WESTERN COUNTRY CLUBS INC, 10KSB, 1997-04-15

WESTERN COUNTRY CLUBS INC
10KSB, 1997-04-15
EATING & DRINKING PLACES

Previous: MICROELECTRONIC PACKAGING INC /CA/, 10-K, 1997-04-15

Next: FIRST MISSOURI BANCSHARES INC, 15-12G, 1997-04-15

<PAGE> 1
FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For Fiscal Year Ended December 31, 1996

COMMISSION FILE NUMBER: 0-24058

WESTERN COUNTRY CLUBS, INC.
(Exact name of registrant as specified in its charter)

COLORADO 84-1131343
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

1601 N.W. EXPRESSWAY, SUITE 1610
OKLAHOMA CITY, OKLAHOMA 73118
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including zip code: (405) 848-0996

5218 Classen Boulevard
Oklahoma City, Oklahoma 73118
(Former address, if changed since last report)

Securities to be registered under Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$.01 PAR VALUE

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 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 at least the
past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and will not 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. [ ]

REVENUES of registrant for year ended December 31, 1996: $7,667,685

AGGREGATE MARKET VALUE of voting stock held by
non-affiliates as of March 27, 1997: $3,543,750
SHARES OF COMMON STOCK, $.01 par value, outstanding as
of March 27, 1997: 3,634,721

DOCUMENTS INCORPORATED BY REFERENCE

The Company's definitive proxy statement in connection with the Annual Meeting
of Shareholders to be held June 10, 1997, to be filed with the Commission
pursuant to Regulation 14A, is incorporated by reference into Part III of this
report.

<PAGE> 2
WESTERN COUNTRY CLUBS, INC.

1996 FORM 10-KSB ANNUAL REPORT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Part I

1. Description of Business .............................................. 1
2. Description of Properties ............................................ 7
3. Legal Proceedings .................................................... 8
4. Submission of Matters to a Vote of Security Holders .................. 9

Part II

5. Market for Common Equity and Related Stockholder Matters ............. 9
6. Management's Discussion and Analysis ................................. 10
7. Financial Statements and Supplementary Data .......................... F-1
8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure .................................. 14

Part III

9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act .................... 14
10. Executive Compensation ............................................... 14
11. Security Ownership of Certain Beneficial Owners and Management. ...... 15
12. Certain Relationships and Related Transactions ....................... 15
13. Exhibits and Reports on Form 8-K ..................................... 15
Signatures ........................................................... 19
</TABLE>

(i)
<PAGE> 3
PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-KSB under "Item 1. Description of
Business", "Item 3. Legal Proceedings", "Item 6. Management's Discussion and
Analysis" and elsewhere constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other facts which may cause the actual results, performance
or achievements of Western Country Clubs, Inc. (the "Company") and its
nightclubs to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; competition; success of operating initiatives; development and
operating costs; advertising and promotional efforts; adverse publicity;
customer appeal and loyalty; availability, locations and terms of sites for
nightclub development; changes in business strategy or development plans;
quality of management; availability, terms and development of capital; business
abilities and judgment of personnel; availability of qualified personnel; food,
labor and employee benefit costs; changes in, or the failure to comply with
government regulations; regional weather conditions; construction schedules;
and other factors referenced in the Form 10-KSB. The use in this Form 10-KSB of
such words as "believes", "anticipates", "expects", "intends" and similar
expressions are intended to identify forward-looking statements, but are not
the exclusive means of identifying such statements. The success of the Company
is dependent on the efforts of the Company and its management and personnel and
the manner in which they operate and develop stores.

ITEM 1. DESCRIPTION OF BUSINESS.

GENERAL

Western Country Clubs, Inc. (the "Company") was organized under the laws
of the State of Colorado in December 1989, but had no operations until April
1993. The Company completed its initial public offering of securities in May
1994, from which it received net proceeds of approximately $1.9 million from
the sale of 460,000 shares of Common Stock. The Company has filed a
registration statement for a public offering of up to 460,000 shares of
convertible preferred stock and 1,150,000 warrants to purchase common stock. If
completed, the offering is expected to result in net proceeds of approximately
$4.0 million, which will be applied to reduce debt, remodel existing Clubs, and
develop and acquire additional clubs. A change of control took place in late
1996, which has resulted in the replacement of senior management and changes in
the Company's operating strategies. See "New Management and Revised Plan of
Operation" and "Management's Discussion and Analysis."

THE COMPANY

The Company currently operates three "country-western" theme nightclubs
located in Indianapolis, Indiana (the "Indy Club"), St. Louis, Missouri (the
"St. Louis Club") and Wichita, Kansas, (the "Wichita Club"). During November
1996, the Indy Club and the St. Louis Club began operating under the name
InCahoots. These Clubs previously operated under the name A Little Bit of
Texas. Each Club combines live entertainment, dancing, bar and food in a
country-western atmosphere. The Wichita Cub has operated as InCahoots since its
inception in 1994, and also features live entertainment, dancing, bar and food
in a country-western atmosphere. The Company acquired its interest in the
Wichita Club an 80% general partner interest in
<PAGE> 4
December 1996 from a corporation affiliated with James E. Blacketer and Joe R.
Love, new Directors of the Company. The Company recently closed a fourth club
located in Tucson, Arizona (the "Tucson Club"), due to continuing losses.

The Company intends to expand its network of Clubs, either through
acquisition of existing Clubs or by building new clubs. Potential future
locations include Louisville, Kentucky; Houston, Texas; Dallas, Texas; Oklahoma
City, Oklahoma; Tulsa, Oklahoma; and Tampa Bay, Florida. Decisions as to
potential club locations are subject to many variables, such as management's
evaluation of the market opportunities, cost of doing business in a particular
locale, and the liquor licensing application process in a state and the
prognosis for issuance of a license.

Gross revenues by Club for each of the past three fiscal years are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
CLUB (1) 1994 1995 1996
-------- ---------- ---------- ----------
<S> <C> <C> <C>
The Indy Club (2) $3,301,252 $2,249,516 $1,956,448
The St. Louis Club (3) $2,400,548 $3,843,062 $3,360,756
The Wichita Club (4) $2,811,776 $2,419,755 $1,988,095
The Tucson Club (5) $3,125,288 $2,257,848 $1,796,549
</TABLE>

- ---------------
(1) The Company is also a limited partner of Cowboys Concert Hall/Atlanta,
Ltd, a Texas limited partnership (the "Atlanta Partnership") formed June
29, 1995 to own and operate a country-western nightclub in Atlanta under
the name of "Cowboys" (the "Atlanta Club"). The general partner of the
Atlanta Partnership is Cowboys Concert Hall/Atlanta I, Inc., a wholly
owned subsidiary of Cowboys Concert Hall - Arlington, Inc., a Texas
corporation ("Cowboys"). For the six month period ended December 31, 1995,
gross revenues earned by the Atlanta Club were $1,344,262. The Company
accounted for its interest in the Atlanta Club using the equity method,
pursuant to which it recognized a loss of $123,676, net of income taxes,
for the fiscal year ended December 31, 1995. As of December 31, 1995, the
Company wrote off its investment in the Atlanta Club, resulting in a
charge against income of $274,621 after taxes. Cowboys placed the Atlanta
Partnership in Chapter 11 bankruptcy in September 1996. See " Investment
in Limited Partnership."

(2) The Indy Club opened in April 1993. During 1993, the Company accounted
for the Indy Club by the equity method and therefore recognized its share
of the Indy Club net income of $272,381 as revenues on the Company's
financial statements.

(3) The St. Louis Club opened as a non-alcoholic establishment in April 1994,
and began marketing alcoholic beverages in May 1994.

(4) The Wichita Club opened in February 1994. The Company acquired its
interest in the Wichita Club in December 1996. See " The Wichita Club."

(5) The Company purchased the Tucson Club in November 1994 and expects to
sell the Club in April 1997. See "The Tucson Club."

THE INDY CLUB

The Indy Club, the first of the Company's Clubs, operates under the name
InCahoots. The Indy Club consists of approximately 34,300 square feet of
entertainment facilities, including several bars, a state-of-the-art sound and
light system (which supports live and taped music), a food service facility and
two in-club stores which sell western wear and souvenirs. National name
entertainment, such as Blackhawk, Lori Morgan, Tracy Lawrence, Tracy Byrd,
Little Texas and Brian White are featured at the Indy Club on a regular basis,
usually scheduled during the middle of the week to attract audiences on what
would otherwise be the club's less popular

2
<PAGE> 5
days. In addition, regional name entertainers are scheduled Tuesday through
Saturday evenings. A modest cover charge is required to enter the Indy Club,
and a customer's average expenditure, exclusive of food and souvenirs, is
approximately $12.00.

The Homestead Store ("Homestead") leases approximately 500 square feet of
the Indy Club for $300 per month pursuant to an oral arrangement with the
Company. Homestead sells wardrobe items on a commission basis. The Logo
Boutique, which is owned by the Indy Club, also sells proprietary wardrobe
items.

The Company owns 80% of Western Country Club, I, Ltd., ("WCC I, Ltd."), a
Colorado limited partnership, which has held the Indy Club's liquor license
since April 1994. Prior to April 1994, Indy Club's liquor license was held by
Texas of Indy, Inc. ("Texas of Indy"), an Indiana corporation formed in October
1992 for the purpose of holding the Indy Club's liquor license. On July 1,
1994, WCC I, Ltd. exercised an option to purchase all of Texas of Indy's assets
in consideration of the consolidation of all loans from WCC I, Ltd. to Texas of
Indy as of June 30, 1994. A Consulting Agreement between Texas of Indy and WCC
I, Ltd., which required the payment of a consulting fee of $100,000 per month
from Texas of Indy to WCC I, Ltd., was modified to $50,000 per month for three
months and then canceled concurrently with the purchase of Texas of Indy's
assets by WCC I, Ltd.

The Indy Club was financed by WCC I, Ltd., which loaned Texas of Indy
$568,200 in January 1993, which amount represented the funds contributed to WCC
I, Ltd. by its limited partners. An additional $300,000 was contributed by WCC
I, Ltd. in March 1993, which WCC I, Ltd. borrowed from the Dulaney National
Bank, Marshall, Illinois. See Item 12. "Certain Relationships and Related
Transactions."

The Company is the general partner of and owns an 80% interest in WCC I,
Ltd., for which the Company initially contributed a nominal amount of cash, its
know-how and expertise in conceiving, constructing and operating nightclubs,
and its oversight of the construction and renovation of the Indy Club. In
February 1994, the Company exercised an option to acquire an additional 19%
interest in WCC I, Ltd. for $200,000 plus 25,000 shares of the Company's
unregistered Common Stock. The Company acquired an additional 31% interest in
WCC I, Ltd., effective September 30, 1994, for $57,600 and 73,600 shares of
unregistered Common Stock pursuant to an offer directed to limited partners of
WCC I, Ltd. to exchange their limited partnership interests in WCC I, Ltd. for
cash or stock, at the limited partner's option.

THE ST. LOUIS CLUB

The St. Louis Club is located on the I-70 corridor between St. Louis,
Missouri and Kansas City, Kansas. The design of the St. Louis Club is similar
to that of the Indy Club and operates under the name InCahoots. The Club
consists of approximately 50,000 square feet, and is the largest of the
Company's Clubs. Sundance Silver & Hide, which sells wardrobe items, including
hats and boots, occupies approximately 800 square feet of the Club, for which
it pays $1,200 per month pursuant to an oral agreement with the Company. The
Homestead Store, which sells Western Indian artifacts, clothing and jewelry,
occupies approximately 600 square feet of the Club, for which it pays $300 plus
10% of sales per month pursuant to an oral agreement with the Company. The
Austin Eatery, a walk-up restaurant selling hamburgers and prime rib, occupies
approximately 2,000 square feet of the Club pursuant to an oral arrangement.
The Company retains 5% of all food and beverage sales and pays the Austin
Eatery 95% of sales.

The St. Louis Club opened for retail business as a non-alcoholic club on
April 22, 1994. It began marketing alcoholic beverages on May 19, 1994 upon
receipt of a liquor license from

3
<PAGE> 6
the Supervisor of Liquor Control of the State of Missouri. The customer's
average expenditure, exclusive of food and souvenirs, is approximately $12.00.

Construction, renovation and furnishing of the St. Louis Club was funded
by Western Country Club III, Ltd. ("WCC III, Ltd."), a Colorado limited
partnership formed in 1994 for the purpose of providing funding for the St.
Louis Club, of which the Company served as general partner. WCC III, Ltd.
initially contributed a total of $850,000 to the Club's construction, but, due
to cost overruns, had to contribute an additional $400,000, which it borrowed
from the Company. Subsequently, WCC III, Ltd. borrowed an additional $465,865
from the Company for construction and operations.

Under the Partnership Agreement, limited partners were to receive 70% of
cash distributions from the St. Louis Club until limited partners had received
a total of $850,000 in cash distributions, and 50% thereafter. Because of loan
repayments, however, no distributions had been made to any partners as of
September 30, 1994. Effective September 30, 1994, the Company purchased all of
the assets of WCC III, Ltd. in exchange for 158,664 shares of its unregistered
Common Stock.

THE WICHITA CLUB

The Wichita Club opened in February 1994, and has been voted the top
country-western club in Wichita since opening. It consists of approximately
30,000 square feet and has parking for 900 cars. The Wichita Club is designed
to appeal to rodeo cowboys as well as the casual country western music lover.
It blends high tech, state-of-the-art, and "good old country boy"
entertainment. The high tech presentation includes giant 20 foot video screens,
double CD players, a roll up lighted American flag, neon touch lighting and the
capability to include a live band's sound throughout the house speaker system.
A comfortable ambiance is achieved through rustic wooden floors, old west
photographs, antique back bars, and a huge, hand-painted mural of past and
present Country and Western entertainers. The showcase of the Club is the
circular, race track style dance floor, complete with a bar in the center
allowing for more dancing room.

The Company acquired its interest in the Wichita Club on December 16,
1996, when it acquired Entertainment Wichita, Inc. ("EWI"), the general partner
and 80% owner of InCahoots, Limited Partnership, a Kansas limited partnership.
In exchange for the 80% interest, the Company issued 400,000 shares of its
Common Stock and assumed $150,000 in debt through a merger transaction. EWI was
owned 45.5% by Shane Investments, L.C. ("Shane Investments"), a corporation
which is solely owned and controlled by Joe Robert Love, Jr., the adult son of
Joe R. Love, a Director of the Company. Shane Investments received 250,500
shares of the Company's Common Stock upon completion of the transaction in
December 1996.

THE TUCSON CLUB

In November 1994, the Company purchased the Wild Wild West nightclub from
Wild Wild West, Inc. and Buckaroos, Inc. for $1,000,000 in cash and $700,000 in
notes payable to certain individuals in consideration of covenants not to
compete through October 31, 1997. The Tucson Club was remodeled to the A Little
Bit of Texas format and operated under that name until November 1996, when the
Club was again remodeled and its name was changed to Stampede. Revenues at the
Tucson Club have steadily declined and the Club has not been profitable,
especially given the levels of its acquisition debt. In March 1997, management
determined that it would be in the best interests of the Company and its
shareholders to discontinue the Tucson Club's operations, and has reached
agreements in principle with third

4
<PAGE> 7
parties for the sale of the Club's assets and a release and satisfaction of the
associated leasehold and other operating liabilities. These agreements are
expected to close in April 1997. See Item 6. "Management's Discussion and
Analysis."

NEW MANAGEMENT AND REVISED PLAN OF OPERATIONS

The Company's senior management changed in late 1996, introducing
substantial changes in the Company's plan of operations and management
strategies. The Company's prior strategies focused primarily on cost reduction
as the preferred means of improving profitability. Such strategies resulted in
lean Club-level management and loss of experienced personnel, low levels of
physical facility maintenance and reinvestment, and reduced levels of
advertising, promotion and entertainment expense. Current management has
replaced much of the Club-level management with new, experienced managers,
instituted management training procedures, implemented a cost management system
which includes daily unit-level accounting and reporting, improved the sound,
light and video systems, increased and redirected radio buys within the local
markets, and implemented new advertising and in-store promotions. These changes
reflect current management's belief that long-term strategies involving greater
investment in personnel and physical facilities will ultimately produce
superior financial performance.

ENTERTAINMENT

The Company seeks to book nationally known entertainers as well as
regionally-known entertainers and/or bands which do not yet have national
recognition. National name entertainers such as Blackhawk, Lori Morgan, Tracy
Lawrence, Tracy Byrd, Little Texas, Brian White and Willie Nelson have
performed at one or more of the Company's Clubs during the last year. The
Company believes it will improve its attractiveness as a performance venue to
such entertainers once two or three additional clubs are opened and operating,
as entertainers can then be offered a package of three or four appearances, as
opposed to one or two. The Company also believes its ability to offer several
scheduled performances to an entertainer will result in a lower price for all
performances than if booked on a one-performance-at-a-time basis.

EXPANSION STRATEGY

The Company intends to grow primarily through owning and operating
additional nightclubs. Additional nightclubs may be financed through private
and/or public equity offerings, internal funding, bank financing, the formation
of limited partnerships or a combination of the foregoing. The Company may also
purchase existing clubs through transactions involving the issuance of the
Company's stock and/or cash. Future locations under consideration by the
Company include Louisville, Kentucky; Houston, Texas; Dallas, Texas; Oklahoma
City, Oklahoma; Tulsa, Oklahoma; and Tampa Bay, Florida.

INVESTMENT IN LIMITED PARTNERSHIP

The Company is also a limited partner of Cowboys Concert Hall/Atlanta,
Ltd, a Texas limited partnership (the "Atlanta Partnership") formed June 29,
1995 to own and operate a country-western nightclub in Atlanta under the name
of Cowboys (the "Atlanta Club"). The general partner of the Atlanta Partnership
is Cowboys Concert Hall/Atlanta I, Inc. ("CCHAI"), a wholly owned subsidiary of
Cowboys Concert Hall - Arlington, Inc., a Texas corporation ("Cowboys"). The
Company and Cowboys each contributed $500 to the capital of the Atlanta
Partnership, and the Company is entitled to receive 50% of net income or loss
and cash

5
<PAGE> 8
distributions. The Company also loaned the Atlanta Partnership $638,822. The
loan is evidenced by a three year promissory note, payable June 29, 1998, which
bears interest at the rate of 10% per annum, payable quarterly. Due to
continuing losses, the Company wrote off its interest in the Atlanta
Partnership effective December 31, 1995.

On September 16, 1996, the Atlanta Partnership filed a Voluntary Petition
in Bankruptcy under Chapter 11 in the United States Bankruptcy Court, Northern
District of Georgia, Atlanta Division (96-74391). The petition lists assets of
$300,000 and liabilities of $2,146,064, including $638,822 owed to the Company.
The Company was not consulted in connection with the decision to file the
petition, and has been informed by counsel for the Atlanta Partnership that it
was filed to forestall foreclosure on the Atlanta Club by the Internal Revenue
Service.

The Atlanta Club consists of 49,000 square feet with three different
levels for seating, general entertainment, dining and dancing. The Club's
maximum occupancy is 4,000 people.

GOVERNMENT REGULATION

The Company's business is subject to extensive federal, state and local
government regulations, including regulations relating to alcoholic beverage
control, public health and safety, zoning and fire codes. In addition, each
nightclub restaurant must have food service licenses from local health
authorities.

Alcoholic beverage control regulations require each of the nightclubs to
apply to a state authority, and, in certain locations, county or municipal
authorities for a license or permit to sell alcoholic beverages on the premises
and to provide service for extended hours and on Sundays. Alcoholic beverage
control regulations relate to numerous aspects of the daily operation,
advertising, wholesale purchasing, inventory control and handling, storage and
dispensing of alcoholic beverages. Licenses to sell alcoholic beverages must be
renewed annually and are subject to suspension or revocation for cause,
including violation by the Company or its employees of any law or regulation
pertaining to alcoholic beverage control, such as those regulating the minimum
age of patrons or employees, advertising, wholesale purchasing, and inventory
control, handling and storage. Each nightclub is operated in accordance with
stringent procedures designed to assure compliance with all applicable codes
and regulations.

In recent years, certain states have enacted "dram-shop" statutes, which
generally provide a person injured by an intoxicated person the right to
recover damages from an establishment which wrongfully served alcoholic
beverages to such person. Presently, Arizona, Indiana, Missouri and Kansas, the
states in which the Company operates, do not have dram-shop statutes. However,
should any of these states enact such statutes, the Company would be subject to
additional exposure in such cases where judgments for damages exceeded its
insurance coverage.

The development and construction of additional nightclubs will be subject
to compliance with applicable zoning, land use and environmental regulations.
Management believes that federal and state environmental regulations have not
had a material effect on the Company's operations, but more stringent and
varied requirements of local governmental bodies with respect to zoning, land
use and environmental factors could delay construction of new nightclubs and
add to their cost.

The Company is also subject to the Fair Labor Standards Act, the
Immigration Reform and Control Act of 1986 and various state laws governing
such matters as minimum wages, overtime, tip credits and other working
conditions. A significant number of the Company's hourly personnel are paid at
rates relating to the federal minimum wage and, accordingly, increases in the
minimum wage or decrease in the allowable tip credit will increase the

6
<PAGE> 9
Company's labor cost. The Company may also incur labor cost increases as a
result of certain mandatory medical and parental leave benefits legislation
enacted by the United States Congress.

The Americans With Disabilities Act prohibits discrimination in employment
and public accommodations, such as restaurants and nightclubs, on the basis of
disability. Under the Act, the Company is required to provide service to, or
make usable accommodations for the employment and service of, disabled persons.

COMPETITION

The nightclub business is highly competitive. Most of the companies which
own and/or operate nightclubs are substantially larger than the Company, and
have greater resources, operating histories and experience. They include many
national, regional and local chains with more locations and larger advertising
budgets. Nightclub and theme entertainment businesses are also affected by
changing customer tastes, local and national economic conditions affecting
spending habits, population shifts and traffic patterns. Quality of service,
attractiveness of facilities, popularity of entertainment and price are also
important factors.

The popularity of the concept of "country-western" nightclubs has spawned
a number of companies and nightclubs seeking to capitalize on that phenomenon.
The Company seeks to identify markets which have a favorable competitive
environment such that the Company's club can be the major operation of its type
in the area and benefit from its competitive position as such.

TRADEMARKS

The Company uses the trademark InCahoots in the operation of its business.
This mark is used by others in the operation of businesses throughout the
country, including other nightclub operators. Because of these uses, the
Company believes that it cannot, nor can its competitors, register the mark
with the United States Patent and Trademark office to obtain exclusive,
nationwide rights to the mark. The Company believes, however, that it has
enforceable common law rights to its mark for use in the immediate trade areas
in which the Clubs operate, and it has encountered no claims of trademark
infringement. As the Company implements its expansion strategy, it may
encounter claims of trademark infringement requiring the Company to negotiate
license agreements with the prior user or to use other non-infringing
trademarks for nightclubs in the affected areas.

The Company also believes that, in the food service industry, its service
marks and "look" ("trade dress"), as well as its advertising and promotional
design and artwork, can be adequately protected by common law, and that it has
enforceable rights to this proprietary information.

EMPLOYEES AND CONSULTANTS

The Company presently has four full time employees in the corporate
office, including James E. Blacketer, President and a Director of the Company,
Ted W. Strickland, Chief Financial Officer, Treasurer and Director, Dominic W.
Grimmett, Vice President of Operations and two part time employees exclusive of
Club employees. The Company has approximately 250 employees in the Clubs. See
"Management."

ITEM 2. DESCRIPTION OF PROPERTIES

The Company's principal offices are located at 1601 N. W. Expressway,
Suite 1610, Oklahoma City, Oklahoma 73118. The Company's offices occupy
approximately 2,460 square

7
<PAGE> 10
feet in an office tower, for which it pays $3,075 per month subject to a lease.
The Company subleases a portion of this space to a non-affiliated company for
which it receives a total monthly fee of $1,000. This lease expires in June
2001.

The Indy Club occupies a 34,306 square foot building which is adjacent to
approximately 3.4 acres of land which is used for parking by the Indy Club's
customers. On January 31, 1994, WCC I, Ltd. exercised an option to purchase the
building for $750,000. WCC I, Ltd. borrowed $600,000 at prime plus 3% from the
Dulaney National Bank, which is due February 1, 2004, and the seller financed
the remaining $150,000 at 10% interest. Monthly payments of $3,187 and $7,546
are payable to the seller and to the Dulaney National Bank, respectively. Troy
H. Lowrie has personally guaranteed repayment of the note to the seller. The
note to the Dulaney National Bank is secured by the building and the furniture,
equipment and fixtures therein, and by rental payments from the tenants of the
Indy Club. WCC I, Ltd. also owns the 3.4 acres of parking adjacent to the
building. It purchased the adjacent land for $105,000 on February 24, 1993.

On August 26, 1993, the Company entered into a lease for nightclub space
in St. Louis, Missouri. The lease, which expires in August 2003, is for a 10
acre parcel of land, a 106,744 square foot building located thereon, and
existing parking facilities. The rental for the first five years is $22,238 per
month, and $26,686 per month for the second five years. The Company has the
right to extend the lease for two five year periods at increased rental rates.
The lease has been guaranteed by International Entertainment Consultants, Inc.,
a privately held company for which Mr. Lowrie served as an officer and
director, and was a shareholder, until November 1993, when Mr. Lowrie resigned
and sold his shares to his sister.

The Wichita Club is leased from Boots, Inc., which is a 20% limited
partner in the InCahoots Limited Partnership, a Kansas limited partnership, but
otherwise unaffiliated with the Company. The lease is for a ten year term,
expiring in the year 2003, with an option to extend the term for two periods of
five years each, and requires monthly payments of $12,500 or 6% of "gross
sales," whichever is greater.

On November 1, 1994, in connection with its acquisition of the Tucson
Club, the Company took an assignment of the lease covering the Club's building
and entered into a lease with the sellers for the parking lot. The building
lease terminates in February 2001, and presently requires monthly rental
payments of $22,145, which escalates to approximately $24,200 over the term of
the lease. The lease on the parking lot is for a four year term, ending October
31, 1998, and requires monthly rental payments of $3,000. Management has
reached an agreement in principle for the termination of these leases in
connection with the Club's closing. Under the agreement, the Company is
obligated for rent and property taxes through July 1997 in the approximate
amount of $93,000, which obligation will be paid in monthly installments of
$10,750 with the balance due December 31, 1997. The Company's security deposit
of $24,000 will also be transferred to the benefit of the new lessee. These
agreements are expected to close in April 1997. See Item 6. "Management's
Discussion and Analysis."

WCC I, Ltd. carries general liability insurance in the amount of
$2,000,000 for the Indy Club, and building and property insurance coverage in
the amount of $1,200,000 and $300,000, respectively. The Company has obtained
general liability insurance for the St. Louis Club in the amount of $2,000,000
and $310,000 in property liability coverage. The Company has general liability
insurance for the Tucson Club in the amount of $2,000,000 and property
insurance coverage in the amount of $700,000.

8
<PAGE> 11
The Wichita Club carries $2,000,000 general liability insurance and
building and property insurance coverage in the amount of $1,200,000.

The Company maintains $1,000,000 in liquor liability insurance coverage at
each of its nightclubs.

ITEM 3. LEGAL PROCEEDINGS

Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" for additional factors
relating to such statements.

From time to time the Company is party to certain legal proceedings
arising in the ordinary course of business. It cannot accurately predict the
amount of any liability that could arise with respect to these proceedings due
to, among other reasons, large variances in judicial and jury perceptions of
case facts and uncertainty in the scope of insurance coverages. In the opinion
of the Company, any liability from such claims will not likely have a material
adverse effect on the Company or its business. Nevertheless, a lawsuit or claim
could result in a material adverse effect on the Company or its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the recently completed fiscal year, the Company did not submit any
matter to a vote of its shareholders.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

On March 27, 1997, there were approximately 84 shareholders of record of
the Company's Common Stock. Based upon information received from brokers and
others in fiduciary capacity, the Company estimates that the total number of
shareholders of the Company's Common Stock exceed 600 as of that date. The
Company's Common Stock was approved for listing on the NASDAQ SmallCap
Market(SM), effective May 18, 1994, under the symbol "WCCI." Prior to listing on
NASDAQ, the Company's Common Stock had briefly traded in the pink sheets.

The following table sets forth, for the periods indicated, the range of
high and low closing bid quotations for the Company's Common Stock, as reported
by NASDAQ:

<TABLE>
<CAPTION>
1995 FISCAL YEAR HIGH BID ($) LOW BID ($)
- ---------------- ------------ -----------
<S> <C> <C>
First Quarter 6.00 5.50
Second Quarter 6.8125 5.875
Third Quarter 6.125 5.50
Fourth Quarter 6.125 5.125

1996 FISCAL YEAR
- ----------------
First Quarter 5.875 3.75
Second Quarter 5.25 3.50
Third Quarter 4.625 3.25
Fourth Quarter 3.75 2.00
</TABLE>

9
<PAGE> 12
DIVIDENDS

The Company has never declared a cash dividend with respect to its Common
Stock and intends to retain future earnings to support the Company's growth.
There are no contractual restrictions on the Company's present or future
ability to pay dividends. Future dividend policy is subject to the discretion
of the Board of Directors and is dependent upon a number of factors, including
future earnings, capital requirements and the financial condition of the
Company.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Report.

GENERAL

The Company commenced operations in April 1993, as general partner with a
30% profits interest in a limited partnership formed to own and operate the
Indy Club. In April 1994, the Company opened the St. Louis Club as general
partner with a 50% profits interest in a limited partnership formed for such
purpose. In May 1994, the Company completed its initial public offering of
securities receiving net proceeds of approximately $1.9 million. In November
1994, the Company purchased the Tucson Club with proceeds from the public
offering. Also during 1994, the Company increased its ownership interest in the
Indy Club to 80% utilizing a combination of cash and the Company's Common
Stock, and in the St. Louis Club to 100% utilizing Common Stock.

In June 1995, the Company participated as a 50% limited partner in a
partnership formed to acquire the Atlanta Club. The Company contributed $500 in
partnership capital and loaned an additional $638,822 to the partnership. Due
to continuing losses, the Company wrote off its interest in the Atlanta
partnership effective December 31, 1995. See "Investment in Limited
Partnership."

In September 1996, Troy H. Lowrie, President and principal shareholder of
the Company entered into a Stock Purchase Agreement whereby (i) Red River
Concepts, Inc., a Delaware corporation ("Red River"), would acquire in three
installments 1,300,000 shares of Mr. Lowrie's Common Stock; (ii) new management
assumed control of the operations of the Company; and (iii) James E. Blacketer
and Joe R. Love, officers of Red River, were appointed to the Company's Board
of Directors. The change of control occurred in October 1996.

New management immediately instituted a plan to acquire the Wichita Club,
which had been in operation since March 1993, and had continuously generated
operating profits. Management believed that the Wichita operation would be an
appropriate addition to the Company's Clubs and would provide additional profit
contribution to the Company with minimal increase in overhead. Subsequently, on
December 16, 1996, the Company acquired the Wichita Club for 400,000 shares of
the Company's Common Stock and assumption of $150,000 in debt. The Wichita Club
was owned in part by entities affiliated with James E. Blacketer and Joe R.
Love, directors of the Company. See Item 12, "Certain Relationships And Related
Transactions."

The Company's new management has introduced substantial changes in the
Company's plan of operations and management strategies. The

10
<PAGE> 13

Company's prior strategies focused primarily on cost reduction as the preferred
means of improving profitability. Such strategies resulted in lean Club-level
management and loss of experienced personnel, low levels of physical facility
maintenance and reinvestment, and reduced levels of advertising, promotion and
entertainment expense. Current management has replaced much of the Club-level
management with new, experienced managers, instituted management training
procedures, implemented a cost management system which includes daily
unit-level accounting and reporting, improved the sound, light and video
systems, increased and redirected radio buys within the local markets, and
implemented new advertising and in-store promotions. These changes reflect
current management's belief that long-term strategies involving greater
investment in personnel and physical facilities will ultimately produce
superior financial performance.

New management also undertook steps to improve the financial performance
of the Tucson Club, which was hampered by high acquisition, leasehold and
operating costs and declining revenues. During October 1996, the Club was
remodeled into two entertainment venues in order to attract new customers and
revenues, cost cutting measures were instituted, and new unit-level management
was installed. Despite these measures, based on the Club's continuing decline
in performance, high overhead and occupancy costs, and lack of foreseeable
benefit from any of the turnaround measures instituted, management recommended,
and the Company's Board of Directors approved, the closure of the Tucson Club,
and management has reached agreements in principle with third parties for the
sale of the Club's assets and a release and satisfaction of the associated
leasehold and other operating liabilities. These agreements are expected to
close in April 1997.

In February 1997, the Company filed a registration statement for a public
offering of up to 460,000 shares of preferred stock at $12.00 and up to
1,150,000 warrants to purchase Common Stock (the "Public Offering"). If the
Public Offering is closed (expected in the second quarter of 1997), the Company
will realize net proceeds of approximately $4.0 million. The Company intends to
use these proceeds to reduce debt, remodel existing Clubs, and develop and
acquire additional clubs. Many factors could prevent the Public Offering from
closing, including the weakening of the financial markets for small
capitalization or hospitality industry equities or the inability of the Company
to attract investment or underwriting interest.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has funded its capital needs through a
combination of cash flows from operations, proceeds from public and private
securities issuances, and loans from commercial banks, principal shareholders
or related persons or entities. In June 1996, the Company issued 95,200 shares
of Common Stock in a private placement generating proceeds of $238,000. The
Company also borrowed $300,000 from a bank to fund the early settlement of the
covenant not to compete related to the purchase of the Tucson Club and $100,000
from the Company's former president. Repayment of notes payable of $871,265
included: $393,000 repaid to International Entertainment Consultants, Inc., a
Company owned by a relative of the Company's former president; $100,000 to
Lowrie Management, a company owned by the Company's former president; $152,868
to Colonial Bank on moneys borrowed for the Company; $42,730 to Dulaney Bank,
holder of the first mortgage on the Indianapolis Club; $27,317 to Expo Bowl,
holder on the second mortgage for the Indy club; and $300,000 to extinguish the
covenant not to compete. The Company also invested $226,818 in the remodeling,
refurbishment and enhancement of its Clubs during 1996. See "Consolidated
Statement of Cash Flows."

11
<PAGE> 14
As of December 31, 1996, the Company had cash of $190,624, which was
generated from operating activities, financing activities and equity
participation. Cash for the twelve months ended December 31, 1996 decreased
$33,215 from cash of $223,839 reported at December 31, 1995. For the year ended
December 31, 1996, the Company generated $818,620 in cash flows from operations
compared to $934,831 from operations for the year ended December 31, 1995, or a
decrease of $116,211. This decrease in cash flow for 1996 is primarily due to
the decrease in revenues experienced by the Company and $142,857 expended in
offering costs during the period, which was partially offset by an increase in
accounts payable and accrued expenses of $127,800 and a refund of income taxes
of $152,851. Net cash provided from operations was primarily generated from
depreciation and amortization expense of $636,806, and Common Stock issued for
services of $159,166 for the twelve months ended December 31, 1996.

At December 31, 1996, the Company's working capital position (current
assets minus current liabilities) was a negative $533,633, compared with a
negative $640,215 at the end of 1995, an improvement of $106,582. Management
does not believe the negative working capital position poses a liquidity risk
or is unusual in the Company's line of business, which is labor intensive, has
significant payables and does not have significant receivables or inventory.
Working capital was impacted most heavily by the use of cash in the amount of
$226,818 during the year to remodel and enhance the Company's Clubs, and by the
net reduction of current notes payable of the Company in the amount of
$181,799.

Property and equipment is primarily made up of assets required to open and
operate the Indy, St. Louis and Wichita Clubs. Leasehold improvements total
$2,112,942; equipment, furniture and fixtures are $1,000,723; buildings and
improvements are $755,900; and land and improvements are $298,286. As of
December 31, 1996, management determined that the value of the long-lived
assets related to the Tucson Club, including furniture and fixtures, equipment
and leasehold improvements, would not be realized based on future expected cash
flows. Therefore, the carrying value of these assets in the amount of $927,152
has been charged to expense in 1996.

Goodwill and the amount of the covenant not to compete decreased by
$414,502 and $508,019, respectively, due to amortization during the year and
the impairment write-offs as of December 31, 1996, relating to the Tucson Club
in the amounts of $321,371 for goodwill and $471,295 for the covenant not to
compete.

The deferred income tax asset increased $136,621 to $333,621 due primarily
to the expected tax benefit from the impairment of the Tucson assets. Future
realization of this asset is dependent upon the generation of sufficient future
taxable income liability against which the tax loss carryforward and losses
from the impairment of the Tucson assets can be offset. The amount of the
deferred income tax asset at December 31, 1996 does not include $668,244
reserved as a deferred income tax valuation allowance based on historical
operating results and projected levels of future income tax liability. The
reserved allowance will provide additional benefit if the Company's level of
future income tax liability exceeds the deferred income tax asset within the
carryforward period (15 years). Income taxes receivable decreased $152,851 due
to refunds received from federal and state authorities by the Company during
1996.

Accounts payable at December 31, 1996 increased $145,467 as compared to
amounts due a year earlier in part because new management established revolving
credit terms with a number of service providers at the club level whereas prior
management had paid these expenses as incurred. The Company also had additional
amounts owing at year end 1996 related to the Public Offering, which were not
present at December 31, 1995. Short term liabilities decreased

12
<PAGE> 15
by $51,131 due to a decrease of $221,781 in the note payable in conjunction
with the covenant not to compete, which was partially offset by an $130,688
increase in accrued expenses. Long term liabilities decreased by $150,022 due
primarily to the early payment of the note payable in conjunction with the
Tucson covenant not to compete.

The Company has and is aggressively looking toward expanding its
operations in the future. Potential club locations are being considered in both
the Midwestern and Southwestern sections of the country. This growth strategy
will dictate the need for and application of funding through 1997 and beyond,
which management expects to fund primarily with proceeds from the Public
Offering, which is expected to close in the second quarter of 1997. Additional
nightclubs may be financed through the formation of limited partnerships,
internal funding, bank financing or private and/or public equity or debt
offerings, or a combination of the foregoing. The Company may also purchase
existing clubs through transactions involving the issuance of the Company's
Common Stock or cash. Until the Company's profitability is restored and debt
levels are decreased, management does not foresee commercial banks as a
significant source of capital financing. If the Company is unsuccessful in
completing the Public Offering in the near future, the Company's planned
expansion will be sharply curtailed. Management believes that current levels of
cash flow will support existing operations for the foreseeable future.

RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995

Total revenues of the Company decreased by 10% during 1996, including a
decline in beverage and food sales of $917,035 or 16%, which was partially
offset by an increase in admission fees of $326,145. This decline in core
business of the Company is attributed to declining sales in each of the
Company's existing Clubs, which was offset in part by the addition of the
Wichita Club sales for the fourth quarter. The Indy Club experienced a sales
decline of $293,068 or 13%; the St. Louis Club experienced a sales decline of
$482,306 or 13%; and the Tucson Club experienced a sales decline of $461,299 or
20%. Other revenues, consisting of machine, boutique and consignment income,
declined by $249,483. During October 1996, new management instituted
promotional concepts, which shifted revenues from beverage sales to admission
fees. This change accounts for the increase in admission fees while beverage
and food sales were concurrently showing declines. New management believes that
its plans of operations will stem the sales declines, and that such plans and
the closing of the Tucson Club will bolster operating margins, thus restoring
profitability even at these lower sales levels.

Due to the Tucson Club's inability to generate current or projected
positive cash flow, and the subsequent decision to discontinue the Club's
operations, the Company concluded that the assets of the Club were completely
impaired at December 31, 1996, and were written off as an impairment expense in
the amount of $1,719,818 in the Company's financial statements. Losses from
operations incurred after December 31, 1996, and expenses required to close the
Club and settle any future rental obligations under the lease will be recorded
as period expenses in 1997 when incurred. If the agreements below are
consummated, management expects that any closing expense will be offset by
proceeds from the sale of the Club's assets.

Management has reached agreements in principle with third parties for the
sale of the Tucson Club's assets and a release and satisfaction of the
associated leasehold and other operating liabilities. Under the purchase and
sale agreement, the Company will sell the assets for $325,000, $100,000 of which
is paid in cash at closing, $10,000 is paid in cash each month for three months
beginning May 1997, and the balance of $195,000 is paid by promissory note
having monthly payments of $7,500 beginning in November 1997 until maturity at
September 30, 1999. The note bears interest at

13
<PAGE> 16
eight percent per year and provides for prepayment discounts of $20,000 if paid
before December 31, 1997, and $10,000 if paid before December 31, 1998. Under
the release and satisfaction, the Company is obligated for rent and property
taxes through July 1997 in the approximate amount of $93,000, which obligation
will be paid in monthly installments of $10,750 with the balance due December
31, 1997. The Company's security deposit of $24,000 will be transferred to the
benefit of the new lessee. These agreements are expected to close in April
1997.

Total costs and expenses in 1996 increased by $1,646,202, or 20%, most of
which is attributable to the impairment of the Tucson Club assets. The
Company's cost of products and services increased by $139,121 due to the
increased costs of beverage purchases associated with the new promotions
discussed above, and additional salary expense incurred in the implementation
of additional management personnel at each Club. Depreciation expense increased
by $56,911 as a result of the increased expense recorded on the Tucson Club
remodeling completed in 1995, and the addition of the Wichita Club as of
October 1, 1996. Amortization expense decreased by $62,916 due to the
pre-opening expenses relating to the St. Louis and Tucson Clubs being
completely amortized in 1995 and 1996, respectively. General and administrative
expenses decreased by $76,713, even though prior management and certain
consultants to prior management received additional compensation of $112,500
from stock and stock option grants recorded in the third quarter of 1996, and
the Company wrote off a note receivable from Cowboys Entertainment, Inc. in the
amount of $100,000 in the fourth quarter of 1996.

In September 1996, the Company settled its remaining obligations under the
liability relating to the Tucson covenant not to compete for $300,000 cash. The
Company was reflecting a liability of $405,506 at that time and therefore,
recognized an extraordinary gain on the extinguishment of the debt of $105,506,
reduced by income tax of $39,776 thereon.

For 1996, the Company incurred a consolidated loss of $1,913,447 compared
to a consolidated loss of $211,233 in 1995. This decline was caused by the
following factors: (i) the loss from operations suffered by the Tucson Club of
approximately $419,000 coupled with the resulting impairment of the Tucson Club
assets of approximately $1,720,000; (ii) the write-off of the note receivable
from Cowboys Entertainment, Inc. in the amount of $100,000; (iii) the decline
in revenues of the Indy and St. Louis Clubs during the fiscal year; and (iv)
additional expense incurred in the transition to new management's operational
and marketing strategies, consisting of relocation and training costs and
attention to repairs and maintenance items which had previously been deferred.
Once the Tucson Club is completely closed (expected in the second quarter of
1997), management believes that the Company's three remaining Clubs will
continue to operate profitably. Management also believes that, assuming
completion of the Public Offering, the Company can expand its number of
operating locations, and that the combination of the elimination of future
Tucson Club losses and the expansion of new locations will ensure the Company's
success in future periods.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's audited financial statements, together with the reports of
auditors, are included in the report after the signature page.

14
<PAGE> 17
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On January 30, 1997, the Company dismissed the auditing and accounting
firm of Causey Demgen & Moore Inc., Denver, Colorado, who have acted as
certifying accountants for the Company for the years ended December 31, 1993,
1994 and 1995, and engaged the auditing and accounting firm of Gross, Collins +
Cress, P.C., Atlanta, Georgia, to act as certifying accountants for the year
ended December 31, 1996. The Company is not aware of any disagreements with the
prior accountants, and the decision to change accountants was not based upon
any question as to accounting treatment of any transaction or type of audit
opinion that might be issued. Rather, the Company believed that the change in
accounting firms would be beneficial to the Company's planned expansion over
the next several years.

PART III

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

The information required in response to this Item is incorporated herein
by reference to the Company's proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120 days
after the end of the fiscal year covered by this report.

ITEM 10. EXECUTIVE COMPENSATION

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial statements: See index to financial statement and
schedules immediately following the signature page of this report.

2. Financial statement schedules: Financial statement schedules have
been omitted because they are not required or the information is
included in the financial statements and notes thereto.

15
<PAGE> 18
3. Exhibits: Exhibits required to be filed with this Form 10-KSB are
identified by the numbers indicated, and, except where incorporated by
reference, immediately follow the financial statements.

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1 Articles of Incorporation, dated December 20, 1989 (1)

3.2 Amendment to Articles of Incorporation, dated November 30, 1993 (1)

3.3 Bylaws of Western Country Clubs, Inc. (1)

9.0 Voting Trust Agreement, dated September 20, 1996, between Red River
Concepts, Inc. and Troy H. Lowrie (7)

10.1 Lease Agreement, dated August 26, 1993, between Wal-Mart Stores, Inc.
and Western Country Clubs, Inc. (1)

10.2 License Agreement, dated January 20, 1993, between Western Country
Clubs, Inc. and Western Country Club I, Ltd. (1)

10.3 Option for Limited Partnership Interest, dated September 23, 1993,
between Western Country Clubs, Inc. and Merrill E. Roberts (1)

10.4 Stock Option Agreement, dated December 16, 1993 (1)

10.5 Lease with Option to Purchase, dated December 26, 1993, between and
among Edward L. and Barbara L. Benshoof and Western Country Clubs, Inc.
(1)

10.6 Agreement to Purchase and Sale of Business and Assets, with exhibits,
dated November 1, 1994 (2)

10.7 Bill of Sale, dated November 1, 1994, transferring Arizona Bar Liquor
License No. 06100208 to Western (2)

10.8 Amendment to Covenant Not To Compete, updated, between Western and
Clarance O. Bond, Jack E. McMurrough and Ada L. Bond (9)

10.9 Agreement and Plan of Merger, dated October 10, 1995, between Western
Country Clubs, Inc., Western Newco, Inc., and Cowboys Concert Hall -
Arlington, Inc. (6)

10.10 Lease with Option to Purchase, dated October 14, 1992, between Expo
Bowl, Inc. and Texas of Indy, Inc. (1)

10.11 Guaranty of Lease with Option to Purchase, dated October 14, 1992, by
Troy H. Lowrie (1)

10.12 First Amendment to Lease with Option to Purchase, dated January 20,
1993, between Expo Bowl Inc. and Texas of Indy, Inc. (1)

10.13 Warranty Deed, dated February 28, 1993, in the name of Western Country
Club I, Ltd. (1)
</TABLE>

16
<PAGE> 19

<TABLE>
<S> <C>
10.14 State of Indiana, Certificate of Trade Mark Registration, dated August
18, 1993, in the name of Texas of Indy, Inc. for "A Little Bit of Texas"
and Design (1)

10.15 Lease, dated April 2, 1993, between Texas of Indy, Inc. and Great
Western Boot Company (1)

10.16 Operating Agreement dated March 17, 1993, between Texas of Indy, Inc.
and Taco Bell Corp. (1)

10.17 Option Agreement, dated January 20, 1993, between and among Western
Country Club I, Ltd., Troy H. Lowrie and Merrill Roberts (1)

10.18 Amended Limited Partnership Agreement of Western Country Club I, Ltd.(1)

10.19 Consulting Agreement dated January 20, 1993, between Western Country
Club I, Ltd. and Texas of Indy, Inc. (1)

10.20 Security Agreement, dated March 18, 1993, between Western Country Club
I, Ltd. and Texas of Indy, Inc. (1)

10.21 Option to Purchase Assets, dated January 20, 1993, between Western
Country Club I, Ltd. and Texas of Indy, Inc. (1)

10.22 Promissory Note, dated January 31, 1994, from Western Country Club I,
Ltd. to Expo Bowl, Inc. in the amount of $150,000 (1)

10.23 Guaranty, dated January 31, 1994, of Promissory Note to Expo Bowl, Inc.
by Troy H. Lowrie (1)

10.24 Promissory Note, dated January 31, 1994, from Western Country Club I,
Ltd. to Dulaney National Bank (1)

10.25 Articles of Incorporation of WCWW Acquisition Corporation, dated January
20, 1995 (4)

10.26 Interim Permit, dated February 9, 1995, from the Arizona Department of
Liquor Licenses and Control for the Wild Wild West nightclub (5)

10.27 Stock Purchase Agreement, dated September 21, 1996, between and among
Troy H. Lowrie, Western Country Clubs, Inc. and Red River Concepts, Inc.
(7)

10.28 Lease Agreement, dated July 30, 1993, by and between Boots, Inc. and In
Cahoots Limited Partnership (9)

10.29 Agreement and Plan of Merger, dated December 16, 1996, by and between
Western Country Clubs, Inc., Entertainment Wichita, Inc., and WCCI
Acquisition Corp. (8)

10.30 Lease Agreement, dated February 25, 1997, between Western Country Clubs,
Inc. and Prime Financial Corporation

10.31 Agreement For Purchase and Sale of Assets, dated April 14, 1997, between
Kirby Bond and Western Country Clubs, Inc. (10)

10.32 Promissory Note and Security Agreement made by Kirby Bond in favor of
Western Country Clubs, Inc. (10)
</TABLE>

17
<PAGE> 20
<TABLE>
<S> <C>
21 Subsidiaries of the Registrant (9)

27.1 Financial Data Schedule
</TABLE>

- --------------
(1) Incorporated by reference from the like numbered exhibits filed with the
Registrant's Registration Statement on Form SB-2, No. 33-72942.

(2) Incorporated by reference from Western's Current Report on Form 8-K, dated
November 1, 1994, attached as Exhibits 10.1 and 10.2 thereto.

(3) Incorporated by reference from Western's Annual Report on Form 10-KSB,
dated February 27, 1995, attached as Exhibit 21 thereto.

(4) Incorporated by reference from Western's Annual Report on Form 10-KSB,
dated February 27, 1995, attached as Exhibit 28.16 thereto.

(5) Incorporated by reference from Western's Annual Report on Form 10-KSB,
dated February 27, 1995, attached as Exhibit 28.17 thereto.

(6) Incorporated by reference from Western's Current Report on Form 8-K, dated
October 19, 1995, attached as Exhibit 10.1 thereto.

(7) Incorporated by reference from Western's Current Report on Form 8-K, dated
October 10, 1996, attached as Exhibit 9 thereto.

(8) Incorporated by reference from Western's Current Report on Form 8-K, dated
October 10, 1996, attached as Exhibit 2 thereto.

(9) Incorporated by reference from the like numbered exhibits filed with the
Registrant's Registration Statement on Form SB-2, dated February 11, 1997,
No. 333-21547.

(10) To be filed by Amendment.

(b) During the last quarter of the period covered by this report, the Company
filed Reports on Form 8-K as follows:

1. Form 8-K dated October 10, 1996, reporting that Troy H. Lowrie, the
President, Chief Executive Officer, Director and principal
shareholder had entered into a Stock Purchase Agreement with Red
River Concepts, Inc. to sell 1,300,000 shares of his stock under Item
1 - Changes in Control of Registrant.

2. Form 8-K, dated December 16, 1996, reporting the Company had acquired
Entertainment Wichita, Inc. through a subsidiary merger under Item 2
- Acquisition or Disposition of Assets.

18
<PAGE> 21
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

April 15, 1997 Western Country Clubs, Inc.

By: /s/ James E. Blacketer
-------------------------------
James E. Blacketer
President

Pursuant to the requirements of the Securities Exchange 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 dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
- ----------------------- --------------------------------------- --------------
<S> <C> <C>
President, Principal Executive
/s/ James E. Blacketer Officer, and Director April 15, 1997
- -----------------------

Chief Financial Officer,
/s/ Ted W. Strickland Treasurer, and Director April 15, 1997
- -----------------------

/s/ Joe R. Love Director April 15, 1997
- -----------------------

- -----------------------
John R. Ritter Director April __, 1997
</TABLE>

19
<PAGE> 22
INDEX TO FINANCIAL STATEMENTS AND NOTES

<TABLE>
<S> <C>
Independent Auditors' Reports ........................................... F-2
Consolidated Balance Sheets - December 31, 1996 and 1995 ................ F-4
Consolidated Statements of Income -
Years Ended December 31, 1996 and 1995 ................................ F-6
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1996 and 1995 ................................ F-7
Consolidated Statements of Cash Flows -
Years Ended December 31, 1996 and 1995 ................................ F-8
Notes to Consolidated Financial Statements .............................. F-10
</TABLE>

F-1
<PAGE> 23

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of

Western Country Clubs, Inc.

We have audited the accompanying consolidated balance sheet of
Western Country Clubs, Inc. as of December 31, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Western Country Clubs, Inc. as of December 31, 1996, the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

Atlanta, Georgia /s/ GROSS, COLLINS + CRESS, P.C.
March 8, 1997 GROSS, COLLINS + CRESS, P.C.

F-2

<PAGE> 24

INDEPENDENT AUDITORS' REPORT

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Stockholders
Western Country Clubs, Inc.

We have audited the accompanying consolidated balance sheet of Western Country
Clubs, Inc. and subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Western Country
Clubs, Inc. and subsidiaries as of December 31, 1995, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.

Denver, Colorado CAUSEY DEMGEN & MOORE INC.
February 26, 1996

F-3
<PAGE> 25
WESTERN COUNTRY CLUBS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
---------- -----------

ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 190,624 $ 223,839
Certificate of deposit, restricted (Note 3) 200,000 -
Accounts receivable 44,736 35,533
Notes and loans receivable (Note 4) 100,000 100,000
Inventories 79,628 96,867
Prepaid expenses 68,889 96,741
Capitalized offering costs 142,857 -
Pre-opening expenses - 52,272
Deferred income taxes (Note 11) 244,287 112,000
Income taxes receivable 7,269 160,120
---------- ----------
TOTAL CURRENT ASSETS 1,078,290 877,372
---------- ----------

PROPERTY AND EQUIPMENT, at cost
Land and improvements 298,286 224,989
Building and building improvements 755,900 755,900
Leasehold improvements 2,112,942 2,605,056
Equipment 667,393 524,783
Furniture and fixtures 333,330 427,009
---------- ----------
4,167,851 4,537,737
Less accumulated depreciation 1,104,353 722,999
---------- ----------
PROPERTY AND EQUIPMENT, net 3,063,498 3,814,738
---------- ----------

OTHER ASSETS
Deferred income taxes (Note 11) 89,334 85,000
Goodwill, net of accumulated amortization of $170,701 in 1996 169,747 584,249
and $189,215 in 1995
Covenant not to compete, net of accumulated amortization of - 508,019
$68,768 in 1995
Deposits and other 108,257 139,765
---------- ----------
TOTAL OTHER ASSETS 367,338 1,317,033
---------- ----------
TOTAL ASSETS $4,509,126 $6,009,143
========== ==========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-4
<PAGE> 26
WESTERN COUNTRY CLUBS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable $ 325,822 $ 180,355
Notes payable (Note 8) 475,742 283,872
Current portion of notes payable - related parties (Note 8) 323,129 493,000
Accrued expenses 390,167 259,499
Current portion of long-term debt (Note 8) 97,063 79,080
Current portion of liability under non-compete - 221,781
agreement (Note 13)
TOTAL CURRENT LIABILITIES 1,611,923 1,517,587
---------- ----------

NOTES PAYABLE - related parties (Note 8) 56,250 -

LONG-TERM DEBT (Note 8) 498,802 552,152

LIABILITY UNDER NON-COMPETE AGREEMENT (Note 13) - 152,922

TOTAL LIABILITIES 2,166,975 2,222,661
---------- ----------

EQUITY INTEREST, other partners in consolidated subsidiary
(Note 1) 265,716 217,854
---------- ----------

COMMITMENTS AND CONTINGENCIES (Notes 15, 16, and 17)

STOCKHOLDERS' EQUITY (Note 10) - -
Preferred stock, $.10 par value; 10,000,000 shares authorized,
none issued and outstanding
Common stock, $.01 par value; 25,000,000 shares authorized, 35,199 29,447
3,519,921 in 1996 and 2,944,721 in 1995 shares issued
and outstanding
Additional paid-in capital 4,201,087 3,782,738
Retained earnings (deficit) (2,159,851) (243,557)
---------- ----------

TOTAL STOCKHOLDERS' EQUITY 2,076,435 3,568,628
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,509,126 $6,009,143
========== ==========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-5
<PAGE> 27

WESTERN COUNTRY CLUBS, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
----------- ----------
<S> <C> <C>
REVENUES
Beverage and food sales $ 4,961,467 $5,878,502
Admission fees 2,312,992 1,986,847
Other revenues 393,226 642,709
----------- ----------
TOTAL REVENUES 7,667,685 8,508,058
----------- ----------

COSTS AND EXPENSES
Cost of products and services 2,488,218 2,349,097
Depreciation 439,802 382,891
Amortization 197,004 259,921
Interest 135,630 137,059
General and administrative expense 4,832,476 4,909,189
Impairment of long-lived assets (Note 7) 1,719,818 -
Consulting fees, related parties - 11,400
Merger expenses - 117,190
----------- ----------
TOTAL COSTS AND EXPENSES 9,812,948 8,166,747
----------- ----------

INCOME (LOSS) BEFORE INCOME TAXES, OTHER PARTNERS'
INTERESTS, EQUITY IN LOSS OF PARTNERSHIP, WRITE OFF
OF INVESTMENT IN PARTNERSHIP AND EXTRAORDINARY ITEM (2,145,263) 341,311
----------- ----------

PROVISION (BENEFIT) FOR INCOME TAXES (Note 11)
Current (48,984) 183,660
Deferred (136,621) (50,000)
----------- ----------
TOTAL PROVISION (BENEFIT) FOR INCOME TAXES (185,605) 133,660
----------- ----------

INCOME (LOSS) BEFORE OTHER PARTNERS' INTERESTS, EQUITY
IN LOSS OF PARTNERSHIP, WRITE OFF OF INVESTMENT IN
PARTNERSHIP, AND EXTRAORDINARY ITEM (1,959,658) 207,651

OTHER PARTNERS' INTERESTS IN NET INCOME (LOSS) OF
CONSOLIDATED SUBSIDIARIES, net of income tax benefit of
$16,868 in 1996 and $12,458 in 1995 (Note 1) (19,518) (20,587)

EQUITY IN LOSS OF PARTNERSHIP, net of income tax benefit
of $74,841 (Note 1) - (123,676)

WRITE OFF OF INVESTMENT IN PARTNERSHIP, net of income
tax benefit of $166,183 (Note 14) - (274,621)
----------- ----------

NET LOSS BEFORE EXTRAORDINARY ITEM (1,979,176) (211,233)

GAIN ON EXTINGUISHMENT OF DEBT, net of income tax
provision of $39,776 (Note 13) 65,730 -
----------- ----------

NET LOSS $(1,913,446) $ (211,233)
=========== ==========

NET LOSS PER COMMON SHARE
Loss before extraordinary Item $ (0.65) $ (0.70)
Extraordinary item 0.02 -
----------- ----------
NET LOSS PER COMMON SHARE $ (0.63) $ (0.07)
=========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,035,079 3,030,383
=========== ==========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-6
<PAGE> 28

WESTERN COUNTRY CLUBS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------------- Paid-In Earnings
Shares Amount Capital (Deficit)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ 3,477,263 $ 34,773 $ 3,544,912 $ (32,324)

Expiration of the recision period for common stock sold
in February 1994 (Note 10) 116,667 1,167 348,833 -

Common stock repurchased from the Company's president
(Note 10) (700,000) (7,000) (1,918,000) -

Deemed contribution of capital by the Company's president
representing the excess of the fair market of the stock
repurchased over the amount actually paid ($.40 per share)
(Note 10) - - 1,645,000 -

Exercise of stock options at $2.50 per share (Note 10) 27,000 269 67,231 -

Common stock issued in exchange for promotional service 15,000 150 44,850 -

Common stock issued in exchange for legal services 8,791 88 49,912 -

Net loss for the year ended December 31, 1995 - - - (211,233)
----------- ----------- ----------- -----------

Balance at December 31, 1995 2,944,721 29,447 3,782,738 (243,557)

Common stock issued for cash in private placement (Note 10) 95,200 952 237,048 -

Common stock issued pursuant to stock compensation plan
(Note 10) 80,000 800 158,366 -

Common stock issued in acquisition of subsidiary (Note 6) 400,000 4,000 22,935 (2,848)

Net loss for the year ended December 31, 1996 - - - (1,913,446)
----------- ----------- ----------- -----------
Balance at December 31, 1996 3,519,921 $ 35,199 $ 4,201,087 $(2,159,851)
=========== =========== =========== ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-7
<PAGE> 29

WESTERN COUNTRY CLUBS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1996 1995
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,913,446) $ (211,233)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation and amortization 636,806 654,910
Gain on extinguishment of debt (105,506) -
Write-off of note receivable 100,000 -
Loss from impairment of assets 1,719,818 -
Minority interest in earnings of subsidiaries 36,386 33,045
Equity in loss of limited partnership - 639,322
Loss in disposal of property and equipment - 10,762
Common stock issued for services 159,166 95,000
Deferred tax provisions (136,621) (50,000)
Changes in assets (increase) decrease
(Increase) decrease in accounts receivable (9,203) 11,780
Increase in pre-opening expenses - (69,686)
(Increase) decrease in inventories 17,239 (17,286)
(Increase) decrease in prepaid expenses 27,852 (33,527)
(Increase) decrease in refundable income taxes 152,851 (160,120)
Increase in capitalized offering costs (142,857) -
Changes in liabilities increase (decrease)
Increase in accounts payable 145,467 104,018
Decrease in income taxes payable - (116,471)
Increase in accrued expenses 130,668 44,317
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 818,620 934,831
----------- ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Restricted certificate of deposit (200,000) -
Investment and advances to Limited Partnership - (639,322)
Notes and loans receivable (100,000) (100,000)
Acquisition of property and equipment (226,818) (626,399)
Decrease in deposits 8,383 15,277
Acquisition of Entertainment Wichita, Inc. (2,936) -
----------- ------------
NET CASH USED BY INVESTING ACTIVITIES (521,371) (1,350,444)
----------- ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of common stock - (280,000)
Proceeds from sale of common stock 238,000 -
Proceeds from exercise of stock options - 67,500
Partnership distributions to minority interests (32,050) (45,400)
Borrowings under notes payable 234,851 300,070
Repayments of notes payable (347,545) (416,658)
Borrowings under notes payable - related parties 100,000 793,000
Repayments of notes payable, related parties (523,720) (300,000)
----------- ------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (330,464) 118,512
----------- ------------
</TABLE>
Continued . . .

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-8
<PAGE> 30

WESTERN COUNTRY CLUBS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
NET DECREASE IN CASH (33,215) (297,101)
CASH, BEGINNING OF YEAR 223,839 520,940
---------- ----------

CASH, END OF YEAR $ 190,624 $ 223,839
========== ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 141,225 $ 123,524
---------- ----------
Cash paid for income taxes $ - $ 92,120
========== ==========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS

During 1996 and 1995, the Company issued 80,000 and 23,791 shares,
respectively, of its common stock in exchange for various services,
including legal, consulting, and promotional aggregating $159,166 in 1996
and $95,000 in 1995.

During 1996, the Company exchanged 400,000 shares of its common stock for
all the common stock of Entertainment Wichita, Inc. (Note 6).

The Company acquired the following assets and liabilities in the transaction:

<TABLE>
<S> <C>
Working capital $ (2,936)
Property and equipment, net 380,648
Notes payable (310,099)
Minority interest (43,526)
---------
Net book value of acquisition $ 24,087
=========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-9
<PAGE> 31

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

Western Country Clubs, Inc. (the "Company") was
incorporated in Colorado on December 19, 1989, and commenced operations
in 1993. The Company's operations have consisted primarily of owning
and operating "country-western" theme nightclubs. The Company's
subsidiaries and divisions are as follows:

Western Country Club 1, Ltd. ("Western 1, Ltd.") is a
limited partnership formed on January 19, 1993. Western 1, Ltd. owns
and operates a nightclub in Indianapolis, Indiana. The operations of
the nightclub began on April 14, 1993. The Company has an 80% profit
interest in the partnership.

WCWW Acquisition Corporation ("WCWW") is a wholly owned
subsidiary formed in January 1995 to hold the interim and final liquor
licenses for the Company's nightclub in Tucson, Arizona.

The St. Louis division of the Company was acquired on
October 7, 1994. This division operates a nightclub in St. Louis,
Missouri.

Entertainment Wichita, Inc. ("EWI"), a wholly owned
subsidiary, owns an 80% interest in In Cahoots, Ltd. ("In Cahoots"). In
Cahoots is a limited partnership that owns and operates a nightclub in
Wichita, Kansas (Note 6).

Western Newco, Inc. ("Newco") was formed on October 5,
1995, for the purpose of participating in the proposed merger with
Cowboys Concert Hall - Arlington, Inc. ("Cowboys"). The merger was
never submitted to the shareholders of Cowboys for approval; hence,
Newco is presently inactive.

In addition to these subsidiaries and divisions, the
Company holds a 50% interest in a nightclub in Atlanta, Georgia (Note
14).

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting
policies followed by the Company:

Cash and cash equivalents - The Company considers all
highly liquid investments with original maturities of three months or
less to be cash equivalents.

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. Actual
results could differ from those estimates.

Consolidation - The consolidated financial statements
include the accounts of the Company, two limited partnerships over which
the Company has financial control, and three wholly owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated in consolidation.

F-10
<PAGE> 32

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments - Investments in partnerships, which the
Company does not financially control, are accounted for on the equity
method until financial control is established.

Inventories - Inventories consist of liquor, wine, beer,
and boutique items. Inventories are stated at the lower of cost
(first-in, first-out) or market.

Depreciation and amortization - Property and equipment are
stated at cost. Depreciation is provided using the straight-line method
over the assets' estimated useful lives as follows: land improvements,
10-15 years; building and improvements, 10-30 years; leasehold
improvements, 7-10 years; equipment, 7-10 years; furniture and fixtures,
7-10 years.

Intangibles - Organization costs and liquor license costs
are amortized over five years and goodwill is amortized over five to
fifteen years, the periods estimated by management to be benefitted.
Certain costs incurred before a nightclub is opened are capitalized as
pre-opening expenses and amortized over a 12-month period commencing the
first full month the nightclub begins operation. The covenant not to
compete is amortized over 15 years, the period covered by the amended
agreement.

Measurement of impairment - At each balance sheet date,
the Company reviews the amount of recorded goodwill, covenant not to
compete and related nightclub assets (separately by club) for
impairment. Whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable out of
undiscounted future operating cash flows and the sum of the expected
cash flows from these assets is less than the carrying amount of these
assets, the Company will recognize an impairment loss in such period in
the amount by which the carrying amount of the assets exceeds the fair
value of the assets.

Repairs and maintenance - Normal costs incurred to repair
and maintain fixed assets are charged to operations as incurred.
Repairs and betterments which extend the life of an asset are
capitalized and subsequently depreciated on a straight-line basis over
the remaining useful life of the asset. When assets are sold or
retired, the cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in operations.

Income taxes - Income taxes are provided based on earnings
reported in the financial statements. The Company follows Statement of
Financial Accounting Standards No. 109 whereby deferred income taxes are
provided on temporary differences between reported earnings and taxable
income.

Net income per common share - Net income per common share
is computed based on the weighted average number of shares outstanding
during the periods. Common stock equivalents included in the
computation represent shares issuable upon assumed exercise of stock
options which would have a dilutive effect. Shares issuable under stock
warrants have been excluded since they would be antidilutive.

Concentration of credit risk - Financial instruments which
potentially subject the Company to concentrations of credit risk are
primarily cash and temporary cash investments. The Company places its
cash investments in highly rated financial institutions. At times, the
Company may have bank deposits in excess of Federal Deposit Insurance
Commission (FDIC) limits.

F-11
<PAGE> 33

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) RESTRICTIONS OF CASH

Restricted cash is composed of a certificate of deposit
for $200,000. This money is used to secure an outstanding loan with a
bank in the amount of $200,000 (Note 8).

(4) NOTES AND LOANS RECEIVABLE

On November 30, 1995, the Company loaned to Cowboys
Entertainment, Inc. $100,000 which was to be repaid on November 30,
1996. The note was determined to be uncollectible and was written off in
1996.

During 1996, the Company loaned a total of $100,000. The
first loan is for $25,000 and is secured by the stock granted under the
Company's qualified stock option plan. The second loan is for $55,000
and will be repaid in early 1997 when the exchange for Cowboys stock
occurs (Note 18). The third loan for $20,000 is due on April 9, 1997
and carries an interest rate of 8% per annum.

(5) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, short-term notes receivable,
commercial paper and notes payable approximates fair value because of
the short-term maturity of these instruments.

The fair value of long-term debt, including current
portion, is estimated based on quoted market prices for the same or
similar issues or on the current rates offered to the Company for debt
of the same maturities.

(6) ACQUISITIONS

Atlanta club investment - On June 29, 1995, the Company,
as the limited partner, contributed $500 to the capital of Cowboys
Concert Hall/Atlanta, Ltd. ("Atlanta") in exchange for a 50% interest in
the Partnership. The Company also agreed to lend the Partnership up to
$750,000 and loaned the Partnership $638,822 pursuant to a three-year
unsecured promissory note, due June 29, 1998 bearing interest at 10% per
annum. The Company accounted for its interest in the Partnership
using the equity method until the investment was written off at
December 31, 1995 (Note 14).

On June 29, 1995, the Partnership closed on the
acquisition of certain assets and liabilities of a country-western
nightclub in Atlanta, Georgia. The purchase price was $1,650,000
payable $425,000 at closing plus a $1,225,000 promissory note due
December 29, 1999 bearing interest at 8% per annum.

Condensed financial information of Atlanta as of December
31, 1995 and for the six months ended December 31, 1995 are as follows:

<TABLE>
<S> <C>
Current assets $ 103,081
Noncurrent assets 1,785,138
Current liabilities 1,645,431
Long-term debt 638,822
Partners' equity (deficit) (396,034)
Net loss (397,034)
</TABLE>

F-12
<PAGE> 34

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) ACQUISITIONS (CONTINUED)

Wichita club acquisition - EWI, a Kansas Corporation, is
the general partner of In Cahoots. Through September 30, 1996, EWI
owned a 1% interest in the profits and losses of In Cahoots. On October
1, 1996, limited partners of In Cahoots owning an aggregate 79% limited
partnership interest exchanged these partnership interests for an
aggregate of 36,800 shares of common stock of EWI and the assumption of
$150,000 of debt related to a previous acquisition of limited
partnership interest by another party.

On December 16, 1996, the Company and EWI entered into an
agreement and plan of merger whereby EWI would become a 100% subsidiary
of the Company. On December 16, 1996, the Company issued 400,000 shares
of its common stock and assumed $150,000 of notes owed to former limited
partners of In Cahoots in exchange for all of the outstanding common
shares of EWI.

The exchange of partnership interests of In Cahoots for
shares of common stock of EWI and the merger of the Company with EWI
have been treated as transactions between entities under common control
and, therefore, the consolidated assets and liabilities of EWI are
recorded at historical cost. The operations of EWI and In Cahoots are
included in the consolidated statement of income beginning October 1,
1996, the first date that common control existed between them and the
Company.

The following unaudited pro forma summary presents the
consolidated results of operations as if the acquisitions had occurred
at the beginning of the period presented and do not purport to be
indicative of what would have occurred had the acquisitions been made as
of that date or of results which may occur in the future.
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Net sales $ 9,118,206 $10,927,813

Net loss $(1,880,916) $ (161,867)

Net loss per common share $ (0.55) $ (0.05)

</TABLE>

(7) IMPAIRMENT OF LONG-LIVED ASSETS

As of December 31, 1996, management determined that the
long-lived assets related to its Tucson operations including furniture
and fixtures, equipment, leasehold improvements, and intangibles would
not be realized based on future expected cash flows. Therefore, the
carrying values of these assets have been charged to expense in 1996.
In addition, the deferred rental obligation has been decreased by
$45,955 to recognize the fact that the lease will not be renewed at the
end of five years. The charge to expense is included in "Impairment of
long-lived assets" and the reduction of the deferred rental obligation
is recorded as a reduction in rental expense.

F-13
<PAGE> 35

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8) NOTES PAYABLE

Short-term notes payable consist of the following:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Note payable, due in monthly installments of interest only
through February 19, 1997, at which time, a final payment of
unpaid principal is due. Interest is computed at 6.36%.
Collateralized by an interest in certain cash accounts of the
Company and of the Company's former president (Note 18). $ 275,742 $ 283,872

Note payable, due on January 31, 1997. Secured by a
certificate of deposit (Note 3). 200,000 -
--------- ---------
Total short term notes $ 475,742 $ 283,872

Notes payable - related parties consist of the following:

1996 1995
--------- ---------
Note payable - relative of former president, bearing interest
at 12% annually. The note matured on April 28, 1996 (Note 9). $ - $ 393,000

Note payable - officer, bearing interest at 12% annually.
The note matured on November 30, 1996 (Note 9). - 100,000

Note payable - former officer, bearing interest at 12%
annually. The note is due on demand (Note 9). 100,000 -

Notes payable - affiliates of a limited partner, payable on
demand, including interest at 10%. Secured by the personal
guarantee of the Company's president (Note 9). 50,000 -

Note payable - former limited partners, payable on demand,
including interest at 10%, unsecured (Note 9). 10,000 -

Note payable - former limited partner, payable in monthly
installments of $6,250 plus interest at prime plus 1%. Secured
by the ownership interest of a stockholder and the guarantee of
a financial corporation. Prime was 8.5% at December 31, 1996
(Note 9). 139,223 -

Note payable - affiliate of a limited partner, due in monthly
installments of $8,069, including interest at 18% through
November 1997. Secured by equipment, inventories, receivables,
furniture and fixtures (Note 9). 80,156 -
--------- ---------

Total notes payable - related parties 379,379 493,000
Less current portion 323,129 493,000
--------- ---------
Noncurrent portion $ 56,250 $ -
========= =========
</TABLE>

F-14
<PAGE> 36

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8) NOTES PAYABLE (CONTINUED)

Long-term debt consists of the following at December 31,
1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Note payable - bank, due in monthly installments of $8,437,
including interest at 3% above prime through February 2004.
Secured by first mortgage on real estate. $486,982 $529,712

Note payable - seller, due in monthly installments of $3,187,
including interest at 10% through January 1999. Secured by
second mortgage on real estate and the personal guarantee of
the Company's former president. 74,203 101,520

Capitalized lease - bank, due in monthly installments of
$256, including interest at 20.5% through November 1998.
Secured by equipment. 4,834 -

Note payable - seller, noninterest bearing, due in monthly
installments of $1,000, through July 1999. Secured by
equipment. 29,846 -
-------- --------
Total long-term debt 595,865 631,232
Less current portion 97,063 79,080
-------- --------
Noncurrent portion $498,802 $552,152
======== ========
</TABLE>

Maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
Year ending December 31, Amount
------------------------ --------
<S> <C>
1997 $ 97,063
1998 103,965
1999 68,956
2000 67,220
2001 75,371
Thereafter 183,290
--------
Total $595,865
========
</TABLE>

(9) RELATED PARTY TRANSACTIONS

During the years ended December 31, 1996 and 1995, the
Company utilized a service organization whose president is a stockholder
of the Company. The service organization was responsible for the
management of the daily operations of the Company in 1995 and through
September 1996. The total amounts paid to the organization during 1996
and 1995 were $59,936 and $177,647, respectively. Of these amounts,
$14,522 and $91,604 represented reimbursement of Company expenses
incurred.

F-15
<PAGE> 37

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) RELATED PARTY TRANSACTIONS (CONTINUED)

In August 1995, International Entertainment Consultants,
Inc. ("IEC") loaned the Company $300,000 at 12% annual interest payable
monthly, to complete the renovation of the Tucson club into the "A
Little Bit of Texas" format. IEC is owned by a relative of the
Company's former president. The loan was due December 28, 1995, and was
extended until January 28, 1996 after the payment of $100,000 in
principal by the Company. During October 1995, the Company borrowed an
additional $193,000 from IEC to make the required payment under the
covenant not to compete. The note bears interest at 12% annually, was
due December 28, 1995, and was extended until January 28, 1996. During
January 1996, $262,000 in principal had been repaid and the remaining
balance was repaid on April 28, 1996. In addition, the Company paid IEC
$38,540 and $86,043 for the years ended December 31, 1996 and 1995,
respectively, for payroll and support services, including insurance and
office expenses.

During 1995, the Company's then president and a company
owned by the Company's then president loaned the Company $300,000 which
has been repaid. On October 10, 1996, the former president loaned the
Company an additional $100,000 which is due on demand and bears interest
at 12% annually (Note 8).

On July 3, 1993, In Cahoots signed a ten-year lease. The
lessor is a 20% limited partner of In Cahoots. Rent expense under this
lease for the three months ended December 31, 1996 amounted to $39,511
(Note 15).

During 1994, In Cahoots borrowed $150,000 from four
limited partners, $90,000 of which was repaid in 1994. The remaining
$60,000 balance is made up of $50,000 which is secured by the personal
guarantee of the president of the Company and $10,000 which is
unsecured. The notes are due upon demand and accrue interest at a rate
of 10% per annum (Note 8).

On October 1, 1996, EWI assumed $150,000 of debt when it
acquired control of In Cahoots. The remaining balance of $139,223 at
December 31, 1996 is due to a former limited partner of the Company
(Notes 6 and 8).

On May 24, 1994, In Cahoots entered into a loan agreement
with a mortgage company whose owner is an affiliate of a limited partner
of In Cahoots. Interest expense on this loan amounted to $4,263 for the
three months ended December 31, 1996. The balance as of December 31,
1996 was $80,156 (Notes 6 and 8).

(10) STOCKHOLDERS' EQUITY

Stock options - On December 16, 1993 the Company granted
an option to purchase 250,000 shares of the Company's $.01 par value
common stock at $2.50 per share, to an employee of the Company. The
option expires on December 1, 1998. During 1995, 20,000 options were
exercised resulting in proceeds to the Company of $50,000.

Private placements of common stock - In December 1993, the
Company consummated the private placement of 110,000 shares of its $.01
par value stock at $1.00 per share for total proceeds of $110,000.

F-16
<PAGE> 38

(10) STOCKHOLDERS' EQUITY (CONTINUED)

On February 7, 1994, the Company commenced the sale of
200,000 shares of its $.01 par value common stock at $3.00 per share
pursuant to a private placement memorandum. The sale was on a
best-efforts basis with no minimum number of shares required to be sold
prior to closing of the offering. The offering was amended on February
16, 1994 to allow $250,000 in borrowings from investors at 10% annual
interest, payable from proceeds of the proposed public offering, and the
sale of 116,667 shares of the Company's common stock at $3.00 per share.
On March 1, 1994, the Company completed the offering raising a total of
$600,000. In connection with the $250,000 notes payable, the Company
granted two five-year options to purchase a total of 17,000 shares of
the Company's common stock at $2.50 per share. Upon the closing of the
public offering on May 9, 1994, the $250,000 notes payable, including
interest of $5,685, were paid from offering proceeds. During 1995,
options to purchase 7,000 shares of common stock at $2.50 per share were
exercised, resulting in net proceeds of $17,500 to the Company.

Common stock subject to rescission - The Company offered
to the purchasers of common stock in the December 1993 and February 1994
private placements the opportunity to rescind their investment in the
Company, upon the Company's filing of its registration statement with
the Securities and Exchange Commission. In the event the December and
February private offerings were integrated into the public offering, the
sales under the private offerings might be considered violations under
Section 5 of the Securities Act of 1933. In connection with the public
offering, 110,000 shares sold in December 1993 for $110,000 were
subsequently registered and sold in the public offering. Therefore,
these 110,000 shares are no longer subject to rescission. As a result,
the Company had a potential liability to purchasers of $350,000 (116,667
shares). The liability expired February 28, 1995.

Public offering of stock - On May 9, 1994, the Company
completed a public offering of 460,000 shares of its common stock at
$5.25 per share, resulting in net proceeds of $1,930,061 after deducting
offering expenses of $484,939.

The underwriter received a discount of 10%, a
nonaccountable expense allowance of 3% of the gross proceeds of the
offering, and warrants to purchase 40,000 shares of common stock. The
warrants are exercisable at $6.30 per share commencing April 25, 1995
until April 25, 1999. The Company has granted the holders of the
warrants certain customary registration rights. As of December 31,
1996, none of these warrants have been exercised.

Warrants granted - Effective July 1, 1994, the Company
granted warrants to purchase 60,000 shares of the Company's common stock
exercisable at $6.00 per share until June 30, 1999, in exchange for
consulting services to be performed over a one-year period. In
addition, stock appreciation rights were granted whereby the consultant
could purchase shares of common stock for $.01 per share representing
the increase in value of the 60,000 shares divided by the then market
price of the stock. Compensation will be recorded as the price of the
Company's stock exceeds the warrant exercise price.

Repurchase of common stock - In March 1995, the Company
repurchased 700,000 shares of its $.01 par value common stock from the
Company's president for $280,000 ($.40 per share). At the time of the
repurchase, the Company had valued the stock at $2.75 per share. The
transaction has been reflected in the statement of stockholders' equity
as the repurchase of the shares at $2.75 per share, allocated between
common stock and additional paid-in capital, and a capital contribution
of the difference between the $2.75 per share fair value and the $.40
per share price paid. As Colorado law does not provide for treasury
stock, the repurchased shares of stock are treated as authorized but
unissued shares.

F-17
<PAGE> 39

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) STOCKHOLDERS' EQUITY (CONTINUED)

Private placements of common stock - During June 1996, the
Company sold 95,200 shares of common stock at $2.50 per share resulting
in net proceeds of $238,000.

Stock compensation plan - In 1996, the Company established
a stock option compensation plan for employees and consultants. The
aggregate number of common shares as to which options and awards may be
granted shall not exceed 250,000, and the options and awards must be
granted within five years. At the time of grant, the Company will
determine the exercise price and the vesting period, which shall not
exceed five years.

During the quarter ended September 30, 1996, the Company
issued: (1) 10,000 shares of the Company's common stock to the
Company's president for services rendered and recorded compensation of
$35,000; (2) 15,000 shares of the Company's common stock to a
consultant as a reduction of accounts payable of $46,666; (3) 10,000
shares of the Company's common stock to a consultant for services
valued at $35,000; and (4) 45,000 shares of the Company's common stock
and 145,000 options to purchase the Company's common stock at $3.50 per
share for three years in exchange for the cancellation of 240,000
options to purchase the Company's common stock at $2.50 per share. Each
of the above issuances of common stock was valued at $3.50 per share
less the previously recorded compensation where warrants were returned.

(11) INCOME TAXES

As of December 31, 1996 and 1995, the Company's deferred tax assets are as
follows:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Compensation element of stock options $ - $ 4,700
Tax over book basis of fixed assets 215,349 156,700
Impairment of long-lived assets 684,029 -
Leases with scheduled rent increases 52,921 35,600
Net operating loss carryforward 49,566 -
---------- ---------
1,001,865 197,000
Valuation allowance (668,244) -
---------- ---------
Net deferred tax asset 333,621 197,000
Current asset (244,287) (112,000)
---------- ---------
Long term asset $ 89,334 $ 85,000
========== =========
</TABLE>

Realization of the deferred tax asset is dependent upon
the Company generating sufficient future taxable income against which
its loss carryforward and loss from impairment of long-lived assets can
be offset. At December 31, 1995, management believed that it was more
likely than not that all of the deferred tax would be realized because
income before income taxes would have been $308,266 for the year then
ended, if it had not been for the losses incurred from the Atlanta Club
(Note 14). However, at December 31, 1996, management has determined
that it is not more likely than not that the Company will be able to
realize all the tax benefits from the net operating loss carryforward
and impairment of long-lived assets and has reduced the deferred tax
asset by a valuation allowance of $668,244.

F-18
<PAGE> 40

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) INCOME TAXES (CONTINUED)

Deferred income taxes resulting from temporary differences
in the recognition of income and expense for tax and financial reporting
purposes are as follows:

<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Differences between book and tax
Compensation element of stock options $ (4,700) $(41,925)
Differences between book and tax depreciation 58,649 70,727
Impairment of long-lived assets 684,029 -
Leases with scheduled rent increases 17,321 21,198
Net operating loss carryforwards 49,566 -
--------- --------
804,865 50,000
Change in valuation allowance (668,244) -
--------- --------
Net deferred tax benefit $ 136,621 $ 50,000
========= ========
</TABLE>

The difference between the Company's effective income tax
rate and the United States statutory rate is reconciled below for the
years ended December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
United States statutory rate (34.0)% 34.0%
State income taxes, net of federal income tax benefit (cost) (3.0)% 4.8%
Increase in valuation allowance 31.1% -
Other (2.8)% 0.4%
------ ------
Total (8.7)% 39.2%
====== ======
</TABLE>

At December 31, 1996, the Company has a net operating loss
carryforward of approximately $131,000 which expires in 2011.

(12) CHANGE IN ACCOUNTING ESTIMATE

Effective October 1, 1995, the Company revised its
estimate of the useful lives of the leasehold improvements and goodwill
relating to the Tucson club from 5 years to 15 years. This date
coincided with the completion of the renovation of the club. Effective
January 1, 1995, the covenant not to compete agreement was amended to
cover a 15-year period and the period for accruing the deferred lease
obligation under the Tucson club's lease, which contains escalating
rental payments, was extended to a 15-year period. The net effect of
these changes was to increase net income by $84,000 ($.03 per common
share) for the year ended December 31, 1995.

(13) GAIN ON EXTINGUISHMENT OF DEBT

During September 1996, the Company settled its remaining
obligations under the liability relating to the Tucson covenant not to
compete for $300,000 in cash. The difference between the amount paid
and the basis of the obligation on the books has been recorded as an
extraordinary gain of $65,730, net of the related income tax effect of
$39,776.

F-19
<PAGE> 41

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(14) WRITE OFF OF INVESTMENT IN PARTNERSHIP

Due to significant on-going operating losses and negative
cash flow of the Atlanta Club, the Company wrote off its investment in
and the related loans to Cowboys Concert Hall/Atlanta, Ltd., the
partnership that owns the Atlanta club. The resulting loss of $274,621,
net of income taxes, is recorded in operations for the year ended
December 31, 1995.

(15) LEASE COMMITMENTS

On July 30, 1993, In Cahoots entered into a building lease
for club operations in Wichita, Kansas, with a 20% limited partner. The
lease term is ten years commencing October 15, 1993. In addition to
minimum rental payments of $12,500, In Cahoots is obligated to pay to
the landlord, as additional rent, a percentage of gross sales after
deductions for alcohol and sales taxes. The lease agreement contains
two five-year renewal options at the primary lease term rental rate
(Note 9).

In December 1993, the Company entered into a building
lease for club operations in St. Louis, Missouri. The lease term is ten
years with two five-year renewal options. Minimum rent per month is
$22,238 for years one through five and $26,686 per month for years six
through ten. The lease requires a $25,000 security deposit, and is
guaranteed by an affiliated company.

On November 1, 1994, the Company assumed a building lease
for club operations in Tucson, Arizona. The remaining primary lease
term is 6.33 years with two five-year renewal options. Minimum rent per
month for the remainder of the lease term increases annually on the
first of March. Minimum payments through February 28, 1997, are $21,500
per month. Minimum rent increases to $22,145 on March 1, 1997, $22,809
on March 1, 1998, $23,494 on March 4, 1999, and $24,198 on March 1,
2000. Also on November 1, 1994, the Company entered into a property
lease for parking around the club in Tucson, Arizona. The lease term is
four years with an option to purchase. Minimum rent per month is $2,000
per month for years one and two and escalates to $3,000 per month for
the remaining term.

Rent expense for the years ended December 31, 1996 and
1995 amounted to $740,613 and $596,708, respectively.

The minimum annual commitments under the real estate leases are as follows:

<TABLE>
<CAPTION>
Year ending December 31, Amount
------------------------ ----------
<S> <C>
1997 $ 717,306
1998 719,240
1999 750,787
2000 759,204
2001 518,629
Thereafter 915,464
----------
Total $4,380,630
==========
</TABLE>

F-20
<PAGE> 42

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(16) CONTINGENT LIABILITIES

In May 1995, the Company announced it had entered into a
letter agreement with Cowboys Entertainment, Inc. pursuant to which the
two companies agreed to continue discussions concerning a possible
acquisition by the Company of certain businesses and/or assets of
Cowboys Entertainment, Inc. In October 1995, the Company announced that
it had entered into an Agreement and Plan of Merger (the "Merger") with
Newco, a wholly owned subsidiary of the Company, and Cowboys pursuant to
which Newco would merge with Cowboys, with Cowboys as the surviving
entity. Simultaneously, the Company was to also offer to limited
partners of Cowboys Concert Hall - Arlington, Ltd. ("CCHA, Ltd."), a
Texas limited partnership, the opportunity to exchange their limited
partnership interests and notes, in the approximate amount of $514,022
for an aggregate of 250,000 shares of the Company's common stock and new
notes in the aggregate amount of $840,000. The transaction was subject
to the approval of the shareholders of Cowboys and the limited partners
of CCHA, Ltd.

The Company filed a registration statement covering the
transactions on November 13, 1995, which included audited financial
statements of the Company, but did not include audited financial
statements of Cowboys or CCHA, Ltd., as required by applicable
Securities and Exchange Commission rules and regulations. Efforts by
Cowboys to retrieve or reconstruct the information necessary to perform
the required audits proved unsuccessful. As a result, the requirement
that the shareholders of Cowboys approve the Agreement and Merger by
December 31, 1995 was not fulfilled, and the parties have not agreed to
extend the date for performance.

(17) LITIGATION

The Company is involved in various claims and legal
proceedings of a nature considered normal to its business, principally
personal injury claims resulting from incidents occurring on the
premises of the Company's nightclubs. While it is not feasible to
predict or determine the financial outcome of these proceedings,
management does not believe that they will result in a materially
adverse effect on the Company's financial position, results of
operations or liquidity

(18) SUBSEQUENT EVENTS

On February 18, 1997, the Company entered into a line of
credit agreement that allows it to borrow up to $160,000. Through March
4, 1997, $140,000 has been drawn on this line. The debt carries a 12%
annual interest rate and is due within sixty days of the draw on the
line. There is also a 10% fee on the amounts borrowed which is due at
the time of the draw. The line is collateralized by property and the
income generated by said property. In addition, the Company will issue
to the lender warrants to purchase the Company's common stock for a
three-year period at a price of $2.00 per share. The warrants issued
will be on the basis of one warrant for every two dollars funded.

On February 4, 1997, the Company entered into a cessation
agreement which provided the terms for the resignation of one of its
directors. The shares held by this director will be sold at a reduced
price under the option agreement dated February 25, 1997.

In February 1997, the Company exchanged 114,800 of its
common stock and a note receivable for $55,000 to certain persons for
77,000 shares of common stock of Cowboys and warrants to purchase an
additional 77,000 Cowboys shares as part of a settlement with Cowboys.

F-21
<PAGE> 43

WESTERN COUNTRY CLUBS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(18) SUBSEQUENT EVENTS (CONTINUED)

On March 15, 1997, the Company entered into a 51.5-month
lease agreement for an office building to serve as the corporate
headquarters in Oklahoma City, Oklahoma. From March 15, 1997 to August
31, 1998, the base rent will be $36,900 per year. From September 1,
1998 to January 31, 2000, the rent increases to $39,360 per year. From
February 1, 2000 to June 30, 2001, the base rent will be $41,820.

Management decided on March 15, 1997 to close its club in
Tucson, Arizona at the end of April 1997 due to its continuing operating
losses. Impairment of the long-lived assets of the Tucson club was
recorded as of December 31, 1996 (Note 7).

A note in the amount of $275,742 was due February 19,
1997. As of the date of this report, the note had not been repaid. The
Company's intention is to repay the note with the proceeds from a public
offering (Note 8).

F-22
<PAGE> 44

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.30 Lease Agreement, dated February 25, 1997, between Western
Country Clubs, Inc. and Prime Financial Corporation

27.1 Financial Data Schedule
</TABLE>

<PAGE> 1
EXHIBIT 10.30

LEASE AGREEMENT

BETWEEN

PRIME FINANCIAL CORPORATION
AS LANDLORD,

AND

WESTERN COUNTRY CLUBS, INC.,
A COLORADO CORPORATION
AS TENANT

<PAGE> 2
TABLE OF CONTENTS

PAGE
----
1. DEFINITIONS............................................. 1
(a) "The Tower"................................... 1
(c) "Base Rent"................................... 1
(d) "Basic Costs"................................. 1
(e) "Broker"...................................... 1
(f) "Building".................................... 1
(g) "Building Grade".............................. 1
(h) "Building Standard Improvements".............. 1
(i) "Commencement Date"........................... 1
(j) "Common Areas"................................ 1
(k) "Land"........................................ 1
(l) "Landlord".................................... 1
(m) "Landlord's Address".......................... 1
(n) "Lease"....................................... 2
(o) "Lease Term".................................. 2
(p) "Parking Structure"........................... 2
(q) "Premises".................................... 2
(r) "Project"..................................... 2
(s) "Project Rentable Area"....................... 2
(t) "Real Estate Taxes"........................... 2
(u) "Rent"........................................ 2
(v) "Rentable Area"............................... 2
(w) "Security Deposit"............................ 2
(x) "Service Areas"............................... 2
(y) "Substantial Completion"...................... 2
(z) "Surface Parking Areas"....................... 2
(aa) "Tenant"...................................... 2
(bb) "Tenant's Address"............................ 2
(cc) "Tenant's Business"........................... 2
(dd) "Tenant's Trade Name"......................... 2
(ee) "Usable Area"................................. 2
(ff) "Utility Vault Areas"......................... 3

2. LEASE GRANT............................................ 3
3. LEASE TERM............................................. 3
4. USE.................................................... 3
5. BASE RENT.............................................. 3
6. BASE RENT ADJUSTMENT................................... 4
7. SERVICES TO BE FURNISHED BY LANDLORD................... 4
8. IMPROVEMENTS TO BE MADE TO THE PREMISES................ 5
9. MAINTENANCE AND REPAIR OF PREMISES BY LANDLORD......... 5
10. GRAPHICS............................................... 5
11. CARE OF THE PREMISES BY TENANT......................... 6
12. REPAIRS AND ALTERATIONS BY TENANT...................... 6
13. USE OF ELECTRICAL SERVICES BY TENANT................... 6
14. LAWS AND REGULATIONS; AMERICANS WITH DISABILITIES ACT.. 6
15. PROJECT RULES.......................................... 7
16. ENTRY BY LANDLORD...................................... 7
17. ASSIGNMENT AND SUBLETTING.............................. 7
18. LIENS.................................................. 8
19. PROPERTY INSURANCE..................................... 8
20. LIABILITY INSURANCE.................................... 8
21. INDEMNITY.............................................. 8
22. WAIVER OF SUBROGATION RIGHTS........................... 8
23. CASUALTY DAMAGE........................................ 9
24. CONDEMNATION........................................... 9

-i-
<PAGE> 3

PAGE
----
25. DAMAGES FROM CERTAIN CAUSES............................ 10
26. EVENTS OF DEFAULT/REMEDIES............................. 10
27. PEACEFUL ENJOYMENT..................................... 11
28. CERTAIN RIGHTS RESERVED TO THE LANDLORD................ 11
29. HOLDING OVER........................................... 11
30. SUBORDINATION.......................................... 12
31. PARKING................................................ 12
32. LANDLORD'S LIEN........................................ 13
33. ATTORNEY'S FEES........................................ 13
34. NO IMPLIED WAIVER...................................... 13
35. PERSONAL LIABILITY..................................... 13
36. SECURITY DEPOSIT....................................... 13
37. SPRINKLERS............................................. 13
38. WASTE MANAGEMENT....................................... 14
39. WAIVER OF BENEFITS..................................... 14
40. MISCELLANEOUS TAXES.................................... 14
41. NOTICE................................................. 14
42. SEVERABILITY........................................... 15
43. RECORDATION............................................ 15
44. GOVERNING LAW.......................................... 15
45. FORCE MAJEURE.......................................... 15
46. TIME OF PERFORMANCE.................................... 15
47. TRANSFERS BY LANDLORD.................................. 15
48. BROKERAGE COMMISSIONS.................................. 15
49. EFFECT OF DELIVERY OF THIS LEASE....................... 15
50. BINDING EFFECT......................................... 15
51. EXHIBITS............................................... 15
52. INTEGRATED AGREEMENT................................... 16

-ii-
<PAGE> 4
LEASE AGREEMENT

This Lease Agreement is made and entered into on this ______day of
____________, 1997, between PRIME FINANCIAL CORPORATION, an Oklahoma
corporation ("Landlord"), and WESTERN COUNTRY CLUBS, INC., a Colorado
corporation ("Tenant").

WITNESSETH:

1. DEFINITIONS

(a) "The Tower" shall mean the certain twenty-two (22)
story office building at 1601 Northwest Expressway, Oklahoma City, Oklahoma.

(b) "Base Operating Cost" shall mean the Basic Costs per
square foot of Project Rentable Area for calendar year 1997.

(c) "Base Rent" shall mean the following sums per year,
payable as provided in paragraph 5 during each indicated period of the Lease
Term and adjusted as provided in paragraph 6:

LEASE PERIOD ANNUAL BASE RENT
<S> <C>

March 15, 1997 through August 31, 1998 $36,900.00 per year, payable in
equal monthly installments of
$3,075.00 (Base Rent for the
last half of March, 1997 shall be
$1,537.50)

From September 1, 1998 through
January 31, 2000 $39,360.00 per year, payable in
equal monthly installments of
$3,280.00

From February 1, 2000 through $41,820.00 per year, payable in
June 30, 2001 equal monthly installments of
$3,485.00

</TABLE>

(d) "Basic Costs" shall mean all direct and indirect costs
and expenses in each calendar year of operating, maintaining, repairing,
managing and owning the Project, including, without limitation, all Real Estate
Taxes. Basic Costs shall not include the cost of capital improvements,
depreciation, interest, principal payments on mortgages and other nonoperating
debts of Landlord. Basic Costs shall, however, include, without limitation, the
amortization of capital improvements which are primarily for the purpose of
reducing Basic Costs, or which are required by governmental authorities.

(e) "Broker" shall mean Trammell Crow MW, Inc.

(f) "Building" shall mean The Tower, which is the building
in which the Premises are situated.

(g) "Building Grade" shall mean the type, brand and/or
quality of materials Landlord designates from time to time to be the minimum
quality to be used in the Project or the exclusive type, grade or quality of
material to be used in the Project.

(h) "Building Standard Improvements" shall mean those
improvements listed on Exhibit "D" attached to this Lease.

(i) "Commencement Date" shall mean March 15, 1997, or such
later date as may be established by paragraph 3(c) of this Lease.

(j) "Common Areas" shall mean those areas within the
Project used for corridors, elevator foyers, elevator mechanical rooms,
restrooms, other mechanical rooms, janitorial closets, electrical and telephone
closets, vending areas, lobby areas (whether at ground level or otherwise),
interior and exterior plaza areas (including improvements thereon), and other
similar facilities provided for the common use and benefit of tenants generally
and/or the public.

(k) "Land" shall mean the tract of land described on
Exhibit "A" attached hereto and made a part hereof.

(l) "Landlord" shall mean Prime Financial Corporation, an
Oklahoma corporation.

(m) "Landlord's Address" shall mean Prime Financial
Corporation, 16 South Pennsylvania, Oklahoma City, Oklahoma 73107.

-1-
<PAGE> 5

(n) "Lease" shall mean this Lease Agreement and all written
amendments, modifications and supplements to this Lease Agreement.

(o) "Lease Term" shall mean the period of time commencing with the
Commencement Date and continuing to and including the last day of the
thirty-sixth full calendar month after the Commencement Date.

(p) "Parking Structure" shall mean that part of the improvements on
the Land in which there are located covered parking spaces and related
driveways and on which there are located a majority of the Project's so-called
"Surface Parking Areas" and related driveways.

(q) "Premises" shall mean the suite of offices within the Building
which is highlighted on the floor plan attached to this Lease as Exhibit "C"
and incorporated herein. The Premises are stipulated for all purposes to
contain 2,460 square feet of Rentable Area.

(r) "Project" shall mean the Land, The Tower, the Parking Structure
and the Utility Vault Areas.

(s) "Project Rentable Area" shall mean 292,544 square feet;
provided that this figure may be revised if Landlord or Landlord's architect
determines that it is inaccurate in any material degree.

(t) "Real Estate Taxes" shall mean all assessments, license fees,
commercial rental taxes, levies, charges and taxes imposed by any governmental
authority on the Project or any part thereof and appurtenances thereto or any
of them, which Landlord shall become obligated to pay because of or in
connection with the operation, maintenance, repair, management, leasing and
ownership of the Project or any part thereof.

(u) "Rent" shall mean all sums of money payable by Tenant to
Landlord under the terms of this Lease, including, without limitation, Base
Rent, additions to Base Rent as provided in paragraph 6 of this Lease, and all
other payments to Landlord under this Lease.

(v) "Rentable Area" shall mean the Usable Area within the Premises
multiplied by one hundred sixteen and 45/100ths percent (116.45%).

(w) "Security Deposit" - none required.

(x) "Service Areas" shall mean those areas in the Project used for
building stairs, elevator shafts, fire towers, utility vaults (including,
without limitation, the Utility Vault Areas), flues, vents, stacks, pipe
shafts, vertical ducts and their enclosing walls (but shall not include any
such areas for the exclusive use of a particular tenant or tenants).

(y) "Substantial Completion" (or "Substantially Completed") shall
mean that Landlord's designated architect has determined that the Premises are
ready for occupancy by the Tenant.

(z) "Surface Parking Areas" shall mean all of the areas on the
surface of the Land outside of the Parking Structure and on the second level of
the Parking Structure on which parking facilities for the Project have been
constructed and which are designated by Landlord for use as parking areas;
provided, however, the term "Surface Parking Areas" shall not include any
parking spaces outside of the Parking Structure or on the second level of the
Parking Structure which Landlord may, in its discretion, mark "Reserved."

(aa) "Tenant" shall mean Western Country Clubs, Inc.

(bb) "Tenant's Address" shall mean The Tower, Suite 1610, 1601 N.W.
Expressway, Oklahoma City, Oklahoma 73118.

(cc) "Tenant's Business" shall mean general office use.

(dd) "Tenant's Trade Name" shall mean Western Country Clubs.

(ee) "Usable Area" shall be determined in accordance with the
American National Standard ANSI/BOMA Z65.1-1996, titled "Standard Method for
Measuring Floor Area in Office Buildings" as published by the Building Owners
and Managers Association International. The Premises are estimated to contain
approximately 2,113 square feet of Usable Area; provided, however, this
estimate of Usable Area within the Premises may be revised, at Landlord's
election if Landlord's architect determines such estimate to be inaccurate in
any material degree after examination of the final drawings of the Premises.

-2-
<PAGE> 6

(ff) "Utility Vault Areas" shall mean those certain
underground areas in the Land which are being used for air intake and exhaust
area, transformer vault, and mechanical rooms.

2. LEASE GRANT.

Subject to and upon the terms herein set forth, Landlord leases
to Tenant and Tenant leases from Landlord the Premises.

3. LEASE TERM. The Lease Term shall begin on the Commencement Date and
shall continue in force during the Lease Term, unless this Lease is sooner
terminated or extended to a later date under any other term or provision hereof.

4. USE.

The Premises shall be used for Tenant's Business as described
in paragraph 1(cc) and for no other purposes. The Tenant will not make or
permit to be made any use of the Premises or any part thereof which would
violate any of the covenants, agreements, terms, provisions and conditions of
this Lease, or which directly or indirectly is forbidden by public law,
ordinance or governmental regulation or which may be dangerous to life, limb,
or property, or which may invalidate or increase the premium cost of the policy
of insurance carried on the Project or covering its operation, and Tenant will
not suffer or permit the Premises or any part thereof to be used in any manner
or allow anything to be brought into or kept therein which, in the judgment of
Landlord, shall in any way impair or tend to impair the character, reputation
or appearance of the Project as a high quality office building complex, or
which will impair or interfere with or tend to impair or interfere with any of
the services performed by Landlord for the Project, or any part of the Project.
Further, Tenant will not make or permit to be made any use of the Premises or
any part thereof as a Bank (herein defined). For the purpose of this paragraph,
the term "Bank" shall mean (i) the principal office of a national banking
association chartered under federal law ("National Bank"), the principal office
of a state banking corporation chartered under the Oklahoma Banking Code of
1965 (6 O.S. Section 101, et seq.) ("State Bank"), the principal office of a
savings and loan association ("Savings and Loan Association"), or the principal
office of a credit union ("Credit Union"), (ii) branch offices of a National
Bank, State Bank, Savings and Loan Association or Credit Union which are
providing savings and/or checking facilities, or (iii) a walk-up teller or
automatic teller facility of a National Bank, State Bank, a Savings and Loan
Association or a Credit Union. By its execution of this Lease, Tenant
specifically consents to the enforcement of this provision by Landlord or any
tenant of the Project which is a third-party beneficiary of this restriction,
whether by specific performance, injunctive relief or in an action for damages,
or all or any of said remedies.

5. BASE RENT.

(a) At all times during the Lease Term, Tenant shall pay to
Landlord, without any prior demand or notice and without any deduction, offset
or counterclaim whatsoever, the Base Rent and all other sums of money
constituting Rent hereunder, and Tenant specifically agrees that its
non-payment of any Rent due hereunder shall entitle the Landlord to exercise
all rights and remedies as are herein provided. The annual Base Rent for each
calendar year or portion thereof during the Lease Term, together with any
estimated adjustment thereto pursuant to paragraph 6 hereof then in effect,
shall be due and payable in advance, in twelve (12) equal installments on the
first day of each calendar month during the initial term of this Lease and any
extensions or renewals thereof, and Tenant hereby agrees to pay such Base Rent
and any adjustments thereto to Landlord at Landlord's Address (or such other
address as may be designated by Landlord in writing from time to time) monthly,
in advance, and without demand. If the Lease Term commences on a day other than
the first day of the month or terminates on a day other than the last day of a
month, then the installments of Base Rent and any adjustments thereto for such
month or months shall be prorated, based on the number of days in such month.

(b) In addition to the foregoing Base Rent, Tenant agrees to
pay Landlord all charges for any service, goods, or materials furnished by
Landlord under this Lease within ten (10) days after Landlord delivers to Tenant
a statement therefor.

(c) If any monthly installment of Base Rent or other payment
due hereunder is not paid on or before ten (10) days after said installment or
other payment is due and payable hereunder, then, and in that event, Tenant
agrees to pay a late payment charge equal to the amount determined by
multiplying twenty percent (20%) per annum, by the amount of the unpaid
installment or other payment due hereunder, as the case may be, by a fraction
the numerator of which is the number of days which elapse after the due date
through the date of payment in full (of such installment or other payment, as
the case may be, together with the late payment charge) and the denominator of
which is 365; provided, however, nothing contained in this Lease shall ever
entitle Landlord, upon the arising of any contingency whatsoever, to receive or
collect any late payment charge hereunder or pursuant to any other provision of
this Lease including, but not limited to, paragraph 26 hereof determined, at a
rate in excess of the highest lawful rate allowed by the laws of

-3-
<PAGE> 7
the State of Oklahoma on any money obligation hereunder and in no event shall
Tenant by obligated to pay any late payment charge thereon determined at a
rate in excess of such lawful rate.

6. BASE RENT ADJUSTMENT.

The Base Rent payable hereunder shall be adjusted upward from
time to time in accordance with the following provisions:

(a) Tenant's Base Rent is based, in part, upon annual Basic
Costs per square foot of Project Rentable Area not exceeding the Base Operating
Cost. Tenant shall during the term of this Lease pay as an adjustment to Base
Rent hereunder an amount (per each square foot of Rentable Area within the
Premises) equal to the excess ("Excess") from time to time of actual Basic
Costs per square foot of Project Rentable Area over the Base Operating Cost.
Landlord may collect such additional Base Rent in arrears on a yearly basis.
Landlord shall also have the option to make a good faith estimate of the Excess
for each upcoming calendar year and upon thirty (30) days' written notice to
Tenant, Landlord may require the monthly payment of Base Rent adjusted in
accordance with such estimate. Any amounts paid based on such an estimate
shall be subject to adjustment pursuant to paragraph 6(b) when actual Basic
Costs are available for each calendar year.

(b) By April 1 of each calendar year during the Lease Term
and by April 1 of the year following the calendar year in which the Lease Term
terminates, or as soon thereafter as practical, Landlord shall furnish to
Tenant a statement of landlord's actual Basic Costs for the previous calendar
year. If for any calendar year additional Base Rent collected for the prior
year, as a result of Landlord's estimate of Basic Costs, is in excess of the
additional Base Rent actually due during such prior year, then Landlord shall
refund to Tenant any overpayment (or at Landlord's option, apply such amount
against Rent due or to become due hereunder). Likewise, Tenant shall pay to
Landlord, on demand, any underpayment with respect to the prior year.

(c) Tenant at its own expense shall have the right once a
year, at Tenant's own expense and upon not less than thirty (30) days' prior
written notice to Landlord, to examine Landlord's books and records relating to
Basic Costs, during normal business hours only, and at a time agreed upon by
the Landlord and Tenant; or at Landlord's sole discretion, Landlord will
provide an audit prepared by an independent certified public accountant.

(d) Notwithstanding any language herein seemingly to the
contrary, if the Project is not fully occupied during any calendar year of the
Lease Term, Basic Costs and the Excess for purposes of paragraphs 6(a) and 6(b)
of this Lease shall be determined as if the Project had been fully occupied
during such year. For the purposes of this Lease, "fully occupied" shall mean
occupancy of ninety-five percent (95%) of Project Rentable Area. Adjustments
for any partial calendar year during the Lease Term shall be a prorated amount
of the Base Rent adjustment which would have been applicable if the entire
calendar year had been included in the Lease Term, prorated in accordance with
the portion of the calendar year contained in the Lease Term in relation to the
entire calendar year.

7. SERVICES TO BE FURNISHED BY LANDLORD.

Landlord agrees to furnish tenant the following services, if
Tenant is not in default:

(a) Domestic water at those points of supply provided for
general use of other tenants in the Building, central heat and air-conditioning
in season, at such temperatures and in such amounts as are considered by
Landlord to be standard or as required by governmental authority; provided
however, heating and air-conditioning service at times other than for Normal
Business Hours (as defined in the Rules and Regulations attached to this Lease
as Exhibit "B," incorporated herein) for the Project, shall be furnished only
upon the written request of Tenant delivered to Landlord prior to 2:00 p.m. of
the prior business day such usage is requested. (For purposes of any such
request, the term "business day" shall mean Monday through Friday other than
State or Federal holidays. A request for heating or air-conditioning service on
a Sunday or at times other than Normal Business Hours on a Saturday must be
delivered not later than 2:00 p.m. on the preceding business day, as defined
above.) Tenant shall bear the entire cost of such additional service as such
costs are determined by Landlord from time to time.

(b) Routine maintenance and electric lighting service for
all Common Areas and Service Areas of the Project in the manner and to the
extent deemed by Landlord to be standard.

(c) Janitorial service as contracted by Landlord, five (5)
days per week, exclusive of normal business holidays; provided, however, if
Tenant's floor covering or other improvements require special treatment, Tenant
shall pay the additional cleaning cost attributable thereto as Rent upon
presentation of a statement therefor by Landlord.

-4-
<PAGE> 8

(d) Subject to the provisions of paragraph 13, facilities to
provide all electrical current required by Tenant in its use and occupancy of
the Premises.

(e) All Building Grade fluorescent bulb replacement in the Premises
necessary to maintain the lighting provided as a part of the Building Standard
Improvements and fluorescent and incandescent bulb replacement in the Common
Areas and Service Areas.

(f) Limited access to the Project during other than Normal Business
Hours shall be provided in such form as Landlord deems appropriate. Landlord
may require those tenants requesting access to the Project during other than
Normal Business Hours to pay a fee for such access partially to reimburse
Landlord for the cost of the system which limits after-hours access. Landlord,
however, shall have no liability to Tenant, its employees, agents, invitees or
licensees for losses due to theft or burglary, or for damages done by
unauthorized persons on the Premises and neither shall Landlord be required to
insure against any such losses. Tenant shall cooperate fully in Landlord's
efforts to maintain security in the Project and shall follow all regulations
promulgated by Landlord with respect thereto.

The failure by Landlord to any extent to furnish, or the interruption
or termination of these defined services in whole or in part, shall not render
Landlord liable in any respect nor be construed to fulfill any covenant or
agreement hereof. If any of the equipment or machinery used in the provision of
such services for any cause cease to function properly, Tenant shall have no
claim for offset or abatement of Rent or damages on account of an interruption
in service occasioned thereby or resulting therefrom.

8. IMPROVEMENTS TO BE MADE TO THE PREMISES.

Tenant accepts the Premises in their "as is" condition and state of
repair. Landlord is not obligated to make any installation and/or improvements
to the Premises. All installations and improvements now or hereafter placed on
the Premises other than or in excess of Building Standard Improvements shall be
for Tenant's account and at Tenant's cost (and Tenant shall pay ad valorem
taxes and increases in insurance thereon or attributable thereto), which cost
shall be payable by Tenant to Landlord upon demand as Rent; provided, however,
Landlord will provide to Tenant an allowance of $500.00 for costs incurred by
Tenant in connection with or relating to Tenant's refurbishing of the Premises,
provided that any alterations to or improvements of the Premises shall be made
in accordance with applicable provisions of this Lease, including, but not
limited to, paragraph 12 hereof. In order to draw on such allowance, Tenant
shall deliver to Landlord at any time after the date hereof, but not later than
May 31, 1997, a single signed request for disbursement which details to the
reasonable satisfaction of Landlord the costs incurred and paid by Tenant,
together with copies of supporting contracts, statements, invoices, releases
and lien waivers, as reasonably requested by Landlord. Upon Landlord's
receipt, review and approval of such draw request, Landlord will reimburse
Tenant for up to $500.00 of payments made by Tenant on approved invoices. Tenant
shall promptly pay all sums due for its refurbishment of the Premises which
exceed the allowance.

Tenant shall not permit its employees, officers, agents, representatives
or contractors to smoke in common areas of the Building, and any smoking within
the Premises must not result in any smoke, smell or other irritant affecting any
other tenant of the 16th floor or any tenant of any other part of the Building.
Upon Landlord's written notification that cigarette, cigar or pipe smoke
originating in the Premises is creating an irritant for any other tenant of the
Building, then within thirty (30) days after receipt of such Landlord
notification, Tenant shall install a mechanical ventilation system which
satisfactorily removes all smoke, odor, and other airborne irritants from the
Premises and the Building. The design, installation and operation of the
mechanical system must all be satisfactory to Landlord and shall be paid for by
Tenant.

9. MAINTENANCE AND REPAIR OF PREMISES BY LANDLORD.

Except as otherwise expressly provided in this Lease, Landlord shall be
required to make any repairs to the Premises or any other part of the Project.

10. GRAPHICS.

Landlord shall provide and install, at Tenant's cost, all letters or
numerals on doors in the Premises; all such letters and numerals shall be in
the standard graphics for the Project and no others shall be used or permitted
on the Premises or elsewhere in the Project, without Landlord's prior written
consent.

-5-
<PAGE> 9

11. CARE OF THE PREMISES BY TENANT.

Tenant agrees not to commit or allow any waste to be committed on any
portion of the Premises or any other part of the Project, and at the
termination of this Lease agrees to deliver up the Premises to Landlord in as
good condition as at the Commencement Date, ordinary wear and tear excepted.

12. REPAIRS AND ALTERATIONS BY TENANT.

Tenant covenants and agrees with Landlord, at Tenant's own cost and
expense to repair or replace any damage done to the Project, or any part
thereof, including, without limitation, the Premises, caused by Tenant or
Tenant's agents, employees, invitees, or visitors, and such repairs shall
restore the damaged property to the condition existing immediately prior to
such damage, and shall be effected in compliance with all applicable laws. Such
work shall be done on such conditions as Landlord may elect. Landlord may, in
its sole discretion, perform such work and in such event Tenant agrees to pay
the cost thereof to Landlord on demand as Rent. Tenant agrees with Landlord not
to make or allow to be made any alterations to the Premises, install any
vending machines on the Premises, or place signs anywhere in the Project,
without first obtaining written consent of Landlord in each such instance,
which consent may be given on such conditions as Landlord may elect, including
Landlord's decision to perform any such work for Tenant's account and at
Tenant's cost, which cost shall be payable by Tenant to Landlord upon demand as
Rent. Tenant shall not contract for any work or service which might involve the
employment of labor incompatible with the Project employees or employees or
contractors doing work or performing services by or on behalf of the Landlord.
Any and all alterations to the Premises shall become the property of Landlord
upon termination of this Lease (except for movable equipment or furniture owned
by Tenant). Landlord may, nonetheless, require Tenant to remove any and all
fixtures, equipment and other improvements installed on the Premises and
thereafter to restore Premises. In the event that Landlord so elects, and
Tenant fails to remove such improvements, Landlord may remove such improvements
at Tenant's cost, and Tenant shall pay Landlord on demand as Rent the cost of
restoring the Building Standard Improvements to the Premises.

13. USE OF ELECTRICAL SERVICES BY TENANT.

Tenant's use of electrical services furnished by Landlord shall be
subject to the following:

(a) Tenant's electrical equipment shall be restricted to that
equipment which individually does not have a rated capacity greater than .5
kilowatt and/or require voltage other than 120/208 volts, single phase.
Tenant's lighting shall not have a design load greater than an average of two
(2) watts per square foot and one (1) watt per square foot electrical power.
Collectively, Tenant's equipment and lighting shall not have an electrical
design load greater than an average of three (3) watts per square foot.

(b) If Tenant's consumption of electrical services exceeds either
the rated capacities and/or design loads as per paragraph 13(a), then Tenant
shall remove such equipment and/or lighting to achieve compliance within ten
(10) days after receiving notice from Landlord. Alternatively, upon receiving
Landlord's prior written approval, such equipment and/or lighting may remain in
the Premises, subject to the following:

(i) Tenant shall pay for all costs of installation and
maintenance of submeters, wiring, air-conditioning and
other items required by Landlord, in Landlord's
discretion, to accommodate Tenant's excess design
loads and capacities.

(ii) Tenant shall pay to Landlord, upon demand, the cost of
the excess demand and consumption of electrical
service at rates determined by Landlord, which shall
be in accordance with any applicable laws.

(iii) Landlord may, at its option, upon not less than thirty
(30) days' prior written notice to Tenant, discontinue
the availability of such extraordinary utility service,
providing such utility service is available directly to
Tenant from the public utility. If Landlord gives any
such notice, Tenant will contract directly with the
public utility for the supplying of such utility
service to the Premises.

14. LAWS AND REGULATIONS; AMERICANS WITH DISABILITIES ACT.

Tenant agrees to comply with all applicable laws, ordinances, rules and
regulations of any governmental entity or agency having jurisdiction with
respect to the use, condition or occupancy of the Premises or the conduct of
Tenant's business therein. Tenant agrees to comply with all requirements of
both the American With Disabilities Act (Public Law 101-336) and Title

-6-
<PAGE> 10

25, Oklahoma Statutes (1991), Sections 1101, et seq., as the same may be
amended from time to time (collectively, the "ADA Statutes") applicable to the
Premises. Tenant agrees to indemnify and hold Landlord harmless from any and
all expenses, liabilities, costs or damages suffered by Landlord as a result of
additional obligations which may be imposed on the Project under any of the ADA
Statutes, by virtue of Tenant's operations. Tenant acknowledges that Tenant
will be wholly responsible for any accommodations or alterations which need to
be made to the Premises and/or the Project to accommodate disabled employees,
invitees and customers of Tenant. No provision in this Lease should be
construed in any manner as permitting, consenting to or authorizing Tenant to
violate requirements under any of the ADA Statutes and any provision of the
Lease which could arguably be construed as authorizing a violation of any of
the ADA Statutes shall be interpreted in a manner which permits compliance with
the ADA Statutes, and this Lease is hereby amended to permit such compliance.

15. PROJECT RULES.

Tenant will comply with the rules and regulations of the
Project adopted and altered by Landlord from time to time for the safety, care
or cleanliness of the Premises and the Project, or for preservation of good
order therein, and Tenant will cause all of its agents, employees, invitees and
visitors to comply with all such rules. All changes to such rules will be sent
by Landlord to Tenant in writing. The current rules and regulations are listed
in Exhibit "B" attached to this Lease. Landlord shall not have the liability to
Tenant for any failure of any other tenants of the Project to comply with such
rules and regulations.

16. ENTRY BY LANDLORD.

(a) On reasonable prior notice to the Tenant, Landlord may
enter the Premises to exhibit the Premises to prospective Tenants during the
last twelve (12) months of the Lease Term, and to any prospective purchaser,
mortgagee, or assignee of any mortgage on the Project or any interest therein
and to others having a legitimate interest at any time during the Lease Term.

(b) Landlord may enter the Premises at any time in the
event of an emergency, and otherwise at reasonable times during Normal Business
Hours, to take any and all measures, including inspections, repairs,
alterations, additions and improvements to the Project or any part of the
Project, including the Premises, as may be necessary or desirable for the
safety, protection or preservation of the Project or any part thereof, or as
may be necessary or desirable in the operation or improvement of the Project,
or any part thereof, or in order to comply with all laws, orders and
requirements of governmental or other authority.

(c) Tenant shall not be entitled to any abatement or
reduction of Rent or claim for damages for any injury to or interference with
Tenant's business, for loss of occupancy or quiet enjoyment or for
consequential damages by reason of Landlord's entry of the Premises pursuant to
any of the provisions of this paragraph 16.

17. ASSIGNMENT AND SUBLETTING

(a) Tenant shall not assign, sublease, transfer or encumber
this Lease or any interest therein. Any attempted assignment, sublease,
transfer or encumberance by Tenant in violation of the terms and covenants of
this paragraph shall be void.

(b) If Tenant requests Landlord's consent to an assignment
of this Lease or subletting of all or any part of the Premises, Landlord shall
either (i) approve such sublease or assignment (but no approval of any
assignment or sublease shall relieve Tenant of any liability hereunder), (ii)
negotiate directly with the proposed subtenant or assignee and (in the event
Landlord is able to reach agreement with such proposed subtenant or assignee),
upon execution of a lease with such proposed subtenant or assignee, terminate
this Lease (in part or in whole, as appropriate) upon thirty (30) days' notice,
or (iii) if Landlord should fail to notify Tenant in writing of its decision
within a thirty (30) day period after Landlord is notified in writing of the
proposed assignment or sublease, Landlord shall be deemed to have refused to
consent to an assignment or subleasing, and to have elected to keep this Lease
in full force and effect.

(c) Tenant shall not, without the prior written consent of
the Landlord, sublet this Lease to the parent or subsidiary of a corporate
lessee or assign this Lease in connection with a consolidation, merger, or
sale of controlling interest of the Tenant.

(d) All cash or other proceeds of any assignment, sale or
sublease of Tenant's interest in this Lease, whether consented to by Landlord
or not, shall be paid to Landlord notwithstanding the fact that such proceeds
exceed the Rent called for hereunder, unless Landlord agrees to the contrary in
writing, and Tenant hereby assigns all rights it might have or ever acquire in
any such proceeds to Landlord. This covenant and assignment shall benefit
Landlord and its successors in ownership of the Project and shall bind Tenant
and Tenant's heirs, executors, adminis-

-7-
<PAGE> 11

trators, personal representatives, successors and assigns. Any assignee,
sublesee or purchaser of Tenant's interest in this Lease (any such assignee,
sublesee or purchaser being hereinafter referred to as "Successor"), by
assuming Tenant's obligations hereunder shall be deemed to have assumed
liability to Landlord for all amounts paid to persons other than Landlord by
such Successor in consideration of any such assignment, sale or subletting, in
violation of the provisions hereof.

18. LIENS.

Tenant will not permit any mechanics', materialmen's, laborers' or
other liens to be placed upon the Project or any part thereof, including,
without limitation, the Premises and nothing in this Lease shall be deemed or
construed in any way as constituting the consent or request of Landlord,
express or implied, by inference or otherwise, to any person for the
performance of any labor or the furnishing of any materials to the Project or
any part thereof, including, without limitation, the Premises nor as giving
Tenant any right, power or authority to contract for or permit the rendering of
any services or the furnishing of any materials that would give rise to any
mechanics', materialmen's, laborers' or other liens against the Project or any
part thereof, including, without limitation, the Premises. In the event any
such lien is attached to the Project or any part thereof, including, without
limitation, the Premises, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same. Any
amount paid by Landlord for any of the aforesaid purposes shall be paid by
Tenant to Landlord on demand as Rent.

19. PROPERTY INSURANCE.

Landlord shall maintain fire and extended coverage insurance on the
Project in such amounts as Landlord may from time to time require; provided,
however, Landlord shall have the right to effect any such insurance by means of
so called "blanket" or "umbrella" policies of insurance. Any such insurance
shall be maintained at the expense of Landlord (the cost to Landlord being
included as a part of the Basic Costs), and payments for losses thereunder
shall be made solely to Landlord and the mortgages of Landlord as their
interests shall appear. Tenant shall maintain at its expense, in an amount
equal to full replacement cost, fire and extended coverage insurance on all of
its personal property, including removable trade fixtures, located in the
Premises and in such additional amounts as are required to meet Tenant's
obligations pursuant to paragraph 23 hereof. Tenant shall provide Landlord with
current certificates of insurance evidencing Tenant's compliance with this
paragraph 19 and paragraph 20. Tenant shall obtain the agreement of Tenant's
insurers to notify Landlord that a policy is due to expire at least thirty (30)
days prior to such expiration.

20. LIABILITY INSURANCE.

Tenant shall, at its expense, maintain a policy or policies of
comprehensive general liability insurance with respect to its activities in the
Project, with the premiums thereon fully paid on or before due date, issued by
and binding upon an insurance company approved by Landlord, such insurance to
afford minimum protection of not less than $3,000,000.00 combined single limit
coverage of bodily injury, property damage or combination thereof. Landlord and
Landlord's manager of the Project shall be named as additional insureds under
Tenant's policy of general liability insurance. Landlord shall not be required
to maintain insurance against thefts within the Project or any part thereof,
including, without limitation, the Premises. Subject to Landlord's rights to
provide "blanket" or "umbrella" policies of insurance as set forth in the first
sentence of paragraph 19, Landlord shall maintain liability insurance with
respect to the Project in the form of one or more policies, such insurance to
afford minimum protection of not less than $3,000,000.00 combined single limit
coverage of bodily injury, property damage or combination thereof. The cost to
Landlord of any such insurance shall be included as a part of the Basic Costs.

21. INDEMNITY.

Landlord shall not be liable to Tenant, or to Tenant's agents,
servants, employees, customers, or invitees for any injury to person or damage
to property caused by any act, omission, or neglect of Tenant, its agents,
servants, or employees, invitees, licensees or any other person entering the
Project or any part thereof, including, without limitation, the Premises under
the invitation of Tenant or arising out of the use of the Premises by Tenant
and the conduct of its business or out of a default by Tenant in the
performance of its obligations hereunder. Tenant hereby indemnifies and holds
Landlord harmless from all liability and claims for any such damage or injury.

22. WAIVER OF SUBROGATION RIGHTS.

Except as provided in the next to last sentence of paragraph 23,
Landlord and Tenant each hereby waives on behalf of itself and its insurers
(none of which shall ever be assigned any such claim or be entitled thereto due
to subrogation or otherwise) any and all rights of recovery, claim, action, or
cause of action, against the other, its agents, officers, or employees, for any
loss or damage that may occur to the Project or any part thereof, including,
without limitation, the Premises, or any personal property of such party
therein, by reason of fire, the elements, or any other cause or causes

-8-
<PAGE> 12
which are insured against the terms of the standard fire and extended coverage
insurance policies referred to in paragraph 19 hereof, regardless of whether
such insurance is actually maintained and regardless of the cause or origin,
including negligence of the other party hereto, its agents, officers, or
employees.

23. CASUALTY DAMAGE.

If the Premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give prompt written notice thereof to Landlord. In
case the Project shall be damaged by fire or other casualty such that
substantial alteration or reconstruction of the Project shall, in Landlord's
sole opinion, be required (whether or not the Premises shall have been damaged
by a casualty affecting the Project) or in the event any mortgagee of
Landlord's should require that the insurance proceeds, or any portion thereof,
payable as a result of a casualty be applied to the payment of the mortgage
debt or in the event of any material uninsured loss to the Project or the
Premises, Landlord may, at its option, terminate this Lease by notifying Tenant
in writing of such termination within the later to occur of ninety (90) days
after the date of such casualty or ninety (90) days after the date of receipt
of Tenant's notice relating to the Premises. If Landlord does not thus elect to
terminate this Lease, Landlord shall commence and proceed with reasonable
diligence to restore the Premises to substantially the same condition in which
they were immediately prior to the happening of the casualty (without regard,
however, to alterations made by or on behalf of Tenant, without Landlord's
prior written consent), except the Landlord's obligation to restore shall not
exceed the scope of the work required to be done by Landlord in originally
constructing the Premises and installing Building Standard Improvements in the
Premises, nor shall Landlord be required to spend for such work an amount in
excess of the insurance proceeds actually received by Landlord for the Building
Standard Improvements in the Premises, nor shall Landlord be required to spend
for such work an amount in excess of the insurance proceeds actually received
by Landlord for the Building Standard Improvements in the Premises as a result
of the casualty. When Building Standard Improvements in the Premises have been
restored by Landlord (to the extent that insurance proceeds actually received
by Landlord are sufficient to complete such work), Tenant shall complete, at
its sole cost and expense, the restoration of the Premises, including, without
limitation, the reconstruction of all improvements in excess of Building
Standard Improvements and the restoration of Tenant's furniture and equipment.
Such work to be performed by Tenant shall not result in any type of mechanic's
or materialman's lien affecting the Premises, the Project or any portion
thereof and shall result in the reconstruction or restoration of said items by
Tenant to a condition that is at least equal in quality to the condition of
said items existing prior to such damage or destruction. Landlord shall have no
liability to Tenant for the Landlord's termination of the Lease in accordance
with the provisions hereof, or for any inconvenience or annoyance to Tenant or
injury to the business or property of Tenant resulting in any way from the
occurrence of a casualty or the repair of any damage or destruction related
thereto, except that, subject to the provisions of the next sentence, Landlord
shall allow Tenant a fair diminution of Rent, as determined by Landlord, during
the time and to the extent the Premises are unfit for occupancy; provided,
however, such unfitness for occupancy shall not be construed to constitute an
actual or constructive eviction. if the Premises or any other portion of the
Project be damaged for fire or other casualty resulting from the fault or
negligence of Tenant or any of Tenant's agents, employees, licensees, or
invitees, the Rent hereunder shall not be diminished, and regardless of whether
this Lease is terminated, Tenant shall be liable to Landlord for the cost of
the repair and restoration of the Premises, all other parts of the Project, and
all tenant improvements in the Project resulting therefrom to the extent such
cost and expenses exceed the amount of insurance proceeds actually received by
Landlord therefor, and Landlord shall retain all other rights and remedies that
Landlord may have at law, in equity or pursuant to this Lease. Anything in this
Lease to the contrary notwithstanding, if more than fifteen percent (15%) of
the Premises are damaged by fire or other casualty or if all or any portion of
the Premises is damaged by fire or other casualty during the last year of the
term (excluding the period during any renewal term, unless such fire or
casualty occurs during a renewal term) of this Lease, then Landlord may, at its
option, terminate this Lease by notifying Tenant in writing of such termination
within the later to occur of ninety (90) days after the date of such casualty
or ninety (90) days after the date of receipt by Landlord of Tenant's notice.

24. CONDEMNATION.

If the whole or substantially the whole of the Project or the Premises
should be taken for any public or quasi-public use, by right of eminent domain
or otherwise or should be sold in lieu of condemnation, then this Lease shall
terminate as of the date when physical possession of the Project or the
Premises is taken by the condemning authority. If less than the whole or
substantially the whole of the Project or the Premises is thus taken or sold,
Landlord (whether or not the Premises are affected thereby) may terminate this
Lease by giving written notice thereof to Tenant; in which event this Lease
shall terminate as of the date when physical possession of such portion of the
Project or Premises is taken by the condemning authority. If the Lease is not
so terminated upon any such taking or sale, the Base Rent payable hereunder
shall be diminished by an equitable amount, as determined by Landlord, and
Landlord shall, to the extent Landlord deems feasible, restore the Project and
the Premises to substantially their former condition, but such work shall not
exceed the scope of the work done by Landlord in originally constructing the
Project and installing Building Standard Improvements in the Premises, nor
shall Landlord in any event be required to spend for

-9-
<PAGE> 13

such work an amount in excess of the amount received by Landlord as
compensation for such taking. All amounts awarded upon a taking of the Project
or any part thereof shall belong to Landlord, and Tenant shall not be entitled
to, and expressly waives all claims to, any such compensation.

25. DAMAGES FROM CERTAIN CAUSES.

Landlord shall not be liable to Tenant for any loss or damage
to any property or person occasioned by theft, fire, act of God, public enemy
injunction, riot vandalism, malicious mischief, earthquake, flood, strike,
insurrection, war court order, requisition, or order of governmental body or
authority or by any other cause beyond the control of Landlord. Nor shall
Landlord be liable for any damage or inconvenience which may arise through
repair or alteration of the Project or any part thereof, including, without
limitation, the Premises.

26. EVENTS OF DEFAULT/REMEDIES.

(a) The following events shall be deemed to be events of
default by Tenant under this Lease: (i) Tenant shall fail to comply with any of
the terms, provisions or covenants of this Lease or any other agreement between
Landlord and Tenant, all of which terms, provisions and covenants shall be
deemed material; (ii) the leasehold hereunder demised shall be taken on
execution or other process of law in any action against Tenant; (iii) Tenant
notifies Landlord, at any time prior to the Commencement Date, that Tenant does
not intend to take occupancy of the Premises upon the commencement of the Lease
Term; Tenant shall fail to promptly move into and take possession of the
Premises when the Premises are ready for occupancy or shall cease to do
business in or abandon any substantial portion of the Premises; (iv) Tenant
shall become insolvent or unable to pay its debts as they become due, or Tenant
notifies Landlord that it anticipates either condition; (v) Tenant takes any
action or notifies Landlord that Tenant intends to file a petition under any
section or chapter of the Bankruptcy Act, as amended from time to time, or
under any similar law or statute of the United States or any State thereof; or
a petition shall be filed against Tenant under any such statute or Tenant or
any creditor of Tenant's notifies Landlord that it knows such a petition will
be filed or Tenant notifies Landlord that it expects such a petition to be
filed; or (vi) a receiver or trustee shall be appointed for Tenant's leasehold
interest in the Premises or for all or a substantial part of the assets of
Tenant.

(b) Upon the occurrence of any event or events of default by
Tenant, whether enumerated in this paragraph or not, Landlord shall have the
option to pursue any one or more of the following remedies without any notice
or demand for possession whatsoever (and without limiting the generality of the
foregoing. Tenant hereby specifically waives notice and demand for payment of
Rent or other obligations due and waives any and all other notices or demand
requirements imposed by applicable law): (i) terminate this Lease in which case
Tenant shall immediately surrender the Premises to Landlord; (ii) terminate
Tenant's right to occupy the Premises and reenter and take possession of the
Premises (without terminating this Lease); (iii) enter upon the Premises and do
whatever Tenant is obligated to do under the terms of this Lease; and Tenant
agrees to reimburse Landlord on demand for any expense which Landlord may incur
in effecting compliance with Tenant's obligations under this Lease, and Tenant
further agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action; and (iv) exercise all other remedies available to
Landlord at law or in equity, including without limitation, injunctive relief
of all varieties.

In the event Landlord elects to reenter or take possession of
the Premises after Tenant's default, Tenant hereby waives notice of such
reentry or repossession and of Landlord's intent to reenter or retake
possession. Landlord may, without prejudice to any other remedy which it may
have for possession or arrearages in Rent, expel or remove Tenant and any other
person who may be occupying said Premises or any part thereof. In addition, the
provisions of paragraph 29 hereof shall apply with respect to the period from
and after the giving of notice of such termination to Tenant. All Landlord's
remedies shall be cumulative and not exclusive. Forbearance by Landlord to
enforce one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of such default.

(c) This paragraph 26 shall be enforceable to the maximum
extent not prohibited by applicable law, and the unenforceability of any
portion thereof shall not thereby render unenforceable any other portion.
Tenant and Landlord hereby agree that no action or inaction by Landlord or its
agents, servants or employees, except written notice to Tenant as provided
herein or judicial proceedings, shall be sufficient to evidence or effect
termination of this Lease.

(d) Landlord shall be in default hereunder in the event
Landlord has not begun and pursued with reasonable diligence the cure of any
failure of Landlord to meet its obligations hereunder within thirty (30) days
of the receipt by Landlord of written notice from Tenant of the alleged failure
to perform. In no event shall Tenant have the right to terminate or rescind
this Lease as a result of Landlord's default as to any covenant or agreement
contained in this Lease or as a result of the breach of any promise or
inducement hereof, whether in the Lease or elsewhere. Tenant

-10-
<PAGE> 14

hereby waives such remedies of termination and rescission and hereby agrees
that Tenant's remedies for default hereunder and for breach of any promise or
inducement shall be limited to a suit for damages and/or injunction, provided
that Tenant shall not have any right to seek or obtain consequential or
exemplary damages. In addition, Tenant hereby covenants that, prior to the
exercise of any such remedies, it will give the mortgagees holding mortgages on
the Project, or any part thereof or any interest therein, notice and a
reasonable time to cure any default by Landlord.

27. PEACEFUL ENJOYMENT.

Tenant shall, and may peacefully have, hold and enjoy the Premises,
subject to the other terms hereof, provided that Tenant pays the Rent to be
paid by Tenant and performs all of Tenant's covenants and agreements herein
contained. This covenant and any and all other covenants of Landlord shall be
binding upon Landlord and its successors only with respect to breaches
occurring during its or their respective periods of ownership of the Tenant's
interest hereunder. Landlord shall be entitled to cause Tenant to relocate from
the Premises to another space (a "Relocation Space") within the Project at any
time after reasonable written notice of Landlord's election (not in excess of
ninety (90) days) is given to Tenant. Any such relocation shall be entirely at
the expense of Landlord or the third party replacing Tenant in the Premises.
Such a relocation shall not terminate or otherwise affect or modify this Lease
except that from and after the date of such relocation, "Premises" shall refer
to the Relocation Space into which Tenant has been moved, rather than the
original Premises as herein defined.

28. CERTAIN RIGHTS RESERVED TO THE LANDLORD.

The Landlord reserves the following rights:

(a) To name the Project, to change the name and/or street address
of the Project, to name the Building, and to change the name and street address
of the Building at any time, without responsibility to Tenant for any
advertising, billboards, printed materials or any other items of expense
incurred by Tenant in regard to a prior Project name or a prior Building name
or street address.

(b) To install and maintain a sign on the exterior and interior of
the Project.

(c) To designate all sources furnishing sign painting and
lettering, ice, drinking water, towels, toilet supplies, shoe shining, vending
machines, mobile vending service, catering, and like services used on the
Project or any part thereof, including, without limitation, the Premises.

(d) To constantly have pass keys to the Premises.

(e) During the last six (6) months of the Lease Term, to show the
Premises to prospective tenants, and at any time to show the Premises to
prospective purchasers of the Project and to prospective lenders; provided,
however, Landlord will not unnecessarily interfere with Tenant's use of the
Premises.

(f) During the last ninety (90) days of the Lease Term, if during
or prior to that time the Tenant vacates the Premises, to decorate, remodel,
repair, alter or otherwise prepare the Premises for reoccupancy, without
affecting Tenant's obligation to pay Rent for the Premises.

29. HOLDING OVER.

(a) In the event Tenant or any of its successors in interest hold
over the Premises, or any part thereof, after expiration or other termination
of this Lease or in the event Tenant continues to occupy the Premises after the
termination of Tenant's right of possession pursuant to paragraph 26(b)(ii)
hereof, then, in addition to Landlord's remedies under paragraph 26, Tenant
shall be liable to Landlord for a daily base rent equal to one-thirtieth (1/30)
of an amount equal to two (2) times the highest Base Rent payable under this
Lease, as adjusted pursuant to paragraph 6(a) hereof. Such holding over shall
not be construed to extend the Lease Term.

(b) In the event Tenant or any of its successors in interest hold
over the Premises, or any part thereof, with Landlord's consent, after
expiration or other termination of this Lease, unless otherwise agreed in
writing, such holding over shall constitute and be construed as a tenancy at
will at a daily base rent equal to one-thirtieth (1/30) of an amount equal to
two (2) times the highest Base Rent payable under this Lease, as adjusted
pursuant to paragraph 6(a) hereof. All other terms, covenants and conditions of
this Lease shall continue to be in full force and effect, provided such holding
over by Tenant after the expiration of the Lease Term shall not be construed to
extend the Lease Term.

(c) Tenant hereby indemnifies and agrees to hold Landlord harmless
against all reasonable attorney's fees, court costs, expenses, damages, or
other liabilities, including, without

-11-
<PAGE> 15

limitation, the cost of defending any claim or action by a third party,
resulting from Tenant's continued occupancy of the Premises after the Lease
Term.

30. SUBORDINATION

Tenant accepts this lease subject and subordinate to any first
mortgage, deed of trust or other lien presently existing or hereafter placed
upon the Project, or any part thereof or any interest therein, to any renewals,
refinancing and extensions thereof, but Tenant agrees that any such mortgagee
shall have the right at any time to subordinate such first mortgage, deed of
trust or other lien to this Lease on such terms and subject to such conditions
as such mortgagee may deem appropriate in its discretion. Landlord is hereby
irrevocably vested with full power and authority to subordinate this Lease to
any mortgage, deed of trust or other lien now existing or hereafter placed upon
the Project, or any part thereof or any interest therein, and Tenant agrees
upon demand to execute such further instruments subordinating this lease or
attorning to the holder of any such liens as landlord may request. The terms of
this Lease are subject to approval by the Landlord's permanent lender(s), and
such approval is a condition precedent to Landlord's obligations hereunder.
Such lender(s) shall have discretion as to whether or not it shall enter an
attornment and nondisturbance agreement with Tenant and as to the form of any
such agreement. In the event that Tenant should fail to execute any
subordination agreement or other agreement required by this paragraph, promptly
as requested, Tenant hereby irrevocably constitutes Landlord as its
attorney-in-fact to execute such instrument in Tenant's name, place and stead,
it being agreed that such power is one coupled with an interest. Tenant agrees
that it will from time to time, within ten (10) days after request by Landlord,
execute and deliver to such persons as Landlord shall request a statement in
recordable form certifying that this Lease is unmodified and in full force and
effect (or if there have been modifications, that the same is in full force and
effect as so modified), stating the dates to which Rent and other charges
payable under the Lease have been paid, stating that Landlord is not in default
hereunder (or if Tenant alleges a default stating the nature of such alleged
default) and further stating such other matters as Landlord shall require.

31. PARKING.

Tenant shall have the right, in common with other tenants of
the Project and their respective employees, clients, guests and invitees, to
use parking spaces located in the Surface Parking Areas. Tenant will also be
provided the use of four (4) nonexclusive and nonreserved parking spaces in the
Parking Structure. Tenant shall pay rent for three (3) of such spaces at the
rate designated by Landlord from time to time, but not less than $45.00 per
space per month (plus sales tax) at any time. Tenant shall not be required to
pay rent for its fourth parking space in the Parking Structure. All parking on
the Surface Parking Areas and in the Parking Structure shall be subject to rules
and regulations for the use thereof as may be prescribed by Landlord from time
to time, and Landlord reserves the right to assign or reserve such parking
spaces as it may elect. Tenant shall not sublease any of its parking spaces or
assign any rights thereto. No vehicle in excess of seventy-eight (78) inches in
height shall be allowed access to the Parking Structure, and vehicles which are
unmoved or abandoned for more than three (3) days will be removed from the
Surface Parking Areas and the Parking Structure and impounded at Tenant's
expense. Tenant shall be responsible for any damage to the Parking Structure
caused by the holder of an access card issued to Tenant. However, neither
Landlord nor its manager or any of tis contractors shall be responsible or
liable for any loss or damage sustained by Tenant or any holder of an access
card issued to Tenant which arises from use of the Surface Parking Areas or the
Parking Structure, including, without limitation, any personal injury, property
damage or theft. Tenant shall, upon request of Landlord, execute a parking
agreement or parking agreements which further detail Tenant's obligations in
regard to the above-referenced parking spaces. With respect to access cards to
the Parking Structure, Tenant covenants and agrees as follows:

(a) Landlord will issue to Tenant one (1) access card for
each of the nonexclusive and nonreserved parking spaces provided to Tenant
under this paragraph.

(b) Only one vehicle per access card shall have access to
the Parking Structure.

(c) Tenant shall at all times maintain with Landlord a list
of access cards held by Tenant, which list shall be in form, scope and
substance satisfactory to Landlord, in its sole subjective discretion, and
shall identify the individual to whom an access card has been issued, the
vehicle used by such individual and the license plate number of such vehicle.

(d) Tenant shall immediately report to Landlord any lost
access card, and Tenant shall pay Landlord's then current charge for a
replacement access card, which charge shall not be less than $15.00 per access
card at any time.

(e) In the event of unauthorized or improper use of an
access card, as determined by Landlord in its sole judgment, Landlord may, in
its sole subjective discretion, (i) withdraw the access card and terminate
Tenant's right to use the parking space represented by the access card, all

-12-
<PAGE> 16

without terminating or otherwise affecting Tenant's responsibilities,
obligations and liabilities under the covenants, agreements, terms, conditions
and provisions contained in this Lease and (ii) exercise any of Landlord's
other rights and remedies against Tenant.

(f) Each access card shall at all times remain the property of
Landlord, and Tenant shall surrender all access cards to Landlord immediately
upon termination of this Lease. Notwithstanding termination of this Lease,
Tenant shall pay to Landlord for each lost access card Landlord's then current
charge for a replacement access card, which charge shall not be less than
$15.00 per card at any time.

32. LANDLORD'S LIEN.

As security for the performance of the obligations of the
Tenant under this Lease, the Tenant hereby grants the Landlord a security
interest in all equipment, inventory, fixtures, furniture, and all other
property now owned or hereafter acquired by the Tenant which is located in the
Premises, and all proceeds and products thereof. The Tenant will not remove any
of such personal property from the Premises until all of the Tenant's
obligations under this Lease have been satisfied in full. Without excluding any
other manner of notice, any requirement for reasonable notice to the Tenant of
the Landlord's intention to dispose of any property pursuant to the enforcement
of such security interest will be met if such notice is given at least ten (10)
days before the time of such disposition. Any sale made pursuant to the
enforcement of such security interest will be deemed to have been a public sale
conducted in a commercially reasonable manner if held at the Premises after
advertisement of the time, place, method of sale and a general description of
the property to be sold in a daily newspaper published in Oklahoma County,
Oklahoma, for five (5) consecutive days before the date of sale. The Tenant
agrees to execute and deliver to the Landlord such financing statements,
continuation statements and other instruments which might reasonably be
required to perfect, protect or continue the foregoing security interest within
ten (10) days after written request therefor.

33. ATTORNEY'S FEES.

In the event either party defaults in the performance of any of
the terms of this Lease and the other party employs an attorney in connection
therewith, the defaulting party agrees to pay prevailing party's reasonable
attorney's fees, all court costs and other reasonable expenses.

34. NO IMPLIED WAIVER.

The failure to insist at any time upon the strict performance
of any covenant or agreement herein, or to exercise any option, right, power or
remedy contained in this Lease shall not be construed as a waiver or a
relinquishment thereof for the future. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly installment of Base Rent or other
Rent due under this Lease shall be deemed to be other than on account of the
earliest such Rent due hereunder, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as Rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or pursue any
other remedy provided or referenced in this Lease.

35. PERSONAL LIABILITY.

The liability of the Landlord to Tenant for any default by
Landlord under the terms of this Lease shall be limited to the interest of
Landlord in the Project and Tenant agrees to look solely to Landlord's interest
in the Project for recovery of any judgment from the Landlord, it being
intended that the Landlord shall not be personally liable for any judgment or
deficiency.

36. SECURITY DEPOSIT.

Intentionally deleted.

37. SPRINKLERS.

If there now is or shall be installed in the Project a
"sprinkler system," and such a system or any of its appliances shall be damaged
or injured or not in proper working order by reason of any act or omission of
the Tenant, Tenant's agents, servants, employees, licensees or visitors, the
Tenant shall immediately notify Landlord in writing, and, within a reasonable
period after Landlord's receipt of such notice, Landlord shall have the
sprinkler system restored at Tenant's expense, which Tenant shall forthwith pay
upon receipt of invoices; and if the Board of Fire Underwriters of Fire
Insurance Exchange or any bureau, department or official of the state or city
government, require or recommend that any changes, modifications, alterations,
or additional sprinkler heads or other equipment be made or supplied by reason
of the Tenant's business, or the location of partitions, trade fixtures, or
other contents, of the Premises, or for any other reason, or if any such
changes, modifications, alterations, additional sprinkler heads or other
equipment,

-13-
<PAGE> 17

become necessary to prevent the imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rate as fixed by
said Exchange, or by any fire insurance company, Landlord shall, at Tenant's
expense, promptly make and supply such changes, modifications, alterations,
additional sprinkler head or other equipment.

38. WASTE MANAGEMENT.

Without limiting its obligations under paragraph 15 (and the
rules and regulations attached to this Lease as Exhibit "B"), Tenant covenants
and agrees to comply with all laws, rules, regulations and guidelines now or
hereafter made applicable to the Premises respecting the disposal of waste,
trash, garbage and other matter (liquid or solid), generated by Tenant, the
disposal of which is not otherwise the express obligation of Landlord under
this Lease (it is expressly understood that the provision of janitorial
services by Landlord is not an express obligation of Landlord under this Lease
for the purpose of this paragraph 38), including, but not limited to, laws,
rules, regulations and guidelines respecting recycling and other forms of
reclamation (all of which are herein collectively referred to as "Waste
Management Requirements"). Tenant covenants and agrees to comply with Waste
Management Requirements applicable to Landlord (i) as owner of the Premises and
(ii) in performing Landlord's obligations under this Lease, if any. Tenant
further covenants and agrees to comply with all rules and regulations
established by Landlord to enable Landlord from time to time to avail itself of
the lowest rate available for the disposal of waste, trash, garbage and other
matter (liquid or solid), generated by Tenant. Tenant covenants and agrees to
indemnify, defend, protect and hold Landlord harmless (in accordance with
paragraph 21) from and against all liability (including costs, expenses and
attorney fees) that Landlord may sustain by reason of Tenant's breach of its
obligations under this paragraph 38. Tenant's obligations under this paragraph
38 shall survive the termination of this Lease.

39. WAIVER OF BENEFITS.

Tenant waives the benefits of all existing and future rent
control legislation and statutes and any similar governmental rules and
regulations, whether in time of war or not, to the extent permitted by law.

40. MISCELLANEOUS TAXES.

Tenant shall pay prior to delinquency all taxes assessed
against or levied upon its occupancy of the Premises, or upon the fixtures,
furnishings, equipment and all other personal property of Tenant located in the
Premises, if nonpayment thereof shall give rise to a lien on any part of the
Project, and when possible Tenant shall cause said fixtures, furnishings,
equipment and other personal property to be assessed and billed separately from
the property of Landlord. In the event any or all of Tenant's occupancy of the
Premises, shall be assessed and taxed with the property of Landlord, Tenant
shall pay to Landlord its share of such taxes, as determined by Landlord,
within ten (10) days after delivery to Tenant by Landlord of a statement in
writing setting forth the amount of such taxes applicable to Tenant's fixtures,
furnishings, equipment or personal property.

41. NOTICE.

Any notice provided for or required in this Lease must, unless
otherwise expressly provided in this Lease, be in writing, and may, unless
otherwise expressly provided in this Lease, be given or served by depositing
the same in the United States mail, postpaid, certified and addressed to the
party to be notified, with return receipt requested, or by delivering the same
in person to an officer of such party, or by prepaid telegram, when
appropriate, addressed to the party to be notified at the address set forth
below or such other address, notice of which has been given to the other party.
Notice deposited in the mail in the manner hereinabove described shall be
effective from and after the expiration of three (3) days after it is so
deposited.

Landlord: Prime Financial Corporation
16 South Pennsylvania
Oklahoma City, OK 73107
Attn: Mr. Robert A. Corff

With copies to: Trammell Crow MW, Inc.
1601 N.W. Expressway, Suite 1200
Oklahoma City, OK 73118
Attn: Mr. Al Branch

Tenant: Western Country Clubs, Inc.
1601 N.W. Expressway, Suite 1610
Oklahoma City, Oklahoma 73118

-14-
<PAGE> 18

42. SEVERABILITY.

If any term or provision of this Lease, or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law notwithstanding the invalidity of any other term or provision
hereof.

43. RECORDATION.

Tenant agrees not to record this Lease or any Memorandum hereof.

44. GOVERNING LAW.

This Lease and the rights and obligations of the parties hereto
shall be interpreted, construed, and enforced in accordance with the laws of
the State of Oklahoma.

45. FORCE MAJEURE.

Whenever a period of time is herein prescribed for the taking
of any action by Landlord, Landlord shall not be liable or responsible for, and
there shall be excluded from the computation of such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations or restrictions, or any other cause whatsoever
beyond the control of Landlord.

46. TIME OF PERFORMANCE.

Except as expressly otherwise herein provided, with respect to
all required acts of Tenant, time is of the essence of this Lease.

47. TRANSFERS BY LANDLORD.

Landlord shall have the right to transfer and assign, in whole
or in part, all its rights and obligations hereunder and in the Project or any
part thereof, and in such event and upon such transfer Landlord shall be
released from any further obligations hereunder, and Tenant agrees to look
solely to such successor in interest of Landlord for the performance of such
obligations.

48. BROKERAGE COMMISSIONS.

Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than the
Broker, and Tenant agrees to indemnify and hold Landlord harmless from and
against any claims by any other broker, agent or other person claiming a
commission or other form of compensation by virtue of having dealt with Tenant
with regard to this leasing transaction. The provisions of this paragraph shall
survive the termination of this Lease.

49. EFFECT OF DELIVERY OF THIS LEASE.

Landlord has delivered a copy of this Lease to Tenant for
Tenant's review only, and the delivery hereof does not constitute an offer to
Tenant or an option. This Lease shall not be effective until a copy executed by
both Landlord and Tenant is delivered to and accepted by Landlord.

50. BINDING EFFECT.

This Lease shall be binding upon and shall inure to the benefit
of the parties hereto and their respective permitted successors and assigns.

51. EXHIBITS.

The following exhibits are attached hereto and incorporated
herein and made a part of this Lease for all purposes:

Exhibit "A" Description of the Land
Exhibit "B" Rules and Regulations
Exhibit "C" Floor Plan Showing Premises
Exhibit "D" Building Standard Improvements

-15-
<PAGE> 19
52. INTEGRATED AGREEMENT.

This Lease contains and constitutes the entire agreement
between Landlord and Tenant and supersedes all prior agreements and
understandings between the parties to this Lease relating to the subject matter
of this Lease. There are no agreements, understandings, restrictions,
warranties, representations or inducements between the parties to this Lease
relating to the subject matter hereof, other than those set forth in this Lease.

IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease in multiple original counterparts as of the day and year first above
written.

"Landlord": PRIME FINANCIAL CORPORATION,
an Oklahoma corporation

By /s/ ROBERT A. CORFF
--------------------------------
Printed Name: Robert A. Corff
Vice President

"Tenant": WESTERN COUNTRY CLUBS, INC.,
a Colorado corporation

By /s/ JAMES E. BLACKETER
--------------------------------
Printed Name: James E. Blacketer
_____ President

STATE OF OKLAHOMA )
) ss.
COUNTY OF OKLAHOMA )

This instrument was acknowledged before me on February 25,
1997, by Robert A. Corff, as Vice President of Prime Financial Corporation, an
Oklahoma corporation.

/s/ VIRGINIA A. GRILLEY
----------------------------------
Notary Public

My Commission Expires:

- ----------------------
(SEAL)

STATE OF OKLAHOMA )
) ss.
COUNTY OF OKLAHOMA )

This instrument was acknowledged before me on February 20,
1997, by James E. Blacketer, as ____ President of Western Country Clubs, Inc.,
a Colorado corporation.

/s/ PRISCILLA RICE
----------------------------------
Notary Public

My Commission Expires:

[ILLEGIBLE]
- ----------------------
(SEAL)
<PAGE> 20
EXHIBIT "A"

Attached to and Made a Part of that
Certain Lease Agreement by and between
Prime Financial Corporation,
As Landlord, and
Western Country Clubs, Inc.,
As Tenant,
Dated __________________, 1997

Description of Land

A part of the S/2 of Section 8, Township 12 North, Range 3 West, I.M., Oklahoma
County, Oklahoma, more particularly described as follows: Commencing at the
Southeast corner of the SW/4 of Section 8, Township 12 North, Range 3 West,
I.M., Oklahoma County, Oklahoma, thence North along the East line of said
Southwest Quarter (SW/4) a distance of 50 feet to the point or place of
beginning; thence South 89 degrees 41'15" West and parallel to the South line
of the SW/4 of said Section 8, a distance of 83.57 feet; thence South 00
degrees 18'42" East a distance of 17.0 feet; thence South 89 degrees 41'15"
West and parallel to the South line of said SW/4 a distance of 353.5 feet;
thence North 45 degrees 00'00" West a distance of 35.35 feet to the Easterly
right-of-way line of Highway I-240; thence due North along said right-of-way a
distance of 276.81 feet to a point on the Southeasterly right-of-way of said
Highway I-240; thence Northeasterly on a curve to the right with a tangent
bearing North 53 degrees 08'52" East and having a radius of 1666.95 feet along
said Southeasterly right-of-way of Highway I-240, a distance of 892 feet;
thence South 38 degrees 35'45" West a distance of 374.06 feet; thence South 00
degrees 09'15" East a distance of 312.90 feet; thence South 89 degrees 50'45"
West and parallel to the South line of the SE/4 of said Section, a distance of
124.57 feet to the point of place of beginning.

<PAGE> 21
EXHIBIT B
Attached to and Made a Part of that
Certain Lease Agreement by and between
Prime Financial Corporation,
As Landlord, and
Western Country Clubs, Inc.,
As Tenant,
Dated___________, 1997

1. Access. The entrances, lobbies, passages, corridors, elevators,
stairways and other Common Areas will not be encumbered or obstructed by any
tenant or its agents, employees or invitees or be used for any purpose other
than for access to the Premises. The Tenant will not permit persons to visit
the Premises in such numbers or under such conditions as to unreasonably
interfere with the use of the Common Areas by other tenants. The Landlord
reserves the right to regulate the use of the common Areas of the Project by
the Tenant, its agents, employees and invitees and by persons making deliveries
to the Tenant (including, without limitation, the right to designate hours for
deliveries, Project entrances and elevators for such use), but such regulations
shall be consistent with the other terms of the Lease. No showcases or other
articles will be placed in the Common Areas without the prior written consent
of the Landlord.

2. Project Hours. Business hours for the Project will be 7:00 a.m.
to 6:00 p.m., Monday through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday.
The Landlord reserves the right to exclude from the Project during nonbusiness
hours all persons not authorized in writing, by pass or otherwise to have
access to the Project and the Premises. Each Tenant will be responsible for all
persons authorized by such Tenant to have access to the Project and will be
liable to the Landlord for all acts of such persons while in the Project. The
Landlord may require all persons given access to the Project during nonbusiness
hours to sign a register on entering and leaving the Project. Any person whose
presence in the Project at any time might adversely affect, in the judgment of
the Landlord, the safety, character, reputation or interests of the Project or
its Tenant may be denied access to the Project or may be ejected therefrom.
During the continuance of any public disturbance, the Landlord may prevent all
access to the Project. The Landlord may require any person leaving any area of
the Project with any package or other object to exhibit a pass from the Tenant
authorizing such removal. The failure to establish or enforce any of the
foregoing requirements will not impose any liability on the Landlord to any
Tenant for the removal of any property from the Project or otherwise. The
Landlord will not be liable to any Tenant or other person for damages or loss
arising from the admission, exclusion or ejection of any person to or from the
Premises or the Project.

3. Care. The Tenant will not mark, paint, drill into or in any
way deface any part of the Premises or the Project. No boring, cutting or
stringing of wires will be permitted except with the prior written consent of
the Landlord and as the Landlord might direct. The Tenant will not install any
tile or other similar floor covering without the prior written consent of the
Landlord.

4. Dangerous Substances. No Tenant or its agents, employees or
invitees will at any time bring or keep on the Premises any flammable,
combustible or explosive fluid, chemical or substance. No acids, vapors or
other damaging materials will be discharged into the waste lines, vents or flues
of the Project.

5. Windows. No awnings or other projections will be attached to
the outside walls of the Project. No curtains, blinds, shades, screens or
covering other than those approved by the Landlord will be attached to, hung
in, or used in connection with any window or door of the Premises without the
prior written consent of the Landlord. Such coverings will be of a quality,
type, design and color approved by the Landlord and attached in the manner
approved by the Landlord. If Landlord has installed, or hereafter installs, any
shades, blinds or curtains in the Premises, Tenant shall not remove them
without the prior written consent of Landlord. The windows, doors and vents
which admit light and air into the Common Areas of the Project will not be
obstructed by the Tenant, and no bottles, parcels, plants or other articles
will be placed on any window sills.
<PAGE> 22
6. Equipment. Without first obtaining the Landlord's written
permission, the Tenant will not install, attach or bring into the Project any
machinery or equipment, other than Tenant's equipment currently used in
Tenant's existing office space and other normal office equipment, or any
instrument, duct, refrigerator, air conditioner, heater, water cooler or other
appliance requiring the use of gas, electric current or water. The Tenant
agrees to limit the use of electric current to the capacity of existing
feeders, risers and wiring installation. All additional electrical wiring will
be done by or supervised by the Landlord, and the Tenant will bear the expense
of any additional installation. Any breach of the foregoing will authorize the
Landlord to enter the Premises, remove what the Tenant has installed and charge
the cost of such removal and any damage that may be sustained thereby to the
Tenant. Nothing contained in this Paragraph 6 shall limit Landlord's
obligations to provide adequate utilities and Leasehold Improvements as set
forth in the Lease.

7. Exterminators. From time to time on the request of the
Landlord, the Tenant, at the Tenant's expense, will cause the Premises to be
exterminated to the satisfaction of and by exterminators approved by the
Landlord.

8. Food. The Tenant will not, without the Landlord's prior written
approval, permit any cooking, conduct any restaurant, luncheonette or cafeteria
for the sale or service of food or beverages to the Tenant's employees or to
others or cause or permit any odors of cooking or other processes or any
unusual or objectionable odors to emanate from the Premises. The Tenant will
not, without the Landlord's prior written approval, install or permit the
installation or use of any food, beverage, cigarette, cigar or stamp dispensing
machine, or permit the delivery of any food or beverages to the Premises except
by such persons as are approved by the Landlord. No food or beverages will be
carried in the Common Areas or elevators except in closed containers.

9. Locks. The Landlord will provide all locks in the Premises,
and no additional locks or bolts of any kind will be placed on any door or
window by the Tenant, nor will any changes be made in existing locks or the
mechanism thereof without the prior written consent of the Landlord. A
reasonable number of keys to such locks will be furnished by the Landlord to
each Tenant, and the Tenant will not permit any duplicate keys to be made by
any person other than the Landlord. The Tenant will, on the termination of its
Lease, restore to the Landlord all keys furnished to the Tenant, and in the
event of the loss of any keys so furnished, the Tenant will pay the Landlord
the cost thereof.

10. Maintenance. The Tenant will promptly notify the Landlord of
any accident which occurs and any defect or maintenance required on the
Premises. The requests of Tenant will be attended to only on application to the
Landlord's office, and the Landlord's employees will not perform any work
unless under instructions from the Landlord's office.

11. Moving. All movement of safes, freight, furniture or bulky
items of any description will be performed by persons approved by the Landlord
under the supervision of the Landlord during the hours and according to such
routes and methods as the Landlord designates from time to time. Each Tenant
will notify the Landlord prior to the delivery of any such items, and the
Landlord will approve the weight and position of safes and other heavy items,
which will in all cases stand on weight distribution devices approved by the
Landlord. The Landlord reserves the right to inspect all freight to be brought
into the Project and to exclude from the Project all freight which violates any
of these Rules and Regulations or the Tenant's Lease. All damages done to the
Project by the movement or positioning of any property of a Tenant, will be
repaired at the expense of such Tenant, and the Landlord will not be liable for
the acts of any person engaged in or any damage or loss of any property or
person resulting from any act in connection with such movement or positioning.

12. Noise. The Tenant will not make or permit to be made any
unseemly or disturbing noises or disturb or interfere with other Tenants of the
Project.

13. Plumbing The water closets and other plumbing fixtures will
not be used for any purpose other than that for which they were constructed and
no improper substances will be thrown therein. All damages resulting from the
misuse of any plumbing fixture by the Tenant, its agents, employees or invitees
will be borne by Tenant.

B-2

<PAGE> 23
14. Prohibited __________________ Project will be used for
manufacturing or for lodging, sleeping or any immoral or illegal purpose. No
space other than space so designated by the Landlord will be used for the
storage of merchandise or for the sale of merchandise, goods or property, and
no auction sales will be conducted by the Tenant without the prior written
consent of the Landlord. The Tenant will not occupy or permit any portion of
the Premises to be occupied for any purpose or in any manner which is contrary
to any zoning, building code or other law or regulation governing the Project.

15. Services. Unless expressly permitted by the Landlord, no
person will be employed by any Tenant to perform janitorial or maintenance
services on the Premises. Each tenant and its agents, employees and invitees
will cooperate with the Landlord in keeping the Project neat and clean. The
Tenant will not throw or sweep anything into the Common Areas of the Project.

16. Signs. One Project directory will be furnished in the
main lobby of the Project at the expense of the Landlord, and the Landlord will
determine the number of listings therein for each Tenant. No sign,
advertisement, notice or other lettering will be exhibited, inscribed, painted
or affixed by the Tenant on any window or other part of the Premises or the
Project without the prior written consent of the Landlord. In the event of the
violation of the foregoing by the Tenant, the Landlord may remove the same
without any liability and may charge the expense incurred in such removal to the
Tenant. All markings on the doors in the Premises will be inscribed, painted or
affixed for the Tenant by the Landlord or by personnel approved by the Landlord,
at the expense of the Tenant, and will be of a size, color, style and location
acceptable to the Landlord. The Landlord will have the right to prohibit any
advertising by any Tenant which, in the Landlord's opinion, tends to impair the
reputation of the Project or its desirability as an office building; on written
notice from the Landlord, the Tenant will refrain from or discontinue such
advertising. The Tenant will not use the name of the Project or the Landlord in
any advertising without the express written consent of the Landlord.

17. Vendors. Canvassing, soliciting and peddling in the
Project are prohibited, and the Tenant will cooperate with the Landlord to
prevent the same.

18. Non-smoking Policy. Smoking is not permitted in any of the
Common Areas of the Project. Ash urns are located at the entrances to the
Building for the purposes of extinguishing all smoking material upon entering
the Building.

19. Vehicles. No bicycles, vehicles or animals of any kind will be
brought into the Project or kept in the Premises. Only hand trucks equipped
with rubber tires and side guards will be used in the Project by the Tenant or
its agents, employees or invitees.

20. Modification. The Landlord reserves the right to rescind any of
the foregoing regulations and to make such other and further regulations as in
the Landlord's judgment are needed from time to time for the safety, protection,
care and cleanliness of the Project, the operation thereof, the preservation of
good order therein and the protection and comfort of the tenants and their
agents, employees, and invitees. Such additional regulations will be binding on
the Tenant when written notice thereof is given to the Tenant by the Landlord.

21. Conflicts. In the event any provision of these Rules and
Regulations or any modifications hereto, conflicts or is inconsistent with the
terms and provisions of the Lease, the terms and provisions of the Lease shall
control.

B-3

<PAGE> 24
EXHIBIT "C"

Attached to and Made a Part of that
Certain Lease Agreement by and between
Prime Financial Corporation,
As Landlord, and
Western Country Clubs, Inc.,
As Tenant,
Dated ____________________, 1997

FLOOR PLAN SHOWING PREMISES

[Floorplan of Office]

16th Floor
--------------------------
Full Floor RSF: 13,040
Total Tenant RSF: 12,251
Total Corridor RSF: 789

The Tower
Trammell Crow Company Sixteenth Floor
1601 Northwest Expressway
Oklahoma City, Oklahoma
<PAGE> 25
EXHIBIT "D"

Attached to and Made a Part of that
Certain Lease Agreement by and between
Prime Financial Corporation,
As Landlord, and
Western Country Clubs, Inc.,
as Tenant,
Dated _________________, 1997

BUILDING STANDARD IMPROVEMENTS

1. Building Grade ceiling grid and fluorescent fixtures in their present
location and Building Grade ceiling tiles as installed.

2. Sprinkler system in its present location, with Building Grade sprinkler
heads as installed.

3. Building Grade variable air volume boxes, flexible ducts, damper
assemblies, diffusers and thermostats in their present locations.

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 190,624
<SECURITIES> 200,000
<RECEIVABLES> 144,736
<ALLOWANCES> 0
<INVENTORY> 79,628
<CURRENT-ASSETS> 1,078,290
<PP&E> 4,167,851
<DEPRECIATION> 1,104,353
<TOTAL-ASSETS> 4,509,126
<CURRENT-LIABILITIES> 1,611,923
<BONDS> 0
0
0
<COMMON> 35,199
<OTHER-SE> 2,041,236
<TOTAL-LIABILITY-AND-EQUITY> 4,509,126
<SALES> 7,667,685
<TOTAL-REVENUES> 7,667,685
<CGS> 2,488,218
<TOTAL-COSTS> 2,488,218
<OTHER-EXPENSES> 5,469,282
<LOSS-PROVISION> 1,719,818
<INTEREST-EXPENSE> 135,630
<INCOME-PRETAX> (2,145,263)
<INCOME-TAX> (185,605)
<INCOME-CONTINUING> (1,979,176)
<DISCONTINUED> 0
<EXTRAORDINARY> 65,730
<CHANGES> 0
<NET-INCOME> (1,913,446)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)

</TABLE>