BIG BUCK BREWERY & STEAKHOUSE INC, 10KSB, 1998-03-23

BIG BUCK BREWERY & STEAKHOUSE INC
10KSB, 1998-03-23
EATING & DRINKING PLACES

Previous: COMPOST AMERICA HOLDING CO INC, 10QSB, 1998-03-23

Next: CNS BANCORP INC, DEF 14A, 1998-03-23

<PAGE>

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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

FORM 10-KSB

/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997

/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

COMMISSION FILE NUMBER 0-20845

BIG BUCK BREWERY & STEAKHOUSE, INC.
(Name of Small Business Issuer in Its Charter)

MICHIGAN 38-3196031
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

550 SOUTH WISCONSIN STREET, GAYLORD, MICHIGAN 49735
(Address of Principal Executive Offices, including Zip Code)

(517) 731-0401
(Issuer's Telephone Number, including Area Code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

COMMON STOCK ($.01 PAR VALUE)
(Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/

The issuer's revenues for its most recent fiscal year were $9,096,580.

The aggregate market value of the voting stock held by non-affiliates of
the issuer as of March 9, 1998 was approximately $15,897,066.

The number of shares of the common stock of the issuer outstanding as of
March 9, 1998 was 5,285,000.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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

<PAGE>

TABLE OF CONTENTS

PAGE
----
<S> <C>
CAUTIONARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

ITEM 1 DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . .8
ITEM 2 DESCRIPTION OF PROPERTY. . . . . . . . . . . . . . . . . 14
ITEM 3 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . 15
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . 15

PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . 18
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . 22
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . 34

PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT . . . 35
ITEM 10 EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 37
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 38
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 39
ITEM 13 EXHIBITS, LIST AND REPORTS ON FORM 8-K . . . . . . . . . 39

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
INDEX TO EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>

i
<PAGE>

CAUTIONARY STATEMENT

BIG BUCK BREWERY & STEAKHOUSE, INC. (THE "COMPANY"), OR PERSONS ACTING ON
BEHALF OF THE COMPANY, OR OUTSIDE REVIEWERS RETAINED BY THE COMPANY MAKING
STATEMENTS ON BEHALF OF THE COMPANY, OR UNDERWRITERS OF THE COMPANY'S
SECURITIES, FROM TIME TO TIME, MAY MAKE, IN WRITING OR ORALLY, "FORWARD-LOOKING
STATEMENTS" AS DEFINED UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 (THE "LITIGATION REFORM ACT"). THIS CAUTIONARY STATEMENT, WHEN USED IN
CONJUNCTION WITH AN IDENTIFIED FORWARD-LOOKING STATEMENT, IS FOR THE PURPOSE OF
QUALIFYING FOR THE "SAFE HARBOR" PROVISIONS OF THE LITIGATION REFORM ACT AND IS
INTENDED TO BE A READILY AVAILABLE WRITTEN DOCUMENT THAT CONTAINS FACTORS WHICH
COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS.
THESE FACTORS ARE IN ADDITION TO ANY OTHER CAUTIONARY STATEMENTS, WRITTEN OR
ORAL, WHICH MAY BE MADE, OR REFERRED TO, IN CONNECTION WITH ANY SUCH
FORWARD-LOOKING STATEMENT.

THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON
THE BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR
PROSPECTS, FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY
STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE
DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT
OR STATEMENTS.

LACK OF PROFITABILITY; LACK OF OPERATING HISTORY

The Company had a net loss of $1,039,520 during the fiscal year ended
December 28, 1997 ("1997") and a net loss of $703,592 during the fiscal year
ended December 29, 1996 ("1996"). The Company had working capital of
$255,296 at December 28, 1997 and working capital of $4,574,454 at December
29, 1996. The Company has opened Big Buck Brewery & Steakhouses-SM- (each a
"Unit") in Gaylord, Michigan (May 1995), Grand Rapids, Michigan (March 1997)
and Auburn Hills, Michigan (October 1997). Prior to the opening of the
Gaylord Unit, the Company had no operations or revenues. Accordingly, the
Company's operations are subject to all of the risks inherent in the
establishment of a new business enterprise, including the lack of operating
history. The likelihood of success of the Company must be considered in
light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with the establishment of a business.
There can be no assurance that future operations of any Unit will be
profitable. Future revenues and profits, if any, will depend upon various
factors, including the quality of restaurant operations, the acceptance of
the Company's beer and general economic conditions. In general, restaurants
experience a decline in revenue growth or in actual revenues following a
period of excitement which accompanies their opening. There is no assurance
that the Company can operate profitably or that it will successfully
implement its plans to open additional Units, in which case the Company will
continue to depend on the revenues of the Gaylord, Grand Rapids and Auburn
Hills Units.

DEVELOPMENT OF FUTURE UNITS; EXPANSION PLAN RISKS

The total cost of developing, constructing and opening the Gaylord Unit was
approximately $5.8 million, including approximately $3.1 million for design and
construction, $1.3 million for equipment, furniture and fixtures relating to the
restaurant, $1.0 million for brewing and bottling equipment, and $400,000 for
land. The Company purchased an existing structure for the Grand Rapids Unit.
The total cost of the land, building, remodeling, equipment, furniture and
fixtures for the Grand Rapids Unit was approximately $3.2 million. The total
cost of developing, constructing and opening the Auburn Hills Unit was
approximately $9.7 million. Management believes that each new Unit will be of a
building style and size suitable to its location. Accordingly, the Company has
not developed a standardized layout.

The Company plans to develop and open additional Units and it will need to
obtain additional financing to carry out such expansion plans. The amount of
financing required for such expansion depends on the definitive locations, site
conditions, construction costs and size and type of Units to be built. There
can be no assurance that financing will be available on terms acceptable or
favorable to the Company, or at all. Without such financing, the Company's
development plans will be slower than planned or even unachievable.

<PAGE>

Successful expansion of the Company's operations will be largely dependent
upon a variety of factors, some of which are currently unknown or beyond the
Company's control, including customer acceptance of Big Buck Brewery &
Steakhouses and Big Buck Beer-Registered Trademark-; the ability of the
Company's management to identify suitable sites and to negotiate purchases of
and financing for such sites; timely and economic development and construction
of Units; timely approval from local governmental authorities; the hiring of
skilled management and other personnel; the ability of the Company's management
to apply its policies and procedures to a larger number of Units; the
availability of adequate financing; the general ability to successfully manage
growth; and the general state of the economy. There can be no assurance that
the Company will be able to open new Units.

The Company's strategy includes operating a brewery at each Unit.
Successful operation of separate breweries will require the Company to overcome
various organizational challenges such as increasing and maintaining production
and establishing and maintaining quality control over numerous geographically
separated Units. In attempting to expand beer distribution, the Company will be
required to establish and manage relationships with wholesale distributors,
retailers and consumers in new markets. The Company is the sole promoter of
sales of its beer in new markets. Consumer tastes and preferences may vary from
market to market. There can be no assurance that the Company will be successful
in entering new markets.

NEED FOR FINANCING

The Company's ability to execute its business strategy depends on its
ability to obtain substantial financing for the development of additional Units.
The Company anticipates that future development and expansion will be financed
through real estate sales and leasebacks, the public or private sale of equity
or debt securities, capital leases and credit facilities. There can be no
assurance that any additional funds will be available or that such funds, if
available, will be on terms acceptable to the Company or its shareholders. New
investors may seek and obtain substantially better terms than those available to
investors purchasing shares of Common Stock on the open market and the Company's
issuance of securities in the future may result in substantial dilution.

STATE LAWS MAY LIMIT GROWTH

The Company is licensed under Michigan law as a "microbrewery." A
microbrewery in Michigan is limited to the production of not more than 30,000
barrels of beer per year by all breweries owned or controlled by the same
person, whether within or outside Michigan. Without a change in current law,
the Company will limit its sales of beer off-site so as to reserve its brewing
capacity for sales of beer on-site, which provide the Company higher margins,
but do not reach the same customer base. There can be no assurance that
legislation raising the barrelage ceiling will pass, that any such legislation
will pass in a form which would facilitate the Company's expansion plans, or
that if such legislation is not passed, the Company will be able to become
licensed to brew in excess of 30,000 barrels of beer per year.

RISKS RELATED TO SALE/LEASEBACKS

In April 1997, the Company sold the Grand Rapids site, including all
improvements thereto, to an unrelated third party pursuant to a real estate
purchase and leaseback agreement for $1.4 million. Pursuant to a separate lease
agreement, the Company leases the Grand Rapids site at a minimum annual base
rent of $140,000 and a maximum annual base rent of $192,500 over a ten-year
term. The lease may be extended at the option of the Company for two additional
five-year terms. In addition to the annual base rent, the Company is obligated
to pay an annual percentage rent in the amount of 5% on gross sales at the site
in excess of $2.9 million per year. In the event that such annual gross sales
do not exceed $2.9 million for any two consecutive years during the lease term,
the Company will be obligated to repurchase the Grand Rapids site for $1.4
million, plus $70,000 for each lease year on a pro rata basis. The Company has
the option to purchase the property from the lessor after the seventh full lease
year for $1.4 million, plus $70,000 for each lease year on a pro rata basis.
The lessor has the option to require the Company to purchase the property after
the seventh full lease year at the same price.

2
<PAGE>

In August 1997, the Company entered into a real estate purchase and
leaseback agreement providing for the sale of the Auburn Hills site, including
all improvements thereto, to an unrelated third party, Michael G. Eyde, for $4.0
million. In connection with this transaction, the Company granted a five-year
stock option, exercisable at $5.00 per share, for 50,000 shares of its Common
Stock to Mr. Eyde. The Company leases the Auburn Hills site pursuant to a
separate lease agreement which provides for a minimum annual base rent of
$400,000, and a maximum annual base rent of $550,000. The lease has a 25-year
term and the Company is able to extend such term for two additional ten-year
terms. In addition to the annual base rent, the Company is obligated to pay an
annual percentage rent of 5.25% of gross sales at the site in excess of $8.0
million per year. In the event that such annual gross sales do not exceed $8.0
million for any two consecutive years during the lease term, the Company will be
obligated to repurchase the Auburn Hills site for $4.0 million, plus $200,000
for each lease year on a pro rata basis. The lessor has the ability to require
that the Company issue Common Stock (valued at $5.00 per share) in payment of
such repurchase price. The Company has the option to purchase the property from
the lessor after the seventh full lease year for $4.0 million, plus $200,000 for
each lease year on a pro rata basis. Independent of annual gross sales, the
lessor has the option to require the Company to purchase the property before the
third full lease year at the same price.

The Grand Rapids and Auburn Hills lessors may terminate in the event of a
default which is not cured within the applicable grace period. A default is
defined as (i) the Company's failure to make a rental payment within 30 days
after receipt of written notice that a payment is past due or (ii) the Company's
failure to perform its obligations under the lease (other than rent payments)
within 30 days after written notice of a curable violation, provided, however
that if such default cannot be cured within the 30-day period, a default will be
deemed to have occurred only if the Company has failed to commence a cure within
such 30-day period.

Annual percentage rent is required whether the Units are profitable or not.
In the event that the Company is required to pay annual percentage rent, the
funds available to the Company for working capital and development plans will be
reduced. In the event that annual percentage rent is not required over two
consecutive years, the Company may be forced to repurchase such sites at a
premium over their respective sale prices. There can be no assurance that the
Company will have sufficient funds to repurchase the Grand Rapids site or the
Auburn Hills site. In the event of a default and termination of either lease,
the Company would be unable to continue to operate the related Unit, which could
have a material adverse impact on the Company's operating results.

COMPETITION; CERTAIN FACTORS AFFECTING THE RESTAURANT AND BREWING INDUSTRIES

The restaurant industry is highly competitive with respect to price,
service, food quality (including taste, freshness, and nutritional value) and
location. New restaurants have a high failure rate. The restaurant industry is
also generally affected by changes in consumer preferences, national, regional
and local economic conditions, and demographic trends. The performance of
individual restaurants may also be affected by factors such as traffic patterns,
demographic considerations, and the type, number and location of competing
restaurants. In addition, factors such as inflation, increased food, labor and
employee benefit costs, and the lack of availability of experienced management
and hourly employees may also adversely affect the restaurant industry in
general and the Company's restaurants in particular. Restaurant operating costs
are further affected by increases in the minimum hourly wage, unemployment tax
rates and similar matters over which the Company has no control. There are
numerous well-established competitors, including national, regional and local
restaurant chains, possessing substantially greater financial, marketing,
personnel and other resources than the Company. The Company also competes with
a large variety of locally owned restaurants, diners and other establishments
that offer moderately priced food to the public and with other
microbrewery/restaurants in a highly competitive and developing microbrewery and
brewpub restaurant market. Other restaurants and companies could utilize the
Big Buck Brewery & Steakhouse format or a related format. There can be no
assurance that the Company will be able to respond to various competitive
factors affecting the restaurant industry.

3
<PAGE>

The domestic beer market is highly competitive due to the enormous
advertising and marketing expenditures by national and major regional brewers;
the continuing proliferation of microbreweries, regional craft breweries,
brewpubs and other small craftbrewers; the introduction of fuller-flavored
products by certain major national brewers; and a general surplus of domestic
brewing capacity, which facilitates existing contract brewer expansion and the
entry of new contract brewers. Although domestic demand for craftbrewed beers
has increased dramatically over the past decade, there can be no assurance that
this demand will continue. The Company anticipates intensifying competition in
the craftbrewed and fuller-flavored beer markets. Most of the Company's brewing
competitors possess marketing, financial, personnel and other resources
substantially greater than those of the Company, and there can be no assurance
that the Company will be able to succeed against intensified competition in the
craftbrewed and fuller-flavored beer markets.

BREWERY OPERATING HAZARDS

The Company's brewing operations are subject to certain hazards and
liability risks faced by all brewers, such as potential contamination of
ingredients or products by bacteria or other external agents that may be
wrongfully or accidentally introduced into products or packaging. The Company's
products are not pasteurized. While the Company has never experienced a
contamination problem in its products, the occurrence of such a problem could
result in a costly product recall and serious damage to the Company's reputation
for product quality. The Company's operations are also subject to certain
injury and liability risks normally associated with the operation and possible
malfunction of brewing and other equipment. Although the Company maintains
insurance against certain risks under various general liability and product
liability insurance policies, there can be no assurance that the Company's
insurance will be adequate.

BEER AND LIQUOR REGULATION

A significant percentage of the Company's revenue is derived from beer
sales. On-site sales of beer accounted for 20.6% of revenues and off-site sales
of beer accounted for an additional 3.2% of revenues during 1997. The Company
must comply with federal licensing requirements imposed by the Bureau of
Alcohol, Tobacco and Firearms of the United States Department of Treasury, as
well as the licensing requirements of states and municipalities where its Units
are or will be located. Failure to comply with federal, state or local
regulations could cause the Company's licenses to be revoked and force it to
cease the brewing and/or sale of its beer. Typically, licenses must be renewed
annually and may be revoked or suspended for cause at any time. Additionally,
state liquor laws may prevent or impede the expansion of the Company into
certain markets. While the Company has not experienced and does not anticipate
any significant problems in obtaining required licenses, permits or approvals,
any difficulties, delays or failures in obtaining such required licenses,
permits or approvals could delay or prevent the opening of a Unit in a
particular area. In addition, changes in legislation, regulations or
administrative interpretations of liquor laws after the opening of a Unit in a
jurisdiction may prevent or hinder the Company's expansion or operations in that
jurisdiction or increase operating costs.

RESTAURANT REGULATION

The restaurant industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and to building and zoning requirements. The Company is subject to
regulation by air and water pollution control divisions of the Environmental
Protection Agency of the United States and by certain states and municipalities
in which its Units are or will be located. The Company is also subject to laws
governing its relationship with employees, including minimum wage requirements,
overtime, working and safety conditions and citizenship requirements.
Restaurant operating costs are affected by increases in the minimum hourly wage,
unemployment tax rates, sales taxes and similar matters, such as any government
mandated health insurance, over which the Company has no control.

4
<PAGE>

The Company is subject to "dram-shop" laws in Michigan and will be subject
to such statutes in other states into which it expands. These laws generally
provide someone injured by an intoxicated person the right to recover damages
from the establishment which wrongfully served alcoholic beverages to such
person. The Company carries liquor liability coverage as part of its existing
comprehensive general liability insurance. However, a judgment against the
Company under a dram-shop statute in excess of the Company's liability coverage
could have a material adverse effect on the Company.

TAXES; SMALL BREWER'S EXCISE TAX CREDIT

The federal government currently imposes an excise tax of $18.00 on each
barrel of beer produced for domestic consumption in the United States. However,
each brewer with production under 2,000,000 barrels per year is granted a small
brewer's excise tax credit in the amount of $11.00 per barrel on its first
60,000 barrels produced annually. No assurance can be given that the federal
government will not reduce or eliminate this credit. To the extent Company-wide
production increases to amounts over 60,000 barrels per year, there will be an
increase in the average federal excise tax rate of the Company.

Michigan currently imposes an excise tax of $6.30 per barrel on each barrel
of beer sold in Michigan. However, each brewer which is a "microbrewery" under
Michigan law (presently with production of not more than 30,000 barrels per
year) is granted a microbrewer's excise tax credit in the amount of $2.00 per
barrel. To the extent Company-wide production increases to amounts over 30,000
barrels per year, there will be an increase in the average Michigan excise tax
rate of the Company.

Other states and municipalities into which the Company may expand also
impose excise or other taxes or special charges on alcoholic beverages in
varying amounts, which amounts are subject to change. It is possible that in
the future the rate of excise taxation could be increased by either the federal
or state governments, or both. Increased excise taxes on alcoholic beverages
have been considered by the United States Congress as an additional source of
tax revenue in connection with various proposals and could be included in future
legislation. Future increases in excise taxes on alcoholic beverages, if
enacted, could adversely affect the Company.

DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL

The Company's future success will depend in large part upon the continued
service of its key management personnel including William F. Rolinski, Gary J.
Hewett and Anthony P. Dombrowski. Given the Company's limited operating
history, the Company is dependent on its ability to identify, hire, train and
motivate qualified personnel necessary to enable it to continue operations. The
Company does not have key person life insurance policies on any of its
employees. The departure of key employees could have a material adverse effect
on the Company's business. The Company's success will also be dependent upon
its ability to attract and retain qualified people, including additional
management personnel. No assurance can be given that the Company's current
employees will continue to work for the Company or that the Company will be able
to obtain the services of additional personnel necessary for the Company's
growth. To date, the Company has not entered into any employment agreements
with its personnel.

NO ASSURANCE AS TO LIQUIDITY ON THE NASDAQ SMALLCAP MARKET

The Company's Common Stock, Class A Warrants and units (each consisting of
one share of Common Stock and one Class A Warrant) are currently listed on the
Nasdaq SmallCap Market. There can be no assurance that an active public market
will develop or be sustained for the Company's securities. In addition, if the
Company's securities do not continue to trade on the Nasdaq SmallCap Market, the
securities would become subject to certain rules of the Securities and Exchange
Commission (the "Commission") relating to "penny stocks." Such rules require
broker-dealers to make a suitability determination for purchasers and to receive
the purchaser's prior written consent for a purchase transaction, thus
restricting the ability to purchase or sell the securities in the open market.

5
<PAGE>

POSSIBLE REDEMPTION OF WARRANTS

The Class A Warrants are subject to redemption at any time by the Company
at $0.01 per warrant, on 30 days prior written notice, if the high closing bid
price of the Common Stock exceeds $9.00 per share (subject to adjustment) for 20
consecutive trading days. If the Class A Warrants are redeemed, warrantholders
will lose their right to exercise the Class A Warrants except during such 30-day
redemption period. Redemption of the Class A Warrants could force the holders
to exercise the Class A Warrants at a time when it may be disadvantageous for
the holders to do so or to sell the Class A Warrants at the then market price or
accept the redemption price of $0.01 per warrant.

CONTROL BY MANAGEMENT

As of March 1, 1998, the current officers and directors of the Company
beneficially owned approximately 43.9% of the outstanding Common Stock.
Assuming the exercise of all Class A Warrants, the current officers and
directors of the Company would have beneficially owned approximately 29.8% of
the outstanding Common Stock. Accordingly, such persons can exert substantial
influence over the composition of the Company's Board of Directors and
generally direct the affairs of the Company and may have the power to control
the outcome of shareholder approvals of business acquisitions, mergers and
combinations and other actions.

SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS

The Company's sales and earnings are expected to fluctuate based on
seasonal patterns. The Company anticipates that its highest earnings will occur
in the second and third calendar quarters due to the milder climate during those
quarters in Michigan. In addition, quarterly results in the future are likely
to be substantially affected by the timing of new Unit openings. Because of the
seasonality of the Company's business and the impact of new Unit openings,
results for any quarter are not necessarily indicative of the results for a full
fiscal year.

MICHIGAN ANTI-TAKEOVER LAWS

The Company is subject to Michigan statutes regulating business
combinations and restricting voting rights of certain persons acquiring shares
of Common Stock which may hinder or delay a change in control of the Company.

VOLATILITY OF MARKET PRICE OF COMMON STOCK

The market price of the Company's Common Stock has been subject to
significant fluctuations in response to numerous factors, including variations
in the annual or quarterly financial results of the Company or its competitors,
changes by financial research analysts in their estimates of the earnings of the
Company or its competitors, conditions in the economy in general or in the
brewing industry in particular, unfavorable publicity or changes in applicable
laws and regulations (or judicial or administrative interpretations thereof)
affecting the Company or the brewing industry. During 1997, the Company's
Common Stock ranged from a high of $7.25 on October 22, 1997, to a low of $1.75
on March 24, 1997. There can be no assurance that purchasers of shares of
Common Stock will be able to sell their shares at or above the prices at which
they were purchased.

IMPACT OF SALE OF SECURITIES; SECURITIES ELIGIBLE FOR FUTURE SALE

The Company had 5,285,000 shares of Common Stock outstanding as of March 1,
1998, and had warrants and stock options outstanding to purchase an additional
3,578,500 shares of Common Stock, exercisable at prices ranging from $2.00 to
$8.00 per share. The sale of shares of Common Stock which may become eligible
for sale in the public market from time to time upon the exercise of warrants
and stock options could have the effect of depressing the market price of the
Company's Common Stock.

6
<PAGE>

ABSENCE OF DIVIDENDS

The Company has never declared or paid cash dividends on its Common Stock
and does not intend to declare or pay cash dividends on its Common Stock in the
foreseeable future. The Company presently expects to retain its earnings to
finance the development and expansion of its business. The declaration or
payment by the Company of dividends, if any, on its Common Stock in the future
is subject to the discretion of the Board of Directors and will depend on the
Company's earnings, financial condition, capital requirements and other relevant
factors. The declaration or payment by the Company of dividends is also subject
to the terms of the Company's credit facility with its bank.

7
<PAGE>

PART I

ITEM 1 DESCRIPTION OF BUSINESS

OVERVIEW

The business of Big Buck Brewery & Steakhouse, Inc. is to develop, own and
operate microbrewery/restaurants under the name "Big Buck Brewery & Steakhouse."
In May 1995, the Company opened its first Unit in Gaylord, Michigan, adjoining
I-75 approximately 200 miles north of Detroit. In March 1997, the Company
opened its second Unit in Grand Rapids, Michigan, and in October 1997, the
Company opened its third Unit in Auburn Hills, Michigan, a suburb of Detroit.

Big Buck Brewery & Steakhouses offer casual dining featuring moderately
priced steaks, ribs, chicken and other food and a distinctive selection of beers
which are microbrewed on-site. The Company also sells its microbrewed beer
off-site through wholesale distributors in order to promote customer interest in
Big Buck Brewery & Steakhouses. The Company's selection of beers ranges from a
light golden ale to a dark full-bodied stout and is designed to satisfy the
tastes of a broad spectrum of consumers. A key element of the Company's
strategy is to capitalize on the growing interest of consumers in high quality,
more flavorful microbrewed beer. The Company believes it will generate customer
loyalty to its beers and its restaurant operations through customer
identification with each local Unit.

Consumer interest in more flavorful beer has resulted in significant growth
in the craftbrewed beer market during the last several years, despite a decline
in per capita beer consumption. The number of microbreweries in the United
States has grown from 21 in 1985 to approximately 442 as of January 1998. From
1985 to 1996, the annual production of craftbrewed beer in the United States
grew from 75,000 barrels to approximately 5.4 million barrels. Despite these
high levels of growth, sales of craftbrewed beers represented approximately 2.8%
of total beer sales in the United States at the end of 1996.

The Company was incorporated under the Michigan Business Corporation Act in
November 1993. The Company's executive office is located at 550 South Wisconsin
Street, Gaylord, Michigan 49735, and its telephone number is (517) 731-0401.
Its World Wide Web site address is www.bigbuck.com.

THE CRAFTBREWED AND SPECIALTY BEER MARKET

The Company's brewing operations are in the relatively small but rapidly
growing craftbrewing segment of the United States brewing industry, which
includes microbreweries such as the Company, contract brewers, regional
specialty brewers and brewpubs (a field into which the Company may expand).
Craftbrewed beers are distinguishable from other domestically produced beers by
their flavor and brewing styles. Consumer interest in higher quality, more
flavorful beer has resulted in significant growth in the craftbrewed beer market
during the last several years. According to industry sources, the United States
craftbrewed beer segment increased at an annual growth rate of approximately
25.6% while the United States beer industry experienced no meaningful growth
during 1996.

BUSINESS STRATEGY -- EXPANSION PLANS

The Company intends to develop and open Units throughout the upper midwest,
the southeast and eventually across the United States.

The Company believes that one of the primary causes for the popularity to
date of its Big Buck Brewery & Steakhouse concept is the development of customer
loyalty to its craftbrewed beers. The Company believes its patrons, who may
order a Big Buck beer with a meal or sample a Big Buck beer at the bar, have
developed a loyalty to one of the distinctive Big Buck beers for a variety of
reasons including (i) the opportunity to identify their favorite Big Buck beer
with their local Unit, (ii) the opportunity to sample any of the ten handcrafted
beers

8
<PAGE>

available at the Units and to select a favorite beer, and (iii) the quality of
Big Buck beer. Increased customer loyalty to Big Buck beers results in repeat
business at each Unit, thereby increasing revenues from restaurant operations
and off-site retail sales.

Sites for future Units will be selected by management after consideration
of various strategic, regulatory, physical and demographic attributes.
Management believes that locations like that of the Gaylord Unit, adjacent to a
major expressway; the Grand Rapids Unit, located on a street with an average
daily vehicle count of approximately 52,000; and the Auburn Hills Unit,
accessible to Detroit metro area residents, significantly increase restaurant
patronage. Management also reviews other demographic attributes of potential
communities into which it may expand. These attributes include traffic counts,
population, sales tax revenues, alcohol consumption and hotel capacity and
occupancy rates. In addition, management will consider the laws of each state
applicable to the Company before expanding into any new state. It is expected
that Units located in metropolitan areas will be larger than those located
outside metropolitan areas and are expected to achieve higher revenues.

RESTAURANT OPERATIONS

GENERAL. A Big Buck Brewery & Steakhouse offers craftbrewed beer brewed
on-site along with a menu featuring steaks, ribs and chicken in a unique,
architecturally spacious setting. The Units offer ten different types of beers
ranging from a light golden ale to a full-bodied stout. The Company attempts to
create an exciting yet casual restaurant where patrons can have fun and feel
comfortable.

DESIGN AND LAYOUT. The Gaylord Unit features a large, open and visually
stimulating dining area which highlights the strategically placed array of
stainless steel and copper brewing equipment used to brew the Company's
craftbrewed beer. This Unit features a 4,000 square foot dining area and a
1,600 square foot bar area, with combined seating capacity of approximately 420.
It is decorated with a rustic wood-finished interior, mounted deer racks,
36-foot high vaulted ceilings and warm lighting. The specially commissioned
Amish hand-carved wooden furniture and overhead genuine Tennessee whisky barrel
lighting fixtures add character to the building's decor. The layout is
flexible, permitting tables to be rearranged to accommodate customer demand. A
wall of television sets, including a ten-foot screen television set, adjacent to
the bar area provides customers the opportunity to watch sporting and other
special events. The friendly and attentive staff, on-site brewing, summertime
outdoor seating and live music are designed to create an appealing atmosphere
for lunch, dinner and bar customers. The Grand Rapids Unit's seating capacity
is approximately 250 in the restaurant and bar combined. The brewing and
fermenting tanks of this Unit front directly on 28th Street, a street with an
average daily vehicle count of approximately 52,000. The Auburn Hills Unit,
which houses a 15-barrel brewing system, encompasses approximately 26,700 square
feet including brewery, bar and restaurant, with a total seating capacity of
approximately 650. This Unit is accessible to Detroit metro area residents.
Each Unit's interior follows the Gaylord Unit's motif with a warm, cozy
atmosphere utilizing soft lighting and Amish furniture. The menu and beer
styles are the same at each Unit. The Company intends to use the Gaylord Unit
as a model for future Units.

MENU AND PRICING. The menu at each Unit consists of appetizers, soups,
meal-sized salads, and entrees, including steaks, ribs, hamburgers, chicken,
fish, pastas as well as a variety of desserts. Management analyzes menu items
for popularity, profitability and ease of preparation. The menu items are
selected to complement the Company's craftbrewed beers. The menu is designed to
offer a broad range of prices that convey value to the customer. Entrees range
in price from $4.95 to $28.00 with an average entree price of $12.00. During
1997, the sale of beer accounted for 22.6%, 19.9% and 29.0% of the Gaylord,
Grand Rapids and Auburn Hills Unit sales, respectively.

CUSTOMERS. The Company believes its restaurants appeal to a wide range of
customers and will draw its clientele from throughout the region in which they
are located. The Gaylord Unit is located approximately 200 miles north of
Detroit at exit 282 on I-75, allowing passersby to conveniently visit. The
Gaylord Unit opens at 11:30 a.m. daily (noon on Sundays). The Grand Rapids
Unit, located on 28th Street in Grand Rapids, opens at 11:00 a.m. daily (11:30
a.m. on Sundays). The Auburn Hills Unit, located in a suburb of Detroit, opens
at 11:00 a.m. daily (noon on Sundays).

9
<PAGE>

BREWING OPERATIONS

GENERAL. The brewery at the Gaylord Unit presently has the capacity to
brew 10,000 barrels of beer per year, and is designed to produce 20,000 barrels
per year with the installation of additional fermentation tanks. The Grand
Rapids Unit features a 7.5-barrel brewing system which can produce 7,000 barrels
per year with the installation of additional fermentation tanks. The Auburn
Hills Unit features a 15-barrel brewing system which can produce 15,000 barrels
per year with the installation of additional fermentation tanks. Future Units
will be built with initial brewing capacities of 2,000 to 5,000 barrels of beer
per year and are expected to have production capacities of 7,000 to 15,000
barrels per year with the installation of additional fermentation tanks. The
Company intends to purchase and install additional fermentation tanks as demand
for its beers requires increased production. Each brewery will be
custom-designed to be integrated into the restaurant layout in the most
efficient and aesthetically pleasing manner possible.

OFF-SITE DISTRIBUTION. The Company sells its microbrewed beer off-site
through wholesale distributors in order to promote customer interest in the Big
Buck Brewery & Steakhouse concept. The Company transports its beer from the
Gaylord Unit to each distributor for redistribution to retailers which include
bars, pubs, restaurants and supermarkets. The beer is available by the keg to
be served on draft at restaurants, bars and pubs and is available in bottles for
retail sales. Presently, off-site sales of the Company's beer are generally
limited to within 200 miles of the Gaylord Unit. Off-site sales of beer
accounted for approximately 3.2% of revenues during 1997. The Gaylord Unit
presently has the capacity to meet additional demand for off-site sales of beer.

PROMOTION OF PRODUCTS WITHIN LOCAL MARKETS. The Company markets its beer
locally with the use of point of sale materials as well as several forms of
other promotional materials including coasters, tap handles and color brochures.
These items are, for the most part, used by retailers to promote Big Buck beers
within their establishment. In addition, the Company offers guided tours of its
Units to further increase consumer awareness of Big Buck beers. The Company
believes that its educational and promotional methods are more effective in
communicating with consumers than broad-based, less flexible national beer
advertising campaigns.

BREWING EQUIPMENT. The Company's brewing equipment was designed and built
by J.V. Northwest, Inc. of Wilsonville, Oregon, and is automated wherever
possible. The Gaylord Unit's system begins with a 47 foot tall, stainless steel
grain silo fabricated to replicate a giant beer bottle. The silo is painted
"beer bottle brown" and the label was hand painted by a commissioned artist.
The Gaylord Unit houses a 20-barrel mash tun; lauter tun; a brew kettle;
50-barrel hot liquor tank; 50-barrel cold liquor tank; six 40-barrel fermenters;
three 80-barrel fermenters; two 40-barrel conditioning tanks and seven 10-barrel
bright beer serving tanks. Filtering is done through a diatomaceous earth
filtering system which removes yeast and other naturally occurring material
resulting in a clear final product. The brewery permits the production of a
wide range of beer styles which can be adapted to market demand for various beer
styles today and into the future. The Grand Rapids Unit features a 7.5-barrel
brewing system with four 15-barrel fermenters and five 15-barrel conditioning
tanks which also serve as bright beer serving tanks. The Auburn Hills Unit
features a 15-barrel brewing system with seven 30-barrel fermenters and twelve
15-barrel conditioning tanks which also serve as bright beer serving tanks. It
is contemplated that the Company will use similar equipment at all breweries
built in future Units.

BOTTLING, KEGGING AND PACKAGING. The Company uses a technologically
advanced bottling line to bottle its beer for off-site retail sales at its
Gaylord Unit. The bottle filler utilizes a carbon dioxide environment during
the bottling process to extend shelf life. Kegs are filled by a keg rack system
and then stored pending shipment to wholesale distributors in a specially
designed cooler. The Company's kegs have the Big Buck Brewery & Steakhouse name
and logo stamped onto the top rail for easy identification and a handsome
appearance. The Company also sells its beer in a container called a "party
pig," a plastic pressurized unit holding 2.25 gallons (one case) of beer. The
pressurization allows the beer to be served from the customer's refrigerator,
boat or golf cart. Party pigs are sold through each Unit's gift shop.

10
<PAGE>

QUALITY CONTROL. Quality control of each brewery is under the supervision
of the Company's Brewmaster. As with the current Units, each future brewery
will contain a laboratory to monitor and maintain quality assurance in the
brewing and packaging processes.

INGREDIENTS AND RAW MATERIALS. The Company currently purchases its malted
barley from market sources on a competitive bid basis. Raw materials such as
hops are available from multiple sources at competitive prices. The Company
also uses competitive sources for its supply of packaging materials such as
bottles, labels, six pack carriers and shipping cases.

BREWING PROCESS

Beer is made primarily from four natural ingredients: malted barley, hops,
yeast and water. The Company uses only the finest barley, primarily two row, in
its production. The universal spice of beer is hops. Hops, like the grapes
used in wine, are varietal. Brewers select hops based on specific varieties
grown in select areas around the world. Some hop varieties are selected for
their bittering qualities, while others are chosen for their ability to impart
distinctive aromas to the beer. Yeast is a uni-cellular organism whose
metabolism converts sugar into alcohol and carbon dioxide. The Company uses
only specially selected yeast. The entire brewing process from mashing through
filtration typically is completed in 14 to 21 days, depending on the formulation
and style of the beer being brewed.

BEER VARIETIES

The Company believes that its diverse and high quality beer varieties
encourage the trial of new beer and, over time, help to create more
knowledgeable and sophisticated beer drinkers. The Company's beers cover a full
range of flavors from very light, to medium, to very dark and heavy.

BIG BUCK BEER: The Company's flagship brand and its top seller is a
standard American-style beer with a small amount of corn added to the grist to
give the brew a smooth, easy-drinking character that most American consumers
have come to expect in a beer. Big Buck Beer has a rich golden color and a
light malt character balanced with a mild dose of hops.

BUCK NAKED: This American-style, low-calorie or "light" beer is formulated
to appeal to those who prefer a low-calorie brew. Buck Naked is an all malt
brew with a touch of imported Czechoslovakian Saaz hops.

WOLVERINE WHEAT: This American wheat beer is made from a blend of malted
barley and malted wheat. The wheat imparts a unique, refreshing flavor to the
beer. Wolverine Wheat is straw in color, lightly hopped, crisp and refreshing.

RASPBERRY WHEAT: A version of Wolverine Wheat, this beer is flavored with
pure fruit to impart a subtle raspberry nose, a delicate fruit flavor and a
slight pink hue.

ANTLER ALE: This amber ale, formulated as a transitional flavor between
lighter and darker beers, has a light amber color while maintaining a mild,
clean flavor and a low hopping rate.

REDBIRD ALE: Similar to a traditional pale ale, Redbird Ale has a reddish
copper appearance, medium body and is well hopped. This is a heartier beer with
a medium body and a pleasant hop bitterness.

DOC'S ESB: This full-bodied bock beer gets its distinctive character from a
blend of four different grains and three hop varieties. Doc's ESB has a deep
reddish brown color and is generously hopped to balance the full body and
complex character.

11
<PAGE>

BLACK RIVER STOUT: This cream stout is slightly sweet with a moderate hop
bitterness. The rich flavor and black color of this brew comes from six
different grains. Deep flavors of coffee and caramel are present in this brew.

BLACK'N BERRY: A Black'n Tan is generally a stout mixed with pale or amber
ale. Black'n Berry is a new twist, Black River Stout and Raspberry Wheat. The
delicate fruit qualities are accented by the heavy stout flavor.

CHERRY SHANDY: Cherry Shandy is a uniquely blended mixture of our homemade
black cherry soda and Buck Naked. This is a light, refreshing, low-alcohol
libation.

The Company also brews various seasonal beers, including Winter Warmer,
Alpenfest, Oktoberfest and 10 pt. Porter. Such beers are offered for limited
periods of time throughout the year.

SALES AND MARKETING

The Company's primary sources of advertising include television, outdoor
billboards, radio and newspapers, which generally cover the local markets of
each Unit, with the exception of billboards which cover more distant
geographical areas of Michigan. In addition to these sources, the Company uses
local travel publications, including golf and vacation planners which are
distributed free of charge, as well as inquiries via local travel information
centers and tourism bureaus. The Company also distributes four-color brochures
promoting its Units to major corporations and various travel welcome centers
throughout Michigan as well as local hotels and resorts. During 1997, the
Company incurred approximately $340,000 in advertising expenses.

The Company strives to provide its customers with a dining experience that
will encourage repeat business and promote "word-of-mouth" advertising. To
supplement its service-oriented marketing efforts, the Company sells merchandise
including hats, t-shirts, sweatshirts and other items bearing the Big Buck
Brewery & Steakhouse name and logo.

COMPETITION

The restaurant industry is highly competitive with respect to price,
service, food quality (including taste, freshness and nutritional value) and
location. New restaurants have a high failure rate. The restaurant industry is
also generally affected by changes in consumer preferences, national, regional
and local economic conditions, and demographic trends. The performance of
individual restaurants may also be affected by factors such as traffic patterns,
demographic considerations, and the type, number and location of competing
restaurants. In addition, factors such as inflation, increased food, labor and
employee benefit costs, and the lack of availability of experienced management
and hourly employees may also adversely affect the restaurant industry in
general and the Company's restaurants in particular. Restaurant operating costs
are further affected by increases in the minimum hourly wage, unemployment tax
rates and similar matters over which the Company has no control. There are
numerous well-established competitors, including national, regional and local
restaurant chains, possessing substantially greater financial, marketing,
personnel and other resources than the Company. The Company also competes with
a large variety of locally owned restaurants, diners, and other establishments
that offer moderately priced food to the public and with other
microbrewery/restaurants in a highly competitive and developing microbrewery and
brewpub restaurant market.

The domestic beer market is highly competitive due to the enormous
advertising and marketing expenditures by national and major regional brewers;
the continuing proliferation of microbreweries, regional craft breweries,
brewpubs, and other small craftbrewers; the more recent introduction of
fuller-flavored products by certain major national brewers; and a general
surplus of domestic brewing capacity, which facilitates existing contract brewer
expansion and the entry of new contract brewers. Although domestic demand for
craftbrewed beers has increased dramatically over the past decade, there can be
no assurance that this demand will continue. The Company anticipates
intensifying competition in the craftbrewed and fuller-flavored beer markets.

12
<PAGE>

GOVERNMENT REGULATION

BEER AND LIQUOR REGULATION. A significant percentage of the Company's
revenue is derived from beer sales. On-site sales of beer accounted for 20.6%
of revenues and off-site sales of beer accounted for an additional 3.2% of
revenues during 1997. The Company must comply with federal licensing
requirements imposed by the Bureau of Alcohol, Tobacco and Firearms of the
United States Department of Treasury, as well as the licensing requirements of
states and municipalities where its Units are or will be located. Failure to
comply with federal, state or local regulations could cause the Company's
licenses to be revoked and force it to cease the brewing and/or sale of its
beer. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Management believes the Company is operating
in substantial compliance with applicable laws and regulations governing its
operations.

RESTAURANT REGULATION. The restaurant industry is subject to numerous
federal, state and local government regulations, including those relating to the
preparation and sale of food and to building and zoning requirements. The
Company is subject to regulation by air and water pollution control divisions of
the Environmental Protection Agency of the United States and by certain states
and municipalities in which its Units are or will be located. The Company is
also subject to laws governing its relationship with employees, including
minimum wage requirements, overtime, working and safety conditions and
citizenship requirements. Restaurant operating costs are affected by increases
in the minimum hourly wage, unemployment tax rates, sales taxes and similar
matters, such as any government mandated health insurance, over which the
Company has no control. Management believes the Company is operating in
substantial compliance with applicable laws and regulations governing its
operations.

The federal government currently imposes an excise tax of $18.00 on each
barrel of beer produced for domestic consumption in the United States. However,
each brewer with production under 2,000,000 barrels per year is granted a small
brewer's excise tax credit in the amount of $11.00 per barrel on its first
60,000 barrels produced annually. To the extent Company-wide production
increases to amounts over 60,000 barrels per year, there will be an increase in
the average federal excise tax rate of the Company. The Company is not aware of
any plans by the federal government to reduce or eliminate the small brewer's
credit.

The Company is licensed under Michigan law as a "microbrewery." A
microbrewery in Michigan is limited to the production of not more than 30,000
barrels of beer per year by all breweries owned or controlled by the same
person, whether within or outside Michigan. Without a change in current law,
the Company will limit its sales of beer off-site so as to reserve its brewing
capacity for sales of beer on-site which provides the Company higher margins but
do not reach the same customer base. Based on production at its Units during
1997, the Company believes it could operate up to approximately ten Units with
similar production levels without exceeding the 30,000 barrel production
ceiling.

13
<PAGE>

EMPLOYEES

At December 28, 1997, the Company employed 485 full-time persons at its
Units, 10 of whom served in executive and corporate administrative capacities,
24 of whom served as restaurant management personnel, and the remainder of whom
were hourly personnel. No employee is covered by a collective bargaining
agreement and the Company has never experienced an organized work stoppage,
strike or labor dispute. The Company considers relations with its employees to
be satisfactory.

TRADEMARKS AND SERVICE MARKS

The Company claims trademark and service mark rights to, and ownership in,
a number of marks including, but not limited to, BIG BUCK BREWERY & STEAKHOUSE
and BIG BUCK BEER. The Company's service mark for BIG BUCK BREWERY & STEAKHOUSE
expires in September 2007 and its trademark for BIG BUCK BEER expires in March
2007. There can be no assurance that the Company's marks will be enforceable
against prior users in the areas where the Company conducts, or will conduct,
its operations. The Company regards its marks as having substantial value and
as being an important factor in the marketing of its microbrewery/restaurants
and beer. The Company's policy is to pursue registration of its marks whenever
possible and to oppose vigorously any infringement of its marks.

ITEM 2 DESCRIPTION OF PROPERTY

The Company owns the Gaylord Unit, including the real property on which it
is located. See "Description of Business -- Restaurant Operations" for a
description of the Gaylord Unit.

The Company purchased the Grand Rapids site in December 1996. The site
included an existing structure of approximately 8,200 square feet and is located
on 28th Street in Grand Rapids. Seating capacity is approximately 250 for
restaurant and bar combined. The Grand Rapids Unit opened in March 1997.

The Company purchased the Auburn Hills site in August 1996. The site is
just off of Interstate 75 at exit 79. The Unit constructed on this site
encompasses approximately 26,700 square feet including brewery, bar and
restaurant. Seating capacity is approximately 650 for the restaurant and bar
combined. The Auburn Hills Unit opened in October 1997.

14
<PAGE>

annual percentage rent of 5.25% of gross sales at the site in excess of $8.0
million per year. In the event that such annual gross sales do not exceed $8.0
million for any two consecutive years during the lease term, the Company will be
obligated to repurchase the Auburn Hills site for $4.0 million, plus $200,000
for each lease year on a pro rata basis. The lessor has the ability to require
that the Company issue Common Stock (valued at $5.00 per share) in payment of
such repurchase price. The Company has the option to purchase the property from
the lessor after the seventh full lease year for $4.0 million, plus $200,000 for
each lease year on a pro rata basis. Independent of annual gross sales, the
lessor has the option to require the Company to purchase the property before the
third full lease year at the same price. The Company pays average effective
annual base rent of $15.00 per square foot at the Auburn Hills Unit.

In the opinion of management, the Company's properties are adequately
covered by insurance.

ITEM 3 LEGAL PROCEEDINGS

The Company is involved in routine legal actions in the ordinary course of
its business. Although the outcomes of any such legal actions cannot be
predicted, in the opinion of management there is no legal proceeding pending
against or involving the Company for which the outcome is likely to have a
material adverse effect upon the financial position or results of operations of
the Company.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the Company's
most recently completed fiscal year.

15
<PAGE>

PART II

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Common Stock of the Company has been included in the Nasdaq SmallCap
Market under the symbol "BBUC" since the completion of the its initial public
offering in June 1996. The following table sets forth the approximate high and
low closing prices for the Company's Common Stock for the periods indicated as
reported by the Nasdaq SmallCap Market. Such quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.

PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
1996
First Quarter . . . . . . . . . N/A N/A
Second Quarter . . . . . . . . . $ 4-1/8 $ 3-3/4
Third Quarter . . . . . . . . . $ 4-3/8 $ 2-1/2
Fourth Quarter . . . . . . . . . $ 4-3/8 $ 2-3/4
1997
First Quarter . . . . . . . . . $ 3-1/8 $ 1-3/4
Second Quarter . . . . . . . . . $ 4-1/2 $ 1-7/8
Third Quarter . . . . . . . . . $ 4-3/4 $ 3-1/8
Fourth Quarter . . . . . . . . . $ 7-1/4 $ 4-3/4
</TABLE>

As of March 16, 1998, the Company had 253 shareholders of record and
approximately 1,600 beneficial owners.

SALES OF UNREGISTERED SECURITIES

On August 1, 1997, the Company issued a five-year stock option, exercisable
at $5.00 per share, for 50,000 shares of its Common Stock, to Michael G. Eyde,
an unrelated third party. This issuance was made in connection with the real
estate purchase and leaseback agreement between the Company and Mr. Eyde, which
provided the Company with financing of $4.0 million. On October 15, 1997, the
Company issued 10,000 shares of its Common Stock to Tracy Stephenson, in
consideration of services rendered, or to be rendered, by Mr. Stephenson as the
Company's new restaurant project manager. Both issuances were made in reliance
upon the exemption provided in Section 4(2) of the Securities Act of 1933, as
amended (the "Act"). The foregoing securities are restricted as to sale or
transfer, unless registered under the Act, and certificates representing such
securities contain restrictive legends preventing sale, transfer or other
disposition unless registered under the Act. In addition, the recipients of
such securities received, or had access to, material information concerning the
Company, including, but not limited to, the Company's reports on Form 10-KSB,
Form 10-QSB and Form 8-K, as filed with the Commission. No underwriting
commissions or discounts were paid with respect to the issuances of such
securities.

16
<PAGE>

USE OF PROCEEDS FROM INITIAL PUBLIC OFFERING

The Company's Registration Statement on Form SB-2 (File No. 333-5883) was
declared effective by the Commission on June 12, 1996 and the initial public
offering commenced on June 13, 1996. The Company closed on the sale of
2,450,000 units (each consisting of one share of Common Stock and one Class A
Warrant) on June 18, 1996 and held an overallotment closing, which involved the
sale of an additional 100,000 units, on July 30, 1996. R.J. Steichen & Co.
served as the underwriter of the above-described securities.

The Company registered an offering amount of 2,817,500 units, 2,817,500
shares of Common Stock (underlying Class A Warrants) and 75,000 shares of Common
Stock on behalf of a selling shareholder, with an estimated aggregate offering
price of $37,002,500 (based on an offering price of $5.00 per unit and an
exercise price of $8.00 per Class A Warrant). The Company sold 2,550,000 units
at a price of $5.00 per unit, resulting in gross proceeds of $12,750,000.

The Company incurred total offering expenses of $1,765,147 in connection
with its initial public offering. Such expenses included: (i) $1,020,000 in
underwriting discounts and commissions paid to the above-named underwriter, (ii)
$318,750 in expenses paid to the above-named underwriter, (iii) $154,000 paid to
the Company's legal counsel; (iv) $105,000 paid to the Company's independent
public accountants, (v) $100,000 paid as a finder's fee to an unrelated third
party, and (vi) $67,397 in other expenses, including the sum paid to the
Company's financial printer. After deducting total expenses of the initial
public offering, the net proceeds to the Company were $10,984,853.

From the effective date of the Registration Statement on Form SB-2 through
December 28, 1997, the Company used approximately $4,050,000 for the purchase of
real estate, $5,053,120 for the construction of new Units, $1,686,426 for the
repayment of indebtedness and $195,307 for working capital. Of such payments,
$318,715 of the repayment of indebtedness was directed to directors, officers,
persons owning 10% or more of the Company's Common Stock, and affiliates of the
Company.

17
<PAGE>

ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THIS DISCUSSION AND ANALYSIS CONTAINS CERTAIN FORWARD-LOOKING TERMINOLOGY
SUCH AS "BELIEVES," "ANTICIPATES," "EXPECTS," AND "INTENDS," OR COMPARABLE
TERMINOLOGY. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED.
POTENTIAL PURCHASERS OF THE COMPANY'S SECURITIES ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS WHICH ARE QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONS AND RISKS DESCRIBED HEREIN.

OVERVIEW

Big Buck Brewery & Steakhouse, Inc. (the "Company") develops, owns and
operates microbrewery/restaurants under the name "Big Buck Brewery & Steakhouse"
(each a "Unit"). Until May 1995 when the Company opened its first Unit in
Gaylord, Michigan, it had no operations or revenues and its activities were
devoted solely to development. In March 1997, the Company opened its second
Unit in Grand Rapids, Michigan, and in October 1997, the Company opened its
third Unit in Auburn Hills, Michigan, a suburb of Detroit.

Future revenues and profits will depend upon various factors, including
market acceptance of the Big Buck Brewery & Steakhouse concept and general
economic conditions. The Company's present sources of revenue are the Gaylord,
Grand Rapids and Auburn Hills Units. There can be no assurances that the
Company will successfully implement its expansion plans, in which case the
Company will continue to depend on revenues from the existing Units. The
Company also faces all of the risks, expenses and difficulties frequently
encountered in connection with the expansion and development of a new business.
Furthermore, to the extent that the Company's expansion strategy is successful,
it must manage the transition to multiple site, higher volume operations,
control increased overhead expenses and hire additional personnel.

The Company has entered into two real estate purchase and leaseback
agreements. In April 1997, the Company completed the sale and leaseback of the
Grand Rapids site to an unrelated third party for $1.4 million. In August 1997,
the Company completed the sale and leaseback of the Auburn Hills site to the
same unrelated third party for $4.0 million. As of December 28, 1997, $50,000
of the Auburn Hills sale was being held back in escrow subject to the Company's
completion of certain post-closing conditions.

The Company uses a 52 or 53 week fiscal year ending on the Sunday nearest
December 31. All references herein to "1997" and "1996" represent the 52-week
fiscal years ended December 28, 1997 and December 29, 1996, respectively.

18
<PAGE>

RESULTS OF OPERATIONS

The operating results of the Company expressed as a percentage of total revenue
were as follows:

DECEMBER 28, DECEMBER 29,
1997 1996
-------------- --------------
<S> <C> <C>
REVENUE
Restaurant sales. . . . . . . . . . . . . . . 93.5% 88.3%
Wholesale and retail sales. . . . . . . . . . 6.5 11.7
----- -----
Total revenue. . . . . . . . . . . . . . 100.0 100.0
----- -----

COSTS AND EXPENSES:
Cost of sales . . . . . . . . . . . . . . . . 33.7 36.5
Restaurant salaries and benefits. . . . . . . 27.8 28.0
Operating expenses. . . . . . . . . . . . . . 21.2 25.3
Depreciation and amortization . . . . . . . . 7.2 10.1
----- -----
Total costs and expenses . . . . . . . . 89.9 99.9
----- -----

RESTAURANT OPERATING INCOME. . . . . . . . . . . . 10.1 0.1

GENERAL AND ADMINISTRATIVE EXPENSES. . . . . . . . 18.0 20.2
----- -----

LOSS FROM OPERATIONS . . . . . . . . . . . . . . . (7.9) (20.1)
----- -----

OTHER INCOME (EXPENSE):
Interest expense. . . . . . . . . . . . . . . (4.5) (9.5)
Interest income . . . . . . . . . . . . . . . 1.1 2.4
Other . . . . . . . . . . . . . . . . . . . . (0.2) (0.3)
----- -----
Other income (expense), net. . . . . . . (3.5) (7.4)
----- -----

NET LOSS . . . . . . . . . . . . . . . . . . . . (11.4%) (27.5%)
------- -------
------- -------
</TABLE>

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 28, 1997 AND DECEMBER
29, 1996

REVENUES

Total revenues for the Company increased 110% to $9,096,580 in 1997 from
$4,338,832 in 1996. The increase is primarily attributable to the opening of
the Grand Rapids Unit on March 17, 1997 and the opening of the Auburn Hills Unit
on October 1, 1997.

COSTS OF SALES

Costs of sales which consist of food, merchandise and brewery supplies
increased 93.5% to $3,065,523 in 1997 compared to $1,584,483 in 1996. The
increase is primarily due to the opening of the Grand Rapids and Auburn Hills
Units during 1997. Costs of sales as a percentage of revenues decreased to
33.7% in 1997 from 36.5% in 1996. The percentage decrease is the result of
purchasing efficiencies, increased menu pricing and improved kitchen management.

19
<PAGE>

RESTAURANT SALARIES AND BENEFITS

Restaurant salaries and benefits, which consist of restaurant management
and hourly employee wages and benefits, payroll taxes and workers' compensation
insurance, increased 108% to $2,526,586 in 1997 compared to $1,215,822 in 1996.
As a percentage of revenues, restaurant salaries and benefits decreased slightly
to 27.8% in 1997 compared to 28.0% in 1996 due to improved labor management at
the Unit level.

OPERATING EXPENSES

Operating expenses, which include supplies, utilities, repairs and
maintenance, advertising and occupancy costs increased 75.2% to $1,925,938 in
1997 compared to $1,099,503 in 1996. Operating expenses as a percentage of
revenues decreased to 21.2% as compared to 25.3% in 1996. This decrease is due
to a continued emphasis on cost controls, improved management and a reduction in
insurance premiums.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative and development expenses increased 87.5% to
$1,640,047 in 1997 compared to $874,498 in 1996. As a percentage of revenue,
these expenses decreased to 18.0% in 1997 as compared to 20.2% in 1996. The
decreased expenses as a percentage of revenues reflect increased total sales.
As additional Units are opened by the Company, management believes that these
expenses will continue to grow at a slower rate than total revenues,
resulting in a continued decrease in these expenses as a percentage of
revenues.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expenses increased 50.2% to $655,474 in 1997
compared to $436,403 in 1996. As a percentage of revenues, these expenses
decreased to 7.2% in 1997 as compared to 10.1% in 1996. The decrease resulted
from the full amortization in 1996 of financing costs related to the February
1996 bridge financing. The amount of this decrease in amortization more than
offset the increase in pre-opening costs and depreciation from the opening of
the Grand Rapids and Auburn Hills Units.

INTEREST EXPENSES/INTEREST INCOME

Interest expense increased 20.2% to $410,964 during 1997 compared to
$341,863 in 1996. This increase is due to the sale and leaseback of the
Grand Rapids and Auburn Hills sites, which are accounted for as long-term
capital lease obligations.

Interest income decreased 52.5% to $102,343 during 1997 compared to
$215,569 in 1996. The decrease in interest income is due to the sale of
short-term investments for use in the construction of the Grand Rapids and
Auburn Hills Units.

GAIN ON SALE OF FIXED ASSETS

The gain on sale of fixed assets of $294,579 during 1996 resulted from the
sale of approximately 2.2 acres of the Gaylord property for $400,000 to a
national hotel chain for the construction of a 100 room hotel adjacent to the
Gaylord Unit.

LIQUIDITY AND CAPITAL RESOURCES

The Company generated $101,309 in cash from operating activities during
1997 and used $1.1 million in cash during 1996 for operating activities. At
December 28, 1997, the Company had working capital of $255,296. Since
inception, the Company's principal capital requirements have been the funding
of (i) Company operations and promotion of the Big Buck Brewery & Steakhouse
format and (ii) the construction of the Gaylord, Grand Rapids and Auburn
Hills Units and the acquisition of furniture, fixtures and equipment for such
Units.

20
<PAGE>

Total capital expenditures for the Gaylord, Grand Rapids and Auburn Hills Units
were approximately $5.8 million, $3.2 million and $9.7 million, respectively.
The Company expects that it will continue to use a significant portion of its
capital resources to fund new Unit development and construction.

The Company generated $4.4 million in cash from financing activities during
1997. Such financing activities included the sales and leasebacks of the Grand
Rapids and Auburn Hills sites. The Company used approximately $9.1 million in
cash for construction and equipment costs at the Grand Rapids and Auburn Hills
Units during 1997. The Company plans to develop and open additional Units and
it will need to obtain additional financing to fulfill such expansion plans.
The amount of financing required for such expansion depends on the definitive
locations, site conditions, construction costs and size and type of Units to be
built. There can be no assurance that financing will be available on terms
acceptable or favorable to the Company, or at all. Without such financing, the
Company's development plans will be slower than planned or even unachievable.

In June 1996, the Company's initial public offering of 2,450,000 units
at $5.00 per unit, each unit consisting of one share of Common Stock and one
redeemable Class A warrant, was declared effective by the Commission. The
Company received net proceeds of approximately $10.6 million in June 1996.
In July 1996, the underwriters exercised a portion of their overallotment
option for 100,000 additional units at $5.00 per unit. The Company received
net proceeds of approximately $400,000 in July 1996. Total net proceeds have
been reflected in the financial statements net of transaction related costs.

Prior to the initial public offering, the Company met its capital
requirements through cash flow generated by capital contributions, loans from
its principal shareholders and officers, bank borrowings and certain private
placements.

SEASONALITY

21
<PAGE>

ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

PAGE
----
<S> <C>
BIG BUCK BREWERY & STEAKHOUSE, INC.
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . 23
Financial Statements
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Statements of Operations. . . . . . . . . . . . . . . . . . . . . . . . 25
Statements of Shareholders' Equity. . . . . . . . . . . . . . . . . . . 26
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . 27
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>

22
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Big Buck Brewery & Steakhouse, Inc.:

We have audited the accompanying balance sheets of Big Buck Brewery &
Steakhouse, Inc. (a Michigan corporation) as of December 28, 1997 and
December 29, 1996, and the related statements of operations, shareholders'
equity and cash flows for the years 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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Big Buck Brewery &
Steakhouse, Inc. as of December 28, 1997 and December 29, 1996, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
February 19, 1998

23
<PAGE>

BIG BUCK BREWERY & STEAKHOUSE, INC.

Balance Sheets

December 28, December 29,
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 354,015 $ 28,468
Short-term investments -- 4,910,000
Sale and Leaseback Financing Receivable (Note 2) 749,650 --
Accounts receivable 170,460 40,000
Inventories 289,805 155,785
Preopening expenses, net 348,581 3,436
Prepaids and other 171,766 106,715
----------- -----------

Total current assets 2,084,277 5,244,404

PROPERTY AND EQUIPMENT, net 18,340,043 9,881,603

OTHER ASSETS, net 383,301 205,686
----------- -----------

$20,807,621 $15,331,693
----------- -----------
----------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 843,430 $ 286,871
Accrued expenses 735,727 132,299
Current maturities of long-term obligations 249,824 250,780
----------- -----------
Total current liabilities 1,828,981 669,950

LONG-TERM OBLIGATIONS, less current maturities 7,274,558 2,124,391
----------- -----------
Total liabilities 9,103,539 2,794,341

COMMITMENTS AND CONTINGENCIES (Notes 2 and 6)

SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares authorized;
5,285,000 shares in 1997 and 5,275,000 shares in 1996 issued
and outstanding 52,850 52,750
Warrants 153,650 153,650
Additional paid-in capital 13,240,694 13,034,544
Accumulated deficit (1,743,112) (703,592)
----------- -----------

Total shareholders' equity 11,704,082 12,537,352
----------- -----------

$20,807,621 $15,331,693
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these balance sheets.

24
<PAGE>

BIG BUCK BREWERY & STEAKHOUSE, INC.

Statements of Operations

For the Years Ended
---------------------------
December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
REVENUE:
Restaurant sales $ 8,500,828 $ 3,830,748
Wholesale and retail sales 595,752 508,084
----------- -----------
Total revenue 9,096,580 4,338,832
----------- -----------
COSTS AND EXPENSES:
Cost of sales 3,065,523 1,584,483
Restaurant salaries and benefits 2,526,586 1,215,822
Operating expenses 1,925,938 1,099,503
Depreciation and amortization 655,474 436,403
----------- -----------
Total costs and expenses 8,173,521 4,336,211
----------- -----------

RESTAURANT OPERATING INCOME 923,059 2,621

GENERAL AND ADMINISTRATIVE EXPENSES 1,640,047 874,498
----------- -----------

LOSS FROM OPERATIONS (716,988) (871,877)
----------- -----------

OTHER INCOME (EXPENSE):
Interest expense (410,964) (341,863)
Interest income 102,343 215,569
Other (13,911) 294,579
----------- -----------
Other income (expense), net (322,532) 168,285
----------- -----------

NET LOSS $(1,039,520) $ (703,592)
----------- -----------
----------- -----------

BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.20) $ (0.17)
----------- -----------
----------- -----------

BASIC AND DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 5,277,033 4,066,071
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

25
<PAGE>

BIG BUCK BREWERY & STEAKHOUSE, INC.

Statements of Shareholders' Equity
For the Years Ended

COMMON STOCK ADDITIONAL
-------------------------- PAID-IN ACCUMULATED
SHARES AMOUNT WARRANTS CAPITAL DEFICIT TOTAL
------------- ----------- ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 . . . . . . . 2,500,000 25,000 18,600 2,482,470 (1,116,416) 1,409,654
Effects of conversion to
C Corporation . . . . . . . . . . -- -- -- (1,116,416) 1,116,416 --
Sale of units for $5.00 per unit . . . 150,000 1,500 7,500 606,037 -- 615,037
Initial public offering of units for
$5.00 per unit. . . . . . . . . . . 2,550,000 25,500 127,550 10,831,803 -- 10,984,853
Issuance of common stock upon conversion
of debt (Note 2). . . . . . . . . . 75,000 750 -- 230,650 -- 231,400
Net loss . . . . . . . . . . . . . . . -- -- -- -- (703,592) (703,592)
--------- ------- -------- ----------- ----------- -----------
BALANCE, December 29, 1996 . . . . . . . 5,275,000 $52,750 $153,650 $13,034,544 $ (703,592) $12,537,352
--------- ------- -------- ----------- ----------- -----------
Issuance of common stock for services
rendered. . . . . . . . . . . . . . 10,000 100 -- 56,150 -- 56,250
Issuance of stock options for services
rendered. . . . . . . . . . . . . . -- -- -- 150,000 -- 150,000
Net loss . . . . . . . . . . . . . . . -- -- -- -- (1,039,520) (1,039,520)
--------- ------- -------- ----------- ----------- -----------
BALANCE, December 28, 1997 . . . . . . . 5,285,000 $52,850 $153,650 $13,240,694 $(1,743,112) $11,704,082
--------- ------- -------- ----------- ----------- -----------
--------- ------- -------- ----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

26
<PAGE>

BIG BUCK BREWERY & STEAKHOUSE, INC.

Statements of Cash Flows

For the Years Ended
---------------------------
December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,039,520) $ (703,592)
Adjustments to reconcile net loss to cash flows used in
operating activities--
Depreciation and amortization 655,474 436,403
Gain on sale of property -- (294,579)
Change in operating assets and liabilities:
Accounts receivable (130,460) (40,000)
Inventories (134,020) (15,590)
Prepaids and other (410,206) (73,915)
Accounts payable 556,613 (440,361)
Accrued expenses 603,428 (13,197)
------------ ------------

Net cash provided by (used in) operating activities 101,309 (1,144,831)
------------ ------------

INVESTING ACTIVITIES:
Purchases of property and equipment, net (9,084,325) (4,692,015)
Proceeds from sale of property -- 400,000
Sale (purchase) of short-term investments, net 4,910,000 (4,910,000)
------------ ------------

Net cash used in investing activities (4,174,325) (9,202,025)
------------ ------------

FINANCING ACTIVITIES:
Proceeds from long-term debt and capital lease obligations 4,649,351 750,000
Payments on long-term debt and capital lease obligations (250,788) (1,588,638)
Payments on line-of-credit borrowings, net -- (325,000)
Payments on debt to shareholders -- (300,000)
Net proceeds from initial public offering of units -- 10,984,853
Net proceeds from sale of units -- 615,037
Payment of deferred financing costs -- (100,000)
------------ ------------

Net cash provided by financing activities 4,398,563 10,036,252
------------ ------------

INCREASE (DECREASE) IN CASH 325,547 (310,594)

CASH, beginning of year 28,468 339,062
------------ ------------

CASH, end of year $ 354,015 $ 28,468
------------ ------------
------------ ------------

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 415,306 $ 369,799
Income taxes paid -- --
NONCASH TRANSACTION:
Conversion of debt to common stock -- 250,000
Issuance of common stock and stock options for property and services 206,150 --
</TABLE>

The accompanying notes are an integral part of these financial statements.

27
<PAGE>

BIG BUCK BREWERY & STEAKHOUSE, INC.

Notes to Financial Statements

December 28, 1997 and December 29, 1996

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS

Big Buck Brewery & Steakhouse, Inc. (f/k/a Michigan Brewery, Inc.) develops,
owns and operates microbrewery/restaurants under the name "Big Buck Brewery &
Steakhouse." As of December 28, 1997, the Company owned and operated three
Units in the state of Michigan. The first Unit opened in Gaylord, Michigan, on
May 26, 1995. The Gaylord Unit is utilized for bottling and wholesale
distribution of its private label beer. Subsequent Units opened on March 17,
1997 in Grand Rapids, Michigan, and on October 1, 1997 in Auburn Hills,
Michigan, a suburb of Detroit.

Prior to the opening of the Gaylord Unit, the Company was in the development
stage. While in the development stage and up to June 1996, the Company met
its capital requirements primarily through initial shareholder contributions,
loans from its principal shareholders and officers, bank borrowings and
certain private placement offerings. During June 1996, the Company received
net proceeds of $10,984,853 through an initial public offering (IPO) of
2,550,000 units (see Note 4).

The Company incurred a net loss of $1,039,520 in 1997 and $703,592 in 1996. The
losses for these periods are primarily attributable to costs and expenses
incurred in the completion of the development and start-up of operations at the
Grand Rapids and Auburn Hills Units and the costs associated with the hiring of
senior corporate management to position the Company for its future expansion
plans. The Company has a limited operating history, and future revenues and
results from operations will depend upon various factors, including market
acceptance of the Big Buck Brewery & Steakhouse concept and general economic
conditions. The Company's ability to meet its expansion plan and achieve
profitability depends on its ability to obtain substantial financing for the
development of additional Units. There are no assurances that such financing
will be available on terms acceptable or favorable to the Company.

FISCAL YEAR

The Company has adopted a 52-/53-week fiscal year ending on the Sunday nearest
December 31 of each year. All references herein to "1997" and "1996" represent
the 52-week fiscal years ended December 28, 1997 and December 29, 1996,
respectively.

INVENTORIES

Inventories consist primarily of restaurant food and beverage items, raw
materials used in the brewing process, finished goods, including beer in kegs
and beer held in fermentation prior to the filtration and packaging process, and
retail goods for resale. Inventories are stated at the lower of cost or market
as determined by the first-in, first out inventory method and consisted of the
following at:

December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
Food . . . . . . . . . . . . . . . . . . . . $ 88,820 $ 29,533
Brewery. . . . . . . . . . . . . . . . . . . 83,032 63,204
Retail goods . . . . . . . . . . . . . . . . 117,953 63,048
--------- ---------
$ 289,805 $ 155,785
--------- ---------
--------- ---------
</TABLE>

28
<PAGE>

PREOPENING EXPENSES

It is the Company's policy to capitalize the direct and incremental costs
associated with opening a new Unit, which consist primarily of hiring and
training the initial workforce, mock service and other direct costs. These
costs are amortized over the period from when the Unit opens until
substantially all of the initial workforce is no longer employed (not to
exceed 12 months). Preopening costs for the Gaylord Unit were charged to
operations as incurred due to its developmental nature. As of December 28,
1997, total capitalized preopening costs were $522,342 with accumulated
amortization of $173,761.

In April 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AICPA) issued an exposure draft
entitled "Reporting on the Costs of Start-Up Activities." The proposed
accounting standard contained in this draft would require entities to expense as
incurred all start-up and preopening costs that are not otherwise capitalizable
as long-lived assets. The AICPA is expected to issue a final pronouncement on
this standard during the second quarter of 1998. The accounting standard would
be effective for fiscal years beginning after December 15, 1998, with earlier
application encouraged. If the new accounting principle is adopted by the
AICPA, the Company will choose early implementation during fiscal 1998. This
implementation will involve the recognition of the cumulative effect of the
change in accounting principle required by the new standard as a one-time charge
against earnings, net of any related income tax effect, retroactive to the
beginning of fiscal 1998.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Improvements are capitalized,
while repair and maintenance costs are charged to operations when incurred.
Property and equipment are depreciated using the straight-line method for
financial reporting purposes and accelerated methods for income tax reporting
purposes over their estimated useful lives of 5 to 40 years.

Property and equipment consisted of the following at:

December 28, December 29, Estimated
1997 1996 Useful Lives
----------- ----------- ------------
<S> <C> <C> <C>
Land and improvements. . . . . . . $ 4,713,545 $ 4,132,941 20 years for
improvements
Building and improvements. . . . . 9,245,345 3,131,108 40 years
Brewery equipment. . . . . . . . . 2,000,276 1,127,125 12-30 years
Restaurant equipment . . . . . . . 1,807,032 855,902 10 years
Furniture, fixtures and equipment. 1,479,898 524,298 5-7 years
Construction in progress . . . . . -- 555,249
----------- -----------
19,246,096 10,326,623
Accumulated depreciation . . . . . (906,053) (445,020)
----------- -----------
$18,340,043 $ 9,881,603
----------- -----------
----------- -----------
</TABLE>

INCOME TAXES

Deferred tax assets and liabilities are computed based on the difference between
the financial reporting and tax bases of the Company's assets and liabilities
using currently enacted tax rates.

LOSS PER SHARE

The Company adopted in 1997, Statement of Financial Accounting Standards (SFAS)
No. 128 "Earnings per Share" which requires disclosure of basic earnings per
share (EPS) and diluted EPS, which replaces the existing primary EPS and fully
diluted EPS, as defined by APB No. 15. Basic EPS is computed by dividing net
income

29
<PAGE>

by the weighted average number of shares of Common Stock outstanding during the
year. Diluted EPS is computed similarly to EPS as previously reported provided
that, when applying the treasury stock method to common equivalent shares, the
Company must use its average share price for the period rather than the more
dilutive greater of the average share price or end-of-period share price
required by APB No. 15.

As a result of the adoption of SFAS No. 128, the Company's reported earning per
share for 1996 were restated. The effect of this accounting change on
previously reported EPS data was as follows:

1996
------
<S> <C>
Primary EPS as reported. . . . . . . . . . . $(0.17)
Effect of SFAS No 128. . . . . . . . . . . . --
------
Basic EPS as restated. . . . . . . . . . . . $(0.17)
------
------
Fully diluted EPS as reported. . . . . . . . $ --
Effect of SFAS No. 128 . . . . . . . . . . . (0.17)
------
Diluted EPS as restated. . . . . . . . . . . $(0.17)
------
------
</TABLE>

USE OF ESTIMATES

The preparation 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.
Ultimate results could differ from those estimates.

RECLASSIFICATIONS

Certain amounts for 1996 have been reclassified to conform to the 1997 financial
statement presentation. These reclassifications have no effect on previously
reported net loss or shareholders' equity.

2. LONG-TERM OBLIGATIONS:

Long-term obligations consisted of the following as of:

December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
Capital lease obligations (see below) $ 5,400,000 $ --

Mortgage note payable to bank, monthly principal payments of
$5,760 plus interest at 10.2%, remaining balance due on
October 1, 2000, collateralized by all assets of the Company
and guaranteed by certain shareholders 1,635,239 1,704,359

Note payable to bank, monthly principal payments of $13,333
plus interest at 10.2%, remaining balance due on October 1,
2000, collateralized by all assets of the Company and
guaranteed by certain shareholders 453,333 613,333

Notes payable to bank, due in monthly installments through
1998 and 1999, interest at 10.95% to 13%, collateralized
by certain equipment 35,811 57,479
------------ ------------

Total 7,524,383 2,375,171

Less-Current maturities 249,825 250,780
------------ ------------

Long-term obligations $ 7,274,558 $ 2,124,391
------------ ------------
------------ ------------
</TABLE>

30
<PAGE>

In April 1997, the Company entered into a real estate purchase and leaseback
agreement with an unaffiliated third party for the land and property of its
Grand Rapids Unit. The Company received proceeds of $1,400,000 and in
return, entered into a ten year lease with a minimum annual base rent of
$140,000 and a maximum annual base rent of $192,500 and percentage rent
provisions. In the event gross sales, as defined, do not exceed established
levels for any two consecutive lease years, the Company is obligated to
repurchase the land at a predefined price. Subsequent to the seventh year,
the Company has the option to purchase the land at a predefined price.

In August 1997, the Company entered into a second real estate purchase and
leaseback agreement with the same unaffiliated third party for the land and
property of its Auburn Hills Unit. The Company received proceeds of
$4,000,000 ($749,650 of which was received during February 1997) and in
return, entered into a 25 year lease with a minimum annual base rent of
$400,000 and percentage rent provisions. In the event gross sales, as
defined, do not exceed established levels for any two consecutive lease
years, the Company is obligated to repurchase the land at a predefined
established price. Subsequent to the seventh year, the Company has the
option to purchase the land at a predefined price. In lieu of cash payment,
the Company may be required to issue shares of common stock for all or part
of the purchase price valued at $5.00 per share.

No gain or loss was recognized on the sale and leaseback transactions.
Management expects that if the Company was required to purchase the land at
these Units that these leases could be renewed or replaced by other leases.

In December 1995, the Company entered into a bridge loan with a limited
partnership which consisted of a $250,000 convertible promissory note
(Convertible Note), a $250,000 nonconvertible promissory note (Nonconvertible
Note) and warrants to purchase an aggregate of 62,500 shares of common stock at
$3.33 per share which expire in December 2000. During 1996, upon completion of
the IPO, the Convertible Note was converted into 75,000 shares common stock, and
the Nonconvertible Note was repaid in full.

Maturities of long-term obligations as of December 28, 1997 were as follows:

<TABLE>
<CAPTION>
<S> <C>
1998 $ 249,825
1999 244,226
2000 1,630,331
2001 --
2002 --
Thereafter 5,400,000
----------
$7,524,303
----------
----------
</TABLE>

3. INCOME TAXES:

Effective January 1, 1996, the Company converted from S Corporation status to a
C Corporation. As of December 28, 1997 and December 29, 1996, the Company's
deferred taxes consisted primarily of net operating loss carryforwards,
preopening costs not currently deductible and accelerated methods of
depreciation. The Company has recorded a full valuation allowance against the
net deferred tax asset due to the uncertainty of realizing the related benefits.
As of December 28, 1997, the Company had net operating loss carryforwards of
approximately $2.8 million which expire through the year 2012.

<PAGE>

4. SHAREHOLDERS' EQUITY:

STOCK SPLIT

On January 19, 1996, the Company's Board of Directors effected a 112.51-for-1
stock split on its $.01 par value Common Stock. All reference to earnings per
share, number of shares and share amount have been retroactively restated
throughout the accompanying financial statements.

PRIVATE PLACEMENT

During February 1996, the Company sold 60 units in a private placement offering
at an offering price of $25,000 per unit. Each unit consisted of (i) 2,500
shares of common stock at $4.95 per share, (ii) a $12,500 principal amount
promissory note bearing interest at 10%, unsecured, repaid upon the completion
of the IPO, and (iii) warrants to purchase 2,500 shares of common stock at an
exercise price of $5.00 per share expiring in February 2001. The Company
received net proceeds of $1,265,000 after the payment of $1,765,147 in related
offering costs. The net proceeds were used to pay off certain debt and purchase
brewery equipment and was also used for working capital purposes.

INITIAL PUBLIC OFFERING

During June 1996, the Securities and Exchange Commission declared effective a
Registration Statement relating to the IPO of 2,550,000 units at an offering
price of $5.00 per unit, including 100,000 units from the exercise of the
underwriters' overallotment option. Each unit consisted of one share of common
stock and one Redeemable Class A Warrant. The Company received net proceeds of
$10,984,853, after the payment of $1,765,147 in related offering costs. The net
proceeds were used to repay the Nonconvertible Note (Note 2), and the private
placement debt and the remaining proceeds were used to fund operating losses and
to finance a portion of the construction on the Grand Rapids and Auburn Hills
Units.

UNDERWRITERS WARRANT

In connection with its IPO, the Company issued a warrant to the underwriters
to purchase 245,000 shares of common stock at $6.00 per share. The warrant
became exercisable in June 1997 and is exercisable until June 2000.

5. STOCK OPTION PLANS:

During January 1996, the Company adopted the 1996 Stock Option Plan (the Plan),
pursuant to which options to acquire an aggregate of 600,000 shares, as amended
in June 1997, of the Company's common stock may be granted. Under the Plan, the
board of directors may grant options to purchase shares of the Company's stock
to eligible employees, nonemployees and contractors at a price not less than
100% of the fair market value at the time of the grant for both incentive and
nonstatutory stock options. Options granted under the Plan vest annually over
four years from date of grant and are exercisable for ten years, except that the
term may not exceed five years for incentive stock options granted to persons
who own more than 10% of the Company's outstanding voting stock.

Also, during January 1996, the Company adopted the 1996 Director Stock Option
Plan (the Director's Plan) pursuant to which options to acquire an aggregate of
100,000 shares of the Company's common stock may be granted to outside
directors. Under the Director's Plan, 5,000 options were automatically granted
to each outside director upon the completion of the Company's IPO, and
thereafter 5,000 options are granted annually for each year of continued service
by the outside director. Each option is granted at fair market value on the
date of grant, vests one year after the date of grant and is exercisable for ten
years.

32
<PAGE>

A summary of the status of the Company's two stock option plans at December 28,
1997 and December 29, 1996 and changes during the fiscal years then ended is
presented in the table and narrative below:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 28, 1997 December 29, 1996
---------------------------- ---------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
-------- ---------------- -------- ----------------
<S> <C> <C> <C> <C>
Outstanding, beginning of
Period. . . . . . . . . 200,000 $ 4.41 -- $ --
Granted. . . . . . . . . . 356,000 4.63 200,000 4.41
Exercised. . . . . . . . . -- -- -- --
Forfeited. . . . . . . . . 10,000 2.00 -- --
Expired. . . . . . . . . . -- -- -- --
-------- -------- -------- -------
Outstanding, end of
Period. . . . . . . . . 546,000 $ 4.55 200,000 $ 4.41
-------- -------- -------- -------
-------- -------- -------- -------
Exercisable, end of
Period. . . . . . . . . 137,750 35,000 $ 4.13
-------- -------- -------
-------- -------- -------
Weighted average fair value
Of options granted. . . $ 3.22 $ 2.63
-------- --------
-------- --------
</TABLE>

The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss and loss per share would have been
increased to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Net Loss As Reported $(1,039,520) $(703,592)
Pro Forma (1,370,375) (788,602)
Diluted EPS As Reported (0.20) (0.17)
Pro Forma (0.26) (0.19)
</TABLE>

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996, respectively: risk-free interest
rates of 6.01% and 6.96%; no expected dividend yields; expected lives of 7 and
5 years; and expected volatility of 85.06% and 60.73%.

6. COMMITMENTS AND CONTINGENCIES:

LEGAL PROCEEDINGS

The Company is involved in various legal actions rising in the ordinary course
of business. Although the outcomes of any such legal actions cannot be
predicted, in the opinion of management there is no legal proceeding pending
against or involving the Company for which the outcome is likely to have a
material adverse effect upon the financial position or results of operations of
the Company.

33
<PAGE>

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

34
<PAGE>

PART III

ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The directors, executive officers and nominees for director of the Company
are as follows:
<TABLE>
<CAPTION>

Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
William F. Rolinski 50 Chief Executive Officer, President and Director

Gary J. Hewett 35 Executive Vice President and Chief Operating Officer

Anthony P. Dombrowski 37 Chief Financial Officer and Treasurer

Blair A. Murphy, D.O. 44 Director

Henry T. Siwecki 53 Director

Casimer I. Zaremba 77 Director
</TABLE>

William F. Rolinski is a founder of the Company and has been the Chief
Executive Officer, President and a director since its formation in 1993. From
1987 to 1994, Mr. Rolinski was the founder, secretary and Corporate Counsel of
Ward Lake Energy, Inc. ("Ward Lake"), an independent producer of natural gas in
Michigan. While Mr. Rolinski was at Ward Lake, the company drilled and produced
over 500 natural gas wells with combined reserves of over $200 million.

Gary J. Hewett became the Chief Operating Officer and Executive Vice
President of the Company in April 1996. From 1989 to March 1996, he served in
various capacities at Hooters of America, Inc., a national restaurant chain,
including Vice President of Franchise Operations in which Mr. Hewett was
responsible for the operational support of 84 franchised restaurants and Vice
President of Company Operations where he was responsible for the operation of 28
company-owned restaurants. Mr. Hewett's responsibilities at Hooters included
supervision of site selection, restaurant design and layout, training and new
restaurant openings. From 1986 to 1989, Mr. Hewett was employed by the Marriott
Corporation as a restaurant general manager.

Anthony P. Dombrowski became the Chief Financial Officer of the Company in
May 1996. He acted as a consultant to the Company, in the capacity of Chief
Financial Officer, from January 1996 to May 1996. From February 1995 to May
1996, Mr. Dombrowski operated his own financial and consulting business. Mr.
Dombrowski began his career with Price Waterhouse LLP in 1982. From 1989 to
1995, Mr. Dombrowski was the Chief Financial Officer of Ward Lake.

Blair A. Murphy, D.O. is a founder of the Company and has been a director
since its formation in 1993. Dr. Murphy has been a urological surgeon since
1990 and is presently a self-employed physician.

Henry T. Siwecki has been a director since August 1995. For more than the
last five years, Mr. Siwecki has been the sole owner and president of Siwecki
Construction, Inc., a commercial and residential contractor.

Casimer I. Zaremba, a founder of the Company who has been a director since
its formation in 1993, has decided not to seek reelection to the Board. Mr.
Zaremba has been a private investor for more than the past five years.

The Company's non-employee directors receive options pursuant to the 1996
Director Stock Option Plan. Management members of the Board receive no
compensation as Board members. Board members are paid their expenses, if any,
which are incurred solely to participate in meetings of the Board or Board
committees.

35
<PAGE>

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of ownership and changes in
ownership with the Commission. Such officers, directors and shareholders are
required by the Commission to furnish the Company with copies of all such
reports. To the Company's knowledge, based solely on a review of copies of
reports filed with the Commission during 1997, all applicable Section 16(a)
filing requirements have been met.

36
<PAGE>

ITEM 10 EXECUTIVE COMPENSATION

The following table sets forth the aggregate cash compensation paid to or
accrued by each of the Company's executive officers who received in excess of
$100,000 for services rendered to the Company during 1997, 1996 and 1995. The
Company has no formalized employment agreements with its executive officers.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
---------------------------- -------------------------------------
SHARES OF COMMON STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY UNDERLYING OPTIONS
----------------------------------- ---------- ------------- -------------------------------------
<S> <C> <C> <C>
William F. Rolinski 1997 $ 167,308 75,000
Chief Executive Officer 1996 134,038 --
1995(1) 34,000 --

Gary J. Hewett 1997 $ 152,061 125,000
Executive Vice President and 1996(2) 101,445 55,000
Chief Operating Officer 1995 -- --

Anthony P. Dombrowski 1997 $ 102,615 60,000
Chief Financial Officer and 1996(3) 112,516 33,000
Treasurer 1995 15,300 --
</TABLE>

- ----------------------
(1) Prior to May 26, 1995, Mr. Rolinski was not paid for his services.
(2) Mr. Hewett's employment with the Company began on April 1, 1996.
(3) Mr. Dombrowski's employment with the Company began on May 1, 1996.

The following tables summarize stock option grants and exercises during
1997 to or by the executive officers set forth below and certain other
information relative to such stock options.

OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE)(1) DATE
- ---------------------------- ------------------ ------------------------------- ---------------------- -----------------
<S> <C> <C> <C> <C>
William F. Rolinski 75,000 25.9% $4.75 9/29/07
Gary J. Hewett 125,000 43.1% $4.75 9/29/07
Anthony P. Dombrowski 60,000 20.7% $4.75 9/29/07
</TABLE>

- ----------------------------
(1) Fair market value per share on the date of grant, in accordance with the
Company's 1996 Stock Option Plan.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION> NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE -------------------------------- --------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------------- ------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William F. Rolinski -- -- -- 75,000 -- $ 56,250
Gary J. Hewett -- -- 17,500 162,500 $ 20,625 $ 90,625
Anthony P. Dombrowski -- -- 10,500 82,500 $ 12,375 $ 46,875
</TABLE>

- -------------------------
(1) Market value of underlying securities at fiscal year end minus the exercise
price.

37
<PAGE>

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table contains certain information as of March 1, 1998,
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially more than 5% of its Common
Stock, (ii) each director, nominee for director, and executive officer named in
the "Summary Compensation Table" above and (iii) the directors and executive
officers as a group, and as to the percentage of the outstanding shares held by
them on such date. Any shares which are subject to an option or a warrant
exercisable within 60 days are reflected in the following table and are deemed
to be outstanding for the purpose of computing the percentage of Common Stock
owned by the option or warrant holder but are not deemed to be outstanding for
the purpose of computing the percentage of Common Stock owned by any other
person. Unless otherwise noted, each person identified below possesses sole
voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OWNED(1) CLASS
- ----------------------------------- ------------ ------------
<S> <C> <C>
Perkins Capital Management, Inc.(2). . . . . . 1,031,600 17.8
730 East Lake Street
Wayzata, Minnesota 55391
William F. Rolinski(3) . . . . . . . . . . . . 840,608 15.9
Casimer I. Zaremba(3)(4)(5). . . . . . . . . . 685,007 12.9
Blair A. Murphy, D.O.(3)(4). . . . . . . . . . 645,007 12.2
The Perkins Opportunity Fund(6). . . . . . . . 600,000 10.7
730 East Lake Street
Wayzata, Minnesota 55391
Henry T. Siwecki(3)(4)(7). . . . . . . . . . . 146,989 2.7
Gary J. Hewett(8). . . . . . . . . . . . . . . 17,500 *
Anthony P. Dombrowski(9) . . . . . . . . . . . 15,500 *
All Directors and Executive Officers as a
Group (6 persons)(7)(10) . . . . . . . . . . 2,350,611 43.9
</TABLE>

- ---------------
*Represents less than one percent.

(1) Securities "beneficially owned" by a person are determined in accordance
with the definition of "beneficial ownership" set forth in the regulations
of the Commission and, accordingly, may include securities owned by or for,
among others, the spouse, children or certain other relatives of such
person as well as other securities as to which the person has or shares
voting or investment power or has the option or right to acquire Common
Stock within 60 days.
(2) As set forth in Schedule 13G filed with the Commission by Perkins Capital
Management, Inc. ("PCM") and The Perkins Opportunity Fund ("POF") on
February 12, 1998. Includes (i) 214,800 shares of Common Stock owned by
the clients of PCM, (ii) 216,800 shares of Common Stock subject to
currently exercisable warrants owned by the clients of PCM, (iii) 300,000
shares of Common Stock owned by POF, and (iv) 300,000 shares of Common
Stock subject to currently exercisable warrants owned by POF. PCM has (i)
sole power to vote 377,000 shares of Common Stock, including 300,000 shares
of Common Stock owned by POF, and (ii) sole power to dispose of 1,031,600
shares of Common Stock, including 300,000 shares of Common Stock owned by
POF and 300,000 shares of Common Stock subject to currently exercisable
warrants owned by POF. PCM disclaims beneficial ownership of the
securities owned by POF.
(3) Substantially all of the shares beneficially owned by Messrs. Rolinski,
Zaremba, Murphy and Siwecki are subject to a three-year escrow agreement
with Norwest Bank Minnesota, National Association, the Company and the
Commissioner of Commerce for the State of Minnesota dated June 7, 1996.
(4) Includes 10,000 shares of Common Stock subject to currently exercisable
options.
(5) Beneficial ownership of 450,005 of these shares is shared with Walter
Zaremba, Casimer Zaremba's brother.
(6) As set forth in Schedule 13G filed with the Commission by PCM and POF on
February 12, 1998. Includes 300,000 shares of Common Stock subject to
currently exercisable warrants. Ownership of ten percent or more of the
outstanding stock of the Company requires the prior approval of the
Michigan Liquor Control Commission. As a result, the warrants held by POF
cannot be exercised in their entirety without such approval.

38
<PAGE>

(7) Includes 6,000 shares of Common Stock subject to currently exercisable
warrants.
(8) Represents shares of Common Stock subject to currently exercisable options.
(9) Includes 10,500 shares of Common Stock subject to currently exercisable
options.
(10) Includes 58,000 shares of Common Stock subject to currently exercisable
options.

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company issued a promissory note for $250,000, with annual interest
thereon at nine percent, to Casimer I. Zaremba, a director of the Company, on
March 17, 1995 which was due and payable on May 17, 1995. A portion of the
proceeds of the December 1995 pre-bridge financing (the "Pre-Bridge Financing")
was used to repay $50,000 borrowed thereunder. On April 10, 1996, the Company
and Casimer I. Zaremba agreed to replace such promissory note with a new
promissory note for $175,000, with annual interest thereon at nine percent. A
portion of the proceeds of the February 1996 bridge financing (the "Bridge
Financing") was used to repay $50,000 borrowed thereunder. The Company also
used a portion of the proceeds of its initial public offering to fully retire
this promissory note. The Company believes the terms of its transactions with
Casimer I. Zaremba were no less favorable to the Company than those that could
be obtained from unaffiliated third parties.

The Company entered into a $750,000 revolving credit facility with Gornick
Holdings Ltd. Partnership. Prior to the Pre-Bridge and Bridge Financings, the
Company had borrowed $250,000 under this credit facility. Messrs. Rolinski,
Murphy, Zaremba and Siwecki, shareholders of the Company, guaranteed repayment
of this facility. A portion of the proceeds of the Pre-Bridge and Bridge
Financings was used to repay the $250,000 borrowed thereunder. The revolving
credit facility was terminated by the Company on April 1, 1996.

The Company has entered into a loan agreement with NBD Bank for three
separate loan facilities which aggregate $3.0 million. Messrs. Rolinski, Murphy
and Zaremba, each a director of the Company, have personally guaranteed
repayment of all amounts under this loan agreement. Messrs. Rolinski, Murphy
and Zaremba do not intend to personally guarantee future obligations of the
Company.

The Company and its affiliates will only engage in other material
transactions with promoters if the transactions are (i) on terms no less
favorable to the Company or its affiliates than those that are generally
available from unaffiliated third parties and (ii) ratified by a majority of
independent outside members of the Company's Board who do not have an interest
in the transactions.

ITEM 13 EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Restated Articles of Incorporation (incorporated by reference
to the Company's Current Report on Form 8-K, filed on October
3, 1997 (File No. 0-20845)).
3.2 Amended and Restated Bylaws (incorporated by reference to the
Company's Registration Statement on Form SB-2, filed on April
15, 1996 (File No. 333-3548)).
4.1 Specimen Form of the Company's Common Stock Certificate
(incorporated by reference to the Company's Registration
Statement on Form SB-2, filed on April 15, 1996 (File No.
333-3548)).
4.2 Form of Warrant Agreement (including Form of Redeemable Class
A Warrant) (incorporated by reference to the Company's
Registration Statement on Form SB-2, filed on April 15, 1996
(File No. 333-3548)).
4.3 Form of Subscription and Investment Representation Agreement,
dated December 1995, between the Company and Pyramid Partners,
LP (including Form of Convertible Secured Promissory Note,
Form of Non-Convertible Secured Promissory Note and Form of
Warrant) (incorporated by reference to the Company's
Registration Statement on Form SB-2, filed on April 15, 1996
(File No. 333-3548)).
10.1 1996 Stock Option Plan.

39
<PAGE>

10.2 1996 Director Stock Option Plan (incorporated by reference to
the Company's Registration Statement on Form SB-2, filed on
April 15, 1996 (File No. 333-3548)).
10.3 Loan Agreement dated July 28, 1995, by and among the Company,
William F. Rolinski, Dr. Blair A. Murphy, Walter Zaremba,
Casimer I. Zaremba and NBD Bank (incorporated by reference to
the Company's Registration Statement on Form SB-2, filed on
April 15, 1996 (File No. 333-3548)).
10.4 Escrow Agreement dated June 7, 1996, by and among the Company,
William F. Rolinski, Dr. Blair A. Murphy, Casimer I. Zaremba,
Henry T. Siwecki, Norwest Bank Minnesota, National
Association, and the Commissioner of Commerce for the State of
Minnesota (incorporated by reference to the Company's Annual
Report on Form 10-KSB, filed on March 31, 1997 (File No.
0-20845)).
10.5 Real Estate Purchase and Leaseback Agreement by and between
Eyde Brothers Development Co., Landlord, and the Company,
Tenant, dated April 11, 1997 (incorporated by reference to the
Company's Quarterly Report on Form 10-QSB, filed on May 9,
1997 (File No. 0-20845)).
10.6 Lease Agreement by and between Eyde Brothers Development Co.,
Landlord, and the Company, Tenant, dated April 11, 1997
(incorporated by reference to the Company's Quarterly Report
on Form 10-QSB, filed on May 9, 1997 (File No. 0-20845)).
10.7 Real Estate Purchase and Leaseback Agreement by and between
Michael G. Eyde, Landlord, and the Company, Tenant, dated
August 1, 1997 (incorporated by reference to the Company's
Quarterly Report on Form 10-QSB, filed on August 12, 1997
(File No. 0-20845)).
10.8 Lease Agreement by and between Michael G. Eyde, Landlord, and
the Company, Tenant, dated October 1, 1997.
10.9 Stock Option Agreement dated August 1, 1997, between the
Company and Michael G. Eyde.
23.1 Consent of Independent Public Accountants.
24.1 Power of Attorney (included on signature page to Form 10-KSB).
27.1 Financial Data Schedule.

(b) Reports on Form 8-K

(1) The Company's Current Report on Form 8-K, filed October 3,
1997 (File No. 0-20845), relating to (i) the Company filing
Restated Articles of Incorporation with the Michigan
Department of Commerce, (ii) the opening of a Big Buck Brewery
& Steakhouse in Auburn Hills, Michigan, and (iii) the Company
changing its name from Michigan Brewery, Inc. to Big Buck
Brewery & Steakhouse, Inc.

40
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Gaylord, State of
Michigan on March 23, 1998.

BIG BUCK BREWERY & STEAKHOUSE, INC.

By /s/ William F. Rolinski
-------------------------------------------
William F. Rolinski
President and Chief Executive Officer
(principal executive officer)

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENT, that each person whose signature appears below
constitutes and appoints William F. Rolinski and Anthony P. Dombrowski as his or
her true and lawful attorney-in-fact and agent, with full powers of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the Securities Act of 1934, this report has been signed
below by the following persons on behalf of the registrant, and in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William F. Rolinski President, Chief Executive Officer and March 23, 1998
- --------------------------------------- Director (Principal Executive Officer)
William F. Rolinski

/s/ Anthony P. Dombrowski Chief Financial Officer (Principal March 23, 1998
- --------------------------------------- Accounting Officer and Principal
Anthony P. Dombrowski Financial Officer)

/s/ Blair A. Murphy Director March 23, 1998
- ---------------------------------------
Blair A. Murphy

/s/ Henry T. Siwecki Director March 23, 1998
- ---------------------------------------
Henry T. Siwecki

Director
- ---------------------------------------
Casimer I. Zaremba
</TABLE>

41
<PAGE>

INDEX TO EXHIBITS
<TABLE>
<CAPTION>

Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 Restated Articles of Incorporation (incorporated by reference to the
Company's Current Report on Form 8-K, filed on October 3, 1997 (File
No. 0-20845)).
3.2 Amended and Restated Bylaws (incorporated by reference to the
Company's Registration Statement on Form SB-2, filed on April 15, 1996
(File No. 333-3548)).
4.1 Specimen Form of the Company's Common Stock Certificate (incorporated
by reference to the Company's Registration Statement on Form SB-2,
filed on April 15, 1996 (File No. 333-3548)).
4.2 Form of Warrant Agreement (including Form of Redeemable Class A
Warrant) (incorporated by reference to the Company's Registration
Statement on Form SB-2, filed on April 15, 1996 (File No. 333-3548)).
4.3 Form of Subscription and Investment Representation Agreement, dated
December 1995, between the Company and Pyramid Partners, LP (including
Form of Convertible Secured Promissory Note, Form of Non-Convertible
Secured Promissory Note and Form of Warrant) (incorporated by
reference to the Company's Registration Statement on Form SB-2, filed
on April 15, 1996 (File No. 333-3548)).
10.1 1996 Stock Option Plan.
10.2 1996 Director Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form SB-2, filed on April 15, 1996
(File No. 333-3548)).
10.3 Loan Agreement dated July 28, 1995, by and among the Company, William
F. Rolinski, Dr. Blair A. Murphy, Walter Zaremba, Casimer I. Zaremba
and NBD Bank (incorporated by reference to the Company's Registration
Statement on Form SB-2, filed on April 15, 1996 (File No. 333-3548)).
10.4 Escrow Agreement dated June 7, 1996, by and among the Company, William
F. Rolinski, Dr. Blair A. Murphy, Casimer I. Zaremba, Henry T.
Siwecki, Norwest Bank Minnesota, National Association, and the
Commissioner of Commerce for the State of Minnesota (incorporated by
reference to the Company's Annual Report on Form 10-KSB, filed on
March 31, 1997 (File No. 0-20845)).
10.5 Real Estate Purchase and Leaseback Agreement by and between Eyde
Brothers Development Co., Landlord, and the Company, Tenant, dated
April 11, 1997 (incorporated by reference to the Company's Quarterly
Report on Form 10-QSB, filed on May 9, 1997 (File No. 0-20845)).
10.6 Lease Agreement by and between Eyde Brothers Development Co.,
Landlord, and the Company, Tenant, dated April 11, 1997 (incorporated
by reference to the Company's Quarterly Report on Form 10-QSB, filed
on May 9, 1997 (File No. 0-20845)).
10.7 Real Estate Purchase and Leaseback Agreement by and between Michael G.
Eyde, Landlord, and the Company, Tenant, dated August 1, 1997
(incorporated by reference to the Company's Quarterly Report on Form
10-QSB, filed on August 12, 1997 (File No. 0-20845)).
10.8 Lease Agreement by and between Michael G. Eyde, Landlord, and the
Company, Tenant, dated October 1, 1997.
10.9 Stock Option Agreement dated August 1, 1997, between the Company and
Michael G. Eyde.
23.1 Consent of Independent Public Accountants.
24.1 Power of Attorney (included on signature page to Form 10-KSB).
27.1 Financial Data Schedule.
</TABLE>

<PAGE>

EXHIBIT 10.1

BIG BUCK BREWERY & STEAKHOUSE, INC.

1996 STOCK OPTION PLAN

1. PURPOSE

The purpose of Big Buck Brewery & Steakhouse, Inc. 1996 Stock Option Plan
(the "Plan") is to promote the interests of Big Buck Brewery & Steakhouse, Inc.,
a Michigan corporation (the "Company"), by providing employees of the Company
and certain independent contractors with an opportunity to acquire a proprietary
interest in the Company and thereby develop a stronger incentive to contribute
to the Company's continued success and growth. In addition, the granting of
stock options will assist the Company in attracting and retaining key personnel
of outstanding ability.

2. DEFINITIONS

Wherever used in the Plan, the following terms have the meanings set forth
below:

2.1 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder.

2.2 "Committee" means a committee of the Board of Directors of the Company
designated by such Board to administer the Plan and composed of not less than
two directors. Beginning on the date the Company first registers the Stock
under Section 12 of the Securities Exchange Act of 1934, each member of the
Committee must be a "disinterested person" within the meaning of Rule 16b-3.

2.3 "Incentive Stock Option" or "ISO" means a stock option which is
intended to qualify as an incentive stock option as defined in Section 422 of
the Code.

2.4 "Non-Statutory Stock Option" or "NSO" means a stock option that is not
intended to, or does not, qualify as an incentive stock option as defined in
Section 422 of the Code.

2.5 "Option" means, where required by the context of the Plan, an ISO or
NSO granted pursuant to the Plan.

2.6 "Optionee" means a Participant in the Plan who has been granted one or
more Options under the Plan.

2.7 "Participant" means an individual described in Section 5 of this Plan
who may be granted Options under the Plan.

2.8 "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.

2.9 "Stock" means the par value, $.01 per share of the Company.

2.10 "Subsidiary" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns 50% or
more of the voting stock in one of the other corporations in such chain.

<PAGE>

3. ADMINISTRATION

3.1 The Plan shall be administered by the Committee, which shall have full
power, subject to the provisions and restrictions of the Plan, to grant Options,
construe and interpret the Plan, establish rules and regulations with respect to
the Plan and Options granted hereunder, and perform all other acts, including
the delegation of administrative responsibilities, that it believes reasonable
and necessary.

3.2 The Committee shall have the sole discretion, subject to the
provisions of the Plan, to determine the Participants eligible to receive
Options pursuant to the Plan and the amount, type, and terms of any Options and
the terms and conditions of option agreements relating to any Option.

3.3 The Committee may correct any defect, supply any omission, or
reconcile any inconsistency in the Plan or in any Option granted hereunder in
the manner and to the extent it shall deem necessary to carry out the terms of
the Plan.

3.4 Any decision made, or action taken, by the Committee arising out of or
in connection with the interpretation and administration of the Plan shall be
final, conclusive and binding upon all Optionees.

4. SHARES SUBJECT TO THE PLAN

4.1 NUMBER. The total number of shares of Stock reserved for issuance
upon exercise of Options under the Plan is Six Hundred Thousand (600,000). Such
shares shall consist of authorized but unissued Stock. If any Option granted
under the Plan lapses or terminates for any reason before being completely
exercised, the shares covered by the unexercised portion of such Option may
again be made subject to Options under the Plan.

4.2 CHANGES IN CAPITALIZATION. In the event of any change in the
outstanding shares of Stock of the Company by reason of any stock dividend,
split, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, or rights offering to purchase stock at a price
substantially below fair market value, or other similar corporate change, the
aggregate number of shares which may be subject to Options under the Plan and
the terms of any outstanding Option, including the number and kind of shares
subject to such Options and the purchase price per share thereof, shall be
appropriately adjusted by the Committee, consistent with such change and in such
manner as the Committee, in its sole discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to or available for
Optionees. Notwithstanding the preceding sentence, in no event shall any
fraction of a share of Stock be issued upon the exercise of an Option.

5. ELIGIBLE PARTICIPANTS

The following persons are Participants eligible to participate in the Plan:

5.1 INCENTIVE STOCK OPTIONS. Incentive Stock Options may be granted only
to employees of the Company or any Subsidiary, including officers and directors
who are also employees of the Company or any Subsidiary.

5.2 NON-STATUTORY STOCK OPTIONS. Non-statutory stock options may be
granted to (i) any employee of the Company or any Subsidiary, including any
officer or director who is also an employee of the Company or any Subsidiary;
and (ii) any consultant to, or other independent contractor of, the Company who
is not a director of the Company.

<PAGE>

6. GRANT OF OPTIONS

6.1 DISCRETIONARY GRANTS. Subject to the terms, conditions, and
limitations set forth in this Plan, the Company, by action of the Committee,
may from time to time grant Options to purchase shares of the Company's Stock
to those eligible Participants as may be selected by the Committee, in such
amounts and on such other terms as the Committee in its sole discretion shall
determine. Unless otherwise specified by the Committee, twenty-five percent
(25%) of the Options granted under this sub-section shall become vested upon
the completion of 12 continuous months of employment from the date of grant,
with vesting of another twenty-five percent (25%) of the Options upon
completion of each subsequent 12 month period of employment, over a
continuous four year period.

6.2 LIMITATIONS. Options specified under Section 6.1 above may be (i)
"Incentive Stock Options" so designated by the Committee and which, when
granted, are intended to qualify as incentive stock options as defined in
Section 422 of the Code; (ii) "Non-Statutory Stock Options" so designated by the
Committee and which, when granted, are not intended to, or do not, qualify as
incentive stock options under Section 422 of the Code; or (iii) a combination of
both. The date on which the Committee approves the granting of an Option shall
be the date of grant of such Option, unless a different date is specified by the
Committee on such date of approval. Notwithstanding the foregoing, with respect
to the grant of any Incentive Stock Option under the Plan, the aggregate fair
market value of Stock (determined as of the date the Option is granted) with
respect to which Incentive Stock Options are exercisable for the first time by
an Optionee in any calendar year (under all such stock option plans of the
Company or Subsidiaries) shall not exceed $100,000. Each grant of an Option
under the Plan shall be evidenced by a written stock option agreement between
the Company and the Optionee setting forth the terms and conditions, not
inconsistent with the Plan, under which the Option so granted may be exercised
pursuant to the Plan and containing such other terms with respect to the Option
as the Committee in its sole discretion may determine.

7. OPTION PRICE AND FORM OF PAYMENT

The purchase price for a share of Stock subject to an Incentive Stock
Option granted hereunder shall not be less than 100% of the fair market value of
the Stock. For purposes of this Section 7, the "fair market value" of the Stock
shall be determined as follows:

(a) if the Stock of the Company is listed or admitted to unlisted
trading privileges on a national securities exchange, the fair market value
on any given day shall be the closing sale price for the Stock, or if no
sale is made on such day, the closing bid price for such day on such
exchange;

(b) if the Stock is not listed or admitted to unlisted trading
privileges on a national securities exchange, the fair market value on any
given day shall be the closing sale price for the Stock as reported on
either the Nasdaq National Market System or the Nasdaq SmallCap Market on
such day, or if no sale is made on such day, the closing bid price for such
day as entered by a market maker for the Stock;

(c) if the Stock is not listed on a national securities exchange, is
not admitted to unlisted trading privileges on any such exchange, and is
not eligible for inclusion in either the Nasdaq National Market System or
the Nasdaq SmallCap Market, the fair market value on any given day shall be
the average of the closing representative bid and asked prices as reported
on the Nasdaq System, and if not reported on such system, then as reported
by the National Quotation Bureau, Inc. or such other publicly available
compilation of the bid and asked prices of the Stock in any
over-the-counter market on which the Stock is traded; or

(d) if there exists no public trading market for the Stock, the fair
market value on any given day shall be an amount determined in good faith
by the Committee in such manner as it may reasonably determine in its
discretion, provided that such amount shall not be less than the book value
per share as

<PAGE>

reasonably determined by the Committee as of the date of determination or
less than the par value of the Stock.

Notwithstanding the foregoing, in the case of an Incentive Stock Option
granted to any Optionee then owning more than 10% of the voting power of all
classes of the Company's stock, the purchase price per share of the Stock
subject to such Option shall not be less than 110% of the fair market value of
the Stock on the date of grant of the Incentive Stock Option, determined as
provided above.

Except as provided herein, the purchase price of each share of Stock
purchased upon the exercise of any Option shall be paid:

(a) in United States dollars in cash or by certified check, bank
draft or money order payable to the order of the Company; or

(b) through the delivery of shares of Stock valued at fair market
value at the time the Option is exercised (as determined in the manner
provided under this Plan); or

(d) by such other method as may be permitted in the written stock
option agreement between the Company and the Optionee.

If such form of payment is permitted, the Committee shall determine
procedures for tendering Stock as payment upon exercise of an Option and may
impose such additional limitations and prohibitions on the use of Stock as
payment upon the exercise of an option as it deems appropriate.

If the Committee in its sole discretion so agrees, the Company may finance
the amount payable by an Optionee upon exercise of any Option upon such terms
and conditions as the Committee may determine at the time such Option is granted
under this Plan.

8. EXERCISE OF OPTIONS

8.1 MANNER OF EXERCISE. An Option, or any portion thereof, shall be
exercised by delivering a written notice of exercise to the Company and paying
to the Company the full purchase price of the Stock to be acquired upon the
exercise of the Option. Until certificates for the Stock acquired upon the
exercise of an Option are issued to an Optionee, such Optionee shall not have
any rights as a shareholder of the Company with respect to such Stock.

8.2 LIMITATIONS AND CONDITIONS ON EXERCISE OF OPTIONS. In addition to any
other limitations or conditions contained in this Plan or that may be imposed by
the Committee from time to time or in the stock option agreement to be entered
into with respect to Options granted hereunder, the following limitations and
conditions shall apply to the exercise of Options granted under this Plan:

8.2.1 No Incentive Stock Option may be exercisable by its terms
after the expiration of 10 years from the date of the grant thereof.

8.2.2 No Incentive Stock Option granted pursuant to the Plan to an
eligible Participant then owning more than 10% of the voting power of all
classes of the Company's stock may be exercisable by its terms after the
expiration of five years from the date of the grant thereof.

<PAGE>

8.2.3 To the extent required to comply with Rule 16b-3, Stock
acquired upon exercise of an Option granted under to the Plan may not be
sold or otherwise disposed of for a period of six months from the date of
grant of the Option.

9. INVESTMENT PURPOSES

Unless a registration statement under the Securities Act of 1933 is in
effect with respect to Stock to be purchased upon exercise of Options to be
granted under the Plan, the Company shall require that an Optionee agree with
and represent to the Company in writing that he or she is acquiring such shares
of Stock for the purpose of investment and with no present intention to
transfer, sell or otherwise dispose of such shares of Stock other than by
transfers which may occur by will or by the laws of descent and distribution,
and no shares of Stock may be transferred unless, in the opinion of counsel to
the Company, such transfer would be in compliance with applicable securities
laws. In addition, unless a registration statement under the Securities Act of
1933 is in effect with respect to the Stock to be purchased under the Plan, each
certificate representing any shares of Stock issued to an Optionee hereunder
shall have endorsed thereon a legend in substantially the following form:

THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
AND WITHOUT REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS,
IN RELIANCE UPON EXEMPTION(S) CONTAINED THEREIN. NO TRANSFER OF THESE
SHARES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO
EFFECTIVE REGISTRATION STATEMENTS UNDER SUCH LAWS UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
TRANSFER OR DISPOSITION DOES NOT REQUIRE REGISTRATION UNDER SUCH LAWS
AND, FOR ANY SALES UNDER RULE 144 OF THE ACT, SUCH EVIDENCE AS IT
SHALL REQUEST FOR COMPLIANCE WITH THAT RULE, OR APPLICABLE STATE
SECURITIES LAWS.

10. TRANSFERABILITY OF OPTIONS

No Option granted under the Plan shall be transferable by an Optionee
(whether by sale, assignment, hypothecation or otherwise) other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined under the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. An Option shall be exercisable
during the Optionee's lifetime only by the Optionee or, if permissible under
applicable law, by the Optionee's guardian or legal representative.

11. TERMINATION OF OPTIONS

11.1 GENERALLY. Except as otherwise provided in this Section 11, if an
Optionee's employment with the Company or Subsidiary is terminated (hereinafter
"Termination") other than by death or Disability (as hereinafter defined), the
Optionee may exercise any Option granted under the Plan, to the extent the
Optionee was vested in and entitled to exercise the Option at the date of
Termination, for a period of three months after the date of Termination or until
the term of the Option has expired, whichever date is earlier.

11.2 DEATH OR DISABILITY OF OPTIONEE. In the event of the death or
Disability of an Optionee prior to expiration of an Option held by him or her,
the following provisions shall apply:

11.2.1 If the Optionee is at the time of his or her Disability
employed by the Company or a Subsidiary and has been in continuous
employment (as determined by the Committee in its sole discretion) since
the date of grant of the Option, then the Option may be exercised by the
Optionee until the earlier of one year following the date of such
Disability or the expiration date of the Option, but only to the extent the
Optionee was vested in and entitled to exercise such Option at the time of
his or her Disability. For the purpose of this Section 11, the term
"Disability" shall mean a permanent and total

<PAGE>

disability as defined in Section 22(e)(3) of the Code. The determination
of whether an Optionee has a Disability within the meaning of
Section 22(e)(3) shall be made by the Committee in its sole discretion.

11.2.2 If the Optionee is at the time of his or her death
employed by the Company or a Subsidiary and has been in continuous
employment (as determined by the Committee in its sole discretion) since
the date of grant of the Option, then the Option may be exercised by the
Optionee's estate or by a person who acquired the right to exercise the
Option by will or the laws of descent and distribution, until the earlier
of one year from the date of the Optionee's death or the expiration date of
the Option, but only to the extent the Optionee was vested in and entitled
to exercise the Option at the time of death.

11.2.3 If the Optionee dies within three months after
Termination, the Option may be exercised until the earlier of nine months
following the date of death or the expiration date of the Option, by the
Optionee's estate or by a person who acquires the right to exercise the
Option by will or the laws of descent or distribution, but only to the
extent the Optionee was vested in and entitled to exercise the Option at
the time of Termination.

11.3 TERMINATION FOR CAUSE. If the employment of an Optionee is terminated
by the Company or a Subsidiary for cause, then the Committee shall have the
right to cancel any Options granted to the Optionee under the Plan.

11.4 SUSPENSION OR TERMINATION FOR MISCONDUCT. If the Committee reasonably
believes that an Optionee has committed an act of misconduct, it may suspend the
Optionee's right to exercise any Option pending a determination by the
Committee. If the Committee determines that an Optionee has committed an act of
embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company's rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition with respect to the
Company, or induces any party to breach a contract with the Company, neither the
Optionee nor the Optionee's estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Committee shall act fairly and
shall give the Optionee an opportunity to appear and present evidence on the
Optionee's behalf at a hearing before the Committee.

12. AMENDMENT AND TERMINATION OF PLAN

12.1 The Committee may from time to time, insofar as permitted by law,
suspend or terminate the Plan or revise or amend it in any respect; provided,
however, that no such revision or amendment shall (a) materially modify the
eligibility requirements for Participants as set forth in Section 5 hereof; (b)
increase the maximum aggregate number of shares of Stock which may be issued
pursuant to Options, except in accordance with Section 4.2 hereof; (c) reduce
the minimum Option price per share as set forth in Section 7 hereof, except in
accordance with Section 4.2 hereof; (d) extend the period of granting Options;
or (e) materially increase in any other way the benefits accruing to Optionees
without the approval of the shareholders of the Company if such approval is
required for compliance with the requirements of any applicable law or
regulation.

12.2 No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to him or her under the Plan.

12.3 The Committee may amend the Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Incentive
Stock Options meeting the requirements of future amendments to the Code.

12.4 In the event of the proposed dissolution or liquidation of the
Company, each Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee.

<PAGE>

The Committee may, in the exercise of its sole discretion in such instance,
declare that any Option shall terminate as of a date fixed by the Committee and
give each Optionee the right to exercise his or her Option as to all or any part
of the Option, including Stock as to which the Option would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Committee determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, that the
Optionee shall have the right to exercise the Option in full including Stock as
to which the Option would not otherwise be exercisable. If the Committee makes
an Option fully exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Committee shall notify the Optionee that the
Option shall be fully exercisable for a period of thirty (30) days from the date
of such notice, and the Option will terminate upon the expiration of such
period.

13. MISCELLANEOUS PROVISIONS

13.1 NO RIGHT TO CONTINUED EMPLOYMENT. No person shall have any claim or
right to be granted an Option under the Plan, and the grant of an Option under
the Plan shall not be construed as giving an Optionee the right to continued
employment with the Company. The Company further expressly reserves the right
at any time to dismiss an Optionee or reduce an Optionee's compensation with or
without cause, free from any liability, or any claim under the Plan, except as
provided herein or in a stock option agreement.

13.2 TRANSFER OF STOCK AND PAYMENT OF WITHHOLDING TAXES. The Company shall
have the right to require that payment or provision for payment of any and all
withholding taxes due upon the grant or exercise of an Option hereunder or the
disposition of any Stock or other property acquired upon exercise of an Option
be made by an Optionee. Stock acquired upon exercise of an Incentive Stock
Option may not be disposed of by the Optionee before the later of two years from
the date of grant or one year from the date of exercise unless adequate
provision is made for payment to the Company of funds sufficient for payment of
any withholding and other taxes required by any governmental authority in
respect of the disposition of such Stock. The Company may place a legend on
certificates restricting the transfer of Stock issued pursuant to Incentive
Stock Options in order to obtain compliance with tax withholding requirements.
The Committee shall have the right to establish such other rules and regulations
or impose such other terms and conditions in any agreement relating to an Option
granted hereunder with respect to tax withholding as the Committee may deem
necessary and appropriate.

13.3 GOVERNING LAW. The Plan shall be administered in the State of
Michigan, and the validity, construction, interpretation, and administration of
the Plan and all rights relating to the Plan shall be determined solely in
accordance with the laws of such state, unless controlled by applicable federal
law, if any.

14. EFFECTIVE DATE

The effective date of the Plan is January 19, 1996. No Option may be
granted after January 19, 2006 provided, however, that all outstanding Options
shall remain in effect until such outstanding Options have expired or been
canceled.

<PAGE>

EXHIBIT 10.8

LEASE AGREEMENT

BETWEEN

MICHAEL G. EYDE,
Landlord

AND

MICHIGAN BREWERY, INC.,
Tenant

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
DATA SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Article 1: PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Article 2: TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . 4

Section 2.1: Commencement Date . . . . . . . . . . . . . . . 4
Section 2.2: Termination Date. . . . . . . . . . . . . . . . 4
Section 2.3: Option to Extend. . . . . . . . . . . . . . . . 4
Section 2.4: Lease Year. . . . . . . . . . . . . . . . . . . 4

Article 3: RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Section 3.1: Base Rent . . . . . . . . . . . . . . . . . . . 4
Section 3.2: Percentage Rent . . . . . . . . . . . . . . . . 5
Section 3.3: Gross Sales . . . . . . . . . . . . . . . . . . 5

Article 4: USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Section 4.1: Permitted Use . . . . . . . . . . . . . . . . . 6

Article 5: OBLIGATION TO REPAIR AND MAINTAIN . . . . . . . . . . . . . . 6

Section 5.1: Tenant's Obligations. . . . . . . . . . . . . . 6

Article 6: INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Section 6.1: Tenant's Obligation . . . . . . . . . . . . . . 6
Section 6.2: Mutual Waiver of Subrogation. . . . . . . . . . 6

Article 7: ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 6

Article 8: SIGNAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Article 9: ADDITIONAL RENT CHARGES . . . . . . . . . . . . . . . . . . . 7

Section 9.1: Maintenance and Repairs . . . . . . . . . . . . 7
Section 9.2: Utilities . . . . . . . . . . . . . . . . . . . 7
Section 9.3: HVAC. . . . . . . . . . . . . . . . . . . . . . 7
Section 9.4: Taxes . . . . . . . . . . . . . . . . . . . . . 7

Article 10: DAMAGE AND DESTRUCTION. . . . . . . . . . . . . . . . . . . . 7

Article 11: EMINENT DOMAIN. . . . . . . . . . . . . . . . . . . . . . . . 8

Article 12: DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

<PAGE>

Article 13: SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . 8

Article 14: SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Article 15: RIGHT OF FIRST REFUSAL. . . . . . . . . . . . . . . . . . . . 9

Article 16: OPTION TO PURCHASE/OPTION TO SELL/STOCK OPTION . . . . . . . 9

Article 16.1: Option to Purchase . . . . . . . . . . . . . . 9
Article 16.2: Option to Sell . . . . . . . . . . . . . . . . 10
Article 16.3: Closing. . . . . . . . . . . . . . . . . . . . 12
Article 16.4: Title, Defects . . . . . . . . . . . . . . . . 12
Article 16.5: Closing Payments . . . . . . . . . . . . . . . 12
Article 16.6: Taxes, Prorations. . . . . . . . . . . . . . . 12
Article 16.7: Survey . . . . . . . . . . . . . . . . . . . . 13
Article 16.8: Claim of Interest. . . . . . . . . . . . . . . 13

Article 17: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 13

Section 17.1: Notice . . . . . . . . . . . . . . . . . . . . 13
Section 17.2: Brokerage. . . . . . . . . . . . . . . . . . . 13
Section 17.3: Quiet Enjoyment. . . . . . . . . . . . . . . . 13
Section 17.4: Mutual Force Majeure . . . . . . . . . . . . . 13
Section 17.5: Legal Expenses . . . . . . . . . . . . . . . . 13
Section 17.6: Joint and Several Liability. . . . . . . . . . 13
Section 17.7: Arbitration. . . . . . . . . . . . . . . . . . 14
Section 17.8: Entire Agreement . . . . . . . . . . . . . . . 14
Section 17.9: Additional Construction or Changes by
Landlord. . . . . . . . . . . . . . . . . . . 14
Section 17.10: Successors and Assigns . . . . . . . . . . . . 14
Section 17.11: Landlord's Agreement . . . . . . . . . . . . . 14
Section 17.12: Recording. . . . . . . . . . . . . . . . . . . 15

EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>

<PAGE>

DATA SHEET

THIS LEASE AGREEMENT, executed this 1st day of October, l997, by and
between MICHAEL G. EYDE, ("Landlord"), and MICHIGAN BREWERY, INC., a Michigan
corporation d/b/a Big Buck Brewery & Steakhouse ("Tenant"), subject to the
following terms and conditions:

A. LEASED PREMISES: Landlord hereby leases to Tenant and Tenant hereby
rents from Landlord the premises (the "Premises") legally described
on Exhibit A attached hereto located at 2550 Takata Drive, Auburn
Hills, MI 49501 in the city of Auburn Hills, Oakland County,
Michigan.

B. TERM OF LEASE: The Term of the Lease shall be twenty five (25) full
Lease Years, as that term is defined in Article 2 herein, together
with two (2) options to renew the Lease of ten (10) years each.

The Term shall commence on the Commencement Date, as defined in Article 2,
and shall expire at midnight on the twenty fifth (25th) anniversary of the
Commencement Date, unless this Lease is extended, renewed or sooner
terminated as otherwise set forth herein.

C. BASE RENT: Tenant shall pay the following as its Base Rent annually:

Initial Term: From the Commencement Date through and including the fifth
full Lease Year, Tenant shall pay $400,000 per annum, in twelve (12) equal
monthly installments of $33,333.33.

Base Rent shall be adjusted on the sixth (6th ) anniversary of the
Commencement Date of this Lease, and on each five year anniversary date
thereafter as follows:

Annual Base Rent for the sixth through tenth years of the Lease shall be
equal to the product of multiplying the sum of Four Million and no/100
($4,000,000.00) dollars by the sum of one and three-quarters (1.75%)
percent per annum plus the prime commercial lending rate for NBD Bank,
established by NBD Bank from time to time in the ordinary course of its
business ("Prime Rate") existing on the first day of the sixth Lease Year
of the Lease, with a minimum Annual Base Rent of $400,000.00 and a maximum
Annual Base Rent of $550,000.00.

Annual Base Rent for the eleventh through fifteenth years of the Lease
shall be equal to the product of multiplying the sum of Four Million and
no/100 ($4,000,000.00) dollars by the sum of one and three-quarters
(1.75%) percent per annum plus the prime commercial lending rate for NBD
Bank, established by NBD Bank from time to time in the ordinary course of
its business ("Prime Rate") existing on the first day of the eleventh
Lease Year of the Lease, with a minimum Annual Base Rent of $400,000.00
and a maximum Annual Base Rent of $550,000.00

Annual Base Rent for the sixteenth through twentieth years of the Lease
shall be equal to the product of multiplying the sum of Four Million and
no/100 ($4,000,000.00) dollars by the sum of one and three-quarters
(1.75%) percent per annum plus the prime commercial lending rate for NBD
Bank, established by NBD Bank from time to time in the ordinary course of
its business ("Prime Rate") existing on the first day of the sixteenth
Lease Year of the Lease, with a minimum Annual Base Rent of $400,000.00
and a maximum Annual Base Rent of $550,000.00.

Annual Base Rent for the twenty first through twenty fifth years of the
Lease shall be equal to the product of multiplying the sum of Four Million
and no/100 ($4,000,000.00) dollars by the sum of one and three-quarters
(1.75%) percent per annum plus the prime commercial lending rate for NBD
Bank, established by NBD Bank from time to time in the ordinary course of
its business ("Prime Rate") existing on the first

<PAGE>

day of the twenty first Lease Year of the Lease, with a minimum Annual
Base Rent of $400,000.00 and a maximum Annual Base Rent of $550,000.00.

Annual Base Rent under the first five years of the first option term, if
same shall be exercised by Tenant, shall be equal to the product of
multiplying the sum of Four Million and no/100 ($4,000,000.00) dollars by
the sum of one and three-quarters (1.75%) percent per annum plus the Prime
Rate existing on the first day of the first option term under the lease,
with a minimum Annual Base Rent of $400,000.00 and a maximum Annual Base
Rent of $550,000.00.

Annual Base Rent under the second five years of the first option term, if
same shall be exercised by Tenant, shall be equal to the product of
multiplying the sum of Four Million and no/100 ($4,000,000.00) dollars by
the sum of one and three-quarters (1.75%) percent per annum plus the Prime
Rate existing on the first day of the sixth year of the first option term
under the lease, with a minimum Annual Base Rent of $400,000.00 and a
maximum Annual Base Rent of $550,000.00.

Annual Base Rent under the first five years of the second option term, if
same shall be exercised by Tenant, shall be equal to the product of
multiplying the sum of Four Million and no/100 ($4,000,000.00) dollars by
one and three-quarters (1.75%) percent per annum plus the Prime Rate
existing on the first day of the second option term under the lease, with
a minimum Annual Base Rent of $400,000.00 and a maximum Annual Base Rent
of $550,000.00.

Annual Base Rent under the second five years of the second option term, if
same shall be exercised by Tenant, shall be equal to the product of
multiplying the sum of Four Million and no/100 ($4,000,000.00) dollars by
the sum of one and three-quarters (1.75%) percent per annum plus the Prime
Rate existing on the first day of the sixth year of the second option term
under the lease, with a minimum Annual Base Rent of $400,000.00 and a
maximum Annual Base Rent of $550,000.00.

In the event that the Prime Rate of NBD Bank shall be unavailable for
purposes of these calculations, then the parties shall use the Prime Rate
of Comerica Bank, and if such rate shall not be available, the parties
shall mutually select a prime rate being charged by similar reputable
banks in the Detroit Metropolitan Area.

D. PERMITTED USE: Tenant's use of the Premises shall be for any legal
purpose.

E. NOTICE ADDRESSES:

LANDLORD: Michael G. Eyde
6250 W. Michigan Avenue
Lansing, MI 48917

With a copy to: Peter C. Samouris, Esq.
Gaffney Professional Building
530 S. Capitol Avenue
Lansing, MI 48933-2333

TENANT: Michigan Brewery, Inc.
550 S. Wisconsin
P.O. Box 1430
Gaylord, MI 49735

<PAGE>

With a copy to: Alan S. Levine, Esq.
Butzel Long
32270 Telegraph Road, Suite 200
Birmingham, MI 48025

F. PERCENTAGE RENT: Five and one-quarter percent (5.25%) of Gross Sales
on Gross Sales in excess of $8,000,000.

IN WITNESS of the attached Lease and any Exhibits, the parties hereto have
executed this Lease the day and year first above written.

("LANDLORD") MICHIGAN BREWERY, INC.
a Michigan corporation
("TENANT")

/s/ Michael G. Eyde By: /s/ William Rolinski
- ---------------------------- ---------------------------
Michael G. Eyde William Rolinski
Its: President

<PAGE>

LEASE

Article 1: PREMISES

Landlord hereby leases to Tenant and Tenant hereby rents from Landlord the
Premises legally described on Exhibit A, together with all rights, privileges,
easements and appurtenances belonging or pertaining to the Premises, and
together with any and all improvements now or hereafter situated upon the
Premises.

Article 2: TERM OF LEASE

The Term of this Lease shall be for the number of Lease Years as set forth on
the DATA SHEET after the Commencement Date as set forth below.

Section 2.1: COMMENCEMENT DATE: The Commencement Date and Tenant's obligation
to pay Base Rent and other charges hereunder shall commence on October 1, 1997.

Section 2.2: TERMINATION DATE: The Term of this Lease shall expire at
midnight on the twenty fifth (25th) anniversary of the Commencement Date,
unless Tenant exercises its option(s) to extend hereunder or this Lease is
otherwise terminated as set forth herein.

Section 2.3: OPTION TO EXTEND: Tenant shall have the option to extend the
Term of this Lease for two additional periods of ten (10) Lease Years each.
If Tenant desires to exercise such option or options, Tenant shall give
Landlord written notice exercising its option to extend the Term no later than
thirty (30) days prior to the expiration of the initial Term, or the expiration
of the first option period, as applicable. The Base Rent for such option
periods shall be as stated in Item C of the DATA SHEET.

Section 2.4: LEASE YEAR: A Lease Year shall be the period from the
Commencement Date through and including the date immediately preceding the
first (1st) anniversary of the Commencement Date and each successive twelve
(12) month period thereafter during the Term.

Article 3: RENT

Section 3.1: BASE RENT: Beginning with the Commencement Date and on the first
(1st ) of every month thereafter without demand, Tenant shall pay 1/12th of the
then applicable Base Rent to Landlord at the address set forth on the DATA
SHEET (unless otherwise notified by Landlord of a change of address). If the
Commencement Date occurs on a day other than the first day of a calendar month
or the termination date occurs on a day other than the last day of a calendar
month, the Base Rent for such partial calendar month(s) shall be prorated on a
per diem basis (calculated based on the actual number of days in such
month[s]). In the event that any payment of Base Rent shall not be received by
Landlord within five (5) days after same shall become due, then Tenant shall
pay to Landlord an additional sum equal to five per cent (5%) of such monthly
payment as a late charge.

Section 3.2: PERCENTAGE RENT:

(a) In addition to the payment of the fixed annual Base Rent, as
hereinbefore provided, Tenant shall pay to Landlord during each lease year of
the term hereof as annual percentage rental, a sum equal to the percent set
forth in paragraph F of the Data Sheet hereof of all Gross Sales resulting from
the sale of food and beverages in, on or from the leased premises during such
lease year. The annual percentage rental shall be payable annually, within
sixty (60) days after the end of each Lease Year, at the office of the
Landlord, or such other place as the Landlord may designate.

<PAGE>

(b) The term "lease year" as used herein shall be defined to mean a
period of twelve (12) consecutive calendar months. The first lease year shall
begin on the date of Commencement Date of the term of this Lease. Each
succeeding lease year shall commence on the anniversary date of the first lease
year.

Section 3.3: GROSS SALES:

(a) DEFINED: The term "Gross Sales" as used herein shall be construed to
include the entire amount of the actual sales price, of all sales of food ,
beverages and merchandise conducted in or from the Demised Premises, and sales
by any sublessee, concessionaire or licensee in said premises. Said term shall
not include, however, any sums collected and paid out for any sales, excise,
or gross receipts tax imposed upon the sale of any food or beverages by any
duly constituted governmental authority nor shall it include the exchange of
food or beverages between the stores of Tenant, if any, where such exchange of
food or beverages are made for the convenient operation of the business of
Tenant and not for the purpose of consummating elsewhere a sale which has
theretofore been made at, in, from or upon the Demised Premises, or for the
purpose of depriving Landlord of the benefit of a sale which otherwise would be
made at, in, from or upon the Demised Premises, nor the amount of returns to
shippers or manufacturers, nor the amount of any complimentary food, beverages
or merchandise given out at the Demised Premises for promotional or other
purposes, nor the amount of any cash or credit refund made upon any sale where
the merchandise sold, or some part thereof, is thereafter returned by the
purchaser and accepted by Tenant, nor receipts from public telephones, stamp
machines, public toilet locks or vending machines, nor to sales of furniture,
equipment, property or bulk sales not in the ordinary course of Tenant's
business, nor sales to employees, nor any credit card charges payable by
Tenant.

(b) REPURCHASE OBLIGATION: In the event that Gross Sales shall not
exceed the sum of Eight Million and no/100 ($8,000,000.00) annually for any two
(2) consecutive full Lease Years during the term of the Lease, then Tenant
shall be obligated to repurchase the Premises from Landlord, upon Landlord's
written request, within one hundred eighty (180) days after receipt of such
request from Landlord. The purchase price for the Premises in such
circumstances shall be equal to the sum of $4,000,000.00, plus $200,000 for
each full lease year, plus a pro rata portion of a partial lease year,
measured from the Commencement Date of this Lease to the date of receipt of
such request from Landlord. The pro rata portion of the Purchase Price for
such partial year shall be prorated on a per diem basis at the rate of $ 547.94
per day ($200,000 / 365).The closing shall otherwise be governed by Paragraphs
16.3 through 16.8 hereof, inclusive.

Article 4: USE

Section 4. 1: PERMITTED USE: Tenant shall be allowed to use the Premises as
set forth in Item D on the DATA SHEET.

Article 5: OBLIGATION TO REPAIR AND MAINTAIN

Section 5.1: TENANT'S OBLIGATIONS: Tenant shall make and perform all
necessary maintenance and repairs to the Premises, other than repairs due to
Landlord's negligence or as a result of damage or destruction as set forth in
Article 10, in order to maintain the Premises in good condition, ordinary wear
and tear excepted.

Article 6: INSURANCE

Section 6.1: TENANT'S OBLIGATION: Tenant shall maintain a comprehensive
policy of liability insurance with respect to the Premises, with Landlord named
as an additional insured. The policy shall be with companies licensed to do
business in the State of Michigan and shall have coverage limits of at least
$4,000,000.00 combined single limit. All insurance policies required hereunder
shall provide that Landlord be given at least thirty (30) days written notice
prior to its cancellation.

<PAGE>

Tenant shall have the right to self-insure for its merchandise, trade fixtures,
furnishings, operating equipment, personal property and plate glass, if any.
Tenant shall be responsible for replacing any broken glass in the Premises.

Any insurance required of Tenant hereunder may be furnished by Tenant under a
blanket policy carried by Tenant or under a separate policy therefor, at
Tenant's option.

Section 6.2: MUTUAL WAIVER OF SUBROGATION: Landlord and Tenant hereby waive
any rights each may have against the other arising out of any loss or damage
connected in any way to, or arising in any way out of an occurrence related to
the Premises to the extent that such damage or loss is coverable by insurance.
Landlord and Tenant, on behalf of their respective insurance companies, waive
any right of subrogation they may have against each other where such waiver of
subrogation is not invalidated by State Law.

Article 7: ASSIGNMENT

Tenant shall not assign this Lease or sublet all of the Premises without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, if any such proposed successor entity
has a net worth of at least Ten Million and No/100 Dollars ($10,000,000.00) and
Tenant furnishes Landlord with reasonable evidence of such proposed successor
entity's net worth, Landlord's consent shall not be required, and in the event
of such sublease or assignment by Tenant, Tenant shall automatically be
released from all obligations under this Lease.

Article 8: SIGNAGE

Tenant may, without Landlord's consent, construct exterior signage in
accordance with the requirements of governmental authorities have jurisdiction.
Tenant shall be responsible for obtaining any necessary governmental permits
relating to its exterior signage, at its sole cost, but Landlord will cooperate
with Tenant and assist Tenant in obtaining any and all necessary approvals,
permits and variances for such sign(s). Tenant shall maintain its exterior
signage in good condition throughout the Term of this Lease. Tenant may,
without Landlord's consent, install any and all signs, displays, and other
advertising matter within the Premises as Tenant elects, in its sole
discretion.

Article 9: ADDITIONAL RENT CHARGES

Section 9.1: MAINTENANCE AND REPAIRS: Tenant shall be responsible to pay all
expenses, costs, disbursements and charges incurred for the operation,
maintenance and repair of the Premises, including but not limited to,
landscaping, parking lot paving and striping, snow removal, utilities, sanitary
control, sprinkler, removal of common area trash, security and repainting.

Section 9.2: UTILITIES: Tenant shall promptly pay for all gas, electricity
and water used in the Premises during the Term of this Lease. Tenant shall pay
for such utility services directly to the public utility supplying the same.

Section 9.3: HVAC: Tenant will perform all maintenance, repairs and
alterations to the HVAC system on an as needed basis.

Section 9.4: TAXES: Tenant shall pay the real estate taxes ("Taxes") levied
against the Premises during the term of the Lease. Tenant shall pay such
Taxes before same shall become delinquent.

Nothing contained herein shall be construed to include as a tax which shall be
the basis of real estate taxes, any inheritance, estate, succession, transfer,
gift, franchise, corporation, income or profit tax or capital levy that is or
may be imposed upon Landlord.

<PAGE>

Notwithstanding anything in this Lease to the contrary, in the event that
during the Lease Term any governmental entity makes any improvement and
assesses any portion of the Premises therefor, Tenant shall be liable only for
so much of its such assignment as the remainder of the Lease Term relates to
the useful life of such improvement. Additionally, with respect to any special
assessments which may be levied as part of the Taxes, Tenant shall have the
right to pay such assessments in equal installments over the longest legally
available period, whether or not Landlord elects to pay in installments,
provided that Landlord has the option of paying said assessment over the
longest period of time.

Article 10: DAMAGE AND DESTRUCTION

If the Premises are damaged by peril coverable by the insurance required
hereunder, Tenant shall promptly repair and restore the Premises to its
condition immediately prior to such damage.

Article 11: EMINENT DOMAIN

In the event a portion of the Premises shall be taken or appropriated by any
lawful power or authority by the exercise of the right of condemnation or
eminent domain, (a) Landlord shall immediately restore such to at least a
condition equal to that existing prior to such taking or appropriation,
sufficient to make the Premises a whole architectural unit, and Base Rent shall
abate until Tenant is able to reopen for business, and (b) Tenant's Base Rent
and other charges shall be equitably adjusted as of the date of such taking to
reflect the reduction in the square footage of the Premises. In the event such
partial taking materially interferes with Tenant's use of the Premises, or in
the event a temporary taking exceeds six (6) months, Tenant may terminate this
Lease upon thirty (30) days written notice to Landlord.

In the event all of the Premises shall be taken or appropriated by any lawful
power or authority by the exercise of the right of condemnation or eminent
domain, this Lease shall terminate as of the date of such taking. Landlord
shall promptly refund any prepaid rents.

Article 12: DEFAULT

The following shall be deemed a Default: (i) Tenant's failure to make a rental
payment within thirty (30) days after receipt of written notice that said
amount is past due; (ii) Tenant's failure to observe and perform its
obligations hereunder (other than a payment of rental) within thirty (30) days
after receipt of written notice of such curable violation; provided, however,
if such default cannot be cured within said thirty (30) day period, then in
that event, a Default shall occur only if Tenant shall fail to have commenced a
cure within such thirty (30) day period.

In the event of a default which is not cured within the applicable grace
period, Landlord shall have the right to re-enter and repossess the Premises,
whereupon this lease shall terminate and Landlord may recover from Tenant all
unpaid rent which is due at the time of termination, as well as the rent and
all other charges payable by Tenant hereunder, all of which sums shall be
payable to Landlord on a monthly basis over what would have been the balance of
the Term. Landlord agrees to use best efforts to mitigate damages and relet
the Premises.

Article 13: SUBORDINATION

Tenant agrees to subordinate this Lease to any mortgage, deed of trust, ground
lease or other lien or lease now on the Premises or any mortgage, deed of
trust, ground lease or other lien or lease placed thereon during the Term of
this Lease or any extension thereof, and shall execute and deliver to Landlord
upon demand and at Landlord's cost, such instruments necessary to effect such
subordination, all of the foregoing on the condition that the holder shall
provide Tenant with a written non-disturbance agreement, in form acceptable to
Tenant, wherein the holder agrees to recognize the validity and continuance of
this Lease and agrees not to disturb Tenant's possession of the Premises.

<PAGE>

Landlord agrees to obtain a Non-Disturbance and Attornment Agreement from its
current lenders, and the ground lessor, if any, and deliver same to Tenant
within thirty (30) days from the date hereof, in form and substance acceptable
to Tenant. If any said Non-Disturbance and Attornment Agreement is not so
delivered, Tenant may, at its option, terminate this Lease by written notice to
Landlord.

Article 14: SECURITY

This Lease constitutes a lien as security for the rent and other amounts
payable hereunder and for the performance by Tenant of every other obligation
herein contained upon all the personal property and fixtures, of any nature,
which are or may hereafter be placed on the Premises by Tenant, which lien may
be enforced on the nonpayment of any rent or other amount due under this Lease
or the nonperformance of any obligations herein contained.

Article 15: RIGHT OF FIRST REFUSAL

Tenant is hereby granted a right of first refusal on the Property during the
term of this Lease and any extensions or renewals thereof ("Right of First
Refusal"). If at any time during the term of this Lease or any extensions or
renewals thereof, Landlord receives a bona fide offer from a third party to
purchase the Property, Landlord shall, within two (2) days from the date of
execution thereof, supply Tenant with a complete copy of the executed purchase
agreement and all exhibits and addenda thereto ("Sale Notice"). Landlord's
Sale Notice shall constitute an offer to sell the Property to Tenant at the
price and upon substantially the same terms and conditions as are contained in
Landlord Sale Notice. Tenant shall have thirty (30) days after receipt of
Landlord's Sale Notice and after all contingencies contained therein have been
satisfied or waived (the "Offer Period"), in which to accept such offer and to
agree to purchase the Property from Landlord at the price and upon
substantially the same terms and conditions contained in the Sale Notice.

Article 16: OPTION TO PURCHASE/OPTION TO SELL/STOCK OPTION

Article 16.1: OPTION TO PURCHASE: Landlord hereby grants to Tenant the option
(the "Purchase Option") to purchase the Premises by written notice from Tenant
to Landlord (the "Purchase Option Notice") given at any time after the end of
the seventh full Lease Year of the term of the Lease and prior to the
expiration of the original term of the Lease, or the end of the thirty fifth
Lease Year, if the First Option to Extend the Lease is exercised by Tenant, or
the end of the forty fifth Lease Year, if the Second Option to Extend the Lease
is exercised by Tenant. The purchase price for the Premises ("Purchase Price")
shall be equal to the sum of $4,000,000.00, plus $200,000 for each full lease
year, plus a pro rata portion of a partial lease year, measured from the
Commencement Date of this Lease to the date of exercise of the Purchase Option.
The pro rata portion of the Purchase Price for such partial year shall be
prorated on a per diem basis at the rate of $547.94 per day ($200,000 / 365).

Article 16.2: OPTION TO SELL.

(a) SALE OPTION: Landlord shall have the right to require Tenant to
purchase the premises from Landlord ("Sale Option") by giving written notice
from Landlord to Tenant (the "Sale Option Notice") given at any time prior to
the end of the third full Lease Year of the term of the Lease. The purchase
price for the Premises ("Purchase Price") shall be equal to the sum of
$4,000,000.00, plus $200,000 for each full lease year, plus a pro rata portion
of a partial lease year, measured from the Commencement Date of this Lease to
the date of exercise of the Sale Option. The pro rata portion of the Purchase
Price for such partial year shall be prorated on a per diem basis at the rate
of $547.94 per day ($200,000 / 365).

(b) GRANT OF STOCK OPTION: Upon exercise by Landlord of the Sale Option,
in lieu of the payment by Tenant of the Purchase Price for the Premises, the
Tenant hereby grants to Landlord an option (the "Stock Option") to acquire
shares of its common stock in consideration of the cancellation of part or all
of the Purchase Price for the Premises upon such exercise by Landlord of the
Sale Option.

<PAGE>

(c) SHARES COVERED BY OPTION: The Stock Option shall entitle Landlord to
acquire a number of shares of common stock of the Tenant determined by dividing
(i) the aggregate amount of the Purchase Price for the Premises to be canceled
by (ii) $5.00.

(d) CONDITION TO EXERCISE:

(1) The Stock Option may be exercised only upon Landlord's exercise
of the Sales Option during the period (the "Exercise Period") beginning on the
date of the execution of this Lease and ending on the third anniversary of this
Lease, upon which it shall expire. In connection with the exercise of the
Stock Option, Landlord may elect to cancel less than all of Purchase Price
owing to Tenant in consideration for the issuance of shares, but the Stock
Option shall immediately expire with respect to any uncanceled amounts to the
extent not so exercised on such date, and the balance of the Purchase Price not
canceled shall be paid by Tenant in cash, by wire transfer or certified funds.

(2) In addition, the Stock Option may only be exercised within the
thirty day period following (a) the filing by the Tenant with the Securities
and Exchange Commission ("SEC") during the Exercise Period of each of its
quarterly reports on Form 10-Q (or 10-QSB, if applicable) or (b) the filing by
the Tenant with the SEC during the Exercise Period of each of its annual
reports on Form 10-K (or 10-KSB, if applicable).

(e) MANNER OF EXERCISE: To exercise the Stock Option, Landlord shall
deliver a written notice to the Tenant (a "Notice of Exercise") which must be
delivered to the Tenant prior to the expiration of the Stock Option as
determined in Section 3 above. The Notice of Exercise must specify the amount
of the Purchase Price with respect to which the Stock Option is exercised, and
the Stock Option shall terminate with respect to any amount of the Purchase
Price not so specified in the Notice of Exercise. An election, once delivered,
may not be canceled or withdrawn without the written consent of the Tenant.

(f) CLOSING OF SALE:

(1) The closing of the acquisition of shares pursuant to the
exercise of the Stock Option in the manner set forth above shall occur as soon
as practicable following the delivery by Landlord to the Tenant of a Notice of
Exercise, but not more than ten days thereafter, at a time and place agreed
upon by the Tenant and Landlord.

(2) At the closing of such acquisition:

a) Landlord shall convey the Premises to the Tenant as set
forth below;

b) the Tenant shall cause to be delivered to Landlord one or
more certificates for the shares being acquired. The
certificates shall bear a legend substantially similar to
the following:

<PAGE>

SUCH REGISTRATION REQUIREMENTS, OR UNLESS THE TRANSFEROR
DEMONSTRATES TO THE REASONABLE SATISFACTION OF COUNSEL FOR
THE TENANT THAT THE TRANSFER IS MADE IN COMPLIANCE WITH THE
PROVISIONS OF RULE 144 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.

c) Landlord shall deliver to the Tenant an acknowledgment in
writing that the shares been registered pursuant to the
Securities Act of 1933 or any applicable state securities
law, an acknowledgment that such shares are being acquired
for investment and with no current intention to resell,
distribute, fractionalize or subdivide such shares, an
undertaking not to sell or transfer such shares unless they
are registered under the Securities Act of 1933 and all
applicable state securities laws or such transfer is exempt
from the registration provisions thereof, and an
acknowledgment that the Tenant will issue stop transfer
instructions to its transfer agent to prohibit the transfer
of the shares represented by such certificates in violation
of the foregoing restrictions.

d) The parties shall deliver such further documents as either
party may reasonably request.

Article 16.3: CLOSING: The closing shall occur on a date mutually agreeable
to Landlord and Tenant, which date shall not be later than six (6) months after
the date Tenant delivers its Purchase Option Notice to Landlord, or the date
Landlord delivers its Sale Option Notice to Tenant, whichever is applicable.
The closing shall be held at the offices of Tenant's lending institution, or at
any other place agreed to by Landlord and Tenant.

Article 16.4: TITLE, DEFECTS: The Premises shall be conveyed by standard
warranty deed, subject to easements and restrictions now of record, the rights
of the public in all streets and roads abutting the Premises, liens for unpaid
property taxes first coming due and payable after the Commencement Date, and
zoning and such other matters created by Tenant or arising out of Tenant's use
and occupancy of the Premises (the "Permitted Exceptions"), but free and clear
of the lien of any mortgage, deed of trust, or security interest created by or
resulting from acts of the Landlord, any successor of Landlord, any party
claiming through Landlord, or any other person, without the express consent of
Tenant. Landlord shall, within fifteen (15) days after delivery of the
Purchase Option Notice to Landlord or delivery of the Sale Option Notice to
Tenant, whichever is applicable, obtain and deliver to Tenant a commitment for
an ALTA owners form of title insurance, without standard exceptions, in the
amount of the Purchase Price. Within fifteen (15) days thereafter, Tenant
shall notify Landlord in writing of any claimed defect in title. Within thirty
(30) days after receipt of such notice, Landlord shall notify Tenant of
Landlord's election whether or not to cure any or all of such defects. In the
event that Landlord shall be unable or unwilling to cure any such claimed
defects, Tenant shall have the option to (i) accept title to the Premises
subject to such claimed defects, with a credit against the Purchase Price in an
amount necessary to discharge any lien against the premises, the amount of
which is liquidated as of closing, (including interest and penalties thereon
accrued to the date of closing) which is not a Permitted Exception, or (ii)
terminate and rescind the exercise of the Purchase Option or the Sale Option,
whichever is applicable, without any liability to Landlord, and Tenant's right
to exercise such Purchase Option and Landlord's right to exercise such Sale
Option thereafter shall be terminated.

Article 16.5: CLOSING PAYMENTS: All transfer taxes, documentary deed stamps,
and the title insurance premiums for an ALTA owners policy of title insurance,
with standard exceptions deleted, in the amount of the Purchase Price shall be
paid by Tenant at the closing.

Article 16.6: TAXES, PRORATIONS: Tenant shall pay all taxes and assessments
which have become a lien against the Premises and which shall become due and
payable prior to the closing. Rents shall be prorated as of the date of
closing.

Article 16.7: SURVEY: Tenant may obtain prior to closing, at Tenant's expense,
a mortgage survey of the Premises.

<PAGE>

Article 16.8: CLAIM OF INTEREST: Tenant shall be free to record an affidavit
of claim of interest against the Premises with the Oakland County Register of
Deeds; provided, if Tenant does not exercise this Option within the time
provided, Tenant shall promptly record a release of such affidavit of claim of
interest promptly upon expiration of all of Tenant's rights under this option.

Article 17: MISCELLANEOUS

Section 17.1: NOTICE: Whenever notice or consent is required hereunder, such
notice shall be sent to the address set forth in the DATA SHEET (or such
subsequent address provided by either party to the other in writing by proper
notice), by United States certified mail, return receipt requested, or by
overnight carrier and shall be deemed delivered when received or rejected as
evidenced by return receipt.

Section 17.2: BROKERAGE: Landlord and Tenant represent to each other that
they have not utilized the services of any broker in connection with the
transaction evidenced by this Agreement. Accordingly, Tenant agrees to
indemnify and hold harmless Landlord from payment of any brokerage fees or any
liability or obligation therefor to any person or party claiming a fee or
commission through Tenant and Landlord agrees to indemnify and hold harmless
Tenant from payment of any brokerage fees or any liability or obligation
therefor to any person or party claiming a fee or commission through Landlord.

Section 17.3: QUIET ENJOYMENT: Landlord covenants that Landlord has the right
to enter into this Lease and Tenant shall lawfully, peaceably and quietly have,
hold, occupy and enjoy the Premises through the Term and any extension thereof
without hindrance or ejection by Landlord or any person claiming, by, through
or under Landlord or landlord's successors, and Landlord shall defend Tenant's
right to such quiet enjoyment.

Section 17.4: MUTUAL FORCE MAJEURE: The time within which any of the parties
hereto shall be required to perform any act or acts under this Lease (other
than the payment rent or other monies owing hereunder) shall be extended to the
extent that the performance of such act or acts shall be delayed by acts of
God, fire, windstorm, flood, delays or restrictions by governmental bodies, or
any other cause beyond the reasonable control of such party; provided, however,
that the party entitled to such extension hereunder shall give reasonable
notice to the other party of the occurrence causing such delay.

Section 17.5: LEGAL EXPENSES: In the event either party hereto institutes
legal action or proceedings arising out of or in any way connected with this
Lease, the non-prevailing party shall reimburse the prevailing party for all
reasonable attorney's fees and costs incurred in connection therewith.

Section 17.6: JOINT AND SEVERAL LIABILITY: In the event two or more
individuals, corporations, partnerships or other business associations (or any
combination thereof) shall execute this Lease as Landlord, the liability of
each to comply with all other terms, covenants and conditions of this Lease
shall be joint and several. In like manner, in the event Landlord is a
partnership or other business association, the members of which are, by virtue
of statute or general law, subject to personal liability, then the liability of
each member shall be joint and several.

Section 17.7: ARBITRATION: In the event of a dispute between the Landlord and
the Tenant, arising out of the terms, covenants and conditions of this Lease,
such dispute shall be submitted to arbitration in accordance with the Rules of
the American Arbitration Association then pertaining, except that the
arbitrator shall have no power to modify or alter the terms of this Lease. The
party in whose favor an award is rendered may cause judgment on the award to be
entered in any court having jurisdiction.

Section 17.8: ENTIRE AGREEMENT: This Lease and the Exhibits attached hereto
and forming a part hereof set forth all the covenants, promises, agreements,
conditions and undertakings between Landlord and Tenant concerning the
Premises, and there are no covenants, promises, agreements, conditions or
undertakings, either oral or written, between them except as set forth herein.
No subsequent alteration, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by both
parties hereto.

<PAGE>

Section 17.9: ADDITIONAL CONSTRUCTION OR CHANGES BY LANDLORD: Notwithstanding
anything in this Lease to the contrary, no modifications, additions or
construction to the Premises shall alter the dimensions, location or
configuration of the Premises adversely affect the use, operation or conduct of
Tenant's business being conducted in the Premises, or adversely affect the
accessibility or visibility of the Premises or Tenant's signage.

Section 17.10: SUCCESSORS AND ASSIGNS: Except as expressly provided herein,
this Lease and the obligations of Landlord and Tenant contained herein shall
bind and benefit the successors and assigns of the parties hereto.

Section 17.11: LANDLORD'S AGREEMENT: Landlord represents, covenants and
warrants that it has full right, power and authority to enter into this Lease.

Section 17.12: RECORDING: Neither Landlord nor Tenant shall record this Lease.
However, at the request of either Landlord or Tenant, the parties shall join in
the execution of a memorandum or so-called "short form" of this Lease for
purposes of recordation. Any recording costs associated with the memorandum or
short form of this Lease shall be borne by the party requesting recordation.

("LANDLORD") MICHIGAN BREWERY, INC.
a Michigan corporation
("TENANT")

/s/ Michael G. Eyde By: /s/ William Rolinski
- ------------------------------- -----------------------------
Michael G. Eyde William Rolinski
Its: President

<PAGE>

EXHIBIT 10.9

STOCK OPTION AGREEMENT

This Stock Option Agreement ("Agreement") dated as of August 1, 1997 by and
between MICHIGAN BREWERY, INC., A MICHIGAN CORPORATION, whose address is 550 S.
Wisconsin, P.O. Box 1430, Gaylord, MI 49735 hereinafter referred to as "Company"
and MICHAEL G. EYDE, an individual, whose address is 6250 W. Michigan Avenue,
Lansing, MI 48917 hereinafter referred to as "Holder".

W I T N E S S E T H :

WHEREAS, the Company has the authority to issue additional shares of the
Company's common stock (all of the Company's shares of common stock being
hereinafter referred to as "Common Stock");

WHEREAS, Holder has provided valuable services to the Company by, among
other things, assisting the Company to obtain a construction loan to enable the
Company to construct a new microbrewery/restaurant on property owned by the
Company in Auburn Hills, Michigan, and by allowing a partnership in which Holder
is the managing general partner to act as co-borrower on such construction loan;

WHEREAS, the Company desires to grant Holder an option to purchase a
portion of the Company's Common Stock, upon the price, terms and conditions
hereinafter set forth.

NOW, THEREFORE, in consideration of the terms and covenants contained
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:

1. OPTION.

Holder shall have the right, at his sole and absolute option, to
purchase on terms and conditions hereinafter set forth, all or any
part of the aggregate of 50,000 shares of Common Stock of the Company
(collectively, the "Option Shares") at the purchase price of $5.00 per
share (the "Option Price"). Such right is hereinafter referred to as
the "Option".

2. EXERCISE; EXPIRATION DATE.

The Stock Option may be exercised only during the period (the
"Exercise Period") beginning on the date of the execution of this
Agreement and ending on the Expiration Date (as defined herein). In
addition, the Stock Option may only be exercised within the thirty day
period following (a) the filing by the Company with the Securities and
Exchange Commission ("SEC") during the Exercise Period of each of its
quarterly reports on Form 10-Q (or 10-QSB, if applicable) or (b) the
filing by the Company with the SEC during the Exercise Period of each
of its annual reports on Form 10-K (or 10-KSB, if applicable). The
Option may be exercised in whole or in part, at the option of Holder,
on or before the Expiration Date (hereinafter defined) by delivering
to the Company written notice of Holder's exercise ("Exercise Notice")
stating the amount of Option Shares to be purchased thereby,
accompanied by a check ("Check") made payable to the order of the
Company for the aggregate sum due for the Option Shares then being
purchased. An Exercise Notice, once delivered, may not be canceled or
withdrawn without the written consent of the Company. As soon as
practicable thereafter, and in any event within ten (10) business days
of the Company's receipt of the Exercise Notice and a Check, the
Company shall issue and deliver to Holder a certificate representing
the Option Shares being purchased pursuant to such Exercise Notice.
Each such certificate shall bear a legend substantially similar to the
following:

<PAGE>

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES ACT. THEY MAY NOT BE TRANSFERRED UNLESS
THEY ARE REGISTERED UNDER ALL SUCH APPLICABLE ACTS OR THE TRANSFER
SATISFIES AVAILABLE EXEMPTIONS FROM THE REGISTRATION PROVISIONS
THEREOF. THE COMPANY SHALL HAVE NO OBLIGATION TO TRANSFER THESE
SECURITIES ON ITS BOOKS AND RECORDS UNLESS IT RECEIVES THE OPINION OF
COUNSEL TO THE TRANSFEROR, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT SUCH
TRANSFER MAY BE MADE WITHOUT VIOLATION OF SUCH REGISTRATION
REQUIREMENTS, OR UNLESS THE TRANSFEROR DEMONSTRATES TO THE REASONABLE
SATISFACTION OF COUNSEL FOR THE COMPANY THAT THE TRANSFER IS MADE IN
COMPLIANCE WITH THE PROVISIONS OF RULE 144 UNDER THE SECURITIES ACT OF
1933, AS AMENDED.

Simultaneously, Holder shall deliver to the Company an acknowledgment
in writing that the shares have not been registered pursuant to the
Securities Act of 1933 or any applicable state securities law, an
acknowledgment that such shares are being acquired for investment and
with no current intention to resell, distribute, fractionalize or
subdivide such shares, an undertaking not to sell or transfer such
shares unless they are registered under the Securities Act of 1933 and
all applicable state securities laws or such transfer is exempt from
the registration provisions thereof, and an acknowledgment that the
Company will issue stop transfer instructions to its transfer agent to
prohibit the transfer of the shares represented by such certificates
in violation of the foregoing restrictions. In the case of an
exercise for less than all of the Option Shares permitted to be
purchased hereunder, the Holder shall reserve the right to exercise
the Option at any time and from time to time prior to the Expiration
Date for the remainder of the Option Shares.

3. STOCK DIVIDEND/DISTRIBUTION.

In case the Company shall declare a stock dividend or other
distribution upon its common stock payable in common stock of the
Company, then the total maximum number of Option Shares issuable upon
the exercise of this Option shall be increased by an amount equal to
the number of shares of common stock which would have been issued to
Holder as a result of the issuance of such dividend or other
distribution if, immediately prior to the record date relating to such
dividend or other distribution, Holder had Option Shares then
remaining subject to purchase. The Option Price in effect immediately
prior to such dividend or other distribution shall be proportionately
reduced.

4. STOCK SPLIT/COMBINATION.

In case the Company shall at any time subdivide or split its
outstanding shares of Common Stock into a greater number of shares,
the Option Price in effect immediately prior to such subdivision or
split shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined
into a smaller number of share, the Option Price in effect immediately
prior to such combination shall be proportionately increased. Upon
each adjustment of the Option Price pursuant to this Section 4, Holder
shall thereafter be entitled to purchase, at the then applicable
Option Price, the number of shares obtained by multiplying the Option
Price in effect immediately prior to adjustment by the number of
shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the applicable Option
Price resulting from such adjustment.

<PAGE>

5. EXPIRATION DATE.

The term "Expiration Date" shall mean five (5) years from the date of
execution of this Agreement, at 5:00 P.M. Detroit time on such date or
if such date shall be a federal holiday, a Saturday or a Sunday, then
5:00 P.M. Detroit time the next following day which is not a federal
holiday, a Saturday or a Sunday.

6. ASSIGNABILITY.

The Option granted herein may not be pledged, assigned, transferred,
sold or otherwise disposed of by Holder without the prior written
consent of the Company other than to Holder's family trusts, family
members, household members, estate trusts, retirement plans or by will
or by the laws of descent and distribution.

7. NOTICE.

Any notice and other communication given pursuant to the provisions of
this Agreement shall be in writing and shall be given (i) by mailing
the same by certified mail or registered mail, return receipt
requested, postage prepaid, (ii) by hand, providing for receipted
delivery, or (iii) by reputable overnight courier providing for
receipted delivery. Except as may be expressly otherwise provided in
this Agreement, any such notice or other communication given by mail
shall be deemed given two (2) business days after same is mailed and
any such notice or other communication given by hand or overnight
courier as aforesaid shall be deemed given when received or when
receipt is refused. If sent to the Company, such notices or other
communication shall be sent to the Company at 550 S. Wisconsin, P.O.
Box 1430, Gaylord, MI 49735, or at such other address or addresses as
the Company may hereafter designate by notice to Holder. If sent to
Holder, such notices or other communications shall be sent to Holder
at 6250 W. Michigan Avenue, Lansing, MI 48917, or at such other
address or addresses as Holder may hereafter designate by notice to
the Company.

8. GOVERNING LAW.

This Agreement shall be governed by and construed in accordance with,
the laws of the State of Michigan, without giving effect to any
conflicts of laws.

9. SUCCESSORS AND ASSIGNS.

This Agreement shall inure to the benefit of the Company and Holder
and their respective successors and permitted assigns.

10. ENTIRE AGREEMENT.

This Agreement constitutes the entire agreement of the Company and
Holder as to its subject matter and supersedes any previous written or
oral agreement or understanding between the Company and Holder with
respect to such subject matter.

11. COUNTERPARTS.

This Agreement may be executed in duplicate originals, each of which
when taken together shall be deemed an original.

<PAGE>

12. AMENDMENT.

This Agreement may not be modified except in a writing signed by both
parties hereto.

MICHIGAN BREWERY, INC.

/s/ Michael G. Eyde By: /s/ William Rolinski
- ------------------------ --------------------------
Michael G. Eyde
Name: William Rolinski
Title: President

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation of our report dated February 19, 1998 included in this Form
10-KSB, into the Company's previously filed Registration Statement File Nos.
333-29149, 333-29151 and 333-34731.

/s/ Arthur Andersen LLP

Minneapolis, Minnesota
March 23, 1998

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 354,015
<SECURITIES> 0
<RECEIVABLES> 170,460
<ALLOWANCES> 0
<INVENTORY> 289,505
<CURRENT-ASSETS> 2,084,277
<PP&E> 19,246,096
<DEPRECIATION> (906,053)
<TOTAL-ASSETS> 20,807,621
<CURRENT-LIABILITIES> 1,828,981
<BONDS> 0
0
0
<COMMON> 52,850
<OTHER-SE> 11,651,177
<TOTAL-LIABILITY-AND-EQUITY> 20,807,621
<SALES> 9,096,580
<TOTAL-REVENUES> 9,096,580
<CGS> 3,065,523
<TOTAL-COSTS> 8,173,521
<OTHER-EXPENSES> 13,911
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 308,621
<INCOME-PRETAX> 1,039,520
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,039,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,039,520)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)

</TABLE>