall club, which is located in Miami, Florida,
Jillian's Billiard Club of Kendall, Inc. ("Jillian's - Kendall"), and all of
the assets of the subsidiary through which the Company owns the Annapolis
billiard club, Jillian's Billiard Club of Annapolis, Inc. ("Jillian's -
Annapolis"). At the time of the lease, Jillian's - Kendall had assets of
approximately $646,000 and was generating approximately $173,000 in cash flow,
and the Company projected that Jillian's - Annapolis would have $600,000 in
assets within three months after commencement of the loan. At March 31, 1996,
Jillian's - Kendall had assets and cash flow of approximately $500,000 and
$159,000, respectively, and Jillian's - Annapolis had assets and cash flow of
approximately $860,000 and $300,000, respectively. At March 31, 1996, the
Company was in compliance with its obligations under the lease, and $214,633
remained payable under the lease. The Company believes, based on the
historical operations of the Annapolis club, that it will have sufficient
working capital in the future to make the scheduled lease payments. If the
Company fails to make the required payments under the lease, it could lose all
ownership interest in the Kendall club and effectively lose all rights to
continue the operations of the Annapolis club if Leasing Technology, Inc.
becomes the owner of that club's assets.

The Company obtained the second equipment lease from Leasing Technology,
Inc. in December 1995 to finance certain equipment for, and leasehold
improvements in, the Tacoma, Washington billiard club for $300,000 at an annual
lease rate of 12.6 percent. The lease was collateralized by the equipment
purchased, as well as the equipment lease obtained from

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<PAGE> 34

Leasing Technology, Inc. to equip and develop the Annapolis club, which is
described above. The Company believes, based on the current operations of the
Tacoma club, that it will have sufficient working capital in the future to make
the scheduled lease payments. If the Company fails to make the required
payments under the lease, it could lose all ownership interest in the Kendall
club and effectively lose all rights to continue the operations of the
Annapolis club if Leasing Technology, Inc. becomes the owner of that club's
assets.

The Company has obtained nine additional equipment leases totaling
approximately $350,000. The terms of the leases range from one to five years.
In addition, the leases bear interest at annual rates ranging from
approximately 12 to 18 percent.

Seller, Landlord and Municipal Financing. The Company has been able to
obtain seller, landlord or municipal financing to partially fund the
acquisition or construction of all of its billiard clubs. In all but one case,
however, the Company collateralized the financing with the assets or stock of
the subsidiary through which the Company owns the club, leaving the Company
with reduced sources of collateral to obtain additional financing for working
capital and further expansion and development and risking the possibility that
the Company could lose its interests in these clubs. The seller, landlord
and/or municipal financing obtained by the Company to partially fund the
acquisition or construction of four of its billiard clubs is described below.

The City of Cleveland Heights, Ohio, loaned the Company $100,000 of the
approximately $650,000 necessary to construct and equip the Cleveland Heights
billiard club in 1991 as an incentive to enter into the lease in what such City
considered a "redevelopment urban area." The loan, which bears interest at a
rate of seven percent and matures in April 1998, is collateralized by the
assets of the subsidiary through which the Company owns the club, Jillian's
Billiard Club of Cleveland Heights, Inc. ("Jillian's - Cleveland Heights"). At
March 31, 1996, the Company was in compliance with its obligations under the
loan, and the loan had a principal balance of $76,219. The Company believes,
based on the historical operations of the Cleveland Heights club, that it will
have sufficient working capital in the future to make the scheduled loan
payments. If the Company fails to make such payments, it could effectively
lose all rights to continue the operations of the Cleveland Heights club if the
City of Cleveland Heights becomes the owner of the club's assets. The Company
also attempted to raise $150,000 in June 1992 through the private placement of
interests in the limited partnership, Jillian's Billiard Club of Cleveland
Heights Limited Partnership (the "Cleveland Heights Limited Partnership"), in
which Jillian's - Cleveland Heights is the general partner and currently has an
87 percent ownership interest. The Company raised only $22,500, out of the
$150,000 that it attempted to raise, from a single unaffiliated third party
even though the Company offered each investor, and the single investor
accepted, an option to sell the investor's partnership interest to the Company
at a cash price equal to the greater of the price paid for the investment or
500 percent of the adjusted net income of

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the Cleveland Heights Limited Partnership for the 12 months ending December 31,
1995, multiplied by a fraction representing a percentage interest in such
Partnership's profits and losses of the investment to be sold to the Company.
The option was exercised in accordance with its terms, within 60 days of the
transmittal to the investor of the financial statements of the Cleveland
Heights Limited Partnership for the 12 months ending December 31, 1995. The
Company and the investor currently are negotiating the terms by which the
Company will purchase the interest of the $22,500 investor. As of the date of
this Proxy Statement, the Company believes that it has sufficient cash flow to
meet its obligation to purchase the interest. The Company's failure to honor
this commitment could result in a suit by the investor to obtain the price, as
well as the investor's cost and expenses, including reasonable attorneys' fees.
The Company financed the remaining $527,500 needed to develop the Cleveland
Heights club using $427,500 in cash generated from the Company's operations and
the proceeds from a $100,000 four-year convertible note, bearing interest at a
rate of 12.5 percent, issued by the Company in February 1992 in favor of an
unaffiliated third party. On January 1, 1993, the third party exchanged the
note for a 10 percent equity interest in the Cleveland Heights Limited
Partnership.

In 1993, the Company paid $150,000 in cash and obtained the remaining
$175,000 of the $325,000 necessary to acquire an existing billiard club in
Pasadena, California, through a loan from the club's seller. The Company
issued the seller a three-year note collateralized by the assets of the
subsidiary through which the Company owns the club, Jillian's Billiard Club of
Pasadena, Inc. ("Jillian's - Pasadena"). Interest on the note is payable
monthly at eight percent and the entire principal amount of $175,000 (and
unpaid interest, if any) is due when the note matures in August 1996. At March
31, 1996, the Company was in compliance with its obligations under the loan.
However, based on the Company's current cash shortage, there can be no
assurance that the Company will have sufficient working capital in the future
to pay the entire principal amount of the loan when it becomes due in August
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." If the Company
fails to make such payment, it could effectively lose all rights to continue
the operations of the Pasadena club if the seller becomes the owner of the
club's assets.

In 1994, the landlord of the Champaign, Illinois, club loaned the Company
$150,000 of the $700,000 required to develop the Champaign club. The loan is
collateralized by the assets of the subsidiary through which the Company owns
the club, Jillian's Billiard Club of Champaign - Urbana, Inc. ("Jillian's -
Champaign"), bears interest at a rate of 10 percent, and matures in September
1999. At March 31, 1996, the Company was in compliance with its obligations
under the loan, and the loan had a principal balance of $110,300. The Company
believes, based on the historical operations of the Champaign club, that it
will have sufficient working capital in the future to make the scheduled loan
payments. If the Company fails to make such required payments, it could lose
all rights

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to continue the operations of the Champaign club if the landlord becomes the
owner of the club's assets. The landlord provided the financing after the
Company was able to raise an additional $425,000 through a 1994 private
placement of interests in the limited partnership, Jillian's Billiard Club of
Champaign - Urbana, L.P. (the "Champaign Limited Partnership"), in which
Jillian's - Champaign is the general partner and currently has a 43 percent
ownership interest. Of the $425,000 raised, $365,000 in limited partnership
interests in the Champaign Limited Partnership were sold to unaffiliated third
parties and $60,000 in such interests were sold to existing Shareholders. The
Company had attempted to raise $525,000 through this offering and believed that
the investment was attractive because the Company, among other things, (i)
guaranteed each investor a 140 percent return on its investment within six
years, (ii) offered a buy-out in 1997 of each investor to be paid 15 percent in
cash and 85 percent in Common Stock, to be valued at the average of the bid and
asked price of the Common Stock during the 30 days prior to the transmittal to
investors of the financial statements of the Champaign Limited Partnership for
the 12 months ending December 31, 1996; provided, however, that if all
investors sell their partnership interests to the Company, the purchase price
would be five times 50 percent of the net profits of such Partnership for the
12 months ending December 31, 1996, and (iii) for a limited period of time,
offered a demand registration right requiring the Company to register such
Common Stock after the end of its 1997 fiscal year. The Company's obligation
to buy out a Champaign investor is contingent upon such investor's giving
notice to the Company, within 60 days of the transmittal to investors of the
aforementioned financial statements, of the investor's desire to sell its
partnership interest to the Company. There can be no assurance that the
Company will have sufficient cash flow to meet these guaranteed payment or
buy-out obligations when they do become due or when they become exercisable.
The Company's failure to meet these obligations could result in a suit by
investors to obtain the guaranteed return or buy-out rights. The Company
financed the remaining $125,000 needed to develop the Champaign club using cash
generated from the Company's operations.

In 1995, the City of Long Beach, California, agreed to honor its
commitment to lend the Company $450,000 of the $1,500,000 necessary to
construct and equip the Long Beach billiard club in a "redevelopment urban
area" only after the Company agreed to use the assets of the subsidiary through
which the Company owns the club, Jillian's Billiard Club of Long Beach, Inc.
("Jillian's - Long Beach"), as well as the assets of Jillian's - Pasadena
(through a second lien), as collateral. The loan bears interest at a rate of
seven percent and matures in January 2006. As additional consideration for the
loan, the Company granted the City of Long Beach a warrant to receive 225,000
shares of Common Stock at an exercise price of $0.00 per share, with the
warrant exercisable solely by the City of Long Beach under the loan agreement
if the Company defaults on the loan. If the City of Long Beach exercises the
warrant and the market value of the Common Stock issued under the warrant is
less than the outstanding loan balance, the Company is required to continue to
issue additional shares of Common Stock until the total market value of the
Common Stock issued to the City of

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Long Beach is equal to the outstanding loan balance. At March 31, 1996, the
Company was in compliance with its obligations under the loan, and the loan had
a principal balance of $474,265. The Company believes, based on the current
operations of the Long Beach club, that it will have sufficient working capital
in the future to make the scheduled loan payments. If the Company fails to
make such payments, it could effectively lose all rights to continue the
operations of the Long Beach and Pasadena clubs if the City of Long Beach
becomes the owner of the assets of both clubs. In addition, if the Company
defaults on the loan, the warrant will be exercisable, as described above. The
Company financed the remaining $1,050,000 needed to develop the Long Beach club
using approximately $680,000 in cash generated from the Company's operations, a
$250,000 landlord contribution and approximately $120,000 from three equipment
leases. The landlord took into consideration the $250,000 contribution when
computing the annual lease payments. The landlord disbursed the funds between
January and May 1995 as the Company presented construction bills to the
landlord. The three equipment leases, which were obtained between May and June
1995, bear interest at annual rates ranging from approximately 13 to 15 percent
and have three- to five-year terms.

Equity and Debt Financing. Since it began its billiard club business, the
Company has made at least six attempts, as described below, in addition to the
Cleveland Heights and Champaign private placements described above, to raise
capital for expansion through private placements of equity and debt
instruments. Because of the dilutive effect that such issuances would have on
the value of the Common Stock in the hands of the existing Shareholders, the
Company has attempted to raise capital in this manner only as a last resort.
Despite its efforts, the Company has had only modest success in raising capital
through private placements of its Common Stock, of debt instruments or of the
equity interests in its subsidiaries. While the Company believed that its
guarantee of favorable returns and offering of early buy-outs would help
attract investors, it was advised during its discussions with potential
investors that such investors had no confidence that the Company could fulfill
its guarantees or buy-out responsibilities, based on the Company's history of
poor performance, and if the Company had insufficient assets or cash flow, it
would be doubtful that an investor with standing to sue would be provided with
the rights guaranteed the investor in the offering. First, during fiscal 1993,
in an effort to raise working capital and funds for expansion and development,
the Company offered Common Stock for sale through a private placement. The
Company sold 2,043,022 shares of Common Stock for approximately $874,000, net
of offering expenses and sales commissions. While the private placement was
successful in that the Company realized over 80 percent of its goal of
$1,000,000, the offering had the effect of substantially diluting the value of
the Common Stock in the hands of the existing Shareholders because the Common
Stock was placed for between approximately $0.50 and $0.60 per share at a time
when the Common Stock was trading at approximately $1 per share.

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Second, the Company was also successful in raising the $850,000 it needed
to construct the Worcester, Massachusetts, billiard club. In 1993, it sold 75
percent of the limited partnership interests in Jillian's Billiard Club of
Worcester Limited Partnership (the "Worcester Limited Partnership"). The
Company's wholly owned subsidiary, Jillian's Billiard Club of Worcester, Inc.
("Jillian's - Worcester"), is the general partner and currently has a 25
percent ownership interest in the Worcester Limited Partnership. The Company,
among other things, (i) guaranteed a 15 percent annual return on the Worcester
investment, (ii) offered a buy-out in 1999 of each investor to be paid 50
percent in cash and 50 percent in Common Stock, to be valued at 80 percent of
the average of the bid and asked price of the Common Stock during the 30 days
prior to the transmittal to investors of the financial statements of the
Worcester Limited Partnership for the 12 months ending December 31, 1998;
provided, however, that if all investors sell their partnership interests to
the Company, the purchase price would be five times 75 percent of the net
profits of such Partnership for the 12 months ending December 31, 1998, with a
maximum purchase price equal to 200 percent of capital invested, and (iii)
offered, for a limited period of time, a demand registration right requiring
the Company to register such Common Stock after the end of its 1999 fiscal
year. The Company's obligation to buy out a Worcester investor is contingent
upon such investor giving notice to the Company, within 60 days of the
transmittal to investors of the aforementioned financial statements, of the
investor's desire to sell its partnership interest to the Company. In
addition, the Company may elect to buy out Worcester investors for the same
purchase price described above if the Company gives such investors notice
during the same 60-day period. There can be no assurance that the Company will
have sufficient cash flow to meet these guaranteed payment or buy-out
obligations when they do become due or when they become exercisable. The
Company's failure to meet these obligations could result in a suit by investors
to obtain the guaranteed return, buy-out and/or the registration rights.

Third, the Company raised only $133,000 out of the approximately $700,000
that was necessary to develop and equip the Annapolis club in a private
placement between July and September 1994, even after offering, among other
things, (i) a 140 percent return of investment in Jillian's Billiard Club of
Annapolis Limited Partnership (the "Annapolis Limited Partnership") within six
years, (ii) a buy-out of each investor in 1998 to be paid 15 percent in cash
and 85 percent in Common Stock, to be valued at the average of the bid and
asked price of the Common Stock during the 30 days prior to the transmittal to
investors of the financial statements of the Annapolis Limited Partnership for
the 12 months ending December 31, 1997; provided, however, that if all
investors sell their partnership interests to the Company, the purchase price
would be four times 50 percent of the net income of such Partnership for the 12
months ending December 31, 1997, with a maximum purchase price equal to 100
percent of capital invested, and (iii) for a limited period of time, a demand
registration right requiring the Company to register such Common Stock after
the end of its 1998 fiscal year. The Company's obligation to buy out an
Annapolis investor is contingent upon such investor giving notice to the
Company, within 60 days of the transmittal to investors of the

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aforementioned financial statements, of the investor's desire to sell its
partnership interest to the Company. Existing Shareholders, including
affiliates of the Company, accounted for $83,000 of the funds raised through
the Annapolis Limited Partnership in which Jillian's - Annapolis is a general
partner and currently has a 79 percent ownership interest. Persons
unaffiliated with the Company accounted for the remaining $50,000 raised.
There can be no assurance that the Company will have sufficient cash flow to
meet these guaranteed payment or buy-out obligations when they do become due or
when they become exercisable. The Company's failure to meet any of its
obligations with respect to the investors in the Annapolis Limited Partnership
could result in a suit by them to obtain the guaranteed return, buy-out and/or
registration rights. The Company financed the remaining $567,000 needed to
develop the Annapolis club through equipment lease financing (see "Bank and
Equipment Lease Financing," above) and cash generated from the Company's
operations.

The Company had virtually no success in its efforts to raise capital
through three additional private placements. Between 1993 and 1994, the
Company made two separate attempts to sell $2,000,000 in interests in JBC - USA
Limited Partnership by guaranteeing a 15 percent return on the investments and
favorable buy-out terms. The Company did not sell any interests in the limited
partnership during either attempt. Lastly, in 1994, the Company attempted to
privately place a $750,000 debt instrument guaranteed by the Company. The
Company raised only $185,000, $60,000 of which came from existing Shareholders.
The Company believes that it was unable to succeed in placing the debt
instrument because it had difficulty in convincing potential lenders that it
would be able to repay the loan.

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Although the Company has not attempted to retain an underwriter for a
public offering of its securities during the past several years, it received
advice from an investment banking firm as to a manner in which the Company
might raise capital. The investment banking firm did not, however, express an
interest in undertaking to underwrite any of the Company's securities when it
provided the advice. The advice was offered during a routine Board meeting in
1994 by Elliot Smith who at that time was a member of the Board and a principal
of Whale Securities, the investment banking firm that placed Common Stock in a
public offering in 1987. The Company was advised by Mr. Smith, on behalf of
Whale Securities, that the Company could raise capital by reducing the exercise
prices of then outstanding warrants to purchase approximately 627,000 shares of
Common Stock to prices significantly below the then current market value of the
Common Stock and reducing the exercise period of the warrants. The warrants
were issued in public offerings in 1985 and 1987 and their exercise prices
range from $4.00 to $5.00 per share of Common Stock. At the time Whale
Securities made the suggestion, the Common Stock was trading for approximately
$1 per share. After considering such advice, the Board determined that it was
inadvisable to reduce the exercise price of the warrants because if the
warrants were exercised at the reduced exercise price, the value of the Common
Stock in the hands of the existing Shareholders would be diluted.

The Company has not given any consideration to raising capital through a
rights or other offering to the Shareholders.

As indicated above, because of their dilutive effect on the value of the
Common Stock in the hands of the existing Shareholders, the Company has been
reluctant to raise capital through private placements of equity securities or
through programs that reduce the exercise price and/or exercise period of
outstanding stock options or warrants to purchase shares of Common Stock.
However, on December 20, 1994, in an effort to raise capital in a short period
of time to complete the Long Beach billiard club, the Company reduced the
exercise price and exercise period of an aggregate of 1,105,000 outstanding
stock options issued under the Stock Option Plans. The Company reduced from
approximately $0.66 per share to $0.25 per share the exercise price of options
to purchase an aggregate of 520,000 shares of Common Stock, 400,000 of which
were held by Steven L. Foster, Chief Executive Officer and Chairman of the
Board of the Company, and the remaining 120,000 of which were held by Kevin
Troy, a Shareholder and advisor to the Company, and the Company reduced the
remaining exercise period of such options from nine years to 90 days. In
addition, the Company reduced from approximately $0.33 per share to $0.25 per
share the exercise price of options to purchase an aggregate of 585,000 shares
of Common Stock, 450,000 of which were held by Mr. Foster and the remaining
135,000 of which were held by Mr. Troy, and the Company reduced the remaining
exercise period of such options from nine years to 90 days. The market value
of the Common Stock was $0.50 per share on December 20, 1994. The options were
granted to Mr. Foster as part of his compensation for serving as an executive
officer of the Company and to Mr. Troy as compensation for serving as an
advisor to the Company. All

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of these options were exercised during the last quarter of the Company's 1995
fiscal year. The Company reduced the exercise price and the exercise period of
the options at a time when continued construction of the Long Beach club was in
jeopardy because of insufficient capital and the Company had exhausted all
available resources for raising cash immediately. The Company reduced the
exercise price and the exercise period of the stock options as a last resort to
raise capital and has not reduced the exercise price or exercise period of
stock options or warrants held by an executive officer or member of the Board
in order to raise capital at any other time during the last three years. By
offering the reduced exercise price and exercise period only for stock options
held by controlling persons of the Company, the Company eliminated the time and
expense associated with putting the matter to a vote of Shareholders and
increased the likelihood that the reduced price and period in fact would result
in an exercise of the options and, therefore, in the desired capital infusion.

Under the Stock Option Plans, the Company issues to its management from
time to time options to purchase shares of Common Stock as part of management's
compensation. Other than the exercise by Mr. Foster described above, no
current executive officer or member of the Board has exercised stock options
since February 1994. See "Market Information." In addition, Mr. Foster holds
an outstanding warrant to purchase 40,000 shares of Common Stock. However, he
is the only executive officer or member of the Board that currently holds any
of the Company's warrants. Mr. Foster and other members of the group from whom
the Company purchased the subsidiary through which the Company's billiard clubs
are operated were issued warrants in April 1993 in accordance with the
anti-dilution provisions of the agreement under which the subsidiary was
purchased by the Company. As of the date of this Proxy Statement, Mr. Foster
has no present intention of exercising these warrants. For a description of
Mr. Foster's ownership interest in the Company, see "Security Ownership of
Certain Beneficial Owners and Management," and for a more detailed description
of the circumstances under which the warrants were issued, see "Financial
Statements of the Company."

Current Effects of Borrowings and Equity Financing. Of the $3,747,000
borrowed by the Company since it began its billiard club business, an aggregate
of approximately $2,923,000 was outstanding as of March 31, 1996. This amount,
which is represented by ten loans and seven leases, bears interest at annual
rates ranging from seven to 15 percent. The Company believes, based on the
historical and current operations of its clubs, that it will have sufficient
working capital in the future to make the scheduled payments with respect to
the foregoing indebtedness, with the exception of the $175,000 note that it
issued to the seller of the Pasadena billiard club, as discussed above. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." If the Company fails to make
the required payments on obligations secured by the assets or stock of the
subsidiaries through which the Company owns the relevant clubs, the Company
could lose its interests in these clubs as discussed

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<PAGE> 42

above under "Bank and Equipment Lease Financing" and "Seller, Landlord and
Municipal Financing." These obligations and contingent liabilities, as well as
the lenders' recourse in the event of the Company's default under the loans,
will continue in the Surviving Company if the Proposal is approved by the
Shareholders and the Merger is consummated.

None of the Company's obligations to provide the guaranteed returns and
buy-outs associated with the Champaign, Worcester and Annapolis Limited
Partnerships has matured as of the date of this Proxy Statement. There can be
no assurance that the Company will have sufficient working capital in the
future to meet these obligations when they do mature or when they become
exercisable. The Company's failure to honor these commitments could result in
investor suits to obtain the guaranteed returns or buy-outs. All of these
obligations, as well as the investors' rights to sue in the event that the
Company fails to satisfy such obligations, will continue in the Surviving
Company if the Proposal is approved by the Shareholders and the Merger is
consummated. In addition, the Board believes that the existence of the
guaranteed returns, buy-outs and registration rights is itself depressing the
price of the Common Stock and inhibiting the Company's ability to raise capital
and will continue to have this effect, whether or not the Company is a "public
company" or a "private company," as long as these rights remain pending and
unsatisfied. The Board's belief is based on the fact that, at the present
time, there is no reasonable prospect that the Company will be able to satisfy
its obligations relating to the guaranteed returns or buy-outs. In addition,
the Board has based its conclusion on the fact that the Common Stock is an
illiquid security that is experiencing a decline in market value.

While the Company has raised approximately $5,800,000 in funds (excluding
landlord contributions) for working capital for the acquisition and/or
construction of its ten existing clubs, as described above, it has not raised
sufficient capital to enable it to expand in accordance with its business
plans. In addition, the site locations for most of the Company's clubs have in
large part been dictated by the availability of seller, landlord and municipal
financing. The Company has not been able to develop sites in other more
attractive areas where such financing has not been available. The Company's
reliance on this type of financing has resulted in the encumbrance of the
assets and/or stock of all of subsidiaries through which it owns its billiard
clubs except Jillian's Billiard Club of Cleveland, Inc. ("Jillian's -
Cleveland"). The unavailability of such collateral has, in turn, contributed
to the Company's difficulty in obtaining bank and equipment lease financing.
Further, the Company's history of poor performance has inhibited its ability to
raise capital through the private placement of its securities or the securities
of its subsidiaries.

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<PAGE> 43

Management believes that there are a number of markets in which the Company
could have achieved market dominance or acquired a more substantial share of
the market if the Company had had sufficient capital either to enter the market
earlier or to commence and expand its operations in that market at an earlier
date. Because the Company has instead had limited amounts of capital
available, it has had to expand the number of clubs that it operates slowly,
and the construction of those clubs has, in some cases, been delayed due to
lack of funds at a particular time. Such delays, in some instances, have
required the Company to pay rent prior to commencement of operations at those
clubs, which resulted in increased expense for the Company without any
offsetting increase in operating income. As a result, delays resulting in the
payment of pre-opening rent have had a direct impact on the costs associated
with developing the clubs. The Board believes that the value of the Common
Stock also has been depressed due to the Company's failure to achieve
profitable operations on a continuing basis. As a result, the Company's
ability to raise capital through the public or private sale of its Common Stock
has been limited. The Board, therefore, is of the view that the Company's
profitability would cause an increase in the market for, and value of, the
Common Stock, which in turn would increase the Company's attractiveness as an
investment and thereby further facilitate capital rasing activities.

By late 1994, for the reasons discussed above, the Board believed that it
was no longer prudent for the Company to continue to seek short-term financing
on terms that could not be considered favorable to the Company due to the
anticipated difficulty of repaying such loans as a result of the Company's slow
or nonexistent growth in assets and income and the increasing level of
competition from better-capitalized entities. The terms of any financing
available to the Company at that time and at the present time was and continues
to be such that the Company's acceptance of financing on such terms would place
the Company at a competitive disadvantage in terms of its debt obligations and
available capital. At a Board meeting held on December 20, 1994, the Board
determined that it might be appropriate for the Company to consider eliminating
its status as a "public company," in part because, as a "private company," the
Company could reduce certain costs associated with complying with the federal
securities laws. Management indicated that this cost savings, which the
Company estimates to be approximately $75,000 per year, could cause the Company
to be more attractive to the types of well-capitalized and sophisticated
investors that are willing to invest substantial amounts of capital in an
enterprise. In addition, in the experience of certain members of the Board,
investors generally are not willing to commit significant amounts of capital to
an enterprise that, like the Company, does not have a history of profitable
operations unless the number of shareholders is relatively small and composed
primarily of individuals who either are actively involved in the operations of
the Company or are family members of such persons. Further, management of the
Company believes that the additional disclosure regarding company operations,
stock ownership and compensation of, or payments to, persons with a significant
investment in the company that is required by the federal securities laws
applicable to a public company is often unacceptable to investors that are
considering a

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<PAGE> 44

substantial investment in a company. The Board believes that the Company
could be an attractive investment, even at this time, because the infusion of
additional capital would enable the Company to expand its business and thereby
increase the likelihood that the Company will become profitable, due in part to
the Company's ability, as a larger company, to achieve economies of scale.
However, a substantial investment in a company, such as the Company, that does
not have a history of profitable operations, but whose prior operating history
and relative position in its markets indicate that a significant infusion of
capital could produce profitable operating results on a consistent basis in the
future, may be more likely to prove profitable (and, therefore, may be more
attractive to a potential investor) if the company is a private company. In
the experience of management, based on its discussions with potential investors
in the Company, the additional attraction of a private company lies in the
belief of many potential investors that the full value of the stock of a
private company is less likely to be reflected in the price at which the stock
may be transferred than is the case for the stock of a public company.

At the request of the Board, Mr. Foster agreed to explore the feasibility
and potential benefits of causing the Company to become a private company.

At a meeting on January 23, 1995, the Board specifically considered
eliminating the Company's status as a public company. The Board believes that
the elimination of the Company's status as a publicly held company would
provide the Company with greater flexibility in structuring financing
arrangements and attracting additional potential sources of capital. For
example, the Board believes that, as a private company, the Company might be
better able to attract investors that are willing to invest significant amounts
in the Company for the reasons discussed above. In addition, this change in
the Company's status would allow the Company to reduce or eliminate certain
costs associated with its status as a public company. Such costs include those
incurred to pay the Transfer Agent (approximately $6,000 per year); those
required to audit the financial statements of the Company in compliance with
federal securities laws and regulations (approximately $10,000 per year); those
required to communicate with the approximately 3,400 Shareholders
(approximately $15,000 per year); and those required to make the necessary
filings with, and otherwise comply with the regulations of, the Securities and
Exchange Commission (the "Commission") and the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), including legal fees
and expenses (approximately $44,000 per year). The Board estimates that the
annual savings for the Company due to the reduction or elimination of these
costs would be approximately $75,000. See "Purposes and Reasons for the
Merger," below.

At the January 23, 1995 Board meeting, Mr. Foster recommended that the
Company retain Bannon & Co., Inc. (the "Financial Advisor") to evaluate the
Company in connection with the Company's consideration of becoming a private
company because of the Financial Advisor's experience with entertainment
entities and its reasonable quoted fees. Mr. Foster

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<PAGE> 45

became aware of the financial services provided by the Financial Advisor
through Douglas M. Suliman, Jr., an agent of Hampshire Securities Corporation
(the "Placement Agent"). For a discussion of how Mr. Foster became acquainted
with Mr. Suliman, see "Alternatives Considered," below. Mr. Foster then
presented to the Board information regarding the qualifications and fees of the
Financial Advisor, which Mr. Foster had obtained by contacting the Financial
Advisor directly, at the suggestion of Mr. Suliman. Mr. Foster had no prior
contact or relationship with the Financial Advisor before he contacted the
Financial Advisor to obtain such information. Upon Mr. Foster's request for
additional valuation experts, John L. Kidde suggested that the Board consider
Brown, Brothers, Harriman & Co. and Layne Weggeland. The Board authorized Mr.
Foster to obtain information regarding the qualifications and fees of these two
valuation experts and to select, in consultation with the other directors as
appropriate, the most suitable of the three experts to present an opinion to
the Board. The Board also authorized the Company to pay all reasonable fees
and expenses incurred by the expert selected in connection with the engagement.
The Board did not establish any parameters with respect to the fees to be
incurred by the expert.

Each of the two experts referred to the Board by Mr. Kidde advised Mr.
Foster that the firm would be unable to undertake the engagement, without
offering any specific reason for that decision. Although Mr. Foster contacted
certain other experts in the industry who were recommended by the two experts
originally referred by Mr. Kidde, these individuals or organizations were, in
the opinion of Mr. Foster, understaffed or had relatively insufficient
experience to complete the evaluation properly. Consequently, in March 1995,
Mr. Foster engaged the Financial Advisor to undertake a study to enable it to
render an opinion with respect to the proposed Merger Payment as an independent
third party and present a fairness opinion to the Board. Except as described
above, there were no contacts between the Financial Advisor and the Company and
its affiliates regarding the hiring of the Financial Advisor to present a
fairness opinion to the Board. See "Special Factors -- Opinion of the
Financial Advisor."

Alternatives Considered. After Mr. Foster selected the Financial
Advisor, the Board began an analysis of methods of structuring a transaction
that would have the effect of eliminating the Company's status as a publicly
held company while maximizing Shareholder value. At meetings held on April 4,
and October 2, 1995, the Board considered continuing to operate the Company
with the current capital structure as a public company. The Board rejected
this alternative primarily because of the Company's history of poor performance
and the Board's belief that the Company's status as a private company would
reduce certain expenses associated with its current public status and provide
the Company with greater flexibility in structuring financing arrangements and
additional potential sources of capital. Because the Board believes that
reducing such expenses and obtaining financing will increase the likelihood
that the Company's performance will improve and the value of the Common

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Stock will increase, the Board determined that it would be imprudent to sell
the Company at this time.

In addition, the Company has received only one bid in the last two years.
On August 11, 1994, the Company received an unsolicited letter via facsimile
from On Cue Limited ("On Cue") in which On Cue merely indicated three things.
On Cue indicated that it operated four billiard club restaurants in Canada,
that its shares were listed on NASDAQ and that it proposed to exchange shares
of Common Stock for shares of On Cue in a transaction that, prior to expenses
and based on the then-trading value of the common stock of On Cue, would have
had a value of approximately $1.25 per share. Immediately thereafter, in an
effort to evaluate the relative merits of the proposal, Mr. Foster, on behalf
of the Company, contacted On Cue and requested copies of recent financial
statements of On Cue, as well as any other documents that On Cue had available
that would provide the Company information about On Cue's business, with which
the Company has no familiarity. On September 13, 1994, Mr. Foster sent On Cue
a brochure describing the Company's business. In addition, Mr. Foster asked an
employee of the Company to contact the Commission and NASDAQ to ascertain
whether any securities of On Cue were registered or listed thereon. The
employee learned that no securities of On Cue had ever been registered with the
Commission or listed on NASDAQ. Despite additional calls placed by Mr. Foster
during the next few weeks to follow up with On Cue with respect to the
proposal, On Cue has never responded to the Company's inquiries. The Company
has no knowledge of any reason or reasons On Cue has failed to provide the
information that Mr. Foster requested and failed to contact the Company to
discuss the proposal further.

Although the Board has not solicited bids for the sale of the Company's
assets during the past two years nor received any other bids during this time,
the Board believes that the Company has little resale value because of the
nature of the Company's assets, which are primarily comprised of leasehold
interests in the billiard clubs that the Company operates, as well as equipment
and furniture. These clubs are not readily convertible to other uses, and
without an agreement by the Company or the managers of the clubs to continue
operating these clubs, the clubs, the leasehold interests and the equipment and
furniture held by the Company have relatively low resale value even if sold to
a competitor of the Company that would take over operations of the clubs. In
particular, the Board believes that a sale of the Company's assets, with the
accompanying expenses, would be unlikely to result in a net distribution to
Shareholders of an amount as great as the Merger Payment. For these reasons,
the Board believes that it can structure a transaction likely to yield greater
distributions to the Shareholders than any distributions they would receive if
the Company were sold. The Board's view on this matter took into account the
Company's receipt of the unsolicited share exchange proposal from On Cue. The
Company never received any information from On Cue to enable the Company to
evaluate the relative merits of the proposal, including the basis for On Cue's
determination of the exchange value of $1.25 per share, and the Company

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<PAGE> 47

was unable to locate any information about On Cue through its own
investigations. In addition, On Cue failed to respond to Mr. Foster's efforts
to discuss the proposal. Consequently, because On Cue took no affirmative
steps after it sent the initial letter to the Company to indicate that it was
serious about engaging in a transaction with the Company, the Board believes
that it is inadvisable to consider the proposal an indication of the Company's
resale value or that the Company's consummation of a transaction with On Cue
would have resulted in greater distributions to the Shareholders than the
Merger Payment. In fact, the Company's experience with On Cue (in which the
entity initiating a bid on an unsolicited basis lacked the interest necessary
to pursue the matter) led the Board to conclude that it was likely to be
unproductive to invest Company resources in seeking additional bids for the
Company in order to assist the Board in determining the Company's value. Even
if the Company had obtained one or more additional bids for the Company, it
would be necessary for the Board to assess the likelihood that any particular
bid could result in a sale of the Company on terms acceptable to all parties in
order to utilize the bids as a measure of the value of the Company.

At the meeting held on April 4, 1995, the Board made an informal, initial
determination that Shareholders should be paid approximately $0.50 per share in
any transaction that the Board structured that would have the effect of
eliminating the Company's status as a publicly held company. For a discussion
of the Board's determination of this distribution amount, see "Payments to the
Other Shareholders," below.

In light of the Board's belief that it is not in the best interests of the
Company and the Shareholders to sell the Company at this time, the Board
considered transactions at the meeting held on October 2, 1995 that could have
the effect of taking the Company private, but would retain the interest in the
Company or any successor to the Company of each Continuing Shareholder (i.e., a
Shareholder that beneficially owns at least 101,000 shares of Common Stock as
of the Record Date and that does not elect to receive a Merger Payment in
respect of each share of Common Stock beneficially owned by such Shareholder
(an Initial Continuing Shareholder) and each Shareholder who is an employee of
the Company and does not qualify as an Initial Continuing Shareholder and who
beneficially owns shares of Common Stock on the Record Date in an amount that,
when added to the aggregate number of shares of Common Stock underlying stock
options or warrants beneficially owned by such employee on the Record Date,
whether or not such options or warrants are then exercisable, totaling at least
101,000 shares of Common Stock (an Employee Continuing Shareholder)). Any one
of the transactions considered could have the effect of terminating the
interest of each Other Shareholder (i.e., a Shareholder that beneficially owns
less than 101,000 shares of Common Stock as of the Record Date or is the
beneficial owner of 101,000 or more shares of Common Stock as of the Record
Date, but elects to receive a Merger Payment in respect of each share of Common
Stock beneficially owned by such holder). The Board considered (i) a tender
offer by the Company, (ii) a tender offer by the Company and a subsequent
merger of the

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<PAGE> 48

Company into a newly formed company to eliminate any nontendering Other
Shareholders, and (iii) a merger, as proposed herein.

The Board rejected the first alternative as impractical because there
could be no assurance that any Shareholders would elect to tender their Common
Stock to the Company. Further, in light of its recent difficulty in obtaining
financing from financial institutions and other sources, it was unlikely that
the Company could obtain financing sufficient to acquire all of the tendered
Common Stock. Because the Board had determined that it was in the best
interest of the Company and the Shareholders for the Company to become a
private company not subject to the provisions of the federal securities laws
and regulations relating to the operation of public entities, the Board did not
believe that it was advisable or in the interest of the Shareholders to
undertake a transaction in which the Company would incur significant expense
but would have no assurance that, even if a majority of the Shareholders
supported the transaction by tendering their Common Stock to the Company, the
transaction would accomplish its purpose. If the transaction were not
sufficient to enable the Company to become a private company, the Company would
have incurred the expense associated with a transaction of this type but would
be required to continue to incur additional expenses to satisfy the additional
recordkeeping requirements associated with operating the Company as a public
company that is subject to the provisions of the federal securities laws and
regulations relating to the operation of public entities. The second
alternative was rejected because, while it could terminate the interests of all
Shareholders in the Company, it would be a protracted and costly process.
After reviewing these alternatives, the Board unanimously selected the Merger
as the most efficient method for taking the Company private and paying some
Shareholders a fair price for their interests in the Company, as well as
retaining the interests of other Shareholders in the Company or a successor to
the Company.

The Board has structured the proposed Merger so that (i) the Company will
be merged into Newco (the "Surviving Company"), (ii) each Other Shareholder
(i.e., a Shareholder that (A) beneficially owns less than 101,000 shares of
Common Stock as of the Record Date, (B) beneficially owns 101,000 or more
shares of Common Stock as of the Record Date, but elects to receive a Merger
Payment in respect of each share of Common Stock beneficially owned by such
holder, or (C) holds of record through a Broker-Dealer Shareholder and does not
provide the Company with evidence regarding the number of shares beneficially
owned by such holder) will have the right to receive the Merger Payment of
$0.50 per share of Common Stock, (iii) each share of Common Stock held by an
Initial Continuing Shareholder (i.e., a Shareholder that beneficially owns at
least 101,000 shares of Common Stock as of the Record Date and that does not
elect to receive a Merger Payment in respect of each share of Common Stock
beneficially owned by such Shareholder) or an Employee Continuing Shareholder
(i.e., a Shareholder who is an employee of the Company and does not qualify as
an Initial Continuing Shareholder and who beneficially owns shares of Common
Stock on the Record Date in an amount that, when added to the aggregate number
of shares of

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<PAGE> 49

Common Stock underlying stock options or warrants beneficially owned by such
employee on the Record Date, whether or not such options or warrants are then
exercisable, totals at least 101,000 shares of Common Stock) will be converted
into the right to receive one share of common stock of Newco and/or each stock
option issued under the Stock Option Plans or warrant of the Company held by a
Continuing Shareholder will be converted into the right to purchase the same
number of shares of common stock of Newco on the same terms and conditions.
The Board initially determined that Shareholders that beneficially own at least
101,000 shares of Common Stock should receive shares of common stock in Newco
in the Merger so that the Merger would satisfy one of the requirements
necessary for the Merger to have no federal income tax consequences to the
Company. One of the conditions for such tax-free treatment is that after the
Merger, the Shareholders, as a group, maintain a significant continuing equity
interest in Newco. The Board was advised by its tax advisor, Shaw, Pittman,
Potts & Trowbridge, that this continuity requirement would be satisfied if
Shareholders, as a group, receive shares of common stock in Newco in the Merger
with a value equal to at least 48 percent of the value of the Common Stock
surrendered in the Merger. After reviewing the Company's Shareholder records,
the Board determined that it could satisfy this requirement if it set a
101,000-share threshold for those receiving shares of common stock of Newco in
the Merger. However, despite this continuity requirement, the Board
subsequently decided to also give Shareholders that beneficially own at least
101,000 shares of Common Stock the option to liquidate their investment in the
Company in the Merger. The Board decided that Employee Continuing Shareholders
should receive shares of common stock in Newco because it would satisfy one of
the requirements necessary for the Merger to have no federal income tax
consequences to the Company and, therefore, would make it more attractive to a
potential investor that could supply the funds necessary to make the Merger
Payments. See "Material Federal Income Tax Consequences." The Board also
determined that unexercised warrants and options should be aggregated with
shares of Common Stock held by an employee in determining whether or not the
employee would qualify as a Continuing Shareholder because the options and
warrants held by Company employees had primarily been granted to the employees
as additional compensation or bonuses for their services. For this reason, and
because certain of the options and warrants are not presently exercisable (or
were not exercisable at the time of the Board's deliberations on this matter),
the Board determined that it was appropriate, and consistent with the
compensation associated with the granting of such options and warrants, to
include such options and warrants in determining the number of shares held by
the employee for purposes of the employee's qualifications as a Continuing
Shareholder. Twelve Shareholders beneficially owned at least 101,000 shares of
Common Stock as of the Record Date. Each of these Shareholders will be treated
as an Initial Continuing Shareholder for purposes of the Merger, unless any of
them makes an election to receive a Merger Payment for each share of Common
Stock owned by each of them, in which case such electing Shareholders will be
treated as Other Shareholders for purposes of the Merger. See "Proposal to
Approve the Merger -- Payment for Common Stock in the Merger." As of the date
of this

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<PAGE> 50

Proxy Statement, _____ of these Shareholders, including Mr. Foster, have
informed the Company in writing that they will not elect to receive a Merger
Payment in respect of each share of Common Stock beneficially owned by each of
them. Consequently, as of the date of this Proxy Statement, there are a total
of ___ Continuing Shareholders, _____ Initial Continuing Shareholders and one
Employee Continuing Shareholder.

At the meeting held on October 2, 1995, the Board also discussed potential
sources of financing for the Merger. For a discussion of the Company's
estimate of the total cost of the Merger, which will be paid entirely by the
Company, see "Fees and Expenses." At the suggestion of Mr. Foster, the Board
authorized the Company to retain Island Partners, Ltd. ("Island") to structure
a transaction designed to raise funds to be used for the Merger Payments. Mr.
Foster was introduced to Douglas M. Suliman, Jr. of Island approximately two
years ago by a mutual friend who works in the entertainment industry in Boston,
Massachusetts. After this introduction, Mr. Foster had a few meetings with Mr.
Suliman to discuss his experience in raising capital, particularly his success
in raising funds for an entity in the restaurant industry. Mr. Foster then
contacted two of Mr. Suliman's references, each of whom confirmed that Mr.
Suliman had been successful in his capital raising efforts. Based on Mr.
Suliman's qualifications, Mr. Foster recommended to the Board that the Company
hire Island to assist the Company with the Company's efforts to raise funds.
Mr. Foster had no prior contact or relationship with Mr. Suliman or Island
prior to the initial introduction approximately two years ago.

In March 1996, Mr. Suliman became an agent of Hampshire Securities
Corporation (i.e., the Placement Agent). On April 29 1996, the Board
authorized the Company to retain Hampshire Securities Corporation, a New York
corporation that specializes in underwriting private placements of debt and
equity and public offerings of small and medium-sized companies and providing
such companies with business valuations and strategic advice on non-recurring
transactions such as mergers and acquisitions and restructurings (the
"Placement Agent"), to structure a transaction designed to raise $6,000,000 to
$12,000,000 in gross proceeds to be used for the Merger Payments, working
capital and the development of additional billiard clubs. The Board had
initially authorized the Company to retain Island because of the experience and
success of Mr. Suliman, one of its principals, particularly his success in
raising capital for an entity in the restaurant industry. Once Mr. Suliman
became affiliated with the Placement Agent, which has had success in raising
capital for small and medium-sized companies in the entertainment/lesiure
industry, the Board believed that it was advisable to retain the Placement
Agent. The Company had no prior contact or relationship with the Placement
Agent before the Company retained the Placement Agent on May 23, 1996. The
Company's prior contacts with Mr. Suliman are discussed above. See "Financing
of the Merger."

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At the meeting on October 2, 1995, the Financial Advisor presented its
preliminary fairness opinion to the Board. See "Opinion of the Financial
Advisor," below.

In its consideration of the timing and structure of the proposed Merger
at the October 2, 1995 meeting, the Board reviewed the Company's guaranteed
return, buy-out and registration rights obligations undertaken in connection
with the private placement of the securities of certain of its subsidiaries to
determine what impact, if any, the Merger would have on such obligations. See
"Current Effects of Borrowings and Equity Financing," above and "Financial
Statements of the Company." The Board determined that all of the obligations
that the Company undertook in connection with these private placements will
continue in the Surviving Company if the Merger is consummated regardless of
the fact that the Surviving Company will not be a public company. However, the
investors in the private placements would be unable to effectively exercise
their registration rights without the Company's re-registration of its
securities under the federal securities laws (which the Company has no present
intention of doing) because the Common Stock will be deregistered under the
Exchange Act and delisted from NASDAQ under the terms of the Merger. The
inability of investors to effectively exercise their registration rights and/or
the loss of their expectation to have rights or interests in a public company
could result in a suit by any of them against the Surviving Company. The
Company in the future may undertake negotiations with the investors in the
private placements to purchase their interests in the subsidiaries with
proceeds from the Private Placement, if any. As of the date of this Proxy
Statement, the Company has not begun any such negotiations and has no current
plans to do so.

Mr. Foster, as Chairman of the Board and as a Continuing Shareholder, is a
participant on both sides of the proposed Merger because he will be a
shareholder in the Surviving Company. His participation in the Board's
decision making process regarding the timing and structure of the proposed
Merger presented him with a conflict of interest. Mr. Foster is the only
Continuing Shareholder who participated in the Board's decision making process.
As of the Record Date, Mr. Foster held a total of 1,323,600 shares
(approximately 14.4 percent of the total shares of Common Stock outstanding)
and Mr. Rubin, a business associate of Mr. Foster, held a total of 1,264,465
shares (approximately 13.8 percent of the total shares of Common Stock
outstanding). See "Security Ownership of Certain Beneficial Owners and
Management." If the Merger is consummated, immediately thereafter, Messrs.
Foster and Rubin, as Continuing Shareholders, will own the same number of
shares of common stock in the Surviving Company as they owned in the Company.
See "Proposal to Approve the Merger -- Certain Effects of the Merger."
However, the actual, individual percentage of equity ownership of Messrs.
Foster and Rubin, as well as all other Continuing Shareholders, in the
Surviving Company will depend upon the type and amount of securities of the
Surviving Company issued in the Private Placement. Accordingly, the relative
equity ownership interests of any individual or group of Continuing
Shareholders cannot be determined at this time. See "Financing of the Merger."

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Payments to the Other Shareholders

At its meeting on April 4, 1995, the Board made a preliminary
determination that Shareholders should yield a distribution of approximately
$0.50 per share of Common Stock in any transaction that would have the effect
of eliminating the Company's status as a publicly held company. The Board
based this determination on the market value of the Common Stock at that time,
which the Board believes is a reasonable and reliable measure of the value of
the Common Stock. During the first three months of 1995, the average of high
and low bid prices of the Common Stock, as reported by NASDAQ, was $0.53 per
share. In light of such market value, the Board determined that a distribution
of $0.50 would be fair, subject to the Board's review of the preliminary
fairness opinion to be provided by the Financial Advisor.

The Board then evaluated the preliminary fairness opinion, presented to it
by the Financial Advisor on October 2, 1995, that the proposed Merger Payment
of $0.50 per share was fair to the Other Shareholders, as of October 2, 1995.
The Board also considered the fact that the Common Stock had not traded above
$0.50 per share since March 16, 1995. In light of the foregoing, the Board
determined at its October 2, 1995 meeting that the Merger Payment was fair to
the Other Shareholders. The Board continues to believe that the Merger Payment
is fair to the Other Shareholders based on the final fairness opinion, dated
____________, 1996, rendered by the Financial Advisor to the Other Shareholders
and the fact that, as of the date of this Proxy Statement, the Common Stock
still has not traded above $0.50 per share since March 16, 1995. See "Special
Factors -- Opinion of the Financial Advisor."

For the reasons discussed above under "Alternatives Considered," the Board
did not solicit bids for the sale of the Company's assets in connection with
its determination of the Merger Payment, despite the Company's receipt of the
unsolicited share exchange proposal from On Cue.

Opinion of the Financial Advisor

On October 2, 1995, the Financial Advisor presented its preliminary
opinion, subject to review and revision, to the Board that the proposed Merger
Payment of $0.50 per share was fair to the Other Shareholders, as of October 2,
1995. In addition, the Financial Advisor issued its final opinion to the Other
Shareholders that the proposed Merger Payment of $0.50 per share was fair to
the Other Shareholders, as of ___________, 1996. The opinion is being
delivered to the Other Shareholders as Appendix __ to this Proxy Statement.
The Financial Advisor was not retained to provide, and did not provide, any
advice as to the fairness of the Merger to any of the Continuing Shareholders,
including those Continuing Shareholders who are not controlling persons of the
Company.

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The Financial Advisor provides investment banking, strategic planning and
financial advisory services to companies primarily in the media and
entertainment industries. The Financial Advisor, as part of its investment
banking activities, is continually engaged in the valuations of businesses and
their securities, principally in the media and entertainment industries. The
Financial Advisor is based in Beverly Hills, California. As of the date of
this Proxy Statement, the Financial Advisor and its controlling persons do not
beneficially own any equity securities of the Company. Neither the Financial
Advisor nor its controlling persons has ever had any relationship with the
Company or any of its controlling persons.

The Board selected the Financial Advisor based on its qualifications and
experience, particularly its familiarity with entertainment entities and its
lack of potential conflicts of interest, as well as its reasonable quoted fees.
The Financial Advisor was retained for the limited purpose of rendering a
preliminary opinion, subject to review and revision, to the Board, and
delivering a final opinion to the Other Shareholders, as to the fairness of the
Merger Payment to the Other Shareholders. The Board did not give any
instructions to or impose any limitations on the Financial Advisor in
connection with rendering its fairness opinions. The Board did not retain the
Financial Advisor to market the Company or solicit indications of interest from
or negotiate with any party with respect to the acquisition of any shares of
Common Stock, and the Financial Advisor did not market the Company or solicit
indications of interest from or negotiate with any party with respect to the
acquisition of any such shares, in connection with rendering the fairness
opinions. In connection with the engagement, the Financial Advisor did not
make an independent evaluation or appraisal of the assets or liabilities of the
Company (or its affiliates), and the Company did not furnish the Financial
Advisor any such evaluation or appraisal.

In March 1995, Mr. Foster engaged the Financial Advisor to undertake a
study to enable it to render an opinion to the Board with respect to the
proposed Merger Payment and to pay all reasonable fees and expenses incurred by
the Financial Advisor in connection with providing such opinion. See "Special
Factors -- Background of the Merger -- Certain Effects of Borrowings and
Equity Financing." In ___________, 1996, the Board authorized the Company to
engage the Financial Advisor to render a final opinion to the Other
Shareholders as to the fairness of the Merger Payment to the Other
Shareholders. Except as described above, there were no business contacts
between the Financial Advisor and the Company and its affiliates regarding the
engagement of the Financial Advisor.

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<PAGE> 54

Financial Advisor determined were comparable in certain limited respects to the
Company, which are identified below (the "Comparison Companies"). The
Financial Advisor also took into account its assessment of general economic,
market and financial conditions and its knowledge of the entertainment industry
as well as its experience in connection with similar transactions and
securities valuation generally. The Financial Advisor's opinion was based on
conditions as they existed and could be evaluated on ___________, 1996, the
date of its opinion. In rendering its opinion, the Financial Advisor reviewed,
among other things, certain publicly available information relating to the
Company and performed such studies and analyses as it considered appropriate,
including, among other things, a comparison of the financial and operational
results and certain other financial and stock market information of the Company
with similar information of the Comparison Companies.

The Financial Advisor relied without independent verification upon the
accuracy and completeness of all of the financial and other information
reviewed by the Financial Advisor for the purposes of its opinion. With
respect to any financial forecasts, the Financial Advisor assumed that they had
been reasonably prepared and reflect the best currently available estimates and
judgment of the management of the Company as to the expected future financial
performance of the Company.

In connection with a presentation to the Board on October 2, 1995, the
Financial Advisor advised the Board that, in evaluating the consideration to be
received in the Merger by the Other Shareholders, the Financial Advisor had
performed a variety of financial analyses with respect to the Company, all as
summarized below.

The Financial Advisor reviewed with the Board for background purposes
certain aspects of the financial performance of the Company, including revenue,
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
earnings before interest and taxes ("EBIT") for fiscal years 1992, 1993, 1994
and 1995 and during the latest twelve months ended June 30, 1995 ("LTM"), as
well as management projections for fiscal 1996 (calculated as of September 11,
1995). The Financial Advisor also reviewed with the Board certain information
concerning the trading prices and volumes of trading of the Common Stock
through September 29, 1995. The Financial Advisor observed that the Merger
Payment represented approximately a 60 percent premium over the trading price
of the Common Stock on September 29, 1995. The Financial Advisor also reviewed
with the Board certain publicly available financial, operating and stock market
information for the Company and for the Comparison Companies. The Comparison
Companies consisted of Bowl America, O'Charley's, Brinker International and
Western Country Clubs.

The Financial Advisor indicated to the Board that, in order to assess the
public market valuation of the Company based on the Merger Payment and the
relative public market valuations of the Comparison Companies, it performed a
market analysis of the Company

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and the Comparison Companies. With respect to such analysis, the Financial
Advisor calculated a range of market multiples for each of the Comparison
Companies based on dividing the "Firm Value" (the total common shares
outstanding times the market price per share on September 25, 1995, plus the
latest reported total debt, less cash and cash equivalents) of each of the
Comparison Companies by each such company's most recent four quarters and
latest fiscal year EBITDA and EBIT. The range of market multiples for the
Comparison Companies included: (i) Firm Value compared to most recent four
quarters EBITDA multiples of 5.90x to 15.53x; (ii) Firm Value compared to most
recent four quarters EBIT multiples of 8.45x to 20.83x; (iii) Firm Value
compared to most recent fiscal year EBITDA multiples of 5.30x to 22.67x; and
(iv) Firm Value compared to most recent fiscal year EBIT multiples of 6.92x to
46.87x. Based on these measures, the Financial Advisor then compared the
Company's market multiples based on the Merger Payment of $0.50 per share of
Common Stock with the median market multiples of the Comparison Companies in
order to establish the relationship between the Company's market multiples and
those of the Comparison Companies. With respect to such review, the Financial
Advisor noted to the Board that: (i) the Company's Firm Value to most recent
four quarters EBITDA multiple was 90.03x ($5,582,000/$62,000), compared to a
median Firm Value to most recent four quarters EBITDA multiple of 9.6x for the
Comparison Companies; (ii) the Company's Firm Value to most recent four
quarters EBIT multiple was not meaningful because the Company's EBIT was a
negative number, compared to a median Firm Value to latest four quarters EBIT
multiple of 14.00x for the Comparison Companies; (iii) the Company's Firm
Value to most recent fiscal year EBITDA multiple was 92.79x
($5,582,000/$60,000), compared to a median Firm Value to latest fiscal year
EBITDA multiple of 12.12x for the Comparison Companies; and (iv) the Company's
Firm Value to most recent fiscal year EBIT multiple was not meaningful because
the Company's EBIT was a negative number, compared to a median Firm Value to
most recent fiscal year EBIT multiple of 20.97x for the Comparison Companies.
In addition, the Financial Advisor reviewed the Company's projected fiscal year
1996 earnings, EBITDA and EBIT market multiples. With respect to such review,
the Financial Advisor noted to the Board that: (i) the Company's Firm Value
to projected fiscal year 1996 earnings multiple was not meaningful because the
Company's earnings were negative; (ii) the Company's Firm Value to projected
fiscal year 1996 EBITDA multiple was 9.04x ($5,582,000/$618,000); and (iii)
the Company's Firm Value to projected fiscal 1996 EBIT was not meaningful
because the Company's EBIT was negative. The Financial Advisor informed the
Board that the EBIT and EBITDA calculations are before start-up costs and
provisions for losses and other income after minority interest expense and
adjustments for the compensation and bonuses paid by the Company to Mr.
Foster.

The foregoing summary does not purport to be a complete description of the
analyses performed by the Financial Advisor. The preparation of financial
analyses and fairness opinions is a complex process and is not necessarily
susceptible to partial analysis or summary description. The Financial Advisor
believes that its analyses (and the summary set forth above)

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must be considered as a whole, and that selecting portions of such analyses and
of the factors considered by the Financial Advisor, without considering all of
such analyses and factors, could create an incomplete view of the processes
underlying the analyses conducted by the Financial Advisor and of its opinion.
The Financial Advisor made no attempt to assign specific weights to particular
analyses. Any estimates contained in the Financial Advisor's analyses are not
necessarily indicative of actual values, which may be significantly more or
less favorable than as set forth therein. Estimates of values of companies do
not purport to be appraisals or necessarily to reflect the prices at which
companies may actually be sold.

Based on the foregoing, on October 2, 1995, the Financial Advisor
delivered to the Board its preliminary opinion, subject to review and revision,
that the proposed Merger Payment of $0.50 per share was fair to the Other
Shareholders, as of October 2, 1995. In addition, the Financial Advisor issued
its final opinion to the Other Shareholders that the proposed Merger Payment of
$0.50 per share was fair to the Other Shareholders, as of ___________, 1996.
The opinion is being delivered to the Other Shareholders as Appendix __ to this
Proxy Statement.

In connection with the engagement, the Company has agreed to indemnify the
Financial Advisor against all losses, claims, damages, liabilities and expenses
to which the Financial Advisor or any of its affiliates, stockholders,
partners, directors, agents, employees or controlling persons may become
liable. In the case of a loss, claim, damage or liability, the Company will
not be required to indemnify the Financial Advisor to the extent that the loss,
claim, damage or liability results from the gross negligence or willful
misconduct of the Financial Advisor in connection with its issuance of the
fairness opinion or any services that it may have provided to the Company.

For its services in rendering its opinions, the Company paid the Financial
Advisor a $_______ fee and reimbursed the Financial Advisor for out-of-pocket
expenses totaling $______, which consisted of $______ in travel expenses, $____
in legal expenses and $_____ in miscellaneous expenses. The Company has
already paid the Financial Advisor the $_______ fee. Consequently, such
payment was not dependent upon the approval of the Merger by the Shareholders
or the consummation of the Merger.

Board of Directors Determination of Fairness of the Merger

The Board unanimously approved the Merger. Two of the four directors are
not employed by the Company. The Board believes that the Merger, including the
process by which the Merger was decided upon and the Merger Payment, is fair
to, and in the best interest of, each Shareholder, including each Other
Shareholder who is not a controlling person of the Company and each Continuing
Shareholder who is not a controlling person of the

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<PAGE> 57

Company. In reaching this conclusion, the Board considered a number of
factors, including but not limited to the following. Each of these factors
supported this conclusion.

(1) The fairness opinion of the Financial Advisor. In considering such
opinion, the Board also took note of the Financial Advisor's reputation,
qualifications and experience in the entertainment industry. The Board in
reaching its conclusion considered the fact that the Financial Advisor, which
is an independent entity whose principals have substantial experience in making
fairness determinations of the type delivered to the Other Shareholders,
concluded that the Merger Payment is fair to the Other Shareholders as of
______________, 1996 supported its view that the Merger is fair to the
Shareholders.

(2) Certain of the factors considered by the Financial Advisor, as set
forth in this paragraph. Like the Financial Advisor, the Board considered the
Company's financial condition and operating losses (which, for the reasons
discussed above under "Certain Effects of Borrowings and Equity Financing,"
indicated that the Company would not realize a profit if it continued to
operate under its current structure), the market price of the Common Stock, and
the trading market for the Common Stock and the manner in which these matters
compared to those of the Comparison Companies. In general, the financial
condition, earnings, market price of the common equity and trading market for
the common equity were more favorable than those of the Company and, therefore,
support the fairness of the Merger and the Merger Payment.

(3) The Board's own knowledge regarding the financial condition,
results of operations and projections of the Company for fiscal 1996 (which,
for the reasons discussed above under "Certain Effects of Borrowings and Equity
Financing," indicated that the Company would not realize a profit if it
continued to operate under its current structure), as well as current industry,
economic and market conditions. The financial projections provided to the
Financial Advisor by the Company projected, for the Company's 1996 fiscal year,
total revenues of approximately $11,500,000 and an adjusted net loss before
taxes of approximately $300,000. In preparing these projections, management
projected a 43.8 percent increase in total revenues (along with a 29.7 percent
increase in the costs associated with operating the billiard clubs and the
Company) over the prior fiscal year based primarily on the opening of the Long
Beach billiard club and an increase in comparable sales of approximately 5.9
percent over the prior fiscal year. The Board believes that the current
industry, economic and market conditions favor companies that are involved in
businesses similar to that of the Company. Entertainment industry experts
project that American consumers will spend over $250,000,000,000 in domestic
restaurant and leisure time entertainment in 1997; American consumers spent
$185,000,000,000 in such entertainment in 1992. In particular, billiards
represented a $4,000,000,000 industry in 1995, with more than 40,000,000
Americans playing at least once a year and 5,000,000 playing at least once a
week, an increase of nearly 20 percent over the past five years. However, due
to the Company's poor financial condition,

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particularly its current cash shortage, the Board determined that the Company
would be unable to benefit from these conditions by developing additional
billiard clubs without a substantial infusion of capital. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." Absent a restructuring of the Company, the
Board concluded that the Company would be unable to obtain the infusion of
capital required.

(4) The Merger Payment in relation to current market prices, historical
market prices and purchase prices paid by members of the Board and executive
officers and other Shareholders owning more than five percent of the issued and
outstanding shares of Common Stock as of the Record Date during the past two
years. As of the date of this Proxy Statement, the Common Stock has not traded
above $0.50 per share since March 16, 1995. During the past two years, no
member of the Board, executive officer or other Shareholder owning more than
five percent of the issued and outstanding shares of Common Stock as of the
Record Date has purchased shares of Common Stock for a price in excess of $0.25
per share. The Board believes that the current market price of the Common
Stock and purchase prices paid for shares of Common Stock by controlling
persons of the Company support the fairness of the Merger and the Merger
Payment.

(5) The effect that the Merger may have on the liquidity of the shares
of common stock of the Surviving Company held by each Continuing Shareholder,
including each Continuing Shareholder who is not a controlling person of the
Surviving Company. The Merger will not be consummated unless the Company
raises at least $6,000,000 in gross proceeds from the Private Placement. After
deducting the Merger Payments of approximately $2,500,000, expenses associated
with consummation of the Merger of approximately $__________ and expenses
associated with consummation of the Private Placement of approximately
$550,000, the Surviving Company will have approximately $__________ for the
development of additional billiard clubs and working capital if the Private
Placement is consummated. See "Financing of the Merger" and "Fees and
Expenses." The Board believes that such an infusion of capital will enable the
Surviving Company to expand its business and improve its profitability, which
in turn would be likely to make the Surviving Company more attractive to
potential investors. Consequently, the Board concluded that consummation of
the Merger may have an indirect positive effect on the liquidity of the common
stock of the Surviving Company held by the Continuing Shareholders, including
those Continuing Shareholders who are not controlling persons of the Surviving
Company, which supports the fairness of the Merger. Based on the foregoing,
the Board determined that consummation of the Merger would not have an adverse
effect on Continuing Shareholders, including those Continuing Shareholders who
are not controlling persons of the Surviving Company.

(6) The desirability of soliciting indications of interest in purchasing
the Company or otherwise purchasing the shares of Common Stock held by the
Other Shareholders. In

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particular, the Board considered the fact that since the Company began its
upscale billiard club business in 1990 the Company has experienced a net
operating loss in each year other than 1993 and the fact that the Company has
never received a "firm offer" of this type. As discussed above under
"Alternatives Considered," the Company did receive an unsolicited share
exchange proposal from On Cue but was unable to initiate negotiations with On
Cue. Further, the Board considered its belief that the Company has little
resale value because of the nature of the Company's assets, which are primarily
comprised of leasehold interests in the billiard clubs that the Company
operates, as well as equipment and furniture. See "Alternatives Considered,"
above. In light of these facts, the Board determined that it was not advisable
for the Company to incur any additional expense in order to retain the
Financial Advisor or another advisor to solicit indications of interest from
potential bidders, and the Board believes that this decision does not detract
from the overall fairness of the Merger, including the Merger Payment and the
process by which it was determined. For a discussion of the process by which
the Merger Payment was determined, see "Payments to the Other Shareholders,"
above.

In reaching its conclusion that the Merger, including the process by which
the Merger was decided upon and the Merger Payment, is fair to each
Shareholder, including each Other Shareholder who is not a controlling person
of the Company and each Continuing Shareholder who is not a controlling person
of the Company, the Board considered the aforementioned factors because most of
them involve evaluations and judgments made by an unaffiliated third party. In
view of the variety of factors considered, the Board did not find it
practicable to, and therefore did not, quantify or otherwise assign relative
weights to the individual factors considered in reaching its conclusion that
the Merger is fair to the Shareholders. For the reasons discussed in the
preceding listing of these factors, each of the individual factors supported
its conclusion.

The Board believes that the Merger is fair even though the Financial
Advisor was not retained by the two directors who are not employed by the
Company or by any of the Other Shareholders and even though the Merger has not
been structured to require the approval of a majority of the Shareholders who
are not controlling persons of the Company. While the Financial Advisor was
not retained by the two directors who are not employed by the Company or by any
of the Other Shareholders, the Board retained the Financial Advisor on behalf
of the Other Shareholders and the Financial Advisor rendered its opinion
directly to the Other Shareholders. The Board believes that a transaction
structured to require the approval of a majority of the shareholders who are
not controlling persons of a company is just one indicator of the fairness of
the transaction and that the transaction must be considered as a whole to
ascertain its fairness. The Board is of the view that the absence of such a
procedural safeguard in the case of the Merger does not detract from the
overall fairness of the Merger.

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The Board did not seek an explanation of the analysis performed, other
than as described under "Opinion of the Financial Advisor," above, or
conclusion reached by the Financial Advisor because it had hired the Financial
Advisor, which has substantial experience in these types of evaluations, to
function as an independent expert and did not wish to influence either the
process followed by the Financial Advisor or its ultimate opinion. The Board
accepted the opinion of the Financial Advisor without detailed evaluation of
the conclusion contained therein not only because of the expertise and
experience of the Financial Advisor in these types of evaluations but also
because the conclusion of the Financial Advisor, which is an independent expert
not affiliated with any member of the Board, any officer or any affiliate of
either, accorded with the analysis, evaluation and conclusion of the Board.

The Board believes that it has satisfied its fiduciary obligation to the
Other Shareholders, including each Other Shareholder who is not a controlling
person of the Company, to obtain a fair price for their Common Stock. In order
to fulfill this obligation, the Board not only reviewed the history of the
Company's performance and lack of ability to obtain financing and attract
investors as a public company, but also obtained an opinion from an independent
third party as to the fairness of the Merger Payment.

The analysis of the Financial Advisor included consideration of the Merger
Payment in relation to EBITDA, EBIT, LTM EBIT and LTM EBITDA. The Board
considered these factors in reaching its conclusion that the Proposal,
including the Merger Payment, is fair to each Shareholder, including the
Continuing Shareholders. For a detailed discussion of the Financial Advisor's
presentation of these factors to the Board, see "Opinion of the Financial
Advisor," above. The Board considered these factors in the aggregate when they
were presented to the Board by the Financial Advisor. The Board did not
undertake an analysis of the fairness of the Merger Payment in relation to each
factor.

No firm offers of which the Board is aware have been made by an
unaffiliated person during the preceding two years for (i) the merger or
consolidation of the Company into or with such person, (ii) the sale or other
transfer of all or any substantial part of the assets of the Company, or (iii)
the purchase of a number of shares of Common Stock that would enable the holder
thereof to exercise control of the Company. In addition, the Board did not
solicit any such offers. The Board did not consider the unsolicited share
exchange proposal from On Cue a "firm offer" because the Company did not have
an opportunity to evaluate the relative merits of the proposal or engage in
negotiations with On Cue with respect to the proposal. Although the Company
made several attempts to pursue the matter, On Cue took no affirmative steps
after it made its initial contact with the Company to indicate that it was
serious about engaging in a transaction with the Company. For a detailed
discussion of the On Cue proposal, see "Background of the Merger --
Alternatives Considered," above.

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Certain Effects of the Merger

Consummation of the Merger through the Private Placement would likely
result in the execution by the Continuing Shareholders of Lock-Up Agreements
(as defined below) which would restrict their ability to transfer any shares of
common stock of Newco received in the Merger and in which they represented that
they had no plan or intention to dispose of the shares of common stock of
Newco. See "Proposal to Approve the Merger -- Lock-Up Agreements."

The Company, as a result of the Merger, will become an entity the
securities of which are privately held. The registration of the Common Stock
under the Securities and Exchange Act of 1934, as amended (the "Exchange Act")
will terminate, resulting in the suspension of the Company's obligations to
file periodic reports such as Forms 10-KSB, 10-QSB and 8-K. Since the Common
Stock will no longer be publicly held, the Company will be relieved of the
obligation to comply with the proxy rules of Regulation 14A under Section 14 of
the Exchange Act, and the executive officers and directors of the Company and
Shareholders owning more than 10 percent of the Common Stock will be relieved
of the reporting

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requirements and "short swing" trading restrictions under Section 16 of the
Exchange Act. In addition, the Common Stock will be delisted from NASDAQ,
which will terminate the Company's public trading market and the Company no
longer will be required to comply with the rules and regulations relating to
NASDAQ listing.

If the Merger is consummated, all of the Company's loan obligations and
guaranteed return, buy-out and registration rights obligations undertaken in
connection with the private placement of the securities of certain of its
subsidiaries will continue in the Surviving Company. See "Current Effects of
Borrowings and Equity Financing," above.

Material Federal Income Tax Consequences

The following is a summary of the material federal income tax consequences
associated with the proposed Merger, based upon the advice of Shaw, Pittman,
Potts & Trowbridge, as tax advisor to the Company. This discussion is based
upon the laws, regulations and reported rulings and decisions in effect as of
the date of this Proxy Statement (or, in the case of certain regulations,
proposed as of such date), all of which are subject to change, retroactively or
prospectively, and to possibly differing interpretations. This discussion does
not purport to deal with the federal income or other tax consequences
applicable to all Shareholders in light of their particular investment
circumstances (such as their source and level of income, the nature of their
investment portfolio and the nature and amount of tax deductions, credits and
other expenses unrelated to the Company). This discussion also does not
purport to deal with all categories of Shareholders, some of whom may be
subject to special rules (including, for example, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States). No ruling on the federal income tax consequences of the Merger has
been or will be requested from the Internal Revenue Service or from any other
tax authority.

This discussion of the federal income tax consequences of the Merger is
intended to provide a general summary and does not address tax consequences
which may vary with, or are contingent on, individual circumstances. For
example, the proposed Merger may affect the tax liability of each Shareholder
differently, depending on such factors as whether the Shareholder is an
individual, corporation, company or other entity. This discussion is not
binding upon any tax authority or any court and no assurance can be given that
a position contrary to those expressed in this discussion will not be asserted
and sustained. Moreover, this discussion does not address any foreign, state
or local income or other tax consequences of the Merger.

ACCORDINGLY, EACH SHAREHOLDER IS STRONGLY URGED TO CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR REGARDING ANY SPECIFIC TAX CONSEQUENCES TO THE
SHAREHOLDER OF THE MERGER,

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INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN INCOME AND OTHER TAX CONSEQUENCES
OF THE MERGER AND POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

Federal Income Tax Consequences for Continuing Shareholders. The federal
income tax consequences of the Merger for Continuing Shareholders will depend
upon whether or not the Merger is treated as a reorganization under section
368(a)(1)(A) of the Code (a so-called "Type A reorganization") for federal
income tax purposes.

In order to qualify as a Type A reorganization the Merger must satisfy
four requirements. First, the Merger must qualify as a merger or consolidation
under state law. Second, the Merger must have a bona fide business purpose
(other than tax avoidance). Third, after the Merger, Newco must continue the
Company's billiard club business or use a significant portion of the Company's
"historic business assets" in its business. Fourth, after the Merger, the
Shareholders, as a group, must maintain a significant continuing equity
interest in Newco. For purposes of issuing private letter rulings, the IRS has
provided a safe harbor, with respect to the minimum continuing equity interest
needed to satisfy this requirement. The safe harbor requires that the
shareholders in a corporation that is being merged out of existence (the
"target" corporation) receive and retain an amount of acquiring corporation
stock with a value at the time of the transaction equal to at least 50 percent
of the value of the target corporation stock surrendered by such shareholders
in the transaction. However, this is merely a safe harbor, and the Company's
tax advisor believes that the Shareholders should be treated as maintaining a
sufficient continuing equity interest in the Company if they, as a group,
receive shares of common stock of Newco in the Merger with a value equal to at
least 48 percent of the value (measured at the time of the Merger) of the
shares of Common Stock surrendered in the Merger, and they actually retain
ownership of such stock for at least two years (assuming that at the time of
the Merger, Shareholders owning at least 48 percent of the Common Stock have no
plan or intention to dispose of the shares of common stock of Newco received in
the Merger). Therefore, if the Merger is structured as described in this Proxy
Statement and Shareholders owning at least 48 percent of the Common Stock (i)
enter into Lock-Up Agreements (as defined below) and (ii) have no plan or
intention of disposing of the shares of common stock of Newco, then the Merger
should qualify as a Type A reorganization for federal income tax purposes.

If the Merger qualifies as a Type A reorganization, Continuing
Shareholders should not recognize any gain or loss as a result of the Merger
and the tax basis of each Continuing Shareholder in the shares of common stock
of Newco received in the Merger should be equal to such Shareholder's adjusted
tax basis in the shares of Common Stock surrendered in the Merger.

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On the other hand, if the Merger does not qualify as a Type A
reorganization, it most likely will be treated as a taxable exchange of the
Company's assets for shares of common stock of Newco and cash, followed by a
liquidation of the Company in which the Continuing Shareholders receive shares
of common stock of Newco. As a result, if the Merger does not qualify as a
Type A reorganization, each Continuing Shareholder will recognize taxable gain
(or loss) equal to the difference, if any, between (i) the value of the shares
of common stock of Newco received by such Shareholder in the Merger and (ii)
such shareholder's adjusted tax basis in its shares of Common Stock immediately
prior to consummation of the Merger. This gain (or loss) will be treated as
ordinary income (or loss) if the shares of Common Stock surrendered by a
Continuing Shareholder is not a capital asset. Otherwise, if the shares of
Common Stock had been held by a Continuing Shareholder for more than one year
prior to the Merger, then this gain (or loss) will be treated as long-term
capital gain (or loss), and if the shares of Common Stock had been held by a
Continuing Shareholder for one year or less prior to the Merger, then they will
be treated as short-term gain (or loss).

If the Merger does not qualify as a Type A reorganization and the value of
the shares of common stock of Newco and cash distributed in the Merger exceeds
the Company's adjusted taxable basis in its assets, then the Merger will also
result in the recognition of taxable gain by the Company. All of the
Shareholders, including the Continuing Shareholders, may be liable as
transferees under section 6901 of the Code for the Company's tax liability with
respect to such taxable gain.

Individual Shareholders will be subject to federal income tax on any
capital gains recognized as a result of the Merger at a maximum rate of 28
percent and generally will only be able to offset capital gains with capital
losses and up to $3,000 of ordinary income, on an annual basis ($1,500 in the
case of a married individual filing a separate return). However, unused
capital losses of individual Shareholders may be carried forward indefinitely
to subsequent tax years to offset either capital gains or a maximum of $3,000
of ordinary income, on an annual basis. Individual Shareholders will be
subject to federal income tax on any ordinary income recognized as a result of
the Merger at a maximum rate of 39.6 percent.

Corporate Shareholders will be subject to federal income tax on any
ordinary income or capital gains recognized as a result of the Merger at a
maximum rate of 35 percent (39 percent for certain corporations in order to
effect the phase-out of the benefits of the graduated rates applied to income
below $75,000) and generally will be able to use any capital losses only to
offset capital gains. However, unused capital losses of corporate Shareholders
may be (i) carried back to each of the three taxable years preceding the
taxable year in which the loss is recognized and (ii) carried forward to each
of the five taxable years following the taxable year in which the loss is
recognized.

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Federal Income Tax Consequences for Other Shareholders. As a result of
the Merger, Other Shareholders will receive a cash payment in exchange for each
share of their Common Stock (i.e., the Merger Payment), resulting in taxable
gain or loss to such Shareholders. This gain or loss will be equal to the
difference, if any, between (i) the Merger Payment received by the Other
Shareholder and (ii) such Other Shareholder's adjusted tax basis in such
Shareholder's shares of Common Stock immediately prior to consummation of the
Merger. If the shares of Common Stock surrendered in the Merger by an Other
Shareholder is a capital asset, the gain or loss recognized by such Other
Shareholder will be treated as a capital gain or loss. Otherwise, the gain or
loss recognized by such Other Shareholder will be treated as ordinary income or
loss. Capital gain (or loss) recognized by an Other Shareholder who has held
shares of Common Stock for more than one year at the time of the Merger will
generally be treated as long term capital gain (or loss). Capital gain (or
loss) recognized by an Other Shareholder who has held shares of Common Stock
for one year or less at the time of the Merger will generally be treated as
short-term capital gain (or loss).

Any capital gains or ordinary income that would be recognized by the Other
Shareholders, would be taxed at the same rates and could be utilized subject to
the same rules described in "Federal Income Tax Consequences for Continuing
Shareholders," above.

As noted above, if the Merger does not qualify as a Type A reorganization
and the value of the shares of common stock of Newco and cash distributed in
the Merger exceeds the Company's adjusted taxable basis in its assets, then the
Merger will result in the recognition of taxable gain by the Company. All of
the Shareholders, including the Other Shareholders, may be liable as
transferees under section 6901 of the Code for the Company's tax liability with
respect to such taxable gain. This tax liability would be in addition to any
tax liability resulting from any taxable gain recognized by the Other
Shareholders in connection with their receipt of a Merger Payment.

Federal Income Tax Consequences for Holders of Warrants to Purchase Common
Stock. If the Merger is approved, each warrant to purchase a share or shares
of Common Stock outstanding immediately prior to consummation of the Merger
will be converted into the right to purchase the same number of shares of
common stock of Newco on the same terms and conditions. This conversion will
be treated as a taxable exchange, and each holder of a warrant to purchase a
share or shares of Common Stock will recognize gain or loss equal to the
difference, if any, between (i) the value of the warrant to purchase shares of
common stock of Newco and (ii) such holder's adjusted tax basis in the warrant
to purchase shares of Common Stock immediately prior to the conversion. This
gain (or loss) will be treated as ordinary income (or loss) if the warrants are
not capital assets. Otherwise, if the warrant had been held for more than one
year prior to the conversion, then this gain (or loss) will be treated as
long-term capital gain (or loss), and if the warrant had been held for one year
or less prior to the conversion, then it will be treated as short-term gain (or
loss).

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Federal Income Tax Consequences for Holders of Options to Purchase Common
Stock. If the Merger is approved, each stock option issued under the Stock
Option Plans to purchase a share or shares of Common Stock outstanding
immediately prior to consummation of the Merger will be converted into the
right to purchase the same number of shares of common stock of Newco. This
conversion will not effect the exercise price, expiration date, vesting
provisions, or any other provisions of the options. The holders of options to
purchase shares of Common Stock issued under the Stock Option Plans should not
recognize any taxable income as a result of this conversion.

Purposes and Reasons for the Merger

The Board's purpose in proposing to the Shareholders the transactions
contemplated by the Proposal is to provide the Company greater flexibility in
structuring financing arrangements and additional potential sources of capital
that will enable it to operate efficiently, expand its business and improve its
market position, while providing fair treatment to the Other Shareholders. The
Board believes that, as a private company, the Company might be better able to
attract venture capitalists for the reasons set forth under "Special Factors --
Background of the Merger -- Current Effects of Borrowings and Equity
Financing." In addition, the Board believes that operating the Company as a
private company that does not include the Other Shareholders will significantly
reduce or eliminate certain costs that currently are necessary to operation of
the Company. Such costs include those incurred to pay the Transfer Agent
(approximately $6,000 per year); those required to audit the financial
statements of the Company in compliance with federal securities laws and
regulations (approximately $10,000 per year); those required to communicate
with the approximately 3,400 Shareholders (approximately $15,000 per year);
those required to make the necessary filings with, and otherwise comply with
the regulations of, the Commission and NASDAQ, including legal fees and
expenses (approximately $44,000 per year). The Board estimates that the annual
savings for the Company due to the reduction or elimination of these costs
would be approximately $75,000. The majority of this savings would result from
reductions in audit and legal fees associated with the Company's compliance
with federal securities laws and regulations. The Company would also incur
significantly lower expenses relating to printing, mailing and postage charges.
In addition, the Company would not in the future incur certain other charges
due to its status as a public corporation.

Interests of Certain Persons in the Merger

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he will be treated as a Continuing Shareholder for purposes of the Merger. Mr.
Foster, as an executive officer and director of the Company and as an Initial
Continuing Shareholder, and Hugh Brennan, as Director of Construction of the
Company and as an Employee Continuing Shareholder, are each participants on
both sides of the proposed Merger because they will be shareholders in the
Surviving Company. Their continuing interest in the Company, as well as
certain other effects of the Merger, present each of them with a conflict of
interest in voting for the Proposal and recommending that the Other
Shareholders vote for the Proposal. In addition, each Continuing Shareholder,
even if not a member of management or employee of the Company, has an interest
in voting their shares of Common Stock in favor of the Proposal because their
interests in the Merger are not the same as those of the Other Shareholders.
See "Special -- Certain Effects of the Merger." Twelve Shareholders
beneficially owned at least 101,000 shares of Common Stock as of the Record
Date. Each of these Shareholders will be treated as an Initial Continuing
Shareholder for purposes of the Merger, unless any of them makes an election to
receive a Merger Payment for each share of Common Stock owned by each of them,
in which case such electing Shareholders will be treated as Other Shareholders
for purposes of the Merger. See "Proposal to Approve the Merger -- Payment
for Common Stock in the Merger." As of the date of this Proxy Statement, _____
of these Shareholders, including Mr. Foster, have informed the Company in
writing that they will not elect to receive a Merger Payment in respect of each
share of Common Stock beneficially owned by each of them. Consequently, as of
the date of this Proxy Statement, there are a total of ___ Continuing
Shareholders, _____ Initial Continuing Shareholders and one Employee Continuing
Shareholder.

As of the Record Date, Mr. Foster held a total of 1,323,600 shares
(approximately 14.4 percent of the total shares of Common Stock outstanding),
the members of the Board and the executive officers of the Company owned an
aggregate of 1,340,850 shares (approximately 14.7 percent of the total shares
of Common Stock outstanding), and Mr. Rubin held a total of 1,264,465 shares
(approximately 13.8 percent of the total shares of Common Stock outstanding).
See "Security Ownership of Certain Beneficial Owners and Management." If the
Merger is consummated, immediately thereafter, Messrs. Foster and Rubin, as
Continuing Shareholders, will own the same number of shares of common stock in
the Surviving Company as they owned in the Company. See "Proposal to Approve
the Merger -- Certain Effects of the Merger." However, the actual,
individual percentage of equity ownership of Messrs. Foster and Rubin, as well
as all other Continuing Shareholders, in the Surviving Company will depend upon
the type and amount of securities of the Surviving Company issued in the
Private Placement. Accordingly, the relative equity ownership interests of any
individual or group of Continuing Shareholders cannot be determined at this
time. See "Financing of the Merger."

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Consummation of the Merger could have a positive effect on the liquidity
of the shares of common stock of the Surviving Company held by each Continuing
Shareholder, including each Continuing Shareholder who is a controlling person
of the Surviving Company. The Merger will not be consummated unless the
Company raises at least $6,000,000 in gross proceeds from the Private
Placement. After deducting the Merger Payments of approximately $2,500,000,
expenses associated with consummation of the Merger of approximately
$__________ and expenses associated with consummation of the Private Placement
of approximately $550,000, the Surviving Company will have approximately
$__________ for the development of additional billiard clubs and working
capital if the Private Placement is consummated. See "Financing of the Merger"
and "Fees and Expenses." Such an infusion of capital may enable the Surviving
Company to expand its business and improve its profitability, which in turn
would likely make the Surviving Company more attractive to potential investors.
Consequently, consummation of the Merger may indirectly result in the creation
of a market for the common stock of the Surviving Company.

The proposed Agreement and Plan of Merger (the "Merger Agreement"), which
will, when negotiated, provide the terms and conditions of the Merger, is
expected to permit continuing indemnification in accordance with the articles
of incorporation of the Surviving Company and the bylaws of the Surviving
Company in the Merger, of directors and executive officers of the Company to
the fullest extent permitted under applicable state law, including
indemnification relating to the period occurring prior to the time at which
Articles of Merger are filed and recorded with the Secretary of State of the
State of Florida and a Certificate of Merger and Certificate of Amendment to
the articles of incorporation of the Surviving Company are filed and recorded
with the Secretary of State of the State of Delaware (the "Effective Time").
See "Proposal to Approve the Merger -- Indemnification."

Effect if the Merger is Not Approved

PROPOSAL TO APPROVE THE MERGER

General

Because the Proposal will terminate the interests of the Other
Shareholders in the Company while enabling the Continuing Shareholders to
obtain ownership of all of the

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equity interest in the Company, Shareholders will have one vote per share of
Common Stock with respect to the Proposal. The description of the Merger
Agreement included in this Proxy Statement is a summary of the principal terms
currently expected to be included, and should not be viewed as complete. The
form of Merger Agreement will become available only upon negotiation of the
final terms thereof with the investors in the Private Placement, and the
following description is, therefore, subject to change and qualified in its
entirety by reference to the definitive Merger Agreement. The Company will
make copies of the form of Merger Agreement available to any Shareholder
without cost upon request when the form of Merger Agreement becomes available.

Certain Effects of the Merger

The Merger Agreement provides that, subject to its terms and conditions,
(i) the Company will be merged with and into Newco at the Effective Time, and
each share of Common Stock held by Other Shareholders (the "Other Common
Stock") will be converted into the right to receive the Merger Payment of $0.50
in cash, without interest; (ii) the Other Common Stock will be canceled; (iii)
each share of Common Stock owned by the Continuing Shareholders will be
converted into a share of common stock of the Surviving Company; (iv) each
stock option issued under the Stock Option Plans or warrant of the Company to
purchase a share or shares of Common Stock outstanding immediately prior to
consummation of the Merger will be converted into the right to purchase the
same number of shares of common stock of Newco on the same terms and
conditions; (v) Newco will be the Surviving Company in the Merger, and the
Company will cease to exist as a result of the Merger; (vi) the articles of
incorporation and bylaws of Newco will be the articles of incorporation and
bylaws of the Surviving Company; and (vii) the name of the Company shall be the
name of the Surviving Company. In addition, it is anticipated that the board
of directors of Newco will be identical to the Company's Board, with one or
more investors as possible additions, but the terms of the Board structure have
not yet been negotiated. Immediately after the Effective Time, the Other
Shareholders will possess no interest in, or rights as Shareholders of, the
Company, and the Company will be wholly owned by the Continuing Shareholders.
For a description of how the Company will calculate the number of shares of
Common Stock held by each holder of record on the Record Date for purposes of
determining a Shareholder's status as a Continuing Shareholder or Other
Shareholder, see "Voting and Proxy Information -- Record Date; Outstanding
Shares; Voting."

Effective Time of the Merger

The Merger Agreement provides that the Merger will become effective upon
the filing and recordation of Articles of Merger with the Secretary of State of
the State of Florida and a Certificate of Merger and Certificate of Amendment
to the articles of incorporation of the Surviving Company with the Secretary of
State of the State of Delaware (i.e., the Effective

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Time). The Company intends to make such filing promptly after the
satisfaction or written waiver, where permissible, of the conditions contained
in the Merger Agreement.

Amounts Paid in the Merger

The Merger Payments will be funded by the Company from funds obtained
through the Private Placement. See "Financing of the Merger." One of the
conditions to consummation of the Merger is that the Company raise a minimum of
$6,000,000 in gross proceeds from the Private Placement and close the
transaction within 180 days after the Shareholders approve the Proposal. See
"Proposal to Approve the Merger -- Conditions to the Merger" and "Financing of
the Merger."

Payment for Common Stock in the Merger

In order to qualify to be treated as an Other Shareholder for purposes of
the Merger, a beneficial owner of 101,000 or more shares of Common Stock as of
the Record Date will be required to submit to a disbursing agent (the
"Disbursing Agent") a duly executed letter of election in the form to be sent
to each such Shareholder as promptly as practicable after the Effective Time,
which will indicate such Shareholder's desire to receive a Merger Payment for
each share of Common Stock owned by the Shareholder. If a beneficial owner of
101,000 or more shares of Common Stock as of the Record Date does not complete
and deliver such letter of election in accordance with the instructions
thereto, such Shareholder will be treated as a Continuing Shareholder for
purposes of the Merger and will not receive a Merger Payment for any shares of
Common Stock owned by the Shareholder.

In order to receive the Merger Payment, each Other Shareholder will be
required to (i) submit a duly executed letter of transmittal (a "Letter of
Transmittal") in the form to be sent to each such Shareholder as promptly as
practicable after the Effective Time and (ii) surrender their Common Stock
certificates to the Disbursing Agent.

Upon receipt of a duly executed Letter of Transmittal and Common Stock
certificates, the Disbursing Agent will promptly issue a check to the person or
persons entitled thereto in an amount equal to $0.50 for each share of Other
Common Stock owned by such person or persons. No interest will be paid or
accrued on amounts payable.

Instructions with respect to the submission of a Letter of Transmittal to
be used for this purpose will be mailed to Other Shareholders as promptly as
practicable after the Effective Time. It is also expected that Letters of
Transmittal will be available at the office of the Disbursing Agent. OTHER
SHAREHOLDERS SHOULD NOT SEND ANY COMMON STOCK CERTIFICATES WITH THE ENCLOSED
PROXY OR AT ANY TIME PRIOR TO RECEIPT OF A LETTER OF TRANSMITTAL.

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The Merger Agreement provides that the Surviving Company shall deposit in
trust for the benefit of Other Shareholders with the Disbursing Agent the funds
to which the holders of shares of Other Common Stock will be entitled in the
Merger. The Merger Agreement provides that the Disbursing Agent may invest
portions of the cash as the Surviving Company shall direct, provided that
substantially all of such investments be in obligations of the United States of
America or agencies of the United States of America, in commercial paper
obligations receiving the highest rating from either Moody's Investors Service,
Inc. or Standard & Poor's Services or in certificates of deposit, bank
repurchase agreements secured by obligations of the United States of America or
bank money market funds of banks with capital, surplus and retained earnings in
excess of $500,000,000 (collectively, the "Permitted Investments"). The
maturity of the obligations of the United States of America or agencies of the
United States of America shall not exceed six months and the maturity of the
commercial paper may not exceed 270 days. Any net profit resulting from, or
interest or income produced by, the Permitted Investments, shall be paid from
time to time to the Surviving Company.

Any amount remaining on deposit with the Disbursing Agent six months after
the Effective Time will be released and paid by the Disbursing Agent to the
Surviving Company, which will be liable for any payment to be made thereafter
under the terms of the Merger Agreement, after which time persons entitled
thereto may look, subject to applicable abandonment, escheat or similar laws,
only to the Surviving Company for any cash payments remaining to be paid to
them pursuant to the Merger, without any interest thereon.

Conditions to the Merger

The respective obligations of the Company and Newco to consummate the
Merger are subject to the fulfillment or written waiver of the following
conditions at or prior to the Effective Time: (i) approval of the Proposal by
Shareholders owning a majority of the outstanding Common Stock; (ii) the
absence of any order, decree or temporary, preliminary or permanent injunction
of any court of competent jurisdiction preventing the consummation of the
Merger (the Company and Newco having agreed to use their best efforts to
prevent the entry or issuance of such an order or injunction); and (iii) the
Company's success in consummating a Private Placement that grosses at least
$6,000,000 within 180 days after the Proposal is approved by the Shareholders.
In addition, Newco's obligation to effect the Merger is subject to the
fulfillment or written waiver of the following conditions: (i) the Company's
having performed in all material respects its agreements contained in the
Merger Agreement at or prior to the Effective Time; (ii) the representations
and warranties of Newco being true and correct in all material respects at the
Effective Time; and (iii) the Company's having made all necessary filings,
registrations and notifications with appropriate regulatory authorities and
having obtained all necessary approvals and authorizations from appropriate
third parties. Furthermore, the Company's obligation to effect the Merger is
subject to the fulfillment or

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written waiver of the following conditions: (i) the Company's having performed
in all material respects its agreements contained in the Merger Agreement at or
prior to the Effective Time; (ii) the representations and warranties of Newco
being true and correct in all material respects at the Effective Time; (iii)
Newco's having made all necessary filings, registrations and notifications with
appropriate regulatory authorities and having obtained all necessary approvals
and authorizations from appropriate regulatory authorities; and (iv) the
opinion of the Financial Advisor included herein as Appendix __ not having been
withdrawn prior to the Effective Time.

Lock-Up Agreements

The Merger Agreement provides that the Company shall use its best efforts
to obtain a lock-up agreement (a "Lock-Up Agreement") from each Continuing
Shareholder prior to consummation of the Merger pursuant to which each
Continuing Shareholder (i) agrees not to offer, sell or otherwise transfer any
of the shares of common stock of Newco received by the Continuing Shareholder
in the Merger until two years following consummation of the Merger without the
prior written consent of the Surviving Company, and (ii) will represent that
the Continuing Shareholder has no plan or intention to dispose of the shares of
common stock of Newco. Consummation of the Merger is not conditioned upon the
execution of a Lock-Up Agreement by each Continuing Shareholder. Failure of
each Continuing Shareholder to execute a Lock-Up Agreement could result in
certain adverse tax consequences to all of the Shareholders and the Surviving
Company, however. See "Special Factors -- Material Federal Income Tax
Consequences -- Federal Income Tax Consequences for Continuing Shareholders."
There can be no assurance that each Continuing Shareholder will execute a
Lock-Up Agreement.

Indemnification

The Merger Agreement provides that the Company and the Surviving Company
shall provide continuing indemnification, in accordance with the articles of
incorporation and bylaws of the Surviving Company, to the directors and
executive officers of the Company to the greatest extent permissible under
applicable law for matters occurring prior to the Effective Time.

Employee Benefit Matters

The Company anticipates that the Surviving Company will continue all of
the existing employee benefit plans offered by the Company as of the date of
this Proxy Statement. The terms of the Merger have not yet been negotiated,
however, and, as a result, the employee benefit plans offered by the Surviving
Company may differ substantially from those offered by the Company.

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Waiver and Amendment

Any provision of the Merger Agreement may be waived in writing at any time
by the party that is entitled to the benefits thereof and the Merger Agreement
may be amended in writing at any time before or after approval of the Merger by
the Shareholders, but after any such approval no amendment may be made that
decreases the amount or changes the type of the Merger Payments or that in any
way adversely affects the rights of such Shareholders without the approval of
the Other Shareholders.

Fees and Expenses

The Merger Agreement provides that if the Merger Agreement is not
consummated, all legal and other costs and expenses incurred in connection with
the Merger Agreement will be paid by the Company.

Rights of Dissenting Shareholders

Any Shareholder objecting to the Proposal is not entitled to any statutory
rights of dissent or appraisal under Florida law or the Articles of
Incorporation or Bylaws of the Company.

Vote Required and Recommendation of the Board of Directors

The Merger will be approved if and only if it receives the favorable vote
of the majority of all Common Stock outstanding on the Record Date. As of the
Record Date, members of the Board and executive officers of the Company owned
1,340,850 shares (approximately 14.7 percent of the total shares of Common
Stock outstanding). Steven L. Foster, as Chief Executive Officer and Chairman
of the Board of the Company, is the only member of the Board and/or executive
officer of the Company that was the beneficial owner of 101,000 or more shares
of Common Stock as of the Record Date. Such Shareholder held a total of
1,323,600 (approximately 14.4 percent of the total shares of Common Stock
outstanding) as of the Record Date. Such Shareholder has informed the Company
in writing that he will not elect to receive a Merger Payment in respect of
each share of Common Stock beneficially owned by him. Consequently, he will be
treated as a Continuing Shareholder for purposes of the Merger. In addition,
such Shareholder has informed the Company that he intends to vote all of the
shares of Common Stock held by him in favor of the Proposal.

The board of directors and shareholders of Newco have approved the Merger,
the execution and delivery of the Merger Agreement by Newco and consummation of
the Merger.

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
MERGER.

REGULATORY MATTERS

FINANCING OF THE MERGER

The Company has determined that approximately $2,500,000 in cash will be
required in order to make the Merger Payment with respect to each share of
Other Common Stock held by an Other Shareholder. For a discussion of the
Company's estimate of the total cost of the Merger, see "Fees and Expenses."
The Company retained the Placement Agent (i.e., Hampshire Securities
Corporation) to raise $6,000,000 to $12,000,000 through the Private Placement
(i.e., the private placement of equity and/or subordinated debt securities of
the Surviving Company), as described below. However, the Placement Agent has
no obligation to consummate any Private Placement if the Proposal is not
approved by the Shareholders. The Company intends to use funds obtained
through the Private Placement to make the Merger Payments, and to provide
Newco, following its merger with the Company, with funds for working capital
and for the development of additional billiard clubs. The respective
obligations of the Company and Newco to consummate the Merger are contingent
upon, among other things, the Company's success in consummating a Private
Placement that grosses at least $6,000,000 within 180 days after the Proposal
is approved by the Shareholders. See "Proposal to Approve the Merger --
Conditions to the Merger." Consequently, even if the Proposal is approved by
the requisite vote of the Shareholders, the Merger will not be consummated
unless the Company obtains a minimum of $6,000,000 in gross proceeds from the
Private Placement and closes the transaction within 180 days of such
Shareholder approval. If this condition is not satisfied, the Company will not
consummate the Merger or make the Merger Payments to any of the Shareholders.
In that event, the Company will continue to conduct its operations as a public
company. There can be no assurance, however, that the Company will raise any
funds from the Private Placement or that the Private Placement that raises at
least $6,000,000 in gross proceeds will be consummated within 180 days after
the Proposal is approved by the Shareholders.

By written agreement dated May 23, 1996, the Company granted the Placement
Agent an exclusive right to present a Merger proposal by June 30, 1996
acceptable to the Company designed to raise $6,000,000 to $12,000,000 in gross
proceeds through the Private Placement to a limited number of accredited
investors. As of the date of this Proxy Statement, the Placement Agent and
its controlling persons do not beneficially own any equity securities of

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<PAGE> 75

the Company. Neither the Placement Agent nor its controlling persons is
affiliated with, or has ever had any relationship with, the Company or any of
its controlling persons.

Consummation of each Private Placement is subject to a number of material
contingencies, including execution of a definitive purchase agreement
satisfactory to the potential investor, the Company and Newco, approval of the
Proposal by the Shareholders, deregistration of the Common Stock under the
Exchange Act and delisting of the Common Stock from NASDAQ. There can be no
assurance, however, that the Placement Agent will consummate a Private
Placement or that a Private Placement raising at least $6,000,000 in gross
proceeds will be consummated within 180 days after the Proposal is approved by
the Shareholders.

The Placement Agent has proposed, subject to negotiation among each
potential investor, the Company and Newco, that the Private Placement consist
of 12 units of 100,000 shares of preferred stock of the Surviving Company per
unit for a price of $500,000 per unit (the "Preferred Stock") and that none of
the Preferred Stock be sold unless all 12 units are sold. Each share of
Preferred Stock would be convertible, at the option of the holder, initially
into two shares of common stock of the Surviving Company, subject to certain
customary anti-dilution adjustments under certain circumstances. The Preferred
Stock would automatically convert into shares of common stock of the Surviving
Company if the Surviving Company sold shares of its common stock in a public
offering or upon the consent of two thirds of the shares of Preferred Stock
outstanding. The Surviving Company would be obligated to redeem the Preferred
Stock six years from the date of issuance of the Preferred Stock. Dividends on
the Preferred Stock would be payable in cash at a rate of six percent per annum
on a cumulative basis at the time of either conversion or redemption, whichever
would occur first, of the Preferred Stock. The Preferred Stock would be
entitled to voting rights identical to the common stock of the Surviving
Company, on an "as if converted" basis, and would have special voting rights as
a class requiring approval of a majority of the shares of Preferred Stock
outstanding for the creation of any senior security or any transaction in which
control of the Surviving Company were transferred. The Preferred Stock would be
entitled to a liquidation preference over the common stock of the Surviving
Company, or any other class or series of stock of the Surviving Company ranking
junior to the Preferred Stock, in an amount equal to the original purchase
price of the Preferred Stock plus accrued but unpaid dividends. In addition,
holders of shares of Preferred Stock would be granted certain demand and
piggyback registration rights.

If the Preferred Stock is placed on the terms described above, the
Continuing Shareholders would realize an immediate increase in the net tangible
book value of the shares of common stock of the Surviving Company owned by
them, while purchasers of the Preferred Stock would experience an immediate
dilution (reduction) in the net tangible book value of their shares of
Preferred Stock because the price per share of the Preferred Stock would

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<PAGE> 76

exceed the net tangible book value per share of the common stock of the
Surviving Company immediately subsequent to placement of the Preferred Stock.
Net tangible book value per share is (i) the difference between the total
tangible assets and total liabilities of the Surviving Company divided by (ii)
the number of shares of common stock of the Surviving Company and number of
shares of Preferred Stock that are expected to be outstanding immediately
subsequent to placement of the Preferred Stock. The following table
illustrates the increase in the net tangible book value of the shares of common
stock of the Surviving Company that the Continuing Shareholders would realize
if the Preferred Stock were placed.

<TABLE>
<S> <C>
Pro forma net tangible book value per share
as of December 31, 1995(1) . . . . . . . . . . . . . . . . . . . . . . . . $
-----

Increase in net tangible book value
per share attributable to placement
of the Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
-----

Pro forma net tangible book value per share
after placement of the Preferred Stock . . . . . . . . . . . . . . . . . . .
-----

Dilution per share of the Preferred Stock . . . . . . . . . . . . . . . . . .
-----

</TABLE>

------------------------
(1) Based upon the pro forma financial statements of the Surviving Company
appearing elsewhere in this Proxy Statement.

As of the date of this Proxy Statement, the Placement Agent has neither
sought nor received any letters of intent or expressions of interest from
potential purchasers of Preferred Stock. Consequently, there is no indication
that the Placement Agent will be able to place any Preferred Stock at all or
will be able to place any Preferred Stock on the terms described above. As of
the date of this Proxy Statement, the Company does not intend to sell any
Preferred Stock to any of its affiliates.

In consideration of the Placement Agent's undertaking, the Company expects
to pay, upon the successful raising of at least $6,000,000 in gross proceeds
from the Private Placement, an amount equal to five percent of such gross
proceeds. In addition, the Company has agreed to sell to Island, concurrently
with the consummation of the Private Placement, for a price of $0.50 per share,
(i) 300,000 shares of common stock of the Surviving Company if the gross
proceeds from the Private Placement equal at least $6,000,000, (ii) one share
of common stock of the Surviving Company per $40 of gross proceeds from the
Private Placement in an amount of between $6,000,001 and $10,000,000, and (iii)
one share of common stock of the Surviving Company per $20 of gross proceeds
from the Private Placement in an amount of between $10,000,001 and $12,000,000.
The Company has also agreed to accept Island's seven-

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<PAGE> 77

year promissory note as payment for any shares acquired pursuant to such
agreement. The Company anticipates that the note would be secured by all of
the shares of common stock of the Surviving Company purchased by Island. The
note would bear interest at a rate applicable to the federal rate for
seven-year notes, with the entire principal amount of the loan maturing at the
end of the seven-year term. Regardless of the success or otherwise of the
Placement Agent's efforts, the Company further agrees to pay the expenses of
the Placement Agent involved in this undertaking, provided such expenses do not
exceed $10,000. Such expenses are not to include payments by the Placement
Agent in respect of legal advice or services and the services of other third
party service providers. The Company may, in its discretion and having had
received prior written notice of the proposed expenditure by the Placement
Agent, pay the reasonable expenses of the Placement Agent where the total of
expenses otherwise paid or payable is in excess of $10,000.

The Company estimates that the fees and expenses in connection with
placement of the Preferred Stock, which would be paid by the Company out of the
proceeds of the sale of such Preferred Stock, would total approximately
$550,000, which consists of $310,000 in fees and expenses payable to the
Placement Agent, $______ in legal expenses, $______ in travel expenses and
$______ in miscellaneous expenses.

BUSINESS AND PROPERTIES OF THE COMPANY

Description of Business

General. From its organization in 1983 through March 16, 1989, the
Company conducted business as a wholesale dealer engaged in the purchase and
sale of fine gold and pure silver in the form of bullion and granules. The
Company registered the Common Stock under the Exchange Act on July 15, 1985.
The Company terminated its precious metals division with the sale of the assets
used in the precious metals operation on March 16, 1989. The operations and
all related gains and losses of the metals division have been treated as
discontinued operations. From the date of the sale of its metals operation and
until April 11, 1990 when the Company acquired an interest in a billiard club
business (discussed below), the Company's primary business operation was
conducted through its wholly owned subsidiary, Dixie Run Corporation ("Dixie
Run"). Dixie Run and its wholly owned subsidiaries had been engaged in the
business of identifying, purchasing and developing raw land suitable for
subdivision and resale to builders and developers and construction of primarily
luxury residential homes. On June 7, 1990, the Board approved the
discontinuation of the operations of Dixie Run and, accordingly, Dixie Run has
been treated as discontinued operations. For a discussion of the discontinued
precious metals division and real estate subsidiary, see "Financial Statements
of the Company."

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<PAGE> 78

On March 11, 1990, the Board approved the acquisition by the Company of a
majority interest in Jillian's, Inc., formerly Jillian's Entertainment
Corporation, a Delaware corporation formed to acquire and operate billiard
clubs located in various cities throughout the United States. The Company
entered into a Stock Exchange Agreement, dated April 11, 1990 (the "Acquisition
Date"), with Jillian's Inc. and Steven L. Foster, The Frank and Celia Foster
Family Trust, Steven Rubin and Kevin Troy (collectively, the "Foster Group")
pursuant to which it acquired a 51 percent ownership interest in Jillian's,
Inc., and the Foster Group acquired the remaining 49 percent ownership
interest. The Company acquired the remaining 49 percent of Jillian's, Inc.
from the Foster Group on March 14, 1991. See "Financial Statements of the
Company" for a discussion of the terms and conditions of the agreements
governing the acquisition of Jillian's, Inc.

Pursuant to a series of related transactions, on the Acquisition Date,
Jillian's, Inc. acquired all of the outstanding stock of corporations that own
and operate billiard clubs in Seattle, Washington and Miami, Florida. Since
the Acquisition Date, Jillian's, Inc., through wholly owned subsidiaries, has
constructed new billiard clubs in Cleveland, Ohio, Cleveland Heights, Ohio,
Worcester, Massachusetts, Champaign, Illinois, Annapolis, Maryland, Long Beach,
California and Tacoma, Washington and additionally, has acquired an existing
billiard club in Pasadena, California.

The Jillian's clubs are part of the new generation of upscale billiard
clubs in America. These new billiard clubs offer a wider variety of
entertainment and food and beverage service and are designed to attract a
broader segment of the adult population than traditional pool halls. The clubs
are decorated in an appealing and comfortable style. The Jillian's billiard
clubs face competition in their respective cities from other billiard clubs, as
well as from other leisure time activities, such as theaters, bowling centers,
theme restaurants and night clubs. The Jillian's billiard clubs also compete
with entertainment centers, large facilities which offer diverse forms of
entertainment, such as billiards, virtual reality and other electronic games,
restaurant and bar services and night club-style entertainment. Some of these
competitors operate single outlet facilities, while others operate multi-unit
entertainment facilities. For a description of some of the competitors that
operate a chain of entertainment facilities, see "Special Factors -- Background
of the Merger -- General." The Jillian's clubs compete with other billiard
clubs, leisure time activities and entertainment centers by providing adult
customers a single stop destination for an entire evening's entertainment. The
Jillian's clubs offer customers an upscale, comfortable setting, billiards
activities, a variety of entertainment activities (e.g., electronic games,
darts and pingpong) and food and beverage services.

The Company currently is concentrating its efforts on its investment in
the billiard club business. Although no assurance can be given, the Company
intends to develop, through wholly owned subsidiaries of Jillian's, Inc.,
additional Jillian's clubs that offer the

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<PAGE> 79

same forms of entertainment that are offered by the existing clubs. These
clubs may be owned by Jillian's, Inc. subsidiaries directly or indirectly
through their participation in limited partnerships or joint ventures that own
the clubs. In the case of clubs owned by limited partnerships, the Company
expects that in each case a wholly owned subsidiary would be the general
partner, own a substantial interest in the limited partnership and receive a
management fee. The Company currently is investigating potential sites for
clubs in Massachusetts and certain other areas in the Midwest and Mid-Atlantic
states.

The Company hired four new executive officers during the first half of
1995. See "Executive Officers and Directors of the Company." These officers
will assist the Company with its efforts to expand its billiard club business,
as discussed above. As of the date of this Proxy Statement, the Company is not
considering any new lines of business, concepts or changes in priorities.
Prior to the hiring of the officers, the Company was thinly staffed at the
management level. The Company believes that the addition of these new
personnel will enable it to provide more efficient and effective management,
including the centralization of its administrative operations.

Jillian's Clubs. Set forth in the table below are descriptions of the
existing Jillian's clubs.

<TABLE>
<CAPTION>
DATE OF
COMMENCEMENT DESCRIPTION OF SPACE NUMBER OF BRUNSWICK
NAME OF LOCATION OF OF (APPROXIMATE BILLIARD TABLES;
SUBSIDIARY OWNER CLUB OPERATIONS FOOTAGE) OTHER AMENITIES
----------------- ---- ---------- -------- ---------------

<S> <C> <C> <C> <C>
Jillian's - Kendall Miami, Florida November 1989 9,600 square feet; 27 tables; other
located in a table top games;
shopping center next high tech video
to a nine-screen games; bar and food
movie theater service

Jillian's - Seattle Seattle, April 1990 18,500 square feet; 34 tables; other
Washington two-story free table top games;
standing building high tech video
games; separate
room available for
private rental; bar
and food service on
both floors

Jillian's - Cleveland Cleveland, July 1990 13,000 square feet; 25 tables; other
Ohio (on the two floors of a table top games;
banks of the building high tech video
Cuyohoga games; separate
River) room available for
private rental; bar
and food service on
both floors
</TABLE>

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<PAGE> 80

<S> <C> <C> <C> <C>
Jillian's - Cleveland Cleveland November 1992 9,600 square feet 21 tables; other
Heights(1) Heights, Ohio table top games;
high tech video
games; bar and food
service

Jillian's - Pasadena "Old Town" August 1993(2) 7,200 square feet; 16 tables; bar and
Pasadena, two floors of a food service on
California building with both floors
additional outside
seating on the first
floor

Jillian's - Worcester, December 1993 16,000 square feet, 24 tables; other
Worcester(1) Massachusetts including a 5,000 table top games;
(near square foot game high tech video
Worcester room; one-story free games; bar and food
Polytechnic standing building service
Institute)

Jillian's - Champaign, August 1994 12,000 square feet; 20 tables; other
Champaign(1) Illinois two-story free table top games;
(adjacent to standing building high tech video
the University games; bar and food
of Illinois service
campus)

Jillian's - Annapolis, October 1994 10,000 square feet; 16 tables; other
Annapolis(1) Maryland (near one-story free table top games;
the U.S. Naval standing building high tech video
Academy and games; bar and food
the Annapolis service
historical
district)

Jillian's - Long Long Beach, May 1995 16,000 square feet; 16 tables; bar and
Beach California two floors of a food service; night
13-story free club located in the
standing building basement

Jillian's - Tacoma Tacoma, December 1995 25,000 square feet 25 tables; other
Washington including a game table top games;
(near the room; two-story free high tech video
University of standing building games; bar and food
Puget Sound service
campus)
</TABLE>

(1) The Cleveland Heights, Worcester, Champaign and Annapolis clubs are
owned by limited partnerships in which the Jillian's subsidiary owner is
the general partner and owns a substantial (87%, 25%, 43% and 79%,
respectively) interest. The Jillian's subsidiary receives a management
fee for operating the related club equal to 6.5% of the gross revenues
in the case of the Cleveland Heights club, 6% in the case of the
Champaign and Annapolis clubs and 5% in the case of the Worcester club.

(2) The club located in Pasadena was an existing billiard club/diner that
the Company, through Jillian's - Pasadena, acquired in August 1993. As
part of the acquisition, the Company acquired all of the assets located
at the existing club (including all leasehold improvements, furniture,
fixtures, bar and kitchen equipment and billiard tables), all of the
seller's interest in the lease for the premises and all alcoholic
beverage licenses and other licenses necessary to operate the club.

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<PAGE> 81

Description of Properties

Administrative Operations. On June 13, 1995, the Company entered into a
written lease agreement for 3,020 square feet of space for its administrative
operations to be located at 727 Atlantic Avenue in Boston, Massachusetts. The
lease began on July 28, 1995 and expires on July 28, 1998. In addition, the
lease has a two-year renewal period. Under the lease agreement, the Company is
obligated to pay the lessor minimum annual rent equal to $31,710 (payable in
monthly installments of $2,642) for the first year, $34,730 (payable in monthly
installments of $2,894) for the second year and $37,750 (payable in monthly
installments of $3,146) for the third year.

On June 1, 1994, the Company entered into a written lease agreement for
its administrative operations in an executive center located at One Alhambra
Plaza, Coral Gables, Florida. The lease is for 1,243 square feet of office
space and began on July 1, 1994 and expires June 30, 1999. The total required
monthly payments are $1,916, all of which is paid by third parties who sublease
the space.

Jillian's, Inc. leases additional administrative space in an executive
center located at 508 North Second Street, Fairfield, Iowa. The lease began on
April 1, 1994 and expires on March 31, 1997. The required monthly payments are
$910.

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<PAGE> 82

Jillian's Clubs. Set forth in the table below are descriptions of the
leases for the Jillian's clubs.

<TABLE>
<CAPTION>
OTHER
&
LEASE TERM & RENTAL PAYMENTS
LESSEE/ LEASE RENEWAL MINIMUM FOR THE YEAR
SUBLESSEE DATE OPTION ANNUAL RENT PERCENTAGE RENT ENDED 3/31/96
---------- ---- ---------- ----------- --------------- -------------

<S> <C> <C> <C> <C> <C>
Jillian's 5/26/89; triple net; $192,000 ($16,000 per 6% of gross sales in under 3/7/94
- Kendall amended 10 years; month); adjusted each excess of $1,000,000 amendment,
3/7/94 two year based on increases lessor was
five-year in the Consumer Price granted warrants
renewal Index ("CPI"), but to purchase
options limited to 6% of the 65,000 shares of
prior year's annual rent; lessee's common
all CPI adjustments stock at $0.50
deferred until 1/1/95 by per share for a
3/7/94 amendment five-year period

rental payments
for FY-96 of
$262,702, which
includes taxes
and common area
maintenance
charges

Jillian's 8/29/89 triple net; $258,000 ($21,500 per 3% of gross sales in FY-96 rental
- Seattle 10 years; month); beginning 3/91 excess of $750,000; payments totaled
one and every 12th month adjusted annually $304,610, which
five-year thereafter, monthly rent based on increases included taxes,
renewal will increase based on in CPI, but no more common area
option increase in CPI, but no than 6%; two thirds maintenance
more than 6% annually; if of the percentage charges and
option to renew lease is rental payments can percentage rent
exercised, rent shall be be made by issuing of $14,054 in
agreed to by both parties the lessor warrants cash; FY-96
and based on fair market to purchase shares rental payments
value ("FMV") of of the Company's also made by the
comparable rentals Common Stock on a Company's
one share per dollar issuance of
basis warrants to
purchase 28,108
shares of the
Company's Common
Stock at an
exercise price
of $0.27 per
share
</TABLE>

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<PAGE> 83

<S> <C> <C> <C> <C> <C>
Jillian's 4/20/90; triple net; $69,615 ($5,801 per 5% of gross sales in 11/24/93
- amended 10 years; month) for years 1-4; excess of $1,392,300 amendment
Cleveland 11/24/93 two $80,325 ($6,694 per for years 1-4, temporarily
five-year month) thereafter; $1,606,500 limited rent and
renewal beginning year 7, rent thereafter common area
options will be increased to an maintenance
amount equal to the charges and
lesser of (i) 105% of the lessor and
annual rent payable for lessee
the prior lease year, or subsequently
(ii) the annual rent verbally agreed
payable for the prior to limit the
lease year adjusted for rents
increases in CPI; if indefinitely to
option to renew lease is $6,000 per month
exercised, rent shall be from October
negotiated, but will not through March
be less than the greater and $9,000 per
of comparable rentals or month from April
the rent payable for the through
last month of the September; in
preceding term; rent for exchange for
each year of first such reduction,
renewal period may not be lessee agreed to
greater than 115% of pay 8.5% of
annual rent of last year gross sales in
of initial term excess of
$650,000 until
lessor received
100% of the
reduced rents
and common area
maintenance

FY-96 rental
payments totaled
$118,478, which
included taxes
and common area
maintenance
charges

Jillian's 10/17/91 triple net; $57,240 ($4,770 per month none FY-96 rental
- 10 years; starting 5/92) for years payments for
Cleveland two 1 and 2; $68,688 ($5,724 primary and
Heights five-year per month) for years 3-6; option space
renewal $76,320 ($6,360 per totaled
options month) for years 7-10; if $110,656, which
renewal option is included taxes
exercised, minimum annual and common area
rent for each of the maintenance
options will be $91,584 charges
and $106,848,
respectively
</TABLE>

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<PAGE> 84

<S> <C> <C> <C> <C> <C> <C>
Jillian's 8/19/93 1st $33,048 ($2,754 per none FY-96 rental
- Pasadena sublease: month) for each year payments (for
10 years; through 9/96; thereafter, both subleases)
two rent will be equal to FMV totaled
five-year of comparable rentals $147,985, which
renewal with CPI adjustments included taxes
options starting 4/1/98 and common area
(1,377 sq. maintenance
ft. on charges
ground
floor)

2nd $68,928 ($5,744 per
sublease: 5 month) for each year
years; through 9/30/94;
expires thereafter, rent will be
9/30/96; increased by CPI
three
five-year
renewal both subleases provide
options that if a renewal option
(5,744 sq. is exercised, rent for
ft. in such period shall be
basement) agreed upon by the
parties and based on FMV
of comparable rentals
with certain CPI
adjustments
</TABLE>

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<PAGE> 85

<S> <C> <C> <C> <C> <C>
Jillian's 4/21/93 triple net; $123,780 ($10,315 per none separate lease
- 10 years; month starting 8/93) for for parking
Worcester two years 1-3; $140,284 spaces for the
five-year ($11,690 per month) for same term as
renewal years 4-5; $165,040 building lease;
options ($13,753 per month) for annual rent is
years 6-10; if renewal $13,200 for
option exercised, rent years 1-5 and
for each year of the $15,840 for
first 5-year period will years 6-10; for
be $198,048, and of the the first and
second 5-year period will second renewal
be greater of $198,048 or periods, rent
80% of the then FMV for will be $19,000
similar space and $22,800,
respectively

FY-96 rental
payments totaled
$183,176, which
included taxes,
parking rental
and common area
maintenance
charges

Jillian's 4/14/93 triple net; $64,800 ($5,400 per month none in 10/94, lessee
- 10 years; starting 8/93) for years entered into
Champaign two 1 and 2; from April 1, separate leasing
five-year 1995, and on April 1 of agreement for
renewal each year thereafter, parking; annual
options during the initial term rent is $5,220
and any extension term, ($435 per month)
the monthly rental amount and the lease
shall be adjusted by expires on
increases in CPI 9/1/97

FY-96 rental
payments totaled
$95,371, which
included taxes,
parking rental
and common area
maintenance
charges
</TABLE>

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<PAGE> 86

<S> <C> <C> <C> <C>
Jillian's 4/20/93 triple net; $79,992 ($6,666 per month none FY-96 rental
- 10 years; starting 4/26/93) for payments totaled
Annapolis two year 1; $90,000 ($7,500) $127,969, which
five-year for year 2; $99,996 included taxes
renewal ($8,333 per month) for and common area
options year 3; beginning year 4, maintenance
the minimum annual rent charges
will be adjusted upward
to an amount equal to 66
2/3% of the annual
increase in CPI, with the
adjustment in any year
limited to 5% of prior
year's annual rent; if a
renewal is exercised, the
minimum annual rent for
each of the first and
second five-year renewal
periods will be the same
as the tenth year's rent
with the same CPI
adjustment

Jillian's 7/12/93 triple net; $178,935 ($14,911 per none FY-96 rental
- Long 10 years, month starting 1/94) for payments totaled
Beach two year 1; $220,790 $297,196, which
five-year ($18,399 per month) for included taxes
renewal years 2-3; yearly and common area
options increases of 5% for years maintenance
4-10; if renewal option charges
is exercised, minimum
annual rent will be equal
to annual base rent
payable for immediately
preceding year, increased
by 5% per annum

Jillian's 12/21/94; triple net; $223,119 ($18,593 per none FY-96 rental
- Tacoma amended 10 years month starting payments totaled
6/15/95 commencement of $70,338, which
operations or 1/1/96) for included taxes
years 1-3; $224,119 and common area
($20,343 per month) for maintenance
years 4-6; $265,116 charges
($22,093 per month) for
years 7-10
</TABLE>

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<PAGE> 87

Legal Proceedings

Neither the Company nor any of its properties currently is subject to any
litigation nor, to the knowledge of the Board, is any material litigation
currently threatened against the Company or any of its properties, other than
ordinary litigation routine to the Company's business, except as follows. In
October 1995, an action to enforce a mechanics lien was filed against the
Company in the California Superior Court for Los Angeles County for
approximately $123,000, plus interest. The Company filed an answer and cross
complaint to the suit in January 1996. While the Company is vigorously
defending the action and believes that it has meritorious defenses, no
assurance can be given of an outcome favorable to the Company. An unfavorable
outcome could have a material adverse effect on the Company's financial
condition, results of operations or liquidity. See "Financial Statements of
the Company."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Results of Operations

First Quarter Ended June 30, 1996 Compared to First Quarter Ended June 30,
1995. The Company had net losses of $70,678 and $191,164 for the quarters
ended June 30, 1996 and 1995, respectively. The decrease in net losses from
1995 to 1996 was primarily due to higher net club operating income of $304,461
and a reduction in start-up costs related to development stage clubs of
$57,976, offset in part by increased general and administrative expenses of
$125,387, depreciation and amortization of $65,672 and interest expense of
$38,850.

Total revenues were $3,263,387 and $2,461,662 for the quarters ended June
30, 1996 and 1995, respectively. The increase of $801,725 was primarily due to
increased revenues of $728,401 from the Long Beach and Tacoma clubs, which
opened in May 1995 and December 1995, respectively.

Total costs and expenses were $3,269,538 and $2,620,309 for the quarters
ended June 30, 1996 and 1995, respectively. The increase in total expenses of
$649,229 was primarily due to increased costs of $483,781 associated with the
Long Beach and Tacoma clubs and increased general and administrative expenses
of $125,387. The Company had general and administrative expenses of $420,357
and $294,970 for the three month period ended June 30, 1996 and 1995,
respectively. The increase in general and administrative expenses was
primarily due to increased wages of approximately $124,000. The increase in
wages from 1995 to 1996 was primarily attributed to the hiring of a new Vice
President of Operations, Vice President of Development and support personnel.

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<PAGE> 88

Interest expense was $84,068 and $45,218 for the quarter ended June 30,
1996 and 1995, respectively. The increase was primarily due to debt associated
with the Long Beach and Tacoma clubs.

Fiscal Year Ended March 31, 1996 Compared to Fiscal Year Ended March 31,
1995. The Company had a net loss of $393,731 for the year ended March 31, 1996
as compared to a net loss of $863,056 for the year ended March 31, 1995. This
improvement from 1995 to 1996 was primarily due to higher net club operating
income of $779,628 and decreased start-up costs relating to development stage
clubs of $452,233, offset in part by increased general and administrative
expenses of $520,699, increased depreciation and amortization of $133,268 and
increased income applicable to minority interest of $79,382.

The Company had revenues from club operations of $11,875,716 and
$7,969,247 for the years ended March 31, 1996 and 1995, respectively. The
increase of $3,906,469 for the year ended March 31, 1996, as compared to the
same period ended March 31, 1995, was due to increases in comparable sales of
$603,492, increased revenues of $973,457 from full operating years for second
year clubs (i.e., the Champaign and Annapolis clubs, which opened for business
on August 19, 1994 and October 27, 1994, respectively) and increased revenues
of $2,329,520 from new clubs opened in fiscal 1996 (i.e., the Long Beach and
Tacoma clubs, which opened for business on May 5, 1995 and December 8, 1995,
respectively). The increase of $603,492 or 12.2 percent in comparable sales
for the year ended March 31, 1996, as compared to the same period ended March
31, 1995, was primarily due to increases of $374,631 or 21.1 percent in
Seattle, $79,940 or 9.5 percent in Cleveland, $77,417 or 9.1 percent in
Cleveland Heights and $71,504 or 8.9 percent in Pasadena.

The Company had total costs and expenses of $12,196,941 and $8,788,984 for
the years ended March 31, 1996 and March 31, 1995, respectively. The increase
of $3,407,957 for the year ended March 31, 1996, as compared to the same period
ended March 31, 1995, was due to increased cost of club operations of
$3,126,841, increased general and administrative expenses of $520,699,
increased depreciation and amortization expenses of $133,268 and increased
income applicable to minority interest of $79,382, offset by a decrease of
$452,233 relating to start-up costs for development stage clubs.

The increase of $3,126,841 in cost of club operations was primarily due to
increased costs associated with the Champaign, Annapolis, Long Beach and Tacoma
clubs. The increase in general and administrative expenses for the year ended
March 31, 1996, as compared to the same period ended March 31, 1996, was
primarily due to increased wages, professional services and travel expenses of
approximately $394,000, $64,000 and $90,000, respectively. The increase in
wages and travel expenses from 1995 to 1996 was primarily attributed to the
hiring of a new President and Chief Operating Officer, Controller, Vice
President of Operations, Vice President of Development and support personnel.
In addition, Steven L. Foster,

-86-
<PAGE> 89

Chief Executive Officer of the Company, began accruing a salary on October 1,
1995. The increase in professional fees was primarily due to consulting and
legal fees associated with the preparation and filing with the Commission of
this Proxy Statement.

The decrease in start-up costs relating to development stage clubs of
$452,233 was primarily due to the fact that during fiscal 1996, the Company
developed one new club (Tacoma) as compared to three new clubs in fiscal 1995
(Champaign, Annapolis and Long Beach). In addition, the Long Beach club was
required to pay rent totaling approximately $284,000 during fiscal 1995, but
did not open for business until May 5, 1995.

Liquidity and Capital Resources

The Company's cash and cash equivalents and restricted cash decreased
$192,786 during the three month period ended June 30, 1996. The primary reason
for the decrease was the repayment of certain indebtedness and distributions to
minority interest shareholders of approximately $100,000 and $111,000,
respectively.

In December 1995, the Company, through a wholly owned Delaware
corporation, opened a new Jillian's billiard club in Tacoma, Washington. The
property is located near the University of Puget Sound. The club occupies
approximately 25,000 square feet of space on two floors and contains 25
Brunswick billiard tables, along with other table top games, dart boards and a
high-tech electronic game room. The cost of building out and equipping the
club was approximately $2,100,000. The Tacoma club was financed primarily by a
$638,000 landlord contribution, $300,000 in equipment financing, $245,000 in
vendor financing, $300,000 in bank financing, $280,000 in bridge financing and
cash generated from the Company's club operations.

The Company had ten clubs fully operational as of June 30, 1996 as
compared to nine as of June 30, 1995. Net club operating income was $661,692
and $357,231 for the three month period ended June 30, 1996 and 1995,
respectively. The Company continues to experience a cash shortage. The
Company is currently pursuing various alternatives, including bank financing
and issuing additional equity or debt securities, to raise funds to meet its
working capital needs. The Company believes that the cash provided from these
ten clubs, other bank financing and the issuance of additional equity or debt
securities should be sufficient to fund current corporate general and
administrative expenses.

The Company, as of June 30, 1996, had goodwill of $792,071, net of
amortization. The Company evaluates the potential impairment of its long-lived
assets, including goodwill related thereto, in accordance with the Statement of
Financial Accounting Standards No. 121 "Accounting for Improvement of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" and evaluates
other goodwill in accordance with Accounting Principle Board Opinion No. 17
"Intangible Assets." The Company does not believe that its long-lived assets
or goodwill has been impaired.

The Company intends to develop, through wholly owned subsidiaries of
Jillian's, Inc., additional Jillian's clubs. These clubs may be owned by
Jillian's Inc. subsidiaries directly or indirectly through their participation
in limited partnerships or joint ventures. In the case of clubs owned by
limited partnerships, the Company expects that in each case a wholly owned
subsidiary would be the general partner, own a substantial interest in the
limited partnership and receive a management fee. The Company currently is
investigating potential sites for clubs in Massachusetts and certain other
areas in the Midwest and Mid-Atlantic states. There can be no assurance that
the Company will be successful in developing additional billiard clubs.

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<PAGE> 90

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth, at June 10, 1996, the Record Date, the
ownership of the Common Stock and the common stock of the Company's
subsidiaries, by each executive officer and director of the Company, executive
officers and directors of the Company as a group and each person known by the
Board to own more that five percent of the Common Stock. The ownership
percentages are calculated in accordance with Rule 13d-3 under the Exchange
Act. The calculations were based on a total of 10,717,070 shares, which
reflects the shares issued and outstanding at June 10, 1996 of 9,137,798 and
1,579,272 shares issuable pursuant to stock options issued under the Stock
Option Plans and warrants of the Company, respectively.

<TABLE>
<CAPTION>
Name, Position & Number of Shares Percent of Outstanding Shares
---------------- ---------------- -----------------------------
Business Address
----------------
<S> <C> <C>
Steven L. Foster, Chief Executive 1,551,100(1) 14.5%
Officer, Chairman of the Board
and a Director of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Daniel M. Smith, President, Chief 115,000(2) 1.1%
Operating Officer and a Director
of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Richard F. Landry, Vice President 15,000(3) (7)%
of Finance, Treasurer, Secretary
and Principal Accounting
Officer of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Stephen M. Weis, Vice President of 0(4) 0.0%
Operations of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Ronald Widman, Vice President of 0(5) 0.0%
Development of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

John L. Kidde, Director of the 67,250(6) (7)
Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Donald R. Leopold, Director of the 50,000(8) (7)
Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111
</TABLE>

-88-
<PAGE> 91

<TABLE>
<CAPTION>
Name, Position & Number of Shares Percent of Outstanding Shares
---------------- ---------------- -----------------------------
Business Address
----------------
<S> <C> <C>
Kevin Troy 634,167(9) 5.9%
145 Ipswich Street
Boston, MA 02215

Steven Rubin 1,280,765(10) 12.0%
508 North Second Street
Fairfield, IA 52556

All executive officers and 1,798,350(11) 16.8%
directors as a group (seven
persons)

</TABLE>

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

(1) Consists of (i) 300,000 shares owned by a trust, (ii) 1,020,000
shares held by Mr. Foster, of which Mr. Steven Rubin, a personal friend and
business associate of Mr. Foster, beneficially owns 10,000 shares, (iii) 187,500
shares issuable pursuant to options held by Mr. Foster, (iv) 40,000 shares
issuable pursuant to a warrant held by Mr. Foster, (v) 5,000 shares held by Mr.
Foster's spouse, and (vi) 8,600 shares, of which 4,300 shares are held by each
of Mr. Foster's sons. Mr. Foster disclaims any beneficial ownership of the
10,000 shares owned by Mr. Rubin, the 5,000 shares owned by his spouse, and the
8,600 shares owned by his children. Excludes 562,500 shares issuable pursuant
to options held by Mr. Foster.

(2) All shares issuable pursuant to options held by Mr. Smith. Excludes
345,000 shares issuable pursuant to options held by Mr. Smith.

(3) All shares issuable pursuant to options held by Mr. Landry.
Excludes 45,000 shares issuable pursuant to options held by Mr. Landry.
Effective close of business on July 2, 1996, Mr. Landry resigned from all of his
positions with the Company. The Company is presently interviewing candidates in
search of a replacement for Mr. Landry.

(4) Excludes 60,000 shares issuable pursuant to options held by Mr.
Weis.

(5) Excludes 60,000 shares issuable pursuant to options held by Mr.
Widman.

(6) Consists of (i) 1,000 shares owned by Mr. Kidde's son, (ii) 17,250
shares held by Mr. Kidde, and (iii) 50,000 shares issuable pursuant to options
held by Mr. Kidde. Mr. Kidde disclaims any beneficial ownership of the 1,000
shares owned by his son.

(7) Less than one percent.

(8) All shares issuable pursuant to options held by Mr. Leopold.

-89-
<PAGE> 92

(9) Consists of (i) 551,667 shares, (ii) 62,500 shares issuable pursuant
to options held by Mr. Troy, and 20,000 shares issuable pursuant to a warrant
held by Mr. Troy. Excludes 250,000 shares issuable pursuant to options held by
Mr. Troy.

(10) Consists of (i) 10,000 shares purchased by Mr. Foster in Mr.
Foster's name and beneficially owned by Mr. Rubin, (ii) 1,230,765 shares held by
Mr. Rubin, and (iii) 40,000 shares issuable pursuant to warrants held by Mr.
Rubin.

(11) Includes 40,000, 20,000 and 40,000 shares issuable pursuant to
warrants held by Mr. Foster, Mr. Troy and Mr. Rubin, respectively, but
excludes 562,500, 345,000, 45,000, 60,000, 60,000, and 187,500 shares issuable
pursuant to options held by Mr. Foster, Mr. Smith, Mr. Landry, Mr. Weis, Mr.
Widman, and Mr. Troy, respectively.

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY

Set forth below is the name, age and principal occupation or employment
during the past five years of each executive officer and director of the
Company, each of whom is a citizen of the United States.

<TABLE>
<CAPTION>
Positions with the Company;
Name and Business Address Principal Occupation and Business Experience
- ------------------------- --------------------------------------------
<S> <C>
Steven L. Foster, age 47 Mr. Foster has been Chief Executive Officer of the
Company since March 1991, Chairman of the Board of
the Company since March 1994 and a Director of the
Company since April 1991. He is the principal
founder and co-creator of the Jillian's billiard
club concept. He has been actively involved in
creating and operating entertainment clubs since
1979 and is co-owner of a Jillian's billiard club in
Boston, Massachusetts. In addition, Mr. Foster is
co-founder of United Fuels International, Inc., an
international energy brokerage firm, and its
affiliates. Mr. Foster graduated magna cum laude
from Boston University School of Law in 1978 with a
Juris Doctor (J.D.) degree.

Daniel M. Smith, age 34 Mr. Smith has been President, Chief Operating
Officer and a Director of the Company since January
1995. Mr. Smith was a Vice President of KFC
(Kentucky Fried Chicken) from 1990 to 1995 and prior
to that was employed as Vice President-European
Operations of Domino's Pizza from 1986 to 1990. He
received a Masters of Management (M.M.A.) degree
from Northwestern University.

Ronald Widman, age 31 Mr. Widman has been Vice President of Development of
the Company since June 1995. Prior to joining the
Company, Mr. Widman was employed by KFC/Pepsico for
over 11 years where he was most recently responsible
for the creation, implementation and turn-key
development of new concepts, including the cross
functional development of Taco Bell and KFC
facilities. He received a Masters of Business
Administration (M.B.A.) degree from the University
of Louisville.

Stephen M. Weis, age 30 Mr. Weis has been Vice President of Operations of
the Company since June 1995. Mr. Weis was Delivery
Operations Manager of KFC from 1991 to 1995 where he
oversaw the field operations of over 100 delivery
restaurants. Prior to that, Mr. Weis was Senior
Operations Supervisor of Domino's Pizza in the
Mid-Atlantic region from 1987 to 1991. He received
a Bachelor of Arts (B.A.) degree in marketing from
The American University.
</TABLE>

-90-
<PAGE> 93

<TABLE>
<CAPTION>
Positions with the Company;
Name and Business Address Principal Occupation and Business Experience
- ------------------------- --------------------------------------------
<S> <C>
John L. Kidde, age 61 Mr. Kidde has been a Director of the Company since
its inception. Mr. Kidde is currently the President
of KDM Development Corporation, an investment
management firm. Mr. Kidde currently serves as a
member of the board of directors of The Futures
Group of Washington, D.C.; Asset Management
Advisors, Inc., Palm Beach, Florida; International
Resources Group, Washington, D.C.; Australasia Inc.,
Cayman Islands; Continental Europe '90, Cayman
Islands; International Agritech Resources, New York;
Juniper Partners, Inc., New York; and HFG Expansion
Management Inc., Massachusetts. He currently serves
as a trustee of Stevens Institute of Technology,
Hoboken, New Jersey; Open Space Institute, New York;
and the Frost Valley YMCA, Montclair, New Jersey.
He is a general partner of Claflin Capital
Management I-VII and The Opportunity Fund, both of
Boston, Massachusetts, and North American Venture
Capital II, L.P. of Madison, New Jersey. From June
1968 through January 1988, Mr. Kidde was Vice
President and Director of International Operations
of Kidde, Inc., a multi-industrial conglomerate.

Donald R. Leopold, age 45 Mr. Leopold has been a Director of the Company since
April 1991. For the past six years, he has been
President of Game Plan, Inc., a Boston-area based
marketing and strategic planning consulting firm.
Game Plan provides marketing research, marketing
planning and strategic planning consulting services
to clients in the sports, recreation, leisure and
consumer goods industries. Mr. Leopold is also on
the faculty of the Harvard University Extension
School, where he teaches graduate level courses in
Marketing of Services and Management of Service
Operations. He earned a Bachelor of Arts (B.A.)
degree, cum laude, from Harvard College in general
studies, and a Masters in Business Administration
(M.B.A.) degree from the Harvard University Graduate
School of Business Administration.
</TABLE>

-91-
<PAGE> 94

PRIOR CONTACTS BETWEEN THE COMPANY
AND CERTAIN AFFILIATES

Since April 1, 1993, there have been no contacts, negotiations or
transactions between the Company and a current director or executive officer of
the Company, or between the Company or a director or executive officer of the
Company and an unaffiliated party concerning (i) a merger, consolidation or
acquisition, (ii) tender offer for or other acquisition of any class of
securities of the Company, (iii) an election of directors of the Company, or
(iv) a sale or other transfer of a material amount of assets of the Company or
any of its subsidiaries. In addition, there have been no transactions between
the Company and any one or more of its directors or executive officers since
April 1, 1993 that involve an aggregate amount of one percent or more of the
Company's consolidated revenues.

-92-
<PAGE> 95

SELECTED FINANCIAL DATA

The following table sets forth certain financial information with respect
to the Company. The financial information was excerpted or derived from the
audited and unaudited financial statements contained elsewhere in this Proxy
Statement and should be read in conjunction with such financial statements.
See "Financial Statements of the Company."

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
3/31/96 3/31/95 3/31/94 3/31/93 3/31/92
----------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
- ---------------------

Total Revenue $ 11,875,716 $8,023,949 $ 5,196,423 $3,620,756 $ 3,037,917

Income/(loss) from continuing
operations $ (393,731) $(863,056) $ (932,529) $ 64,824 $(1,061,404)

Net income (loss) $ (393,731) $(863,056) $ (904,282) $ 161,834 $(1,665,676)

Per Share Data:
- --------------

Income (loss) from continuing
operations $ (0.04) $ (0.11) $ (0.12) $ .01 $ (0.25)

Net income (loss) $ (0.04) $ (0.11) $ (0.12) $ .02 $ (0.40)

Weighted average common
and common stock equivalent
shares outstanding
9,137,798 8,116,291 7,803,209 6,713,323 4,176,041

Balance Sheet Data:
- ------------------
Working capital $ 646,306 $ (24,485) $ 454,879 $ 555,641 $ 141,083

Total assets $ 9,904,271 $7,847,472 $ 6,339,345 $ 5,352,088 $ 5,459,847

Long-term debt $ 3,374,095 $1,568,171 $ 589,291 $ 406,266 $ 469,108

Stockholders' equity $ 2,844,428 $3,111,746 $ 3,600,298 $ 4,049,771 $ 3,008,211
</TABLE>

-93-
<PAGE> 96

MARKET INFORMATION

The Common Stock is traded in the over-the-counter market and is included
for quotation on NASDAQ under the symbol "QBAL." On June 10, 1996, the Record
Date, the average of high and low bid prices of the Common Stock was $0.25 per
share. On ___________, 1996, the last full day of trading for which quotations
were available at the time of printing of this Proxy Statement, the average of
the high and low bid prices of the Common Stock was $_____ per share.

The following table sets forth the range of high and low bid quotations
for the Common Stock as reported by NASDAQ for each quarter since March 31,
1994. Such quotations reflect inter-dealer prices without retail markup,
markdown or commissions and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
------------- -------- -------
<S> <C> <C>
3/31/94 7/8 9/16

6/30/94 25/32 11/16

9/30/94 23/32 5/8

12/31/94 3/4 7/16

3/31/95 5/8 7/16

6/30/95 15/32 5/16

9/30/95 7/16 11/32

12/31/95 15/32 7/32

3/31/96 5/16 1/4
</TABLE>

Despite the fact that the Common Stock is quoted on NASDAQ, there is
currently only a limited trading market for the Common Stock. In addition, the
Company has never declared a cash dividend and does not intend to do so in the
foreseeable future.

-94-
<PAGE> 97

The following table shows the shares of Common Stock purchased by the
Company and each director and executive officer (including former directors and
officers) of the Company and the average purchase price for shares for each
quarter since March 31, 1994.

<TABLE>
<CAPTION>
Number of Average Purchase
Company/Director/Officer Shares Purchased Price Paid
------------------------ ---------------- ----------
<S> <C> <C> <C>
Fourth Quarter Ended John L. Kidde, Director 10,000 $0.25
3/31/94 of the Company

First Quarter Ended N/A N/A N/A
6/30/94

Second Quarter Ended N/A N/A N/A
9/30/94

Third Quarter Ended N/A N/A N/A
12/31/94

Fourth Quarter Ended Steven L. Foster, Chief 850,000 $0.25
3/31/95 Executive Officer,
Chairman of the Board and
a Director of the Company

First Quarter Ended N/A N/A N/A
6/30/95

Second Quarter Ended N/A N/A N/A
9/30/95

Third Quarter Ended N/A N/A N/A
12/31/95

Fourth Quarter Ended N/A N/A N/A
3/31/96

First Quarter Ended N/A N/A N/A
6/30/96
</TABLE>

-----------

(1) The shares were purchased without consideration in satisfaction of
certain anti-dilution obligations of the Company arising from a merger
agreement between the Company and a company owned by Mr. Foster and Kevin Troy,
a Shareholder of the Company.

-95-
<PAGE> 98

FEES AND EXPENSES

All fees and expenses in connection with the preparation, printing and
mailing of this Proxy Statement and the Proxy and in connection with the
Proposal (including the fees and expenses of the Financial Advisor) will be
borne by the Company, whether or not Shareholders approve the Proposal and
whether or not the Merger is consummated.

The estimated fees and expenses referred to above are as follows:

<TABLE>
<S> <C>
Merger Payments . . . . . . . . . . . . . $2,500,000
Commission Filing Fee . . . . . . . . . . 426
Financial Advisor Fees and Expenses . . . *
Legal Fees . . . . . . . . . . . . . . . *
Accounting Fees . . . . . . . . . . . . *
Solicitation Expenses . . . . . . . . . . *
Mailing Expense . . . . . . . . . . . . . *
Printing Costs . . . . . . . . . . . . . *

Miscellaneous . . . . . . . . . . . . . . *

TOTAL . . . . . . . . . . . . . . . . *
</TABLE>

-----------------------
*To be determined.
INDEPENDENT ACCOUNTANTS

The financial statements of the Company as of March 31, 1996 included
herein have been included herein in reliance upon the report of BDO Seidman,
LLP, independent certified public accountants to the Company, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing. Representatives of the firm are expected to be present at the
Special Meeting, will have an opportunity to make a statement should they
desire to do so and are expected to be available to respond to appropriate
questions.

-96-
<PAGE> 99

BDO Seidman, LLP was engaged by the Company as its principal accountant on
June 11, 1996 after the resignation of Deloitte & Touche LLP ("Deloitte") on
March 21, 1996 (the "Resignation Date"). Deloitte had served as principal
accountant to the Company since 1989.

Deloitte's report on the financial statements of the Company for the
fiscal years ended March 31, 1995 and 1994 did not contain an adverse opinion
or a disclaimer of opinion, and such reports were not qualified or modified as
to uncertainty, audit scope, or accounting principles.

During the two fiscal years in the period ended March 31, 1995 and in the
subsequent period through the Resignation Date, there were no disagreements
between the Company and Deloitte on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure. In
addition, during the two fiscal years in the period ended March 31, 1995 and in
the subsequent period through the Resignation Date, there were no reportable
events as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange
Act.

MISCELLANEOUS

No person has been authorized to give any information or make any
representation on behalf of the Company other than as contained in this Proxy
Statement and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company.

The Board is not aware of any matter which may properly be presented for
action at the Special Meeting other than the matters set forth herein, but
should any matter requiring the vote of the Shareholders arise, it is intended
that Proxies in the accompanying form will be voted in respect thereof in
accordance with the best judgment of the person or persons voting the Proxies,
discretionary authority to do so being included in the Proxy.

DOCUMENTS INCORPORATED BY REFERENCE

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement and prior
to the date of the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement.

-97-
<PAGE> 100

GLOSSARY

"Annapolis Limited Partnership" means Jillian's Billiard Club of Annapolis
Limited Partnership.

"Board" means the Board of Directors of the Company.

"Broker-Dealer Shareholders" means holders of record of Common Stock who
are brokers or dealers registered under the Exchange Act.

"Champaign Limited Partnership" means Jillian's Billiard Club of Champaign
- - Urbana, L.P.

"Cleveland Heights Limited Partnership" means Jillian's Billiard Club of
Cleveland Heights Limited Partnership.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means the issued and outstanding shares of common stock,
par value $.001 per share, of the Company.

"Company" means Jillian's Entertainment Corporation, a Florida
corporation.

"Comparison Companies" means Bowl America, O'Charley's, Brinker
International and Western Country Clubs.

"Continuing Shareholder/s" means the Employee Continuing Shareholders and
the Initial Continuing Shareholders, and any of them.

"CPI" means the Consumer Price Index.

"Deloitte" means Deloitte & Touche LLP.

"Disbursing Agent" means the disbursing agent that will accept the letters
of election from the beneficial owners of 101,000 or more shares of Common
Stock as of the Record Date and the Common Stock certificates of the Other
Shareholders and will distribute and accept the Letters of Transmittal, that
will act as the depositary for the Merger Payments and that will distribute a
Merger Payment to each Other Shareholder owning a share of Other Common Stock
entitled thereto.

-98-
<PAGE> 101

"Dixie Run" means Dixie Run Corporation.

"EBIT" means earnings before interest and taxes.

"EBITDA" means earnings before interest, taxes, depreciation and
amortization.

"Effective Time" means the time at which Articles of Merger are filed and
recorded with the Secretary of State of the State of Florida and a Certificate
of Merger and Articles of Amendment to the articles of incorporation of the
Surviving Company are filed and recorded with the Secretary of State of the
State of Delaware, at which point the Merger will become effective.

"Employee Continuing Shareholder" means an employee of the Company, who
does not qualify as an Initial Continuing Shareholder, beneficially owning on
the Record Date an aggregate number of shares of Common Stock, plus an
aggregate number of shares of Common Stock underlying stock options or warrants
held on the Record Date (whether or not such options or warrants are then
exercisable), totaling at least 101,000 shares.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Financial Advisor" means Bannon & Co., Inc.

"Firm Value" means the Company's market capitalization plus debt less cash
and cash equivalents.

"First Union" means First Union Bank.

"FMV" means fair market value.

"Foster Group" means Steven L. Foster, The Frank and Celia Foster Family
Trust, Steven Rubin and Kevin Troy.

"Initial Continuing Shareholder" means any Shareholder that is the
beneficial owner of at least 101,000 shares of Common Stock as of the Record
Date and that does not elect to receive a Merger Payment in respect of each
share of Common Stock beneficially owned by such Shareholder.

"Island" means Island Partners, Ltd.

"Jillian's - Annapolis" means Jillian's Billiard Club of Annapolis, Inc.

"Jillian's - Champaign" means Jillian's Billiard Club of Champaign -
Urbana, Inc.

-99-
<PAGE> 102

"Jillian's - Cleveland" means Jillian's Billiard Club of Cleveland, Inc.

"Jillian's - Cleveland Heights" means Jillian's Billiard Club of Cleveland
Heights, Inc.

"Jillian's - Kendall" means Jillian's Billiard Club of Kendall, Inc.

"Jillian's - Long Beach" means Jillian's Billiard Club of Long Beach, Inc.

"Jillian's - Pasadena" means Jillian's Billiard Club of Pasadena, Inc.

"Jillian's - Seattle" means Jillian's Billiard Club of Seattle, Inc.

"Jillian's - Tacoma" means Jillian's Billiard Club of Tacoma, Inc.

"Jillian's - Worcester" means Jillian's Billiard Club of Worcester, Inc.

"Letter of Transmittal" means a duly executed letter of transmittal that
each Other Shareholder will be required to submit to the Disbursing Agent in
order to receive the Merger Payment for each share of Other Common Stock owned
by each of them.

"Lock-Up Agreement/s" means the lock-up agreements which the Company
shall, pursuant to the Merger Agreement, use its best efforts to obtain from
the Continuing Shareholders prior to consummation of the Merger, and any of
them.

"LTM" means the twelve month period ended June 30, 1995.

"Merger" means the merger between the Company and Newco to be effected
subject to the terms and conditions of the Merger Agreement.

"Merger Agreement" means the proposed Agreement and Plan of Merger by and
between the Company and Newco.

"Merger Payment" means the cash payment of $0.50 per share of Common
Stock, without interest, that will be paid to Other Shareholders for each share
of Other Common Stock owned by them upon consummation of the Merger.

"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.

"Newco" means a recently formed Delaware corporation.

-100-
<PAGE> 103

"On Cue" means On Cue Limited, a company operating four billiard club
restaurants in Canada.

"Other Common Stock" means each share of Common Stock held by Other
Shareholders which at the Effective Time will be converted into the right to
receive the Merger Payment.

"Other Shareholder" means any Shareholder, other than an Employee
Continuing Shareholder, that (A) is the beneficial owner of less than 101,000
shares of Common Stock as of the Record Date, (B) is the beneficial owner of
101,000 or more shares of Common Stock as of the Record Date, but elects to
receive a Merger Payment in respect of each share of Common Stock beneficially
owned by such holder, or (C) holds its shares through a broker or dealer
registered under the Exchange Act and does not provide the Company with
evidence regarding the number of shares beneficially owned.

"Permitted Investments" means collectively, investments made by the
Disbursing Agent, at the direction of the Surviving Company, with portions of
the cash to which the holders of shares of Other Common Stock will be entitled
in the Merger in obligations of the United States of America or agencies of the
United States of America, in commercial paper obligations receiving the highest
rating from either Moody's Investor Service, Inc. or Standard & Poor's Services
or in certificates of deposit, bank repurchase agreements secured by
obligations of the United States of America or bank money market funds of banks
with capital, surplus and retained earnings in excess of $500,000,000.

"Placement Agent" means Hampshire Securities Corporation, a New York
corporation.

"Preferred Stock" means the preferred stock of the Surviving Company, to
be sold, pursuant to the Private Placement, in 12 units of 100,000 shares at a
price of $500,000 per unit.

"Private Placement" means the private placement of equity and/or
subordinated debt securities of the Surviving Company.

"Proposal" means the proposal to approve the Merger.

"Proxy" means the proxy set forth on the proxy card enclosed with this
Proxy Statement.

"Proxy Statement" means this Proxy Statement, as the same may be amended.

-101-
<PAGE> 104

"Put" means the right acquired by an unaffiliated trust in November 1989
to require the Company to repurchase 206,825 shares of Common Stock from the
trust at $1.64 per share immediately upon the demand of the trust.

"QBAL" means the symbol under which the Common Stock is included for
quotation on the NASDAQ.

"Record Date" means June 10, 1996, the date as of which Shareholders are
shown on the Company's records as holders of issued and outstanding shares of
Common Stock.

"Resignation Date" means March 21, 1996, the date Deloitte resigned as
principal accountant to the Company.

"Schedule 13E-3" means the Rule 13e-3 Transaction Statement on Schedule
13E-3 under the Exchange Act, and any amendments thereto, including exhibits
filed as a part thereof, that the Company has filed with the Commission.

"Shareholder/s" means the shareholders of the Company, and any of them.

"Special Meeting" means the special meeting, together with adjournments
thereof, at which the Shareholders will vote on the Proposal.

"Stock Option Plans" means collectively, the Company's Consolidated Stock
Option Plan, 1994 Director, Adviser and Key Employee Stock Option Plan and 1995
Director, Adviser and Key Employee Stock Option Plan.

"Surviving Company" means Newco, which will be the surviving company in
the Merger.

"Transfer Agent" means American Stock Transfer.

"Type A reorganization" means a reorganization under section 368(a)(1)(A)
of the Code.

"Worcester Limited Partnership" means Jillian's Billiard Club of Worcester
Limited Partnership.

-102-
<PAGE> 105

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Unaudited Financial Statements:
Consolidated Condensed Balance Sheets as of June 30, 1996 and March 31, 1996 (unaudited).............. F-2

Consolidated Condensed Statements of Operations for the Three Month Periods Ended June 30, 1996
and June 30, 1995 (unaudited)..................................................................... F-3

Consolidated Condensed Statements of Cash Flows for the Three Month Periods Ended June 30, 1996
and June 30, 1995 (unaudited)..................................................................... F-4

Notes to Consolidated Condensed Financial Statements (unaudited)...................................... F-5

Financial Statements:
Report of BDO Seidman, LLP, Independent Auditors...................................................... F-6

Consolidated Balance Sheet as of March 31, 1996 ....................................................... F-7

Consolidated Statements of Operations for the Years Ended March 31, 1996 and 1995 ..................... F-8

Consolidated Statements of Changes in Stockholder Equity for the Years Ended March 31, 1996
and 1995 .......................................................................................... F-9

Consolidated Statements of Cash Flows for the Years Ended March 31, 1996 and 1995...................... F-10

Notes to Consolidated Financial Statements ............................................................ F-11
</TABLE>

F-1
<PAGE> 106

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEET

<CAPTION>
June 30, March 31,
1996 1996
----------- -----------
(Unaudited)

ASSETS

<S> <C> <C>
Current assets:
Cash and cash equivalents $ 453,520 $ 646,306
Inventory 201,410 204,581
Accounts receivable 47,687 63,386
Other current assets 179,064 166,035
----------- -----------
Total current assets 881,681 1,080,308

Investments 39,725 39,725
Property, leasehold improvements and
equipment, net 7,512,636 7,687,606
Goodwill, net 792,071 805,384
Other assets 290,833 291,248
----------- -----------
Total assets $ 9,516,946 $ 9,904,271
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 950,207 $ 941,707
Accrued expenses and other liabilities 529,683 635,167
Current portion of notes and equipment
leases payable 666,411 712,910
Notes payable to related parties 280,000 -
----------- -----------
Total current liabilities 2,426,301 2,289,784

Deferred rent 1,140,697 1,187,860
Notes payable and equipment
leases payable 1,852,664 1,906,235
Notes payable to related parties - 280,000
----------- -----------
Total liabilities 5,419,662 5,663,879
----------- -----------

Minority interests 1,323,534 1,395,964
----------- -----------
Commitments and contingencies

Stockholders' equity:
Cumulative preferred stock, $.001 par
value, 1,000,000 shares authorized, none
issued or outstanding - -
Common stock, $.001 par value, 25,000,000
shares authorized, 9,137,798 shares issued
and outstanding 9,138 9,138
Paid-in capital 9,536,277 9,536,277
Accumulated deficit (6,771,665) (6,700,987)
----------- -----------
Total stockholders' equity 2,773,750 2,844,428
----------- -----------
Total liabilities and stockholders' equity $ 9,516,946 $ 9,904,271
=========== ===========
</TABLE>

See accompanying notes to consolidated condensed financial statements

F-2

<PAGE> 107

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

<CAPTION>
Three Month Period
Ended June 30,
------------------------
1996 1995
---------- ----------

<S> <C> <C>
Revenues from clubs $3,263,387 $2,461,662
---------- ----------
Cost and expenses:
Cost of club operations:
Cost of food and beverage 739,569 599,743
Wages 785,903 577,730
Rent 432,681 387,540
Direct operating expenses 643,542 539,418
Start-up costs related to development stage clubs - 57,976
General and administrative expenses 420,357 294,970
Depreciation and amortization 209,220 143,548
Minority interest 38,266 19,384
---------- ----------
Total cost and expenses 3,269,538 2,620,309
---------- ----------

Other income/(expenses):
Other income, including interest 19,541 12,701
Interest expense (84,068) (45,218)
---------- ----------
Total other income/(expenses) (64,527) (32,517)
---------- ----------

Net loss $ (70,678) $ (191,164)
========== ==========

Net loss per share of common and common equivalents $ (.01) $ (.02)
========== ==========

Weighted average common and common equivalent
shares outstanding $9,137,798 $9,137,798
========== ==========
</TABLE>

See accompanying notes to consolidated condensed financial statements

F-3

<PAGE> 108

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

<CAPTION>
Three Month Period
Ended June 30,
-----------------------
1996 1995
--------- ----------

<S> <C> <C>
Cash flows from operating activities:
Net loss $ (70,678) $ (191,164)
--------- ----------
Adjustments to reconcile loss to net cash used by operations:
Depreciation and amortization 209,220 143,548
Decrease in accounts receivables 15,699 2,259
Decrease/(increase) in inventory 3,171 (19,942)
(Increase)/decrease in other assets (19,897) 44,707
Increase/(decrease) in accounts payable 8,500 (37,244)
Decrease in other liabilities (152,647) (4,846)
Decrease in minority interest 38,266 19,384
--------- ----------
Total adjustments 102,312 147,866
--------- ----------
Cash provided by/(used) by operating activities 31,634 (43,298)
--------- ----------

Cash flows from investing activities:
Purchases of property and equipment (13,654) (584,173)
Collections of notes receivable - 103,413
--------- ----------
Cash used in investing activities (13,654) (480,760)
--------- ----------

Cash flows from financing activities:
Repayment of notes and leases payables (100,070) (190,425)
Distributions to minority interest shareholders (110,696) (32,136)
--------- ----------
Cash used by financing activities (210,766) (222,561)
--------- ----------

Net decrease in cash and cash equivalents (192,786) (746,619)

Cash and cash equivalents at beginning of year 646,306 1,254,120
--------- ----------
Cash and cash equivalents at end of period $ 453,520 $ 507,501
========= ==========
</TABLE>

See accompanying notes to consolidated condensed financial statements

F-4

<PAGE> 109

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 30, 1996
-------------------

Note A - General
- ------------------

The unaudited consolidated condensed financial statements include the
accounts of Jillian's Entertainment Corporation (the "Registrant"), Jillian's,
Inc. and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

Net loss per share amounts are computed based upon the average number of
common and common equivalent shares outstanding, assuming proceeds from the
assumed exercise of options and warrants were used to purchase common shares
outstanding at the average fair market value during each period, unless such
exercise is anti-dilutive.

The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions for Form 10-QSB and therefore
do not include all information and footnotes necessary for a fair presentation
of financial position, results of operations and changes in cash flow in
conformity with generally accepted accounting principles. The unaudited
consolidated condensed financial statements should be read in conjunction with
the financial statements and related notes included in the Registrant's Annual
Report on Form 10-KSB for the year ended March 31, 1996. In the opinion of
management, the unaudited consolidated condensed financial statements contain
all adjustments necessary for a fair presentation of the results of operations
for the interim periods presented and all such adjustments are of a normal and
recurring nature. The results of operations for the three months ended June 30,
1996 are not necessarily indicative of the results which may be expected for the
entire fiscal year.

Certain amounts in the accompanying condensed consolidated financial
statements for the three months ended June 30, 1995 have been reclassified to
conform to the presentation in the three months ended June 30, 1996.

F-5

<PAGE> 110

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Jillian's Entertainment
Corporation:

We have audited the accompanying consolidated balance sheet of Jillian's
Entertainment Corporation and subsidiaries as of March 31, 1996, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jillian's
Entertainment Corporation and subsidiaries at March 31, 1996, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.

/s/ BDO Seidman, LLP

Boston, Massachusetts
July 2, 1996

F-6

<PAGE> 111
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 1996

ASSETS

Current assets:
Cash and cash equivalents $ 646,306
Inventory 204,581
Accounts receivable 63,386
Other current assets 166,035
----------
Total current assets 1,080,308

Investments (Note 2) 39,725
Property, leasehold improvements and equipment,
net (Notes 3 and 4) 7,687,606
Goodwill, net 805,384
Other assets 291,248
----------
Total assets $ 9,904,271
==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 941,707
Accrued expenses and other liabilities 635,167
Current portion of notes and equipment
leases payable (Note 4) 712,910
----------
Total current liabilities 2,289,784

Deferred rent 1,187,860
Notes payable and equipment
leases payable (Note 4) 1,906,235
Notes payable to related parties (Note 4) 280,000
----------
Total liabilities 5,663,879
----------
Minority interests (Note 11) 1,395,964
----------
Commitments and contingencies (Notes 6, 8 and 11)

Stockholders' equity (Notes 4, 7, 8, 9 and 11):
Cumulative preferred stock, $.001 par
value, 1,000,000 shares authorized, none
issued or outstanding -
Common stock, $.001 par value, 25,000,000
shares authorized, 9,137,798 shares issued
and outstanding 9,138
Paid-in capital 9,536,277
Accumulated deficit (6,700,987)
----------
Total stockholders' equity 2,844,428
----------
Total liabilities and stockholders' equity $9,904,271
==========
</TABLE>

See accompanying notes to consolidated financial statements

F-7
<PAGE> 112

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 1996 and 1995

<TABLE>
<CAPTION>
1996 1995
---- ----

<S> <C> <C>
Revenues from club operations $ 11,875,716 $ 7,969,247
------------ ------------

Costs and expenses:
Cost of club operations:
Cost of goods sold 2,736,704 1,749,269
Wages 2,745,768 1,870,360
Rent 1,685,014 1,223,785
Direct operating costs 2,393,039 1,590,270
Start-up costs related to development
stage clubs 82,575 534,808
General and administrative expenses 1,707,460 1,186,761
Depreciation and amortization expense 656,768 523,500
Income applicable to minority
interest (Note 11) 189,613 110,231
------------ ------------
Total costs and expenses 12,196,941 8,788,984
------------ ------------

Other income/(expenses):
Gain on sale of investment -- 4,785
Interest expense (211,520) (98,021)
Other income 139,014 49,917
------------ ------------
Total other expenses, net (72,506) (43,319)
------------ ------------
Net loss $ (393,731) $ (863,056)
============ ============

Net loss per common and
common equivalents share $ (0.04) $ (0.11)
============ ============

Weighted average common and common
equivalent shares outstanding 9,137,798 8,116,291
============ ============
</TABLE>

See accompanying notes to consolidated financial statements

F-8
<PAGE> 113
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER EQUITY
For the years ended March 31, 1996 and 1995

Common Stock Total
-------------------- Paid-in Accumulated Notes Stockholders'
Shares Amount Capital Deficit Receivable Equity
------ ------ ------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994 8,032,798 $8,033 $9,188,132 $(5,444,200) $(151,667) $3,600,298
Shares issued, stock options
exercised (Note 7) 1,105,000 1,105 275,145 276,250
Collection of notes receivable 48,254 48,254
Services contributed by
shareholder (Note 6) 50,000 50,000
Net loss (863,056) (863,056)
--------- ------ ---------- ----------- --------- ----------
Balance at March 31, 1995 9,137,798 9,138 9,513,277 (6,307,256) (103,413) 3,111,746
Collection of notes receivable 103,413 103,413
Services contributed by
shareholder (Note 6) 23,000 23,000
Net loss (393,731) (393,731)
--------- ------ ---------- ----------- --------- ----------
Balance at March 31, 1996 9,137,798 $9,138 $9,536,277 $(6,700,987) $ -- $2,844,428
========= ====== ========== =========== ========= ==========
</TABLE>

See accompanying notes to consolidated financial statements

F-9
<PAGE> 114

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years ended March 31, 1996 and 1995

<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (393,731) $ (863,056)
----------- -----------
Adjustments to reconcile net loss to
net cash provided by operating activities:

Depreciation and amortization 656,768 523,500
Gain on sale of investments -- (4,785)
Provision for losses on receivables -- 41,587
Increase in paid-in capital for contribution

of services 23,000 50,000
(Increase)/decrease in accounts receivable (29,698) 5,706
Increase in inventory (49,014) (38,484)
Decrease/(increase) in other assets 29,706 (103,015)
Increase in accounts payable 362,922 284,592
Increase in accrued expenses and other liabilities 282,518 294,102
Increase in minority interest 189,613 110,231
----------- -----------
Total adjustments 1,465,815 1,163,434
----------- -----------

Cash provided by operating activities 1,072,084 300,378
----------- -----------

Cash flow from investing activities:

Purchase of property and equipment (1,677,301) (1,775,960)
Collection of note receivable 103,413 6,667
Proceeds from sale of investments -- 9,470
----------- -----------
Net cash used in investing activities (1,573,888) (1,759,823)
----------- -----------

Cash flows from financing activities:

Issuance of notes payable 630,253 1,419,320
Repayment of notes and leases payable (506,829) (261,505)
Proceeds from issuance of common stock -- 276,250
Proceeds from sale of partnership interests -- 258,084
Distributions to minority interest partners (229,434) (108,145)
----------- -----------
Net cash (used)/provided by financing activities (106,010) 1,584,004
----------- -----------

Net (decrease)/increase in cash and cash equivalents (607,814) 124,559
Cash and cash equivalents at beginning of year 1,254,120 1,129,561
----------- -----------
Cash and cash equivalents at end of year $ 646,306 $ 1,254,120
=========== ===========

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for interest $ 211,520 $ 98,021
=========== ===========

Non-cash investing and financing activity:

Acquisition of equipment through capital leases $ 723,392 $ --
=========== ===========
Acquisition of leasehold improvements through
landlord contributions $ 872,682 $ --
=========== ===========
Conversion of notes payable into limited partner-
ship interest $ -- $ 100,000
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements

F-10

<PAGE> 115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS

Jillian's Entertainment Corporation (the "Company"), owns, operates and manages,
through wholly-owned subsidiaries, billiard clubs in Miami, Florida; Seattle,
Washington; Cleveland, Ohio; Cleveland Heights, Ohio; Pasadena California;
Worcester, Massachusetts; Champaign, Illinois; Annapolis, Maryland; Long Beach,
California and Tacoma, Washington. The Cleveland Heights, Worcester, Champaign
and Annapolis clubs are owned by limited partnerships in which wholly-owned
subsidiaries of Jillian's, Inc. are the general partners and own 87%, 25%, 43%
and 79% interests, respectively.

Certain amounts in the accompanying consolidated financial statements as of and
for the year ended March 31, 1995, have been reclassified to conform to the
presentation as of and for the year ended March 31, 1996.

The following is a summary of significant accounting policies followed in the
preparation of these consolidated financial statements:

Principles of Consolidation

The consolidated financial statements include the accounts of Jillian's
Entertainment Corporation, Jillian's, Inc. and subsidiaries and Carom Financial
Corporation. The Cleveland Heights, Worcester, Champaign and Annapolis clubs are
owned by limited partnerships in which wholly-owned subsidiaries of the Company
have an 87%, 25%, 43% and 79% ownership interest, respectively. All of the
limited partnerships are consolidated herein, since the Company controls the
operations of the limited partnerships. All significant intercompany accounts
and transactions have been eliminated.

Use of Estimates

The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks and
interest-bearing deposits with banks, with original maturities of less than
three months.

F-11

<PAGE> 116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS,
CONTINUED

Inventory

Inventory, primarily food and beverage, is stated at cost. Cost is determined by
the first-in, first-out method.

Investments

Investments in equity securities and non-billiard club limited partnerships,
which do not have readily determinable fair values, are carried at the lower of
cost or estimated fair market value. Gains and losses on the sale of investments
are calculated on the "specific identification" method.

Property, Leasehold Improvements and Equipment

Property, leasehold improvements and equipment are stated at cost. Property and
equipment are depreciated using the straight-line method over the estimated
useful lives of the assets which range from five to ten years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term (including all renewal periods) or the useful lives of the
improvement which range from ten to twenty years. When items are retired or
otherwise disposed of, the related costs and accumulated depreciation are
removed from the accounts and any resulting gains or losses are recognized.

Goodwill

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121"). SFAS No.
121 requires, among other things, that impairment losses on assets held, and
gains or losses from assets that are expected to be disposed of, be included as
a component of income from continuing operations.

The excess of the cost of the investment in Jillian's, Inc. over the fair value
of net assets acquired is being amortized on a straight-line basis over twenty
years from the acquisition dates. The Company evaluates the potential impairment
of its long-lived assets, including goodwill related thereto, in accordance with
SFAS No. 121 and evaluates other goodwill in accordance with Accounting
Principle Board Opinion No. 17 "Intangible Assets". The Company does not believe
that its long-lived assets or goodwill has been impaired.

F-12

<PAGE> 117

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS,
CONTINUED

Income Taxes

The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes". Under SFAS 109, current income taxes are
provided based upon taxes currently payable and deferred taxes are provided to
reflect the temporary difference in the tax basis of assets and liabilities and
their reported amounts in the financial statements. A valuation allowance is
recorded to reduce deferred tax assets to an amount which is considered more
likely than not to be realized.

Earnings/Loss Per Share

Earnings (loss) per share amounts are computed based upon the average number of
common and common equivalent shares outstanding, assuming proceeds from the
assumed exercise of options were used to purchase common shares outstanding at
the average fair market value during each period, unless such exercise is
anti-dilutive.

Start-up Costs

Start-up costs related to development stage clubs are expensed as incurred.
These costs include all wages, rents and direct general and administrative
expenses incurred prior to a club opening for business.

Advertising Costs

Advertising costs are charged to operations as incurred. Advertising expense was
approximately $317,000 and $168,000 for the years ended March 31, 1996 and 1995,
respectively.

Leases

The Company has entered into operating lease agreements which contain scheduled
rent increases during the term of the lease. Such scheduled rent increases are
recorded on a straight-line basis over the term of the lease. Landlord
incentives are recorded as deferred rent and amortized over the terms of the
lease.

Fair Value of Financial Instruments

The Company believes that the carrying amount of notes and equipment leases
payable, as reported in the accompanying consolidated balance sheet,
approximates fair value.

F-13

<PAGE> 118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

2. INVESTMENTS

Investments at March 31, 1996 consisted of the following:

<TABLE>
<S> <C>
North American Venture Capital
Fund II, L.P. $25,000
Tellurado Assoc., Ltd. 14,725
-------
Total $39,725
=======
</TABLE>

North American Venture Capital Fund II, L.P. and Tellurado Assoc., Ltd represent
limited partnership interests purchased in fiscal 1990 and fiscal 1992,
respectively. These partnerships were formed primarily to invest in marketable
securities and real estate, respectively.

3. PROPERTY, LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET

Property, leasehold improvements and equipment consists of the following at
March 31, 1996:

<TABLE>
<S> <C>
Leasehold improvements $ 5,487,014
Game equipment 1,391,937
Club and office equipment 1,772,683
Furniture and fixtures 720,323
-----------
9,371,957
Less accumulated depreciation (1,684,351)
-----------
Total $ 7,687,606
===========
</TABLE>

4. NOTES AND EQUIPMENT LEASES PAYABLE

Notes Payable

Notes payable at March 31, 1996 consist of the following:

<TABLE>
<S> <C>
Note payable to U.S. Government. (See Note 8). $199,792

Note payable to City of Cleveland Heights collateralized by personal
property and fixtures in the Cleveland Heights club. Interest
payable at 7%. Principal and interest payable in monthly
installments of $1,161. Balance due in April 1998. 76,219

Note payable to seller of Pasadena club. Interest payable monthly
at 8%. Principal due in August, 1996. (See Note 10). 175,000
</TABLE>

F-14
<PAGE> 119

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

4. NOTES AND EQUIPMENT LEASES PAYABLE, CONTINUED

Notes Payable, Continued

<TABLE>
<S> <C>
Note payable to unaffiliated third parties. Interest at 15%.
(Currently payable at 12%). Principal and accrued interest due
October 20, 1999. 185,000

Note payable to bank collateralized by stock in Seattle club
Interest payable at 9.5%. Principal and interest payable in
monthly installments of $4,205. Balance due May 18, 1999. 144,538

Note payable to Champaign club landlord. Interest payable at 10%. Principal and
interest payable in monthly installments of $3,187.
Balance due September 1, 1999. 110,301

Note payable to City of Long Beach. Interest accrues at 7% for first year,
thereafter, principal and interest is payable in monthly installments of $5,507
beginning April 1, 1996.
Balance due April 2006. 450,000

Note payable to unaffiliated third party. Interest payable
quarterly at 8.5%. Balance due August 1, 1996. 50,000

Note payable to bank collateralized by equipment in
Tacoma club and by stock in Seattle club. Interest payable
in monthly installments of $6,306. Balance due December
2000. 284,357
---------

Total 1,675,207

Notes Payable to Related Parties

Notes payable to affiliated third parties. Interest payable
at 25%. Interest payable semi-annually. Principal and accrued
interest due May and June 1997. 280,000
---------

Total notes payable 1,955,207
---------
Capitalized Equipment Leases Payable

Equipment leases payable to unaffiliated third party. Payable in monthly
installments of $6,673. $30,000 buy-out due June 1, 1999. 214,633

Other equipment leases payable to unaffiliated third party. 178,923
</TABLE>

F-15

<PAGE> 120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

4. NOTES AND EQUIPMENT LEASES PAYABLE, CONTINUED

Capitalized Equipment Leases Payable, Continued
<TABLE>
<S> <C>
Equipment leases payable to unaffiliated third party. Payable
in monthly installments of $6,762. $30,000 buyout due January
2001. 294,556

Equipment leases payable to unaffiliated third party. Payable in
monthly installments of $11,953. Balance due in March 1998. 255,826
----------

Total capital leases payable 943,938
----------

Total notes and equipment leases payable 2,899,145

Less current portion of notes and equipment leases payable 712,910
----------

Long term portion of notes and equipment leases payable $2,186,235
==========
</TABLE>

The aggregate amount of required payments under the notes payable at March 31,
1996 are as follows:

Years Ending March 31,

<TABLE>
<S> <C>
1997 $ 420,626
1998 549,154
1999 309,254
2000 322,767
2001 99,433
Thereafter 253,973
----------
Total $1,955,207
==========
</TABLE>

As collateral on the City of Long Beach loan, the Company has issued the City of
Long Beach a warrant to receive 225,000 shares of its common stock at no charge.
This warrant is only exercisable if the Company defaults on the loan and fails
to cure such default. Any net proceeds the City of Long Beach receives on the
sale of such warrant would be used to offset the outstanding loan balance. If
such net proceeds were not sufficient to repay the outstanding loan balance, the
Company has agreed to continue to issue additional shares of its common stock
until the outstanding loan balance is paid in full.

F-16

<PAGE> 121

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

4. NOTES AND EQUIPMENT LEASES PAYABLE, CONTINUED

Future minimum lease payments under capital lease obligation together with the
present value of the net minimum lease payments are as follows:

Years Ending March 31,

<TABLE>
<S> <C>
1997 $ 395,662
1998 355,550
1999 202,095
2000 140,035
2001 77,947
----------
Total minimum
lease payments 1,171,289

Less amounts repre-
senting interest 227,351
----------
Present value of net
minimum lease pay-
ments $ 943,938
==========
Current $ 292,284
Long-term 651,654
----------
$ 943,938
==========
</TABLE>

5. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes and operating loss carryforwards.
The tax effects of significant items comprising the Company's net deferred tax
assets as of March 31, 1996 are as follows:

F-17

<PAGE> 122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

5. INCOME TAXES, CONTINUED

<TABLE>
<CAPTION>
1996
----

<S> <C>
Gross deferred tax liabilities $ --
-----------
Deferred tax assets:
Contribution carryforward 8,000
Net operating loss carryforward 2,202,300
Capital loss carryforward 31,600
-----------
Gross deferred tax assets 2,241,900
-----------
Deferred tax asset 2,241,900
Valuation allowance (2,241,900)
-----------
Net deferred asset $ --
===========
</TABLE>

No provision or benefit for income taxes was recorded in the accompanying
consolidated financial statements for the years ended March 31, 1996 and 1995.
As of March 31, 1996, the Company has unused operating loss carryforwards of
approximately $5,850,000 for federal income tax purposes. Approximately
$4,000,000 of these carryforwards are limited under Section 382 of the Internal
Revenue Code to approximately $350,000 per year. These carryforwards begin to
expire in the year 2006.

The Company's provision for income taxes differs from the amounts determined by
applying the statutory federal income tax rate to income before income taxes as
follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
Amount % Amount %
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Tax (benefit) at federal rate $(137,800) (35.0) $(302,070) (35.0)
Benefit of graduated rate 4,200 1.0 8,631 1.0
Goodwill amortization 18,600 4.7 18,637 2.2
Change in valuation allowance 94,402 24.0 260,545 30.1
Accrued officers compensation 35,000 8.9 -- --
Other, net (14,402) (3.6) 14,257 1.7
--------- ----- --------- -----
Total $ 0 0% $ 0 0%
========= ===== ========= =====
</TABLE>

The valuation allowance increased by $94,402 in the year ended March 31, 1996.

6. COMMITMENTS AND CONTINGENCIES

Leases

On June 13, 1995, the Company entered into a lease agreement for 3,020 square
feet of space for its administrative operation located at 727 Atlantic Avenue in
Boston, Massachusetts. The lease commenced in July, 1995 and expires July, 1998.
In addition, the lease has a two-year renewal period. Under the lease agreement,
the Company will be obligated to pay the lessor minimum annual rent equal to
$31,710 (payable in monthly installments of $2,642) for the first year, $34,730
(payable in monthly installments of $2,894) for the second year and $37,750
(payable in monthly installments of $3,146) for the third year.

F-18

<PAGE> 123

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

6. COMMITMENTS AND CONTINGENCIES, CONTINUED

The Company also leases the premises in which its billiard clubs are operated.
The future minimum lease payments under the administrative and clubs operating
leases are as follows:

<TABLE>
<CAPTION>
Years ending Leases as of
March 31, March 31, 1996
------------ --------------
<S> <C> <C>
1997 $ 1,607,000
1998 1,553,000
1999 1,561,000
2000 1,213,000
2001 1,011,000
Thereafter 2,878,000
-----------
Total $ 9,823,000
===========
</TABLE>

Some of the billiard clubs lease agreements contain clauses that provide for
additional rental expense based on gross sales exceeding specified dollar
amounts. Such rental clauses differ by club. During the year ended March 31,
1996, none of the clubs were required to pay any material amounts of additional
rent. Additionally, the Company is using the straight line method for certain
lease payments under the lease agreements and, therefore, current expenses are
greater than the actual cash payments.

Litigation

On October 13, 1995, an action foreclosing a mechanics lien was filed against
the Company in a California Superior Court for Los Angeles County for
approximately $123,000, plus interest. The Company filed an answer and cross
complaint on January 3, 1996. While the Company is vigorously defending the
action and believes that it has meritorious defenses, no assurance can be given
of a favorable outcome.

Employment Agreement

On March 14, 1991, Steven L. Foster entered into an employment agreement with
the Company. The term of the employment agreement was for four years at an
annual salary of $50,000 plus annual incentive compensation and was extended to
September 14, 1995. There was no annual incentive compensation earned during the
term of the agreement. Mr. Foster has waived his annual salary from May 1, 1992
through September 14, 1995 in order to reduce the Company's general and
administrative expenses. For fiscal 1995 and 1996, the Company recognized an
expense of $50,000 and $23,000, respectively for the fair value of the service
rendered by Mr. Foster and a corresponding credit to paid-in capital.

F-19

<PAGE> 124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY

During fiscal 1993, the Company offered for sale its common stock through a
private placement. The Company sold 2,043,022 shares of its common stock for
approximately $874,000 net of offering expenses and sales commissions. In
accordance with the terms of the subscription agreement for the private
placement, the Company filed with the Securities and Exchange Commission a
registration statement with respect to the shares sold in the private placement.
The registration statement became effective February 5, 1993 and continues to be
effective.

On March 14, 1991 the Company issued 1,000,000 shares of common stock in
connection with the Jillian's, Inc. acquisition. Additionally, on such date, the
Company and Steven Foster, Steven Rubin, Kevin Troy and The Frank and Celia
Foster Family Trust (collectively, the "Foster Group") entered into a
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Foster Group has a one time demand registration right to require the Company
to register its stock for sale to the public and certain rights to participate
in registrations of securities by the Company, subject to certain restrictions.

The Registration Rights Agreement also contains an anti-dilution provision
providing that for a period of 18 months from March 14, 1991, the Company would
not engage in any offering and sale of any of its equity securities or
securities convertible into or exchangeable into equity securities without the
prior written consent of Steven Rubin acting as the representative of the Foster
Group. Steven Rubin was required to negotiate on behalf of the Foster Group in
good faith with the Company in an effort to achieve the Company's capital
requirements while minimizing the dilutive effect on the Foster Group of the
sale of any securities in any such offering. On April 28, 1993, the Company and
Steven Rubin negotiated a settlement with respect to the anti-dilution provision
for the River Club Limited Partnership transaction (see Note 9) and the 1993
private placement of common stock discussed above. The Company issued the Foster
Group an additional 650,000 shares of common stock pursuant to its anti-dilution
rights. The Company also granted the Foster Group a warrant, for the purchase of
100,000 shares of the Company's common stock at an exercise price of $1.50. The
warrant is exercisable for a three-year period commencing April 28, 1993.

F-20

<PAGE> 125

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY, CONTINUED

At March 31, 1996, outstanding warrants and options to purchase shares of the
Company's common stock were as follows:

<TABLE>
<S> <C>
Warrants issued to investment banker (a) 125,000
Warrants issued in connection with the River Club
Limited Partnership transaction (See Note 9) 75,995
Warrants issued in connection with the Seattle club lease (b) 86,885
Warrants issued to public relations firm (c) 50,000
Warrants issued to former directors and officers (d) 262,500
Warrants issued in connection with the California clubs' acquisition (e) 10,000
Warrants issued to the Foster Group in connection with the anti-dilution
provision, discussed above 100,000
Warrants issued in connection with the Miami club lease (f) 65,000
Consolidated Stock Option Plan (g) 150,500
1994 Stock Option Plan (h) 124,000
1995 Stock Option Plan (i) 1,645,000
Warrants issued to the City of Long Beach (See Note 4) 225,000
---------
Total number of common shares issuable upon exercise of warrants
and stock options 2,919,880
=========
</TABLE>

(a) On December 31, 1988, the Company entered into a letter agreement with
an investment banking firm (the "Firm"), pursuant to which the Company
retained the Firm to assist the Company in its efforts to locate
suitable acquisition opportunities. The Firm failed to locate an
acquisition opportunity for the Company and the Company and the Firm
informally agreed on March 7, 1990 to terminate the agreement. The
Company and the Firm negotiated a settlement with respect to the
investment banking services rendered. Under the terms of the
settlement, the Firm was granted warrants to purchase 100,000 shares
and 25,000 shares of the Company's common stock exercisable for a five
year period commencing May 15, 1991 at an exercise price of $1.00 and
$2.00 per share, respectively.

(b) Under the terms of an amendment to the Seattle club lease, the lessor
and Jillian's - Seattle have agreed that the percentage rental payments
may be made one-third in cash and two-thirds by issuing the lessor
warrants to purchase shares of the Company's common stock in an amount
equal to one share for each dollar of percentage rent owing. The
warrants will be issued on the fifteenth day following the end of each
fiscal year and will be exercisable for a five-year period at an
exercise price equal to the average bid and asked prices of the common
stock for the ten-day period prior to issuance. The warrants issued
under this amendment are as follows:

F-21

<PAGE> 126

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY, CONTINUED

<TABLE>
<CAPTION>
For Fiscal Warrants Exercise
Year Issued Price/Share
---------- -------- -----------
<S> <C> <C> <C>
1992 9,901 $0.97
1993 12,608 0.745
1994 15,637 0.70
1995 20,631 0.45
1996 28,108 0.27
------
86,885
======
</TABLE>

(c) On September 10, 1992, the Company issued to its public relations firm,
for services rendered, a warrant to purchase 50,000 shares of the
Company's common stock for a five-year period commencing at the time of
issuance at an exercise price of $0.50 per share.

(d) The Board of Directors has issued former directors and a former officer
of the company common stock purchase warrants exercisable for a
five-year period from the date of grant. The warrants have various
restrictions and registration rights. The warrants issued are as
follows:

<TABLE>
<CAPTION>
Date Warrants Exercise
Granted Issued Price/Share
------- -------- -----------
<S> <C> <C> <C>
3/23/93 40,000 $0.78
3/31/94 40,000 0.70
1/23/95 40,000 0.656
2/17/95 67,500 0.656
2/17/95 75,000 0.33
-------
262,500
=======
</TABLE>

(e) On August 19, 1993, the Company issued to an unaffiliated broker, for
services rendered in connection with the acquisition of the Pasadena
club and negotiating the City of Long Beach loan, a warrant to purchase
10,000 shares of the Company's common stock for a three-year period,
commencing on the date of issuance, at an exercise price of $1.00 per
share.

(f) On March 7, 1994, under the terms of an amendment to the Miami club
lease, the lessor and the Company have agreed to eliminate all basic
percentage rents due from inception of the lease through the
termination of the lease (including all renewal periods) and delay all
CPI increases until January 1, 1995. The basic percentage rent was 3%
of gross revenues up to $1,000,000 for years 1990 and 1991 of the lease
and 4% thereafter. In exchange for the amendment, the Company issued
the lessor

F-22

<PAGE> 127

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY, CONTINUED

40,000 shares of its common stock and granted the lessor warrants to
purchase 65,000 shares of its common stock at $0.50 per share. The
warrants are exercisable for a five-year period.

(g) On June 28, 1994, the Board of Directors cancelled all options (786,000
shares of the Company's common stock in the aggregate) previously
granted to directors, advisors and key employees under all stock option
plans adopted prior to March 31, 1994. Such plans were replaced with
the Consolidated Stock Option Plan which provided that options to
purchase 786,000 shares of the Company's common stock could be awarded.
On the same date, the Stock Option Committee granted options to
purchase 786,000 shares of the Company's common stock. On December 20,
1994, the Company reduced the exercise price of 520,000 options held by
Mr. Foster and Mr. Troy to $0.25 per share and all such options were
exercised during the fourth quarter of fiscal 1995. As of March 31,
1996, 520,000 of these options were exercised, 150,500 of these options
remained outstanding and 115,500 of these options were surrendered by
the option holder and/or terminated by the Company. The outstanding
options are exercisable at $.656 per share to the extent vested which
is as follows: 1) 132,100 options were exercisable as of March 31,
1996, 2) 9,200 options vest during fiscal 1997 and 3) 9,200 options
vest during fiscal 1998. The outstanding options expire as follows: 1)
5,000 options in fiscal 1998, 2) 5,000 options in fiscal 1999, 3) 5,500
options in fiscal 2000, 4) 32,000 options in fiscal 2001, 5) 30,000
options in fiscal 2002 and 6) 73,000 options in fiscal 2004.

(h) On March 31, 1994, the Board of Directors adopted, subject to
shareholder approval, the 1994 Director, Adviser and Key Employee Stock
Option Plan (the "1994 Plan"). Under the 1994 Plan, options to purchase
804,000 shares of the Company's common stock could be awarded. On the
same date, the Stock Option Committee granted options to the Board of
Directors and to key employees which, in the aggregate, allowed for the
purchase of 774,000 shares of the Company's common stock. The options
were exercisable to the extent vested under the vesting schedule, which
is 100% vested on the date of grant for 660,000 of the options and 50%
on the date of grant and 50% one year thereafter for the remaining
114,000 options. The exercise price was $0.656 per share for 114,000
options and $0.33 for the remaining 660,000 options. On December 20,
1994, the Company reduced the exercise price of 585,000 options held by
Mr. Foster and Mr. Troy to $0.25 per share and all such options were
exercised during the fourth quarter of fiscal 1995. On March 31, 1995,
the Board of Directors granted 20,000 additional options with an
exercise price of $0.45 per share to the outside directors, exclusive
of Mr. Foster; these options were 50% vested upon grant and were fully
vested on March 31, 1996. As of March 31, 1996, 585,000 of

F-23

<PAGE> 128

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY, CONTINUED

these options were exercised, 124,000 options remained outstanding and
85,000 options were surrendered by the option holder and terminated by
the Company. The outstanding options are currently fully vested, of
which 104,000 and 20,000 options are exercisable at $.656 and $.45,
respectively. The outstanding options expire as follows: 1) 104,000
options on March 31, 2004 and 2) 20,000 options on March 31, 2005.

(i) On October 2, 1995, the Board of Directors, adopted a new 1995
Director, Adviser and Key Employee Stock Option Plan (the "1995 Plan").
Under the 1995 Plan, options to purchase 1,650,000 shares of the
Company's common stock can be awarded. In October 1995, the Stock
Option Committee granted options to key employees which, in the
aggregate, allow for the purchase of 1,645,000 shares of the Company's
stock. As of March 31, 1996, 1,645,000 options remained outstanding.
The outstanding options are exercisable at $.40 per share to the extent
vested, which is as follows: 1) 380,000 options were exercisable as of
March 31, 1996, 2) 411,250 options will vest during fiscal 1997, 1998
and 1999 and 3) 31,250 options will vest during fiscal 2000. The
outstanding options expire in October 2005.

8. SETTLEMENT AGREEMENT

Precious Metals Operation

On April 30, 1992, the United States Attorney executed a Settlement Agreement
with the Company concerning certain litigation. The litigation related to the
Company's discontinued precious metals operations that were sold in March 1989
to Advent Technology, Inc. ("Advent") prior to the Company's involvement in the
Jillian's billiard club business.

Under the Settlement Agreement, the Company specifically denied any wrongdoing
but agreed, because the Company may have unknowingly received property subject
to forfeiture, and therefore, desired to prevent the expenditure of monies in
defense of any such claim, that a newly-incorporated subsidiary would deliver to
the government 100,000 shares of the common stock of the Company owned by the
subsidiary and a secured promissory note in the amount of $250,000 payable over
eight years commencing April 30, 1993. The promissory note is secured by the
Company's obligation to issue 200,000 shares of the Company's common stock in
the event of default.

On March 31, 1994, the Company amended the promissory note to provide that the
Company would, starting April 30, 1994, make six monthly payments of $1,000,
followed by six monthly payments of $1,500, followed by twelve monthly payments
of $2,500, followed by twenty-four monthly payments of $3,000, and one final
payment of $127,792 on April 30, 1998.

F-24

<PAGE> 129

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

9. THE RIVER CLUB LIMITED PARTNERSHIP PRIVATE PLACEMENT

On February 4, 1992 (the "closing date"), the Company entered into an agreement
(the "Agreement") and two $100,000 promissory notes with the River Club Limited
Partnership ("River Club"). Pursuant to the Agreement, River Club delivered to
the Company $325,000 in exchange for 311,377 shares of the Company's common
stock. The offering of the common stock issued to River Club was registered
pursuant to a registration statement which became effective April 14, 1993.
Additionally, under the Agreement the Company has granted River Club 75,995
common stock purchase warrants (which includes warrants issued pursuant to an
anti-dilution provision) exercisable for five years from the closing date at
$1.50 per share. The promissory notes were four-year convertible notes accruing
interest at a rate of 12.5% per annum.

On January 1, 1993 and October 1, 1994 the River Club converted each of the
promissory notes for a 10% interest in each of the limited partnerships which
own the Cleveland Heights club and the Champaign club, respectively. After River
Club holds the limited partnerships' equity for a four year period, it can
exchange its equity interest in the limited partnership for the Company's common
stock. The number of shares issuable by the Company in the exchange will equal
River Club's percentage of the limited partnerships' cash flow times five
divided by the average bid and asked prices of the Company stock for the last
ten trading days before the exchange.

10. ACQUISITION OF PASADENA CLUB

On August 19, 1993, the Company, through Jillian's Billiard Club of Pasadena,
Inc., a wholly-owned California corporation ("Jillian's-Pasadena"), entered into
a series of related agreements with an unrelated third-party to acquire all the
assets of an existing billiard club/diner located in the downtown business
district of Pasadena, California. The Pasadena club contains approximately 7,200
square feet of space on two floors. The ground floor is approximately 1,400
square feet, which is operated as a diner with additional outside seating. The
downstairs space is approximately 5,800 square feet and is operated as a
billiard club with 16 Brunswick billiard tables. The Pasadena club also has a
bar and food service. The assets acquired were (a) all assets located at the
billiard club/diner, which includes all leasehold improvements, furniture,
fixtures, bar and kitchen equipment, billiard tables and related items, (b) all
of the seller's rights, title and interest as lessee under the leases of the
premises, and (c) all alcoholic beverage licenses and other licenses and permits
necessary or useful for the operation of the billiard club/diner.

Jillian's-Pasadena paid $150,000 in cash and delivered a $275,000 note payable
for the assets. The note bears interest at the rate of 8% per annum.
Jillian's-Pasadena will pay interest monthly with all principal and any unpaid
interest due three years from the closing date. (See Note 4). The obligations of
Jillian's-Pasadena under the note are guaranteed by the Company.

F-25

<PAGE> 130

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

11. MINORITY INTERESTS

In order to partially finance the costs of renovating and equipping the
Jillian's billiard clubs located in Cleveland Heights, Worcester, Champaign and
Annapolis, the Company sold limited partnership interests in limited
partnerships that own those clubs. The Company sold 13%, 75%, 57% and 21% of the
partnership interests in the partnerships that own the billiard clubs in
Cleveland Heights, Worcester, Champaign and Annapolis, respectively.
Wholly-owned subsidiaries of the Company own the remaining interests. Each of
the limited partnership agreements for the partnerships allows the limited
partners, after a certain date (the "Put Date"), to require the Company to
repurchase their limited partnership interests.

The purchase price is a multiple (ranging from four to five) times the limited
partner's allocable share of the limited partnership's net income for the twelve
month period preceding the Put Date. The limited partners will receive part of
their purchase price in the form of the Company's common stock and the balance
in cash. The limited partners also will have the right for a certain period of
time after receipt of the common stock to require that the Company register its
shares of common stock for sale to the public. The Company receives a fee from
each limited partnership for managing the related club and the partnership,
ranging from 5% to 6.5% of the gross revenues of the club.

JILLIAN'S BILLIARD CLUB OF CLEVELAND HEIGHTS, LTD.

The Cleveland Heights, Ohio club is owned by Jillian's Billiard Club of
Cleveland Heights Limited Partnership, an Ohio limited partnership, in which a
wholly-owned subsidiary of Jillian's, Inc. (Jillian's Billiard Club of Cleveland
Heights, Inc., a Delaware corporation) is the general partner and owns an 87%
interest. The remaining 13% of the limited partnership interest was sold for
$122,500.

A 3% limited partner will have the option to sell its three units to the
Company, the parent corporation of the general partner, during the sixty day
period after the transmittal to limited partners of the financial statements for
the partnership for the twelve months ending December 31, 1995. The Company has
agreed to purchase such units at a price equal to the greater of (a) the price
paid by a limited partner for units, ($22,500) or (b) 500% of the "Adjusted Net
Income" of the partnership for the twelve months ending December 31, 1995,
multiplied by a fraction representing the percentage interest in partnership
profits and losses of the units to be sold by the partner to the Company.
Adjusted Net Income is the net income of the Partnership determined in
accordance with general accounting principles, plus any depreciation taken by
the partnership in determining net income.

A 10% limited partner will have the option to sell its interest to the Company
any time after January 1, 1997. The Company has agreed to purchase the 10%
interest at a price equal to

F-26

<PAGE> 131

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

11. MINORITY INTERESTS, CONTINUED

500% of the annualized cash flow of Jillian's Billiard Club of Cleveland
Heights, Ltd, times 10%. The full purchase price is to be paid in common stock
of the Company and such common stock will be valued based on the average of the
bid and asked prices, for the ten trading days immediately prior to the limited
partner exercising its option to sell its interest.

The Company's ability to fulfill its obligations and the future value of the
Company's common stock is dependent on the success of the Company's business.
There is no assurance that the Company will be able to fulfill its obligations
to the partnership or to the limited partners, including its obligations under
its guarantee to the limited partners, and there can be no assurance that the
Company's common stock will have value in the event the limited partners
exercise their options to sell their units to the Company in exchange for the
Company's common stock.

JILLIAN'S BILLIARD CLUB OF WORCESTER, LTD.

The Worcester, Massachusetts club is owned by Jillian's Billiard Club of
Worcester Limited Partnership, a Massachusetts limited partnership, in which a
wholly-owned subsidiary of Jillian's, Inc. (Jillian's Billiard Club of
Worcester, Inc., a Massachusetts corporation) is the general partner and owns a
25% interest. The remaining 75% of the limited partnership interest was sold for
$850,000.

The limited partners will have the option to sell their units to the Company
during the sixty day period after the transmittal to limited partners of the
financial statements of the partnership for the twelve months ending December
31, 1998. If a limited partner exercises its option, the purchase price for the
units will be paid partly in cash (50% of the purchase price) and partly in
common stock of the Company (50% of the purchase price), with the stock to be
valued at 80% of its market price. Assuming all limited partners elect to sell
their units, the purchase price is five times 75% of the net profits of the
partnership for the twelve months ending December 31, 1998, determined in
accordance with generally accepted accounting principles, with a maximum
purchase price equal to 200% of the price paid by the limited partners for their
units. The Company has agreed to provide a right to the limited partners, for a
limited time, to register the Company's common stock for sale to the public. The
Company has guaranteed that owners of the units will receive distributions from
the partnership equal to 8% per annum of their investment in the partnership
from the close of escrow in connection with the sale of units until the sooner
of the opening of the partnership's club or November 30, 1993, and 15% per annum
of their investment in the partnership thereafter.

F-27

<PAGE> 132

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

11. MINORITY INTERESTS, CONTINUED

The Company's ability to fulfill its obligations and the future value of the
Company's common stock is dependent on the success of the Company's business.
There is no assurance that the Company will be able to fulfill its obligations
to the partnership or to the limited partners, including its obligations under
its guarantee to the limited partners, and there can be no assurance that the
Company's common stock will have value in the event the limited partners
exercise their option to sell their units to the Company in exchange for the
Company's common stock.

JILLIAN'S BILLIARD CLUB OF CHAMPAIGN-URBANA, LTD.

The Champaign-Urbana, Illinois club is owned by Jillian's Billiard Club of
Champaign-Urbana Limited Partnership, an Illinois limited partnership, in which
a wholly-owned subsidiary of Jillian's, Inc. (Jillian's Billiard Club of
Champaign-Urbana, Inc., an Illinois corporation) is the general partner and owns
a 43% interest. The remaining 57% of the limited partnership interest was sold
for $325,000.

Limited partners, owning a 47% interest in the partnership, will have the
option to sell their units to the Company, the parent corporation of the
general partner, during the sixty day period after the transmittal to limited
partners of the financial statements for the partnership for the twelve months
ending December 31, 1996. If a limited partner exercises its option, the
purchase price for the units will be partly in cash (15% of the purchase
price) and partly in common stock of the Company (85% of the purchase price).
Assuming all limited partners elect to sell their units, the purchase price
would be five times 50% of the net income of the partnership multiplied by
their respective limited partnership interest, for the twelve months ending
December 31, 1996, determined in accordance with general accounting principles.
The Company has agreed to provide a right to the limited partners for a limited
time to register the Company's stock for sale to the public.

A 10% limited partner will have the option to sell its interest to the Company,
the parent of the general partner, anytime after October 1, 1998. The Company
has agreed to purchase the 10% interest at a price equal to 500% of the
annualized cash flow of Jillian's Billiard Club of Champaign-Urbana, Ltd. times
10%. The full purchase price is to be paid in common stock of the Company and
such common stock will be valued based on the average bid and asked prices for
the ten trading days immediately prior to the limited partner exercising its
option to sell its interest. The limited partner does not have a demand
registration right.

If the limited partners do not exercise their right to sell, the Company has
guaranteed that owners of the units will receive distributions from the
partnership

F-28

<PAGE> 133

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

11. MINORITY INTERESTS, CONTINUED

equal to 140% of their investment over a six year period. The guarantee period
will commence at the beginning of the first calendar quarter after the closing
of the sale of units.

The Company's ability to fulfill its obligations and the future value of the
Company's common stock is dependent on the success of the Company's business.
There is no assurance that the Company will be able to fulfill its obligations
to the partnership or to the limited partners, including its obligations under
its guarantee to the limited partners, and there can be no assurance that the
Company's common stock will have value in the event the limited partners
exercise their option to sell their units to the Company in exchange for the
Company's common stock.

JILLIAN'S BILLIARD CLUB OF ANNAPOLIS, LTD.

The Annapolis, Maryland club is owned by Jillian's Billiard Club of Annapolis
Limited Partnership, a Maryland limited partnership, in which a wholly-owned
subsidiary of Jillian's, Inc. (Jillian's Billiard Club of Annapolis, Inc., a
Maryland corporation) is the general partner and owns a 79% interest. The
remaining 21% of the limited partnership interest was sold for $133,084. The
limited partners will have the option to sell their units to the Company, the
parent corporation of the general partner, during the sixty day period after the
transmittal to limited partners of the financial statements for the partnership
for the twelve months ending December 31, 1997. If a limited partner exercises
its option, the purchase price for the units will be partly in cash (15% of the
purchase price) and partly in common stock of the Company (85% of the purchase
price). Assuming all limited partners elect to sell their units, the purchase
price would be four times 50% of the net income of the partnership multiplied
by their respective limited partnership interest, for the twelve months ending
December 31, 1997, determined in accordance with generally accepted accounting
principles, with the maximum price being an amount equal to 100% of the
investment of the limited partners in this offering. The Company has agreed to
provide a right to the limited partners, for a limited time, to register the
Company's common stock for sale to the public.

If the limited partners do not exercise their right to sell, the Company has
guaranteed that owners of the units will receive distributions from the
partnership equal to 140% of their investment over a six year period. The
guarantee period will commence at the beginning of the first calendar quarter
after the closing of the sale of units.

F-29

<PAGE> 134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

11. MINORITY INTERESTS, CONTINUED

limited partners, including its obligations under its guarantee to the limited
partners, and there can be no assurance that the Company's common stock will
have value in the event the limited partners exercise their options to sell
their units to the Company in exchange for the Company's common stock.

The following is a summary of the limited partnerships terms:

<TABLE>
<CAPTION>
Minimum Percent of
Original Annual Purchase Purchase Price
Investment by Return Put Price Payable in Cash/
Limited Partners Guaranteed Date Multiple Common Stock
---------------- ---------- ---- -------- ------------

<S> <C> <C> <C> <C> <C>
Cleveland Heights $ 22,500 0 12/31/95 5(a) 100%/0%
Cleveland Heights 100,000 0 1/01/97 5 0%/100%
Worcester 850,000 15%(b) 12/31/98 5 50%/50%
Champaign 325,000 23.33%(c) 12/31/96 5 15%/85%
Champaign 100,000 0 10/01/98 5 0%/100%
Annapolis 133,084 23.33%(c) 12/31/97 4 15%/85%
</TABLE>

- ----------------
(a) Minimum return of original investment.
(b) Minimum annual return guaranteed until put date.
(c) Minimum annual return guaranteed over a six-year period, assuming
partners do not exercise their right to sell.

The minority interest at March 31, 1996 consisted of the following:

<TABLE>
<CAPTION>
1996
----
<S> <C>
Cleveland Heights Limited Partnership $ 113,532
Worcester Limited Partnership 632,930
Champaign Limited Partnership 446,974
Annapolis Limited Partnership 202,528
----------
Total $1,395,964
==========
</TABLE>

F-30

<PAGE> 135

PRELIMINARY COPY

JILLIAN'S ENTERTAINMENT CORPORATION

PROXY FOR SPECIAL MEETING OF SHAREHOLDERS

_____________, 1996

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.

The undersigned hereby appoints Steven L. Foster and Daniel M.
Smith, and each of them as proxies, with full power of substitution in each, to
represent and to vote all shares of common stock, par value $.001 per share
(the "Common Stock") of Jillian's Entertainment Corporation (the "Company")
which the undersigned would be entitled to vote, as fully as the undersigned
could vote and act if personally present, at the Special Meeting of
Shareholders to be held on ___________, 1996, at __:__ _.m., Eastern Time, and
all adjournments thereof, upon all matters set forth in the Notice of Special
Meeting of Shareholders and Proxy Statement, dated __________, 1996, a copy of
which has been received by the undersigned, as follows:

1. To approve a merger (the "Merger") by and between the Company
and Jillian's Entertainment Corporation, a recently formed
Delaware corporation ("Newco"), pursuant to which, among other
matters (a) the Company will be merged with and into Newco,
and Newco will be the surviving entity, and (b) each share of
Common Stock owned immediately prior to consummation of the
Merger by any Shareholder that holds of record less than
101,000 shares of Common Stock and any Shareholder that holds
of record at least 101,000 shares of Common Stock, at such
Shareholder's election, will be converted into the right to
receive cash of $0.50, without interest, other than certain
employees of the Company and certain brokers or dealers.

/ / For / / Against / / Abstain

2. GRANT AUTHORITY to vote upon such other matters as may
properly come before the Special Meeting as Steven L. Foster
and Daniel M. Smith determine are in the best interest of the
Company.

/ / For / / Against / / Abstain

The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders and the Proxy Statement. Any proxy heretofore given to
vote said Common Stock is hereby revoked. The undersigned hereby ratify and
confirm all that said proxy or any of their substitutes may lawfully do by
virtue hereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH OF THE MATTERS STATED.
<PAGE> 136
Please complete, date and sign your name(s) as it appear(s) to the
left and return in the enclosed envelope. If acting as an executor,
administrator, trustee, guardian, etc., you should so indicate when signing.
If the signer is a corporation, please sign the full corporate name, by a duly
authorized officer. If Common Stock is held jointly, each Shareholder named
should sign.

Date: , 1996
----------------

<TABLE>
<S> <C>
Name Signature
-------------------------- --------------------------

Name Signature
-------------------------- --------------------------
</TABLE>

<PAGE> 1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors of
Jillian's Entertainment Corporation
Boston, Massachusetts

We hereby consent to the use in Jillian's Entertainment Corporation's
Rule 13E-3 Transaction Statement on Schedule 13E-3, as amended, of our report
dated July 2, 1996 relating to the Jillian's Entertainment Corporation
consolidated balance sheet as of March 31, 1996 and the consolidated statements
of operations, shareholders' equity and cash flows for the year then ended.

/s/ BDO Seidman, LLP

BDO Seidman, LLP

Boston, Massachusetts
August 1, 1996